Q4 2022 Huize Holding Ltd Earnings Call
Speaker 2: Ladies and gentlemen thank you for standing by and welcome to Huitza Holding Limited's fourth quarter and full year 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.
Speaker 2: Today's conference call is being recorded and a webcast replay will be available.
Speaker 2: Please visit Huitza's IR website at ir.huitza.com under the events and webcast section. I'd now like to hand the conference over to your speaker today, Miss Harriet Hu, Huitza's Investor Relations Director. Please go ahead, Harriet.
Speaker 2: Thank you, operator. Hello, everyone, and welcome to our earnings conference call for the fourth quarter and full year of 2022. Our financial and operating results were released earlier today and are currently available on both our IO website and the newswire.
Speaker 2: Before we continue, I would like to refer you to the Safe Harbor Statement in our Ernest Press release, which also applies to this call as we will be making full looking statement.
Speaker 2: Please also note that we will discuss non-GAAP measures today, which are more thoroughly explained in our own interviews and filings with the ACC.
Speaker 3: Joining us today are our founder and CEO , Mr. Sun Jin-ma, COO, Mr. Li Jiang, COCFO, Mr. Minh-hye Hsiao, and COCFO, Mr. Rong-Penh.
Speaker 3: Mr. Ma will start call by providing an overview of the company's performance and operational highlights for the fourth quarter and full year of 2022. Mr. Tam will then provide details on the financial results for the period before we open up the call for questions.
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Speaker 3: Hello everyone and thank you for joining with us for the quarter and four year 2022 earnings conference call.
Speaker 3: In a fourth quarter, COVID outbreaks weaken private consumption and consumer confidence in China, hampering the recovery of both the overall domestic economy and the insurance industry. Against the challenging macro backdrop, Huizhou reported another step of encouraging results.
Speaker 3: as we took proactive steps to adjust our product offerings and business strategies to mitigate downsides at risk in line with our mission to achieve operational resilience.
Speaker 3: We also made good progress in implementing our strategic roadmap to build an omnichannel digital insurance service ecosystem that integrates agents, business, and customers, or ABC.
Speaker 3: In 2022, total growth, return premiums or GWP facilitated on our platform remains stable as RMB 4.9 billion despite a high base for comparison. In line with our guidance in the third quarter, we achieved non-gabbed net profit of approximately RMB fortune million for the first time. In line with our guidance in the third quarter, we achieved non-gabbed net profit of approximately RMB 4.9 billion.
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Speaker 3: continue to maintain industry and education. In terms of product mix, although the pandemic limited our growth in terms of total first-year premiums or FYP facilitated on our platform, we continue to see heightened public health awareness.
Speaker 3: drive a rebound in a demand of health insurance.
Speaker 3: In a fourth quarter, the FYP of long-term health insurance products increased by 39.2% sequentially.
Speaker 3: Fantasy came from our leading market position in long-term insurance and our relentless efforts to maintain a high-quality user profile.
Speaker 3: The DWB contribution of our long-term insurance product was 96.2%, remaining about 90% for the 13th consecutive quarter.
Speaker 3: Renewal premiums also increase substantially by 80.8% year-over-year to more than RMB 1 billion, which highlights our operational resilience amid the complex business environment.
Speaker 3: In terms of user profile, about 65.3% of our long-term insurance customers were from higher-tier cities, with a average age of 33.8 years old.
Speaker 3: The average Tiki size of long-term insurance products in terms of FYP was approximately RMB 3,625.
Speaker 3: While that of long-term savings products increased substantially to approximately RMB 46,000 during the quarter,
Speaker 3: As of December , our average persistence ratios for long-term life and health insurance in a 13th and 25th month remained at industry high levels of 90% and 96% respectively.
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Speaker 3: As of the end of the fourth quarter, we have cooperated with 106 insurer partners to co-develop a wide range of cost-effective and high quality customized products.
Speaker 3: During the quarter, we launched Team Huyen Shun Premium, an increasing whole-life insurance product designed to satisfy the needs of our users in multiple scenarios, including children's education, retirement and inheritance.
Speaker 3: We also entered into a strategic partnership with PROM special forces awaiting late ?
Xin Ha Yin Jia series of Patient and UNT products, demonstrating our efforts in offering products that combine insurance and retirement services.
In March, we established a strategic alliance with P9 Health Insurance and launched our first co-developed product, Chang Xiang An, Long Term medical insurance.
We look forward to accelerating our cooperation with PINAN Health Insurance in a fair of insurance product customization and promotion, customer engagement and health management service.
Meanwhile, our Darwin critical characteristics was once again honored with the China Insurance Innovation Arch Award for 2022. And in a fourth quarter, our innovative critical illness product.
Darwin critical care number seven was named one of the top 10 recommended commercial health insurance products in China.
For the full year 2022, the GWP contribution of CODEveloped products increased by 4.6 percentage points year-over-year to 64.8 percent, which underlined our ability to identify market opportunities.
based on our in-depth customer insight and offer a full range of insurance products across scenarios.
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In 2022, we achieved effective cost control and continued to implement our group-wide organizational structure optimization, driving a considerable improvement in our growth margin.
from 24.7% in 2021 to 36.6% in 2022.
are operating expenses decreased by 30.1% AR over year in 2022 and 16% sequentially in the fourth quarter.
Even as we continue to reduce our cost base and improve our efficiency, we remain committed to our core belief in providing high-quality services to our customers.
In 2022, Hoi Zhe provided professional insurance services to more than
780,000 families threw over 2 million insurance policies.
During the year, Quizzer provided claim assistance service to 70,000 customers, with the total claim settlement amount increasing by 8.8% year-over-year to RMB 620 million. Across these numerous user interactions, Quizzer provided a
We achieved a 92% customer satisfaction rate according to our 2020 customer service report.
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During the year, we made substantial progress on executing our three-year ABC strategic business plan to build an omnichannel digital insurance service ecosystem.
In a QC segment, we have class 5 arc target users into different groups and adopted a unique business strategy for each group.
These differentiated service strategies have enabled us to deepen our engagement with existing customers, driving repeat purchase of new insurance products, and providing upselling opportunities to optimize lifetime customer value.
In the fourth quarter, although the pandemic limited users' willingness to purchase insurance, we continued to promote our customized products to existing users, particularly high-value users and female users.
Through these targeted monthly promotions, branding and consumer care activities, we reached more than 50,000 users and achieved approximately 10,000 self-conversion.
Since our inception, we have served a large number of young middle-class families, which should become a cornerstone that strengthens our long-term development.
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a business model based on systematic operations and standardized sales processes, and strengthen the service capabilities of our localized sales team, facilitating our online to offline integration through enhanced operational and sales capabilities.
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and the development of the human rights system. In the QB segment, we continue to export various digital tools and technologies to insurance companies.
In 2022, the total revenue contribution of our technology service business reached RMB 15.2 million. In the 2A segment, we launched our new user management system, Hotlink 1.0, which enables agents to accurately identify users.
quick-clave view user profiles on the mobile device, filter and target users based on profile similarity, and share information through individual or group messaging.
This system will enhance our core capability to empower insurance agents in all aspects of their business. FYP facilitated by the QA business increased by 26.7% sequentially to RMB 82.6 million in the fourth quarter.
exceeded RMB 200 million for the full year.
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In 2023, we will focus on our localized deployment plan, aiming to establish professional and high-quality offline service teams in 16 key regions nationwide.
We will also strive to boost user activity through increased engagement with high value users and enhance our core strength through technology upgrades, with particular focus on optimizing our transaction system.
user management system, and insurance policy custodian system.
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In 2023, we will focus on our localized deployment plan, aiming to establish professional and high-quality offline service teams in 16 key regions nationwide. We will also strive to boost user activity through increased engagement with high-value-
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This concludes my prepared remarks for today. I will now turn the call to our CFO , Mr. Rong Tan, and he will provide an overview of our key financial highlights for the fourth quarter and for the year of 2022.
Thank you, Mr. Ma and Harriet. Good evening, everyone. In the fourth quarter, operating conditions in China remain tough.
The significant macroeconomic challenges during the quarter weighed heavily on consumer confidence and recovering health-told income and hindered the cells of insurance products in China.
The total growth return premium or GWP for the entire insurance industry in China was RMB 531 billion in Q4, which is down 16.3% sequentially.
Against the backdrop of macro challenges and a sluggish industry recovery, we're very pleased to still achieve a 16% quarter-on-quarter increase in total GWP facilitated on-up platform.
totaling RMB 1.4 billion in Q4 and to close out the full year 2022, the total GWP specificitated on a platform of RMB 4.9 billion, which is essentially flat on a year-on-year comparison basis.
For the full year of 2022, we have added 1.2 million customers to our ecosystem, bringing the total from 7.5 million to 8.4 million as of the end of 2022.
And most importantly, in line with our guidance given in the previous quarter, we also achieved the probability in Q4 thanks to the successful execution of our key business strategies.
First, on the product front, we continued our strategic focus on long-term insurance products and our offerings in this category continue to be well received by customers.
The GWP contribution of our long-term insurance products exceeded 90% of the 13th consecutive quarter.
Second, on our channels, we continue to improve the quality of our user base and enhance customer acquisition capabilities. We are our Omni Channel distribution platform.
Our new 2A2C business line maintains strong growth momentum in the offline market, generating a total FYP of more than RMB $200 million in 2022.
And finally, on a corporate front, we continued with our group-wide organizational structure optimization and achieved significant cost savings in our fixed cost base across all business lines in 2022.
establishing a solid foundation for sustained improvement in operating leverage as the macroeconomy and consumer consumption recovers in the post-pandemic world.
I will now recap a few key highlights and takeaways from this quarter's operating results.
In the fourth quarter, the 16% sequential increase in our GWP was mainly driven by robust quarter-on-quarter growth in renewal premiums, which increased 83% to RMB1 billion.
Our auto-renewal metrics have also remained healthy with our persistency ratios for long-term life and health insurance in the 13th and 25th months, both remaining at industry high levels of 90%, 96% as of December respectively.
In addition, the average ticket size for long-term savings insurance products was approximately 46,000 RMB in Q4.
These metrics not only reflect the high quality and LTV potential of our 8.4 million strong customer base, but also highlight our efforts to successfully deepen our engagement with users existing and realize upselling opportunities to increase customer lifetime value.
In terms of FYP product mix, we are seeing a sequential recovery in the long-term health insurance category, and we expect that for the year 2023, our overall product mix to be more balanced between the long-term health segment and the savings categories as compared to 2022. We expect that for the year 2023, our overall product mix to be more balanced between the long-term health segment and the savings categories as compared to 2022.
The anticipated macro recovery should drive consumption of protection products and especially with the pandemic effect on raising consumers' awareness of the need to procure health insurance.
For this, we will continue to invest heavily in co-developed market leading long-term health insurance products.
such as our Darwin Critical Illness Series, which is now in its seventh iteration, as well as long-term medical insurance products such as the latest exciting strategic collaboration we have just announced last week with Ping On Health Insurance.
Amid the tough macro environment and COVID challenges, our total operating revenue in Q4 was RMB 258 million, down 27% sequentially.
Nonetheless, we continue to focus on tightening marketing channel costs.
optimizing a group-wide organizational structure, and improving operational efficiency.
And as a result, our operating costs for Q4 decreased by 78% year-over-year to RMB 162 million, prompting a healthy improvement in our gross margin to 37.2% from 23.4% a year earlier. In Q4, our SG&A and R&D expenses both decreased by 63% year-over-year.
We continue to maintain a strong liquidity position as evidence by a combined balance of cash and cash equivalent of R&B 277 million.
We have continued to repurchase shares from the open market under our existing share repurchase program. And as of the end of the December quarter, we have repurchased an aggregate of approximately 655,000 ADSs.
On March 17, our board has just authorized a new Sherry Pages program to buy back up to 5 million US dollars of ADS over the next 12 months.
which continue to demonstrate the confidence that we have in our business model and our long-term growth prospects.
Going forward, we'll further scale our omni-channel digital insurance service ecosystem by executing on our ABC business plan to secure a position as a top-tier insurance intermediary in China. Strengthening this ecosystem should help us gain market share among high-quality new generation consumers and families.
who demand innovative and customized insurance products, a seamless digital experience, and professional customer service. We'll continue to streamline our overall corporate cost structure and enhance sales conversions, striving to strategically allocate capital to create shareholder value and sustain our long-term business growth.
Now, turning to our outlook for the year, at this time we are cautiously optimistic about a sustained recovery in the economic activity which should improve customer confidence and consumption in China. Although the complex external environment and geopolitical tensions would continue to provide challenges
to the global and Chinese economy. We expect to remain profitable in 2023 on the anticipated macro recovery, our improving operational efficiency, our continued efforts to upsell existing customers, and our ability in acquiring new mass affluent customers.
Based on a preliminary assessment, we currently expect that for the full year of 2023, we will achieve a non-GAAP net profit of not less than RMB 30 million in 2023.
Before we conclude our prepared remarks for the call, I would like to provide a quick update on a notice that we received from the NASDAQ listing office regarding our compliance with listing requirements with the NASDAQ listing rule 5450A1 in October 2022. We would note that the matter has been fully resolved and closed until the end of the meeting.
and we have regained compliance as of December 14, 2022. And with that, we will now open up the call to questions.
regain compliance as of December 14, 2022. And with that, we will now open up the call to questions. Send an offer to your operator.
Thank you. To ask a question you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 and 1 again.
Please stand by while we compile the Q&A queue.
Please stand by while we compile the Q&A queue.
Our first question comes from the line of Yu Yu Zhang from CICC. Please go ahead, your line is open. Hi, my name is Yu Yu Zhang, I'm a senior at CICC, I'm a senior at CICC, I'm a senior
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So I have two questions. The first one is related to your operating strategy. This year will you put more emphasis on growth or profitability, what business goals do you set and then how to achieve them? And the second one in terms of...
the AI technology, we've noticed that the digital technology has an altitude connect by doing any bot. I'm just wondering how AI can affect insurance sales business. Could you share some more color on this? Thanks.
Hey, thank you. It's Ron here. Two questions from your side. So the first one regarding the business strategy for this year, I think clearly we are seeing the end of the pandemic towards the end of the quarter of last year.
and with that we're seeing that the reopening of the Chinese economy has seen the consumer recovery in everyday consumption in the first quarter. I think we're also seeing initial effects of that spilling over to the insurance industry and in the first quarter we're seeing some modest recovery and you know on a year-on-year basis across all business lines and with the pandemic effect on raising people's awareness on book-
continue to iterate and upgrade our product matrix and co-develop products with leading insurance companies. And now that we have a new strategic leverage of Ping An, I think that will be very positive for the product side of things. I think your question on the growth versus profitability, I think this year will be cautiously optimistic on the growth.
We have just given out clear guidance for the full year 2023 that our profit will be no less than 30 million RMB, which states our clear intention on the focus on bottom line profitability for this year.
So that would be question one. And for question two on AI deployment and Baidu, I think we have been investing heavily in our R&D over the last two and a half, three years that we have been consistently telling the market. And throughout the years, we've also been able to incubate AI tools.
technology to increase efficiency throughout our entire operational processes. For example, on the front end on CRM, and on, you know, we have an AI proposal engine that enables our consultants, etc. I think these products that we have developed in-house is an example of that, and that's basically already...
our in-house AI investment and deployment. Now that we have entered 2023 under the heavy influence of the AI capabilities of, for example, ChatGPT and Baidu, we are definitely going to explore and trial test.
the point of these technologies in our in-house business processes. And for my view, we have we have we have we did announce that collaboration and we already doing some trial testing internally as well as chat GVT. We have already now done some trial testing in-house.
on our product development and R&D personnel to utilize JetTBT on improving significantly their coding and programming worker streams and we're now already seeing some initial results on that. So I think on the product development side definitely the AI will also be very helpful in terms of improving efficiency and thereby even further improving our operating leverage in the next few years.
and one again. We kindly ask you to state your question in Chinese first and then translate it into English. Please stand by.
Our next question comes from the line of Amy Chen from City. Please go ahead your line is open.
are from you. We're hosting you now. Thank you so much.
The first question is regarding latest regulatory notice regarding the self inspection of the online marketing of insurance agents.
We're wondering what would be the potential impacts for who is a sales going forward.
The second question is relating to Huizi's products. We see that more and more smaller insurers are actually exiting the online insurance space, and we see that Huizi has been starting to collaborate with relatively larger scale insurers.
We want to understand more about the difference in terms of commission take rate and product design regarding to these new products. And also regarding to the full year of 2023, is there guidance for premium facilitators? Thank you. Thanks, Amy. Thanks, Amy.
ever since the first regulation came out on the online insurance, marketing, business compliance requirements two years ago. And we have been continuously adapting to the regulatory changes.
And this is something that is definitely not new to us. And in fact, we have basically over the last two years, we have been adjusting our business processes. We have been strengthening our controls of our third-party channel partners into the compliance requirements. We have clear guidelines and clear...
requirements for our channel partners to obey and to abide by in order to cooperate with us on a compliant manner. We have been holding compliance very highly throughout the last two years and I think this self-inspection is just an execution step by the regulators based on the earlier to correct laws, the finger one.
regulatory framework and it is not a new regulatory requirement per se, it's just an execution step. So for crazy, because we have been maintaining high standards of compliance throughout a whole ecosystem, we are ready to be confident that first of all, we will be fully compliant with the regulators' self-exession requirements.
We also encourage our third-party channel partners to cooperate fully. We should come up from this three-month inspection, which starts from April 3rd, and to finish by June 3rd. We should come up from this self-inspection even stronger on the competitive standing versus some of our peers in the industry.
just because of the higher compliance standards that we have here at HRSA. And I just want to note that also to give you a sense of the regulatory compliance that we have, we actually won't be only two insurance intermediaries in China which is operating on the online context. It's a greater intent than China, which has...
voluntarily connected our back-end system to the regulators' EAST system, which mandates a real-time sharing of transaction data with the regulatory body. So I think we are one of the very few market participants that are able to do this, and I think this is a...
a very strong testament as to our compliance with the regulations. So that would be the first question. And the second question on the future development of our business vis-a-vis the the upstream insurance partners. I think that yes I think the Ping An health insurance is a very good example of
now that we are moving into a post-pandemic world, and also that the more stringent requirements on the regulator side would mandate that we would be working even more now with the mid-sized or larger-sized insurance companies in the market.
and Ping An help insurance definitely is a very strong first step in this foray. And the long-term health insurance product remains to be a very attractive market segment for China. I think that working with Ping An definitely will give us a very strong advantage in the market in providing good valuable money.
and customer-centric products, which will help address some of the vacuum in the marketplace right now. So that will be the question number two. For full year guidance, I think that, again, we are giving out clear guidance on the probability side of the P&L.
For top mind, I think we are cautiously optimistic that we've continued and sustained macro recovery, which is seeing a model of growth in the premium facilitated this year.
Thank you.
Thank you.
We'll now move on to our next question. Our next question comes from the line of Rick Zhao from Morgan Standing. Please go ahead, your line is open.
I have a question, to myself and to everybody but myself in the Today open domain Dion today meeting is a parallel conversation in this talk the gravitationalriot Neighbor I hope you all will have a good day.
The first question is that the regulator is doing research on reducing the pricing rate. What am I pleased?
and Internet industry. Thanks.
Thanks, Rick. Thanks for joining. Welcome you to the Hui Ze story. I think the first question on the pricing front, yes, I think that we do note that the regulators are now looking into maybe adjusting the pricing rates on the products. And I think the short-term impact on not just the company, but also on the overall industry is that we might see more diesels running out than always. And then only afteruse sections does the FME enforce the orders to a broad range of manufacturers, app developers, fire developers to avoid changing applications. So we have to understand why that's possible. We also have to good-for-all manufacturers. We are a global company. We provide dietary services, delicious lasagna-a-thinning technology. Our Town administrators have Restat products but it's a call to action and allows the FME that burnt a lot of dollars
some of the current products to switch the end of the lifecycle. So I think that that might be translated into some of the accelerated sales of some of these existing products in the next quarter or two. I think that that would be some of the short-term impact, which actually should be a net positive for the company because we are well positioned.
in terms of the product supply side, with very good market leading products that we can facilitate to the market. For a long, medium to longer term, I think that because we have always been very focused on co-developing new products with our option in short partners, we are fully prepared and we are already in discussion to iterate the savings products.
into the next version, maybe post the pricing rate regulatory changes. So I think we are fully anticipating some of these changes going into the second half of this year in 2024 onwards. So with that, I think that, again, because of the way that we have been operating.
with a very clear focus on middle class, mass affluent families in China. I think that the good quality customer base and the ability that we can acquire a quality new customers will provide us an upper end in terms of negotiating and working with the larger, middle sized, mid to larger sized insurance partners.
to help a co-develop new versions of these savings products and a quick health product to the marketplace to adapt to the changes in the regulatory side. So I think that will be the first question. Second question, I think I told the other analysts earlier on the call, we are seeing some modest recovery in Q1 on a year-on-year basis actually quite strong.
SMEs in China and so forth into consumer confidence. So, but then I think Q1, we are seeing modest and healthy recovery across the key product segments, i.e. long-term health and long-term savings, long-term savings products. So I think that the...
we should be hopeful for a modest rebound in the first half this year. Thank you. Thank you. There are no further questions at this time so I'll hand the call back to you for closing remarks. Thanks, operator.
and carry our hair. So including on behalf of the Huesa 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 you with the IR team. And thank you for joining us today. This concludes the call. Thank you.
So in closing, on behalf of the HUISAS 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 your HUISAS IR team. And thank you for joining us today. This concludes the call. Thank you, everyone.
Have a good evening. This concludes today's conference call. Thank you for participating. Speakers, please stand by.
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