ZhongAn’s growth engine keeps running in a bumpy economy

The digital insurer’s third-quarter revenue grew far faster than the overall industry as its flagship low-cost policies continue to attract demand

Key Takeaways:

• ZhongAn’s insurance business income grew about 10% in the third quarter, well ahead of the overall industry, despite consumer caution in an uncertain economy
• The company’s strength stems from its digital distribution capabilities targeting low-cost policies for the mass market

By Warren Yang

Despite their name, insurance companies are hardly a “sure” bet in China’s current rocky economy, especially as volatile financial markets undermine many of the investment products they rely on to help fund their business. In the face of those challenges, ZhongAn Online P&C Insurance Co. Ltd. (6060.HK) appears to be sailing through the choppy waters quite well.

Last Friday, the online insurer said it generated 7.81 billion yuan ($1.17 billion) in insurance business income for the third quarter, as part of its quarterly disclosure of key solvency-related metrics. That’s about 10% more than what the company posted for the year-earlier period. ZhongAn made a net loss of 793 million yuan in the third quarter, swinging from a profit a year earlier, but that’s probably due to a sharp decline in the fair value of its equity holdings under international accounting rules.

Such revenue growth may look modest. But it’s actually well ahead of the broader insurance industry, where many companies reported double-digit revenue declines as consumers exercise caution and scale back discretionary spending. As a case in point, PICC Property and Casualty (2328.HK), the largest P&C insurer in China, reported its revenue fell 20.4% in the third quarter.

ZhongAn’s strength stems from its digital distribution capabilities that give it a relatively low cost structure, combined with its focus on cheap policies for the mass market. Those set it apart from traditional property and casualty (P&C) insurers that rely heavily on auto and commercial coverage.

Consumer sentiment across China is wobbly but people still need insurance — they have just grown far more selective. Navigating a prolonged real estate downturn and broader economic uncertainty, households in China are shunning discretionary car upgrades and speculative financial products in favor of essential protection. These high-necessity niches are where ZhongAn thrives.

For one, rising healthcare costs are pushing families to seek reliable financial safety nets to supplement their coverage under China’s national health plan. As a result, demand for affordable, supplementary medical insurance is booming across the country, driving premium revenue from ZhongAn’s flagship Zhenxiang Yisheng medical series up more than 60% year-over-year in the first half of 2026. This shows that when a policy directly addresses an immediate, important health need, Chinese consumers are still willing to open their wallets.

Similarly, pragmatic consumer spending preferences are underpinning growth for ZhongAn’s “digital life” segment, which covers everything from shipping fees for returned e-commerce products to pet health to travel logistics. Because these low-cost, micro-coverage products are embedded directly into daily online transactions through ZhongAn’s partner platforms, their sales remain relatively insulated from the sluggishness of the overall Chinese economy.

The company’s distributors include some of China’s biggest and most popular internet companies, led by Alibaba, one of ZhongAn’s original founders, whose Ant Group financial affiliate continues to hold 6.4% of the insurer’s shares.

Beyond consumer health and lifestyle micro-coverage, ZhongAn is also building a newer high-growth engine with electric vehicle (EV) insurance. As China accelerates its EV adoption, ZhongAn’s premium income from this segment more than doubled in the first half to account for more than a third of its total auto business. Tapping directly into EV manufacturers’ direct-sales networks allows ZhongAn to bypass expensive traditional agency channels while capturing market share in a rapidly growing segment.

Shunning credit risks

While demand for essential protection is holding up to some extent, the current economic climate in China is forcing insurers to adjust their strategies. For ZhongAn, the most glaring shift is a pullback from credit guarantees for retail borrowers, which were once one of its main growth drivers. In the first half of 2026, ZhongAn’s premium income from consumer finance insurance plummeted by nearly 79%, reducing its total outstanding policy obligations for this business line by half. That reduction has helped ZhongAn improve its underwriting margin.

China’s economic conditions also create headaches for insurers in managing the asset side of their balance sheets.

As rate cuts keep long-term government bond yields near historic lows, Chinese insurers face continuous reinvestment risks as they are forced to replace maturing high-yield fixed-income assets with lower-yielding alternatives. That, in turn, drags on their investment returns.

Against this backdrop, a domestic stock market rally in the first half of this year was a welcome development for yield-hungry insurers including ZhongAn. The company boosted its stock holdings to 13% of its total investment assets at the end of June from 9% six months earlier.

Changes in the values of equity holdings flow directly into insurers’ income statements in the form of mark-to-market gains or losses under international accounting rules. As Chinese stock prices jumped in the first six months of this year, ZhongAn’s total investment income soared 150% during the period, driving a 132% net profit surge.

But obviously, good times don’t last forever, and the same strategy that boosted Zhongan and its peers is already showing signs of haunting the group in the second half of the year as most indexes have fallen in the last few months. Hong Kong’s benchmark Hang Seng Index is currently down 10% from a peak in August.

When things go south, as they are now, equity investments can hit insurers’ bottom lines hard as seen in ZhongAn’s net loss for the third quarter. Among larger traditional peers, Ping An Insurance (2318.HK; 601318.SH), which sells both P&C and life insurance, also posted a 94% year-on-year profit plunge in the third quarter.

Financial market volatility affects insurers’ capital buffers as well because fair-value losses in investments reduce their net balance-sheet assets in real time. However, despite these quarterly valuation markdowns, ZhongAn’s capitalization remained strong at the end of September, with solvency ratios far exceeding regulatory minimums.

ZhongAn shares rose for two consecutive days after its latest disclosure. This indicates that investors are focusing on the company’s strength, rather than inevitable earnings ups-and-downs induced by market movements. Its stock trades at a price-to-earnings (P/E) ratio of 6.9, comparable to 6.7 for PICC.

For the broader Chinese insurance industry, ZhongAn’s performance may serve as a blueprint for surviving economic weakness as a smaller player: stay away from risky business and focus on the areas where people are willing to spend.

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