Huize Holding Limited

Ladies and gentlemen, thank you for standing by and welcome to Hui Ze Holding Limited fourth quarter and full year 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, we will have a question and answer session. Today's conference call is being recorded and a webcast replay will be available please visit Huizhi's IR website at ir.huizhi.com under the events and webcast. And I'd like to hand the conference over to your speaker host today, Ms. Harriet Hu, Huizhi's investor relations director. Please go ahead, Harriet.

Thank you, operator. Hello, everyone, and welcome to our earnings conference call for the fourth quarter and fourth year of 2021. Our financial and operating results were released earlier today and are currently available on both our IELTS website and the newswire. Before we continue, I would like to refer you to the Safe Harbor Statement in our earnings press release, which also applies to this call, as we will be making forward-looking statements. Please also note that we will discuss non-GAAP measures today, which are more thoroughly explained in our earnings release and filings with the SEC. Joining us today are our founder and CEO, Mr. Cunjin Ma, COO, Mr. Li Jiang, co-CFO, Mr. Minghan Xiao, and co-CFO, Mr. Ronald Tam. Mr. Ma will start the call by providing an overview of the company's performance and operational highlights for the fourth quarter and the fourth year of 2021. Mr. Tam will then provide details on the financial results for the period before we open up the call for questions. I will now turn the call over to Mr. Ma.

is further strengthened. The uncertainty in the operating environment and the market has increased, but with our consistent strategy of using users as the center, insisting on digitalization and development, and the strategy of online and offline integration, we have achieved the ideal results. Over the years, the platform has generated a total insurance fee of more than RMB 5 billion, which has increased by 66.2% in total. The total income has increased by

Hello everyone, and thank you for joining Hui Ze's fourth quarter and full year 2021 earnings conference call. China's insurance industry witnessed a number of changes in 2021. However, this brought about new opportunities and a year of reform for Hui Ze. Despite the ongoing pandemic, further regulatory refinements, and increasing uncertainties in the overall market and business environment, Huize has adhered to its user-centric strategy, high-tech and digitalization philosophy, and online-to-offline integration, which led to another year of satisfactory results. In 2021, Total Growth Return Premiums, or GWP, facilitated on our platform increased by 66.2% year-over-year to RMB 5 billion, while operating revenue increased by 84% year-over-year to RMB 2.25 billion, meeting the revenue guidance we provided for four-year 2021.

In the long-term insurance users of Goubao, about 67.1% of them come from cities above the county level. Their average age is 35.3 years old. According to the first-year insurance fee, the long-term insurance fee of the military is increased from $6,684 to $9,593 in three seasons. By the end of November, In the fourth quarter, total GWP facilitated on our platform increased by 90.2% year-over-year to RMB $1.99 billion. And operating revenue grew 1.5 times year-over-year to RMB $980 million.

GWP for long-term insurance products accounted for 97% of total GWP and continued to generate high-quality business for our insurer partners. While growing rapidly, we were able to continue maintaining a high-quality user profile. In the fourth quarter, roughly 67.1% of our long-term insurance customers were from higher tier cities. with an average age of 35.3 years old. In terms of first-year premiums, the average ticket size of long-term insurance products increased from RMB 6,684 in the third quarter to RMB 9,593 in the fourth quarter. As of November, our persistency ratios for long-term life and health insurance in the 13th and 25th months have sustained at an industry-high level of 94%. So now turning to our product.

From the product side, after the release of the new rule of the human resource line on the Internet, we are following the trend of the market, actively grasping the opportunity to customize the demand line in the market. In the fourth quarter, the product of the supply line will contribute about 120 million yuan to the new security fee. on the change of the supply chain products after the new rule. On the one hand, we focus on the cooperation of large and medium-sized insurance companies. In January, we also continuously accelerate the construction of offline branching, promoting the seamless connection between online and offline products and services. In addition, to stimulate the market demand for insurance products, We launched Darwin No. 6 in January. This is also the first heavy-duty product we launched after the new rules fell. In addition to the characteristics of Darwin series heavy-duty line high-performance ratio, it is also upgraded on the basis of the use of insurance that is recognized by the market. There are innovative insurance responsibilities such as heavy-duty compensation and recovery. We believe Now turning to our products.

Following the announcement of the new regulations on internet personal insurance, we proactively expanded our savings product line to cope with the surging market demand. In the fourth quarter, Our savings insurance product contributed to about RMB 1.2 billion of the first-year premium. In response to the change in the supply of online savings insurance products after the new regulations, we focused on co-developing such products with leading mid- to large-size insured partners and launched the first internet-only incremental whole-life product in January. At the same time, we have accelerated the offline expansion to facilitate the provision of online and offline products and services. To stimulate demand for protection products, we launched Darwin No. 6 in January, which was the first major critical illness insurance product we launched since the new regulations came into effect. In addition to the cost-effective feature of the Darwin series critical illness product, Darwin number six has upgraded the protection benefits such as the inclusion of coverage reinstatement benefits after the first claim of critical illness. We believe that the adjustment of our product strategy and the introduction of new products have not only demonstrated our quick response to the new operating environment, but also endorsed our experience and strength in product innovation.

to set up a management network in the provincial and regional areas. This is important for the optimization of the digitalized ecological layout of Huize online and offline, which is the last mile of digitalization. The first is to accelerate the construction of all scenarios and products that are integrated online and offline, and the user service capabilities of online and online exclusive and offline products, so that the scenarios of Huize service users are not limited to online, At the end of the fourth quarter, we have cooperated with 109 insurance partners

and have strengthened our offline presence. Last December, we entered into a definitive agreement to acquire 100% equity interest in Shanghai Senhao Insurance Agency Company Limited. The acquisition is expected to be completed in March this year. Senhao Insurance is a nationwide professional insurance agency company with business networks in 11 provincial areas in China. We believe the acquisition will reinforce our competitive edge in both online and offline service capabilities and generate strategic synergies within our new digitalized ecosystem. We believe this will accelerate the O2O integration, thereby strengthening our service capabilities for users through a full range of insurance products across all scenarios. This will allow us to meet the needs of users through online insurance products, while simultaneously providing efficient offline professional services through our local branches. Moreover, through our platform, we have empowered the traditional intermediaries with digitalization and product supply, thereby creating scalability and reducing the operating costs of our ecosystem.

In the process of deepening the long-term market in many years, high-quality and diversified services are one of our core competitiveness. In 2021, the total number of services and assistance for small and medium-sized retail service users has reached 5.7 billion yuan. The number of cases of assistance retail service has reached 4.3 million cases. The largest unit of assistance retail service is 2 million yuan. Through system upgrade, 70% of users have already been able to achieve the quick repayment of the image key, which has further highlighted the efficiency and performance of Internet insurance services. Over the years, we have gained consistent recognition in the industry by using the service record, and have won the 2021 China Insurance Industry Innovation Award. In addition, we have released the first ESG report, During these years of operating in the long-term insurance market,

Our high-quality and differentiated services remain one of our core competencies. In 2021, the total number of insurance claims cases assisted by our SHELMA claim service reached 43,000, and the total claim settlement reached RMB 570 million. The highest claim settlement amount in a single case reached RMB 2 million. The upgraded online claim system enabled 70% of users to submit their insurance claims using photocopies, further highlighting the efficiency and potential of our online insurance services. During the year, our traceable customer service record was unanimously recognized by the industry, and we were awarded the 2021 China Insurance Arc Award. Moreover, we have published our first ESG report, highlighting our strategic ESG initiatives and accomplishments while providing users and investors with a new perspective on Hui Ze. Our continued efforts on optimizing service capabilities and improving user experience have enabled us to attract more new users and increase user conversion rates. As of end 2021, our insurance clients have reached 7.5 million.

In 2021, we have started to export digital tools and technology capabilities to insurance companies and other partners, such as digital CRM systems, NLP intelligent inspection systems, to make our revenue structure more diversified. At the same time, we are building a new line of business. The goal is to serve independent agents all over the country, to seize the opportunity of traditional channel reform and industry-industrial separation, and to help the supply chain to improve product quality through a one-stop service platform. The supply chain of Internet customers, online professional tools and service systems,

In 2021, we also began to explore the digital and technology capabilities that we have developed in-house, such as the digital CRM system and the NLP intelligent quality control system to insurance companies, thereby diversifying our revenue streams. At the same time, we are establishing a new business line targeting independent insurance agents. We will seize the opportunity brought forth by the reform in traditional channels, the separation of product and development and distribution in the industry, and empower offline agents with the product metrics, online customer acquisition capabilities, and online business development tools and service systems through our platform. We believe this should help promote the digitalization of the insurance industry and generate a new growth driver for Hui Ze.

In 2022, under the constant improvement of industry regulations and the gradually brightening of the business environment, we will actively consolidate the advantages of Hui Ze's platform. rely on the competitiveness of digitized capabilities and user insight, and continue to immerse insight users, constantly pushing forward to meet the needs of user individualization, and to play a greater role in the channel attribute and universal advantage of Internet insurance. At the same time, we will continue to extend our services to the offline market, and further improve the integration of online and offline products and services. In 2022, as we continue to see a refinement in industry regulations and the business environment, we will actively strengthen our new leading position in the online insurance business.

we will rely on our solid digitalization and data analytic capabilities to continue gaining in-depth insights on users to launch new products that meet the protection needs of users, thereby delivering the competitive advantages of an online insurance platform as an efficient, effective, and inclusive distribution channel. At the same time, we will continue to expand our offline layout and further strengthen the O2O integration of products and services through a more professional and seamless user experience. We strive to promote the growth in a number of users and improve user quality, thereby driving sustainable growth in both our premiums and revenue.

接下来请我们的CFO Ron给大家详细介绍一下业绩和财务的数据。

This concludes my prepared remarks for today. I will now turn the call over to our CFO, Mr. Ronald Chen, and he will provide an overview of our key financial highlights for the fourth quarter and full year 2021.

Thank you, Mr. Ma and Eric, and good evening, everyone. First of all, I would like to thank everyone on this call for continued interest in following the company. in particular in light of the recent turbulent market conditions. And for our friends in the Asian time zone, thanks so much for spending the Friday night with us here. And to those of you who may currently be under quarantine, in lockdown or semi-lockdown mode in Hong Kong or mainland China, please stay safe and healthy. For the purpose of this call, I would just like to quickly recap a few key highlights and takeaways from this quarter's operating and financial results. And for the detailed financial line items, I would like to kindly refer you to look at our uploaded earnings release for more details. Overall, we're very pleased to close out the final quarter of 2021 with record highs in both total gross return premiums, or GWP, facilitated on our platform, as well as total operating revenues. For the full year 2021, total GWP amounted to RMB $5 billion, representing a strong growth of 66% year-over-year. First-year premiums or FYP accounted for RMB 3.1 billion, or 62% of the total GWP, which is up 99% year-over-year from 2020. Renewal premiums accounted for RMB 1.9 billion, or 37.8% of total GWP, representing a year-on-year increase of 30.5% in 2021. As we have expected during our Q3 results call, our strategic focus on savings insurance products since the beginning of the year, coupled with strong market demand for savings insurance products by consumers, was expected to provide strong momentum for growth in savings products and overall FYP in the fourth quarter. Our continued strong growth in savings product FYP that we have demonstrated in the results is a real reflection of a few very important aspects of our platform business and of our customer base. First and most importantly, the quality of our existing customer base and the effective customer acquisition capabilities via omni-channel distribution platform that we have built up over the years. The two key metrics to highlight here again, which demonstrate this, are the average ticket size of the long-term insurance products that we have distributed, as well as the persistency ratios that we have delivered for the renewals of the policies. For average ticket size, this quarter we have seen this number increasing from 6,684 for the third quarter to RMB 9,593 in the fourth quarter. As of November, our persistence evasions for long-term life and health insurance policy renewals in the 13th and 25th months have still remained at a very high level of 94% compared to industry averages. The consistently high persistence metrics that we have delivered also help deepen our engagement and relationships with our upstream insurance carry partners. and that continues to reflect the high quality of our 7.5 million customer base that we have accumulated to date and their long-term lifetime value potential that we can extract. For the year 2022, one of our key strategic initiatives will be to focus on further deepening our engagement by existing high-value customers by encouraging cross-selling and upselling opportunities, leveraging on the proprietary data insights that we have accumulated from the interactions these customers have with our platform over the lifecycle, as well as utilizing our expanded offline service coverage from a continued investment in this area. Our strong operating performance in the fourth quarter has driven a 1.5x increase in operating revenue to RMB $976 million for the quarter, as well as to close out the full year 2021 at RMB $2.25 billion. which represents an increase of 84% year-over-year and surpassing our full-year guidance given in the last earnings call by 10%. For the quarter, we have also achieved a net profit of RMB $19.8 billion. As we head into the year 2022, amid a backdrop of tightening industry regulations, challenging macroeconomic and capital market conditions, the next two quarters are expected to be a period of adaptation and transition for most players in the industry. At Quasar, our first priority from a strategic financial management standpoint is to further drive improvement in our overall corporate cost structure and operating efficiencies. As we have reported in the last quarter, we are currently in the midst of implementing group-wide organizational structure optimization, and so far we have achieved a double-digit percentage improvement in our fixed cost base in the new year. In addition, the board has also approved a share repurchase program, which we have announced also today, which is aligned with our commitment to return value to our shareholders and reflects the continued confidence that we have in purchase long-term growth prospects. We believe that the current market conditions do provide us with an opportunity to strategically allocate capital to enhance shareholder value while maintaining resources to fund our operations and continue business growth. This concludes our prepared pre-match for today. We will now open up the call to Q&A. Thank you, operator.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to withdraw your request, please press the pound or hash key. Please stand by while we compile the question and answer roster. So once again, ladies and gentlemen, there's star one for questions. Our first question comes from the line of Michelle Ma from CT. Please ask your question.

Thank you. Hello, Ms. Ma. Hello, I'm Michelle from Huaqi. We have a strong 4G industry. Congratulations to the management team. I have two questions. The first question is 我们看到就是我们的这个保费的一个增长是在90% 然后我们的一个收入的增长是在1.5倍 看上去是我们的take rate上来了嘛 它这样子一个上升的原因是这个product mix 就是我们的一个四季度销售的一个产品的这个 mix, which is the change between last year and last year, or is it that we have the same type of product? For example, since the stock market is going to go down, the company is more willing to give the commission, which is what kind of situation it is, and whether we can give the product a specific distribution of a specific distribution, which is a distribution of a specific distribution of a specific distribution, which is a distribution of a specific distribution, which is a distribution of a specific distribution, about the product mix in the fourth quarter and its take rate. The second question is to ask about the new rules for online sales, the new rules for online sales. We can see that our product has a very big change in the new and old model. The insurance companies we work with are now relatively large. And then, as Taichung just said, the next two quarters are also two seasons of transformation in this industry. I would like to ask what our experience is in this transition, whether it is our product strategy or the strategy of our partner insurance companies. We are now in this What is the biggest change that has happened in the transition period? What changes have we made to adapt to the changes in the supervision? We want to understand the changes in the supervision for our business model and our product strategy. What is the biggest change that we have seen so far? These are the two main questions. Then I will simply translate it. My first question is about the product mix for the first year premium. And written in the fourth quarter last year, we noticed the tick rate for premium actually increased as the operating revenue growth outpaced GWT. underwritten in the Q4 last year. So what's the reason behind? And the second question is about the radical regulatory environment changes. What's our new product strategy and what's the difference between the old model of cooperating with medium-sized insurance company versus currently we need to collaborate with more top-tier insurance companies. What's the major difference and the difficulties we face here? Thank you.

Michelle, it's Ron here. Thank you so much for joining us and for the two questions. Maybe quick answers to both questions from me. First question really relating to the take rate of the fourth quarter and how the product mix is looking at in the fourth quarter for the FYP. So I think the overall take rate that you've seen, which has increased, is really a function of the fact that the mix of the GWP in the fourth quarter has a much larger contribution from FYP. Around 71.3% of the fourth quarter GDP is coming from first-year premium policies, and 28.7% from renewals. And in terms of the FYP product mix, I can give you some more detailed breakdown here. Roughly 63% is coming from long-term life, and long-term life is mainly the incremental savings product that we are distributing for Hong Kong life. And then around 21.6% is coming from annuities, And then 10% coming from long-term health products, which is critical illness. And then the rest of it is really from the short-term products. So I think overall, the tick rate has improved, mainly as a result of the increased proportion of contribution from FYP in overall, both with the premiums number. So that's the answer to the first question. For the second question, with respect to the new operating environment after January 1st, I think on the product strategy perspective, I think we'll be quite clear to tell the market that we will be seeing significant, I guess, changes On the online side, as it relates to the online savings product segments, which has obviously been a key driver for growth for the 2021 year. And also, as we expect in the new year, I think this has a combination of a few factors at play. And most importantly, I think it's really a result, a function of the market demand for insurance products in the savings or investment-linked products. continue to exist in the protection products as we have seen across the board in the industry. And so in the new year this year, I think we will still be placing significant focus on driving the savings product segments online and offline. So the online space as you see, as we have told the audience in the opening remarks, we have already put online the first internet online savings product with a qualified insurance company partner. And that was in January. And actually, we have also introduced an online critical illness product, our number six, as we have told you in the opening remarks as well. We have a full suite of products that is in our pipeline, close to 30 products, which we'll be looking to release in this year. And so I think we're on a very good track here. As to the offline space, again, I think a lot of the mid-sized or smaller-sized insurance companies that we have been working with which may not qualify under the new rules on the online side, will be able to offer offline products. And I think that's why we are now accelerating our online-offline integration business model. We also have disclosed just now, again in December, that we acquired 100% interest in Sennheil Insurance, which provides us with offline coverage in 11 provisional areas. So this will really speed up our online-offline touchpoints and the ability to service customers in the offline context. So I think that is really the major changes that we're seeing with respect to the so-called regulations coming into force in the new year. And I think that we will continue to drive the momentum in this space, and hopefully we'll have more material updates in the next earnings call for us to share with everyone. Thank you.

Right, thank you. Our next question comes from the line of Mindy Gao from CLSA. Please ask your question.

领导好,大家晚上好。 我是CLSA的Mindy, 然后我这边有两个问题。 第一个就是关于刚刚提到的关于3号保险, 就是去年12月收购了3号保险, 然后想请问一下接下来, um um I got two questions. The first one is regarding to Senhao Insurance that you agreed to acquire Senhao Insurance in last December. And what will be your business plan for this company? And what is your plan for online and offline integration plan in the future? And the second question is regarding the technology export. And you have mentioned previously that you have began to export your technology to other insurance companies, and this will generate new revenue streams. And I wonder, could you please give us an update on this business and its related revenue, as well as its outlook in the future? Thank you.

Okay, thanks, Mindy. It's Ron again here. So two questions. The first question on the O2O integration and the Center Hall acquisition and our business plan with respect to that. I think I'll also touch upon that quickly just now in the response to Michelle's question. I think the key focus areas here is that one thing we've always been trying to complement our service capabilities in the offline context So far, that's now up to probably the beginning of last year. I think over the first 15 years of the company's development, we have really been solely focused on the online distribution, the online service capabilities to our customer set. And I think starting from last year, we've accomplished a few things. One thing, the regulatory changes, and two, I think with respect to our own internal business plan to improve and deepen the engagement of our existing customers to drive repeat purchases, to drive retention, and to increase lifetime values, we do have the need to have extensive offline coverage so that we can service these customers and particularly the higher value customers that we can extract from our user database internally to cross-sell and up-sell, as we have also mentioned in the opening remarks. So with a bolt-on acquisition like SunHow, I think that really accelerates our efforts here rather than building it out organically. And it does seem quite time-consuming for us to go into each province on our own with respect to the regulatory admin timetable, et cetera, et cetera. So that's the first point here. And the second point is that with respect to the regulatory new environment, I think offline products will become increasingly important for us to distribute as well. We are beginning to distribute this year, starting with... you know our own internal custom consultants Salesforce and now with the somehow bolt-on acquisition that will also enable us to provide the cloud platform that we have already has quite a mature supply chain with respect to the insurance products that we are cooperating with over 100 insurance companies and particularly the customized products that we have been distributing on a very successful basis these products can be channeled into the offline agency course that is connected to the SunHao network. And therefore, we can really streamline the online to offline integration through this way. And then I think the third point that we can also look forward to is the so-called , which is the independent agency framework that is now being put in place by the CPIRC. And I think this is a very interesting and attractive opportunity for a comprehensive one stop shop distribute digital insurance by ourselves, whereby the independent agents can be plugged into our, our ecosystem and therefore leveraging on our online cloud system. They can also provide, you know, front end services, product comparison. you know, intelligent proposals to the customers through our SaaS tools, and also they can utilize our intelligent underwriting systems, our policy claim system services that would really enable them to provide, you know, bespoke and, you know, a very fully digitized insurance service experience for their offline customers. So I think all these are the things that we are looking to drive through this bolt-on acquisition into the key ecosystem that we have already put in place over the years. Hopefully that answers the question indeed. Thank you.

Yes, very clear. Thank you. Thank you. Our next question comes from Zixuan Wang from CICC. Please ask your question.

Thank you for giving me the opportunity to ask this question. First of all, congratulations to the company for achieving a very bright performance in Q2. I have two main questions here. The first one may be to ask about our number. Will we continue to expand the team of agents? Or as we mentioned earlier, it is currently covered by 11 entities. Is there any plan to continue to expand it in this area? The second question may be about our profit rate. We can see that the profit rate of Q2 has improved. Does the company think that such a level can continue? Because in fact, what we see is that the first is that we have replaced some subsidiary product suppliers into a large company. In the future, will we have a certain gap compared to the previous contract? Then later, we may also have the cost of this offline channel to continue to spread. In general, it can give a rate of return compared to 2021. I will simply translate it later. First, congrats to the impressive results of our management in Q4. I have two questions. The first one is about Sun Hao. Will our company continue to hire more agents or broaden our business to more provinces? The next question is about profit margins. We see the margin has improved in Q4. I'd like to know whether this level is sustainable since we change more product suppliers to large companies and there is still costs related to offline outlets. So overall, will the margin in 2022 to be improved or deteriorated compared with the 2021 level?

Great. Thank you so much. So two questions. The first question with respect to the offline business and whether we will be looking to expand I think the answer clearly is a yes. I think right now, I think we would probably be happy to start with the first batch of locations that we have already put in place through this acquisition. And I think that this has already covered, I would say, most of the key insurance heavy or the top ranking areas for our target markets. But then I think there would still be a few areas where I think we can also look to expand into. So I think we would do it on a measured basis. And as we go along further down this track, I think we will be looking to expand further. But we'll be happy with the initial kind of coverage of that work that we have already got in place through this acquisition. Secondly, on the profitability of the company, I think yes, in Q4 we have turned a profit, albeit a marginal profitability in the fourth quarter. As we have also mentioned in the opening remarks, we do expect the next two quarters, Q1 and Q2, to be extremely challenging. from the operating perspective. Not only are we adjusting to the new regulatory regime and new business models, and also from a macroeconomic standpoint, it's extremely challenging. I think most of you in Shenzhen are still placed under lockdown. In Shanghai, I think it's semi-lockdown, and I think over the country, pockets of the population are also in kind of lockdown mode. And I think that the consumer confidence has reached a very low level, particularly due to the quite massive layoffs that we have been seeing in different industries. So I think that we have a very significant impact on the willingness to consume, I think, the non-discretionary financial products. And within the financial products, I guess insurance products are the least important. or the most discretionary of all. So we do see next two goals to be challenging. So I think we have not given an official guidance and I think we would just leave it at that for now. And we would be also in the opening remarks we are continuing our program of cost reduction throughout the corporate structure. And I think that this is something of a priority in the first half of this year. We will be further driving cost control, driving down our base cost base. I think we have already achieved a double-digit percentage figure in the first quarter to date. I think we will continue to drive further cost reductions in the second quarter. Thank you.

Right. Thank you. We have reached the end of the question and answer session. I'll turn the call back to Ms. Harriet Hu, Investor Relations Director, for closing remarks.

Thank you, operator. So, in closing, on behalf of the Hoyser's management team, I would like to thank you for your participation in today's call. And if you require any further information, please feel free to reach out to us. And thank you for joining us today and have a nice weekend.

Thank you, ladies and gentlemen. This concludes our conference for today. Thank you for participating.