ZhongAn Online P & C Insurance Co Ltd

HKEX:6060

Earnings Call Analysis

ZhongAn Online's Strong First Half of 2024

In the first half of 2024, ZhongAn Online reported total premium income of HKD 15.23 billion, up by 5.4% year-on-year. Insurance service revenue grew by 19% to HKD 1.588 billion, with a solid underwriting profitability shown by a 97.9% combined ratio. Technology export revenue surged 55.5%, reaching HKD 4.24 billion. Innovations in artificial intelligence and strategic expansion into sectors like new energy vehicles and digital transformation contributed significantly to growth. ZhongAn's international technology business also flourished, marking a substantial presence in 12 countries. The company maintains robust solvency with a 224% adequacy ratio and aims for continuous user experience improvements and long-term development.

Navigating the Halfway Point of 2024

ZhongAn Online has reached a total premium income of HKD 15.23 billion in the first half of 2024, reflecting a year-on-year increase of 5.4%. Their insurance service revenue grew to HKD 1.588 billion, marking a 19% increase, showcasing a resilient performance despite macroeconomic pressures. The combined ratio for underwriting remained healthy at 97.9%, indicative of sustained underwriting profitability.

Segment Performance and Innovation

The company's health ecosystem saw a significant rise in insurance service revenue, up by 22.7% to RMB 4.876 billion, highlighting the effectiveness of their product innovations focused on user needs. The digital life ecosystem, fueled by e-commerce growth, reported a 24.2% rise in revenue, totaling RMB 7.07 billion, benefiting from a boom in pet insurance and scenario-based products. On the contrary, the consumer finance ecosystem faced challenges, leading to a slight dip of 1.7% in revenue to RMB 2.8 billion as the market adapted to external economic pressures.

Strategic Adjustments and Future Guidance

ZhongAn's strategy includes a focus on user-centric development and improving user experience as they scale down the consumer finance business. The management anticipates a sustainable growth trajectory for health and digital life segments, while the automotive sector reported a strong 215% rise in premiums from new energy vehicles. Despite mixed results, they express confidence in their portfolio, with plans to innovate further in high-demand areas.

Financial Health and Solvency

As of June 30, 2024, ZhongAn's solvency ratio stands at a robust 224%, underscoring financial stability. This strength is reflected in their credit ratings, with Moody's rating at Baa1 and A.M. Best at A-. The management is actively considering refinancing options for upcoming bond maturities, ensuring liquidity in a potentially unstable market.

Harnessing Technology for Efficiency

Significant strides were made in their technology segment as well. The technology export revenue increased by 55.5% year-on-year to HKD 4.24 billion due to enhanced operational efficiencies driven by the adoption of AI. This allowed for improved services and reduced operational costs. ZhongAn projects this trend to accelerate as they leverage AI and big data to optimize their service delivery and product development.

Conclusion: A Path Forward

Looking ahead, ZhongAn aims to continue empowering their business with technology, reinforcing their product offerings particularly in health and automotive insurance. Their commitment to refining operations and enhancing user experiences places them in a strategic position to navigate a complex economic landscape while capitalizing on growth opportunities in emerging market segments.

Earnings Call Transcript 2024-Q2

[Unknown Executive]

[Foreign Language]

to attend this 2024 Interim Result call of ZhongAn Online, I am the Director of the Investor Relations and Capital Markets. My name is Lin.

First of all, let's now move to introduce the management, the General Manager of ZhongAn and CEO, Jiang Xing. Mr. Gaofeng, the Chief Investment Officer and Chief Financial Officer; the Vice General Manager and Board of the -- Secretary of the Board, Mr. Wang Min; and also [indiscernible], the President of International of ZhongAn.

Now please give the floor to Mr. Jiang Xing.

[Jiang Xing, executive]

All right. So good afternoon, dear investors and management. I am Jiang Xing, the General Manager of ZhongAn Online. I would like to welcome everybody to attend the 2024 interim results conference of ZhongAn Online. And also, I'm appreciating your continuous attention and support to ZhongAn.

2024 is the beginning of a new decade of ZhongAn. And also in the recent release, 2024, Fortune China 500 list, ZhongAn ranking has improved by 37 places to 460 years and reflecting a summary and recognition of our achievements over the past decade.

Facing the complicated macro external environment in recent years, we are here to the mission of empowering the finance business with technologies and providing insurance service with our caring hand and embrace the value of the best performance of yesterday is a minimum requirement of today. We are focused on listening to our users' feedback, improving user experience and also staying true to our original aspiration and driving the long-term sustainable development of ZhongAn.

In the first half of 2024, we achieved a total premium income of HKD 15.23 billion, a year-on-year increase of 5.4%. And in terms of the total premium written, we maintained a market share of over 20% in this pension and P&C insurance sector, holding the first position.

On a new accounting standard, our insurance service revenue in the first half of the year reached HKD 1.588 billion, a year-on-year increase of 19%. And also the combined ratio for underwriting was 97.9%, maintaining a healthy underwriting profitability.

Also with a commitment to the long-term and proven operation. So our net assets have continued to grow, and our solvency remains ample with a comprehensive solvency adequacy ratio of 224 present at the end of the first half of the year. We were also consistent received issue credit rating of Baa1 from Moody's and A minus from A.M. Best.

And that's one of the strategic engines of ZhongAn, the technology business has been benefited from the ongoing digital transformation in the domestic and global financial sector. In the first half of the year, our technology export revenue increased by 55.5% year-on-year to HKD 4.24 billion, for the domestic technology [ export ] revenue reaching HKD 319 million, a year-on-year growth rate of around 112.7%.

[indiscernible] growth rate was primarily driven by the expansion of new clients in the financial, retail and manufacturing sectors. In addition to consolidating our reinsurance industry client base. This has resulted in rapid growth supporting the launch of multiple products under the ZhongAn business growth and infrastructure series. And also due to the increase in the prototype revenue and improvement in operational efficiency, the Technology segment reduced its loss by HKD 165 million in the first half of the year comparing to the same period last year.

And now taking a look at the Hong Kong Digital Bank, ZA Bank performance. Maintaining a very strong growth momentum this year, achieving a net income of HKD 255 million in the first half of the year with a year increase of 45.9% and the record growth in this particular income has led to the realization of scale effects, improving the cost to income ratio and also narrowed by HKD 99.1 million in the first half of the year. And also, we have realized the overall profit attributable to the parent company of HKD 55 million.

And also, this is the very critical year for our 14th, 5-year plan in response to the guiding operation and promotion of high-quality development of inclusive finance issued by the National Financial Supervision and Administration Commission, we have remained committed to empowering with technology, providing innovative, inclusive and diverse insurance products.

And also fulfilling the interest role as a buffer in the economy and stabilizing society and also, we are going to develop the small and diversified and convenient inclusive insurance products tailored to the Internet scenarios and enhancing the convenience and accessibility of insurance services.

The first half of the year, we provide health and accidental insurance coverage for over 1 million new citizens and flexible workers including the food delivery riders and couriers and rail, painting, drivers. Also, we launched over 100 exclusive products covering more than 1 million individuals with quant illnesses and also standardized the health conditions. We also develop insurance products for groups, including women and elderly and creating a safety net for them.

And also furthermore, addressing the pain points of domestic micro and small enterprises in this operation, we provided the multiline insurance coverage, including property insurance and liability insurance for over 1.33 million micro and small enterprises, helping to enhance the risk resilience.

In the first half of 2024, in our proprietary operated channels, we have adjusted our marketing strategies, focusing on the user operation in the private domain and improving the user experience, laying a solid foundation for the long-term user value realization, and also around the 4 ecosystems, we have also upgraded the services of health, family and pets, continue to enrich our product matrix to provide users and consumers with convenient, economical and comprehensive production.

In the first half of the year, for all the proprietary channels, 40% of the premium was contributed by the old users from 2019 and even older showing the accompany of ZhongAn to our users. In the first half of 2024, the average number of policies held per user reached 1.6 in our proprietary channel and HKD 667 for the average premium per user and leveraging our self-developed data platform and the customer middle platform. We have achieved a real-time data sharing across the entire ecosystem. And also, we are servicing the whole life cycle of the users.

In the first half of the year, the total premium proprietary channel was RMB 3.6 billion, and also with additional policies purchased and by contributing to 31% of the total premium and also the renewal rate increased by 3.2 percentage points and reaching 95% year-on-year.

And next, just now I have introduced the overall situation. And next, I would like to talk to you about the progress of each business segment in the first half of the year. The first is the health ecosystem. In the first half of 2024, we have provided the health coverage to approximately 12.39 million insured and with the total premium reaching -- order for capital reaching RMB 343 million.

And also in terms of the inclusive finance or health care, we have upgraded and iterated, the upgraded version of 1 million health care coverage and also this increased the accessibility of the insurance service and expanded the coverage to the preexisting condition people, individuals with quant illnesses and special occupational group.

And also tapping into the market amount. Also to address the unmet needs all pain points. This is inclusive products, including to member. We're covering over 100 exclusive products in the first half of the year, we have the total premium growth rate exceeded 2.7x.

And also our outpatient emergent insurance products extended the service scenarios from the inpatient care to outpatient care, meeting users the daily high-frequency medical needs and also achieving rapid growth. So this total premium increased a lot. And the total premium reached RMB 427 million with a year-on-year increase of 321%.

Apart from that, our short-term critical illness product became also the primary choice for ZhongAn users to enhance their coverage, and this has achieved a very steady growth in the first half of the year with the total written premium is exceeding RMB 800 million.

And also, we are developing the medium to high-end medical insurance products. And also this year, we have been also trying to understand the pain point of many users and also, we have also launched some of the other wide spectrum and wide range covered products and meeting the people space of need of outpatient and emergent visits. And these products were welcomed by the public, and we had a very impressive premium growth.

Next, taking a look at the digital life ecosystem. In the first half of 2024, the total premium reached RMB 7.47 billion, in the first half of 2024, mainly benefiting from the sustained profitability of the e-commerce industry and also the rapid growth of innovative products like the pet insurance, scenario-based accident insurance and household insurance, et cetera.

In this E-commerce segment, we provided the users with the integrated solution covering the entire e-commerce transaction chain, including the return shipping insurance, quality assurance, account security and logistics protection. In the first half of 2024, our E-commerce business segment captured the opportunity presented by the overall prosperity of the e-commerce industry maintaining a rapid written premium growth.

In the Travel and Aviation business segment, we adopted a more differentiated strategy, strengthening the travel development and product R&D in response to the gradual recovery of both patient and outbound travel, while improving the business quality.

In terms of Innovation business segment, the pet insurance achieved over 2.8x premium growth would be in total 1.46 million new pet owner users in the first half of the year and also based on extensive -- also claims data analysis, we updated and iterated the original 107 cover diseases in our pet major illness insurance product, covering more common diseases among pets, enhancing the product competitiveness and also releasing the product value.

As of June 30 of 2024, our pet insurance service network further expanded to over 18,000 off-line pet hospitals and service institutions and covering major cities nationwide. The pet insurance service as the carrier for services providing over 930,000 services in the first half of the year, a year-on-year increase of 3x and 1 out of every 3 pet insurance users actively choosing to use our pet services.

And in addition to the popular pet insurance, during the reporting period, we continued to closely follow the development trend of new consumption and very quickly launched several innovative insurance products based on the data analysis and tracking of the users' lifestyles together with the ecosystem partners. We are exploring new scenarios in the food delivery sector, covering the pain points such as the food safety and delivery delays with related product premiums increasing by threefold.

So overall speaking, we are pretty much promoting the Healthy China and the Fitness China, also focusing on those fashionable lifestyle groups, covering 10 different scenarios for exercise and sports and covering the accidental insurance of tenants, riding sports on winter and snow et cetera.

And now taking a look at the consumer finance ecosystem. In the first half of the year, facing challenging macroeconomic and industrial environment, we proactively and strategically reduced our business scale. At the end of the first half of the year, the balance of insured loans was RMB 23.1 billion, down by 15% comparing with the same period last year.

We operated prudently focusing on small dispersed and short-term Internet consumer finance assets with the borrower primarily being near-prime consumers aged at 30 to 50 -- 45, and the average loan amount was HKD 7,500 with the average duration of about 10 months, leveraging the big data and other technological enablers. We implemented real-time risk control, strengthened post loan monitoring and achieved a sustained underwriting profitability.

And last but not least, taking a look at the automotive ecosystem. We achieved the breakthroughs in scale, quality and service in the first half of the year. We actively embrace the wave of new energy vehicles with the total written premiums for the new energy vehicles increasing by 215% year-on-year and now accounting for over 10% for the total auto insurance premiums.

And in terms of the customer experience, we upgraded our one-stop intelligent video claim service using artificial intelligence and other technologies. At the end of July, the coverage rate of ZhongAn's video claims cases, which has become the main characteristics of our company, and we have the claim cases reached 50%.

And with this technology, we could complete it the extent inspections in as fast as 6 minutes and reducing the average inspection time by 85% compared to the off-line inspections. At the same time, we enhanced the risk identification and alert focusing on underwriting private costs and achieved a combined ratio for auto insurance that outperformed the initial average in the first half of the year.

So next, for the Technology segment, our ecosystem. We're going to hand the call over to Wang Min.

[Wang Min, executive]

All right. Thank you very much, [ Simon ], for introduction. And now please allow me to share with you the progress of Technology segment in the first half of the year.

We have continued to invest in cutting-edge technologies like artificial intelligence and also reshaping the -- every link of the insurance value chain through technology. Internally, AI has improved the efficiency across various aspects from product marketing, risk control and to daily operations.

So in consumer service, we introduced a full AI-based human [indiscernible] interactive service, which increased the efficiency of our customer service representative by over 15% in health insurance claims process. We integrated the intelligent camera service to enhance the experience of -- so many materials and finding claims. We also launched an AI-based claims Compass online customer service bot [ severely ] reducing the need for human systems.

In addition, we established an intelligent data collection platform and an intelligent review platform, incorporate large model and a small model material classification integration solutions, and these innovations reduce the human labor and time costs, effectively improving the review efficiency and further enhancing user experience.

In technology export side, the ZhongAn Technology Output business, which relies on deep expertise in insurance technology achieving segment breakthroughs in regulatory technology, data integration, and intelligence insurance core systems, intermediary middle office and insurance digital marketing, maintaining rapid growth for our business. In the first half of 2024, the group's total technology export revenue reached RMB 424 million, increasing by 65% year-on-year.

As of June 30 of 2024, we have first serviced 892,000 clients and signed in total six new clients from insurance industries and also seven from new clients in banking, brokerage and fund insurance from the industries, and also benefiting from the rising demand of domestic information technology innovation and also promotion of Digital China initiative.

In total, we have reached RMB 392 million for this Domestic Energy Output segment, increasing by 171% year-on-year. And on one hand, our products such as the property insurance core system, intelligent marketing and data intelligence have signed by many domestic insurance industry claims. Also, from the other hand, we have the continued expansion of our boundaries extending to financial industries such as the brokerage and banking, and further cover to the marketing infrastructure operations and other products, they're also helping clients to achieve the rapid business growth and accelerating their digital transformation.

It is worth mentioning that in terms of the business product series, we have productive end-to-end and self-developed IFRS 17 system solution, which is compatible with multiple domestic chips, servers and database systems and has signed by 15 leading domestic insurance companies covering both life and property industry, and the contract amount has grown rapidly. In the future, we will continue leveraging the technology, power and capability of ZhongAn can continue to construct the digital economy and Digital China.

Now I hand the call over to Wayne to talk to us about development of ZhongAn International.

[Unknown Executive]

Thank you very much, Wang Min and now I'll be responsible for telling you something about the international business. And also now we have realized this technology export business of international by ZA Tech established in 2018, we have established our technology and solutions based on Graphene and Fusion and Graphene with a well-known insurance like AIA, Generali, Prudential and Zurich.

Also, we have partners with the digital platforms like Carro and PayPay, continuing building the -- and also expanding the embedded insurance businesses. Over the 6 years, we have expanded into 12 countries and regions globally, and established offices in 16 in other countries and regions, including Tokyo, Thailand, Germany, Denmark, France and Ireland.

In May of this year, we innovatively launched the agricultural drone damage insurance production solution with DJI in Thailand, leveraging our extensive overseas collaboration network and solid insurance technology capabilities to quickly support the DJI's related projects in Thailand.

In March, ZA Tect completed a USD 35 million Series A financing, attracting global renowned institutional investors and officially referred as Peak3, with a new brand facing the world. The company will accelerate expansion in more regions and speed up its layout in AI and big data, driving the global insurance industry's digital transformation towards intelligence.

And also in terms of business data, during the reporting period, we have reached RMB 132 billion for the technology export revenue. And also, we have reached RMB 127 million for our annual subscription revenue ARR, with a loss significantly narrowing. In relation to the overseas technology export business in Hong Kong, our virtual bank, ZA Bank continues to advance its vision of building one-stop digital financial service platform in Hong Kong, providing rich, convenient and inclusive financial services to retail users and small and medium-sized enterprises.

The first half of the year, the ZA Bank's income was very good. And also in total, we have realized the total asset of almost HKD 20 billion, comparing with the end of 2023, 43.2% were increased. The balance of the deposit, HKD 16.8 billion, increasing by 43.1% versus the end of 2023, because of the interest hike cycle and enriched the loan products, the net spread has been improved to 2.21% from 1.87%, and also the net income was HKD 252 million, increasing by 45.9%.

Noninterest income accounting for 18.4%, at the same time, our fund business also saw a substantial growth this year. By the end of the mid of this year, we had in total the reserve over balance of RMB 2.3 billion, increasing by 23x also the beneficial on the U.S. stock trading service, further enhancing the financial product metrics for serving the clients.

So while we are increasing our efficiency and also, you can see that our overall cost has significantly reduced in the first half of this year, this figure was 119% compared with the same period, it was lowered by [ 80 ] percentage points. And also the bank loss, certainly narrowed. Net loss was HKD 190 million, and we have been improving by 71.7 percentage points.

So looking ahead, we will continue to upgrade our user experience and creating more value for users' future digital financial experience. We will enhance and support the development of financial technology in Hong Kong, building a financial center with global financial influence, promoting financial inclusion and also drive quality growth at ZA Bank, and we are confident in achieving profitability.

Now let's invite Gaofeng to share with you the financial performance in the first half of the year.

[Gaofeng Li, executive]

All right. Thank you very much to management for your review of the past. And now I'll be responsible to introducing the financial performance and investment situation.

First half of the year, ZhongAn achieved the financial service revenue of RMB 15.08 billion, a year-on-year increase of 19% by ecosystem, health ecosystem staying true to our mission of providing insurance with the technology and carrying ahead. We continue to enrich our health insurance products to cover more people and meet the users' needs.

We also introduced a new offering in our health product matrix. And also, we have the RMB 4.876 billion reached in terms of the insurance service revenue year-on-year increase of 22.7%. Digital life ecosystem with the continued prosperity of the e-commerce industry, and we have rapid growth of our innovative products like the pet insurance, et cetera.

The insurance service revenue was RMB 7.07 billion in the first half of the year, a year-on-year increase of 24.2%. Consumer finance ecosystem, basically the pressure from the uncertain macroeconomic environment and industrial challenges, we adopted a more prudent operating models and actively scale down the business.

In the first half of the year, our consumer finance cycle system insurance service revenue was RMB 2.8 billion, and a year-on-year decrease of 1.7%. Automotive ecosystem, we focus on underwriting in private car sector and also continue to embrace the way from new energy vehicle. And in total, the insurance service revenue reached RMB 863 million year-on-year increase of 24.2%.

In the first half of the year and the particular underwriting, overall combined ratio in the first half of year was 97.9%, marking the fourth consecutive year for underwriting profitability. Combined ratio was 60.7%, combined expense ratio, 37.2%. The combined underwriting ratio increased by 2.1 percentage points compared with the same period last year, and also with the expense ratio improving by 1.5 percentage points.

Breaking down by ecosystem. The health ecosystem, we have a combined ratio in the first half of the year was 95.7%, up 3.2 percentage points and also the overall loss ratio remained stable at 38.1%, while the combined expense ratio rose to by 3.1 percentage points, and also mainly due to increased investment, back-end service infrastructure to enhance user experience for insurance applications and claims.

Digital life ecosystem, the combined ratio remained stable at 99.9%, with overall performance consistent with last year. The combined loss ratio was 71.7%, up 3.3 percentage points from the same period last year, while the combined expense ratio decreased by 3.2 percentage points to 28.3%. The change in cost structure was primarily due to the changes in product metrics, and also facing the macro economy and also the challenges, the consumer finance ecosystem had the combined ratio of 99.1%, up 8.4 points year-on-year.

And due to the 13 percentage points increase in loss ratio to 73.8%. However, since the second half of last year, we have actively scaled down the consumer finance business and tighten the risk controls, and leading to an improvement in loss ratio compared with the second half of last year.

The quality of our online assets and various indicators have been improving quarter-by-quarter. The expense ratio decreased by 4.6 percentage points due to the lower consumer acquisition costs and we have focused more on service existing users in line with the year's macroeconomic and industrial cycle. This particular expense ratio was 25.3%.

Automotive ecosystems combined ratio improved by 3.1 percentage points to year-on-year to 94.2%. Combined loss ratio increased by 7.6 percentage points to 66.7% year-on-year, primarily due to the increased travel in the first half of the year, and also the overall kind of combined expense ratio decreased by 10.7 percentage points to 27.5%.

Also, on the investment side, we continue to adopt the fixed income plus capital allocation strategy. During the reporting period, the total invest methods of ZhongAn domestic insurance funds amounted to approximately RMB 27.69 billion, of which fixed income investments totaled RMB 28.4 billion, accounting for 75.4%, mainly consisting the bonds and bond funds.

Benefited from the strong performance of domestic bond market in the first half of the year, we achieved relatively stable returns with the total investment income from domestic interest funds reaching RMB 620 million and also, we had annualized total investment yield and net investment yield during the reporting period of 3.3% and 2.3% approximately -- respectively, remaining stable.

And also in the summary with the service revenue growth this year, we are achieving continuous underwriting profitability to buy down certain external environment. It is worth mentioning that both technology and also the banking ecosystem significantly reduced their losses in the first half of the year. They also benefited from the continued digital transformation of the domestic and global financial industries, leading to a rapid growth in technology output revenue with the increased proportion of prototized revenue and the release the management efficiencies. The technologies segment losses narrow significantly.

Also ZA Bank's interest earning asset scale and net interest margin grow drove rapid net income growth and improve the operational efficiency and the scale effects further optimized indicators, such as ZA Bank's cost to income ratio and showing the also clear path to profitability for ZA Bank. The company's capital remains at sufficient level, comprehensive solvency adequacy ratio of 24% as of June 30, 2024. We would like to thank investors and analysts and the capital market for their support and companionship along the way.

Looking ahead and a complex and ever-changing global economic environment. We will continue to uphold the mission. And also, we will refine our internal operations and remain user centric and focusing on in housing user experience for everyone.

Thank you. Now we're going to have the Q&A.

[Operator]

[Operator Instructions] And now the first question is from Rick Zhao from Morgan Stanley.

[Rick Zhao, analyst]

All right. I am analyst Zhao Rick from Morgan Stanley. I have two questions. The first one is on the investment side. We have seen that in the first half of the year, the overall kind of revenue decreased a little bit. So what were the reasons? And also, how that we are going to face this particular kind of environment. And also, we are going to further allocate the resources and what is the expectation?

The second question is that in terms of the health insurance. So for instance, the revenue of the premium actually decreased, but still the service revenue increased. So what are the reasons of having this particular kind of a difference? And also, could you help us to understand the major breakdown by different insurance types?

[Jiang Xing, executive]

Thank you very much for the question. Let me answer the question about the health insurance and Gaofeng will answer the rest.

So in the health insurance sector this year, we've had the total premium exceeded trillion. So it is really promising in the future. We're going to see more product innovation opportunities. Just now in the business review, I have already shared that for the strategy of development, we still are building around the month and also for health insurance, we have several products.

The first one is represented by personal clinic policy and 1 million health insurance coverage product. This is still our major products and also all the way up to now, we've been incorporating all kinds of different value-added services, and also helping to enrich the essential drug list and to make sure that this bigger product is volatile. And also in terms of the networking hospitals, we have also had a breakthrough. Now in total, we're expanding that from public solutions to private hospitals as well.

And in terms of inclusion -- an inclusive finance, the Zhong Min Bao as the product is actually positioned as the million-claim health insurance to the mass public, so we are covering the three kinds of people that cannot be covered by reimbursement, the super old and also the quant illness patients. The patients with preexisting conditions. So this delivered the product, lowered down the threshold of underwriting and increase the upper limit on the age and no health announcement and also some of the occupational limits.

So this is more inclusive and also more applicable. Also, we have been adding some of the nonstandardized service like the health checkups and small [ club ] box, et cetera. So while we're upgrading this, the total written premium increased a lot. So we hope that Zhong Min Bao is going to become the next breakthrough edge.

And also, we are talking about the outpatient and merchant health insurance coverage and also some of the short-term pet owner's insurance. The particular contribution has been increasing as we have already mentioned that we had a very big potential in this area.

And last, not least, I would like to say that originally, we were developing some of the value for money health insurance products. But now we're focusing on medium to high-end healthy insurance sector. Leveraging the Internet channel, we are selling the insurance policies to those affluent users.

So for instance, the child version of medium to high-end health entrants that we have promoted and covering multiple pain points of the parents and covering more scenarios. For instance, the kind of need of getting outpatient treatments by most of the children. And also in the future, we're going to cover more group of population.

And Gaofeng, please answer the question about the investment.

[Gaofeng Li, executive]

Thank you very much. So I think that in total, we have a very good arrangement of the investments. Overall speaking, in terms of the investment, it is pretty much based on the fixed income assets. By end of June, the overall kind of asset investment is 37.7 billion, 75% of fixed income investment, the flat versus last year. 55% of our bonds and bond funds, this was also flat versus last year.

I'm on the bonds that we invested 99.2% of them are having the rating of AA and with the lower interest rates with regards to fixed income asset, we are going to drastically adjust the duration and also enhancing our yield. Also, we have focused a lot on the changes by the end of June, we had 6.4% of our investment of shares energy funds. And also, in total, we do have some of the adjustment of our allocation and the portfolio strategies. And also, we are going to increase and enhance the overall yield and try to reduce the volatility.

So the comprehensive investment yield will be higher. In the future, while we are controlling the certain scale, we are going to also focus more on the allocation to those segments with a higher dividend and also to be in line with the long-term economic development mindset of Chinese government.

[Operator]

Next question comes from Mao Qingqing from CICC.

[Qingqing Mao, analyst]

I am Mao Qingqing from CICC. I have two questions. The first one is related to the growth opportunity of insurance products. So how do we actually define the future growth opportunities apart from million health care. And also the refund insurance, what are the other potential areas that we're going to see the growth?

And my second question is about the credit insurance. So we have been tested many times of the trustability of credit insurance, but still, the environment is quite stressful towards this business. So how do you plan the credit insurance in order to maintain the profitability, and whether you're confident in maintaining the profitability?

[Gaofeng Li, executive]

All right. Thank you very much, Mao Qingqing for your questions. Let me answer the first question.

In ZhongAn, we always raised the concept of growth by quality. So in order to understand whether this is growing or not, we have three points. The first one is that whether the future market scale is enough, and potential is enough. And second, we're going to consider that whether there are some of the untapping demand of customers and also, we can fulfill the mission of providing the insurance product with a warming and caring hands.

And lastly, we're going to consider the quality of the long-term business development. And just now you were talking about several specialty insurance products that we have developed, and they are in line with these three points, as I mentioned. For those some of the business segments that I already talked to you about and in the future, we're going to focus on first of all, the auto insurance. The total premium growth was pretty much higher than the industrial average and the profitability ratio was also increasing.

And also in Chinese PMC, the auto insurance is the biggest one, and penetration, of course, of the incident auto insurance is quite low. So for ZhongAn, the auto insurance total premium scale was growing very fast. But still, we are -- our market share is still quite low. So this year, on the service side, we have been doing some of the high techs and trying to differentiate ourselves from -- for instance, by the end of July, we were developing the video-based claim service and have a little bit of breakthrough. At the current stage, we can have around 50% of the claims that are down over line or on the line.

And looking in the future, we're going to seize the opportunity of combining Internet technology with auto insurance and hopefully, that the total premium will be further increased. And the second opportunity is the digital lifestyle ecosystem. And on top of the e-commerce and travel business, we have been expanding the innovative products to other areas like the pet insurance. And we have more and more innovative products, taking the pet insurance as example.

We have upgraded the basic protection-based exponential insurance and also emphasizing on critical illness insurance for pets. This is a very quick mitigation of the missing demand. And also this year, we hope, and we have been hoped that by leveraging our own technology advantage, we're able to, for instance, do more innovations because of a better pricing and also better design of the products. And around the whole China, we've had almost 100 million pets and pet owners, but now the penetration is still quite low.

Last not least, we're talking about the health ecosystem. For instance, as anybody knows about the personal clinic policy and million health care policy around this particular area, we do more innovations around the service provision and also the stratification of the patient or the customer clusters. And we've been promoting the products like Zhong Min Bao and also some of the other products like the outpatient, the merchant insurance and the pet owner's insurance et cetera, which we have just to share the colors upon.

Thank you for this question. And now Jiang Xing, you can answer the question relating to the consumer finance.

[Jiang Xing, executive]

Right. Thank you very much for your question. considering the pressure of the macro environment and the adjustment of this policies industry and from last year onwards, we have been shrinking this total premium on this area of credit insurance. And then I see that in terms of this particular underwriting balance and also the total underwriting scale. These two were reducing significantly from the disclosed data, you can see that with such a large pressure from the outside.

In the first half of the year, we were profitable on the ecosystem of consumer finance. So all the time, since always, we were quite cautious in thinking about our mindset and combined with the risk control model that is empowered by the technology. This year, we focus more on the underwriting renewal combined with different platforms with the users.

So you can see that the combined ratio of the first half of this year was increasing versus same period last year, if you are comparing with the second half of last year was improving. So overall speaking, the -- in the second quarter of the first half, also, we had a very good quarter-by-quarter improvement.

And also at the same time, we are optimizing all the parameters of the users. So in the second half of the year, we're going to maintain as prudent attitude and also continue provide the service to those absent customers that we have already covered and also maintain a very stringent risk control standard.

[Operator]

And now let's have Michael Li from Bank of America Securities.

Sorry, the voice is quite low.

[Michael Li, analyst]

So in the first half of the year, we had a very good trend. So now we have in the cycle of interest lowering. So in this bigger cycle, one of the strategies was to cope with this cycle? What is the expectation? Second question is about the Technology segment. We had a very good growth. So can you talk to us about this more? What is the plan in the future?

[Unknown Executive]

All right. Thank you very much, Michael, for this question. This is a very good question. So let me repeat your question. So you asked that for the interest lowering, what's the impact to ZhongAn, ZV Bank and whether that's an impactful, right?

So to be honest with you, this is pretty much impactful. And also for different business segments, we have a different impact. And also the overall kind of impact will be different. And -- but for ZV Bank, this is pretty much active. So first of all, in terms of the net spread, which is going to be further squeezed. So comparing with the traditional industry at the current stage, we have a low percentage of CASA against the deposit. So overall speaking, we are going to have a much quicker capital cost reduction than the traditional banks. And also on the asset side, we're going to see more demand of getting loans and also, we're going to bring more revenue.

On the bank side, the bond held can increase also its price and increase in the investment yield. Also for the non-net interest income, the shares and equity that we have invested are going to be positively impacted because of a more active capital market. So these are all something that we have observed.

Second question is about the technology export. And now let's give the floor to Wang Min to answer this question.

[Wang Min, executive]

All right. Thank you very much, Michael, for your question.

So first of all, the technology segment increased rapidly in the first half of the year. And also, we had also a more robust growth for the domestic technology export business, benefiting by the more policies to benefiting the Digital China and also establishment of digitized economy. We have a very big confidence over the long-term growth of the technology export business, so I really understand that you pay a little attention to technology segment, not only growth, but also, you're expecting to see the improvement of profitability.

In the first half of the year, be it the technology export in China and also overseas, we've been shortening the losses a lot. So on one hand, we are increasing the percentage contributed by the high gross margin products. And also, as for AIGC and other new technologies, we are actively applying them, helping us to actually increase the efficiency in terms of product R&D.

And of course, that we are enhancing our internal management capability and efficiency and lower down the cost as a result. So while we are increasing our revenue scale, it is helping us to manage our cost very successfully and thus, improving our profitability further. Thank you.

[Operator]

Now let's have the final question.

[Unknown Analyst]

I am [indiscernible] from Citi Securities. I have two questions. The first one is that we can see that the total premium growth was slowed down in the first half of the year, what were the reasons? What about the guidance. And also what is the like placement strategy on the channels? And the second one is about the U.S. bonds. And we remember that we're going to do the U. S. debt and how that you're going to pay that debt?

[Unknown Executive]

All right. Thank you very much for the question. So you can see that the slowdown of the growth of the total premium in the first half of the year. And the first reason was that the consumer finance business was shrinking actively based on the macro and external environment. And also, we had a strategic adjustment of the user acquisition on the health insurance area.

We want to get acquired the new customers in a more economical way. So based on these two reasons, the overall gross written premium decreased, or growth rate decreased. But looking ahead to the second half and also the future, we're going to still be user-centric and focus on the elevation of the user experience. Hopefully, that we're going to have a sustainable development.

And Gaofeng, please answer the question about the financing and also the dollar bond.

[Gaofeng Li, executive]

All right. Thank you for this question. In 2020, we have issued USD 1 billion of high-level debt bond in overseas and in 2022, we repurchased USD 49.9 million of the bond in total. And also in terms of the duration, we have USD 590 million bond is going to be due next year, July, and $360 million bond will be due by March of 2026.

At current stage, our cash flow is quite stable. Solvency ratio quite sufficient, and we are actively very for the payback, and of course, considering the external environment, we are also going to also think about the possibility of doing financing -- refinancing.

[Operator]

All right. Thank you very much. Due to time limit, we have to end this conference call. Thank you very much for your participation and support to ZhongAn Online. Thank you, and you may disconnect now.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]