Q1 2022 Huize Holding Ltd Earnings Call

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Took first quarter to thousand him 20 to earnings conference call.

At this time, all participants are in the listen only mode. After the management's prepared remarks, we will have a question and ourwer session.

Today's conference call is being recorded and a webcast replay will be available.

Please visit waiters IR website at irdot waiter do com under the event webcast section.

Speaker 1: I'd now like to hand the conference over to your speaker, ST today, MS Harriet H with it. Investor Relations Director. Please go ahead, Harriet.

Thank you, operator. Hello everyone and welcome to our earnings conference call for the first quarter of 2022. our financial and operating results were released earlier today and are currently available on both our IR website and the newswirebefore we continue, I would like to refer you to the safe harbor statements in our earnings press release, which also applies to today's call, as we will be making forward-looking statements.

Please also note that we will discussed non-GAAP measures today, which shall more thoroughly explained in our earnings release and filings with the ATC. Joining us today are our funder and CEO M songima, CEO M liion cocfo, MR Ning, htel and Co. MR ronalo 10. MR M will started a call by providing an overview of the company's performance and operational highlights for the first quarter of 2022. MR Ken will then provide details on the financial results for the perif before we open up the callfor questase. I will now turn the call over to MA.

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In the first quarter quadas business results. dammonur' strong resilience despite a challenging operating environment caused by the ongoing pandemic, sofing insurance demine in China due to economic uncertainty and the impact of the tightening industry regulationthanks to the solid foundation we have established in past year, total growth return premience, or GWP, facilitated on our platform remains fairly stable at R in the one point three bilence during the period, despite a high base for comparison in the fourth quarter of last year.

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In terms of product mix. We have maintained a strong competitive age in long-term insurance products.

In the first quarter, GWP contribution of long-term insurance product remains about 90%. For the 10 consecutive quarter, renewal premiums increased by 114% year-over-year to R in the one point one billion, providing steady cash flow for us to withstand times of economic downturn and market volatility.

As we continue to grow our client base, we have maintainended a high cology user profile. As of March, cumulative number of insurance client reach 10 MAS, representing a quarter over a quarter increase of approximately fourth hundred and 95 thousandin the first quarter, roughly 64% of our long term insurance customers were from higher Tier C within average age of 33.5. in the first quarter, our average persistency ratios for long term lifeic and health insurance in the thirteen and.

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The end of the first quarter, we have cooperated with 100 insure partners. bespite the expected short term impact of the new regulations on the supply of online insurance product, our supply chain has recovered quickly thanks to the states. We took in the F to strengthen our offline presence and our proven capabilities in product innovation and development. Since March, we have launched several customized critical illionic product, such as and quaking 2022, as well as customized saving product.

Such as teen Union. In the first quarter, gable P for our customized product accounted for nine Sixty nine point two percent of total GOP, up eight point two percentage points year-over-year.

At the same time, we have codeveloped off-line savings progrs with our inshare partners.

In addition, we have extendeded our customized product W to a wide ectron young, life and health insurance custoization as allowed us to refine our product management through more precise customer and product segmentation. For intend, we launch four new custommer product, including a critical illness product guarding, number five and the medical insurance products and continial who, a saving product injred to hung and the a acident insurance product, thousandousing and 2020 two.

This customized product had uniique features such as the introduction of multiple qus and the relaxation of age requirements, which has helped us satisfy the protection needs of the alu, the middle age and the younger generations alike.

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On our technology service business, brons. We have continued to make solid progress and our clients already includde the Li of large midssiides and emerging insurance companies who come to us for assistance with their digital transformation needsfor example, we are deeply involved in a digital acceleration tracking system and customer profiling projects of our acclients, including typing and great war.

In March. We have been named one of the most reliable insure tape insure takepe platform for 2022, given us solid digal capabilities and high quality service.

In APRA, leveraging our proprietary IC data analysis and technical advantages, we launch a new digital insurance on underwriting system, minimizing the information symmetry between insurance products and customers. The system aims to solve the problems chronic basis patient phas in obpending insurance by offering a one-stop solution that includes health management reand, underwriting and insurance product recommendation.

Finally in May we obtainend the data management capacity maturity assessment model. The DCM stable cost level three certification, one of the most authoritative ceridtification systems for data management and maturity in China. I pouring our industry leadating data management capabilities. We left Lum.

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Over the next two years. We have set a strategic roadmap to build an omnichannel digital insurance service ecosystem that integrates agents businesses, customers.

To customers. We will leverage our proven online platform, with our extending offline service coverage, to deepen engagements with our high-value customers and offer them with a full range of insurance products across all scenarios. We will utilize the dital capabilities and multi-dimensional client data to drive customer insight and to serve our customers for their lifelong insurance needs. Moreover, we will continue to enhance retention and repeat purchase and to optimize our customer acquisition paths through customer referalss.

To businesses. We will further drive industry digitalization by developing and exporting our technology through insurance companies to support digital customer relationship management, underwrriing risk management and insurance planam and further diversify our revenue streams.

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To adent. We have established a new business line, targety independent off-line insurance agent and workshops nationwide as a new growth drivertotalgogry facilitated by the Q a business which are in the three million in the first five months of 2020 -yearmeanwhile, we will open our first independent agents store, chingent. In the third quarter.

With the long-term industry trend of insurance product distribution by independent agents and broaders the shift in product maix towards saving products such as anuity, and increasing customer demand for independent insurance agents, all providing tailwind, we believe there will be huge room for growth in a few business we will meet. We will need the need of independent agents with our differentiated advantages of good products, high commission excellence, service and well-known brands.

And we will empower them with a diversified online and offline insurance product matrix, digal business development tools and the customer service support through our core hooral platform.

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Over the past 16 years, we have won the trust of the pport of more than six million customers with our consistent professional, reliable and customer friendly servicesin our next stage, we will spare no efforts to build the most trusttied brand of one-stop online insurance platform and become the gold-to insurance service for middle-class families in China.

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This concludes my prepared remarksable today. I will now turn the call over to our CFO , MR romten, and he will provide an overview of our key financial highlights for the fourth quarter of 2000 and twenty-q.

Thank you mrthe mine Harit.

Good evening everyone.

Speaker 2: For this call. I would like to quickly reakcap a few highlights and takeaways from our first quarter 2022 results.

For detailed discussions of financial line items. I would kindly refer you to our upload earnings release for full details.

Overall we are very pleased to report a set of resilient operating and financial results for the first quarter of 2022. in light of significant macroeconomic headwinds of resurgence of otoron in China and the challenges brought by tightening regulatory measures in the industry.

In the first quarter total goes within premiums of cbp we made fairly stable at RMB one point three billion, which represents a 4% year-over-year decrease, and that it despite a high base for comparison that was triggered by the transition to the new statuortory definition of critical illness in the first quarter of last year.

At the same time. First E premiums are: FY reach rmv two hundred and Sixty million.

We newural premiums born in double to RMB one bypoint one billion and that reflects the continued high user of speickiness of our customized long-term insurance products.

one key highlight in the quarter results is that we have continued to codevelop long-term customized protection and savings products without insurance partners.

one of the key challenges that we have expected going into the year 2022 was the disruption on the supply side of online insurance products due to the regulatory changes.

As MR M has measured in his opening remarks, we have already made significant progress in replenishing the supply of products on our platform, and we have now a full suite of coultibog products covering long-term health savings and PNC products.

In the first quarter, our platform offered four and 82 insurance products online.

These efforts continue to help to drive GP contribution of long-term insurance products to be above 90% per the tenth consecutive quarter.

And the GWP contribution of our customized products also remained at a high level of 59 per 2% in the first quarter.

Our resilient performance, operationally and financially, continues to reflect the high quality of our eight million strong customer base and the effective customer acquisition capabilities provided by our omnichannel distribution platform model.

The two key operated metrics that demonstrate its strongpoint are the averageticket size of our long-term savings products and the persistency Rio for the renewals of the policies.

The lhyp of our long-term savings pores were well over R nb 29 thousand in the first quarter of 2020 -two.

And in the first quarter. Our oprecistency ratios for in-force long-term life and health insurance policies renewals in the 13 TH to twenty-fif months remained at 94% on average, a very high level compared to industry averages.

Our busust product innovation and customer acquisition capabilities have not only helped us strengthen our engagement and relationship with our upstream insurance companies, but also empowered us to maximize the lifetime customer value potential of our users.

While revenue for the quarter saw a temporary setback, given the industry-wide weakness in FY pepresentation amidst the adverse external practice and also the high base for comparison Q1 of last year, this was more than offset by an overall improvement in our corporate cost structure.

Speaker 2: As we have mentioned in our previous earnings call, we expected the first half of 2022 to be a period of adaptation and transition for most players in the industry and at quasa, our first priority from our strategic cial management standpoint is to further drive improvement in our overall corporate cost structure operating efficiencies.

And we are pleased to report that, following the implementation of our grouwide organization structure optimization program, we have achieved a 15: nine perpoint 7% decrease year-over-year in our total operating cost and expenses in Q1 to R the two hundred and eighty-five million.

As such, we achieved a GAAP net profit attributable to shareholders of RMB tentem zero point six milling in the first quarter of 2020 -two.

As of the end of the first quarter, our combined balance of cash and cash equivalents was approximately R in B 38 million, demonstrating our ampo liquidity and solid balance sheet position to withstand the current economic downturn and providing capital for further investment in business growth.

In the first quarter we have also reppurchased an aggregate of approximately 339 -month 3000 ads, or 10% of our fruit mandate under the existing 12 -month share repurchase program.

Going forward. We will continue to execute on the groupwide optimization program in Q2 with the goal of further reducing our fixed cost base to improve operating leverage upon business recovery.

And based on our preliminary assessment of current market conditions, together with a macro recovery in the second half, we expect to achieve quarterly profit in the second half of this year.

As MR MA mentioned, we have set out a strategic direction to build an omn-ichannel digital insurance service ecosystem that integrates agents a, businesses B and customers C over the next three years.

We believe our ABC strategy will provide us with tremendous opportunities to strategically allocate capital to enhance shareholder value and sustain our long-term business growth.

This concludes our prepared remarks for today and we will now open up the call to qany. Thank you and open to your operator.

Thank you, Ladies and gentlemen. We will now begin to question and answer the session.

Speaker 1: If you wish you ask the questionution now. Please for allar one or a telephone and wait for your name to be nounced.

Speaker 1: If you wish to withdraw your request Please, P pan O hashkay. Please, then by. While we compile the question-and answer Ulster, what's get us style one for questions?

Speaker 1: Af first question will come from the line at Amy trren, France cityittierp, Please go ahead.

Thank you management, for let me have the chance to ask a questionand I'll be asking question on behalf of Michelle todayate, and the first question would be that, as management has mentioned areali, there is a new regulation this year that have brought some short-term headwind on the supply chain on a supply sidewell like would it be. Would you be able to share more color on how good has adapted to this new regulation and what was your strategy to better cope with the changes, and did you see any changes in terms of product line and in terms of channel mix?

And the second question would be on: can you give us some updates related to the second quarter operations? Thank you very much.

Okay thanksfully, y it's wrong here. I'll take your questions.

So the first question regarding the the impact on the regulatory changes time from this year. I think that the regulatory changes have been well, I guess, absorbed by the market in the industry and I guess three key points that I would like to answer in relation to this question will be that, most importantly, we have replenagished our asupply side with over the launch product the first quarter of this year, and that compasses the suite of productsfrom longterm health savings in also poperty casualty. So I think that the major concern that people have or the market has on the sector is that the disruption of the supply.

Second point is that, with respect to the impact on the regulation, that is also a point about how the first new commissions, or the first period commissions, have been constrained about 60%, thereby that in the economics of the policy for for brokcus like ourselves, I think that what we have achieve so far is that on our new of crical unness product that we have good develop with the insurance companies, we have now able to achieve a basically a lifetime value of allicy which is basically the same as what we have been before the regue changes. So what that means is that the depen first year commission of 60% has been compensated by higher second thir year.

Renew commission rates and therefore we have able to maintain the lifetime value of the policy at probably 1, one hundred and twenty percent, which I think has been the major milestone. Again on on the regulatory changes front.

And the third point I'd like to make is that we've also, since the second half last year, actively going into the offline space and I think with that we have been able to launch offline versions of the savings product that we have been Co developing with our insurance company partners, but particular ongkong life. I think that that has of each coming through in the second quarter of this year. So I think that I think we have been, over the past two quarters, been able to adjust, adapt to new regulatory regime and we have come out quite strongly respect to the supply side of things with respect to the online, offline presence, services and products and also the economic arrangements of the insurance companyies.

So the second question regarding the Q2 guidance. I think, as we all know and the market is very well aware of, Q2 has been done extremely challenging period of time for the Chinese economy in general, with enforced lockdown in major cities across the country, and that kind of backdrop didn't get it very reasonable to expect a very weak Q2 in terms of operating performance. I think, from a FYP perspective, we have been showing some sequential recovery because of the, the strike that we have made, replenishing the supply side on the online insurance products.

But however, we also see continued challenges and particularly with the lockdown situation and we also have a less, an offset from the strong we neuro policies contribution from the first quarter of this year. It was a big result of the very strong quarter first quarter of last year because the critical that vision regime change. So I think that Q2 will be flattish year-over-year and correspondingly I think that with a macro recovery that we expect in the second half, this and with the coming back on the stream, we do expect that we will be able to IE a quarterly profit in the second half. Thank you.

Thank you very much. That was very clearthank you. Next question comes from the line of miny G from C A. please ask a question.

Thank you for taking my question and this is many from salay and I got to questionions. The first one is, as we noticed, as we see the resurgence of called it outbreak in the first half in China. I just wonder how would that, how would that affect our business in the first half of two and 2? And my second question, with the, as we noticed earlier that qua has been included in the provisessional is under hfcaa recently and I'm just wondering what were beating and how does the management plan to do with the potential risk of the list.ing?

That's my two question, Thank you. Thank you mean the quare questions and thanks for joining. So two questions. The first question on the, the covert impact on the business. I think where, on two sides of things, I think first time of things will be from a business operational perspective. I think that we are not as as affected by you. emmergence of covert, then maybe something more additional of my agencies, of cogages, because most of our activities are done not right as you know. However, I think that the more pertinent point is make is that the OM coin outbreage has really dampled.

Income expectations of the average consumer in China and also I think that it also has a unfortunately led to quite massively ay offs in the economy of acrossitive industries. And so I think that major impact of omoneire on the industryes really has to do with the consumers confidence and the consumers ability or willingness to consumer and insurance products which, as we all know, insurance product is not nonessential item in a way, is that the most discreionary of all the financial products available, comaredtitive certain things like securitieses.

orfixed income product. I think, and therefore I think that the major impact on has is on the demand side of the industry and it has been very, very weak in the first two quarters, as we can also take reference on the FIP numbers of the major insurers in China and also from the other brogages and the party intermediaries.

So that'will be the Yes of the first question and for the second question on FCA a and the listing ways, I think that the market has somewhat absorb all this news for already by now I think most of the Chinese companies that are are list in the? U's edl markets has already gone on this list and I think the company's standpoint. What we would like to make as a statement is that that we continue to maintain our listing in the? U's and we will all the steps that that is required to make sure that we will ATE our shaholders interested in shaholder value and obviously we'will be looking into measures.

Including potential's realallist in Hong Kong, in order to somehow hedge this risk of the realistic scenario. And I think that we also be seeing some encouraging signs in the news reporting on the collaborative efforts between der to sze of the regulators table, the China signals on the? U side in terms of proressing on the PC issues, on on site inspection of ordits, et cetera. But I think frankly, this is some what the corpts level of control but we will make optimistic on a resolution of the betterter between the sides and on our own level we will continue to CT all measures.

In order to SA CA over this interestand Thank you an.

Thank you as a reminder. If you wish you ask a question, please press out a new, new telephone key pad.

Thank you. As there are no further question, I'll turn the call back to harod for closing remarlks.

Thank you all further. So, in closing, on behalf of quisus manageurement team, we want to say thank you for your participation in today's call and if you require any further information, Please So free to reach out to us. And thank you for joining us today and ple conclude the call.

Thank you, Ladies and gentlemen. That does conclude our conference for today. Thank you for participating. You may all disconnect.

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