New stocks outlook | Shouhui Group submits three consecutive years of losses: losses of 494 million yuan over two years. The "separation of banking and insurance" policy has become a high commission "roadblock".

Benefiting from technological innovation, the internet insurance industry has made breakthrough progress in accurate customer targeting, and reducing operating costs. It is expected that in the next five years, the annual growth rate of internet insurance will remain between 15% and 20%, and the total industry premium is expected to exceed one trillion yuan. Internet insurance development is thriving, with competitors in the race expanding market through traffic and scene exploration. For example, Ant Insurance has launched mutual aid plans and built insurance malls based on extensive traffic; Waterdrop Mall has built a "fundraising + mutual aid + insurance" closed loop based on traffic pools; HuiZe Net has utilized underlying databases to build a matrix-style media marketing system; ZA ONLINE has laid out scenario-based operations and gradually established its own platform. As core participants, intermediary sales platforms form a B2B2C structure, including typical insurance malls like Ant Group, HuiZe Net, and Little Umbrella, as well as more distinctive customized platforms such as Wukong Insurance, which can directly reach consumers for sales. According to statistics, online intermediaries dominate the personal insurance intermediary market in China, accounting for 89.1% of the total premium in the personal insurance intermediary market in 2023. On March 7, 2025, Shouhui Tech Limited, the parent company of Little Umbrella, submitted an IPO application to the Hong Kong Stock Exchange, with plans to list on the main board with China International Capital Corporation and Huatai International as its joint sponsors. This is the company's third IPO application, having first applied on January 12, 2024, and then again on July 30, 2024. Behind the three applications, revenue fluctuations have decreased, and the company has been in continuous losses for two years. Is Shouhui Group facing development challenges despite the high growth in the industry? Significant revenue fluctuations Loss of 494 million yuan in two years According to the prospectus, Shouhui Group is a Chinese personal insurance intermediary service provider dedicated to providing insurance services and solutions to insurance customers online through digital personal insurance transaction and service platforms. The company mainly provides personal insurance products, including long-term life insurance, long-term critical illness insurance, long-term medical and other insurance, and short-term insurance products. Since its establishment in 2015, the company has distributed over 1,900 products, including over 280 customized products and over 1,600 existing products from insurance companies. As of December 31, 2024, there are 306 products currently on sale, with over 14 IP incubated successfully on the company's platform. In terms of distribution channels, Shouhui Group distributes personal insurance products through three distribution channels facilitated by three platforms. The first is direct distribution on Little Umbrella, the second is distribution through insurance agents on KaCha Insurance, and the third is distribution through NiuBao100 with the assistance of business partners. From 2022 to 2024 (referred to as the reporting period), revenue from NiuBao100 contributed over 60%, amounting to 524 million yuan, 1.101 billion yuan, and 865 million yuan, accounting for 65.4%, 67%, and 62.6% of total revenue respectively. According to Frost & Sullivan data, based on the total premium of the personal insurance intermediary market in China in 2023, the company ranked eighth with a market share of 2.9%. Based on the total premium of long-term personal insurance in 2023, the company is the second-largest online insurance intermediary in China with a market share of 7.3%. Based on the first-year premium of long-term personal insurance in 2023, the company is the second largest online insurance intermediary in China. In terms of performance, during the reporting period, the company's revenue was 806 million yuan, 1.634 billion yuan, and 1.387 billion yuan respectively, with profits of approximately 131 million yuan, -356 million yuan, and -136 million yuan. In summary, the company's revenue fluctuated significantly, and the company has been in continuous losses for two years, accumulating nearly 500 million yuan in losses. It is worth noting that many insurance technology companies, including those that have submitted IPO applications, have been in a state of loss. For example, Hengguang Holdings, Zhibao Technology, and others are still hovering around the breakeven point or continuing to incur losses, with only a few like Zhongmiao Chuangke achieving profitability. In terms of product distribution, life insurance and critical illness insurance are the company's main revenue drivers. During the reporting period, revenue from life insurance was 401 million yuan, 969 million yuan, and 465 million yuan, accounting for 50%, 59.4%, and 33.8% of total revenue respectively; revenue from critical illness insurance was 331 million yuan, 441 million yuan, and 475 million yuan, accounting for 41.3%, 27.1%, and 34.5% of total revenue respectively. It is worth noting that the drastic fluctuations in revenue from life insurance have resulted in corresponding fluctuations in the company's total revenue. In 2024, revenue from life insurance was nearly halved. The company cited the decrease in revenue from long-term life insurance mainly due to reduced demand for long-term life insurance products caused by the overall economic slowdown and insurance companies reducing the expected return rates on long-term life insurance products in response to the 2024 interest rate cut in China, as well as controlling the risk of costs exceeding income due to payments to policyholders for returns and other costs. Delving into its operating costs, we can see the reasons why Shouhui Technology has been stuck in a loss cycle. According to the prospectus, from 2022 to 2024, Shouhui Technology's operating costs accounted respectively for 65.2%, 66.2%, and 61.9% of total revenue. During this period, the company's commission expenses were 335 million yuan, 519 million yuan, and 479 million yuan, accounting for 63.7%, 47.9%, and 55.8% of total operating costs for the same period. In addition, the company's channel promotion fees paid to self-media traffic channels during the same period were 150 million yuan, 503 million yuan, and 322 million yuan, accounting for 28.6%, 46.5%, and 37.5% of total operating costs respectively. Insurance intermediary platforms have long relied too much on third-party traffic platforms, but the current internet platform is no longer in its infancy. With internet traffic peaking and customer acquisition costs rising, these factors are squeezing the profitability of insurance intermediary platforms, including Shouhui Group. High commissions have encountered a "roadblock." From the market development perspectiveFrom the trend perspective, the online life insurance intermediary market in which Shouhui Technology operates is definitely a high-growth track.According to Frost & Sullivan data, the total premium of China's online life insurance market reached 550 billion yuan in 2023, with a compound annual growth rate of 31.1% from 2019 to 2023. It is estimated that by 2028, the market size will reach 2015 billion yuan, with a compound annual growth rate of 29.7% from 2023 to 2028. Relying on the double high-speed development of the Chinese online life insurance market, the growth rate of the online life insurance intermediary market size is even more prominent. It is estimated that by 2028, online intermediaries will contribute a total premium of 1.031 trillion yuan to the Chinese life insurance market, with a compound annual growth rate of 37.3% from 2023 to 2028. The high growth trend of the industry is obviously bringing many opportunities for Hand Back Technology's subsequent development, but it is important to note that the current online intermediaries are facing the development risk brought by the declining commission rate due to the "integration of underwriting and distribution" policy. This is policy-driven and an inevitable growth obstacle. Especially with the advancement of underwriting and distribution integration and de-intermediation, insurance technology companies are seeing a sharp decrease in commission income from insurance companies. The "integration of underwriting and distribution" aims to standardize the pricing of insurance companies, requiring their declared pricing assumptions to be consistent with actual operational data, eliminating channel interest transfers, and strictly controlling commission rates. This policy has directly led to a general reduction in commissions when insurance companies sign new contracts. The average first-year commission rate for Hand Back Group's long-term life insurance products decreased from 31.7% in 2023 to 21.5% in 2024. To make matters worse, the pressure of declining commissions is likely to continue. Regulatory authorities have clearly stated that they will continue to strengthen channel fee rate regulation, and insurance companies, under the background of pressure on investment returns, will inevitably further compress intermediate costs to ensure their financial health. Another aspect of the industry's high growth trend being strongly associated with regulatory policy is that insurance technology companies have a relatively single business model, with commission income still being the main source of revenue, and income related to insurance technology services can be almost negligible. For example, in the third quarter of 2024, Hui Ze's commission income accounted for approximately 97% of revenue; during the same period, Shui Di Company's brokerage business revenue accounted for 85%; Che Che Technology accounted for about 99%. When commission income still dominates revenue, the "technology narrative" of insurance technology companies seems to be facing difficulties. In terms of valuation in the capital market, the valuation positioning of insurance technology companies is much lower than the average level of information technology stocks, and even lower than the average level of financial stocks in most cases. Hand Back Group also mentioned risks in its prospectus, stating that since the company's revenues from distributing insurance products to insurance clients are based on premiums and commission rates set by insurance companies, any decrease in these commission rates or any increase in commission expenses or channel promotion expenses may adversely affect the company's business performance. However, the consistently high net debt levels have prompted Hand Back Group to seek external financing to supplement its capital chain. According to the prospectus, the company's net current liabilities were 573 million yuan, 1.018 billion yuan, and 1.301 billion yuan respectively during the period, and the net liabilities were 374 million yuan, 626 million yuan, and 740 million yuan respectively. In addition, the company's net cash used in operating activities in 2024 was negative 17.515 million yuan, indicating a negative operating cash flow. All of the above situations indicate that the company faces the risk of a shortage of working capital. In conclusion, although Hand Back Group has achieved a certain scale in the online insurance industry, in order to enter the Hong Kong stock market, it needs to face multiple challenges such as unstable performance, inability to hide losses, and single business model. With the pressure of declining commissions, regulation, and multiple pressures from shareholders, capital may not wait for a significant improvement in performance in the short term.