Huize Holding Ltd experienced a sharp decline in its stock price, falling nearly 27% after reporting Q3 2024 earnings that significantly missed revenue forecasts. The company's revenue came in at RMB 370 million, far below the expected RMB 1.07 billion, raising concerns among investors. Despite achieving record Gross Written Premiums and notable growth in First Year Premiums, the market reacted negatively to the earnings shortfall and guidance for a softer Q4.
Key Takeaways
- Revenue fell short of expectations, missing the RMB 1.07 billion forecast.
- Stock price dropped by 26.73% following the earnings announcement.
- Record Gross Written Premiums and strong growth in insurance segments.
- Guidance suggests a weaker Q4 2024 due to product transitions.
- Market sentiment remains very negative amid regulatory pressures.
Company Performance
Huize reported a record quarterly Gross Written Premiums of RMB 2.06 billion, reflecting strong operational performance. First Year Premiums grew by 110% year-over-year, and whole life insurance experienced a 150% increase. However, these achievements were overshadowed by a significant revenue miss, which has raised questions about the company's short-term outlook.
Financial Highlights
- Revenue: RMB 370 million, significantly below forecast.
- Gross Written Premiums: RMB 2.06 billion, a quarterly record.
- First Year Premiums: RMB 1.35 billion, up 110% YoY.
- Net Profit: RMB 18.7 million.
Earnings vs. Forecast
Huize's revenue of RMB 370 million fell short of the RMB 1.07 billion forecast, missing expectations by a wide margin. This discrepancy highlights potential challenges in meeting growth projections and suggests a need for strategic adjustments.
Market Reaction
Following the earnings release, Huize's stock price plummeted by 26.73%, reflecting investor concerns over the revenue shortfall and future guidance. The stock's performance contrasts sharply with its 52-week high of $10.58, underscoring a significant loss in market confidence.
Company Outlook
Looking ahead, Huize aims to expand its international business, targeting 30% of total revenue by 2026. The company plans to enter the Singapore and Philippines markets within the next year. However, management anticipates a weaker Q4 due to ongoing product transitions.
Executive Commentary
"We are confident that our strategies will further solidify our position as Asia's leading insurance technology platform," said Ron Tam, CFO. CEO Chen Jin Ma noted, "2024 has been a year of both challenges and opportunities," highlighting the company's commitment to leveraging partnerships to maximize resources.
Q&A
During the earnings call, analysts inquired about potential healthcare services expansion and the impact of regulatory changes on gross margins. The company clarified its expectations for Q4 and 2025, addressing concerns over future performance.
Risks and Challenges
- Regulatory pressures impacting gross margins.
- Potential difficulties in achieving international expansion goals.
- Market saturation in key segments.
- Macroeconomic factors affecting consumer demand.
- Operational challenges in product transitions.
Full transcript - Huize Holding Ltd (HUIZ) Q3 2024:
Conference Operator: Ladies and gentlemen, thank you for standing by, and welcome to Quaest's Third Quarter 2024 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 on Waitr's IR website at ir. Waitr.com under the Events and Webcasts section.
I'd now like to hand the conference over to your speaker host today, Mr. Kenny Lo, Huite's Investor Relations Manager. Please go ahead, Kenny.
Kenny Lo, Investor Relations Manager, Huizhai: Thank you, operator. Hello, everyone, and welcome to our Q3 2024 earnings conference call. Our financial and operational results were released earlier today and are currently available on both our IR website and Global News Wire 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 note that we will discuss non GAAP measures today, which are more forwardly explained in our earnings release and filings with the SEC.
Joining us today are our Founder and CEO, Mr. Chen Jin Ma COO, Mr. Li Yap Co CFO, Mr. Min Han Sia and Co CFO, Mr. Ron Tan.
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 quarter before we open up the call for questions. I will now turn the call over to Mr. In Q3 2024, as the effects of the government's policy mix began to materialize and market confidence improved, China's macroeconomy showed signs of steady recovery.
In September, the State Council issued the opinions on strengthening supervision, refining risk and promoting high quality development of the insurance industry, charting a cause for the high quality development of the insurance sector. In response to industry trends, Huizhai refined its product strategy, capitalized on market opportunities and built on its international expansion efforts over the past 2 years. As a result, the company achieved strong performance this quarter. In Q3, gross written premiums or GWP facilitated across all platforms reached RMB2.06 billion, setting a new quarterly record. Total (EPA:TTEF) revenue amounted to RMB370 1,000,000 and net profit reached RMB18.7 million delivering a solid and commendable results.
In the Q3, total 1st year premiums or FYP facilitated
Ron Tam, CFO, Huizhai: on
Kenny Lo, Investor Relations Manager, Huizhai: the platform amounted to approximately RMB1.35 billion, up 110% year over year. Renewal premiums reached approximately RMB706 1,000,000 up 18% year over year. From a product mix perspective, savings products were among the most popular insurance offerings prior to the downward adjustment of the assumed interest rate. In the Q3, FYP from savings products saw a 1.5 fold increase year over year. Notably, FYP for whole life insurance reached approximately RMB765 1,000,000 of 150 percent year over year.
Meanwhile, our short term insurance business recorded double digit growth with gross written premiums climbing 40% year over year to approximately RMB129 1,000,000. This further enhanced our
Ron Tam, CFO, Huizhai: ability to provide diversified product offerings.
Kenny Lo, Investor Relations Manager, Huizhai: Building on our profound customer insights and service capability, we remain committed to serving high quality customers and delivering superior service experience. By the end of the Q1, the cumulative number of insurance clients served surpassed a significant milestone of 10,000,000. The average age of customers who purchased long term insurance products in the Q3 was 35, among which 60.7% were located in higher tier cities, reflecting our high quality customer profile. The average FYP size of long term insurance products rose nearly 140% to approximately RMB9630. The average FYP ticket size of savings product reached approximately RMB79000, up 59% year over year.
As of the end of August, 13th month and 25th month persistency ratios for long term insurance both exceeded 95%, remaining at an industry high level. As of the end of the Q3, we maintained stable partnerships with 123 insurance companies. Drawing on deep insights into customer needs and leveraging on our product development capabilities, we continued to introduce new tailored insurance offerings and reaching our product metrics. In August, we partnered with CPIC P&C to launch LITESGOL, accident and health insurance covering 2 critical areas of protection for students. Meanwhile, we continued to iterate and upgrade our existing products.
In September, we partnered with new China Life Insurance (NS:LIFI) to launch the upgraded Waste 2.0 Lifetime Annuity Insurance, leveraging product innovation to support the high quality development of the National 3rd pillar pension system. And powered by AI, we have been driving the digital upgrade of our sales operations and developed a suite of AI powered tools that can improve internal efficiency and business development capabilities. Since the beginning of this year, we have leveraged AI to swiftly generate high quality marketing materials, including articles, infographics, videos and customized digital avatars, enabling widespread content distribution on social media. Meanwhile, AI powered knowledge basis and customer service tools provide efficient insurance support for external users, agents and back office teams, streamlining their access to information and solutions. In terms of sales tools, AI enables the intelligent generation and optimization of proposals and underwriting tools, providing precise support to the sales team.
Furthermore, we introduced an AI sales assistant that can conduct semantic analysis and evaluate the sales stage to help formulate more target communication strategies. By year end, these initiatives are expected to drive a 50% improvement in content production, further enhancing the surface capabilities of our teams. This year, we have made encouraging and continuous progress in expanding our international business. In the Q1 of 2023, even with strong performance in our domestic business, our international business contribution to total revenue reached a new record high of 19%, up big percentage points compared to the previous quarter, mainly driven by the strong demand for premium products in our international business. Our international growth at the year, 1st, to diversify revenue streams by expanding into overseas markets and second, to establish new growth trajectories and foster the group's long term sustainable development.
To this end, we have established the headquarters of our overseas brand, Puneechee Tech in Singapore, positioning it as the strategic hub for our international operations. Through mergers and acquisitions and joint ventures, we are working with local partners to accelerate our expansion into Southeast Asia with clear regional business model. Hong Kong and Singapore will cater to the inbound insurance needs of high network and mass affluent clients in the region. While in the VIP markets of Vietnam, Indonesia and the Philippines, we will focus on the high growth potential of these markets enhancing digital insurance penetrations by offering embedded insurance solutions, further expanding user coverage and market share. In September, we have successfully entered the Vietnam market with acquisition of a leading XU Tech platform GlobalCare.
In October, we jointly launched GlobalCare. Vn with GlobalCare in Vietnam, an insurance comparison platform positioned as a one stop insurance supermarket to provide consumers with a superior transparent and user friendly insurance shopping experience. This milestone signifies the continued deepening of our international expansion. The successful expansion into the Vietnam market has not only reinforced our leadership in the international expansion journey, but also set a benchmark for future market expansion. Looking forward, we plan to enter 2 additional overseas markets within the next 12 months, Singapore and the Philippines.
In the Philippines, we have identified a well established electronic service provider and plan to form a joint venture combining Hoeijer's technological capabilities with our partners' local resources to promote digital insurance services for local consumers. In Singapore, we have formed an experienced team and are in the process of applying for an insurance brokerage license with plans to further develop high end insurance services in the region and establish another key insurance service hub in our international expansion journey. By 2026, we target our international business will account for 30% of our total revenue, driving diversified growth and creating long term value to the group. 2024 has been a year of both challenges and opportunities. Leveraging our deep understanding of consumer needs and exceptional product capabilities, we have demonstrated remarkable resilience by adapting our business strategies amid industry transformation, while also experiencing significant growth in our international business.
Looking ahead to 2025, the Chinese insurance market continues to present opportunities for development. We will continue to collaborate closely with insurance companies to maximize and leverage our combined resources and strengths, while launching a diverse range of innovative customized products tailored to the market needs and trends. Moreover, we will proactively capitalize on opportunities in the international markets, particularly in emerging Southeast Asian markets to enhance Huizeng's competitiveness. With these efforts, we aim to inject new growth momentum into the company and remain committed to delivering greater value for our shareholders. This concludes my prepared remarks for today.
I'll now turn the call over to our CFO, Mr. Ron Tam, who will provide an overview of our key financial highlights for the Q3.
Ron Tam, CFO, Huizhai: Thank you, Mr. Mahai and Kenny. Good morning to our friends in the U. S. And good evening everyone from Asia.
So just to quickly recap the Q1 results, I think we have delivered a very strong set of record results in terms of GWP facility on a platform amid the challenging macro environment in the industry landscape. Total GWP reached a record quarterly high of RMB 2,000,000,000 while our total FYP also more than doubled to RMB 1,350,000,000. We also recorded a non GAAP and GAAP net profit of RMB 18,300,000 for the quarter. Ability (OTC:ABILF) to meet evolving consumer demand for long term insurance products amid ongoing regulatory reforms can be attributed to our efficient omni channel distribution network, covering online and offline channels, our relentless efforts to attract high quality customers, our sophisticated product innovation capabilities and our proprietary AI solutions. More importantly, we are the pioneer in the industry to initiate international expansion, a strategic move that is set to become a new growth driver for our long term sustainable development.
Our strategic focus has still remained on long term insurance products, which have accounted for over 90% of our premium facilitated for 5 years. Meanwhile, omni channel distribution ecosystem and proprietary AI tools further strengthened our customer acquisition and engagement capabilities. In the Q3, we added about 287,000 new customers to our ecosystem, bringing our total number of customers to a milestone of 10,000,000 mark as of the end of the third quarter. The repurchase ratio for our long term insurance products stood at a very high 40.2% during the quarter as well, which highlights our ability to continuously up sell, cross sell and capitalize on the lifetime value potential of a high quality customer base. Our open platform architecture continues to empower both our internal financial advisors and also external independent financial advisors or IFAs.
Total FYP for our 2A business surged by 102% year over year to RMB 181 1,000,000 in the 3rd quarter. We also leverage on our self developed AI solutions to streamline operations and further enhance operational efficiency. In the Q3, our expense to revenue ratio improved by 5 percentage points year over year to 24%. I will also highlight other key achievements over the quarter, which includes the following. Number 1, renewal premiums increased by 18% year over year to approximately RMB706 1,000,000 which again is underpinned by our percent by high percentage ratios for long term life and health insurance, which as of the end of August remained at our industry leading high level of over 95% for both 13 months and 26 months.
The average ticket size of our long term savings product reached a record high of over RMB78000 in the 3rd quarter, which is up by 59% year over year, partly reflecting an increased contribution from premium product sales in our international market segment, which is predominantly Hong Kong. We continue to pursue a balanced mix between long term health and savings products. FYP for our long term health products surged by 67% year over year to approximately RMB173 1,000,000 primarily driven by our customized products with CPIC. Meanwhile, FYP from short term health and P and C products sustained steady growth of 14% year over year to approximately RMB 129 1,000,000. In terms of our liquidity position, our financial position remains very robust with a combined balance of cash and cash equivalents of RMB 243,000,000 or US35 million dollars as of the end of September.
Going forward, we'll continue to empower our insurance agents, our distribution partners and our IFA partners with an optimized omnichannel distribution ecosystem, which product offerings and advanced AI tools to support customer acquisition and engagement. Impara will continue to leverage on our successful China proven business model to capitalize on the tremendous unpegged market opportunities across Southeast Asia through our international arm, Pony InsurTech. Our total international revenue contribution for this quarter rose to 19% of total group revenues, which is up from 11% in the last quarter, which is mainly driven by our ongoing expansion of the business in our Hong Kong segments. Alongside our expansion in Hong Kong, in September, we completed the acquisition of a controlling stake in Global Care, our Finam based subsidiary. We have since enhanced the Global Care platform with innovative customized insurance products, distribution partnerships and comprehensive AI solutions, which is aiming to accelerate business growth through its mainly embedded insurance model.
We are confident that we can achieve a more prominent revenue contribution from our Vietnam operations in the new year 2025. Moreover, as we have alluded to earlier in the opening remarks, we plan to enter 2 further markets in Southeast Asia, which is namely Singapore and the Philippines in the next 12 months. We believe that these initiatives will further diversify our revenue streams and service new growth drivers to enhance long term shareholder value. We are now presently on track to achieve our international revenue contribution target of 30% of group revenues by 2026. In summary, we are very well positioned to benefit from China's evolving industry landscape, which is expected to foster healthy and sustainable growth across the entire insurance value chain.
We will also capitalize on growing economies, large and down demographics, urbanizing middle class populations and an increasing demand for digital insurance solutions in Southeast Asia to expand our international footprint. We are confident that our strategies will further solidify our position as Asia's leading insurance technology platform, connecting consumers, insurance carriers and distribution partners digitally and efficiently through our data driven and AI powered solutions. And my final remark on a recent capital market development as of yesterday, December 9th, our ADS ratio change has become effective, which in effect has a 5 to 1 wafer split effect on our shares outstanding and share price. And this has been reflected in the market trading as of yesterday. And with that closing remark, we will now open up the call to questions.
Thank you and over to you, operator.
Conference Operator: Thank you. We will now begin the question and answer session. We'll now take our first question from the line of Amy Chen from Citi. Please ask your question, Amy.
Amy Chen, Analyst, Citi: Hi. Thank you very much and congratulations on a very decent quarter, especially a very strong GDP growth. My first question would be on your full year guidance for net profit. It's very good to see that Brazil has turned profitable again in the Q3. What would be your outlook for the 4th quarter and also for the next year of 2025?
The second question is mainly on
Conference Operator: expense wise.
Amy Chen, Analyst, Citi: First, I noticed that actually the gross margin has seen a little bit of pressure in the Q3 this year. Do you think that the impact of the expense rationalization in the broker channel has been fully reviewed? Or do you think that gross margin could be further pressured going on? Secondly, we noticed that the G and A expenses actually rose quite significantly and management actually attributed this to increase in rental and utility expenses. Would you mind elaborating more on this?
Thank you very much.
Ron Tam, CFO, Huizhai: Thank you, Amy. Thanks for joining us again as always. So with regards to your few questions, I would just address 1 by 1. In terms of the first question on our full year guidance for 2024, I think we would like to say that Q3 has been a very strong quarter, mainly due to a couple of reasons. And I think the most prevalent one has to do with the so called the adjustment of the interest rate in the China Mainland China products relating to the savings products category.
That has driven a lot of upfront demand by customers or the open market into the month of July August and particularly in August. So some of the demand has been front loaded into Q3. And as a result, we think Q4 what we envisage is a somewhat lukewarm recovery in this particular product category on the savings side. But we do have an offsetting growth continuously in our offshore market, which is predominantly our Hong Kong segment is still seeing strong momentum in the months leading up to the current December month. So there would be some offsetting effect on that part.
But overall, we think that still given that our mainland China business consists of the predominant share of our overall FIP and revenue as a result. And therefore, we think that the Q4 quarter would likely be less strong as a quarter as compared to Q3. The other factor that we have to deal with right now is the overall product transition into the new regime of the power products, which is now being promoted mostly by the intermediaries, in particular, the brokerages like ourselves. And therefore, the change of the mind share and the mindset of the consumers from the traditional savings products into the car product, it still takes time to mature. We think that this probably is a process for the next 2 to 3 quarters.
And therefore, we think that as a result as well, Q4 on the savings category, we do see that the demand will be definitely not as strong as we've seen in Q3. So at this point in time, we think that the 4th quarter would be less strong as Q3. So that's the first question. The second question on gross margins, you have correctly noted that the gross margin has declined to around 27% in the Q3, which is a slight drop from the levels in Q2. We do think that this level of gross margin has fully reflected the effect of the so called expense rationalization on the brokerage channel or Baoxing Ke Yi.
The regulatory effect also has to do with a decline in the overall commission rates. And therefore, as a result, because a lot of our business also is in partnerships with other distribution channels partners, right? And therefore, as a result of that, the channel economics needs to be adjusted to compensate for the decline in commission rates, the headline commission rates or take rate. And therefore, the gross margin has been compressed a bit as a result of the cost structure or economic structure for the value chain. We do see that this level should more or less be we think that at least on the Mainland China business side should remain relatively steady going forward in the next few quarters as the full effects of the rationalization has been felt in Q2 and Q3.
And on your third question on G and A expenses, we do note that on a quarter on quarter basis, it has trended down from Q2. And we do not expect that G and A expense to materially increase from this point onwards because we are highly focused on further optimization of our overall cost structure across the selling expenses, G and A and R and D, especially with a fixed cost base. We have a very strong and clear target to improve our cost to revenue ratio in this particular part of the cost structure of the company.
Amy Chen, Analyst, Citi: Thank you very much. That's very
Ron Tam, CFO, Huizhai: clear. Thank you, Amy.
Conference Operator: Thank you. Your next question comes from the line of Ray Guo from CICC. Please ask your question, Ray.
Ron Tam, CFO, Huizhai: Hi, thank you. I have one question for the management. And does the company have any plans or further plan on the health management industry because the commercial insurance companies are likely to have access to medical data of hospitals and perhaps Huizhou has any further plan on the health management industry? And another one is about the 2025 FYP guidance. Do we have any guidance on the amount of 2025 FYP?
Thank you. Right. Thank you. Thank you, Ray, for joining the call. For the first question, I think the question was about whether we have plans to enter the healthcare services segment or the healthcare industry because we have a very strong focus on life and health insurance as a whole.
We do have plans. Actually, we do have already established our own Internet healthcare platform, although the business model and business scale has been still at a start up stage. I think our focus going forward would still continue to be coming up with the right customized products to tackle market pain points, especially on the consumer side, because what we see that going forward is the trends that we are seeing in the healthcare industry. For example, the DRG reforms, which will lead to, we believe, a very strong necessity among consumers to upgrade their health care coverage with respect to pursuing commercial insurance to complement to what they have already on a Social Security level. So we are setting our focus on the mid to high end medical health product going forward in the next 2 to 3 years.
Our plan is already we have solid plans to come up with a customized product in the near future, probably in the next two quarters that will provide good coverage to our target customers in respect of this overall healthcare reforms that we are seeing in the industry. So that's the first question. A second question on guidance for full year 2025, We do think that right now it's a little bit early. We would be providing guidance to the market when we reach our Q4 results, which will be scheduled for a few months down the road. Thank you, Ray.
Conference Operator: Do you have any follow-up question, Ray? All right. Thank you. I'm showing no further questions. And with that, I'll turn the conference back to Mr.
Kenny Lo for closing comments.
Kenny Lo, Investor Relations Manager, Huizhai: Thank you, operator. In closing, on behalf of OHS 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.
Conference Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
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