Huize Holding Limited ($HUIZ)

Ladies and gentlemen, thank you for standing by, and welcome to the Huize's Second Half and Full Year 2025 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded, and the webcast replay will be available on Hotel'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, Investor Director. Please go ahead, Kenny.

1 Thank you, operator. Hello, everyone, and welcome to our second half and full year 2025 earnings conference call. Our financial and operational results were relisted earlier today and are currently now available on both our IR website and Globe Newswire services. Before we continue, we will like to refer you to safe harbor statement in our earnings press release, which also applies to this call as we will be making forward-looking statements. Please don't 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 Founder and CEO, Mr. Cunjun Ma, So, Mr. Minghan Xiao; and Colao, Mr. Ron Tam. Mr. Ma will start the call by providing an overview of the company's performance and operational highlights. Both will go our financial results for the year 2025. Then we'll open the call for questions. I will now turn the call over to Mr. Man.

[Interpreted] Welcome to Huize Second Half and Full Year of 2025 Earnings Conference Call. in 2025, Chinese insurance industry underwent profound structural changes. -- as bank deposit rates continued to decline household while allocation shift fundamentally with capital accelerating to long-term stable assets such as insured anticipating products that offer both protection and wealth accumulation emerged as the core growth engine for the industry. Furthermore, the generated AI and AI agent capabilities is the way we're shaping the industry ecosystem and operating models, driving a factor towards greater efficiency and intelligence Internationally. Southeast Asia insurance not case expecting accelerating digital penetration. -- happens in a growing middle class, creating compelling structural opportunities. Our proactive forward-looking strategy as positioned us to cap on these dynamics and deliver a strong performance in 2025. Both GWP and FYP facilitated on our platform in 2025 reached record highs of RMB 7.4 billion and RMB 4.6 billion, searching 21% and 35% year-over-year, respectively. Total revenue for the year came in at RMB 1.6 billion, growing approximately 27% from last year, driven by strong top line mineral caused efficiency improvement from the strategy strategic deployment of AI solutions across our organization. we delivered non-GAAP net profit of RMB [indiscernible] million. This marks the first consecutive year of non-GAAP profitability, a testament to our resilient execution in a dynamic market and the long-term sustainability of our business model. We remain deeply committed to our customer-centric strategy, serving our high-quality customer base across the full insurance life cycle. In 2025, we added approximately 1.7 million new customers bringing the total to over 12 million by year-end. The average age of long-term insurance policyholders was [indiscernible] years with 65.8% residing in Tier 2 cities or above, reflecting our focus on high-quality customer demographic segments. The average FYP take size for long-term which is approximately RMB 7,900 in 2025, a 38% increase year-over-year. As of year-end, each of our teas and 25-month persistency ratios for long-term insurance products remained at industry-leading levels of over 95%, highlighting our strong retention capabilities and fully validating the quality of our service and the competitiveness of our product offerings. By year-end, our partner ecosystem grew to 150 insurer partners allowing us to continue expanding the differentiated customized products we offer. To address the growing demand for wealth management and financial planning solutions in an aging society. We launched Data 2.0, a participating annuity product designed to provide premium diversified retirement planning solutions -- we also launched 2 customized million medical insurance products in 2.0 and Changing and 3.0, which overran differentiated features, including 20-year guaranteed renewal and simplified help underwriting that cater to the diverse health protection needs of different customer segments. Together, these largest reinforced our core competitiveness in the medical insurance segment and a solid foundation for our long-term sustainable growth. We began fostering an AI-native culture across the organization during the year. deploying AI solutions across the insurance service value chain. This significantly improved our expense to revenue ratio which fell 5.9 percentage points year-over-year to 26.3% and was a key contributor to our turn to full year profitability. We also deployed our AI solutions across the entire customer journey covering intent recognition, product recommendations and writing place. This meaningfully enhance the user experience and supported a [indiscernible] year-over-year increase in e-driven self-service policy plan new users in 2025. Our AI systems are now capable of independently completing sales conversion. The launch of our AI financial plan highlights this evolution into a full life cycle financial planning partner for our customers. AI cannot directly generate personalized family issuance plans directly from individual user profiles. More recently, we launched our AI claims service with our AI agent fully embedded across core claim system. The first AI review of the claims were settled in just 23 minutes and Mark's first full end-to-end agent-driven claims settlement in China's student major sector and the completion of our intelligent closed-loop service capability. Looking ahead, we will collaborate with insurance carriers to build connected ecosystem, spanning users, issuers and agents embedding AI across every stage of insurance services in financial planning to fully realize our vision of an AI-driven insurance platform. Our international business continued to deliver strong performance. In Singapore, Hakoranta we obtained a financial adviser and exempt insurance proteins from the Monetary Authority of Singapore, formally establishing our local operational footprint. Simultaneously, we are actively expanding our proprietary AI solutions to Singapore to offer an innovative and differentiated insurance experience. Demand for our insurance products in Hong Kong remained robust in 2025, with revenue increasing more than 2 holded year-over-year, driven by the differentiated product features. In Vietnam, Global Care generated a 106% year-over-year increase in full year GWP and an 84% increase in revenue growth. Notably, the GCL business line has a standout performance with platform users call tripling drilling the year-end premiums growing more than threefold year-over-year. strongly validating the scalability of our digital distribution model in Southeast Asia. Looking ahead, we will continue to focus on 3 strategic priorities to drive high-quality growth. First, we will continue to deploy AI growth business to deep in service quality and improve user experience. By using AI to streamline workflows, we deploy freed up resources towards further improving service quality and expanding AI application scenarios. -- facilitating technology and creating real value for our customers. Second, we will deepen product innovation in our core growth areas, develop and differentiated and innovative products catered to specific customer segments. Our focus will remain on participating products in long-term health insurance to address demand for comprehensive coverage across both health care and wealth management. Third, we will accelerate and deepen our international expansion through Positec, growing the proportion of overseas revenue contrition and delivering sustainable long-term value for our shareholders. This concludes my prepared remarks for today. I will now turn the call to our CFO, Mr. [indiscernible], who will provide an overview of our key financial highlights.

Thank you, Mr. Ma and Kent -- good evening, everyone. First of all, we closed out the year very strongly with another solid performance despite a volatile macroeconomic and geopolitical landscape. On a full year basis, both gross written premiums and first year premiums facilitated on our platform has reached record highs of RMB 7.4 billion and RMB 4.6 billion, respectively. -- representing year-over-year increases of 21% and 35%, while total revenue grew 27% year-over-year to RMB 1.6 billion. Notably, we gained profitability with net profit of RMB 4 million and non-GAAP net profit of RMB 23 million. Our financial position remains solid with cash and cash equivalents of RMB 251 million as of the year-end. This exceptional performance was driven by our omnichannel distribution network, expanding high-quality customer base and efficiency gains on the strategic deployment of our advanced proprietary AI solutions, underpinned by continued progress in the execution of our international expansion strategy. Looking at our core business. long-term insurance products continue to be our strategic focus, which accounts for over 90% of our total GWP in 2025. FYP from long-term savings products surged 48% year-over-year to RMB 3.5 billion in 2025. Notably, FYP for annuity products more than doubled year-over-year to RMB 1 billion, which is driven by robust demand for wealth management and financial planning solutions in a lowering interest rate environment in China. We have capitalized on the national strategic guidance to build a multi-tiered health care protection system and the release of National Commercial Insurance innovative drug catalog with a launch Olin UN medical insurance products to address the long-term comprehensive health production needs of mid- to high-income families. By leveraging our well-established omnichannel distribution network and advanced AI solutions, we have significantly enhanced customer acquisition and engagement. Our total customer base has reached $12.3 million as of December 31, 2025, reflecting an increase of approximately 1.7 million customers over the full year. The repurchase ratio for our long-term insurance products remained solid at 36%, highlighting our opportunity to grow customer lifetime value through effective upselling and cross-selling. I would like to highlight several key operational achievements for the year that further demonstrate this progress. The FYP from our IFA business has increased by 44% sequentially to RMB 215 million in the second half of 2025, reflecting the impact our AI solutions are happening in enhancing the productivity of both our internal and independent financial advisers. FYP from short-term health and accident insurance grew 12% year-over-year to RMB 613 million, demonstrating our ability to innovate and deliver an increasingly diverse range of product offerings. As of December 31, 2025, our 13th and 25th month persistency ratios for long-term life and health insurance has remained at industry-leading levels of over 95% and underscoring the strong customer loyalty we attract with these diverse product offerings and the effectiveness of a post-sales servicing. The average ticket size of our long-term savings products rose 37% year-over-year to RMB 103,000 in 2025 driven in part by the increased sales of premium products internationally. In 2025, we have implemented our systematic 3-pillar AI strategy to enhance internal operational efficiency to improve customer experience and to drive platform transformation. Internally, we are fostering an AI-native culture across the organization. deploy AI solutions tailored to various business units that automate routine tasks and optimize workflows. On the customer front, we have upgraded our AI app with multi-agent architecture that facilitates integrated end-to-end user journeys with product recommendations, insurance underwriting and policy servicing. Additionally, we also unlocked new revenue opportunities through AI-driven product and service innovations. For instance, our AI financial planner is capable of designing tailored family insurance solutions based on client-specific information. Collectively, these AI solutions have delivered meaningful cost savings and productivity gains. Our total operating expenses increased at a slower pace than revenue rising by just 3.4% year-over-year to RMB 415 million. And consequently, our expense-to-income ratio improved significantly by 5.9 percentage points year-over-year to 26.3% for the full year of 2025. Furthermore, our AI-driven self-directed policy purchases grew by 50% year-over-year in 2025 underscoring the effectiveness of our AI agents. Pollinate, our international arm delivered another strong performance and remains a key pillar of our long-term growth strategy. In Vietnam, our majority-owned subsidiary, Global Care achieved impressive growth with the number of insurance policies issued increasing by 31% year-over-year, driving a surge of 106% and 84% year-over-year growth in GWP and revenue, respectively. Our IFA business in Vietnam had a particularly standout year with a number of active platform users contributing and parts issued going by [indiscernible]. threefold year-over-year in 2025. While GWP and revenue from this channel also grew significantly over 3.8x and 2.5x, respectively. Global Care also onboarded new merchant partners and launched Vietnam's first issuance influencer platform in July, a proven distribution model that's pioneered by Prezi China, further extending our digital reach in the local market. In Singapore, we obtained approval from the MAS to upgrade as a financial advisory and example insurance broker, marking a significant milestone in our regional expansion. This license reinforces our dual regional hub strategy across Singapore and Hong Kong, positioning us to attract cross-border assets and deliver premier protection and wealth management solutions to consumers across Asia. Collectively, the continued expansion of Pony Incotec will diversify our revenue streams and create new growth drivers, enhancing long-term shareholder value for Huaze. In conclusion, we are confident in our ability to capitalize on the opportunities arising from China's evolving industry landscape and the broader Asian market. Domestically, prevailing low time deposit rates are expected to continue to encourage retail depositors to reallocate the world towards high-yield savings and participating insurance products. In parallel, aligned with the national strategic directive to establish a multi-tiered production system, demand for long-term commercial insurance protection for health is expected to grow steadily, underpinning healthy and sustainable development across the entire value chain. Internationally, through Pony -- in trade, we are replicating our proven model in China and proprietary AI solutions to drive our expansion into high-growth Southeast Asian markets. with a particular focus on the young and fast-growing middle-class demographic in the region. We remain steadfastly committed to strengthening our positioning as Asia's leading Infratech platform by harnessing our advanced data analytics, fully integrated AI solutions and a proven market penetration strategy. Our vision remains focused on building an AI-driven intelligent ecosystem that seamlessly connects consumers our carrier partners and distribution partners, while consistently delivering and driving value to all stakeholders. And with that, we will conclude the opening remarks and open up the call to questions. Thank you very much, and over to you, operator.

[Operator Instructions] And now we're going to take our first question -- and it Cosan of Kenny Lim from UOB.

First of all, congestion on a strong result. So a few couple of questions from my end. First, your OpEx was well condemned by I noticed that the operating costs grew faster than the revenue. So could you give us more color on this? And how are you going to improve this? And second question will be, we know that few regulatory schedules in Hong Kong, like the broker, referee, cap and also content spreading are taking effect this year. So how does -- who is the plan to suspend the promoter in Hong Kong, -- these 2 questions of mine. Thanks.

Okay. Great. Thank you, Jenny, for your 2 questions. On the first question regarding the -- your observation on the operating costs growing faster than revenue growth. I think in the effect that would mean that there's a depressed gross margin year-over-year. The main reason for this has to do with the makeup of our revenue for the domestic market and also the international markets. The domestic market revenue contribution has declined because of the high growth of our international revenues. And our international revenue segment current a slightly lower gross margin and therefore -- but that is the observation that you've made that the operating costs has -- the growth of that has surpassed revenue growth. And that's the die of the makeup of the revenue as adjusted explains. So that's the first question. . We do expect that the gross margin or operating margin to remain at this level, and we do expect a slight improvement over the course of this year. Your second question on the Hong Kong market, we start to the regulatory cap on the referral fees and also on the commission spreading that has been in effect since the first of this year -- first of June of this year. We do expect and which has been seen in the market that there's been a dampening effect on the growth momentum of the overall brokerage market channel in Hong Kong, specifically coming from the MCV segment, which obviously, I think most of the China base focus on -- focus on. However, we do note that the underlying growth drivers for customers to seek out offshore product in Hong Kong remains very robust. And the momentum has not decrease year-over-year. We do see that with the substantive maturity of time deposits in the onshore market, which is to the tune for various estimates are putting that at around RMB 3 billion to RMB 5 trillion and a meaningful proportion of this could be allocated to offshore markets and Hong Kong would definitely be a natural recipient of this outflow. And therefore, the underpinning growth momentum should remain relatively robust. -- for the Hong Kong savings plan, which is the main products that are being distributed by brokers in Hong Kong. So with that, we do believe that we would expect that strong growth momentum would persist for our Hong Kong business in 2026.

Kenny, any further questions?

[indiscernible] .

[Operator Instructions] And now we're going to take our next question. And the question comes from line of Mona Wang from Greenridge Global.

Hello, everyone. This is Mona from Greenest Global. And it's great to see the company delivering several pegative development regionally. And there are 2 questions. 1 question, there was some more gross margin comparison in the first half of 2020 as compared to the same period in 2024, when looking at brokerage income against the cost of revenue, so except the AI, is there opportunity or another opportunity for the margin expansion? And the second question, you saw strong top line growth and throwing back to profitability in 2025, but the stock still shade below cash value. So we do think the stock is not moving with the fundamentals. Thank you.

Great. Thank you for the question, Mona, and thanks for joining us for the first time I appreciate your attendance. And -- with respect to your 2 questions, I believe the first question was about the compression of gross margin as it compares across 25 and 24 and whether AI could have a positive effect on improving gross margins. So I think 2, 2 fronts here. I think, as I explained to Kenny just now, in his first question. The gross margin depression in 2025 has to do with the makeup of our revenue and specifically, the contribution of our international revenue to the overall revenue pool. -- which has increased substantially over the course of 2025. And as a result, the gross margin has decreased because the international revenue carries a margin as compared to domestic or Mainland China revenue segment. So therefore, as a result of the 2, the gross margin has been decreased. However, as you know they're very accurately with the deployment of AI solutions and the initial results that we are seeing. Obviously, AI deployment has a significant cost savings or by efficiency improvement in the business flow in the mid to back office. As you can see, the expense ratio has improved by almost 6 percentage and that's more to do with the expense or cost savings point of view. But on a gross margin level, I think that what we can potentially envisage over the course of the next few years as AI continues to be deployed in the front line, i.e., in terms of customer acquisition into lead generation, we do believe that there could be a potential for a significant rerating or upgrade of our gross margin going forward. For example, we have noted in our opening remarks that AI has been driving a 50% year-over-year increase in self-service policy purchases by our customers in 2025. Our AI systems are capable of independently completing sales conversions and we have been generating over millions of RMB or premiums already through the AI engines. So this -- obviously, we do have the high hopes and high expectations that AI will continue to drive and scale our revenue-generating capabilities to the tune that we don't need any human interaction. -- or involvement in the entire customer acquisition and conversion process. So I think that's something that we are continuing to work hard towards, and that probably is the whole grill in terms of how AI can scale our profitability over the next foreseeable future. So that's something that we have already proven to the market, and we will continue to invest in driven growth in 2026. With respect to your second question about the fundamentals somehow is not tying with our share price performance. We do note that the market has been relatively pessimistic, I believe, on the performance of our company. It may have to do with the switch of our reporting schedule since the second half last year, we have migrated to a half yearly announcement schedule. And therefore, the market may have certain concerns on the continued sustainable growth and performance of the company. But as we have shown in this earnings release, we have delivered strong growth, not in terms of just top line and or premium growth, but also in terms of bottom line profitability. We have demonstrated that we are able to operate a very set business model. And with the advances in AI and our strong investment in AI-related proprietary products, across our business value chain, both in the front end and us. We do expect that altogether, we are looking at a very much a robust growth momentum in 2026. So that would hopefully drive a rating in our share price. You've noted that our share price right now is trading even below our net asset value, and therefore, there's significant room for us to rerate our share price to the more of an intrinsic value.

There are no further questions for today. I would now like to hand the conference over to your speaker, Mr. Kenny Lo Houses IR Director, for any closing remarks.

Thank you, operator. In closing, on behalf of its 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 us reach out to us. Thank you for joining us today. This concludes the call.

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