Shuli Ren is a Bloomberg Gadfly columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.

Don't say he never does anything for you, Hong Kong. Three years after snubbing the territory in favor of New York for the listing of Alibaba Group Holding Ltd., billionaire Jack Ma is handing the loser its most exciting initial public offering in years.

Just like Alibaba's record-breaking IPO, everyone wants a piece of ZhongAn Online P&C Insurance Co. On Monday, the first day of orders, retail investors took out more than $6.7 billion of loans to buy the shares, subscribing for 87 times the number available to them, the Hong Kong Economic Times reported.

ZhongAn's operational problems have been documented by my Gadfly colleague Nisha Gopalan. The company faces severe key-customer risks. Will Alibaba, the insurer's biggest shareholder and source of almost half of its premiums last year, still prop up ZhongAn when it gets its own online insurance license?

The insurer's expense ratio is also rising, a sign that it has little bargaining power over clients. For instance, ZhongAn has to pay 80 percent of premiums earned from International Ltd. to the online travel agency.

Paying for Growth
ZhongAn's expense ratio is rising despite fast premium growth
Source: Company filings
Note: 2017 data are for the first three months.

Valuation is another challenge. ZhongAn is priced more like a tech firm than an insurance company, and with the profitability of a startup to match: It sees a net loss for 2017.

Priced Like a Tech
ZhongAn is a lot more expensive than other property and car insurers
Source: Bloomberg Intelligence

So why the rush?

Despite recent regulatory setbacks, Alibaba affiliate Ant Financial and Lufax, the fintech arm of fellow ZhongAn backer Ping An Insurance Group Co., still want to go public next year. Right now, the big guys just need to float the smaller company first (ZhongAn's initial market cap will be little more than $10 billion), get the market excited about fintech and then introduce the real blockbusters. 

ZhongAn's valuation will be an important benchmark for the upcoming IPOs. There's a lot riding on the insurer's shares having a good performance in the coming year.

Chairman Yaping Ou's knowledge of the Hong Kong market will help, too. A close friend of Jack Ma and Tencent co-founder Ma Huateng, Ou is the largest shareholder of Sinolink Worldwide Holdings Ltd., a Chinese real estate developer, and of EnerChina Holdings Ltd., which has a brokerage license. Since 2003, Ou has become a substantial shareholder in at least a dozen Hong Kong-listed companies, disclosures to Hong Kong Exchanges & Clearing Ltd. show.

On the positive side, ZhongAn still has less than 1 percent of China's insurance market despite its rapid growth. Its proprietary technology platform can process about 13,000 policies per second, according to the company's prospectus. Tencent and Alibaba, the two biggest shareholders, may not have reached that kind of technical edge yet, says Smartkarma analyst Ke Yan.

Premium Growth
ZhongAn increased its premium income by 90 percent in the first half
Source: China Insurance Regulatory Commission

The real risk for ZhongAn is, of course, when its backers get their own online insurance licenses. But that's some way down the road. In the meantime, retail investors will be happy to hop on for the ride, just as Americans rushed for Alibaba shares precisely three years ago. Those who got on that bandwagon and held until now have made 165 percent.

Liquidity is key in the Hong Kong market, and there's a torrent behind ZhongAn's offering. If you don't want to ride this wagon, at least don't short it. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Shuli Ren in Hong Kong at

To contact the editor responsible for this story:
Matthew Brooker at