Huize Holding Limited (HUIZ) Q2 2025 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to Huize's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's 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 Webcast section. I'd now 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 second quarter 2025 earnings conference call. Our financial and operational results were released earlier today and are currently available on both our IR website and Globe 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; Co-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 second quarter 2025. Then we will open the call for questions. I will now turn the call over to Mr. Ma.

[Interpreted] Hello, everyone, and thank you for joining Huize's Second Quarter 2025 Earnings Conference Call. In the second quarter of 2025, we remained steadfast in our customer-centric approach, focusing on evolving customer needs and partnering with industry leaders to broaden our product portfolio. Our strong results were underpinned by a high-quality customer base, industry-leading persistency ratios and a diverse suite of product offerings. During the quarter, Huize delivered a total revenue of RMB 400 million, a 3-year quarterly high with net profit reached RMB 10.9 million. Gross written premiums facilitated on our platform grew 34% year-over-year to RMB 1.8 billion while first year premiums increased by 73% year-over-year to RMB 1.13 billion. We continue to strengthen our full life cycle service ecosystem while precisely targeting high-quality young customers. As of the end of the second quarter, Huize's cumulative insurance users exceeded 11.4 million with approximately 400,000 new clients added during the quarter. In the second quarter, our long-term insurance customers had an average age of 35.2 with more than 65% residing in first and second-tier cities in China. By focusing on these high-quality customer groups, we have further supported sustainable growth in business value. In the second quarter, the average first year premium ticket size for long-term products jumped by 87% year-over-year to RMB 7,600, while our retention metrics continued to lead the industry with both the 13th and 25th month persistency ratios remaining above 95% as of the end of May. Beyond long-term products, we remain committed to delivering a diversified suite of insurance solutions. Our short-term insurance business also recorded healthy growth in the quarter with gross written premiums rising 19% year-over-year to approximately RMB 140 million. As of the end of the second quarter, we have further expanded our partner ecosystem, maintaining strong collaborations with 146 insurance companies and continuing to drive innovation in customized and diversified insurance products. Against the backdrop of preference for steady financial planning and an aging population, our early move in participating products has delivered strong progress. Centered on client wealth management needs, we introduced customized products, Bliss (Golden Edition) annuity, offering superior and sustainable wealth planning solutions. We have also jointly launched Xiao Shen Tong 7.0’ children'’s accident insurance with Ping An Property & Casualty Insurance, and jointly launched ‘Little Scholar 2.0 Pro’ student accident & medical insurance with PICC Property & Casualty, delivering multidimensional and comprehensive protection for children and students. We drew on years of AI research and investment to launch company-wide adoption of AI agents. This has driven meaningful efficiency improvement, reshaped core operating processes and laid the groundwork for deeper business model transformation. These efforts have helped us unlock new growth curves and reinforce the foundation for long-term value creation. With the continued rollout of AI initiatives, our expense to revenue ratio improved by 16.6 percentage points year-over-year to 23.9%. We accelerated the deployment of AI tools and fostered an AI native culture within our company, delivering measurable productivity improvements. In R&D, we introduced the Vibe Coding model where AI now generates and contributes more than 200,000 accepted lines of code each month, significantly accelerating product iteration and technological innovation. To support this transformation, we built a comprehensive training system that deploys employees from entry level to advanced AI practice. AI adoption is now company-wide with more than 300 employees able to create and deploy AI agents on our low-code platform. Collectively, we have released over 700 productivity-enhancing AI agents, driving improvements in operational efficiency, workflow improvements and risk control. Drawing on nearly 2 decades of industry experience, we have built one of the most extensive proprietary data access in the insurance sector, encompassing hundreds of millions of customer interaction records and knowledge base of more than 10,000 insurance products. This foundation enables us to deliver highly personalized services tailored to individual customer profile. We rolled out 24/7 AI customer support, driving the self-service purchase rate among new users up by 50%. The AI customer support also covers product recommendations, claims assistance and policy delivery serving over 20,000 customers each month. These results validated AI's core value in boosting sales and efficiency. We are accelerating deployment across more touch points to build high-quality closed-loop growth engine from customer-rich conversion to automated service. Poni Insurtech, Huize's international arm has secured a financial adviser and [indiscernible] insurance broker license from the Monetary Authority of Singapore through its local operating entity, marking a significant milestone in our Southeast Asia expansion. In addition, our Vietnam subsidiary, Global Care, recorded a 32% year-over-year increase in both GWP and revenue. We launched Vietnam's first KOL platform for the insurance industry, digitally empowering distribution and leveraging the country's high social media penetration, enhancing product reach and conversion efficiency. In parallel, we strengthened partnerships with leading local players, including GXE, an emerging online logistics platform and MWG, Vietnam's largest retail group, supported by Global Care's technology capabilities. These collaborations are advancing embedded and micro insurance across multiple use cases. Leveraging the group's international platform, we provided commercial insurance services to China investor enterprises in Vietnam and facilitated the placement of corporate property policies with sum insured of RMB 1 billion. This fully demonstrates the depth of our product offering in the local market and the results of our internationalization strategy. Looking ahead to the second half of the year, China's insurance industry is experiencing strong momentum on both demand and supply sides with rising needs in health, retirement and wealth management driving customers to seek more intelligent services, while regulatory policies guide the market towards high-quality growth, greater standardization and technology adoption. In this environment, AI is emerging as a core growth engine, enhancing customer experience, reducing operating costs and strengthening risk management. At the same time, Southeast Asia's rapid digital adoption and expanding middle class are pushing insurance penetration into a critical stage of expansion, creating significant structural opportunities and positioning the region as a key platform of further globalization of China's insurtech capabilities. Against this backdrop, Huize will continue to embed AI across the entire value chain, reshaping industry dynamics and unlocking a new growth curve. Meanwhile, we will further expand our ecosystem across Southeast Asia to capture long-term opportunities from demographic tailwinds and rising insurance penetration and working with local partners to build a broader, smarter digital insurance ecosystem. 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 second quarter.

Thank you, Mr. Ma and Kenny, and good evening, everyone, in the U.S. and -- sorry, in Asia, and good morning, everyone in the U.S. I think that the opening remarks have been quite detailed on the operational highlights. For my section, I'll just give some highlights on the overall financial metrics. Amid the evolving macroeconomic and geopolitical environment, the second quarter is quite remarkable in terms of total gross written premiums and FYP facilitated, which has increased by 34% and 73% year-over-year, respectively, reaching RMB 1.8 billion and approximately RMB 1.1 billion. Total revenue hit a 3-year high for the quarter of approximately RMB 400 million, which is up 40% year-over-year. We also returned to GAAP and non-GAAP net profit for the quarter of approximately RMB 11 million and RMB 8 million, respectively. Meanwhile, our financial position has continued to remain very robust with a combined balance of cash and cash equivalents of RMB 239 million as of the end of the second quarter. The remarkable operational performance was driven by our efficient omnichannel distribution network, our relentless efforts to acquire high-quality customers and the deployment of advanced proprietary AI solutions throughout. Crucially, we are on track to execute and deliver on our international expansion strategy, which is a core new growth driver for our long-term sustainable development and shareholder value creation. Our strategic focus has remained firmly on long-term insurance products, which continue to account for over 90% of our total GWP facilitated. FYP from our long-term savings products more than doubled year-over-year to RMB 864 million in the second quarter. Leveraging on our robust omnichannel distribution network and advanced AI solutions, we have significantly strengthened our customer acquisition and engagement capabilities, adding approximately 400,000 new customers during the second quarter, and this brings our total customer count to over 11.4 million as of the end of the second quarter. The repurchase ratio for our long-term insurance products also stood at a very decent level of 37%, underscoring our ability to continue to unlock the lifetime value of our high-quality customer base through effective upselling and cross-selling strategies. I would also like to highlight a few other key achievements over the quarter. Number one, the FYP for our IFA business increased by 13% year-over-year to FYP of RMB 84 million, reflecting our continued efforts to empower both our internal and external international financial advisers. And number two, as of the end of the May second quarter, our 13th and 25th-month persistency ratios for long-term life and health insurance remained at industry-leading levels of over 95%. And number three, the average ticket size of long-term insurance products distributed has increased 41% sequentially to RMB 7,615, partly reflecting the premium product sales in our international market segment. We have established a private AI large language model and local application development platform to promote employees as in-house AI agent developers. Over 200 employees in-house have created and deployed AI agents, publishing more than 500 productivity-enhancing tools. Our broad deployment of AI-driven automation has delivered cost savings and productivity gains. As such, our total operating expenses decreased 17% year-over-year to RMB 95 million and our expense-to-income ratio improved significantly by 16.6 percentage points year-over-year to 23.9% in the second quarter. Poni Insurtech, our expanding international arm delivered another strong quarter and remains central to our long-term strategy. For example, in Vietnam, our majority-owned subsidiary, GlobalCare, achieved impressive business growth with GWP and total revenue both rising 32% year-over-year in the second quarter. Active platform users increased by 52%, while the average ticket size on the B2A2C business line tripled sequentially. Global Care also onboarded new merchant partners, including names like GXE and Mobile World Group, offering embedded and micro insurance products powered by its advanced technological capabilities. In July, Global Care also launched Vietnam's first insurance KOL platform, which is a replica of our China model, a proven distribution model pioneered by Huize in China. Additionally, we obtained approval from the MAS in Singapore for financial advisory license, further extending our presence in Southeast Asia, these strategic initiatives to diversify our revenue streams and create new growth drivers to enhance long-term shareholder value creation. In conclusion, we are confident in our ability to capitalize on the opportunities arising from China's evolving industry landscape in the broader Asian market. Domestically, continued strong demand for long-term protection should drive healthy and sustainable growth across the entire value chain. Internationally, through Poni Insurtech, we're extending our China proven model and proprietary AI capabilities to high-growth Southeast Asian markets, particularly in the young and fast-growing middle-class demographics. By leveraging our advanced data analytics, fully integrated AI solutions and disciplined market penetration, we are committed to solidifying our position as Asia's leading insurtech platform for distribution and building an AI-driven intelligent ecosystem connecting consumers, insurance carriers and distribution partners while delivering enduring value to all stakeholders. And with that comment, we will now open up the call to questions. Thank you very much, and over to you, operator.

[Operator Instructions] We'll now take our first question from the line of [indiscernible] from CICC.

This is [indiscernible] from CICC Research. First of all, congratulations on the remarkable business performance on the second quarter this year. And I have 2 questions for the management. First, Huize has successfully executed its strategy shift towards participating insurance in recent years. So could you please add some color on the approaches the company has taken to enhance the team's professional capabilities in selling participating insurance and what plans are in place for deeper cooperation with insurers on the development of participating products? And what's the company guidance for sales performance in the second half of the year? This is the first question. And the second question is that Huize is recognized as the first insurance service platform to integrate DeepSeek in the industry. And the company's Xiao Ma claims has significantly improved claims handling efficiency. So please, could you please add some color on how does Huize intend to further leverage AI technology to enhance product sales, long-term customer relationship management and achieve greater efficiency and cost control?

Thank you, for your 2 questions. So your first question was regarding our successes in the power product distribution front. And I think that over the last 2 years, I think we have already been foreseeing the industry transformation or transition to selling power product as the mainstream product with the expectation of a continued declining interest rate environment in China. I think we have been vindicated with this foresight. And starting from 2023, I think the company as a whole internally have been actively promoting the training of our agents and also encouraging our channel partners and the IFAs that are connected to our platform to get up to speed on the product. I think that the foresight and the training has -- we have reaped the benefits from that, early anticipation. Secondly, I think that with respect to our product supply, I think we have also been quite -- in anticipation of the power product being a mainstream product for this year, we have been actively seeking out cooperation with our upstream insurance carriers, providers to co-develop customized savings products that would be very suitable for the clientele. And I think what we have demonstrated to the market is that we have already been rolling out customized power products with leading brands such as Aviva-COFCO's, which we have repeated for the last 2 quarters. Fu Man Jia product is a top-selling savings product in the power category for the last 2 quarters. Also, we have been working with the Chinese joint venture between the Chinese SOE and Generali, which again has proven to be a top-selling product on the online, offline channels. We have also been quite innovative in terms of customizing power products in the annuity and in the retirement areas. For example, a recent product that we have launched with Bosun Primerica is an example. So not only do we do endowments, we also do annuities and retirement plans with a power feature. So I think that this is something that we have been quite successful also on the product supply front and which also delivers a competitive moat for Huize compared to the competition. And I think we are very proud to say that according to various sources, we are probably ranked in the top 3 in terms of distribution channels in the broker and agency segment in China for power products currently. So in terms of guidance for the product, I think that we are continuing to see increased interest in power products from the market, mainly as a result of the continued education of consumers of the product by online and offline channels, such as ourselves and also the traditional insurers and the traditional agencies. So consumers are increasingly aware of the relative attractiveness of the power product, especially in the declining interest rate environment, whereby the product in terms of overall return profile is much superior to other forms of fixed income products, including traditional bank deposits and so forth. So we do expect that there's continued sequential growth in distribution in the power product in Q3 and also in Q4. So your last question was on the AI front in terms of how we are going to be driving increased productivity gains in addition to just the claims processing area that you have mentioned. I think that we have already been deploying our AI strategy also on the -- in the customer acquisition perspective. Our mobile app has integrated DeepSeek and the DeepSeek powered mobile app that's facing consumers can provide very relevant and customized product recommendations based on customers' feedback and drawing upon on our very robust internal knowledge base and knowledge pool, we are able to provide very much a customized product recommendation experience for our customers. In another area that we think that is very relevant for AI technology to be deployed and which we are now actively investing into is the underwriting part of the value chain, whereby with AI, we are able to be much more nimble and be much more adept at managing risk for our customers in terms of finding the most suitable products according to the individual risk assessment and risk circumstances. And therefore, that will also likely lead to much improved conversion ratios downstream. That would also be relevant to the long-term customer relationship management, which we just mentioned because the AI tool will be able to memorize all the customer interactions. And therefore, whenever the customer returns to our mobile app, it will be able to recall the relevant data points on the customers' profile and be able to continue the dialogue in a most appropriate manner. So I think those 3 things are very good examples that we are able to cite in terms of the AI deployment to date. And I think we're just still only in the very much beginning of the AI journey. A lot more investments need to be made, and we do believe that the fruits of the investment will be harvested over the years to come.

We will now take our next question from the line of Amy [Chen] from Citi.

This is Amy from Citi Research. Congratulations on a profitable quarter. I have 2 questions. The first one on your overseas business. You mentioned earlier that average ticket size was higher sequentially, partially due to participating sales in international markets, which I assume would be mainly Hong Kong. I'm not sure if this was partially driven by the change in the regulatory cap on illustrated product return and how has the sales momentum been in the third quarter so far? And also on the regulatory front, from October 1, there would be a cap on broker channel referral fee and from next year -- from the beginning of next year, there would be this requirement to spread out commissions in the broker channel. How do you think this would impact your business, particularly in Hong Kong? And the second one would be about net profit outlook. We see that after the second quarter -- in the first half, Huize has already delivered a net profit. What is your earnings guidance for the full year of 2025?

Thanks, Amy, on your 2 questions. The first question relating to the Hong Kong business. I think you're right in citing the regulatory changes on the illustrated returns having an impact on [indiscernible] sales in the second quarter. We do see that a lot of the industry participants have witnessed and saw significant demand for Hong Kong products in the last month of the Q2, which due to the revenue recognition would likely be reflected in the Q3 results. So we do see that, that has an impact on the sales of the entire industry as a whole. And on your comment on the other regulatory developments, we think that the underlying demand for offshore products still have to do with the interest rate differential between the onshore and offshore markets. So we do believe that the underlying situation has not changed albeit I think the U.S. likely will be reducing interest rates in the next few meetings. We're likely seeing another 50 basis points by the end of this year. But still the attractiveness of the offshore products still provide a meaningful pickup in terms of overall yield potential versus onshore. So that has not changed. So we do continue to expect that the sequential momentum to continue in this area of the business. So I think that would be my response to your first question. And then on your second question regarding net profit outlook, we are very glad that we have delivered profit in Q2. And we do see sequential improvement in terms of our net profit outlook by the quarter -- by the next quarter, although we also continue to invest in business growth. So right now, we are expecting a second half profit for the year. And especially in Q3, we do expect a meaningful sequential growth in the earnings profile.

That's very clear. May I have a quick follow-up. How much of your revenue is contributed by international business in the second quarter?

Right. I think we would like to say that we are on track in delivering our previously given outlook for the year. So I think that will be the answer.

[Operator Instructions] our next question comes from the line of Kenny Lim from UOB Kay Hian.

First of all, congratulations on the solid results. So I have 2 questions from here. So my first question is regarding your margin performance. Apart from improvement in expense to income ratio, I noticed that your gross margin also improved sequentially. Could you give us more color on this and how sustainable it is? How you balance between your channel cost growth as well as your premium growth? And my second question is regarding your product mix. Since you quoted that the demand for the product is quite strong. I would like to ask that how is the performance of your demand for the health and protection products? That's all from my end.

Thank you for your questions, Kenny. I'm very glad to hear from you. So 2 questions on your side. One is the gross margin outlook. Yes, we do see a stabilization of gross margin in the second quarter. I think there's a slight pickup from Q1. Q1 was around 26%. This quarter it's around 27%. We do see that the stabilization gross margin remain at this current level for the next few quarters. I think that the overall negative impact that has been felt by the industry on the China side with respect to the [passing Huize] regulatory implementation, I think that's been fully felt already. And that's -- and thus, it's been reflected in the results here in the second quarter. The overall business have transitioned to the new regime. So most of the products that we are distributing and channel costs and so forth have now been mostly stabilized at the current level. So we do believe that our gross margin should remain relatively stable for the next few quarters in the foreseeable future. Your second question was regarding the HMP product segment. So we do see a modest improvement in demand in the second quarter over first quarter. So in terms of actual numbers, I can cite for the HMP segment, we're looking at a 24% sequential growth in terms of first year premiums from the first quarter to second quarter. So overall, I think that the environment have -- in terms of the China macroeconomic environment, we do see that there's a stabilization trend. And with the improving customer confidence and improving consumer confidence outlook, we do see that the HMP segment should continue to grow steadily. So -- and we'll also be investing in this product category, albeit the savings product definitely is not the major driver of performance. But then the health and protection product, as we all know, is typically higher margin. And then therefore, with a reviving macroeconomic and consumer confidence kind of picture, we do see that we should be investing more in this area. So that will be my answer to your questions.

Ron, just a follow-up question. I saw that your commission rate improved year-on-year. May I know what is the main driver?

Sorry, can you repeat that question, sorry?

I noted that your blended commission rate improved sequentially. May I know what is the main driver?

Right. I think they are mainly due to the improved contribution from our customized products, which typically carries a higher commission rate.

I am showing no further questions. And with that, I'll turn the conference back to Mr. Kenny Lo for his closing comments.

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.

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