Amy Chen

Amy Chen asked about the drivers behind the improved efficiency of selling and marketing expenses as a percentage of revenue, its sustainability, and management's thoughts on shareholder returns like dividends or share buybacks.

Answer

CFO Ray Wan explained that marketing efficiency improvements are due to dynamic strategy adjustments, though seasonality exists, and the company aims for balanced growth and efficiency. He added that shareholder return strategies, including dividends, are actively being evaluated.

Amy Chen asked about the drivers behind the improved efficiency of selling and marketing expenses as a percentage of revenue, its seasonality, and sustainability. She also inquired about management's thoughts on shareholder returns, specifically dividends or share buybacks.

Answer

Ray Wan, CFO, explained that marketing efficiency has some seasonality due to acquisition strategy adjustments but shows continuous improvement over 13 quarters, aiming for balanced growth. He confirmed that dividends are actively being considered as a strategy for shareholder return.

Amy Chen from Citi asked about the significant year-over-year growth in selling and G&A expenses during the fourth quarter. She also inquired about the outlook for gross profit margin and the net profit guidance for 2025, noting the margin compression in 2024.

Answer

Co-CFO Kwok Ho Tam attributed the Q4 expense growth to one-off costs from personnel restructuring and increased AI investments, stating these are not ongoing trends. For 2025, he said the company targets a year-over-year decrease in operating expense ratios. He noted the gross margin recovered to 34.7% in Q4 and the outlook for 2025 is to maintain the low-to-mid 30s range, with a goal for a profitable year and a mid-single-digit net profit margin, supported by international business momentum.

Amy Chen of CICC inquired about Huize's full-year net profit guidance for 2024 and the outlook for 2025, questioned if the Q3 gross margin pressure fully reflects expense rationalization, and asked for more details on the rise in G&A expenses.

Answer

Co-CFO Kwok Ho Tam explained that Q3 profit was boosted by front-loaded demand for savings products ahead of an interest rate adjustment, making Q4 likely less strong. He confirmed the current gross margin of around 27% fully reflects regulatory impacts and should remain steady. Mr. Tam also noted that G&A expenses trended down from Q2 and are not expected to increase materially as the company focuses on cost optimization.

Amy Chen inquired about the full-year guidance for earnings and expenses, the reasons for the Q2 slowdown in First-Year Premium (FYP) growth and the Q3 outlook, and how regulatory changes to broker commissions have impacted Huize's product mix.

Answer

Co-CFO Kwok Ho Tam explained that the Q2 increase in share-based compensation was a non-cash item related to new option grants and a share price rally, with expense ratios expected to normalize. He attributed the Q2 FYP slowdown to both commission rationalization and a demand shift to Q3, as customers awaited a product interest rate change, leading to an expected FYP uptick in Q3. Regarding product mix, Mr. Tam noted a strong consumer preference for savings products, particularly participating (par) products, in the current low-rate environment. He highlighted Huize's proactive launch of a customized par product with Aviva-COFCO to meet this demand and mitigate commission pressures.