Ladies and gentlemen, thank you for standing by, and welcome to Huize Holding Limited First Quarter 2024 Earnings Conference Call. [Operator Instructions]. Today's conference call is being recorded, and the webcast replay will be available. Please visit Huize 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, Mr. Harriet Hu, Investor Relations Director. Please go ahead, Harriet.

Thank you, operator. Hello, everyone, and welcome to our earnings conference call for the first quarter of 2024. 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 Zhang, 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 quarter of 2024. 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 with the first quarter 2024 earnings conference call. In the first quarter of 2024, China's economy continued its recovery and showed positive momentum. The insurance industry also made progress towards high-quality development with original premium income increasing by 5.1% year-over-year to approximately RMB2.2 trillion. Adeptly navigating the profound impact of the alignment of registered and actual expenses on the insurance market with our diversified product offerings, omnichannel distribution capabilities an international business footprint allowed us to deliver solid results, surpassing industry average. In the first quarter, total gross written premium, or GWP, facilitated on our platform reached RMB1.7 billion, up 38% sequentially. Total revenue increased by 31.5% sequentially to RMB310 million. We achieved a net profit of RMB6.9 million marking our sixth consecutive quarter of profitability. In terms of product mix, the increased volatility in domestic capital markets and the continued decline in interest rates during the quarter strengthened demand for insurance products with relatively stable returns. Spotting this opportunity, we further enriched our offerings of savings insurance products, including participating and annuity products. As a result, total first-year premiums or FYP facilitated on our platform more than doubled sequentially to RMB816 million. On a sequential basis, FYP of long-term life insurance products more than tripled to RMB438 million. FYP of annuity products increased by 47.9% to RMB157 million and FYP of long-term health insurance products increased by 12.2% to RMB96 million. We further strengthened our industry-leading position in the long-term insurance market. GWP for long-term insurance accounted for 90.5% of total GWP, marking our 18th consecutive quarter with a ratio above 90%. Renewal premiums reached RMB816 million, up 4.1% sequentially. As of the end of the first quarter, our cumulative number of insurance customers has grown to 9.6 million, representing an increase…

Thank you, Mr. Ma and Harriet, and good morning, everyone in Asia, and good evening for those in the U.S. We're very pleased to report that the total GWP facilitated on our platform during the first quarter of 2024 has increased by 38% sequentially amid challenging industry landscape to over RMB1.7 billion as the overall market landscape and macro-economic recovery gradually improved. This growth has been largely driven by our omnichannel distribution platform model and a diverse range of product offerings that are attracting new high-value customers and enhancing existing customer engagement as well as the increasing contribution of international revenue from a successful expansion into the Hong Kong market since the second half of last year. We're also pleased to announce the sixth consecutive quarter of portability. Our sustainable profitability further ascertains the effective execution of our key business strategies, Firstly, we have maintained our strategic priority on long-term insurance products, which contributed to over 90% of our GWP in the first quarter. Secondly, our open platform continued to empower the independent financial advisers or IFA with our omnichannel distribution network, diversified product matrix and advanced AI productivity tools. FYP generated by our IFA platform reached RMB127 million in the first quarter of 2024, which is up significantly by 70% year-over-year. Thirdly, we further deepened our customer engagement in our direct-to-consumer segment. In the first quarter, the repeat purchase ratio for our long-term insurance products has increased by 4.5 percentage points year-over-year to 40.5%, which reflects our relentless efforts in exploring the long-term value or lifetime value of our customers. Finally, we leverage our proprietary AI solutions to further streamline our operations and further enhance our operating leverage as evidenced by the further improvement in our expense ratio. As we look at our operational results, I want to highlight…

[Operator Instructions]. Our first question comes from Zeyu Yao from CICC. Please go ahead.

So, my first question is related to the health insurance. So, we want your observations how has -- the recent demand of short-term and long-term health insurance products. What's the customer [indiscernible] such products. Can we see a tendency of consumption downgrades? And how you see online health insurance future? And my second question is, as we see fee regulation is moving on, many insurance brokers from they face the challenges the group this strict regulation period. And they have taken actions to avoid a sharp decrease of their revenue and profits. We just want to know in terms of the mainline business from short term maybe 2024, what's your cost strategy and from the view of long term, what measures will you take to ensure our sustainable growth?

Okay. Thanks, Zeyu for your two questions. Let me address these two questions one by one. With regards to the first question on the demand for long-term or short-term health products. I think we are seeing similar trends in the first quarter in line with the broader market. I think as we have seen in the broader market this category continues to be quite weak in terms of the recovery. Although we did disclose in our opening remarks that we have seen sequential growth in our long-term health product segment in the first quarter. I think we have quoted actual numbers here, whereby our long-term health products have achieved FYP of $96 million in the first quarter, which increased sequentially by 12%. I think this is a demonstration of how we have been always at the forefront of product innovation to adapt to changing consumer behavior or budgets or preferences, if you will. Obviously, in a macro downturn where by consumer demand for reimbursement type products or production-type products continue to be relatively weak as compared to savings products, which are the key focus for consumers right now. So, I think going forward, in terms of health products, we will continue to be very focused on the innovation of products as we have also delivered recently, cooperating with a bigger brand insurer, for example, PICC. In April, we have launched the new Darwin product which is targeting some optimal health groups. So further to expand the addressable market from what the industry has been kind of selling to previously over the past 3 years to 5 years, where, for example, critical illness products have been relatively well marketed and saturated and then the further production gap that customers or consumers require in the product market will be satisfied by way…

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

This is Amy. I have some questions. The first one is on net profit. Actually, congratulations on a consecutively profitable quarter. However, we do notice that the net profit in the first quarter this year, it's actually significantly lower compared to the same period last year. May I know what the main reason behind this? And also, on the cost of revenue, we noted that this actually picked up around over 20%. And probably due to higher channel costs. Could you please elaborate on that front? And the second question is also on [indiscernible]. Could you please -- I'm wondering if you could provide more color with respect to how this has impacted your commission level on saving-type products as well as on protection-type products. Thank you.

Okay. Thanks, Amy, for joining us again. So yes, key questions from you with regards to margin compression. I would say that's really a direct result of the regulatory changes that will be one key part of that. But the other will also be due to the fact that as you currently pointed out, in the first quarter, channel costs have increased quite a bit. I think it was a strategic move in the first quarter to capitalize on the expected strong demand in the market for the last available savings products under the previous regulatory regime. And so that also led to quite a fierce competition among different players in the market to convert policies from this. So that has resulted in some surge in the channel cost. And also, there's another reason for that, which will be the relative smaller contribution from our DTC segment for Q1 distribution as compared to B2C and ATC and therefore, resulting in a higher cost of revenue as a percentage of revenues in the first quarter. We do target to improve that over the course of the next few quarters as we continue to adapt to the changing environment. So that will be the first answer for your questions. And on [indiscernible] on the regulatory impact on commissions, I would say we are now seeing the effect on the agencies and brokerage channels starting in the second half, first quarter to the second quarter. In general, I think I would say, savings products have broadly declined in the neighborhood of 30% to 40%. And in terms of conversion rates for the first year. For protection products, we are seeing a somewhat more resilience or less of an impact because for protection products, we have always been more focused on the so-called online products, [indiscernible] products. So, for this type of products, we're not seeing as much of a impact on commissions as compared to savings products. But obviously, right now, in the broader market, most of the distribution on both of the products that has been bought by customers are in the savings category. So, the decline in the commission rate for savings products have a more market impact on overall commission levels versus protection in the same concept that we are looking at the numbers right now.

Our next question comes from Kenny Lim of [indiscernible].

Hi, Ron. Thank you, very much. First, congratulation to management on achieving another profitable quarter. So basically, two questions for him. First, could you give us more color about your expansion plan in Southeast Asia. And how is the progress so far? Do these segments start to contribute any revenue? And second, I wanted to ask whether there is an update on your shareholder return policy?

All right. So, thank you, Kenny, for joining us for the first time, and I appreciate your coverage. So, first question on Southeast Asia. Yes, we -- to this point, we have -- in terms of Southeast Asia, we have been in active dialogue with multiple parties over the course of the past two quarters in terms of expanding into various markets. And the list includes, obviously, Singapore and also other growth markets like Indonesia, Philippines and Vietnam. So, we are very focused on landing on our first overseas market outside of Hong Kong in the next two quarters. But right now, Southeast Asia is still not contributing international revenues to the overall group revenues. But [indiscernible] Hong Kong is Southeast Asia then yes, 7% in the first quarter. We will look to improve that percentage to double digits this year from both organic growth in Hong Kong as well as a new market in Southeast Asia. And the Southeast Asia expansion would most likely be an initiative under a M&A kind of buy-and-build strategy. But we also want rollout partnerships with local groups where we have also received some reverse inquiries in terms of performing joint ventures from local groups in respective countries where they see the large potential for digitalization of insurance distribution in the respective countries and markets, and we're seeing a very fruitful dialogue in those areas. So that will be my answer to your Southeast Asia question. The second question on shareholder returns. I think we are we are planning to -- in the next 2 years to 3 years to return the capital to shareholders by way of dividends. So, we are planning ahead on setting up the right structure to enable this dividend distribution. But for 2024, I think that would be unlikely. I think it's more probably in the next 2 years, 3 years kind of horizon that we will be looking to initiate our dividend policy. So that will be my answer to your questions, Kenny. Thank you.

Thank you very much. This concludes our Q&A session. Now I hand back to Harriet for closing remarks.

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

Thank you very much.

Thank you. This concludes today's conference call. Thank you all for participating. You may now disconnect.