How Asian investors have accessed insurtech assets
Investors would be forgiven for thinking that the best hunting ground for unicorns - or private technology companies that get valued at over $1 billion following share sales to venture capital companies or strategic investors - is likely to be the west coast of the US, or possibly cities like London. Add into the mix the need for them to be insurance-focued, and this further intensifies this assumption.
However, Asia is increasingly yielding its own array of unicorns in the insurance arena, on the back of mounting demand for various products in the industry.
Take Lemonade, a US renters and homeowner insurer founded in 2015. It was priced at a pre-money valuation of over $2 billion after raising $300 million over several rounds of funding. Investors include Allianz X, the digital investment unit of German life insurance group Allianz.
Indeed, Allianz X has used a €1 billion ($1.1 billion) fund to make 15 investments in insurance-linked tech companies across three continents since 2013. These include an investment in Indonesia-based Gojek, a Southeast Asia on-demand multi-service platform and digital payment technology group.
The investment bucks the regional trend, as Asian insurtech start-ups tend to congregate in Singapore or Hong Kong. One example is ZhongAn, the Chinese online-only insurance company which listed on the Hong Kong stock exchange for $1.5 billion in 2017.
The group is an example of a company that had an insurer backer from the start; China’s second largest life insurer Ping An Group is a founder and top shareholder, while online conglomerates Alibaba and Tencent offer financial backing.
ZhongAn benefited from a rather specific growth plan via e-commerce platforms that allowed it to enjoy exponential growth. Between its inception in October 2013 and the end of 2016, ZhongAn reportedly sold 7.2 billion insurance products and served more than 492 million customers.
FINTECH FOCUS
Zhong An hasn’t been Ping An’s only foray in this field. The insurance group has established Ping An Global Voyager Fund, a $1 billion global investment vehicle focusing on financial technology, including insurtech and health care.
“We tend to favour “enabling” technologies that allow traditional financial services companies to make use of new technology, as opposed to pure B2C businesses,” Jonathan Larsen, chief innovation officer of Ping An Group and chairman and CEO of the Ping An Global Voyager Fund, told AsianInvestor.
One example of a recent investment was a $72.5 million funding round for H2O.ai that Ping An co-led with Goldman Sachs. H2O.ai has developed what it calls a “driverless AI” platform that lets non-data scientists use machine learning and data science tools to improve business performance. It counts numerous insurance clients among its customers, including Ping An.
“We invest in insurtech companies where we see an opportunity for Ping An to add value in some meaningful way over time. That can include becoming an anchor customer of a product, initiating a distribution relationship inside of China, or deploying our own technology to help a company grow faster,” said Larsen. “That sort of a strategy, we believe, will result in attractive financial returns as well as useful strategic benefits to the group.”
He noted that one tangible example of this philosophy in action was its recent investment in Joonko, a next-generation financial services portal in Europe that Ping An is backing alongside prominent European fintechs like finleap and Raisin.
Singapore Life is another key regional example of an insurtech success story. The firm was founded in 2014 as a start-up and secured a license from the Monetary Authority of Singapore in 2017, becoming the first new life insurer in the city state for 30 years when it went live later that year.
In January 2018 it reached a big landmark when it acquired the S$6 billion ($4.35 billion) business portfolio of Zurich Life Singapore, which comprised of life, critical illness and disability benefits. This development led to Sumitomo Life’s eventual $90 million investment.
“We foresee rapid growth in the life insurance markets in Southeast Asia and Singapore in particular. We are excited to support Singapore Life’s growth by participating in the company as a long-term strategic investor,” Masahiro Hashimoto, president and chief executive officer of Sumitomo Life said in a statement following the announcement.
“By investing in Singapore Life, which has in-depth expertise and know-how in utilising technology, we aim to strengthen our ability in gathering information on the latest trends in Singapore where insurtech is flourishing; as well as the application of technology to actual business operations to improve customer ease and achieve greater management efficiency,” he elaborated.
Other shareholders of Singapore Life include US insurance company Aflac, which took an equity stake for $20 million, and Aberdeen Standard Investments, which spent $13 million on acquiring its own stake earlier this year.
These deals are likley to be followed by many more, as insurers in the region in particular seek to bulk up their insurtech investments - and learn from the very assets they are acquiring.
This article was adapted from the cover story of AsianInvestor's Autumn 2019 edition.