Ladies and gentlemen, thank you for standing by, and welcome to Huize Holding Limited's third quarter 2022 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. Please visit 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, Ms. Harriet Hu, Huize's Investor Relations Director. Please go ahead, Harriet.
Thank you, operator. Hello, everyone, and welcome to our earnings conference call for the third quarter of 2022. Our financial and operating results were released earlier today and are currently available on both our IR website and the Newswire. 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. Ronald Tam. Mr. Ma will start the call by providing an overview of the company's performance and operational highlights for the third quarter of 2022.
Mr. Ronald Tam will then provide details on the financial results for the period before we open up the call for questions. I will now turn the call over to Mr. Ma.
Hello, everyone, and thank you for joining Huize's third quarter 2022 earnings conference call. For the third quarter, Huize reported another set of results that underlies our resilience in the face of an uncertain operating environment characterized by the ongoing impact of COVID-19, a relatively moderate recovery in the consumer confidence, and the deepening consolidation of the insurance industry. During the quarter, we continued to make progress on implementing our strategic roadmap to build an omni-channel digital insurance service ecosystem that integrates agents, businesses, and customers or ABC, and further refined our competitive edge in customer insights, product innovation, and professional insurance services.
In the third quarter, total gross written premiums, or GWP, facilitated on our platform increased by 29.4% year-over-year to RMB 1.3 billion. Our total operating revenue increased by 11.7% year-over-year to RMB 352 million. In terms of product mix, we have responded to market demand by enhancing our focus on promoting savings insurance products, and this strategy has produced remarkable results. In the third quarter, the total first-year premiums, or FYP, facilitated on our platform increased by 34% year-over-year to RMB 685 million, of which the FYP of savings product amounted to RMB 509 million, a 49.3% year-over-year increase. These results reflect the ability of our asset-light business model and market-driven product offerings to successfully sustain our high-quality business growth.
Meanwhile, thanks to the snowball effect and the high user stickiness generated by our strategic focus on long-term insurance products, our renewal premiums increased by 24.1% year-over-year to CNY 564 million. Providing us with a valuable source of stable cash inflows in this challenging macro environment.
自2020年以来，我们持续分享长期险业务相关指标。至此，我们很自豪地说，惠择深耕长期险领域所打下的基本盘已经十分稳固。一方面，长期险占总保费比例已经实现了连续十二个季度高于90%，第三季度为90%。另一方面，截止三季度末，平台累计投保用户达到了830万，用户画像始终保持高质量。在三季度投保长期险的用户中，二线及以上的城市客户占比为65.2%，平均年龄为33.7岁。以首连保费计，长期险件均提升至人民币6,108元，储蓄险件均为人民币4万元。今年前七个月，长期险第十三个月和第二十五个月平均继续率分别高于91%和96%，保持行业较……
We have been sharing the operating metrics of our long term insurance business with investors since 2020. We are very proud of the solid foundation laid down by this business. In the third quarter, the GWP contribution of our long term insurance product was 93.9%, remaining above 90% for the 12th consecutive quarter. We have also maintained a high quality user profile as our cumulative number of insurance clients continues to grow, reaching 8.3 million as of September. In the third quarter, about 65.2% of our long term insurance customers were from higher tier cities with an average age of 33.7 years old.
In terms of FYP, the average ticket size of long term insurance products and long term savings products were approximately CNY 6,108 and CNY 40,000 in the third quarter, respectively. Our average persistency ratios for long term life and health insurance in the 13th and 25th month remained at industry high levels of 91% and 96% in the first seven months of 2022, respectively.
截止三季度末，我们与106家保险公司保持稳定的合作关系，不断开发兼具性价比和高质量的重疾险、医疗险、养老险及意外险，以多元化产品供给和创新形态刺激需求。三季度定制产品保费占比为72.9%，较去年同期提升了20，23.7个百分点。九月至今，惠择全新上线了达尔文7号、欣喜人生增享版、增额寿险、小团圆家庭综合保险、惠择小神童超越版等定制产品。其中达尔文7号创新推出了重度、轻度恶性肿瘤和原位癌二次赔付。ICU住院保险金也将疾病列表外的大病纳入了保障范围，为用户及家庭提供了更加周全的保障。
As of the end of the third quarter, we have cooperated with 106 insurer partners to co-develop a wide range of cost-effective and high-quality customized products to stimulate market demand in areas including critical illness, medical, pension, and accident insurance. In the third quarter, the GWP contribution of co-developed products increased by 23.7 percentage points year-over-year to 72.9%. Since September, we have launched various customized products such as Darwin Critical Care No. 7, 欣喜人生 Premium, a customized increasing whole life insurance product. 小团圆, a comprehensive family insurance product, and 惠择小神童 Premium, a comprehensive accident insurance product for children. Of particular note was the launch of Darwin Critical Care No.
7, the latest critical illness insurance product offering in the Darwin Critical Care Series, which offers additional benefits for severe, mild, and mild malignant tumors and carcinoma in situ, as well as ICU hospitalization benefits covering major disease outside the list of severe, moderate, and mild illnesses, providing extensive protection for our users and their families.
与此同时，我们持续推进了ABC全渠道的数字化保险生态战略落地。在A端，自年初开辟全新业务线以来，我们不断取得令人欣喜的成绩。三季度，由A端业务线促成的新单保费达到了人民币6,500万，较上一季度增长了53.3%。今年前九个月，A端业务线实现了新单保费人民币1.2亿元，为惠择拓展了新的增长曲线。在C端，我们分别上线了针对高潜用户、家长用户等群体的精准推广活动。通过一系列直播互动及增值服务，三季度成功转化投保用户一万多人。
We also continue to make progress on executing our three-year agents businesses customers strategic business plan. Our 2A business has achieved pleasing results since its launch at the beginning of the year. The FYP facilitated by our 2A business increased by 53.3% sequentially to CNY 65 million in the third quarter and reached a total of CNY 120 million in the first nine months, becoming a key driver of our future business growth. In terms of customers, we have actively launched promotional activities including live streaming interactions and value added services customized for different groups of users, such as new parent and high value users, which have enabled us to achieve sales conversion of more than 10,000 users in the third quarter.
在B端，我们持续向保险公司等合作伙伴输出包括SCRM系统、NLP智能质检系统、数字化加速引擎、智能驾驶舱等输出的和用户成长旅程，为保险公司在产业端、服务端、产品供给端提供数字作业面。今年前九个月，科技输出业务贡献的收入约为人民币1,400万元。同时，我们的研发能力、创新能力和综合实力再次获得认可。凭借具有竞争优势的保险科技产品和解决方案。
On the 2B side, we continue to export various digital tools and technologies to insurance companies with offerings including the supply chain risk management system and the NLP intelligent quality control system, the digital acceleration engine and the business intelligence dashboard. Our goal is to drive the digital and intelligent transformation of insurance companies, empowering them in areas of business development, customer service and product development, and ultimately enabling them to grow their business sustainably. In the first nine months, the total revenue contribution of our technology service business was approximately RMB 14 million. Meanwhile, our capabilities in driving innovation and R&D development have earned industry recognition by being selected as one of the new distinctive, specialized and sophisticated SMEs in Sichuan province in 2022, which highlights our competitive advantages in developing insurtech products and solutions.
另一方面，我们持续落实降本增效，总营业费用同比下降27.8%，其中销售费用同比下降32.4%，销售费用率同比下降10.4个百分点，充分显现整体运营效率的提升。我们相信在中国经济随着互联网不断深化，线上线下产品和服务进一步融合，以及保险科技输出能力的加持，惠择能持续巩固投顾平台的优势，实现业务的多样成长。
Meanwhile, we continued to reduce our fixed cost base to improve operational efficiency. In the third quarter, our total operating expenses decreased by 27.8% year-over-year. In particular, our selling expenses declined by 32.4% year-over-year, driving our selling expense to revenue ratio 10.4 percentage points lower on a year-over-year basis and demonstrating the great strides we have made in improving our overall operational efficiency. Against the backdrop of China's accelerated economic recovery and the digital transformation of the insurance industry, we believe that by building an omni-channel digital insurance service ecosystem, advancing the O2O integration of our products and services, and strengthening our technology service capabilities, we can sustain our leading position in the digital insurance intermediary business. We will strive to optimize our capital allocation to diversify our business and drive sustainable long-term, high-quality growth. This concludes my prepared remarks for today.
I will now turn the call over to our CFO, Mr. Ronald Tam, and he will provide an overview of our key financial highlights for the third quarter of 2022.
Thank you, Mr. Ma and Harriet. Good evening, everyone. The third quarter has proved to be a very difficult quarter on multiple fronts. In particular, the ongoing pandemic-related restrictions imposed with lockdowns on a considerable part of the economy has weighed on consumer confidence, income expectations, and as a result, depressed demand for insurance by consumers in China, especially for protection products such as long-term health insurance. The lingering uncertainties with respect to the outcomes of the ongoing PCAOB inspections of the audit working papers of Chinese ADR companies and the corresponding potential delisting risk of Chinese ADRs, have also led to further dislocations in the stock prices of ours, as well as our peers, and altogether contribute to an overall extremely challenging capital markets environment. Despite the difficult macro environment, we have been very focused on the execution of our key strategy.
On the product front, we continue to focus on driving distribution of savings insurance products, which continue to be welcomed by the consumer market, given its relative attractiveness as compared to bank deposits in a declining rate environment in China. On the channels front, our new 2A 2C business line continued to deliver strong growth momentum in the offline space, generating in excess of RMB 120 million of FYP already in the first nine months of the year. On the corporate front, we continue to implement firm-wide cost savings measures with a strong focus on expense control across our business lines. As a result of our key business strategy, we managed to achieve double-digit growth across all of our key metrics.
In the second quarter, total GWP increased by 29.4% year-over-year to RMB 1.2 billion, which was driven by the strong growth in FYP of 34% year-over-year to RMB 685 million. On a sequential basis, FYP in the third quarter grew by 41.3%, which was contributed by the continued momentum in our long-term savings insurance product segment. The results again demonstrates the agility of our platform to adapt to the changing regulatory and market environment, and the successful execution of our product strategy to focus on the co-development and distribution of the increasing whole life insurance product category in 2022.
The highly successful product IP that we have launched, Jin Man Yi Zu series, which we co-developed with Hong Kong Life and exclusive to Huize's platform, continues to be one of our key top selling products on our platform during the third quarter. Together with our co-developed retirement annuity products with other insurer partners such as Sun Life Everbright Life Insurance and Sinatay Insurance. The long-term savings insurance product category, excluding annuities, recorded very strong FYP growth of 1.9x year-over-year. Our renewal metrics continue to be robust, with renewal premiums increasing by 24.1% year-over-year to CNY 561 million. Mr.
Ma already touched on our sound persistency metric in his remarks, and this continues to demonstrate the relatively high quality of our customer acquisition and the attractive customer profile that our digital distribution ecosystem brings to our insurer partners during this difficult macro environment. As of the end of the third quarter, our customer base has further grown to reach the 8.3 million mark, and customer lifetime values are still showing consistent accretion to an average ticket size of well over 40,000 RMB per long-term savings insurance product distribution in the third quarter. Along with the growth in GWP and FYP, our total operating revenue increased by 11.6% year-over-year to RMB 352 million in the third quarter.
As mentioned in the previous quarter, we continue to place strong emphasis on the optimization of our overall corporate cost structure and to further drive operational efficiencies. In the third quarter, our operating costs overall were CNY 248.7 million, which represents an increase of 6.7% year-over-year. As a result, our gross margin has improved by 3.3 percentage points from 26% to 29.3%. Our continued focus on reducing firm-wide costs and expenses have resulted in the 24% year-over-year decrease in our SG&A expenses, while our R&D expenses also decreased further by 45% year-over-year.
For the third quarter, we recorded a net loss of CNY 10.5 million, which narrowed significantly by 87% from the same period of last year, reflecting both our top line growth this quarter as well as the improved operational efficiency. At the end of the third quarter, we continue to maintain a strong liquidity position, as evidenced by our combined balance of cash and cash equivalents of CNY 307 million. We have continued to repurchase shares from the open market under our existing share repurchase program. As of the end of the third quarter, we have repurchased an aggregate of 382 ADSs.
Our ABC business plan will enable us to build and scale an omni-channel digital insurance service ecosystem, which will place us firmly in the top tier of insurance intermediaries in China. Becoming a digital partner of choice for our upstream insurer partners as we move into an age of insurance distribution for new generation consumers, which demands innovative solutions on the product side, as well as a seamless digital experience and professional customer service. We believe that the underlying long-term secular growth trends for China's insurance industry remains firmly intact, and especially for an increasing share of product distribution to be contributed by digital intermediaries like ourselves, providing tremendous opportunities for us to allocate capital to create shareholder value and sustain a high quality long-term business growth.
Lastly, as disclosed in a recent announcement, we would also like to make a quick note on the recent notice that we have received from the Nasdaq listing office with respect to the compliance with continued listing requirements due to our share price being below $1. We would note that many companies currently listed on the Nasdaq market, and especially our peers in the China ADR space, are also facing a similar situation due to the current dislocations in the market valuation due to geopolitical and PCAOB-related risks. We would note to investors that common market practice adopted by companies to regain compliance include an adjustment in the ADS to common share ratio or a reverse stock split, which would result in the share price regaining compliance with relevant Nasdaq requirements.
We will continue to closely monitor market conditions, which is expected to continue to be quite volatile, and we could implement the aforementioned measures within the 180-day grace period allowed under the Nasdaq rules. We reiterate that the receipt of the notice from Nasdaq does not affect the company's business operations at all. With that, it concludes our prepared remarks for today, and we'll now open up the call to Q&A. Thank you, and over to you, operator.
Thank you. At this time, if you'd like to ask question, please press star one one on your telephone and wait for your name to be announced. Once again, to ask question, please press star one one and wait for your name to be announced. One moment for the first question. First question comes from the line of Yuyu Zhang of CICC. Please proceed.
We have two questions regarding the ABC strategy. First one is in terms of the 2A segment. What's the profile of the agents who currently have the partnership with you? By what means can you advocate the collaboration with more high-quality agents under your ABC strategy in the future? The second question is, what's the effect of your 2B segment, and how will this part of business contribute earnings in the future? Thank you.
Thank you for questions. It's Ron here. With regards to the first question on the 2A business, I think right now we have, you know, been running the 2A, 2C business for, you know, 11 months now since the start of the year. I think that we have been targeting the experienced insurance agents from the marketplace. A lot of these agents carry with them over five years of experience with respect to life and health insurance policy sales.
Most of these agents that we target could complete the entire customer service or customer journey from the customer acquisition itself to business development and to, you know, assistance with underwriting and post-policy administration and in-force service assistance, etc. We believe that the Huize model of empowering the independent agents has so far proven to be a success. I think it really has to do with our advantages in providing a comprehensive product supply matrix through our SaaS platform. We can enable and empower the agents via the mature digital tools that we have been deploying in-house for our in-house consultants.
Basically, we're exporting these tools to the 2A business line independent agents in the marketplace. So I think that's the answer to your first question. With regards to the 2B segment, I think that since the IPO, we have been deploying meaningful capital in developing the technology service capabilities of Huize. Since the start of this year, we've started to export these services to our upstream insurer partners. So far, we've signed up a few reputable names such as, you know, Ping An Life and Great Wall Insurance as well. The tools that we're deploying in-house with respect to customer relationship management, to compliance, and to, you know, underwriting assistance and claims assistance, etc.
All these tools have been exported to the insurance companies that have been signing up for our 2B business as a client. I think that right now, for the first 9 months we've already achieved a double-digit million of revenue, CNY 13 million overall. I think that this is expected to grow at a very high rate over the next 2-3 years as we start to scale the business with the word of mouth in the market, given the success that our initial seed clients are experiencing. We believe that over the next 2 or 3 years, we'll be able to roll out more and more products to the marketplace and to accelerate the adoption by other insurance companies as well.
Given that the investment has been made already in the last two years, we do expect that the tool will be relatively higher-margin versus our core insurance distribution business. We do expect that we will be able to generate positive cash flow in the next year. Thank you.
Thank you for the questions. Once again, to ask question, please press star one one. Next question comes from Michelle Ma of Citi. Please proceed.
Thank you. Thank you management team, and congratulations on such a good result. My first question is a follow-up question. I'm wondering, for our offline agents, what's currently their average monthly income? Second question is about the outlook. We noticed that for the fourth quarter, you mentioned we will achieve quarterly profitability in the fourth quarter. We noticed that the cost-income ratio has improved very impressively. Just wondering the sustainability and what is the outlook for next year's profitability. You mentioned we will see positive cash flow, but how about the profitability? Do you have any view on the revenue growth and expense growth next year? Thank you.
Hey, thank you, Michelle. Thanks for joining again. Appreciate it. The first question on the 2A business, the offline agents and the average, I guess, productivity or take-home kind of, you know, salary. I think it all depends on the individual agent's own productivity. I think overall, on average, I would believe that the productivity of the agents have been relatively robust and which will be on a comparative level as to our own in-house cruiser consultants. As a result, I believe that the take-home pay on a monthly average basis will be in excess of RMB 10,000 level.
I think that level compares quite favorably with respect or in comparison with the offline brokerages or agencies or even the tied agency agents within the insurance companies themselves. I think that would be the answer to the first question. Yes, most of the agents are located in the tier 1 and tier 2 cities. We have always been quite focused on the mass affluent market sector within China. The 400 million or so middle-class consumers and therefore the 2A, 2C business line will be in sync with our core business platforms focus area in terms of the end user market. The second question on the profitability outlook.
Yes, I think Q3 we have shown substantial improvement, nailing losses down to almost a break-even level. We are on course for a profit-making quarter for Q4. For next year, I think that we do see a very encouraging sign and very promising news coming out from China today. It's very timely for us to have this call tonight, with the COVID zero policies seemingly to be pivoting toward a reopening. I think the wider investment community is having consensus that reopening could happen in the spring of next year.
With that kind of backdrop and with consumer confidence coming back, and with a macroeconomic recovery, we do believe that, you know, the growth has been reset this year, and then we will be going back to a trend growth kind of level for the next few years. I think that number should be something around like 30% CAGR for the next two, three years is a reasonable starting point.
you can see that our growth margins for this quarter is around 30%, and I think our growth margins is relatively stable. Next quarter, we will expect to see meaningful renewals contributing to the bottom line, because last year in Q4, we had a very huge quarter due to the regulatory change in the savings product distribution, as we can all remember. Q4, we will be benefiting from that. We'll be benefiting from the renewal spike from the corresponding quarter from last year. For the whole of next year, we should be targeting at a meaningful mid- to high-single-digit kind of net margin, as a starting point.
I think that would be my answer to your second question, Michelle. Thanks.
For the questions. One moment for the next question. Our next question comes from the line of Bonnie Liu of China Renaissance. Please proceed.
Hi, this is Bonnie Liu from China Renaissance. Thanks, management, for giving me this chance to ask questions. I have one question about your product. Could you please share with us more details about the new products launched in the third quarter this year? Is there any plan in the fourth quarter or in 2023? Thanks.
All right. Thank you. Thanks for joining the call today. I appreciate it. The question on new product launches, I think, Mr. Ma mentioned in his opening remarks that we have launched quite a few products in the third quarter. This revolved around the customer lifetime value and on the entire spectrum from, you know, health to savings to pension to annuities. Also for our children, you know, healthcare. Next year, I think we also intend to iterate our product launches.
I think the average timeframe that we look at for upgrading or launching a new product in each of the various subcategories is about 3-6 months, as we work with different insurer partners and launch various products specializing on different subsectors of the market. You know, product development and product launches is bread and butter to Huize's business plan. This is something that we would be looking to innovate, as we collect more and more, you know, customer insights from our A, B, and C business lines. With that, we will feed back into our product development team, which will work with our insurer partners on the upstream, to launch new products on all the different segments. As Mr.
Ma also mentioned, in the third quarter, we have achieved a very meaningful increase in the proportion of the contribution from our customized products to our overall FYP. I think that is also in evidence that we continue to you know have a very strong relationship and deep engagement with our insurer partners on the product front. Hope that answers questions. Thank you.
Thank you for the questions. There are no more questions from the line. I would like to call back to the management for closing remarks.
Thank you, operator. 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, please feel free to reach out to us. Thank you for joining us today. This concludes the call.