ZHONGAN ONLINE P & C INSURANCE CO., LTD.

ZhongAn Online P & C Insurance Co., Ltd.

6060

CNE100002QY7

Property & Casualty Insurance

Market Closed - Hong Kong S.E. Other stock markets 04:08:20 2024-04-26 am EDT			5-day change	1st Jan Change
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Apr. 05	ZhongAn Online P&C Insurance Raises Transaction Limits with Ant Group	MT
Mar. 26	ZhongAn Online P&C Insurance Returns to Profit in 2023; EPS, Revenue Beat Estimates	MT

ZhongAn Online P & C Insurance : INTERIM REPORT 2020

September 11, 2020 at 07:10 am EDT

Contents

Corporate Information

Management Discussion and Analysis Disclosure of Interest

Other Information

Report on Review of Interim Financial Information

Interim Condensed Consolidated Statement of Comprehensive Income

Interim Condensed Consolidated Balance Sheet

Interim Condensed Consolidated Statement of Changes in Equity

Interim Condensed Consolidated Statement of Cash Flows

Notes to the Interim Condensed Consolidated Financial Information

Definitions

Glossary

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	2

Board of Directors

Executive Directors

Yaping Ou (Chairman of the Board)

Jin Chen

Hugo Jin Yi Ou

Non-Executive Directors

Xinyi Han

Xiaoming Hu*

Liangxun Shi

Ming Yin

Weibiao Zhan**

Independent Non-Executive Directors

Shuang Zhang

Hui Chen

Yifan Li

Ying Wu

Wei Ou

Supervisors

Yuping Wen

Baoyan Gan

Haijiao Liu

Audit Committee

Hui Chen (Chairman)

Yifan Li

Liangxun Shi

Risk Management Committee

Yifan Li (Chairman)

Xiaoming Hu*

Ming Yin

Remuneration and Nomination Committee

Shuang Zhang (Chairman)

Yaping Ou

Ying Wu

Investment Strategy Committee

Jin Chen (Chairman)

Hugo Jin Yi Ou

Xinyi Han

Weibiao Zhan**

Related Transactions Control Committee

Wei Ou (Chairman)

Hui Chen

Yifan Li

Consumer Rights Protection Committee

Ying Wu (Chairman)

Hugo Jin Yi Ou

Liangxun Shi

Corporate Information

Headquarters and Principal Place of Business in the PRC

219 Yuanmingyuan Road

Shanghai

PRC

Registered Office

4-5/F, Associate Mission Building 169 Yuanmingyuan Road Shanghai

PRC

Principal Place of Business in Hong Kong

Level 54, Hopewell Centre

183 Queen's Road East

Hong Kong

H Share Registrar

Tricor Investor Services Limited

Level 54, Hopewell Centre

183 Queen's Road East

Hong Kong

Joint Company Secretaries

Yongbo Zhang

Ella Wai Yee Wong

Authorized Representatives

Jin Chen/Hugo Jin Yi Ou (effective on August 26, 2020) Ella Wai Yee Wong

Legal Advisors

As to Hong Kong and U.S. laws:

Skadden, Arps, Slate, Meagher & Flom

As to PRC law:

CM Law Firm

Auditors

PricewaterhouseCoopers

Certified Public Accountants and Registered PIE Auditor

Principal Banks

ICBC Shanghai Branch Sales Department

CITIC Bank Shanghai Branch Sales Department

Listing Information

Stock Code: 6060

Company Website

www.zhongan.com

Resigned on August 26, 2020.
Mr. Weibiao Zhan shall be a non-executive director of the Company and member of the investment strategy committee of the Company upon his qualification as a director of the Company being approved by the CBIRC.

3	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

	Management Discussion and Analysis1

Business Review

Business Development Overview

As the first Internet-based Insuretech company in China, ZhongAn upholds the mission of "empowering the finance business with technologies and providing insurance services with a caring hand". We embrace the two-winged growth strategy of "Insurance + Technology", and adhere to integrating technologies into the whole insurance value chain. Through platforms operated by our ecosystem partners and our proprietary platforms, we aim to build ecosystems around customers' online activities and offer a comprehensive product suite to meet their diversified protection needs, thus revolutionizing the insurance value chain with technologies. Meanwhile, we consistently demonstrate and enhance our technology strength in the operation of our insurance business, and we aim to enable the online insurance industry chain by exporting Insuretech, facilitating the digital transformation of industry players across the world.

In the first half of 2020, we provided services to approximately 400 million insured customers, among which approximately 55% were under the age of 35 with insurance policies per capita of 9.0 and premiums contribution per capita of RMB16.9 (first half of 2019: 348 million insured customers with insurance policies per capita of 9.6 and premiums contribution per capita of RMB16.9).

In the first half of 2020, ZhongAn continued to pursue growth with quality and recorded a GWP of RMB6,766.5 million, representing a year-on-year increase of 14.7%. Our business structure has been continuously optimizing, driven by the accelerated growth of our health and lifestyle consumption ecosystems. In the first half of 2020, GWP from the health ecosystem grew by 115.6% year-on-year, now contributing to 45% of GWP (first half of 2019: 24%). Meanwhile, GWP from the lifestyle consumption ecosystem grew by 40.4% year-on-year, now accounting for 28% of GWP (first half of 2019: 23%).

The rapid growth of our health and lifestyle consumption ecosystem segments and the constant optimization of our business structure were driven by the following forces:

(1) Thanks to the convenience of our online services, we effectively captured the rapid growth in consumer demand for insurance fueled by the pandemic

The outbreak of COVID-19 at the beginning of the year not only significantly raised consumer health insurance protection awareness, but also further shifted their insurance purchasing activities from offline to online. Leveraging our mature Internet model, ZhongAn has effectively captured this market opportunity by offering

customers a smooth and pleasurable purchasing experience, strengthening our Insuretech brand recognition, leading to a 138.2% year-on-year growth of GWP from the Personal Clinic Policy Series within the health ecosystem in the first half of the year.

The rapid development of the e-commerce industry during the same period also led to a 40.4% growth of GWP from our lifestyle consumption ecosystem.

(2) Empowering our proprietary platforms with technologies to further explore the potential of the aforementioned markets

As we continued to build out the marketing, customer acquisition and service capacities of our proprietary platforms, GWP generated through our proprietary platforms reached RMB1,048.7 million in the first half of 2020, representing a year-on-year increase of approximately 8.1 times, and its percentage contribution to GWP increased to approximately 16% (first half of 2019: approximately 2%). We served 1.66 million insured customers for the first half of 2020. In particular, the Personal Clinic Policy Series contributed approximately 88% of GWP generated through our proprietary platform, and accounted for approximately 34% of total Personal Clinic Policy Series premiums (first half of 2019: approximately 11%).

Using original promotion materials distributed through our proprietary platforms (including APP, mini programs, official websites), we constantly carried out market education under new scenarios to enhance users' insurance awareness and attract users to purchase insurance products through our proprietary platforms. Leveraging the self-developed intelligent marketing system, we apply user profiles to achieve targeted marketing and customer reach in new scenarios, and implement closed-loopreal-time monitoring of the entire marketing process to continuously optimize our marketing efforts.

(3) Enhancing the closed-loop health ecosystem to provide inclusive medical treatment, deeply integrating insurance protection and medical services to differentiate ZhongAn's competitive advantage

By deeply integrating insurance protection and medical services, ZhongAn successfully established a closed- loop health ecosystem, providing customers with an one-stop-shop service experience, which is also our starting point for enhancing brand recognition and competitive differentiation amid rapidly growing user demands.

1 Except for specifically explained, all data referred to in Management Discussion and Analysis contained the offset effect by segment; the insurance business referred therein does not include life insurance business.

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	4

Management Discussion and Analysis

We have formed a closed-loop ecosystem through		At the same time, we focus on risk control and
the integration of health insurance, ZhongAn Internet		pay close attention to the impact of the macro
Hospital, Nova Technology, etc., providing users with		factor on the businesses. Since 2019, the domestic
insurance-centric products and a one-stop-shop		economy entered a credit down cycle with
solution that encompasses disease prevention, health		slowing growth, leading to heightened risks in the
management, medical consulting and medical records,		consumer finance industry. Correspondingly, we
to assist users to manage their health in a more efficient		have taken a more cautious approach, tightened
and convenient way and achieve wellness goals. Our		our lending standards, and scaled back from our
services cover users' entire life cycle, satisfying their		consumer finance business to control overdue
needs for various medical services under different health		risks caused by the macroeconomic downturn.
conditions, and strive to enhance service experience		Amid the challenging environment brought about
and user royalty. As a result, we can achieve a win-win		by the outbreak of COVID-19 in early 2020, we
relationship, strengthening ZhongAn's brand image by		further strengthened our risk control measures
providing users with health management services, which		and tightened the assessment of users' repayment
in turn improves our risk control capabilities.		abilities. Our prudent risk control strategy has
As the payment end of the medical service industry		effectively kept the loss ratio of the consumer
	finance ecosystem under control. In the first half
chain, health insurance can effectively integrate the
	of 2020, the loss ratio of the consumer finance
value of relevant health services. It is especially powerful
	ecosystem has dropped to 69.8% from 78.0%
in pioneering and influencing the planning, design, and
	in the first half of 2019; and the outstanding
innovation of health services.
	loan balance shrank to RMB14,400 million,

Due to our persistent pursuit for growth with quality		representing a decrease of 44% from the end of
	2019. The risk-focused development strategy has
as well as technology-driven cost reduction and
	significantly reduced the impact of the consumer
efficiency improvement, the combined ratio for the
	finance ecosystem on the overall loss ratio of the
first half of 2020 improved from 108.3% in the first
	Company.
half of 2019 to 103.5%, representing a year-on-year

improvement of 4.8 percentage points. In particular,	(2)	Leveraging automated and intelligent business
the loss ratio was 56.6%, representing a year-on-year
	processes to further our scale advantage during
drop of 7.3 percentage points, while the expense ratio
	high-growth periods: We continue to enhance
increased by 2.5 percentage points year-on-year to
	the degree of automation and intelligence of
46.9%. The underwriting loss for the first half of 2020
	every process, which has begun to exhibit scale
has narrowed to RMB263.2 million, representing a
	effects as the business grows. Taking the health
year-on-year decrease of RMB229.0 million or 46.5% as
	ecosystem as an example, we promote inclusive
compared to the underwriting loss of RMB492.2 million
	insurance through our proprietary platforms
for the first half of 2019.
	and ecosystem partners, centered around the

Specifically we have taken the following measures:		million coverage medical insurance - Personal
	Clinic Policy Series. The intelligent underwriting,

(1) Pursuing "growth with quality" and further		automatic adjustment, intelligent review and other
	capabilities allow users to enjoy a more convenient
optimizing our business structure: Benefiting
	and efficient experience in the purchase and claim
from the rapid growth of health and lifestyle
	settlement process of health insurance. Meanwhile,
consumption ecosystems and their increasing
	the customer service and risk control processes
weight in GWP, our combined ratio has further
	that originally required huge investment in labor
improved.
	costs are gradually being replaced by algorithm-
In the first half of 2020, while continuing to develop
	based models that utilize big data and artificial
the five major ecosystems, we concentrated more		intelligence.
resources on our health and lifestyle consumption
ecosystems. As a result, the proportion of GWP

from health and lifestyle consumption ecosystems reached 45% and 28%, respectively, and our business structure further improved.

5	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

In the customer service process, user inquiries received for Personal Clinic Policy Series in the first half of 2020 experienced explosive growth momentum by approximately 150% as compared with the second half of 2019, while the labor cost of the customer service department only increased by 42%, which was attributable to the application of AI in online and voice customer services. AI has been used in over 85% of our online services. In the first half of 2020, intelligent customer service robots have served a total of 2.35 million users, and intelligent voice customer service has covered 275 business scenarios. As a result the proportion of calls transferred to customer service representatives has decreased by 36%, effectively mitigating the inquiry-answering tasks of manual operators. This was achieved by our extensive database of nearly 50,000 data entries accumulated throughout the insurance industry and our 96% accuracy rate of recognizing customers' insurance needs.

In the insurance purchase, claim settlement and risk control processes, through data connected to the "Nova Technology" platform, as well as the jointly developed intelligent underwriting and claim settlement models, we have built a risk control chain driven by data analytics to provide customers with a more efficient insurance purchase and claim settlement experience, as well as empowering risk control with effective technology.

Through the platform developed by our incubator "Nova Technology", we have connected with the systems of more than 1,000 hospitals in 28 provinces (over 80% of which are second-class and above) and the regional medical information platform of 16 provinces and cities (covering 60% of the top 10 provinces in terms of sales of the health ecosystem). With our customers' authorization, we achieved direct online connection with medical information databases, which not only effectively enhances our intelligent risk control capabilities and efficiency by conducting risk identification in the underwriting and claim management process, but also immensely improves our customers claim settlement experience. For customers of the hospitals directly connected with ZhongAn, claim settlement can be completed by simply clicking on the case under the "claim settlement" page in the APP without providing any paper documents.

Through a data-driven underwriting, claim settlement, and risk control model, we achieved

highly digital one-stop-shop management process: using intelligent underwriting models and personal health profiles, the underwriting

end can identify high-risk insurance applications, thereby achieving effective annualised loss reduction of approximately RMB25 million; the claim settlement end has also cut the loss ratio efficiently by applying medical knowledge graphs and an intelligent claim settlement model, thus leading to an effective annualised loss reduction of approximately RMB60 million.

In addition, relying on the data-based automatic adjustment system and intelligent claim settlement model, we have significantly improved our operational and management efficiency. The claim amount can be automatically calculated based on the insured's medical information, and claim obligations and terms specified under the insurance contract. In the first half of 2020, the efficiency of document review in the claim settlement process (the average daily processing volume of claim-settlement documents per person) increased by 70% month-on-month from the second half of 2019. The automation rate of claims materials for classification, automatic rotation and key phases extraction has reached more than 90% with the help of the OCR.

Meanwhile, we continue to invest in the buildout of our proprietary platform. Although the brand and advertising expenses have led to a higher expense ratio, it will effectively contribute to our long-term value generation, which is mainly manifested through the following three aspects:

(1) For users of our proprietary platform, our renewal expenses will decrease

When users renew their insurance policy in subsequent and following years, we will incur lower renewal expenses, which will significantly dilute customer acquisition costs incurred in previous periods and reduce the overall expense ratio.

(2) Targeted marketing based on algorithms helps to increase the repeated purchases rate (different from renewal rate) of customers and allows us to further monetize customers

On our proprietary platforms, we developed user labels based on various categories of their characteristics. By implementing algorithm- driven redirecting based on user profiles such as age, gender, family and products purchased, the upselling rate of the Personal Clinic Policy Series through our proprietary platforms in the past 12 months has reached approximately 11% (upselling rate = (other insurance products offered by ZhongAn purchased by policyholders of the

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	6

Management Discussion and Analysis

Personal Clinic Policy Series for themselves as the insured on our proprietary platforms + the Personal Clinic Policy Series products purchased by such policyholders for their family members as the insured)/the number of total policyholders of the Personal Clinic Policy Series on our proprietary platforms).

(3) Leveraging the value-added services on our proprietary platforms to enhance user loyalty and brand recognition

In addition to providing insurance products to our users through our proprietary platforms, we also encourage them to obtain one-stop-shop services encompassing insurance knowledge, medical services (including health management, online medical consulting and express channel for critical illnesses, etc.), and post-sale auto services through our proprietary platforms, to improve customer experience, enhance customer loyalty and advance ZhongAn's brand effect.

Taking the integration between our proprietary platforms and health ecosystem as an example, users are able to obtain health knowledge in multiple formats such as short texts and short videos, as well as health management and online medical consulting services like experts-led video courses and one-click diagnosis through ZhongAn Internet Hospital; customers can also access the one-click application function through our own proprietary platforms if they need to apply for express channel for critical illnesses, proton- heavy-ion therapy or medical advance payment, etc. during hospitalization. Our proprietary platforms have become integral bridges to connect customers and services, ensuring that customers under different health situations (healthy, sub- healthy or ill) are all able to enjoy ZhongAn's all-round medical services, maximizing the competitive strengths of ZhongAn's closed-loop health ecosystem.

With respect to technology export, COVID-19 has brought more market opportunities to digital transformation of the industry.

We continue to focus on the Insuretech field, exporting our advanced Insuretech experience and technology strengths to domestic and international customers (including insurance companies and Internet platforms) who intend to expand into the digital insurance sector, to facilitate the

digital transformation throughout the insurance industry. Specifically, we develop core digital insurance systems and scenario-based solutions for insurance companies, and collaborate with Internet platforms to develop online ecosystem- oriented insurance solutions. Our revenue comprises of licensing fees, technology service fees and other charges using a SaaS model (for instance, as a percentage of income or usage). Our technology export business will therefore benefit from the growth of our customers' insurance businesses, achieving sustainable revenue growth that is aligned with the long-term interests of our customers.

In the first half of 2020, under the effect of COVID-19, users' expectations for digital insurance increased significantly, and insurance companies also actively conducted online transformation to respond to users' demands. Meanwhile, regulatory authorities also set out clear targets for the overall online transition by 2022, stipulating that online business ratio in sectors including auto insurance, agriculture insurance, accident insurance, short- term health insurance and family property insurance, etc. should at least reach 80%, which opens a new phase for the Insuretech market. With several years of experience, we have developed mature Insuretech products and solutions covering comprehensive demands in each stage of the digital transformation of the insurance industry throughout operations (entirely digital process), technology (digital IT infrastructure), data (establishing user profile to empower refined operation), and organizational management (online training).

In the first half of 2020, we recorded income from technology export of RMB119.9 million, representing a year-on-year increase of 26.2%, with 64 contracted clients, among which, 29 were from the insurance industry. Approximately 80% of our existing insurance system product customers purchased additional insurance system modules from us or upgraded their existing modules in the first half of 2020.

Our strategic positioning is not only a cutting- edge technology service provider, we also export and replicate our leading business models to the international insurance industry, and join our customers in exploring business model and product innovation in the Internet ecosystem.

7	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

In Japan, we have served three leading local insurance companies and online platforms, including SOMPO, one of the top three domestic property and casualty insurance companies. Through our next-generationcloud-based decentralized core insurance system (i . e . Graphene), our customers have connected with various local ecosystem partners launching

variety of user-based and scenario-based insurance coverage products.

In Singapore, NTUC Income, the largest domestic comprehensive insurer, through our core insurance system (i.e. Graphene), established API connections with various local partners in catering, public transportation, food delivery and other sectors in the first half of 2020. NTUC Income launched an usage-based insurance package, which allows users to upsize their coverage based on their own needs. After signing up with this insurance package plan, NTUC Income will automatically deduct a small fee (less than S$1) every time the user completes a payment on the aforementioned partner's platform, and increase the coverage on their accident, life and critical illness insurance according to the previous agreement with the user.

We have formed a joint venture company with Grab, a leading O2O platform in Southeast Asia, to jointly explore the online insurance distribution sector in Southeast Asia, and to offer an integrated insurance and finance solution. In particular, ZhongAn establishes the digital insurance platform and provides back-office technology support for the joint venture company. Meanwhile, the joint venture company joins hands with insurance partners around the world to provide various customized and usage-based insurance products (such as the usage-based critical illness plan, usage-based auto insurance, and accident insurance for families launched in Singapore and Malaysia, respectively) for Grab's tens of millions of users in Southeast Asia by exporting sophisticated Insuretech solutions and advanced business models in China. In the first half of 2020, our cooperation with Grab has been further expanded to Indonesia, where we have launched usage-based property insurance products for freight to cover the risk of damage during express delivery on Grab Express. The Grab ecosystem has generated over 12 million policies with the support of our insurance and technology strengths.

On March 24, 2020, our "Virtual Bank" (i.e. ZhongAn Bank) officially opened for business in Hong Kong. On May 18, the "Digital Insurance" (i.e. ZA Life) also officially opened for business in Hong Kong. We hope to apply fintech capabilities to Hong Kong's mature financial market to improve customer experiences, create products that closely cater to users' needs and assist Hong Kong regulators to implement the initiative of inclusive finance.

ZA Bank, as the first licensed Virtual Bank in operation in Hong Kong, has attracted over HKD2.4 billion of savings as of June 30, 2020. This achievement is attributable to the fact that we have always put customer experience as the utmost priority and gained customer recognition: customers of ZA Bank can truly experience 24/7 banking services encompassing account registration, deposit, transfer, loans and other services by our one-stop-shop mobile APP. We intelligentize parts of the front, middle and back office processes, handling the most labor-intensive and time-consuming processes at traditional banks at a lower marginal cost. And since there is no need to establish offline branches, we can focus more on improving customer experience.

ZA Life also upholds the same ideology, providing simple, convenient, and seamless experience and insurance products with affordable prices and flexibility through a 24/7 online platform. To date, ZA Life has launched three protection related insurance products in response to customer needs - life insurance, cancer insurance and heart insurance. These three products provide term life, cancer and cardiovascular disease coverage, meeting users' personalized needs with numerous innovative terms.

We will continue to reach out to more potential clients in domestic and international markets, and export our insurance technologies and proven business models to more countries and regions to become the best partner in the digital transformation of the global insurance industry. In addition, we will increase our investment in research and development in the Insuretech and Fintech sectors to support and facilitate the digital transformation of the traditional financial industry to ultimately benefit all customers.

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	8

Management Discussion and Analysis

Segment Financial Highlights

The following table sets forth the profit/(loss) from each business segment in the first half of 2020. Specifically, the insurance segment offers a wide range of online property and casualty insurance business; the technology segment provides information technology export related business to its clients; the banking segment provides virtual banking services to its customers in Hong Kong; and the other segments include entities other than the aforesaid segments, which provides online life insurance business, insurance brokerage, bio technology services and etc. Among them, both ZA Bank and ZA Life officially opened for business in the first half of 2020.

Segment income statement for the period ended June 30, 2020

RMB'000	Insurance		Technology		Banking		Others	Eliminations		Total

GWP	6,769,848		-		-	309	(3,370)	6,766,787
Net premiums earned	7,445,201		-		-	281	(3,337)	7,442,145
Other income	110,850	140,449	19,016	32,500	16,575	319,390
Net profit/(loss)
622,142	(106,701)	(111,476)	(54,965)	33,323	382,323
Attributable to:


- Owners of the parent										490,493

Segment income statement for the period ended June 30, 2019

RMB'000	Insurance		Technology		Banking		Others	Eliminations		Total

GWP	5,900,508		-		-		-	(3,429)	5,897,079
Net premiums earned	5,917,713		-		-		-	(4,399)	5,913,314
Other income	46,565	104,635		-	50,974	(38,423)	163,751

Net profit/(loss)	319,693	(162,472)	(74,964)	(51,241)	3,067	34,083


Attributable to:
- Owners of the parent										94,538

Net profit attributable to owners of the parent in the first half of 2020 was RMB490.5 million, representing a year-on-year increase of RMB396.0 million or 418.8%, which was mainly due to the significant increase in net profit of insurance segment that resulted from the decrease in underwriting loss. The specific performance of each segment as follows:

Insurance segment: benefiting from the decrease of underwriting loss following the pursuit of "growth with quality" and solid investment income performance, the insurance segment remains profitable. Net premiums earned in the first half of 2020 represents a year-on-year increase of 25.8% and the combined ratio represents a year-on-year improvement of 4.8 percentage points, which decreased from 108.3% in the first half of 2019 to 103.5% in the first half of 2020. Underwriting loss narrowed by RMB229.0 million, a year-on-year decrease of 46.5%. At the same time, investment income remains robust;

Technology segment: due to delayed confirmation of acceptance caused by COVID-19, the technology segment recorded other income of RMB140.4 million in the first half of 2020, representing a year-on-year increase of 34.2%. At the same time, net loss of the technology segment was RMB106.7 million, representing a decrease of RMB55.8 million;
Banking segment: as ZA Bank is currently in the early stage of operation, its net loss was mainly resulted from general and administrative expenses;
Other segment: the net loss of this segment was mainly due to the general and administrative expenses of ZA Life in its early stage of operation.

9	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

Five Major Ecosystems				further enrich user profiles, which enables us to seize business
In 2020, we continued to focus on the five major ecosystems to	opportunities from cross-ecosystem users and achieve
maximum user value. Meanwhile, with the development of
provide comprehensive insurance coverage to our customers:
our health, consumer finance and auto ecosystems, we have

We had frequent interactions with a large number of users	expanded our business into a whole insurance value chain
with improved brand recognition among users and increased
through lifestyle consumption and travel ecosystems
average premium per capita, to create a more balanced and
to strengthen users' trust in ZhongAn's products and
diversified business portfolio. The following table sets forth
enhance market education on online insurance, the users'
GWP in absolute amounts and as percentages of total GWP by
understanding of our products and willingness to pay and to
ecosystem in the first half of 2020 and 2019:


			For the six months ended June 30
		2020		2019			Year-on-year

		RMB'000				RMB'000
	Ecosystems	Percentage %		Percentage %	growth rate %

	Health	3,049,151			45%	1,414,539		24%	115.6%
	Lifestyle consumption	1,921,946			28%	1,369,250		23%	40.4%
	Consumer finance	750,974			11%	1,733,566		29%	-56.7%
	Auto	456,887			7%	582,547		10%	-21.6%
	Travel	274,559			4%	626,094		11%	-56.1%
	Other	312,961			5%	171,083		3%	82.9%

	Total	6,766,478			100%	5,897,079		100%	14.7%

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	10

Management Discussion and Analysis

The following table sets forth a breakdown of (i) GWP, (ii) net written premiums, defined as gross written premium less premium ceded to reinsurers, (iii) premiums earned, defined as net written premiums less net change in unearned premium reserves,

loss ratio, defined as net claims incurred as a percentage of net premiums earned, and (v) channel fees, defined as handling charges directly related to written premiums as well as commissions, technical service fees and other channel related fees, as percentages of net written premiums, by ecosystem in the first half of 2020 and 2019:

For the six months ended June 30

	2020
Ecosystems	RMB'000
Health

GWP	3,049,151
Net written premiums	2,979,348
Premiums earned	2,961,034
Loss ratio%	45.1%
Channel fees as a percentage of net written premiums%	28.4%
Lifestyle consumption
GWP	1,921,946
Net Written Premiums	1,921,946
Premiums earned	1,907,042
Loss ratio%	70.6%
Channel fees as a percentage of net written premiums%	23.5%
Consumer finance
GWP	750,974
Net Written Premiums	709,556
Premiums earned	1,505,419
Loss ratio%	69.8%
Channel fees as a percentage of net written premiums%	9.4%
Auto
GWP	456,887
Net Written Premiums	456,887
Premiums earned	558,337
Loss ratio%	50.2%
Channel fees as a percentage of net written premiums%	25.4%
Travel
GWP	274,559
Net Written Premiums	272,750
Premiums earned	267,820
Loss ratio%	7.2%
Channel fees as a percentage of net written premiums%	77.0%
Others
GWP	312,961
Net Written Premiums	307,356
Premiums earned	242,212
Loss ratio%	75.6%
Channel fees as a percentage of net written premiums%	17.0%

2019

RMB'000

1,414,539

1,318,270

1,224,925

60.3%

25.8%

1,369,250

1,352,226

72.0%

20.1%

1,733,566

1,848,319

78.0%

14.6%

582,547

611,531

55.9%

26.1%

626,094

623,063

626,628

8.6%

86.5%

171,083

168,904

249,687

91.8%

33.0%

11	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

Health ecosystem:	Notably, by leveraging various platforms under new scenarios,
We focus on customer demands for healthcare services and	we reached customers and carried out insurance education
with innovative formats and continued to foster their insurance
provide them with an one-stop-shop experience of "insurance
awareness to drive rapid growth in transaction volume on
coverage + medical services" through a closed-loop health
our propriety platforms. GWP derived through our proprietary
ecosystem. Customers can enjoy accessible, understandable,
platforms accounted for approximately 34% of GWP generated
and affordable health coverage and medical services. We strive
from the Personal Clinic Policy Series in the first half of 2020
to satisfy individual needs of different customers with the deep
(first half of 2019: approximately 11%), with the amount of
integration of "insurance coverage + medical services" and
such GWP growing to 7.4 times that of the first half of 2019.
have established our distinctive competitive advantage.

Our various innovative product lines, including Personal	Personal Clinic Policy Series is not only insurance coverage
products, but also our entry point to establish closed-loop
Clinic Policy (尊享e生), Walk to Wellness Policy (步步保) and
medical service ecosystems. Through the network of health
Didi Automobile Owner Insurance Plan (滴滴車主保障計劃),
insurance, ZhongAn Internet Hospital, Nova Technology and
have become major products marketed by many ecosystem
so on, we established a closed-loop ecosystem to provide a
partners of our health ecosystem. In particular, taking our mid-
one-stop-stop solution that is insurance-centric, integrating
end health insurance product, the Personal Clinic Policy Series,
disease prevention, health management, medical consulting
as an example, we have included a deductible clause in the
and medical information to assist customers in managing
policy, which enables consumers to enjoy extensive medical
their health more efficiently and conveniently and ultimately
insurance coverage at a relatively low premium, easing their
achieving health goals. Our offerings cover various medical
concern over medical expenses. We also provide medical
services needed under different health conditions throughout
services catering to customers' entire life cycle, covering
users' life cycle and strive to enhance service experience and
their different medical services needs under different health
user loyalty. While creating ZhongAn's brand effect, we also
conditions (healthy, sub-healthy/minor illness, and major
enhance risk control capabilities by providing users with health
illness, etc.) and keep innovating with our offerings. Constantly
management services and create a win-win situation between
innovating leading customized medical services (express
users and company.
channel for critical illness, medical treatment in Japan, specific

medicine for tumors, etc.) under Personal Clinic Policy Series,	With the gradual manifestation of users' medical services
health management services for customers with chronic	needs, high-quality customer service has become our most
illness or in sub-healthy conditions, and one-stop-shop online	differentiating competitive strategy. As the payment end of
services provided by ZhongAn Internet Hospital (online medical	medical services industry chain, ZhongAn health insurance
advice and doorstep medicine delivery, etc.).	can effectively integrate relevant value of healthcare services.
In the first half of 2020, the health ecosystem provided	Especially in the planning, product design and innovation of
healthcare services, ZhongAn health insurance has a relatively
health insurance and medical services to approximately
strong leading position and integration capabilities.
12.35 million users and recorded RMB3,049.2 million of GWP,

representing an increase of 115.6% as compared to that	In July 2020, upgraded Personal Clinic Policy Series
of the corresponding period of last year. The increase was	incorporated online video medical advice into the covered
attributable to our continuous efforts in enhancing users'	services of million coverage medical insurance, bringing
insurance awareness and providing users with personalized	million coverage medical insurance into the outpatient
and customized insurance products and services by actively	era. Through ZhongAn Internet Hospital, users are able to
upgrading medical services to form a closed-loop ecosystem.	obtain outpatient medical services by video diagnosis, which
GWP generated from the Personal Clinic Policy Series in	represents our implementation of the ideology of "integration
the first half of 2020 was RMB2,737.8 million, representing	of insurance coverage and medical services".
a year-on-year growth of 138.2% and accounting for 89.8%
of GWP generated from the health ecosystem. We served
over 8.70 million insured customers in the first half of 2020,
representing a year-on-year increase of approximately 209%.
The users were at an average age of about 35.

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	12

Management Discussion and Analysis

As an important part of the health ecosystem layout, ZhongAn Internet Hospital plays many important roles. We have selected approximately 2,000 doctors (mostly external doctors) by building medical teams and cooperating with third- party medical groups to provide users with online medical consulting services, and have their medicine delivered to their doorstep after completing online diagnosis and obtaining an electronic prescription from doctors, allowing the users to receive medical treatment for minor illnesses without leaving their homes. During the pandemic lockdown, ZhongAn Internet Hospital and medical partners jointly launched 24/7 online medical consulting service and free psychological therapy public welfare services. In the first half of 2020, we also rolled out medical services that focus on chronic diseases (thyroid medical advice, diabetes medical advice, etc.). The upgrading of outpatient medical services of the Personal Clinic Policy Series in July was an even more important step of customer redirecting for ZhongAn Internet Hospital.

Our other individual health insurance products continued to increase the frequency of user interactions and provide more inclusive insurance products. As of June 30, 2020, through our Walk to Wellness Policy, we have obtained authorization to the exercise data of approximately 33.00 million users. Didi Automobile Owner Insurance Plan and Didi Insurance have also attracted extensive participation of automobile owners from the Didi Chuxing platform. We have so far provided critical illness insurance and medical insurance coverage to over 1.80 million users with accumulated insurance policies of approximately 1.8 billion. In addition, we launched a new cancer medical insurance in June 2020. Users are not required to provide health information when purchasing insurance; on the basis of this, we extend insurance coverage to the population with chronic diseases and bring more people under insurance coverage.

On the other hand, the optimization of product structure of the health ecosystem also further improved the loss ratio. We have been optimizing the business structure of the health ecosystem since 2019, such as pulling back from the group health insurance business that produced higher loss ratio, shrinking its relative percentage contribution to the health ecosystem from 2019. However, as some insurance policies with higher loss ratio gradually expired in 2019, the 2019 loss ratio was still negatively affected. Since the majority of such group insurance policies have expired in 2019, the loss ratio of the health ecosystem in the first half of 2020 improved to 45.1%, representing a year-on-year decrease of 15.2 percentage points.

The channel fee ratio of the health ecosystem in the first half of 2020 was 28.4%, representing a year-on-year increase of

2.6 percentage points, which was due to the increase in the proportion of GWP generated from the Personal Clinic Policy Series products with yearly premium payment that were marketed through our ecosystem partners.

Lifestyle consumption ecosystem:

We continue to provide protection to cover risks associated with product return, product quality, logistics, post-sale services and merchant security deposits for mainstream e-commerce platforms in China, such as Taobao Marketplace and Tmall, occupying a market-leading position. Furthermore, we provide users with risk protection service associated with pets, household property and phone screen crack, penetrating into users' digital lives. In the first half of 2020, the lifestyle consumption ecosystem served approximately 380 million insured customers with policies per capita of 8.9. For the first half of 2020, we recorded RMB1,921.9 million in GWP, representing an increase of 40.4% as compared to the corresponding period of last year. Leveraging technology and innovation strengths in product upgrading, risk management, marketing and user engagement, we have deepened our cooperation with Ant Group in several business segments to jointly explore innovative insurance products and user experience enhancement, to drive the growth of premiums of the lifestyle consumption ecosystem.

The loss ratio of the lifestyle consumption ecosystem in the first half of 2020 was 70.6%, representing a year-on-year decrease of 1.4 percentage points, which was attributable to a lower frequency of product returns by customers due to the impact of COVID-19, while the channel fee ratio increased, representing a year-on-year increase by 3.4 percentage points to 23.5%.

In the first half of 2020, we continued to extend the scope of international services (the "Overseas Customers Return Policy"), which has reached users in North America, Australia and Europe, helping Alibaba's international customers solve difficulties in returning products purchased from China through AliExpress. We are also actively exploring potential opportunities of pet insurance with Ant Group, to meet users' broader demands for lifestyle services. In the future, we will continue to work closely with ecosystem partners to proactively explore upgrades and innovation under lifestyle consumption scenarios by deepening cooperation and improving the quality of the underwriting process, aiming to identify any unsolved pain points and provide comprehensive insurance solutions.

13	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

Consumer finance ecosystem:	In the first half of 2020, the coverage term of insurance policies
Through cooperation with licensed financial institutions and	in our consumer finance ecosystem was one year or less, and
the amount of a single borrowing by users of the consumer
by connecting with different kinds of Internet platforms via our
finance ecosystem was less than RMB6,000.
cutting-edge technology, risk control, data and other technology

strengths, we are committed to provide customers with	Our targeted customers of the consumer finance ecosystem
consumer finance products with credit guarantee, and have	are the young near-prime group in China, typically aged
developed leading technologies, big data risk control, as well	between 25 and 35 with quality education and strong
as fund and asset matching capacities in the consumer finance	consumption demands, who often face challenges when
ecosystem. We have proactively expanded our cooperation with	applying for credit facilities due to lack of sufficient historical
various Internet scenario-based platforms, such as Bestpay,	credit record as a result of shorter working history with stable
Wo Wallet and Cmpay under telecommunication scenarios	income. In particular, due to the lack of complete and real-time
and Secoo e-commerce scenarios. We have also provided	credit record information, it is difficult for certain traditional
consumer finance solutions to selected leading Internet finance	financial institutions to carry out credit assessment on this
platforms, such as X Financial, Lexin and PPDAI by joint risk	population group. Our business mostly provides credit facilities
control and joint scenario-based operations. The fund lenders	for borrowers who have a credit record with the central bank
that we cooperate with are licensed financial institutions.	credit reference system and have had difficulties in increasing
In the first half of 2020, due to COVID-19 and fluid international	credit to meet their financing needs.

dynamics, the macro economy faced unprecedented	In the first half of 2020, both GWP and outstanding loan
challenges, heightening risks of the consumer finance industry.	balance amount in the consumer finance ecosystem decreased
In response, we proactively raised our risk control standards,	year-on-year. In the first half of 2020, our consumer finance
implemented strict control mechanisms over the performance	ecosystem recorded RMB751.0 million in GWP, representing a
of the underlying assets, and continuously scaled down our	decrease of 56.7% as compared with the corresponding period
scale of business. In particular, we raised the entry barrier for	of last year, and provided services to approximately 1 million
cooperation with online financial platforms and focused on	users. As of June 30, 2020, the outstanding loan balance
first-tier online finance platforms. Meanwhile, we continued	amount of the consumer finance ecosystem was RMB14.4
to explore online scenario-based platform business, such as	billion, representing a decrease of 44% as compared with the
cooperating with the three major telecommunication operators	end of 2019 (as of December 31, 2019: RMB25.6 billion).
in communication scenarios and with Secoo in e-commerce	The channel fee ratio of the consumer finance ecosystem
scenarios. Thanks to these tightened risk control strategies
for the first half of 2020 was 9.4%, representing a year-on-
and adjustments to business strategies, the loss ratio of
year decrease of 5.2 percentage points, which was due to
the consumer finance ecosystem for the first half of 2020
the decrease in marketing expenses incurred in acquiring
decreased to 69.8%, representing a year-on-year decrease
customers as a result of downscaling.
of 8.2 percentage points. The overdue risk of the consumer

finance ecosystem has also been reduced significantly.	Auto ecosystem:

We focused on small-sized,spread-out and short-term	With the launch of the "Baobiao Auto Insurance" product, we
Internet consumer finance assets. We set insurance premium
offer professional auto insurance products and solutions as
rates based on individual risk profile of the underlying assets
well as value-added services to protect our customers against
and provided coverage with our credit guarantee insurance
vehicle damage, personal injury and death, as well as vehicle
products. Our risk control system penetrates through the
theft and robbery. Based on the coinsurance model jointly
underlying assets, and we implement real-time big data
developed with Ping An P&C adopted by the "Baobiao Auto
risk control on every individual borrowing by connecting the
Insurance", we connect with Internet platforms and automotive
systems of our partners' platforms with financial institutions,
aftermarket service channels by leveraging our technology
thereby enabling us to make real-time lending decisions. In
strengths to acquire customers, while Ping An P&C relies on
order to cope with macro-economic risks, namely the impact of
its offline claim network to provide quality claim settlement
overall slowdown in the economy on borrowers's default risks,
services to users. Since January 2020, we began to implement
we integrated external macro-economy monitoring signals
the renewed coinsurance agreement with Ping An P&C, valid
with in-house credit insurance risk management strategies
from January 1, 2020 to December 31, 2022. The cooperation
in a dynamic manner, and implemented a wide range of retail
framework largely remains unchanged. The premiums, claim
finance risk measurement models to apply differentiated credit
payments and other costs for auto insurance shared between
insurance management approaches to different customer
ZhongAn and Ping An P&C will still be split by a 50%:50% ratio.
groups based on the characteristics of the economic cycle

and customers' life cycle, to mitigate the negative impact of
fluctuations in the economy on our credit risk.

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	14

Management Discussion and Analysis

In the first half of 2020, our auto ecosystem recorded a year- on-year decrease of 21.6% in GWP to RMB456.9 million, which was primarily due to the reduction in volume caused by the pandemic and the implementation of our business structure optimization strategy. We served approximately 0.44 million insured users in the first half of 2020, who were mainly 30- to-40-year-old male in second- and third-tier cities. Given the regulatory and competitive landscape of the auto insurance industry, we will adhere to our steady development strategy for the auto insurance segment in 2020 and optimize the underwriting quality of our existing business through refined operations. The loss ratio of the auto ecosystem for the first half of 2020 was 50.2%, down by 5.7 percentage points on a year-on-year basis, which was primarily due to the decline in claim frequency as a result of car owner lowering trip frequency caused by the COVID-19 lockdown, while the channel fee ratio was down by 0.7 percentage point on a year-on-year basis to 25.4%, which was also in line with the overall more stringent industry-wide regulatory control over channel fees.

Our major ecosystem partners include Internet platforms and automotive aftermarket service channels. Regarding cooperation with Internet platforms, we expanded throughout the auto industry chain and accumulated a vast quantity of user insights and Internet operating capabilities by continuing to enhance cooperation with all kinds of ecosystem partners, such as new auto-retail platforms like Guazi (瓜子) and Maodou (毛豆) and automobile financial platforms like Cango (燦穀). Through SaaS platforms and APIs, we also connected with more offline automotive aftermarkets and other channels, such as auto detailing shops and automobile repair shops, thereby allowing our products to efficiently reach more users without significant human resources investments to establish and maintain the connections. In addition, we joined hands with SAIC Motor Corporation Limited and other automobile manufacturers to explore the application of big data to auto insurance.

Our video claim settlement service for auto insurance, by integrating various technologies such as the Optical Character Recognition (OCR) and AI damage assessment, helps to improve customer experience and process efficiency. Especially during the COVID-19 period, video claim settlement services for auto insurance played an integral role to provide "contactless service", which was highly praised by customers.

Travel ecosystem:

Through our online tourism and travel platforms, we provide travel risk insurance to tourists and business travelers for unexpected emergencies such as flight accidents, flight delays,

travel accidents, and flight or hotel cancellations. In the first half of 2020, due to the pandemic, the travel business shrank significantly, recording RMB274.6 million in GWP, representing

year-on-yeardecrease of 56.1%, and provided services to around 8.30 million users. At the same time, we have also taken initiatives to optimize the business structure of the travel ecosystem, and continued to scale down certain products and channels with relatively high loss ratios or channel fee ratios, further improving the overall underwriting quality of the travel ecosystem. In the first half of 2020, the channel fee ratio of the travel ecosystem was 77.0%, down by 9.5 percentage points on a year-on year basis. At the same time, the loss ratio decreased by 1.4 percentage points to 7.2%.

Others:

Other businesses mainly included individual accident insurance (non travel-related insurance) and employer liability insurance. With the significant reduction in the employer liability insurance policies which produced higher loss ratio since 2019 and as most of employer liability insurances expired in 2019, the loss ratio has significantly improved in the first half of 2020.

Technology Investment and Export

R&D Investments

We continue to focus on the development of cutting-edge technology sectors including artificial intelligence, blockchain, cloud computing, big data and life science, aiming to reshape every stage throughout the insurance value chain with technology.

In the first half of 2020, ZhongAn invested RMB427.7 million in research and development activities, accounting for 6.3% of the Company's GWP. As of June 30, 2020, ZhongAn had a total of 1,297 engineers and technicians, representing 46% of our total employees, among which, 118 responsible for data analytics, 46 responsible for artificial intelligence, 15 responsible for blockchain technology, 583 responsible for system development, 273 responsible for product research and development and delivery, and the rest mainly responsible for business-related system connection and maintenance, etc. As of June 30, 2020, we have accumulatively filed applications for 482 patents, including applications for 169 overseas patents, among which, 6 applications were filed in the first half of 2020, including applications for 2 overseas patents. In addition, we have 34 PCT (Patent Cooperation Treaty) patent applications in total covering 11 countries and regions.

15	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

As our cloud-based distributed core system "Wujieshan"	to build a sustainable marketing closed loop to drive rapid
is able to support a great number of individual policies, we	user and revenue growth with one-stop-shop services; 3) the
issued a total of 3.60 billion policies in the first half of 2020 and	business support series including the system security storage
provided services to 400 million users.	computing, intelligent system operations and maintenance,
	and information security products, providing stable, safe and
Technology Export	compliant support services for the customers in their pursuit
We continued to focus on the Insuretech segment, developing	of rapid business development. In addition, to solve practical
problems faced by customers, we provided a wide variety of
and exporting our advanced experience and technology	solutions for enterprises in the insurance ecosystem, such
strengths in the Insuretech industry to domestic and	as the intelligent marketing solutions and intelligent risk
international customers (including insurance companies	control solutions, helping customers to achieve a quick rollout
and Internet platforms) who intend to expand into the digital	of related businesses, seize market opportunities, minimize
insurance sector, to facilitate digital transformation throughout	operation costs, as well as improve operation efficiency and
the insurance industry. Specifically, we developed core digital	business quality.
insurance systems and scenario-based solutions for insurance	Graphene digital core insurance system: the system provides
companies, and joined hands with Internet platforms to develop
Internet ecosystem-oriented insurance solutions. Our revenue	end-to-end system solutions to solve the deficiencies of
comprises of licensing fees, technology service fees and other	traditional core insurance systems in processing digital
charges under a SaaS model (for instance, as a percentage	insurance business from the origin, through the next
of income or usage). Our technology export business will	generation core insurance system based on micro services
therefore benefit from the growth of our customers' insurance	and distributed structure.
businesses, achieving sustainable growth in revenue, aligned	Fusion digital insurance platform system: the system
with the long-term interests of our customers.
provides digital insurance platform system solutions for

We have developed mature Insuretech products and solutions	Internet platforms to connect online platforms with insurance
covering comprehensive demands in each stage of the digital	companies, in a joint effort to provide users with customized
transformation of the insurance industry throughout operations	and usage-based innovative online insurance products.
(entirely digital process), technology (digital IT infrastructure),	Insurance middle office: thanks to our insurance middle office
data (establishing user profile to empower refined operation),
system, insurance companies do not have to replace their
and organizational management (online training).
core system immediately. The solutions empower the front

Our existing Insuretech products mainly fall into three series,	office with digital middle office via shared services, to achieve
namely, the business production series, the business growth	expedited connection with various channels, quick rollout of
series, and the business support series, covering the front,	products, and unified platform support capabilities for online
middle and back offices of the insurance industry in an all-	business processing in high-concurrency situations, as well
round manner. Specifically: 1) the cloud-based distributed	as improve intelligent underwriting and claim management
core systems, namely Graphene (the digital core system	capabilities by personalized interactive questionnaire to
for insurance companies) and Fusion (the digital insurance	enhance user experience. In particular, our solutions support
platform system for Internet platforms), and the core business	the clients to engage in online insurance business by
production series for insurance middle office (including an	leveraging the microservices-based structure with flexible
on-premise version and a SaaS version), facilitating the	scalability. We provide both an on-premise version and a SaaS
expeditious launch of online insurance business for corporate	version, with an aim to cater to the diversified business needs
clients; 2) the business growth series including the intelligent	of insurance companies and insurance brokers and agents in a
marketing platform and the user growth platform, helping	flexible manner.
insurance companies and insurance brokers and agents

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	16

Management Discussion and Analysis

Intelligent marketing solutions: the traditional insurance industry has several deficiencies in marketing such as limited formats of promotional activities, obscure user profiles or user insights, lack of in-depth analysis on the marketing results and potential data security risks. With our intelligent marketing platform and user growth platform and based on big data exploration and analytics, our solutions help to efficiently target users and embrace various marketing scenarios and approaches, to drive growth for insurance industry participants with data analytics through integration of "data

scenario + intelligent technology". We also help companies to build effective customer acquisition channels, continuously optimize customer acquisition costs, and establish sustainable and closed-loop user growth models to achieve rapid user and income growth.

Intelligent risk control solutions: Through a data-driven risk decision-making engine, these solutions help financial institutions and insurance companies refine risk management and optimize risk control models. In addition, due to the high visibility, customizability and flexibility of the business and risk control standards, product managers are able to carry out rule configuration without the participation of technology development staff during product upgrades.

In the first half of 2020, we recorded income from technology export of RMB119.9 million, representing a year-on-year increase of 26.2%, with 64 contracted clients, among which, 29 were from the insurance industry, and approximately 80% of our existing insurance system product customers purchased additional insurance system modules from us or upgraded their existing modules in the first half of 2020.

The insurance industry is speeding up its digital transformation, which is attributable to the fact that: 1) affected by the pandemic, customers' expectations for digital insurance have increased significantly, and insurance companies are also actively exploring online business transformation to meet user demands; 2) the regulatory authorities have also set clear goals for the improvement in overall online ratio of the industry by 2022, the online ratio of auto insurance, agricultural insurance, accident insurance, short-term health insurance, home property insurance and several other business segments should reach 80% or more; at the same time, the development of compliance technology opens up a new stage for the technology export market. After years of accumulation, our Insuretech products and solutions have covered the digital transformation needs in business, technology, data, and organization dimensions of the insurance industry. As regulators push for digital transformation of the insurance industry, accelerated by the pandemic, our market expansion initiatives and growth runway will benefit in the long run.

We have seen that the pandemic is prompting traditional life insurance companies to transform the agent model into an online business model. In the first half of 2020, we signed cooperation agreements with many insurance companies, using our intelligent marketing products to help their agent team digitalize customer management resources. In particular, we promote agent's Internet social marketing, categorize agents' customer characteristics into user tags, and design a customer-specific marketing campaign to achieve granular operations and improve customer engagement.

ZhongAn's technology reserves are consistent with the regulatory trend developments, exemplified by our visual backtracking system. On June 30, 2020, the CBIRC issued the "Notice on Regulating the Traceable Management of Online Insurance Sales". which requires insurance institutions to record and catalog the sales of insurance products on self- operated online platforms through sales page management and sales process recording to make it available for inspection. The notice will take effect from October 1 of this year with a mere 3-month preparation window. We immediately launched a visual backtracking solution to the market. The system utilizes cutting-edge technologies such as visualized data restoration, data arrangement, container engine, and fault- tolerant algorithms to achieve accurate visualized restoration of user behavior on the Internet. Its advantage also lies in the use of plug-in technology, enabling the completion of docking within existing business systems in as fast as 3 days, it can also automatically analyze related insurance policies based on the video to quickly search for important information, thus achieving a high degree of automatic integration within the business. The solution has been verified internally by ZhongAn, covering more than 300 online insurance sales scenarios.

The rapid launch of this system is attributable to the following factors: 1) We have a leading position in Internet technology and a wealth of technology and product reserves, and can first test it through internal actual business scenarios; 2) Fast productization capabilities: we launched the product as soon as possible, and achieved rapid technical docking and lightweight deployment through a plug-in format.

In the future, we will continue to explore potential market opportunities for compliance technology and help to address compliance deficiencies related to the traceability of sales behavior, data quality management, and anti-fraud during the online transformation of insurance companies. On the basis of this, we will further explore customers'long-term value and support their digital transformation in various aspects such as business development, technology, data and organizational functions through intelligent marketing system, insurance middle office and other mature product series.

17	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

Our strategic positioning is not only a cutting-edge technology service provider, we also export and replicate our leading business models to both domestic and international insurance industry, and join our customers in exploring business model and product innovation in the Internet ecosystem.

In Japan, we have served three leading local insurance companies and online platforms including SOMPO, one of the top three property and casualty insurance companies in Japan. Through our next-generationcloud-based decentralized core insurance system (i.e. Graphene), our customers have launched in the local area with various ecosystem partners a number of individual and scenario-based insurance coverage products.

In Singapore, NTUC Income, the largest domestic comprehensive insurer, through our core insurance system (i.e. Graphene), also established API connections with various local partners in catering, public transportation, food delivery and other sectors. NTUC Income launched an usage-based insurance package, which allows users to upsize the coverage based on their own needs. After signing up with this insurance package plan, NTUC Income will automatically deduct a small fee (less than S$1) every time the user completes a payment on the aforementioned partner's platform, and increase the coverage on their accident, life and critical illness coverage according to the previous agreement with the user.

The Grab ecosystem has generated over 12 million policies with the support of our insurance and technology strengths.

Looking ahead, through our leverage on the geographical advantage of the Guangdong-HongKong-Macau Greater Bay Area, we will closely follow the national "Belt and Road" initiative and export our cutting-edge insurance technologies and proven business models to more countries and regions.

Virtual Bank and Digital Insurance in Hong Kong

ZA Bank, as the first licensed Virtual Bank in operations in Hong Kong, has attracted over HKD2.4 billion of savings as of June 30, 2020. This achievement is attributable to the fact that we have always put customer experience as the utmost priority and gained customer recognition: customers of ZA Bank can truly experience 24/7 banking services encompassing account registration, deposit, transfer, make loans and other services by our one-stop-shop mobile APP. We intelligentize parts of the front, middle and back office processes, handling the most labor-intensive and time-consuming processes at traditional banks at a lower marginal cost. And since there is no need to establish offline branches, we can focus more on improving the customer experience.

We will apply our insights on customers' behavior pattern gained through big data analytics, identity authentication and other Fintech capabilities to the virtual bank business. Upholding the ideology of "user participation", we encourage our users to closely communicate with our product managers as partners through online and offline interactions and participate in the product designing process, with an aim to improve customer experience and create products that closely cater to users' needs.

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	18

Management Discussion and Analysis

ZA Life also upholds the same ideology, providing simple, convenient and seamless experience and insurance products with affordable prices and flexibility through a 24/7 online platform. To date, ZA Life has launched three protection related insurance products in response to customer needs - life insurance, cancer insurance and cardiovascular disease insurance. These three products provide term life, cancer and cardiovascular disease coverage, meeting users' personalized needs with numerous innovative terms. We have designed thousands of scenarios through big data technology and decision tree model. While ensuring the risk is controllable, we allow users to complete the health underwriting questionnaire in the simplest way. Our shortest health underwriting questionnaire has only 3 questions.

Asset Management

As of June 30, 2020, we had total investment assets of RMB23,532.8 million, of which 12.4%, 41.2% and 20.0% are comprised of stocks and equity mutual funds, fixed income investments, and other investments (wealth management products and trusts), respectively. In the first half of 2020, our total investment income was RMB785.8 million, of which the total investment income attributable to owners of the parent was RMB 783.4 million (total investment income in the first half of 2019 was RMB 757.9 million, of which the total investment income attributable to owners of the parent was RMB754.6 million), our total investment yield and net investment yield (un-annualized) was 3.6% and 1.9% respectively (first half of 2019: 4.0% and 1.8% respectively).

In the first half of 2020, based on the pre-judgement of the macro economy and risk/return of various of asset classes, we strengthened asset allocation management and risk management to seize investment opportunities in capital markets and timely lock in investment profits. We have taken the following measures:

Strengthening our portfolio management capabilities and adjusting the year's strategic asset allocation plan in a flexible manner. On the one hand, we increased allocation to fixed- income assets to fortify the portfolio return; on the other

hand, we actively adjusted the allocation to more volatile asset classes based on our analysis of market dynamics to boost excess returns; 2) making flexible adjustments to equity-related investments positions and styles, by actively implementing profit-taking strategies and style adjustments under the volatile market environment and making significant structural differentiation in the first half of the year, outperforming the market; and 3) enhancing the overall risk management by implementing comprehensive control measures over market risk, credit risk, operational risk and liquidity risk throughout the entire process, to mitigate risk exposure to asset investments. At the same time, we also actively strengthened credit risk screening and market risk hedging to maintain steady growth in investment income. As of June 30, 2020, about 99.7% of the credit bonds we invested in had an external rating of AA (domestic) and above, or BBB- (international) and above; about 76.2% of domestic credit bonds had an external rating of AAA (domestic).

Looking forward into the second half of 2020, changes in the domestic and international fundamentals, policy adjustments and Sino-US relationship will continue to affect the performance of major markets. Amid a highly uncertain and relatively low-interest-rate environment, we will cautiously respond to changes in the market and adjust our asset allocation in a flexible manner, with an aim to secure stable investment income.

Outlook

In the second half of 2020, we will continue to adhere to the two-winged strategy of "Insurance + Technology". Adhering to the principle of high-quality growth and technology- empowered development to reduce costs and improve effeciency, we will incorporate technology development and innovation into the whole insurance value chain and continuously optimize underwriting efficiency and user experience while commercializing our insurance technology strengths in domestic and overseas markets, to become the best partner in the digital transformation and upgrading of the global insurance industry.

19	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

Financial Review	profitability. We focused more on business quality and invested

		more on fine management and data-driven operations. For
During the six months ended June 30, 2020, we continued	the six months ended June 30, 2020, the Group's total income
to take advantage of development opportunities in the PRC	reached approximately RMB8,585.6 million, representing a
Insuretech market and achieved steady growth and improved	year-on-year increase of 24.4%.
The following table sets forth the comparative figures for the six months ended June 30, 2020 and 2019:

				For the Six Months Ended June 30

		2020	2019
				RMB'000	RMB'000

	Total income	8,585,616	6,899,545
	Net profit for the period	382,323	34,083
	Total comprehensive income for the period	564,560	106,012
	Profit per share
	- Basic profit per share (RMB yuan)	0.33	0.06
	- Diluted profit per share (RMB yuan)	0.33	0.06

The following table sets forth the key financial ratios for the six months ended June 30, 2020 and 2019:

	For the Six Months Ended June 30

	2020	2019

Net investment yield(1)	1.9%	1.8%
Total investment yield(2)	3.6%	4.0%
Return on assets(3)	1.5%	0.4%
Return on equity(4)	3.2%	0.6%
Gearing ratio(5)	50.3%	39.4%

Notes:

Net investment yield equals the sum of net interest income, dividend income and share of net profit/(loss) of associates and joint ventures less interest expense relating to securities sold under agreements to repurchase for the period as a percentage of the average of the opening and closing balances of total investment assets of the period.
Total investment yield equals total investment income (defined as the sum of net investment income, net fair value changes through profit or loss and share of net profit/(loss) of associates and joint ventures less interest expense relating to securities sold under agreements to repurchase and impairment relating to investment assets) for the period as a percentage of the average of the opening and closing balances of total investment assets of the period.
Return on assets equals profit/(loss) for the period attributable to owners of the parent divided by the average of the opening and closing balances of total assets of the period.
Return on equity equals profit/(loss) for the period attributable to owners of the parent divided by the average of the opening and closing balances of total equity attributable to owners of the parent of the period.
Gearing ratio is represented by total liabilities (excluding capital supplementary bonds and subordinated term debts) divided by total assets.

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	20

Management Discussion and Analysis

Insurance Business

The following table sets forth the selected financial indicators of the underwriting business of the Company and its subsidiaries(excluding life insurance) and their percentages to net earned premiums for the relevant periods:

			For the Six Months Ended June 30

	2020		2019
	RMB'000	%		RMB'000	%

Net premiums earned	7,441,864			100.0	5,913,314		100.0
Net claims incurred	4,213,496			56.6	3,777,275		63.9
Insurance operating expenses	3,491,577			46.9	2,628,200		44.4

Underwriting loss	(263,209)			(3.5)	(492,161)		(8.3)




						For the Six Months Ended June 30

					2020		2019

Retention ratio(1)					98.2%		98.3%
Loss ratio(2)					56.6%		63.9%
Expense ratio(3)					46.9%		44.4%
Combined ratio(4)					103.5%		108.3%

Notes:

Retention ratio equals net written premiums, which is gross written premiums less premiums ceded to reinsurer, as a percentage of gross written premiums.
Loss ratio equals net claims incurred as a percentage of net premiums earned.
Expense ratio equals insurance operating expenses as a percentage of net premiums earned.
Combined ratio equals the sum of loss ratio and expense ratio.

21	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

1. Gross Written Premiums

GWP primarily includes premiums written by us on insurance contracts issued or renewed for a given period, without deduction for premiums ceded by us to reinsurers.

Gross written premiums increased by approximately 14.7% from approximately RMB5,897.1 million for the six months ended June 30, 2019 to approximately RMB6,766.5 million for the six months ended June 30, 2020. We continued to optimize our product structure in order to fulfill high-quality growth. Benefiting from deep cooperation with our ecosystem partners and rapid

development of our proprietary platforms, we achieved huge growth in health insurance and shipping return insurance. Simultaneously, GWP for accident insurance, liability insurance and bond and credit insurance as a whole decreased noticeably as we cut down the scale of Employer Liability Insurance, Group Accident Policy, Flight Accident and Delay Policy and reduce the scale of GWP generated from consumer finance ecosystem to manage the overall risk. In addition, GWP for motor insurance decreased mainly due to the impact of COVID-19 outbreak in January 2020 on the overall Chinese auto market.

A breakdown of the GWP by insurance products types for the periods indicated is shown below:

	For the Six Months Ended June 30

	2020	2019		(% of change)
	RMB'000		RMB'000

Health insurance	2,996,046	1,301,680	130.2
Bond insurance	727,248	1,587,136	-54.2
Accident insurance	611,333	841,533	-27.4
Motor insurance	456,887	582,547	-21.6
Credit insurance	167,208	299,070	-44.1
Cargo insurance	90,901	82,994	9.5
Liability insurance	52,205	81,571	-36.0
Household property insurance	46,211	27,271	69.5
Others(1)	1,618,439	1,093,277	48.0
Of which:
Shipping return insurance	1,576,332	1,043,267	51.1

Total	6,766,478	5,897,079	14.7

Note:

The CBIRC recognizes the following types of the property and casualty insurance products: accident insurance, bond insurance, health insurance, liability insurance, credit insurance, cargo insurance, household property insurance and others. "Others" primarily consists of shipping return insurance, which is categorized as such based on its policy terms in our periodic reports to the CBIRC.

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	22

Management Discussion and Analysis

Premiums ceded to reinsurers

Net claims incurred

The premiums ceded to reinsurers increased from approximately RMB101.5 million for the six months ended June 30, 2019 to approximately RMB118.6 million for the six months ended June 30, 2020, of which the ceded premiums of accident insurance amounted to approximately RMB9.3 million, which was approximately RMB2.2 million less than that for the same period of 2019, and the ceded premiums of health insurance amounted to approximately RMB67.9 million, which was approximately RMB21.0 million less than that for the same period of 2019, and the ceded premiums of credit insurance which was the new product ceded to reinsurers amounted to approximately RMB41.4 million for the six months ended June 30, 2020. The increase in premiums ceded to reinsurers is mainly due to the changes of product portfolio and optimization of ceding policy.

The Company continued to carry out the stable ceding policy for the six months ended June 30, 2020. Reinsurance helps to diversify risk and support the Company's long term growth. The Company also continued to strengthen and deepen cooperation with reinsurers in other aspects. Our current reinsurer partners include, but are not limited to, General Reinsurance AG Shanghai Branch, China Property

Casualty Reinsurance Company Ltd. and Taiping Reinsurance (China) Co,. Ltd.

3. Net change in unearned premium reserves

Unearned premium reserves are portions of written premiums relating to unexpired risk of insurance coverage. Unearned premium reserves decreased by approximately RMB794.0 million as of June 30, 2020 compared to that as of December 31, 2019 due to the significant decrease in GWP of bond and credit insurance for the six months ended June 30, 2020.

4. Net premiums earned

Net premiums earned represent net written premiums less net change in unearned premium reserves. As a result of the foregoing, net premiums earned increased by approximately 25.8% from approximately RMB5,913.3 million for the six months ended June 30, 2019 to approximately RMB7,441.9 million for the six months ended June 30, 2020.

Net claims incurred represent insurance claims paid less claims paid ceded to reinsurers, as adjusted by net change in claim reserve. Net claims incurred increased by approximately 11.5% from approximately RMB3,777.3 million for the six months ended June 30, 2019 to approximately RMB4,213.5 million for the six months ended June 30, 2020, among which net claims for bond and credit insurance decreased by approximately 27.5% from approximately RMB1,516.5 million for the six months ended June 30, 2019 to approximately RMB1,099.7 million for the six months ended June 30, 2020, and net claims for health and other insurance rose by approximately RMB648.2 million and approximately RMB384.8 million, respectively, from the six months ended June 30, 2019 to the six months ended June 30, 2020

6. Handling charges and commissions

Handling charges and commissions represent fees paid to insurance agents for the distribution of our policies less reinsurance expenses recovered. Handling charges and commissions decreased by approximately 14.3% from approximately RMB437.2 million for the six months ended June 30, 2019 to approximately RMB374.9 million for the six months ended June 30, 2020, primarily due to our adjustment of product portfolio. We cut down the scale of those products with higher commission rate, such as Group Accident Policy, Flight Accident Policy and Employer Liability Insurance.

7. General and administrative expenses

General and administrative expenses primarily include consulting and technical fee primarily paid to our ecosystem partners, employee benefit expenses, advertising and marketing expenses, amortization of right-of use assets, impairment loss of premium receivable and intangible assets, asset management fee, and other miscellaneous general and administrative expenses. General and administrative expenses amounted to approximately RMB3,113.3 million for the six months ended June 30, 2020, representing a year-on- year increase of 42.1%, primarily due to our cooperation with some key media platforms to promote our products leading to increase of advertising and marketing expense by approximately RMB774.7 million.

23	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

Investment Business

During the six months ended June 30, 2020, the Group's investing activities consisted of (i) equity investment; (ii) proprietary trading of bonds and other asset management products; and (iii) entrustment of third-party asset management companies for purchase of stock, bonds and other asset management products.

8. Composition of investment assets

We strictly comply with the requirements of relevant PRC laws and regulations and implement prudent risk management by establishing a comprehensive and integrated asset management framework to ensure that our assets are properly managed. The following table shows the composition of our investment assets:

		June 30, 2020		December 31, 2019

		Balance		Percentage		Balance	Percentage
		RMB'000	%		RMB'000	%
By category:

Cash and amounts due from banks and
other financial institutions	3,905,119	16.6	2,914,820	14.6
Fixed income investments	9,692,368	41.2	8,450,182	42.4
Bonds	13,365,389	56.8	11,674,380	58.6
Term Deposits	300,000	1.3	300,000	1.5
Other fixed income investments	965,523	4.1	525,527	2.6
Securities sold under agreements to repurchase	(4,938,544)	(21.0)	(4,049,725)	(20.3)
Equity and investment funds	5,219,973	22.2	4,712,869	23.6
Investment funds	2,641,042	11.2	1,991,589	10.0
Stocks	2,000,756	8.5	2,082,521	10.4
Unlisted equity shares	578,175	2.5	638,759	3.2
Other investments	4,715,298	20.0	3,852,755	19.3
Wealth management products	3,440,584	14.6	2,576,079	12.9
Trust	1,274,714	5.4	1,276,676	6.4

Total investment assets	23,532,758	100.0	19,930,626	100.0

	We had total investment assets of approximately	approximately RMB2,914.8 million as of December 31,
	RMB23,532 . 8 million as of June 30, 2020 and	2019 to approximately RMB3,905.1 million as of June 30,
	approximately RMB19,930.6 million as of December	2020. The primary reason for the increase was net cash
	31, 2019 representing an increase of approximately	inflows from operating activities and financing activities
	RMB3,602.2 million. Total investment assets represented	as discussed in the section headed "Cash flows".
	approximately 66.9% of our total assets as of June 30,
	2020, compared to approximately 64.5% as of December	10. Bonds
	31, 2019. As of June 30, 2020, equity and investment	Bonds include government bonds, financial bonds,
	funds and other investments represented approximately
	corporate bonds and interbank deposits. As of June 30,
	22.2% and approximately 20.0% of our total investment
	2020, approximately 99.7% of the bonds the Company
	assets, respectively. Our total investment yield (un-
	held received external ratings of AA (domestic) level
	annualized) was approximately 4.0% and approximately
	or above, or BBB- (international) level or above. For
	3.6% for the six months ended June 30, 2019 and 2020,
	domestic bonds, more than approximately 76.2% of them
	respectively.
	received external ratings of AAA (domestic) level. Bonds

9.	Cash and amounts due from banks and other financial	increased from approximately RMB11,674.4 million as
of December 31, 2019 to approximately RMB13,365.4
	institutions
	million as of June 30, 2020. With the increase of the scale

	Cash and amounts due from banks and other financial	of total investment assets, we appropriately adjusted the
	institutions primarily include cash, time deposit and	proportion and allocation of various investment assets
	placements with banks. Cash and amounts due from	accordingly.
	banks and other financial institutions increased from

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	24

Management Discussion and Analysis

11. Stocks and investment funds

12. Other investments

The Group's investment in stocks decreased from approximately RMB2,082.5 million as of December 31, 2019 to approximately RMB2,000.8 million as of June 30, 2020, while our investment in investment funds increased from approximately RMB1,991.6 million as of December 31, 2019 to approximately RMB2,641.0 million as of June 30, 2020. Considering our need to invest in a variety of products and the value advantage of different kinds of investment assets, we reduced the scale of stocks and invested more in investment funds.

Other investments include: (i) wealth management products, which include asset management plans issued by reputable financial institutions such as Ping An Asset Management Co., Ltd.; and (ii) trust products, which typically have longer terms and higher return over investment as compared to traditional fixed income products and receive external ratings of AA level or above. The Group's investment in these other investments increased from approximately RMB3,852.8 million as of December 31, 2019 to approximately RMB4,715.3 million as of June 30, 2020. Considering our need to diversify the investment portfolio, we invested more in other investments to secure stable investment return and manage overall credit risk.

13. Net Investment Income

		For the Six Months Ended June 30

		2020	2019		(% of change)
		RMB'000		RMB'000
Interest income

- Bank deposits	27,504	40,441	(32.0)
- Bond investments	250,699	254,259	(1.4)
- Securities purchased under agreements to resell	2,169	5,624	(61.4)
- Trust investment scheme	36,861	21,162	74.2
Dividend income
- Fund investment	67,867	18,658	263.7
- Equity investment	14,972	13,755	8.8
- Wealth management products	49,632	44,308	12.0
Realized gain/(loss), net	418,589	313,286	33.6

		868,293	711,493	22.0

Net investment income is comprised of interest income from trust products, term deposits, securities purchased under agreements to resell and debt securities, dividend income from wealth management products, investment funds and equity securities, and realized gains or losses on security transactions and available-for-sale securities. We had net investment income of approximately RMB711.5 million for the six months ended June 30, 2019 and net investment income of approximately RMB868.3 million for the six months ended June 30, 2020. On one hand, we invested more in investment funds and wealth management products to gain steady dividend income. On the other hand, we fully utilized the fluctuation in the stock market and realized gains from stock trading.

25	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

14. Net Fair Value Gains through Profit or Loss

Net fair value gain through profit or loss represent net fair value change on financial assets measured at fair value through profit or loss. We had net fair value loss of approximately RMB44.2 million for the six months ended June 30, 2020, compared to gain of approximately RMB111.0 million for the six months ended June 30, 2019. The changes were primarily due to general condition change of capital markets for the six months ended June 30, 2020.

Technology Business

Revenue generated from technology export business of ZhongAn Technology and ZhongAn International was approximately RMB119.9 million for the six months ended June 30, 2020, representing a year-on-year increase of approximately 26.2%. Correspondingly, technology export business incurred approximately RMB112.5 million loss for the six months ended June 30, 2020, representing a year-on-year decrease of approximately 30.8%.

On March 24, 2020, our "Virtual Bank" officially opened for business in Hong Kong, which generated revenue of approximately RMB19.0 million for the six months ended June 30, 2020.

Overall Results

15. Total Income

Total income represents the sum of net premiums earned, net investment income, net fair value changes through profit or loss and other income. As a result of

the foregoing, total income increased by approximately 24.4% from approximately RMB6,899.5 million for the six months ended June 30, 2019 to approximately RMB8,585.6 million for the six months ended June 30, 2020.

16. Total profit before tax

Total profit before tax of the Group was approximately RMB334.3 million for the six months ended June 30, 2020 compared with total profit before tax of approximately RMB15.4 million for the six months ended June 30, 2019, representing a year-on-year increase of approximately 2,075.6%.

17. Income tax expense

Under the Enterprise Income Tax Law of the People's Republic of China (中華人民共和國企業所得稅法), the Company and some of its subsidiaries are subject to the statutory rate of 25%. We had income tax credit of approximately RMB18.7 million and income tax credit of approximately RMB48.0 million for the six months ended June 30, 2019 and 2020, respectively, which were primarily generated from changes in deferred income tax liabilities.

18. Net profit for the Reporting Period

The Group recorded a net profit of approximately RMB382.3 million for the six months ended June 30, 2020 compared to a net profit of approximately RMB34.1 million for the six months ended June 30, 2019. The net profit was mainly due to the decrease in underwriting loss.

Cash Flows

The following table sets forth our cash flows for the periods indicated:

	For the Six Months Ended June 30

	2020	2019
	RMB'000		RMB'000

Net cash inflow/(outflow) from operating activities	2,234,108	(597,371)
Net cash (outflow)/inflow from investing activities	(2,623,292)	35,253
Net cash inflow from financing activities	1,145,407	417,354
Effect of exchange rate changes on cash and cash equivalents	36,816	12,556
Net increase/(decrease) in cash and cash equivalents	793,039	(132,208)
Cash and cash equivalents at the beginning of the period	2,914,820	2,426,829

Cash and cash equivalents at the end of the period	3,707,859	2,294,621

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	26

Management Discussion and Analysis

We had net cash inflow from operating activities of approximately RMB2,234.1 million in the six months ended June 30, 2020, which comprised of cash inflow from underwriting business and other operating activities of approximately RMB10,027.5 million, offset by the cash outflows from claims and other operating expenses of approximately RMB3,377.4 million and approximately RMB4,415.9 million, respectively.

We had net cash outflow from investing activities of approximately RMB2,623.3 million for the six months ended June 30, 2020, whereas our net cash inflow from investing activities for the six months ended June 30, 2019 was approximately RMB35.3 million. This was primarily due to the increase in purchase of investment assets.

We had net cash inflow from financing activities of approximately RMB1,145.4 million for the six months ended June 30, 2020, which primarily consisted of (i) net cash inflows from transaction of securities under agreements to repurchase of approximately RMB837.5 million; (ii) capital injection from non-controlling interest of approximately RMB896.4 million, which was offset by cash outflow of approximately RMB511.9 million paid for redemption of preference shares.

Indebtedness

As of June 30, 2020, we did not have any material mortgages, charges, debentures, loan capital, debt securities, loans, bank overdrafts or other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptances (other than normal trade bills), acceptance credits, which are either guaranteed, or unguaranteed, secured or unsecured, nor had any guarantees or other contingent liabilities.

Solvency For Insurance Companies

The solvency ratio for insurance companies is an important supervisory indicator to assess the capital adequacy of insurance companies. Stable solvency ratio enables a company to meet the capital requirements by regulatory and rating agencies and other external institutions, and supports the business development of the company and long-term shareholders' value.

With its adequacy solvency at present, the Company will continue to strengthen the supervision control and analysis on its solvency ratio while proactively developing its insurance business and expanding the arrays of its investments in the future.

The table below summarizes the core capital, actual capital and minimum required capital of the Company according to the original CIRC's solvency rules.

Actual capital Core capital

Minimum required capital Comprehensive solvency margin ratio (%) Core solvency margin ratio (%)

	As of
As of	December 31,
June 30, 2020	2019
RMB'000	RMB'000

15,207,808 14,587,980

2,778,424 2,903,217

Notes: Comprehensive solvency margin ration = Actual capital/Minimum required capital;

Core solvency margin ration = Core capital/Minimum required capital

27	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

19. Material investments

We did not hold any material investments during the six months ended June 30, 2020.

20. Material acquisitions and disposals

Saved as disclosed in this report, we did not have any material acquisitions or disposals of subsidiaries, associates or joint ventures during the six months ended June 30, 2020.

21. Future plans for material investments and capital assets

As of June 30, 2020 we did not have other plans for material investments and capital assets.

22. Pledge of assets

As of June 30, 2020, none of the Group's assets were pledged.

23. Gearing ratio

As of June 30, 2020, our gearing ratio, calculated as total liabilities (excluding capital supplementary bonds and subordinated term debts) divided by total assets, was approximately 50.3%, representing an increase of 10.9 percentage point as compared with approximately 39.4% as of June 30, 2019.

24. Foreign exchange exposure

During the six months ended June 30, 2020, we mainly operated our underwriting business in the PRC and majority of the transactions were settled in Renminbi, the Company's functional currency. As of June 30, 2020, our cash and cash equivalents denominated in foreign currencies included approximately HK$582.5 million, approximately USD87.8 million and approximately JPY1,073.5 million, mainly arising from the business operation of ZhongAn International. We did not use any financial instruments for hedging purposes for the six months ended June 30, 2020.

25. Contingent liabilities

As of June 30, 2020, we did not have any material contingent liabilities.

26. Off-balance sheet commitments and arrangements

As of June 30, 2020, we had not entered into any off- balance sheet arrangements.

27. Events after the Reporting Period

On 16 July 2020, the Company issued 5-year notes in the aggregate principal amount of USD600,000 thousand at the rate of 3.125% on the Hong Kong Stock Exchange.

The COVID-19 pandemic outbroke and continued to spread in China and around the world since early 2020. The COVID-19 pandemic has had certain impacts on the business operation and overall economy in some areas or industries around the world, including in China. The interim condensed consolidated financial information has reflected the known impact of the COVID-19 pandemic on the financial position as at June 30, 2020 and on the operating results and cash flows for the six months ended June 30, 2020 of the Group. Since the beginning of the second quarter in 2020, although China's economic and social operation has gradually got back on track despite prevention and control measures applied, it remains largely uncertain how things will develop with the global outbreak of the COVID-19 pandemic. The Group will pay close attention to the development of the COVID-19 pandemic and evaluate its impact on the financial position and operating results of the Group.

Use of net proceeds from the Listing

On September 28, 2017, the Shares of the Company were listed on the Main Board of the Hong Kong Stock Exchange. The gross proceeds from the above offering were approximately HK$13,682.5 million, which will be gradually used for the purposes as set out in the Prospectus.

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	28

Disclosure of Interest

Directors', Supervisors' and Chief Executive's Interests and Short Positions in the Shares, Underlying Shares and Debentures of the Company and Any Associated Corporation

As at June 30, 2020, the interests and short positions of the Directors, Supervisors and Chief Executive of the Company in the Shares, underlying Shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Model Code are as follows:

Approximate

percentage of

percentage in

the Company's

Number of

Shares of the

total issued

Name of Director

Class of Shares

Nature of interest

same class(1)

share capital(1)

Yaping Ou(2)

Domestic Shares

Interest of controlled

81,000,000

8.10%

5.51%

corporation

(Long position)

Notes:

The shareholding percentages are calculated on the basis of 1,000,000,000 Domestic Shares and 469,812,900 H Shares.
Cnhooray Internet Technology Co. Ltd. (深圳日訊網絡科技股份有限公司) is a subsidiary of Timeway Holdings Limited (中宇集團有限公司). The entire interest of Timeway Holdings Limited (中宇集團有限公司) is held by Sinolink Worldwide which is listed on the Hong Kong Stock Exchange (Stock Code: 1168) and is owned by Asia Pacific Promotion Limited, a company wholly owned by Mr. Yaping Ou, as to approximately 45.10%. As such, Timeway Holdings Limited (中宇集團有限公司), Sinolink Worldwide, Asia Pacific Promotion Limited and Mr. Yaping Ou are deemed to be interested in the Shares held by Cnhooray Internet Technology Co. Ltd. (深圳日訊網絡科技股份有限公司).

Save as disclosed above, as at June 30, 2020, so far as is known to any Director, Supervisor or the Chief Executive of the Company, none of the Directors, the Supervisors and the Chief Executive of the Company had any interests or short positions in the Shares, underlying Shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which (a) were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Part XV of the SFO (including the interests and short positions which the Director is taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code, to be notified to the Company and the Hong Kong Stock Exchange.

29	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

Substantial Shareholders' and Other Persons' Interests and Short Positions in the Shares and Underlying Shares of The Company

As at June 30, 2020, within the knowledge of the Directors, the following persons (other than the Directors, the Supervisors and the Chief Executive of the Company) had an interest or a short position in the Shares or underlying Shares of the Company which would be required to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO:

Approximate

percentage of

percentage in

the Company's

Number of

Shares of the

total issued

Name of Shareholder

Class of Shares

Nature of interest

Shares(1)

same class(2)

share capital(2)

Ant Group(3)

Domestic Shares

Beneficial interest

199,000,000

19.90%

13.54%

Hangzhou Yunbo Investment Domestic Shares

Interest of controlled

199,000,000

19.90%

13.54%

Consulting Co., Ltd. (3)

corporation

Yun Ma(3)

Domestic Shares

Interest of controlled

199,000,000

19.90%

13.54%

corporation

Tencent Computer System(4)

Domestic Shares

Beneficial interest

150,000,000

15.00%

10.21%

Huateng Ma(4)

Domestic Shares

Interest of controlled

150,000,000

15.00%

10.21%

corporation

Tencent Holdings Limited(4)

Domestic Shares

Interest of controlled

150,000,000

15.00%

10.21%

corporation

Ping An Insurance(5)

Domestic Shares

Beneficial interest

150,000,000

15.00%

10.21%

Shenzhen Jia De Xin

Domestic Shares

Beneficial interest

140,000,000

14.00%

9.53%

Investment Limited(6)

Shenzhen Huaxinlian

Domestic Shares

Interest of controlled

140,000,000

14.00%

9.53%

Investment Limited(6)

corporation

Yafei Ou(6)

Domestic Shares

Interest of controlled

140,000,000

14.00%

9.53%

corporation

Unifront Holding Limited(7)

Domestic Shares

Beneficial interest

90,000,000

9.00%

6.12%

Shanghai Songlu Investment Domestic Shares

Interest of controlled

90,000,000

9.00%

6.12%

Management Co., Ltd. (7)

corporation

Shanghai Jianglu Investment Domestic Shares

Interest of controlled

90,000,000

9.00%

6.12%

Management Co., Ltd. (7)

corporation

Shanghai Xinlu Investment

Domestic Shares

Interest of controlled

90,000,000

9.00%

6.12%

Management Co., Ltd. (7)

corporation

Shanghai Youlu Investment

Domestic Shares

Interest of controlled

90,000,000

9.00%

6.12%

Management Co., Ltd. (7)

corporation

Zhen Zhang(7)

Domestic Shares

Interest of controlled

90,000,000

9.00%

6.12%

corporation

Cnhooray Internet

Domestic Shares

Beneficial interest

81,000,000

8.10%

5.51%

Technology Co. Ltd. (8)

Timeway Holdings Limited(8)

Domestic Shares

Interest of controlled

81,000,000

8.10%

5.51%

corporation

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	30

Disclosure of Interest

Approximate

percentage of

percentage in

the Company's

Number of

Shares of the

total issued

Name of Shareholder

Class of Shares

Nature of interest

Shares(1)

same class(2)

share capital(2)

Sinolink Worldwide(8)

Domestic Shares

Interest of controlled

81,000,000

8.10%

5.51%

corporation

Asia Pacific Promotion

Domestic Shares

Interest of controlled

81,000,000

8.10%

5.51%

Limited(8)

corporation

Qingdao Huilijun Trading

Domestic Shares

Beneficial interest

50,000,000

5.00%

3.40%

Company Limited(9)

Gongqingcheng

Domestic Shares

Interest of controlled

50,000,000

5.00%

3.40%

Shengchuang Investment

corporation

Partnership

(Limited Partnership)(9)

Shengchuang Weiye

Domestic Shares

Interest of controlled

50,000,000

5.00%

3.40%

(Xiamen) Equity

corporation

Investment Fund

Management Limited(9)

Shenzhen Qianhai Lihui

Domestic Shares

Interest of controlled

50,000,000

5.00%

3.40%

Fund Management

corporation

Limited(9)

Yu Chen(9)

Domestic Shares

Interest of controlled

50,000,000

5.00%

3.40%

corporation

Zuojie Peng(9)

Domestic Shares

Interest of controlled

50,000,000

5.00%

3.40%

corporation

Shanghai Yuanqiang

Domestic Shares

Beneficial interest

50,000,000

5.00%

3.40%

Investment Company

Limited(10)

Song Zou(10)

Domestic Shares

Interest of controlled

50,000,000

5.00%

3.40%

corporation

SVF Zen Subco (Singapore)

H Shares

Beneficial interest

71,909,800

15.30%

4.89%

Pte. Ltd. (11)

SVF Holdco (Singapore) Pte.

H Shares

Interest of controlled

71,909,800

15.30%

4.89%

Ltd. (11)

corporation

SVF Holdings (Cayman)

H Shares

Interest of controlled

71,909,800

15.30%

4.89%

Ltd. (11)

corporation

SVF Holdings (UK) LLP(11)

H Shares

Interest of controlled

71,909,800

15.30%

4.89%

corporation

SoftBank Vision Fund L.P. (11)

H Shares

Interest of controlled

71,909,800

15.30%

4.89%

corporation

Vision Technology

H Shares

Interest of controlled

71,909,800

15.30%

4.89%

Investment Company(11)

corporation

Public Investment Fund(11)

H Shares

Interest of controlled

71,909,800

15.30%

4.89%

corporation

31	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

Approximate

percentage of

percentage in

the Company's

Number of

Shares of the

total issued

Name of Shareholder

Class of Shares

Nature of interest

Shares(1)

same class(2)

share capital(2)

SVF GP (Jersey) Limited(11)

H Shares

Interest of controlled

71,909,800

15.30%

4.89%

corporation

SoftBank Group Corp. (11)

H Shares

Interest of controlled

71,909,800

15.30%

4.89%

corporation

Notes:

All the Shares are held in long position (as defined under Part XV of the SFO) unless otherwise specified.
The shareholding percentages are calculated on the basis of 1,000,000,000 Domestic Shares and 469,812,900 H Shares.
Hangzhou Junhan Equity Investments Partnership (Limited Partnership) (杭州君瀚股權投資合夥企業(有限合夥)) ("Hangzhou Junhan") and Hangzhou Junao Equity Investments Partnership (Limited Partnership) (杭州君澳股權投資合夥企業(有限合夥)) ("Hangzhou Junao") held approximately 29.86% and 20.66% (together approximately 50.52%) of Ant Group's total issued Shares, respectively. Hangzhou Yunbo Investment Consulting Co., Ltd. (杭州雲鉑投資諮詢有限公司) ("Hangzhou Yunbo") is the executive partner and general partner of, and controls, Hangzhou Junhan and Hangzhou Junao. Mr. Jack Ma held a 34% equity interest in Hangzhou Yunbo and each of Mr. Eric Jing, Mr. Simon Hu and Ms. Fang Jiang held a 22% equity interest in Hangzhou Yunbo. Pursuant to the Concert Party Agreement entered into between them and the articles of association of Hangzhou Yunbo, Mr. Jack Ma has ultimate control over Ant Group.
Tencent Computer System is a consolidated affiliated entity (through contractual arrangements) of Tencent Holdings Limited, a company listed on the Hong Kong Stock Exchange (Stock Code: 0700), and is one of its principal PRC domestic operating entities. Tencent Computer System is a leading provider of Internet value-added services in the PRC and a clear holder of the Company's Shares. As such, Tencent Holdings Limited is deemed to be interested in the Shares held by Tencent Computer System. Mr. Huateng Ma (馬化騰) holds 54.29% shares in Tencent Computer System.
Ping An Insurance is a joint-stock company incorporated in the PRC and listed on the Hong Kong Stock Exchange (Stock Code: 2318) and the SSE (Stock Code: 601318).
Shenzhen Jia De Xin Investment Limited (深圳市加德信投資有限公司) is a subsidiary of Shenzhen Huaxinlian Investment Limited (深圳市華信聯投資有限公司). As such, Shenzhen Huaxinlian Investment Limited is deemed to be interested in the Shares held by Shenzhen Jia De Xin Investment Limited. Shenzhen Huaxinlian Investment Limited is controlled by Mr. Yafei Ou (歐亞非). As such, Mr. Yafei Ou (歐亞非) is deemed to be interested in the Shares held by Shenzhen Jia De Xin Investment Limited.
Unifront Holding Limited (優孚控股有限公司) is owned by Shanghai Songlu Investment Management Co., Ltd. (上海松鹿投資管理有限公司) as to 25.00%, Shanghai Jianglu Investment Management Co., Ltd. (上海江鹿投資管理有限公司) as to 16.88% and Shanghai Xinlu Investment Management Co., Ltd. (上海鑫鹿投資管理有限公司) as to 13.12%. The entire interest of Shanghai Songlu Investment Management Co., Ltd., Shanghai Jianglu Investment Management Co., Ltd. and Shanghai Xinlu Investment Management Co., Ltd. are held by Shanghai Youlu Investment Management Co., Ltd. (上海游鹿投資管理有限公司), which in turn is controlled by Zhen Zhang (張真). As such, Shanghai Youlu Investment Management Co., Ltd., Shanghai Songlu Investment Management Co., Ltd., Shanghai Jianglu Investment Management Co., Ltd. and Shanghai Xinlu Investment Management Co., Ltd. are deemed to be interested in the Shares held by Unifront Holding Limited. As such, Zhen Zhang (張真) is deemed to be interested in the Shares held by Unifront Holding Limited.
Cnhooray Internet Technology Co. Ltd. (深圳日訊網絡科技股份有限公司) is a subsidiary of Timeway Holdings Limited (中宇集團有限公司). The entire interest of Timeway Holdings Limited (中宇集團有限公司) is held by Sinolink Worldwide. Sinolink Worldwide is held by Asia Pacific Promotion Limited (a company wholly owned by Mr. Yaping Ou) as to approximately 45.10%. As such, Timeway Holdings Limited (中宇集團有限公司), Sinolink Worldwide, Asia Pacific Promotion Limited and Mr. Yaping Ou are deemed to be interested in the Shares held by Cnhooray Internet Technology Co. Ltd. (深圳日訊網絡科技股份有限公司).
Qingdao Huilijun Trading Company Limited (青島惠麗君貿易有限公司) is a subsidiary of Gongqingcheng Shengchuang Investment Partnership (Limited Partnership) (共青城盛創投資合夥企業 (有限合夥)). The general partner of Gongqingcheng Shengchuang Investment Partnership (Limited Partnership) (共青城盛創投資合夥企業 (有限合夥)) is Shengchuang Weiye (Xiamen) Equity Investment Fund Management Limited (盛創偉業 (廈門) 股權投資基金管理有限公司), which is wholly owned by Shenzhen Qianhai Lihui Fund Management Limited (深圳前海力匯基金管理有限公司). Each of Mr. Yu Chen (陳宇) and Mr. Zuojie Peng (彭作傑) holds 50.00% of Shenzhen Qianhai Lihui Fund Management Limited (深圳前海力匯基金管理有限公司). As such, Gongqingcheng Shengchuang Investment Partnership (Limited Partnership) (共青城盛創投資合夥企業 (有限合夥)), Shengchuang Weiye (Xiamen) Equity Investment Fund Management Limited (盛創偉業 (廈門) 股權投資基金管理有限公司), Shenzhen Qianhai Lihui Fund Management Limited (深圳前海力匯基金管理有限公司), Mr. Yu Chen (陳宇) and Mr. Zuojie Peng (彭作傑) are deemed to be interested in the Shares held by Qingdao Huilijun Trading Company Limited (青島惠麗君貿易有限公司).
Shanghai Yuanqiang Investment Company Limited (上海遠強投資有限公司) is owned by Mr. Song Zou (鄒松) as to 80.00%. As such, Mr. Song Zou (鄒松) is deemed to be interested in the Shares held by Shanghai Yuanqiang Investment Company Limited (上海遠強投資有限公司).
SVF Zen Subco (Singapore) Pte. Ltd. is a wholly owned subsidiary of SVF Holdco (Singapore) Pte. Ltd., which is wholly owned by SVF Holdings (Cayman) Ltd. SVF Holdings (Cayman) Ltd. is a wholly owned subsidiary of SVF Holdings (UK) LLP, which is wholly owned by SoftBank Vision Fund L.P., which is owned by Vision Technology Investment Company as to 48.31%. Vision Technology Investment Company is wholly owned by Public Investment Fund. The general partner of SoftBank Vision Fund L.P. is SVF GP (Jersey) Limited and the ultimate parent company is SoftBank Group Corp., which is a Japanese corporation listed on the Tokyo Stock Exchange (Stock Code: 9984).

Save as disclosed above, according to the register kept by the Company under Section 336 of the SFO, there was no other person who had a substantial interest or short positions in the Shares or underlying Shares as at June 30, 2020.

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	32

Other Information

Employees and Remuneration Policies

As at June 30, 2020, the Group had 2,842 full-time employees (June 30, 2019: 2,893). The number of employees employed by the Group varies from time to time depending on need. Employee remuneration is determined in accordance with prevailing industry practice and employees' educational backgrounds, experiences and performance. The remuneration policy and package of the Group's employees are periodically reviewed. Apart from pension funds, in-house training programs, discretionary bonuses, medical insurance and mandatory provident fund, share awards may be granted to employees according to the assessment of individual performance.

Compensation of key executives of the Group is determined by the Company's remuneration and nomination committee which reviews and determines executives' compensation based on the Group's performance and the executives' respective contributions to the Group.

The total remuneration cost incurred by the Group for the six months ended June 30, 2020 was approximately RMB674.4 million (for the six months ended June 30, 2019: approximately RMB762.8 million).

Corporate Governance

The Company is committed to maintaining and promoting stringent corporate governance. The principle of the Company's corporate governance is to promote effective internal control measures and to enhance the transparency and accountability of the Board to all Shareholders.

The Company has adopted the principles and code provisions of the CG Code set out in Appendix 14 to the Listing Rules as the basis of the Company's corporate governance practices. During the Reporting Period, the Company has complied with all the applicable code provisions set out in the CG Code.

Compliance With the Model Code for Securities Transactions by Directors

The Company has adopted the Model Code as set out in Appendix 10 to the Listing Rules as the code of conduct regarding the Directors' dealings in the securities of the Company. The Company has made enquiries into all Directors, and all the Directors confirmed that they had complied with the standards set out in the Model Code during the Reporting Period.

Review by Audit Committee

The Company has established an audit committee in accordance with the Listing Rules. The primary duties of the audit committee are to supervise our risk management, internal control system, financial information disclosure and financial reporting matters. The audit committee comprises Mr. Liangxun Shi, Mr. Yifan Li and Ms. Hui Chen. Mr. Liangxun Shi is a non-executive Director, and Mr. Yifan Li and Ms. Hui Chen are independent non-executive Directors. Ms. Hui Chen is the chairman of the audit committee.

The audit committee has reviewed the unaudited interim results of the Group for the six months ended June 30, 2020. The audit committee has also discussed matters with respect to the accounting policies and practices adopted by the Company and internal control with senior management members and the external auditor of the Company, PricewaterhouseCoopers. The interim financial statements of the Company are unaudited.

Other Board Committees

In addition to the audit committee, the Company has also established a risk management committee, a remuneration and nomination committee, an investment strategy committee, a related transactions control committee and a consumer rights protection committee.

33	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

Changes in Directors, Supervisors and Chief Executive during the Reporting Period

At the annual general meeting of the Company held on May 11, 2020, Mr. Weibiao Zhan was elected as a non-executive Director of the third session of the Board. The appointment of Mr. Weibiao Zhan will become effective upon the approval of his qualification as director by the CBIRC.

Changes in information of Directors, Supervisors and Chief Executives which are required to be disclosed under Rule 13.51B(1) of the Listing Rules are set out below:

Ms. Hui Chen has been serving as the chief compliance risk controller of Huazhu Group Limited, a company listed on NASDAQ (stock code: HTHT), since February 2020.
Mr. Weibiao Zhan ceased to serve as a non-executive director of Maoyan Entertainment, a company listed on Hong Kong Stock Exchange (stock code: 1896) with effect from June 2020.
Mr. Shuang Zhang has been serving as an independent non-executive director of Planetree International Development Limited, a company listed on the Hong Kong Stock Exchange (stock code: 613), since April 2020.
Changes in the fees of independent non-executive Directors since January 2020 are as follows: HK$250,000 per annum for each independent non-executive Director serving as the chairman of professional committees of the Board, and HK$200,000 per annum for each independent non-executive Director serving as the member of professional committees of the Board.

Purchase, Sale or Redemption of Company's Listed Securities

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any listed securities of the Company during the Reporting Period.

Litigation

As of June 30, 2020, the Company was not involved in any material litigation or arbitration. Nor were the Directors of the Company aware of any material litigation or claims that were pending or threatened against the Company.

Interim Dividend

In order to retain resources for the Group's business development, the Board does not declare an interim dividend for the six months ended June 30, 2020 (for the six months ended June 30, 2019: Nil).

For and on behalf of the Board

Yaping Ou

Chairman

August 26, 2020

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	34

Report on Review of Interim Financial Information

To the Board of Directors of ZhongAn Online P & C Insurance Co., Ltd. (incorporated in the People's Republic of China with limited liability)

Introduction

We have reviewed the interim financial information set out on pages 35 to 74, which comprises the interim condensed consolidated balance sheet of ZhongAn Online P & C Insurance Co., Ltd. (the "Company") and its subsidiaries (together, the "Group") as at 30 June 2020 and the interim condensed consolidated statement of comprehensive income, the interim condensed consolidated statement of changes in equity and the interim condensed consolidated statement of cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting". Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of Review

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information of the Group is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting".

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 26 August 2020

35	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020
Interim Condensed Consolidated Statement of Comprehensive Income

	For the six months ended 30 June 2020
	(All amounts expressed in RMB'000 unless otherwise stated)

	Notes
Gross written premiums	6
Less: Premiums ceded to reinsurers	6
Net written premiums	6
Less: Net change in unearned premium reserves	6
Net premiums earned	6
Net investment income	7
Net fair value changes through profit or loss	8
Other income
Total income
Net claims incurred	9
Handling charges and commissions	10
Foreign exchange gains/(losses)
Finance costs
General and administrative expenses	11
Other expenses
Total expenses
Share of net profit/(loss) of associates and joint ventures accounted
for using the equity method
Profit before income tax
Income tax	12
Net profit for the period

Profit attributable to:

Owners of the parent
Non-controllinginterests

Six months ended 30 June

20202019

(unaudited) (unaudited)

6,766,787 5,897,079

(118,663) (101,479)

6,648,124 5,795,600

794,021 117,714

7,442,145 5,913,314

868,293 711,493

(44,212) 110,987

319,390 163,751

8,585,616 6,899,545

(4,213,886) (3,777,275)

(374,886) (437,188)

(1,011)2,205

(62,832) (50,288)

(3,339,508) (2,329,342)

(267,340) (278,018)

(8,259,463) (6,869,906)

8,133 (14,274)

334,286 15,365

48,037 18,718

382,323 34,083

490,493 94,538

(108,170) (60,455)

382,323 34,083

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	36

Interim Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

		Six months ended 30 June

	Notes	2020	2019
		(unaudited)		(unaudited)
Profit per share

- Basic profit per share (RMB yuan)	13	0.33	0.06
- Diluted profit per share (RMB yuan)	13	0.33	0.06
Other comprehensive income to be reclassified to profit or loss


in subsequent periods:
- Changes in fair value of available-for-sale financial assets	14	143,888	61,578
- Exchange differences on translation of foreign operations	14	38,349	10,351

Other comprehensive income for the period, net of tax	14	182,237	71,929

Total comprehensive income for the period		564,560	106,012
Total comprehensive income for the period attributable to:


- Owners of the parent		654,532	161,395
- Non-controlling interests		(89,972)	(55,383)

		564,560	106,012

The accompanying notes form an integral part of the interim condensed consolidated financial information.

The interim condensed consolidated financial information and the accompanying notes starting from page 35 to page 74 are signed by:

Yaping Ou		Jin Chen
(On behalf of Board of Directors)		(On behalf of Board of Directors)

37	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

Interim Condensed Consolidated Balance Sheet

As at 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

	Notes
ASSETS
Cash and amounts due from banks and other financial institutions	15
Financial assets at fair value through profit or loss	16
Securities purchased under agreements to resell	17
Interest receivables	18
Premium receivables	19
Reinsurance receivables	20
Reinsurers' share of insurance contract liabilities	34
Available-for-sale financial assets	21
Loans and advances to customers
Investments classified as loans and receivables	22
Term deposits
Restricted statutory deposits	23
Held-to-maturity financial assets
Investments in associates and joint ventures	24
Right-of-use assets	25
Property and equipment	26
Intangible assets	27
Goodwill
Deferred income tax assets	28
Other assets	29
Total assets
EQUITY AND LIABILITIES
Equity
Share capital	30
Reserves	31
Accumulated losses
Equity attributable to owners of the parent
Non-controlling interests
Total equity
Liabilities
Customer deposits	32
Securities sold under agreements to repurchase	33
Premium received in advance
Reinsurance payables
Income tax payable
Insurance contract liabilities	34
Lease liabilities	25
Deferred income tax liabilities	28
Contract liabilities
Other liabilities	35

Total liabilities

Total equity and liabilities

30 June		31 December
2020	2019
(unaudited)		(audited)

3,905,119	2,914,820
5,771,672	6,220,536
632,945	160,000
282,921	306,078
3,431,424	3,532,160
281,776	238,028
253,664	275,127
15,889,054	12,200,672
105,646	50,900
1,274,714	1,276,676
300,000	300,000
294,338	294,338
78,048		-
325,412	613,309
321,558	363,635
81,246	90,968
504,428	488,779
7,186	3,997
-		-
1,449,607	1,577,552

35,190,758	30,907,575


1,469,813	1,469,813
16,754,933	16,576,422
(2,644,087)	(3,134,580)

15,580,659	14,911,655
1,910,324	1,593,876

17,490,983	16,505,531

2,193,755 23,841

4,938,544 4,049,725

103,465 101,134

215,895 218,060

5,6262,170

7,521,650 7,542,640

361,532 398,366

40542

33,238 22,089

2,325,665 2,043,977

17,699,775 14,402,044

35,190,758 30,907,575

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	38

Interim Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

										For the six months ended 30 June 2020 (unaudited)

						Attributable to owners of the parent

										Reserves

										Other				Available-
										reserves				for-sale
										due to				financial		Foreign
										share-				assets		currency									Non-
	Share	Capital			Surplus				based	revaluation		translation	Accumulated					controlling				Total
	capital	reserves			reserves				payments				reserves		reserves		losses				Total			interests		equity

1 January 2020	1,469,813		16,587,401	32	38,400	(65,152)		15,741	(3,134,580)	14,911,655	1,593,876	16,505,531
Total comprehensive income	-	-			-				-	144,451		19,588	490,493	654,532	(89,972)	564,560
Contributions from non-controlling
interests 5(b)	-	-			-				-				-		-		-				-	896,398	896,398
Consideration paid to non-
controlling interests 5(b)	-	(16,266)			-				-				-		-		-	(16,266)	(495,628)	(511,894)
Non-controlling interests on
acquisition of subsidiary 5(b)	-	-			-				-				-		-		-				-	5,650	5,650
Others 24(c)	-	30,738			-				-				-		-		-	30,738				-	30,738

30 June 2020	1,469,813		16,601,873	32	38,400	79,299		35,329	(2,644,087)	15,580,659	1,910,324	17,490,983




										For the six months ended 30 June 2019 (unaudited)

						Attributable to owners of the parent

										Reserves

										Other				Available-
										reserves				for-sale
										due to				financial		Foreign
										share-				assets		currency									Non-
	Share	Capital			Surplus				based	revaluation		translation	Accumulated					controlling				Total
	capital	reserves			reserves				payments				reserves		reserves		losses				Total			interests		equity
1 January 2019
1,469,813		16,596,375			-	38,400	7,763		135	(2,680,447)	15,432,039	1,042,634	16,474,673
Total comprehensive income	-	-			-				-	61,578		5,279	94,538	161,395	(55,383)	106,012
Contributions from non-
controlling interests	-	-			-				-				-		-		-				-	377,889	377,889
Consideration paid to non-
controlling interests	-	(4,381)			-				-				-		-		-	(4,381)	(313,238)	(317,619)
Non-controlling interests on
deconsolidation of subsidiary	-	-			-				-				-		-		-				-	(91,629)	(91,629)
30 June 2019
1,469,813		16,591,994			-	38,400	69,341		5,414	(2,585,909)	15,589,053	960,273	16,549,326

39	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

Interim Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

	Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from/(used in) operating activities	36
Net cash inflow/(outflow) from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment, intangible assets and other assets
Proceeds from sale of property and equipment, intangible assets and
other assets
Purchases of investments, net
Acquisition of subsidiaries and other business entities, net
Deconsolidation of subsidiaries, net
Dividends and others received from investments
Net cash inflow/(outflow) from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings
Proceeds from issue of preference shares
Increase in securities sold under agreements to repurchase, net
Proceeds from capital injection by non-controlling interests
Considerations paid for repurchase of non-controlling interests' shares
Considerations paid for redemption of preference shares
Principal elements of lease payments
Net cash inflow from financing activities
Effects of exchange rate changes on cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period	15(b)

Six months ended 30 June

20202019

(unaudited) (unaudited)

2,234,108 (597,371)

(110,729) (121,102)

211
(3,412,651) (609,647)

(27,151) (17,273)

(28,692)
927,239 811,756

(2,623,292) 35,253

(2,258) (15,339)

342,048
837,515 431,227

896,398 35,841

(317,619)
(511,894)-
(74,354) (58,804)

1,145,407 417,354

36,816 12,556

793,039 (132,208)

2,914,820 2,426,829

3,707,859 2,294,621

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	40

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

1. GENERAL INFORMATION

Approved by the former China Insurance Regulatory Commission (the "CIRC") of the People's Republic of China (the "PRC"), ZhongAn Online P & C Insurance Co., Ltd. (the "Company") is a joint stock company established on 9 October 2013.

The Company and its subsidiaries (collectively, the "Group") are principally engaged in Insuretech business, which provides internet insurance services and insurance information technology services to customers.

The Company became listed on the Main Board of the Stock Exchange of Hong Kong on 28 September 2017, and its stock code is 6060.

2. BASIS OF PREPARATION

This interim condensed consolidated financial information for the six months ended 30 June 2020 has been prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA"), as part of the Hong Kong Financial Reporting Standards ("HKFRSs"), and applicable disclosure requirements of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited.

This interim condensed consolidated financial information does not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2019.

3. SIGNIFICANT ACCOUNTING POLICIES

3.1 Changes in accounting policies

The accounting policies adopted in the preparation of the interim condensed consolidated financial information are consistent with those of the Group's annual financial statements for the year ended 31 December 2019, except for the adoption of amended or improved standards as of 1 January 2020 as set out below. The adoption of these revised HKFRSs currently has had no significant impact on the condensed consolidated financial information.

Amendments to HKAS 1 and HKAS 8	Definition of Material
Amendments to HKFRS 3	Definition of a Business
Amendments to HKFRS 9, HKAS 39 and HKFRS 7	Interest Rate Benchmark Reform
Revised Conceptual Framework for Financial Reporting

The Group has not early adopted any other standard, interpretation or amendment that was issued but is not yet effective.

41	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

3.2 Impact of standards issued but not yet applied

HKFRS 9 and HKFRS 4 Amendments

HKFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of HKFRS 9 was issued in July 2014. It replaces the guidance in HKAS 39 that relates to the classification and measurement of financial instruments. HKFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortized cost, fair value through other comprehensive income ("OCI") and fair value through statement of comprehensive income. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI which are not recycled to profit or loss. There is now a new expected credit losses model that replaces the incurred loss impairment model used in HKAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. HKFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the 'hedged ratio' to be the same as the one management actually used for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under HKAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. The Group is eligible to and has elected to apply the temporary option to defer the effective date of HKFRS 9 under the amendments to HKFRS 4 'Insurance contracts'. The impact of the adoption of HKFRS 9 on the Group's consolidated financial statements will, to a large extent, have to take into account the interaction with the issued insurance contracts standard. The Group is defined as an insurer with its activities predominantly connected with insurance. The Group will not adopt the HKFRS 9 until 1 January 2021. The International Accounting Standards Board ("IASB") issued the amendments to IFRS 4 and IFRS 17 to defer the effective date of IFRS 17 to 1 January 2023 and the temporary exemption from IFRS 9 will be extended as well. The deferral for HKFRS 17 to 1 January 2023 is yet to be endorsed by the Financial Reporting Standards Committee of the

HKICPA.

Financial assets meeting Solely for Payment of Principal and Interest (SPPI) test are relevant financial assets of which the contractual cash flows generated on a specific date are solely payments of principal and interest on the principal amount.

Additional disclosures of financial assets listed in financial assets at fair value through profit or loss, available- for-sale financial assets, investments classified as loans and receivables, Held-to-maturity financial assets are as follows:

Financial assets held for trading (A)

Financial assets managed and whose performance evaluated on a fair value basis (B)

Financial assets other than A or B

Financial assets meet SPPI (C)
Financial assets not meet SPPI

Total

	Six months ended
		30 June 2020
30 June 2020		Change in the
Fair value		fair value

5,771,672	(44,212)
-		-
11,137,149	(872)
6,104,191	192,605

23,013,012	147,521

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	42

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

3.2 Impact of standards issued but not yet applied (continued)

HKFRS 9 and HKFRS 4 Amendments(continued)

			30 June
			2020
Credit risk rating grades of financial assets meet SPPI(C)			Carrying amounts
Domestic

AAA			7,701,342
A-1			230,054
AA+			1,283,077
AA			190,018
C			19,331
Overseas
A3(inclusive) or above			503,988
Baa1			180,889
Baa2			155,718
Baa3			872,975

Total			11,137,392




	30 June 2020

	Carrying amounts	Fair value

Financial assets not have low credit risk	19,331		19,331

Except for the above assets, other financial assets other than cash held by the Group, including securities purchased under agreements to resell, loans and advances to customers, term deposits, restricted statutory deposits, etc., are financial assets, which meet the SPPI conditions. The carrying amounts are close to their fair value.

HKFRS 17

HKFRS 17 was issued in May 2017 and will replace the current HKFRS 4 Insurance Contracts. It applies to the measurement of insurance contracts issued, all reinsurance contracts and investment contracts with discretionary participating features. It requires a current measurement model where estimates are re-measured each reporting period. Contracts are measured using the building blocks of:

discounted probability-weighted cash flows
an explicit risk adjustment, and
a contractual service margin ("CSM") representing the unearned profit of the contract which is recognized as revenue over the coverage period.

43	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

3.2 Impact of standards issued but not yet applied (continued)

HKFRS 17(continued)

The standard is currently mandatorily effective for annual periods beginning on or after 1 January 2021 and earlier application is permitted. On 25 June 2020, the IASB issued the amendments to IFRS 4 and IFRS 17, the effective date of IFRS 17 will be deferred to annual reporting periods beginning on or after 1 January 2023, and the temporary exemption from IFRS 9 will be extended to enable the implementation of both IFRS 9 and IFRS 17 at the same time. The deferral for HKFRS 17 to 1 January 2023 is yet to be endorsed by the Financial Reporting Standards Committee of the HKICPA. The impact is expected to be significant. The Group is in the process of assessing the impact of adoption of HKFRS 17.

There are no other HKFRSs or HK (IFRIC) interpretations that are not yet effective that would be expected to have a material impact on the Group.

4. SEGMENT INFORMATION

The Group's operating segments are listed as follows:

The insurance segment offers a wide range of online P&C insurance business;
The technology segment provides IT related business and international IT consulting to its customers;
The banking segment provides banking services to its customers;
The others segment includes entities other than the insurance segment, the technology segment and the banking segment, which provides investment management, online life insurance business, insurance brokerage, bio technology services and etc.

The measurement of segment assets and liabilities, as well as segment revenue, expense and results is based on the Group's accounting policies. There is no difference between the accounting policies used in the preparation of the Group's financial statements and those used in preparing the operating segment information.

The banking segment has been identified as a new operating segment. As a consequence, the comparative segment information has been restated.

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	44

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

4. SEGMENT INFORMATION (continued)

Segment statement of comprehensive income for the six months ended 30 June 2020

		Insurance				Technology				Banking					Others	Eliminations	Total

Gross written premiums	6,769,848				-				-	309	(3,370)	6,766,787
Less: Premiums ceded
to reinsurers	(118,635)				-				-	(28)					-	(118,663)
Net change in unearned
premium reserves	793,988				-				-					-	33	794,021

Net premiums earned	7,445,201				-				-	281	(3,337)	7,442,145

Net Investment income	820,917	35,090				-	12,688	(402)	868,293
Net fair value changes through
profit or loss	(43,778)	(1,585)				-	1,151					-	(44,212)
Share of net profit/(loss) of
associates and joint ventures
accounted for using the
equity method	20,439	(5,181)				-	(8,005)	880	8,133
Other income	110,850	140,449	19,016	32,500	16,575	319,390

Segment income	8,353,629	168,773	19,016	38,615	13,716	8,593,749

Net claims incurred	(4,213,511)				-				-	(390)	15	(4,213,886)
Handling charges
and commissions	(379,934)				-				-					-	5,048	(374,886)
Foreign exchange gains/(losses)	10	284	(1,223)	(1,359)	1,277	(1,011)
Finance costs	(55,875)	(4,166)				-	(2,791)					-	(62,832)
General and administrative
expenses	(3,120,975)	(58,667)	(119,620)	(53,110)	12,864	(3,339,508)
Other expenses	(9,145)	(212,983)	(9,649)	(35,966)	403	(267,340)

Segment expenses	(7,779,430)	(275,532)	(130,492)	(93,616)	19,607	(8,259,463)

Profit/(Loss) before income tax	574,199	(106,759)	(111,476)	(55,001)	33,323	334,286
Income tax	47,943	58				-	36					-	48,037

Net profit/(loss)	622,142	(106,701)	(111,476)	(54,965)	33,323	382,323



Segment balance sheet at 30 June 2020

		Insurance				Technology				Banking					Others	Eliminations	Total

Segment assets	31,631,636	2,576,804	3,803,850	3,896,487	(6,718,019)	35,190,758
Segment liabilities	14,976,302	489,125	2,718,789	468,913	(953,354)	17,699,775
Segment equity	16,655,334	2,087,679	1,085,061	3,427,574	(5,764,665)	17,490,983

45	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

4. SEGMENT INFORMATION (continued)

Segment statement of comprehensive income for the six months ended 30 June 2019

	Insurance		Technology		Banking		Others	Eliminations		Total

Gross written premiums	5,900,508		-		-		-	(3,429)	5,897,079
Less: Premiums ceded to
reinsurers	(101,479)		-		-		-		-	(101,479)
Net change in unearned
premium reserves	118,684		-		-		-	(970)	117,714

Net premiums earned	5,917,713		-		-		-	(4,399)	5,913,314

Net Investment income	695,080	19	6,394	5,469	4,531	711,493
Net fair value changes through
profit or loss	110,987		-		-		-		-	110,987
Other income	46,565	104,635		-	50,974	(38,423)	163,751

Segment income	6,770,345	104,654	6,394	56,443	(38,291)	6,899,545

Net claims incurred	(3,778,687)		-		-		-	1,412	(3,777,275)
Handling charges and
commissions	(450,083)		-		-		-	12,895	(437,188)
Foreign exchange gains/(losses)	(66)	(239)		-	2,403	107	2,205
Finance costs	(43,969)	(5,451)		-	(868)		-	(50,288)
General and administrative
expenses	(2,196,712)	(56,501)	(81,358)	(21,687)	26,916	(2,329,342)
Share of net loss of associates
and joint ventures accounted
for using the equity method	(600)	(11,812)		-	(1,532)	(330)	(14,274)
Other expenses	(1,061)	(192,010)		-	(85,305)	358	(278,018)

Segment expenses	(6,471,178)	(266,013)	(81,358)	(106,989)	41,358	(6,884,180)

Profit/(Loss) before income tax	299,167	(161,359)	(74,964)	(50,546)	3,067	15,365
Income tax	20,526	(1,113)		-	(695)		-	18,718

Net profit/(loss)	319,693	(162,472)	(74,964)	(51,241)	3,067	34,083



Segment balance sheet at 31 December 2019

	Insurance		Technology		Banking		Others	Eliminations		Total

Segment assets	29,866,877	2,412,783	1,245,211	2,531,516	(5,148,812)	30,907,575
Segment liabilities	13,977,513	731,350	60,818	378,706	(746,343)	14,402,044
Segment equity	15,889,364	1,681,433	1,184,393	2,152,810	(4,402,469)	16,505,531

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	46

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

5. SUBSIDIARIES

The Company's subsidiaries at 30 June 2020 are as follows:

Place of

Registered

Place of

incorporation/

capital

Percentage

Acquisition

Name

operations

registration

Nature of business

(Thousand)

of equity

Mode

ZhongAn Information Technology Services

Shanghai,

Shenzhen,

Technology

RMB 3,000,000

100.00%

Set-up

Limited Company ("ZhongAn Technology")

The PRC

Development/

Technology Consulting

ZhongAn Online Insurance Broker Limited

Guangzhou,

Insurance Broker

RMB 100,000

100.00%

Set-up

Company ("ZhongAn Insurance Broker")

The PRC

Hangzhou Qihui Internet Technology

Hangzhou,

Technology

RMB 3,000

100.00%

Equity

Limited Company ("Hangzhou Qihui")

The PRC

Development/

Purchase

Technology Consulting

ZhongAn (ShenZhen) Life Sciences

Shenzhen,

Bio Technology

RMB 100,000

70.00%

Set-up

Co., Ltd ("ZhongAn Life Sciences")

The PRC

Ningbo Haoyin Biotechnology Co., Ltd.

Ningbo,

Bio Technology

RMB 66,700

54.87%

Set-up

("Ningbo Haoyin")

The PRC

Shanghai Renxin Medical Laboratory

Shanghai,

Medical Examination

RMB 20,000

100.00%

Controlled

Co., Ltd. ("Shanghai Renxin") (a)

The PRC

under

contractual

arrangements

Shanghai Lianmo Information Technology

Shanghai,

Technology

RMB 7,010

100.00%

Equity

Co., Ltd. ("Shanghai Lianmo")

The PRC

Development/

Purchase

Technology Consulting

ZhongAn (HaiNan) Medical Technology

Hainan,

Online Medical Service

RMB 5,000

70.00%

Set-up

Co., Ltd ("ZhongAn Medical Technology")

The PRC

ZhongAn (Hainan) Telemedicine Centre Ltd.

Hainan,

Telemedicine

RMB 1,000

100.00%

Set-up

("ZA Telemedicine Centre")

The PRC

ZhongAn (Hainan) Internet Hospital Ltd.

Hainan,

Internet Hospital

RMB 1,000

100.00%

Set-up

("ZA Internet Hospital")

The PRC

Hebei Xiongan ZhongAn Financial Service

Hebei,

Technology

RMB 3,000

100.00%

Set-up

Information Technology Limited Company

The PRC

Development/

("Hebei Xiongan Information")

Technology Consulting

ZA Technology Services Ltd. ("ZA Technology")

British Virgin

Technology

USD 0.001

100.00%

Set-up

Islands

Development/

Technology Consulting

47	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

5. SUBSIDIARIES (continued)

The Company's subsidiaries at 30 June 2020 are as follows: (continued)

Place of

Registered

Place of

incorporation/

capital

Percentage

Acquisition

Name

operations

registration

Nature of business

(Thousand)

of equity

Mode

Shanghai JuA Technology Ltd.

Shanghai,

Technology

RMB 5,000

100.00%

Set-up

("Shanghai JuA") (b)

The PRC

Development/

Technology Consulting

Zhongyanshe (Jiaxing) Software

Zhejiang,

Technology Training

RMB 5,000

100.00%

Set-up

Training Ltd. ("Zhongyanshe") (c)

The PRC

ZhongAn Technologies International Group

Hong Kong,

Technology

RMB 2,070,784

51.00%

Set-up

Limited ("ZhongAn International")

The PRC

Development/

Technology Consulting

ZA Tech Global Limited ("ZA Tech Global")

Hong Kong,

Technology

HKD 156,797

49.00%

Set-up

The PRC

Development/

Technology Consulting

ZA Tech Global (Cayman) Limited

Cayman Islands

Technology

USD 50

100.00%

Set-up

("ZA Tech Global Cayman")

Development/

Technology Consulting

ZA Tech Japan Inc ("ZA Japan")

Tokyo,

Technology

JPY 20,000

100.00%

Set-up

Japan

Development/

Technology Consulting

ZA Tech Global (Singapore) PTE. LTD.

Singapore

Technology

HKD 1,000

100.00%

Set-up

("ZA Tech Singapore")

Development/

Technology Consulting

ZA Tech Global (Ireland) Limited

Dublin,

Technology

EUR 1

100.00%

Set-up

("ZA Tech Ireland") (d)

Ireland

Development/

Technology Consulting

ZA Life Limited ("ZA Life") (e)

Hong Kong,

Life Insurance

HKD 1,000,000

65.00%

Set-up

The PRC

ZhongAn Financial Services Limited

Hong Kong,

Investment holding

HKD 1,500,000

100.00%

Set-up

("ZA Financial")

The PRC

ZA Bank Limited (formerly known as

Hong Kong,

Virtual Bank

HKD 1,500,000

100.00%

Set-up

ZhongAn Virtual Finance Limited)("ZA Bank")

The PRC

ZA Care Limited ("ZA Care")

Hong Kong,

Technology

100.00%

Set-up

The PRC

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	48

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

5. SUBSIDIARIES (continued)

The Company's subsidiaries at 30 June 2020 are as follows: (continued)

Place of

Registered

Place of

incorporation/

capital

Percentage

Acquisition

Name

operations

registration

Nature of business

(Thousand)

of equity

Mode

ZhongAn Digital Asset Group Ltd.

British Virgin

Digital Asset

USD 50

100.00%

Set-up

("ZA Digital Asset")

Islands

ZhongAn International Investment Management

Hong Kong,

Asset Management

HKD 0.1

100.00%

Set-up

Company ("ZA International Investment")

The PRC

ZhongAn International Financial Services

Hong Kong,

Financial

HKD 0.1

100.00%

Set-up

Limited ("ZA International Financial")

The PRC

Bloom Rewards Limited ("Bloom Rewards") (f)

Hong Kong,

Technology

HKD 0.1

100.00%

Set-up

The PRC

Development/

Technology Consulting

1. On 6 May 2020, Ningbo Haoyin provided loans of RMB20,000 thousand to the registered owners of Shanghai Renxin for the completion of registered capital injection. Ningbo Haoyin does not have directly or indirectly legal ownership in equity of Shanghai Renxin. Nevertheless, under certain contractual arrangements entered into with Shanghai Renxin and its registered owners, Ningbo Haoyin has rights to exercise power over Shanghai Renxin, receives variable returns from its involvement, and has the ability to affect those returns through its power over Shanghai Renxin. On consolidation date, the fair value of net assets of Shanghai Renxin was RMB16,811 thousand, and the Group recognized goodwill at the amount of RMB3,189 thousand.
2. On 4 March 2020, ZhongAn Technology set up Shanghai JuA, with registered capital of RMB5,000 thousand. ZhongAn Technology holds 100% of voting rights of Shanghai JuA.
3. On 15 May 2020, ZhongAn Technology set up Zhongyanshe, with registered capital of RMB5,000 thousand. ZhongAn Technology holds 100% of voting rights of Zhongyanshe.
4. On 3 March 2020, ZA Tech Global set up ZA Tech Ireland, with registered capital of EUR1,000. ZA Tech Global holds 100% of voting rights of ZA Tech Ireland. ZhongAn Technology has control over ZA Tech Ireland through ZA Tech Global.
5. On 17 April 2020, ZhongAn International together with Fubon Life Insurance (Hong Kong) Company Limited ("Fubon Life Insurance") injected HKD1,000,000 thousand in total into ZA Life, amongst which ZhongAn International injected HKD650,000 thousand and Fubon Life Insurance injected HKD350,000 thousand. After this transaction, the paid-in capital of ZA Life increased to HKD1,000,000 thousand in accordance with the registered capital. ZhongAn International holds 65% of the voting rights of ZA Life.
6. On 18 June 2020, ZhongAn International set up Bloom Rewards, with registered capital of HKD100. ZhongAn International holds 100% of voting rights of Bloom Rewards. ZhongAn Technology has control over Bloom Rewards through ZhongAn International.
Non-controllinginterests
Changes in non-controlling interests:

			ZhongAn
	ZhongAn		Medical		ZhongAn		Shanghai
	International		Technology		Life Sciences		Dexu		Total
31 December 2019
1,572,985	1,174	19,717		-	1,593,876
Total comprehensive income	(84,110)	(270)	(5,592)		-	(89,972)
Contributions from non-controlling
Interests (i)	896,398		-		-		-	896,398
Consideration paid to non-controlling
Interests (ii)	(495,628)		-		-		-	(495,628)
Non-controlling interests on acquisition of
subsidiary (iii)	-		-		-	5,650	5,650
30 June 2020
1,889,645	904	14,125	5,650	1,910,324

49	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

5. SUBSIDIARIES (continued)

Non-controllinginterests (continued)
1. On 16 January 2020, ZhongAn Technology and Sinolink Worldwide Holdings Limited ("Sinolink Worldwide") injected RMB600,000 thousand and RMB576,471 thousand into ZhongAn International respectively. After this transaction, Sinolink Worldwide remains 49% of the voting rights of ZhongAn International as non-controlling interest.
  On 17 April 2020, ZhongAn International and Fubon Life Insurance injected HKD650,000 thousand and HKD350,000 thousand respectively into ZA Life, equivalent to RMB594,152 thousand and RMB319,927 thousand. After this transaction, Fubon Life remains 35% of the voting rights of ZA Life as non-controlling interest.
2. On 16 January 2020, ZhongAn International redeemed 480,000 thousand redeemable preference shares from Sinolink Worldwide at a total redemption price of RMB 511,894 thousand and the non-controlling interests of ZhongAn International decreased by RMB495,628 thousand.
3. Business Combination
  On 12 June 2020, the Company acquired 29% of equity of Shanghai Dexu Investment Center (Limited Partnership) ("Shanghai Dexu") for consideration of RMB25,000 thousand pursuant to the equity transfer agreement with TongXiu Commercial Factoring Co.,Ltd. As a result, the Company holds 99% of equity of Shanghai Dexu and has control over the entity.
  Details of total acquisition cost are as follows:

	Cash paid	25,000
	Fair value of shareholding before acquisition date	338,951

	Total acquisition cost	363,951



The assets and liabilities recognized as a result of the acquisition are as follows:

		Fair Value

	Cash and cash equivalents	4,274
	Financial assets at fair value through profit or loss	369,753
	Other assets	27,245
	Other liabilities	(179)

	Net identifiable assets acquired	401,093
	Less: Non-controlling interests	(5,650)
	Gains arising from the acquisition	(31,492)

		363,951

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	50

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

5. SUBSIDIARIES (continued)

At 30 June 2020, consolidated structured entities are as followings:

		Holding by		Total
	the Company	Subscription
Name	(%)		(RMB'000)		Principal activities

ZhongAn TaiKang Asset Management Plan	100%	4,021,432		Asset Management Product
ZhongAn LeXiang No.1 Asset Management Plan	100%	3,744,409		Asset Management Product
ICBC Credit Suisse Asset Management ZhongAn	100%	800,000		Asset Management Product
Insurance No.1 Asset Management Plan
Shanghai Dexu	99%	350,000		Equity Investment
ZhongAn TaiPing Asset Management Plan	100%	1,787		Asset Management Product

6. NET PREMIUMS EARNED

		Six months ended 30 June

		2020	2019

	Gross written premiums	6,766,787	5,897,079
	- Short-term life insurance written premiums	3,607,379	2,143,213
	- Property and casualty insurance written premiums	3,159,099	3,753,866
	- Long-term life insurance written premiums	309		-
	Less: Premiums ceded to reinsurers	(118,663)	(101,479)

	Net written premiums	6,648,124	5,795,600
	Less: Net change in unearned premium reserves	794,021	117,714

	Net premiums earned	7,442,145	5,913,314

7. NET INVESTMENT INCOME

	Six months ended 30 June

	2020	2019
Interest income

- Debt investments	250,699	254,259
- Trust investment scheme	36,861	21,162
- Bank deposit	27,504	40,441
- Securities purchased under agreements to resell	2,169	5,624
Dividend income
- Fund investments	67,867	18,658
- Wealth management products	49,632	44,308
- Equity investments	14,972	13,755
Realized gains, net	418,589	313,286

	868,293	711,493

51	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

8. NET FAIR VALUE CHANGES THROUGH PROFIT OR LOSS

	Six months ended 30 June

	2020	2019
Financial assets at fair value through profit or loss

- Equity investments	(3,852)	80,277
- Fund investments	(6,582)	18,987
- Wealth management products	(13,631)	11,868
- Debt investments	(20,147)	(145)

	(44,212)	110,987

9. NET CLAIMS INCURRED

	Six months ended 30 June

	2020	2019

Insurance claims paid	3,539,003	3,670,282
- Property and casualty insurance claims paid	2,778,914	2,926,356
- Short-term life insurance claims paid	760,089	743,926
Less: Claims paid ceded to reinsurers	(119,606)	(85,104)

Net claims paid	3,419,397	3,585,178
Add: Net change in insurance contract liabilities	794,489	192,097

	4,213,886	3,777,275

10. HANDLING CHARGES AND COMMISSIONS

	Six months ended 30 June

	2020	2019

Handling charges and commissions before reinsurance arrangement	349,245	440,894
Less: Reinsurance commission expenses/(income)	25,641	(3,706)

	374,886	437,188

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	52

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

11. GENERAL AND ADMINISTRATIVE EXPENSES

	Six months ended 30 June

	2020	2019

Consulting and technical fee	1,503,487	1,283,438
Advertising and marketing expense	894,764	90,943
Employee benefit expense	430,855	494,488
Impairment loss	117,191	60,814
Amortization of intangible assets	51,163	41,502
Depreciation of right-of-use assets	49,817	50,855
Taxes and surcharges	34,588	25,824
Depreciation of property and equipment	19,730	17,681
Auditors' remuneration	6,500	6,000
Other	231,413	257,797

	3,339,508	2,329,342

12. INCOME TAX

(a) Income tax

	Six months ended 30 June

	2020	2019

Current income tax	(79)	1,808
Deferred income tax (note 28)	(47,958)	(20,526)

	(48,037)	(18,718)

(b) Reconciliation of income tax

A reconciliation of the tax expense applicable to profit before income tax using the applicable income tax rate to the income tax at the Group's effective tax rate is as follows:

	Six months ended 30 June

	2020	2019

Profit before income tax	334,286	15,365


Tax computed at the applicable tax rate	98,207	31,017
Income not subject to tax	(17,088)	(4,243)
Expenses not deductible for tax	1,776	784
Tax losses for which no deferred tax asset was recognized	52,639	46,443
Extra tax deductions for research and development costs	(7,918)		-
Utilization of previously unrecognized tax losses	(176,145)	(70,018)
Adjustments to income tax in respect of previous periods	492	(22,701)

Income tax at the Group's effective rate	(48,037)	(18,718)

53	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

13. PROFIT PER SHARE

Basic profit per share is calculated by dividing net profit for the period by the weighted average number of shares in issue during the period. Diluted profit per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all dilutive potential shares.

The calculation of profit per share is based on the following:

			Six months ended 30 June

			2020	2019

		Net profit for the period attributable to owners of the parent	490,493	94,538
		Weighted average number of shares in issue (in thousand)	1,469,813	1,469,813

		Basic profit per share (RMB yuan)	0.33	0.06


		Diluted profit per share (RMB yuan)	0.33	0.06



	The Company had no dilutive potential shares at 30 June 2020 and 2019 respectively.
14. OTHER COMPREHENSIVE INCOME

			Six months ended 30 June

			2020	2019
		Available-for-sale financial assets

		Gains arising from changes in the fair value of available-for-sale financial assets	229,220	73,195
		Reclassification adjustments for amounts transferred to profit or loss	(37,011)	8,909

			192,209	82,104
		Income tax relating to available-for-sale financial assets	(48,321)	(20,526)

			143,888	61,578
		Exchange differences on translation of foreign operations	38,349	10,351


			182,237	71,929

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	54

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

15. CASH AND AMOUNTS DUE FROM BANKS AND OTHER FINANCIAL INSTITUTIONS

Cash and amounts due from banks and other financial institutions are as follows:

	30 June		31 December
	2020	2019

Cash in hand	73	102
Placements with banks and other financial institutions	1,894,575	667,627
Deposits with original maturity of no more than three months	1,346,827	1,512,322
Due from banks	428,643	465,770
Other monetary assets (i)	235,001	268,999

	3,905,119	2,914,820

1. Other monetary assets refer to funds deposited by the Group for daily business operations and investment activities.
Cash and cash equivalents are as follows:

	30 June		31 December
	2020	2019

Cash in hand	73	102
Placements with banks and other financial institutions	1,697,315	667,627
Deposits with original maturity of no more than three months	1,346,827	1,512,322
Due from banks	428,643	465,770
Other monetary assets	235,001	268,999

	3,707,859	2,914,820

16. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

	30 June		31 December
	2020	2019
Listed

- Debt investments	1,358,381	1,539,220
- Equity investments	30,116	56,456
Unlisted

- Debt investments	2,132,734	2,642,604
- Wealth management products	1,167,637	1,263,751
- Fund investments	855,492	718,505
- Equity investments	227,312		-

	5,771,672	6,220,536

55	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

17. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL

	30 June		31 December
	2020	2019
Securities - bonds

- Stock exchange	473,000		-
- Inter-bank market	159,945	160,000

	632,945	160,000

18. INTEREST RECEIVABLES

	30 June		31 December
	2020	2019

Debt investments	256,904	283,283
Bank deposits	26,342	26,855
Loans	5,777	2,112
Securities purchased under agreements to resell	78	8

Less: Impairment provisions	(6,180)	(6,180)

	282,921	306,078

19. PREMIUM RECEIVABLES

	30 June		31 December
	2020	2019

Premium receivables	3,722,658	3,712,817
Less: Provision for impairment of premium receivables	(291,234)	(180,657)

	3,431,424	3,532,160

20. REINSURANCE RECEIVABLES

	30 June		31 December
	2020	2019

Reinsurance receivables	281,776	238,028
Less: Provision for impairment of reinsurance receivables	-		-

	281,776	238,028

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	56

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

21. AVAILABLE-FOR-SALE FINANCIAL ASSETS

	30 June		31 December
	2020	2019
Listed

- Debt investments	4,437,793	2,849,160
- Equity investments	1,970,640	2,026,064
- Fund investments	108,007	43,019
Unlisted

- Debt investments	5,468,462	4,791,274
- Wealth management products	2,272,948	1,312,328
- Fund investments	1,677,543	1,230,064
- Equity investments	25,450	25,450

Less: Impairment provisions	(71,789)	(76,687)

	15,889,054	12,200,672

22. INVESTMENTS CLASSIFIED AS LOANS AND RECEIVABLES

	30 June		31 December
	2020	2019

Trust investment scheme	1,274,714	1,276,676

At 30 June 2020, the underlying loan assets of the trust investment schemes were neither pass due nor impaired. After considering the creditability of each of the counterparties and the collateral or guarantee obtained, no impairment was provided for such loan assets.

23. RESTRICTED STATUTORY DEPOSITS

	30 June		31 December
	2020	2019

At the beginning of period	294,338	293,963
Increase	-	48,500
Decrease	-	(48,125)

At the end of period	294,338	294,338

In accordance with relevant provision of Insurance Law of the PRC, the Company should place 20% of its share capital as restricted statutory deposits.

	30 June 2020 and 31 December 2019

	Amount	Storage	Period

China Citic Bank	145,838	Term deposit	3 years
China Everbright Bank	148,500	Term deposit	3 years
Total
294,338

57	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

24. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

							Transfer		Other
							out due to		changes
	1 January				Share of		acquisition		in capital		Exchange		30 June
	2020		Additions		profit/(loss)		of subsidiary		reserves		difference	2020

Shanghai Dexu (a)	318,374		-	20,577	(338,951)		-		-		-
ZA-CP Network Technology
(Shanghai) Co., Ltd. (the "ZA-CP")	4,696		-	(2,344)		-		-		-	2,352
Youwozai (Beijing) Network
Technology Limited Company
("Youwozai (Beijing)")	3,200		-	(537)		-		-		-	2,663
Shenzhen Small and Medium
P&C-Union Investment Co., Ltd.
(the "Shenzhen Small and Medium")	5,277		-	(139)		-		-		-	5,138
Shanghai Nuanwa Technology Co., Ltd.
(the"Shanghai Nuanwa")	35,884		-	(2,008)		-		-		-	33,876
Shanghai Xiaojia Financial
Technology Service Co., Ltd.
(the "Shanghai Xiaojia")	2,296		-	(22)		-		-		-	2,274
Chongqing ZhongAn Microloan
Limited Company
("ZhongAn Microloan")	208,874		-	1,499		-		-		-	210,373
A3 Holdings Inc. (the "A3 Holdings") (b)	28,133	9,930	(4,035)		-		-	507	34,535
Nova Technology Ltd.
("Nova Technology") (c)	5,632		-	(5,969)		-	30,738		-	30,401
Shanghai Dingzuan Ltd. ("Dingzuan")	943		-	(143)		-		-		-	800
Shanghai Zhongzhirong Digital
Technology Ltd. ("Zhongzhirong") (d)	-	3,000		-		-		-		-	3,000

	613,309	12,930	6,879	(338,951)	30,738	507	325,412

On 12 June 2020, the Company acquired 29% of equity of Shanghai Dexu for consideration of RMB25,000 thousand pursuant to the equity transfer agreement with TongXiu Commercial Factoring Co.,Ltd. As a result, the Company holds 99% of equity of Shanghai Dexu and has control over the entity.
On 19 June 2020, ZA Tech Global Cayman injected USD500 thousand and non-cash service valued at USD900 thousand to A3 Holdings, equivalent to RMB9,930 thousand in total. As a result, ZA Tech Global Cayman remains 40% of voting rights of A3 Holdings, and ZhongAn Technology holds 40% of voting rights of A3 Holdings through ZA Tech Global Cayman. ZA Tech Global Cayman acts as a shareholder with 2 out of 5 seats on the board of A3 Holdings.
On 21 February 2020 and 26 February 2020, SCC Venture VII Holdco, Ltd., LFC Investment Hong Kong Limited, Lighthouse International Growth Fund L.P. and Lighthouse Fellow L.P. injected RMB112,230 thousand into Nova Technology pursuant to the capital injection agreement. After this transaction, ZA Technology's share of Nova Technology's equity increased by RMB30,738 thousand.
On 9 April 2020, ZhongAn Technology together with Zhejiang Hesheng Digital Technology Co., Ltd and Shanghai Fucheng Enterprise Management Consulting Center LLP signed a capital injection agreement. Zhongan Technology injected RMB3,000 thousand into Zhongzhirong and obtained 30% of voting rights of Zhongzhirong. ZhongAn Technology acts as a shareholder with 2 out of 5 seats on the board of Zhongzhirong.

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	58

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

25. LEASES

Amounts recognized in the interim condensed consolidated balance sheet

The interim condensed consolidated balance sheet shows the following amounts relating to leases:

	30 June		31 December
	2020	2019
Right-of-use assets

Buildings	318,914	360,257
Equipment	2,644	3,378

	321,558	363,635


Lease liabilities	361,532	398,366

Additions to the right-of-use assets during the six months ended 30 June 2020 were RMB28,251 thousand.

Amounts recognized in the interim condensed consolidated statement of comprehensive income

The interim condensed consolidated statement of comprehensive income shows the following amounts relating to leases:

	Six months ended 30 June

	2020	2019
Depreciation charge of right-of-use assets

Buildings	(69,418)	(76,106)
Equipment	(910)	(199)

	(70,328)	(76,305)


Interest expense	9,270	11,563
Expense relating to short-term leases	857	4,612

The total cash outflow relating to leases for the six months ended 30 June 2020 was RMB74,354 thousand.

59	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

26. PROPERTY AND EQUIPMENT

				Electrical		Office furniture	Leasehold
		Motor vehicles		equipment		and equipment	improvements	Total
Cost

1 January 2020	4,475	59,767	9,816	132,877	206,935
Additions	-	4,790	445	6,028	11,263

30 June 2020	4,475	64,557	10,261	138,905	218,198
Accumulated depreciation

and impairment
1 January 2020	(3,394)	(27,476)	(5,101)	(79,996)	(115,967)
Depreciation charge	(69)	(5,772)	(995)	(14,149)	(20,985)

30 June 2020	(3,463)	(33,248)	(6,096)	(94,145)	(136,952)

Net book value
1 January 2020	1,081	32,291	4,715	52,881	90,968


30 June 2020	1,012	31,309	4,165	44,760	81,246

27. INTANGIBLE ASSETS

		Software		Patent		Other	Total
Cost

1 January 2020	804,704	30,100	1,826	836,630
Additions	100,874		-		-	100,874

30 June 2020	905,578	30,100	1,826	937,504
Accumulated amortization and impairment

1 January 2020	(343,465)	(4,013)	(373)	(347,851)
Amortization	(72,287)	(1,505)	(91)	(73,883)
Impairment	(11,342)		-		-	(11,342)

30 June 2020	(427,094)	(5,518)	(464)	(433,076)

Net book value
1 January 2020	461,239	26,087	1,453	488,779


30 June 2020	478,484	24,582	1,362	504,428

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	60

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

28. DEFERRED INCOME TAX ASSETS AND LIABILITIES

	30 June		31 December
	2020	2019

Net deferred income tax assets/(liabilities), at the beginning of period	(42)	19
Recognized in profit or loss	47,958	(24,366)
Recognized in other comprehensive income	(48,321)	24,305

Net deferred income tax liabilities, at the end of period	(405)	(42)

The breakdown of deferred income tax assets and liabilities during the period, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

	30 June		31 December
	2020	2019
Deferred income tax liabilities

Accumulated taxable losses	169,154	307,136
Insurance contract liabilities	325,105	99,484
Impairment loss provision	91,216	60,728
Amortization of intangible assets	31,250	26,971
Employee stock ownership plan	9,600	9,600
Unrealized gains of structured entities	(560,487)	(480,245)
Net fair value adjustment on financial assets carried at fair value
through profit or loss	(30,118)	(41,021)
Net fair value adjustment on available-for-sale financial assets	(26,603)	21,718
Share of net profit of associates and joint ventures accounted
for using the equity method	(9,522)	(4,413)

Net deferred income tax liabilities	(405)	(42)
Represented by


Deferred income tax assets	626,325	525,637
Deferred income tax liabilities	(626,730)	(525,679)

Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. At 30 June 2020, the Group did not recognize deferred income tax assets of RMB962,821thousand in respect of losses amounting to RMB4,546,275 thousand that can be carried forward against future taxable income.

61	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

29. OTHER ASSETS

	30 June		31 December
	2020	2019

Subrogation receivable	540,118	574,340
Advanced payment	308,424	442,125
Coinsurance expense to be reimbursed	199,943	279,631
Receivable from investment clearance and settlement	148,090	73,833
Deposits	48,805	49,429
Estimate of input tax	48,385	37,335
Assets recognized from costs to fulfil a contract	18,683	16,334
Others	140,747	108,091
Less: Provisions for other assets	(3,588)	(3,566)

	1,449,607	1,577,552

30. SHARE CAPITAL

	30 June		31 December
	2020	2019

Number of shares issued and fully paid at RMB1 yuan each	1,469,813	1,469,813

31. RESERVES

The amounts of the Group's reserves and the movements therein during the period are presented in the consolidated statement of changes in equity.

(a) Capital reserves

Capital reserves mainly represents share premium from issuance of shares.

(b) Surplus reserves

Surplus reserves consist of the statutory surplus reserve and the discretionary surplus reserve.

Statutory surplus reserves (the "SSR")
According to the PRC Company Law and the articles of association of the Company, the Company is required to set aside 10% of their net profit (after offsetting the accumulated losses incurred in previous years) determined under PRC GAAP, to the SSR until the balance reaches 50% of the respective registered capital.
Subject to the approval of shareholders, the SSR may be used to offset the accumulated losses, if any, and may also be converted into capital, provided that the balance of the SSR after such capitalisation is not less than 25% of the registered capital of the Company's retained profits. Since the Company does not have net profit at its company level instead of Group level, no reserve has been retained.

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	62

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

31. RESERVES (continued)

Surplus reserves (continued)
1. Discretionary surplus reserves (the "DSR")
  After making necessary appropriations to the SSR, the Company may also appropriate a portion of their net profit to the DSR upon the approval of the shareholders in general meetings.
  Subject to the approval of the shareholders, the DSR may be used to offset accumulated losses, if any, and may be converted into capital.
Other reserves

The investment revaluation reserve records the fair value changes of available-for-sale financial assets. The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of the subsidiaries incorporated outside the PRC. Other reserves due to share-based payments records the fair value of share options granted to the directors and employees of the Company.

32. CUSTOMER DEPOSITS

	30 June		31 December
	2020	2019
Current and savings accounts

- Corporate customers	22		-
- Individual customers	781,264	7,740
Term deposits

- Corporate customers	45		-
- Individual customers	1,412,424	16,101

	2,193,755	23,841

33. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

	30 June		31 December
	2020	2019
Securities - bonds

- Inter-bank market	2,971,944	2,326,973
- Stock exchange	1,966,600	1,722,752

	4,938,544	4,049,725

At 30 June 2020, bond investments of approximately RMB 5,815,460 thousand were pledged as securities sold under agreements to repurchase. Securities sold under agreements to repurchase are generally repurchased within 12 months from the date the securities are sold.

63	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

34. INSURANCE CONTRACT LIABILITIES

			30 June 2020

			Reinsurers'
			share of
	Insurance		insurance
	contract		contract
	liabilities		liabilities	Net
Insurance contracts liabilities

- Unearned premium reserves	4,549,299	(86,522)	4,462,777
- Claim reserves	2,971,956	(167,142)	2,804,814
- Long-term life insurance reserves	395		-	395

	7,521,650	(253,664)	7,267,986


Incurred but not reported claim reserves	1,943,615	(77,027)	1,866,588




		31 December 2019

			Reinsurers'
			share of
	Insurance		insurance
	contract		contract
	liabilities		liabilities	Net
Insurance contracts liabilities

- Unearned premium reserves	5,368,632	(111,834)	5,256,798
- Claim reserves	2,174,008	(163,293)	2,010,715

	7,542,640	(275,127)	7,267,513

Incurred but not reported claim reserves	1,051,298	(62,099)	989,199

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	64

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

34. INSURANCE CONTRACT LIABILITIES (continued)

Movements of unearned premium reserves

			Reinsurers'
			share of
	Insurance		insurance
	contract		contract
	liabilities		liabilities	Net

1 January 2020	5,368,632	(111,834)	5,256,798
Premium written	6,766,787	(118,663)	6,648,124
Premium earned	(7,586,120)	143,975	(7,442,145)

30 June 2020	4,549,299	(86,522)	4,462,777

Movements of claim reserves

				Reinsurers'
				share of
	Insurance			insurance
	contract			contract
	liabilities			liabilities	Net

1 January 2020	2,174,008	(163,293)	2,010,715
Claims incurred	4,336,951	(123,455)	4,213,496
Claims paid	(3,539,003)	119,606	(3,419,397)

30 June 2020	2,971,956	(167,142)	2,804,814

35. OTHER LIABILITIES

	30 June		31 December
	2020	2019

Payables to service suppliers	852,961	739,805
Deposit payable	660,856	262,694
Payable for investment purchased but not settled	199,959	53,625
Salary and staff welfare payable	189,800	314,200
Commission and brokerage payable	120,247	158,853
Claims payable	90,543	115,895
Tax payable other than income tax	63,926	80,117
Insurance guarantee fund	24,840	49,489
Payables for asset management fee	18,979	110,210
Others	103,554	159,089

	2,325,665	2,043,977

65	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

36. NOTE TO CONSOLIDATED STATEMENT OF CASH FLOWS

Reconciliation from profit before income tax to cash generated from/(used in) operating activities:

Six months ended 30 June

	2020

Profit before income tax	334,286
Impairment loss	117,191
Net investment income	(868,293)
Net fair value changes through profit or loss	44,212
Depreciation of property and equipment	20,985
Amortization of intangible assets	73,883
Depreciation of right-of-use assets	70,328
Exchange losses/(gains)	1,011
Finance costs	62,832
Increase in premium receivables	(9,841)
Decrease/(increase) in reinsurance receivables	(43,748)
Increase in amounts due from banks and other financial institutions	(197,260)
Amortization of deferred income	(316)
Share of net loss/(profit) of associates and joint ventures	(8,133)
Increase in insurance contract liabilities	473
Increase in customer deposits	2,169,914
Decrease/(increase) in other operating assets	100,603
Increase/(decrease) in other operating liabilities	365,981

Cash generated from/(used in) operating activities	2,234,108

2019

15,365

60,814

(711,493)

(110,987)

41,390

57,476

76,305

(2,205)

50,288

(7,772)

99,520

(316)

14,274

74,383

(212,150)

(42,263)

(597,371)

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	66

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

37. RELATED PARTY TRANSACTIONS

The Company's directors were of the view that Ant Group Co., Ltd. ("Ant Group") (formerly known as Ant Small and Micro Financial Services Group Co., Ltd), Ping An Insurance (Group) Co. of China Ltd. ("Ping An Insurance"), Tencent Holdings Limited ("Tencent"), Sinolink Worldwide Holdings Limited ("Sinolink") and Nova Technology Ltd. ("Nova Technology") and their subsidiaries were considered as related parties of the Group. Alibaba Group Holdings Limited ("Alibaba") and its subsidiaries were also considered as related parties of the Group given the relationship between Alibaba and Ant Group.

The Group's transaction with related parties are conducted under the ordinary course of business.

(a) Sale of insurance contracts

	Six months ended 30 June

	2020	2019

Tencent and its subsidiaries	8,755	6,597
Alibaba and its subsidiaries	782	928
Ping An Insurance and its subsidiaries	689		-
Ant Group and its subsidiaries	496	671
Nova Technology and its subsidiaries	265		-
Sinolink and its subsidiaries	51	337

	11,038	8,533

(b) Claim from insurance contracts

	Six months ended 30 June

	2020	2019

Tencent and its subsidiaries	3,732	3,414
Alibaba and its subsidiaries	1,383	1,848
Ping An Insurance and its subsidiaries	219		-
Ant Group and its subsidiaries	185	408
Sinolink and its subsidiaries	174	358
Nova Technology and its subsidiaries	80		-

	5,773	6,028

67	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

37. RELATED PARTY TRANSACTIONS (continued)

(c) Technical service fees

		Six months ended 30 June

		2020	2019

	Ant Group and its subsidiaries	1,009,644	426,228
	Tencent and its subsidiaries	1,070	1,245

		1,010,714	427,473

(d) Asset management fees

	Six months ended 30 June

	2020	2019

Ping An Insurance and its subsidiaries	5,597	7,048

(e) Fees for purchasing goods and other services

	Six months ended 30 June

	2020	2019

Alibaba and its subsidiaries	32,033	35,142
Nova Technology and its subsidiaries	12,818		-
Ant Group and its subsidiaries	11,401	1,772
Tencent and its subsidiaries	9,743	5,536
Ping An Insurance and its subsidiaries	4,861		-

	70,856	42,450

Fees for purchasing goods and other services mainly include cloud rental fees, guarantee fees, advertising fees, other IT service fees and etc.

(f) Interest income

Six months ended 30 June

20202019

Ping An Insurance and its subsidiaries	72	161

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	68

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

37. RELATED PARTY TRANSACTIONS (continued)

(g) Technical service income

	Six months ended 30 June

	2020	2019

Nova Technology and its subsidiaries	1,064		-
Alibaba and its subsidiaries	-	9,187

	1,064	9,187

Technical service income refers to the revenue from IT service.

(h) Capital transaction with Sinolink Worldwide

On 16 January 2020, ZhongAn Technology and Sinolink Worldwide injected RMB600,000 thousand and RMB576,471 thousand into ZhongAn International respectively. After this transaction, Sinolink Worldwide remains 49% of the voting rights of ZhongAn International as non-controlling interest.

On 16 January 2020, ZhongAn International redeemed 480,000 thousand redeemable preference shares from Sinolink Worldwide at a total redemption price of RMB511,894 thousand and the non-controlling interests of ZhongAn International decreased by RMB495,628 thousand.

Receivables with related parties

	30 June		31 December
	2020	2019

Ping An Insurance and its subsidiaries (i)	195,112	275,827
Nova Technology and its subsidiaries	32,320	25,683
Ant Group and its subsidiaries	517	50,195
Tencent and its subsidiaries	186	1,345

	228,135	353,050

Due to the motor co-insurance business with Ping An Property and Casualty Insurance Company of China Ltd.

69	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

37. RELATED PARTY TRANSACTIONS (continued)

(j) Payables with related parties

	30 June		31 December
	2020	2019

Ant Group and its subsidiaries	222,527		-
Nova Technology and its subsidiaries	3,750		-
Alibaba and its subsidiaries	3,445	7,902
Ping An Insurance and its subsidiaries	3,066	67,574
Tencent and its subsidiaries	289	246
Sinolink Worldwide and its subsidiaries	2	16

	233,079	75,738

(k) Prepayments to related parties

	30 June		31 December
	2020	2019

Alibaba and its subsidiaries	22,635	25,869
Nova Technology and its subsidiaries	17,258	19,050

	39,893	44,919

(l) Compensation of key management personnel

The compensations paid or payable to key management personnel are shown below:

	Six months ended 30 June

	2020	2019

Wages, salaries and bonuses	6,508	5,983
Pension costs - defined contribution plans	41	291
Other social security costs, housing benefits and other employee benefits	216	286

	6,765	6,560

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	70

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

38. CONTINGENT LIABILITIES

Owing to the nature of the insurance business, the Group is involved in the making of estimates for contingencies and legal proceedings in the ordinary course of business, both in the capacity as plaintiff or defendant in litigation and arbitration. Legal proceedings mostly involve claims on the Group's insurance products. Provision has been made for the probable losses to the Group, including those claims where directors can reasonably estimate the outcome of the litigations taking into account the related legal advice, if any. No provision is made for contingencies and legal proceedings when the result cannot be reasonably estimated or the probability of loss is so low.

In addition to the above contingencies and legal proceedings relating to the claims on the Group's insurance products, at 30 June 2020, the Group has no major pending litigation that may have a material adverse effect on the financial position or operating results of the Group.

39. MATURITY PROFILE OF FINANCIAL INSTRUMENTS

The tables below summarize the maturity profiles of the financial assets and financial liabilities of the Group based on remaining undiscounted cash flows, and insurance contract liabilities of the Group based on the estimated timing of the net cash outflows.

							30 June 2020

					Within		1 to			Over
	On demand				1 year		5 years			5 years			Undated	Total
Assets:

Cash and amounts due from
banks and other financial
institutions	3,707,858	197,261			-		-				-	3,905,119
Financial assets at fair value
through profit or loss	-	992,714	2,642,914	373,531	2,280,557	6,289,716
Securities purchased under
agreements to resell	-	632,945			-		-				-	632,945
Premium receivables	-	3,431,424			-		-				-	3,431,424
Reinsurance receivables	-	281,776			-		-				-	281,776
Available-for-sale
financial assets	-	2,566,897	6,844,739	1,808,745	6,054,588	17,274,969
Held-to-maturity
financial assets	-	4,123	67,994	25,048			-	97,165
Investments classified as
loans and receivables	-	305,511	902,310	324,030			-	1,531,851
Loans and advances to
customers	-	80,476	28,947			-			-	109,423
Term deposits	-	16,500	334,375			-			-	350,875
Restricted statutory deposits	-	51,477	279,252			-			-	330,729
Other assets	-	866,779	48,805			-			-	915,584

Total	3,707,858	9,427,883	11,149,336	2,531,354	8,335,145	35,151,576
Liabilities:


Customer deposits	781,286	1,420,241			-		-				-	2,201,527
Securities sold under
agreements to repurchase	-	4,938,544			-		-				-	4,938,544
Reinsurance payables	-	215,895			-		-				-	215,895
Other liabilities	-	1,404,428			-		-	660,856	2,065,284

Total	781,286	7,979,108			-		-	660,856	9,421,250

71	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

39. MATURITY PROFILE OF FINANCIAL INSTRUMENTS (continued)

					31 December 2019

			Within		1 to		Over
	On demand		1 year		5 years		5 years		Undated		Total

Assets:
Cash and amounts due from
banks and other financial
institutions	2,914,820		-		-		-		-	2,914,820
Financial assets at fair value
through profit or loss	-	692,437	3,250,131	820,458	2,038,712	6,801,738
Securities purchased under
agreements to resell	-	160,000		-		-		-	160,000
Premium receivables	-	3,532,160		-		-		-	3,532,160
Reinsurance receivables	-	238,028		-		-		-	238,028
Available-for-sale
financial assets	-	1,848,373	5,885,094	878,355	4,636,925	13,248,747
Investments classified as
loans and receivables	-	151,374	1,078,538	326,363		-	1,556,275
Loans and advances
to customers	-	1,913	50,326		-		-	52,239
Term deposits	-		-	382,500		-		-	382,500
Restricted statutory deposits	-		-	330,729		-		-	330,729
Other assets	-	955,162	49,429		-		-	1,004,591

Total	2,914,820	7,579,447	11,026,747	2,025,176	6,675,637	30,221,827


Liabilities:
Securities sold under
agreements to repurchase	-	4,049,725		-		-		-	4,049,725
Reinsurance payables	-	218,060		-		-		-	218,060
Other liabilities	-	1,379,991		-		-	262,694	1,642,685

Total	-	5,647,776		-		-	262,694	5,910,470

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	72

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

40. FAIR VALUE MEASUREMENT

Fair value estimates are made at a specific point in time based on relevant market information and information about financial instruments. When an active market exists, such as an authorized securities exchange, the market value is the best reflection of the fair values of financial instruments. For financial instruments where there is no active market, fair value is determined using valuation techniques.

The Group's financial assets mainly include cash and amounts due from banks and other financial institutions, financial assets at fair value through profit or loss, available-for-sale financial assets, statutory deposits, held-to-maturity financial assets and etc.

Determination of fair value and fair value hierarchy

All assets and liabilities for which fair value is measured or disclosed in the condensed consolidated financial information are categorized within the fair value hierarchies. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

The levels of the fair value hierarchy are as follows:

Fair value is based on quoted prices (unadjusted) in active markets for identical assets or liabilities ("Level 1");
Fair value is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) ("Level 2"); and
Fair value is based on inputs for the asset or liability that are not based on observable market data (unobservable inputs) ("Level 3").

The level of fair value calculation is determined by the lowest level input with material significant in the overall calculation. As such, the significance of the input should be considered from an overall perspective in the calculation of fair value.

For Level 2 financial instruments, valuations are generally obtained from third party pricing services for identical or comparable assets, or through the use of valuation methodologies using observable market inputs, or recent quoted market prices. Valuation service providers typically gather, analyze and interpret information related to market transactions and other key valuation model inputs from multiple sources, and through the use of widely accepted internal valuation models, provide a theoretical quote on various securities. Debt securities traded among Chinese interbank market are classified as Level 2 when they are valued at recent quoted price from Chinese interbank market or from valuation service providers. Substantially most financial instruments classified within Level 2 of the fair value hierarchy are debt investments denominated in RMB. Fair value of debt investments denominated in RMB is determined based upon the valuation results by the China Central Depository & Clearing Co., Ltd. All significant inputs are observable in the market.

For Level 3 financial instruments, prices are determined using valuation methodologies such as discounted cash flow models, recent transaction prices of the same or similar instruments, and other similar techniques. Determinations to classify fair value measures within Level 3 of the valuation hierarchy are generally based on the significance of the unobservable factors to the overall fair value measurement, and valuation methodologies such as discounted cash flow models and other similar techniques. The Group's valuation team may choose to apply internally developed valuation method to the assets or liabilities being measured, determine the main inputs for valuation, and analyze the change of the valuation and report it to management. Key inputs involved in internal valuation services are not based on observable market data. They reflect assumptions made by management based on judgements and experiences.

For assets and liabilities that are recognized at fair value on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

73	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

40. FAIR VALUE MEASUREMENT (continued)

Determination of fair value and fair value hierarchy (continued)

The following tables provide the fair value measurement hierarchy of the Group's financial assets and liabilities:

					30 June 2020

	Level 1				Level 2				Level 3		Total
Assets measured at fair value

Financial assets at fair value through
profit or loss
- Fund investments	855,492				-				-	855,492
- Equity investments	30,116				-				-	30,116
- Debt investments	1,358,381	2,132,734					-	3,491,115
- Wealth management products	192,729	974,908					-	1,167,637
- Unlisted equity investments	-				-	227,312	227,312
Available-for-sale financial assets
- Debt investments	4,437,793	5,396,673					-	9,834,466
- Equity investments	1,970,640				-				-	1,970,640
- Fund investments	1,785,550				-				-	1,785,550
- Wealth management products	928,679	1,344,269					-	2,272,948
- Unlisted equity investments	-				-	25,450	25,450

	11,559,380	9,848,584	252,762	21,660,726
Assets for which fair values are disclosed


Investments classified as loans and receivables	-				-	1,274,714	1,274,714
Held-to-maturity financial asset	77,572				-				-	77,572

	77,572				-	1,274,714	1,352,286




					31 December 2019

	Level 1				Level 2				Level 3		Total
Assets measured at fair value

Financial assets at fair value through
profit or loss
- Fund investments	718,505				-				-	718,505
- Equity investments	56,456				-				-	56,456
- Debt investments	1,539,220	2,642,604					-	4,181,824
- Wealth management products	-	1,263,751					-	1,263,751
Available-for-sale financial assets
- Debt investments	2,849,160	4,714,587					-	7,563,747
- Equity investments	2,026,064				-				-	2,026,064
- Fund investments	1,273,083				-				-	1,273,083
- Wealth management products	-	1,312,328					-	1,312,328
- Unlisted equity investments	-				-	25,450	25,450

	8,462,488	9,933,270	25,450	18,421,208
Assets for which fair values are disclosed


Investments classified as loans and receivables	-				-	1,276,676	1,276,676

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	74

Notes to the Interim Condensed Consolidated Financial Information

For the six months ended 30 June 2020 (All amounts expressed in RMB'000 unless otherwise stated)

40. FAIR VALUE MEASUREMENT (continued)

Valuation techniques

The fair value of the unquoted debt investments is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities, with appropriate adjustment where applicable.

The fair value of the unquoted equity investments has been determined using valuation techniques such as comparable company valuation multiples, recent transaction prices of the same or similar instruments, with appropriate adjustments have been made where applicable, for example, for lack of liquidity using option pricing models. The valuation requires management to make certain assumptions about unobservable inputs to the model, which mainly include historical volatility and estimated time period prior to the listing of the unquoted equity instruments, etc. The fair value of the unquoted equity investments is not significantly sensitive to a reasonable change in these unobservable inputs.

41. SUBSEQUENT EVENTS

On 16 July 2020, the Company issued 5-year notes in the aggregate principal amount of USD600,000 thousand at the rate of 3.125 per cent on the Hong Kong Stock Exchange.

The COVID-19 pandemic outbroke and continued to spread in China and around the world since early 2020. The COVID-19 pandemic has had certain impacts on the business operation and overall economy in some areas or industries around the world, including in China. The interim condensed consolidated financial information has reflected the known impact of the COVID-19 pandemic on the financial position as at 30 June 2020 and on the operating results and cash flows for the six months ended 30 June 2020 of the Group. Since the beginning of the second quarter in 2020, although China's economic and social operation has gradually got back on track despite prevention and control measures applied, it remains largely uncertain how things will develop with the global outbreak of the COVID-19 pandemic. The Group will pay close attention to the development of the COVID-19 pandemic and evaluate its impact on the financial position and operating results of the Group.

42. APPROVAL OF THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The interim condensed consolidated financial information has been approved and authorized for issue by the directors of the Company on 26 August 2020.

75	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

Definitions

"Alipay Insurance"	the insurance business segment under Ant Group
"Ant Group"	Ant Group Co., Ltd. (螞蟻科技集團股份有限公司), a joint stock limited company
	incorporated in the PRC (established on October 19, 2000, its name was Zhejiang
	Alibaba E-commerce Co., Ltd.(浙江阿裡巴巴電子商務有限公司) back then) and one
	of our substantial shareholders
"Bestpay"	China Telecom Bestpay E-commerce Ltd. (天翼電子商務有限公司), a company
	incorporated in the PRC and a wholly-owned subsidiary of China Telecom
"associate(s)"	has the meaning ascribed to it under the Listing Rules
"Board" or "Board of Directors"	the Board of Directors of our Company
"CBIRC"	the China Banking and Insurance Regulatory Commission (中國銀行保險監督管理委
	員會)
"CG Code"	the Corporate Governance Code and Corporate Governance Report set out in
	Appendix 14 to the Listing Rules
"Chief Executive(s)"	has the meaning ascribed to it under the Listing Rules
"CIRC"	the China Insurance Regulatory Commission (中國保險監督管理委員會)
"Company", "Our Company", "ZhongAn",	ZhongAn Online P & C Insurance Co., Ltd. (眾安在綫財產保險股份有限公司), a joint
"we" or "us"	stock limited company with limited liability incorporated in the PRC on October 9,
	2013
"Director(s)"	the director(s) of our Company
"Domestic Shares"	ordinary shares issued by the Company, with a nominal value of RMB1, which are
	subscribed for or credited as paid in RMB
"Global Offering"	has the meaning ascribed to it in the Prospectus
"Grab"	Grab International Inc., a leading O2O platform in Southeast Asia, with which
	ZhongAn International has formed a joint venture company, Grab Insure
"Group", "we", "our" or "us"	the Company and its subsidiaries, or where the context so requires, in respect of the
	period before the Company became the holding company of its present subsidiaries,
	such subsidiaries could be viewed as if they were the subsidiaries of the Company at
	the time
"Guazi"	Guazi (瓜子), a second-hand auto sales platform operated by Chehaoduo Secondhand
	Auto Broker (Beijing) Co., Ltd. (車好多舊機動車經紀(北京)有限公司), a company
	incorporated in the PRC
"H Shares"	the overseas listed foreign invested ordinary shares in the ordinary share capital of
	the Company, with a nominal value of RMB1 each, which are to be subscribed for and
	traded in Hong Kong dollars, and a "H Share" means any of them
"HK$"	Hong Kong dollars, the lawful currency of Hong Kong
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC
"Hong Kong Stock Exchange"	The Stock Exchange of Hong Kong Limited
"iyunbao"	iyunbao.com (i雲保), an online insurance platform operated by Baotong Insurance
	Agent Co., Ltd. (保通保險代理有限公司), a company incorporated in the PRC
"JPY"	Japanese yen, the lawful currency of Japan

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	76

Definitions

"Keywise Fund"	Keywise Greater China Opportunities Master Fund
"Lexin"	LexinFintech Holdings Ltd., a Cayman Islands company, and listed on the NASDAQ
	Global Market (stock code: LX)
"Listing"	the listing of the H shares on the Main Board of the Hong Kong Stock Exchange
"Listing Rules"	the Rules governing the Listing of Securities on The Stock Exchange of Hong Kong
	Limited (as amended from time to time)
"Maodou"	Maodou (毛豆), an auto sales platform operated by Jinmaodou Technology
	Development (Beijing) Co., Ltd. (金毛豆技術開發(北京) 有限公司), a company
	incorporated in the PRC
"Model Code"	the Model Code for Securities Transactions by Directors of Listed Issuers set out in
	Appendix 10 to the Listing Rules
"NTUC Income"	NTUC Income Insurance Co-operative Limited, the largest comprehensive insurer in
	Singapore
"Ping An Insurance"	Ping An Insurance (Group) Co. of China, Ltd. (中國平安保險(集團)股份有限公司), a
	joint stock limited company incorporated in the PRC on March 21, 1988 listed on the
	Main Board of the Hong Kong Stock Exchange (SEHK: 02318) and the Shanghai Stock
	Exchange (SSE: 601318), and one of our substantial shareholders
"Ping An P&C"	Ping An Property and Casualty Insurance Company of China, Ltd. (中國平安財產保險
	股份有限公司), a subsidiary of Ping An Insurance
"PPDAI"	FinVolution Group, a Cayman Islands company, which is listed on the New York Stock
	Exchange (Stock Code: FINV)
"PRC" or "China"	the People's Republic of China, but for the purposes of this interim report only, except
	where the context requires, references in this interim report to the PRC or China
	exclude Hong Kong, Macau and Taiwan
"Prospectus"	the prospectus of the Company dated September 18, 2017
"RMB" or "Renminbi"	the lawful currency of PRC
"Reporting Period"	the six months ended June 30, 2019
"S$"	Singapore dollars, the lawful currency of Singapore
"Secoo"	Secoo (寺庫), an e-commerce online platform operated by Secoo Holding Limited
	incorporated in the Cayman Islands
"SFO"	the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as
	amended or supplemented from time to time
"Share(s)"	the shares in the share capital of our Company with a nominal value of RMB1 each
"Shareholder(s)"	the holders of the Shares
"Sinolink Worldwide"	Sinolink Worldwide Holdings Limited (百仕達控股有限公司), a company incorporated
	in Bermuda with limited liability whose shares are listed on the Main Board of the
	Hong Kong Stock Exchange (Stock Code: 1168)
"SOMPO"	Sompo Japan Insurance Inc., one of the top three property and casualty insurance
	companies in Japan
"substantial shareholders"	has the meaning ascribed to it under the Listing Rules

77	ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020

"Supervisor(s)"	members of the supervisory committee of the Company
"Supervisory Committee"	the supervisory committee of the Company established pursuant to the Company
	Law of the PRC (中華人民共和國公司法)
"Taobao Marketplace"	an e-commerce platform of Alibaba
"Tencent"	Tencent Holdings Limited, a company incorporated in the Cayman Islands and listed
	on the Main Board of the Hong Kong Stock Exchange
"Tencent Computer System"	Shenzhen Tencent Computer Systems Company Limited (深圳市騰訊計算機系統有
	限公司), a limited liability company incorporated in the PRC on November 11, 1998,
	one of our substantial shareholders and a subsidiary of Tencent
"Tmall"	Tmall.com (天貓), an online platform created by Alibaba
"USD"	United State dollars, the lawful currency of the United States of America
"X Financial"	a Cayman Islands company, and listed on the New York Stock Exchange (stock code:
	XYF)
"ZA Bank"	ZA Bank Limited (眾安銀行有限公司), a subsidiary of our Company, incorporated in
	Hong Kong on August 8, 2018
"ZA Life"	ZA Life Limited (眾安人壽有限公司), a subsidiary of our Company, incorporated in
	Hong Kong on February 27, 2019
"ZhongAn International"	ZhongAn Technologies International Group Limited (眾安科技 (國際) 集團有限公司),
	a subsidiary of our Company, incorporated in Hong Kong on September 22, 2017
"ZhongAn Technology"	ZhongAn Information and Technology Services Co., Ltd. (眾安信息技術服務有限公司),
	a wholly-owned subsidiary of our Company, incorporated in the PRC on July 7, 2016
"%"	per cent

ZhongAn Online P & C Insurance Co., Ltd. / Interim Report 2020	78

Glossary

"big data analytics"	the use of advanced analytic techniques against very large, diverse data sets
	to uncover hidden patterns, unknown correlations, market trends, customer
	preferences and other useful information that can help organizations make more-
	informed business decisions
"cede"	the transfer of all or part of a risk written by an insurer to a reinsurer
"claim"	an occurrence that is the basis for submission and/or payment of a benefit under
	an insurance policy. Depending on the terms of the insurance policy, a claim may be
	covered, limited or excluded from coverage
"commission"	a fee paid to an agent or broker by an insurance company for services rendered in
	connection with the sale or maintenance of an insurance product
"customer"	unless otherwise indicated, the insured under our insurance policies. The number of
	our customers was calculated based on unique identifiers and contact information
	available to us
"gross written premiums" or "GWP"	total premiums (whether or not earned) for insurance contracts written or assumed
	during a specific period, without deduction for premiums ceded
"handling charges and commissions"	fees paid to insurance agents for the distribution of our products
"insured"	the insured person as specified in the insurance product
"Insuretech"	use of technology innovations designed to achieve savings and efficiency from the
	traditional insurance industry model
"net investment income"	the sum of interest income, dividend income and realized gains or losses on
	securities through profit or loss and available-for-sale securities
"net premiums earned"	net written premiums less net change in unearned premium reserves during a period
"premium"	payment and consideration received on insurance policies issued or reissued by an
	insurance company
"reinsurance"	the practice whereby a reinsurer, in consideration of a premiums paid to it, agrees
	to indemnify another party for part or all of the liabilities assumed by the reinsured
	party under an insurance contract, which the reinsured party has issued
"reserves"	liability established to provide for future payments of claims and benefits to
	policyholders net of liability ceded to reinsurance companies
"unearned premium reserves"	portions of written premiums relating to unexpired risk of insurance coverage

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Chinese Regulator NAFR Permits ZhongAn Online to Issue Bonds	23-09-13	MT
Zhongan Online P & C Insurance Co., Ltd. Appoints Yao Wang as Employee Representative Supervisor	23-09-13	CI
ZhongAn Online P&C Insurance Returns to H1 Profit	23-08-28	MT
Transcript : ZhongAn Online P & C Insurance Co., Ltd., H1 2023 Earnings Call, Aug 28, 2023	23-08-28
ZhongAn Online P & C Insurance Co., Ltd. Reports Earnings Results for the Half Year Ended June 30, 2023	23-08-28	CI
ZhongAn Online P&C Insurance to Swing to H1 Profit	23-08-16	MT
Zhongan Online P & C Insurance Co., Ltd. Provides Group Earnings Guidance for the Six Months Ended June 30, 2023	23-08-15	CI

Chart ZhongAn Online P & C Insurance Co., Ltd.

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Chart ZhongAn Online P & C Insurance Co., Ltd.

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Company Profile

ZhongAn Online P & C Insurance Co., Ltd. is a China-based online insurance company. The Company provides insurance services include lifestyle consumption insurance, consumer finance insurance, health insurance, auto insurance and travel insurance. The Companyâs products include shipping return policy, online payment security insurance, account security insurance, phone accident policy, phone screen crack policy, Baobei Open Platform, Mashanghua, individual health insurance, group health insurance plans, flight accident and delay policy and among others.

Sector

Property & Casualty Insurance

Calendar

2024-08-25 - Q2 2024 Earnings Release (Projected)

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Ratings for ZhongAn Online P & C Insurance Co., Ltd.

Trading Rating

Investor Rating

ESG Refinitiv

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Analysts' Consensus

Sell

Buy

Mean consensus

BUY

Number of Analysts

Last Close Price

12.14 CNY

Average target price

20.94 CNY

Spread / Average Target

+72.43%

Consensus

EPS Revisions

Estimates Revisions

Annual profits - Rate of surprise

Company calendar

Sector Other Property & Casualty Insurance

	1st Jan change	Capi.
ZHONGAN ONLINE P & C INSURANCE CO., LTD.	-26.46%	2.46B
TOKIO MARINE HOLDINGS, INC.	+38.91%	61.52B
AMERICAN INTERNATIONAL GROUP, INC.	+10.01%	50.24B
THE TRAVELERS COMPANIES	+12.05%	48.88B
THE ALLSTATE CORPORATION	+21.50%	44.86B
ARCH CAPITAL GROUP LTD.	+22.39%	33.96B
INTACT FINANCIAL CORPORATION	+10.03%	29.23B
MS&AD INSURANCE GROUP HOLDINGS, INC.	+50.11%	27.95B
FAIRFAX FINANCIAL HOLDINGS LIMITED	+21.57%	24.78B
SAMPO OYJ	-3.96%	20.38B

Other Property & Casualty Insurance

ZhongAn Online P & C Insurance Co., Ltd.

Equities

6060

CNE100002QY7

Property & Casualty Insurance

ZhongAn Online P & C Insurance : INTERIM REPORT 2020

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Chart ZhongAn Online P & C Insurance Co., Ltd.

Company Profile

Income Statement Evolution

Ratings for ZhongAn Online P & C Insurance Co., Ltd.

Analysts' Consensus

EPS Revisions

Annual profits - Rate of surprise

Sector Other Property & Casualty Insurance