Hong Kong-listed ZhongAn’s share price has fallen by almost two-thirds over the last 12 months.

As of Tuesday’s close, the stock was also down almost 54 percent from its HK$59.70 IPO price back in September 2017.

Asian markets have had a bearish time of late, with Hong Kong’s Hang Seng Index down about 16 percent over the past year. However, the scale of ZhongAn’s decline has raised questions about the InsurTech pioneer’s business model.

Three of the most powerful men in Chinese business launched ZhongAn in 2013. Together, the trio are known as the three Mas: Jack Ma, Alibaba CEO; Ma Huateng, founder of tech giant Tencent; and Ma Mingzhe, Ping An chairman.

Sam Radwan, CEO of consultancy Enhance International, said the initial hype around the company was not justified.

“There’s the myth and there’s the reality. The reality was clear to everyone who worked in the insurance industry in China,” he said, adding that the digital insurer made “very little impact” in its early years.

Nonetheless, ZhongAn went on to become the first InsurTech to list in September 2017 in an IPO that priced at the top of the indicative range, with the stock surging another 10 percent on the debut.

The offering was backed by SoftBank, which bought up 5 percent of the shares as a cornerstone investor.

“I was actually pretty shocked at how the IPO was priced,” Radwan told The Insurance Insider.

“The mere fact that you are an internet company does not mean that customers will flock to you.”

But flock they have. By 2018, the five-year-old insurer had 300 million customers.

From January to November 2018, the latest available data, ZhongAn had gross written premiums of 10.17bn yuan ($1.4bn), more than double the 2017 gross written premium (GWP).

But Radwan’s chief criticism of ZhongAn is that the carrier is paying costly acquisition costs to pull in those customers, which range from around 40 percent for auto business to as much as 80 percent on e-commerce goods cover.

It’s not a problem unique to ZhongAn. “Everybody in the Chinese market is paying through the nose for acquisition costs,” Radwan noted.

One of the carrier’s main tie-ups is with Alibaba’s main online shopping site: ZhongAn offers shipping return insurance for digital shoppers. Other product lines include an auto policy in a joint venture with Ping An.

ZhongAn’s losses deteriorated over 2018, with the company disclosing a loss of 666mn yuan in H1, compared with 287mn yuan in H1 2017.

Nevertheless, there’s room for optimism in the ZhongAn numbers. In H1 2018, the carrier’s combined ratio improved by 9.1 points to 124 percent, driven by a reduction in the expense ratio.

The carrier has set its sights beyond China. The company is looking at expansion into the Japanese market.

ZhongAn has also agreed a distribution deal in Southeast Asia through Grab Taxi, the owner of a ride hailing app valued at around $11bn. Chubb is providing capacity in the arrangement.

ZhongAn and Grab have a common backer: SoftBank, which is also the main investor in InsurTech royalty Lemonade.

Moreover, SoftBank’s Vision Fund, the world’s largest venture vehicle, is bankrolling ZhongAn’s global ambitions.

SoftBank and Zhong An have set up a joint venture – ZA Tech Global – to roll out InsurTech and fintech worldwide. The initiative has “an initial focus on Asia”, ZhongAn noted in its first-half report.

SoftBank, through its own balance sheet and through the sovereign wealth fund petro-dollars poured into the $100bn Vision Fund, has amassed a formidable portfolio, stretching from Uber and WeWork to US telecom Sprint.

If ZhongAn can become the go-to insurance partner for SoftBank technology businesses and the consumers they serve, it should have a bright future ahead of it.