Huize Holding Ltd - ADR Stock

Ladies and gentlemen, thank you for standing by. Welcome to the Huize First Half 2026 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded, and a webcast replay will be available on Huize's IR website at ir.huize.com under the Events and Webcasts section. I would now like to hand the conference over to your speaker host today, Mr. Kenny Lo, Investor Relations Director. Please go ahead, Kenny.

Thank you, operator. Hello, everyone, and welcome to our first half 2026 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; 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 first half of 2026. Then we will open the call for questions.

I will now turn the call over to Mr. Ma.

[Interpreted] Hello, everyone, and welcome to Huize's First Half 2026 Earnings Conference Call. 2026 marks Huize's 20th anniversary. Over the past 2 decades, we have witnessed insurance industry evolve from a market dominated by traditional distribution and agent-led sales into a more digital and professionalized ecosystem. We have product innovation. Customer engagement and operating efficiency have become more increasingly important sources of competitive differentiation. Today, a low interest rate environment and shifting demographics are driving sustained demand for long-term savings, retirement planning and health protection. At the same time, rapid advances in AI are reshaping both the delivery of insurance services and the way companies operate. Against this backdrop, we are building on capabilities developed over the past 20 years to unlock new growth opportunities while continuing to improve efficiency and operating quality in the first half of 2026.

In the first half of 2026, GWP facilitated on our platform reached RMB 4.2 billion, up 30% year-over-year and marking a new all-time high, while FYP increased 49% year-over-year to RMB 2.76 billion. As our business continued to scale, total revenue reached RMB 720 million. At the same time, AI became more deeply embedded across our internal operations and core workflows as Huize advances its transition towards an AI-native organization, supporting continued improvements in organizational efficiency and operating capabilities. As a result, net profit attributable to common shareholders increased to RMB 25.3 million. Overall, the first half was marked not only by strong premium growth, but also by broader growth momentum, improved operating efficiency and stronger profitability.

We remain firmly committed to our customer-centric approach, continuously deepening customer engagement across the entire life cycle. During the first half, we added approximately 798,000 (sic) [ 789,000 ] new customers, bringing the cumulative number of insurance clients served to approximately 13.1 million as of June 30. The average age of customers purchasing long-term insurance products was 35.3 years with 62.5% coming from Tier 2 cities and above. The average FYP ticket size for long-term insurance products increased 25% year-over-year to approximately RMB 8,211. As of May 31, both our 13th and 25th-month persistency ratios remained above 95%, continuing to rank among the highest. Together, these metrics underscore the quality and long-term value of our customer base.

We are also using AI to further deepen customer engagement. Our AI financial planning agents can generate personalized family insurance plans based on each customer's profile and protection needs. Among active users, the plan report generation rate has now reached 45%, demonstrating AI engagement is expanding beyond individual consultations towards more comprehensive household protection plan. This enables us to serve customers' long-term protection needs with greater depth, personalization and efficiency.

As of June 30, we maintained stable partnerships with 159 insurance carriers and continue to codevelop customized products across multiple insurance categories, addressing customers' increasingly diverse needs in savings, retirement and health protection. As demand for long-term financial planning continues to grow, we further expanded our core annuity product franchise with the launch of Bliss 5.0, a participating annuity product designed to support long-term wealth accumulation, family asset planning and retirement preparation.

In health protection segment, we further expanded the scope of coverage and broadened our service offerings. Darwin No.15 Kids Protection integrates critical illness protection for children with long-term medical coverage, extending protection beyond a onetime financial payout towards long-term health support. Changxiang An 5.0 further expands mid- to high-end medical coverage to customers with certain new deals, preexisting conditions and other needs that are traditionally underserved by medical insurance.

In the first half of 2026, we remain firmly committed to our AI native strategy, further deepening the adoption of AI applications and expanding the coverage across our business. Huize's AI app completed its upgrade to a 2.0 multi-agent architecture with the number of users engaging in AI conversations increased 65% from the beginning of the year. AI is gradually becoming an important gateway for users to assess insurance services with more customers using AI for insurance consultation, product recommendations and preliminary protection planning. Across our hybrid service operations, AI is becoming more deeply involved in customer analysis, solution generation and customer engagement. Family insurance plans can now be generated in under 5 minutes, while intelligent customer screening and AI-powered outbound calls are helping identify and convert business opportunities, demonstrating that AI is evolving beyond an operational efficiency tool into an intelligent engine for business growth.

On the claims side, Xiao Ma Claim AI has expanded from completing its first pilot claim line covering 4 core insurance categories and supporting most of our mainstream products. End-to-end AI claims processing can now be completed within 1 hour with more products processed in minutes. We are also continuing to strengthen fundamental capabilities as our professional insurance knowledge base, providing specialized and granular data support for the deployment of AI agents across a broader range of service scenarios. Going forward, we will place greater emphasis on the practical impact of our AI applications and the kind of value they deliver across customer experience, professional services, operating efficiency and business conversion.

On the international front, Poni Insurtech continued to deepen its presence across key Asian markets, generating approximately RMB 220 million in international revenue during the first half. In Vietnam, GlobalCare maintained strong business momentum with GWP and revenue increasing approximately 45% and 24% year-over-year, respectively. Our customized maternal and child health insurance product received a positive initial market response, and we accelerated its rollout through our agent channels, successfully validating local demand for maternal and child health protection. In Singapore, we are focused on serving high-value customers with protection, wealth allocation and long-term financial planning needs while continuing to broaden our high-value offerings through differentiated products.

Looking ahead to the second half, Huize will remain focused on 3 priorities. First, we will continue to advance our AI native strategy, deepening the adoption and practical impact of AI applications so that alongside improving customer experience, professional service capabilities and operating efficiency, AI can increasingly generate sustainable business value. Second, we will further strengthen customer-driven product innovation while reinforcing our competitiveness in savings products such as participating insurance. We will accelerate the iteration of long-term health and core protection products and continue to build and upgrade our flagship product franchises to better address customer retirement, health and family protection needs. Third, through Poni Insurtech, we will deepen our operations across key Asian markets, leverage Hong Kong and Singapore as our dual regional hubs and continue strengthening local product and distribution capabilities to build a solid foundation for the long-term development of our international business.

With that, I will now turn the call over to our CFO, Ron Tam, who will provide a detailed review of Huize's operating and financial results for the first half of 2026.

Thank you, Mr. Ma and Kenny. Good evening, everyone in Asia, and good morning for those in the U.S. In terms of first half, against the backdrop of continued macro and geopolitical uncertainty, we have delivered another set of very strong results in the first half of 2026. Total GWP facilitated on the platform has reached a record high of RMB 4.2 billion, representing a year-over-year increase of 29.8%. Total FYP also surged by 48.7% year-over-year to RMB 2.76 billion. Total revenue rose to RMB 720 million.

Our GAAP net profit increased to RMB 25.3 million. Our financial position remains very solid with cash and cash equivalents totaling RMB 241 million as of the quarter end June 30. These exceptional results underscore the effectiveness of our omnichannel distribution network, our disciplined focus on attracting high-quality customers from the market and the extensive application of our proprietary AI technologies. Notably, we are steadily advancing our international expansion strategy and additional revenue to long-term sustainable growth and geographical diversification.

Turning to our core business. FYP from a long-term savings product category rose more than 45% year-over-year to RMB 2 billion, supported by heightened demand for wealth management and financial planning solutions in a sustained low interest rate environment in China. Further against the backdrop of continued policy support for a multi-tiered health care protection system, including the introduction of the National Commercial Health Insurance Innovative Drug Catalog, we continue to expand our long-term health insurance offerings to address increasingly sophisticated customer needs. FYP of our long-term health insurance category grew by 1.6x year-over-year to RMB 204 million.

Our diversified distribution network and advanced AI solutions enabled us to broaden our customer reach and cultivate relationships. Total customer base has reached 13.1 million as of June 30, reflecting a net addition of approximately 0.8 million during the first half of 2026. The repurchase ratio for our long-term insurance products remained high at 33.3%, demonstrating the continued progress we've made in enhancing customer lifetime value through targeted upselling and cross-selling initiatives.

I would like to highlight several key operational achievements during the period. First, FYP for our 2A business increased by 44% year-over-year to RMB 216 million in the first half, underscoring the effectiveness of our AI capabilities in improving the productivity of both our in-house consultants and our IFA partners. Second, FYP from our short-term health and accident insurance grew 48% year-over-year to RMB 376 million in the first half, reflecting our relentless efforts in product innovation and growing the breadth of our portfolio. And third, as of May 31, our 13th and 25th-month persistency ratios for long-term life and health insurance remained at industry-leading levels of over 95%, reaffirming strong customer loyalty and the high quality of our post-sale servicing. And four, average ticket size of our long-term savings products rose 10.4% year-over-year to [ RMB 140,500 ] in the first half, partly attributable to higher tickets of premium products in international markets.

In the first half, we've advanced our systematic 3-pillar AI strategy centered on raising operational efficiency, elevating the user experience and enabling platform-wide transformation. Across the organization, we continue to embed an AI-first mindset by introducing purpose-built applications within individual business functions to automate routine tasks and streamline workflows. For customers, we upgraded our AI app with a multi-agent architecture that supports seamless end-to-end user journeys, spanning product recommendations, insurance underwriting and policy servicing. We also launched -- we also launched an AI-powered financial planning feature that generates personalized family financial plan tailored to each household specific production needs and gaps.

On the adviser side, we equipped our agents with an AI-powered assistant that enhances productivity across key workflows, including intelligent lead screening, automated interaction summaries, AI-enabled outbound calls, tailored insurance proposals and advanced customer analytics. We also integrated our AI capabilities with our extensive knowledge base to assist insurer partners and optimize the products. Overall, these initiatives produced measurable cost efficiencies and productivity gains. Our total operating expenses decreased to RMB 175 million in the first half, resulting in an improved expense-to-income ratio of 24.2%.

Our international arm, Poni Insurtech, delivered another strong performance and remains a key pillar of our long-term growth strategy. In Vietnam, GlobalCare recorded an 11% year-over-year increase in the policies issued through the first half, driving a year-over-year surge in gross written premiums and revenue growth of 45% and 24%, respectively. The local IFA business also made notable progress with the number of policies issued growing 48% year-over-year. In Singapore, we focused on serving high-value customers with increasingly sophisticated protection, wealth allocation and long-term financial planning needs. We continue to broaden our portfolio of differentiated and customized products in partnership with leading insurers, strengthening Singapore's role as an important regional platform for delivering integrated protection and wealth management solutions. The expansion of Poni's regional footprint serves as an important driver of revenue diversification and create additional growth engines for Huize, supporting long-term shareholder value creation.

Looking ahead, we're well positioned to capture emerging opportunities across China's evolving insurance landscape and a broader pan-Asian market. Domestically, persistently low deposit rates are expected to further drive household allocation towards higher-yield savings and participating insurance products, while government initiatives to strengthen the multi-tier protection system are expected to sustain demand for commercial insurance and support the industry's long-term development. Beyond China, Poni is leveraging proven business model and proven AI capabilities to deepen its presence across key Asian markets. These initiatives together are strengthening the resilience and diversification of our growth and laying a solid foundation for sustainable long-term value creation.

And with that, we'll open up the call to questions. Thank you very much, and over to you, operator.

[Operator Instructions] And our first question coming from the line of Aashi Shah with Sidoti & Company.

Can you talk a little bit about the AI investing that you are doing? And can you give us some tangible examples of the returns you are seeing from that investment, whether through lower customer acquisition costs or higher conversion, improved agent productivity or lower operating costs? Like where do you see the most benefits from the AI investment that you're doing?

Thank you, Aashi, and thanks for joining for the first time. I appreciate your presence. With respect to the AI investments and the key value creation that we are trying to achieve, I think we did go over quite in some detail just now in the opening remarks. But just to summarize, I think the key goals that we're trying to achieve here, obviously, the first phase of AI adoption mainly is really to turn our organization into more of an AI-native structure. And typically, that would mean that automating workflows, right, and optimizing the workflow and deploying AI agents across the value chain. And that typically means that lower operating costs and improve operational efficiency. So that's the first phase of value creation. And I think we have demonstrated that in the operating expenses ratio, we have achieved initial success in that regard.

The second phase that we're now pushing is demonstrated in the front end, which you have alluded to in terms of lower customer acquisition costs. And in a way, it's demonstrated by the increasing amount of self-directed policy purchases that's being addressed by AI consultations in our mobile app. And that's also leading to improved conversion rate and higher agent productivity because with the same number of agents, we're actually producing more premium growth from the same headcount. So that's the Phase 2 of growth and value creation that we're driving right now.

And as you grow your revenue in international markets. Can you talk about the profitability in Hong Kong, Singapore and Vietnam individually? Which markets are already profitable today? And what does the path to consolidated margin expansion look like as international becomes a bigger part of the revenue mix?

Sure. Thanks for the question. In terms of the international markets, we have to say that in the key markets of Hong Kong, for example, we are already profitable since last year, and that's been contributing to our bottom line results. Our Singapore business has just started since the fourth quarter of last year, still ramping up, but we are expecting to also drive profitability from that region this year in the full year.

In Vietnam, we are almost there in terms of the profitability. Vietnam is still in a high growth phase, as you can imagine, albeit it's still not EBITDA positive, but then the loss there is actually quite minimal given the low absolute number of the business compared to the product group. So overall, international markets are profitable, combined with the Chinese business, which is also profitable. The main reason for a relatively low net profit margin is due to the fact that we continue to invest our cash flow into AI, close to USD 10 million pretty much last year and this year, working around the same number in terms of operating expenses in the R&D front and also on CapEx. So I think that would answer your question.

Yes. No, that's really helpful. And lastly, can you just discuss a little bit about your capital allocation strategy? And will you be needing to raise any cash in the next 12 to 18 months?

Great. In terms of capital allocation, I think we just touched on it just now. AI is front and center in terms of the organic investment in the group's organic business. In terms of international markets, we think that right now, we are happy with what we have. So further new markets is not likely in the next 12 to 24 months. And we just want to scale and -- the existing businesses to a more healthy level. And I think -- what's the third part of the question? I missed the last part.

Yes. Will you be needing to raise more capital?

We are unlikely to be raising capital at this stage because we still have decent cash on balance sheet. Until we identify some major transformative M&A opportunities, it's quite unlikely that we will be tapping the market given the relatively low valuation right now of the company.

Our next question coming from the line of Amy Chen with Citi.

Congrats on another resilient quarter. My question will be regarding to the Mainland Chinese Visitors business in Hong Kong. After the news flows regarding Decree 837 and the latest media reports inciting that local tax authorities are charging 20% tax on core product dividends, I'm wondering if Huize has observed any changes in terms of customer demand on the ground, both in terms of overseas business as well as domestic business.

Thank you, Amy. So just to clarify your questions on the impact from the recent regulatory documents and news article on the MCV business. So I guess the quick answer to that is based on what we are seeing in the month of July and month-to-date in August, we see that the overall market sentiment and momentum, particularly in Hong Kong, for example, is still robust from our numbers and as well as from our channel checks in the market. We do think that there will be some degree of impact on certain customers' mindset with respect to the 837 Decree.

And with the media article that you mentioned, the content of the article is actually nothing new. It's actually something that has been long term written in the relevant regulations in China. So it's a matter of future and potential endorsement of the relevant tax clauses in that document. So we do believe that the underlying customer demand or the logic behind overseas or offshore insurance purchases still remain intact, given the attractiveness of the underlying asset allocation for international products provided by insurers in Hong Kong and Singapore, for example, which is a diversified global strategy for the consumers. And the prevailing differential in the interest rate environment should also continue to underpin a strong demand for offshore products.

And I am showing no further questions in the Q&A queue at this time. I will now turn the call back over to Mr. Kenny Lo for any closing comments.

Thank you, operator. On behalf of the Huize's management team, we thank you, everyone, for joining our earnings conference call. And if you need further information, please feel free to connect us through our e-mail address. This concludes the call. Thank you.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live Call.]

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 Huize's IR website at ir.huize.com under the Events and Webcasts section. I'd now like to hand the conference over to your speaker host today, Mr. Kenny Lo, Huize's Investor Relations Director. Please go ahead, Kenny.

Thank you, operator. Hello, everyone, and welcome to our second half and full year 2025 earnings conference call. Our financial and operational results were released earlier today and are currently now 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; 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 year 2025. Then we'll open the call for questions.

I will now turn the call over to Mr. Ma.

[Interpreted] Welcome to Huize's Second Half and Full Year of 2025 Earnings Conference Call. In 2025, China's insurance industry underwent profound structural changes. As bank deposit rates continued to decline, household wealth allocation shifted fundamentally, with capital accelerating to long-term stable assets such as [ insurance, participating ] products that offer both protection and wealth accumulation emerged as a core growth engine for the industry. Furthermore, the generative AI and AI agent capabilities is deeply shaping the industry ecosystem and operating models, driving sector towards greater efficiency and intelligence.

Internationally, Southeast Asia insurance markets are expecting accelerating digital penetration -- and a growing middle class, creating compelling structural opportunities. Our proactive forward-looking strategy ideally positioned us to capitalize 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, surging 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 -- cost efficiency improvement from the strategic deployment of AI solutions across our organization. We delivered non-GAAP net profit of RMB 22.6 million.

This marks the third 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 35.3 years with 65.8% residing in Tier 2 cities or above, reflecting our focus on high-quality customer demographic segments. The average FYP ticket size for long-term insurance was approximately [ RMB 7,900 ] in 2025, a [ 38% ] increase year-over-year.

As of year-end, each of our 13th and 25th 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 158 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 Dajia Hui Xuan 2.0, a participating annuity product designed to provide premium diversified retirement planning solutions.

We also launched 2 customized million [indiscernible] medical insurance products, Xing Xiang Shou 2.0 and Chang Xiang An 3.0, each offering differentiated features, including 20-year guaranteed renewal and simplified health underwriting that cater to the diverse health protection needs of different customer segments. Together, these launches reinforce our core competitiveness in the medical insurance segment and lay 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 return to full year profitability. We also deployed our AI solutions across the entire customer journey, covering intent recognition, product recommendations and underwriting claims. This meaningfully enhanced the user experience and supported a 50% year-over-year increase in AI-driven self-service policy purchases among 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 can now directly generate personalized family insurance plans directly from individual users' profiles. More recently, we launched our AI claims service with our AI agent fully embedded across core claims system. The first AI reviewed claims were settled in just 23 minutes and marks the first fully end-to-end AI agent-driven claim settlement in China's insurance intermediary 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, insurers and agents embedding AI across every stage of insurance services and financial planning to fully realize our vision of an AI-driven insurance platform. Our international business continued to deliver a strong performance. In Singapore, headquarters of [ Huize ], we obtained a financial adviser and exempt insurance license 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 twofold year-over-year, driven by their 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 [ GSL ] business line has a standout performance with platform users quadrupling during the year and 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 across our business to deepen service quality and improve user experience. By using AI to streamline workflows, we will redeploy 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, developing differentiated and innovative products tailored 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 Poni Insurtech, growing the proportion of overseas revenue contribution 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. Ron Tam, who will provide an overview of our key financial highlights.

Thank you, Mr. Ma and Kenny. 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 regained 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 from 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 our 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 -- medical insurance products to address the long-term comprehensive health protection 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 ability 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 having in enhancing the productivity of both our internal and independent financial advisers. FYP from our 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%, underscoring the strong customer loyalty we attract with these diverse product offerings and the effectiveness of our 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, deploying 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.

Holding Insurtech, 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 quadrupling and policies issued growing by 2.3-fold 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 insurance influencer platform in July, a proven distribution model that's pioneered by Huize in China, further extending our digital reach in the local market.

In Singapore, we obtained approval from the MAS to operate as a financial advisory and exempt 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 Poni Insurtech will diversify our revenue streams and create new growth drivers, enhancing long-term shareholder value for [ Fraser. ] 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 wealth towards higher-yield savings and participating insurance products.

In parallel, aligned with the national strategic directive to establish a multi-tiered protection 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 Poni Insurtech, 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 Insurtech 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 intelligence ecosystem that seamlessly connects consumers, our carrier partners and distribution partners while consistently delivering enduring 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 comes from the line of Kenny Lim from UOB Kay Hian.

First of all, congratulations on the strong result. So a few couple of questions from my end. First, OpEx was well contained, but I noticed that the operating costs grew faster than your 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 a few regulatory changes in Hong Kong, like the broker refer fee cap and also the commercial spreading are taking effect this year. So how does -- what is the plan to sustain your growth momentum in Hong Kong? These 2 questions from my end.

Okay. Great. Thank you, Kenny, for your 2 questions. On the first question regarding the -- your observation on the operating costs growing faster than revenue growth. I think in 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 carries a slightly lower gross margin. And therefore, what that is the observation that you have made that the operating cost has -- the growth of that has surpassed revenue growth, and that has to do with the makeup of the revenue, as I just explained. 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 with regards to the regulatory cap on the referral fees and also on the commission spreading that has been in effect since of this year -- 1st of January of this year. We do expect and it has been seen in the market that there has 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-based brokers are focused 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 decreased year-over-year.

We do see that with the substantive maturity of time deposits in the onshore market, which is to the tune of for various estimates of putting that at around RMB 3 trillion to RMB 5 trillion and a meaningful proportion of this could be allocated to offshore markets, and Hong Kong will definitely be a natural recipient of this outflow. And therefore, the underpinning growth momentum should remain relatively robust for the Hong Kong savings plans, which is the main products that are being distributed by brokers in Hong Kong. So with that, we do believe that we do expect that strong growth momentum would persist for our Hong Kong business in 2026.

So back to you, operator.

And the question comes from the line of [ Mona Wang ] from Greenridge Global.

This is Mona from Greenridge Global. And it's great to see the company delivering several positive development recently. And there are two questions. The one question, there was some gross margin compression in the first half of 2025 as compared to the same period in 2024 when looking at brokerage income against the cost of revenue. So if except the AI, is there opportunity -- another opportunity for the margin expansion? And the second question, you saw strong top line growth and strong back to profitability in 2025, but the stock still trade below cash value. So why do you think the stock is not moving with the fundamentals?

Great. Thank you for the questions, 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 2025 and 2024 and whether AI could have a positive effect on improving gross margins. So I think 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 revenues 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 lower margin as compared to our domestic or Mainland China revenue segment.

So therefore, as a result of the two, the gross margin has been decreased; however, as you know, 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 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, in terms of 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 of 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 holy grail 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 AI-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 of 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 lean 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 we do expect that altogether, we are looking at a very much of a robust growth momentum in 2026. So that would hopefully drive a re-rating in our share price.

As you have noted that our share price right now is trading even below our net asset value. And therefore, there's a significant room for us to re-rate 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, Huize's IR Director, for any closing remarks.

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.

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

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live Call.]

Ladies and gentlemen, thank you for standing by, and welcome to Huize's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded, and a webcast replay will be available on Huize'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's Investor Relations Manager. Please go ahead, 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.

[Interpreted] Hello, everyone, and thank you for joining Huize's Second Quarter 2025 Earnings Conference Call. In the second quarter of 2025, we remained steadfast in our customer-centric approach, focusing on evolving customer needs and partnering with industry leaders to broaden our product portfolio. Our strong results were underpinned by a high-quality customer base, industry-leading persistency ratios and a diverse suite of product offerings. During the quarter, Huize delivered a total revenue of RMB 400 million, a 3-year quarterly high with net profit reached RMB 10.9 million. Gross written premiums facilitated on our platform grew 34% year-over-year to RMB 1.8 billion while first year premiums increased by 73% year-over-year to RMB 1.13 billion.

We continue to strengthen our full life cycle service ecosystem while precisely targeting high-quality young customers. As of the end of the second quarter, Huize's cumulative insurance users exceeded 11.4 million with approximately 400,000 new clients added during the quarter. In the second quarter, our long-term insurance customers had an average age of 35.2 with more than 65% residing in first and second-tier cities in China. By focusing on these high-quality customer groups, we have further supported sustainable growth in business value.

In the second quarter, the average first year premium ticket size for long-term products jumped by 87% year-over-year to RMB 7,600, while our retention metrics continued to lead the industry with both the 13th and 25th month persistency ratios remaining above 95% as of the end of May. Beyond long-term products, we remain committed to delivering a diversified suite of insurance solutions. Our short-term insurance business also recorded healthy growth in the quarter with gross written premiums rising 19% year-over-year to approximately RMB 140 million.

As of the end of the second quarter, we have further expanded our partner ecosystem, maintaining strong collaborations with 146 insurance companies and continuing to drive innovation in customized and diversified insurance products. Against the backdrop of preference for steady financial planning and an aging population, our early move in participating products has delivered strong progress. Centered on client wealth management needs, we introduced customized products, Bliss (Golden Edition) annuity, offering superior and sustainable wealth planning solutions. We have also jointly launched Xiao Shen Tong 7.0’ children'’s accident insurance with Ping An Property & Casualty Insurance, and jointly launched ‘Little Scholar 2.0 Pro’ student accident & medical insurance with PICC Property & Casualty, delivering multidimensional and comprehensive protection for children and students.

We drew on years of AI research and investment to launch company-wide adoption of AI agents. This has driven meaningful efficiency improvement, reshaped core operating processes and laid the groundwork for deeper business model transformation. These efforts have helped us unlock new growth curves and reinforce the foundation for long-term value creation. With the continued rollout of AI initiatives, our expense to revenue ratio improved by 16.6 percentage points year-over-year to 23.9%. We accelerated the deployment of AI tools and fostered an AI native culture within our company, delivering measurable productivity improvements. In R&D, we introduced the Vibe Coding model where AI now generates and contributes more than 200,000 accepted lines of code each month, significantly accelerating product iteration and technological innovation.

To support this transformation, we built a comprehensive training system that deploys employees from entry level to advanced AI practice. AI adoption is now company-wide with more than 300 employees able to create and deploy AI agents on our low-code platform. Collectively, we have released over 700 productivity-enhancing AI agents, driving improvements in operational efficiency, workflow improvements and risk control. Drawing on nearly 2 decades of industry experience, we have built one of the most extensive proprietary data access in the insurance sector, encompassing hundreds of millions of customer interaction records and knowledge base of more than 10,000 insurance products. This foundation enables us to deliver highly personalized services tailored to individual customer profile.

We rolled out 24/7 AI customer support, driving the self-service purchase rate among new users up by 50%. The AI customer support also covers product recommendations, claims assistance and policy delivery serving over 20,000 customers each month. These results validated AI's core value in boosting sales and efficiency. We are accelerating deployment across more touch points to build high-quality closed-loop growth engine from customer-rich conversion to automated service. Poni Insurtech, Huize's international arm has secured a financial adviser and [indiscernible] insurance broker license from the Monetary Authority of Singapore through its local operating entity, marking a significant milestone in our Southeast Asia expansion.

In addition, our Vietnam subsidiary, Global Care, recorded a 32% year-over-year increase in both GWP and revenue. We launched Vietnam's first KOL platform for the insurance industry, digitally empowering distribution and leveraging the country's high social media penetration, enhancing product reach and conversion efficiency. In parallel, we strengthened partnerships with leading local players, including GXE, an emerging online logistics platform and MWG, Vietnam's largest retail group, supported by Global Care's technology capabilities. These collaborations are advancing embedded and micro insurance across multiple use cases.

Leveraging the group's international platform, we provided commercial insurance services to China investor enterprises in Vietnam and facilitated the placement of corporate property policies with sum insured of RMB 1 billion. This fully demonstrates the depth of our product offering in the local market and the results of our internationalization strategy. Looking ahead to the second half of the year, China's insurance industry is experiencing strong momentum on both demand and supply sides with rising needs in health, retirement and wealth management driving customers to seek more intelligent services, while regulatory policies guide the market towards high-quality growth, greater standardization and technology adoption.

In this environment, AI is emerging as a core growth engine, enhancing customer experience, reducing operating costs and strengthening risk management. At the same time, Southeast Asia's rapid digital adoption and expanding middle class are pushing insurance penetration into a critical stage of expansion, creating significant structural opportunities and positioning the region as a key platform of further globalization of China's insurtech capabilities. Against this backdrop, Huize will continue to embed AI across the entire value chain, reshaping industry dynamics and unlocking a new growth curve.

Meanwhile, we will further expand our ecosystem across Southeast Asia to capture long-term opportunities from demographic tailwinds and rising insurance penetration and working with local partners to build a broader, smarter digital insurance ecosystem. This concludes my prepared remarks for today.

I will now turn the call to our CFO, Mr. Ron Tam, who will provide an overview of our key financial highlights for the second quarter.

Thank you, Mr. Ma and Kenny, and good evening, everyone, in the U.S. and -- sorry, in Asia, and good morning, everyone in the U.S. I think that the opening remarks have been quite detailed on the operational highlights. For my section, I'll just give some highlights on the overall financial metrics. Amid the evolving macroeconomic and geopolitical environment, the second quarter is quite remarkable in terms of total gross written premiums and FYP facilitated, which has increased by 34% and 73% year-over-year, respectively, reaching RMB 1.8 billion and approximately RMB 1.1 billion. Total revenue hit a 3-year high for the quarter of approximately RMB 400 million, which is up 40% year-over-year. We also returned to GAAP and non-GAAP net profit for the quarter of approximately RMB 11 million and RMB 8 million, respectively.

Meanwhile, our financial position has continued to remain very robust with a combined balance of cash and cash equivalents of RMB 239 million as of the end of the second quarter. The remarkable operational performance was driven by our efficient omnichannel distribution network, our relentless efforts to acquire high-quality customers and the deployment of advanced proprietary AI solutions throughout. Crucially, we are on track to execute and deliver on our international expansion strategy, which is a core new growth driver for our long-term sustainable development and shareholder value creation. Our strategic focus has remained firmly on long-term insurance products, which continue to account for over 90% of our total GWP facilitated.

FYP from our long-term savings products more than doubled year-over-year to RMB 864 million in the second quarter. Leveraging on our robust omnichannel distribution network and advanced AI solutions, we have significantly strengthened our customer acquisition and engagement capabilities, adding approximately 400,000 new customers during the second quarter, and this brings our total customer count to over 11.4 million as of the end of the second quarter. The repurchase ratio for our long-term insurance products also stood at a very decent level of 37%, underscoring our ability to continue to unlock the lifetime value of our high-quality customer base through effective upselling and cross-selling strategies.

I would also like to highlight a few other key achievements over the quarter. Number one, the FYP for our IFA business increased by 13% year-over-year to FYP of RMB 84 million, reflecting our continued efforts to empower both our internal and external international financial advisers. And number two, as of the end of the May second quarter, our 13th and 25th-month persistency ratios for long-term life and health insurance remained at industry-leading levels of over 95%. And number three, the average ticket size of long-term insurance products distributed has increased 41% sequentially to RMB 7,615, partly reflecting the premium product sales in our international market segment.

We have established a private AI large language model and local application development platform to promote employees as in-house AI agent developers. Over 200 employees in-house have created and deployed AI agents, publishing more than 500 productivity-enhancing tools. Our broad deployment of AI-driven automation has delivered cost savings and productivity gains. As such, our total operating expenses decreased 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 expanding international arm delivered another strong quarter and remains central to our long-term strategy. For example, in Vietnam, our majority-owned subsidiary, GlobalCare, achieved impressive business growth with GWP and total revenue both rising 32% year-over-year in the second quarter. Active platform users increased by 52%, while the average ticket size on the B2A2C business line tripled sequentially. Global Care also onboarded new merchant partners, including names like GXE and Mobile World Group, offering embedded and micro insurance products powered by its advanced technological capabilities. In July, Global Care also launched Vietnam's first insurance KOL platform, which is a replica of our China model, a proven distribution model pioneered by Huize in China.

Additionally, we obtained approval from the MAS in Singapore for financial advisory license, further extending our presence in Southeast Asia, these strategic initiatives to diversify our revenue streams and create new growth drivers to enhance long-term shareholder value creation. In conclusion, we are confident in our ability to capitalize on the opportunities arising from China's evolving industry landscape in the broader Asian market. Domestically, continued strong demand for long-term protection should drive healthy and sustainable growth across the entire value chain. Internationally, through Poni Insurtech, we're extending our China proven model and proprietary AI capabilities to high-growth Southeast Asian markets, particularly in the young and fast-growing middle-class demographics.

By leveraging our advanced data analytics, fully integrated AI solutions and disciplined market penetration, we are committed to solidifying our position as Asia's leading insurtech platform for distribution and building an AI-driven intelligent ecosystem connecting consumers, insurance carriers and distribution partners while delivering enduring value to all stakeholders.

And with that comment, we will now open up the call to questions. Thank you very much, and over to you, operator.

[Operator Instructions] We'll 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 on the second quarter this year. And I have 2 questions for the management. First, Huize has successfully executed its strategy shift towards participating insurance in recent years. So could you please add some color 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? And what's the company guidance for sales performance in the second half of the year? This is the first question.

And 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 has significantly improved claims handling efficiency. So please, could you please add some color on how does Huize intend 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 2 questions. So your first question was regarding our successes in the power product distribution front. And I think that over the last 2 years, I think we have already been foreseeing the industry transformation or transition to selling power product as the mainstream product with the expectation of a continued declining interest rate environment in China. I think we have been vindicated with this foresight. And starting from 2023, I think the company as a whole internally have been actively promoting the training of our agents and also encouraging our channel partners and the IFAs that are connected to our platform to get up to speed on the product.

I think that the foresight and the training has -- we have reaped the benefits from that, early anticipation. Secondly, I think that with respect to our product supply, I think we have also been quite -- in anticipation of the power product being a mainstream product for this year, we have been actively seeking out cooperation with our upstream insurance carriers, providers to co-develop customized savings products that would be very suitable for the clientele. And I think what we have demonstrated to the market is that we have already been rolling out customized power products with leading brands such as Aviva-COFCO's, which we have repeated for the last 2 quarters. Fu Man Jia product is a top-selling savings product in the power category for the last 2 quarters.

Also, we have been working with the Chinese joint venture between the Chinese SOE and Generali, which again has proven to be a top-selling product on the online, offline channels. We have also been quite innovative in terms of customizing power products in the annuity and in the retirement areas. For example, a recent product that we have launched with Bosun Primerica is an example. So not only do we do endowments, we also do annuities and retirement plans with a power feature. So I think that this is something that we have been quite successful also on the product supply front and which also delivers a competitive moat for Huize compared to the competition. And I think we are very proud to say that according to various sources, we are probably ranked in the top 3 in terms of distribution channels in the broker and agency segment in China for power products currently.

So in terms of guidance for the product, I think that we are continuing to see increased interest in power products from the market, mainly as a result of the continued education of consumers of the product by online and offline channels, such as ourselves and also the traditional insurers and the traditional agencies. So consumers are increasingly aware of the relative attractiveness of the power product, especially in the declining interest rate environment, whereby the product in terms of overall return profile is much superior to other forms of fixed income products, including traditional bank deposits and so forth.

So we do expect that there's continued sequential growth in distribution in the power product in Q3 and also in Q4. So your last question was on the AI front in terms of how we are going to be driving increased productivity gains in addition to just the claims processing area that you have mentioned. I think that we have already been deploying our AI strategy also on the -- in the customer acquisition perspective. Our mobile app has integrated DeepSeek and the DeepSeek powered mobile app that's facing consumers can provide very relevant and customized product recommendations based on customers' feedback and drawing upon on our very robust internal knowledge base and knowledge pool, we are able to provide very much a customized product recommendation experience for our customers.

In another area that we think that is very relevant for AI technology to be deployed and which we are now actively investing into is the underwriting part of the value chain, whereby with AI, we are able to be much more nimble and be much more adept at managing risk for our customers in terms of finding the most suitable products according to the individual risk assessment and risk circumstances. And therefore, that will also likely lead to much improved conversion ratios downstream. That would also be relevant to the long-term customer relationship management, which we just mentioned because the AI tool will be able to memorize all the customer interactions.

And therefore, whenever the customer returns to our mobile app, it will be able to recall the relevant data points on the customers' profile and be able to continue the dialogue in a most appropriate manner. So I think those 3 things are very good examples that we are able to cite in terms of the AI deployment to date. And I think we're just still only in the very much beginning of the AI journey. A lot more investments need to be made, and we do believe that the fruits of the investment will be harvested over the years to come.

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

This is Amy from Citi Research. Congratulations on a profitable quarter. I have 2 questions. The first one on your overseas business. You mentioned earlier that average ticket size was higher sequentially, partially due to participating sales in international markets, which I assume would be mainly Hong Kong. I'm not sure if this was partially driven by the change in the regulatory cap on illustrated product return and how has the sales momentum been in the third quarter so far?

And also on the regulatory front, from October 1, there would be a cap on broker channel referral fee and from next year -- from the beginning of next year, there would be this requirement to spread out commissions in the broker channel. How do you think this would impact your business, particularly in Hong Kong? And the second one would be about net profit outlook. We see that after the second quarter -- in the first half, Huize has already delivered a net profit. What is your earnings guidance for the full year of 2025?

Thanks, Amy, on your 2 questions. The first question relating to the Hong Kong business. I think you're right in citing the regulatory changes on the illustrated returns having an impact on [indiscernible] sales in the second quarter. We do see that a lot of the industry participants have witnessed and saw significant demand for Hong Kong products in the last month of the Q2, which due to the revenue recognition would likely be reflected in the Q3 results. So we do see that, that has an impact on the sales of the entire industry as a whole.

And on your comment on the other regulatory developments, we think that the underlying demand for offshore products still have to do with the interest rate differential between the onshore and offshore markets. So we do believe that the underlying situation has not changed albeit I think the U.S. likely will be reducing interest rates in the next few meetings. We're likely seeing another 50 basis points by the end of this year. But still the attractiveness of the offshore products still provide a meaningful pickup in terms of overall yield potential versus onshore. So that has not changed.

So we do continue to expect that the sequential momentum to continue in this area of the business. So I think that would be my response to your first question. And then on your second question regarding net profit outlook, we are very glad that we have delivered profit in Q2. And we do see sequential improvement in terms of our net profit outlook by the quarter -- by the next quarter, although we also continue to invest in business growth. So right now, we are expecting a second half profit for the year. And especially in Q3, we do expect a meaningful sequential growth in the earnings profile.

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.

[Operator Instructions] our next question comes from the line of 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 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 very glad to hear from you. So 2 questions on your side. One is the gross margin outlook. Yes, we do see a stabilization of gross margin in the second quarter. I think there's a slight pickup from Q1. Q1 was around 26%. This quarter it's around 27%. We do see that the stabilization gross margin remain at this current level for the next few quarters. I think that the overall negative impact that has been felt by the industry on the China side with respect to the [passing Huize] regulatory implementation, I think that's been fully felt already. And that's -- and thus, it's been reflected in the results here in the second quarter.

The overall business have transitioned to the new regime. So most of the products that we are distributing and channel costs and so forth have now been mostly stabilized at the current level. So we do believe that our gross margin should remain relatively stable for the next few quarters in the foreseeable future. Your second question was regarding the HMP product segment. So we do see a modest improvement in demand in the second quarter over first quarter. So in terms of actual numbers, I can cite for the HMP segment, we're looking at a 24% sequential growth in terms of first year premiums from the first quarter to second quarter.

So overall, I think that the environment have -- in terms of the China macroeconomic environment, we do see that there's a stabilization trend. And with the improving customer confidence and improving consumer confidence outlook, we do see that the HMP segment should continue to grow steadily. So -- and we'll also be investing in this product category, albeit the savings product definitely is not the major driver of performance. But then the health and protection product, as we all know, is typically higher margin. And then therefore, with a reviving macroeconomic and consumer confidence kind of picture, we do see that we should be investing more in this area. So that will be my answer to 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 does conclude the program. You may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]