Moody's confirms ZA ONLINE Insurance financial strength rating at Baa1, outlook upgraded to positive

Moody's has confirmed the insurance financial strength rating (IFSR) of ZhongAn Online (06060.HK) at "Baa1" and the senior unsecured debt rating at "Baa2". At the same time, Moody's has adjusted ZhongAn Online's rating outlook from "stable" to "positive".

Moody's stated that the change in rating outlook from stable to positive reflects the improvement in ZhongAn Online's profitability, particularly in non-insurance business areas, which mainly include technology exports and virtual banking services. Since 2024, the overall net loss of ZhongAn Online's non-insurance segment has significantly narrowed. Given that its insurance underwriting business has become profitable and the unhedged foreign exchange positions have decreased, it is expected that ZhongAn Online's profitability will improve in the next 12 to 18 months, with reduced earnings volatility.

Moody's indicated that maintaining ZhongAn Online's Baa1 insurance financial strength rating highlights the company's solid market position. Its premium income continues to grow at double-digit rates, underwriting profitability is good, and the leverage ratio of high-risk assets is low, while maintaining a robust capital position.

Since 2021, ZhongAn Online has achieved underwriting profitability by focusing on profitable product lines. In the first half of 2025, its combined cost ratio was 95.6%, an improvement of 2.3 percentage points compared to the same period last year. As the revenue share of the relatively less profitable digital lifestyle ecosystem business decreases, ZhongAn Online's product structure continues to optimize. It is expected that its underwriting performance will remain basically stable in the next 12 to 18 months.

Moody's also noted that ZhongAn Online has maintained a robust and stable capital position. As of the end of June 2025, its core solvency ratio and comprehensive solvency ratio were 217% and 226%, respectively, far exceeding the regulatory minimum requirements (50% and 100%, respectively). The Hong Kong stock placement completed in July 2025 further strengthened ZhongAn Online's capital strength.

ZhongAn Online's senior unsecured debt rating is Baa2, one notch lower than its Baa1 insurance financial strength rating, reflecting the subordinate position of senior unsecured debt holders relative to ZhongAn Online's policyholders.

Moody's may upgrade its rating if ZhongAn Online meets the following conditions: (1) Achieving stable overall profitability, significantly reducing non-insurance business losses, while maintaining a combined cost ratio below 98%; (2) Further diversifying products without significantly increasing product risk; (3) Maintaining a comprehensive solvency ratio above 250%.

Given the current positive rating outlook, the likelihood of a downgrade is low. However, if the following situations occur, Moody's may revert the rating outlook to stable: (1) A significant deterioration in underwriting profitability, with a combined cost ratio consistently exceeding 100%, or a substantial expansion of non-insurance business losses; (2) A comprehensive solvency ratio consistently below 200%; (3) The ratio of high-risk assets to adjusted shareholders' equity rising above 100% ZA ONLINE is headquartered in Shanghai, China, providing a full range of property insurance products and technology services. By the end of 2024, its total assets will reach 45.3 billion RMB, with total shareholders' equity amounting to 20.9 billion RMB