AI And Blockchain Expansion Will Drive Long Term Health Insurance Platform Upside

Catalysts

About Health In Tech

Health In Tech operates a technology driven health insurance marketplace that connects brokers, TPAs, carriers and employers of all sizes through an AI enabled underwriting and claims platform.

What are the underlying business or industry changes driving this perspective?

• Rapid expansion into the large employer segment through the enhanced eDIYBS platform, including bindable quotes for groups of 150 or more employees in as little as two weeks, is expected to increase total addressable market, premium volume and top line revenue over the next several years.
• The launch of the 3 year rate hold product amid persistent health care cost inflation provides brokers and large employers with a differentiated cost stability solution, which may support higher win rates, stronger retention and improved earnings visibility and net margins as the portfolio scales.
• Co development of HITChain with AlphaTON to digitize and automate claims workflows in a market with more than $300 billion of administrative costs can create new high margin revenue streams from carriers, TPAs and health plans while structurally lowering Health In Tech’s own processing costs and enhancing operating margins.
• A growing broker, TPA and agency network, now 849 partners and rising, combined with increased quote velocity per underwriter, positions the company to pursue distribution driven growth with minimal sales headcount expansion, potentially improving sales efficiency and sustaining attractive EBITDA margins.
• Elevated brand visibility and strategic relationships from hosting the InsurTech Summit at Davos and leading conversations around AI, digital health and blockchain may catalyze partnerships with larger insurers and institutional clients, potentially accelerating enterprise deal flow and supporting long term revenue and earnings growth.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Health In Tech's revenue will grow by 48.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.7% today to 24.7% in 3 years time.
• Analysts expect earnings to reach $24.6 million (and earnings per share of $0.42) by about December 2028, up from $1.4 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 14.4x on those 2028 earnings, down from 42.0x today. This future PE is greater than the current PE for the US Insurance industry at 13.4x.
• Analysts expect the number of shares outstanding to grow by 4.2% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.96%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The 3 year rate hold program commits Health In Tech and its carrier partners to fixed pricing during a period of structurally rising medical and pharmaceutical costs. If underlying claims inflation or adverse medical trends outpace the assumptions embedded in the underwriting models, the company could face pressure to subsidize unprofitable groups, which would compress net margins and earnings over time.
• Expansion into the large employer segment and reliance on complex medical management programs require flawless execution over multiyear benefit cycles. If brokers are slow to adopt the enhanced eDIYBS platform or the programs fail to deliver expected health outcomes, enrollment growth could stall and the contribution from larger groups could be lower than anticipated, limiting revenue growth and operating leverage.
• The HITChain blockchain initiative targets a massive but highly regulated claims processing market, and previous failures by larger players suggest significant adoption, interoperability and governance challenges. If carriers, hospital systems and administrators are reluctant to overhaul legacy systems or regulators tighten controls on blockchain and tokenization, potential new fee income streams and cost savings could fall short, weighing on future revenue and profitability.
• Health In Tech is leaning heavily on AI driven automation, capitalized software development and external partners such as AlphaTON to scale its platform. If technology projects are delayed, underperform or require more in-house spend than planned, the company may need to increase operating and development expenses, reducing operating leverage and dampening EBITDA and net income growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $4.5 for Health In Tech based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $99.7 million, earnings will come to $24.6 million, and it would be trading on a PE ratio of 14.4x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $1.06, the analyst price target of $4.5 is 76.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.