By Julie Zhu and Elzio Barreto
HONG KONG (Reuters) - Zhong An Online Property and Casualty Insurance plans to sell 5-10 percent of the company to a couple of strategic investors, to raise up to 10 billion yuan (1.2 billion pounds), ahead of a planned initial public offering in mainland China, according to four people with direct knowledge of the matter.
China's first internet-only insurer, whose current major shareholders include two of China's largest Internet companies - Alibaba Group's (N:BABA) Ant Financial affiliate with 16 percent and Tencent Holdings Ltd (HK:0700) with 12 percent – is in early talks with potential investors, according to the sources who declined to be named.
The investors would be expected to commit at least 1 billion yuan each and the new funds would be used by Zhong An to expand its business and buy time before securing a green light from regulators for the IPO, one of the people said. The company’s proposed valuation for the offering has yet to be decided, the sources said.
Reuters could not immediately learn the identity of the prospective investors.
A spokeswoman for Zhong An in Shanghai declined to comment on the company's fundraising plan. Tencent and Ant Financial didn't immediately reply to Reuters requests for comment.
The company says it offers more than 300 insurance products and has written more than 7.56 billion policies for more than 535 million customers.
FLIGHT DELAYS
China's securities regulator is considering offering a shortcut for some of the country's largest technology companies, including Zhong An, to list at home, allowing them to jump a long line of applicants seeking approval for IPOs.
Zhong An was founded in November 2013 by Alibaba's Executive Chairman Jack Ma, Tencent's Chairman Pony Ma and Ping An Insurance Group Co of China Ltd (HK:2318) Chairman Ma Mingzhe. Ping An retains a 12 percent stake.
When consumers buy products online on Alibaba or other companies' platforms, they can choose to buy insurance that will cover the shipping costs in case they want to return the goods later. That type of shipping return insurance was Zhong An’s main product last year, accounting for 50 percent of its business, Zhong An's Chief Operating Officer Wayne Xu said at a presentation in Hong Kong in November.
That was followed by insurance against flight delays that people can buy when they purchase tickets at online travel agencies to deal with a common headache for travellers in China, he added.
In 2015, Zhong An raised 5.78 billion yuan from a group of investors that included Morgan Stanley (N:MS), domestic investment bank China International Capital Corp Ltd (CICC) (HK:3908) and private equity firms CDH Investments and SAIF Partners. The fundraising valued it at about $8 billion at the time.
Zhong An is among several Chinese financial technology companies tapping investors for pre-IPO financing to fund expansion as consumers move more of their banking, payments, investing and insurance online.
Ant Financial, the world's most valuable fintech company, last year raised $4.5 billion in a financing round, one of the biggest for a private internet company.
In January 2016, Lufax, China's biggest peer-to-peer lending and wealth management platform, raised $1.2 billion, while JD Finance, the finance subsidiary of online direct sales firm JD.com (O:JD), raised $1 billion.
($1 = 6.8954 Chinese yuan renminbi)