ZhongAn Online, China's first internet insurance technology firm, reported a substantial surge in first-half net profit, buoyed by robust growth in investment returns. The company's annualized total investment yield and net investment yield stood at approximately 7.8% and 4.0%, respectively, marking increases of 4.5 percentage points and 1.9 percentage points year-on-year.

According to the interim report of ZhongAn Online (06060.HK), the company achieved a net profit attributable to shareholders of 1.55 billion yuan in the first half of this year, a year-on-year increase of 132.2%. The primary drivers behind the profit surge were enhancements in both underwriting profit and investment income, with the latter playing a more prominent role.

In terms of underwriting performance, the interim data shows that ZhongAn Online's comprehensive cost ratio improved by 0.1 percentage point year-on-year to 95.5%. The company realized an underwriting profit of 773 million yuan, up 17.8% from the same period last year. Li Gaofeng, Vice President and Chief Investment Officer of ZhongAn Online, stated at the results briefing: "Due to the company's strategic contraction in the overall financial consumer sector, we effectively avoided fluctuations in credit risk and their impact on costs and profits. Overall underwriting performance in the first half exceeded expectations."

Data reveals that total premiums from ZhongAn Online's consumer finance ecosystem fell by 79.2% year-on-year to 560 million yuan in the first half. Despite this, the company's total premiums remained stable, decreasing only slightly by 0.6% year-on-year to 16.558 billion yuan. This stability was primarily supported by premium growth in the health ecosystem and the digital ecosystem.

Within the digital life ecosystem, premiums grew by 24.7% year-on-year to 7.74 billion yuan, surpassing the health ecosystem to become ZhongAn Online's largest insurance revenue segment in the first half. Notably, pet insurance premiums within this segment increased by 22.7% year-on-year to 691 million yuan, while low-altitude economy premiums grew by 27%.

Jiang Xing, General Manager of ZhongAn Online, analyzed at the results briefing that the number of urban dogs and cats in China is projected to exceed 126 million in 2025, yet the pet insurance penetration rate is only around 4%. This indicates immense future market growth potential, making it a sector with long-term prospects.

On the investment front, as of the end of the first half, ZhongAn Online's domestic insurance capital investment assets totaled approximately 41.487 billion yuan. The company stated that benefiting from the upward trend in the equity market, its total investment income from insurance investment assets surged by 150.0% year-on-year to 1.596 billion yuan. This included net investment income of 799 million yuan and fair value changes of 797 million yuan. The annualized total investment yield and net investment yield were approximately 7.8% and 4.0%, respectively, up 4.5 percentage points and 1.9 percentage points from the same period last year.

In its interim report, ZhongAn Online noted that it flexibly adjusted its secondary market equity positions during the first half, completing allocations for related assets. Following these increases, core equity assets (stocks plus equity funds) accounted for 13.2% of the total as of the end of the first half. Li Gaofeng commented that the company's equity allocation ratio typically fluctuates within an 8%-15% range, and the current level of around 13% is approximately 1 percentage point higher than the average for property insurance companies. "We will optimize based on the current allocation, but it is unlikely we will further expand the proportion," he added.

Looking ahead to future equity investment strategies, Li Gaofeng stated that from the third quarter onwards, the company will flexibly adjust positions based on the macro environment and the risk-return characteristics of various asset classes. "We will appropriately allocate high-quality assets during market pullbacks and actively tighten risk exposure when valuations are elevated. Overall, we will continue to use low-risk fixed-income assets as the 'ballast stone' and equity assets as a source of flexibility, pursuing steady long-term returns while matching assets and liabilities."

Beyond the insurance segment, ZhongAn Online's technology division turned profitable in the first half, posting a net profit of 17 million yuan. The company attributed this to the ongoing digital transformation of the domestic and overseas financial industries. Additionally, as of the end of the first half, ZhongAn Online's comprehensive solvency adequacy ratio stood at 287.7%, an increase of 45.2 percentage points from the end of last year.