Q3 2022 Huize Holding Ltd Earnings Call

November 11, 2022

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The conference will begin shortly to raise your hand during Q&A you can dial star one one.

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The conference will begin shortly to raise your hand during Q&A.

Ladies and gentlemen, thank you for standing by and welcome to <unk> Holdings Limited's third quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the management's prepared remarks, we will have a question and answer session. Today's conference call is being <unk>.

Recorded and a webcast replay will be available. Please visit <unk> IR website at IR <unk> dot.

Dot com under the events and webcast section.

I'd like to hand, the conference over to your speaker host today, Ms Harris, who.

Investor Relations Director. Please go ahead.

Thank you operator.

Hello, everyone and welcome to our earnings conference call for the third quarter of 2022, our financial and operating results were released earlier today and are currently available on our IR website, and then you fly.

Before we continue I would like to refer you to the safe Harbor statement in our earnings release.

Which also applies to this call as well I'll be making forward looking statements. Please.

Please also note that we will discuss non-GAAP measures today, which are more thoroughly explained in our earnings release and filings with the SEC.

Joining us today are our founder and CEO , Mr. <unk> Ma C.

Hello, Mr. Li Zhang co CFO , Mr. <unk>, Hinesville and co CFO , Mr. Ron Hutton.

The amount will start our call by providing an overview of the company's performance and operational highlights for the third quarter of 2022, Mr. Tim will then provide details on our financial results would appear it before we open up the call for questions.

I will now turn the call over to Mr. Matt.

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Thank you.

Hello, everyone and thank you for joining <unk> third quarter 2022 earnings conference call.

Third quarter was a reported another set of results that underlies our resilience in the face of an uncertain operating environment characterized characterized by the ongoing impact of COVID-19 are relatively moderate recovery in consumer confidence and the deepening consolidation.

The insurance industry.

During the quarter, we continued to make progress on implementing our strategic roadmap to build a nominee China.

Our insurance service ecosystem that integrates agents businesses and customers or ABC and further refined our comparative age in customer insights product innovation and professional insurance services.

In the third quarter.

Total gross weekend premiums or DWP facilitated on our platform increased by 29, 4% year over year to RMB, one 3 billion.

And our total operating revenue increased by 11, 7%.

Our over years RMB 352 million.

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And then quickly.

In terms of product mix, we have responded to market demand by enhancing our focus on promoting savings insurance products.

And this strategy has produced remarkable results.

In the third quarter, the total first year premiums or FRP facilitated on our platform increased by 34% year over year to RMB $685 million.

Of which the FRP of savings product Monday to RMB $509 million.

A 49%.

3% year over year increase.

These results reflect the ability of our asset light business model and market driven product offerings.

To successfully sustain our high quality business growth.

Meanwhile, Thanks, Judah snowball effect.

Hi, user's thickness.

Generated by our strategic focus on long term insurance product or renewal premiums increased by 24, 1% year over year to RMB $564 million, providing us with a valuable source of stable cash inflows.

In a challenging macro environment.

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We have been sharing the operating metrics of our long term insurance business with investors since 2020, and we're all very proud of the solid foundation laid down by this business.

In the third quarter due to the contribution of our long term insurance products was 93, 9% remained above 90% for the 12th consecutive quarter.

We have also maintained a high quality user profile as our accumulative number of insurance clients continues to grow reaching $8 3 million as of September <unk>.

Third quarter.

65, 2% of our launch insurance customers with a higher tier cities.

Within average age of 33.

Yes.

In terms of FRP.

The average ticket size of launching the insurance product and long term savings products.

Approximately RMB 6000 and 108.

RMB 40000 in the third quarter, respectively.

Our average persistency ratios fall launch on life and health insurance in a 13th and 25th month remained industry high levels of 90, 91%, 96% in the first seven months of 2022, respectively.

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As of the end of the third quarter, we have cooperated with 106 in shop partners to co develop a wide range of cost effective and high quality customized product to stimulate market demand in the area, including critical illness.

You may recall pension and accident insurance.

In the third quarter. The DWP contribution of co developed product increased by 23, seven percentage points year over year to 72.9% since.

Since September we have launched Darius customized product such as Darwin critical care number seven he hears.

Premia, a customized increasing whole life insurance product shall plan, a comprehensive family insurance product and Quaker assumptions on Premia, a comprehensive accident insurance products with challenging.

Of particular note was the launch of Darwin critical care and number seven.

That is critical illness insurance product offering in the Darwin critical care area.

Which offers additional benefits or severe myers.

And Myles malignant tumors <unk> carcinoma in situ as well as ICU hospitalization benefits covering major disease outside of least of Serbia moderates and amount of illnesses, providing extensive protection for our users and their families.

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We also continue to make progress on executing our three year agents businesses.

<unk> strategic business plan.

<unk> business has achieved placing results since its launch at the beginning of the year.

The FY <unk> facilitated by our <unk> business increased by 53, 3% sequentially to RMB $65 million in the third quarter.

And reached a total of RMB 120 million in the first nine months, becoming a key driver of our future business growth.

In terms of customers, we have activity launched promotional activities, including life's Jimmy interactions and value added services customized for different groups of users such as new parents and high value users.

Which have enabled us to achieve sales conversion of more than 10000 users in the third quarter.

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<unk> seen the use of the volume could you tell me what you bought.

On the <unk> side, we continue to export various digital tools and technologies to insurance companies.

With offerings, including the supply chain risk management system, and our key intelligence quality control system.

The digital acceleration aging and the business intelligence dashboard.

Our goal is to drive the digital and intelligent transformation of insurance companies empowering them in the areas of business development customer service and product development.

And ultimately you have intent to grow with our business sustainably.

In the first nine months the total revenue contribution of our technology services business.

Approximately RMB 14 million.

Meanwhile, our our capabilities in driving innovation and R&D development have earned industry recognition by being selected as one of their new distinctive specialized and sophisticated Smes in Sichuan province in 2022, which highlights our comparative.

Advantages in developing insurance products and solutions.

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Meanwhile, we continued to reduce our fixed cost base to improve operational efficiency in the third quarter. Our total operating expenses decreased by 27, 8% year over year in particular are selling.

Expenses declined by 32, 4% year over year.

Driving our selling expense to revenue ratio 10, 10, four percentage points lower on a year over year basis.

And demonstrating the great strides we have made in improving our overall operational efficiency.

Against the backdrop of China's accelerated economic recovery and the digital transformation of the insurance industry, We believe that building an omnichannel.

Insurance services ecosystem.

<unk> seen the <unk> integration of our products and services and strengthening our technology service capabilities, we can sustain our leading position in a digital insurance intermediary business.

We will strive to optimize our capital allocation to diversify our business and drive sustainable long term high quality growth.

Hey, Joe, Let's say a whole lot Digest Shanxi Zhejiang.

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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 chief financial highlights for the third quarter of 2022.

Thank you Mr mind, Harry good evening, everyone.

The third quarter has proved to be a very difficult quarter on multiple fronts.

The killer the ongoing pandemic related restrictions imposed with lockdowns on considerable part of the economy.

This weighed on consumer confidence.

Some expectations and as a result depressed demand for insurance by consumers in China.

Especially for protection products, such as long term health insurance.

The lingering uncertainties with respect to the outcomes of the ongoing PCA Ob inspections.

With working papers of Chinese ADR companies and the corresponding potential delisting risk of Chinese ADR ops have also led to a further dislocations in the stock prices of ourselves as far as our peers.

All together contribute to an overall extremely challenging capital market environment.

Yes.

The difficult macro environment, we have been very focused on the execution of our key strategy.

On the product front, we continue to focus on driving distribution.

All savings insurance products.

Which continues to be welcomed by the consumer market given its relative attractiveness as compared to bank deposits of a declining weights involvement in China.

On the channel front, our new toy placebos to slide continued to deliver strong growth momentum in the alpine space.

Generating in excess of RMB $130 million up already in the first nine months of the year.

And on the corporate front, we continue to implement firm wide cost savings measures with a strong focus on expense control across all business lines.

As a result of this strategy, we managed to achieve double digit growth across all of our key metrics.

In the second quarter total <unk> increased by 29, 4% year over year to RMB, One 2 billion, which was driven by the strong growth in FY <unk> of three 4% year over year to RMB 685 billion.

And on a sequential basis FY peak in third quarter grew by 41, 3%, which was contributed by the continued momentum in our long term savings insurance product segment.

The results again demonstrate the.

Utility.

Our platform to adapt to the changing regulatory and market environment.

The successful execution of our product strategy to focus on the co development and distributions will be increasing whole life insurance product category in 2022.

The highly successful product IP that we have launched Jim on mutual series, which we co developed with Hong Kong life and exclusive to <unk> platform continues to be one of our key top selling.

So that platform during the third quarter.

Together with our co developed retirement annuity products.

With auto insurer partners, such as Sun life, Everbright facilitate insurance the long term savings insurance product category.

Excluding annuities recorded very strong FY <unk> year over year.

Our renewal metrics continued to be robust.

Premiums, increasing by 24, 1% year over year to RMB $561 million.

Mr. <unk> would you touched on a solid persistency metric in his remarks and this continues to demonstrate the rest will be high quality of our customer acquisition and the attractive customer Colbaugh Dallas.

Digital distribution ecosystem brings joy ensure partners during this difficult macro environment.

And that's not the end of the third quarter, our customer base has further grown.

To which the $8 3 billion, Mark and customer lifetime values are still showing consistent accretion.

The average ticket size.

Over 40000, RMB per long term savings insurance product distributions.

In the first quarter.

Along with the broken <unk>.

Our total operating revenue increased by 11, 6% year over year to RMB $352 million in the third quarter.

As mentioned in the previous quarter, we continue to place strong emphasis on the optimization of our overall corporate cost structure.

To further drive operational efficiencies.

In the third quarter operating costs overall were RMB $248 7 million, which represents an increase of six 7% year over year and as a result, our gross margin has improved by three three percentage points from 26% to train nine 3%.

Our continued focus on reducing <unk> costs and expenses have resulted in the 24% year over year decrease SG&A expenses, while R&D expenses also decreased further by 45% year over year.

For the third quarter, we recorded a net loss of RMB 10, 5 billion, which now will significantly by 87% for the same period of last year, reflecting both our topline growth this quarter as well as the improved operational efficiency.

At the end of the third quarter as we continue to maintain a strong liquidity position as evidenced by a combined balance of cash and cash equivalents.

<unk> $307 million.

We have continued to repurchase shares in the open market under our existing share repurchase program and as of the end of the third.

Quarter, we have repurchased an aggregate of $302 <unk>.

83.

<unk> business plan will enable us to build and scale and Omnichannel digital insurance service ecosystem, which would place us firmly in the top tier of insurance intermediaries in China.

Becoming a digital partner of choice for upstream and show our partners as we move into an age of insurance distribution for new generation of consumers, which demands innovative solutions on the cost side as well as a seamless digital experience and professional customer surface.

We believe that the underlying long term secular growth trends for China's insurance industry remains firmly intact.

And especially for an increasing share of product distribution to be contributed by digital intermediaries like ourselves.

Providing tremendous opportunities for us to allocate capital to create shareholder value and sustain our high quality long term business growth.

Lastly, as disclosed in our recent announcements we will also like to make a quick note on the recent notice that we have received from the NASDAQ listing office with respect to the compliance with continued listing requirements due to our share price being below $1 U S.

We would note that many companies currently listed on the NASDAQ market and especially our peers in the China Edr space are also facing a similar situation due to the current dislocations in the market valuation due to geopolitical and PCA Ob related risks.

Lots of investors that common market practice adopted by companies two.

To regain compliance include an adjustment in the Ats to common share ratio or a reverse stock split.

Would result in the share price regaining compliance with web and NASDAQ requirements.

We will continue to closely monitor market conditions, which is expected to continue to be quite volatile.

And we could implement the aforementioned measures within the 180 day Grace period allowed under the NASDAQ rules.

We reiterate that the receipt of the notice of that that does not affect the company's business operations at all.

With that it concludes our prepared remarks for today and we will now open up the call to Q&A.

And over to you operator, thank you.

At this time, if you'd like to ask question. Please press star one on your telephone and wait for a name to be announced.

Yeah.

Once again to ask question. Please press star one one and wait for a name to be announced.

One moment for the first question.

Yeah.

First question comes from the line of Yoyo Chahar CIC. Please proceed.

Hey, Glenn.

Oh, Hello, guys, Hi, Brian Frank I wondered if you wanted to do.

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I was wondering.

Sure Danielle.

Welcome to Liberty to ultra.

Now I'll go on to your share all consider energy companies wanted to yes.

Sure.

Okay.

We have two questions regarding the strategy and the first one is in terms of okta to any segments once.

After agents, who currently have a ton of ship with you.

<unk> okay.

Operations with more high quality agents under your ABC strategy.

Uh huh.

And the second question is what do we expect offshore to be effective.

And how long it is part of it does not contribute to earnings in the future. Thank you.

Thank you thank you for questions.

We're on here.

So with regards to the first question on the <unk> business I think right now we have.

One in the <unk> business for.

11 months now since the start of the year and I think that we've been targeting the experienced.

Insurance agents from the marketplace and a lot of this.

<unk> carry with them over five years of experience.

With respect to life and health insurance policy sales.

And most of this agent that we target a quick completes the entire.

Customer service or customer journey.

From the.

The customer acquisition itself.

Business development and to assistance of underwriting.

In the post.

Policy administration and enforce.

Our systems et cetera. So.

We believe that the <unk> model of empowering the independent agents have proven to be a success I think it really has to do with.

Advantages in providing a.

Comprehensive products apply matrix, so while SaaS platform.

We can enable and then polity agents.

Via.

The mature digital tools that.

We have a decline in house for our in house consultants and basically we are exporting as tools 32 eight.

Assign independent agents in the marketplace.

So I think that's the answer to your first question.

With regards to the <unk> segment I think that.

Since the IPO, we have been deploying a meaningful capital in developing the technology service capabilities of Fraser.

Hum.

Since the start of this year, we have started to export this services to our upstream onshore partners and so far we've signed up.

Few reputable names such as Taiping life.

And great wall insurers as well.

So the tools that we're deploying in house with respect to customer.

Patients should management.

Two compliance.

Two.

Underwriting.

Assistance claims assistant et cetera, all these tools have been exported to the.

Insurance companies that have been signing up for it will be business as declines and I think that right now for the first nine months of already achieved a double digit.

$1 billion of revenue 13 billion overall, I think that is expected to growth.

The vertical high rates over the next two or three years as we start to scale the business.

The word of mouth in the market.

Given the success that our initial C class.

Experiencing we believe that over the next two to three years, we'll be able to go out more and more products to the marketplace and to accelerate the adoption by other insurance companies as well.

Given that the the investment has been made already in the last two years, we do expect that the two previous slides relatively higher margin infosys.

For insurance.

Distribution business.

And we do expect that we were able to generate.

Positive cash flow in the next year.

Thank you.

Yeah.

Okay.

Thank you for the questions. Once again to ask question. Please press Star One one next question comes from Michelle MA of Citi. Please proceed.

Thank you Thank you management.

Congratulation on such as the <unk>.

So my first question is a follow up question so.

I'm wondering for our offline ancient whats currently their average monthly income could.

Could you give us that's where I found it.

Second question is about.

The outlook. So we noticed the Houghton fourth quarter, you mentioned will achieve quarterly profitability in the fourth quarter and we noticed that the cost income ratio has improved very.

In Cross company.

So just longer into sustainability and whats the outlook for next year.

<unk> you mentioned, we will see positive cash flows.

The profitability.

Do you have any view on the revenue growth and expense growth next year.

I think anytime you want to stick with it.

Okay, Sandro Gamba <unk> motto.

Nick around soccer they got Harry.

Yes, hi, Thank you maintained our mine site. Thank you Polly and good are you guys, how will that Shanghai Madison.

I'll take the question about.

Yeah.

<unk> got good Ethernet yourself under 10 minutes.

Archie how long a sense that I shall Amanda equal offline, yes.

Hello <unk>.

Hi, This is Andy again.

Yes, showroom Takashi younger shaping come on.

You guys noted that you Tien tsin novartis or now that you have seen that it goes on like that Shaw Shan Shan Shan Hey, John .

Just show on the Shaw <unk>.

Chartwell.

Since <unk> <unk> Sidoti <unk> co unique Roxanne when you got to go the cartridges inkjet <unk> gesture. Neither you got that launches on the agile <unk>. Let you go something after the home lending issuance Ukraine tissue the approaching a one man show Luca.

Just I'll say you don't you acquire Armenia, Ego-syntonic chatwal understands that you'll never know.

Just say is that I'm gonna Goldman Sachs just yet.

Okay. Thank you Michele thanks for joining again I appreciate it.

So the first question on the <unk> business.

By agents and the average I guess productivity or telecom kind of.

Sure.

Salary I think it all depends on the individual agents on productivity, but I think overall on average I would believe that the productivity of the agents have been relatively robust and which will be on a comparative level as to in house laser consultants. So as are we.

So I believe that the take home pay on a monthly average basis with the will be in excess of RMB 10000 level. So I think that that level of compares quite favorably favorably with respect of <unk>.

In comparison with the offline brokerage or agency or even the the.

Tight agency agents.

Agents within the <unk> companies those companies themselves.

So I think that will be the answer the first question and yes. Most of the agents are located in the tier one and tier two cities.

Cities.

We have always been quite focused on the mass affluent market sector within China. So the 401 billion also a middle class consumers and therefore, the <unk> will also be in.

In synchrony in sync with our.

Liquids platforms focus area in terms of the end user market.

So the second question on the.

Profitability outlook, so I guess in Q3, which shows a substantial improvement.

The only losses down to almost breakeven level. We are on course for a profit making a quarter for Q4.

And for next year I think that.

We do see break encouraging signs are very promising.

News coming out from China today is very timely for us to have this for this call Tonight with the call is yours.

Policies seemingly to be pivoting towards reopening and I think the the wider investment community is.

Consensus that we opening it could happen in the spring of next year, so with that backdrop and with consumer confidence coming back anywhere else.

Macro economic recovery, we do believe that.

The growth has been reset this year.

And then we will be going back to a trend growth kind of.

A level for the next few years and I think that should be something around like 30% CAGR, what makes sense two or three years.

As a reasonable starting point.

So with that and then also you can see that our gross margins for this quarter is around 30% and nothing.

Is it relatively stable.

Next quarter, we would expect to see meaningful renewals.

What you're bringing to the bottom line because last year in Q4, we had a very.

Huge quarter due to the rapidly changing these savings product distribution as soon as we can all remember so Q4, we will be benefiting from that.

We will be benefiting from the <unk>.

Renewal spike from the.

Corresponding quarter from last year.

And then I think for the whole of next year, we should be targeting at meaningful mid to high single digit comp net margin.

As a starting point so I think that would be my answer to your second question Michelle.

Yes.

Quick questions one moment for the next question.

Okay.

Our next question comes from July <unk> of China Renaissance. Please proceed.

Yes.

Hi, this is economies from kindergarten management housekeeping media channels.

Okay.

I have one question.

Got that.

Could you please.

More details of the new products launched in the third quarter.

And is there any plan in the fourth quarter or.

In 2023.

Yeah.

Yes.

Alright. Thank you thanks for joining the call today I appreciate it.

So the question on new product launches I think Mr. Martin mentioned in his opening remarks that we have launched quite a few products in the third quarter.

And that has revolved around the customer lifetime value and R&D at highest spectrum.

Health to savings too.

To pension.

Annuities.

And also for our children.

Health care.

So.

Next year I think we all.

Also intend to.

Iterate, our product launches I think the average.

The timeframe that we look at for upgrading or launching a new product in each of the various subcategories is about three to six months.

As we work with their financial partners and launch.

<unk> products specializing on different sub sectors of the market.

So.

Bulk debarment and bought launches is bread and butter to Asia business plan.

And this is something that we would be looking to innovate.

SB collectible and more.

Insights from our.

<unk> slides and with that we will feed back into our product development team, which will work with onshore.

On the upstream to launch new products on all the different segments.

Mr. Maazel mentioned in the third quarter, we have achieved a very meaningful increase in the proportion of the contribution from our customized products to our overall.

Pete.

So I think that is also evidence that we continue to.

Have a very strong relationship.

Deep engagement with our.

Issuer partners on the product front.

Hope that answers questions. Thank you.

Yeah.

Thank you for the questions no.

No more questions from the line.

Go back to the management for closing remarks.

Thank you operator.

On behalf of <unk> management team I 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 for joining US today. This concludes the call.

Thank you.

Yeah.

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

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Yes.

Okay.

Thank you.

Yes.

[music].

Okay.

Yes.

Okay.

Yes.

And a webcast replay will be available. Please visit <unk> IR website at IR Dot dot.

Dot com under the events and webcast section.

I would now like to hand, the conference over to your speaker host today, Ms. Harriet who does Investor Relations Director. Please go ahead.

Thank you operator.

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 as 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 SEC.

Joining us today, RF Thunder and our CEO Mr. <unk> Ma.

Mr. Li Zhang co CFO , Mr. Amy Hartzell 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 third quarter of 2022.

Tim will then provide details on our financial results without peer and before we open up the call for questions I will now turn the call over to Mr. Matt.

Yes.

Calculate the.

Thank you for that Bob will again.

Yes.

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<unk>.

Yes.

<unk>.

Good morning.

Great.

Hey.

Thank you Susan.

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On Johan <unk>.

Even so the calculus.

<unk> will launch out of it and do that.

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Donna.

<unk> argue against that.

<unk>, it's Scott.

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So I would argue.

Thank you.

Hello, everyone and thank you for joining <unk> third quarter 2022 earnings conference call.

Third quarter.

We reported another set of results that underlies our resilience in the face of an uncertain operating environment.

Characterized characterized by the ongoing impact of COVID-19 are relatively moderate recovery in consumer confidence and the deepening consolidation of the insurance industry.

During the quarter, we continued to make progress on implementing our strategic roadmap to build an omnichannel.

Digital insurance service ecosystem that integrated Asian businesses and customers or ADC.

Further refined our comparative H in customer insights product innovation and professional insurance services.

In the third quarter.

Total growth weakened premier or DWP facilitated on our platform increased by 29, 4% year to RMB, one 3 billion.

Our total operating revenue increased by 11, 7%.

Year over year to RMB $352 million.

Okay.

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So NIM, albeit.

I mean the cytosorb.

Doug maybe you again by year end.

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Since that time Youll Moshe deals all the time in Korea.

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We are confident that we got.

On the volume.

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Dr RMB, Louisiana.

With Adobe on that this year, we're diligent in London.

Great.

In terms of product mix, we have responded to market demand by enhancing our focus on promoting savings insurance products.

And this strategy has produced remarkable results.

In the third quarter, the total first year premier or FRP facilitated on our platform increased by 34% year over year to RMB $685 million.

Of which the FRP of savings product Monday to RMB $509 million.

A 49.

3% year over year increase.

These results reflect the ability of our asset light business model and market driven product offerings.

He has successfully sustain our high quality business growth.

Meanwhile, Thanks, Judah snowball effect.

Hi, user's thickness.

Generated by our strategic focus on long term insurance product or renewal premiums increased by 24, 1% year over year to RMB $564 million, providing us with a valuable source of stable cash inflows.

In a challenging macro environment.

For Ani.

Thank you. Thank you John .

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Keep in mind.

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Yes.

Jason Thank you, though more pinelli cobalt novotel, Bobby Thanks, a lot.

Youll find out so don't box your Cogs down.

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Paul Cheng.

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Yes.

We have been sharing the operating metrics of all long term insurance business with investors since 2020, and we're all very proud of the solid foundation laid down by this business.

In the third quarter <unk> contribution of all long term insurance products was 93, 9% remained above 90% for the 12th consecutive quarter we have.

Have also maintained a high quality user profile as our accumulative number of insurance clients continues to grow reaching $8 3 million as of yet.

September .

In the third quarter.

65, 2% of our launch insurance customers with.

Higher tier cities.

Within average age of Phase III plan.

Yes.

In terms of FRP.

The average ticket size of loss of insurance product and long term savings products.

Approximately RMB 6000 and 108.

RMB 40000 in the third quarter, respectively.

Our average persistency ratios fall launch our life and health insurance in a 13th and 25th month remained industry high levels of 90, 91%, 96% in the first seven months of 2022, respectively.

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ICU program.

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You've got we've got to kind of model.

As of the end of the third quarter, we have cooperated with hunt.

And sixth inkjet partners to co develop a wide range of cost effective and high quality customized product to stimulate market demand in the area, including critical illness medical pension and accident insurance.

In the third quarter. The DWP contribution of co developed product increased by 23, seven percentage points year over year to 72.9%.

In September we have launched Darius customized product such as Darwin critical care number seven he hears.

<unk> premium <unk>.

Increasing whole life insurance product <unk>, a comprehensive summary insurance product and Quaker assumptions on Premier.

Prehensile accident insurance products, but challenging.

Of particular note with the launch of Darwin Kreger, Karen number seven.

That is critical illness insurance product offering Darwin critical care area.

Which offers additional benefits or severe Myers and.

And Myles malignant tumors and <unk> carcinoma in situ as well as ICU hospitalization benefits covering major disease outside at least of Serbia moderates and amount of illnesses, providing extensive protection for our users and their families.

He is a closure.

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Jonathan Thanks into their children P walk with him Commvault, you see that both of them.

Thank you for attending Dropbox Yahoo, you Onboarding.

We also continue to make progress on executing our three year agents businesses customers strategic business plan.

<unk> business has achieved placing results since its launch at the beginning of the year.

<unk> facilitated by our QA business increased by 53, 8% sequentially to RMB $65 million in the third quarter.

<unk> reached a total of RMB $120 million in the first nine months, becoming a key driver of our future business growth.

Which have enabled us to achieve sales conversion of more than 10000 users in the third quarter.

The people in <unk>.

Matriculation biomedical followed suit.

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Seeing that change year over year could you food Hall.

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Two questions.

Okay.

<unk> seen the use of the volume could you tell me what you bought.

On the <unk> side, we continue to export various digital tools and technology to insurance companies.

<unk> offerings, including the supply chain risk management system.

And our key intelligence quality control system.

You saw acceleration aging and the business intelligence dashboard.

Goal is to drive the digital and intelligent transformation of insurance companies empowering them in areas of business development customer service and product development.

And ultimately in App intent to grow their business sustainably.

In the first nine months the total revenue contribution of our technology services business.

Approximately RMB 14 million.

Which highlight our comparative.

Vantage is in developing insurance products and solutions.

While not strictly a loss jumbos.

So, yes, <unk> got John Bevan.

And then Bob you don't social point.

Hi, John Bevan, just wondering audience.

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Company <unk> Shelby that Houston.

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<unk>.

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Yeah.

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Any thoughts.

<unk> loan book.

Could you foothold in either gotcha.

Thank you <unk>.

Sure Ken.

No.

Meanwhile, we continued to reduce our fixed cost base to improve operational efficiency.

The third quarter, our total operating expenses decreased by 27, 8% year over year in particular, our selling expenses declined by 32, 4%.

We're driving our selling expense to revenue ratio 10, 10, four percentage points lower on that year over year basis.

And demonstrating the great strides we have made in improving our overall operational efficiency.

Against the backdrop of China's accelerating economic recovery and the digital transformation of the insurance industry, We believe that building an omnichannel.

Insurance service ecosystem.

<unk> seen the <unk> integration of our products and services.

Strengthening our technology service capabilities, we can sustain our leading position in a digital insurance intermediary business.

We will strive to optimize our capital allocation to diversify our business and drive sustainable long term high quality growth.

Let's say I have all wrong Digest Yankees, yes, yes, yes.

Al with us.

This concludes my prepared remarks for today I will now turn the call over to our CFO , Mr. Ron <unk> and he will provide an overview of our key financial highlights for the third quarter of 2022.

Thank you Mr Mind Harry.

Turning everyone.

The third quarter has proved to be a very difficult quarter on multiple fronts.

In particular, the ongoing pandemic related restrictions imposed with lockdowns on a considerable part of the economy.

Weighed on consumer confidence.

Income expectations and as a result depressed demand for insurance by consumers in China.

Especially for protection products, such as long term health insurance.

The lingering uncertainties with respect to the outcomes of the ongoing <unk> inspections of the audit working papers of Chinese ADR companies and the corresponding potential delisting risk of Chinese ADR ops have also led to a further dislocations in the stock prices of ourselves as far as our peers and also.

Contribute to an overall extremely challenging capital market environment.

Yes.

Despite the difficult macro environment, we have been very focused on the execution of our key strategy on it.

Product front, we continue to focus on driving distribution of.

Savings insurance products.

Which continues to be welcomed by the consumer market given its relative attractiveness as compared to bank deposits in a declining rate environment in China.

On the channel front, our new toy placebos to slide continued to deliver strong growth momentum in the alpine space Jeff.

<unk> generating in excess of RMB $120 million of FPP already in the first nine months of the year.

And on the corporate front, we continue to implement firm wide cost savings measures with a strong focus on expense control across all business lines.

As a result of our business strategy, we managed to achieve double digit growth across all of our key metrics.

In the second quarter total GWB increased by 29, 4% year over year to RMB, One 2 billion, which was driven by the strong growth in FY <unk> of three 4% year over year to RMB $685 million.

And on a sequential basis FY peak in third quarter grew by 41, 3%, which was contributed by the continued momentum in our long term savings insurance product segment.

The results again demonstrate the.

The agility of our platform to adapt to the changing regulatory and market environment and the successful execution of our product strategy to focus on the co development and distribution of the increasing whole life insurance product category in 2022.

The highly successful product IP that we have launched demos mutual series, which we co developed with Hong Kong alive and exclusive to <unk> platform continues to be one of our key top selling.

So that platform during the third quarter.

And together with our co developed retirement annuity products with auto insurer partners, such as Sun life Everbright in CFA insurance.

Long term savings insurance product category exclude.

Excluding annuities recorded very strong FY <unk> year over year.

Our renewal metrics continued to be robust.

Renewal premiums, increasing by 21% year over year to RMB $561 million.

Mr. <unk> would you touched on some persistency metric in his remarks and this continues to demonstrate the rest of the high quality of our customer acquisition and the attractive customer pulled off the shelf digital distribution ecosystem brings joy ensure partners during this difficult macro environment.

And that's not the end of the third quarter, our customer base has further grown.

To which the $8 3 million Mark.

Customer lifetime values are still showing consistent accretion.

We had average ticket size of well over 40000 RMB per long term savings insurance product distributions.

In the first quarter.

Along with the broken <unk>.

Our total operating revenue increased by 11, 6% year over year to RMB $352 million in the third quarter.

As mentioned in the previous quarter, we continue to place strong emphasis on the optimization of our overall corporate cost structure.

Further drive operational efficiencies.

From 26% to 29, 3%.

Our continued focus on reducing cost and expenses have resulted in the 24% year over year decrease SG&A expenses, while R&D expenses also decreased further by 45% year over year.

For the third quarter, we recorded a net loss of RMB 10, 5 billion, which now will significantly by 87% from the same period of last year, reflecting both our topline growth this quarter as well as the improved operational efficiency.

At the end of the third quarter, we continued to maintain a strong liquidity position as evidenced by a combined balance of cash and cash equivalents.

RMB $307 million.

We have continued to repurchase shares in the open market under our existing share repurchase program and as of the end of the third quarter, we have repurchased an aggregate of 308.

200 <unk>.

Okay.

<unk> <unk> business plan will enable us to build and scale and Omnichannel digital insurance service ecosystem, which would place us firmly in the top tier of insurance intermediaries in China, becoming a digital partner of choice for our upstream ensure partners as we move into an age of insurance distribution.

For a new generation of consumers, which demands innovative solutions on the cost side as well as a seamless digital experience and professional customer surface.

We believe that the underlying long term secular growth trends, while China's insurance industry remains firmly intact.

And especially for an increasing share of product distribution to be contributed by digital intermediaries like ourselves.

Providing tremendous opportunities for us to allocate capital to <unk>.

<unk> showed a value and sustain our high quality long term business growth.

Yes.

Our share price being below $1 U S.

We would note to investors that common market practice adopted by companies to.

To regain compliance include an adjustment in the Ats, two common share ratio or a reverse stock split.

Would result in the share price regaining compliance with web and NASDAQ requirements.

We will continue to closely monitor market conditions, which is expected to continue to be quite volatile.

Implement the aforementioned measures within the 180 day Grace period allowed under the NASDAQ rules.

We reiterate that the receipt of the notice of that that does not affect the company's business operations at all.

With that it concludes our prepared remarks for today and we will now open up the call to Q&A.

And over to you operator, thank you.

At this time, if you'd like to ask question. Please press star one on your telephone for a name to be announced.

Yeah.

Once again to ask question. Please press star one one and wait for a name to be announced.

Okay.

One moment for the first question.

Yeah.

First question comes from the line of <unk> Shah CIC. Please proceed.

Hey, Glenn.

Oh, Hello, guys, Hi, Brian Frank I wondered if you wanted to do.

Cool.

Well Neil Cohen.

Archie got a B C D go into should something Tom.

I was wondering.

How long should that.

Now, while I don't listen to it.

They will go into your shell uncles their brands with Wanda.

Sure.

Okay.

We have two questions regarding <unk> business strategy and the first one is in terms of ochsner to any segments once a profile after agents.

We have just a ton of ship with you.

Okay.

With more high quality agents under your ABC strategy in the future.

And the second question is when do you expect Florida to be segment and how at this product does not contribute to earnings in the future. Thank you.

Yes.

Thank you. Thank you quick questions, it's Ron here.

So obviously close to the first question on the <unk> business I think right now we have.

It will be running the <unk> business.

Sure.

11 months now since the start of the year.

We have been targeting the experienced.

Insurance agents from the marketplace.

Europe is.

Agents carry with them over five years of experience.

With respect to life and health insurance policy sales.

And most of this agent that we target a quick completes the entire custom.

Customer service or customer journey from.

From the.

Because of the acquisition itself.

Business development and to assistance of underwriting.

On the post.

Policy administration and enforce.

Ah.

Assistance et cetera. So.

We believe that the <unk> model of empowering the independent agents have.

Proven to be a success I think it really has to do with al.

Advantages in providing a.

Comprehensive products apply matrix, so while SaaS platform.

We can enable and then polity agents.

Bye.

The mature digital tools.

We have a decline in house for our in House consultants.

If we were exporting this tools into a business line independent agents in the marketplace.

So I think thats the answer to your first question.

With regards to the <unk> segment I think that.

Since the IPO, we have been deploying a meaningful capital in developing the technology service capabilities of Fraser.

Since the start of this year, we have started to export this services to our upstream onshore partners and so while we've signed up a few reputable names such as keeping lives.

Great wall insurance as well.

So the tools that we're deploying in house with respect to customer relationship management.

<unk> compliance.

And two.

Underwriting.

Assistance claims assistant et cetera, all these tools have been exported to the.

The insurance companies.

Have been signing up for our <unk> business.

Declines and I think that right now.

Nine months <unk> achieved a double digit.

$1 billion of revenue 13 billion overall, I think that is expected to growth.

Already the high rates over the next two or three years as we start to scale the business.

The word of mouth in the market.

Given the success that our initial C class.

Experiencing we believe that over the next two or three years, we will be able to go out more and more products to the marketplace and to accelerate the adoption by other insurance companies as well.

That the the investment has been made already in the last two years, we do expect that the two previous slides relatively higher margin infosys.

Our core insurance disc.

Distribution business.

And we do expect that we were able to generate.

Positive cash flow in the next year.

Thank you.

Yeah.

Okay.

Thank you for the questions. Once again to ask question. Please press Star One one next question comes from Michelle MA of Citi. Please proceed.

Thank you Thank you management.

Congratulation on such as the <unk>.

So my first question is a follow up question. So I'm wondering for our offline ancient.

What's current claim their average monthly income.

Could you give us a strong foundation.

Second question is about.

The outlook. So we noticed the hotter fourth quarter, you mentioned will achieve quarterly profitability in the fourth quarter and we noticed that the cost income ratio has improved very.

In cross company, so just longer Anda sustainability and.

What's the outlook for next year's profitability, you mentioned, we will see positive cash flow, but how about the profitability.

Do you have any view on the revenue growth and expense growth next year.

I just wanted to say that Q&A Steve.

Okay.

Hi, Michael.

Nick Earl.

Harry.

Yes, hi, Thank you and then kind of what months.

Thank you Polly and good luck.

You guys Hal will touch on highway magazine for women.

Christa.

After the ASO.

<unk> is now going to turn many advantages.

Archie how long a sense that I show Amanda equal offline.

Hi, This is Andy again.

Yes, showroom Takashi question beyond the shape in tomo.

And that's all just that you Tien tsin, Novartis and nowadays I assume that it goes on like that Shaw Shan Shan Shan Shan.

Just show on the Shaw <unk>.

Wow.

Since <unk> <unk> Sidoti <unk> co unique Roxanne when you got to go the Curtis Youre seeing <unk> gesture.

You got that launches on the onshore in Canada that you go something after the whole timing.

Issuance increased tissue the approaching a one man show Luca.

So I'll tell you Akshay <unk>.

Hey, guys. Thanks on the chartwell understands that you'll need for that.

So are you just saying is that I'm gonna Goldman Sachs just yet.

Okay. Thank you Michele thanks for joining again I appreciate it.

So the first question on the <unk> business.

Agents and the average I guess productivity or take home kind of.

I believe that the take home pay on a monthly average basis with the will be in excess of RMB 10000 level. So I think that that level of compares quite favorably for you.

<unk> with respect.

In comparison with the offline brokerage or agency or even the the.

Tight agency agents.

Agents within the <unk> companies those companies themselves.

So I think that will be the sort of <unk>.

First question and yes, most of the agents are located in the tier one and tier two cities.

We have always been quite focused on the mass affluent market sector within China. So the 401 billion also a middle class consumers and therefore, the <unk> will also be in.

And synchrony.

In sync with our.

Liquids platforms focus area in terms of the end user market.

So the second question on the.

Profitability outlook, so I guess in Q3, which shows a substantial improvement.

The only losses down to almost breakeven level. We are on course for a profit making a quarter for Q4.

And for next year I think that.

We do see a break in closing size and very promising.

News coming out from China today is very timely for us to have this for this call Tonight with the cold is fuel.

Policies seemingly to be pivoting towards reopening and I think the the wider investment community is how.

Consensus that we opening could happen in the spring of next year, so with that backdrop and with consumer confidence coming back.

And it was all the macroeconomic recovery, we do believe that.

Sure.

The growth has been reset this year.

And then we will be going back to a trend growth kind of.

Level for the next few years and I think that should be something around like 30% CAGR for the next two or three years.

Reasonable starting point.

So with that and then also you can see that our gross margins for this quarter is around 30% and nothing.

Is it relatively stable.

Next quarter, we will expect to see meaningful renewals.

What you're bringing to the bottom line because last year in Q4, we had a huge quarter due to the rapidly changing savings product distribution as soon as we can all remember so Q4, we will be benefiting from that.

We will be benefiting from the renewal spike from the <unk>.

Corresponding quarter of last year.

And then I think for the whole of next year, we should be targeting at meaningful mid to high single digit net margin.

As a starting point so I think that would be my answer to your second question Michelle.

Yes.

Two quick questions one moment for the next question.

Okay.

Yeah.

Yes.

Our next question comes from the line of colony Liu of China Renaissance. Please proceed.

Yes.

Hi, Connie from Canada.

Management hugging media channel.

Thanks.

And I have one question Albert.

Got that.

Could you please.

More details of the new products launched in the third quarter.

And is there any plan in the fourth quarter.

In 2023.

Thanks.

Yes.

Alright. Thank you thanks for joining the call today I appreciate it.

So the question on new product launches I think Mr. Martin mentioned in his opening remarks that we have launched quite a few products in the third quarter.

And that has revolved around the customer lifetime value and on the entire spectrum.

Health to savings too.

<unk> penetration too.

Annuities.

And also for our children.

Yes.

Health care so.

Next year I think we also intend to.

Iterate, our product launches I think the average.

The timeframe that we look at for upgrading or launch you have your product in each of the various subcategories is about three to six months.

As we work with their financial partners and launch.

Products specializing on different subsectors of the market.

And so.

They vomited bought launches is bread and butter to Asia business plan.

And this is something that we would be looking to innovate.

SB collect more and more customer insights.

<unk> and <unk>.

With that we will feed back into our product development team, which will work with onshore.

Partners on the upstream to launch new products on all the different segments.

Mr. Michael mentioned in the third quarter, we have achieved a very meaningful increase in the proportion of the contribution from our customized products to our overall.

Pete.

And so I think that is also evidence that we continue to.

I have a very strong relationship deepening.

Deep engagement with our.

Issuer partners on the product front.

Hope that answers questions. Thank you.

Yeah.

Thank you for the questions no.

No more questions from the line.

<unk> back to the management for closing remarks.

Thank you operator.

So on behalf of <unk> management team, we'd 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 for joining US today. This concludes the call.

Q3 2022 Huize Holding Ltd Earnings Call

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