Author | Fusu
Process Editor | Rookie
Fengyunjun is a person who likes online shopping and basically receives new couriers every day.
However, after all, online shopping is different from offline. After receiving the goods, we often encounter dissatisfaction. Fortunately, many e-commerce platforms provide services such as return freight insurance or freight subsidy. Even if the goods are returned, the freight is also borne by the platform or third-party insurance companies.
Today, Feng Yunjun will show you an Internet insurance company with "return freight insurance" as its main product.Zhongan Online P&C Insurance (06060.HK)。
I. A list of the latest achievements
According to the prospectus, Zhongan Online P&C Insurance was already the largest Internet insurance company in China before going public:
During the period from its establishment in October 2013 to the end of 2016 before going public, Zhongan Online P&C Insurance has sold a total of 7.2 billion insurance policies, claiming to be the first among all insurance companies in China.
Zhongan Online P&C Insurance was listed on the main board of the Hong Kong Stock Exchange in September 2017.
By the end of 2019, Zhongan Online P&C Insurance was still the largest Internet insurance company in China.
In 2019, the total number of insurance policies for the whole year has exceeded 8 billion, exceeding the total number of policies accumulated since the establishment of the company to the time before listing.
The total premium scale of the company is also expanding.
The CAGR (average annual compound growth rate) of total premiums was 59 per cent in 2015-2019.
In 2019, the company's total premium was 14.6 billion yuan, an increase of 30% over the same period last year. Following the rapid growth in 2017 and 2018, the growth rate of total premiums slowed significantly in 2019.
For an insurance company, the part of the total premium that the company bears the relevant insurance risk can be recognized as its premium income.
The company's total income is defined as the sum of earned premiums, net investment income, net profit and loss from changes in fair value and other income.
In 2019, the company's total revenue was 15.2 billion yuan, an increase of 57% over the same period last year, which was lower than in 2017 and 2018.
In addition, the COVID-19 epidemic so far this year has not had a significant adverse impact on the company's premium income.
According to the latest disclosure, from January to May 2020, the company's original insurance premium income was 5.34 billion yuan, up 19% from 4.59 billion yuan in the same period last year, while the original insurance premium income in the same period last year increased by 16% year-on-year.
In terms of earnings, both net profit and homing net profit began to turn negative from the year the company went public in 2017.
In 2018, the company's total premium growth reached a record high, up 89 per cent from the same period last year, but also reached a record loss: the net loss for the year was 1.8 billion yuan, an increase of 80 per cent over the same period last year; and the net loss at home was 1.7 billion yuan, an increase of 75 per cent over the same period last year.
In 2019, the company's losses narrowed significantly: a net loss of 640 million yuan and a net loss of 450 million yuan, 64% and 74% respectively compared with the same period last year.
Fengyunjun roughly summed up the performance of China's largest Internet insurer: three consecutive years of losses after listing and a sharp decline in total premium growth in 2019, but losses narrowed significantly over the same period.
Next, before we talk about business, Fengyunjun adds something else.
II. Ownership structure
Zhongan Online P&C Insurance's total share capital is about 1.47 billion shares, which is composed of domestic shares and H shares.
Of these, domestic shares are about 1 billion shares, accounting for 68% of the total share capital, while H shares are about 470 million shares, accounting for 32% of the total share capital.
At present, the company's tradable shares, that is, H shares, domestic shares can not be circulated.
However, the company submitted an application for "full circulation of H shares" to the China Securities Regulatory Commission in April. If the application is approved, the company's domestic shares will be converted into H shares and will be able to trade on the Hong Kong Stock Exchange.
At present, more than 5% of the shareholders of the company are domestic shareholders, with a total of 6:
Ant Technology (formerly "Ant Financial Services Group") holds a stake of 13.5%.
Tencent10.2% shareholding,
Ping An Insurance10.2% shareholding,
Caterson Investment holds 9.5% of the shares.
Youfu Holdings holds 6.1% of the shares.
Nikkei owns 5.5% of the shares.
(source: heavenly Eye check)
The company disclosed that the company was identified as "no actual controller" because the shareholding ratio of the top five shareholders was no more than 20%.
However, Fengyunjun found that Europe, Asia and Africa, the actual controller of Caltech Investment, the company's fourth largest shareholder, and ou Yaping (also chairman of Zhongan Online P&C Insurance), the actual controller of the sixth largest shareholder Rixun network, were revealed to be siblings according to the prospectus.
As a result, the combined shareholding of Oslo Brothers (Europe, Asia, Africa and Euro Yaping) has reached 15%, surpassing Ant Technology, the largest shareholder.
From the perspective of management structure, the company currently has 12 directors and 3 supervisors. Among them, 9 seats of directors and 2 seats of supervisors are nominated by shareholders.
Caltech Investment and Daily News Network, controlled by the Orange Brothers, nominated three directors and one supervisor, while Ant Technology nominated two directors.
II. Analysis of underwriting business
(1) Internet property insurance is the main business
Now for Zhongan Online P&C Insurance's business.
Until 2018, the company disclosed its revenue by single department. Starting in 2018, the company began to be divided into three departments:
(1) Insurance department: provide a variety of Internet property insurance services
(2) Technical department: provide for its customersInformation technologyRelated business and international information technology consultation
(3) other departments: providing insurance brokers, banks,biotechnologyWaiting for service.
The insurance department is always the most important revenue department of the company.
In 2019, the total income of the insurance sector, science and technology sector and other sectors accounted for 98%, 2% and 1% respectively.
In terms of profit contribution, the insurance sector is also the most important.
Since 2017, the company has suffered a net loss every year. So far, the vast majority of the company's accumulated net loss comes from the insurance sector.
In 2017 and 2018, the net loss of the insurance sector accounted for 88% and 74% of the company's net loss, respectively.
It is worth mentioning that the company's insurance division achieved a net profit at the departmental level in 2019.
In 2019, the net profit of the insurance department was 7.6 million yuan, compared with a net loss of 638 million yuan that year.
Combined with the above, Zhongan Online P&C Insurance's net loss narrowed sharply in 2019 because his insurance unit made a net profit that year.
In addition, the science and technology sector and other sectors are still in the stage of continuing net losses.
In view of the fact that Zhongan Online P&C Insurance mentioned the performance of his science and technology department many times in his annual report, Feng Yunjun would like to give a brief introduction to this business:
After partnering with SOMPO, one of Japan's top three property insurers, in 2018, the company partnered with NTUC Income, the largest integrated insurer in Singapore, in 2019 to provide cloud-based next-generation distributed insurance core systems and digitally upgraded solutions.
In January 2019, the company established a joint venture with Grab, a leading O2O platform in Southeast Asia, to cooperate in Internet insurance distribution business in Southeast Asia. Among them, the company is responsible for building a digital insurance distribution platform for the joint venture company and providing back-end technical support.
Zhongan Online P&C Insurance received the first batch of "virtual bank" licenses issued by the Hong Kong Monetary Authority on March 27th, 2019. On December 18, 2020, Zhongan Bank launched a trial operation, becoming the first virtual bank in Hong Kong.
In view of the fact that Zhongan Online P&C Insurance's current income and profit mainly depend on his insurance department, the next analysis is mainly focused on his Internet property insurance business.
(2) the products are mainly health insurance and return freight insurance
In terms of total premiums in 2019, Zhongan Online P&C InsurancePICC Property and CasualtyRanked 11th in the company. At the same time, Zhongan Online P&C Insurance ranks first in China's Internet non-car property insurance market.
Obviously, auto insurance is not Zhongan Online P&C Insurance's strong suit.
But auto insurance has always been the largest part of China's entire property insurance market. According to the Oliver Wyman report, China's total car insurance premiums accounted for 77 per cent of the overall property insurance market in 2016.
However, as far as the Internet property insurance market is concerned, the car insurance-based pattern finally took a turn in 2019.
According to the data released by the China Insurance Industry Association, the scale of Internet non-car insurance business surpassed that of Internet car insurance business for the first time in 2019. By the end of 2019, the proportion of Internet non-car insurance business was as high as 67.26%.
In other words, if this trend continues in the future, it may benefit Zhongan Online P&C Insurance, who is mainly in non-car insurance business.
The company divides its insurance business into five ecological layouts according to the proportion of total premiums:
(1) healthy ecology: mainly based on personal health insurance, including "premium e-health", "step-by-step insurance", "DiDi Global Inc. car owner protection plan" and other risk innovation products
(2) Consumer financial ecology: mainly for domestic Internet financial platforms, customers include wing payment, Wallet, and bag,Temple library, Xiaofeng and LexinFintech Holdings Ltd., etc.
(3) Automotive ecology: mainly provide auto insurance products "insurance" in cooperation with Ping An Insurance.
(4) Life and consumption ecology: provide returns, product quality, logistics, after-sales service and merchants for domestic mainstream e-commerce platforms (Taobao, Tmall, etc.)Security depositAnd other related insurance products
(5) Travel ecology: for online travel and travel platform, provide insurance products related to travel accidents, such as aviation accidents, flight delays, travel accidents, air tickets or hotel cancellations.
In 2019, the top three ecological layouts (and the proportion of total premiums) are: healthy ecology (33%), consumer ecology (25%) and consumer financial ecology (21%).
Among them, the proportion of the total premium of healthy ecology increased by 8% compared with the same period last year, replacing consumer finance to become the largest ecological layout of the company.
The proportion of total premiums of living consumption increased by 11% compared with the same period last year, becoming the ecology with the fastest growth of total premiums in 2019.
From the perspective of specific types of insurance, Zhongan Online P&C Insurance's current insurance products are mainly health insurance (belonging to health ecology) and return freight insurance (belonging to living consumption ecology).
In 2019, the top three types of insurance (and the proportion of total premiums) are: health insurance (32%), return freight insurance (21%) and guarantee insurance (20%).
Among them, the total premiums of health insurance and return freight insurance increased by 96% and 190% respectively over the same period last year, making them the two types of insurance with the fastest expansion of total premiums in that year.
In addition, the total premiums of liability insurance (belonging to other ecology) and credit insurance (belonging to consumer financial ecology) fell by more than 70% in 2019 compared with the same period last year, which was the most obvious decline in the company's total insurance premiums in that year.
The company said the sharp year-on-year drop in total premiums for liability and credit insurance in 2019 was due to the company's initiative to scale back its business.
Liability insurance mainly refers to employer liability insurance. According to the company's disclosure, the company took the initiative to significantly reduce its size in 2019 because of its high compensation rate.
At the same time, for the consideration of the overall risk of the consumer financial industry, the company has taken the initiative to reduce the size of the credit insurance business, especially when cooperating with the Internet financial platform.
Does the change in the insurance product portfolio optimize the company's financial ratio?
We use the "comprehensive cost rate" to measure the operational efficiency of the company's underwriting business.
Comprehensive cost rate: the sum of compensation rate and channel expense rate
Compensation rate: the percentage of net reparations generated as a percentage of net premiums earned
Channel expense rate: insurance operating expenses as a percentage of net premiums earned.
Since the company went public in 2017, the company's comprehensive cost rate has been declining, falling by 7 percentage points in 2018 and 13 percentage points in 2019. In 2019, the comprehensive cost rate is 113%.
The decline of the comprehensive cost rate is mainly due to the obvious decrease of the channel expense rate.
The channel expense rate decreased by 13 percentage points in 2018 and 15 percentage points in 2019 compared with the same period last year. In 2019, the channel expense rate was 46%.
In contrast, the change in the compensation rate does not have a beneficial impact on the company's comprehensive cost rate.The compensation rate stabilized at around 60% in 2017 and 2018. In 2019, the compensation rate rose 7 percentage points year-on-year to 67%.
In other words, if you want to make a profit, think about how to flatten this 13.3% cost.
(1) the rate of channel expenses has decreased.
The rate of channel expenses is affected by insurance operating expenses.
Insurance operating expenses refer to the fees and commissions, technical service fees and other channel-related fees directly related to premium income in the daily operation of the company, mainly commission and commission.
Usually, the handling fee and commission of a traditional insurance company refers to the fees paid by the company to the insurance agent.
For Internet insurers, when they sell insurance products through third-party platforms, these platforms will charge fees and commissions based on a percentage of total premiums.
For different types of insurance, the percentage charged by third-party platforms based on total premiums is usually different.
For example, the company attributed the decline in the channel expense rate in 2019 to a reduction in the ecological business of air travel with higher channel rates, which covers aviation accidents, flight delays, travel accidents, ticket or hotel cancellations, etc.
The company currently sells most of its insurance products through third-party platforms rather than its own platforms.
The company's own platforms include APP, Mini Program, official account, mobile website and so on.
It was revealed that the proportion of total premiums generated by the company's own platform was only 7.6% in 2019, compared with 2% in 2018.
Therefore, the third-party platform is the sales channel that the company depends on.The company calls third-party platforms that sell its insurance products "ecological partners".
According to the company's website, the third-party platforms for cooperation include Taobao, Tmall,millet、CTRIP, Alipay, Ju cost-effective,MogujieAnd have a home and so on.
In its latest earnings report, the company called Ant Technology, its largest shareholder, an "important ecosystem partner" and said that Ant Technology "provides customer coverage that cannot be compared with other Internet platform service providers."
After listing, the company did not disclose the total premiums from various "ecological partners".
However, according to previous prospectuses, total premiums from the top five ecosystem cooperation platforms accounted for 98.9%, 95.3% and 80.8% of total premiums in 2014, 2015 and 2016, respectively.
In addition, Fengyunjun needs to remind that the customers of the company are the insured of the insurance product and the insured of the insurance policy, and the "ecological partner" is not the customer of the company. therefore, it is impossible to reflect the proportion of the total premium of the "ecological partner" through the sales of major customers.
(2) the compensation rate has increased.
The compensation rate is affected by the net amount of reparations generated. The net reparations generated do not include the transfer of the company to a third partyReinsurance CompanyThe reparations.
In addition, let's take a look at the indicator of "retention ratio".
Retention ratio refers to the percentage of net underwriting premiums (i.e. total premiums less split premiums) in total premiums.
The higher the retention ratio, the smaller the proportion of total premiums to third-party reinsurers.
The company's retention ratio reached 98.4% in 2019, indicating that the vast majority of insurance products are paid by the company itself.
In 2019, the company paid a total of 8.3 billion yuan of insurance reparations, from the return freight insurance reparations as high as 2.3 billion yuan, accounting for 28%. That compares with 17% in 2018.
It can be seen that the reason for the increase in the compensation rate in 2019 is mainly due to the substantial growth of the return freight insurance business with higher compensation rate in that year.
Fengyunjun did not expect that the operation of easily buying some broken things on Taobao and then returning them frequently made a large-scale Internet insurance company unable to make a profit for a long time.
Finally, Fengyunjun will summarize the current situation of the company's underwriting business:
Among the company's five ecological layouts (excluding other ecology), the comprehensive cost rate of healthy ecology is the highest, while that of consumer finance is the lowest.
Therefore, healthy ecology has replaced consumer financial ecology in 2019 and become the largest ecological layout of the company at present, which is the main reason for the decline of comprehensive cost rate.
In terms of more specific compensation rates and channel fee rate indicators:
Living consumption and consumer finance, which rank second and third respectively in the proportion of total premiums, have higher compensation rates. In particular, living expenses, which are mainly based on return freight insurance, have led to a sharp increase in the company's compensation rate in 2019.
At the same time, the company's main ecological layout, such as health, consumer finance and living consumption, has a lower channel expense rate than other ecological layout, which is the reason for the company's lower channel expense rate in recent years.
IV. Reasons for narrowing losses
The factors that affect the company's profit are not only the compensation rate and channel expense rate of its underwriting business, but also the total investment income generated by the company through investment activities.
Total investment income is defined as the sum of net investment income, net profit and loss of fair value changes and net profit attributable to associates and joint venture companies, less interest expenses related to the sale and repurchase of financial assets and impairment related to investment assets.
Among them, mainly for the net investment income and fair value changes in the net profit and loss.
In 2019, the company's net investment income was 1.78 billion yuan, a sharp increase of 129% compared with 770 million yuan in the same period last year.
In the same period, the net profit and loss of fair value changes changed from negative to positive, to 170 million yuan, compared with-150 million yuan in the same period last year.
In the endThe company's total investment income reached 1.82 billion yuan in 2019, an increase of 1.32 billion yuan over the same period last year and an increase of 264% over the same period last year.
In addition, what needs to be distinguished is that the fact that the company achieved the net profit of the insurance sector in 2019 does not mean that the company has achieved the profit of the underwriting business.
Underwriting profit (loss): refers to the net premium earned by the company less the net reparations incurred and the rest of the insurance operating expenses.
In 2019, the company's underwriting loss was 1.7 billion yuan, down 7.4% from the 1.8 billion yuan underwriting loss in the same period last year.
Due to the calculation of underwritingWhen making a profitThe total investment income is not included, but the total investment income is added to calculate the net profit of the insurance sector. Therefore, in 2019, while the underwriting business continued to lose money, the company realized the net profit of the insurance sector business.
In 2019, the total value of the company's investment assets is 19.9 billion yuan, accounting for 72% of its total assets.
From the distribution of investment assets, the company mainly invests in fixed income investment, followed by equity and investment funds.
Fixed income investment accounted for 42% of total investment assets in 2019, down 19 percentage points from 2018.
At the same time, stocks and investment funds accounted for 24% of total investment assets, up 10 percentage points from 2018.
Clearly, the company increased its allocation of equity assets in 2019.
At the same time, the company attributed the substantial increase in total investment income in 2019 to the excellent performance of the A-share market that year.
According to the data, in 2019Shanghai Composite IndexThe annual increase was 22.30%.Deep syndrome component indexThe annual increase was 44.08%, and that of the gem index was 43.79%.
The company's total return on assets reached 9.3% in 2019, the highest since it went public. The rate of return on net assets is 4.8%, the highest in nearly five years.
Traditional property insurance companies also made high investment returns in 2019.
PICC Property and Casualty (02328.HK) in 2019 underwriting profits fell sharply at the same time, the realized and unrealized net income is as high as 730 million yuan, compared with the same period last year-1.22 billion yuan greatly improved.
The fair value change profit and loss of Ping an property Insurance reached 44.1 billion yuan in 2019, which is much better than-28.3 billion yuan in the same period last year.
Conclusion
Finally, Fengyunjun makes a summary.
Zhongan Online P&C Insurance is the largest Internet insurance company in China, after listing, with the rapid expansion of underwriting business, the company fell into the quagmire of losses.
The reason for the continued loss is that the company's underwriting business is dominated by insurance types with higher compensation rates. In 2019, while the company's return freight insurance business grew significantly, the compensation rate also increased.
At the same time, the company's sales channels rely on third-party platforms, especially Ant Technology.
Although Ant Technology is the largest shareholder of the company, the combined shareholding of Oslo Brothers (Europe, Asia, Africa, Europe and Yaping) has surpassed that of Ant Technology.
The narrowing of the company's net loss in 2019 is mainly affected by a sharp increase in total investment income, but the underwriting business has not been profitable so far.
Even with the all-out blessing of the "three horses" and their respectiveSuperior resourcesThe investment of the company's underwriting business is still a long way from making a profit.
In addition, the company has submitted an application for full circulation of H shares, and domestic shares, which currently account for more than 60% of the total share capital, may become negotiable H shares in the future, which is also worthy of the attention of investors in the secondary market.
Disclaimer:This report (article) is based on the public company attributes of listed companies and the information publicly disclosed by listed companies in accordance with their legal obligations (including, but not limited to, interim announcements, periodic reports, official interactive platforms, etc.) as the core basis; market capitalization Fengyun strives to be objective and impartial in the contents and opinions contained in the report (article), but does not guarantee its accuracy, completeness, timeliness, etc. The information or opinions expressed in this report (article) do not constitute any investment advice, and the market capitalization assumes no responsibility for any action taken as a result of the use of this report.