MICT Inc (NASDAQ: MICT) has set the stage for a strong day in the market today, and for good reason. The company announced an acquisition that gives it the ability to sell a wide range of insurance products across China. Here’s what’s going on:
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MICT Announces Acquisition
In the press release, MICT said that it acquired an established Chinese insurance company as well as its trading subsidiary. The acquired company is known as Beijing Fucheng Insurance Brokerage Co., Ltd.
Through the acquisition, MICT now has a nationwide license that allows it to offer a broader range of insurance products. These products include vast and fast-growing areas like property, motor, business, life, health and reinsurance markets.
Beyond the ability to market growing insurance products, the nationwide license gives the company the ability to complete its deals with major insurers to develop new products and create tailor-made insurance products, ultimately strengthening the company’s market position and differentiating it from other platforms and brokers.
In the release, MICT went on to explain that the nationwide license gives it the ability to accelerate the onboarding of new agents onto its platform and mobile app through China and creates the opportunity to promote its platform and mobile app through partnerships with several of China’s biggest online portals and websites.
Moreover, it is expected that the license, together with new distribution channels, will give the company the ability to significantly increase its profit margins.
Finally, MICT explained that it will now be able to leverage its full range of distribution channels, including business-to-business, business-to-business-to-consumer, and business-to-consumer, all of which have the potential for rapid expansion through China’s fast-growing insurance market.
In a statement, Darren Mercer, CEO at MICT, had the following to offer:
Our insurance platform performed better than expected in December, followed by a significant escalation in the month of January. The acquisition of Fucheng and its license and permissions, constitute a dramatic step-change in the development of our insurance business. Through continued execution, we expect this business to continue its rapid growth shortly after Chinese New Year in late February, putting us well ahead of expectation.
Why This News Is Huge
First off, Fucheng is a well established company that was founded in 2004. At the moment, the company operates through several specialist departments and offices in nineteen of China’s largest cities. Some of these cities include Beijing, Shanghai, Tianjin, Nanjing, and Guangzhou.
Moreover, the license brought to the table allows MICT to sell its own insurance products across China. You see, previously, in order to sell insurance products, MICT had to team up with licensed providers, ultimately cutting into its margins. As a result of today’s announcement, the company now has the ability to sell insurance without having to team up with licensed third parties, ultimately increasing margins.
Moreover, this license also gives the company the ability to team up with large online brands in China, which sets the stage for tremendous growth. Especially when you consider the fact that the CEO of the company, Darren Christian Mercer, has a long history of working with massive online companies in China like Alibaba, JD, and several others. These already minted working relationships will set the stage for MICT to become the leader in a massive and growing insurance market.
In fact, the nascent market for insurance products in China is considered to be the second largest in the world and is growing rapidly. In fact, it has been forecast to become the number one market in the world by the mid-2030s.
With online insurance premiums in China expected to grow at a 41% annual rate between 2019 and 2024 and an estimated market size of $2.36 trillion by 2032, MICT is making waves in a massive market, and will likely reap serious benefits as a result.
Insurance is only one part of what MICT does. The company is also actively involved in the stock market in China. In fact, the company owns a subsidiary known as GFH Intermediate Holdings, which has developed a next-generation trading platform.
Last year, the company said that it expects for its trading platform to go live in the first quarter of 2021. Importantly, China shuts down for the first two weeks of February in celebration of the Chinese New Year. Following the celebration, business picks up in a big way.
Considering the timing, it makes sense that shortly following the Chinese New Year, we’ll hear about the launch of GFHI’s trading platform, which is expected to drive significant revenue for MICT.
The bottom line here is simple. MICT is firing on all cylinders. Through today’s announcement, the company has the ability to expand in a massive way, bringing insurance products to customers across China and setting the stage for significant growth and increasing margins in a market that’s expected to become the top insurance market in the world relatively soon. If that doesn’t catch your attention, I’m not sure what will! All in all, MICT is one for the watchlist.
Disclosure. CNA Finance is not a financial advisor or broker dealer. This article does not constitute a solicitation to buy any stock mentioned. The article represents the honest opinions of the author, but not necessarilly the outlet it was published on. CNA Finance has a monetary relationship with MICT. Trading in penny stocks can result in the loss of capital.