Ladies and gentlemen, thank you for joining us for Huize's Second Quarter 2025 Earnings Conference Call. Today's call is being recorded, and a replay will be available on Huize's Investor Relations website. I would now like to turn the call over to Mr. Kenny Lo, Huize's Investor Relations Manager. Please proceed, Kenny.

Thank you, operator. Hello, everyone, and welcome to our second quarter 2025 earnings conference call. Our financial and operational results were released earlier today and are currently available on both our IR website and Globe Newswire services. 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. Ron Tam. Mr. Ma will start the call by providing an overview of the company's performance and operational highlights, followed by Mr. Tam, who will go over our financial results for the second quarter 2025. Then we will open the call for questions. I will now turn the call over to Mr. Ma.

Hello, everyone, and thank you for joining Huize's Second Quarter 2025 Earnings Conference Call. In this quarter, we remained committed to a customer-centric approach, focusing on evolving customer needs and collaborating with industry leaders to expand our product offerings. Our strong results were supported by a high-quality customer base, industry-leading persistency ratios, and a diverse range of products. Huize generated total revenue of RMB 400 million, a three-year quarterly high, with net profit reaching RMB 10.9 million. Gross written premiums on our platform rose 34% year-over-year to RMB 1.8 billion, and first-year premiums surged by 73% year-over-year to RMB 1.13 billion. We continue to enhance our comprehensive service ecosystem while targeting high-quality young customers. By the end of the second quarter, Huize's total insurance users exceeded 11.4 million, with about 400,000 new clients added during the quarter. Our long-term insurance customers had an average age of 35.2, with over 65% located in first and second-tier cities in China. By focusing on these premium customer groups, we have further fueled sustainable business growth. The average first-year premium for long-term products rose 87% year-over-year to RMB 7,600, and our retention metrics continued to outperform the industry, with both the 13th and 25th month persistency ratios above 95% as of May. In addition to long-term products, we are dedicated to providing a diverse array of insurance solutions. Our short-term insurance segment also experienced robust growth, with gross written premiums increasing 19% year-over-year to approximately RMB 140 million. As of the end of the second quarter, we expanded our partner ecosystem, collaborating with 146 insurance companies and driving innovation in customized and diversified insurance products. Given the trend towards steady financial planning and an aging population, our early entry into participating products has yielded significant results. We launched the Bliss (Golden Edition) annuity tailored to client wealth management needs, as well as the Xiao Shen Tong 7.0 children’s accident insurance in partnership with Ping An Property & Casualty Insurance, and the ‘Little Scholar 2.0 Pro’ student accident and medical insurance with PICC Property & Casualty, providing comprehensive protection for children and students. We also utilized years of AI research and investment to implement company-wide AI agents, enhancing efficiency, reshaping core processes, and paving the way for deeper business model transformation. This has enabled us to unlock new growth pathways and solidify the foundation for sustainable value creation. With the ongoing rollout of AI initiatives, our expense-to-revenue ratio improved by 16.6 percentage points year-over-year to 23.9%. We have accelerated the use of AI tools and fostered an AI-driven culture within the company, resulting in measurable productivity gains. In R&D, we introduced the Vibe Coding model, with AI now generating over 200,000 accepted lines of code monthly, significantly speeding up product iterations and technological advancements. To support this transformation, we built a training system for employees of all levels to engage in advanced AI practices. AI adoption is comprehensive, with more than 300 employees able to create and deploy AI agents on our low-code platform. Together, we have launched over 700 productivity-enhancing AI agents, improving operational efficiency, workflow, and risk management. Drawing from nearly two decades of industry experience, we have established one of the most extensive sets of proprietary data in the insurance sector, comprising millions of customer interaction records and a knowledge base of over 10,000 insurance products. This foundation allows us to provide highly personalized services tailored to individual customer profiles. We introduced 24/7 AI customer support, which increased the self-service purchase rate among new users by 50%. The AI customer support also covers product recommendations, claims assistance, and policy delivery to over 20,000 customers monthly. These results affirm AI's value in enhancing sales and efficiency. We are expanding deployment across more touchpoints to develop a high-quality closed-loop growth engine from customer-rich conversions to automated services. Poni Insurtech, our international arm, has received a financial adviser and insurance broker license from the Monetary Authority of Singapore, marking a significant milestone in our Southeast Asia expansion. Additionally, our Vietnam subsidiary, Global Care, reported a 32% year-over-year increase in both gross written premiums and revenue. We launched Vietnam's first KOL platform for the insurance sector, digitally empowering distribution and leveraging the country's high social media usage to enhance product reach and conversion efficiency. Simultaneously, we fortified partnerships with leading local companies, including GXE, an emerging online logistics platform, and MWG, Vietnam's largest retail group, supported by Global Care's technological capabilities. These partnerships are promoting embedded and micro insurance across various applications. Utilizing our international platform, we offered commercial insurance services to Chinese investor enterprises in Vietnam and facilitated the placement of corporate property policies with a value of RMB 1 billion. This exemplifies our extensive product offering in the local market and showcases the success of our internationalization strategy. Looking ahead to the second half of the year, China's insurance industry is experiencing strong growth driven by increased demand for health, retirement, and wealth management services. Regulatory policies are facilitating a shift towards high-quality growth, greater standardization, and enhanced technology adoption. In this context, AI is becoming a central growth driver, improving customer experiences, lowering operating costs, and enhancing risk management. Meanwhile, Southeast Asia's rapid digital adoption and growing middle class are pushing insurance penetration to a critical stage, creating significant opportunities and positioning the region as key for further globalization of China’s insurtech capabilities. Against this backdrop, Huize will continue to integrate AI throughout our entire value chain, transforming industry dynamics and unlocking new growth potential. At the same time, we will further develop our ecosystem in Southeast Asia to seize long-term opportunities arising from demographic trends and increasing insurance penetration, collaborating with local partners to establish a broader and smarter digital insurance ecosystem. This concludes my prepared remarks for today. I will now turn the call over to our CFO, Mr. Ron Tam, who will share an overview of our key financial highlights for the second quarter.

Thank you, Mr. Ma and Kenny, and good evening to everyone in Asia, and good morning to everyone in the U.S. The opening remarks have covered the operational highlights quite thoroughly. In my section, I will share some key points regarding our financial metrics. In light of the changing macroeconomic and geopolitical landscape, the second quarter has been noteworthy, with total gross written premiums and first-year premiums facilitated increasing by 34% and 73% year-over-year, reaching RMB 1.8 billion and approximately RMB 1.1 billion, respectively. Total revenue for the quarter reached a three-year high of approximately RMB 400 million, up 40% from last year. We also reported GAAP and non-GAAP net profits for the quarter of approximately RMB 11 million and RMB 8 million, respectively. Our financial position remains strong, with a combined balance of cash and cash equivalents amounting to RMB 239 million at the end of the second quarter. This strong operational performance was driven by our efficient omnichannel distribution network, our efforts to acquire high-quality customers, and the integration of advanced proprietary AI solutions. Importantly, we are on schedule to execute our international expansion strategy, which is a key growth driver for our long-term sustainable development and shareholder value creation. Our strategic focus continues to be on long-term insurance products, which make up over 90% of our total gross written premiums facilitated. First-year premiums from our long-term savings products more than doubled year-over-year to RMB 864 million in the second quarter. By leveraging our robust omnichannel distribution network and advanced AI solutions, we significantly enhanced our customer acquisition and engagement capabilities, adding approximately 400,000 new customers during the second quarter, resulting in a total customer count of over 11.4 million by the end of the quarter. The repurchase ratio for our long-term insurance products remained strong at 37%, highlighting our ability to maximize the lifetime value of our high-quality customer base through effective upselling and cross-selling strategies. I would also like to mention a few other key achievements from the quarter. First, the first-year premium for our IFA business increased by 13% year-over-year to RMB 84 million, demonstrating our ongoing efforts to empower both our internal and external international financial advisers. Second, as of the end of the second quarter, our 13th and 25th-month persistency ratios for long-term life and health insurance remained at industry-leading levels of over 95%. Third, the average ticket size of long-term insurance products distributed rose 41% sequentially to RMB 7,615, partially reflecting higher premium product sales in our international market segment. We have established a private AI large language model and a local application development platform to enable employees to become in-house AI agent developers. Over 200 employees have created and deployed AI agents, producing more than 500 productivity-enhancing tools. Our extensive use of AI-driven automation has resulted in cost savings and increased productivity. Our total operating expenses decreased by 17% year-over-year to RMB 95 million, and our expense-to-income ratio improved significantly by 16.6 percentage points year-over-year to 23.9% in the second quarter. Poni Insurtech, our growing international division, had another strong quarter and remains a central element of our long-term strategy. For instance, in Vietnam, our majority-owned subsidiary, GlobalCare, achieved impressive growth, with gross written premiums and total revenue both increasing by 32% year-over-year in the second quarter. Active platform users grew by 52%, while the average ticket size in the B2A2C business line tripled sequentially. GlobalCare also partnered with new merchants, including GXE and Mobile World Group, to offer embedded and micro insurance products powered by its advanced technology. In July, GlobalCare launched Vietnam's first insurance KOL platform, replicating our successful model from China. Additionally, we received approval from the Monetary Authority of Singapore for a financial advisory license, further expanding our presence in Southeast Asia. These strategic initiatives aim to diversify our revenue streams and develop new growth drivers to enhance long-term shareholder value. In conclusion, we are optimistic about our ability to take advantage of the opportunities that arise from the transforming industry landscape in China and the broader Asian market. Domestically, the strong demand for long-term protection will foster healthy and sustainable growth across our entire value chain. Internationally, through Poni Insurtech, we are adapting our proven model and proprietary AI capabilities from China to rapidly growing Southeast Asian markets, focusing on the young and expanding middle-class demographics. By leveraging our advanced data analytics and integrated AI solutions along with disciplined market penetration, we are committed to establishing ourselves as Asia's leading insurtech platform for distribution and creating an AI-driven intelligent ecosystem that connects consumers, insurance providers, and distribution partners while creating lasting value for all stakeholders. We will now open the call to questions. Thank you very much, and I will hand it over to the operator.

We will now take our first question from the line of indiscernible from CICC.

This is indiscernible from CICC Research. First of all, congratulations on the remarkable business performance in the second quarter this year. I have two questions for the management. First, Huize has successfully executed its strategy shift towards participating insurance in recent years. Could you please elaborate on the approaches the company has taken to enhance the team's professional capabilities in selling participating insurance and what plans are in place for deeper cooperation with insurers on the development of participating products? What is the company's guidance for sales performance in the second half of the year? This is the first question. The second question is that Huize is recognized as the first insurance service platform to integrate DeepSeek in the industry, and the company's Xiao Ma claims have significantly improved claims handling efficiency. Could you please elaborate on how Huize intends to further leverage AI technology to enhance product sales, long-term customer relationship management, and achieve greater efficiency and cost control?

Thank you for your two questions. Your first question was about our achievements in power product distribution. Over the last two years, we anticipated the industry's shift towards power products becoming mainstream, particularly with the expectation of declining interest rates in China, and we believe our foresight has been validated. Since 2023, we have been actively promoting training for our agents and encouraging channel partners and independent financial advisors connected to our platform to familiarize themselves with these products. This training has yielded positive results from our early anticipation. In terms of product supply, we have proactively sought partnerships with our upstream insurance providers to develop customized savings products that meet our clients' needs. We have successfully launched customized power products with leading brands like Aviva-COFCO, and our Fu Man Jia product has been a top seller in the power category over the past two quarters. We also collaborated with a Chinese joint venture between a state-owned enterprise and Generali, which has become a leading product in both online and offline markets. Our innovation extends to annuities and retirement products as well; for example, our recent launch with Bosun Primerica exemplifies this. We offer a range of options, including endowments, annuities, and retirement plans with power features, giving us a competitive advantage in the market. We are proud to be ranked among the top three distribution channels for power products in the broker and agency segment in China. Regarding guidance, we continue to see growing market interest in power products, driven largely by consumer education through our online and offline channels, as well as traditional insurers and agencies. Consumers recognize the relative appeal of power products, especially in a declining interest rate environment, where their overall returns are superior to traditional fixed-income options like bank deposits. We expect sequential growth in power product distribution for both Q3 and Q4. In response to your last question about our AI strategy and productivity improvements beyond claims processing, we have already begun implementing AI in customer acquisition. Our mobile app, integrated with DeepSeek, offers personalized product recommendations based on customer feedback and leverages our extensive knowledge base to enhance customer experience. Another critical area for AI deployment is underwriting, where it enables us to manage risk more effectively by matching suitable products to individual risk assessments, likely improving conversion rates. This capability is also important for long-term customer relationship management, as our AI tools can remember customer interactions, allowing us to provide personalized service when they return to our app. These examples demonstrate our ongoing AI deployment efforts, and though we are just starting this journey, we anticipate significant benefits from future investments in this area.

We will now take our next question from the line of Amy from Citi.

This is Amy from Citi Research. Congratulations on a profitable quarter. I have two questions. The first one is about your overseas business. You previously mentioned that the average ticket size increased sequentially, partly due to participating sales in international markets, which I assume mainly refers to Hong Kong. I'm curious if this was influenced by the change in the regulatory cap on illustrated product returns and how the sales momentum has been in the third quarter so far. Additionally, regarding regulatory changes, starting October 1, there will be a cap on broker channel referral fees, and from the beginning of next year, commissions in the broker channel will need to be spread out. How do you think these changes will impact your business, especially in Hong Kong? My second question concerns the net profit outlook. We noticed that after the second quarter, Huize has already reported a net profit in the first half. What is your earnings guidance for the full year of 2025?

Thank you, Amy, for your two questions. Regarding the Hong Kong business, you are correct to mention that regulatory changes regarding illustrated returns have affected sales in the second quarter. We've observed significant demand for Hong Kong products in the last month of Q2, which will likely be reflected in the Q3 results due to revenue recognition. This has impacted sales across the entire industry. As for the other regulatory developments, we believe that the continued demand for offshore products is influenced by the interest rate difference between onshore and offshore markets. We think the underlying situation remains unchanged, though we anticipate the U.S. will likely reduce interest rates in upcoming meetings, possibly by another 50 basis points by the end of the year. Nevertheless, the appeal of offshore products still offers a substantial yield advantage over onshore options. We expect this momentum to continue in this segment of the business. Now, regarding your second question about net profit outlook, we are pleased to have delivered a profit in Q2 and anticipate sequential improvement in our net profit for the upcoming quarter, all while continuing to invest in business growth. Currently, we expect a profit for the second half of the year, with particularly meaningful sequential growth in our earnings profile for Q3.

That's very clear. May I have a quick follow-up. How much of your revenue is contributed by international business in the second quarter?

Right. I think we would like to say that we are on track in delivering our previously given outlook for the year. So I think that will be the answer.

Our next question comes from Kenny Lim from UOB Kay Hian.

First of all, congratulations on the solid results. So I have 2 questions from here. So my first question is regarding your margin performance. Apart from improvement in the expense to income ratio, I noticed that your gross margin also improved sequentially. Could you give us more color on this and how sustainable it is? How you balance between your channel cost growth as well as your premium growth? And my second question is regarding your product mix. Since you quoted that the demand for the product is quite strong. I would like to ask that how is the performance of your demand for the health and protection products? That's all from my end.

Thank you for your questions, Kenny. I'm glad to hear from you. You had two questions. First, about the gross margin outlook. We do see a stabilization of gross margin in the second quarter, with a slight increase from Q1; Q1 was around 26%, and this quarter it's around 27%. We expect this stabilization to continue at this level for the next few quarters. The negative impact felt by the industry in China due to regulatory changes has been fully realized, which is reflected in the second quarter results. The overall business has adapted to the new environment, and most of our products and channel costs have stabilized. Therefore, we believe our gross margin will remain relatively stable in the foreseeable future. Your second question was about the HMP product segment. We see a modest improvement in demand in the second quarter compared to the first. Specifically, the HMP segment experienced a 24% sequential growth in first-year premiums from Q1 to Q2. Overall, the macroeconomic environment in China is showing signs of stabilization, with increasing customer and consumer confidence. This indicates that the HMP segment should continue to grow steadily. We will also be investing in this product category, although the savings product isn't the main performance driver. The health and protection product is typically higher margin, and with the recovering macroeconomic conditions and consumer confidence, we plan to invest more in this area. That addresses your questions.

Ron, just a follow-up question. I saw that your commission rate improved year-on-year. May I know what is the main driver?

Sorry, can you repeat that question, sorry?

I noted that your blended commission rate improved sequentially. May I know what is the main driver?

Right. I think they are mainly due to the improved contribution from our customized products, which typically carries a higher commission rate.

I am showing no further questions. And with that, I'll turn the conference back to Mr. Kenny Lo for his closing comments.

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.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.