Aijian Group invested 128 million yuan to knock on the insurance industry and intends to subscribe for 10% of the equity of Huagui Life to become the fourth largest shareholder

Recently, Aijian Group (600643. SH) disclosed that it intends to acquire 100 million shares of Huagui Life Held by Tibet Kuai Communications Co., Ltd. (hereinafter referred to as "Kuai Communications Company") for 128 million yuan, accounting for 10% of its total share capital, ranking as the fourth largest shareholder. For Aijian Group, which has laid out trusts, financial leasing and other sectors in the financial field, it is proposed to be involved in insurance in order to improve the financial business chain, and from the perspective of the pressure on its AIJIAN trust business, it may also have the intention of making more efforts to promote transformation.

From the perspective of the target situation, although the original premium income of Huagui Life in 2020 was 2.013 billion yuan, with a three-year compound growth rate of nearly 70%, there was a significant contraction in 2021, a year-on-year reduction of nearly 40%. In terms of business, Aijian Group particularly emphasized the market advantage of Huagui Life in terms of Internet term life insurance, which it focuses on. According to industry analysts, due to the low average premium and high cost of sales, life insurance companies have not been enthusiastic about term life insurance in the past, and under the development of Internet channels, term life insurance may become a differentiated path for small and medium-sized insurance companies to break through.

128 million yuan was transferred 10% of the equity, and the trust business was under pressure to put together the insurance sector puzzle

Look at the deal specifically. Aijian Group intends to invest 128 million yuan to acquire 10% of the equity of Huagui Life, and through the equity transfer, Aijian Group has become the fourth largest shareholder of Huagui Life, listed after Guizhou Financial Holding Group Co., Ltd. (21%), Guizhou Moutai (20%) and Huakang Insurance Agency (15%). For this shareholding, Aijian Group stressed that it is "to further enrich the company's financial business sector and improve the company's financial business chain". Clearly, the intent of strategic synergy is clear.

Judging from public information, the business structure of Aijian Group, which was restructured in 1992 and listed in 1993, mainly includes comprehensive financial and quasi-financial businesses such as trust, securities, financial leasing, asset management and wealth management, and private equity investment. Previously, Aijian Group had proposed to lay out and develop other financial and quasi-financial businesses, covering various types of target customers and service groups, and providing comprehensive and integrated financial services.

From the perspective of development performance, in the first three quarters of 2021, Aijian Group achieved operating income of 1.613 billion yuan, an increase of 29.31% year-on-year, net profit of 1.156 billion yuan, an increase of 12.76% year-on-year, and total assets of 27.389 billion yuan, an increase of 1.16% over the end of the previous year.

But from the perspective of its own plate, it also faces stumbling. Recently, AIJIAN Group disclosed the unaudited financial data of its AIJIAN Trust in 2021, in the context of the regulatory pressure drop financing and channel trust business scale, throughout the year, AIJIAN Trust revenue and profit fell by 4%, total operating income fell by 4%, net profit fell by 23 percentage points, at the same time, due to the signs of impairment of AIJIAN Trust's self-operated loans to Tongfei Mining and other companies, it is proposed to make an impairment provision of 210 million yuan in 2021. According to the announcement of Aijian Group, in 2021, its consolidated statements are expected to make an impairment provision of 339 million yuan, resulting in a decrease of 260 million yuan in net profit.

"Under the continuous impact of the epidemic and the pressure drop requirements of the regulator on financing and channel business, the development of the main trust and financial leasing sectors under aijian group is facing certain pressure," a financial researcher pointed out to Blue Whale Insurance, "The transfer of equity in insurance companies and the increase of business sectors are helpful to the replenishment and transformation of the financial chain of Aijian Group." At the same time, insurance and other financial businesses of Aijian Group have opportunities to integrate in terms of customer base, channels, scenarios, business models, etc., which is conducive to achieving synergy."

"But at the same time, in the future, we also need to pay attention to the prudence and compliance of capital use, related party transactions, and the construction of cross-financial business firewalls to prevent cross-domain cross-risks," the financier added.

Aijian Group also proposed that participating in Huagui Life is faced with asset risks, repayment risks, credit risks, loss-making operation risks that may arise in the course of operation, as well as cross-market, cross-regional and cross-industry transmission risks. In this regard, on the one hand, we will strengthen the research on the financial industry and improve the awareness and ability of risk prevention; on the other hand, we will ensure the health and compliance of the transaction target, pay attention to the core product business and asset-light development positioning of the target company, and promote its business development and investment capabilities and long-term sustainable operation capabilities.

In terms of pricing, according to the announcement, the static PEV valuation of A-share listed life insurance companies in the past decade has been in the range of 1-1.5 times most of the time; at the same time, referring to the transaction prices of similar small and medium-sized life insurance companies in the market in recent years, as well as inquiries about other mergers and acquisitions, the equity prices of newly established small and medium-sized life insurance companies to introduce strategic investors are generally between 1.0-1.1 yuan / share.

Based on Huagui Life's equity trading experience, at the end of 2019, Huagui Life had a relevant equity transfer, according to relevant information, in November 2019, Huagui Life's original shareholder Hebei Huijia Real Estate Development Co., Ltd. transferred 20 million shares of Huagui Life (accounting for 2% of the total share capital) held by it to Tianjin Jinyi Supply Chain Management Co., Ltd. at a transfer price of 1.2 yuan per share. At the same time, according to the industry's common "appraisal value method" to calculate the valuation range of Huagui Life, the valuation range of Huagui Life is between 1.175 billion yuan and 1.396 billion yuan, corresponding to its current registered capital of 1 billion yuan, the transfer price should be 1.175 yuan - 1.396 yuan / share. Based on this, Aijian Group and the equity transferor Kuai Communications Company negotiated and set the equity transfer price at 1.28 yuan per share.

In 2021, Huagui Life Will shrink by 40% of the water, and strive to find a differentiated path for the Internet to determine life

So what is the success of huagui life, the subject of the transaction?

Founded in February 2017, Huagui Life is registered in Guizhou Province with a registered capital of 1 billion yuan. According to public information, Huagui Life is positioned as an Internet platform insurance company with leading products and services. In terms of market strategy, Huagui Life implements a differentiated competitive strategy, focusing on young and middle-aged people aged 30-45, focusing on term and whole life insurance products. In terms of institutional structure, Huagui Life currently has 2 provincial branches and 3 central branches in Guizhou and Hebei.

From a more intuitive operating data point of view, in the announcement of Aijian Group, it was proposed that the original premium income of Huagui Life in 2020 was 2.013 billion yuan, with a three-year compound growth rate of nearly 70%. In 2021, Huagui Life's operating income was 1.194 billion yuan, a year-on-year decrease of about 41.7 percentage points, but in the same period, it achieved a turnaround, and the annual net profit was 31.272 million yuan.

At the same time, Aijian Group stressed in the announcement that Huagui Life has certain market advantages in its Internet term life insurance products that it focuses on developing.

"Taking term life insurance as the starting point of differentiated competition should be a feasible choice," Li Wenzhong pointed out to Blue Whale Insurance Analysis, "At present, the people's risk awareness and insurance awareness are getting stronger and stronger, and the insurance demand is becoming more and more personalized." Some insurance companies focus on term life insurance, which can better meet the risk protection needs of some consumers. An important feature of term life insurance is 'lower premium, higher protection', which is suitable for consumers who have limited willingness to spend premiums and higher degree of protection, and once they die, they can leave a large amount of living security funds for their survivors. Moreover, term life insurance can generally be extended or converted into whole life insurance, so it is more suitable for young people who have just entered the society. ”

Blue Whale Insurance noted that in recent years, Huagui Life has been particularly focused on the field of term life insurance, and more than 30 of the 77 products listed in the "Catalogue and Terms of Insurance Products Operated" on its official website are term life insurance. Previously, there were also industry data showing that the luxury barley series of term life insurance accounted for about 50% of the market share of the Internet fixed life market. Recently, under the new regulations of Internet life insurance, Huagui Life has launched four 2022 editions of term life insurance, all of which are marked as "Internet exclusive" and regulated by channels.

"In the past, an important reason for the lack of enthusiasm of life insurance companies for the term life insurance product market was that the average premium was low, the cost of sales was high, and it was not suitable for the exhibition through agents. Today, the rapid development of Internet insurance has significantly changed this situation, making it possible for life insurance companies to develop the term life insurance market," Li Wenzhong added.

"Different from financial management and savings products, term life insurance focuses on the protection value, and compared with whole life insurance products, the average premium is lower, so the sales logic of term life insurance is different from other products, and the Internet channel is one of the channels suitable for sales," Xu Yuchen introduced to Blue Whale Insurance, "Huagui Life's barley series had obvious sales performance in the early days, which is its greater strength in terms of term life insurance." From the experience of the United States, the proportion of term life insurance policies accounts for about 40% of the total number of policies, which can become a blue ocean market, but at present, there are not many companies that have achieved breakthroughs in the field of term life insurance in the mainland. ”

This article originated from Blue Whale Finance