Q2 2023 Huize Holding Ltd Earnings Call
Speaker 1: Ladies and gentlemen, thank you for standing by and welcome to Whois Holding Limited Second Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. After the management prepare remarks we will have a question and answer session. Today's conference call is being recorded and a webcast reply will be available. Please visit whois.irp.uk.
Speaker 1: ARU is.com, under the events and publicast section. I would like to end the conference over to you host today. Miss Harriet Hugh, who is Investulation Director. Please go ahead, Harriet. Thank you all for either. Hello everyone, and welcome to our only conference called for the second quarter of 2020. Next week.
Speaker 2: Our financial and operating results were released earlier today and the currently available on both our IOWs sites and in the new Slyer. Before we continue, I will ask you a very good update cover that meant senior earnings crisis release, which also applies to this cost as well as making thorough looking statements. Please also know that we will discuss non- GAAP measures today, which are more thoroughly explained in our earnings release and following with the EXDAs.
Speaker 2: Joining us today are our founder and CEO , Mr. Tung Jima. CEO of Mr. Mita, Co-DF of Mita Minkai-Chen, and Co-DF of Mr. Romance-Hem. Mita Mah was started call by providing an overview of the company's performance and operational highlights for the second quarter of 2023, and Mr. Tem wasn't provided details on the financial results for the period before we opened up the call for questions. I will now turn up all of our true Mr. Minkai.
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Speaker 2: Hello everyone and thank you for joining with the second quarter 2020 2020 Bolero City
Speaker 2: In the second quarter of 2023, macroeconomy continued to recover and the operating conditions in an insurance industry continued to improve. The life insurance industry consumer confidence index reached 68.2 in the second quarter of 2023, which is higher than it was.
Speaker 2: or competitive age in long-term insurance products. Comprehensive online to offline integration and industry-leading product innovation and customer acquisition capability. We reported another set of encouraging results today.
Speaker 2: In the second quarter, total growth rate and premium or GWP facilitates a total of five-warm, rich R&B, one-pronged, four-billion, up by a considerable 58% deal over year.
Speaker 2: Our total operating revenue increased by 48.3% over year to R&B 300 and 700 million.
Speaker 2: We also achieved our first concept kit of non-gap net profit with R&B 19 years in the second quarter.
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Speaker 2: In terms of product mix, first year premiums or is SYT facilitated on our platform increased by 85.2% yield year to approximately RMB 900 million in a second quarter. When your premiums continue to grow steadily.
Speaker 2: increasing by 24% over year to RMB 480 million.
Speaker 2: During the quarter, amid the surge in demand for savings products, we leverage our diversified product offerings and solid Omnit channel distribution capabilities to capture the market opportunity.
Speaker 2: As such, FYP of long-term savings products increased by 136% EO of year to RMB 670 million in a second quarter. FYP of long-term health products also increased by 10.4% EO of year to RMB 140 million.
Speaker 2: GWP contribution of the long-term insurance product was 93.6%, marking the 15th consecutive quarter about 90%.
Speaker 3: are vull attached to the level of the high quality growth. In our overall charge of spending, we are offering such a delicate, verlfelt divorce with high-suction cost.
Speaker 3: In the first six months of the year, the number of users in the market is 64.6% The average year is 34.4% The average year is 54.4% The average year is 54.4% The average year is 54.4% The average year is 63.2% The average year is 43.2% The average year is 53.2% The average year is 53.2%
Speaker 2: Continue to maintain industry and high-quality. While achieving high-quality business growth, our customers remain young with high potential and high thickness, and we continue to capitalize the lifetime value of our existing customers.
Speaker 2: At the end of the second quarter, our accumulated number of insurance clients reached 8.9 million. During the quarter, about 66% of our long-term insurance customers were from higher tier cities, with an average age of 34.4 years old. In terms of FYP, the average ticket size of long-term insurance product was approximately RMB 5,000.
Speaker 2: The savings product was approximately RMB 63,000, up by 43.2% yield year.
Speaker 2: As of the end of May, our accumulated persistence ratios for long-term insurance in the 13th and 25th month remains at industry high levels of more than 95%.
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Speaker 2: As of the end of the second floor, we have collaborated with 110 insurer partners. During the period, we continue to optimize our product offerings from leading insurance companies, striving to develop more customized and reliable products for our users.
Speaker 2: Apart from our strategic partnership with PINAN Health Insurance and PINAN Property and Catering Insurance to co-develop Chang Xiao An, a customized long-term medical insurance product and Xiao Zhan's home number three, a customized accident insurance product for children respectively.
Speaker 2: We also strengthened our strategic cooperation with various subsidiaries of China-Pacific Insurance Group. In June , we signed a new strategic partnership agreement with China-Pacific Property Insurance and jointly launched, shall we sing our number three?
Speaker 2: which is a comprehensive, active insurance product customers to make the protection needs of the elderly. This is a comprehensive, active insurance product customer to make the protection needs of the elderly.
Speaker 2: In August , we signed a strategic partnership agreement with China Pacific Life Insurance Hong Kong and announced the co-launch of Tima Izu Multi-Currency, which is an increasing whole life insurance product targeting Hong Kong customers. This is an innovative product in the market promoting the concept of underwriting Hong Kong and retirements in the mainline. We present a milestone in a development of cross-boundary insurance services in the Greater Bay Area.
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Speaker 2: In the second quarter, we continue to depend the online to offline integration of our insurance service ecosystem, which continues to yield encouraging results.
Speaker 2: As present, we have opened branches with regulatory approval sales qualifications in 19 provinces and cities across the country with a full coverage in major tier 1 localities, including the Beijing Tianjin-Huobai region, the Yangtze River Delta and the Pearl River Delta.
Speaker 2: In a two-A segment, we kept exploring new technology and we have empowered independent agents with sophisticated intelligent tools.
Speaker 2: During the period, we launched Relink, a proprietary user management system that helps agents manage users more efficiently and effectively, enabling them to spell up businesses and customer bases with ease. Going forward, we will make further improvements to the Relink system.
Speaker 2: In a second quarter, A4P facilitated by the QA business, which RMB 160 million, up by 270% yield year, and 110% sequentially.
Speaker 2: In the first half of 2023, the FYP facilitated by the QA business amounted to RMB 230 million, surpassing the FYP facilitated in a whole year of 2022.
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Speaker 2: In a Tuesday segment, we remain committed to our customer centers approach and continue to find two our operations to better recognize client-naked and with and provide targeted products and service matching for various customer segments.
Speaker 2: In the second quarter, we launched a series of brand promotions and customer engagement activities, including company anniversary celebrations and various value-added health care services targeting existing and new users.
Speaker 2: High left-hand body users and the parent group users.
Speaker 2: We successfully reached more than 60,000 users through these efforts and achieved more than 20,000 self-conversions.
Speaker 2: We also continue to provide users with professional and efficient claims assistance.
Speaker 4: Services.
Speaker 3: We further expanded the scope of our Xiamen CLAM services and offering CLAM settlement services to a wider range of users in need. For more information, visit Xiamen CLAM.
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Speaker 3: Going forward, we strive to create a win-win dynamics for insurance companies and insurance customers, demonstrating the value added of insurance intermediaries and driving the high quality and sustainable
Speaker 2: offerings and strengthen our user engagement and online to offline integration.
Speaker 2: with a further optimized operational system, sales process, and localized deployment plan.
Speaker 2: We believe COISA will be able to provide more flexibility to users to choose between online and offline one-stop insurance services.
Speaker 2: For insurance companies, we will continue to explore new industry dynamics and new growth drivers to help bring down operating costs and improve operational efficiency for insured partners.
Speaker 2: and empowering them to build a high-quality customer base and deliver top-notch insurance services.
Speaker 3: After the Global Summit, introduction of information for internals and materials issues is rarely possible.
Speaker 2: This concludes my prepare remarks for today. I will now turn the calls to our CEO , Mr. Wrongtemp, and he will provide an overview of our key financial highlights for the second quarter. Thank you, Mr. Ma and Harriet, and good evening.
Speaker 2: the street China grew steadily.
Speaker 5: Sector Y grows within premiums increased by 22% year over year to RMB 900 billion during the quarter.
Speaker 5: At the way that we leverages on our OTO integrated insurance service ecosystem, and our business will continue to significantly outpace the border market.
Speaker 5: We have delivered a 58% year-over-year increase in total GWP facility on our platform, which reached RMB 1.4 billion in the second quarter. We have also added about 200,000 new customers to our ecosystem in the second quarter.
Speaker 5: bring the total number to 8.9 million at the end of the student quarter.
Speaker 5: During the quarter, we recorded a non-GAP net profit of RMB 19 million, marking our third consecutive quarter of the probability, and putting us on track to meet the upward revised full year non-GAP net profit guidance of RMB 15 million that we have issued in the last quarter.
Speaker 5: This can be attributed to the successful execution of our key business strategies. First, we continue the strategic focus on long-term insurance products with GWP contribution from these products remaining about 90% for the 15th straight quarter.
Speaker 5: Second, we continue to target high-quality mass-appluent customers and empower insurance agents to our omnichannel distribution platform, which product offerings and sophisticated technologies.
Speaker 5: Our 2A2C business line remains solid with total FYP of RMB 156 million in the second quarter. Representing a year-over-year increase of over 2X and a sequential increase of over 1X.
Speaker 5: And third, we continue to play an emphasis of optimizing operational efficiency throughout our business. And this can be demonstrated by the improving operating leverage and profitability for a quarter.
Speaker 5: Some key highlights and takeaways from this quote is operating results include the following.
Speaker 5: Total growth within premiums increased by 58% year over year, reaching RMB 1.4 billion, and this growth was mainly driven by an 85.2% year over year increase in first year premiums, or FYP, as well as a 24% year over year increasing with newer premiums.
Speaker 5: Our Presidency ratios for long-term life and health insurance we made at the industry high level.
Speaker 5: As of May, the 13th and 25th month persistency ratios are maintained at about 95% respectively. The average ticket size for a long-term savings insurance products increased by 44% year over year to about RMB 63,000.
Speaker 5: This positive metrics reflect a high quality customer pover and a relentless effort to enhance upselling opportunities and tap into the lifetime valuable potential of our customer base.
Speaker 5: In the second quarter, we solidified our market-leading position in long-term savings products, in particular the increasing sum assured whole life and retirement annuities product categories.
Speaker 5: The FIP of a long-term savings product searched by 1.4 XE over year to RMB665 million.
Speaker 5: The FYP of a long-term health products also increased by 10.4% yield per year to R&B 139 million in the second quarter.
Speaker 5: Looking ahead, we anticipate to achieve a more balanced product mix between the long-term health and savings categories in adaptation with the evolving customer needs.
Speaker 5: The robust growth in FYP helped drive a 48% year-over-year increase in our total operating revenue.
Speaker 5: which reached R&B's 368 million in the second quarter.
Speaker 5: We remain focused on tightening marketing channel costs and optimizing our operations to improve our margins and efficiencies.
Speaker 5: As a result, our operating costs in the second quarter increased at a slower pace than revenue, rising 40% year-over-year to RMB 244 million. And this has led to a healthy improvement in our gross margin to 34% compared to 30% in the second quarter of last year.
Speaker 5: In Q2, our total operating expenses continue to decrease, falling by 1.8% over year, resulting in our expense to revenue ratio improvement to 32% in a second quarter from 48% over the same period of last year.
Speaker 5: Our gap and one gap net profit figures were approximately R&B 14 million and R&B 19 million in the second quarter respectively.
Speaker 5: At the end of the second quarter, we continue to maintain ample liquidity as demonstrated by a combined balance of cash and cash significance of R&B 248 million. We have continued to repurchase shares from the open market under our assistant share we purchased mandates. And that's up the end of the two quarter. We have repurchased an aggregate of approximately in phase.
Speaker 5: Moving forward, leveraging our continued investments in generative AR technologies will further improve operational efficiencies across a business value chain.
Speaker 5: strengthening the integration of our OTO ecosystem and reaching our product and service offerings across all scenarios and empowering our agent and insurance partners with technology enhancements.
Speaker 5: This effort should help us gain market share and solidify our position as a top-tier, digital insurance product and service platform, and ultimately striping to enhance shoulder value and achieve sustainable business resilience. This effort should help us gain market share and solidify our position as a top-tier, digital insurance product and service platform, and ultimately striping to enhance shoulder value and achieve sustainable business resilience.
Speaker 5: Now, turning to our outlook for the year, while we remain cautiously optimistic regarding the macro and insurance industry outlook in China, in light of the better and expected results in the first half and our strong execution in acquiring high-quality customers from the market, improving cost efficiencies and enhancing customer engagement.
Speaker 5: Once again, we advise our outlook guidance upwards and currently expect to achieve a non-gap net profit of not less than RMB 60 million in 2023.
Speaker 5: And with that, we will now open up the call to questions. Thank you and over to you operator.
Speaker 1: Ladies and gentlemen, we now begin the question and answer session. If you wish to ask a question, please press star 1 1 on your telephone.
Speaker 1: Please can you state your question in Chinese first and English translation after.
Speaker 1: Please can you state your question in Chinese first and English translation after? We are now taking the first question.
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Speaker 1: and the first question from CocoaGog from MS.
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Speaker 7: So hi everyone, I'm Kobo from Morgan Stanley . So congratulations to the management on the very good results. So I have two questions. And the first one would be on the product transition and product performances potentially in the third quarter and offers to have them.
Speaker 7: next year because of the pressing interest rate tax on basically honest birth. So we're wondering if you know the management has used any sort of potential product transition and how the performance will be in third quarter and because of the high base this year, how is management thinking about what we forward into next year for a tax?
Speaker 7: That's the first question and the second would be what ways of strategy in the Bay Area given that you know the new products which launched with CPSC Live Hong Kong and overall what would be the all-of-good strategy for this opportunity area.
Speaker 5: Thank you. Right. Thank you for questions, Coco. It's Ron here.
Speaker 5: So regarding your first question on the outlook for Q3, I think indeed the 3.5% pricing products have came off the shelves effective on August 1st. In Q3, we do have the month of July contributing to our Q3 results. So we can say that the
Speaker 5: The July sales numbers are quite strong across the board. And I think as one of the leading participants in this industry, I think we also have benefited from good sales in July . In the fourth quarter, I think, or over the next two quarters, I think the overall industry is going to an adaptation phase.
Speaker 5: with respect to the product structure. I think the mainstream opinions on this topic is highly topical right now. A lot of people are discussing what's the more mainstream product that will be coming to the market in the next two quarters. I think a lot of insurance companies now have.
Speaker 5: So, I think the whole industry is still going through this adaptation right now. It's a bit too early to tell, but we do think that the overall savings product category will continue to be well received by the average insurance customer in China, mainly because of the continued anticipation of a declining rate environment, leading to the relative attractiveness of these savings products will continue to have an appeal to customers versus other wealth management alternatives in China, for example bank deposits and other wealth management products in the market.
Speaker 5: So, our anticipation is that the savings product category will continue to perform well over the medium term and long term, but then in the short term there will be a slight lukewarm market demand for such products, particularly on the back of the strong sales in the second quarter and the month of July itself.
Speaker 5: So that would be the outlook for the product perspective. And the second question on the Greater Bay Area business plans for ourselves. I think overall, you know, we have been in the industry for 17 years already and we have the benefit of geographically being located in the center or the heart of GBA.
Speaker 5: in Chien Hai, Shenzhen. So we sit right in the center of the whole GBA region. So with the open up the borders of Hong Kong this year, we are now capitalizing on this new opportunity on potential cross-border activities. And this latest product launch that we have.
Speaker 5: achieved with CPIC Hong Kong Live is a good testament of our continued innovation to provide the right products for the customers in our respective markets and this marks our first foray into the Hong Kong market.
Speaker 5: with this product targeting Hong Kong customers and also new immigrants in the Hong Kong from China. These two sets of customers are prime target customers for this product. And we do believe that with the the long-term trends of retirement demand from the Hong Kong residents.
Speaker 1: Thank you for your question. We're now taking the next question. And the next question from Mindy Gao for CLCA. Please go ahead. Your line is open. First, let me ahead everyoneC is CLCAKids. Thank you.
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Speaker 8: Thank you for taking my question. This is Mindy from CLFA.
Speaker 8: the rationale behind. So my second question is about your overseas expansion plan. So can you share with us more color about who has this overseas expansion plan and when do you expect to see a more meaningful revenue contribution from this part of business?
Speaker 5: Thank you. Thank you, Mindy. It's Ron here. Two questions. The last question on
Speaker 5: our growth margin outlook. I think we have been demonstrating that we have achieved cost efficiencies throughout our business line, and as a result, our growth margin for the second quarter has improved by almost 4% from the same period last year.
Speaker 5: I think we continue to strive to maintain growth margins at the current level through three main areas. One is we continue to have a very disciplined cost control on our marketing spend, on our customer acquisition channel costs. We have actually been...
Speaker 5: quite stringent on our direct acquisition budgets. We have been quite focused on harvesting our existing customer base as well in terms of repurchases. We have actually achieved more than 3% repurchase rate from our Direct2C business line in this quarter. We have been able to demonstrate that we have been able to...
Speaker 5: achieve premium growth for my existing customer base. And we balance that very carefully with new customer acquisition spend to attract new customers.
Speaker 5: Secondly, I think we continue to invest in the technology and we have been also deploying more capital into AI efforts. I think we are expecting to yield efficiency enhancements again on many aspects of our business across the value chain. So that will be the second measure.
Speaker 5: And I think a combination of these masters and strategies will help us maintain our gross margins at the current level.
Speaker 5: So that will be the answer to your first question. The second question on overseas expansion, I think Hong Kong is the first destination in terms of international strategy or expansion. Hong Kong is a natural expansion for our mainland China business because Hong Kong we do have a very good opportunity in the overall MCB business.
Speaker 5: in the Hong Kong market. This is a 40 billion Hong Kong dollar market pre-COVID and we expect that to be around 80% or 100% recovery this year. So as a major player in the mainland Chinese insurance brokerage industry with the brand recognition that we have with many of the Hong Kong local.
Speaker 5: residents who have a linkage with mainland China, we believe that our brand equity will help us achieve a decent market share in the Hong Kong local market as well. So we are targeting to become a top tier broker in the Hong Kong market in the next three years.
Speaker 5: to achieve a meaningful market share as well in the MCV business and also for local Hong Kong market business. And I think on the back of the Hong Kong expansion, we are looking into potential investment opportunities in Southeast Asia. We are now currently in the feasibility study stage.
Speaker 5: We are in preparation for a potential roll out of our business across the region. Right now we are still in the early phase of identifying opportunities and potential Toronto Venture Partners.
Speaker 5: in targeted countries in Southeast Asia.
Speaker 5: in targeted countries in Southeast Asia. Thank you for your question.
Speaker 1: As a reminder, if you wish to ask a question, please press star 1 1 on your telephone.
Speaker 1: Please press star 1 1 if you wish to ask a question.
Speaker 1: We are now taking the next question. The next question from Michelle Ma from Citi. Please go ahead. Your line is open.
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Speaker 8: Q. The first question is about our thoughts on initial attacks. Is
Speaker 8: Should we think about first mover or early mover advantage? Or we should follow the steps of those industry teammates for Asia Tech's consideration? So just want to have a sense of what the future is for Asia Tech.
Speaker 8: and we are seeing some deterioration in operating leverage, but with I think a very promising net profit outlook for the whole year and for the second half this year. So, we'll return to a.
Speaker 5: Thank you, Michelle. I'll tell you a question. So the first question on AI. I think the way that we look at AI is we don't really see as a first mover or second mover. I think the most pertinent question is, for AI to really work for any particular company in the respective industry vertical, I think the key prerequisite is you have data in the platform. You have the right data in the platform to help you deploy AI technology to improve efficiency.
Speaker 5: So to that regard, I think what we have is we have over 17 years now of transaction data and this encompasses pre-sales consultation conversations because we have a real-time compliance monitoring system, as you all know. So we have a lot of daily conversations between our consultants and our customers.
Speaker 5: and the end customers as data to be fed into AI training models. We also have a lot of underwriting data. We have also claims processing data. As you understand, we have the Xamalipay, the Xamal claims service.
Speaker 5: So therefore we actually have accumulated a lot of this data. So Aldi is actually helping us to effectively train any kind of AI algorithms internally so that we can potentially derive game-changing AI technologies to be deployed in-house.
Speaker 5: So I think that to the extent would be the answer to your first question. I think we have the natural advantage to deploy AI because we hold proprietary data within our ecosystem, within our platform. And hopefully over the next 6 to 12 months.
Speaker 5: we will be able to release the market or to announce the market as some milestone achievements in this regard. In relation to your second question also, some expenses might have creeped up in the second quarter, but we still intend to maintain cost of discipline very, very rigidly to the extent that the macro economy in China, as everyone is well aware, is still relatively pounding.
Speaker 5: although overall it's in a recovery mode, I think most industry participants remain cautious on the outlook. We do think that the overall business dynamics with respect to Fraser continue to be very solid and resilient.
Speaker 5: and sustainable as we have proven over the last few years now, starting from COVID, where everything needs to be happening online and we have a natural advantage being an online native platform. And over the last one year or so, when the Chinese economy has...
Speaker 5: been negatively impacted by restrictions relating to COVID, leading to much dampening in consumer confidence and demand. We have been able to ride through these cyclical challenges and have emerged since the fourth quarter of last year being palpable for.
Speaker 5: three consecutive quarters. So I think the overall trajectory is in terms of medium to long term as an insurance intermediary, as a leading player in this space, we have very very positive outlook in the long term in terms of the market share of a digital brokerage like ourselves with the increasing separation between
Speaker 5: record the distribution and the product manufacturing in China, the single digit percentage market share of insurance brokerage should go up to more of a mid-double digit as we have seen in different economies.
Speaker 5: So I think that will be the overall outlook on that front. The second half of this year we are constructive. I think there will be some product transitions in this period. Everyone is anticipating that. So I think that will be the overall outlook on that front.
Speaker 5: But at the end of the day, I think it depends on what the customers in the market would demand. I think that savings product would continue to be the mainstream product in the insurance industry. And we still hold an advantage in customizing the...
Speaker 5: better and newer products with insurance companies. And we already have a backlog of new products to be launched in the Q2 and Q4 when the time is right, which would be suitable for the average customer in the new environment.
Speaker 1: Thank you. Thank you for your question. I will now hand the conference over to Ms. Hejia Tu for closing remarks. Thank you, operator. On behalf of HUISAS management team, we would like to thank you for your participation.
Speaker 1: Thank you. Thank you for your question. I will now hand the conference over to Ms. Hejia Tu for closing remarks. Thank you, operator. On behalf of HUIS's management team, we would like to thank you for your participation in today's call.
Speaker 1: If you require any further information, please feel free to reach out to us with the IRT. Thank you all for joining us today. This concludes the call. And that concludes the conference for today. Thank you for participating. You may hold this connect.