Q3 2023 Huize Holding Ltd Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Horizon holding limited third quarter 2023 earnings Conference call.
At this time all participants are in a listen only mode.
After the managements prepared remarks, we will have a question and answer session.
Today's conference call is being recorded and a webcast replay will be available.
Please visit <unk> IR website at IR Dot H U I Z E dot com under the events and webcast section.
I'd now like to hand, the conference over to your speaker host today, Mr. Kenny low caused us Investor Relations manager. Please go ahead.
Thank you operator, Hello, everyone and welcome to our earnings conference call for the fourth quarter of 2023.
Our financial and operating results were released earlier today and.
Currently available on both our website and a newswire.
Before we continue I would like to refer you to the Safe Harbor statement, you know 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 measure today, which are more properly explained in our earnings release and filings with SEC.
Joining us today are founder and CEO, Mr. Tien Tsin Marc.
So Mr. Li Zhang co CFO, he sent me a shout.
And co CFO you start running again.
Mr. MA will start the call by providing an overview of the company's performance and operating highlights for the first quarter of 2023.
And Mr. <unk> will then provide details on our financial results for the period before we open up the call for questions.
I'll now turn the call over to Mr. Mark.
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Hello, everyone and thank you for joining <unk> first quarter 2020 earnings conference call.
The first quarter of 2023, the macro economy gradually recover with economic activity is showing signs of improvement. However international relationship Congress persistent and kept them I guess, you rapid quite experienced fluctuations.
And he is going as the industry continued to dividend products structural adjustment in transformation.
Yes, that's all insurance companies were primarily affected by the continuous impact off the stock market downturn.
Declining interest rates and ongoing impairment losses.
So 10 adverse impacts to the overall industry investment income.
In the first three quarters the net profit.
Life insurance industry generally show a year on year downward trend in the market.
Experiencing ups and downs, but it's on a long term positive path towards recovery Amy.
Jamie It is X.
External uncertainties, we are focused on leveraging our competitive edge in product innovation omnichannel distribution costs.
Customer acquisition capabilities and high quality customer profile and reported another set of solid results in the first quarter.
Total gross written premiums or G. W. P.
Military.
Platform reached RMB, one 5 billion and we recorded total revenues of RMB 290 million or GAAP net profit increased 43% sequentially to our M. P $21 7 million and we achieved our fourth consecutive quarter of non-GAAP net.
Province, with our M. B, a coupon four 9 million in the first quarter.
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In terms of product mix, we continue to leverage our diversified product offering and solid omnichannel distribution capabilities first year premiums or F y P.
<unk> on our platform reached RMB $640 million in the first quarter.
Across the first nine months of 2023.
Why is he has increased by 54% year over year to RMB, two 2 billion.
The FY P of our longtime health.
<unk> increased by 8% year over year to approximately RMB $100 million in the first quarter.
Our savings products maintain strong growth momentum during the quarter.
We used the FY payout annuity products tripling year over year to RMB $190 million.
We are seeing a strong snowball effect as a result of our strategic focus on long term insurance products.
And a higher stickiness of our users are renewal premiums in Q3 reached <unk> $600 million.
7% year over year, and 25% sequentially generating steady cash flow to support our resilient business performance. Moreover, the GW P contribution too long of long term insurance products was 94, 9% matching the 16th consecutive quarter, where it is.
Figure has exceeded 90%. Meanwhile, the continued recovery of the domestic economy boosted demand for short term health P&C and accident insurance products in the first quarter as a result, the FY P of our short term insurance products increased by 50% year over year, two our M. B a.
$110 million.
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As of the end of the third quarter, our cumulative number of insurance clients reached $9 2 million representing an additional 223.
And new customers.
I'm in clients, who appreciate longtime insurance in the third quarter.
67, 5% were from high tier cities and the average age was $23 nine years old, reflecting our focus on young loyal and high quality customers.
In terms of FY P F.
The average ticket size of longtime insurance products was approximately <unk>.
Our M P.
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The average ticket size of savings products was approximately RMB 50000 up by 23% year over year.
As of the end of August our.
Cumulative persistency ratios for long term insurance in the 13th and trying to save money remains an industry high levels of more than 95%.
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As of the end of the first quarter.
Had cooperated with 121 insurer partners.
Meanwhile, we continue to co develop areas cost effective and high quality customized insurance products with our issuer partners.
Since September we have launched showed how she and number two a customized child critical illness insurance product and God, you're in critical care and number six our customized multi pulp benefit critical illness insurance product.
We also partner with China Pacific Life insurance to Johnny launch, SR, Changzhou premium and increasing whole life insurance products with increasing.
With the increasing retirement signing of awareness of the millennials.
We recently launched two annuity products.
Raj Alkylation and <unk> number five to help young customers develop sustainable long term wealth management and retirement plans.
We strive to provide comprehensive protection for our clients and their families through a broad range of product offerings, including insurance products for children and the elderly as well as various long term life insurance products and health insurance products.
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<unk> segment, we continue to empower insurance agents with innovative technologies.
In the period, we upgraded our <unk> system with new functions, providing automated opportunity identification and alert.
<unk> business consultants assets <unk>.
The insurance agents more effectively and efficiently.
The upgraded <unk> system is currently April to identify 31 business scenarios and 100 types of business opportunities in the third quarter FY <unk> facilitated by the two way business reached RMB $89 $65 million up by 48% year over year.
In the first nine months of 2023.
The FY <unk> facilitated by the toy business amounted to RMB $320 million, surpassing the total FY facilitated by this sentiment and the whole year of 2022.
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<unk> segment, we remain committed to our customer centric approach and continue to provide high quality.
And effective surfaces that meets our customers' diversifies needs across various insurance segments in the third quarter. We continue to have various brand promotions and customer engagement activities aimed at attracting new users.
If anything existing users engaging highlight time value juices, we successfully reached more than 50000 users through these efforts and Montana.
More than 30000 sales conversions.
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In the third quarter, we continued to strengthen our user engagement efforts and then hance, our upselling capabilities to maximize the lifetime value of our customers.
Third quarter <unk>, 4% of our long term insurance product customers, where repeat purchases from existing customers up four 7% touch points year over year.
Reflecting the stickiness of our client base.
This high level of customer loyalty has helped stabilize our revenue stream and lower our customer acquisition costs.
In the first quarter, our gross profit margin increased by six percentage points year over year to 35, 3%.
While the company's organizational efficiency continue to can be optimized driving a 27.
And year on year decrease in total operating expenses in particular, we reduced our general and administrative expenses by 15% year over year, resulting a five percentage point decline in the G&A expenses to total revenue ratio demonstrating overall improvement in our operational efficiency.
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Going forward, we will leverage our in depth customer insights to develop a broad range of innovative customized products.
Satisfy the full spectrum of our customers' needs from healthcare accident and retirement protections for financial and asset plan. We are committed to fostering a win win dynamic between insurance companies and insurance customers through our digital products and service platform at the same.
In time, we will assess the opportunities presented by the industry's digital transformation.
The application of digital technology, and finance and further promote the <unk> integration of our insurance services ecosystem.
This aims to empower agents and teams with technology facilitating high quality development within the industry.
Kim Let's say are all run by Dr. Sharron, <unk> hotel, which would be.
This concludes my prepared remarks for today I will now turn the call to our CFO, Mr. Ron <unk>, who will provide an overview of our key financial highlights for the fourth quarter.
Thank you Kenny and Mr Ma.
Good evening everyone.
In the third quarter China's insurance market has entered a transitional phase with respect to the product structure. Following the suspension of three 5% products from first August.
Despite this significant industry wide challenge to totally see the P. Facilitated on our platform has remained fairly stable year over year at about RMB, one 2 billion.
Good quarter. Thanks.
Thanks to the resilience of our Omnichannel distribution platform integrating online and offline channels.
Large established and high quality customer base, and a strong insurance product innovation capabilities that we have.
We are consistently acquiring new customers more efficiently with 223000 net new customers added to the ecosystem in Q3, bringing.
Bringing the total number to more than $9 1 billion at the end of the quarter.
During the quarter, we continued to record a non-GAAP net profit of about RMB 118 million, marking our fourth consecutive quarter of profitability.
This strong bottom line performance is being driven by the successful execution of our key business strategies.
First we remain steadfast focus in long term insurance products with GW <unk> contribution from these products were meeting at above 90%.
Secondly, we continue to empower insurance agents to our Omnichannel distribution platform.
Which product offerings and advanced technologies.
We see this a slight continued.
Liver robust growth.
Generating total MIP RMB.
RMB 90 million, representing a yogurt increase of 38%.
In our direct to see segments, we continue to target high quality mass affluent young consumers and drive upselling opportunities across our customer base.
In terms of <unk> that we participate show of a long term insurance products increased by about five percentage points year over year to 38, 4% in Q3.
Lastly, we continue to focus on boosting operational efficiencies throughout our business and thats, reflecting improvements in our gross and operating margins.
Key highlights and takeaways from our operating results include the following number one total <unk> increased by 32% year over year during the first three quarters of 2023.
Which facility premiums and renewal premiums increased by 54% and 16% year over year, respectively.
Two a persistent persistency ratio for long term life and health insurance remained at an industry high level as of August 13, and 25 month persistency ratios stood at about 95%.
Third the average ticket size for long term savings insurance products increased by 23% year over year to about RMB 50000.
These positive metrics continue to reflect our high quality customer Copa and a relentless relentless efforts and success in tapping into the long term lifetime value potential of our customers.
In the third quarter, we sustained our market leading position in long term insurance products.
<unk> of our long term help us increase by 8% year over year to RMB $104 million, while the FPP about annuity products more than tripled year over year to RMB $116 million.
We will continue to pursue a balanced mix between the long term health and savings categories.
Despite our evolving customer needs.
We remain focused on tightened and marketing channel costs, and optimizing our organizational structure improve profit margin and efficiency.
As a result, our operating costs in Q3 decreased by 24% year over year to RMB $189 million, leading to a strong improvement in our gross margin to 35%.
Between 9% over the same period last year, primarily driven by increased customer acquisition efficiencies and repurchases by existing customers on our platform.
In Q3, our total operating expenses continue to decrease falling by 27% year over year, and our operating expense ratio improved to 29% in Q3 from 33% in the same period of last year.
And our GAAP and non-GAAP that public because go approximately RMB 20 million to $80 million in Q3.
As of the end of the quarter, we continued to maintain strong liquidity as a combined balance of cash and cash equivalents increased to RMB $258 million.
And we have continued to repurchase shares from the open market under our existing share repurchase program.
And as of the end of the September quarter, we have repurchased an aggregate of approximately one 4 million <unk> ads's.
<unk> to date, which continue to demonstrate management's confidence in the business model and long term growth prospects.
Moving forward, we will continue to deepen the financial applications of generative AI striving to enhance our product innovation upselling capabilities will further strengthen the integration of our online to offline ecosystem and empower our agents to acquire high quality customers and engage with clients more efficiently and effectively.
We will also continue to drive improvements in operating efficiency and optimize.
Resource allocations across the business.
We remain committed to expanding our market share and solidifying our position as a top tier digital insurance product and service platform in our home market in China.
As we strive to enhance shareholder value and achieve sustainable business growth.
We are also investing in growth opportunities in the international market with our Hong Kong operations, now up and running and gaining good momentum having launched our first ever customized whole life insurance products earlier in August with China Pacific Life insurance, Hong Kong with an innovative product feature that facilitates underwriting the Hong Kong and retirement in the mainland.
Yeah.
We're now working to expand into other attractive markets in the ASEAN region, and we are currently targeting to generate double digit percentage of our group's revenues from our international markets within next 12 months.
And with that we'll now open up the call to questions. Thanks to an over to you operator.
Thank you if you wish to ask a question. Please press Star then one on your telephone and wait for your name to be announced.
If you wish to cancel your request. Please press Star then two.
If you're on a speakerphone please pick up the handset to ask your question.
At this time, we will pause momentarily to assemble the roster.
And our first question will come from Coco Gong of Morgan Stanley. Please go ahead.
Okay. Thank you so much for taking my question and congratulations on a very good performance.
For the third quarter of 2023, and a very challenging environment.
I have two questions today, if I may so the first one would be about some of the regulation changes in China.
Especially on the broker channel as well as some recent regulations on short term housing trends. So how does the management perceive that change.
<unk> impact on our overall business.
Doubt.
Thereby insight on that maybe sort of the product mix change or.
Product innovation or anything related would be much appreciated and the second question would be.
About the critical illness.
And.
Because.
We've talked about launching a new critical illness product, but how are you seeing the marginal changes in terms of the critical units to mind.
<unk>.
The savings to mine is very significant but are you seeing any positive changes fir.
For the critical units where protection.
Type of product in mind.
Recently, thank you very much.
Thanks, Thanks Coco.
It's Ron here. So two questions from you the first one relating regulatory changes and how is that impacting the overall business.
I think that's a very.
Great question, and it's very topical right now I think the multiple funds of the business is being impacted by the recent regulatory changes I think the most.
Evident one would be.
The cessation of three 5% products and and that has led to a <unk>.
The downturn in the overall market I think across the board we have seen.
<unk> numbers are coming down quite a bit.
Among the top tier companies as well as I think the.
Market channel checks I think slowly we have seen that the demand recovery has commenced.
After the October 1st holidays. After the National day holidays, I think we're seeing some momentum being regained into November but.
But I think that we are still short of where we were for a.
Normal months.
Notwithstanding any special changes in the structure that is driven by the Berkeley changes.
So in terms of mix I think.
We are seeing some.
Chad.
Channels or.
Market demand for participating products I think we're seeing some some trends there.
We do believe that policy admin costs could be very interesting in the new environment, where it provides a wet with lower fixed guaranteed return.
Until a bit more of a variable return kind of Copa to consumers I think consumers deal.
Strong demand for good savings put adequate deliver good returns over the long term.
And with more of a protected kind of structure. So I think theres been products gain momentum, particularly in the new year.
That's point number one.
We're also seeing good demand from consumers on retirement annuities products.
And with that we have already launched at least two.
Annuity products in the recent quarter as we have mentioned in the opening remarks.
With.
Two insurance companies.
Targeting different segments of the population. So I think we are continuing to drive product innovation to capitalize on the changing customer preferences.
Due to the regulatory changes that is that.
He is already in place.
The increase in sum assured products still are interesting I think that provides a guaranteed.
The 3% kind of IRR, which should continue to be well received by.
The overall market win the declining rate environment is expected to continue in the near to medium term.
If we set the critical illness product I think on that.
We have also the public disclosures that we have around 8% year over year growth on the long term health segment, which is primarily from critical illness products. So it's.
It's a slow recovery, but then we also are driving.
Innovation in this respect we have launch different types of critical illness for different segments of the consumer base. For example, the critical illness product that we've launched so I think we will continue to tackle.
A resumption of oil recovery of consumer demand through delivery of.
High value customized products.
So that would be the answer to your first question.
With respect to your second question I think also addressed it to sell on the critical illness demand. So hopefully those are good.
Answers to your questions cocoa.
Okay.
Yes, thank you very much.
The next question comes from you Zhang of CIBC. Please go ahead.
Hey, guys, if anything though I think that's John I Silvana will commence this year.
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Finish off on more details. Thank you.
Yes.
Thank you. Thank you.
<unk>.
So first question on which are the more popular products. These days.
I think we are seeing real time data in our systems I think I think that.
The top two or top three categories.
Probably.
I think number one would be more towards retirement annuities and these are the customized products that we have launched together with our partners I think that is gaining the best momentum in the third quarter.
We're also as I mentioned to Cocos question, just now I think we are seeing good demand as well.
Participating products. So this is something a bit new I think.
Some of our new trend.
So this will be the second category.
And I think.
With respect to MTV products.
We have launched a new product in August so I think it still takes time for us to.
The Trump all channels and pushed sales, but I think we are getting decent market feedback on this innovative product, which enables Hong Kong residents.
All of our insurance customers in Hong Kong to enjoy privileges as to retirement in the mainland I think this is a very innovative product structure and I think that given time political attitude to run I think that we will be achieving a pretty good sales on this.
With respect to MTV I think.
We are also gaining momentum there because of our brand equity.
In the mainland China and I think we're also getting a good.
Attention.
From incoming travelers.
So with respect to product mixed I think mostly I think.
As he said we have seen in other companies or other operators in the auto market. The strongest demand is probably still for savings products that is.
Underwritten by Hong Kong or international insurance companies with brand name. So I think Thats my answer to your second question.
Okay.
Yes.
As a reminder, if you ask a question in Chinese please translated into English for the benefit of everyone on the call.
Our next question comes from Amy Chen of Citi. Please go ahead.
Yes.
Hi.
Question is changed.
Costco Quanta and I have two questions here. The first final went beyond guidance for next year.
You touched a bit on the trend of product mix.
In the third quarter.
I Wonder if you could share more color about your product strategy in 2024 and also what's your outlook in time for a question come next I'll asked on the earnings side.
Alright.
The second question is that we see that.
The company has made and all.
A list of satcom containing operating costs.
All funds.
We see that formally.
Cost to income ratio has come down I'm wondering if management has set a target for that.
Yes.
Yes.
Yes.
Okay. Thank you Amy.
So with respect to your first question on guidance.
Right now we have not refresh our guidance for the next year.
I think we will be giving guidance when we.
Keeping up with the fourth quarter results for next year I think we are still.
Looking to standardize on the overall strategy for next year. So it's a bit early to tell now.
And product mix I think we can share a little bit more insights I think.
In the new year, we are more likely to.
Cooperate with larger sized insurance companies.
With respect to savings related products.
Particular.
And.
And we can also explore cooperation with Sino foreign joint venture companies.
<unk> involved in the savings category.
And particularly with respect to participating products I think that we will very likely it will be rolling out a customized product in that segment.
Second I think we will still have a great strong focus on retirement annuities products.
Additional service.
Tied to the insurance policies. So I think that's something that is in strong demand.
We are also able to drive differentiating.
Product innovations in this two to set us apart from the competition. So I think.
Those two will be.
Our strong focus for next year into the product strategy.
And on cost on the cost side I think it's.
It's always going to be top of mind in terms of driving additional.
Efficiencies across the business across the organization structure. So I think that will continue to drive costs down.
And I think Theres always a further room to improve in that regard.
Maybe we have already done quite substantial cost cutting.
Already to date, but then I think that is something that we will continue to be very focused on.
Maybe we can squeeze out another few percentage points.
There but.
We will continue to work hard on that.
To drive profitability for the business.
Thank you Amy.
Thank you Ron.
Once again, if you would like to ask a question. Please press Star then one on your telephone and wait for your name to be announced please wait while we reassemble our roster.
Seeing no further questions at this time I will now turn the call back to Ken Lowe for any closing remarks.
Thank you operator.
Closing on behalf of <unk> management team wed like to thank you for your participation in today's call. If you require any further information feel free to reach out to us. Thank you for joining US today. This concludes the call.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
Okay.
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Ladies and gentlemen, thank you for standing by and welcome to the Horizon holding limited third quarter 2023 earnings Conference call.
At this time all participants are in a listen only mode.
After the managements prepared remarks, we will have a question and answer session.
Today's conference call is being recorded and a webcast replay will be available.
Please visit poisons IR website at IR Dot H U I Z E dot com under the events and Webcasts section.
I'd now like to hand, the conference over to your speaker host today, Mr. Kenny low poised us Investor Relations manager. Please go ahead.
Thank you operator, Hello, everyone and welcome to our earnings conference call for the fourth quarter of 2023.
Financial and operating results were released earlier today and are currently available on both our website and a newswire.
Before we continue I would like to refer you to the Safe Harbor statement, you know 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 measure today, which are more properly explained in our earnings release and filings with SEC.
Joining us today are founder and CEO, Mr. Jean Marc <unk>.
So Mr lithium.
<unk> CFO, Mr Ming Yang Zhao.
And co CFO, you're still running with him.
We will start the call by providing an overview of the company's performance and operating highlights for the first quarter of 2023 and.
And Mr. <unk> will then provide details on our financial results for the period before we open up the call for questions.
I'll now turn the call over to Mr. Mark.
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Hello, everyone and thank you for joining <unk> first quarter 2020 earnings conference call.
The first quarter of 2023, the macro economy gradually recover with economic activity is showing signs of improvement However, international relationships Congress persistent and Kevin when you wrap it quite experienced fluctuations.
The insurance industry continue to dividend products structural adjustment in transformation.
Yes, that's all insurance companies were primarily affected by the continuous impact also spot market contracts.
The kind of interest rates and ongoing impairment losses.
So 10 adverse impacts to the overall industry investment income.
In the first three quarters the net profit.
Life insurance industry generally show.
Year on year downward trend the market is experiencing ups and downs, but it's on a long term positive path towards recovery Amy.
Amy.
External uncertainties, we are focused on leveraging our competitive edge in product innovation omnichannel distribution customer.
Customer acquisition capabilities and high quality customer profile and reported another set of solid results in the first quarter.
Total gross written premiums are GWB.
Military has had on our platform reached RMB, one 5 billion.
And we recorded total revenues of RMB $219 million or.
Net profit increased 43% sequentially to our M. P $21 7 million and we achieved our fourth consecutive quarter.
non-GAAP net profit with our anti <unk> four 9 million in the first quarter.
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In terms of product mix, we continue to leverage our diversified product offering and solid omnichannel distribution capabilities.
First year premiums or FY <unk>.
Facilitated on our platform reached RMB $640 million in the first quarter.
Across the first nine months of 2023.
<unk> has increased by 54% year over year to RMB, two 2 billion.
The FY P of our long term health.
Products increased by 8% year over year to approximately RMB $100 million in the first quarter.
Our savings products maintained strong growth momentum during the quarter.
With the FY payoff, our annuity products tripling year over year to RMB $120 million.
We are seeing a strong snowball effect as a result of our strategic focus on long term insurance products.
In our high stickiness of our users are renewal premiums in Q3.
<unk> $600 million.
Up 7% year over year, and 25% sequentially generating steady cash flow to support our resilient business performance. Moreover, the <unk> contribution to long of long term insurance products was 94, 9%, marking the 16th consecutive quarter, where it is.
Berger has exceeded 90%. Meanwhile, the continued recovery of the domestic economy boosted demand for short term health P&C and accident insurance products in the first quarter as a result, the FY P of our short term insurance products increased by 50% year over year to <unk>.
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As of the end of the third quarter, our cumulative number of insurance clients reached $9, one 2 million, representing an additional 223000, new customers and clients, who appreciate long term insurance in the third quarter 67, 5% were from high tier cities and the average age was.
439 years old, reflecting our focus on young loyal and high quality customers in.
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While the average ticket size of savings products was approximately RMB 50000 up by 23% year over year.
As of the end of August our.
Cumulative persistency ratios for long term insurance in the 13th and trying to save money remained at industry high levels of more than 95%.
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As of the end of the first quarter.
Had cooperated with 121 insurer partners.
Meanwhile, we continue to co develop areas cost effective and high quality customized insurance products with our issuer partners.
Since September we have launched showed how it and number two a customized child critical illness insurance product and God, you're in critical care and number six a customized multiple benefit critical illness insurance product.
We also partner with China Pacific Life insurance to Johnny launch.
Sydney, Changzhou premium and increasing our whole life insurance products 50, increasing.
With the increasing retirement planning or awareness of the millennials.
We recently launched two annuity products.
Calculation and <unk> number five to help young customers develop sustainable long term wealth management and retirement plans.
We strive to provide comprehensive protection for our clients and their families through a broad range of product offerings, including insurance products for children and the elderly as well as various long term life insurance products and health insurance products.
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<unk> segment, we continue to empower insurance agents with innovative technologies.
In the period, we upgraded our <unk> system, new functions, providing automated opportunity identification and alert.
<unk> business consultants assets.
Insurance agents more effectively and efficiently.
The upgraded <unk> system is currently April to identify further one business scenarios 100 types of business opportunities.
Quarter FY facilitated by the two way business reached RMB $89 $65 million up by 48% year over year.
In the first nine months of 2023.
<unk> facilitated the toy business amounted to RMB $320 million, surpassing the total FY facilitated by this segment in the whole year of 2022.
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<unk> segment, we remain committed to our customer centric approach and continue to provide high quality and effective surfaces that meets our customers' diversifies needs across various insurance segments in the third quarter, we continue to hold various brand promotions and customer.
<unk> activities.
At attracting new users.
So if anything existing users engaging highlight time value juices, we successfully reached more than 50000 users through these efforts and have shipped more than 30000 sales conversions.
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In the third quarter, we continue to strengthen our user engagement effort and then hance, our upselling capabilities to maximize the lifetime value of our customers.
Third quarter <unk>, 4% of our long term insurance product customers, where repeat purchases from existing customers up four 7% touch points year over year.
Reflecting the stickiness of our client base.
This high level of customer loyalty has helped stabilize our revenue stream and lower our customer acquisition costs.
In the first quarter.
<unk> profit margin increased by six percentage points year over year to 35, 3%.
Meanwhile, the communities organizational efficiency continue to can be optimized driving a 27 10 year on year decrease in total operating expenses in particular, we reduced our general and.
In Australia expenses by 52% year over year.
Over year, resulting a five percentage point decline in the G&A expenses to total revenue ratio demonstrating overall improvement in our operational efficiency.
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Going forward, we will leverage our in depth customer insights to develop a broad range of innovative customized products.
Satisfy the full spectrum of our customers' needs from healthcare accident, and retirement protection to financial and estate planning.
We're committed to fostering a win win dynamic.
The insurance companies and insurance customers through our digital product and service platform.
At the same time, we will assess the opportunities presented by the industry's digital transformation deepen the application of digital technology and finance and further promote the <unk> integration of our insurance surface ecosystem.
This aims to empower agents and teams with technology facilitating high quality development within the industry.
Jade Cheng the Fayetteville run by Dr. Sean <unk> hotel, which will be.
This concludes my prepared remarks for today I will now turn the call to our CFO, Mr. <unk>, who will provide an overview of our key financial highlights for the fourth quarter.
Thank you Kenny and Mr Ma.
Good evening everyone.
In the third quarter China's insurance market has entered a transitional phase with respect to the product structure. Following the suspension of three 5% products from first August.
Despite this significant industry wide challenge to totally see the P. Facilitated on our platform has remained fairly stable year over year at about RMB, one 2 billion.
Nice quarter. Thanks.
Thanks to the resilience of our Omnichannel distribution platform integrating online and offline channels.
Large established and high quality customer base, and a strong insurance product innovation capabilities that we have.
We are consistently acquiring new customers more efficiently with 223000 net new customers added to the ecosystem in Q3, bringing the total number to more than $9 1 billion at the end of the quarter.
During the quarter, we continued to record a non-GAAP net profit of about RMB 118 million, marking our fourth consecutive quarter of profitability to.
This strong bottom line performance is being driven by the successful execution of our key business strategies.
First we remain steadfast focus in long term insurance products with GW <unk> contribution from these products were meeting at above 90%.
Secondly, we continue to empower insurance agents to our Omnichannel distribution platform.
Which product offerings and advanced technologies to wait to see this a slight continued to deliver robust growth.
Generating total MIP.
RMB 90 million, representing a yogurt increase of 38%.
In our direct to see segments, we continue to target high quality.
Mass affluent young consumers and drive upselling opportunities across our customer base.
In terms of <unk> that we participate show of a long term insurance products increased by about five percentage points year over year to 38, 4% in Q3.
Lastly, we continue to focus on boosting operational efficiencies throughout our business and thats, reflecting improvements in our gross and operating margins.
Key highlights and takeaways from our operating results include the following number one total <unk> increased by 32% year over year during the first three quarters of 2023.
Which facility premiums and renewal premiums increased by 54% and 16% year over year, respectively.
Two opposite the persistency ratio for long term life and health insurance remains at an industry high level as of August 13 of the 25 month persistency ratios stood at about 95%.
Third the average ticket size for long term savings insurance products increased by 23% year over year to about RMB 50000.
These positive metrics continue to reflect our high quality customer profile and our relentless relentless efforts and success in tapping into the long term lifetime value potential of our customers.
In the third quarter, we sustained our market leading position in long term insurance products.
<unk> of our long term help us increase by 8% year over year to RMB $104 million, while the FPP about annuity products more than tripled year over year to RMB $116 million.
We will continue to pursue a balanced mix between the long term health and savings categories.
Despite our evolving customer needs.
We remain focused on tightened and marketing channel costs, and optimizing our organizational structure to improve profit margin and efficiency.
As a result operating costs in Q3 decreased by 24% year over year to RMB $189 million, leading to a strong improvement in our gross margin to 35%.
Between 9% over the same period last year, primarily driven by increased customer acquisition efficiencies and we purchases by existing customers on our platform.
In Q3, our total operating expenses continue to decrease falling by 27% year over year, and our operating expense ratio improved to 29% in Q3 from 33% in the same period of last year.
And our GAAP and non-GAAP that public because go approximately RMB 20 billion to $80 million in Q3.
As of the end of the quarter, we continued to maintain strong liquidity as a combined balance of cash and cash equivalents increased to RMB $258 million.
And we have continued to repurchase shares from the open market under our existing share repurchase program.
And as of the end of the September quarter, we have repurchased an aggregate of approximately $1 4 million ads's.
<unk> to date, which continue to demonstrate management's competency in the business model and long term growth prospects.
Moving forward, we will continue to deepen the financial applications of generate of AI striving to enhance our product innovation upselling capabilities will further strengthen the integration of our online to offline ecosystem and empower our agents to acquire high quality customers and engage with clients more efficiently and effectively.
We will also continue to drive improvements in operating efficiency and optimize.
Resource allocations across the business.
We remain committed to expanding our market share and solidifying our position as a top tier digital insurance product and service platform in our home market in China, as we strive to enhance shareholder value and achieve sustainable business growth.
We are also investing in growth opportunities in the international market with the Hong Kong Operation is now up and running and getting good momentum having launched our first ever customized whole life insurance products earlier in August with China Pacific Life insurance, Hong Kong with an innovative product feature that facilitates underwriting the Hong Kong and retirement in the mainland.
Sure.
We're now working to expand into other attractive markets in the ASEAN region, and we are currently targeting to generate double digit percentage of our group's revenues from international markets within next 12 months.
And with that we'll now open up the call to questions. Thanks to an over to you operator.
Thank you if you wish to ask a question. Please press Star then one on your telephone and wait for.
Your name to be announced.
If you wish to cancel your request. Please press Star then two.
If you're on a speakerphone please pick up the handset to ask your question.
At this time, we will pause momentarily to assemble the roster.
Our first question will come from Coco Gong of Morgan Stanley. Please go ahead.
Thank you so much for taking my question and congratulations on a very good performance.
For the third quarter of 2023, and a very challenging environment.
I have two questions today, if I may so the first one would be about some of the regulation changes in China.
And especially on the broker channel as well as <unk>.
Some recent regulations on short term housing trends, so how does the management perceive that change.
Impact on our overall business.
No doubt.
Just.
A better insight on that.
Maybe sort of the product mix change or.
Product innovation or anything related would be much appreciate it and the second question would be.
About the critical illness to mind.
Yeah.
We've talked about launching a new critical illness product, but how are you seeing the sort of a marginal changes in terms of the critical units to mind.
Given.
The savings to mind is very significant but are we seeing any positive changes for.
For the critical units where protection.
Type of product in mind.
Recently, thank you very much.
Thanks, Thanks Coco.
It's Ron here. So two questions from you the first one relating regulatory changes and how is that impacting the overall business.
I think that's a very.
Great question, and it's very topical right now I think the multiple funds of the business is being impacted by the recent regulatory changes I think the most.
One would be.
The cessation of three 5% products and that has led to a.
The downturn in the overall market I think across the board we have seen.
FY <unk> numbers coming down quite a bit.
Among the top tier companies as far as I think.
Market channel checks, but I think slowly we have seen that the demand recovery has commenced starting after the October 1st holidays. After the National day holidays, I think we're seeing some momentum being regained into November.
I think that we are still short of where we were for a normal month.
Notwithstanding any special changes in the structure that is such a and by the Berkeley changes.
In terms of mix I think.
We are seeing some.
John.
Channels or.
Market demand for participating products I think we're seeing some some trends there.
We do believe that positive and pull is can be very interesting in the new environment, where it provides a radically.
Lower fixed guaranteed.
Guaranteed return.
Until a bit more of a variable return kind of profile to consumers I think consumers still.
Strong demand for good savings product that could deliver good returns over the long term.
And with more of a protected kind of.
Structure, so I think but it's been products gain momentum, particularly in the new year.
That's point number one I think we're also seeing good demand from consumers on retirement annuities products.
And with that we have already launched at least two.
Annuity products in the recent quarter as we have mentioned in the opening remarks.
With.
Two insurance companies.
Targeting different segments of the population. So I think we are continuing to drive product innovation to capitalize on the changing customer preferences.
Due to the regulatory changes.
That is already in place.
The increase in somewhat short products still.
I think that provides a guaranteed.
The 3% kind of IRR, which should continue to be well received by.
The open market when the declining rate environment is expected to continue in the near to medium term.
If we set the critical illness product I think on that.
We have also the public disclosed that we have around 8% year over year growth on the long term health segment, which is primarily from critical illness products. So it's.
As I said, a slow recovery, but then we also driving.
Innovation in this respect.
Launch different types of critical illness for different segments of the consumer base. For example, the critical illness product that we've launched so I think we will continue to tackle.
A resumption of oil recovery of consumer demand through delivery of.
High value of customized products.
So that will be the answer to your first question.
With respect to your second question I think also addressed it to sell on the critical illness demand. So hopefully those are good.
As to your questions cocoa.
Yes, thank you very much.
The next question comes from you use Zhang of CIBC. Please go ahead.
Hey, guys everybody's until I think John I Silvana will commence.
Thanks.
Just.
Hey, Jonathan.
And then can you just and I just wanted to get.
I know you mentioned it is unfortunate that Wayne just fits quite well Mackenzie dynamics, just considering the actual just ingalls has hurdles with Avalon Roger one thing Kevin.
Joe I wanted to highlight.
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Yes, I think so.
As Joel mentioned related MTV dosing is Heng Chen.
And then finally my question is obliged to tell all of our products.
Each cell lunch that ing insurance, so far this year, so I'm very observation, what's hot popular products and by the way how is the cell phones and <unk>.
For more details thank you.
Thank you thank you Neil.
So first question on which are the more popular products. These days.
I think we are seeing real time data in our systems I think I think that.
The top two or top three categories.
Probably.
<unk>.
Number one would be more towards retirement annuities and these are the customized products that we have launched together with our partners I think that is getting the best momentum in the third quarter.
Also as I mentioned to <unk> question, just now I think we are seeing good demand as well.
Participating products. So this is something a bit new I think.
More of a new trend.
So this will be the second category and.
And I think.
But to MTV products.
We have launched a new product in August so I think it still takes time for us to.
Really jump up all channels and push sales, but I think we are getting decent market feedback on this innovative product, which enables Hong Kong residents.
Our insurance customers in Hong Kong to enjoy privileges as to retirement in the mainland I think this is a very innovative product structure and I think that given time, but with the ability to run and I think that we will be achieving.
Pretty good sales on this.
With respect to MTV I think.
We are also getting momentum there because of our brand equity.
In the mainland China and I think we're also getting good.
Attention.
Incoming travelers.
With respect to product mixed I think mostly I think.
We have seen in other companies or other operators in the auto market. The strongest demand is probably still for savings products that is.
The written by a Hong Kong or international insurance companies with branding. So I think Thats my answer to your second question.
Okay.
Yes.
As a reminder, if you ask a question in Chinese please translated into English for the benefit of everyone on the call.
Our next question comes from Amy Chen of Citi. Please go ahead.
Hi, Congrats.
Congratulations on another question.
Possible corner and I have two questions here. The first one would be on guidance for next year.
You touched a bit on the trend of product mix.
And is that quarter one.
I Wonder if you could share more color about your product strategy in 2024 and also what's your outlook in time for a question come the slowest on.
Alright.
The second question is that we see that.
The company has made.
Enormous assets on containing operating costs.
So all funds.
See that effectively.
Operating cost to income ratio has come down I'm wondering if the management has set targets for that.
Thank you.
Yes.
Okay. Thank you Amy.
So with respect to your first.
Question on guidance right.
Right now we have not refresh our guidance for next year.
I think we will be giving guidance when we.
Keeping up with the fourth quarter results for next year I think we are still.
Looking to strategize on the overall strategy for next year. So it's a bit early to tell now.
And product mix I think we we can share that would be more insights I think.
In the new year, we are more likely to.
Cooperate with larger sized insurance companies.
With respect to savings related products.
Hello.
And.
And we can also explore cooperation with Sino foreign joint venture companies.
Are involved in the savings category.
And particularly with respect to participating products I think that we will very likely it will be rolling out a customized product in that segment.
Second I think we will still have a very strong focus on retirement annuities products.
No service.
Tied to the insurance policies. So I think that's something that is in strong demand.
We were also able to drive differentiating.
Product innovations in this two to set us apart from the competition. So I think.
Those two will be.
Our strong focus for next year into the product strategy.
And on cost on the cost side I think.
It's always going to be top of mind in terms of driving additional efficiencies across the business across the organization structure. So I think that will continue to drive costs down.
And I think Theres always a further room to improve in that regard.
Maybe we have always been quite substantial cost cutting.
Already <unk>.
But then I think that is something that we will continue to be very focused on.
Maybe we can squeeze out another few percentage points there.
Yeah, but.
We will continue to work hard on that.
To drive profitability for the business.
Thank you Amy.
Thank you Ron.
Once again, if you would like to ask a question. Please press Star then one on your telephone and wait for your name to be announced please wait while we reassemble our roster.
Seeing no further questions at this time I will now turn the call back to Ken Lowe for any closing remarks.
Thank you operator in closing on behalf of <unk> management team.
Thank you for your participation in today's call. If you require any further information feel free to reach out to us. Thank you for joining US today. This concludes the call.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.