Huize Holding Limited

Ladies and gentlemen, thank you for standing by and welcome to Hoytser Holding Limited's fourth quarter and full year 2023 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 Hoytser's IR website at ir.hoytser.com under the events and webcast section. I'd now like to hand the conference over to your speaker host today, Ms. Harriet Hu, Hoyt's Investor Relations Director. Please go ahead, Harriet.

Thank you, Sarah. Hello, everyone, and welcome to our earnings conference call for the fourth quarter and full year of 2023. Our financial and operating results were released earlier today and are currently available on both our Iowa website and a new flyer. 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 follow-up statements. Please also note that we will discuss non-GAAP measures today, which are more thoroughly explained in our earnings-per-release and filing with the FDC. Joining us today are our funder and CEO, Mr. Sun Junma, COO, Mr. Li Jiang, Co-DFO, Mr. Minghan Jiao, and Co-DFO, Mr. Rong Chen. Mr. Ma will start the call by providing an overview of the company's performance and operational highlights for the fourth quarter and fourth year of 2023. Mr. Temp 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 full-year performance conference of the fourth quarter of 2023. In 2023, China's insurance industry continues to improve and achieve deep transformation in the industry. Since the second consecutive year of growth, especially in an environment where interest rates have dropped, the market's customers' demand for savings has continued to rise. It has also led to a 12.75% increase in the revenue of the entire insurance industry. The confidence index of Chinese insurance consumers is also clearly recovering. Consumers' confidence in the macroeconomic and industrial environment continues to recover, of which Zengbao's will has been reborn in three consecutive seasons, higher than the same level as in 2021 and 2022, and will adapt to the development trend of the market. We have grasped the opportunity of growth in the savings line, rely on long-term strategy, diversified business layout, product innovation, and core advantages in terms of customer performance, and have once again achieved the ideal increase. In 2023, the total insurance fee for our entire platform was about RMB 5.8 billion, which increased by 18.2% in total. The total income increased by 3.3%, reaching 1.2 billion, achieving a net profit of 72.3 million after adjustment, exceeding the expected profit target of 60 million.

Hello everyone and thank you for joining us for the fourth and fourth year 2023 earnings conference call. In 2023, China's insurance industry continues a positive growth trajectory, marking the second consecutive year of growth following the industry's significant reforms. In particular, the demand for savings insurance products remains robust, driving a 12-year 12.75% growth in total premiums for China's life insurance industry amidst the declining RMB interest rate. The China Insurance Consumer Confidence Index also reflected a resurgence in consumer confidence towards the macroeconomic environment and the insurance industry. Notably, the intention to increase insurance coverage has rebounded for three consecutive quarters surpassing levels seen in the same period of both 2021 and 2022. Navigating through this evolving market trend, Huizhe has successfully seized the market opportunities in long-term saving products. By leveraging our strategic focus on long-term insurance products, diversified operational tactics, product innovation, and customer acquisition capabilities, we have once again delivered satisfactory results. In 2023, total gross return premium, or GWP, facilitated on our platform reached RMB 5.8 billion, up 18.2% year-over-year. Our total revenue increased by 3.3% year-over-year to RMB 12 billion, and we achieved a non-GAAP net profit of RMB 72.3 million. exceeding our guidance of RMB 16 million.

In terms of the structure of the balance sheet, in 2023, the total ratio of the balance sheet is 92.3%, which is more than 90% over the next four years. Among them, the first year balance sheet increased by 4% to 26.2 billion yuan, and the second year balance sheet increased by 4% to 31.8 billion yuan. In the year, under the market opportunity of intensive demand for savings, Guizhe chose to diversify the supply of products and the ability to distribute them throughout the channel to contribute a total cost of 16.5 billion yuan for the new single in Chuxu County, which is 54.6% of the total increase. The new single cost of the long-term health insurance is about 5.1 billion yuan, which is 19% of the total increase. On the other hand, while long-term insurance businesses continue to increase in quality, Guizhe provides risk management solutions and exclusive customized products for corporate customers, As a result, the New South Wales fee increased by 74% and reached 3.9 billion yuan.

The total first-year premiums for HYT facilitated on our platform reached RMB 2.6 billion, up significantly by 42% year-over-year, and renewal premiums increased by 4% year-over-year. reaching RMB 3.2 billion. In terms of product mix, the GWP contribution for long-term insurance products in 2023 was 92.3%, representing the fourth consecutive year exceeding 90%. During the year, we witnessed a rise in demand for savings products and leveraged our diverse product offerings and omnichannel distribution capabilities to capitalize on the market opportunities. In light of that, FYP from our long-term savings products increased by 54.6% year-over-year to RMB 1.7 billion, and FYP from our long-term health products increased by 19% year-over-year to RMB 510 million. While we maintain high-quality growth in our long-term insurance business, We also provided customized products and risk management solutions to our corporate clients, which led to a 74% surge in the FYP of our PMC insurance products, reaching RMB 390 million in 2023.

At the end of the fourth quarter, the total number of users on the platform has exceeded 9.3 million. Among the long-term users on the fourth quarter, The percentage of users in AXIE and the above cities is 65.8%, and the average age is 34.1 years old. Of these, 41.8% of users have applied on the platform, and the resale rate has increased by 8% from the same period last year. At the same time, the value of the entire life cycle of the operating users will be further released, and the rapid expansion of four-level high-value Hong Kong-style businesses will be provided. With the first-hand warranty, As of the end of the fourth quarter, our cumulative number of insurance customers exceeded 9.3 million.

Among the long-term insurance customers from the fourth quarter, 65.8% were from higher tier cities, and their average age was 34.1 years old. 41.8% were repeat purchase from existing customers, which has increased by 8 percentage points year over year. We also witnessed a substantial increase in the fourth quarter in the average ticket size of saving products in terms of FYP. which was approximately RMB 59,000, representing a 30% increase year-over-year. This was primarily driven by our focus on acquiring high-quality customers and upselling existing customers with high LTP potential, as well as the success of our Hong Kong business extension, contributing premium international product sales in the fourth quarter. As of the end of December, our accumulated Persistence ratios for the long-term insurance in the 13th and 25th months remained at industry-high levels of more than 95%.

to further enrich our diversified product system. In November, Huize Company, a large-scale pension insurance company, proposed a large-scale pension pension insurance. With three types of insurance options and a pension service system, users after 80 and 90 years of age have achieved a personalized system. In December, Huize Co., Ltd. fully upgraded the Daewon No. 8 cruise ship's heavy-duty ship. Since 2018, with higher security, As of the end of the fourth quarter, we have cooperated with 123 insured partners. Throughout the year, we maintain solid collaboration with leading insurance companies.

further enrich our diversified product matrix in order to meet the differentiated protection needs from customers, whether they are in search of premium brands or cost-effective products. For example, in November, we partnered with Dajia Annuity Insurance to launch Dajia Huixue, a customized retirement and annuity insurance product, addressing the unique needs of the post-80s and 90s customers by offering elderly care services and various types of protection options. In December, we partnered with PICC Life Insurance to launch the Darwin Critical Care No. 8 Advanced. Since its launch in 2018, the Darwin Critical Care Series products have provided over 310,000 customers with enhanced protection through higher limits broader coverage, and better service quality. In 2023, the GWB contribution from our customized insurance product was 51.6%.

In 2023, the new insurance fee from the IFA platform reached 3.5 billion yuan, which increased by 73%. The number of core employees in the studio increased by 106% in 2022. At the C-end, we are targeting new users In 2023, FYP facilitated by our independent financial advisors or ISA platform, which are in the 350 million, representing a significant increase of 73% from the previous year.

The number of high-performing ISA studios increased by 106%. In our direct-to-consumer segment, we launched a series of promotions and marketing initiatives to engage potential and high-value customers, which effectively reduced customer acquisition costs and boosted conversion rates. As we extend our customer base, we continue to remain highly committed to deepen our engagement with existing customers. In 2023, we served more than 1 million families with over 11 million insurance policies and assisted with 92,000 insurance plans, amounting to a total plan settlement of RMB 570 million.

To meet the needs of users for high-end insurance and overseas asset configuration, we have set up the Hong Kong insurance market in advance. At the same time as realizing the diversification of the income and income structure, we have improved the resilience and risk resistance of enterprises. In the year, we have jointly customized the multi-billion currency version of the gold and jade in Hong Kong under the protection of Taibao. Based on the extension of the product chain, we have further expanded the Hong Kong insurance economy business, and formed a currency ring that provides high-end insurance services to high-value users. In addition to the comprehensive recovery of Hong Kong and the mainland, the number of domestic residents who come to Hong Kong has increased by more than a quarter. The total contribution of the Hong Kong insurance business has reached 6%. In addition to the internal growth of the Hong Kong business, we are actively exploring the insurance market opportunities in the Southeast Asian region. Data show that in 2022, the average cost of insurance in the new Asian market is 3.6%, while the cost of life insurance is only 2.1%. We recognize the growing demand for premium insurance and overseas at the allocation. We took action rapidly and save the opportunities in the Hong Kong insurance market.

which has allowed us to diversify our revenue streams, bolster our operational resilience, and enhance our risk management abilities. During the year, we partnered with China-positive life insurance Hong Kong to co-develop the Timah Ibu multi-currency product. With the extension of our product portfolio, we have also extended our Hong Kong insurance brokerage business, creating a comprehensive suite of high-end insurance services tailored for high-value customers. With the resumption of cross-border travel, we saw a substantial surge in the scale of our MTC business. The revenue contribution from our Hong Kong brokerage business already reached 6% of our total revenue in our fourth quarter. Beyond Hong Kong, we are actively exploring insurance business opportunities in Southeast Asia. Market statistics show that the average insurance penetration rate of Asia's emerging market was 3.6% in 2022, while that for life insurance was only 2.1%. In particular, the insurance penetration rate in Vietnam and Indonesia was at a low level ranging from 1 to 2%. We believe that the proven success of our business model can be replicated overseas, especially at suitable emerging markets where the per capita disposable income continues to rise. We see that the potential in the insurance market in this region is massive, and we believe we are in a good position to capture this opportunity.

Finally, I would like to share with you the progress we have made in the research of the insurance AI model. HuiZhe has served more than 60 million insurance users, accumulated a large number of user data and product data, including user images and compensation data, as well as insurance product data and sales situation. With the advantage of dual data pool, combined with the leading technology and innovation capabilities of the industry, HuiZhe's AI marketing assistant has launched a new computer, insurance product support, and smart dialogue and other functions. and put it into use in the face of the consultant and the agent at the A-end. For example, the年金計算器 can automatically perform the demonstration of年金利益, which will shorten the time it takes for consultants to make products. It can also understand the selling point of the product and help consultants quickly answer users' questions. These tools not only improve the success rate of consultants and transform customers, but also improve the overall experience of users in terms of precise recognition needs, shortening waiting times, and so on.

Finally, I'm excited to share some of our advancements in the development of AI large language models for insurance applications. Huizhe has cumulatively served over 60 million insurance customers to date, amassing a wealth of data that encompasses not only our user profiles and claim statistics, but also product details and sales information. Leveraging the strengths of our dual data pools, coupled with our industry-leading technology and innovation capabilities, we have launched a suite of tools powered by our AI marketing assistance. These tools include the annuity calculator, an extensive insurance called a knowledge bank, and an intelligent chatbot, all of which are widely adopted by our consultants and agents. To provide more color, our annuity calculator is designed to instantly and automatically display annuity payouts upon calculation and clearly illustrates product features, reducing the time it takes for consultants to prepare product proposals and enabling them to quickly adjust users' inquiries. These AI-driven tools not only increase consultants' efficiency, capacity, and conversion rate, but also improve the overall user experience by precisely pinpointing user needs and reducing wait times.

In the future, Quizzes will grasp the growth trend of the Chinese and Asian insurance markets. We will strengthen the product customization ability of the whole scene and the difference between products, the online and offline integrated sales and service capabilities, and at the same time, Continue to expand the insurance market business in Hong Kong And actively explore the development opportunities of the new insurance industry in Southeast Asia To copy the commercial model to acquire a more diversified market share and revenue structure Improve the international recognition and recognition of the brand Achieve the goal of double-digit international market income contribution rate in 2024 At the same time, we will continue to invest and develop our own AI model Looking ahead, Huize is committed to capitalizing on the long-term growth opportunities of the insurance industry in China and Asia.

We will enhance our ability to customize differentiated products and integrate online and offline product distribution and services in our home market. We will continue to invest in our market expansion in Hong Kong and actively pursue opportunities in the emerging market of Southeast Asia. Our goal is to identify adjustable growth markets with supportive demographics and replicate our proven business model, further diversify our revenue stream to more markets and elevate our brand awareness and recognition on the international stage. We are targeting a double-digit percentage revenue contribution from international markets in 2024. At the same time, We have been investing in our own proprietary AI large language model and will strive to integrate our AI product throughout the entire insurance service chain to empower our business operations and ecosystem partners, which includes insurance carriers, independent agents, and distribution channels, from the initial insurance product consultation to user engagement, marketing, risk management, customer service, and plan service. This concludes my prepared remarks for today. I will now turn it all over to our VFO, Mr. Rong Tan, and he will provide an overview of our key financial highlights for the fourth quarter.

Thank you, Mr. Ma and Harriet. Good evening, everyone in the Asia time zone. and good morning to everyone in New York. As the macroeconomy and industry conditions gradually recover, we are very pleased to report that the total GWP facilitated on our platform for the year increased by 18.2% to RMB 5.8 billion in 2023. We think that this growth is largely driven by our omni-channel distribution platform capabilities, our high-quality customer base, our diverse range of product offerings, as well as our maiden contribution of international revenues from our expansion into the Hong Kong market in the second half of 2023. Our efforts to acquire new customers have also become increasingly efficient, with more than 212,000 new customers added to our ecosystem in the fourth quarter. By the end of the year, our total customer count has exceeded 9.3 million. We are proud to announce that we recorded a non-GAAP net profit of RMB 72.3 million for the 2023 fiscal year, surpassing our previously given guidance of RMB 16 million. Our fourth quarter non-GAAP net profit of RMB 16.4 million also marked our fifth consecutive quarter of profitability. Our robust financial results are a testament to the effective execution of our key business strategies. To elaborate, first, we have consistently prioritized our strategic focus on long-term insurance products, which have contributed to over 90% of our gross return premiums for the 17th straight quarter. Secondly, we have continued to empower the capabilities of insurance agents through our superb distribution network, product innovation, and technological advancements. This has resulted in a significant 73.4% year-over-year increase in premiums generated by our IFA platform, reaching RMB 354 million in 2023. Thirdly, we continue to pursue upselling opportunities across a high-quality customer base. In 2023, the repeat purchase ratio for long-term insurance products climbed by 6.9 percentage points year-over-year to 36.9%, reflecting the deepening loyalty and trust of our customers in our brand. And finally, we continue to optimize our operational efficiency and customer acquisition costs as reflected in the further improvements in our growth margin and expense ratio. As we look at our operational results, I want to highlight several key achievements that drove our strong performance. One, our first year premiums and renewal premiums increased by 42% and 4% year-over-year respectively, indicating our ability to attract new customers and also engage with existing ones. Second, our persistency ratio for long-term life and health insurance remained at an industry-high level. As of the end of the year, the 13th and 25th month persistency ratios stood about 95%. And third, the average ticket size for long-term savings insurance products, which has become increasingly important as a category for distribution, increased by 31% year-over-year to over RMB 54,000 in 2023. demonstrating our continued success in upselling our existing customers. These highlights are just a few examples of our high-quality customer profile and our relentless efforts and successes in capitalizing on the lifetime value potential of our customers. In 2023, we proudly sustained our market-leading position in long-term insurance products in China. The FYP of our long-term health products increased by 19% year-over-year to approximately RMB 500 million, while the FYP of a long-term life and annuity product surged 55% year-over-year to RMB 1.7 billion. We will continue to pursue a balanced product mix between long-term health and savings categories to satisfy evolving customer needs and market environments. In parallel, we have actively diversified our product portfolio to include also customized P&C insurance products. This diversification has also paid off as the FYP from this business grew by 74% to approximately RMB 400 million in 2023, providing us with new and promising revenue stream diversification. In addition, our expansion into the Hong Kong market yielded encouraging results, with total international revenue contribution from Hong Kong reaching 6% in the fourth quarter. Throughout the year, we have diligently maintained tight control over our marketing expenses and continue to streamline our operations to improve our profit margins and efficiency. Our growth margin improved to 37.4% in 2023 from 36.6% in 2022. This improvement reflects the enhanced customer acquisition efficiencies and the increased repeat purchases by existing customers. In 2023, our total operating expenses continued to decrease, falling by 15% year over year. Our operating expense ratio further improved to 33% in 2023 from 40% a year earlier, decreasing by 7 percentage points. We also achieved non-GAAP net margin of 6% for the full year of 2023. And as of the end of 2023, our financial position remained strong as our combined balance of cash and cash equivalents stood at RMB 249 million, which is more than 30 million US dollars. In addition, with our commitment to drive shareholder value, we have continued to buy back shares from the open market under our existing mandate. And as of the end of 2023, we purchased an aggregate of approximately 1.5 million ADSs, which reiterates management's confidence in our long-term business model prospects. As we continue to solidify our market share in China, we are committed to capitalizing on the long-term digitalization opportunities of Asia's insurance industry. Our key focus will be to increase our presence in the Hong Kong market, where we plan to expand the sales team and launch more customized products to capitalize on the robust MCV demand and also local insurance demand for high-value customers. We also proactively identify addressable growth markets with supportive demographics in Southeast Asia and largely untapped market potential to replicate our proven business model in China and further diversify our revenue stream to more markets and elevate our brand awareness and recognition on the international market. we have set the target to achieve a double-digit revenue contribution from international markets by 2024. And this goal reflects our confidence in the scalability and replicability of our business model itself. Moving forward, we'll continue to leverage our deep customer insights and our own proprietary AI products to enhance our product innovation and upselling capabilities. We'll also further strengthen the integration of our online to offline ecosystem to enhance customer acquisition and engagement capabilities of our insurance agents by providing them with the tools and support in an increasingly competitive landscape. As we recognize the importance of resource allocation across the businesses, we'll maintain a laser-shot focus on driving further improvement in operating efficiency with the aim to enhance our overall profitability. And in summary, considering our robust AI-powered product innovation capabilities, our extensive online-to-offline distribution ecosystem, the empowerment of our insurance agents and IFA partners, and our proactive overseas expansion efforts, we continue to be optimistic about the outlook for 2024. We are now targeting a non-GAAP net profit of RMB $16 million for 2024 with continued investments in new markets and AI. We are confident that our strategies will solidify our position as a leading insurance technology platform in Asia, connecting consumers, insurance carriers, and distribution partners digitally and efficiently through our data-driven and AI-powered solutions. And with that, we will now open up the call to questions. Thank you very much and over to you, operator.

Thank you. 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. So once again, if you do have a question, please press star 1 and 1 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. Thank you. We will now take our first question. And this is from the line of Amy Chen from Citi. Please go ahead.

Hi. First of all, I want to congratulate management on another profitable quarter. And I have two questions. The first question is on the rationalization of compensation paid to the brokerage channel, which is called in Chinese. And I'm wondering how would this impact our brokerage income in terms of, for example, for annuity products or say for CI products, how would this impact our first year commissions and the renewal commission? And the second question would be on customer demand. Going into 2024, how has the product mix shift so far and what is our most mainstream or most popular products at the moment. Thank you.

Thank you, Amy. So I got two questions from you. The first one on Baoxing Hei's impact on the business. So we know that this is a very important topic among investors' minds right now. And so far, I think that what we've seen, which has happened already for the bank assurance channels, is that commission rates have generally been reduced by around 30% to 50% in that area. For the brokerage and agency channels, of course, the actual regulations have not come out officially or effective yet, but we do expect that this will come probably in the next few months, maybe as early as April. So what we envisage is that probably there will be a somewhat similar kind of impact on the brokerage and agency channels as we have seen in bank assurance channels in terms of commission rate impact, generally speaking. And I think the impact on the offline so-called savings products will be more marked or more adversely impacted versus some of the online-only products. So that's what we see as the potential market impact on that question. On your second question about customer demand and product mix shifts, I think we have also continued to see strong and sustained momentum in the long-term savings category or annuities. This has still been the most popular or most in-demand product among Chinese consumers. due to the declining rates environment and probably the lack of attractive alternative investment alternatives in the China market right now with what we've seen in the real estate market and also underperforming equities markets. So the long-term savings products offered by insurance companies still represents a very viable and attractive investment product or wealth allocation product for general Chinese consumer. So we see that for the rest of this year, and at least for the first quarter, we are still seeing very strong demand for savings products. In particular, we have been distributing participating long-term savings products, and we are proudly one of the leading online platforms. to distribute hopefully the most popular participating products right now offered by the market, which is from generally China. So we are probably one of the leading platforms distributing this product in the China market. So I think this is going to be the mainstream product for the rest of the year, and we will continue to work hard to co-develop customized products in this category with some of the larger brand names, which we hopefully will be able to launch as early as April next month. So we will be looking to cooperate with one of the top brands in the China market for a customized, free to exclusive, long-term, you know, participating savings product. So those will be the answers to your questions, Amy.

And that is very clear. Thank you, Ron.

Thank you. Thank you. We'll now take our next question. And this is from the line of Coco Gong from Morgan Stanley. Please go ahead.

Thank you very much. And yeah, congratulations on the very good results. I only have one question that's a little bit specific. Ron talked a lot about the savings products to mine. And obviously the protection is still on investors' mind, although the demand seems to be still kind of weak right now, especially in China. So I want to understand since we can see a lot of data on this, do we see marginal improvement on critical illness like the long-term health insurance product? Specifically, are we seeing more customers, new customers buying this insurance product, or are we just seeing more existing customers buying more coverage And do we see any other potential signs of marginal improvement in a specific product type? Thank you.

Right. Thank you, Coco. So a question on, you know, customers or consumer's demand on, you know, long-term health products, particularly in critical illness. uh type of products i think we we do see uh you know continued or at least from our internal data i mean obviously the savings category is what people want these days uh and especially in in the current macro environment i think generally chinese consumers have a relatively stringent budget to allocate uh you know the money um so uh long-term savings or whole-life products, particularly participating products these days, have drawn a lot of the customers' focus and budget. So I think that this is why we still continue to see a relatively lukewarm growth in the long-term health categories, for example, critical illness, which has continued to be recovering slowly. We do see existing customers and new customers buying these products through our platform. It's not like the demand is not there. It's just that with the relative attention more towards savings products generally in the market, and especially as a function of intermediaries like ourselves, platforms like ourselves and our competitors, and also generally insurance agents in the overall market mainly pushing the distribution and sales of savings products, which has resulted in such a market phenomenon. So what we'll do is we'll continue to innovate on the health products. So we mentioned that we have just launched our number eight, which is a new version of our long-term successful brand IP in the critical illness category. And this time we're actually now working with PICC which Mr. Ma mentioned earlier in the call. We are working now with large insurers on these customized products to hopefully create more attention among our customer set and to drive more sales in these categories.

Thank you very much. That's very clear. Thank you.

Thank you.

We'll now take our next question. This is from the line of Yuyu Zhang from CICC. Please go ahead.

Thanks, management. Congratulations on your good result. I'm Yujun from CLCC, and I have one question here, and my question is for the 2A segment. Could you give us some more color on how is it going so far? And we've noticed that recently Insurance Association of China has asked for industry's advice about agent classification. So if it increments, I think it may have some effect on 2A business. So could you share some more views on that? Thank you.

Right. Thanks. So we touched on the 2A business earlier in the opening remarks. I think this business line has continued to be very strong, at least in 2023. It's contributing almost 20% of our overall premium facilitated, and we continue to see strong growth in this business line. So specifically, I think there's a number that I can share here. So yeah, so FYP facilitated by the IFA platform, which is the 2A platform, was 350 million RMB last year, which is a year-over-year increase of 73%. And I think the most important thing is more and more independent agents or IFAs are now coming to our platform as partners because they find the three things that are very much our competitive strengths. Firstly, we have a very extensive product matrix from simple PNC products to the extensive life and health products that we have. And in particular, the customized exclusive creature products that we co-develop with insurance providers. So I think that's a big draw to these independent agents to become associated with us as a partner. And secondly, I think obviously because of our scale advantage, we earn top commission rates with most of the insurance carriers and thereby these agents by plugging into our platform will be able to enjoy the revenue pickup versus maybe partnering with another platform or as an agent inside an agency. So I guess these are the things that are helping us attract more and more agents to come. And I think finally, most importantly, we have the whole suite of the digital tools that we have been mentioning across our opening remarks, which really helps digitalizing the customer journey for these agents and also help them manage customers very efficiently with our digital and AI tools. And this is something that I think is quite a unique proposition in the Chinese market, at least. So just to touch upon the IFA business model, I think what we're looking to launch is we want to replicate this into the rest of Asia. So I think we'll be starting with Hong Kong and also going into other parts of Southeast Asia. I think that's something that we think will be a very good value proposition to those local markets as well. So yeah, I think in short, it's performing very well and it will be increasingly important as a revenue stream and business line for us. And your second part of the question is regarding the, I believe it's the 分级分类, right? The 大理人分级分类,是吧? So the agent qualification exams and the differentiation of different gradings. So what we understand is right now there is four grades for agents, grade one to grade four. So for grade one, you can sell all the complicated products, life and health, savings, what not. And grade four, you can only sell very simple products like protection or PNC. What we think that is for most of the agent partners that we have on our 2A business or our IFA platform, most of these are relatively experienced agents who have been working in the industry for over five years on average. So this regulatory impact will be minimal because I think most of these experienced agents have already qualified or can qualify for the higher tiers of the classification. And therefore, it will not have a limiting impact on what they can sell or distribute to the customers. And I think the same can be applied to our in-house consultants and agents in the Razor platform. And most of our high-performing agents can qualify under these new regulations. And we think that the draft paper has been out, but then the effective date will likely be next year.

Thank you.

At this point, we have no further questions. So I would like to hand the conference back to Harriet for closing remarks.

Thank you. So on behalf of the management team, we would like to thank you for your participation in today's call. And if you require further information, please feel free to reach out to the IR team. And thank you again for joining us today. This concludes the call.

Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by. Thank you. Ladies and gentlemen, thank you for standing by and welcome to Hoytser Holding Limited's fourth quarter and full year 2023 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 Hoytser's IR website at ir.hoytser.com under the events and webcast section. I'd now like to hand the conference over to your speaker host today, Ms. Harriet Hu, Hoyt's Investor Relations Director. Please go ahead, Harriet.

Thank you, Sarah. Hello, everyone, and welcome to our earnings conference call for the fourth quarter and full year of 2023. Our financial and operating results were released earlier today and are currently available on both our Iowa sites and the newswire. Before we continue, I would like to refer you to the State Harbor Statement in our earnings press release, which also applies to this call, as we will be making follow-up statements. Please also note that we will discuss non-GAAP measures today, which are more thoroughly explained in our earnings-per-release and filing with the FDC. Joining us today are our funder and CEO, Mr. Zeng Junma, COO, Mr. Li Jiang, Co-CFO, Mr. Minghai Jiao, and Co-CFO, Mr. Wang Chen. Mr. Ma will start the call by providing an overview of the company's performance and operational highlights for the fourth quarter and fourth year of 2023. Mr. Temp 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 the year, the 4th quarter of the year, the 4th quarter of the year, China's insurance industry continues to improve and achieve deep transformation in the industry. Since the second consecutive year of growth, especially in an environment where interest rates have dropped, the market's customers' demand for savings has continued to rise, which has also led to a 12.75% increase in the total risk of business spending. The confidence index of Chinese insurance consumers is also clearly recovering. Consumers' confidence in the macroeconomic and industrial environment continues to recover. One of them, Zengbao, has returned three consecutive seasons, higher than the same level as in 2021 and 2022, and will adapt to the development trend of the market. We have grasped the opportunity of growth in the savings line, rely on long-term strategy, diversification of business layout, product innovation, and core advantages in terms of customer performance, and have once again achieved the ideal increase. In 2023, the total insurance fee for our entire platform was about RMB 5.8 billion, which increased by 18.2% in total. The total revenue increased by 3.3% to 1.2 billion, achieving a net profit of 72.3 million after adjustment, exceeding the expected profit target of 60 million.

Hello everyone and thank you for joining us for the fourth quarter and fourth year 2023 earnings conference call. In 2023, China's insurance industry continues a positive growth trajectory, marking the second consecutive year of growth following the industry's significant reform. In particular, the demand for savings insurance products remains robust, driving a $12 billion 12.75% growth in total premiums for China's life insurance industry amidst the declining RMB interest rate. The China Insurance Consumer Confidence Index also reflected a resurgence in consumer confidence towards the macroeconomic environment and the insurance industry. Notably, the intention to increase insurance coverage has rebounded for three consecutive quarters surpassing levels seen in the same period of both 2021 and 2022. Navigating through this evolving market trend, Huizhe has successfully seized the market opportunities in long-term savings products. By leveraging our strategic focus on long-term insurance products, diversified operational tactics, product innovation, and customer acquisition capabilities, we have once again delivered satisfactory results. In 2023, total gross return premium, or GWP, facilitated on our platform reached RMB 5.8 billion, up 18.2% year-over-year. Our total revenue increased by 3.3% year-over-year to RMB 12 billion, and we achieved a non-GAAP net profit of RMB 72.3 million. exceeding our guidance of RMB 60 million.

From the structure of the insurance fee, in 2023, the total interest rate of the long-term insurance fee is 92.3%, which is more than 90% in four consecutive years. Among them, the annual insurance fee increased by 4% to 26.2 billion yuan, and the annual insurance fee increased by 4% to 31.8 billion yuan. In the year, under the market opportunity of intensive demand for savings, Gui Zhe selects diversified product supply and all-channel distribution capabilities, which adds up to a total cost of 16.5 billion yuan for the new single of the temporary line, which is 54.6% compared to the increase. The new single cost of the long-term health line is about 5.1 billion yuan, which is 19% compared to the increase. On the other hand, while the long-term line business continues to increase in high quality, Gui Zhe provides risk management solutions and exclusive customized products for corporate customers, As a result of the accident, the new insurance fee increased by 74% and reached 3.9 billion yuan.

The total first-year premiums for HYT facilitated on our platform reached RMB 2.6 billion, up significantly by 42% year-over-year, and renewal premiums increased by 4% year-over-year. reaching RMB 3.2 billion. In terms of product mix, the GWP contribution for long-term insurance products in 2023 was 92.3%, representing the fourth consecutive year exceeding 90%. During the year, we witnessed a rise in demand for savings products and leverage our diverse product offerings and omni-channel distribution capabilities to capitalize on the market opportunities. In light of that, FYP from our long-term savings products increased by 54.6% year-over-year to RMB 1.7 billion, and FYP from our long-term health products increased by 19% year-over-year to RMB 510 million. While we maintain high-quality growth in our long-term insurance business, We also provided customized products and risk management solutions to our corporate clients, which led to a 74% surge in the FYP of our PMC insurance products, reaching RMB 390 million in 2023.

At the end of the fourth quarter, the total number of users on the platform has exceeded 9.3 million. Among the long-term users on the fourth quarter, The proportion of users in AXIE and other cities is 65.8%, and the average age is 34.1 years old. Of these, 41.8% of users have bought on the platform, and the resale ratio has increased by 8% compared to the same period last year. At the same time, it will further release the value of the entire life cycle of the operating users, which is subject to a rapid expansion of four-level high-value Hong Kong-style businesses. With the first-hand insurance fee, As of the end of the fourth quarter, our cumulative number of insurance customers exceeded 9.3 million.

Among the long-term insurance customers from the fourth quarter, 65.8% were from higher tier cities, and their average age was 34.1 years old. 41.8% were repeat purchase from existing customers, which has increased by 8 percentage points year over year. We also witnessed a substantial increase in the fourth quarter in the average ticket size of saving products in terms of FYP. which was approximately RMB 59,000, representing a 30% increase year-over-year. This was primarily driven by our focus on acquiring high-quality customers and upselling existing customers with high LTP potential, as well as the success of our Hong Kong business extension, contributing premium international product sales in the fourth quarter. As of the end of December, our accumulated Persistence ratios for the long-term insurance in the 13th and 25th months remained at industry-high levels of more than 95%.

to further enrich our diversified product system. In November, Huize Company, a large-scale pension insurance company, proposed a large-scale pension pension insurance. With three types of insurance options and a pension service system, users after the 80s and 90s have achieved a personalized system. In December, Huize Co., Ltd. fully upgraded the Daewoo No. 8搭配版的重机显。从2018年至今,凭借更高保额, As of the end of the fourth quarter, we have cooperated with 123 insured partners. Throughout the year, we maintain solid collaboration with leading insurance companies.

further enrich our diversified product matrix in order to meet the differentiated protection needs from customers, whether they are in search of premium brands or cost-effective products. For example, in November, we partnered with Dajia Annuity Insurance to launch Dajia Huixue, a customized retirement and annuity insurance product, addressing the unique needs of the post-80s and 90s customers by offering elderly care services and various types of protection options. In December, we partnered with PICC Life Insurance to launch the Darwin Critical Care No. 8 Advanced. Since its launch in 2018, the Darwin Critical Care Series products have provided over 310,000 customers with enhanced protection through higher limits broader coverage, and better service quality. In 2023, the GWB contribution from our customized insurance product was 51.6%.

In 2023, the new insurance fee generated by the RFA platform reached 3.5 billion yuan, which increased by 73%. The number of core employees in the studio increased by 106% in 2022. At the C-end, we are targeting new users in 2023 fyp facilitated by our independent financial advisors or ifa platform which rmb 250 million representing a significant increase of 70

of 73% from the previous year. The number of high-performing ISA studios increased by 106%. In our direct-to-consumer segment, we launched a series of promotions and marketing initiatives to engage potential and high-value customers, which effectively reduced customer acquisition costs and boosted conversion rates As we extend our customer base, we continue to remain highly committed to deepening our engagement with existing customers. In 2023, we served more than 1 million families with over 11 million insurance policies and assisted with 92,000 insurance plans, amounting to a total plan settlement of RMB 570 million.

In order to meet the needs of users for high-end insurance and overseas asset configuration, we have set up the Hong Kong insurance market in advance. At the same time as realizing the diversification of the income and income structure, we have improved the toughness and anti-risk capabilities of enterprises and businesses. In the year, we have jointly customized the multi-currency currency version of the gold and jade of Hong Kong with Taibao. Based on the extension of the product chain, we have further expanded the Hong Kong insurance economy business. to provide high-end insurance services to high-value users. In addition to the comprehensive recovery of Hong Kong and the mainland, the number of domestic residents returning to Hong Kong has increased by a large scale, and the total contribution of the Hong Kong insurance economic business to the total income has reached 6%. In addition to the deep growth of the Hong Kong business, we are actively exploring the insurance market opportunities in the Southeast Asia region. The data shows that in 2022, In Asia, the average cost of insurance in the new market is 3.6 percent, while the cost of life insurance is only 2.1 percent. Among them, insurance in Vietnam and Indonesia is 1 to 2 percent lower. We believe that the business model of Guizhou has been verified. Our success in China can be repeated. With the growth of human resources and affordable income, the insurance market in these areas has a huge potential.

recognizing the growing demand for premium insurance and overseas at the allocation. We took action rapidly and seized the opportunities in the Hong Kong insurance market, which has allowed us to diversify our revenue stream, bolster our operational resilience, and enhance our risk management abilities. During the year, we partnered with China-specific life insurance Hong Kong to co-develop the Ping Ma Yi Bu multi-currency product With the extension of our product portfolio, we have also extended our Hong Kong insurance brokerage business, creating a comprehensive suite of high-end insurance services tailored for high-value customers. With the resumption of portfolio travel, we saw a substantial surge in the scale of our MCC business. The revenue contribution from our Hong Kong brokerage business already reached 6% of our total revenue in our fourth quarter. Beyond Hong Kong, we are actively exploring insurance business opportunities in Southeast Asia. Market statistics show that the average insurance penetration rate of Asia's emerging market was 3.6% in 2022, while that for life insurance was only 2.1%. In particular, the insurance penetration rate in Vienna and Indonesia was at a low level ranging from 1 to 2%. We believe that the proven success of our business model can be replicated overseas, especially at suitable emerging markets where the per capita disposable income continues to rise. We see that potential in the insurance market in this region is massive, and we believe we are in a good position to capture this opportunity.

Finally, I would like to share with you the progress that Hui Ze has made in the research of the insurance AI model. Hui Ze has served more than 60 million insurance users, accumulated a large number of user data and product data, including user images and compensation data, as well as insurance product data and sales data. With the advantage of a dual data pool, combined with the leading technology and innovation capabilities in the industry, the AI marketing assistant has already launched the year-end computer, insurance product support, and intelligent dialogue, intelligent dialogue and other functions, and has invested in the use of face-to-face consultants and A-end agents. For example, the year-end computer can automatically display the year-end interest, which will shorten the time of the consultant's production of the product plan to a few minutes, Finally, I'm excited to share some of our advancements in the development of AI large language models for insurance applications.

Pfizer has cumulatively served over 60 million insurance customers to date, amassing a wealth of data that encompasses not only our user profile and plan statistics, but also product details and sales information. Leveraging the strengths of our dual data pools, coupled with our industry-leading technology and innovation capabilities, we have launched a suite of tools powered by our AI marketing assistance. These tools include the annuity calculator, an extensive insurance card and knowledge bank, and an intelligent chatbot, all of which are widely adopted by our consultants and agents. To provide more color, where our annuity calculator is designed to instantly and automatically display annuity payouts upon calculation, and clearly illustrates product features, reducing the time it takes for consultants to prepare product proposals and enabling them to quickly adjust users' inquiries. These AI-driven tools not only increase consultant efficiency, capacity, and conversion rate, but also improve the overall user experience by precisely pinpointing user needs and reducing wait times.

In the future, Huize will grasp the growth trend of the Chinese and Asian insurance markets. We will strengthen the product customization ability of the whole scene and the difference. Online and offline integrated sales and service capabilities. At the same time, continue to expand the insurance market business in Hong Kong. And actively explore the development opportunities of the new market insurance industry in Southeast Asia. To copy the commercial model, obtain a more diversified market share and revenue structure. to improve the international reputation and recognition of the brand, to achieve the double-digit goal of achieving an international market revenue contribution rate in 2024. At the same time, we will continue to invest and develop our own AI model and integrate more applications into the entire insurance service chain, from insurance consulting, user operation, marketing, risk management, customer service and compensation service, comprehensive insurance company, agents, and sales channels.

Looking ahead, Huize is committed to capitalizing on the long-term growth opportunities of the insurance industry in China and Asia. We will enhance our ability to customize differentiated products and integrate online and offline product distribution and services in our home market. We will continue to invest in our market expansion in Hong Kong and actively pursue opportunities in the emerging markets of Southeast Asia. Our goal is to identify addressable growth markets with supportive demographics and replicate our proven business model, further diversify our revenue stream to more markets, and elevate our brand awareness and recognition on the international stage. We are targeting a double-digit percentage revenue contribution from international markets in 2024. At the same time, we have been investing in our own proprietary AI large language model and will strive to integrate our AI products throughout the entire insurance service chain to empower our business operations and ecosystem partners, which includes insurance carriers, independent agents, and distribution channels from the initial insurance product consultation to user engagement, marketing, risk management, customer service, and plan service.

This concludes my prepared remarks for today. I will now turn it all over to our CFO, Mr. Rong Tan.

and he will provide an overview of our key financial highlights for the fourth quarter.

Thank you, Mr. Ma and Harriet. Good evening, everyone in the Asia time zone, and good morning to everyone in New York. As the macroeconomy and industry conditions gradually recover, we are very pleased to report that the total GWP facilitated on our platform for the year increased by 18.2% to RMB 5.8 billion in 2023. We think that this group is largely driven by our omnichannel distribution platform capabilities, our high-quality customer base, our diverse range of product offerings, as well as our maiden contribution of international revenues from our expansion into the Hong Kong market in the second half of 2023. Our efforts to acquire new customers have also become increasingly efficient, with more than 212,000 new customers added to our ecosystem in the fourth quarter. By the end of the year, our total customer count has exceeded 9.3 million. We are proud to announce that we recorded a non-GAAP net profit of RMB 72.3 million for the 2023 fiscal year, surpassing our previously given guidance of RMB 16 million. Our fourth quarter non-GAAP net profit of RMB 16.4 million also marked our fifth consecutive quarter of profitability. Our robust financial results are a testament to the effective execution of our key business strategies. To elaborate, first, we have consistently prioritized our strategic focus on long-term insurance products, which have contributed to over 90% of our gross return premiums for the 17th straight quarter. Secondly, we have continued to empower the capabilities of insurance agents through our superb distribution network, product innovation, and technological advancements. This has resulted in a significant 73.4% year-over-year increase in premiums generated by our IFA platform, reaching RMB 354 million in 2023. Thirdly, we continue to pursue upselling opportunities across a high-quality customer base. In 2023, the repeat purchase ratio for long-term insurance products climbed by 6.9 percentage points year-over-year to 36.9%. reflecting the deepening loyalty and trust of our customers in our brand. And finally, we continue to optimize our operational efficiency and customer acquisition costs as reflected in the further improvement in our growth margin and expense ratio. As we look at our operational results, I want to highlight several key achievements that drove our strong performance. One, our first year premiums and renewal premiums increased by 42% and 4% year-over-year respectively, indicating our ability to attract new customers and also engage with existing ones. Second, our persistency ratio for long-term life and health insurance remained at an industry high level. As of the end of the year, the 13th and 25th month persistency ratio stood about 95%. And third, the average ticket size for long-term savings insurance products which has become increasingly important as a category for distribution, increased by 31% year-over-year to over RMB 54,000 in 2023, demonstrating our continued success in upselling our existing customers. These highlights are just a few examples of a high-quality customer profile and our relentless efforts and successes in capitalizing on the lifetime value potential of our customers. In 2023, we proudly sustain our market-leading position in long-term insurance products in China. The FYP of our long-term health products increased by 19% year-over-year to approximately RMB 500 million, while the FYP of our long-term life and annuity products surged 55% year-over-year to RMB 1.7 billion. We will continue to pursue a balanced product mix between long-term health and savings categories to satisfy evolving customer needs and market environments. In parallel, we have actively diversified our product portfolio to include also customized P&C insurance products. This diversification has also paid off as the FYP from this business grew by 74% to approximately RMB 400 million in 2023, providing us with new and promising revenue stream diversification. In addition, our expansion into the Hong Kong market yielded encouraging results with total international revenue contribution from Hong Kong reaching 6% in the fourth quarter. Throughout the year, we have diligently maintained tight control over our marketing expenses and continue to streamline our operations to improve our profit margins and efficiency. Our growth margin improved to 37.4% in 2023 from 36.6% in 2022. This improvement reflects the enhanced customer acquisition efficiencies and the increased repeat purchases by existing customers. In 2023, our total operating expenses continued to decrease, falling by 15% year over year. Our operating expense ratio further improved to 33% in 2023 from 40% a year earlier, decreasing by 7 percentage points. We also achieved non-GAAP net margin of 6% for the full year of 2023. And as of the end of 2023, our financial position remained strong, as a combined balance of cash and cash equivalents stood at RMB $249 million, which is more than $30 million. In addition, without commitment to drive shareholder value, we have continued to buy back shares from the open market under our existing mandate. And as of the end of 2023, we purchased an aggregate of approximately 1.5 million ADSs, which reiterates management's confidence in our long-term business model prospects. As we continue to solidify our market share in China, we are committed to capitalizing on the long-term digitalization opportunities of Asia's insurance industry. Our key focus will be to increase our presence in the Hong Kong market, where we plan to expand the sales team and launch more customized products to capitalize on the robust MCV demand and also local insurance demand for high-value customers. We also proactively identify addressable growth markets with supportive demographics in Southeast Asia and largely untapped market potential. to replicate our proven business model in China and further diversify our revenue stream to more markets and elevate our brand awareness and recognition on the international market. We have set the target to achieve a double-digit revenue contribution from international markets by 2024, and this goal reflects our confidence in the scalability and replicability of our business model itself. Moving forward, we'll continue to leverage our deep customer insights and our own proprietary AI products to enhance our product innovation and upselling capabilities. We'll also further strengthen the integration of our online to offline ecosystem to enhance customer acquisition and engagement capabilities of our insurance agents by providing them with the tools and support in an increasingly competitive landscape. As we recognize the importance of resource allocation across the businesses, we'll maintain a laser-shot focus on driving further improvement in operating efficiency with the aim to enhance our overall profitability. And in summary, Considering our robust AI-powered product innovation capabilities, our extensive online-to-offline distribution ecosystem, the empowerment of our insurance agents and IFA partners, and our proactive overseas expansion efforts, we continue to be optimistic about the outlook for 2024. We are now targeting a non-GAAP net profit of RMB $16 million for 2024 with continued investments in new markets and AI. We are confident that our strategies will solidify our position as a leading insurance technology platform in Asia, connecting consumers, insurance carriers and distribution partners digitally and efficiently through our data-driven and AI-powered solutions. And with that, we will now open up the call to questions. Thank you very much and over to you, operator.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. withdraw your question please press star one and one again so once again if you do have a question please press star one and one on your telephone and wait for your name to be announced please stand by while we compile the q a roster thank you we will now take our first question and this is from the line of amy chen from city please go ahead

Hi. First of all, I want to congratulate management on another profitable quarter. And I have two questions. The first question is on the rationalization of compensation paid to the brokerage channel, which is called Baoxin Heyi in Chinese. And I'm wondering how would this impact our brokerage income in terms of, for example, for annuity products or say for CI products, how would this impact our first-year commissions and the renewal commission. And the second question would be on customer demand. Going into 2024, how has the product mix shift so far? And what is our most mainstream or most popular products at the moment? Thank you.

Thank you, Amy. So I got two questions from you. The first one on Baoxing Heyi impact on the business. So we know that this is a very important topic among investors' minds right now. And so far, I think that what we've seen, which has happened already for the bank assurance channels, is that commission rates have generally been reduced by around 30% to 50% in that area. For the brokerage and agency channels, Of course, the actual regulations have not come out officially or effective yet, but we do expect that this will come probably in the next few months, maybe as early as April. So what we envisage is that probably there will be a somewhat similar kind of impact on the brokerage and agency channels as we have seen in bank assurance channels in terms of commission rate impacts generally speaking. And I think the impact on the offline so-called savings products will be more marked or more adversely impacted versus some of the online-only products. So that's what we see as the potential market impact on that question. On your second question about customer demand and product mix shifts, I think we have also continued to see strong and sustained momentum in the long-term savings category or annuities. This has still been the most popular or most in demand product among Chinese consumers due to the declining rates environment and probably the lack of attractive alternative investment alternatives in the China market right now with what we've seen in the real estate market and also underperforming equities markets. So the long-term savings products offered by insurance companies still represent a very viable and attractive investment product or wealth allocation product for general Chinese consumer. So we see that for the rest of this year, and at least for the first quarter, we are still seeing very strong demand for savings products. In particular, we have been distributing participating long-term savings products And we are probably one of the leading online platforms to distribute probably the most popular participating products right now offered by the market, which is from generally China. So we are probably one of the leading platforms distributing this product in the China market. So I think this is going to be the mainstream product for the rest of the year. And we will continue to work hard to co-develop customized products in this category with some of the larger brand names, which we hopefully will be able to launch as early as April next month. So we will be looking to cooperate with one of the top brands in the China market for a customized, free to exclusive, long-term, you know, participating savings product. So those will be the answers to your questions, Amy.

And that is very clear. Thank you.

Thank you. Thank you. We'll now take our next question. And this is from the line of Coco Gong from Morgan Stanley. Please go ahead.

Thank you very much. And yeah, congratulations on the very good results. I only have one question that's a little bit specific. Ryan talked a lot about, you know, like about the savings products to mine. And obviously, the protection is still on investors mind, although the demand seems to be still kind of weak right now, especially in China. So I want to understand since we can see a lot of data on this. Do we see marginal improvement on critical illness like the long term health insurance product? Specifically, are we seeing more customers, new customers buying this insurance product? Or are we just seeing more existing customers buying more coverage? And do we see any other potential signs of marginal improvement in a specific product type? Thank you.

All right. Thank you, Coco. So a question on, you know, customers' or consumers' demand on, you know, long-term health products, particularly in critical illness. type of products. I think we do see continued, or at least from our internal data, I mean, obviously the savings category is what people want these days. And especially in the current macro environment, I think generally Chinese consumers have a relatively stringent budget to allocate the money. So long-term savings or whole life products, particularly participating products these days, have drawn a lot of the customer's focus and budget. And so I think that this is why we still continue to see a relatively lukewarm growth in the long-term health categories, for example, critical illness, which has continued to be recovering slowly. We do see existing customers and new customers buying these products through our platform. It's not like the demand is not there. It's just that with the relative attention more towards savings products generally in the market, and especially as a function of intermediaries like ourselves, platforms like ourselves and our competitors and also generally insurance agents in the overall market mainly pushing the distribution and sales of savings products, which has resulted in such a market phenomenon. So what we'll do is we'll continue to innovate on the health products. So we mentioned that we have just launched our number eight, which is a new version of our long-term successful brand IP in the critical illness category. And this time, we're actually now working with PICC, which Mr. Ma mentioned earlier in the call. We are working now with large insurers on these customized products to hopefully create more attention among our customer set and to drive more sales in these categories.

Thank you very much. That's very clear. Thank you.

Thank you.

We'll now take our next question. This is from the line of Yu-Yu Zhang from CICC. Please go ahead.

Thanks, management. Congratulations on your good result. I'm Yujun from JCC. And I have one question here, and my question is for the 2A segment. Could you give us some more color on how is it going so far? And we've noticed that recently Insurance Association of China has asked for industry's advice about agent classification. So if it increments, I think it may have some effect on 2A business. So could you share some more views on that? Thank you.

Right, thanks. So we touched on the 2A business earlier in the opening remarks. I think this business line has continued to be very strong, at least in 2023. It's contributing almost 20% of our overall premium facilitated, and we continue to see strong growth in this business line. So specifically, I think there's a number that I can share here. So yeah, so FYP facilitated by the IFA platform, which is the 2A platform, was 350 million RMB last year, which is a year-over-year increase of 73%. I think the most important thing is more and more independent agents or IFAs are now coming to our platform as partners because they find the three things that are very much our competitive strengths. Firstly, we have a very extensive product matrix from simple PNC products to the extensive life and health products that we have. And in particular, the customized exclusive Quasar products that we co-develop with insurance So I think that's a big draw to these independent agents to become associated with us as a partner. And secondly, I think obviously because of our scale advantage, we earn top commission rates with most of the insurance carriers and thereby these agents by plugging into our platform will be able to enjoy the revenue pickup versus maybe partnering with another platform or as an agent inside an agency. So I guess these are the things that are helping us attract more and more agents to come. And I think finally, most importantly, we have the whole suite of the digital tools that we have been mentioning across our opening remarks, which really helps digitalizing the customer journey for these agents and also help them manage customers very efficiently with our digital and AI tools. And this is something that I think is quite a unique proposition in the Chinese market, at least. So just to touch upon the IFA business model, I think what we're looking to launch is we want to replicate this into the rest of Asia. So I think we'll be starting with Hong Kong and also going into other parts of Southeast Asia. I think that's something that we think will be a very good value proposition to those local markets as well. So yeah, I think in short, it's performing very well and it will be increasingly important as a revenue stream and business line for us. And your second part of the question is regarding the, I believe it's the 分级分类, right? The 大理人分级分类, right? So the agent qualification exams and the differentiation of different gradings. So what we understand is right now there is four grades for agents, grade one to grade four. So for grade one, you can sell all the complicated products, life and health, savings, what not. And grade four, you can only sell very simple products like protection or PNC. What we think that is for most of the agent partners that we have on our 2A business or our IFA platform, most of these are relatively experienced agents who have been working in the industry for over five years on average. So this regulatory impact will be minimal because I think most of these experienced agents have already qualified or can qualify for the higher tiers of the classification. And therefore, it will not have a limiting impact on what they can sell or distribute to the customers. And I think the same can be applied to our in-house consultants and agents in the Razor platform. And most of our high-performing agents can qualify under these new regulations. And we think that the draft paper has been out, but then the effective date would likely to be next year.

Thank you. At this point, we have no further questions, so I would like to hand the conference back to Harriet for closing remarks.

Thank you, O'Reilly. So on behalf of Quidditch Magazine, we would like to thank you for your participation in today's call. And if you require further information, please feel free to reach out to Huizhou's IR team. And thank you again for joining us today. This concludes the call.

Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.