Digital lifestyle leading growth; ZA Bank and technology export breakeven on track

Investment Rating - Maintain BUY with a new target price of HK$22.0 [2][6] Core Viewpoints - ZhongAn reported a significant turnaround in FY23, with net profit attributable to shareholders reaching RMB4.1bn, compared to a net loss of RMB1.1bn in FY22 [2] - Excluding the one-off gain from the disposal of ZA International (RMB3.78bn), the insurer recorded a net profit of RMB294mn, in line with consensus [2] - The company's growth is driven by its digital lifestyle ecosystem, technology export, and ZA Bank's breakeven progress [2][6] Domestic P&C Insurance - Domestic P&C insurance premiums grew by 33.1% YoY in 2H23, driven by digital lifestyle-related products such as e-commerce cargo insurance, travel insurance, and pet insurance [2] - The underwriting combined ratio (CoR) rose 1.0ppt to 95.2% in 2023, but underwriting profit (UWP) increased by 1.7% YoY to RMB1.3bn due to higher insurance revenue (+24.2% YoY) [2] - The health segment saw a 130.6% YoY increase in gross written premiums (GWP) for critical illness insurance, reaching RMB1.3bn in 2023 [2] Technology Export - Revenue from domestic technology export surged 73% YoY to RMB504mn in 2023, benefiting from the Digital China initiative [2] ZA Bank Performance - ZA Bank's net revenue increased by 42.9% YoY to RMB366mn in 2023, with a net interest margin (NIM) expansion of 10bps to 1.94% [2] - The bank launched US-stock trading in January 2024, which is expected to attract tech-savvy customers and improve retention [2] Proprietary Channels - Premiums from proprietary channels grew 31.0% YoY to RMB7.6bn, accounting for 26% of total GWP [2] - In the Health ecosystem, GWP from proprietary channels increased by 45.0% YoY to RMB4.4bn, representing 44.5% of total Health GWP [2] - The number of paid customers rose 14.8% to 11.43mn, with premiums per user increasing by 14.4% YoY to RMB670 [2] Financial Projections - FY24-26E net profit is projected at RMB434mn, RMB547mn, and RMB678mn, respectively [3] - The underwriting combined ratio (CoR) is expected to remain stable at 95.8%/96.0%/96.0% for FY24-26E, with underwriting profits projected at RMB1.38bn/RMB1.56bn/RMB1.77bn [6] Valuation - The stock is trading at FY24E 0.9x P/B and FY24E 0.5x P/S [5] - The fair value is based on a FY24E P/B of 1.46x, implying a 20-year growth rate of 8% [6]