Ladies and gentlemen, thank you for standing by, and welcome to Huize Holding Limited's First Quarter 2020 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to hand the conference over to your host today, Mr. Jack Wang, Vice President of ICR, the company's Investor Relations partner. Please go ahead, Jack.

Thank you, operator. Hello, everyone. Welcome to Huize Holding Limited First Quarter 2020 Earnings Conference Call. The company's financial and operating results were released by our newswire services earlier today and are currently available online. Participants on today's call will include our Founder and CEO, Mr. Cunjun Ma; COO, Mr. Li Jiang; CFO, Mr. Minghan Xiao; CFO, Mr. Ronald Tam; and IR Manager, Ms. Harriet Hu. Mr. Ma will start the call by providing an overview of the company and performance highlights for the first quarter of 2020. Mr. Tam will then provide details on the company's operating and financial results for the quarter before we open the call for your questions. As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on our IR website at ir.huize.com. Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which also applies to this call as we will be making forward-looking statements. Please also note that we will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under the generally accepted accounting principles in our earnings release and filings with the SEC. With that, I will now turn the call over to our Founder and CEO, Mr. Cunjun Ma. Please go ahead, sir.

[Foreign Language]

[Interpreted] Hello, everyone, and thank you all for joining the Huize Holding Limited First Quarter 2020 Earnings Conference Call. First of all, before diving into our quarterly performance, all of us at Huize hope that you and your loved ones are staying safe and healthy. As the pandemic has spread across the globe, we are all facing new challenges to our everyday routine as normal ways of life. Nevertheless, we are also witnessing the best in humanity as ordinary people continue to step up and help each other in extraordinary ways. On behalf of the entire team here at Huize, I would like to express my gratitude to those medical professionals, public service personnel and others working on the front lines around the world. Witnessing and hearing of your fearless act in support of the greater good provides us with strength, courage and hope. Moreover, your work serves as a source of further inspiration for us to continue developing the industry -- the insurance industry throughout China so that people can more easily access to the protection they need to ensure the well-being of themselves and their families. During the quarter, the operating pressure on insurance industry increased while its overall development slowed down. Despite these uncertain macro conditions, we delivered strong results due to our prudent expansion strategy, the competitive advantages of our online platform business model and our [ seasoned ] leadership team with deep insurance industry experience. In the first quarter, total gross written premiums, or GWP, facilitated on our platform increased by 40.6% year-over-year to RMB 597.9 million. Total operating revenue reached RMB 248.7 million, and total non-GAAP net profit reached RMB 22.2 million, representing an increase of 265.6% on a sequential basis. Overall, we are pleased with the solid results we achieved despite the severe impact on the normal business activity brought by the unfortunate COVID-19 outbreak and the longer-than-usual Chinese New Year holiday in the first quarter.

[Foreign Language]

[Interpreted] I would now like to take a moment to add some additional color on how we are ensuring the development of our business in the face of the COVID-19 pandemic. In terms of operating strategy, we have always focused on the sale of long-term insurance. During the first quarter, long-term life and health GWP accounted for 93.8% of our total GWP, a ratio which has stayed above 90% for the past 2 consecutive quarters. More importantly, our GWP for long-term health insurance increased by 52.6% year-over-year to RMB 505.5 million. We have also made efforts to cope with the negative effect of the pandemic. In the first quarter, for example, we reduced operating costs by 7.3% quarter-over-quarter, while sales expenses decreased by 14.3% quarter-over-quarter due to the reduction in advertising. It's also important to highlight that we have long been committed to seeking the balance between business growth and financial stability, and we're able to establish healthy cash positions before the COVID-19 outbreak. As a result of these policies, Huize has established a solid and long-lasting foundation, which has proven to be essential to both weathering the current market headwinds and setting us up well for growth going forward.

[Foreign Language]

[Interpreted] Regarding our business model, Huize has been deeply involved in the insurance industry for 14 years and has developed an Internet insurance ecosystem around its closed loop online platform. The insurance ecosystem is driven by innovative technology and data analysis using both to support our customer acquisition and education, product sales and after-sales customer service capabilities. As we have witnessed across industries, the pandemic has accelerated the shift in consumer behavior from off-line to online. Huize has benefited from this trend and continue to attract and convert new users, thereby achieving a double-digit growth in total GWP during the pandemic. Additionally, during the period, Huize launched a COVID-19 Zone on its website, mobile app and other social media channels to provide real-time pandemic situation information and related query tools. At the same time, our online claim service enabled users to submit and process their insurance claims safely without physical contact. Our ability to rapidly launch these supportive functions further illustrates our well development expense and effective technology support. In the future, we will maintain our dedication to serving the needs of insurance clients, continue to optimize our user experience by improving functions and services, and strive to become the go-to platform for online insurance in China.

[Foreign Language]

[Interpreted] As mentioned before, we have a long-proven track record of operations for more than 14 years. The core management team of Huize comes from leading insurance, Internet and financial institutions. And our long-term accumulation of experience and strong management team have enabled us to achieve a faster and stronger recovery than our more traditional off-line industry peers. At the beginning of the outbreak, Huize set up an internal control office for epidemic prevention and a special working group while organizing a personnel protection service training for [ all the staff who would ] attend online, helping to ensure maximum operational efficiency as well as the health of our employees. At February 3, our IT systems were capable of supporting our staff in their remote work from home so as to ensure effective business development and service delivery.

[Foreign Language]

[Interpreted] It is worth noting that as the pandemic reached their turning point, our health insurance sales are expected to exhibit a positive growth trajectory driven by our long-term strategic focus in this area. On the one hand, China's health insurance industry is experiencing rapid growth. On the other hand, people's health care and insurance awareness will be greatly stimulated after the pandemic, resulting in a substantial increase to health insurance demand. This is similar to the gradual containment of SARS in 2003 when, from May to August, health insurance displays and [ post ] its growth trend with the highest monthly year-over-year growth rate exceeding 300%. Meanwhile the pandemic [ forced ] the education of market and promoted online insurance, we believe that other users have experienced the convenience of online insurance policies purchased, online renewal and online claim services. For the first time, the user behaviors were changed. In addition compared to the mature insurance markets of Europe and the U.S., insurance penetration in China is still low. And therefore, there is still room for the further growth of our online insurance business. With the increase in per capita disposable income and people's growing awareness of insurance in China, we are confident in the prospects for both the development of the company and the entire industry over the long term.

[Foreign Language]

[Interpreted] Finally, I would also like to share the operational results for the month of April. Total GWP facilitated in April reached RMB 240 million, of which first year premiums accounted for more than 60%. Although we may have to face some challenges in the short term, we believe that the general impact of increased insurance awareness is both profound and long-lasting. While the outbreak of COVID-19 has gradually been brought under control, we are optimistic about the recovery of the insurance industry as well as the macro economy. Leveraging our prudent operating strategy, experienced management team and stable financial conditions, we have strong aspirations to continue our growth and expansion moving forward.

[Foreign Language]

[Interpreted] This concludes my prepared remarks for today. With that, I will now turn the call over to our CFO, Mr. Ronald Tam. He will provide an overview of our key operational and financial highlights for the quarter.

Thank you, Mr. Ma, and thank you, Harriet, and hello, everyone. To our Asian participants, thanks so much for joining us on a Friday night. Just now, Mr. Ma mentioned some key metrics for Q1 as well as our April run rate numbers. I think I would like to first start by providing some more details on these metrics to help set up the context of the line by line discussions of our Q1 results. For Q1, GWP facilitated on our platform was RMB 597.9 million, which was up 40.6% year-over-year. As you can appreciate, given COVID-19 impact on overall economic activity, which has resulted in disruption to normal business operations in both February and March, Q1 was a very tough quarter for the entire industry in general in terms of new policy distribution. The pandemic obviously affected the average consumer's willingness to spend money on discretionary items, especially on insurance products like our long-term life and health products, which is our strategic focus for a long time. The fact that we have been able to deliver double-digit growth for GWP in the first quarter is a big testament to our online business model as well as a swift transition to a remote working system for our staff. In addition, given that we have established ourselves as a pure online insurance brokerage platform in our 14 years of history, we are also relatively insulated from the negative impact on productivity as compared to some of our more traditional off-line industry peers. To further breakdown the GWP figure for Q1, renewal premiums accounted for RMB 321 million, growing by 2.8x from the same period of last year. Renewal premiums accounted for 53.7% of our total GWP in Q1 as compared to 19.7% in the same period of last year. I think…

[Operator Instructions] We have our first question from the line of Tian Dan from CICC.

[Foreign Language]

Okay. Can you -- let me repeat the question in English. So the question comes from CICC. And the question is about the growth rates for, I believe, first year premiums, right, for both the 2B channel and 2C channel in the first quarter.

Right.

So I think the answer to this question is that we have reported overall first year premium numbers for the quarter. And basically, for both the indirect and direct channels, if you will, categorize that way, and it essentially is down at the same rate -- comparable rate, around 18% to 20% year-over-year.

Our next question from the line of Michelle Ma from Citigroup.

[Foreign Language] So I would like to know the breakdown of new premium versus renewal premium of the GWP facilitated in the first quarter. And also for more details in the new premium, how much is from annuity products from critical unit products? And the second question is on the share-based compensation. So for the first quarter, I would like to know who -- to whom this was allocated and what's the guideline for the full year number on this expense?

Thanks, Michelle. Appreciate your questions. So let me take both questions at this time. So the first question was regarding the breakdown of our GWP for Q1 in terms of first year premiums and renewal premiums. So we had a total number of RMB 598 million, approximately. So of that, RMB 276.6 million is from first year premiums and RMB 321.3 million is from renewal premiums. So that's the question -- that's the answer to the first question. As to the breakdown of first year premiums in Q1, approximately 80% of that is from critical illness. And actually, we have a minimal contribution from annuity product in the first quarter, although we expect to see contribution from annuity in the second quarter. And the rest of the first year premiums will be coming from short-term products. Regarding the second question on SBC, I think that right now -- although we have released a scheme in the market, I think right now, we are still currently undergoing the share option ground for the rest of the year. So right now, we will not be able to provide a guidance on this number. But then I think we will make appropriate disclosures when we are firm with the details.

[Operator Instructions] As there are no further questions at this time, I would like to hand the conference back to our management for closing remark.

Okay. It's Ron here. Thanks so much again for joining us today and for joining us on a Friday night in Asia. Hope you guys can stay safe and healthy and look forward to the next call for Q2. Thank you very much.

Thank you. That concludes our conference for today. Thank you for your participation. You may all disconnect your lines now. Thank you.

Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]