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August 5, 2019
Cunjun Ma
Chief Executive Officer
Huize Holding Ltd
5/F, Building 3-4
Shenzhen Animation Park, Yuehai Road, Nanhai Avenue
Nanshan District, Shenzhen 518052
People's Republic of China
Re: Huize Holding Ltd
Amendment No. 1 to Draft Registration Statement on Form F-1
Submitted July 19, 2019
CIK No. 0001778982
Dear Mr. Ma:
We have reviewed your amended draft registration statement and have the
following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Amendment No. 1 to Draft Registration Statement on Form F-1 submitted July 19,
2019
Prospectus Summary, page 1
1. We note your response to comment 1. Please provide us with a complete
copy of the
Oliver Wyman report.
2. We note your response to prior comment 4 and your revisions to page 7.
Please revise
your disclosure on page 1 to explain the extent to which travel
insurance accounts for the
wide disparity between the 5.3 million "insurance clients" and the 41.8
million "insured,"
or alternatively remove the 41.8 million figure from your Summary
presentation. In this
regard, we note your revised disclosures on page 111 indicates that each
of your
Cunjun Ma
FirstName LastNameCunjun Ma
Huize Holding Ltd
Comapany2019
August 5, NameHuize Holding Ltd
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"individual clients" has accumulatively purchased an average of 2.6
insurance policies,
which is far less than the 7.9 insurance policies highlighted in your
disclosure on page 1.
Risk Factors
Risks Related to Our Business and Industry
We depend on our cooperation with our insurer partners...., page 19
3. To help us evaluate your response to prior comment 12, please tell us
in your response the
names of the two insurance partners and indicate the percentage of
2018 operating
revenue attributable to each partner. In light of your revised
disclosure on page 20, please
also tell us whether you or your senior management are related parties
to either insurance
partner.
We may not be able to ensure the accuracy and completeness of product
information..., page 19
4. We refer to prior comment 13 and note that your revised disclosure on
page 20 indicates
that you and your senior management are/were related parties of your
insurance partners.
Accordingly, please tell us whether sales to these affiliated
insurance partners have been
material to your business in recent years. If these sales have been
material, then please
revise your disclosures to describe the conflicts of interest that may
result from these
affiliations, discuss how you manage these conflicts, and amend your
disclosure on page 1
and elsewhere concerning your lack of affiliation with insurance
companies and industry
participants.
Management's Discussion of Financial Condition and Results of Operations
Results of Operations
Operating costs and expenses, page 83
5. Please address the following regarding the revisions provided in
response to prior
comment 15 in order for readers to understand how you utilize user
traffic channels and
how your service fee arrangements with these distribution channels are
structured:
Revise to identify and provide a detailed description of each user
traffic channel within
the "social media influencer, emerging media channel and financial
institution"
categories and an explanation of the methods used in each user
traffic channel
to "attract" or "guide" Insurance Clients to your online insurance
products and service
platform, as discussed on page 126.
Revise to disclose a description of key terms governing your
contractual arrangements
with each user traffic channel. Where possible, provide
quantification of the impact of
those terms with your contractual arrangements with user traffic
channels.
You disclose on page 126 that you pay your user traffic channels
service fees "based
on the transactions completed with clients they attract" to your
platform. Revise to
quantify the indirect marketing brokerage income as quantified on
page 82 based on
clients attracted by each traffic channel for each period
presented.
Cunjun Ma
FirstName LastNameCunjun Ma
Huize Holding Ltd
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Similarly revise to disclose a breakdown of service fee expense by
user traffic channel
for each period presented.
Revise to explain how you "equip" certain user traffic channels
with "client service
team and resources" and how you account for these business
activities. Refer to your
discussion on page 126.
Revise to provide an explanation of the key factors underlying
fluctuations in the
relationship between indirect marketing brokerage income and
service fee expense for
each period presented.
Provide a description of the methods used to compute service fee
expense and
the associated amount recognized for each user traffic channel in
each period
presented.
6. Please address the following regarding the revisions provided in
response to prior
comment 16:
Please provide a description and quantification of the activities
and associated costs to
develop and maintain your online insurance products and service
platform, planned
future investment in your systems as discussed on page 113 and your
accounting
treatment for these costs.
In your response, integrate your analysis with information related
to your technology
and risk management systems provided on pages 126-129 and expense
breakdowns on
page F-40.
Revise to more clearly identify the parameters within which you make
underwriting
decisions, and discuss the extent to which that varies by insurance
product.
Revise to identify the parameters within which you conduct claims
management
activities and within which you make claims payment decisions.
In order to clearly explain how you assist your Insurer Partners in
technology support,
systems integration, product design, policy underwriting, and
claims settlement,
provide us with the following information, focusing on the
contractual arrangements
with your two largest Insurer Partners.
o A description of the contractual terms in the "cooperative
agreements" with your
Insurer Partners, as described on page 121, particularly those
governing your
obligation to provide support services to your Insurer
Partners.
o A description of the resources used to deliver each support
service to your Insurer
Partners as described on page 109, including intelligent
underwriting, in-force
policy administration, claims settlement and systems
integration. Integrate this
analysis with information in the table on page 130, showing the
number of
employees by function, and the expense breakdowns on page F-40.
Cunjun Ma
FirstName LastNameCunjun Ma
Huize Holding Ltd
Comapany2019
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Reorganization, page 91
7. Please refer to prior comment 17. Please expand your disclosure on
page 91 to disclose
the remaining incremental information described on pages 7-8 of your
response,
particularly the share ownership positions in the Company and Huiye
Tianze, as held by
the same parties.
Critical Accounting Policies
Consulting Services, page 92
8. Revise your revisions provided in response to prior comment 18 on
pages 92 and F-22 to
clarify whether you receive both brokerage revenue and consulting
revenue from the sale
of a given cargo insurance policy. If so, revise your explanation of
how the consulting
revenue amount is determined accordingly, and revise to quantify the
amount of brokerage
income recorded on cargo insurance policies. If not, clearly state
that fact, and explain
why not.
Taxation
People's Republic of China Taxation , page 183
9. We note your response to comment 29. Please revise the prospectus
disclosure on page
183 to indicate that the "People's Republic of China Taxation"
disclosure is the opinion of
named counsel. Please also ensure that Exhibit 8.2 contains a similar
statement and note
that counsel must opine on the tax consequences of the offering, not
the manner in which
those consequences are described in the prospectus. Accordingly,
Exhibit 8.2 should not
address whether the statements in the prospectus concerning PRC tax
laws "are accurate
in all material respects." For guidance, please refer to Section
III.B.2 and III.C.2 of Staff
Legal Bulletin No. 19.
10. Please revise the first sentence of the second full paragraph on page
184 to clarify, if true,
that in outside counsel's opinion non-PRC resident holders will not be
subject to PRC
income tax on dividends or gains from sales or other dispositions. If
such opinion is
subject to uncertainty, counsel may provide a "should' or "more likely
than not" opinion
and explain why a "will" opinion cannot be given and describe the
degree of uncertainty.
The opinion should provide risk factor and/or other appropriate
disclosure setting forth the
risks of uncertain tax treatment to investors. For guidance, please
refer to Section
III.C.4 of Staff Legal Bulletin No. 19.
Cunjun Ma
FirstName LastNameCunjun Ma
Huize Holding Ltd
Comapany2019
August 5, NameHuize Holding Ltd
August 5, 2019 Page 5
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Notes to Consolidated Financial Statements
2. Summary of significant accounting policies
(w) Revenue recognition, page F-22
11. Please address the following related to your response to prior comment
32:
Please explain the terms governing the operation of your loyalty
program, quantify the
associated revenues generated under these programs, and quantify
the associated costs
recorded in each period presented.
For your loyalty program discounts or concessions for future
insurance transactions,
tell us how you considered whether such concessions represent
"credit or other items
(for example a coupon or voucher) that can be applied against
amounts owed to the
entity (or to other parties that purchase the entity's good or
services from the
customer)." In the cases where you provide credit to the insured
towards insurance
policies purchased from your insurance partners, explain in greater
detail how you
considered whether this falls into the guidance of ASC
606-10-32-25.
Further, refer to "Case One" in the Case Study provided on page 124.
Tell us and
revise your disclosure here to explain how you would account for
the 30 day traffic
accident insurance policy issued to Mrs. Chen which was issued at
no cost to her.
Specifically address in your response how you considered the
application of ASC 606-
10-32-25. Tell us whether the issuance of the insurance policy
represents a voucher
that can be applied against amounts owed to your insurance partners
who purchased
from you the service of a successfully matched insurance policy
with the insured.
(x) Cost of revenue, page F-23
12. Please address the following regarding your response to prior comment
33:
As originally requested, explain your statement that "channel cost
is recognized when
insurer obtains control of the insurance brokerage service, which
is consistent with the
revenue recognition."
Explain the process and timing for establishing insurer control of
the insurance
brokerage service and the expected consistency between revenue and
the associated
cost of revenue.
Explain the basis for your statement that "user traffic channels
have influences over
their followers and users" and your basis for expecting that these
"influences" will
facilitate future insurance purchase activity. Clarify how you
track the business
contact derived from a given traffic channel and how you track and
compare the
likelihood that an insurance policy will be sold as a result.
Cunjun Ma
Huize Holding Ltd
August 5, 2019
Page 6
You may contact Franklin Wyman at 202-551-3660 or Kevin Vaughn at
202-551-3494 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Christine Westbrook at 202-551-5019 or Joe McCann at 202-551-6262 with
any other
questions.
Sincerely,
FirstName LastNameCunjun Ma
Division of
Corporation Finance
Comapany NameHuize Holding Ltd
Office of Healthcare &
Insurance
August 5, 2019 Page 6
cc: Haiping Li, Esq.
FirstName LastName