Ladies and gentlemen, thank you for standing by, and welcome to Huize Holding’s Limited Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Today’s conference call is being recorded and a webcast replay will be available. Please visit Huize’s IR website at ir.huize.com under the Events and Webcast section. I would now like to hand the conference over to your speaker host today, Ms. Harriet Hu, Huize’s Investor Relations Director. Please go ahead, Harriet.

Thank you, operator. Hello, everyone and welcome to our earnings conference call for the third quarter of 2022. 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 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. Kwok Tam. Mr. Ma will start the call by providing an overview of the company’s performance and operational highlights for the third quarter of 2022. 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 third quarter 2022 earnings conference call. For the third quarter, Huize reported another set of results that underlies our resilience in the face of an uncertain operating environment characterized by the ongoing impact of COVID-19, a relatively moderate recovery in the consumer confidence and the deepening consolidation of the insurance industry. During the quarter, we continued to make progress on implementing our strategic road map to build an omnichannel digital insurance service ecosystem that integrates agents, businesses and customers or ABC, and further refines our competitive age in customer insights, product innovation, and professional insurance services. In the third quarter, total gross written premium, or GWP, facilitated on our platform increased by 29.4% year-over-year to RMB1.3 billion, and our total operating revenue increased by 11.7% year-over-year to RMB352 million. In terms of product mix, we have responded to market demand by enhancing our focus on promoting savings insurance products, and this strategy has produced remarkable results. In the third quarter, the total first year premiums or FYP facilitated on our platform increased by 34% year-over-year to RMB685 million, of which the FYP of savings products amounted to RMB509 million, a 49.3% year-over-year increase. These results reflect the ability of our asset-light business model and market-driven product offerings to successfully sustain our high-quality business growth. Meanwhile, thanks to the snowball effect and the high user stickiness generated by our strategic focus on long-term insurance products, our renewal premiums increased by 24.1% year-over-year to RMB564 million, providing us with a valuable source of stable cash inflow in this challenging macro environment. We have been sharing the operating metrics of our long-term insurance business with investors since 2020. And we are very proud of the solid foundation laid down by this business. In the third…

Thank you, Mr. Ma and Harriet. Good evening, everyone. The third quarter has proved to be a very difficult quarter on multiple fronts. In particular, the ongoing pandemic-related restrictions imposed with lockdowns on a considerable part of the economy, has weighed on consumer confidence, income expectations and as a result, the first demand for insurance by consumers in China, especially for possession products such as long-term health insurance. The lingering uncertainties with respect to the outcomes of the ongoing PCAOB inspections of the audit working papers of Chinese ADR companies and the corresponding potential delisting risk of Chinese ADRs have also led to further dislocations in the soft prices of ourselves as well as our peers, and altogether contributed to an overall extremely challenging capital markets environment. Despite the difficult macro environment, we have been very focused on the execution of our key strategy. On the product front, we continue to focus on driving distribution of savings insurance products, which continues to be welcomed by the consumer market given its relative attractiveness as compared to bank deposits in a declining rate environment in China. On the channel front, our new 2A 2C business line continued to deliver strong growth momentum in the offline space, generating in excess of RMB120 million of FYP already in the first 9 months of the year. And on the corporate front, we continue to implement firm-wide cost savings measures with a strong focus on expense control across our business lines. As a result of our business strategy, we managed to achieve double-digit growth across all of our key metrics. In the second quarter, total GWP increased by 29.4% year-over-year to RMB1.2 billion, which was driven by the strong growth in FYP of 34% year-over-year to RMB685 million. And on a sequential basis, FYP in third…

Thank you. [Operator Instructions] First question comes from the line of [indiscernible] of CICC. Please proceed.

We have two questions regarding the ABC strategy. And first one is in terms of the 2A segment, what’s the profile of the agents who currently have the partnership with you. By what means can you allocate the collaboration with more high-quality agents under your ABC strategy in the future? And the second question is, what do you expect of your 2B segment? And how will this product business contribute to earnings in the future? Thank you.

Thank you for questions. It’s Ron here. So with regards to the first question on the 2A business, I think right now, we have been running the 2A 2C business for 11 months now since the start of the year. I think that we have been targeting the experienced insurance agents from the marketplace. And a lot of these agents carry with them over 5 years of experience with respect to life and health insurance policy sales. And most of these agents that we target could complete the entire customer service or customer journey from the customer acquisition itself to business development and to assistance underwriting and post policy administration and invoice service systems, etcetera. So we believe that the Huize model of empowering the independent agents have so far proven to be a success. I think it really has to do with our advantages in providing a comprehensive product supply matrix through our SaaS platform. And we can enable and empower the agents via the mature digital tools that we have been deploying for in-house consultants. And basically, we’re exploiting this to tools to the 2A business line, independent agents in the marketplace. So I think that’s the answer to your first question. With regards to the 2B segment, I think that since the IPO, we have been deploying meaningful capital in developing the technology service capabilities of Huize. Since the start of this year, we’ve started to export these services to our upstream insurer partners. And so far, we’ve signed up a few reputable names such as Piping Life and Great Wall insurance as well. So the tools that we’re deploying in-house with respect to customer relationship management to compliance and to underwriting assistance and claims, etcetera. All these tools have been exported to the insurance companies that have been signing up for our 2B business as a client. And I think that right now, for the first nine months, we already achieved a double-digit million of revenue, $13 million overall. I think that this is expected to grow at a very high rate over the next 2 years, 3 years as we start to scale the business with the word of mouth in the market given the success that our initial clients are experiencing. We believe that over the next 2 years or 3 years, we will be able to roll out more and more products to the marketplace and to accelerate the box by other insurance companies as well. Given that the investment has been made already in the last 2 years, we do expect that the two business line to be relatively higher margin versus our core insurance distribution business. And we do expect that we will be able to generate positive cash flow in the next year. Thank you.

[Operator Instructions] Next question comes from Michelle Ma of Citi. Please proceed.

Thank you. Thank you, management and congratulations on such a good result. So, my first question is a follow-up question. So, I am wondering, for our offline agents, what’s currently the average monthly income. Could you give us a sense on this? Second question is about the outlook. So, we noticed for the fourth quarter, you mentioned we will achieve quarterly profitability in the fourth quarter. And we noticed that the cost/income ratio has improved very impressively. So, just wondering the sustainability and what’s the outlook for next year’s profitability? You mentioned we will see positive cash flow, but how about the profitability? Do you have any view on the revenue growth and expense growth next year? Thank you.

Thank you, Michelle. Thanks for joining again. I appreciate it. So, the first question on the 2A business, the offline agents and the average, I guess productivity or take home kind of salary. I think it all depends on the individual agents own productivity. But I think overall, on average, I would believe that the productivity of the agents have been relatively robust and which will be on a comparative level as to our own in-house created consultants. So, as a result, I believe that the take-home pay on a monthly average basis will be in excess of RMB10,000 level. So, I think that level compares favorably with respect or in comparison with the offline brokerages or agencies or even the third agency agents within the incumbent insurance companies themselves. So, I think that will be the answer to the first question. And yes, most of the agents are located in the Tier 1 and Tier 2 cities. We have always been quite focused on the mass affluent market sector within China, so the 400 million or so middle-class consumers. And therefore, the 2A, 2C business line will also be in sync with our affordable creative platforms focus area in terms of the end-user market. So, the second question on the profitability outlook. So yes, in Q3, we have shown substantial improvement. Now, net earnings loss is down to almost a breakeven level. We are on course for a profit-making quarter for Q4. And for next year, I think that we do see a great encouraging size and very promising news coming out from China today. It’s very timely for us to have this – for this call tonight with the [indiscernible] bureau pauses, seemingly to be pivoting towards a reopening. And I think the wider investment community is having…

For the questions we will move for the next question. Our next question comes from the line of Connie Liu of China Renaissance. Please proceed.

Hi. This is Connie from China Renaissance. Thank you management for giving me this chance. Thanks. And I have one question about product. Could you please share with us more details of the new products launched in the third quarter? And is there any plan in the fourth quarter or in 2023? Thanks.

Alright. Thank you. Thanks for joining the call today. I appreciate it. So, the question on new product launches, I think Mr. Ma mentioned in his opening remarks that we have launched quite a few products in the third quarter. And this will evolve around the customer lifetime value and on the entire spectrum from health to savings, to pension, to annuities and also for children healthcare. So, next year, I think we also intend to iterate our product launches. I think the average timeframe that we look at for upgrading or launching a new product in each of the various sub-categories is about three months to six months. As we work with different insurer partners and launch various products specializing on different sub-sectors of the market. And so product development and product launches is bread and butter to Asia’s business plan. And this is something that we would be looking to innovate as we collect more and more customer insights from our A, B and C business lines. And with that, we will feed back into our product development team, which will work with our insurer partners on the upstream to launch new products on all the different segments. As Mr. Ma already mentioned, in the third quarter, we have achieved a very meaningful increase in the proportion of the contribution from our customized products to our overall FYP, and so I think that is also indicative that we continue to have a very strong relationship and deep engagement with our insurer partners on the product front. I hope that answers questions. Thank you.

Thank you for the questions. There are no more questions from the line. I would like to hand the call back to the management for closing remarks.

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

Thank you.