Huize Holding Limited (HUIZ) Q1 2025 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to Huize's First Quarter 2025 Earnings Conference Call. [Operator Instructions] This conference call is being recorded, and a webcast replay will be available on Huize's IR website at ir.huize.com under the Events and Webcasts section. I would like to hand the conference over to your speaker host today, Mr. Kenny Lo, Huize's Investor Relations Manager. Please go ahead, Kenny.

Thank you, operator. Hello, everyone, and welcome to our first quarter 2025 earnings conference call. Our financial and operational results were released earlier today and currently available on both our IR website and global Newswire services. Before we continue, I would like to refer you to the safe harbor statement in our earnings press release, which also applies to this call as we will be making forward-looking statements. Please also note that we will discuss non-GAAP measures today, which are more thoroughly explained in our earnings release and filings with the SEC. Joining us today are our Founder and CEO, Mr. Cunjun Ma; COO, Mr. Li Jiang; our CFO, Mr. Minghan Xiao; and Co-CFO, Mr. Ron Tam. Mr. Ma will start the call by providing an overview of the company's performance and operational highlights, followed by Mr. Tam, who will go over our financial results for the first quarter 2025. Then we will open up the call for questions. I will now turn the call over to Mr. Ma.

[Interpreted] Hello, everyone, and thank you for joining Huize's first quarter 2025 earnings conference call. In 2025, against the backdrop of ongoing macroeconomic and geopolitical volatility Huize upholds its customer-centric approach. Leveraging years of insights into customers' needs, we stayed ahead of market trends and now working alongside leading insurers, continually expanding and refining our product offerings. At the same time, we are accelerating the integration of AI across our operations, driving remarkable productivity improvements and further optimizing our cost structure to lay the solid foundation for long-term value creation. In the first quarter, operating revenue exceeded RMB 280 million with gross written premiums and first-year premiums facilitated on our platform increasing 38% and 31% sequentially, reaching RMB 1.4 billion and RMB 730 million, respectively. Renewal premiums also grew 46% sequentially to approximately RMB 710 million. Huize remains committed to providing full life cycle insurance solutions for its high-value customers. By quarter end, our cumulative number of users surpassed 11 million with 390,000 new clients added during the quarter. The average age of long-term insurance customers was 35 with over 65% residing in high-tier cities where we have consistently achieved this percentage over the past few quarters. In terms of FYP, the average ticket size for long-term products rose 58% to over RMB 5,400, underscoring the effectiveness of our sustainable customer strategy. As of the end of February, 13th and 25-month persistency ratios for long-term insurance maintained industry-leading levels of over 95%. As of the end of March, we had strong partnerships -- as of the end of March, we had strong partnerships with 143 insurance companies and continue to develop and launch differentiated customized products with insurer partners. With declining yields on traditional bank deposits and wealth management products, demand for wealth protection solutions has been intensified. In response, we partner with New China Life to launch Bliss No. 3, the savings products striving to achieve sustainable returns for customers. Additionally, we expanded our portfolio of customized participating products. Building on the Fu Man Jia series co-launched with Aviva-COFCO, we partnered with Cathay Lujiazui Life Insurance on Jin Man Yi Zu No.6, a participating incremental whole life insurance product. This was followed by the launch of Xing Hai Hui Xuan, a participating annuity product co-developed with Pramerica Fosun Life Insurance. These customized products were designed to cater to the industry-wide demand shift from fixed returns to floating returns, further solidifying our leadership in China's participating insurance segment. In view of our global expansion strategy, we introduced Xiao Tao Qi global, a children's critical illness product co-developed with [ Cigna & CMB ] Life Insurance that leverages the overseas resources to offer global client settlement and overseas medical support. The rapid advancement of generative AI and AI agents is transforming traditional enterprise workflows and our AI strategy, we continue to enhance both the user experience and operational efficiency. We have deployed the Huize AI agent development platform in internally with the goal of developing independent AI productivity. Leveraging open source AI models, we have implemented private domain deployment of large language model to ensure data security and regulatory compliance. At the same time, we are actively promoting the development of local agents -- local AI agents to accelerate AI agent creation using visualization tools. This is driving the company-wide productivity revolution with AI agents acting as a new generation of digital employees. In the quarter, we have further optimized our cost structure and reduced operating expenses with total operating expenses falling by 29% sequentially. Our customer-centric approach leverages innovative technologies to deliver personalized insurance service experiences. During the quarter, we launched an AI-powered smart portal on Huize's app, offering 24/7 insurance agent support. Our AI services now cover key customer life cycle touch points, including policy inquiries and product matching, serving an average of over 15,000 users daily. We are also revolutionizing aftersales claims processing through Xiao Ma Claim's AI agents, achieving end-to-end automation of claims reporting, review and payout. With AI now capable of handling our claims reporting, we are now working to expand this innovative feature to our app and mini programs. This innovation is expected to reduce processing time on Xiao Ma Flash Claim from 1 day to 1 hour upon full rollout. During the quarter, Xiao Ma Claim facilitated RMB 190 million in claims across 36,000 cases, providing customers with efficient and reliable insurance claim services. Our international brands, Poni Insurtech continued to deliver strong growth momentum, underscoring the vast untapped potential of Southeast Asia. Our Vietnamese operation, Global Care, maintained solid traction and grew total policy count by 29% compared to the first quarter in 2024. The gross written premiums and revenue increasing by 35% and 34% year-over-year, respectively. We recently partnered with [indiscernible] Post, a leading logistics service provider in the region to expand our distribution network further growing our team of independent financial advisers and enhancing the reach and conversion capabilities of the [ GC ] platform. On the product side, Global Care launched 5-year and 10-year critical illness insurance products in collaboration with PBI Insurance, enriching our product portfolio to better meet customers' diverse protection needs. Poni Insurtech continues to drive the transformation of the Vietnamese insurance market through innovation and marks a crucial milestone of our international expansion. We are making steady progress in expanding into Singapore and other overseas markets and are on track to achieve our goal of reaching 30% of total revenue contribution from international markets by 2026. Global macro and geopolitical conditions remain volatile. Yet insurance demand in China and across Asia stays resilient with digital adoption accelerates. Drawing on deep customer insights and AI-driven product innovation, and strong momentum in Vietnam and other Southeast Asian markets, Huize delivered another quarter of solid growth and operating agility. Looking ahead, we will widen our range of savings and have products for high-value clients, embedding our self-hosted large language model platform across the service chain to lift efficiency and experience. Internationally, Poni Insurtech, further tap into Singapore and other priority markets, keeping us on cross overseas revenue targets. Grounded in product innovation, customer experience and AI enablement, Huize will continue to create win-win value for insurers and customers while delivering sustainable long-term returns for shareholders. This concludes my prepared remarks for today. I will now turn the call to our CFO, Mr. Ron Tam, who will provide an overview of our key financial highlights for the third (sic) [ first ] quarter.

Thank you, Mr. Ma and Kenny, good evening, everyone in Asia, and good morning for those in the U.S. It's Ron here. Despite a challenging macroeconomic and geopolitical environment, we have delivered yet another quarter of resilient performance during which the first quarter for both total gross written premiums, GWP and first-year premiums facilitated on our platform increasing by 37.8% and 30.9% sequentially, reaching RMB 1.4 billion and RMB 730 million, respectively. Total operating revenue remained at RMB 284 million. Our financial position remains very robust with a combined balance of cash liquidity of around RMB 202 million or USD equivalent $28 million as of the end of the March quarter. This resilient performance was driven by our efficient omnichannel distribution network our focused efforts to continue to acquire high-quality customers from the market and the deployment of advanced proprietary AI solutions. Crucially, we have made significant progress in executing on our international expansion strategy which is a key growth driver for long-term sustainable growth for the company. Our strategic focus has remained on long-term insurance products, which continue to account for over 90% of total GWP facilitated on the platform. Leveraging on our robust omnichannel distribution network and advanced AI solutions, we are significantly strengthening customer acquisition and engagement, adding approximately 390,000 new customers during the first quarter of 2025. This brings our total customer base count to 11 million as of the end of the first quarter. In addition, repeat purchase ratio for our long- term insurance products stood at a very high level of 38%, demonstrating our ability to continue to unlock the lifetime value of a high- quality customer base through effective upselling and cross-selling. We've also seen reasonable reductions in all three kinds of operating expenses ranging from 15% to 48% quarter-over-quarter, which has improved our expense to income ratio by 11.5 percentage points quarter-over-quarter to 29% in the first quarter of 2025. In addition, total operating expenses has fall by 29% compared to the fourth quarter '24. The reduction reflects decisive actions in continued workplace optimization, broad deployment of AI-driven automation, which has sharply reduced manual workload and boosted efficiency throughout the business flow. These results demonstrate the strength of our intelligent cost control framework in delivering real cost savings and productivity gains in the business. A clear illustration of our AI-driven productivity gains is the use of localized AI avatars and marketing. These avatars can replicate a human voice and appearance in under a minute, producing highly engaging insurance content that is virtually indistinguishable from a live presenter. Integrated with our content management platform, the system now automates script generation, video editing and distribution, creating a seamless end-to-end workflow. As a result, we are scaling our social media presence with richer, more compelling content while materially reducing production time and costs. Our international growth engine, Poni Insurtech, delivered yet another solid quarter and remain central to our long-term strategy. Building on the success of a proprietary AI tool set in China, we are now looking to deploy these solutions across our overseas operations to streamline workflows and deliver a more personalized customer journey. Vietnam continues to provide a robust proof of concept for our Southeast Asia playbook, and we are making steady progress towards entering Singapore this year. These initiatives will further diversify our revenue mix and establish additional scalable growth drivers for the group. In closing, we believe that we are well positioned to capture the opportunities emerging from China's rapidly evolving insurance landscape and the broader Asian market. Domestically, robust demand for long-term protection underpins a healthy, sustainable growth trajectory across the value chain. Internationally, Poni Insurtech allows us to replicate and apply a China-proven model and proprietary AI capabilities to high-growth Southeast Asian markets, particularly among the young rapidly expanding middle class. By combining advanced data analytics, end-to-end AI enablement and disciplined market penetration we aim to cement Huize's status as Asia's premier insurtech platform, seamlessly connecting consumers, carriers and distribution partners and delivering durable value to all stakeholders. And with that, we now open up the call to questions. Thank you very much, and over to you, operator.

[Operator Instructions] Our first question comes from Amy Chen from Citi.

This is Amy from Citi. I have a couple of questions. The first one would be regarding selling expenses. We noted that the first-year premium facilitated in the first quarter saw around 15% year-over-year decline. However, selling expenses was up by 7%. What's the gap here? And the second question is on sales momentum in the second quarter and your outlook for the rest of 2025. The industry is expecting another round of pricing rate cut in the third quarter. Has this somehow boosted customer demand so far?

Thank you, Amy. It's a pleasure to have you again on the call. So I know that you have three questions to your -- just now. So the first one is regarding the year-on-year decline on FYP and versus an increase in expense -- some expense, I believe, right? So I think to address the question on the FYP decline, I would note that in June '24 in the first quarter, there was -- actually, there was a pricing cut effect during the quarter, which has also led to rush sales during that quarter. So I think effectively, we are comparing the first quarter of 2025 versus a relatively high base for the first quarter of last year. So I think that has to do with a high base effect for 2024, albeit that in the first quarter of this year, we have further driven our revenue growth from not just domestic but also from international markets. So that has to do with the reasons that are cited on the low base -- high base effect of last year. And then on the gap between the FYP downturn and the channel cost increase, I would note that the international business in terms of gross margins, it's relatively lower than the domestic business. And therefore, I think that has been reflected in what you noted in terms of the gross margin decline in the first quarter of 2025. So on your second question regarding the outlook for the rest of the year, we do think that Q1 for 2025 is probably the rock bottom for this year. In Q2, we are seeing a very decent momentum. Obviously, the international market is still in high growth phase. And for the domestic China market, also, we are seeing a revival of growth given that the transition to the par products has basically been completed over the last 2 quarters and channels have adjusted to the new product regime. So I think that in Q2, we're seeing growth in the -- across different products. And -- but you know that the expectation for a further pricing rate cut in August 31, which is now widely rumored and expected to be put in place. We do expect that there will be a, there will be an effect on rush sales in the third quarter, particularly in the months of July and August, where we have seen similar situations in the last year and also in the past few years as well. Although we would note that the pricing rate at this time, because relatively speaking, versus previous episode is relatively muted. And given that we're already in a sort of 2% handle kind of return level. The incitement for consumers to purchase would probably see a diluted effect versus what we have seen in the past years. So we do expect that Q3 will be strong with August being the peak for domestic sales of savings products. I hope that answered your question, Amy.

Next question comes from the line of Kenny Lim of UOB Kay Hian.

I'm Kenny from UOB. And I have two questions from my end. The first one, how do we expect the enforcement of [indiscernible] across the agency channels to affect your [ 2A ] business? And how does it change the overall industry competitive escape? And my second question is about the latest international revenue contribution in first quarter. And so what is the later progress of your business expansion plan in Singapore and Philippines as well.

Thank you, Kenny. [indiscernible] two questions, 1 on [indiscernible], which is the regulatory rule change impacting commissions for various channels. Given that we have lived through this regulatory change in the last 12 months now. And we do hear and expect that the similar measures will be implemented and imposed upon the tied agency channel, which you have noted in your question. if such a measure would be implemented in the second half of this year, we do expect that the so-called impact on our business will be positive because what that means is that the playing field is leveled among the different channels, among banker brokers and agencies -- tied agencies. And therefore, we do expect that there will be continued so-called exodus of agents from the agency model into independent third- party platforms such as ourselves. So we would likely will be capturing an additional influx of productive agents if such a measure will be implemented on the agency channel. And on the overall market, I would think that a similar observation will be seen across our competitors as well. And as a whole, the market would continue to gravitate towards a more independent third-party kind of broker-agency distribution model. We do know that right now in China. The third-party intermediaries still account for less than 10%. I think still 5%, 6% of overall premium distribution versus what we see in more mature and developed markets such as Japan or in Hong Kong or even Singapore, where we see that intermediary broker-agency distribution is as much as 30% to 50% of the market. So in the long-term secular trend, we do see that the intermediation of premium distribution will continue to be in favor of platforms such as ourselves. And the second point that I would note here is that we do see that independent financial advisers or independent agents are increasingly favoring platforms where they can get access to a wide variety of products from different providers such as ourselves. We have over 100 products on our platform that we can facilitate for agents to serve the customers. And also, especially the digital age whereby agents will require digital tools to serve the customers and to make sure that the consumers have a very efficient and digital purchase journey. And for the likes of the incumbents this may be a difficult solution to be provided and where we have a very clear and strong advantage on the competition. So overall, we do think that the impact will be positive. And we would wait and see when the measures will be implemented on the agency channel. And your second question on international market expansion. We are very much on track in terms of our expansion into Singapore. We would likely be able to give a further material update in our next earnings call as to what our Singapore development has materialized into, hopefully into an operational status by the third quarter. We're working very closely with regulators in the meantime to finalize arrangements and to make sure that our recruitment of necessary personnel for the business is in place and our target is to be in business on this model by the third quarter of this year. Philippines, we are still progressing, given that we are now prioritizing Singapore as a business development market, we likely will see Philippines in the second half this year. Thank you, Kenny.

Thank you for the questions. With that, I would like to hand the call back to Kenny for closing remarks.

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

That concludes today's conference call. Thank you for your participation. You may now disconnect your lines. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]