ZhongAn Online P&C Insurance Co., Ltd. (6060.HK), a leading insurtech company in China, has reported a notable year-on-year increase in gross written premiums (GWP) and underwriting profits during its 2023 annual earnings call. General Manager Jiang Xing highlighted the company's decade-long journey, culminating in a GWP of RMB 29.501 billion, marking a 24.7% increase from the previous year. ZhongAn maintained a combined ratio of 95.2%, signifying profitability in its underwriting operations for the third consecutive year.
The company's technology export business also saw a 40% revenue increase, reaching RMB 829 million. ZhongAn's focus on integrating technology with insurance, commitment to ESG principles, and expansion into new markets, including Hong Kong with ZA Bank, have contributed to a comprehensive digital transformation strategy aimed at creating value for users, shareholders, and society.
Key Takeaways
- ZhongAn achieved a 24.7% year-on-year increase in total PNC GWP, reaching RMB 29.501 billion in 2023.
- The company maintained a combined ratio of 95.2% and reported underwriting profit for the third year in a row.
- Technology export business revenue increased by 40% year-on-year, totaling RMB 829 million.
- Proprietary channels grew by 31%, generating a total premium of RMB 7.6 billion.
- ZhongAn's four major ecosystems—health, total lifestyle, consumer finance, and auto insurance—demonstrated strong growth.
- The company is committed to ESG principles, launching over 50 green insurance products.
- ZA Bank, ZhongAn's virtual bank in Hong Kong, reported significant growth and was recognized as the best mobile banking app in Asia.
- ZhongAn reported a net profit of CNY 3.845 billion in 2023, with a net profit attributable to equity holders of CNY 294 million.
Company Outlook
- ZhongAn plans to continue its growth and profit margin maintenance, focusing on empowering financial services with technology.
- The company aims to expand its presence in the Hong Kong market, leveraging its collaboration with notable partners like Alibaba (NYSE:BABA), Tencent, and Ping An.
- ZhongAn is committed to innovation across various ecosystems and is confident in sustaining long-term growth and profitability.
Bearish Highlights
- The consumer finance sector experienced slowed growth in the latter half of the previous year, though it remained profitable and above industry average.
- The company reported a decrease in its core service ratio to 129%, partially due to the exclusion of ZhongAn International.
Bullish Highlights
- ZhongAn's accidental insurance sector has served over 1.5 million drone owners and over 500,000 households.
- The auto insurance segment is recognized for its potential growth, particularly in new energy vehicle insurance products and services.
Misses
- Despite overall growth, the consumer finance sector's growth decreased in the second half of the previous year.
Q&A Highlights
- The company discussed its focus on sustainable growth and creating new customer experiences and products.
- Strategies for proprietary channels and technology investments were also covered, with a focus on AI applications and platforms.
- Investment priorities include fixed income investments and exploration of higher dividend assets.
ZhongAn's earnings call underscored its robust financial performance and strategic initiatives aimed at reinforcing its market position. The company's dedication to technological innovation, customer-centric product development, and sustainable practices have paved the way for continued success in the insurtech industry.
Full transcript - None (ZZHGF) Q4 2023:
Operator: Good afternoon. Welcome everyone to attend this 2023 Annual Announcements of ZhongAn Online. [Operator instructions]. And also before the end, there will be Q&A. [Operator instructions] Now I'll give the floor to the first speaker, Zhang Lin.
Zhang Lin: [Interpreted]. Distinguished investors, analysts and media friends, good afternoon. Welcome everyone to attend this 2023 annual announcements of ZhongAn Online. I am the director of IR, Zhang Lin. First of all, I'll be introducing the management from ZhongAn Online. General Manager and CEO, Mr. Jiang Xing from ZhongAn Online, CFO and Chief Investment Officer, Mr. Li Gaofeng, and Executive Vice General Manager and Secretary of the Board, Wang Min and also Xu Wayne. The Director and President of ZhongAn International. Now I'll give the floor to the first speaker, Jiang Xing?
Jiang Xing: [Interpreted]. So good afternoon, dear friends and media friends and investors and analysts. My name is Jiang Xing, the General Manager of ZhongAn Online. Welcome everyone to attend this 2023 annual announcements of ZhongAn Online. And thank you very much for your support and also attention to ZhongAn. The year 2023 holds a special significance for ZhongAn as it marks the 10th anniversary of the company. There's a nation in China saying that it takes 10 years to sharpen the sword. Over the past decade, we have transformed from the child learning how to walk and gradually explored to become the ninth largest PNC insurance company in terms of premium volume in China. Throughout these 10 years, ZhongAn has consistently adhered to the mission of empowering the finance with technologies and providing insurance service with a caring hand to contribute to deepen our understanding and application of technology in finance. We adhere to dual engine strategy of insurance plus technology, deeply integrating technology with insurance throughout the entire process, while at the same time also driving the digital transformation of the global insurance industry. Over the past 10 years, we have issued over 64 billion policies and served over 500 million users. Last year, we were listed for the first time in the Fortune China 500 ranking for 2023, becoming the only Insuretech company to be selected. Next, I'll be sharing with you the specific achievements of the company in 2023. In 2023, amidst a complex international environment, the overall Chinese economy showed a science of recovery and improvement. Despite the ever-changing economic landscape, we boldly moved forward. In 2023, we achieved a total PNC GWP of RMB 29.501 billion, representing a year-on-year increase of 24.7%, almost 25% already. And also, you can see that securing the top market positioning in internet PNC insurance sector, starting from January of 2023, we adapted to the new insurance contract accounting standard, a IFRS 17. On this new standard, the revenue from PNC insurance service amounted to RMB 27.521 billion, a year-on-year increase of 24.2%. Upholding our cooperation philosophy centered around users and effective branding, our proprietary channels achieved a total premium of RMB 7.6 billion, with a year-on-year growth rate of 31%, surpassing the overall company's GWP growth rate. In 2023, we continue to implement our strategy of sustainable growth rate quality, maintaining a combined ratio of 95.2% and achieving the underwriting profit for three consecutive years, surpassing the industrial average. Our overall investment income significantly improved compared with the previous year. As a result, the insurance business admin achieved a net profit of RMB 554 million, successfully turning losses into profits. And at the group level, we achieved a net profit attributable to the parent company of RMB 4.078 billion in 2023, including approximately RMB 3.784 billion of one-time investment income. So the adjustment was made because Dong Wan International ceased to be a subsidiary of the company from August 14th of 2023 and was no longer accounting as the equity method investee. So we actually, this one-time investment income and then we adjusted net profit attributable to the parent company was RMB 2.94 billion, also turned around into profit compared to the previous year. Meanwhile, the overall asset quality remained solid and our solvency was robust, earning us a rating of Moody's (NYSE:MCO) BAA1 with a positive outlook and also AM Best, A- with a stable outlook from the international rating agencies. As one of the Dong Wan's strategic engines, our technology business also made breakthroughs last year, benefiting from recovery of domestic economy and the ongoing digital transformation of the global financial industry. Our total revenue from the technology export business reached RMB 829 million, a year-on-year increase of 40%. So our virtual bank in Hong Kong, ZA Bank, also continued its rapid growth momentum, achieving a net income of 366 million HKD in 2023, a year-on-year increase of 2.9%. Over the past 10 years, we have been providing users with various types of insurance, covering scenarios such as e-commerce and travel, starting from internet platforms. And through this high-frequency products and services, we have gained consumer recognition and trust in Dong Wan brand. In recent years, we have increased the investment in building the Dong Wan brand while vigorously developing the proprietary channels. So the aim is to deliver the caring hand and service of Dong Wan directly to our users throughout app and nearly 30 proprietary channels and also private domains. So we are here a long term philosophy of managing and developing Dong Wan's proprietary channels. And we strive to provide users with convenient and affordable comprehensive protection for their lives. In 2023, the GWP of our proprietary channels reached a RMB 7.614 billion, while the total premium contributed further increasing to 25.8%. The number of paying users grew by 47.6% to 11.36 million with an average premium per capita of RMB 670. And we have enriched the product matrix of our proprietary channels, upgrading services around the four major ecosystems, including the medical health, family and pets, and to better provide the value to users. The proportion of repeated users premiums in the proprietary channels premium reached 39% with an average policy per person of 1.6. Moreover, the neural rate increased by 3.3 percentage points to 88.3%. In the future, we will continue to upgrade the products and services of our proprietary channels and making Dong Wan brand even more deeply integrated into people's mindsets. And next I would like to introduce to you the main operational achievements for a four major ecosystem is in 2023. The first one is about health ecosystem. In 2023, we achieved the GDP of RMB 9.806 billion, a year on year increase of 9.2%. Among them, our flagship health insurance product, personal clinic policy has contributed and continued to iterate and innovate since its launch, meeting the users constant upgrading and personalized health needs, demonstrating a strong vitality. So in 2023, so you can see that the total premium of the RMB 1 million medical insurance represented by personal clinical policy increased by 14.4% year on year reaching RMB 6.515 billion in total premium. Among them, the zero deductible version, personal clinic policy provides users with practical protection through more flexible product combinations and has been well recognized. So while the personal clinic policy continues to penetrate into the mass market, we have observed the specific needs of the segmented consumer targets and the high end version and medium to high end version of personal clinic policy launched last year, focusing on people with medical upgraded needs, so achieving a rapid premium growth, also upon its launch. So apart from this flagship product, in 2023, our short term clinical illness insurance product has also become popular for meeting the consumer's insurance protection needs. And also it became another blockbuster product with an annual TWP breaking RMB 1 billion reaching RMB 1.341 billion in the TWP and a year on year growth of 130.6%. Additionally, our outpatient insurance products, which inevitably integrate online consultation, medication purchase and offline medical services through internet hospitals experience in 2023 a total premium growth of 157.3% and in 2023 reaching RMB 327 million. In the health ecosystem, the number of paying users reached 19.96 million in 2023, a year on year growth of 23.6%. Upholding our initial aspiration of providing health insurance for 1 million people by the end of 2023, we have provided the health protection to over 125 million insured. Next to the total lifestyle ecosystem in 2023, we had a breakthrough of RMB 10 billion threshold achieving a TWP of RMB 12.563 billion with a strong year on year growth rate of 41.6%. We actively embrace the evolution and development of e-commerce formats, providing products covering various types of e-commerce scenarios such as platform-based or live streaming, short videos and private domains. Leveraging our technology capabilities and product development expertise, we introduced the products covering the entire e-commerce value chain including return shipping insurance, product quality assurance, amount security and also logistics guarantees for instance. In 2023, the total premium growth rate of our e-commerce business reached 25.3%, reaching RMB 6.593 billion. Also at the same time last year, with the rapid recovery of domestic tourism industry, the aviation and travel business sector also benefited from the industrial revival. Our aviation and travel business achieved a total premium of RMB 3.242 billion, a year on year growth of 89%. And we cover the major OTA platforms as well as the other specialized apps of airlines, providing travel protection for over 70 million travelers. So apart from the e-commerce and travel, in the ecosystem we're also having innovative business, achieving a GWP of RMB 2.728 billion, representing a year on year growth of 43.8% and increasing their proportion to 22% of the total premium against the digital lifestyle ecosystem as a whole, so one of the important products is the pet insurance. And last year we had RMB 500 million in terms of the total transaction volume with the growth rate of exceeding 150%. And also in total, we have served over 4.645 million pet owners, mainly driven by an increasing level of pet memorization, leading to a higher average spending per pet. In terms of the product offerings, in addition to pet medical and accidental coverage, we have collaborated with the ecosystem partners to launch various innovative insurance products such as the chronic pet disease and pet food safety, for instance. This expansion has broken the boundary to both our company and industry. Also, we have been partnering with nearly 14,000 offline pet hospitals and service institutions. In our innovative business endeavors, we, apart from the pet insurance, are closely following the development trends of the new consumption patterns, exploring new growth trajectories within the digital lifestyle ecosystem. We have achieved breakthroughs in accidental insurance, like volumes for lifestyle and fashion, as well as sports and other scenarios. We have provided various services, including liability insurance and quality insurance to over 1.5 million drone owners. And additionally, our service-oriented home insurance and also has serviced over 500,000 households. Also, we have joined the Shanghai Family Insurance Alliance, a customized and inclusive home insurance initiative in Shanghai to better meet the practical needs of Shanghai residents and newcomers, thus promoting the inclusive insurance practice. Next, take a look at the consumer finance ecosystem. And we focus on quality customers in small and dispersed internet scenarios. In 2023, our total premium, or GDP, of our consumer finance ecosystem reached RMB 5.551 billion, a year-on-year increase of 22.5%. And we constantly and consistently adhere to a strategy of prudent and steady development and strictly enforce the rigorous risk control standards and also dynamically adjust our risk reserves based on the macroeconomic conditions. This approach has sustained the underwriting profitability in our business. And additionally, we offer insurance products from other ecosystems to users within the consumer finance ecosystem and meeting their comprehensive protection needs. So last but not least, we are talking about the auto insurance ecosystem and that we achieved the GDP of RMB 1.58 billion for the year, with a year-on-year growth of 24.7%. And we actively embrace the opportunities and policy dividends of new energy vehicle insurance, providing insurance products and services for new energy vehicle owners from over 100 brands. And also, this has injected a new momentum into the overall growth of automotive insurance. In 2023, the GDP of new energy vehicle insurance grew by over 196% compared to the previous year. And also, we are providing comprehensive services to vehicle owners, including the coverage for driving accidents and aftermarket service and also videos, claims, et cetera, offering them with more comprehensive and integrated services. Although we already talked to you about the four ecosystems, and next, I would like to share with you our practice in ESG, so although a property insurance product provides a short-term protection within a year, our business philosophy and interaction with users are focusing on a long-term fashion. So we also integrate the ESG principles and the United Nations Sustainable Development Goals into Taiwan's business development and practice in environment protection and social responsibility. Specifically, we have launched over 50 green insurance products covering different areas, such as new energy, environment protection, and photovoltaics, with a risk coverage amounted to RMB 20 billion. And in terms of the protection provided to SM micro and small enterprises, we offer 95 products covering various potential risks in their operations. And our blockbuster product, the Dian Dian Bao, has insured over 14,000 micro and small enterprises and spanning multiple industries. In the inclusive insurance field, we have developed more protection products covering groups such as the chronic illness of patients and women and elderly and children. Our online operation model in the insurance technology enables us to conduct the business with lower carbon emissions, contributing to carbon neutrality. And our ESG rating has also steadily improved in recent years. In the future, we will further implement the joint sustainable development strategy to create more value for users, shareholders, and also the society as a whole. Now, I would like to invite, this is the end of my talk, and I will invite Wang Ming to introduce the progress of our technology segment.
Wang Min: [Interpreted]. Thank you very much, Jiang Xing, for your sharing. And next, I'll be delving to the progress of our group in technology research and development as well as technology export. We are strategically positioned ourselves in the cutting edge technologies such as artificial intelligence, reshaping various aspects of the insurance value chain through technology, leveraging our solid foundation in AI. Cumulatively over the past decade, in 2023, we released the first AI and general insurance, AIGC application, a white paper in domestic insurance industry. This white paper delineates over 30 specific application scenarios and points of AIGC application in the insurance field. Also, at the same time, we have produced the two-on-one capabilities and launched the AIGC middle platform, LingXi, as well as the operational analysis platform featuring dialogue generation AI and dev pilot, which enhances the code export efficiency. AI has improved efficiency across various aspects with our organization, including product development, marketing risk control, and management and daily operations. In terms of customer service, we utilize AIGC to construct intelligent customer service system based on the customer intent. Personalized services are provided, resulting in faster and more customized responses. By embedding AIGC into our online customer service, we have been at average time saving of over 10 seconds per person and session, while also assisting in identifying the high-risk customers and reducing complaints rate. And on the marketing front, AIGC enables the rapid generation of promotional videos, enhancing the video production efficiency and reducing the costs. With the assistance of AI code helpers and assistants, the development efficiency within the group has increased by over 20% within six months. And we firmly believe that through this continuous investment in AI, ZhongAn will definitely maintain our leading positioning in this area. In 2023, our technology export business experienced a remarkable growth with an overall revenue growth rate of a region 40%, and also the total revenue of the technology export within the group reaching CNY 829 million. We signed the contracts with 101 domestic and foreign clients along the industrial chain and are successfully assisting them in achieving digital transformation. By the end of last year, our technology business had a cumulative service of 848 clients from various industries. Additionally, we broke through industrial barriers, signing contracts with 12 clients from the banking and securities industry throughout the year. We are actively expanding into non-financial industries, providing ZhongAn's general software and solutions. So we deeply understand that digital transformation is an inevitable trend of the industry and a key factor in housing our competitiveness. So at the beginning of 2023, also we hope that we are going to comprehensively create more values with our users. And in the beginning of 2023, with the entrance of the overall layout plan of building digital China by the state council, the construction of digital China was proposed as an important engine for promoting Chinese-style modernization in the digital era. By 2025, a horizontally interconnected and vertically integrated and well-coordinated integrated development pattern will be formed and making significant progress in the construction of digital China. Our technology export business focuses on the exploration and also research on this cutting edge technologies, such as artificial intelligence, big data, cloud computing, et cetera. Leveraging the advantages of ZhongAn's ecosystem and validated through practical business operations, we have established a value delivery system based on the technology and service. So in 2023, our domestic technology export business grew by over 70% compared to the previous year. And also we signed contracts with 91 clients along the industrial chain with over 30 clients have contracted amounts exceeding CNY 1 million, four clients exceeding 10 million in terms of the value of contracts. So these achievements are really remarkable and are truly the best against our history. So we do have three series for our products, business production series, business growth series and digital infrastructure series, covering the entire business process of insurance industry comprehensively in 2023, our next generation property insurance core system MATE has been successfully launched and used by multiple PNC companies in China. In the field of data, we have collaborated with several life insurance companies to develop data platforms and intelligent data solutions, providing services such as data planning, data governance and data platform construction. Starting from 2023, the insurance industry began implementing the new insurance contract standard IFRS 17 integrated platform and our independently developed system has been successfully operational for two years. In 2023, we prototyzed this IFRS 17 integrated platform for external output and assisting many insurance companies, including the Mitsubishi Insurance and other general China insurance and KBA insurance, et cetera. So in the future, we are going to continuously leverage the technology power of ZhongAn to contribute to the development of digital economy and construction of digital China. This is pretty much my part. And next, I'll hand over to Wayne of introducing the development of international, ZhongAn International, please.
Wayne Xu: [Interpreted]. Thank you very much Wang Ming for your introduction about the ZhongAn technology. So next I'll be introducing to you the business of the international technology export through the ZA Tech. We were founded in 2018 and headquartered in Singapore. ZA Tech focuses on exporting the advanced insurance core systems and digital insurance technology expertise to overseas insurance companies and intermediaries. And also it is committed to setting new standards for global digital insurance technology. Currently ZA Tech business footprint expands across Japan, Southeast Asia, Hong Kong and Europe. And ZA Tech has built a global digital operating system for insurance industry, servicing clients categorized into insurers and internet platforms. And through this unique cloud native and modularized and no code or no code digital solutions, including the insurance core systems, distribution systems, customer data platforms and AI solutions, it provides digital infrastructure support for various insurance business models, all insurance product lines and every aspect of the end to end insurance business value chain. For the insurance companies clients, our next generation distributed the insurance core system graphene, can assist them in locally connecting various ecosystem partners to launch the fragmented and scenario based insurance products tailored to the local environment. So for the internet platform and clients, we provide the low code insurance distribution solution Fusion, which helps the internet platforms offering more value added services to their end users and improve the traffic monetization efficiency. In 2023 July, our core system product graphene successfully entered the track of the traditional core business systems and was deployed for one of the leading insurance companies in Central and Eastern Europe and assist them in achieving full coverage of traditional car insurance end to end functionalities seamlessly, supporting five countries in Europe market and we're going to have a very rapid replication and development deployment. Not only it is about this, but also we would like to establish an ecosystem based on insurance operation systems for mutual benefits. For instance, in 2023, through the strategic collaboration with leading traffic channels in Japan, we generated positive network effects by establishing strategic partnership with the major traffic channels in Japan through our insurance distribution platform Fusion, targeting the insurance intermediaries and also similar to attract top tier insurance companies in Japan to launch the product on leading e-commerce platform like Yahoo Japan and leading the e-wallets like PayPay through their four stack core system product graphene. So this arrangement not only attracted the new insurance company clients through the broad traffic channels, but also helped to expand the client base of insurance intermediaries and agencies continuously. So this synergetic growth between the insurance companies and also other agencies contributed to the collaborative expansion of both segments. In 2023, our international export revenue reached JPY 325 million with sustainable revenue accounting for 51%, driving the gross profit margin to increase by six percentage points to 46%. In addition to our overseas technology export business, in Hong Kong, our virtual bank, ZA Bank, has been committed to building all in one digital financial services platform since its establishment in 2020, providing rich, convenient, and inclusive financial services to retail users and small and medium sized enterprises. In 2023, ZA Bank achieved the improvements in our business matrix. As of the December 31st of 2023, ZA Bank has approximately HKD 11.7 billion in deposit balances representing year on year growth of 27.5%. Total loan balance was approximately HKD 5.4 billion with a year on year growth of 10%. Additionally, benefiting from the interest rate hike cycle and continuous arrangement of loan products, ZA Bank's net interest margin increased from 1.84 billion percent in the same period of 2022 to 1.94%. And during the reporting period with the launch of new products, ZA Bank recorded a net income of HKD 366 million a year on year increase of 40%, and non-interest income accounting for approximately 43% of the total. At the same time, ZA Bank focuses on the business quality and operation efficiency improvement, resulting in the improvement of 85.6 basis points in the net loss ratio. At current stage, ZA Bank has become one of the most feature-rich virtual banks in Hong Kong market with a highly quality customer base, our retail banking side, ZA Bank, in addition to traditional banking products and services, enhancing user engagement through the continuous development of innovative gamified experience, while also facilitating the online account opening for visitors to Hong Kong, resulting in a very good and also strong user growth of those visitor users. Currently speaking, one out of every 10 adults in Hong Kong is a ZA Bank user. As the Hong Kong's first virtual bank of exceeding 10 billion HKD in customer deposits, ZA Bank is honored to be recognized as the best mobile banking app in Asia by ZA Partners, 2023 International Mobile Banking Benchmark, and ranks the sixth globally. And also at the same time, in February of 2024, ZA Bank officially launched the US Stock Trading Service to Hong Kong users. By entering into the world's largest stock market, ZA Bank users can seize the growth potential of the most valuable and influential companies globally. And this marks another milestone for ZA Bank on its journey to create an all-in-one digital financial platform. On the corporate banking side, to further promote the concept of inclusive finance in Hong Kong and support of financial technology, transformation of the bank industry, ZA Bank officially launched its enterprise client e-onboarding service in April of 2023. This service provides a local small and medium-sized enterprises with a rapid account opening experience and address the pain points, such as the difficulty of slowness of account opening for SMEs, thereby seizing market opportunities. Through this rapid account opening function, corporate clients can complete account opening applications in as little as six minutes, and account opening process completed in as fast as two hours, enabling them to enjoy the one-stop banking service. Looking ahead, ZA International will continue to leverage the synergetic effect in various brands to enhance the user experience and create more values for users in their future digital financial experiences. We will continue to support the development of financial technology in Hong Kong, contributing to establish more global influential financial center and promote financial inclusion. Now, I'd like to invite Gaofeng to share the financial performance in 2023. Thank you.
Li Gaofeng: [Interpreted]. For the three presenters, for the summarization and review of our business performance that last year, now providing an overview of growth, including the overall financial, like insurance service revenue, profits and investments and balance sheet. Now I would like to introduce to you the situation of our insurance service revenue under the new standard. In 2023, our domestic PNC business achieved insurance service revenue of CNY 27.521 billion, an increasing of 24.2% year on year, with rapid evidence across all the major four ecosystems. In a health ecosystem, we adhere to our original aspiration of providing national medical insurance for 100 million people in 2023 while maintaining sustainable growth in our product, co-product, personal credit policy. We witnessed a remarkable growth in new products such as outpatient insurance and critical illness insurance. At the same time, we enhanced our service capabilities to meet the rapidly growing healthcare needs of our users and establish non-term competitive edges. And the revenue from health ecosystem reached CNY 8.599 billion in 2023 with a year on year growth of 7.9%. In digital life ecosystem, we seized the opportunity arising from the growth and new e-commerce formats and recovering of the aviation and travel industry last year. Leveraging our insights into our users' behavior and data analytics capabilities, we witnessed rapid growth in innovative products such as pen insurance. In 2023, the revenue from digital lifestyle ecosystem insurance services reached CNY 12.446 billion, surpassing 10 billion mark with a year-on-year growth of 39.9%. In the customer finance ecosystem, we adhere to risk control guidance and develop business prudently. In 2023, the revenue service reached CNY 5.041 billion with a year on year increase of 19.8% in automotive ecosystem. The revenue from auto insurance ecosystem services reached CNY 1.434 billion and a year on year growth of 30.9% outperforming this average. In 2023, benefited from adherence to the strategy of sustainable growth equality, the company achieved a combined ratio of 95.2% under the new standard and marking three consecutive years of underwriting profit and surpassing this average. Next, I'll present the loss ratio and expense ratio for each ecosystem. In 2023, the combined ratio of the health ecosystem was 87.2% maintaining underwriting profitability and improving by 1.4 percentage points and comprehensive loss ratio was 34.2% decrease of 14.8 percentage points year on year mainly due to optimization of product structure and an increase in the proportion of new policies and improved risk control. The comprehensive expense ratio for the healthcare ecosystem in 2023 was 53% rising 13.4 percentage points primarily due to increasing less in the user growth and retention during the reporting period. In 2023, benefiting the strategy of sustainable growth by quality we have reached a comprehensive underwriting combined ratio of 95.2% and also realizing a very good and stable growth. And also while we are increasing the volume, the total profitability of underwriting has reached a very good growth. And in 2023, the comprehensive also that the particular consumer finance combined ratio was 96.4% increasing by 6.8 percentage points and the loss ratio 68.4% primarily due to the rising of the risk. The expense ratio 28% reducing by 13.4 percentage points. This is primarily due to the increasing of our users of proprietary channels. For the auto insurance, the profitability improving, the combined ratio of this ecosystem 95.4% improving by two percentage points and the impact defined the mobility and the loss ratio increasing by 5.5 percentage points to 65.1% but due to the cost reduction and lean management, the expense ratio reduced by 7.5 percentage points to 30.3%. And next, I would like to give a recap of our investment performance from last year. In 2023, our total investment income from domestic insurance funds amounted to CNY 720 million and total investment yield of 1.9%, so significant improvement compared to the previous year. This improvement was primarily attributed to a strong performance of domestic bond market and a steady fast commitment to prudent investment principles. We have strengthened the risk control measures and leading to value appreciation of insurance funds. As of December 31st of 2023, the total investment assets of our domestic insurance investment amounted to CNY 38.2 billion. Among these fixed income investments amounted to 75% made in domestic bonds and bond funds representing 65% of our total investment assets among the bonds that we hold. Those with external credit rating of AA or higher accounted for 99%. With those rated AAA or higher accounted to 77%. Regarding equity investments, considering the volatility in the HMI market last year, we proactively reduced the equity positionings. And at the end of 2023, we combined the proportion of stock and equity funds that was 6.7% and decreasing by 4.1% points compared to the end of 2020 when it was 10.8%. In 2023, financial indicators of various segments within the group shows improvements in the insurance division achieved a stable and rising underwriting profits, significant improvement in investment income and a certain degree of improvement in foreign exchange gains and losses. As a result, the insurance division successfully turned losses into profits achieving a net profit of 554 million CNY and technology export sector despite achieving 40% increase in revenue further narrow than that loss ratio. Also, the A-Plan with a revenue growth rate of exceeding 40%, we have improvement in both amount of ratio, amount and ratio of losses. Starting from August 14 of 2023, the international is no longer recognized as a social company and is a little longer accounted for on the equity method. Instead, a one-time investment income of CNY 3.784 billion is recognized. Overall speaking, we achieved a net profit of CNY 3.845 billion in 2023 with a net profit attributable to share equity holders of parent company of CNY 4.078 billion excluding the impact of one-time investment income. We had just net profit attributable to equity holders of CNY 294 million marking a turnaround from losses in 2023. At the end of 2023, the total assets of the group amounted to CNY 42.9 billion, a decrease of CNY 4.7 billion compared to the end of 2022. The amount affected by the exclusion of Z International from financial statements decreased by CNY 10.5 billion actually in this impact, so that's an increase by CNY 5.7 billion. At the end of 2023, the group's attributable net assets was CNY 20.1 billion, an increase of CNY 4.3 billion compared to the end of 2022. The amount affected by exclusion of Z International from financial statements increased by CNY 3.8 billion. At the end of 2023, the company-company service ratio was 240%, a decrease of approximately 59 percentage points compared to the end of 2022. Approximately 42 percentage points of the decrease was attributable to exclusion of Z International from financial statements. The company's core service ratio of 129%, a decrease of 56 percentage points compared to the end of 2022. Approximately 38% points of decrease was attributable to this exclusion of ZhongAn International. 2034 marks a new beginning of the next decade for ZhongAn. We would like to express our gratitude to our users for choosing products and services. We also extend our thanks to our investors and managers in the capital market from our continuous trust on ZhongAn. Remain committed to our original aspiration, empowering the financial business with technologies and providing insurance services with a caring hand. Thank you. And now we're going to have Q&A.
Operator: [Operator instructions] And the first question from online is Michael Lee from Bank of America, please.
Michael Lee: [Interpreted]. So thank you for having this opportunity. I'm from Bank of America. I have two questions. The first question is that how do we balance the growth rate and profit margin of the business? In the past years, our growth rate was maintained at around 20 to 25% in the future while we have expanded our business volume. Do you think that this profit margin could be maintained? And also at the same time, you're going to sacrifice the profit and could you give us some guidance that in the next two to three years of time, how that we're going to maintain the growth rate and also what is the situation for the net profit and also how or what is the level of the combined ratio that we would like to keep? The second question is about the ZA Bank in Hong Kong. In Hong Kong, we've been actually seeing a very good and rapid growth in Hong Kong. So you're taking a lot of deposits also from the Hong Kong users. In 2024, you're going to actually break even, right? Start to making profit in 2024. Do you still maintain that target? And when you start to make profit, what kind of strategic changes that you're going to have? Also, we have noticed that some of your stock, US stock exchange and what is the thinking behind?
Li Gaofeng: [Interpreted]. Thank you very much, Matthew, for this question. So for the first question, with regards to the balance of the growth rate and also the profit margin, we know that 2024 is the 11th year of our foundation. So together with our expectations of the macro economy and also the overall situation, in the future, we're going to adhere to the long-term and stable sustainable growth instead of just driving the growth of GWP, but also we're paying attention to the underlying profit, the quality of our product, and also the profitability of non-insurance products. Renewal rate and also the additional cross and up-selling rate are something that we are going to focus. So in terms of the overall growth, we are also going to have four ecosystems. So starting from the value of the users and starting to protect the comprehensively more to the users and also to have a cross and up-selling more, also using proprietary channels and private domains to improve the conversion rate. So in the interim result announcement of this year, we're going to share with you more. And also we are confident that on top of that, we are going to maintain a very robust growth on the underwriting profitability and to provide more inclusive and more value for money products. So for ZA Bank, please.
Wayne Xu: [Interpreted]. As for your second question, you have already noticed that for the ZA Bank, we have already started to do transaction on the US stock market and also what kind of next moves that we are going to have. In the annual announcement just now, we already said that in 2023, in terms of retailing and corporate banking of ZA Bank, we made a lot of achievements. And this year we're going to focus on these two areas and providing more excellent services. Also, as for the Hong Kong users and also the US stock market transaction service, we have launched this year successfully. So we hope that we can provide a one-stop solution for our users. And this is going to satisfy the needs of diversifying the asset portfolio of our users. So at the current stage, not only are we providing service to the existing users, but also attracting more US stock investors into Hong Kong and finding differentiated advantages. And also the ZA Bank app is going to be a very important platform for us to attract new users. The existing products were really welcoming. By the end of 2023, you can see that, we had in total the volume of HKD 1 billion. Apart from providing the equity and stocks and shares, we're also providing more choices to our users. Also, the ZA Bank is going to be optimizing ourselves continuously and getting satisfactory results. In the long run, the digital bank of ZA Bank is also going to improve our adherence and user stickiness, and hopefully that the operational efficiency could be improved. Thank you.
Operator: Thank you very much for this question. Now we are going to have the next question. The next question is a simple time from Nomura.
Unidentified Analyst: [Interpreted]. Hello, thank you for this opportunity. I have two questions. So the first question is that, we would like to ask the management that how do you think about the cooperation and competition among the three shareholders? One is Alibaba and Tencent and Ping An. So how do you think about the collaboration and competition with them? And second question is about the healthcare insurance. So by having the regulation change, if we look into the future, how do you think about the perspectives and how do you think about profitability? Seems that the profitability improvement is pretty big. Thank you.
Jiang Xing: [Interpreted]. Thank you for your question. So let me have the first question, which is about the business of our shareholders. So we had actually over 430 different customers from the internet industry, and we explore with them and talking about the possibilities of insurance industry. Also, we are here to the mindset of inclusive, but a win-win and also collaborating with our partners. In terms of the channel collaborations, we are actually paying attention to, for instance, Tencent and also Alibaba, in terms of the collaboration on the healthcare insurance. So pretty, we have a very thorough collaborations with them. And also together with Ping An, we are having the co-insurance together with them for the years for auto insurance, and also on the WeChat platform, we also position ourselves in the Tencent videos in those private domains with Tencent. So I do believe that this is an open and win-win collaborations. So as for the Joanne's business, we do have hundreds of different partners from different ecosystems. So you can see that we are having a very good performance and also our total performance is more robust. Also at the same time, in our reports, we have already said that we are exploring the establishments of more proprietary channels and reaching to more end users at the current stage. Now we have over 30% of our users from the proprietary channels. Second question about the health ecosystem and healthcare insurance, and some of the aspects on the future. So, the health ecosystem is actually the ecosystem that we focus for years. In 2024, we are going to maintain the momentum of our robust growth. And in 2023, we had a steady user growth. So we are in favor of this market for a very long time. Now the total market potential is 1 trillion, and still there are diverse demands and needs. And we need to innovate and integrate more to satisfy the needs of our users. So in the past, we have seized the opportunities and we believe that in the future, there'll be more opportunities for innovations. So the ecosystem, we have several parts. The first is the personal clinic policy, which is going to be continuously growing. So also last year, we had a version of zero deductible to actually lower down the threshold of purchase so that we're going to cover more people and also insured. Also we have medium to high end products available, tailoring to a more customized users from the corporations. Also at the same time, apart from the million UN healthcare insurance, we're also focusing on the health management. So by having more inclusive pricing and also very enriched product items, we also are going to launch new products like the credit owners products, which experience hundreds of percentage of growth. And also another breakthrough is that by integrating with the internet, healthcare and online hospitals, our outpatient and emergent insurance was really welcoming. So by having more innovations on our product and business models, I do believe that this is going to be offering more potentials to our future. On the overall basis, for the healthcare industry in China, we are continuously paying attention to it. And we hope that we can cover the diversified needs in a very enriched way. And also we firmly believe that ZhongAn will have more market potential and opportunities to seize from. Thank you.
Operator: Thank you very much. Let's wait for another question. The next question is from CICC, Qingqing Mao. You may have the opportunity, please.
Qingqing Mao: [Interpreted]. Thank you for this opportunity. I am Qingqing Mao from CICC. I have two questions. The first one is that I would like to follow up question on the expectations of the GWP growth. I would understand that what is the driver in the future from which ecosystem and which product. Also in terms of innovative products, which kind of products are really potential in becoming the long-term driver force? And second question is about the credit insurance. So you can see that you had the underwriting profitability in 2023 for the credit insurance. By the current stage, I think that people are concerning about this. So we would like to understand your countermeasures over this, whether you have confidence and how do you think about the long-term growth strategy, whether you have adjusted this?
Jiang Xing: [Interpreted]. Thank you very much for your questions. So innovation is the gene of Johan and also in our announcement, you have already seen that in different ecosystems, we have actually a very good innovation. Also, I would like to give you a brief summary. First one is that on a digital lifestyle ecosystem, in the e-commerce business, we are actively embracing the new areas like live stream and short videos and vertically integrated e-commerce. Also, we are having innovations a lot by embracing them and like the impact and drone insurance, et cetera. Also focusing on those less than popular areas and we have our advantages in terms of pricing and designing of our products. Also at the same time, we are focusing on some of the green economy area. So for instance, the PVs and I mean, affordable tech and renewable energies. And also in terms of our healthcare ecosystem, we also have a lot of innovations and also a lot of incremental growth. In our announcement, we have iterations of personal clinic policy in covering more users. In recent years, the critical illness insurance has the growth of over 100% because we have a digging into the deeper demands of our users and also critical illness and emergent insurance are also developing very well. So in the future, we have to really focus on this and making this as a sustainable growth engine. Another one is for the auto ecosystem, auto insurance ecosystem. You know that for the last years, the GWP growth was very rapid, but because still the base number was small, but I believe that while we are having more on the writings and transactions finished online for the auto insurance and the habits of transaction is going to change. I do believe that the auto insurance segment will be exploded very soon. So I think that we fully believe in ourselves and we are more than capable to seize the opportunity of this round. In the future, we are going to adhere to our original aspiration and focusing on the long-term strategy. So by leveraging new technologies, we are going to create new customer experience and create more products with more added values. So we are confident over a long-term growth in the future. And in terms of the consumer finance, I would like to hand over the call to Wang Min to answer this question.
Wang Min: [Interpreted]. Thank you very much for this question. Actually, we have a prudent operational mindset and risk control methods. So at the current stage, we maintain a very good robustness. So for the consumer finance, the online assets have been keeping a very good positioning. So of course, considering the overall macroeconomic pressure which is quite big and the industry is shifting and experiencing the shifts and adjustments. So in the second half of last year, we have identified those risks and also made some countermeasures. So the kind of premium growth was shrinking for this business. In the second half of last year, the GWP growth of consumer finance sector was only increasing by about 2% only in the second half. Whereas in the first half of last year, we had 52% of the growth of GWP for the consumer finance segment. So you know that there was a big change on it. And also from those figures and statistics, we see that still the consumer finance segment is profitable and also better performing than the industrial average. So as we have already mentioned, that we are providing the other product insurance and also tailoring to the needs of different users. Also, as for the value contribution, year on year wise, we had an increase. Actually, towards the future. Of course, we're going to be confronted with many different external challenges, still uncertainties about economic growth, but still, I think that the consumers are still going to have a very rational consumption needs. We're going to be precautious and prudent and also we are going to focus on the risk control fashions. So we are able to provide the franchise services to those users and also at the same time, we're going to maintain a very robust risk control measures and to realize a high quality based growth for all the businesses. Thank you very much.
Operator: Next question is from the Citibank, Michelle Ma.
Michelle Ma: [Interpreted]. Thank you very much for accepting this question. I am from Citibank. My name is Michelle. So just now, we have already mentioned something about the operational channels and in 2023, we had around 30% growth and also in the annual announcements, you already said that RMB 7.6 billion of the total return premium. So this was already big enough and also accounting for 26% of our GWP as a whole. So how are you going to focus on the proprietary channels and also the private domains and any methods and any strategies that you are able to be sharing with us? Second question is that just now, we have mentioned that for the banking segments, you have certain measures. Also, you had a plan of having a break even for this segment by 2024. So I'd like to understand more details about this? Thank you.
Jiang Xing: [Interpreted]. Thank you very much, Michelle, for your questions. I would like to answer the first question, which is about the establishment of our proprietary channels. So for the proprietary channels, we have two focuses. The first one is that we are going to continue the focus on the traffic marketing and short video, live streaming and also some of the public videos, traffic and to attract more users. And usually on the Xiaohongshu, the Red Book, we have been achieving a lot. Also, we're going to leverage some of the new technologies, for instance, artificial intelligence to improve the marketing efficiency and also establish in the branding continuously and increasing the brand recognition among the users. Also in the past several years, by establishing the proprietary channels, we have already the apps and also the corporate WeChat accumulating many users already. So how are we going to benefit the users with more choices among the matrix and to have cross and up-selling and cross service provision so that we are going to create more values for our users? This is something that we're going to thinking about. Also, how do we leverage the IGC at this round and to use AI and to have high efficient, artificial intelligence to better retain the users and renew the users and also provide the better conversion rate. So with regards to the loss reduction of our technology segment, I would like to hand over to Wang Min to answer this question.
Wang Min: [Interpreted]. Thank you very much, Michelle, for this question. For the technology segment in 2023, still we maintain a very rapid growth and especially in China, the technology export revenue was very robust, even though the operational environment as a whole for some of the customers had the impact on the revenue, but on the overall basis in terms of digital transformation and also the technology investment based on this digital transformation, actually this is something that has been enhanced continuously. So this is the industrial background and the contract signing and also the revenue all grew a lot. So as for the technology output and technology export business, we have a confidence in having a long-term and high quality growth. Also, as we have already mentioned that, for instance, the new generation of core systems have been launched in many different PNC insurers and by iterating the products in the future, based on this as a core, we are going to further optimize the insurer tax matrix and also to further boost our users' thickness and also the user coverage of our existing products. And also the repeated purchase rate is going to be improved and more products could be optional so that the more efficient and high intelligent products could be provided to the users. Actually, for this MATE core system, this is actually a revolutionary product that we have. Also, based on a better product R&D and also based on the more investments that we have conducted to the product development, now we have a better product and the better operational cost and also a better matching of our products with the users' needs and demands. So during this whole approach, the gross margin of our product is going to be improved. Also, in other areas, in terms of data, for instance, we are already operating the collaborations with many different data companies in terms of the provision of services of data governance and data platforms and others. So by leveraging our experience, we are also going to provide AI services to our users like the AI modeling and data modeling, for instance, to help them with their digital transformation. So in the past, we have already had a very good product and investments. Also, some of the digital products are available this year, I believe, continuously. So for this technology segment, we will have more business profit margins. And also, it is worth mentioning that in 2023, the Hong Kong IFRS, I mean, the China version IFRS 17 is going to be implemented. So we are having R&D focusing on this standard and we were involved quite early. That's why you can see that when the product is launching into the market, it's already a very mature product, which has already been testified by the different scenarios. So I believe that this is going to be more matching the people's needs and also a very good and tailor-made solution. Also, it will be welcomed by the users. And this segmented market, we're going to have a far leading market share. Also, by having this particular kind of situation, on one hand, we're going to have more continuous revenue and also at the same time, we are going to have more products and better business with higher profit margin. But of course, while we are diversifying the business of technology export, at the same time, we're also increasing the efficiency of management and also the human resource efficiency. We firmly believe that in the future, by leveraging this experience in the past and also by having the same momentum capped in the future, we will definitely give a very satisfactory result. Thank you.
Operator: So next question is Rick Dahl from Morgan Stanley.
Richard Xu: [Interpreted]. Thank you very much. This is Rick Dahl from Morgan Stanley. I have two questions. The first question is about the investment. So now while the interest rate is reducing and also there is a fluctuation, but how do we think about the equity and also fixed income investment proportion? Second question is that we would like to have a follow-up that throughout this year, the overall premium is growing and breakdown by ecosystems. I'd like to understand that which ecosystems are having a better growth and the reasons behind.
Jiang Xing: So thank you very much for this question. With regards to the investment, the overall investment is always fixed on the fixed income investment. And also, that as of the end of last year, in total RMB 38.2 billion of those assets and also a lot of them are fixed income. And comparing with the level of 2022, we had actually an increase. Also, that AA and above are accounting for 92.4% and 77% of them are having AAA and above. So while talking about this overall market, while we had the new standard implemented, the investment strategy is optimized. We are emphasizing more on the un-comprehensive yield of investment also in terms of equity. We have also more kinds of, assets with a higher dividend, so that we are going to see a lowering of the risk of investment. And also now we are going to enjoy the long-term development benefit. And in 2024, in terms of the overall premium growth, in 2024, the overall drivers of our premium is on two areas. The first one is digital lifestyle, the other is the healthcare ecosystem. So these two ecosystems are something that we're going to focus on the premium growth. Throughout the whole year of 2024, we are also going to actually pay not only the attention to the growth premium, but also the quality of the premium and also underlying quality as well. Also, the user satisfaction also is going to be paid attention to. Hopefully that we're going to sustainably grow ourself. Also, throughout the whole year, we are going to really realize a robust development as a whole, thank you.
Operator: Due to the limit of time, this is the end of this annual announcement. So on behalf of the management, I would like to thank you all for your participation. Thank you.
Operator: Ladies and gentlemen, this is the end and you may disconnect now. Thank you very much for your participation again.
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