ZhongAn Online P & C Insurance Co Ltd

HKEX:6060

Earnings Call Transcript 2022-Q4

[Operator]

Ladies and gentlemen, hello everyone, welcome to attend this ZhongAn Online 2022 full-year result announcement. I just would like to remind you that joining the call you are all going to be muted and there will be a Q&A after the presentation.

And also now hand the call over to the management.

Good afternoon, investors, analysts and media friends. Welcome everybody to attend this annual announcement of 2022. So this is [indiscernible]. Let me introduce to you the management. We do have Jiang Xing, General Manager of ZhongAn Online, and also CFO, Li Gaofeng, from ZhongAn, and also the Board Secretary, [indiscernible]. And also, we have Wayne Xu from ZhongAn International.

So now, give the floor to Jiang Xing.

[Jiang Xing, Chief Executive Officer]

Dear, investors, analysts, media friends, good afternoon. This is Jiang Xing from ZhongAn Online. Thank you all for attending ZhongAn 2022 full-year performance conference. And also thank you for your constant attention and support to ZhongAn.

2022 is the year full of challenges. And also, this is the year that we are chasing after the dreams. In face of the macroenvironment and external pressure from industry, ZhongAn has continued to move forward one step at a time with aggressive and also pioneering spirit, always carrying out the mission of empowering the finance business with technologies and providing insurance services with a caring hand, and also achieving breakthroughs.

So, next, I'd like to share with you the achievements of ZhongAn in the past year. Looking back to 2022, the company achieved total P&C GWP of RMB 23.65 billion, an increase of 16.1%. year-on-year. In 2022, ZhongAn's crediting [ph] ranked 9th in the Chinese P&C insurance industry in terms of GWP and further increasing our market share. And also, we are the fast growing company out of the top 10 P&C insurance companies.

And also, we firmly invested in ZhongAn's branding to drive the organic growth in our proprietary channel. In 2022, in total, the GWP already accounted for 25% of the company's GWP and also increasing 7 percentage points over the last period.

And also because of this, benefiting from our adherence to the technology driven cost reduction efficiency, our combined ratio in 2022 improved by 1.1 percentage point to 98.5% in 2022. And also, the underwriting profit continued to be released with an underwriting profit of RMB 330 million in 2022, up 337% year-over-year.

In terms of technology export segment benefiting from the recovery of domestic economy in the second half of the year and continued digital transformation of the global financial industry above the trend and achieved the revenue of RMB 590 million for the year, up 13.8% year-on-year. And also, we had more than 40% of the growth rate for the second half of the year.

Apart from that, ZA Bank continued to maintain the position as number one virtual bank in Hong Kong, surpassing 650,000 retail subscribers or retail customers as the end of 2022 and achieving a net income of RMB 270 million, up 106% year-on-year. And also, we are following the global digital economy trend and the pace of digital transformation of the insurance industry, adhering to the strategy of insurance plus technology and build a user-centric service model through the deep integration with services and also helping the construction of digital China with the insure tech.

Now I would like to talk to you about the performance of different ecosystems in 2022. In the health ecosystem, healthcare has a pivotal role in the promotion of the 14th five year plan of the country. With the original intention of providing insurance services with a caring hand, we have strategically oriented towards medicine plus drugs and insurance, linking the upstreams and downstreams of the health industry and build a one-stop service protection system.

And also, adhering to our commitment of providing national medical insurance for over 100 million people after years of cultivation, at the end of 2022, the health ecosystem has serviced a total of 109 million insureds, with nearly 38 million new insureds and 16 million paid users or insureds for individual insurance in 2022.

And also, personal clinic policy was launched in 2015 and has been upgraded and iterated annually, in line with consumers needs, leading the industry development. And in 2022, we achieved a 29% growth for the total premium, highlighting the vitality of our product and also innovative power of ZhongAn.

Around the multi-layered and diversify needs of consumers, we also enriched the product matrix of our health ecosystem. For instance, the multiple claim of critical illness insurance and innovative classes of insurance for different groups, such as chronic illnesses, for elderly as well as the outpatient insurance, we enjoy very good growth. And also, the per capita premium for individual insurance grew by 28%, reaching RMB 527.

On the service side of our health insurance, ZhongAn Internet hospital has a team of nearly 2000 physicians and has serviced around 800,000 people, further unleashing the value of digital health care.

And also, we focus on the health management of not only the 2C business, but also last year, we actively developed the corporate employees welfare related services. And also, we provided the group insurance solution. And this solution helped the companies to develop an ecological, systematic and digital health benefit management system in place. And during the reporting period, the premium income for group insurance was increasing by 68.32% year-on-year.

And also next, I would like to share with you in terms of the digital life ecosystem. So, ZhongAn has been further using the data analysis as the very important base to gaining sight and also analyze the growing insurance needs of consumers and also provide the complete protection from individuals to the whole family.

And also, with our longstanding technology accumulation in the ecommerce sector, together with the advancement of the ecosystem of ecommerce, we pushed for the new and more diversified products. And also, you can see that during the reporting period, we had ecommerce business accounted for RMB 5.26 billion of the overall digital life ecosystem, up 25.7% year-on-year.

And in terms of travel, despite the huge challenges faced by the overall travel industry in 2022, our travel business achieved GWP of RMB 1.7 2 billion, nearly flat compared with the previous year. And also, with a corresponding recovery and the ending of COVID control, we believe that the products of the travel industry will experience certain rebound.

And in terms of innovative business, it is worth mentioning that the pet insurance in 2022 maintained nearly 100% growth, leading the market share and serving nearly 3.18 million pet owners in accumulation. On the other hand, we explore diversification of pet coverage, further expanding from pet medical accident to pet travel to food insurance to cover the whole lifestyle of the pets.

Also, we work together with the pet owners and to connect them to the high quality pet health management service resources through the partnership with the leading pet service companies in China. As of 31st of December of 2022, our pet insurance service network will be close to 10,000 offline pet hospitals and service providers.

For the other innovative segments include the sports insurance that capture the multiple scenarios including skiing, cycling, outdoor campaign, fitness and other accident insurance, et cetera, we have fully served the insurance protection need and derived from the bold evolution of users' lifestyles.

And also, we are actively exploring and developing innovative products using technology to further serve the real economy with insurance technology. And now, our corporate property insurance has serviced a total of 23,000 small and medium micro sized enterprises. In addition, we have designed exclusively insurance products in areas such as household property and cybersecurity, actively embracing the development of digital economy.

So, next, let's talk about the consumer finance ecosystem. We continue to focus on small and diversifying short-term Internet consumer finance assets and improving the quality of underlying assets through our industry-leading technologies, risk control capabilities, for example, and also the constantly iterating and evolving pricing model, effectively preventing risks in the face of great pressure from the industry. And also, the overall on-lending balances and also the loss ratio are quite stable and asset quality is very solid.

In terms of the auto ecosystem, last year, we have seized opportunity of the industry recovery with the auto insurance GWP growth reaching 33.9%, which is higher than the industrial average. And now, auto insurance is not that large in terms of our total business contribution, but the growth is very good. So, we are going to really focus continuously on a further development and operation. And also, you could see that the renewal rate actually of auto insurance improved by 16 percentage points in 2022. And also, loss ratio further improved.

In 2022, we just now talk about many different ecosystems. And also, at the same time, we continue to drive the brand building and deepening the development of ZhongAn's proprietary channels by having new media and also the internet new media matrix. We have in total nearly 20 million followers across all channels, ranking first in the industry.

In the public domain traffic segments, we adopted multiple forms of content delivery and further optimized the delivery, recovery, efficiency of public domain traffic through the data, algorithm and system capabilities of our self-built RTA. And through refine operations and user focused service upgrades, the average monthly active users of ZhongAn branded app reached 4.23 million in 2022. So, we use the ZhongAn app and enterprise WeChat as the main base to conduct in depth operation of our users and enhance the average value of customers.

We're now able to differentiate our product recommendations by stratifying and analyzing the users on the app. And also, we provide one-on-one service by the enterprise manager and building trust with customers in daily high frequency interactions and serving the entire lifestyle or lifecycle of the users. Based on our self-developed data middle platform and customer middle platform, ZhongAn realizes real time data sharing across the global ecosystem and also refine operations on a per user basis.

In 2022, we had 7.7 million paid users on our proprietary channels. Per capita premium for the proprietary channel reached RMB 755 in 2022, up 49.2% from RMB 506 in 2021. Total premium for the self-operated proprietary channels reached at RMB 5.81 billion, up 61.1% from the same period in 2021 and now accounting for 25% of the GWP of the whole company. So, this is contributing to the sustainable growth and high quality growth of our company and laid a solid foundation.

Also, we are laying out the cutting edge technologies, such as artificial intelligence and big data to reshape all parts of our insurance value chain through technology. With our long term investment in technology and also our technology know-how, we have continued to drive automated business accelerations and data-driven decision support and we've built a solid technological infrastructure and related tools over the past decade and developed various applications on a basis and this is further promoting our business. So, we are supporting the full year of over 9 billion policies processed in the year and R&D efficiency has been enhanced.

In 2022, our technology export segment or ecosystem continued to grow steadily. After a brief decline the first half of the year, we seized the opportunity of the economic and industrial recovery in the second half of year and achieving over 40% growth in the second half of the year. And in total, 112 insurance industry clients as well as 18 banking and brokerage clients were signed up for technology for a year. And in total, in the end of 2022, we have cumulatively serviced over 700 customers.

And also, we are further promoting the growth of the domestic market for the technology export. And also, we, through our business growth products series, will provide integrated operational – platform plus operation services to clients as a China and Beijing Life, helping to build a one-stop digital insurance marketing platform.

And also, in terms of 2022, we enter into a strategic partnership with a number of insurers, including CIC and also [indiscernible] insurance and also quickly helped the clients to build a digital platform for their business systems and facilitate the closure of their online customer operations loop with our proven products.

In 2022, we also released the upgraded version of our core 2.0 product to serve the leading insurance intermediaries and also those agencies here in China. And also, we do have the collaborations with our customers in terms of cybersecurity and also the others and helping them to improve their operational efficiency.

In 2022, our domestic technology also leveraged on the very good trend of [indiscernible] to really sign up contracts with 18 banks and also brokerages and security companies to export our product modules, opening up new room for growth of our business. So, this is pretty much about the performance of 2022 and different ecosystems.

And now, I'd like to hand it over to Wayne to talk to you about the development of international markets.

[Wayne Xu, President, ZhongAn International]

Thank you very much, Simon. So, in 2022, ZhongAn International continues to strengthen our overseas presence through three areas – technology export, virtual banking and virtual insurance.

So, ZA Tech has been expanding its presence in both domestic and overseas markets, setting a new global benchmark in insurer tech. Currently now, we are presenting in Japan, Singapore, Thailand, Malaysia, Vietnam and other Asian markets. And this year, we have made new breakthroughs in Europe.

We focused on using insuretech to empower our global partners to transform digitally and our overseas customers falling into two main categories, insurance companies and internet platforms.

For insurers, we have built a cloud native, end-to-end distributed insurance core system, Graphene, which helps clients to connect with various ecosystem partners locally. Our lightweight SaaS core product, Nano, helps insurers to quickly go live with our products and link to internet distribution channels to rapidly enter the market. And for internet platform consumers or customers, our insurance distribution SaaS product, Fusion, helps customers to link up with a wide range of insurance organizations to provide insurance services to users on the platform.

So, building on existing client base, in Japan, we have partnered with local partners to help to service Sumitomo Life Insurance Company, a leading life insurance group in Japan, to launch an innovative recoverage – also the heat stroke cover through PayPay, the largest mobile payment platform in the region which has been well received by the market in Southeast Asia.

We and our strategic insurance brokerage partner, WPS, also enter into a sales partnership agreement with the China Life Insurance Indonesia Limited in May, helping China Life Indonesia to further expand its presence in the Indonesian market and provide an easier and more effective and efficient insurance process.

And also, ZA Tech has entered into a strategic collaboration and signed a joint venture with Carro, the largest used car buying and selling platform in Southeast Asia. Through ZA Tech's insurance finance solution, Fusion, Carro will further optimize the online insurance distribution and claims process, including insurance company partners, and work with the ZA Tech to develop applications, including generative artificial intelligence tools such as ChatGPT to assist customers in comparing and screening insurance products.

During the reporting period, ZA Tech's overseas technology export revenue was approximately RMB 300 million, of which recurring revenue accounted for 44%.

As an important part of our overseas presence, ZA Bank has made also significant development in Hong Kong market this year. Since its inception in 2020, ZA Bank has been committed to becoming the one stop financial service platform in Hong Kong, providing rich, convenient and inclusive financial services to retail and also small and medium sized enterprises.

After being granted a Type 1 regulated activity, security trading license by the Hong Kong Securities and Futures Commission in January 2022 and becoming the first virtual bank in Hong Kong to be granted such a license, we officially launched our fund investment business in August. And as of 31st of December of 2022, we have already listed nearly 100 public fund products with a very significant breakthrough in number of relevant users and fund holdings.

In terms of bancassurance channel, we have ventured into a bancassurance partnership with the Generali Hong Kong to offer a wide range of life insurance products to our retail consumers. And also, we have partnered with Wise, a financial technology company, to provide bank customers with cheap and fast insurance remittance services.

And in terms of public service, to further promote the concept of financial inclusion in Hong Kong, ZA Bank has launched a sample trial of a full online company account opening service for Hong Kong SMEs, with company accounting opening completed in as little as one working day.

So with this, ZA Bank has become one of the most extensive virtual banks in Hong Kong in terms of product lines, creating a one-stop integrated personal finance platform through a fully digital operational model, providing users with 24-hour digital banking services, such as deposits, loans, transfer, spending, remittance, insurance, investments and business banking. This series of efforts and development have enabled ZA Bank to stand out in the highly competitive Hong Kong banking market with its best-in-class user experience and rapidly iterating product matrix and was awarded the number one ranking in mobile banking in Hong Kong and Singapore by Sia Partners 2022.

So, looking back to the 2022, ZA Bank in all business lines grew a lot. At the end of last year, ZA Bank had over 650,000 retail users, representing a 30% year-on-year growth. Deposits reached approximately HK$9.1 billion and loans reached approximately HK$4.9 billion, an increase of 94% year-on-year, where at the same time deposit to loan ratio also improved by 18 percentage points to approximately 54% now.

From a revenue perspective, we achieved a net income of HK$270 million for the year, up to 106% year-on-year, and non-interest income reached 30%.

And also, in terms of the business quality, we have achieved a net interest margin of a closer losses. And also, in the future, ZhongAn International will continue to leverage the synergies among its brands to further upgrade the user experience and create more values for our users' digital financial experience in the future. We will continue to help Hong Kong to develop financial technology, build a financial center with global financial influence and promote financial inclusion. This is pretty much about international business.

I now give the call back to CFO, Gaofeng, to give introduction about the financial performance.

[Li Gaofeng, Chief Financial Officer]

Thank you very much. Now I would like to talk to you about the financial performance of 2022.

Throughout the whole year of 2022, the domestic P&C business reached RMB 223.65 billion for the GWP, an increasing of 16.1% year-on-year.

In terms of the health ecosystem, we adhered to our original intention of being the national health insurance for 100 million people focusing on services and health management for the whole lifecycle of our users, continuously enriching our product matrix and improving the serviceability to maintain a steady pace growth and building the long term [indiscernible], up 16.8% to RMB 8.98 billion compared with the same period last year.

In terms of digital lifestyle ecosystem, we leveraged our insights and data analysis capabilities to capture data, digital live clients and develop customized production services in digital life scenarios, while continuing to capture the wave of new consumer development continuously to use technology to empower business, enrich our product matrix and push the boundaries and fulfill the customer's diversified production needs with various innovative products, including pet insurance and also the home mobile screen and breakage insurance and multiple scenario accident insurance and home insurance, etc.

Our digital life vehicle premium ecosystem premium increased by 21.7% to RMB 8.88 million renminbi. And also, for the consumer finance ecosystem, we developed our business in a prudent and also very good manner. And also, we had a minor 1.9% of the growth year-on-year and reaching the GWP of RMB 45.3 billion. And also, for the auto ecosystem, we achieved a total premium of RMB 1.27 billion and 33.9% year-on-year growth and higher than the industry average.

And in 2022, continue to improve the quality of our underwriting business on the back of solid premium growth. The overall loss ratio, 55.2%, and channel rate was optimized by 2.2 percentage points year-on-year to 26%.

And also, we have continued to iterate our technology capabilities and improve our service capability to strengthen the ZhongAn brand image. At the same time, we continue to focus on the different strategies and build up our own proprietary channels, enriching the product matrix and increasing our repeat purchase rate, which helped us to further optimize our channel fees.

And also, let me introduce to you the loss ratios and also the channel's fee ratios for different ecosystem for the year. So, the health ecosystem total combined ratio and also total loss ratio 48.5%, a decrease of 2.8 percentage points year-on-year, mainly due to the further improvement in the level of risk control through technology enabled underwriting declined through the year.

And also, we had also from the health ecosystem 26.3% for 2022 in terms of the channel fee rate, a decrease of 2.5 percentage points year-on-year. And also in 2022, the loss ratio for the digital life ecosystem was approximately 64.3%, down approximately 3 percentage points year-on-year and channel fee rate was approximately 30.2%, down approximately 1.9 percentage points year-on-year, mainly because of the increasing share of new channel ecommerce return insurance and better margin innovative category business.

In 2022, both the domestic macroeconomy and consumer finance industry were under pressure to recover. However, through our prudent business development strategy, the consumer finance ecosystem loss ratio was 48%, up only 2 percentage points from 46% in same period of 2021, of which in the second half of 2022, the consumer finance ecosystem loss ratio was 47.4%, an improvement on 1.4 percentage points from the first half of the year, and the asset quality performing. In 2022, consumer finance ecosystem channel fee rate was 20.8%, down 2.4 percentage points compared to 2021.

And auto insurance ecosystem profit continued to improve, grasping opportunity of the rising industry boom and rebound. 2022, we saw the further improvement of auto ecosystem operating profit due to the travel restrictions, including a 12.2 percentage point year-on-year decrease in loss ratio to 55.8% and also 0.6 percentage point year-on-year improvement in channel fee ratio to 12.4%.

And talk about investments. In 2022, we saw challenging global macroenvironment and downturn in capital market and continuous in divergence trend in industrial sectors. And also, as the end of 31st of December of 2022, our investment assets in domestic insurance assets in total amounted to approximately RMB 36.52 million. The total share of fixed income investment was 68%, of which domestic credit bonds with external rating of AA and above amounted to 99.5%. With a year-on-year decreased investment return due to a combination of factors such as market fluctuations and use of accounting rules and the combined effect of market fluctuations and use of the new accounting rules of HKFRS 9 in 2022 resulted in the loss of investment income of RMB 280 million, of which nearly RMB 1.3 billion was affected by the switch.

And in 2022, ZhongAn's core business fundamentals improved across the board as we saw further release of underwriting profits from a domestic property and casualty insurance and continued loss reduction from our technology and banking businesses, all of which contributed positively to net attributable profit. However, 2022 will be another challenging year. On other hand, due to strengthening of the US dollar and appreciation, we recorded a foreign exchange loss of US$560 million in 2020, a decrease of approximately US$690 million compared to the foreign exchange gain in previous year.

On the other hand, due to the capital market volatility and also adoption of the new accounting standard, our total investment income decreased by RMB 2.4 6 billion, including impact of the standard of almost RMB 1.3 billion compared to 2021. As a result of above, we had a net attributable loss of RMB 1.36 billion in 2022.

At the end of 2022, we have total assets of RMB 64.6 billion, an increase of 5.4% from the end of 2021. Following the implementation of [indiscernible], the consolidated solvency ratio remains strong at 299%.

In 2023, this is our 10th year of operation. And we will also strive to be the first to create more value for our users, investors and society. Thank you all.

[Unidentified Company Representative]

Thank you very much for introduction. We're now having Q&A. Please do not ask more than two questions at a time.

[Operator]

[Operator Instructions]. So the first question is from Michael Lee from Bank of America.

[Michael Lee, Bank of America]

I have two questions. The first one is about health insurance. So, now health insurance is the most contributable and also the insurance type with the highest contribution. And also, the growth rate is higher than the other industry average. So I would like to understand the reasons behind the good growth against the challenges and how do you expect the growth of this year?

And also, second is about ZA Bank. And also, you can see that ZA Bank has been developing very fast in the past years, and we've been seeing advertisements. And also, many of my friends are the customers of yours. So as for the development of 2023 and also longer term, what is your plan? And especially after the travel recovery and also the cross border business recovery, have you considered any of those advantages?

[Jiang Xing, Chief Executive Officer]

Healthcare insurance, this is actually a very important ecosystem of our business. And we were taking the needs of consumers and maintain the robust growth of the health ecosystem. So, apart from the core Million Medical insurance, which enjoy 29% of the growth, for the other subtypes of products or illnesses, insurance, and also outpatient and inpatient, emergency insurance and group insurance, in the past year, had grown a lot.

And in terms of the total market of the healthcare industry or healthcare insurance industry, we remain positive. First, talking about the expenses of the hygiene related businesses, you can see that the out of pocket payment is still very high. So, the out-of-pocket ratio against the total medical expenses is already over 40%. And in other developed countries like Japan and Germany, this is lower than 15%. So I believe that under the long term planning of 14th Five Year Plan and Healthy China 2030, commercial health insurance definitely speaking will play a more vital role against the whole system and also play a more promotive and active role in really realizing the Healthy China target.

So, talking about our experience in doing this business for the past decade, in the future, we have to be user centric and iterate our services accordingly. Recently, according to the needs and demands of consumers, we have already upgraded kind of protection based only medical insurance to a fully diversified and multi layered health service and health management. And also, we are using, for example, personal clinical policy to make people enjoy the services by leveraging the internet hospital resources even without going out.

And also, in the future, we will have more innovations on our product types and service more people. And based on the big data, we also have a new model of the risk based pricing model. And also in the future, we're going to dedicate our service to the Hepatitis B patients, the diabetics and also elderlies and women in specifics and really promote those products and design the products for them, and also implement the objective of financial inclusion.

So, [indiscernible] ZA Bank, I would like to have Wayne answering this question.

[Wayne Xu, President, ZhongAn International]

I think that it's almost three years of the inception of ZhongAn Bank or ZA Bank. So, as the very first virtual bank available in Hong Kong, we maintained the position as number one virtual bank in Hong Kong. So, in terms of the balance of deposit, now it's already HK$9.1 billion and the outstanding loan balance of HK$4.9 billion. And also, now we had already exceeding 650,000 retail users on the app, and this is already marvelous in Hong Kong.

And in terms of retail banking, ZA Bank, on top of the traditional banking products and services, is iterating the gamification experience of our product and make the financial products available to all the users and enhance the activities of the users. And also, at the same time, last year, ZA Bank has seriously launched the insurance products of savings based and financing related products and forex products. So, these are providing a omnichannel financial service to our users. And also in 2023, we also experienced a quick AUM growth.

And also, apart from retailing banking, we're also expanding the corporate banking business as well. For example, we really helped to launch the pilot of the sandbox trial targeting the corporate users. And the accounts and corporate account could be available within one working day. And also, we are helping the SMEs of Hong Kong to unleash more potential for the development by leveraging our financial products, and also diversify services.

As we already mentioned, ZA Bank now is already supporting the visitors to Hong Kong opening account in Hong Kong online, which is also compliant with the regulation and the users in Hong Kong can submit all the relevant materials to open up their account via the ZA Bank app.

And also now, we co-create the future innovations together with our users and being user centric and also becoming a technology driven one stop solution provider. And in the future, we're going to launch more products and services. Please stay tuned.

[Operator]

Next we have Charles Zhou from Credit Suisse.

[Charles Zhou, Credit Suisse]

I have two questions. The first is that we have noticed that the underwriting profit is quite good with the three-fourths of the growth and also combined ratio reduced. So, I think that you achieved a lot, but if you're taking a look in the profit – net profit, so we saw the fluctuation of your net profit versus that adopting IFRS 9 standard, you had a big fluctuating profit. And also, another one is in terms of investment, the appreciation of US dollar also caused a kind of a big forex loss of your US bond. So, I want to understand whether you have anything [indiscernible] trying to reduce the volatility of the profit.

And the second question is that also I analyzed some of the other consumer finance companies and I think that the industry alone is very much experiencing challenging a lot. And I understand that for ZhongAn against this big macro backdrop, you performed quite robustly. So I would like to understand what are the measures that you have been taking and also looking into the future in terms of the financial businesses, how do you think about this?

And also, from the premium GWP growth all the way to underwriting profit growth, how are you planning that?

[Jiang Xing, Chief Executive Officer]

Let me talk about the answers to your question about volatility of our profits. So, net profit includes the group insurance in China, technology export, and also the virtual bank in Hong Kong.

So take a look at the domestic P&C part, so the combined ratio of P&C and with our very good growth strategy in 2021, we had the very first underwriting profit positive. And in 2022, further improved and optimized and further unleash the potential of the underwriting profit. So, this is very important with our efficiency enhancement, also cost reduction.

And in terms of investment, we will further focus on a better portfolio structure for assets and focus on the balance between the long term and robust fixed income assets and also the short term opportunity of the capital market.

And also, in 2023, together with the macroenvironment of the external market, we are also going to adjust and replan the ratio of different products in the portfolio in order to be adapted to the new accounting standards. And in terms of the forex rate, we will also manage the debt exposure and the risk accordingly.

In terms of technology and virtual bank, as you can see that, we have already significantly shortened the loss significantly. So we have confidence to realize the profitability in the near two years for these two segments.

As for the consumer finance, I'd like to have [indiscernible] to answer this question.

[Unidentified Company Representative]

You can see that this is actually a very challenging year. So, in 2023, you can see that, still we have been confronted with many different challenges. So, we will further use the insuretech to enable and empower our business and also to really have a very good risk control ability. Also, we are able to maintain a very high quality of our business by doing that.

And also, if you are evaluating the quality of our underlying assets, you can see that they're very robust and also high quality. And also, from the figure of 2022, you could sense that the loss ratio of our ecosystem of consumer finance is still very robust and further improve our loss ratio in the second half of the year, which is already better than the industry average. So, with our years of technology investment and also very good realization and implementation of our strategies, this is the result by doing that.

Looking into 2023, we will further believe that still the consumer loan and also some of the other demands are still there. So we are going to work with our eco partners to really laser focus on the different market scenarios. So, we are able to further optimize our business and also really provide a better service.

In the future, the prudent risk control measures are going to be there and also we are going to be developed on a more prudent way.

[Operator]

Now we have the next question from [indiscernible] from CICC.

[Unidentified Participant]

I am from CICC. I have two questions here. The first one is about the pet insurance. So, in the presentation, you mentioned a bit about this, but could you share with us more details in terms of profitability and also the business process?

Also, another one is that, in recent two years, many of the top notch companies are raising the importance of pet insurance. So, in the past years, have you actually had any newcomer or earlier comer kind of advantage?

And second question is that, for the overall insurance business, can you expect that, in 2023, what kind of businesses are going to be the main contributors to your business?

[Jiang Xing, Chief Executive Officer]

Let me answer the question about the pet insurance. So in terms of the total volume, in 2022, the premium of the pet insurance increased by almost 100%. And also, in terms of the overall volume, as well as our market share, we were leading the market of pet insurance in China. But I think that it is still in a very early stage in terms of the pet insurance here in China. But still, the base is huge.

And also, second is that, for pet business segment, not only we are focusing on pet related insurance, but also we had multiple iterations of our products covering the [indiscernible] and also the other relevant services of the pet itself, like the health management of the pets. So, if you're a pet owner, you could turn on our app and to find more on our app.

And also, next one is that in terms of very important technology capabilities, we are also exploring the possibilities in terms of the scenarios and also new areas like the travel, food safety, et cetera. So, while you can see that now in the society pets are becoming more important in the family and also the pet related consumption volume just increased a lot, so still this is a blue ocean market with less competition in 2023. Definitely speaking, more products will be researched and launched in 2023 that are relevant to the pet related demands. And also, we are really positive on the future of pet related market.

And also, in the near future, there will be as many as 100 million pets owned by families in China. But I still believe that it takes time for everybody to adopt this pet insurance and other relevant products.

But with regards to profitability, I'd like to have my colleague in answering this question.

[Unidentified Company Representative]

So, for 2023, in terms of the total premium, health and digital lifestyle ecosystems are the major contributors to our premium income. On top of our existing business, we're also exploring the business opportunities for innovative business. With the macro recovery, the consumer finance ecosystem will also be recovered. And also, the overall asset quality is still good.

In terms of profitability, we're also focused on efficiency enhancement and cost reduction and also drive the high quality growth and maintain a positive underwriting profit.

[Operator]

Next question is [indiscernible].

[Unidentified Participant]

I have two questions. First is that at the end of last year, the regulator's already had a intention of loose the management and regulation on the platform related economy. So, you are working also with some of the platform economy regulators and also companies? So I would like to understand that what are the measures that you're going to take under this big background and you're able to collaborate with more platform companies to gain more traffic?

Second question is also about your insurance. So, you can see that, in the underwriting profit, health insurance is the major contributor. So, we also noticed that the customers of your company is quite young. So in the future, with the growing age of the existing customers and insureds, the loss ratio might be higher. So what are the countermeasures that you're going to take to maintain a robust combined ratio?

[Jiang Xing, Chief Executive Officer]

Talking about the traffic and data-related questions, so we are an internet insurer. So internet channel is very important to us. And we're doing the branding and imaging a lot via the internet platforms. For example, the hot trends. And also launch very innovative market activities.

In 2022, we had a very good positive feedbacks in terms of our branding activities. And in terms of public domain traffic, we actually continued to do the branding. And our cumulative omnichannel number of followers reached almost 20 million. And also, now by leveraging live streaming and short videos as the major way for us to expose ourselves, we are leveraging our technology know-hows to further enhance our efficiency of customer acquisition.

In terms of private domain operation, we use the app of ourselves and corporate WeChat to really focus on the operation. And also empowered by technology, we are improving the repurchase rate percentage and renewal rate. So, by developing our own app, we are also trying to understand more deeply the consumers' needs and also trying to trigger more insurance needs.

So, in total, the monthly active users reached 4.23 million and renewal rate further improved to 85% in 2022. And also, you can see that the per capita premium is already reaching RMB 755, up by 49.2%.

And also, another question that you mentioned was related to product innovation. So ZhongAn is sticking on the dual engine development strategy of insurance plus technology, and also doing the insurance product innovation around four ecosystems.

So in the health ecosystem, we are going to really focus on the blockbuster product of Million Medical, and also trying to digitalize and also refine our products, catering different needs. For instance, chronic illnesses, elderly patients and women as well.

So in the business report, you have already heard about the product of chronic illness insurance and group insurance and group coverage. These are actually continuously contributing to our premium. And also in 2022, the growth rate for chronic illness related premium was 149% and 68% growth rate for the premium income from the group insurance. So in the future, the products will be enriched to further enhance the contribution from health ecosystem to our overall income.

And in terms of digital lifestyle ecosystem, by leveraging the social media, ecommerce, and short video and live streaming, we are gaining new momentum for the growth. And also, now you can see that the entrance of the goods return is already – has been used by many different users of the ecommerce platforms.

And also, apart from that, another innovative product which is pet insurance and also the digital device insurance and other multi-scenario A&H insurance and also the home property and also on some of the other insurances, these are the products that we launched and a very good proof of our innovative ability. In the future, we'll have the confidence to seize the opportunity of [indiscernible] of the internet consumption, and also really continue to get a close loop for our customers and provide our production to all the users across the internet. This is my answer.

[Operator]

Due to the limit of time, we're going to accept the very last question. [indiscernible] from Daiwa.

[Unidentified Participant]

I think the majority of the products and majority of the questions have already been covered. And there is another one which is about a technology export. So my question is about the technology export. So, in the past half a year or so, we have already seen different designs of the top level policies. And [indiscernible] has been the hot topic recently. So, I'd like to understand what is the plans from ZhongAn's perspective, what about your product matrix design in China?

And second question is about a long term strategy for technology export. And just now, you already mentioned several blockbuster products. And also, as internet company, you have also very good quality service. So I want to ask the management that whether you want to be a product oriented company or service oriented company, what is your positioning?

[Jiang Xing, Chief Executive Officer]

Indeed, against the digital China as a background and context, technology companies including ZA Tech and ZhongAn Insurance, we had many good opportunities. First of all, we are laser focused on the insuretech domain. And also, we really emphasize on the technologies empowerment to the core products and also to service the core industry customers. And now, we had in total 700 different customers in China and also abroad, but also in China we have already had many different strategic partners, and we are exporting our core credit loan system ability and the other capabilities to them.

And also, we are trying to stand out of our existing cycle, which is that, for example, the operation, cybersecurity and some of the vertically integrated softwares. We have expanding this capabilities to another 18 non-insurance customers.

In the future, we will further export our technology of especially insuretech and also seize the opportunity of [indiscernible] and also seize the opportunity of replacing the foreign brands with domestic ones and surpass the other brands.

So, the answer to the second question is, according to the positioning of ourselves as a company of insuretech, we are using insuretech to empower the global insurance and financial industry and enable digital transformation of many companies. So in the long term, we will continuously position ourselves to further optimize our products. And by the experiences that we accumulated for the past years in terms of the product matrix, now in China, we have three major series of products and the series of insurance growth oriented and also the business – and production related and business infrastructure related series. And also, at the same time, we have also some of the other insurance agency distribution platform, which is lightweight and SaaS based, and also helping the digital transformation of our customers along the insurance link in the world. And also, in the future, we are going to really focus on our core products and R&D investment and also core customers.

So, by deepen our strategic partnership with our customers, we are also going to enhance our ability of making better products and also getting more opportunities from the market.

[Unidentified Company Representative]

Due to the limit of time, this is the end of the annual announcement – annual performance announcement of 2022. On behalf of all the management, thank you very much for your participation.

[Operator]

Thank you very much, everyone. Now you are able to be disconnected. Thank you very much, everyone.