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Operator
Ladies and gentlemen, thank you for standing by and welcome to OneConnect's first quarter 2024 earnings call. Please note this event is being recorded. Now I would like to hand the conference over to your speaker host today, Mr. Rick Chan, the company's head of investor relations. Please go ahead, Mr. Chan.
Chan
Thank you, operator. Hello, everyone, and welcome to our 2024 first quarter earnings conference call. Our financial and operating results are released earlier today and currently available on our IR website. Today, you will hear from our Chairman and CEO, Mr. Shen Chongfeng, who will give opening remarks and business highlights. Afterwards, our CFO, Mr. Luo Yuntao, will offer a closer look into our financials. And then in question and answer session, our management team will be available to you. We will have our CEO, Mr. Li Jie, Head of Corporate Banking and Product Management, Mrs. Jettison. In today's conference, our management team will give statements in Mandarin and in English. For those in Mandarin, a consecutive translation will be provided. In case of any discrepancy between the Mandarin version and the English version, our statements in the original language shall prevail. Let me quickly cover the safe harbor statement before we start. as we will make forward-looking statements which involve a number of risks and uncertainties that could cause actual results to diverge materially. Please note that we may present both IFRS and non-IFRS financial measures. With that, I am now pleased to turn our call to Mr. Chairman and CEO, Mr. Shen Chongfeng, please. Hello, everyone. I am Shen Chongfeng.
Shen Chongfeng
I would like to thank everyone for participating in the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter Hello, everyone. I'm Shen Chongfeng. Thank you for taking the time to dial in OneConnect's 2024 Q1 earnings call.
Shen Chongfeng
On behalf of OneConnect, I would like to extend a warm welcome to all investors, analysts, and friends from media who are with us today. It's a great pleasure to take this opportunity to share with you what we have achieved in the first quarter of 2024.
Shen Chongfeng
Regarding the 2024 economic work deployment, the Central Economic Work Committee has proposed nine key tasks. will use technology innovation to lead the development of modern industrial systems and put it at the forefront of the development of the financial industry. Combining the main economic task requirements, the 2024 financial work will focus on accelerating the development of technology and finance, monetary policy, and the development of energy efficiency, in order to promote the deep integration of finance and technology and assist the development of high-end economies. The Central Economic Work Conference put forward nine key tasks for this year's economic development. The construction of the modernized industrial system led by technical innovation, which is the top priority among the nine tasks,
Shen Chongfeng
also points out the direction for the development of the financial industry. Under these requirements, development of the industry this year will center around expediting application of technology and measures that achieve both quality and efficient monetary policy so as to promote the deep integration of finance and technology as well as quality economic development. The recent Science and Technology World Conference held by the People's Bank of China also put forward tasks such as accelerating the planning and construction of digital central banks, continuously enhancing network security and data security capabilities, as well as deepening the application of financial technology and digital transformation.
Shen Chongfeng
Under the digital trend, financial institutions and large state-owned enterprises With digitalization becoming ever more relevant, financial institutions as well as large SOEs are facing many challenges.
Shen Chongfeng
OneConnect closely monitors policy and market development and continues to leverage the unique advantages of technology plus business to improve its product capabilities in three major segments, namely digital banking, digital insurance, and gamma platform, so as to empower the development of new quality productive forces in the financial industry.
Shen Chongfeng
As the spring comes, In the Q1 of 2024, our profit and loss situation has been further improved. The net profit and loss of continuing operations from the same period of RMB 0.8 billion last year has been improved to RMB 0.6 billion, which is 21.2% lower than before. The profit and loss ratio has also increased by 0.3%. In the first quarter, we actively adjusted the product combination, deepened customer cooperation, and continued to expand the domestic and foreign markets, and improved operating efficiency. This has laid the foundation for our long-term performance and profit.
Shen Chongfeng
The spring of the year of long witnessed further improvements in our profitability. Net loss from continuing operations attributable to shareholders improved to 60 million yuan from 80 million yuan in the same period last year, narrowing by 21.2% year-on-year. Gross profit margin increased by 0.3 percentage points year-on-year. In the first quarter, we actively adjusted our product portfolio, deepened customer engagement, and continued to expand domestic and overseas markets. Additionally, we also continued to improve operational efficiency, which laid a solid foundation for us to achieve profitability in the medium term. Next, please go to page four.
Shen Chongfeng
As for the management concept of value-added supply and high-quality development, in the first quarter, we focused on product upgrades, deep-rooted customers, and the development of three core items in foreign countries, and achieved good results. At this stage, we are accelerating the promotion of security technology output and self-improvement, and gathering resources to build high-value products. At the same time, we also pay attention to improving the production capacity of sales teams, expanding the business base, and working hard to promote three-way income growth. Committed to our business philosophy of value, win-win cooperation, and quality development, we achieved significant progress in three core priorities, namely product upgrade, customer expansion, and overseas expansion in Q1.
Shen Chongfeng
At this stage, we are accelerating export of Ping An Group technology and upgrade of self-developed products and aggregating resources on high-value products. At the same time, the company has boosted the productivity of its sales team, expanded pipeline, and increased third-party revenue growth so as to further improve revenue structure. On top of that, OneConnect has also ramped up efforts in overseas markets, meeting international market demands by continuously improving our products based on the demands and preferences of local markets. Next page.
Shen Chongfeng
At this stage, we will focus on financial institutions and customers to deepen the strategic development of 1.2 billion. We will continue to work with financial institutions and customers as the core, through the integration and optimization of our products and services, around the digital bank, digital insurance, and gamma platform, the three major business blocks, to continue to improve product capabilities. We will focus closely on the market dynamics, strengthen the cooperation with various financial supervision agencies and corporate and industry partners, In addition to the mainland Chinese market, we will focus on China, Hong Kong, Southeast Asia, South Africa, the Middle East, and other regions. These regions' financial markets are constantly growing, and digital needs are also growing rapidly. We will actively seek cooperation opportunities to expand our business model.
Shen Chongfeng
2024 remains a key year in our Stage 2 strategy of broadening customer engagement, where we focus on financial institution customers while deepening Unite the Core, Empower the Win strategy. We will continue to focus on our financial institution customers, integrate and optimize our products and services to continuously improve our product capability around the three major business segments, digital banking, digital insurance, and gamma platform, so as to empower financial institutions to improve quality and efficiency and successfully achieve digital transformation and upgrading. We will closely monitor market developments and strengthen cooperation with financial regulators and enterprise or industry partners around the world. In addition to the mainland market, we will also focus on regions including Hong Kong, China, Southeast Asia, South Africa, and the Middle East. As the financial markets in these regions continue to grow and the demand for digitalization is increasingly prominent, we will actively seek opportunities to collaborate and expand our footprint.
Shen Chongfeng
OK, next page. In this quarter, we successfully achieved a series of new benchmark cases. With the unique advantage of technology and business, we have gained continuous trust from domestic and foreign customers. Through the continuous deepening cooperation of new projects and next-generation, This quarter, we landed a series of new benchmark cases
Shen Chongfeng
Our unique competence in technology plus business has earned the sustained trust of our customers from both home and abroad, leading to renewed partnerships and deepened collaboration through new projects or contract renewals. For instance, expanded engagement with customers such as China Everbright Bank, Bank of Hunan, and SB Finance demonstrate customer recognition for our products and services. Additionally, customer stickiness has been further enhanced through cross-selling of multiple products.
Shen Chongfeng
Aligned with market trends, our digital banking segment continuously enhances product intelligence and convenience for use. Our advanced AI mortgage loan plan helps financial institutions to create mortgage loan innovation products, realize the diversified audit automation of customers, automate and intelligent operation and digitalization, and provide customers with a more convenient, efficient, and safe financial service experience. In terms of business convenience, our 300 million series of products, including industry-oriented, marketing-oriented, and financial-oriented, through the ability to manage team management, commercial management, and financial management, help customers AOM to compete more than 20%. the rate of customer response has increased by two to three times, and the number of customers in the fourth line has increased by 38%. In terms of regulatory initiative, we are only helping customers achieve the improvement of regulatory and risk management. We have opened a watchtower, as well as full-scale solutions such as one-to-one communication. It covers 2157 standards of customer risk 1104 and EASE. It covers more than 10 themes and supports the submission of 90 plus reports. The implementation of real-time data matching processing greatly improves the efficiency and accuracy of work.
Shen Chongfeng
In terms of AI intelligence, our Jingjieying AI housing mortgage solution helps financial institutions create innovative housing mortgage loan products, realize diversified customer acquisition, automatic approval, intelligent risk management, and intelligent operation, so as to provide customers with a more convenient, efficient, and safer financial service experience. As for business streamlining, our three E-series products, including E-Banker App, E-Sales Management, and E-Wealth Advance Map, help customers increase their AUM by over 20%, improve business opportunity reach rate by two to three times, and enhance private banking customer growth by 38% through the empowerment of team management, business opportunity management, and wealth management. With regard to active compliance, we aim to help customers improve their compliance level and risk management level, and therefore have developed comprehensive solutions such as a one-table solution with customer risk 1104 and EAST standard items totaling 2157, covering over 10 thematic areas and over 90 report forms submission. and realizing real-time data docking and processing, which greatly improves efficiency and accuracy.
Shen Chongfeng
Next page. In the digitalized insurance version, over the past period of time, we have provided an end-to-end system for a state-owned insurance company. We have resolved the pain points of retail, castle, and service. We have helped customers strengthen the risk of retail, improve the quality of the castle, and improve customer experience. We have realized the weakness of the end-to-end system cooperation benchmark case. In the future, the company will continue to increase customer yearning through multi-product cooperation and expand more customers through continuous growth of high-quality products and services.
Shen Chongfeng
In digital insurance, we have provided a state-owned PNC insurance company with an end-to-end PNC insurance system to solve the pain points of claims underwriting and servicing, help customers strengthen claims risk, enhance underwriting quality, and improve customer experience. The project also marks another benchmark case of our end-to-end system cooperation in property and casualty insurance. In the future, the company will continue to enhance customer stickiness through multi-product cooperation and expand more customers by continuously upgrading high-quality products and services.
Shen Chongfeng
Next page. At the same time as serving mainland financial institutions, the company has successfully exported to the outside world, actively expanding its international business map, and is committed to making China's financial technology service a broader global market.
Shen Chongfeng
While serving financial institutions in mainland China, the company also exported successful experience abroad, actively expanded its overseas presence, and remains committed to empowering a broader market with China's financial technology.
Shen Chongfeng
In the first quarter of 2024, foreign customers' income contributions increased by about 14.8%. Foreign customers' income accounted for the third-party income The third-party income ratio has increased by about 5%, reaching 20%. China, Hong Kong, Southeast Asia, South Africa and the Middle East have increased their business. The company is actively expanding its sales network in the foreign market, and the product is deeply welcomed by foreign customers. For example, Yijidou, Jinzhong Yuzhangtong and SB Financial signed a SLP product upgrade contract, and achieved a significant success in the opening of the Southeast Asian market. Revenue contribution of overseas customers increased by approximately 14.8% year-on-year in this quarter, and the proportion of overseas customer revenue to third-party revenue was up by 5 percentage points to 20%.
Shen Chongfeng
Business growth in Hong Kong, China, Southeast Asia, South Africa, and the Middle East experienced strong momentum as we actively explore overseas markets and continue to expand sales network and introduce products well received by our overseas customers. For example, in Q1, OneConnect signed an SLP product upgrade contract with SB Finance achieving another success story in the development of the Southeast Asian market. The company will continue to expand our overseas customers, expand our cooperation with Hong Kong-China customers, and strive to deepen and replicate our cooperation with South Africa's old mutual. Next page.
Shen Chongfeng
The ESG report has been released recently. In terms of the implementation of ESG, we have always seen the financial technology as an important strategy for the company to build a sustainable industry ecosystem. The company co-operates with government institutions to promote the construction of new infrastructure standards. Through the power of financial technology, we provide solid support for the construction of multi-platform platforms. This not only helps to improve the modernization of social infrastructure, but also provides more convenient and efficient financial services to the general public. and the comprehensive management platform of carbon emission data, which is launched by the financial industry, to help enterprises achieve real-time monitoring and management of carbon emission data. The company has also actively participated in the cleaning and cleaning work of many countries and industry standards, promoting the standardized and standardized development of the financial technology industry. In addition, we also actively support the initiative of One Belt, One Road, and co-operate with ADGM to assist Abu Dhabi to build a digital financial ecosystem, which has more than 495 registered users.
Shen Chongfeng
This quarter, OneConnect also released its 2023 ESG report. In our ESG practices, we have always regarded financial technology empowerment and building a sustainable industry ecosystem as an important strategy of the company. The company partnered with government agencies to create benchmarks for new infrastructure, providing solid financial technology support for the construction of the Fini platform. This not only helps to modernize social infrastructure, but also provides more convenient and efficient financial services for the general public. OneConnect has launched a comprehensive carbon emission data management platform to help enterprises realize real-time monitoring and management of carbon emission data. The company has also actively participated in the drafting of a number of national and industry technical standards to promote the standardization and development of the financial technology industry. In addition, we actively respond to the Belt and Road Initiative and worked with ADGM to help Abu Dhabi build a digital financial ecosystem, which has more than 495 registered users. Next page.
Shen Chongfeng
In the first quarter, we won many awards from the three-party institutions and the media. It fully reflects the high recognition of industry and society for our product and technical strength and industry influence. In the first quarter, we have also won a number of honors from third-party institutions and renowned media outlets.
Shen Chongfeng
which testifies industry and social recognition for our products, as well as our technology capabilities and industry influences. These awards include KPMG China FinTech 50 and Emerging 50, the Economic Observer's Annual Leading Financial Services Platform, Deruan Caixin Annual FinTech Top 50, and Annual Financial IT Innovation Top 30.
Shen Chongfeng
Since the beginning of 2024, we have witnessed a new wave of technological revolution and industrial change. AI as the core driving force is leading the industry to accelerate the road to high-quality development. We believe that the financial industry will become the best platform for AI strategic landing. It is also the key field of new production and boom of vitality. As an active participant in this change, We will continue to use technology to innovate, to upgrade and transform the financial industry. We aim to serve high-quality customers and continuously improve the quality of products and services to meet the needs of financial institutions for productivity in all kinds of businesses. Our products, such as smart voice robots and all-round agents, are the peak of new productivity. They will provide financial institutions to increase efficiency and services, reduce costs, and reduce risks. We believe that through continuous efforts and continuous innovation, Yizhangtong will contribute its strength to the prosperity and development of the financial industry. Thank you.
Shen Chongfeng
Since the beginning of 2024, we have seen a new round of scientific and technological revolution and industrial transformation continue to deepen. New quality productive forces with artificial intelligence as the core It's accelerating to lead the high quality development of industries. We firmly believe that the financial industry has the best use case for artificial intelligence plus and will be a strategic focus for new quality productive forces. OneConnect as an active participant of this revolution will continue to empower the upgrade and transformation of the financial industry with technological innovation. We aim to focus on serving premium-plus customers and product improvement so as to satisfy the core demands of financial institutions for various business productivity improvements. We also aim to develop products featuring new quality productive forces, such as AI voice assistant and omni-channel agent solution, so as to improve efficiency and services, reduce costs and risks for financial institutions. We believe that with sustained commitment and innovation, OneConnect will make its own contribution to the development and prosperity of the financial industry. Thank you.
Shen Chongfeng
Next, I'll give the floor to Mr. Luo to introduce
Shen Chongfeng
to give you a more detailed introduction of OneConnect financials in this quarter.
Law
Okay. Thank you. Good evening, everyone. As previously reported, we completed the disposal of our virtual banking business to LUFEX for consideration of HK$933 million in cash on April 2, 2024. As a result of the disposal, the historical financial results of the virtual banking business segment have been reflected as discontinued operations in the first quarter of 2024. and the comparative period in 2023. On the other hand, the historical financial results of the remaining business have been reflected as the continuing operations. The financial information we will soon cover is presented on a continuing operation basis, unless otherwise specially stated. Despite an uncertain macro environment, we recorded satisfactory first quarter results. We delivered revenue from continuing operations of 723 million in the first quarter of 2024, decreased by 19.1% compared to the same period last year. Revenue generated from third-party customers decreased by 14.8% to $243 million in the first quarter. Revenue decline reflects our decision to adopt quality growth strategy and reduce customized projects of low margin. We are encouraged to see the IFRS basis gross margin for the quarter improved by 0.3 percentage points year-over-year to 37.7% because of this strategy. And non-IFRS gross margin was relatively stable at 40%. Net loss attributable to shareholders was 54 million. and the corresponding net margin narrowed by 0.7 percentage points year-over-year to negative 7.4%. Now let's turn to our revenue mix. In the first quarter, our revenue mix by customer type maintained relatively stable. Our third-party revenue contributed 33.6% total revenue in Q1 2024. The uncertain macro environment and the strategic adjustment of our revenue structure did have an impact on our revenue, which reflected in a decreased revenue from business origination services and implementation services in the first quarter. Third-party revenue growth remains a key focus of our second stage strategy. Once macro pressures subside and as we continue to advance our initiatives, we believe revenue from third party will improve. We are also glad to see that our overseas business continued strong momentum in the first quarter, making up the shortfalls of the temporary reduced demands for certain products and services. In the first quarter, revenue from LUFAX decreased 18.4% to $58 million and contributed 8.1% of our total revenue. The revenue decline from LUFAX was mainly due to LUFAX business operation optimizations, resulting in lower demands for our business origination services, risk management, and other technology services. Revenue from PN Group decreased 21.4% to $422 million and contributed 58.3% of our total revenue. As always, OneConnect regards PN Group as our most important flagship customer. Our services to PN Group also have a proven record of success. For example, in the area of AI technology services, PN Group has enabled AI agents through our AI technology to optimize and transform business processes to improve operational efficiency and the customer experience. Our products and services provided to PN Group are robust and comprehensive. Moving on to revenue mix by business type. Implementation revenue decreased by 25% on a year-over-year basis to 157 million, mainly due to a reduced demand for banking system products and a gamma data middle platform in the first quarter. Revenue from business origination services decreased by 73.8% on a year-over-year basis to $13 million, primarily due to declined transaction volumes in marketing management platform under digital ratio banking solutions and in loan origination system under digital credit management solutions. Revenue from risk management services decreased by 15.8% on a year-over-year basis to 65 million, mainly due to reduced transaction volume from banking loan technology products because of lower than expected recovery of banking loan activities in the first quarter. Revenue from operation support services decreased by 39.8% on a year-over-year basis to $134 million, which was primarily caused by the change of business model in auto ecosystem services that we migrate from acting as a contractor to a distributor. Revenue from cloud services platform was $380 million, decreased by 8.9% on a year-over-year basis, compared with 292 million in the first quarter last year, mainly due to increased transaction volume. Revenue from post-implementation support and other services decreased by 17% to 35 million. As you can see, our business are diverse and we are developing more products around the core technology for business solutions. We remain committed to diversifying our product mix and adopting a stable and a sustainable stock-based charging model. Let's turn to revenue mix by product segments. Gamma platform segment accounting for 59.4% of our total revenue decreased by 6.2% in first quarter 2024 due to lower demand of implementation services. Digital banking segment which accounted for 22.3% of total revenue reduced by 37.6% on a year-over-year basis. that was mainly caused by reduction in transaction volume of business origination services and risk management services. This revenue decline reflects our continued efforts to phase out lower-value products. Digital insurance segment, which accounted for 18.2% of total revenue, decreased by 25.3% on a year-over-year basis. primarily due to the change of business model in auto-insurance, auto-ecosystem, as I just described before. Let's now take a look at customer numbers. Premium Plus customers decreased to 59 as compared with 73 for the same period last year. We believe as we continue to advance our initiatives, we expect that more Premium Plus customers using our products and services. Next page, the gross margins. We are very glad to see our gross profit reached 272 million in the first quarter 2024. IFRS gross margin improved 0.3 percentage points to 37.7%. On non-IFRS basis, gross margin was 40%, remains about the same as Q1 last year. In the first quarter of 2024, the continued efforts in product integration and delivery efficiency together with execution on quality growth helped improve our gross margin. We will stick to this strategy and continue the endeavor of achieving profitability target. Moving on to our expenses and net loss. You can see that we are well on track to our breakeven midterm target. First of all, our research and development expense came down to $213 million from $276 million. As a percentage of revenue, it decreased to 29.5% compared with 30.9% in the prior year. In the first quarter, we continued implementing our Stage 2 strategy that focuses on product integration. As our products upgraded and integrated, we further improved our product delivery efficiency. Looking ahead, we will keep investing in research and development at a measured and reasonable pace to enhance our competitiveness in the market. Our sales and marketing expense for Q1 decreased by 18.1% to $49 million, compared to $59 million in the prior year. As the percentage of revenue sales and marketing expense remains flat as 6.7%, the expense reduction mainly benefited from enhanced sales capability and marketing efficiency. Our general and administrative expense modestly increased by 0.4% to $81 million from $80 million in the prior year. As a percentage of revenue, it increased by 2.1 percentage points to 11.1% due to decreased revenue in the first quarter. It is worth mentioning again that under challenging business environment, our net loss attributable to shareholders continued to improve substantially to negative 54 million from negative 72 million in the same period last year. And the corresponding net margin to shareholders improved by .7 percentage points to negative 7.4%. Now, looking forward to the rest of the year, Although we continue to see a degree of unpredictability in the market, our focus remains on improving third-party revenue. We will continue to enhance gross margin, focus on cost controls, and expand overseas business to stay on a path to mid-term profitability. Next two pages we listed key financial metrics of the first quarter 2024, including figures from discontinued operations, the virtual banking business in Hong Kong. Lastly, we summarized the adjustments in non-AFRAS gross margin for reference. Thank you.
LUFEX
Back to you, Rick. Thank you, Mr. Law. Operator Emily, we are ready for questions. Please open the line.
Operator
Thank you. If you would like to ask a question today, please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind and would like to be removed from the queue, please press star and then two. When preparing to ask your question, please ensure that your device and your microphone are unmuted locally. Our first question today comes from the line of Lydia Lynn with Morgan Stanley. Please go ahead.
Lydia Lynn
Hello, everyone. I'm Lydia from Morgan Staley. I have two questions for you. The first one is about the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security of the security So my first question is about the previous announcement on the termination of Ping An Insurance Group on Gamma platform. And I wonder what the reason behind that and what would be the impact. And the second question is about if management can share more detailed breakdown of the P&OB impact when it was extracted from our P&L. Thank you.
Chan
Thank you, Lidia. For both questions, Mr. Law will take both questions, please.
Law
Okay. As we previously announced on May 7th, the change of the business is due to
Shen Chongfeng
changed procurement strategy for our customers. And as a service provider, we fully respect and understand their decision.
Law
We are currently in active negotiations with Ping An Group subsidiaries and associates to ensure a smooth transition and for more
Shen Chongfeng
detailed information and more updates, we will publish new information accordingly and promptly.
Law
Additionally,
Shen Chongfeng
The change in the financial cloud business will not affect our other businesses. It will also not affect our relationship with PM Group, PM Group subsidiary, and PM Group associate.
Law
Secondly, our cloud business will not affect the strategic direction of our company. We will continue to grow our customers.
Shen Chongfeng
Another comment would be that the change in cloud business will not affect our current strategy which is to focus on three priorities namely broadening customer engagement and standardizing our products as well as expanding overseas.
Law
The second issue is about the impact of the POB's financial statements. In early April and mid-April, we made a relevant announcement. On April 2nd, we obtained a loan of 9.33 billion Hong Kong dollars. In mid-April, we estimated that the profit of this transaction was about 2.6 billion RMB.
Shen Chongfeng
As we announced in April, namely on April 2nd, we received the consideration from Lufax for PALB, which is HK$993 million in cash. And as we announced in mid-April, we expect to record a profit of HK$262 million in Q2.
Law
The sale of PAOB has provided us with more working capital and thus has ensured that we have sufficient resources for future development. Looking forward, the company will focus more on our strategic targets, namely our technology and products, customer expansion and expansion overseas. Thank you.
Lydia Lynn
Thank you, Mr. Luo. Thank you.
Law
Thank you.
Operator
The next question comes from Laura Lee with CGS International. Please go ahead.
Laura Lee
Hello, everyone. I'm Laura Lee from CGS International. I have two questions today. One is about the company's Because we saw that last year, there was a significant rebound in the car insurance and in the car insurance sector. May I ask how long we can expect this rebound to push or have a positive impact on our future projects? The second question is about the issue of Ganba Platform. May I ask, what are the main support factors and driving factors for Ganba Platform What are your expectations and expectations? Let me translate my question. First question is about when can we expect the positive in mind or the recurring premium insurance premium account from the PIC and auto insurance will benefit our digital insurance business? And second question is about the gamma platform. What kind of the driver or sustainable driver to make that to the gamma platform value? That's all about the question.
LUFEX
Thank you, Laura. Both questions will be taken by Mr. Shenzhen.
Shen Chongfeng
Okay, I will answer your two questions. The first question, Let me address your first question on insurance business. Despite recovery in premium volume last year, premium growth in the industry is still slowing down. For P&C insurance companies, business development and profitability is still under pressure, and profit targets for them are very challenging.
Shen Chongfeng
As insurance in China continues to lower costs and improve efficiency, IT spending is likely to be affected over the short run. However, insurers will still need digital transformation to improve their operations, which could mean new business opportunities for OneConnect.
Shen Chongfeng
The number of employees in China who have experienced two to three years of business challenges has continued to decline. This year, the business situation is still in recovery. For life insurers, on the other hand, business has been under challenge in the past two to three years.
Shen Chongfeng
with agent number declining continuously. The industry is still recovering this year. Our life insurance business focuses on overseas markets. Despite being only a relatively new initiative, we've made major breakthroughs in the South African market, achieving sustained revenue growth in recent years. Looking forward, we will strengthen overseas efforts and export more life insurance products to the international market.
Shen Chongfeng
Next, I'll address your second question about the growth driver of Gamma platform. As digital infrastructure, Glamour platform has experienced high customer stickiness.
Shen Chongfeng
Looking forward for future growth engine, we will continue to leverage our technology strengths and exploring new growth opportunities. We will maintain close technology partnership with Ping An Group to explore more proven scenarios.
Shen Chongfeng
We will differentiate from other peers through our AI technology and strength in IT innovation.
Shen Chongfeng
We will differentiate from other peers through our AI technology and strength in IT innovation. On top of that, we will proactively explore overseas market by deeply integrate gamma platform with banking and insurance solutions.
Shen Chongfeng
Through this, we will cross-sell more products to our customers and maintain our edge to our competitors. Thank you.
Operator
Our next question comes from Alan Chen with Citigroup. Please go ahead.
Alan Chen
Our next question comes from Alan Chen with Citigroup. Please go ahead. Thank you for giving me the chance to ask a question. I just want to follow up on the cloud business, wondering if the business has already broke even, and what's the profit margin like? And given that we have this business cooperation with a relative party on the cloud business, how would this impact our net loss reduction goal this year? Thanks.
Chan
For this question, we will take a dive into the cloud.
Law
Okay. As we announced, cloud business accounts for a major part of our business.
Shen Chongfeng
revenue contribution was about 30% in the past two years. Additionally, as an infrastructure for our customers, revenue from this part of business remained relatively stable.
Law
The cloud itself has some profitability. When all the related business are confirmed, we will make further announcements to make the relevant revenue scale and the impact on our profitability a more familiar disclosure.
Shen Chongfeng
Cloud business is relatively profitable, and after the business shift has been completed, we will publish further information to the general public, including information on the impact of cloud business on our revenue and on our profitability.
Law
As I mentioned previously, the change in cloud business will not affect the expansion of our other business, nor will it affect our relationship with Ping An Group and its subsidiaries. We will continue to pivot towards our strategic focus and remain committed to our mid-term profitability target. Thank you.
Operator
I would now like to hand the call back over to Rick for any closing remarks.
Chan
Okay, thank you. Thank you for participating in our call today and if you have any questions, feel free to contact our team. We always appreciate your interest in following us and look forward to speaking with you again. Thank you.
Operator
Thank you everyone for joining. This concludes today's call and you may now disconnect your lines.
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