Q2 2022 Huize Holding Ltd Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Yeah.
Ladies and gentlemen, thank you for standing by and welcome to equate their holdings limited second quarter 2022 earnings Conference call.
At this time all participants are in a listen only mode.
After the managements 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 visit our website at IR adult wager dot com under the events and webcast section.
Now like to hand, the conference over to your Speaker House today, Ms. Harriet true quite this Investor Relations Director. Please go ahead Harry.
Thank you Amber Hello, everyone and welcome to our earnings conference call for the second quarter of 2022, our financial and operating results were released earlier today and there are many available on both our IR website, and then use wire.
Before we continue I would like to refer you to the Safe Harbor statement in our earnings press release, which also applies to this call we will be making forward looking statements.
Please also note that we will discuss non-GAAP measures today, which are more thoroughly explained in our earnings release and filings with the H D C. Joining.
Joining us today are <unk> founder and CEO , Mr. Tien Tsin.
Oh, Mr. Li Zhang co CFO , Mr Min Feng Zhang and co CFO , Mr. Ron Hutton Mr.
Mr. MA will start our call by providing an overview of the company's performance and operational highlights for the second quarter of 2020 to you. Mr. Tim will then provide details on our financial results for the period before we open up the call for questions I will now turn the call over to meet them.
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Hello, everyone and thank you for joining the second quarter 2022 earnings Conference call.
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In the second quarter, where it does business continued to demonstrate strong resilience. Despite stopped any insurance demand caused by ongoing economic uncertainty and disruption caused by regional pandemic restrictions in China.
Thanks to our solid digitalization and product innovation capabilities as well as our in depth work is on cultivating users' lifetime value. We continued to drive industry digitalization and press on with executing on our strategic plan.
Building, an omnichannel digital insurance service ecosystem, thereby achieving another quarter remarks.
In our second quarter total gross written premiums or G. W. P facilitated on our platform increased by 35% year over year to RMB 872 million.
Our total operating revenue also increased by 35% year over year to RMB 208.
8 million.
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In terms of product mix in response to shifting consumer preferences and macroeconomic backdrop, we have strategically forecasting promoting the distribution of savings insurance product.
In the second quarter, the first year premiums or a flat sheet of savings product facilitated on our platform amounted to RMB 282 million up by 143% year over year.
Responding we are total FY <unk> increased by 59, 9% year over year RMB $485 million.
Reflecting our comprehensive product offerings have supported our high quality business growth.
While we have maintained a strong competitive age in distributing long term insurance products in the second quarter that you did a P contribution of our long term insurance product was 91, 7% with many above 90% for the 11th consecutive quarter.
We have also maintained a high quality.
While a recording robust business growth.
As of June .
The accumulative number of insurance clients reached $8 2 million in.
In our second quarter about 64, 2% of our long term insurance.
Customers were from higher tier cities within the average age of 33.3 years out.
In terms of FY, Pete the average ticket size of long term insurance products and long term savings products in the second quarter were approximately RMB 3491, and RMB 44000, respectively.
Operating systems, the ratios for long term life and health insurance.
Her team and 25 month remains an industry high levels of 91%, 96% respectively.
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As of the end of the second quarter, we have cooperated with 100 insurance partners.
Yes.
Customized product.
Nationally.
Suzanne.
No premium for that middle aged and the elderly as well as <unk>.
Inclusive and guaranteed product co developed with Sun life, Everbright life to satisfy the high quality retirement needs of customers.
This new product demonstrates our ability to extend our customized product line to a wide spectrum of insurance coverage in our house.
In the second quarter due to repeat for co developed products increased by 16 eight percentage points year over year. Moreover, we are pleased to share the accumulative FY Pete cannot Youtube premium.
Customize each increasing whole life insurance product, we launched in last July as well.
Reached RMB, one <unk> billion approx mentally highlighting our ability to gain insights into users' needs and develop the most appropriate product for our users.
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To satisfy the high quality insurance service needs of our customers.
We upgraded our insurance Colin assistance each day in June by extending the Chalmette Quinn survey, she policyholders immediate family members and including Darin quick policy.
In the first half.
The assisted in a total of 34000 insurers Glen cases with their total plan settlement amounts of RMB $320 million.
The highest claim settlement amount in a single case reached RMB 2 million within these trends we have assisted in handling 252 dispute with a total claim settlement among of RMB 979 million.
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Meanwhile, following our disciplined cost control measures.
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Group wide organizational structure optimization.
Our operational efficiency continued to improve in the second quarter selling expenses and G&A expenses decreased by a further 16% sequentially going forward, we will continue to reduce our fixed cost base to improve operational efficiency and achieved.
Sustainable business development through resource integration and the optimization of staff productivity and workflow.
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I would also like to share the progress on our strategic roadmap to build an omnichannel digital.
Insurance service ecosystem that integrates agent businesses customers or a b C D.
Two customers.
Part from acquiring new customers and establishing valuable long term relationships with them. We have also accelerated our business growth through a better engagement with existing customers.
In the second quarter, we have actively launched new product and promotional activities and provided various service upgrades.
These together with live streaming interaction, adding marketing and consultant communications have enabled us to reach more than.
100000 users and achieved sales conversion.
More than 30000 users.
Two businesses, we continue to drive in depth digital transformation of the industry for instance, through our digital acceleration ancient project with Taiping life.
We empowered typing to collect over 4 billion pieces of traffic data from over 20 business scenarios.
<unk> six business lines.
In the second quarter. The total revenue contribution of our technology services business was approximately RMB five three.
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To agents, we have expense expanded our offline business line with registered insurance agents copper in Beijing Shanghai.
One girl and Shenzhen.
FY <unk> facilitated by our QA business reached RMB $56 6 million in the first six months of 2022 more.
Moreover, we opened our first independent agents store in Shenzhen in the third quarter.
Striving to reach out to the rest of the region and provide them with a wide range of customized insurance services.
And empower our professional premium insurance agents.
We will use this as a starting point to drive our integrated online and offline business model and will extend the mold onto your other regions.
After the operations are proven to be sustainable.
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We believe that our 16 years of operational experience and industry, leading digitalization capabilities will enable us to offer our customers a full range of insurance products across all scenarios and empower the whole E E.
Issuance industry value chain.
Two of our integrated online and offline business model.
Our technology services to our <unk> partners and the provision of value added insurance products and services in the areas of protection medical savings and retirement, we strive to enhance customer retention and repeat purchase rates and their lifetime value.
If our customers, thereby achieving diversified business development and sustainable long term growth.
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Thank you.
This concludes my prepared remarks for today I will now turn the call over to our CFO Mr. Around him and he will provide an overview of our key financial highlights for the second quarter of 2022.
Okay.
Thank you Mr. Monahan, Thank you Harry and good evening everyone.
For the purpose of this earnings call I would like to quickly recap a few key takeaways from the operational and financial results for the second quarter.
And for a detailed discussion of financial line items I would like to refer you to our uploaded earnings release for full details.
We are very pleased to report an encouraging set of operating and financial results for the second quarter of 2022, Okay.
According which with you Paul.
We delivered topline growth coupled with improved operational efficiency.
Particularly set against a very challenging macro environment with continued nationwide COVID-19 resurgence leading to much weakened overall economic activity and depressed.
In a couple of uncertainties.
In the second quarter total AWP increased by a solid three 5% year over year to RMB $872 million, which is mainly driven by the strong growth in first year premiums.
All 59, 9% year over year to RMB $485 million.
The strong recovery.
He is a testament to the agility of wages business model to adapt to the changing regulatory and market involvement and the successful execution on our product strategy to focus on the co development and distribution of the <unk>.
And whole life insurance product category in 2022.
The highly successful products Jean might need to series, which we co developed with Hong Kong life has been one of our top selling products on the platform.
During the quarter and together with other co developed products such as the retirement annuity product with Sun life Everbright.
Well as out of savings products, the long term savings insurance product category, we call. It a very strong <unk> growth of one four X year over year.
The recovery in our other important long term health insurance category has also been strong during the second quarter.
<unk> launched new iterations of our highly successful Darwin critical care series as well as the long term medical insurance product named <unk> with CPI seat.
With total FPP up long term health insurance products growing by 83% quarter over quarter and 8% year over year.
Touching quickly upon up with newer metrics when your premiums increased by six 1% year over year to RMB 387 billion with our 13th month persistency ratio as we've made at high levels 91, and 96% respectively.
And which continues to demonstrate the high quality user profile on our platform, which provides much competence for upstream and show our partners doing despite difficult macro environment.
Okay.
And during the quarter, we are fully replenished online insurance product supply chain with a full suite of products spanning the entire spectrum.
Chairman whole lot production health.
<unk> medical.
Annuity savings in P&C categories.
But the AWP contribution of our long term insurance products remaining above 90% and the GWB contribution of customized products also increasing by 68 percentage points year over year in the second quarter.
Meanwhile, our sophisticated product innovation and customer acquisition capabilities have helped strengthen engagement goodbye and show our partners and empowered us to maximize the lifetime value potential of our users.
With an effective customer acquisition capabilities provided by our Omnichannel distribution platform customer.
Customer base has reached $8 2 million as of the end of third quarter.
In addition.
Ticket size.
Of our long term savings product category for the increased to RMB 44000 in second quarter of 2022.
Yeah.
Along with our strong growth in FY <unk>, our total operating revenue increased by 13, 5% year over year to RMB $248 million in the second quarter.
As we have mentioned in the previous earnings call.
Last quarter, we continue to place an emphasis on optimizing overall corporate cost structure and operating efficiencies.
With the further implementation of our group wide organizational structure optimization program of selling expenses and G&A expenses decreased by six 8%.
One 6% sequentially to RMB $94 million in the second quarter.
And for second quarter, we have recorded a net loss of RMB $39 million, which now at about 55% as compared to Q2 of 2021.
Which reflects both our topline growth this quarter as well as the improved operational efficiency as a result of our continuing cost reduction program.
Yes.
And that's not the end of the second quarter, a combined balance of cash and cash equivalents was RMB $444 million.
Demonstrating our ample liquidity and solid balance sheet position to withstand the continued challenging macro economic environment and providing capital at the same time for future business growth.
We have continued to repurchase shares in the open market under the existing share repurchase program and that's not the end of the June quarter, we have repurchased an aggregate of approximately 357000 <unk>.
Yeah.
And going forward, we will continue to execute on a group wide optimization program in Q3, and Q4 aiming to further bring down our fixed cost base and improve our operating leverage upon a business of macroeconomic recovery.
And based on our preliminary assessment of our current market conditions, we expect to achieve quarterly profitability in the second half this year.
As Mr. <unk> mentioned in his opening remarks, we will continue to build and scale and Omnichannel digital insurance service ecosystem that integrates eight agents.
The businesses and see customers over the next three years, which places us firmly in the top tier of insurance intermediaries in China.
Being a partner of choice for strategic partners as we move into an age of insurance distribution for new generation of consumers, which demands innovative solutions on the pork side slow as seamless digital user experience.
We believe this underlying secular growth trends for the industry remain intact and provide much growth potential for professional and digitally native platform Black pizza and provide us with tremendous opportunities to strategically allocate capital to create shareholder value.
The high quality long term business growth.
And with that this concludes our prepared remarks for today and we'll now open up the call to Q&A. Thank you operator.
Thank you we will now begin the question and answer session to ask that question you will need to press star one on your telephone please standby, while we compile the question and answer roster.
Once again Thats star one one for questions.
Our first question comes from the line of.
He Jiang from C. ICC. Please ask your question do you anyway.
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Yes.
Three questions first question.
Can you give us some updates on the operation of your offline business.
Second question is what is your current product portfolio.
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Okay, great sauce different projects and the last question.
Demand master been weak what do you think of the reinsurance market in second half of this year and what's your corresponding.
Operations strategy.
Okay. Thanks for the questions. It's.
It's Ron here, let me address these two questions today, just taking down the first question regarding.
The development of the offline business I.
I guess, we have also mentioned in the opening remarks that we have been seeing very strong growth momentum.
Two <unk> model, which is the independent agents motor that we have.
<unk> started in the first quarter this year.
I think that this also has to do with the ability for us to connect to offline product supply.
As well as our existing online product supply and matrix.
We had also helped by independent agents to sell.
That customer base.
Efficient manner.
Letting them to the online and offline product.
Supply as well as leveraging digital tools to serve the end customers efficiently and effectively especially during this period, where COVID-19 resurgence.
We should know pandemic, obviously it does have still been restricting the traditional offline agency model. So I think that ties really oh once you hire that'd be about just mentioned in the opening remarks that it's great to see model has seen a very strong progress.
That took two independent hff's covering the major tier one and T. Two regions in China, including Beijing, Shanghai, Guangdong Sichuan.
And we also shared in the opening remarks that the <unk> that has been facilitated by the two <unk> model has already reached almost 60 million RMB in the first six months of this year and I think we do have targets you see this number going to about 100 million RMB bought it yet so.
For the second question I think that the take rates on commission rates.
For the various products on the platform I think that.
Essentially the alkali be commissions fall on that product has kept its cap of 60%.
60% for the health products, the long term health products that we sell 1000 series.
B, especially your commissions with 60%, but then for the lifetime value for the product.
At around 110% LTV commissions and most of the backend commissions being paid for.
For the second year.
The renewal so essentially for a lot of health products are we getting a 110% LTV commissions.
For the savings products, Oh, we have pretty much getting around 60% as well for the first year and for the long term.
Lifetime value with getting another 10% to 50% in year two to tier five.
So that will be the take rates for the various products right now.
And third question regarding the strategy with respect to the second half of the year.
The continued weakness in the market and solid customer demand et cetera, I think.
We're seeing right now in the market is that the demand for protection type products is expected to be continued to be very weak.
To counter this weakness I think we have launched.
Our new innovative products in the market in the market place for example, the ether products, which we have cooperated with CPI <unk>.
As well as the new version of Darwin critical care I think we are also seeing a recovery.
In the product segment.
Which because of the fact that the policy now catering to the new consumer preferences not doing the weakness in the economy.
And I think the major focus on the product perspective will still be on the savings product segment for the next 12 months.
We do see continued demand in the third quarter, especially for the increasing whole life product that we have been not showing much success in the market that you might use your product.
Are still seeing a pretty strong momentum in Q3 sequentially and despite of that product. So I think that will continue to drive scale.
Growth in savings product for the next 12 months through a new new iterations of product launches also leveraging a lot of the physical part of IP group, which we have developed already in the market.
With regards to customer acquisition.
I think that we are getting more and more precise on large panel.
You know it does a lot of investment.
The profit channels, and we will be leveraging more and more on the SCO SCM or buy existing part of Ip's.
To drive in the op, you'll see a couple of acquisitions to add on the new customer front.
We also.
Showing a much more concerted efforts internally.
You.
To drive the existing customer sales on Upselling and also referrals by existing customers.
Overall, you can further improve our gross margins from the Q2 level.
So I guess another thing that we would like to continue to drive into Q3, Q4, which we have alluded to in the opening remarks, it's the continued cost reduction.
We would want to target.
10% to 50% additional reduction in our fixed cost base and the law.
Our cost base by end of the year as well I suppose that you get the expense control.
I think overall that will be the second half kind of company strategy on the political front.
Thanks.
Yeah.
Do you have any further questions.
No thanks very clear.
Thank you very much. Our next question comes from the line of Amy Chang from Citi. Please ask your question Amy.
Hi, Thank you management for giving me the chance to ask questions.
So the first question would be also on the commission rate and take rate.
For our newly launched whole life products.
Compared to critical illness products and the second one would be.
I remember on our first quarter result call management mentioned that.
We expect to achieve quarterly profits in the third quarter and the fourth quarter do we still maintain that guidance or do we have any new guidance for the second half of the year. Thank you.
Okay.
Thank you Amy thanks for joining the call.
Support for US I think the two questions on the first one takeaways.
Take rates for the various products.
Pretty must be looking at around.
60% or so for the savings products that we are.
Selling on the platform I think you also need to consider.
Debt.
The difference in the commission rates for the different durations of the savings products, because some customers might.
Be going for tenure.
Payment. So most of them will be great for a 15 year 20 year payments and soda that the difference in duration will also lead to a difference in the commission rates. So I think what we see on a blended basis, we're looking at about close to 60%.
440 savings products. So if you compare that with the online health insurance product, which is actually it's also capped at 60%.
Even though there is a.
But a pretty small differential between the two with respect to the first premium commissions, but about 40 for the lifetime value commissions that there'll be a difference there because as I just answered too.
To the earlier question before.
The savings products.
The some of the increase.
The increase in coli products that we're selling the LTV ambitions for a second to the fifth year, probably it will be it will be another 10% to 50% Commission.
Of course this for a long term health product lack of critical illness will be getting.
110% lifetime value portal, so that that'll be that'll be around 50% in the year two to five so that'll be a different take rates.
With respect to the two products specifically.
And for the second question regarding the guidance for second half I think we need to maintain and we do target the second half quarterly profitability.
I think that would require us to continue.
To implement on our costs.
Our optimization program and also obviously.
Rely on a continued macro step.
So macro recovery.
Consumer demand and.
You know the country's consumer confidence force for consumption.
Is it really just be covered so that's you know insurance products being the most this question they have all financial products.
The medical such would also be improve and recovered so I think that we.
We do maintain our guidance and we do talk very.
We will describe our best to meet these targets in second half of the year.
Yeah.
Thanks Amy.
Thank you very much that's very clear.
There are no further questions at this time I would now like to hand, the conference back to Mr. <unk> for closing remarks.
Thank you operator.
In closing on behalf of <unk> management team, we would like to thank you for your participation in today's call and if you require any further information please feel free to reach out to us. Thank you all for joining US today. This concludes the call.
Thank you.
Our conference call for today. Thank you for participating you may now disconnect.
Yeah.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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