Q3 2021 Huize Holding Ltd Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to <unk> Holdings Limited third quarter 2021 earnings Conference call. At this time all participants are in listen only mode. After management's prepared remarks, we will have a question and answer session Today's conference call.
Is being recorded and a webcast replay will be available. Please was it skews those IR website at IR <unk> com under the events and webcast session I would now like to hand, the conference over just speaking host mice to choose those investor relation director. Please go ahead.
Thank you operator, Hello, everyone and welcome to our earnings conference call for the third quarter of 2021.
And already right now literally earlier today.
Only available on both our website and then you're flying.
Before we continue I would like.
Refer you to the Safe Harbor statement in our earnings.
The press release, which also applies to this call actually we will be making forward looking statements. Please also note that we will discuss non-GAAP measures today, which are more thoroughly.
Our earnings release and filings with the SEC.
Joining us today are our founder and CEO Mr. <unk> Ma.
Mr. Lee.
Oh CFO Mr. Jeremy.
And co CFO, Mr. Ron our 10.
Mr. MA will start call by providing an overview of the company.
These performance and operational highlights for the third quarter of 2020 one Mr. Tim will then provide details on our financial results before we open up the call for questions.
I will now turn the call over to Jeremy.
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Hello, everyone.
And thank you for joining the third quarter of 2021 earnings call.
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From the ongoing and army challenging macroeconomic environment.
With me and consumer confidence.
And yet to impact our growth momentum and make sure all that in mind.
I'm sure throughout the industry in the third quarter.
We have proactively adjusted our business.
Accordingly in response to the difficult industry dynamics and have benefited from our colleges.
College events business model.
Product innovation and the ability to acquire and service a high quality user base.
Our omnichannel distribution platform.
By the overall weak operating environment in our industry, we continue to deliver solid results in the third quarter total gross written premiums facilitated on our platform increased by 24% year over year to RMB 966 million, while total revenue.
<unk> was RMB 315 million in the third quarter, reflecting steady improvement in our business and validation of our execution strategy.
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As we continue to grow our user base, our user profile with Matt young with a high lifetime value and strong thickness.
The third quarter, roughly 60, 65, 6% of our long term insurance customers.
From higher tier city with an average age of 35 two years.
We have proactively adjusted our business strategy to increase the contribution.
<unk> products.
Our overall average ticket size.
In terms of all of our key opinion.
Average ticket size of our long term insurance products increased by 74, 6% to RMB 6000 and 684.
Third quarter, while the average ticket size of our savings products increased from RMB 25000 in the second quarter to RMB 35000 in the third quarter.
The repeat purchase way of our long term insurance product and saving products.
<unk> 28, 4% and 29% in the third quarter respectively.
As of August our persistency ratio for long term life, and health insurance and a 13 and 25th months, Texas stands at about 95% for 11 months consecutively.
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Now turning to our product mix the talking to him for a long time sure product was 94% of total geography in a circle.
Or conceptually about 90% over the last eight quarters.
The DWP will co develop insurance product.
At 449, 2% a quota with utility in the third quarter, which helped sustain our growth momentum.
Third quarter last year.
Premiums amounted to RMB 500, and we love Amelia.
42, 7% year over year basis.
This accounted for 52, 9% total GBP six.
Six nine percentage points year over year and highlight the quality growth in our business to diversifying product mix.
Again, the sluggish market demand for our protection products, we strategic play focused on growing our savings insurance business.
And to launch new customer products, such as E. Two premium which was well received by the market.
As such well, if you're a premium well for long term life product and annuity products.
Significantly to RMB 341 million in the third quarter.
Trading our jazz and capabilities in defining our selling customized long term insurance products to extend our services for the entire user lifecycle.
Moreover, we believe the successful development of savings across that line well English the product offering.
Open platform as well.
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Apart from the operating performance for the quarter I would like to share with you the future vision of what he does ticket for our products and our open platform strategy to provide our users with more exercise and personalized products and services online and offline.
At the end of the third quarter, we have cooperated with hunter and to ensure our partner.
Accelerating the development of our offline operations.
Subject to the new entry requirement for the operation online savings or fitness.
Marching media in here are likely to focus more on developing protection products online and.
As a result.
While our health insurance.
Life insurance product.
The increase next year.
Co develop more innovative and cost effective product without any sharp partners.
In the life markets in mind for protection products.
Meanwhile, in response to the regulatory change.
All life savings insurance business.
We will target Kohl's evolve online savings insurance products with leading insurer partner with value added services, such as the retirement community and we will improve our service capabilities to facilitate the online and offline operation simultaneously.
In response to the high end insurance needs of our users.
Our continued investment and expansion in our offline Grand Parkway enabled our company to sell both online only insurance products and meet your high end products via our offline channel complying.
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Well it does open platform was officially launched into trial run three months or so this upgrade should bring about more possibilities for our business model as we explore the real value of our T cell platform to the industry. We have initially completed their first day.
Houston development by opening up the business process and imagine them, one to Asia to ensure partners as Martin.
J M life of <unk>.
Coca Cola life insurance, and the Generali, China life insurance.
Successfully signed up as merchants on our open platform.
We have also introduced a differentiated survey for our users that features an account manager financial planner and settlement manager jointly providing insurance planning services.
The open platform.
Well allow us to truly meet the needs of users who are individual access to online insurance clause at launch by insurers directly Edison.
At the same time, we will clarify station offline professional services through our local branches.
In the future, we will further improve our tour, including precision traffic Sherry.
A question all solution customization and user lifecycle management to empower the digitalization of our partners such as insurance company intermediaries and independent agents.
Cross all scenarios and improve the efficiency and my seems to match demand with supply.
Okay.
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We believe the new regulatory measures will bring about new wins to the online insurance market in the short term of course.
Correspondingly, we will accelerate the launch of our open platform and extend our offline layoffs, thereby creating value for our users with a full range of insurance products across all scenarios.
We are also beginning to explore digital and technology capabilities that we have that we have developed in house to external customer such as insurance company.
And empowers their digitalization upgrades.
Industry throughout the value chain and generate new revenue streams in the form of technical service income.
At the same time, we're all active we will actively implement our cost reduction and operating efficiency enhancement strategy by integrating resources optimizing organization, all processes and implementing other measures to improve our growth.
We strive to strike a balance between scaling the business and managing our operating costs.
In the long run we believe Quaker at that.
One with proven technology.
<unk> experience and service capability will ultimately benefit from the healthy and sustainable development of the industry.
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This concludes my prepared remarks for today I will now turn the call over to our CFO, Mr. <unk>, who will provide an overview of our key financial highlights for the third quarter.
Thank you Mr mine areas, but EBIT everyone.
For the purpose of this call I think I would like to quickly recap and summarize a few key highlights and takeaways from this quarter's operating results.
And for the financial line items discussions I would like to kindly refer the audience to our uploaded earnings release for full details.
Overall I think we are very pleased to deliver a set of robust operating performance in light of the very challenging macroeconomic and industry environment.
Obviously, it missed the ongoing tightening regulatory regime for the online insurance industry for.
For the quarter, we were still able to achieve strong double digit growth in FY peak of 42, 7%.
Which is attributable to our very early anticipation of expected weakness in market demand for traditional production type of insurance products and so since the second quarter of this year. We are strategically focused on match group resources in.
In scaling up the distribution of savings insurance products to more than compensate for the shortfall in long term critical illness product demand in the market.
Our strong growth in savings products F y P. As we have demonstrated since the second quarter is a direct result of the customer insights.
Why did it to ourselves by the platforms data analytics and the agility of our platform business model to adapt and respond.
Changes in the market industry dynamics and.
And more importantly, it is also a result of Covid.
Successful product development and marketing of long term in Darwin life insurance and annuity products with our insurer partners.
Relatively accelerated timeframe.
Which again itself is a testament to our product development capability.
Deep engagement and a strong relationship with our insurance partners.
Another highlight with respect to our strong growth in savings insurance products. This quarter is that it continues to reflect the quality of both our customer acquisition capabilities.
Our omnichannel distribution platform as well as our existing user base.
As mentioned in the opening remarks, the average ticket size of long term insurance products that we have facilitated in the third quarter reflect our high quality young customer demographic.
<unk> FY P per policy of RMB 6684 in the quarter representing.
Tangible increase of 74, 7% quarter over quarter.
In addition repeat purchases accounted for approximately 29% of savings insurance products.
Which again reflects the high lifetime value potential of our platform 7 billion plus user base as we continue to deepen our engagement with our users to encourage cross selling and upselling opportunities by leveraging on our proprietary data insights that we have accumulated from interactions with our platform usage.
Lifecycle.
Okay.
Another highlight with respect to the LTV potential of our user base is the continued strong performance in persistency metrics for our long term life and health insurance policy holders with persistency metrics in the 13th month being paid up about 95% as mentioned earlier.
First strong persistency performance will continue to enable us to work closely with our insurer partners to come up with new iterations of long term life and health insurance products.
Particularly under the new regulatory regime, where the regulators are highly focused on the technological operational and customer service capabilities and up and above or most importantly, a strong track record of strict regulatory compliance by insurance companies and their platform intermediaries partners such as ourselves.
As a result of the foregoing a push in those strategies.
Waiting revenue rebounded from the season that seasonally weak second quarter increased by 44, 1% quarter on quarter.
We are continuing to see very strong momentum savings insurance product.
Going into the fourth quarter, which again greatly complement to our FY P and topline performance and becoming an increasingly important contributor to our diversification in our overall revenue and put up portfolio.
And accordingly.
We are making in upward adjustments to our full year 2021 revenue guidance.
From our previously stated RMB, one 7 billion to RMB, one, 9% to 2 billion, which represents a year over year increase of 56% to 64%.
Versus last year.
On the other hand as mentioned earlier in the opening remarks, starting from the fourth quarter of this year. We are also actively implementing a group wide organizational structure optimization program too.
To further improve our cost structure and operating efficiencies.
We are expecting to deliver cost savings over the next few quarters.
Particularly in our fixed cost base.
In the bids to accelerate any improvement in the up in our bottom line performance.
In terms of our financial position, we continue to maintain a strong liquidity position.
With a combined cash and cash equivalent balance of approximately $16 million U S dollars.
Our outlook reflects the company's current views on the market and operational conditions, which are subject to changes as a result of various market uncertainties, including to those including those related to the ongoing pandemic both globally and in China.
And with that this concludes our prepared remarks for today, we'll now open up the call to Q&A. Thank you operator.
Secondly.
Participants you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced to withdraw your question. Please press the pound or hash key.
The benefit of all participants on this call. If you wish to ask questions to management in Chinese. Please immediately repeat your question in English It star followed by one to ask a question.
Q.
Your first question comes from the line of Michelle Morris from Citi. Please go ahead.
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My first question.
Regarding to the pardon me Internet a life insurance regulations, while we will see a lot of moving parts regarding to Florida.
Product available.
And he tuition partners, we can work together so from your perspective how.
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Landscape could change.
The market position of <unk>.
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Okay. Thank you. Thank you Mr. <unk>, let me translate kit.
Grateful for the audience. So the questions is relating to the impact of the recently announced a regulatory changes to the online.
Lifetime insurance.
Market and how that would affect our business.
And also the expected.
Cost control measures or any relevant guidance, we can give to the market. So the response was that the obviously the regulatory changes will have a very meaningful.
Meaningful impact on the overall industry.
So it's being included.
But we obviously have been operating in the insurance industry for 15 years and insurance itself is a heavily regulated business and the fact that now the rules and regulations are relatively set in place with very clear.
The regulatory framework for the industry participants is actually a very beneficial development for industry players to be able to focus the long term sustainable development of the business models going forward.
Them being constantly on the on the outlook for any new potential changes to the regulations. So the answer is that it's.
Good to have a very clear pathway to deal with Deregulatory changes.
Now it is pretty much set in place and therefore, we are able to focus our business.
In the in the in the near and in the near and Middle time.
Going forward.
And then with respect to the Internet insurance product itself.
It does.
Upside of this regulatory change recently is that protection products now.
Uh huh.
<unk> made clear that it's a very.
Conducive to online insurance companies.
Companies to market.
With a clear pathway for us to operate in.
Helping ourselves being a longtime participant in this particular subsegment of the market for example, since 2015, we have been.
We're focused on include the Bopping critical illness product, which itself is a very much.
T protection product now a days with respect to the.
The.
Middle income groups in China.
Yeah insurance awareness being becoming more and more prevalent.
Part of the customers that we operate in.
<unk> five years old is now getting more and more.
Conversant and knowledgeable about insurance protection and.
And therefore adult.
The regulatory changes the commission rates offered to.
The industry players may be somewhat negatively affected but in the long term.
It should mean that consensuses will become more and more receptive and also accelerate the online consumption of protection products, such as critical illness long term health products as well as term life insurance products, which we have already been <unk>.
Quite some success in the last few years.
With insurance partners as well.
And going on to the third part of the pie.
We believe that now that again with directly achieved with gene being more set in place.
For the for the industry going forward, we can now more focused on.
We source of deployment internally with respect to how to build the business going forward emerging online offline operations and therefore going going into next few quarters as we have alluded to in the opening remarks that we will be able to.
Optimize our organizational structure and therefore there'll be certain head count optimization in next few quarters, which would obviously be disclosing to the market as we release our next few quarters of results.
So I hope that answers the question.
Oh, yes, we do it to the next.
Thank you.
Your next question comes from the line she can walk from <unk>. Please go ahead.
Finally to help understand kitchen, all along.
Hey, Peter.
Hello Hello.
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That's all I had.
So for sure they are counting on what metrics.
Paul.
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Outside you show your Cogs I checked out I think it also comes down quite a bit to get all of that.
So theres a lag there.
I want to check on the chance that.
Sure thing.
What I find is a windshield.
So first of all to absolute detail about the new regulation, so whether it be through negatively impactful cooperating with covenants and especially for the saving type basically.
And next well what is the process of acquiring the offline brokerage brokerage calmly and what are the online and offline strategy for the company into the future.
Okay. Thanks for the question so two questions the first one.
Leading to the impact on the supply side for I guess, a nice savings insurance products as we move into the <unk>.
New regulatory regime, starting from next year I think the short as the here is that we have been cooperating with over 100 insurance companies.
The past.
Therefore, we are able to.
Co develop new savings products.
Our insurance partners, who are quantified obviously under the regulatory regime.
Spec to their for example, coastal policy ratios and other metrics that it would be quite now under the new regulations. So I think that we will be actively looking to cooperate with partners who are qualified under the new rules and with respect to the maybe the existing suppliers.
Suppliers of savings insurance products that we have been working with I think the the motto here could be are moving.
Moving towards the offline context, where we are still able to leverage on our online platform to generate leads.
And acquire customers from our Omnichannel distribution capabilities.
Capabilities and BBB EBIT would route.
Customers are for consultations and also for.
The settlement through our offline branch network. So I think that's really the Genesis of our online and offline business model as we have been building up over the last few quarters and we have been actively deploying capital as well as investments in this area and I think that also answers. Your question with respect to the second question, which is the.
The online offline cannot business, a concept, which again I think that we are always going to utilize our online platform and our fronts.
To service customers customers come to our platform for product information for comparisons for consultations.
It has always been operating on a more of a passive marketing.
Model, where we provide content. We also work with third party partners to educate the market as a whole on insurance products and now for customers.
Interested in having consultations they will be able to.
Request for a one on one discussion with our consultants and therefore has always been more of a passive approach and it also fits into the regulatory requirement for online insurance distribution as you can as you can.
Can I understand from reading the other regulatory regime documents.
Yeah.
Can we move to the next questions.
Yes. Please.
Thank you and our next question comes from the line of <unk> from <unk> Securities. Please go ahead.
And I'll say it again.
With you in a different way.
Under agenda <unk> Suzhou call.
What do you mean, even now in the Lindsay juices Dealogic, Virginia into the reason behind and I said this is Jean so I'm going to take the equipment and the Union number a woman's how long you're going to want it doesn't mean, the one woman she too much extinguish the Gs on the bigger Fujian <unk> women don't your frequent player. That's agree you can hardly see sit inside she <expletive> neither amendments at Goldman Sachs. A challenge I'm just so many changes.
I think the year one day, Jamie somebody said, we weren't written down.
Yeah I was wondering why you missed the Guangxi <unk>.
Maybe they'll go into this year.
Bruce anxious as you are mentioning exchange of the <unk> the moment or you can go down a path of Blue collar yourself when you go to chew on.
What is it energy and then things how well it wouldn't be right.
Congratulations on the company's achievements for the last three quarter and this year is a particularly tough year for the industry.
<unk> two <unk>.
Operating the business and look.
Look forward and how can we assess risk is squeezed because as the business next year and whereas the situation be better off and can you talk about about the planning of the offline and end points.
The opposite of business development.
And my second question is about the I think the key country anymore unless there is a.
Milk price and these are.
Obviously undervalued and is there any plan to buy back.
And most of your free cash.
Cash reserve was for the buyback thank you.
Thank you for your question.
No.
For your first part about our outlook for next year I think we would be honest to to say that the next few quarters for the whole industry would be an adaptation period of transition period.
But again because of our long term engagement.
In the industry.
And for our continued success in innovating our business model.
Our nimble nimbleness in kind of adapting to regulatory changes since all this regulatory changes have been happening in the last few years, we have.
Still be able to maintain that business grow.
Throughout all of this.
Challenging periods of time, so I think that what we would.
I would say is we are cautiously optimistic I think that again as Mr. Marc alluded to earlier in his response now that the regulatory framework is clear I think that most players in the market would not be able to focus the business development and able to spend the investment dollars wisely in things that would be productive rather than.
Trying to anticipate various scenarios and therefore.
The resource allocation perspective, some may go into.
Let's put active investment areas. So I think in that respect I think that we are cautiously optimistic because of the fact that we have been operating for 15 years, because we have been investing in the platforms business or we have been investing in our technology stack, we have incurred over 100 million RMB over last two years and therefore.
Now, perhaps to say that throughout the online business.
Scenarios from the front end to the back end, we are very well mature.
Political.
Tools that not only we are.
Enabling our in house consultants to to serve the customers, but now we are also already beginning to export.
Capabilities to outside insurance companies customers there are few.
A leading insurance companies have to have already procured these tools from our platform in the past quarter and as as we scale up further on this new technology service income revenue stream, we will be happy to provide a breakdown to the market as we scale up in volume.
With respect to the offline.
Operations again, I think that.
Our view on the online offline model has always been.
Leveraging on our strained on the online side.
No benefit from the user base perspective from our online service capabilities perspective.
We are able to extract.
Redfin customer labeling on the use of sets and therefore are plugging. This a relatively high value customers into the offline context, we have been able to connect these so called high.
<unk> customers with higher value products offline in a compliant way and so for the next year I think that we have started from tier one cities in the last few quarters, we are going to expand further into more of a nationwide coverage. So we're looking at the clock.
Close to 20 to 30 offline.
Offline branch network.
The locations in the next 12 months.
So the second question on share price performance I think that this is obviously a combination of many factors as many investors are well aware of the challenges faced in China in the last two quarters.
A combination of medical III pressures on different industries from the ongoing U S China political dynamics.
So from just an overall.
Resurgence of Covid, and et cetera, I think that the company has already.
Given the announcement earlier that management has a set in place a management buyback program.
We have a period of six months and so we will be continuing to execute on that management buyback program.
As the time fits and also as you know in.
In the more of a regulatory compliant way.
Company itself.
Currently do not do not have plans to repurchase shares or the company's balance sheet. We believe that the capital on the balance sheet is better we said for business development and to cope with the regulatory changes with the sequel in the next few quarters.
Okay. Thank you Ron.
Thank you.
That was our last question.
Constrained I will hand, it back to <unk> for any closing remarks now thank you.
Thank you operator, so on behalf of the management team.
I'd like to thank you for your participation in today's call.
And if you require further information please feel free to reach out to you and thank you for joining US today. This concludes the call.
Thank you.
Thank you for participating you may disconnect. Thank.
Thank you.
[music].