Earnings Transcript for 6060.HK - Q2 Fiscal Year 2021

Operator: Hello, everyone. Welcome to this con-call. So this is the 2021 Joint Financial and Results Earning Call. So I have to remind everybody that this is the English line, and everybody would be muted. So, before we end we're going to have a Q&A after the presentation. And also this is the English line, the translator is now speaking. And we're going to have a recording. Now, I'm going to hand over the floor to Stanley . Stanley, you may start.

Unidentified Company Representative: All right. Dear investors and also analysts, researchers as well as the media friends, good afternoon. Welcome to the 2021 interim results earning call. Please allow me to introduce the management from ZhongAn. So there are the CEO of ZhongAn Online, Mr. Jiang Xing; and there are Mr. Yuping Wen, the Executive Deputy Chairman for ZhongAn Online, and the CFO, Li Gaofeng; and also, we have President, Mr. Xiaoming Wang. I'll hand over the floor to Xing Jiang.

Jiang Xing: All right, hello. Dear investors, analysts and media friends, good afternoon. So my name is Jiang Xing, CEO of ZhongAn Online. So first of all, I would like to thank you for attending our 2021 interim results earnings call, and also thank you for your attention and support to ZhongAn all the time. So this year, May 2021, we continue to practice our mission of empowering the finance business with technologies and providing insurance services with a caring hand for leverage our insurer tech know-how to maximize the synergies with the ecosystem basis for services and continue to promote interest inclusion. Now, we'd like to tell you something about our achievements we made in the first half. So in the first half of 2021 as the pandemic was well under control here in China, the macro economy continued to rebound in China. So in the first half of 2021, the total gross written premium reached RMB9.84 billion, representing a year-on-year increase of 45%, and benefited from our long-term development strategy of sustainable quality growth and test-driven cost control, as well as operation efficiency improvement. We achieved underwriting profitability in the first half of 2021 for the very first time since we commenced our business with combined ratio decreased to below 100% to 99.4% in specific, representing a year-on decrease of 4.1 percentage point; so, also underwriting profitability further improved. And also because of the change of combined ratio, and you can see that in the first half of this year, we have a total of RMB755 million of the profit attributed to our owners of the parents, representing a year round increase of 54%. And also talking about our segment of technology export, revenue reached RMB266 million representing a year-on-year increase of 123%; mainly because we captured the opportunity of digitization of the insurance industry with our new insurance infrastructure capabilities and mature product portfolio and realized the fast growth of revenue scale of technology export. So, we not only served many important customers here in China but also export our new insurance infrastructure ability to marketing along the Belt and Road Initiative in Asia and Europe, and helped with the digital transformation of the insurance industry around the world. And also as the first virtual bank in Hong Kong, ZA Bank remains to be the leading position among virtual banks in Hong Kong as the very first opened virtual bank in Hong Kong, and as of July -- at the end of June, we now have over 400,000 users. And ZhongAn consistently creates value for users with technology and actively practices the public welfare as well as fulfills our social responsibility. And as a public company, ZhongAn adheres to the philosophy of technology for social goods and also actively promotes increasing inclusion, providing the simplified and customized products, and also lower down the threshold of buying insurance, and also further we are -- actively promotes the inclusiveness. And also during the flood in Hunan Province, we had for the very first time provided very emergency plan, and also, altogether fight with the society and co-build and contribute our society -- to the society, our abilities. And also at the same time, we are trying to prove the Green Finance, and also we do have our own ability of the capabilities and we are going to develop based on the low carbon fashion. And also, this year is the eighth year for ZhongAn since we commenced our business; and we adhere, as always to the dual engine strategy of insurance plus technology firmly for the very long time. We actively explore the synergies and the in-depth integration of technology and insurance along the value chain by empowering the insurance value chain with technology. We also actively promote insurance inclusion to provide full production for those with real needs, and meanwhile, we export our insurance tax solutions and operational experience traditional insurance, both domestic and abroad, to drive the digital transformation. We explored technology to drive innovation and we continue to explore potentials in the incremental markets with a diversified products and wider coverage; while at the same time, we're maintaining our core competitiveness and existing ones with better services, and also we are exploring the boundaries of the insurance market with more inclusive insurance. And premium per insured grew by 41% year-on-year in the first half of 2021 which further strengthened our conviction of promoting insurance inclusion. And also in 2021, this is actually the beginning year of the 14th five-year plan. And in the plan, commercial medical insurance will play an active role in promoting the construction of the healthy China. And as the medical scenarios become more diversified, our services and products evolved from the required medical scenarios such as daily inpatient and critical illnesses to the daily needs of outpatient emergency, chronic disease management, health management, rehabilitation and optional consumer medical services. Meanwhile, we are committed to refine every step of operation, from the consultation to the post-operative care, to provide a full lifecycle health management services to the consumers and also improve their wellbeing, also continue to improve the overall well-being of the users. And also at the same time, we continue to iterate our products and scenarios focusing on promoting service capabilities of health insurance to meet people's multi-level and diversified health production means. We also developed customized insurance products for patients with chronic illness and special groups of patients to promote insurance inclusion. So after a very long-term effort in health ecosystem, the gross written premium reached RMB3,926 million, representing a year-on-year increase of 29% in the first half of '21. And number of paying users increased by 10%, reaching 9.14 million, and premium per paying user increased by 17% to RMB430. And also this year, we continue to deepen the internet-based insurance plus medical plus medicine health ecosystem closed loop strategy. Leveraging our advantage as a payer, we connected with more ecosystem partners in the tailwind of the industrial upgrade and provide better services to our consumers. And also, among the 14.5 million users of joint health ecosystem this year, more than 6 million users have free access to our Internet Hospital in their policies; and we provide safe and also compliance one-stop shop solution including online diagnosis, medical consultation, and E-pharmacy through our internet hospitals. We can help our users to manage their health spaces efficiently and conveniently. And also in a digital lifestyle ecosystem, we leverage our cutting-edge technology to drive product innovation and to have incremental markets. And this year, our digital lifestyle ecosystems continue to iterate, upgrade product offerings and services. And also following the decentralization kind of the e-commerce industry, we are actually providing more complete services to our users. For example, in the innovative products, we have actually -- the past insurance and also phone screen cracking insurance and also the other family property and accidental insurance around the digital life achieved also new breakthroughs in the first half of this year. Innovative business GWP reached a year-on-year growth of over 130% contributing around 20% in a digital lifestyle ecosystem. Passing for instance , phone screen cracking insurance grew by 60 times and 37 times respectively year-on-year gaining a leader position in the market share. And you can see that the pet insurance is a strategically important part of our digital lifestyle ecosystem because we're optimistic about the growth potential of the domestic tech economy. You can see that we have over 99% of the accuracy rate of our patent those print recognition technology with such leading technology in this industry, we can further meet the owners requirements. And also apart from this basic pet bonus and accident coverage, we also provide wellness coverage including the vaccine, like the warming , and also online med consultation and nutrition consultation. So, since the launch we have several iterations already of our pat insurance products, and hopefully, that we can better our service and products to rediversify or cover the diversified needs of different pet owners. And also, we really believe that with the innovation and continuous momentum we can actually now have a very good leading market share in the domestic industry. And also at the same time, we actively participated in the construction of infrastructure of the pet economy. And also, we actively explore our potential and abilities. So, now we are negotiating with some of the government, for example, together with 100 municipal government or South City municipal governments, we are promoting the urban pet management and pet loss services. In the future, we will go into deep-dive into the pet industry and proactively engaged in uprising pet economy. So, we're going to actively participate in the full round. As of June 30, 2021, our pet insurance has served as more than 1 million pet owners with the leading market share in this industry. And in the first half of 2021, we are going to continue to implement our investment into the pet insurance products; and also continuously in the second half of 2021, hopefully that we can have a better growth. In the first half of 2021, our team continues to enhance the omni-channel brand building strategy to further leverage and also improve our own self-management channels, and also altogether brand -- or build the brand. And now we have ZhongAn app which have many programs and WeChat official account, and also the Wycombe mobile official websites and short video channels on joint brands, etcetera, etcetera. We have achieved seamlessly integrated online channels covering over 10 million followers across all the platforms. And also, we keep up closely with time to break the circle of culture and marketing through multiple brand activities, and to really inspire the users to create and participate in their own desire. And in the first half of 2021, the user generated content across all platforms gained over 120 million views and joint brand gained over 160 billion exposures, showcasing the improving brand awareness of ZhongAn Insurance. So, while we are promoting and another promotion of branding in first half of 2021, we see that received from proprietary channels increased by 48% year-on-year reaching RMB1,549 million accounted for 16% of the total gross written premium. The number of our paying users increased from 3.17 million in the same period last year to 3.8 million, representing a year-on-year increase of 20%; so this represented the trust from our users. And premium paying user also increased by 23% year-on-year from RMB330 in the first half of '20 to RMB406 in the first half of 2021. And also you know that, ZhongAn has technology plus insurance, and we have dual engines of these two; so technology is always a bedrock of ZhongAn, and this year we continue to cultivate our strengths and refine our capabilities. And we kept focusing on development of cutting-edge technologies, and aiming to redefine every step throughout the insurance value chain with technology and strengthen the competitive advantages with the in-shore tech; so continuous investment in research and development continuously optimized the user experience as well. So to give you an example, taking health insurance, as an example, the average waiting time for the claim settlement decreased by 55%, and also, we launched the one-day fast-track settlement of claims under RMB10,000. Net Promoter Score, NPS, was also improved by 31%; by integrated -- intelligent customer services and also improved efficiency and reduced the cost empowered by technology or further given back to our customers with better services and also products. At the same time, in terms of the technology export segment, we focus on inshore tech field, exporting our advanced infotech expertise and know-how insurers, and also internet platforms home/abroad; so we really hope that we can have a kind of a module-based turnkey solution and really cover this whole value chain. And now, our product offerings are categorized into three segments including business growth, business production and business infrastructure; in response to the regulatory requirements, we were the first in the industry to launch a visual backtracking system last year in response to the regulatory policies. And also, you know, this year we have also further launched the EAST regulatory data reporting platform to help the industry develop in a compliant and sustainable manner. And also, we have also had very good scenarios and used cases as well. So benefited from the global trend of digital transformation in the insurance industry, the growth rate of our technology export revenue this year has further increased compared to the previous years. And while the good historical renewal rates reflected that our customers strongly recognized our values. In the first half of 2021, the revenue from technology segment reached approximately RMB266 million, representing a year-on-year growth of 122%. And a growth of the technology revenue on one hand came from crossing selling -- cross-selling with mature price matrix, and also the exploration of long-term value of our customers. So, take our customer A as an example; so in the third year our corporation would expect to achieve 39 times growth in revenue contribution from that customer A through cross-selling. And also on the other hand, we further expanded our technology export overseas this year to more countries in Southeast Asia, and also the very first time, we expanded our intro-tech footprint to Europe, and also have already completed launch of our very trusted product to the European customers. And while we are improving the maturity of our product offerings, and the proportion of recurring revenue reached 48% and benefited from the improved gross margin, the net loss margin of technology segment was further narrowed. So next, I have early finished the brief introduction about the business performance of the first half of 2021. And then, I'm going to specifically welcome Wen to introduce our rapid development in overseas markets in the first half of 2021. And he is the President of ZhongAn International. Now, Wen, please. You have the floor.

Yuping Wen: All right, thank you very much, Mr. Jiang. So in the first half of 2021, we have seen continuously breakthroughs and progress made in our tech segment in overseas markets. So in Asia, we have further expanded geographically to more countries servicing, meeting local P&C life insurer, and also internet platforms as well. Meanwhile, we have also tapped into European infotech market to have -- and also have already launched our very first product successfully with our first European client. Also, we have our cutting-edge technology solutions, as well as extensive industrial knowledge, and also our experience in Asia markets we have enabled ourselves to participate in digital transformation of our business partners. So talking about our partners, we can actually divide them into insurers and internet platforms as two categories. So for internet platform clients, we offer fusion solutions and integrated insurance and finance solution. And also, grabbing sure that JV that we have formed with Grab has further expanded into Indonesian market. So, the Grab -- on Grab experience, we have actually launched the usage-based property insurance products and cover the risk of damage during the express delivery. As of June 30, 2021, supported by the tech strength of the ZhongAn, the Grab insurance has written more than 100 million policies through Grab app. Meanwhile, we also formed a JV with OVO, a leading e-wallet platform in Indonesia to provide technology solutions with our strength in infotech to really promote inclusive finance to local markets. And also because we have advantage of the product design and we're going better promote the inclusion of the finance locally. And for our insurer clients, we offer an end-to-end and cloud-native insurance core system, Graphene, to facilitate our clients' cooperation with local ecosystem partners, and also help them launch various scenario-based insurance products. So, we can really reach a full internet-based end-to-end interest product design. In Singapore, our clients NTUC Income, is the largest insurance company locally, and has been able to cooperate with local partners in penetrating public transportation, food delivery, and other sectors with the support from the Graphene, and also NTUC Income has also been able to launch usage-based insurance plans which allow the customers to up-size their coverage based on their own needs. And also, this year, also partnered with AIA Group, as a tech solution provider helping speeding up the digitalization of AIA Group, increased customer base, and also meet customer's production needs through innovative insurance products, as well as cooperation with local partners. And also in the second quarter of this year, we unveiled our very first cross-border light-soft core product MANO in Southeast Asia. So this was actually know pretty much based on the core system, Graphene; we extended our cooperation with AIA into digital marketing as well. So, we have taken Singapore as a local sort of hub, and we'll set the combination of Graphene and the marketing module expand as the recommended standards for the next phase of AIA digital transformation. So, our overseas business also includes ZA Bank, a virtual bank, and also ZA ensure a fully digital insurer. So these two companies are dedicated to create a brand new and accessible digital financial experience for our customers in Hong Kong, carrying out the concept of finance inclusion. As the very first licensed virtual bank to commence business in Hong Kong, ZA Bank has maintained a leading position in both, customer base and also scale of business among virtual banks in Hong Kong; we leveraged technology to reshape the banking experience for users and also reducing costs while the same time enhance efficiency and we're going to provide a brand new experience to the users. As of June 30, 2021, ZA Bank deposits doubled to HKD7.6 billion, and loan balance has grown by 20 times to HKD1.3 billion. As of mid-July of 2021, the number of ZA Bank users have already exceeded 400,000, and also talking about the digital insurer, ZA insurer uploads this position to provide insurance to customers and dedicates to providing insurance products that everyone can afford through internet platforms for residents, 7/24. And of course, in the initial phase, we launched four cost-effective products; life insurance, and cancer insurance and cardiovascular disease insurance and individual accident insurance. But of course, at the same time we continue to understand the demands and requirements of the users and we have already launched the inclusive ZA Voluntary Health Insurance Scheme, VHIS, with transparent pricing in response to the customer's needs providing customers with more comprehensive base medical protection. And we hope to apply FinTech capabilities and our insights into customers in Hong Kong's mature financial markets to really improve user experiences, and also help carry out the concept of inclusive finance. Also, at the same time, as the only technology company in Hong Kong granted a virtual bank license and identical life insurance license, ZhongAn International is the very first one to have achieved a deep cooperation between virtual banking and digital insurance. And also in May of 2021, ZA Bank partnered with ZA Insurer officially to create a speedy insurance experience on the bank app. So in addition, relying on our own digital development framework we launched ZA One, a one-stop shop financial service platform that provides customers with diversified investments services; so this should be regarded as a new business. So, we call it the IPO-Go , and this is actually a starting point, and we hope that we can provide more diversified financial needs and services to the customers. And also looking into the future, so under ZA, all kinds of different brands are going to synergize further, and also we're going to share technology strength and cost synergy; we will generate more values for our customers digital wealth management experience. And also talking about the ZhongAn International interruption , this is the end of it. So next, I'm going to handle the floor to CFO of ZhongAn, Mr. Li Gaofeng to talk to us about the financial performance in the first half of '21.

Li Gaofeng: All right, thank you very much, Wen, for your introduction. So next, I'm going to introduce to you something related to the financial performance. So in 2021 first half, we have achieved a 45% year-on-year for the GWP, and I'm on the insurance segment, the healthy ecosystem maintained a robust growth momentum with the ye-end growth of 29% to RMB393 billion. Our digital lifestyle ecosystem grew by 52% to RMB3.34 billion, the GWP of two core ecosystems accounted for 74% of the total GWP in terms of the consumer finance ecosystem. In the first half of '21 as the domestic pandemic situation getting well-controlled and the overall macro economy rebounded, there are strict standards of risk control, our consumer finance ecosystem saw recovery, and GWP for the consumer finance ecosystem totaled RMB2.19 billion in the first half of '21 representing an increase of 55% from the second half of 2020. And we managed risks prudently, and we maintained cooperation with the reinsurers actively. In the first half of 2021, the proportion of the premium ceded to the reassurance of consumer finance ecosystem reached 22%, which is 17 percentage points above that of the same period. And also as of June 30, 2021, our outstanding loan insured by ZA in the customer finance ecosystem was RMB18.7 billion representing a relatively mild increase of 15.1%. And in terms of auto ecosystem, in the first half of 2021, we upheld auto insurance pricing reforms principle of benefiting consumers that there was a decrease in the premium per policy. In the first half of 2021, the auto ecosystem achieved a total GWP of RMB0.38 billion, down by 17% year-on-year. In the first half of 2021, our underwriting quality continued to improve, benefited from the cost reduction and productivity improvement driven by technology, we have the very first time achieving underwriting profitability; the combined ratio has decreased from 103.5% in the same period last year to 99.4%, down by 4.1 percentage points of which comprehensive loss ratio down by 7.2 percentage points to 49.4%. And channel fees as a percentage of GWP saw a minor increase. Next, I'm going to introduce the loss ratio as percentage of GWP in the first half of '21 by ecosystems. The loss ratio of the health ecosystem in the first half of 2021 was 37.1%, down by 8 percentage points from the same period last year. There was a reason driven by our years of effort by putting to refine operation. The channel fees as percentage of digital fee of health ecosystem was 27.9% representing a year-on-year decrease of 0.5 percentage points. The channel fee as a percentage of the GWP of the digital lifestyle ecosystem in the first half of '21 was 35.4%, up by 5.3 percentage points compared with the same period last year, it was mainly due to the recovery of premiums contributable from travel business which usually charges higher channel fees and loss ratio lifestyle was 62.1%. And in terms of consumer finance ecosystem, we have always been prudent and we maintain a strict set of risk management strategies benefited from the continuous collaboration and our calibration of our pricing models, the quality of the life underwriting assets has been significantly enhanced, and also loss ratio of the consumer finance ecosystem has further improved significantly. In the first half of '21, the loss ratio decreased to 38.9% from 69.8% in the same period last year, down by 30 percentage points. From auto ecosystem, we are here to our steady development strategy and improve our underwriting quality of our existing business through refined operations. With the auto insurance pricing reform was carried out by the regulators in 2020, auto insurance market order was further improved with a decrease of every premium for car insurers and an increase of loss ratio. So you can see that affected by this trend, our loss ratio for auto ecosystem was 71.5%, up by 21.3 percentage point year-on-year, but channel fee of our auto ecosystem was 13.8%, down by 11.6 percentage points year-on-year. And we've seen economy of clear while we stick to a sustainable quality growth, the year of operating expense or operating as a percentage of net written premium has decreased to 16.8% from 26.3% in the same period. And we can see this demonstrate on our continuous improvement operation efficiency and powered by technology. So, let's talk about the asset management. As of the mid-June 2021, we had the total investment assets of insurance business of approximately RMB13.1 billion, our total investment income of interest, this was approximately RMB981 million, and the non-annualized total investment yield and net investment yield was 3.8% and 1.3%; the overall performance being robust and resilient . In the future, we will continue to adhere to solid investment strategy based on a pre-judgment of our macro economy, we're going to further strengthen our capacity of the asset allocation and risk management. And also in the first half of 2021, our financial data continued to improve upholding through sustainable and quality growth, our assets and net assets increased by 8.6% and 6.7% respectively compared with those at the end of last year. And also core solvency margin ratio was 541%. Since our licensing, we've been hearing to long-term commitment to achieve underwriting profitability and quality growth, and we've been re-defining our operation management continuously and take actions to prove the market of joint insurance PAC. And our future asset will further expand in rapid growth, and we expect our revenue to grow at a high speed in the future. Meanwhile, our competitive financial business in Hong Kong has seen steady growth and also expanded. And in the future, we firmly believe that those who wins the users, wins the business. We'll focus on our customers' needs and continuously drive innovations with technology capabilities, and we're going to build and enhance the joint brands and win more customers mindset. We're going to provide customers with warm and personalized insurance products throughout upgrade services creating our space -- create a long-term value, participate in inclusive insurance and develop business in a sustainable and compliant way to get back to society. Thank you very much for introduction. Now, let's start the Q&A. So before asking question, please identify yourself first. And due to the limit of time, please raise no more than two questions at a time. Operator, please remind everyone how to raise questions in the manner .

Operator: All right. So the very first question is from Citigroup, Amy Chen . Please, you can ask your question.

Unidentified Analyst: Hello, management. So this is Michelle from Citi. So, I have two questions. The very first one is that, we all know that has been felt for one and a half years, and we've been having a lot of concern over the short-term medical insurance. But since May, you can see that our health insurance may increase it's development. So, I would like to understand the reasons behind because in July I can see that your premium doubled; so what do you think about the phenomenon? Do you think that this is something about a short-term phenomenon because of more data and also more traffic from this industry? Or do you believe that this is a momentum that can be tapped for a medium-term or long-term? So can you give us a guidance over the next three to five years as well as short-term guidance? And next question is about the innovative products. Because as we have mentioned that in terms of pet economy, which is RMB55 billion market, you're very much interested. And also, you know, the screen cracking insurance is also very well sold. And also, these two are blockbuster products; so what is the next stage? And what is the plan for the next stage? So what kinds of innovative points do you see or foresee? Or what kind of innovative products that you're going to see and also foresee to appear in what kind of sectors?

Jiang Xing: All right, so thank you very much, Michelle, for your questions. So let me give you the answer for the very first one. So, I really believe that and the appearance of was a very good thing because it made more people understanding what insurance is all about, and this is widely applicable, and also the transfer is very low; so the insurance itself is truly inclusive. So, it is also a very significant thing for us to improve the awareness of people buying insurance. And also, I think it's quite promoted to the long-term healthy development of medical insurance. So we actively participate in a winning mile project. And together with -- also, we have been participating into more than 10 cities in terms of their products etcetera. So we are actively practice the inclusive finance and insurance. So of course, while we are educating the people about the importance of insurance, we found that the needs and demands of the users are not only serving or searching for protection, and they have actually a deeper medical need and health management need. So we're iterating our products in the future, and also try to embed more services, especially the entire hospitals of ZhongAn have been firmly combined with our insurance products, and we are upgrading our products to adding new features of more medical services. And also at the same time, we are trying to enrich our product matrix to service different customers with different needs. And also, we're having a different tailor-made products; for example, now we have promoted kind of a short-term chronic illness insurance targeting seniors, and targeting chronic illnesses, and targeting the female diseases as well. So hopefully, that we can really now making practice the mindset of inclusive insurance by ZhongAn. And also talking about the second question; you were talking about innovation. So, as you can see that innovation and innovative ability has always been the gene of ZhongAn, and also this is actually the direction that we're going to be very consistent, and also this is something that can really support a sustainable growth of our company. So alongside the pathway of making innovations, not only we should do innovation around products based on the needs and demands of our users, but also we should do our services better. And we can actually, of course, do innovation based on a compliant way. And of course, that in the past in different ecosystems we were iterating continuously all kinds of different products and services and also maintain the business style of being innovative. And of course, in this big healthcare as a very important industry, this is a very important thing and we're always innovating on this particular area. We are going to be quicker and accelerated our innovation, and also actively develop the medical insurance, and also really play -- make the medical insurance playing more vital roles and active roles in promoting the establishment of a healthy China during the 14th targeted planned period. And also going to promote all kinds of different products and form factors of the products with all kinds of different attributes to integrate more services; and of course, that we're going to do more of those. And also, talking about the digital lifestyle ecosystem; in the first half of this year, we've been exploring possibilities about pet insurance, property insurance, and accidental and health insurance, for example. And these are broad branding with this new incremental market, and also in the first half of this year, this particular kind of improvement of intervals business reached 20% in terms of growth rate, and also the year-on-year growth rate exceeded 130%. In the future, we're going to further leverage on that. In the auto ecosystem, we've been seeing the potential of new entry vehicles, and also some of the new form factors like UBI as a new format of the product, and actively we are preparing for that. In the future, definitely speaking, ZhongAn is going to be really technical-driven and also demand-driven, and we're going to continue the innovation efforts based on these two driving forces, and really play our vital role and use our advantage to really promote more inclusive products around the lifestyles of users, and also demand of the users. So, I really hope that in the future we're going to have more innovative point of insurance products and services. All right, thank you very much, Michelle. Thank you. Operator, please have the next question.

Operator: All right. So next question is Charles Simon from Credit Suisse. Please raise your question.

Unidentified Analyst: All right, thank you. So this is Credit Suisse. My name is Charles Simon . So I have two questions. The first one is that; we have seen that in the first half, the traditional insurance, no matter it's P&C or life insurance section or has a lower growth, but actually I think that you had also a very high growth. So my question to you is that how do you see this particular kind of, development opportunities for instant insurance and also the impact of traditional insurance industry? And also, in terms of the challenge I have seen and the regulators have stricter rules over the internet policy -- internet insurance; so whether or not you're facing some pressure? And second question is that, I would like to understand more about ZA Bank. So I want to understand the future opportunities and different strategies of ZA Bank in the future. How you're going to leverage your technology advantage to support it as a virtual bank? And when we're going to actually reach a balance, even breakeven point or even profitable situation of virtual banking?

Jiang Xing: Thank you for your question. I'm going to answer the first question, and Wen is going to answer the second question. All right, so just now, you've been asking about a notion that the traditional industry of insurance was growing very slowly but internet based insurance was growing faster. So of course, that is beginning for insurance that is based on internet, we have created new scenarios and new ways to get access to users, and also expanded the boundaries of the insurance market. Through technology we are optimizing the user experience and lower the cost and improve efficiency, and also with the impact of the pandemic, of course, you know that the traditional insurance industry was heavily impacted. So actually, you can see that because of the digital transformation and digital technologies, the digital transformation made those traditional insurers more active, and accelerated. So, of course, we can see that in China; the internet insurance penetration is very low in 2020, that was only 6%; 5.8% for P&C and 6.7% for life insurance. So in the future we have a broader potential for further development of the online insurance; so because -- first of all, the user behaviors are changing, and especially the young generation, growing out of the internet environment, they are more adaptive and also more embracing to the insurance from online. So we're going to further leverage on our abilities. So next, we are talking about the technology driven products, for example, the kind of fragmented and high frequency inclusive products are also technically driven; so in the future we're going to further leverage on that ability of platform making and also the innovative capabilities. And in the future we're going to empower the whole opportunities with technology revolution, and to really now provide more services to our users. So of course, that if we do innovation alone, definitely speaking, we are also going to strengthen our collaborations with the traditional insurance. So continuously, we are going to help them to kind of perform the digital transformation and also digital empowerment as well. So hopefully, that our technology capabilities can really contribute to the whole industry of insurance. So talking about the regulation environment; I think that the core spirit should be that we are protecting, and we should protect the benefits and the interest of the consumer. So definitely speaking, we're going to make more regulatory rules to standardize the whole industry, and also try to protect the interests of the consumers. And of course, we should make the whole industry develop on a healthier track. So, we truly believe that a very important thing is that, of course, we were benefited by the exploitation of the boundaries of the industry, as well as the innovation capabilities of our company. In the future, the space is becoming even bigger. All right, so next, we're going to have Wen answering the question about the development of ZA Bank and virtual banking.

Yuping Wen: All right. So, yes, we have been operational. I mean, ZA Bank has been operational for more than one year, and also, we're very glad to have achieved a very good result. So some statistics have mentioned, like the deposits actually exceeded HKD7.6 billion, and the outstanding loan actually now exceeded HKD1.3 billion. But of course, we are more caring about the number of users of ZA Bank which has already exceeded 40,000. So, now that we have already over 5% of the percentage against the total population. So, talking about the categorization of virtual banking -- so talking about the parameters; we are also in a ranking quite to the top. Of course, even if we are talking about virtual -- not only talking about virtual banking, but talking about the whole banking sector in Hong Kong; we are a medium scale bank in terms of the number of users. So actually, as a kind of a bank with only a operational history of more than one year, this is difficult to achieve, right, but we achieved it. So -- because we leveraged our technology and really promote our development based on that. Another very important thing is that, you know, we always emphasize on co-creating demand with our users; and also, you know, being a user-centric, and also make a one-stop comprehensive financial platform. Many analysts and investors are also the users of ZA Bank, and some of our friends also give us suggestions and help us to improve. We are also very glad to really now have such kind of a close relationship with them to altogether experience the changes brought by technology to finance here in Hong Kong. And talking about our future, we're going to continuously focus on user-centric strategy to actually now be a one-stop comprehensive finance platform. And currently, we have already pushed the services like deposits, loan, and also the pensions. And also, we are going to further enrich the product matrix to really now have more loan products, and also lending products, as well as provide the products like wealth management or finance. And also by leveraging technology we're going to bring Hong Kong users and customers better experience. So at the same time, we are going to continuously explore the business of the banking, and of course, leveraging our ability of technology we're going to actually now use more flexible banking products to really help our users to be benefited. So, these two are the big directions. But of course, we are leveraging our mindset of technology driven, oriented, and hopefully that no matter what's on the retail or wholesale or the other like banking consumers, we're going to actually now make the technologies benefiting them more. And also we're going to use our products and services to really now benefit and give contributions back to our users.

Unidentified Analyst: All right, thanks.

Jiang Xing: Thank you very much for Simon and Wen for their answers. And next question, please.

Operator: All right, so the next question is from .

Unidentified Analyst: All right, hello. This is Neil . So, I'd like to have two questions for the management. The very first one is about the management and also regulation. So apart from what you have mentioned, the regulation over the Internet bank -- Internet insurance; I'd like to actually understand that when that policy is going to be implemented? And also in first half of this year, we have been seeing some kind of cross sector kind of a behavior; and also I don't know, whether or not the data security law is going to actually impact your business and how you're going to counter or take countermeasures. And second question is about the technology export business. We've been seeing very clearly that you had also a very good performance, a more than double, and also margin improved. But from a long-term perspective, how do you see such kind of -- market of the technology export? And also in terms of products, I know that you have covered almost all the areas of the insurance where you do have some kind of basic retailing, and also some kind of medium platform of the business, and also infrastructure as well; so it's very complete. But if I'm going to understand this particular market, do you mean that you're going to cover the front and medium and back office of the insurance? And also what kind of other digital services are they going to provide? And also apart from the insurance, what else or what are the other financial institutions that you are going to cover? Thank you.

Jiang Xing: All right, thank you very much for this question. So, just now the very first question as we mentioned, about the data regulation; so that just became as we have mentioned that the Personal Information Protection management plan has been published and also implemented. So we are always paying attention to the latest trends of the regulatory requirements. And of course, that our company has always been focusing on regulation and trying to protect the interests of consumers. And of course, we're going to make the whole industry develop on a healthier track and more compliant track. And of course, that in terms of the data management and also data governance; we are going to have a stricter requirements and we emphasize more on compliance. And also at the same time, we do not want to sacrifice our efficiency; so this is exactly something that can be done by an in-shore tech company. So of course, that because of some of the new requirements we're going to actually try to examine ourselves and try to really find out those missing gaps and try to supplement that. So we're going to actually make innovations and make the insurance as a warmth and caring hand to our consumers. So definitely speaking that, the prerequisite is to protect the interest of the users and we have to do that, and do it in a more confined way. And also just now you were talking also about the development strategy and market potential of technology export segments. So of course, our aim is to actually be the best partner in the digital transformation and insurance industry to the global market. As we have mentioned that not only we are servicing insurers but also we are expanding our partnership to brokers, platform companies, and also the other stakeholders in the upstream and downstream of this industrial chain; so we have all kinds of different partners along the whole track. So since the pandemic and COVID, we are accelerating the digital transformation of the insurance industry, and this has brought a huge market potential to digital and technology export markets. So in 2020, the total global insurance business total premium was almost US$6 trillion, and also you can see that we have a broader space for the transformation. And also together with the life insurance, P&C and also internet platform, we have all kinds of different investments and the total market size is trillion even; so we're going to emphasize more on that. And also, we're going to emphasize more on innovation and also the RMB of our products; we're going to further optimize our contributions, and also around the whole value chain we're going to really enhance our fostering solutions around this area, and also making our solutions more about -- and also more leading. So based on this particular thing, in the first half of this year what you're going to see is, the total revenue of technology segment was really good reaching 120% growth year-on-year. And also, because first of all we launched new products and find new contracts with new customers. And also in China, we are embracing the trends of stricter regulations and also promote some kind of visible or backtracking products of the internet base that was launched last year. And also, we are also signing contracts with new customers as well and also enhance our brand awareness and branding and image. And also as we have mentioned, talking about overseas markets in terms of the technology export, we are performing quite mostly now in Southeast Asia, and also in Europe we are opening up the market. So we really hope that we are going to be further globalized and further enhancing our maturity and capabilities of our products, and also export more products to more locations globally. So, I really believe that by optimizing our pipelines of technology products, we are going to really now shorten the space of loss-making, and also in the future enjoying a better and faster growth. But of course, current speaking, we need to invest and the core issue is to make the product robust, and also make the experience better. Thank you very much for this question. All right, thank you very much Leon . And operator, please let us to next question.

Operator: All right. The next question is from Morgan Stanley, Jenny . And you may ask the question, please.

Unidentified Analyst: All right. Hello, everyone. So I'm Jenny from Morgan Stanley. So I have to congratulate on having such a wonderful achievement. And also especially, with all the other traditional insurance industry wasn't performing quite well, you're actually accelerating. So, I have actually now three questions. Let me be very quick. The first one is about the credit insurance. You increased a lot of premium, so I'd like to ask you that what do you think about your future strategy and developing this trend. And also, of course, the premium grew very quickly but I'm going to understand about the risk exposure, whether or not it has been increased? Or that premium increase was because of the price increase? So, can you help us to analyze? The second question is about the customer access cost, and also customer acquisition costs. So, we can see that different pipelines have different cost structure. So, I'd like to understand that how do you think about the future trends of the online customer acquisition cost, and especially in the medium to long-term, whether or not you have some beneficial and also positive trend? And also third, about the Greater Bay Area integration. So just now you were saying that you have a very complete positioning analyses; so is it possible for you to actually now participate in a Finance Connect and also Wealth Management Connect? And there you can have a breakthrough between China and also abroad and build up a more complete system?

Jiang Xing: All right, thank you very much, Jenney for your questions. So the very first question, I'm going to have Xiaoming in answering. And I'm going to answer the very second question, and Wen is going to answer the third question. All right, Xiaoming, please answer the question.

Wang Xiaoming: All right. So please allow me to answer this particular question, the very first one. So I think that in ZhongAn, our development strategy has always seen that the credit insurance is -- credit guarantee insurance is a very important tool in this market. And of course, this tool is there to fully meet and diversifying financial and consumption needs of consumers. So, of course, that in the past several years in terms of the credit insurance, we always now maintained a certain investment. And we always emphasize on a very strict risk control strategy, and also we want to be very much elegant, and also distributive and also breaking into small volume. And also, we are meeting and trying to satisfy the needs. And also by leveraging our abilities and the technologies, and there is a bigger risk control of the credit insurance; we have been setting up a very good competitive edge. And also, you know, on one hand we're talking about the technology breakthroughs; in this particular risk control area, we are able to do more product operation, and also, you know, to do more product innovation. And also, you know, in the first half of this year because of the very positive trends of the macro economy, the credit cycle has been recovering. And also, I truly believe that because of the dual reasons, we have been seeing the scenario that in the first half of this year, the consumer finance business developed pretty much in line with our expectations. And also in the second half, and also in the next several years, we're going to continue focusing on the -- kind of development on our credit guarantee insurance and also maintain a very strict risk control standard. And also trying to reign our focus on the consumer finance business, and also stick on and really try to combine with the needs and demands of our insurance users. So, I totally believe that because that we are up leveling our capabilities of the requirement meeting and also demand meeting, as well as the risk control capabilities. We can really have a better feedback and also a better return. And also you can see at talking about all kinds of different parameters, they have been further improved comparing with several years before. And also, you know, at the same time we have certain advantages as well; so this is another kind of proof that our risk control capability is very good. And also just now you were mentioning that talking about this year, the total gross written premium increase growth rate actually was higher. But we are saying that we control the premium increase to fairly low level or limited level because last year -- because talking about the risk control capability of ZhongAn, it was very good, and also everybody recognized this ability. So while we are collaborating, we started from the operating strategy and we have further leverage abilities. And also now, the kind of loan outstanding growth factor is lower than the premium growth, and that was because that during the whole track and whole development process we are trying to find a better platform and try to control the rhythm of growth of our business. And also in the future, we're going to have a stricter risk control standard and continuously trying to develop all kinds of different businesses. And of course, that altogether, we are going to start from our own demand, and to continuously build a professional capability of risk control, and make this as the core, and also maintain the development on a prudent fashion. All right. So much for my answer.

Jiang Xing: Thank you very much. So just now, you have mentioned that talking about the customer acquisition cost of this particular industry has been increasing and how do we look into this bigger scenario? So, of course, at last year talking about the sentiment of the health insurance industry, this was improving as well. So talking about the short period of time, there was a fluctuation over the customer acquisition cost. So, of course, this was pretty much in line with our expectation. So, customer acquisition costs include the pre-investment, and also conversion in the middle, and how well you're going to adapt your products to the customer's needs, and also the marketing as well as the branding and brand image and awareness. So of course, in terms of our conversion efficiency and also the service provision capability, we are very much confident that we have a very good situation of these two parameters. So of course, that we are going to fully combine with our strategies, and also to create more values to our users, and to really improve further our innovative capabilities, and as well as the Big Data operation capabilities; and our customer acquisition cost can be controlled at a fairly fair level. And of course, apart from that we are talking about the strategies like, through advertisement we are trying to divert our customers to our own app, and by using our own app and many programs and official accounts and website, etcetera, we can actually use our own proprietary platforms to get access to users and operate deeply on our users, and really have the enhancement over the cross selling capabilities. Last year we had a very good breakthroughs; in the first half of this year, the premium from the proprietary platform accounted for really 16% of our total premium, increased by 2 percentage points compared with 2020. So by further building our proprietary platform, our per insurance users contributable premium also increased. So we really believe that we can create a better product and better service to our users, while at the same time, we can operate and service better our users in a more efficient way. Thank you very much. And we'll have Wen now answering the third question.

Yuping Wen: Hi, thank you. So with regards to the Greater Bay Area and development opportunities; so of course, are now in Hong Kong under the ZA platform. We have actually now servicing the local customers in Hong Kong, but we are really looking forward to the development opportunities in the Greater Bay Area. So on one hand, we are talking about the market size of Greater Bay Area which is 10 times larger than that of the local Hong Kong market; so this is actually a very good thing for us to expand our market with survey, and also because of the greater kind of advantage of geopolitical thing and policy issues. In Greater Bay Area, we're going to have more imagination space for our innovative capabilities in terms of products and services. So we always pay attention to that particular area, in Greater Bay Area. And also internally, we have continuous discussions together with our partners, we're also having all kinds of different explorations and experiments in the Greater Bay Area. And also we are going to also communicate with the regulators in the Greater Bay Area continuously, and also in terms of a detailed implementations, we are always trying to maintain a very good status. So overall speaking, we are going to continue our investment into Hong Kong local market, but also, at the same time, pay attention to the trend of the policy making in Greater Bay Area.

Jiang Xing: Thank you very much, Wen. And thank you, Jenny, for your question. And operator, please arrange the next question.

Operator: So the next question is from . Please raise your question.

Unidentified Analyst: All right, hello. So hello, this is analyst from CICC. So first of all, congratulations on having such a great achievement. So, I truly believe that this particular kind of achievement is going to help to improve the investor's confidence. I have two questions. The first question is about the pet insurance. So, I'm going to understand about the profitability and plans of the pet insurance in the future, whether or not we're going to attract more insurance to create the product like this; any countermeasures to fight against the competition? And second is about the auto insurance. You know, new energy vehicle is different from traditional ICE vehicles; so any preparation for that?

Jiang Xing: All right, thank you very much . Thank you for the encouragement as well. So, let me first of all answer the very first question about the pet insurance. So first, let me talk to you about the potential of pet insurance here in China. So I think that the whole industrial or industry of pet insurance is a sunrise industry, and also in 2020 we are talking about a market of the pet exceeding 100 million pets, and the total value exceeded RMB300 billion; and also we're going to have actually now higher -- like, very high CAGR. And also, we are going to dedicate ourselves to this particular area, and also in the next three years of time we're going to have more than 20% CAGR. And also, talking about the essence of this pet industry, it is all about service because not only talking about the accident and insurance covering the diseases, right; we are one of the very, very few products that can cover comprehensively those needs. But apart from that, we also have some free of charge health management capabilities or services, and insect repellent and vaccine etcetera. So, we have been setting up a very leading advantage in this area. So first of all, increase the underwriting experience of our users and built up the core capabilities. And also second of all in terms of the risk control, we have been also -- in terms of ecosystem, we have been connecting with more than 8,000 offline vet hospitals, and also create a O2O model to explore the possibilities. We're going to provide a standardized experience to our users, also at the same time we're going to manage the risk of the pet insurance product. So just now, we have mentioned that because of the new business; so if we are going to be better, we have to make a better management over the product on the basis of a very good product innovation so that we are going to make the pet insurance as a very good product. So, I think that in the future we're going to further explore the possibilities of combining the innovation of pet insurance with the smart city projects of the municipal government, and also fully explore possibilities altogether with the government and co-create, if possible. Also in the future, as we have mentioned that pet insurance is a very promising industry, and this is always a very important carrier for us to connect and embed with more services and deeply participate ourselves in the establishment of the pet economy. So by doing that, we are going to really provide better services and also try to establish a long-term barrier in creating a higher consumer values, and also use the values as well. So in terms of your second question; you are talking about the new energy vehicle and some of the innovations in the auto insurance like the UBI etcetera. So kind of speaking, we're actively preparing for the innovation. So we cannot comment on the quite detailed plan, and we maintain our potency in the development of the auto business. But of course, by having a reformed pricing scheme of the auto insurance we are always actively preparing for the new trends, covering new energy vehicles as well. And internally, we have already finished the UBI, mileage product plan, and also collaborate with new OEMs and traditional OEMs as well. And also, we have already finished the connection of development to some of the partners, how we're going to really know focus on this broad market and try to catch new opportunities in this particular new market, and try to leverage our own abilities of technical driven and data driven up to one to really better service a broader market of auto insurance in China. All right, thank you very much. And so much for my answers. All right, due to limited time, we are still having very last question now. Please, have the very last question.

Operator: All right. So last question is .

Unidentified Analyst: All right, right. Thank you very much for accepting my question. So I have two questions. The very first one is about the future combined ratio. And another very important thing is that how do you see the future premium growth? Thank you.

Jiang Xing: All right, thank you. I'm going to have our CFO answer it.

Li Gaofeng: All right. So, I think that talking about the very first question, talking about the premium growth; we always are going to emphasize on the product innovation and realize their quality and continuous sustainable growth. So we are a public company; so actually, during the growth we always pay attention to the consumer experience as well, and also we should pay attention to the values that we created for the society and compliance and sustainable development of our business as well. So, we always hope that we're going to leverage our abilities and innovation to make incremental markets; and also at the same time, we are going to realize a high fee growth in the future. I have to emphasize that we are really looking forward to the beautiful two industries of health and digital life ecosystems. In the health ecosystem, we are going to further leverage our payment side advantage and try to embed our high-quality medical service into our health insurance products. And we're going to provide a one-stop solution platform to our users covering coverage and health management and provide a better service to our users. And also leveraging our digital and technology advantage to really iterate more products and provide more products and services to our users; this is something in the digital lifestyle ecosystem. And second, about the future growth potential, and also our focus. In the future, we are going to really focus on high-quality and sustainable growth. So comparing with the short period of time; profitability, we pay more attention to the very growth in the longer term and contribution to the society. In recent years we've been investing a lot into branding, and also servicing provision; we are creating more value to our users. And also in terms of the technology R&D, we're going to pay more investment and to make the technology empowering our development of the product. And also, we are going to really now give more benefits to our users and to make the insurance really, really inclusive, and make the product with a caring hand.

Jiang Xing: All right. Due to limit of time, this is the end of the interim results call. Thank you very much for the management, and thank you investors for joining in. Operator, please.

Operator: Thank you. Ladies and gentlemen, that does conclude our conference for today. If you did not get an opportunity today to ask a question, or if you have any follow-up questions, you may email them to ir@zhongan.com. I repeat, that's ir@zhongan.com. Thank you for participating. You may all disconnect.