ZhongAn Online P & C Insurance Co., Ltd. (6060) Earnings Call Transcript & Summary

Hello, everyone. Welcome to the ZhongAn Online 2024 Full Year Earnings Conference Call. [Operator Instructions] Now I give the call to Lin Zhang, the Head of the Capital Market and IR, to give us the opening.

Dear investors, analysts and media friends, good afternoon. Welcome, everyone, to attend today's ZhongAn Online 2024 Full Year Earnings Conference Call. I am Zhang Lin, in-charge of IR and Capital Markets. Please allow me to introduce the management. We have General Manager, Chief Executive Officer of ZhongAn Online, Mr. Jiang Xing; CFO and Chief Investment Officer, Mr. Li Gaofeng; and for ZhongAn Online Secretary of Board, Mr. Wang Min. And also we have from ZhongAn International, Wayne Xu. Now please give the floor to Mr. Jiang Xing.

Hello, good afternoon, investors, analysts and media friends. This is Jiang Xing, the General Manager of ZhongAn Online. Thank you very much for attending ZhongAn Online 2024 Full Year Earnings Conference Call. Also here, I would like to thank everyone for your continued support and attention to ZhongAn Online. In 2024, this marks the new beginning of our decade-long journey. And always, we adhere to our mission of driving finance with technology and providing insurance with more on hand, steadfastly advancing the dual engine of insurance plus technology. Also, we always put the users to the centric, and also, we adhere to the mission and value of yesterday's bad performance is today's minimum requirement. In a complex and ever-changing market environment of last year, we have still maintained a steady development and also, at the same time, facing opportunities such as AI technology innovation and deepening the digital infrastructure and dual carbon strategy. We are also actively exploring and formulating the new strategies to create the new growth engines for the next decade of ZhongAn and drive the company's long-term sustainable development as well. And next, I will focus on reporting the business achievements that the company has made in 2024. In 2024, we achieved the GWP of RMB 33.417 billion, a year-on-year increase of 13.3%. In terms of the total written premiums, we rose one place to eighth in the domestic P&C industry and also making us the fastest-growing and youngest company among the top 10. Also, in 2024, we have achieved the insurance service revenue of RMB 31.744 billion, a year-on-year increase of 15.3%. The underwriting combined ratio was 96.9%, making the fourth consecutive year of underwriting profitability. At the same time, investment income significantly improved. So based on the above operating results, in 2024, we achieved a net profit attributable to parent company of RMB 603 million, a year-on-year increase of 105.4% compared to the adjusted net profit attributable to the parent company of RMB 294 million in 2023. We adhere to the long-termism and steady operations, which has continuously strengthened our net asset and maintain a very good and ample solvency. At the end of 2024, the company's comprehensive solvency adequacy ratio was 227%, and we maintained the Moody's Baa1 and AM Best A- credit ratings. As one of the as strategic engines, the technology business benefited also from the ongoing wave of digital transformation in the domestic and global financial industries. In 2024, the total revenue from Technology export increased by 15.3% year-on-year to CNY 956 million. Considering the company's shareholding ratio, the Technology segment achieved a profit of RMB 78 million for the year. Our Hong Kong digital bank, ZA Bank, continued its rapid growth momentum, achieving the net revenue of HKD 548 million for the year, a year-on-year increase of 52.6%. The high growth in revenue brought about scale effects and significantly improving the cost-to-income ratio and ZA Bank's losses narrowed massively by HKD 167 million. We believe that the corporate value is not just about the numbers on our financial statements, but more about using business powers to drive a positive cycle of social value. Recently, we successfully signed the United States Environment Programme Finance Initiative principles for sustainable insurance, becoming the very first Internet insurance company globally to join. We have always firmly believed that inclusivity is not a choice but a must-answer question. We actively responded to the guiding operations or opinions on promoting high-quality development of inclusive insurance issued by the National Financial Regulatory admission and leveraging the insurance role as the shock absorber in the economy and stabilizer in society. We deeply focus on technology empowerment, launching a series of innovative, inclusive and diverse insurance products, further enhancing the convenience and accessibility of insurance services and enabling insurance coverage to reach a broader population with lower thresholds. Over the past 1 year, we have achieved impressive results by providing diversified coverage such as accidental insurance and liability insurance, we have cumulatively provide the solid protection for over 2 million flexible employment groups. And in response to the risk challenges faced by small and micro-sized enterprises, we introduced 95 inclusive products targeting small and micro-sized enterprises servicing over 1 million domestic small and micro-sized enterprises, helping them to grow steadily. In the health insurance segment, we focus on the protection needs of special groups such as those with preexisting conditions, chronic illnesses and elderly, providing health protection for over 2.8 million such special groups through inclusive health insurance products. Additionally, in green insurance, we also launched 507 green insurance products, strongly promoting the green development of the industry. At the same time, our performance in global mainstream ESG ratings has significantly improved year-by-year demonstrating our company's continuous investment in sustainable development and the recognition of our phased achievements. Looking ahead, we will actively fulfill the principles for sustainable insurance with higher standards and firmer determination under the guidance of national macro policies promoting comprehensive green transformation of economic and social development, we actively guide insurance products towards a new journey of sustainable development. Today, as we stand at the critical juncture of AI reshaping global industries, the integration of insurance and AI is not just about the cold algorithms replacing human touches, but about making risk production more warm and human-centric. We actively embrace the technological development and using mainstream large language models and our own data to forge our own AI mid platform, reshaping the insurance value chain. And in 2024, this has already been coming into place. In terms of the underlying architecture, we have integrated domestic mainstream large models such as Qianwen Tongyi and DeepSeek and also Doubao and the others, combined with their own data mid platform to distill and fine-tune these general models and forming our own self-developed user navigation map. We also integrated the various models such as language voice, image and classification paired with big data platforms and machine learning platforms to achieve deep optimization of intelligent engines. Now the company mid platform, which is called Lingxi platform has completed refinement of multiple core capabilities and launched over 70 active bots, deeply integrating AI technology into full chain business scenarios and we lead the industry in the volume of mainstream general model calls and also in terms of the number of calls upon the mainstream large models, we ranked the top with Lingxi mid platform production environment, the bots averaged 50 million calls per month. In terms of application level, we have achieved the AI applications across the entire chain of product design, marketing, underwriting, service, claims and quality inspection. On the design side, AI assists us to rapidly produce the product and also iterate the product as well. On the marketing side, AI help us to improve the user reach and efficiency, achieving precision demand matching. We continuously upgrade AI customer service, providing proactive emotional value on the service end. We have also achieved the automated underwriting and claims using AI to identify potential underwriting risks and fraud possibilities, providing early warnings to reduce the company's risk costs, and we have also implemented full process AI quality inspection and establishing dynamic risk barriers. In 2024, facing increasing fierce market competition, we continue to reach potential customer groups through multiple scenario and multiple dimensional touch points around the ZhongAn brand. At the same time, we adjusted our marketing strategy to focus on operation of our user and to really explore long-term value of our users. In 2024, ZhongAn self and proprietary channel realized the -- gross written premium of RMB 7.46 billion, accounting for 22.3% of the total premiums. The number of paying users in our proprietary channel reached 9.46 million with average premium per user of CNY 788, an increase of 18% year-on-year. The average number of policies per user increased from 1.6 last year to 1.7. Among them, the renewal policies generated premium of CNY 2.251 billion, a year-on-year increase of 34% and customer renewal rate increased by 2.7 percentage points to an year-on-year increase of 91%. Also, at the same time, with the assistance of AI, the company's customer service personnel managed over 60,000 cases per person doubling the previous data, the premium output per user service personnel increased by 60% and policy inspection violation rate decreased by 96%, greatly improving the efficiency of our private domain operations, strengthening the brand awareness, increasing user stickiness and improving the premium conversion rate. Now I would like to introduce the overall progress of each insurance ecosystem. First of all, taking a look at the health ecosystem, health insurance ecosystem. Over these 10 years, we have been adhering to the original belief that we want to become the national medical insurance for 100 million people and empowered by technologies and breaking the insurance boundaries through this and continuously enriching health insurance products and services and in total, servicing over 130 million users already. During the reporting period, we provided the health protection to 27.77 million insured users and the total premiums of the health insurance ecosystem exceeded CNY 10 billion mark, reaching CNY 10.338 billion in 2024, a year-on-year increase of 5.4% with the growth exceeding 20% in the second half of last year. Our flagship health insurance product, the personal clinic policy, has undergone 25 iterations since its launch 10 years ago. Each iteration has a more precisely aligned users and with increasing personalized health protection needs. The latest 2025 version took the lead in the industry by including coverage for externally purchased medical devices and further expanding hospital coverage and providing patients with more diverse and rich medical options and significantly enhancing the breadth and depth of the medical protection. In 2024, the total premiums of the series were CNY 4.661 billion. In addition, we actively responded to the government's policy guidance on inclusive insurance, continuously improving the health insurance ecosystem product matrix, targeting the specific medical protection needs of different groups. We vigorously developed the various customized cut health insurance products and committed to improving the accessibility of the service and recently expanding the coverage for nonstandard populations. For instance, our continuously optimized and upgraded Zhong Min Bao, CNY 1 million medical product, especially designed for nonstandard and elderly populations has been well received by the market since its launch. During the reporting period, the overall gross written premiums of Zhong Min Bao series products were CNY 768 million, a year-on-year increase of 177%. In terms of the supplementary medical insurance product sector, critical illness insurance and outpatient insurance also performed well, maintaining strong growth momentum. During the reporting period, the critical illness insurance achieved total premium of CNY 1.96 billion, year-on-year increase of 46%. Outpatient insurance achieved a total of CNY 1.058 billion, year-on increase of 224% and also our group insurance business maintained a steady growth, achieving total premium of CNY 637 million, 6% year-on-year growth. And also, we are vigorously promoting the deep empowerment of AI technology in the major ecosystems in the health ecosystem. We fully promoted AI-assisted marketing, achieving 100% coverage of AI Copilot in paid scenarios. AI customer service outperformed than the manual customer service by over 40% in high-value policy sales and repeated purchase. We also continue to improve AI claims service, which now fully cover the seven major scenarios, including claims application and progress inquiry and AI intelligent fast claim approval rate significantly improved. The intelligent recognition rate of accident and health insurance claims materials increased to 90% with the fastest case resolution taking only 15 seconds, greatly optimizing user experience and making the insurance service more efficient, convenient and user-friendly. Next, take a look at the digital life economy and ecosystem. In this particular ecosystem, we have achieved in total CNY 16.197 billion of total premium year-on-year increase of 28.9%, mainly benefiting from the continuous positive development trend of e-commerce industry and rapid growth of innovative products such as pet insurance. In the e-commerce business sector, we not only established a deep collaboration with the mainstream e-commerce channels, but also actively expand the vertical e-commerce channels. Total premiums of the e-commerce business increased by 30.6% year-on-year, contributing 54% to the ecosystem's total premiums. In the business segment of travel business, in 2024, we proactively adjusted and optimized the business structure with related business contributing 18% to our total premiums of the ecosystem. In terms of innovative business, we continue to focus on emerging consumer area, fully leveraging technical means to deeply explore unmet need and pain point of our consumer industry. Now I would like to highlight some of the representative innovations in this area. First of all, in terms of pet insurance, we continuously to cultivate the product innovation and focusing on the completion of the system of pet insurance -- also apart from the accident and health insurance of the pets, but also we provided the current owners and third-party liability insurance and pet death compensation as well. We can precisely meet the increasing needs of protection with this diverse production and products. To date, our pet insurance has covered over 6 million pet owners. In 2024, the GWP of pet insurance increased by 130% year-on-year to nearly CNY 700 million with pet insurance service exceeding 1.53 million times, a year-on-year increase of 2.6x. Up to now, according to the volume, we should be regarded as the leader in this segment of the pet insurance. So apart from this, also, we captured the new opportunities brought by the industry of low-altitude economy. So in the area of drones, we are also one of the best companies and insurers. At the current stage, we have been servicing over 1 million drone owners cumulatively. Also last year, we've been responded to the policies requirements of the national government. And also, we have been covering over 100,000 farmers' drones. In the future, the company will be positioning further in low attitude economy field and increasing the innovation of relevant products. Also, in terms of small and micro inclusive sector, we precisely understand the core demand of the companies, for instance, affordability, satisfaction with claims and convenience to use. Also, we deeply explore high-efficiency, high-frequency risk claims scenarios for enterprises and servicing over 1 million small and micro-sized enterprises. Also, we actively explore the cooperation opportunities with the leading AI service providers to innovate further. So at the current stage, we've been building a very important direction to have an online Q&A for pet and health management and with AI empowerment for the digital life ecosystem. And next, I would like to talk about the automotive ecosystem. Under the comprehensive implementation of the policy, we have been reaching 29.8% of the year-on-year increase in terms of premium and total premium reaching CNY 2.05 billion. I believe that for the auto ecosystem, while we have this new policy of unified reporting and execution, the trend of online car insurance sales have become increasingly prominent. So we will seize the opportunity of the industry's digital transformation and leverage our unique advantage in Internet channels so that we are able to better develop this particular segment. Also, last year, for the new energy vehicle segment, we have been increasing by 188.4%, contributing more than 12% to the total premium of this ecosystem. In 2024, a very important breakthrough was that in Shanghai and Zhejiang province, we've been obtaining the approval for compulsory traffic insurance operations. So meaning that following that approval, we have the qualification to operate independently and we take action very quickly in Zhejiang province and Shanghai, and we operated them already. So we firmly believe that in the next several years, while we are going to sell more compulsory insurance for autos and also we are going to open a second growth curve for our automotive ecosystem. How do we use and leverage AI technology to empower this ecosystem? At the current stage, a very important project is that we use AI technology to very precisely identify the risk and also realizing the intelligent pricing of our product. Also, we continuously optimize AI-empowered claim service. At current stage, we use AI technology to analyze video materials related to claims. As a result, the average time for video reporting has reduced to just 100 seconds, while video inspections now take an average of only 7.5 minutes and greatly improving the claims experience and also enhancing our customer satisfaction. Last but not least, we would like to take a look at the consumer finance ecosystem. So altogether with the macro environment of last year, we have always been maintaining a mindset of the precautious operation, focusing on small-scale, diversified and short-term Internet consumer finance assets. So in 2024, if you're talking about the average loan amount of approximately CNY 7,200 and average duration of about 10 months. So the balance has been reducing, but still for this particular consumer finance ecosystem, not only we have a continuous underwriting profitability and also our profitability further improved versus 2023. And also in the past 1 year, we have leveraged the AI technology to realize a further update of our risk management capability and also to have almost 100% of the technology coverage to remind those consumers to repay. And also at the same time, we have been our risk model and further increase the capability to use the model to control the risk. Now I would like to hand the call over to Wang Min to talk to us about the technology segment.

Now I'll be responsible for introduction of the progress of the technology segment. In 2024, we have seen accelerated adoption of emerging technologies such as AI blockchain and also the global financial industry's digital transformation has been propelled. ZhongAn remains committed to technology-driven user-centric approach and acting the future of insurance industry. Our technology exports business built on years of deep expertise in insurance technology has achieved significant breakthroughs in key areas such as core business systems, AI, big data and intermediary platform and digital insurance marketing. And these advancements have driven the steady growth of our technology business. During the reporting period, we have servicing over 962 clients in total. In 2024, we have signed agreements with 156 clients for the -- from the industry of insurance value chain and 16 clients from the banking, securities and other financial sectors. In total, we have reached a revenue of CNY 956 million, representing 15.3% year-on-year increase. By implementing high-quality growth strategy in 2024, our Technology division achieved a net profit of CNY 78 million. So in terms of the domestic technology output business, we focus on exploration and research of cutting-edge technologies such as AI, big data, cloud computing, fully integrating our ecosystem advantages. And through rigorous validation in real-world business scenarios, we have built a high-value delivery system of products plus services. In the whole set, we have further improved the three product lines of business growth line, business production line and digital infrastructure line, achieving significant breakthroughs in regulatory technology, data integration and business systems and mid- platforms and digital marketing. We maintain high-speed growth trend in domestic market and also a leading positioning. In the wave of AI technological transformation, we have taken the lead to build a comprehensive barrier for intelligent enterprise service software in this area also demonstrated a very good servicing capability. ZhongAn InfoTech has also fully integrated its AI product to -- with the DeepSeek large model, injecting more powerful intelligent core into our products. Also in the business growth line, we provided AI intelligent marketing tools based on the fine-tuned industry large models offering high-value returns for industry. In business production line, we also provide a new generation core operating systems based on the fine-tuned industry large models to enhance the operational efficiency of our customers. In the business infrastructure line, we leverage deep industry know-how to help the enterprise to accelerate adoption and efficiency of large model applications. Also, ZhongAn InfoTech AI mid platform provides the enterprises with one-stop intelligent agent building service capable of handling complex and ever-changing business scenarios, helping enterprises achieving intelligent operations and management. Also, we have built instantly a more model suite to build a super agent with a stronger intelligent core using DeepSeek. And also altogether, we enable our company outbound core system to achieve a more cost-friendly approach and also based on a very good data analysis capability, we help to establish a continuous to optimize this is closed loop. Also, it's worth mentioning that in China, while implementation of IFRS 17 is there for the new insurance contract standards we have leveraged this deep industry experience and excellent product development and also independently developed an end-to-end solution. Also, we can be adopting the advanced distributed system architecture supporting massive data processing and also, at the same time, using softwares and hardwares as well. So we provide a one-stop solution to our customers. In 2024, the IFRS 17 product secured contracts with 21 clients, fully demonstrating our comprehensiveness and competitiveness in this market. Also, for the further promotion of the product of this fund, we have laid a very good solid foundation for our next wave of the further development to provide further intelligent products to our customers. This concludes our introduction about the technology of ZhongAn. And now I'll give the floor to Wayne to talk to us about ZhongAn International development in 2024.

Thank you very much, Wang Min. Now I'll be responsible to talk about the international technology output business of ZhongAn. And now we call it the Peak3 as a company. So Peak3 focuses on developing and delivering cutting-edge technology and AI solutions for insurers and insurance intermediaries in global markets. Its product portfolio includes cloud-native modular core insurance systems and insurance intermediary system and brokerage system, supporting life health insurance, P&C and accent insurance. So these solutions have been widely recognized and adopted by leading global insurers, Internet platforms and also other intermediaries. So in June of last year, the company successfully completed CNY 35 million -- I mean, U.S. dollar Series A funding round and officially rebranded as Peak3, accelerating its business expansion in Europe, Middle East and Africa under a refreshed brand and identity. In 2024, Peak3 achieved income business progress in these markets, including adoption and implementation across six new European countries. And also to support its strong growth momentum, Peak3 established a European technology center in Serbia. By the end of 2024, Peak3's annual subscription revenue reached HKD 168 million, representing an 18.5% increase compared to the end of 2023. Also at the same time, we continue to reduce the cost and improve efficiency and significantly narrow our net loss margin. And except for that, also ZA Bank in Hong Kong has continued its steady development, advancing towards its vision to build a one-stop digital financial service platform in Hong Kong. Also, ZA Bank is committed to provide diverse, convenient and inclusive financial services to retail users and small and micro-sized enterprises. In 2024, the ZA Bank launched a series of new products. And in February, it officially introduced the U.S. stock trading service for users. In November, it became the very first bank in Asia to offer cryptocurrency trading service for retail users. While the service ecosystem continues to improve, the ZA Bank's customers' appeal and satisfaction level have steadily increased. As of December 31, 2024, we have over 800,000 retail users with a monthly active users rate of 40% the bank also served more than 3,000 corporate banking accounts with total customer deposits reaching HKD 19.399 billion and total loan balances at HKD 5.86 billion. All key performance indicators have shown stable growth. The steady business growth has continued to drive the gradual expansion of ZA Bank total assets and key financial indicators also showing consistent improvement. As of December 31, 2024, our total assets reached HKD 22.336 billion, marking a 60.3% increase compared to the previous year, benefiting from the interest rate hike cycle and expanding range of loan products, the bank's net interest margin further increased from 1.94% in 2023 to 2.41% in 2024, exceeding the industry average. Also, meanwhile, the capital adequacy ratio remained at the stable 23%, providing a solid buffer for continued business expansion. In 2024, ZA Bank's net revenue reached HKD 548 million, reflecting 52.6% year-on-year growth. Behind the achievement is our keen marketing side and effective execution of business strategies. At the same time, through refined management, we further reduced the cost-to-income ratio and achieved a dual optimization of revenue growth and cost control. This strong financial performance was directly reflected in bank's narrowing net loss. In 2024, the net loss decreased to HKD 232 million with a net loss ratio narrowing to 42%, so marking a steady step towards our breakeven goal. Now I'll give the floor to Gaofeng to share insights in our financial performance in 2024.

Thank you, all three speakers for their reviews and summaries of each business segment. And now I'll be responsible to introduce the company overall financial performance of the past year. In 2024, June achieved the insurance service premium of RMB 31.744 billion, representing 15.3% year-on-year growth. In terms of health ecosystem, against the backdrop of forms and medical insurance payment method, we fully leverage the unique value of commercial health insurance, continuously expanding our product portfolio and made a multi-tier medical protection system that completes the basic medical insurance and addresses users' pain points. During reporting period, health ecosystem insurance service revenue reached CNY 9.738 billion, reflecting 13.2% year-on-year increase. In terms of digital life ecosystem, we accurately capture consumption trends in e-commerce, mobility and pet economy, integrating insurance production services to various consumer scenarios. driven by the continuous prosperity of e-commerce sector and rapid growth of innovative products such as pet insurance. This ecosystem achieved insurance service revenue of CNY 15.786 billion, marking 26.8% year-on-year increase. Consumer finance ecosystem facing a challenging external environment, we adhere to a prudent business strategy and proactively scaled down our operations. During the reporting period, insurance service revenue reached CNY 4.377 billion, reflecting 13.2% year-on-year decline. Automotive ecosystem, we see the opportunity brought by industry's accelerating digitization, actively embracing the policy benefits and growth potential of new energy vehicle and focus on household auto insurance underwriting while closely following the rising wave of NEV insurance in 2024, this ecosystem achieved insurance service revenue of CNY 1.843 billion, reflecting 28.4% year-on-year increase. In 2024, benefiting from the company's consistent strategy of sustainable growth with quality and under the new Hong Kong IFRS 17 standard, the underwriting combined ratio reached 96.9%, achieving underwriting profitability for 4 consecutive years. Combined ratio -- loss ratio was 58.3% and combined expense ratio of 38.6%, respectively, with the total overall underwriting combined ratio increased by 1.7 percentage points. And also in the health ecosystem, during reporting period, combined ratio was 95.7%, up 8.5 percentage points than last year. Claim ratio or loss ratio of 39% increase of 4.8 percentage points, mainly due to changes in the product structure and increased renewal premium ratio. Expense ratio was 56.7%, up 3.7 percentage points, primarily due to buildup of private domain operations and maintenance system as well as initial infrastructure investment in AI. Also, in digital life ecosystem, the combined ratio, 99.7%, maintained steady compared to the last year. The loss ratio 68%, up 2.1 percentage points from last year. Expense ratio 31.7%, down 1.9 percent points due to adjusted product structure. Consumer finance ecosystem in 2024 combined ratio, 90.1%, improving by 6.3 percentage points compared with the last year. The loss ratio, 62.1%, down 6.3 percentage points because we have prudent risk control strategy and strengthened the upgraded risk control measures, which improved the underlying asset quality. Expense ratio 28% remained stable compared to 2023. For the auto ecosystem, combined ratio 94.2%, improving by 1.2 percentage points. The claim ratio -- loss ratio increased by 2.4 percent points to 67.5% influenced by increased user travel. and the expense ratio decreased by 3.6 percentage points to 26.7%, benefiting from the improvement in refined operational management and also the new policy. In 2024, in terms of investment, we continuously to implement the fixed income plus capital allocation strategy. By the end of 2024, the total investment of insurance funds amounted to RMB 39.776 billion with 77% of investment in fixed income assets, primarily consisting of bonds and bond funds, benefiting from the strong rebound in domestic bond market and recovery of the secondary equity market in 2024. The total return on investment reached CNY 1.335 billion and a significant increase from CNY 720 million in 2023, reflecting year-on-year growth rate of 85.4%. The net income -- net investment income was CNY 349 million, 41.3% increase -- the net fair value change gain and losses amounted to CNY 990 million, a sustainable increase of 109.3% compared to 2023. The total investment return rate in 2024 was approximately 3.4%. Net investment return rate was about 2.3%, represent an increase of 1.5 percentage points and 0.1 percent points, respectively, compared to 2023. Also in 2024, the insurance business segment, the insurance service income achieved steady growth despite the uncertain external environment, we have been achieving underwriting profitability for four consecutive years since 2021. Also, the profit of the insurance business segment has further improved compared to the previous year, demonstrating resilience and stability. Also, it's worth mentioning that both technology and banking segment has reduced losses as scheduled in 2024. In Technology segment, benefiting from a global digital transformation, we have been seeing a very good income with increasing proportion of productization and release of management efficiency, the loss in Technology segment narrowed significantly. In terms of banking segment, ZA Bank further expanded interest-earning asset base and coupled with increase in net interest margin during the interest rate hike cycle, achieved rapid growth in net income. Also, with the continuous improvement in operational efficiency and a gradual realization of economies of scale, key indicators such as cost-to-income ratio were significantly optimized. This is showcasing a clear path towards the profitability of ZA Bank. In summary, the net profit in 2024 saw a sustainable year-on-year growth of 105.4% compared to the adjusted net profit in 2023. Regarding capital, we have continuously maintained an ample level. By the end of 2024, the comprehensive solvency ratio was 227% and the core solvency ratio was 221%, all financial indicators remaining healthy. Looking ahead, we will stay true to our original mission, leveraging technology and empower the insurance industry chain, deeply understanding and meeting customers' increasing financial services and insurance production needs. We firmly believe that with our forward-looking strategy layout and solid technology foundation, we will explore the vast potential of combined insurance and AI, driving digital transformation of insurance industry and implementation of AI technology. Here, on behalf of the management, I sincerely thank everyone for your support and trust to our products and services. At the same time, we extend our heartfelt gratitude to all investors and us for the long-term attention and trust. Thank you.

Thank you very much, all management introductions. Now we're going to have the Q&A section. [Operator Instructions] The first question is from CICC, Mao Qingqing. Let's have the next one. We have Rick Zhao from Morgan Stanley.

Congratulations on such a wonderful achievements in 2024. I have two questions. The first one is that in terms of AI application this year, we could see that in this report, in business segments, we have the AI empowered. So can the management give us a summary? What about the core advantage of using AI and what kind of positioning that we have in this industry? Also in the financial report, how do we reflect the power of AI? And also, what is the increased rate of CapEx related to AI? My second question is related to consumer finance because we have noted that throughout the whole year, the kind of particular improvement has been there and almost to 90%. So meaning that in 2024 second half, we had about 80% of the combined ratio. So what was the reason to drive the significant improvement? Can this be continued? And also for the consumer finance as for the trend of growth and also the combined ratio trend, can you give us an answer?

All right. Thank you very much, Rick, for this question. Let me, first of all, answer the question related to AI. For the consumer finance, my colleague will answer. So in terms of the arrival or before the arrival of AI large model, we have been investing a lot in the development of AI from patents and integration with our business. So for ZhongAn Online, we always wanted to regard the AI as a very important segment to reshape our business also because we have a very high frequency kind of interaction with our customers online, and we can integrate AI further. So in ZhongAn, our AI strategy is that we do not compete on the large model, but only compete on our expertise and know-how to this industry. We will be laser focusing on the business scenarios and using AI to reshape and also to upgrade the value chain of insurance. So in the previously presented content, you can see that for the AI, we built up the underlying infrastructure, and we have a proprietary innovative mid platform and integrate the AI into our product innovation, we have achieved a certain level of achievements already. Also, I would like to share with you a data, which is that by the large model that we have distilled every day we have seven dialogues and also we have refined that based on 70 billion parameters so that the prediction accuracy level could be above 85%. Also at the same time, while we have the Lingxi mid platform, which we have proprietary innovated, and we have completed the refining of many different key capabilities and also launched over 70 bots. We are integrating AI into all works of life and in the Lingxi mid platform in the production environment in terms of the bots there, on average, monthly level, we have a call of 50,000 -- 50 million. So this is actually a pretty big number, meaning that in ZhongAn Online insurance, we are not trying to just do AI for the sake of doing this, but we are implementing AI for sure. And also finally, generating values for our business, especially covering business design, product design, claims and the other service provision. So as for ZhongAn, we are a company that is driven by both technology and also our product. We are going to further strengthen on this point and further deepen our strategy and also integration of AI so that in the next few years, we're going to achieve a high-level achievements with the empowerment of AI.

Thank you for this question, Rick. In the consumer finance ecosystem in years, we have been withholding a very precautious and prudent operational mindset and also by optimizing our strategies and iterate our products, we have realized a more excellent selection of the underlying assets or underwriting assets. Actually, we've been receiving a lot of challenges from the capital market, but still we overcame these challenges. And amidst the challenges, we should strengthen our core capabilities. And for the consumer finance ecosystem of the rounds of the stress test of our asset quality test, we maintain still a pretty big scale and also we maintain underwriting profitability. In 2024, we focus further on the customer-centric underwriting. And also, we have our own risk control model and firmly withhold the precautious and prudent strategy. So in terms of underlying asset quality in 2024, it was further improved and has a tendency of being further improved. By the end of 2024, the underlying underwriting assets, we have kept a very good level in the beginning of 2025 for the quality of underlying assets, we have a very good positive trend. So in the future, we will further adhere to the prudent operation strategy and mindset and also optimize our models of risk control. So in 2024, for consumer finance ecosystem, why we achieved such a wonderful profitability, which was the best already. The reason or one of the reasons was because of the empowerment and the implementation of AI. So AI technology is now managing the risks before the loan during and after within controllable fashion. So that also we are using AI into the process of identifying the risk of the users and also reminders today users and also this year, for the consumer finance ecosystem, we will keep a very steady growth of our scale and emphasize continuously the significance of risk control. So that for this business segment, this is going to be developed on the right track.

Thank you. Thank you very much for this question. And also, now we're going to give the floor to Mao Qingqing from CICC again.

All right. Thank you I am Mao Qingqing from CICC. First of all, congratulate on such a wonderful achievement. My question is about the health insurance and auto insurance. The first question is that in this industry, we had actually a discussion about the medium to high-end commercial health insurance. So we would like to know that for this particular product, what is the expectation of the future? For instance, what is the scale in the future and operational level? Also, a follow-up question is that can you talk to us about the changes and also reform on the payment and reimbursement system? What is the opportunity you are going to get? My second question is about the auto insurance. In 2024, you had a big growth of the premium and also a very good profitability of auto insurance. So what is your strategy for the future development? We are quite curious to know that whether the auto ecosystem is going to be bigger in the future. And also, how against this backdrop of the competitiveness in the market, you are going to have underlying profitability realized continuously.

All right. Now let me answer the first question about the health insurance industry, which is about Zhong Min Bao. Actually, as I have already mentioned that we've been operating the health insurance for about 10 years and also covering over 300 million insureds. Actually, we have been seeing that for the traditional kind of industry, it has limitations of a lot times and in terms of the doctors and also hospital coverage and others, there were shortcomings. And now we have the backdrop of DIG and DIP. These shortcomings are becoming more important and significant now. So I believe that we have to do more. And in 2019, we already started to focus on the demand of nonstandard population. Also, we have a deep insight and also the service provision experience accumulated. In 2023, we have successfully launched the new product. And in total, we've been covering almost to 500,000 insure and provide service to them. Actually, previously, we have the personal clinical policy series already promoted and also covering those people without the owners. And by designing the product in a better way, we are lowering down the threshold of underwriting and also at the same time, we are able to pay claims to the pre-existing condition with the Zhong Min Bao new product. So that for those people with chronic illnesses, they are able to get fair benefits and coverage. So adhere to the mission of becoming an insurer with a warm hand this year, we are also promoting the medium to high-end medical insurance of Zhong Min Bao. So we have the mindset of being an inclusive insurer helping to innovate in this health industry or health insurance industry. So this product is a genuine new product that is driven by the users' demand. And this marks a very good accumulation of our experience in the past 10 years and realization of our innovation capabilities. So the GWP has already been exceeding CNY 141 million. So for this mid- to high-end product, we're still covering the special needs and VIP section and also covering certain private hospitals as well into the policy. This covers the externally purchased medications and some of the other high-end therapeutics. We're now incorporating many and services into this product policy so that we can meet the tailor-made needs of different users and different buyers. So for this particular insurance product, and everyone is discussing a lot about this. Actually, we have our confidence in promoting this product because for the health insurance segment, we've been challenged and successfully solved those challenges by the whole industry. So we have a more refined management capability. Also, we have been accumulating rich experience in the design of coverage details. Also in the health management segment, we will spare efforts further to develop the network of our hospitals. So we are going to incorporate the whole disease duration management into the product design so that the health-related services could be further promoted and provided to our buyers. Also, at the same time, we're going to make full use of the AI and the large models and other key technologies to realize a more precise pricing and also realizing more efficient and low-cost user operation so that we are able to have a more sustainable development and healthy development in the future. And this is something about the health insurance. And also just now, you have the question about the auto insurance. Actually, auto insurance was quite small against the total GWP, but actually, auto insurance is the biggest one in P&C industry. So we had also 5.4% of the increase for the whole industry and total scale of auto insurance exceeded the threshold of CNY 900 billion. CNY 917 billion or so to be specific. So this is such a large potential market. And because of our experience, we have our confidence that in the traditional auto insurance segment, we will have another breakthrough. So in the next several years, ZhongAn Online will be focusing further on the further development of auto insurance segment. Of course, there are several thinkings behind. The first is that -- against that backdrop, the online insurer is still -- and the Internet-based insurer is still having very low penetration. And also from the industrial data standpoint, you can see that for the Internet-based insurer or auto insurer percentage, this is actually quite small. And against the new policy of integrating fine and execution altogether, we are at the stage of the high-quality development. So we are accelerating or experiencing the acceleration of the reform in this industry, and we are going to see more Internet-based insurer for the auto insurance segment. We want to seize this opportunity further and making full use of our advantages in this area that we have achieved in the past years. We will definitely realize a very good growth. Of course, we have a low base for the auto insurance segment in ZhongAn Online. So GWP increased a lot in recent years, but still the absolute volume is small, relatively speaking. So there is room for further improvement and especially on one hand, we actively integrate the new energy vehicle-related products. And also, we actively explore the opportunities and cash opportunities in the NEV segment. And also, we hope that we are able to design differentiated products in the new energy vehicle segment. So this year, we emphasized further on the auto insurance business enlargement. So we have actually achieved the independent operational capability in Zhejiang and Shanghai in the auto industry -- auto insurance industry. And in the future, we're going to further expand the legitimate regions of operation and further inject the momentum into the whole industry. Also, at the same time, we have very confidence that by using this new technology in terms of innovation and pricing and service provision, we are able to bring some differentiated capabilities from ZhongAn Online. At the current stage, the models and also some of the coefficient, we had our experience in the past, and we have more confidence in providing more precise pricing models also. We are now trying to cover more the claim identification and also, we're going to control the loss a lot and also focusing further on the key brand of ZhongAn Online and also at the same time, we have a better loss assessments and also we are able to provide a better service covering the requirements of claims and at the same time, control the risk. So definitely speaking, the auto insurance is going to be a very important strategic focus of ZhongAn Online in the near future. So at the end of the day, we are able to build a very competitive segment in the auto insurance industry.

Thank you. Now let's have the next question. Next, we have Michael Li from Bank of America.

This is Michael Li from Bank of America. I have two questions. The first one is about the investment. Last year, actually, for the total investment performance is very good. For instance, we had the total return on investment and the net investment income. So the market also rebounded. I would like to know that in this environment of low interest rate, what is your plan in 2025? What is about the asset allocation plan? Second is about financing. So for instance, for the U.S. bond that you have issued, it is about to be due? And what is the thinking behind?

Thank you very much, Michael. Now let's talk about the investment. Actually, this is an environment with the low interest rate. And for ZhongAn Online, we will be focusing on the particular like low-risk fixed income-based investment. And also, we will focus on the allocation to those long-term sustainable products and also balancing that with the existing portfolio. Also, we are going to control the credit risk a lot with a matching duration, we will have a more optimized operation. And also in this particular area, we will be actually further extend the duration of the bond and try to catch opportunities to further improve the investment income. Also, in terms of equity investment, we always analyze the macro economy a lot. And in the end of 2024 for the secondary equity portfolio reduced. And also under the new accounting principle of 9, we are able to also have more equity with a higher share points. And also, we will focus further on the very intelligent adjustment of the positions. Also related to the U.S. bond and debt. actually, in 2020, we have been issuing in total USD 1 billion of bond of U.S. dollars. And also, we bought back USD 49.9 million of bonds in the two years ago. Also in total, now the USD 590 million of bond will be due in July of this year. And also, we have another USD 290 million of bond that is due by 2030. So at the current stage, we have a very good solvency ratio, and we are going to be very confident using our proprietary fund to cover that.

Now let's have the next question. Next, we have from [ Xu Jian ] from Citics.

I am from Citics and my name is Xu Jian. I have two questions. The first question is about the health insurance, which is the innovative product, Zhong Min Bao. Since launch, it's been very popular. So we would like to ask you that can you further analyze that what is the detail of the risk control because we have considered that comparing with the general insurance, we might have a higher risk of claim in this new product. Also, in the long run, how do you think about expectation of the loss ratio? So my second question is about the channel. We'd like to know that among all the different channels, what is the strategy of expanding and especially for the proprietary channels?

All right. So for ZhongAn, we always emphasize a lot on the position of new products, not only meeting the unmet needs of our customers. But in terms of new product, the risk control is very important, right? So we always put it as a priority. We have to make sure that the risk is measurable, intervenable and controllable. In terms of the detailed method, in the past 11 years of operation, we had a lot of experience on the data of underwriting claim, especially we had experience of 10 years for the health insurance industry and accumulated enough data. So as for the coverage design and pricing, we had enough material to refer to. And also second thing is that we had a very good communication with the other existing insurers and also learn from their insights. Also at the same time, according to the risk disclosure, we are able to adjust our strategies timely of different products. Also as for Zhong Min Bao, as I have already mentioned, in the past 4 years, we had experience of servicing nonstandard population. And we already started the work of research in 2019. So with this new product, we have our own consulting system, and we can have the whole process risk control and management from underlying control -- underlying risk control and also all the way to the claim risk control. So I believe that the product of Zhong Min Bao can be developed continuously and sustainably in the future. Also, you have mentioned just now something about the traffic now. Actually, we've been having a lot of challenges and starting from 2024 onwards, we focus the traffic of the private domain operation as one of the strategic focuses. So as for the private domain operation, we are now having the pilot map based on the trajectories and habits of the users so that we are able to identify the users' needs more precisely and provide certain matchable products to them. So leveraging the WeCom and also some of the other apps to further optimize the private domain operation and to make the product recommendation more precise so that we are able to convert the low-frequency transactions such as insurance products to high-frequency ones and also furniture trade with other services. So the users value-based operation could be done in a more efficient fashion. But of course, in terms of the public domain traffic, we will never give up on this front in terms of our investment. And further, we are going to innovate to explore further the customer data and application-related data. So I think that in this area, the health and the external insurance, people do have more needs and demand. And hopefully, that we are able to innovate based on multiple scenarios to get an acquisition of new customers. So for instance, for the pet insurance, at current stage, it is pretty much good to acquire the insurers from online. And also, we are going to lower down the acquisition cost as well using multiple measures. So in the near future, definitely speaking, we have a proprietary channel and also focusing on the other channels as well. So a lot of those product innovations is pretty good, and people are saying that this is also very much mutually promotive to each other so people are saying that you are going to do more and quicker innovations on your proprietary channel. And also at the same time, you're going to be integrating with a third-party channel in a more efficient fashion. Also, you are able to further showcase your capability to innovate on the product supply side. So traffic is expensive. Of course, I believe that this is both a challenge and opportunity to us. And I firmly believe that we have our confidence in doing a better job in the future.

Thank you. Thank you very much. And the last question from online is Michelle Ma from Citibank.

I'm Michelle from Citi Bank. I have two questions. The first is that in 2025 for the top 2 months, premium growth was quite healthy and pretty efficient. So we would like to know that whether the management has any target and objective for the premium growth in 2025? And second question, it's very glad and pleased to see that in 2024, you have already realized a very good profit growth of the technology segment. Also, previously, you have said that we had a profit planning for banking segment. And the question is that, do you have a timetable for the breakeven or even profitable stage for the banking segment?

All right. Thank you very much. Let me answer the question first about the total scale and the guidance of our profit in 2025. So in 2025, we are going to further maintain the strategy of growth with quality, and we should at least keep the same level of growth than the industry average and further expand our business in achieving more market share. Also, we're going to focus on the deepen the digging of the consumers' needs and also further increase the premium from the proprietary channel. Also, the combined ratio should be further improved, and also we are integrating with our businesses and to improve the user experience. On the investment front, we're going to be having more stable income. Also in technology output and digital lifestyle ecosystem, we're going to have the breakeven realized in a quick fashion. Also, let's talk about the second question by Wayne.

All right. Thank you very much. Let's answer the question about ZhongAn Bank. The bank -- actually, as for the banking segment and further competition, to be honest, since we were founded, we were in a very competitive market and environment. From the previous performance standpoint, you could see that even against this backdrop of a highly competitive market, we had a very good growth. Also, we improved our profitability further. In Hong Kong, if you talk about the data of last year, this reflected further the capability of the pricing and also a better capability of managing our liabilities. Actually, if you talk about the digital bank as an ecosystem or as an industry, in the very beginning, we spent a lot on the product design and innovation. We have to do that actually. be it we are servicing 10,000 users or 100,000 or 1 million users, we have to do that investment. And while we are increasing the number of users and optimizing the product matrix, we believe that in the future, the total economy of scale will be fully showcased. Coming back to the micro economy and macro environment in Hong Kong. Hong Kong is actually a quite sensitive market in the international arena. So while we had an interest rate decline on the liability and debt side, definitely speaking, it will have a narrowing on the loss margin or interest margin. But actually, we acquire the different users through online fashion and also by adjusting this in the past years, we have been accumulating a lot of tools and methods as well. Also in terms of our liability structure and comparing with the industry, it is a relatively low situation. So in this interest rate decline environment, I believe that we are in a more favorable positioning than the traditional bank, and this is our advantage. Also, another thing is on the asset side. I think that in this cycle, the particular requirement or demand of getting loans is going to be more. And also in total, the balance is going to be increasing at the same time, for the existing bond price is going to be increasing. Our investment income is going to be more. So I believe that everything is pretty positive to us. More important thing is that by positioning after so many years for the Bank, not only we depend on the existing products, but we are now becoming a more comprehensive wealth and asset management company. So in the future, we're going to get those noninterest rate-based income and the fund and the investment businesses are also going to be impacted positively by this cycle. So these are all the economic cycles that we are expecting to happen in the future. And also, we're going to have some of our relevant strategies if there are impacts to us.

Thank you. Thank you very much, Wayne, for the answer. Due to a little bit of time, we have to conclude this earnings call. On behalf of the management of ZhongAn Online, I would like to thank everyone for your participation.