ZhongAn to improve profitability and maintain solid capitalisation—analyst

But investment in tech and other business lines run a risk of straining these growths.

ZhongAn Insurance is expected to improve its profitability whilst building its scale and to maintain a solid capitalisation, according to Moody’s.

This prediction reflects the insurer's market presence as the largest online insurer in China, strong capitalization, improved product diversification and low high-risk asset leverage.

“However, continued investments in technology and other non-insurance business could strain its capitalization and profitability. The proposed capital supplemental bond issuance could also significantly increase its financial leverage and weaken its earnings coverage,” Moody’s said.

ZhongAn’s strong business growth had consistently increased its market presence and is now the ninth largest property and casualty (P&C) insurer in China by direct premiums.

The insurer's premium grew 22% in 2021, largely driven by the increase in its consumer finance segment. However, the rebound in premium growth of guarantee insurance under this segment in view of the slowdown of economic growth in China may pose a risk to its underwriting profitability. Nevertheless, the insurer's product portfolio has become more diversified and less reliant on shipping return insurance than it was a few years ago. Its online distribution model withstood well much of the coronavirus pandemic-induced disruptions faced by other insurers.

ZhongAn reported a net profit of $113.93m in 2021 after it made a profit of $38.28m for the first time in 2020. According to Moody’s its underwriting profitability has improved over the past few years and turned around to become profitable in 2021 for the first time. 

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