Net profit attributable to parent company drops by over 70%, leading internet property insurance leader ZA ONLINE proactively downsizes

On August 27, ZhongAn Online (6060.HK) disclosed the company's performance for the first half of the year.

The total premium and net profit attributable to the parent company were RMB 15.238 billion and RMB 0.55 billion, with year-on-year growth rates of 5.4% and -74.96% respectively, highlighting the phenomenon of "increased profit without increased revenue".

On one hand, the liability side outperformed peers.

In terms of listed insurance companies, according to Xinfeng (ID: TradeWind01), in the first half of the year, China Taiping (601601.SH), Ping An of China (601318.SH), PICC (601319.SH) and ZhongAn Online collectively garnered premiums of RMB 600.66 billion, a year-on-year increase of 4.56%.

ZhongAn Online's growth rate was 5.34%, higher than the overall growth rate, and second only to Taiping P&C's 7.7% among the four companies.

Its domestic internet P&C market share has exceeded 20%, ranking first among similar insurers.

Different from traditional P&C insurers, ZhongAn Online, as the first domestic internet insurance company, divides its business into four segments: digital life, health, consumer finance, and auto.

In terms of scale, the premium distribution of each segment is 48.7%, 29.8%, 14.3%, and 7.2% respectively.

In the first half of the year, each segment showed significant differentiation, with "two increases and two decreases".

Premium income for digital life and auto segments was RMB 7.414 billion and RMB 1.102 billion, with year-on-year increases of 27% and 34%; while health and consumer finance segments saw income of RMB 4.538 billion and RMB 2.184 billion, with year-on-year declines of 9.6% and 21.6%.

In terms of overall scale and change magnitude, the growth rate of premiums was mainly dragged down by the decline in consumer finance business.

ZhongAn Online stated that the contraction in business scale was a proactive decision by the company.

Consumer finance mainly refers to providing credit technology services to licensed financial institutions.

The specific process involves cooperating with internet platform partners in multiple scenarios (such as Alipay), reaching potential borrowers with good credit through multiple channels, strengthening credit assessment of potential borrowers, and assisting internet finance companies (such as ZhongAn Dai, Masan Consumer Finance, etc.) in managing credit risks.

ZhongAn Online stated that faced with the uncertain macro environment and industry challenges in the first half of the year, the company proactively reduced its business scale to cope with fluctuations in asset quality.

As of the first half of the year, the outstanding balance covered by the consumer finance ecosystem was RMB 23.028 billion, a decrease of 15.0% from the end of last year.

On the other hand, net profit saw a significant decline.

The net profit attributable to the parent company in the first half of the year was only RMB 0.55 billion, a decrease of 74.96%.

ZhongAn Online stated that the main reason for the pressure on net profit was the decrease in underwriting profit caused by the increase in the loss ratio.

Xinfeng (ID: TradeWind01) noted that in the first half of the year, the comprehensive loss ratios for the health, digital life, consumer finance, and auto segments all increased compared to the same period last year, rising by 0.1 percentage points, 3.3 percentage points, 13 percentage points, and 7.6 percentage points respectively.

This led to an overall increase in insurance claim payouts However, the comprehensive cost ratio is still maintained within 100%, at 92.5%, 99.8%, 90.7%, and 97.3% respectively.

Investment pressure is another major reason for the decline in net profit.

In the first half of the year, ZA ONLINE's total investment income from insurance funds was 620 million yuan, a year-on-year decrease of 14.25%, with a net investment income of -174 million yuan.

ZA ONLINE stated that in the future, it will strictly control the scale of equity investments, dynamically adjust the proportion of secondary market equity investments, strengthen the allocation focus on high-yield stocks; at the same time, aiming to maintain a stable holding yield, maintain a high proportion of fixed-income assets, strictly control credit risks, and continuously improve the asset management capabilities of insurance funds