Huize Holding Limited Price & Performance (HUIZ)

Hello, everyone, and welcome to our fourth quarter and full year twenty twenty four earnings conference call. Our financial and operational results were released earlier today And are currently available on both our IR website and global newswire services. Before we continue, I would like to refer you to the safe harbor statement in our earnings press release. Which also applies to this call as we will be making forward looking statements. Please also note that we will discuss non GAAP measures today, which are more horribly explained in our earnings release and filings with the SEC. Joining us today are our founder and CEO, Mr. Tranjuma. COO, Mr. Li Jiang Co CFO Mr. Min Han Xiao and Co CFO, Mr. Ron Tam, Mr. Ma will start the call by providing an overview of the company's performance and operational highlights followed by Mr. Tam, who will go over our financial results for the fourth quarter and full year of 2024. Before we open up the call for questions. I will now turn the call over to Mr. Ma. In 2024, the insurance industry continued to deepen the implementation of unified commission and fees in reporting and underwriting. The industry entered a 2% era, Further, China's State Council released its 10 measures which outlined comprehensive regulations for the high quality of the industry.

In response to these policy directions and market trends, we proactively adjusted our strategic focus and expanded our diversified and customized product offerings. As generative AI accelerates the transformation of the industry, we have implemented a forward looking AI plus strategy transitioning from the application of intelligent tools to a comprehensive restructuring of our surface ecosystem. This strategic shift has enhanced the product matching and service efficiency. Establishing Huize as the benchmark for the intelligent transformation of the industry. Meanwhile, our accelerated international business development has built a strong second growth engine. Fueling high quality sustainable growth. As a result, in 2024, total revenue increased by 4.5% year over year to RMB1.25 billion and both gross written premiums GWP and first year premiums FYP facilitated across our platforms [indiscernible] [indiscernible] In 2024, GWP amounted to RMB6 RMB6.16 billion, up by 6% year over year. Full year FYP reached at RMB3.42 billion, up by 31% year over year. In terms of our product mix measured by FYP, whole life premiums contributed RMB 1,840,000,000.00, surging by 76% year over year. While long term health insurance contributed RMB $520,000,000, up 2% year over year. Influenced by the downward adjustment in assumed interest rates, we registered a stable growth in savings insurance products.

Accounting for point 6% of total FYP, representing a year over year increase of 5.5%. Meanwhile, our short term insurance business recorded robust double growth with premiums up 23% year over year to approximately RMB550 million, strengthening the diversity of our product portfolio. Driven by profound customer insights and outstanding service capabilities, we remain committed to delivering a premium service experience to high grade customers. By the end of the fourth quarter, accumulative number of insurance users further increased to 10,600,000, with 380,000 new users added during the quarter. The average age of customers who purchase long term insurance products in 2024 was 35.1 years old, among which 68.4% were located in higher tier cities. Reflecting our high quality customer profile. The average FYP plus size for savings products reached approximately RMB 75,000 in 2024, up by 39% year over year. By the December 2024, thirteen months and twenty fifth month persistency ratios for long term insurance both exceeded 95% continuing to up industry averages. As of the end of the fourth quarter, we maintained a strong partnerships with 139 insurance companies continuing to develop and launch customized products across a diverse range of insurance categories. In 2024, partnered with Aviva Copco to launch [indiscernible] participating whole life insurance product that combines protection and investment features.

Which receive widespread market recognition. Additionally, we partnered with Ping An to introduce the upgraded Changshan An number two long term medical insurance product. Which has been continually optimized in three key areas. Including ease of enrollment lower deductibles, and enhanced value added services. To better meet the growing public demand for high quality health care protection. In the fourth quarter of twenty twenty four, GWP contribution from our customized insurance products accounted for 53.1% of total premiums reflecting the recognition and confidence in our product development capabilities from both customers and the broader insurance industry. In 2024, the insurance industry accelerated [indiscernible] transformation towards greater intelligence and efficiency. Upholding a long term commitment to digitalization we have developed substantial advantages in both product and sales data, alongside industry leading techno technological innovation capabilities. During the year, we launched an intelligent client services system combining smart navigation with human assisted services to provide a twenty four seven response mechanism. Additionally, we developed an intelligent assistant for our mid to high end medical insurance products to assist our client service personnel with product recommendations. Policy interpretation and after sales support. This system has achieved a 95% accuracy rate in responses and significantly accelerated the development of our intelligent surface ecosystem.

In q four, we launched the phone underwriting risk control engine system. Establishing an intelligent automated and digital underwriting risk control platform to enhance risk measurement across multiple scenarios and all insurance product types. Leveraging Huize's nineteen years of operations our proprietary FengFeng system integrates multi dimension multidimensional internal risk data. Including underwriting claims and fraud detection, and connects to hybrid external data sources to build a robust underlying system data. Data system. We've proprietarily developed a disease classification system and algorithm tagging technology to accurately identify high value insured individuals and high concentration rates. By incorporating external data such as fraud indicators, credit risk, occupations, place of residence we achieved more comprehensive risk assessment capabilities and significantly [indiscernible] Meanwhile, we customize risk control rules and modules according to the specific characteristics of different insurance products. Enabling the flexible application of risk control rules and models to provide customized risk management solutions. These have been successfully implemented in various products, including Guardian Critical Care, Little B, and Xiaoxing An Our verification engine with automated rules has reduced underwriting time to just one point zero one seconds per case on average. Drastically improving operational efficiency. Since its launch, the Fengtong system has maintained a positive controllable risk identification risk rate of between 230% across different product categories.

Key products saw a monthly claims reduction of 7% and helped insurance products cumulatively reduce claims exposure by over RMB 300,000,000. Overall, the system has achieved a claims ratio below the industry average. These outcomes have significantly strengthened business quality and showed a seamless user experience and created a positive cycle between risk management capabilities and business growth. Backed by our exceptional technological strengths, robust business capabilities and extensive expertise in the Chinese market, made significant and rapid strides in our international expansion in 2024. Our international brand, Pony Injutag, successfully completed the acquisition of Vietnam's leading digital Injutec platform, GlobalCare. In Q4, GlobalCare achieved a 32% sequential increase in total policies issued. With revenue growing 33% sequentially. As a strategic shareholder, Hony Injutec has begun to undertake a comprehensive technology and business empowerment at GlobalCare. In October 2024, we launched GlobalCare.byan, a health insurance comparison platform integrated into the GCL app. Offering Vietnamese consumers the high quality, transparent, and user friendly insurance purchasing experience. VNIM is a pivotal component of our international strategy and representing a significant strategic milestone in our long term Asian SCN expansion strategy. Looking ahead, we plan to bring the AI agent model to core Southeast Asian markets, Vietnam, accelerating the localization and implementation of Huize's proven intelligent surface model from China.

Will further enhance ensuring surface efficiency and user experience in these markets. We believe the success and insights gained from our Vietnam operations in 2024 will strongly support our further expansion into Singapore, The Philippines in 2025 and other Southeast Asian markets in the longer term. Helping us to achieve our target of 30% international business revenue contribution by 2026. [indiscernible] In February 2025, amid rapid advancement in China's AI large language models we fully integrated DeepSeq into the Huize app. This milestone enables seamless AI driven interactions throughout the entire insurance purchasing journey. From consolation to policy issuance. Are among the first organizations in the insurance sector to deeply embed the AI model into consumer facing services. And to establish an around the clock intellect intelligent insurance service model by introducing the AI agent model our AI powered app now delivers 20 fourseven personalized insurance advisory support, giving customers always on intelligent service at their fingertips. This innovation significantly optimizes the purchase process and holistically improves the user experience. In the first month since its launch, the AI powered Huize app achieved breakthrough results. Customer acquisition effectiveness significantly improved with an activation rate exceeding 40%. New users' self purchase rates and premium conversion efficiency also showed improvements.

Combining power, natural language processing capabilities, with the comprehensive insurance knowledge base from Huize, Our intelligent recommendation system RightPick, precisely matches customers with suitable insurance products further improving sales conversion rate. Additionally, the AI model's real time interaction capabilities ensure timely responses to customer inquiries. In the first month after the app's launch, the daily average number of users served exceeded 40,000, delivering a more convenient and efficient service experience for our customers. Looking ahead, to 2025, our focus will be on developing an intelligent assessment system for user needs precisely matching user profiles with product recommendations. Further enhancing conversion rates, and setting a new benchmark for high quality digital development within the industry. In 2024, we demonstrated strong resilience amid industry shifts by leveraging profile market insights and product innovation to adapt our strategies with agility and achieve rapid high quality growth in our international business. Looking ahead to 2025, we will deepen collaborations with insurance partners and develop more innovative customized products tailored to evolving market demands. By harnessing cutting edge AI technologies like DeepSeq, we aim to further enhance service efficiency and elevate customers' experiences while continually pursuing breakthroughs in product design and risk management to reinforce our leading market position.

Meanwhile, we will capture international market opportunities and expand our footprint in Southeast Asian markets. Through these initiatives, we aim to enhance our brand influence and build a more resilient innovation driven international business framework. Ultimately, we are committed to reinforcing our competitive position in the international market and delivering sustainable long term value for customers, shareholders and partners. This concludes my prepared remarks for today. I will now turn the call to our CFO, Mr. Ron Tan, will provide an overview of our key financial highlights for the fourth quarter. Thank you, mister Maher and Kenny. Good evening, everyone, in Hong Kong. Asia, and good morning for those in The Americas. I realized there's been a very long opening remarks, so I'll be brief here on the results highlights So despite a challenging macroeconomic and regulatory environment over or until '24, I think we have delivered a very resilient performance. With both total GWP and FIP facilitated on on a platform reaching record highs. Of 6,200,000,000.0 and three point four billion, respectively. Our total revenue has increased 4.5% year over year and achieving our second consecutive year of non GAAP profitability We have achieved this by leveraging our efficient omnichannel distribution network, which integrates both online and offline channels, focusing on acquiring high quality customers, offering innovative high value products, and deploying our proprietary AI solutions.

Throughout the ecosystem. We importantly, we have also made significant progress in our international expansion strategy which will help act as a key growth driver for our long term sustainable development going forward. Over the course of 2024, we continue to strategically prioritize long term insurance products in China, which have account accounted for over 90% of our GDP for the past five years. Our omnichannel distribution network and sophisticated AI tools are significantly enhancing customer acquisition engagement capabilities. Acquired approximately 380,000 new customers during the fourth quarter, increasing our total customer base to date of 10,600,000. Repeat purchases for our long term insurance products have increased by 3.3 percentage points to 40.2% in 2024, which underscores our ability to capture and capitalize on the LTV potential of a high quality customer base through both upselling and cross selling. Our open platform architecture continues to empower our international our internal financial advisers and also external independent financial advisors, IFAs. With total FYP from our two a business, increasing by 17% to RMB $415,000,000 in 2024. I would also like to highlight several key achievements that drove our solid performance throughout the year our thirteen and twenty fifth month persistency have reached a stable 95% over the year average ticket size for long term savings products have surged by 39% to over $75.000 and premiums facilitated for short term health and P and C products also increased by 23%.

To RMB 548,000,000 in 2024. Terms of our liquidity position, financial position remains very strong and robust with a combined balance of cash and cash equivalents or RMB $22,333,000,000 or US dollar 32,000,000 as of the end of twenty twenty four. In terms of our international expansion Pony Insurtech our international arm continues to serve as the cornerstone of our growth strategy and deliver exceptional results in 2024. Total revenue of our international businesses has grown to RMB 228.7 million in 2024, with international revenue contribution reaching 18% for the year ended 2024, which is on track in achieving our stated 30% target by 2026. In Vietnam, we continue to make meaningful strides in integrating the local operations with the broader expertise and capabilities of the Huize Following the completion of the acquisition in Q3, our Vietnam business has achieved an impressive sequential growth, with gross written premiums increasing by 29% sequentially and revenue by 33%. GlobalCare has launched a customized family accident insurance product, which was co developed the Military Insurance Corporation, one of the leading P and C insurers in Vietnam. In addition, we are making steady progress toward expanding into Singapore and The Philippines markets with entry planned within the next twelve months.

This will further diversify our revenue streams and create new growth drivers to enhance long term shareholder value creation. Notably, on the AI front, we were among the earliest in China's intratech space, to deeply integrate deep six model in February 2025. Deployed it inside our mobile app Quaser. This enables us to deliver real time customized and data driven recommendations to our customers, which will strengthen customer acquisition, engagement capabilities for distribution partners and IFAs going forward. Also provides a very scalable model for technological foundation to accelerate our international expansion. In summary, we believe we are ideally positioned to capitalize on the opportunities which is created by China's evolving industry landscape, which is poised for healthy long term sustainable growth across the entire value chain. Through Pony Intertek, we'll leverage our proven business model refined in China and advanced proprietary AI solutions to tap into the tremendous growth opportunities across Southeast Asia and the rest of the the world, particularly in the young middle class demographic. We are confident that our cutting edge technology and targeted market penetration strategy solidify position as Asia's leading insurance technology platform connecting consumers carriers and distribution partners digitally and efficiently through our data driven and AR powered solutions.

And with that, we'll now open up the call to questions. Thank you very much, and over to you, operator.

Thank you. We will now begin the question and answer session. You would then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please stand by while we compile the q and a roster. We will now take our first question from the line of Chongqing Mao from CICC. Please ask your question, Chongqing.

I'm not I have two questions. My first question is about the commission caps regulation. I think it has been in place for almost one year. Has the one off impact of this regulation already subsided? And has market computation improved since its implementation? My second question is on AI. Could you please elaborate on the specific ways in which AI technology can improve your operations? And what can we expect in terms of the financial outcome? That's all.

Okay. Thank you, Jin Jin, for joining us again. For continued support over the years. So your questions on two sides, the first one on the regulatory commission caps and the and the effects of that on the brokerage channels. I think the answer is the regulations have been rolled out and officially implemented over the course of the year. And I think that the whole industry has now migrated into the new so called new normal. Ever since September first of last year, all the new products that have been launched by the insurance companies have already incorporated the new commission structure So the the short answer is yes. I think the the impact has been felt and I think it's already fully reflected in our financial results for the Q4. And also for the rest of the industry and our peers that are also listed in the public markets. I think that similar results have been have been felt through. Across the industry. In terms of the regulatory impact itself, on the focus channels and agencies that's already been felt. We'd like to note that for the regulatory implementation on the tight age agency channel. This has not yet been implemented.

And we are expecting this to be effective sometime towards maybe the middle to later later part of this year. And with that expectation, we do believe that it could be incrementally positive for the brokerage and agencies channels, including ourselves. Given that right now, the the regulatory framework has not been fully implemented across all different channels. So, again, the fourth quarter results have fully reflected the new regulatory environment for our business models and as well as for the rest of the industry. In terms of the competitive landscape, we would like to comment that very likely with the implementation the implementation of the commission caps, market share is likely to be more consolidated among the top tier players, including ourselves. And maybe some of the listed peers. And as a result, we do believe that the comparative dynamics would become relatively more you know, in in terms of long term perspective, healthy and more sustainable. And very likely that the market share be increasingly consolidated and concentrated among the top tier players. So I guess that's the, first question, and I think that for for Quizr, I think that we have a natural advantage when smaller players exit the market.

And while market share is concentrated in top players, because we have a very flat hierarchy, and much lower nimble cost base compared to maybe particular, the traditional brokers that's operating in the market for for a long time. We do have a very natural cost structure advantage, particularly with respect of, you know, customer acquisition, always been, you know, rely on the platform model the open platform model to acquire customers rather than a a a agent agent led model. That's that's number one number one. And number two, I think the AI you know, evolution and in the actual deployment of AI technology across our different business scenarios on our platform has also accelerated that advantage. Towards, the online operators or digital players like ourselves. So on AI technology, I think that, you know, mister Mah has actually shared a lot of details on how AI tech is being implemented operations. I think that in terms of the financial you know, outcome, if you will. Right? So what what would what would that translate into our our financial results? I think very likely that over the course of next next few years, you'll see that the the biggest contribution from AI is that the the fixed cost base could be much more nimble.

I think the efficiency can be much more amplified. Basically, with less human resources investment, we can then support a much scalable operations So meaning that operating leverage would likely increase by by multifold. You know, scalable business growth without the need of deploying a lot more human resources to support, for example, the conversion of customers or especially in the customer service front. I think that AI can resolve or or or or deal with 95% of the of the customer, inquiries and services that's required on a normal course business. And I think that the AI agent would be a key anchor for us going forward, in terms of further investments into, you know, improving customer journey and, you know, using and utilizing AI as a major tool, a scalable tool to acquire customers at large. So that is something that we have already launched. Through the Deepsea integration in February. We're seeing some initial encouraging result in I think that over the course of the next few quarters, we'll be happily sharing additional milestones that we as we achieve them. So hopefully, answers your questions, Qinqing. Thank you.

Right.

Thank you.

We will now take our next question from the line of Amy Chen from Citi. Please ask your question, Amy.

Thank you. Thank you, Amy. Again, for joining us again and continuing to support us. Maybe I can help you translate your questions for you. Maybe maybe I can translate the question So, I have two questions. The first one is regarding to the trends of operating expenses in the fourth quarter. We noted that actually both selling expenses and G and A expenses saw significant year over year growth in the fourth quarter last year. I wanted to ask what's the main rationale behind this trend? And the second question is regarding to the gross profit margin as well as net profit guidance for the year of 2025. We noted that actually after the rationalization of commission in the broker channel, the gross profit margin actually was compressed to around 30% in the year of 2024. I'm wondering if we would likely to see some margin improvement going ahead to the year of 2025, given our investment in AI and the potential improvement in efficiency. Thank you.

Thank you, Amy. So three questions. I think the first one, let me address that first So there are some sequential growth on some of the expense accounts. I think that one of the main reasons to do that is we actually implemented some further restructuring in Q4 in terms of our personal headcount. Personnel headcount in the in the fourth quarter. So that has led to some onetime one off, you know, costs associated with that exercise. And have made some further AI investments in q four, so that has led to some you know, modest increase in in the expense items. I think over the course of 2025, I think of the key focus was obviously to further utilize and deploy AI throughout the whole business operations on offense on the front end, on the mid office, and back office. I think there's a lot of room for us to further drive cost savings and efficiency in the mid to back office. In the tunes of double digit percentage. So so AI definitely would be leveraged and deployed at large in terms of, you know, not just, customer acquisition and customer service, but also on the, you know, normal course business operations.

So I would note that in q four, those are relatively one off trends. So in 2025, I think that we are still targeting to to drive a year over year decrease in the operating expense ratios. Across the three three key line items there. Terms of gross margin trends, I think, yes, you do note that correctly that, you know, there has been some depression in gross margins. Over the over the course of the last few quarters. But I do note that in Q in Q4 you know in q four of this year or twenty twenty twenty four our group gross margin has actually recovered to around 34.7%. So I think that our outlook for 2025 is definitely to maintain at least that, you know, the kind of the low to mid 30 range gross margins. And, ideally, the investments that we're making on the AI front would drive further gross margin improvement and expansion. Particularly on the customer acquisition front because that hopefully would drive more scalable direct to see customer acquisitions at low cost. So I think, hopefully, g, the gross margin line can improve further. And in terms of the guidance for 2025, we do guide towards a profitable full year of 2025, and we are targeting mid single digit kind of profit margin.

For now. I think that the earnings growth will also be driven by our continued business momentum in the international revenue front. Obviously, I'm referring to the large competition, but not right now from our from our Hong Kong business. So so and also, we would be further you know, deploying investments into the two new Southeast Asian markets that we mentioned just now in the call and also you know, invest will be made in AI. So overall, I think 2025, we're looking at a profitable year and, you know, looking at [indiscernible] mid single digit type of profit margin. Net profit margin.

So it's very clear.

Thank you.

Thank you. We have reached the end of the question and answer session and with that I'll now turn the conference back to Mr. Kenny Lo for closing comments.

Thank you, operator. In closing, on behalf of Huize's management team, we would like to thank you for your participation in today's call. If you require any further information, feel free to reach out to us. You for joining us today. This concludes the call.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Thank you very much.