Huize Holding Limited

Ladies and gentlemen, thank you for standing by and welcome to Huitza Holdings Limited's fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, we will have a question and answer session. Today's conference call is being recorded and a webcast replay will be available. please visit Huitzer's IR website at ir.huitzer.com under the events and webcast section. I'd now like to hand the conference over to your speaker today, Ms. Harriet Hu, Huitzer'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 full year of 2022. Our financial and operating results were released earlier today and are currently available on both our IELTS website and the newsletter. 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 examined in our earnings release and filings with the ACC. Joining us today are our founder and CEO, Mr. Chunjun Ma, COO, Mr. Li Jiang, co-CFO, Mr. Minghan Xiao, and co-CFO, Mr. Rong Tan. Mr. Ma will start a call by providing an overview of the company's performance and operational highlights for the fourth quarter and full year of 2022. Mr. Tam will then provide details on the financial results for the period before we open up the call for questions. I will now turn the call over to Mr. Ma.

Hello, everyone. Welcome to the 4th quarter of 2022 and the 8th quarter of the entire year. Looking back at the 4th quarter, the country's epidemic is frequent, the situation is severe, the consumer activity and confidence are affected, lead to the overall economic recovery of the insurance industry. In the face of a challenging macroeconomic environment, we actively adjust products, operations, and other strategies to reduce risk and risk reduction, and be resilient to run as the primary goal. At the same time, we continue to advance the digital insurance service platform ecosystem strategy of ABC all channels to make good progress. The whole year of 2022, the entire platform contributed to the total insurance fee RMB Hello everyone and thank you for joining Huizi's fourth quarter and four year 2022 earnings conference call. In the fourth quarter,

COVID outbreaks weakened private consumption and consumer confidence in China, hampering the recovery of both the overall domestic economy and the insurance industry. Against the challenging macro backdrop, Huize reported another set of encouraging results as we took proactive steps to adjust our product offerings and business strategies to mitigate downside risks in line with our mission to achieve operational resilience. We also made good progress in implementing our strategic roadmap to build an omni-channel digital insurance service ecosystem that integrates agents, business, and customers, or ABC. In 2022, total gross return premiums, or GWP, facilitated on our platform remain stable at RMB 4.9 billion, despite a high base for comparison. In line with our guidance in the third quarter, we achieved non-gap net profit of approximately RMB 14 million for the fourth quarter.

From the structure of the treasury, although the real market of the new treasury is inevitably affected by the epidemic, we also noticed that the national health awareness has improved during the epidemic. to further soften the demand for health insurance. In the fourth quarter, the first-tier health insurance fee for long-term health insurance has increased by 39.2%. This is due to our steady growth in the long-term health insurance market and the high-quality user image. In the fourth quarter, the overall health insurance fee ratio for long-term health insurance is 96.2%, which is higher than 90% in the 13 consecutive quarters. The total health insurance fee has increased by 80.8%. reached RMB 10.3 billion, supporting us to maintain a resilient business in a complex form. In terms of user image, among the users who have long-term insurance in the fourth quarter, the second-tier and above city users accounted for 65.3%, with an average age of 33.8 years old. In terms of the first-tier insurance, the long-term insurance was established for RMB 3,625, In terms of product mix,

Although the pandemic limited our growth in terms of total first-year premiums, or FYP, facilitated on our platform, we continued to see heightened public health awareness drive a rebound in the demand of health insurance. In the fourth quarter, the FYP of long-term health insurance products increased by 39.2% sequentially. benefiting from our leading market position in long-term insurance and our relentless efforts to maintain a high-quality user profile. The GWB contribution of our long-term insurance product was 96.2%, remaining above 90% for the 13th consecutive quarter. Renewal premiums also increased substantially by 80.8% year-over-year, to more than RMB 1 billion, which highlights our operational resilience amid the complex business environment. In terms of user profile, about 65.3% of our long-term insurance customers were from higher-tier cities with an average age of 33.8 years old. The average ticket size of long-term insurance products in terms of FYP was approximately RMB 3,625, while that of long-term savings products increased substantially to approximately RMB 46,000 during the quarter. As of December, our average persistence ratios for long-term life and health insurance in the 13th and 25th months remained at industry high levels of 90% and 96% respectively.

At the end of the fourth quarter, Guizhou maintained a stable cooperation relationship with 106 insurance companies. In the fourth quarter, Guizhou presented a new life version of Zunxiang version of Zun'er Lifetime Benefit, striving to flexibly meet the needs of users in education, retirement, and inheritance, etc. At the same time, Huize and Fuxing Baohexin launched strategic cooperation in the field of insurance professional and nursing ecological services, and strongly launched the product of the Xinhai Yingjia series of pension money. In March this year, Huize and Ping'an Health Insurance signed a strategic cooperation agreement and jointly issued the first customized new product, Changxiang'an Long-term Medical Insurance. In the future, We will cooperate with Ping An Health Insurance to customize and promote insurance products, continue to operate with customers, and conduct comprehensive cooperation in the fields of health management, service, and construction. It is worth mentioning that the Darwin Heavy-Duty Series will once again win the 2022 China Insurance Industry Innovation New Zhou Award, Fangzhou Award, and the Darwin Heavy-Duty Series carried by the four groups, also based on innovation, has gained the approval of 10 commercial health insurance recommended products. In 2022, the ratio of limited product contribution tax has increased by 4.6% to 64.8%, fully verifying the accuracy of the user's needs and market changes. Continuous expansion of product standards, and the effectiveness of all types of layout strategies.

As of the end of the fourth quarter, we have cooperated with 106 insurer partners to co-develop a wide range of cost-effective and high-quality customized products. During the quarter, we launched Xinxi Rensheng Premium, an increasing whole life insurance product designed to satisfy the needs of our users in multiple scenarios including children's education, retirement, and inheritance. We also entered into a strategic partnership with Primerica Folsom and launched the Xinhai Yinjia series of pension annuity products, demonstrating our efforts in offering products that combine insurance and the retirement services. In March, we established a strategic alliance with Pingnan Health Insurance and launched our first co-developed product, Long-Term Medical Insurance. We look forward to accelerating our cooperation with Pingnan Health Insurance in the field of insurance product customization and promotion, customer engagement, and health management service. Meanwhile, Our Darwin Critical Care Series was once again honored with the China Insurance Innovation Arc Award for 2022. And in the fourth quarter, our innovative critical illness product, Darwin Critical Care No. 7, was named one of the top 10 recommended commercial health insurance products in China. For the full year 2022, the GWP contribution of co-developed products increased by 4.6 percentage points year-over-year to 64.8%, which underlines our ability to identify market opportunities based on our in-depth customer insights and offer a full range of insurance products across all scenarios.

On the audience. We have achieved efficient cost control and organization structure optimization. The interest rate increased significantly from 24.7% last year to 36.6%. The annual operating costs were reduced by 30.1%. The operating costs for the fourth quarter were reduced by 16% on the basis of the third quarter. In the meantime, we do not change the core concept of operating users. In 2022, we will increase the operating costs of more than 780,000 families In 2022, we achieved effective cost control and continued to implement our group-wide

organizational structure optimization, driving a considerable improvement in our growth margin from 24.7% in 2021 to 36.6% in 2022. Our operating expenses decreased by 30.1% year-over-year in 2022 and 16% sequentially in the fourth quarter. Even as we continue to reduce our cost base and improve our efficiency, we remain committed to our core belief in providing high quality services to our customers. In 2022, Huize provided professional insurance services to more than 780,000 families through over 2 million insurance policies. During the year, Quizza provided clam assistance service to 70,000 customers, with the total clam settlement amount increasing by 8.8% year-over-year to RMB 620 million. Across these numerous user interactions, we achieved a 92% customer satisfaction rate according to our 2022 customer service reports.

Through the layout and promotion of the last year, our A, B, and C channels have achieved practical progress in the digital insurance service platform ecosystem strategy. At the C-end, Gui Zhe faces different target users. The refined label of the group takes the strategy of differentiating services and at the same time continuously deepens the operation of old users to achieve the maximum value of the entire life cycle of users in order to increase the resale and marketing. In the fourth quarter, despite the impact of the epidemic on users' willingness to purchase insurance, HuiZhe has accurately promoted users, high-value users and travel users to the platform, including more than 50,000 potential users, and successfully transferred about 10,000 investment users. Since the start of the business, HuiZhe has served a large number of young middle-class families. We believe that with the growth of users, During the year, we made substantial progress

on executing our three-year ABC strategic business plan to build an omni-channel digital insurance service ecosystem. In a QC segment, we have classified our target users into different groups and adopted a unique business strategy for each group. These differentiated service strategies have enabled us to deepen our engagement with existing customers driving repeat purchase of new insurance products, and providing upselling opportunities to optimize lifetime customer value. In the fourth quarter, although the pandemic limited users' willingness to purchase insurance, we continued to promote our customized products to existing users, particularly high-value users and female users. Through these targeted monthly promotions, branding, and customer care activities, we reached more than 50,000 users and achieved approximately 10,000 sales conversions. Since our inception, we have served a large number of young middle-class families, which should become a cornerstone that serves them our long-term development. Going forward, in the QC segment, We will build a business model based on systematic operations and standardized sales processes, and strengthen the service capabilities of our localized sales teams, facilitating our online to offline integration through enhanced operational and sales capabilities.

At the B-end, by exporting digitalized products and technology to insurance companies and partners, In 2022, the technology output and business contribution income reached RMB15 million. In addition, Huize will become Baidu Air's major model, Wenxin Yiyan's first in-house partner. In the future, we will apply Baidu's leading intelligent dialogue technology results in the field of insurance services, and combine the company's experience and data presentation related to insurance technology accumulated over the past 16 years to create a full-scale insurance artificial intelligence solution and service for users.

In the 2B segment, we continued to export various digital tools and technologies to insurance companies. In 2022, the total revenue contribution of our technology service business reached RMB 15.2 million. In the 2A segment, we launched our new user management system, Hotlink 1.0, which enables agents to accurately identify users, quickly view user profiles on a mobile device, filter and target users based on profile similarity, and share information through individual or group messaging. This system will enhance our core capability to empower insurance agents in all aspects of their business. FYP facilitated by the 2A business increased by 26.7% sequentially to RMB 82.6 million in the fourth quarter and exceeded RMB 200 million for the full year.

At the end of the year, our integrated capabilities are strengthened again. The official online user management system, Hotline 1.0, has achieved the most accurate identification of users. The mobile end quickly checks the data and selects and locks the same user. One-to-one or one-to-many information is exported into multiple functions. All-in-one delivery insurance agent. In the fourth quarter, the A-end business line exported the first-tier insurance fee to RMB 8,255 million, which increased by 26.7%. In 2022, the whole year, the A-end first-tier insurance contribution has exceeded RMB 200 million.

In 2023, we will focus on our localized deployment plan, aiming to establish professional and high-quality offline service teams in 16 key regions nationwide. We will also strive to boost user activity through increased engagement with high-value users and enhance our core strengths through technology upgrades. with particular focus on optimizing our transaction system, user management system, and insurance policy custodian system.

In 2023, we will use localization as the core of our work. In 16 key areas across the country, we will create a professional and high-quality local and offline service team. We will focus on high-value users. In 2023, we will focus on our localized deployment plan, aiming to establish professional and high-quality offline service teams in 16 key regions nationwide.

We will also strive to boost user activity through increased engagement with high-value users and enhance our core strengths through technology upgrades with particular focus on optimizing our transaction system, user management system, and insurance policy custodian system.

Next, let's listen to our CFO, Rong, to give you a detailed introduction to the performance and financial data.

This concludes my prepared remarks for today. I will now turn the call to our CFO, Mr. Rong Tam, and he will provide an overview of our key financial highlights for the fourth quarter and full year of 2022.

Thank you, Mr. Ma and Harriet. Good evening, everyone. In the fourth quarter, operating conditions in China remained tough. The significant macroeconomic challenges during the quarter weighed heavily on consumer confidence. and recovery in household income and hinder the sales of insurance products in China. The total growth return premium or GWP for the entire insurance industry in China was RMB 531 billion in Q4, which is down 16.3% sequentially. Against the backdrop of macro challenges and a sluggish industry recovery, we're very pleased to still achieve a 16% quarter-on-quarter increase in total GWP facilitated on our platform totaling RMB 1.4 billion in Q4, and to close out the full year 2022 with total GWP facilitated on a platform of RMB 4.9 billion, which is essentially flat on a year-on-year comparison basis. For the full year of 2022, we have added 1.2 million customers to our ecosystem, bringing the total from 7.5 million to 8.4 million as of the end of 2022. And most importantly, In line with our guidance given in the previous quarter, we also achieved profitability in Q4 thanks to the successful execution of our key business strategies. First, on the product front, we continued our strategic focus on long-term insurance products, and our offerings in this category continue to be well received by customers. The GWP contribution of our long-term insurance products exceeded 90% for the 13th consecutive quarter. On our channels, we continue to improve the quality of our user base and enhance customer acquisition capabilities via our omni-channel distribution platform. Our new 2A2C business line maintains strong growth momentum in the offline market, generating a total FYP of more than RMB 200 million in 2022. And finally, on the corporate front, we continued with our group-wide organizational structure optimization and achieved significant cut savings in our fixed cost base across all business lines in 2022, establishing a solid foundation for sustained improvement in operating leverage as the macroeconomy and consumer consumption recovers in the post-pandemic world. I will now recap a few key highlights and takeaways from this quarter's operating results. In the fourth quarter, the 16% sequential increase in our GWP was mainly driven by robust quarter-on-quarter growth in renewal premiums. which increased 83% to RMB 1 billion. Our other renewal metrics have also remained healthy with our persistency ratios for long-term life and health insurance in the 13th and 25th months, both remaining at industry high levels of 90%, 96% as of December respectively. In addition, the average ticket size for our long-term savings insurance products was approximately 46,000 RMB in Q4. These metrics not only reflect the high quality and LTV potential of our 8.4 million strong customer base, but also highlight our efforts to successfully deepen our engagement with users existing and realize upselling opportunities to increase customer lifetime value. In terms of FYP product mix, we are seeing a sequential recovery in the long-term health insurance category, and we expect that for the year 2023, our overall product mix to be more balanced between the long-term health segment and the savings categories as compared to 2022. The anticipated macro recovery should drive consumption of protection products, and especially with the pandemic effect on raising consumers' awareness of the need to procure health insurance. For this, we will continue to invest heavily in co-developed market-leading long-term health insurance products, such as our Darwin Critical Illness Series, which is now in its seventh iteration, as well as long-term medical insurance products, such as the latest exciting strategic collaboration we have just announced last week with Ping An Health Insurance. Amid the tough macro environment and COVID challenges, our total operating revenue in Q4 was RMB 258 million, down 27% sequentially. Nonetheless, we continue to focus on tightening marketing channel costs, optimizing our worldwide organizational structure, and improving operational efficiency. And as a result, our operating costs for Q4 decreased by 78% year-over-year to RMB 162 million, prompting a healthy improvement in our gross margin to 37.2% from 23.4% a year earlier. In Q4, our SG&A and R&D expenses both decreased by 63% year-over-year, and overall we recorded a GAAP and non-GAAP net profit of RMB $8 million and RMB $14 million in Q4, respectively. This translates to a non-GAAP net margin of 5.5% for Q4. At the end of 2022, we continue to maintain a strong liquidity position, as evidenced by our combined balance of cash and cash equivalents of RMB 277 million. We have continued to repurchase shares from the open market under our existing share repurchase program, and as of the end of the December quarter, we have repurchased an aggregate of approximately 655,000 ADSs. On March 17, our board has just authorized a new share repurchase program to buy back up to 5 million US dollars of ADSs over the next 12 months, which continue to demonstrate the confidence that we have in our business model and our long-term growth prospects. Going forward, we'll further scale our omni-channel digital insurance service ecosystem by executing on our ABC business plan to secure a position as a top-tier insurance intermediary in China. Strengthening this ecosystem should help us gain market share among high-quality new generation consumers and families who demand innovative and customized insurance products, a seamless digital experience, and professional customer service. We'll continue to streamline our overall corporate cost structure and enhance sales conversions, striving to strategically allocate capital to create shareholder value and sustain our long-term business growth. Now turning to our outlook for the year. At this time, we are cautiously optimistic about a sustained recovery in the economic activity, which should improve customer confidence and consumption in China, although the complex external environment and geopolitical tensions would continue to provide challenges to the global and Chinese economy. We expect to remain profitable in 2023 on the anticipated macro recovery, our improving operational efficiency, our continued efforts to upsell existing customers, and our ability in acquiring new mass affluent customers. Based on a preliminary assessment, we currently expect that for the full year of 2023, we will achieve a non-GAAP net profit of not less than RMB 30 million in 2023. Before we conclude our prepared remarks for the call, I would like to provide a quick update on a notice that we received from the NASDAQ Listing Office regarding our compliance with listing requirements with the NASDAQ Listing Rule 5450 in October 2022. We would note that the matter has been fully resolved and closed and we have regained compliance as of December 14th of 2022. And with that, we will now open up the call to questions. Thanks and over to you, operator.

Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again.

Please stand by while we compile the Q&A queue.

Our first question comes from the line of Yuyu Zhang from CICC. Please go ahead, your line is open.

Thank you for giving me the opportunity to ask this question. I am Zhang Yu from the Chinese company. I have two questions here. The first one is that we actually want to understand the business strategy of this company this year. Will it focus more on growth or will it focus more on profit? What are the specific measures to achieve a similar business goal? The second question is also related to the current popular AI technology. We also noticed that Huawei has announced that it will join Baidu's Wenjing Yiyan. I also want to ask you to share with us the future of AI technology. So I have two questions. The first one is related to your operating strategy. This year, will you put more emphasis on growth or profitability? What business goals do you set and then how to achieve them? And the second one in terms of the AI technology, we've noticed that with the digital technology has announced to connect by do-earning bots. I'm just wondering how AI can affect insurance sales business. Could you share some more color on this? Thanks.

Hey, thank you. It's Ron here. Two questions from your side. So the first one regarding the business strategy for this year. I think clearly we are seeing the end of the pandemic towards the end of the last quarter of last year. And with that, we're seeing that the reopening of the Chinese economy has seen the consumer recovery in everyday consumption in the first quarter. I think we're also seeing initial effects of that spilling over to the insurance industry. And in the first quarter, we're seeing some modest recovery on a year-on-year basis across all business lines. And with the pandemic effect on raising people's awareness on procuring health insurance for themselves and the families, I think we are seeing structural long-term growth to be intact with the improved awareness. And I think in the product perspective, we will continue to very focus on developing variable money propositions for the broader market. And I think the recent announcement that we have with Ping An Health Insurance is a very good example of that, we will continue to iterate and upgrade our product matrix and co-develop products with leading insurance companies. And now that we have a new strategic collaboration ping out, I think that will be very positive for the product side of things. I think your question on the growth versus profitability, I think this year we'll be cautiously optimistic on the growth prospects for the economy and the industry, as I just said before. But then I think the focus for the organization And I think for the industry overall, it will be very much on the profitability side. The bottom line of the P&L will be the main focus of this year. And I think we have just given out clear guidance for the full year of 2023 that our profit will be no less than 30 million RMB, which states a clear intention on the focus on bottom line profitability for this year. So that would be question one. And for question two on AI deployment and Baidu, I think we have been investing heavily in our R&D over the last two and a half, three years, and we have been consistently telling the market. And throughout the years, we've also been able to incubate AI tools and technology to increase efficiency throughout our entire operational processes. For example, on the front end on CRM and on, you know, we have an AI proposal engine that enables our consultants I think these products that we have developed in-house is an example of that, and that's basically already our in-house AI investment and deployment. Now that we have entered 2023 under the heavy influence of the AI capabilities of, for example, ChatGPT and Baidu, we are definitely going to explore and trial test the deployment of these technologies in our in-house business processes. for by deal we have uh we have we did announce that collaboration and we're already doing some trial testing internally uh as well as chat gbt we have already now uh done some trial testing in-house on our product development and r d personnel uh to utilize gbt on improving significantly their coding and programming uh worker streams and we're now already seeing some initial results on that um so i think on the product development side definitely the ai will also be very helpful in terms of improving efficiency and thereby even further improving operating leverage in the next few years. That will be all. Thank you.

Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We kindly ask you to state your question in Chinese first and then translate it into English.

Please stand by. Our next question comes from the line of Amy Chen from City. Please go ahead. Your line is open. Hello, thank you for giving me the opportunity to ask this question.

My first question is about a notification recently sent by the supervision. It says that it requires insurance salespeople to check their own online promotions. For example, in WeChat, social media, and video accounts, there are some unlawful information. I would like to ask, um um The first question is regarding latest regulatory notice regarding the self-inspection of the online marketing of insurance agents. We're wondering what would be the potential impacts for Huize's sales going forward. The second question is relating to Huize's products. We see that more and more smaller insurers are actually exiting the online insurance space, and we see that Huize has been starting to collaborate with relatively larger-scale insurers. We want to understand more about the difference in terms of commission take rate and product design regarding to these new products. And also regarding to the full year of 2023, is there a guidance for premium facilitated? Thank you.

Hey, thanks, Amy. It's Ron here again. Thanks for joining again. So the first question on the regulatory requirements the self-inspection notice. I think this is something that we have been taking seriously ever since the first regulation came out on the online insurance marketing business compliance requirements two years ago. And we have been continuously adapting to the regulatory changes. And this is something that has not been, it's definitely not new to us. And in fact, we have basically over the last two years, we have been adjusting our business processes. We have been strengthening our controls of our third party channel partners in terms of compliance requirements. We have clear guidelines and clear requirements for our channel partners to obey and to abide by in order to cooperate with us on a compliant manner. So we have been holding compliance very highly throughout the last two years. And I think this self-inspection is just an execution step by the regulators based on the earlier regulatory framework. And this is not a new regulatory requirement per se. It's just an execution step. So for CREZA, because we have been maintaining high standards of compliance throughout our whole ecosystem, we are relatively confident that, first of all, we'll be fully compliant with the regulators' self-inspection requirements. We will also encourage our third-party channel partners to cooperate fully. And we should come up from this three-month inspection, which starts from April 3rd and to finish by June 3rd, we should come up from this self-inspection even stronger, from a competitive standing versus some of our peers in the industry, just because of the higher compliance standards that we have here at Hazer And I just want to note that also to give you a sense of the regulatory compliance that we have. We're actually one of the only two insurance intermediaries in China which is operating on the online context. It's us, Fraser, and Tencent, Tangxun, which has voluntarily connected our back-end system to the regulators' east system, which mandates a real-time sharing of transaction data with the regulatory body. So I think we are one of the very few market participants that are able to do this, and I think this is a very strong testament as to our compliance with the regulations. So that would be the first question. And the second question on the future development of our business vis-a-vis the upstream insurance partners, I think that, yes, I think the Ping An Health Insurance is a very good example of now that we are moving into a post-pandemic world, and also that the more stringent requirements on the regulator side would mandate that we would be working even more now with the mid-sized to larger-sized insurance companies in the market. And Ping An Health Insurance definitely is a very strong first step in this foray. And the long-term health insurance product remains to be a very attractive market segment for China. I think that working with Ping An definitely will give us a very strong advantage in the market in providing good value for money and customer-centric products, which will help address some of the vacuum in the marketplace right now. So that would be the question number two. For full-year guidance, I think that, again, we are giving up clear guidance on the possibility side of the P&L. For top line, I think we are cautiously optimistic that with a continued and sustained macro recovery, we should see modest growth in the premium facilitated this year.

Thank you.

Thank you. We'll now move on to our next question. Our next question comes from the line of Rick Zhao from Morgan Stanley. Please go ahead. Your line is open.

Okay. Thank you, Mr. Guan. I'm Rick Zhao from Morgan Stanley. I have two questions. The first one is also about monitoring. We have seen that the monitoring has been working closely with various companies to guide the industry to reduce the default rate of products. What kind of impact will it have on the products that our company is currently selling? Or what preparations do we have? Secondly, we see that the whole economy or the consumption of the whole economy is relatively resuming this year. Do we see that insurance products, especially products like heavy-duty insurance, have a resuming attitude? For example, from January, February, or March this year, what kind of situation is the overall sales? The first question is that the regulator is doing research on reducing the pricing rate. What might be the potential impact of the company and any preparation from our side? And second question is that with the China's economy and the consumer recovery, have we seen a better selling trend on production products like legal units and also medical versus the pandemic and internet industry? Thanks.

Thanks, Rick. Thanks for joining. Welcome you to the Huize story. I think the first question on the pricing front, yes, I think that we do note that the regulators are now looking into maybe adjusting the pricing rates on the products. And I think the short-term impact on not just the company, but also on the overall industry is that we might see some of the current products to reach the end of the life cycle. So I think that that might translate into some of the accelerated sales of some of these existing products in the next quarter or two. I think that will be some of the short-term impact, which actually should be a net positive for the company because we are well-positioned in terms of the product supply side with very good market-leading products that we can facilitate to the market. For medium to longer term, I think that because we have always been very focused on co-developing new products with our upstream insurer partners. We are fully prepared and we are already in discussion to iterate the savings products into the next version, maybe post the pricing rate regulatory changes. So I think we are fully anticipating some of these changes going into the second half this year and 2024 onwards. So with that, I think that, again, because of the way that we have been operating with a very clear focus on middle class, mass affluent families in China. I think that the good quality customer base and the ability that we can acquire quality new customers would provide us an upper hand in terms of negotiating and working with the larger size insurance partners to help develop new versions of these savings products and health products to the marketplace. to adapt to the changes in the regulatory side. So I think that will be the first question. Second question, I think I told the other analysts earlier on the call, we are seeing some modest recovery in Q1. On a year-on-year basis, actually quite strong versus Q1 of last year. So we are still cautiously optimistic. I think the broader external environment is definitely very challenging right now as we speak. I think geopolitical tensions remain extremely tight. So there are still a lot of uncertainties on the exports, and I think that will also have some severe effects on the SMEs in China and so forth into consumer confidence. But then I think Q1, we are seeing modest and healthy recovery across the key product segments, i.e. long-term health and long-term savings. a lot of savings products. So I think that we should be hopeful for a modest rebound in the first half this year. Thank you.

Thank you.

There are no further questions at this time, so I'll hand the call back to you for closing remarks.

Thanks, operators. It's Harriet here. So in closing, on behalf of the Hoysers management team, We would like to thank you for your participation in today's call. And if you require any further information, please feel free to reach out to you with the IR team. And thank you for joining us today. This concludes the call.

Thank you, everyone. Have a good evening.

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.