Ladies and gentlemen, thank you for standing by, and welcome to the Huize Holding's Limited First Half and Second Quarter 2021 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 Huize IR website at ir.huize.com under the Events and Webcasts section. I’d now like to hand the conference over to your speaker host today’s conference, Ms. Harriet Hu, Huize’s Investor Relations Director. Please go ahead, ma'am.

Thank you, operator. Hello, everyone, and welcome to our earnings conference call for the first half and second quarter of 2021. Our financial and operating results were released earlier today and are currently available on both our IR website and the newswire. Before we continue, I would like to refer you to the Safe Harbor statement in our earnings press release, which also applies today’s 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. Ronald Tam. Mr. Ma will start the call by providing an overview of the company’s performance and operational highlights for the first half and second quarter of 2021. Mr. Tam will then provide details on the financial results for the period before we open up the call for questions. I will now turn the call over to Mr. Ma.

Hello, everyone, and thank you for joining Huize’s first half and second quarter 2021 earnings conference call. We achieved record results in the first half which is particularly commendable given the challenging environment we currently face. Total gross written premium facilitated on our platform increased by 72.7% year-over-year to RMB2.06 billion, well above the industry average growth in the first half, and total operating revenue nearly doubled to RMB950 million. In the second quarter, most life insurance companies reported year-over-year declines in GWP due to technology from Jumpstart [indiscernible] at the beginning of the year, and the statutory definition change of critical illness. Nonetheless, we have demonstrated strong resilience in our operations during this traditionally slow season, with total GWP amounting to RMB670 million in the second quarter returning a double-digit growth year-over-year. Apart from the robust growth in total GWP and operating revenue, our cumulative number of insurance clients and insured clients reached 7.2 million and 60.3 million, respectively. I would like to further emphasize the differentiation [ph] of our user profiles, and how this could benefit our business. In the first half, about 72% of long-term insurance customers were from higher tier cities, with an average age of 33 years old. In terms of first year premium, the average ticket size of our long-term insurance products has maintained at a relatively high level of RMB4,332 in the first half. While the average ticket size of our savings insurance product has reached RMB28,439 in the first half. Moreover, in the first half our persistency ratio for long-term life and health insurance in the 13 and 26 months have maintained at above 95%. We believe these indicators highlight the strong stickiness and high lifetime value of Huize's customers. In the first half, GWP for long-term life and health insurance products…

Thank you, Mr. Ma. and Harriet, and hi, everyone. We are very pleased to report a set of record first half operating and financial results. In terms of both total growth within premiums or GWP facilitate on a platform as well as total operating revenues. In the first half of 2021, total GWP amounted to RMB2.1 billion, representing a very strong growth of 72.7% year-over-year. First year premiums, or FYP accounted for RMB1.2 billion, or 57.9% of total GWP, which has doubled from the same period of last year. Renewal premiums accounted for RMB868 million, or 42.1% of total GWP, representing a year-on-year increase of 45.4% in the first half. And for the half year mark, we have already achieved over two-thirds of the total GWP for the entire year of 2020 and almost 80% of total revenue for last year. In the first quarter of the year, we recorded we’ve capitalized on the tremendous market demand for critical illness products by consumers by taking upon a more aggressive approach on marketing spend and customer acquisition strategies, which has resulted in a very strong 2.2x growth in FYP in Q1 as well as the acquisition of many high quality users onto our platform with average FYP per policy of over RMB4,000. For the second quarter, as we have expected it to be a relatively slower quarter due to seasonality as a result of the Jumpstart sales campaign in Q1 and also expected softness in the critical illness product segments after the absorption of pent up demand in the first quarter. We are therefore strategically focused on the marketing and distribution of savings insurance products, including a customized endowment life insurance and annuity products which we have [indiscernible] with our insurance carrier partners. As a result of our strategy, we have…

Thank you, sir. [Operator Instructions] We have the first question from the line of Michelle Ma from Citi. Please ask your question.

So my first question is regarding to a recent directory crackdown on irregularities in the online insurance sales space. So just wondering what's the impact on our [indiscernible] channel? And the second question is about our future strategy. So we have, obviously, a large amount of cash on balance. So where we have any, like new initiatives regarding future business strategy, especially, we mentioned that before that we want to strengthen our [indiscernible] channel previously so as to so going forward. Thank you.

Okay. Thank you, Michelle. It's Ron here. Maybe I will take your questions. So the first question regarding regulations, I think the market has obviously been quite concerned over not just in our industry, but also across various sectors on the recent [indiscernible] of government regulations coming out to the market. So I think in particular with relating to the insurance industry, or the internet insurance industry, particularly where we are participating in, the recent number 80 -- sorry, 87 document, the content of which is actually not any new regulations, per se, it's more of a reemphasis on the implementation timetable for the underlying regulations that was actually released in December of last year, and was coming into effect of this February of this year. So overall, of course, I think Huize is a long established platform with 15 years of track record. We are very embracive of this new regulatory regime and demand because it's definitely good for the overall long-term sustainable growth of the industry as a whole. And as one of the more leading and compliant platforms in the industry, I think that we see ourselves as a beneficiary of the regulatory developments. So particularly with pertaining to the points relating to regulations, I think that the regulators are more focused on best-selling activities by platforms, [indiscernible] bundled sales of insurance products, more in compliant operations during the business processes, and so forth. So I think given that we have been adapting to the changes since last year or late last year, we have already [indiscernible] in a complete and comprehensive review of our operation so that we have established the relevant rules and policies with respect to our own self operated activities as well as the other channels that we cooperate with to make sure…

Thank you.

We have the next question from the line of Edwin Liu from CLSA. Please ask your question.

So it's good to see that the savings insurance has accounted for a larger portion of the FYP. So I just want to understand more about the details of the savings insurance. In particular, if we are to calculate the take rate with the denominator as FYP, what would be the take rate level for the savings insurance? And also, if we calculate the cost of revenue percentage of the brokerage income for the savings insurance, what would be the level, especially if we compare to other types of products like the long-term health insurance? Thank you.

Okay. Hi, Edwin. Thank you for joining the call again. So on the question on latest development on the saving insurance product, I think that, first of all, I think it's very encouraging to see that we are making headwinds -- headway into scaling up this portion of the portfolio, not only because of the weakness or softness in critical illness, as we all know in the market, but also as a long-term strategy for us to extract further LTV from our existing users. And also we have touched upon the relatively high proportion of repeat purchases of savings insurance products from existing users. So I think that is a very good reflection of our overall business strategy is working out fine. With respect to the take rate or commission rate, I think that -- I think to put it simply take an example for our latest endowment life insurance product, I think you're looking at roughly around 10 to 20 percentage points commission rate a bit lower than your typical customized long-term critical illness products. But I think you need to bear in mind also that the average ticket size for this product is quite a lot higher than critical illness products. So I think we've been telling the market and disclosing the market that on average the CI products we distribute, carries around a 4000-ish kind of RMB ticket size on average. But now we are seeing that the average savings insurance products are growing at RMB28,000. So I think despite the [indiscernible] lower take rate, if you will, but the overall economics accretion to our P&L or to our revenue line is actually quite promising. So I think that will be the answer to your commission rate or take rate question. In terms of costs, I think that if you look at our Q2 results versus our Q1 on a quarter-on-quarter basis, you can actually see that is a 5 percentage point improvement on our gross margin. So I think that also is partly due to the reasons I stated above.

Great, thank you. It's very clear. Thank you.

Thank you, Edwin.

We have the next question from the line of Allen Feng from Morgan Stanley. Please ask your question.

I have two quick questions for management today. So first, should we continue to expect an increase of mix for savings products in the upcoming quarters, given the critical illness sales are still pretty weak in China? And secondly -- so you talked about -- a lot about the O-to-O synergies between in a sense life and general agency and your core business. Could you maybe just elaborate and give us a few examples? Thank you.

Okay, thank you, Allen. Thanks for joining the call again. So two questions here. I think the first question on the proportion or contribution from our savings insurance products going forward in the second half this year. I think you're very correct to point out that it's very likely that we'll see a increasing proportion or contribution from savings products in the third quarter and fourth quarter due to the overall market sentiment around in BCI products. And also, I think the consumers right now as a whole is definitely more geared towards consuming life insurance or annuity products. So I think you can also see that we have recently just launched the new retirement annuity product with Sun Life Everbright. So I think that's a very good example of how we are constantly adapting to market changes, and also leveraging on our product development expertise to co-develop and work with our insurance carrier partners. I think that the endowment life insurance product that we have co developed with HongKang Life has been doing very well in the second and third quarter. And we are already seeing, I think we can also disclose on this call that we are also seeing already a sequential growth, quite strong growth in this area. So I think we can expect that there will be a meaningful increase in the contribution from the savings in the third and fourth quarter. However, I think that the critical illness product should come back to life, if you will, towards the end of this year. We are also gearing up towards launching a new product in this space, probably towards the back end of this quarter or next quarter. And I think with the new product launch, we should also be able to drive improved sales in…

Thank you, sir. Can we go ahead and move to questions?

Yes, please.

Thank you. We have the next question from the line of [indiscernible]. Please ask your question.

My first question is about the savings product. We can see an increase in the proportion of savings products. What percentage of savings products are from existing customers? The second question is have we seen the drop off [indiscernible] due to the headwinds [indiscernible] education industry in the second quarter? Thanks.

Okay, thank you. Thanks for joining the call. Two questions here. First question was about the savings product. How much of the FYP is coming from existing users? So I think we have actually touched upon this earlier. We see that in the second quarter, around 31% of our savings product is coming from repeat purchases on all existing users on the platform who have purchased a policy with us before. So that's the answer to the first question. And the second question on the [indiscernible] cost trend vis-à-vis the overall headwinds stating the education or the ed tech sector. I think that what we've seen here [indiscernible] is that we do not see -- perhaps we have a very different marketing strategy than obligate our peers. And the target customers that the ed tech sector look at is probably not exactly the users that we're targeting. So, we do not see a material, or obvious impact on where we see cost of acquisition on our platform. Thank you.

Thank you, sir. At this time, I would like to hand the call back to the speakers for any closing remarks. Thank you.

Hi. Thank you. Thank you, operator. Thank you, everyone. So we would like to thank you all for joining the call today. And if you require any further information, please feel free to reach out to us. Thank you for joining us today.

Thank you.

Thank you, sir. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.