Ladies and gentlemen, thank you for standing by and welcome to the Huize Holding Limited Third Quarter 2023 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'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 Lou, Huize's Investor Relations Manager. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to our earnings conference call for the third quarter of 2023. Our financial and operating results were released earlier today and are currently available on both our IR website and 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 measure today, which are more partly 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 operating highlights for the first quarter of 2023. And Mr. Jiang 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 2023 earnings conference call. In the third quarter of 2023, the macro economy gradually recovered. With economic activities showing signs of improvement. However, international relationship challenges persisted and capital markets erratically experienced fluctuations. The insurance industry continues to depend products for co-adjustment and transformation. The assets of insurance companies were primarily affected by the continuous impact of the stock market downturn, declining interest rates, and ongoing impairment losses, resulting an adverse impact to overall industry investment income. In the first three quarters, the net profit of the life insurance industry generally shows a year-on-year downward trend. The market cap is experiencing ups and downs but is on a long-term positive path towards recovery. Amid these external uncertainties, we focus on leveraging our competitive edge in product innovation, omnichannel distribution customer acquisition capabilities, and high-quality customer profile and reported another set of solid results. In the third quarter, total gross recent premium, or GWP, facilitated on our platform reached RMB1.25 billion, and we recorded total revenues of RMB290 million. Our GAAP net profit increased 43% sequentially to RMB20.17 million, and we achieved our fourth consecutive quarter of non-GAAP net profit with RMB18.49 million in the third quarter. In terms of product mix, we continue to leverage our diversified product offering and solid omnichannel distribution capabilities. First-year premiums or FYP facilitated on our platform reached RMB640 million in the third quarter. Across the first nine months of 2023, while FYP has increased by 54% year-over-year to RMB2.2 billion. The FYP of our long-term health products increased by 8% year-over-year to approximately RMB100 million in the first quarter. Our savings products maintained strong growth momentum during the quarter. With the FYP of our annuity products tripling year-over-year to RMB120 million, we are seeing…

Thank you, Kenny and Mr. Ma, and good evening, everyone. In the third quarter, Chinese insurance market has entered a transitional phase with respect to the product structure following the suspension of 3.5% products from 1 August. Despite this significant industry-wide challenge, the total GWP facilitated on our platform has remained fairly stable year-over-year at about RMB1.2 billion in the third quarter. Thanks to the resilience of our omnichannel distribution platform, integrating online and offline channels, a large established and high-quality customer base, and strong insurance product innovation capabilities that we have. We are consistently acquiring new customers more efficiently with 223,000 net new customers added to the ecosystem in Q3. Bringing the total number to more than 9.1 million at the end of the quarter. During the quarter, we continued to record a non-GAAP net profit of about RMB118 million, marking our fourth consecutive quarter of profitability. This strong bottom-line performance is being driven by the successful execution of our key business strategies. First, we remain a steadfast focus in long-term insurance products with GWP contribution from these products remaining at about 90%. Second, we continue to empower insurance agents through our omnichannel distribution platform, which product offerings and advanced technologies. Our To-A, To-C business line continued to deliver robust growth, generating total FYP of RMB90 million, representing a year-over-year increase of 28%. Third, in our direct to-sea segment, we continue to target high-quality mass affluent young consumers and drive up selling opportunities across our customer base. In terms of FYP, the repurchase ratio of our long-term insurance products increased by about 5 percentage points year-over-year to 38.4% in Q3. Lastly, we continue to focus on boosting operational efficiencies throughout our business, and that's reflecting improvements in our growth and operating margins. Key highlights and takeaways from our operating…

Our first question will come from CoCo Gong of Morgan Stanley. Please go ahead.

Thank you, so much for taking my question. Congratulations on a very good performance. for the third quarter of 2023 in a very challenging environment. I have two questions today, if I may. So, the first one would be about some of the regulation changes in China, especially on the broker channel as well as some recent regulations on short-term health insurance. So how does the management perceive this change impact on our overall business? That just a little bit of an insight on maybe sort of the product mix change or product innovation or anything related would be much appreciated. And the second question would be about the critical Illness demand because we've talked about launching like the new Critical Illness product. But how are you seeing the sort of marginal changes in terms of the Critical Illness demand, given the savings demand is very significant, but are we seeing any positive changes for the Critical Illness or protection type of product demand recently. Thank you very much.

Thanks, CoCo. It's Ron here. So, two questions from you. The first one relating regulatory changes and how is that impacting the overall business. I think that's a very bad question, and it's very topical right now. I think the multiple fronts of the business is being impacted by the recent regular changes. I think the most evident one would be the cessation of 3.5% products, and that has led to a somewhat downturn in the overall market I think across the board, we have seen FYP numbers coming down quite a bit. among the top-tier companies as well as, I think, the market channel checks. But I think slowly, we have seen that the demand recovery has commenced starting after the October 1 holidays after the National Day holidays. I think we are seeing some momentum being regained into November. But I think that we are still a bit short of where we were for a normal month notwithstanding any special changes in the product structure that is driven by the regulatory changes. So, in terms of product mix, I think we are seeing some channels or market demand for participating products. I think we're seeing some trends there. We do believe that policing products could be very interesting in the new environment where it provides a relatively lower fixed guaranteed return with -- on top of that, more of a variable return kind of profile to consumers. I think consumers still in strong demand for good savings products that would deliver good returns over the long term, and with more of a protected kind of structure. So, I think participating products could gain momentum, particularly in the new year. That's point number one. I think we're also seeing good demand from consumers on retirement and annuities products. And…

Yes. Thank you, very much.

The next question comes from Zeyu Yao of CICC. Please go ahead.

My question is, I like to our product strategy. with the launch many unusual products, vale. So, under your observation, we're too popular products. And by the way, how is the sales of MCB products, could you share some more details. Thank you.

Thank you Zeyu Yao. So, first question on each of the more popular products these days. I think we're seeing real-time data in our systems. I think that the top two or top three categories are probably -- I think number one will be more towards retirement annuities. And these are the customized products that we have launched together with our partners. I think that is gaining the best momentum in the third quarter. We also -- as I mentioned to Coco's question just now, I think we are seeing good demand as well in participating products. So, this is something a bit new, I think, some of our new trends. So, this will be the second category. And I think with respect to MCB products, -- we have launched a new product in August. So, I think it still takes time for us to really jump up our channels and push sales. But I think we're getting a decent market feedback on this innovative product, which enables Hong Kong residents or no privileges as to retirement in the Mainland. I think this is a very innovative product structure. And I think that given time, -- but for the product to run, I think that we will be achieving pretty good sales on this. With respect to MCB I think. We are also gaining momentum there because of our brand equity in the Mainland China. And I think -- we're also getting a good attention from incoming travelers. And so, with respect to product mix there, I think mostly, I think as we have seen in other companies or other operators in the Hong Kong market, the strongest demand is probably still for savings products that is underwritten by Hong Kong or international insurance companies with brand name. So, I think that's my answer to your second question.

[Operator Instructions]. Our next question comes from Amy Chan of Citi. Please go ahead.

Hi. Congratulations on another possible quarter. And I have two questions here. The first one would be on guidance for next year. You touched a bit on the trend of product mix in the third quarter. And I wonder if you could share more color about your product strategy in 2024. And also, what's your outlook in terms of brokerage income as well as on the earnings side? And the second question is that we see that -- the company has made enormous assets on containing operating costs through all fronts. And we see that effectively, the operating cost-to-income ratio has come down. I'm wondering if the management has a target for this ratio. Thank you.

Okay. Thank you, Amy. So, with respect to your first question on guidance. Right now, we have not refreshed our guidance for the next year. I think we'll be giving guidance when we are coming up with the fourth quarter results next year. I think we are still looking to strategize on the overall strategy for next year. So, it's a bit early to tell now. in product mix, I think we can share a little bit more insights. I think in the new year, we're more likely to cooperate with larger-sized insurance companies. with respect to savings-related products in particular and we can also explore cooperation with [indiscernible] and joint venture companies that are involved in the savings category. And in particular, with respect to participating products, I think that we would very likely will be rolling out a customized product in that segment. Second, I think we still have a very strong focus on retirement and annuities products with additional service tied to the insurance policies. So, I think that's something that is in strong demand, and we can -- we are also able to drive differentiating product innovations in this to set ourselves apart from the competition. So, I think those two will be our strong focus for next year in terms of product strategy. And on the cost side, I think it's always going to be top of our mind in terms of driving additional efficiencies across the business, across the organizational structure. So, I think that we'll continue to drive costs down. And I think there's always a further room to improve in that regard. Maybe we have already done quite substantial cost-cutting already year-to-date. But then I think that's something that we will continue to be very focused on. Maybe we can squeeze out another few percentage points there. But we will continue to work hard on that to drive probability for the business.

[Operator Instructions]. Seeing no further questions at this time. I'll now turn the call back to Kenny Lou for any 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.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.