Good morning, ladies and gentlemen, and thank you for standing by for Waterdrop Inc.'s Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, there will be a question-and-answer session. As a reminder, today's conference call is being recorded.

I would now like to hand the conference over to your host for today's call, Ms. Cui. Please go ahead..

Thank you, operator. Hello everyone, thank you for joining Waterdrop’s third quarter 2021 earnings conference call. Please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities and the Litigation Reform Act of 1995.

Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to those outlined in our public filings with the SEC.

The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law. Also, this call includes discussion of certain non-GAAP measures. Please refer to our earnings release for a reconciliation between non-GAAP and GAAP. Joining us today on the call are Mr.

Shen Peng, our Founder, Chairman and CEO; Mr. Yang Guang, Co-founder, Director and General Manager of Insurance Marketplace; Mr. Hu Yao, Co-founder, Director and General Manager of Medical Crowdfunding and Healthcare; and Mr. Kevin Shi, our CFO. We will be available for a Q&A session after the remarks.

Now I would like to turn the call over to our CEO Mr. Shen Peng. Please go ahead..

[Foreign Language] Hello everyone, thank you for joining our quarterly earnings conference call. Since the beginning of the third quarter, the capital markets have experienced an increase in volatility and the growth of the insurance industry has softened.

The opportunities and challenges faced by our company were also quite different from those prior to our IPO. Notwithstanding this, we continued to strive to be a customer-centric company that focuses on the development of our business and creating sustainable shareholder value.

[Foreign Language] In our last earnings release, we announced a one-year share repurchase plan. During the third quarter, we have pragmatically commenced the plan under the relevant compliance framework.

Since September 8th, the announcement date of the repurchase plan to the end of the third quarter, we have repurchased a total of nearly 500,000 ADS and we will continue to implement as deemed appropriate. We plan to use these repurchased ADS for our share incentive plans in the future.

[Foreign Language] In addition, before IPO, our core management team of more than 30 executives, including myself, have already voluntarily undertaken not to sell or dispose shares or options of Waterdrop in another at least 18 months since the expiry of our IPO lockup in this November, continuing to strengthen strategic stability and keeping focused on business development.

This was based on our united confidence in the company’s prospects and our support for its long-term sustainable development. It also demonstrates our long-term commitment to safeguarding the interests of our investors.

Despite the entire industry having encountered various challenges throughout the past few months, we see it an optimal time for us to enhance our fundamental operations. We collectively and firmly believe in the long-term positive trend in the Chinese healthcare market and a better future for Waterdrop.

We have confidence in the future, and remain patient in the present. [Foreign Language] Since the beginning of the year, several new regulatory guidelines and industry policies were released, aiming to promote the healthy development and consolidation of the industry in the long term.

As a listed company, Waterdrop has proactively responded to the new regulatory guidance and have maintained good communications with the regulators. We also took the initiative to pivot our business model to ensure that we are in compliance with the new rules.

This round of rectification on the online insurance sales does not only amend the problems from the past to comply with the new guidance, but also provides a clearer direction for the future development of the industry. Waterdrop is actively cooperating with regulators and engaging in self-inspection and rectification.

Going forward, we will continue to proactively promote the healthy development of the industry. [Foreign Language] Waterdrop is uniquely positioned to provide inclusive insurance, which is in line with the regulatory guidance.

At the same time, we have established a solid business infrastructure through our product development capabilities, technological innovations, and unique synergies amongst our business segments. These helped us demonstrate our resilience and stability during this transitionary period in the industry.

Especially at present, along with the unstable situation of the pandemic, it is believed that the demand for insurance protection will continue to rise in near future and people will be more inclined to turn to online channels, which implies an opportunity to online players like us.

Despite facing short-term challenges, we are committed to strengthening our cost control and optimizing profitability, ensuring that we are on the right track to a quality development in the years ahead. [Foreign Language] I'll pass to Yang Guang to discuss the development of the Waterdrop Insurance business..

The main theme of this quarter is the transformation and upgrade of our online user acquisition model so as to better comply with the new regulatory guidance and evolving industry trends. Since the beginning of this year, the growth of the insurance industry has also entered into an adjustment period.

According to the statistics from CBIRC, the gross written premium of the health insurance sector only increased by 5% year-over-year in the first three quarters of this year, while the growth rate was minus 3% year-over-year for Q3 and the net profit of major listed insurance companies declined by about 36% year-over-year on average during the third quarter.

Our growth has also been affected under this operating environment; however, we are still outperforming the industry. Our FYPs for the first three quarters increased by 37.5% year-over-year to RMB14.46 billion, exceeding the total FYPs for the whole year of last year.

And despite the negative growth of the industry in Q3, our FYPs during the quarter remained flat and positive growth. We also significantly improved our cost efficiency with the net loss in Q3 narrowed by 27.3% on a quarter-over-quarter basis.

Over the past two years, products of monthly-pay with first month low-premium has stimulated strong market demand, driving a rapid expansion in new users across the online insurance sector.

However, since the beginning of this year, along with the reduction in the reaching out efficiency of this model, the benefits of online traffic brought by this model have gradually faded. This was directly manifested by the decline in both the new user conversion rate and retention rate.

In addition, the increased customer acquisition costs brought about by intensified competition has also gradually weakened the competitiveness of this model.

Meanwhile, in order to ensure the industry’s healthy development, regulators specifically made a reminder for consumer complaints potentially brought by the first-month low-premium model, discouraging prominent promotion of these products via online insurance platforms.

Rather, the regulators advocated insurance companies to leverage their product innovation and technology innovations to enhance insurance protection for the public from the supply side and service side.

So in order to align with the guidance and to comply with the new regulatory requirements and the evolving industry trends, we have taken the lead to upgrade and optimize the online customer acquisition model since the third quarter.

We hope to promote an enhancement in the short-term insurance marketing model of the entire industry and further improve our users' economics, thereby achieving a healthier and a most sustainable development.

So after we eliminated the first month discount since the end of August and switch the focus of our online user acquisition channels from third-party sources back to internal channels, our quality indicators have improved significantly. The monthly take rate of our short-term insurance products increased by 5% from July to September.

The recovery in take rates was mainly driven by the significant improvement in retention rate. In the third quarter, the LTV of new customers have also improved on a sequential basis, with the LTV for September increased by about 75% month-on-month, resulting a significant improvement in ROI, or return on investment.

In the meantime, we continued to increase our investment in new technologies and leverage technology to improve our retention and sales force productivities.

Based on our data platform, voice platform and NLP platform, we have explored building a large-scale semantic search engine and we also have applied the manual + machine labeling and Feudal Reinforcement Learning, FRL, technology to enhance data collection and strategic machine learning capabilities to build an intelligent outbound calling system for the insurance retention and renewal.

We continued to synergize information from our CRM system, outbound calling system, voice platform and dialogue robots to set up different script templates for different types of consumers. So we can fully get users' intentions and provide customized product solution.

Our system supports various functions such as automated reporting, call recording and intelligent statistical analysis, and provides suitable outbound calling strategy and script considering different operation scenario.

This helps to improve our customer renewal efficiency, reduce the workload of data reporting, provide tailor-made solutions to reach out some customers and further improve our customer retention and benefiting from the optimization of this technology, the renewal rate in the third quarter improved by more than 20% compared to the same period last year.

And our business resilience is certified on top of our large customer base, especially during the slowdown in the industry. Compared to the initial rapid growth stage of our company, we are now placing more emphasis on existing customers and service quality enhancement.

We provide comprehensive insurance protection plans that cover vertically the life cycle of our users and horizontally their family members.

By analyzing our user profiles and lifecycle, we empower our online service team enterprise WeChat to provide users with flexible, dynamic and comprehensive protection solutions, thereby maximizing the LTV of users. In terms of the repeat purchase, critical illness policies contribute more in the third quarter.

In Q3, the number of short-term CI repeat purchase policies within 35 days increased more than 30% over Q2. Our monthly repurchase rate increased significantly month-over-month, with the 35 day repurchase rate stood at around 33% in the third quarter.

Our three-year repurchase rate and renewal rate for customer group in the third quarter increased further by 10% compared to Q2. The share of long-term insurance in our total LTV per user reached 40% in Q3 up by 15% over Q2.

And in Q3, the premiums per customer continued to increase, driven by our effective management of existing customers and the increase in repurchase.

The number of policies per customer increased by 10% quarter-by-quarter, at the same time, our efforts in private domain traffic are starting to deliver results, with a 130% increase in the number of Enterprise WeChat contacts in Q3 compared to Q2, and a 70% quarter-over-quarter increase in conversion.

We continued to make further progress with our offline brokerage business. As we brought in more industry veteran to our management team, we have gained a deeper foothold in offline brokerage business.

We created new general rules for our brokerage team and adopted an innovative organizational structure, which is totally different from the traditional pyramid structure in the insurance industry.

We also empowered our brokerage team with professionalism and digitalization through four systems, including the digital operation system, product system, training system and marketing system.

Full event of the digital operation system helps our brokers with customer segmentation, digitalizing the customer engagement process, and improving the refinement and effectiveness of marketing management.

And since the beginning of this year, we have already explored and launched the SAAS model to allow insurance companies to leverage our capabilities in underwriting reviews, insurance claims, user operations, risk management, product customization, and actuarial pricing.

Compared with the traditional brokerage model, those are in-depth system integrations enable us to have a closer collaboration with our insurance company partners in system establishment so as to engage in insurance industry chain more deeply.

It also allows us to manage our resources more efficiently to better serve insurance companies, while simultaneously gaining more first-hand user knowledge and business insight. At the same time, our role in assisting insurance companies with claim decisions also enables us to improve our risk identification capabilities and accumulate related data.

Going forward, our technology exports will also be aligned with the evolving value-added needs from insurance companies. Here I’ll give you an example on the user operation services we provide to our insurance company partners.

This service leverages our online customer management capabilities, our core insurance systems and SAAS-based CRM system to help insurance companies analyze the needs of their existing customers in various scenarios.

Insurance companies can adopt Waterdrop’s CRM system to either co-develop the user resources from Waterdrop platform or manage their existing consumers by leveraging our online operation mechanisms.

Our service enables insurance companies to realize a higher LTV for their existing customers while helping us enrich our customer acquisition scenarios and further penetrate into existing users of the insurance market. Above is the update on insurance business, and let me hand over to Mr.

Hu Yao for the update of our technology, medical crowdfunding and healthcare business..

[Foreign Language] In the next session, I will update our progress of R&D and technology innovation, medical crowdfunding and healthcare business. In terms of technology innovation, adhering to our user-centric principle, we at Waterdrop aspire to bring insurance and healthcare service to billions through technology.

We leverage our technologies to improve the efficiencies of key business processes, such as online marketing, telemarketing, insurance underwriting, policy renewal, and the claims settlements, thereby resolving the key business pain points and improving our service efficiencies.

We have developed an AI-powered matching tool between the sales teams and users. Under our traditional online marketing and telemarketing business model, service staff essentially reach out to users on a random basis, however, leveraged by AI analysis plus considering LPs’ historical service data and the user group they are good at serving.

We can match the most appropriate staff to provide services for each user. This substantially improves our user satisfaction and enhances the efficiency of our entire service system. Following the system development in Q2, we conducted some pilot tests on the AI-powered matching tool for sales team and users this quarter.

During these pilot tests, we leveraged cutting-edge algorithms to constantly improve our intelligent matching logics through more than 30 rounds iterations.

We also established a more intelligent matching system by combining the traditional GBDT machine learning model with the DEEPFM network, enabling self-adaptive adjustments in model metrics based on changes in LP’s leads and data features through a heuristic algorithm. Number of forecast in the algorithm reached over 1 billion per day.

Among our major users, the system efficiency improved by 20% to 40%, resulting in an increase in insurance premiums of tens of millions RMB level this quarter. Meanwhile, we have also obtained several key intellectual property rights in this space.

The AI-powered matching tool has formed a core technological advantage in Waterdrop’s smart insurance marketing service system. Technology has become the core driver in promoting the transformation of the insurance business.

We have made positive progress in terms of our insurance digitalization and intelligent transformation and are striving to establish more digital competitive strengths.

Our proprietary confluence medical knowledge graph was built upon real cases and covers 99% of the diagnostic database and medical insurance catalog library, and more than 98% of hospitals and disease identification institutions nationwide.

We have also standardized the names of drugs and diseases that frequently occur in our daily operation, generated over 30 million uniformed codes, and integrated hundreds of thousands of nodes and over a million entity relationships. At Waterdrop, we have applied the knowledge graph in various business scenarios.

In scenario of patients’ recruitment for clinical trials, under the compliance framework, we have upgraded the traditional recruitment model and provided a direct connection between doctors and patients through our online open platform.

Leveraging our powerful intelligent system, medical knowledge graph and medical data center, we fully take advantage of our deeply structured patient data, treatment data and data outside the hospital system to determine the right trial patients.

Within the compliance framework, we first apply multimodal learning algorithms to provide precise patient segmentation by integrating picture and text materials.

With this segmentation, we leverage the cutting-edge algorithm architecture BERT plus CRF to carry out comprehensive structured data analytics, and fully consider the patients convenience and the distance between the patient’s location and research center.

And then we recommend the most suitable clinical trial project to patient, thereby expecting to improve the recruiting efficiency and matching rate.

In the scenario of auditing for medical crowdfunding business, we adopt YOLOv5 target detection algorithm to mask off, desensitize and de-identify information such as ID card, hospitalization number, cell phone, home address, infectious diseases, et cetera.

to protect user privacy, while automatically entering information in the crowdfunding application files in the audit process to control fraud risk and improve the effectiveness of the audit.

In insurance claims processing scenario, we refined claim settlement rules for nearly 10,000 medical insurance products in the market and formed nearly 100 core engine models to support automatic calculation of various products.

Also, we predict high-to-low-risk cases based on medical knowledge mapping to improve the accuracy of claims and reduce the risk cost rate by more than 20%. In smart underwriting scenario, currently, our proprietary database for the insurance underwriting covers more than 10,000 worldwide diseases and the major unhealthy conditions of our users.

Based on each users’ specific health conditions, the system also makes intelligent insurance product recommendations. As our business grows, we will keep upgrading our insurance underwriting system.

These coupled with our AI analytics on the questionnaires related to health conditions and insurance products will enable our intelligent insurance underwriting platform to integrate complex underwriting logics and undertake extensive business volume. Next let me talk about our medical crowdfunding business update.

In spite of the fluctuations in the market in third quarter, our Waterdrop Medical Crowdfunding business has grown well which further reinforced its market-leading position during this quarter.

As of the end of Q3, the number of donors reached 383 million, helping 2.23 million patients and pushing the cumulative funds raised amount to over RMB45.7 billion.

From the perspective of its internal role in business segments interactions, Waterdrop Medical Crowdfunding is not only acting as an aid-seeking platform for critical illness or a stand-alone scenario for insurance conversion, but also a multi-functional conversion scenario for patient management services, Waterdrop Medicine, and patient recruitment for clinical trials.

Thereby, Waterdrop Medical Crowdfunding is a fundamental incubator to launch more healthcare business to help customers with critical illnesses.

[Foreign Language] In terms of external business cooperation and medical system building, we assisted local governments to tap into multi-level medical insurance and medical assistance system to support common prosperity.

For example, we have cooperated with Jinyun County Healthcare Security Administration of Zhejiang Province to launch the Jinyun Project, a project to build up a one plus, two plus, four multi-level system of medical insurance for poverty alleviation.

By working with local governments, Healthcare Security Administration, civil affairs departments, Health Commission, and the charity organizations, we have established a multi-department information platform with integrated poverty relief resources.

The initiative will help governments establish a long-term mechanism for precise medical assistance that will prevent poverty caused by diseases, further meeting the diversified health insurance needs of the public.

Following a half year of its launch, Jinyun Project makes the number of people who obtained assistance and the number of medical aid funds both exceed those in 2020. [Foreign Language] And another case here on this ground. Waterdrop upgraded Jinyun Project to operate Zibo Qihuibao or Zibo Inclusive Medical Insurance Program.

To meet the needs of the Zibo Healthcare Security Administration, we link the reimbursement of Qihuibao with charity medical aid fund for some rare diseases and the related drugs. This will effectively support poverty prevention and promote the development of Zibo’s multi-level medical insurance system.

[Foreign Language] And I will introduce our healthcare business in the third part.

Benefitting from the synergies from Waterdrop Medical Crowdfunding and Waterdrop Insurance Marketplace, we have been able to develop healthcare business with capabilities that other companies do not have, that being the huge patient resources, hospital networks, and cooperation with pharmaceutical companies accumulated over years.

Our business segments are at different stages of development but several have already begun to take shape.

For instance, both Waterdrop Medical Crowdfunding and Waterdrop Insurance Marketplace have enjoyed industry-leading competitive advantages while our healthcare business has gained growth momentum gradually since the initial exploration last year.

[Foreign Language] Besides our PBM business Waterdrop Medicine and patient management business we discussed before, next, I will provide an introduction to the business and the prospects of our patient recruitment for clinical trials.

[Foreign Language] Our Waterdrop Medical Crowdfunding service helps patients raise funds to solve their problem for medical payments. On top of that, we also found some patients have developed resistance to existing drugs in the market or wish to take new treatments but cannot afford the high costs.

These patients may inquire about the new drug clinical trial programs, hoping to receive free access to new drugs through these programs. To address this pain point for patients, we are developing the digital platform for patients’ recruitment.

The platform helps patients find the best matches for clinical trials, and access new drugs and frontier innovative therapies, while reducing their financial burden from treatment costs.

The ability to directly and accurately reach a wide range of patients who are willing and receptive to participate in clinical trials is also one of our key advantages, which will enable us to stand out from other patient recruitment platforms in China.

[Foreign Language] From the perspective of pharmaceutical companies in the medical industry chain, new drug R&D has always been regarded as high-risk and high-reward. The market has long said that developing a new drug could take 10 years and cost $1 billion. Of which, the patient recruitment cost would account for approximately 10% from clinical CRO.

Hence, a faster patient enrollment could drive an efficient completion of clinical trials. This would help save the cost, and speed up the process of new drug development and product launch, which has remarkable commercial value and social significance.

[Foreign Language] Through our team’s initial exploration, we expect to have over 100 patients enrolled in the clinical trial projects per month by the end of the year. These cover clinical trials of new drugs for lung cancer, liver cancer, gynecological tumors and gastrointestinal tumors.

We are also exploring expansion of our CRO services through clinical recruitment and provide more high-value new drug development services. [Foreign Language] Although the contribution from the medical business to overall revenue is modest as of now, we have seen promising progress across the sub-segments.

We will provide updates on this business regularly in the future. With that, we will now turn over the call to Kevin, our CFO to discuss our third quarter financial performance..

Okay. Thank you, Hu Yao. Before I go into details on the financial performance, please be reminded that all numbers quoted here will be in RMB, and please refer to our earnings release for detailed information on our comparative financial performance on a year-over-year basis.

In the third quarter of 2021, our first year premium reached RMB4,639 million and we managed to achieve stable and positive growth in FYP on a relatively high basis during the period of industry transformation.

Our net operating revenue decreased by 9.7% year-over-year to RMB779 million from RMB863 million, and decreased by 7.3% on a comparable basis, i.e. without taking into account the management fee income from Mutual Aid business we already ceased in the first quarter.

The decline in revenue was due to soften trend in FYP and decrease in our take rate compared with last year, which was caused by the fast expansion of our customer base compared with last year. In recent months, we have seen our take rate stabilized and began to pick up resulting from the improvement in our business quality.

Operating costs and expenses for quarter three increased by 31.5% year-over-year, to RMB1,292 million. However, on a quarter-over-quarter basis, it decreased by 26.4% compared to the last quarter, showing our measures on cost control have taken effect.

To break it down, the operating costs were RMB296 million, an increase by 49.2% year-over-year, mainly due to the increase in labor cost as our consultants and insurance agents’ team expanded rapidly compared to last year, and increase in professional and outsourced customer service fees.

Sales and marketing expenses increased by 24.3% year-over-year to RMB782 million for the third quarter of 2021. The increase was primarily due to increase in outsourced sales and marketing service fees to third parties, and increase in payroll and related expenses for employees involved in sales and marketing functions.

As we announced in last earnings call, we would reduce such expenses materially, and we managed to deliver the result this quarter. On a quarter-over-quarter basis, sales and marketing expenses decreased by 37.2% from last quarter.

Along with the sales model upgrade, we have reduced reliance on third-party traffic through more refined operational management and strict cost control. G&A expense increased by 9.4% in quarter three to RMB111.4 million year-over-year, and decreased by 25.3% quarter-by-quarter.

R&D expense increased by 92.9% to RMB103 million year-over-year, and increased by 2.6% quarter-by-quarter. We uphold the technology driven innovation and continue to invest in R&D on a disciplined manner.

In third quarter, we incurred a net loss of RMB477 million on a GAAP basis and an adjusted net loss of RMB454 million, decreased by 27.3% and 20.4% respectively compared with last quarter.

For the fourth quarter of 2021, following the cost control plan in the third quarter, we expect to further materially reduce our sales and marketing expenses as well as total operating costs and expenses compared to this quarter.

Such outlook is based on the current market conditions and reflects our preliminary view and estimates, which are all subject to change. This concludes our prepared remarks. I will now hand over to the operator to open the call for Q&A. Operator, we are ready to take questions. Thank you..

Thank you. [Operator Instructions] We will now take our first question from Michael Li from Bank of America. Please go ahead..

Thank you. [Foreign Language] Thanks management. This is Michael Li from Bank of America Securities. My question is about cost. So we see that third quarter cost and the marketing expenses dropped quite significantly from second quarter in line with our previous guidance.

And I also see that in the announcement that we forecasted that in fourth quarter we will continue to see material reduce of our cost and marketing expenses.

So my question is whether this kind of cost is because of seasonality because third quarter and fourth quarter are usually weaker quarter compared with first quarter and second quarter, or this about our strategy changes in the current challenging environment.

We want to control our cost and control pace of expansion and to make more balanced growth and focusing more on profitability. Thank you..

Hi, Michael. Thank you for question. I think it's a great question. Actually, the main reason is a change of our strategy on the cost control side and also the seasonality. If we compare with last year, the year-over-year increase in total cost and expenses was mainly due to the increase in operating costs and R&D expense.

And total operating costs and expenses increased by RMB310 million year-over-year mainly due to the increase in labor cost, but comparing with quarter two, our total operating cost and the expenses reduced significantly this quarter.

The decrease of RMB462 million is in total costs and expenses quarter-over-quarter was mainly due to the decrease of RMB460 million in marketing expenses to the third-party traffic channels.

And the increase in R&D expenses was mainly due to the increased R&D investment as planned to the infrastructure and the functionality as well as the technology empowerment to the insurance companies and other partners. And actually, we have adopted a lot of specific standards to cancel costs and expenses in quarter three and quarter four.

In terms of total marketing expenses, our matters include number one, we have lowered the marketing expenditure and used stricter criteria to select traffic acquisition platforms. And then number two, we are also leveraging our AI empowered platform to conduct more intelligent and targeted marketing.

We have seen good results from the tested strategies. In terms of operating costs, specific matters include number one reviewing key tasks and the all business procedures to identify where and the how to optimize.

And number two, integrating organizational functions with highest synergies and number three, is strengthening control over selection of suppliers, and number four, measuring some certain officers that who are moving to areas with more reasonable rents. And considering, the industry is currently in a period of transition.

All the players will somewhat adjust business strategy and the competitive landscape will also undergo some changes. Platforms with more aggressive, but non-compliant business practice are expected to be greatly shadowed by new regulation, which is good for Waterdrop in the long run.

We in terms of the profitability, actually – we originally planned to procure in 2023, but as market environments change, we have increased our efforts to control costs and expenses. Marketing expenses, which used to be our largest highest item have been significantly reduced in third quarter.

And we expect this trend will continue in the fourth quarter. So our goal is that our mature business will breakeven by certain months earlier than 2023. Hope that addresses your question, Michael. Thank you..

Thank you..

We will now take our next question from Kui Ma from CICC. Please go ahead..

[Foreign Language] My question is about your auto plan. Could you please talk a little bit about the advantages of your commission system compared with traditional insurance companies? And what would you do to promote offline growth in the new cycle? That's all from me..

Thank you, Kui for the question. This is Yang Guang speaking and we answer your question. I think our national head of auto team has already being on board in last quarter. And he previously spoke in the innovation oriented insurance clients such as AAI and Allianz Life Insurance.

And after several months of research and experience-based review we basically formulated the preliminary outline and the general rules for our offline brokerage team.

And as mentioned earlier, different from the traditional procurement structure in the insurance industry, we decreased the sales organizational structure to two layers only in order to save more incentive for the direct sales team and increase the recruitment competitiveness.

We replace the traditional management layers with AI driven system and online tools to provide more efficient training customization, and operation management support.

And we are currently working on the constructional infrastructure and the recruiting, and we will probably pilot the innovative model in three to five cities, especially speaking, we adopt a more productive model as well as management and control mechanism.

I think going forward, we’re going to continue to strengthening our capabilities in the – in several aspects. I think firstly to further diversify our customer source both online from our platform and offline from our sales force.

And secondly to make more efficient distribution and use of subsidies based on the accurate identification of user needs and the data driven operation. And certainly to be more user centric, to further increase our product offering and deepen the service level by leveraging the offline sales force.

And hopefully to equip the offline sales force with online user operation knowhow CRM system and online tools and further assist the sales force to build our personal IP through social media and internet platforms.

For our management and control mechanism, we will focus on productivity and efficiency of our offline team and develop corresponding organizational structure, training system incentive mechanism and management model, which hopefully will inspire the team's sales potential.

And meanwhile, we will continue to explore different offline models for different customer groups in the future. Hope that answers your question. Thank you..

Due to time constraints, the call will end now. Thank you for your participation in today's conference call. You may now disconnect..