Huize's Q2 2025 Earnings Call: Contradictions Emerge on Sales Momentum, Regulatory Impact, Gross Margin Stability, and Health Product Demand

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: RMB400 million, up 40% YOY; a three-year quarterly high
• Gross Margin: 27%, up from 26% in Q1 2025

Guidance:

• Expect continued sequential growth in participating (par) product sales in Q3 and Q4.
• Q3 earnings expected to grow meaningfully sequentially; company expects second-half 2025 profit.
• Gross margin expected to remain around current levels for the next few quarters.
• Overseas/Hong Kong demand to remain resilient; sequential momentum to continue despite regulatory changes, supported by yield differentials.
• Health and protection segment expected to grow steadily.
• Ongoing investment in AI and business expansion.

Business Commentary:

* Revenue Growth and GWP Increase: - Huizhou reported total revenue of RMB400 million for Q2, marking a three-year quarterly high, with gross written premiums facilitated on its platform increasing by 34% year-over-year to RMB1,800,000,000.0. - This growth was primarily driven by a high-quality customer base, industry-leading persistency ratios, and a diverse product offering.

• Participating Insurance Products and Customer Base Expansion:
• The average first year premium ticket size for long term products jumped by 57% year-over-year to RMB7600.

• The company's focus on high-quality young customers and the normalization of declining interest rates in China contributed to the increased demand for participating insurance products.

• AI Integration and Efficiency Improvements:

• Huizhou's expense to revenue ratio improved by 16.6 percentage points year-over-year to 23.9%.

• The wide adoption of AI agents, which contributed over 200,000 lines of code each month, significantly accelerated product iteration and technological innovation.

• International Expansion and Market Penetration:

• The company's international arm, Pony InsureTech, delivered strong results, with its Vietnam subsidiary, Global Care, achieving a 32% year-over-year increase in both GWP and revenue.
• The expansion was driven by strategic initiatives like obtaining a financial advisor and exempt insurance broker license in Singapore and leveraging local partnerships in Vietnam.

Sentiment Analysis:

• Management cited a three-year quarterly high in revenue (RMB400M, up 40% YOY) and a return to GAAP profitability (~RMB11M). Expense-to-income ratio improved by 16.6 ppt YOY to 23.9%. Gross margin rose to ~27% from 26% in Q1. Guidance called for meaningful sequential growth in Q3 earnings and profit for the second half.

Q&A:

• Question from Sing Tao Chen (CICC Research): How did you build capabilities and partnerships for participating insurance, what are collaboration plans with insurers, 2H sales outlook, and how will AI further drive sales/CRM/cost efficiency beyond claims?
  Response: They trained agents and partners since 2023, co-developed customized par products with leading carriers, and are now top-tier in par distribution; expect sequential growth in par sales in Q3–Q4; AI is integrated into consumer app (personalized recommendations), underwriting (risk fit, conversion), and CRM memory, with continued investment ahead.

• Question from Amy Chen (Citi Research): Was HK strength driven by illustrated-return cap changes, how is Q3 momentum, what is the impact of new HK broker rules, and what is 2025 earnings outlook?
  Response: Rush sales before illustrated-return cap boosted Q2 with recognition into Q3; momentum should continue as offshore yields remain attractive despite expected U.S. cuts; they expect second-half profit with meaningful sequential earnings growth in Q3 while continuing to invest.

• Question from Amy Chen (Citi Research) follow-up: What percentage of Q2 revenue came from international business?
  Response: Management did not disclose a figure, stating only that they are on track with prior outlook.

• Question from Kenny Lim (UOB Kay Hian): Drivers and sustainability of gross margin improvement; balancing channel costs with premium growth; and demand trends in health & protection?
  Response: Gross margin improved to ~27% from ~26% in Q1 and should remain stable as the new regulatory regime is absorbed; health & protection FYP rose 24% sequentially and should grow steadily, offering higher margins.

• Question from Kenny Lim (UOB Kay Hian) follow-up: What drove the sequential improvement in blended commission rate?
  Response: A higher mix of customized products, which carry higher commission rates.