Form 20-F
Table of Contents
falseFYDepreciation expenses for the years ended December 31, 2020, 2021 and 2022 were RMB4,684, RMB6,474 and RMB17,319, respectively. During the year ended December 31, 2022, the Group’s disposal of a subsidiary resulted in a decrease of RMB4,519 in insurance agency license, and the Group’s acquisition of a subsidiary resulted in an increase of RMB37,333 in insurance agency license.Amortization expenses for the years ended December 31, 2020, 2021 and 2022 were RMB424, RMB950 and RMB1,201, respectively. 0001778982 2022-01-01 2022-12-31 0001778982 2022-12-31 0001778982 2021-12-31 0001778982 2021-01-01 2021-12-31 0001778982 2020-01-01 2020-12-31 0001778982 2019-12-31 0001778982 2018-11-02 2018-11-02 0001778982 2015-11-02 2015-11-02 0001778982 2018-01-01 2018-12-31 0001778982 2019-01-01 2019-12-31 0001778982 2020-12-31 0001778982 2020-02-12 0001778982 us-gaap:CommonClassAMember 2021-12-31 0001778982 us-gaap:CommonClassBMember 2021-12-31 0001778982 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2021-12-31 0001778982 huiz:CustomerKMember 2021-12-31 0001778982 huiz:CustomerAMember 2021-12-31 0001778982 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM
20-F
 
 
(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022.
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
.
OR
 
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
                    
Commission file number:
001-39216
 
 
Huize Holding Limited
(Exact Name of Registrant as Specified in Its Charter)
 
 
N/A
(Translation of Registrant’s Name into English)
Cayman Islands
(Jurisdiction of Incorporation or Organization)
49/F, Building T1Qianhai Financial Centre, Linhai Avenue,
Qianhai
Shenzhen-Hong
Kong Cooperation Zone, Shenzhen 518000
People’s Republic of China
(Address of Principal Executive Offices)
Ronald Tam
49/F, Building T1Qianhai Financial Centre, Linhai Avenue,
Qianhai
Shenzhen-Hong
Kong Cooperation Zone, Shenzhen 518000
People’s Republic of China
Telephone: +86 755 3689 9088
Email:
 
tanguohao@huize.com
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
 
Title of Each Class
 
Trading
Symbol
 
Name of Each Exchange
On Which Registered
American depositary shares (each representing 20 Class A common shares, par value US$0.00001 per share) Class A common shares, par value US$0.00001 per share*
*Not for trading, but only in connection with the listing on the Nasdaq Global Market of American depositary shares.
 
HUIZ
 
Nasdaq Global Market
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
 
 
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
As of December 31, 2022, there were (i) 872,744,986 Class A common shares issued and outstanding, par value US$0.00001 per share, and (ii) 150,591,207 Class B common shares issued and outstanding, par value US$0.00001 per share.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ☐  Yes    ☒  No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    ☐  Yes    ☒  No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer      Accelerated filer     Non-accelerated filer  
           
                 Emerging growth company  
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13 (a) of the Exchange Act.  
 
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accountant firm that prepared or issued its audit report.  
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.  ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to
§240.10D-1(b).  ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
U.S. GAAP  ☒           International Financial Reporting Standards as issued             Other  ☐
            by the International Accounting Standards Board  ☐                 
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    ☐  Item 17    ☐  Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    ☐  Yes      No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    ☐  Yes    ☐  No
 
 
 


Table of Contents

TABLE OF CONTENTS

 

INTRODUCTION

     1  

FORWARD-LOOKING INFORMATION

     2  

PART I.

     3  

ITEM 1.

   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS      3  

ITEM 2.

   OFFER STATISTICS AND EXPECTED TIMETABLE      3  

ITEM 3.

   KEY INFORMATION      3  

ITEM 4.

   INFORMATION ON THE COMPANY      74  

ITEM 4.A.

   UNRESOLVED STAFF COMMENTS      117  

ITEM 5.

   OPERATING AND FINANCIAL REVIEW AND PROSPECTS      117  

ITEM 6.

   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES      130  

ITEM 7.

   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS      140  

ITEM 8.

   FINANCIAL INFORMATION      141  

ITEM 9.

   THE OFFER AND LISTING      142  

ITEM 10.

   ADDITIONAL INFORMATION      143  

ITEM 11.

   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK      154  

ITEM 12.

   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES      155  

PART II

     158  

ITEM 13.

   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES      158  

ITEM 14

   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS MATERIAL      158  

ITEM 15.

   CONTROLS AND PROCEDURES      158  

ITEM 16.A.

   AUDIT COMMITTEE FINANCIAL EXPERT      160  

ITEM 16.B.

   CODE OF ETHICS      160  

ITEM 16.C.

   PRINCIPAL ACCOUNTANT FEES AND SERVICES      160  

ITEM 16.D.

   EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES      160  

ITEM 16.E.

   PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS      160  

ITEM 16.G.

   CORPORATE GOVERNANCE      162  

ITEM 16.H.

   MINE SAFETY DISCLOSURE      162  

ITEM 16.I.

   DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS      162  

PART III

     163  

ITEM 17.

   FINANCIAL STATEMENTS      163  

ITEM 18.

   FINANCIAL STATEMENTS      163  

ITEM 19.

   EXHIBITS      163  

 

i


Table of Contents

INTRODUCTION

In this annual report on Form 20-F, or this annual report, except where the context otherwise requires and for purposes of this annual report only:

 

   

“ADRs” are to the American depositary receipts which may evidence the ADSs;

 

   

“ADSs” are to the American depositary shares, each of which represents 20 Class A common shares;

 

   

“China” or the “PRC” are to the People’s Republic of China, excluding, for the purposes of this annual report only, Hong Kong, Macau and Taiwan;

 

   

“Class A common shares” are to our Class A common shares, par value $0.00001 per share, carrying one vote per share;

 

   

“Class B common shares” are to our Class B common shares, par value $0.00001 per share, carrying 15 votes per share;

 

   

“common shares” are to our Class A common shares and/or our Class B common shares, par value US$0.00001 per share, as the context may require;

 

   

“GWP” are to gross written premiums, which include first year premiums and renewal premiums where applicable;

 

   

“insurer partners” are to the insurance companies we work with who underwrite insurance products on our platform;

 

   

“insurance clients” are to purchasers of insurance products we distribute through our platform; for travel insurance products, travel agencies usually purchase policies for multiple individuals, and we count each purchasing travel agency as an insurance client, and each such individual protected by any single policy as an insured;

 

   

“insured” are to individuals that are insured under insurance policies; when calculating the number of insured for any given period, we eliminate duplicates so that an insured protected by more than one policy during the period would be counted as one insured for such period; when calculating the cumulative number of insured, we eliminate duplicates so that an insured protected by more than one policy through our platform would be counted as one insured;

 

   

“our WFOE” are to Zhixuan International Management Consulting (Shenzhen) Co., Ltd.;

 

   

“RMB” and “Renminbi” are to the legal currency of China;

 

   

“US$,” “U.S. dollars,” “$,” and “dollars” are to the legal currency of the United States;

 

   

“VIE” are to Shenzhen Huiye Tianze Investment Holding Co., Ltd.; and

 

   

“Huize,” “we,” “us,” “our company” and “our” are to Huize Holding Limited, our Cayman Islands holding company and where the context may require, include its subsidiaries, and, in the context of describing our operations and consolidated financial information, its consolidated variable interest entity and the subsidiaries of the consolidated variable interest entity in China.

When disclosing our operating matrix, we only took into consideration our business operation in mainland China. An insurance product with a term that is longer than one year is categorized as a long-term insurance product. An independent platform refers to a platform that is not affiliated with insurance companies or other insurance industry participants.

 

1


Table of Contents

Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this annual report are made at a rate of RMB6.8972 to US$1.00, the exchange rate in effect as of December 30, 2022, as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, or at all.

FORWARD-LOOKING INFORMATION

This annual report contains forward-looking statements that reflect our current expectations and views of future events. These forward-looking statements are made under the “safe-harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Known and unknown risks, uncertainties and other factors, including those listed under “Item 3. Key Information—D. Risk Factors,” may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:

 

   

our mission, goals and strategies;

 

   

our future business development, financial conditions and results of operations;

 

   

the expected growth of insurance industry in China;

 

   

our expectations regarding demand for and market acceptance of our products and services;

 

   

our expectations regarding our relationships with insurance clients, insurance companies and other partners;

 

   

competition in our industry;

 

   

our proposed use of proceeds;

 

   

relevant government policies and regulations relating to our industry; and

 

   

potential impact of COVID-19 pandemic on our current and future business development, financial condition and results of operations.

These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations. Other sections of this annual report include additional factors that could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. You should read thoroughly this annual report and the documents that we refer to with the understanding that our actual future results may be materially different from, or worse than, what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

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This annual report contains certain data and information that we obtained from various government and private publications. Statistical data in these publications also include projections based on a number of assumptions. The insurance industry may not grow at the rate projected by market data, or at all. Failure of this market to grow at the projected rate may have a material and adverse effect on our business and the market price of the ADSs. In addition, the rapidly evolving nature of this industry results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.

The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual report and the documents that we refer to in this annual report and exhibits to this annual report completely and with the understanding that our actual future results may be materially different from what we expect.

PART I.

 

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

 

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

 

ITEM 3.

KEY INFORMATION

Our Holding Company Structure and Contractual Arrangements with the VIE

Huize Holding Limited is not an operating company but rather a Cayman Islands holding company with no equity ownership in its VIE. Our Cayman Islands holding company does not conduct business operations directly. We conduct our operations in China primarily through (i) the VIE with which we have maintained contractual arrangements, and (ii) the VIE’s subsidiaries in China. PRC laws and regulations restrict and impose conditions on foreign direct investment in companies involved in internet-based business and insurance intermediary business. Therefore, we operate such business in China through the variable interest entity, Shenzhen Huiye Tianze Investment Holding Co., Ltd., which we refer to as the VIE in this annual report, and its subsidiaries in China, and rely on contractual arrangements among our WFOE, the VIE and its shareholders to control the business operations of the VIE. Investors in our ADSs thus are not purchasing direct equity interest in our operating entities in China but instead are purchasing equity interest in a Cayman Islands holding company. As used in this annual report, “Huize,” “we,” “us,” “our company” or “our” refers to Huize Holding Limited, and where the context requires, includes its subsidiaries, and, in the context of describing our operations and consolidated financial information, the VIE and its subsidiaries in China.

A series of contractual agreements, including power of attorney, equity pledge agreement, exclusive business cooperation agreement and exclusive option and equity custody agreement, have been entered into by and among our WFOE, the VIE and its shareholders. In particular, through:

 

  (i)

the power of attorney, pursuant to which each shareholder of the VIE irrevocably authorized our WFOE or any person designated by our WFOE to act as its attorney-in-fact to exercise all of its rights as a shareholder of the VIE, and the equity pledge agreement, pursuant to which the shareholders of the VIE have pledged the 100% equity interests in the VIE to our WFOE to guarantee performance by the shareholders of their obligations under the exclusive business cooperation agreement, exclusive option and equity custody agreement and power of attorney, we retain effective control over the VIE;

 

  (ii)

the exclusive business cooperation agreement, pursuant to which our WFOE has the exclusive right to provide the VIE with comprehensive technology and business support as well as the relevant consultations services required by the business of the VIE, or to appoint a third party to provide the VIE with such services, we may receive substantially all economic benefits from the VIE; and

 

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  (iii)

the exclusive option and equity custody agreement, pursuant to which each of the shareholders of the VIE has irrevocably granted our WFOE an exclusive option to purchase, or have its designated third party to purchase, at its discretion, all or part of his or its equity interests in the VIE and/or the assets that the VIE holds at a nominal consideration or the lowest price permitted by applicable PRC law, we have the option to purchase the equity interest in and assets of the VIE at low cost.

The VIE is consolidated for accounting purposes; however, neither our Cayman Islands holding company nor the investors in the holding company have an equity ownership or direct investment in the VIE. Our Cayman Island holding company is considered the ultimate primary beneficiary of the VIE and consolidates the VIE and its subsidiaries as required by Accounting Standards Codification topic 810, Consolidation. Accordingly, we treat the VIE as our consolidated entity under U.S. GAAP and we consolidate the financial results of the VIE in our consolidated financial statements in accordance with U.S. GAAP. For more details of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with The VIE and Its Shareholders.”

Our corporate structure is subject to risks associated with our contractual arrangements with the VIE. Our Cayman Islands holding company that investors own equity interest in may never directly hold equity interests in the businesses that are conducted by the VIE. If the PRC government finds that the agreements that establish the structure for operating our business do not comply with PRC laws and regulations, or if these regulations or their interpretations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company, our PRC subsidiary, the VIE, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the VIE and, consequently, significantly affect the financial performance of the VIE and our company as a whole. For a detailed description of the risks associated with our corporate structure, please refer to risks disclosed under “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure.” In addition, the contractual arrangements may not be as effective as equity ownership in providing us with control over the VIE, and we may incur substantial costs to enforce the terms of the arrangements. Uncertainties in the PRC legal system may limit our ability, as a Cayman Islands holding company, to enforce these contractual arrangements. Meanwhile, based on officially published and publicly available judgements, the legality and validity of VIE contractual arrangements have not been tested in a court of law in the PRC. There are very few precedents as to whether contractual arrangements would be judged to form effective control over the relevant VIE through the contractual arrangements, or how contractual arrangements in the context of a variable interest entity should be interpreted or enforced by the PRC courts. Should legal actions become necessary, we cannot guarantee that the court will rule in favor of the enforceability of the variable interest entity contractual arrangements. In the event we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exert effective control over the VIE, and our ability to conduct our business may be materially adversely affected. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure—We rely on contractual arrangements with the VIE, and its shareholders for our operations in China, which may not be as effective as equity ownership in providing operational control,” and “—The shareholders and directors of the VIE may have potential conflicts of interest with us, and if any such conflicts of interest are not resolved in our favor, our business may be materially and adversely affected.”

 

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The following diagram illustrates our current corporate structure, which includes our significant subsidiaries, the VIE and its material subsidiaries as of the date of this annual report:

 

LOGO

 

 

Note:

 

(1)

Shareholders of Shenzhen Huiye Tianze Investment Holding Co., Ltd., or Huiye Tianze, are: (1) Shenzhen Huidecheng Investment Development Limited Partnership and Shenzhen Huideli Consulting Management Limited Partnership, both as our PRC ESOP holding entities, holding an aggregate of 49.43% shares in Huiye Tianze; (2) PRC holding entities of the shareholders of our Cayman Islands holding company, holding an aggregate of 50.57% shares in Huiye Tianze.

We face various legal and operational risks and uncertainties associated with being based in or having our operations primarily in China and the complex and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on offerings conducted overseas by and foreign investment in China-based issuers, the use of the VIE, anti-monopoly regulatory actions, oversight on cybersecurity and data privacy, which may impact our ability to conduct certain businesses, accept foreign investments, or list on or remain listed on a United States or other foreign exchange. These risks could result in a material adverse change in our operations and the value of our ADSs, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause the value of such securities to significantly decline or become worthless. For a detailed description of risks related to doing business in China, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China.”

PRC government’s significant authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide regulations in this nature may cause the value of such securities to significantly decline or become worthless. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our ADSs.”

 

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Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our ADSs. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.”

The Holding Foreign Companies Accountable Act

Pursuant to the Holding Foreign Companies Accountable Act, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including our auditor. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of this annual report on Form 20-F for the fiscal year ended December 31, 2021. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCAA after we file this annual report on Form 20-F. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. If PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong and we continue to use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the Securities and Exchange Commission, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. There can be no assurance that we would not be identified as a Commission-Identified Issuer for any future fiscal year, and if we were so identified for two consecutive years, we would become subject to the prohibition on trading under the HFCAA. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections.” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in China. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.”

Permissions Required from the PRC Authorities for Our Operations

We conduct our business primarily through our PRC subsidiary, the VIE and its subsidiaries in China. Our operations in China are governed by PRC laws and regulations. As of the date of this annual report, our PRC subsidiary, the VIE and its subsidiaries have obtained the requisite licenses and permits from the PRC government authorities that are material for the business operations of our holding company, the VIE and its subsidiaries in the PRC in all material respects, including, among others, the value-added telecommunications business operating license, the license to operate insurance brokerage business, the license to operate insurance agency business, the record-filing certificate on insurance adjustment assessment business and the record-filing certificate on the graded protection of information system security. Any failure to obtain or delay in obtaining such permissions or approvals, or a rescission of any such approval if obtained by us, would subject us to sanctions by the applicable PRC regulatory authorities. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our ADSs. Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services of our platform in the future. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—Failure to obtain, renew, or retain licenses, permits or approvals may affect our ability to conduct or expand our business” and “—We may be adversely affected by the complexity, uncertainties and changes in PRC regulations of internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations.”

 

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Meanwhile, the PRC government has recently sought to exert more oversight and control over capital raising activities of listed companies that are conducted overseas and/or foreign investment in China-based issuers. In December 2021, the Cyberspace Administration of China, or the CAC, together with other authorities, jointly promulgated the Cybersecurity Review Measures, which became effective on February 15, 2022, and replaces its predecessor regulation. Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators that procure internet products and services and network platform operators that conduct data process activities must be subject to the cybersecurity review if their activities affect or may affect national security. The Cybersecurity Review Measures further stipulates that network platform operators that hold personal information of over one million users shall apply with the Cybersecurity Review Office for a cybersecurity review before any public offering at a foreign stock exchange. On July 7, 2022, the CAC issued the Measures for the Security Assessment of Data Cross-border Transfer, which became effective on September 1, 2022. The Measures for the Security Assessment of Data Cross-border Transfer requires that any data processor providing important data collected and generated during operations within the territory of the PRC or personal information that should be subject to security assessment according to law to an overseas recipient shall conduct security assessment. The Measures for the Security Assessment of Data Cross-border Transfer provides certain circumstances, under any of which data processors shall, through the local cyberspace administration at the provincial level, apply to the national cyberspace administration for security assessment of data cross-border transfer. These circumstances include: (i) where a data processor transfers important data overseas; (ii) where a critical information infrastructure operator, or a data processor processing the personal information of more than one million individuals, who, in either case, transfers personal information overseas; (iii) where a data processor who has, since January 1 of the previous year cumulatively transferred overseas the personal information of more than 100,000 individuals, or the sensitive personal information of more than 10,000 individuals; or (iv) other circumstances under which security assessment of data cross-border transfer is required as prescribed by the national cyberspace administration. On February 17, 2023, China Securities Regulatory Commission, or the CSRC, released several regulations regarding the filing requirements for overseas offerings and listings by domestic companies, including the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies and five supporting guidelines (collectively, the “Overseas Listing Filing Rules”), which were formally implemented on March 31, 2023. According to the Overseas Listing Filing Rules, the overseas offering and listing by a domestic company, whether directly or indirectly, shall be filed with the CSRC. Any failure to obtain or delay in obtaining such approval or completing such procedures could subject us to restrictions and penalties imposed by the CSRC, the CAC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, delays of or restrictions on the repatriation of the proceeds from our offshore offerings into China, or other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our ADSs. For more detailed information, see “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China—The approval of and filing with the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.” As of the date of this annual report, we have not been required to file with the CSRC, nor have we been subject to any cybersecurity review initiated by the CAC. If (i) we fail to obtain the relevant approval or complete other filing procedures, (ii) we inadvertently conclude that such approval or filing procedures are not required, while they actually are required, or (iii) we are required to obtain the relevant approval or complete other filing procedures as a result of changes of applicable laws, regulations or interpretations thereof but fail to do so, we may face sanctions by the CSRC or other PRC regulatory authorities, which may include fines and penalties on our operations in China, limitations on our operating privileges in China, restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China, restrictions on or delays to our future financing transactions offshore, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—The approval of and filing with the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing” and “—Our business generates and processes a large amount of data, and is subject to complex and evolving Chinese and international laws and regulations regarding privacy, data protection and cybersecurity. Any failure to protect the confidential information of third parties or improper use or disclosure of such data may subject us to liabilities imposed by data privacy and protection laws and regulations, negatively impact our reputation, and deter our clients from using our online platform..”

 

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Cash Flows through Our Organization

We have established stringent controls and procedures for cash flows within our organization. Each transfer of cash between our Cayman Islands holding company and a subsidiary, the VIE or the subsidiaries of the VIE is subject to internal approval. The cash of our group is under the unified management of our finance department, and is dispatched and applied to each operating entity based on the budget and operating conditions of the specific operating entity. Each cash requirement, after raised by an operating entity, is required to go through a three-level review process of our finance department. The funding team of the finance department will allocate the cash to the operating entity after the application for cash requirement is approved by the responsible person in the finance department. To date, we have not had difficulty in transferring cash between our Cayman Islands holding company and a subsidiary, the VIE or the subsidiaries of the VIE. The cash inflows of the Cayman Islands holding company were primarily generated from our initial public offering in February 2020. In 2020, 2021 and 2022, the Cayman Islands holding company transferred cash in the total amount of RMB156.0 million (US$22.6 million) to our PRC subsidiary and the subsidiaries of the VIE through our offshore intermediate holding entities in two methods: (i) Hong Kong Smart Choice Ventures Limited, our Hong Kong subsidiary, made capital contribution to Zhixuan International Management Consulting (Shenzhen) Co., Ltd., our WFOE, in the amount of RMB0.5 million in 2020, RMB129.5 million in 2021 and nil in 2022; our WFOE and its subsidiary then provided inter-company loan of RMB128.0 million in 2021 and RMB6.0 million (US$0.9 million) in 2022 to the VIE; (ii) through cross-border guarantee, where our Hong Kong subsidiary provided guarantee to certain China-based commercial banks or their offshore branches by pledging offshore cash deposits, and the onshore branches of these banks granted loans to the subsidiaries of the VIE, namely, Huize Insurance Brokerage Co., Ltd. and Shenzhen Huize Shidai Co., Ltd, in the amount of RMB85.4 million in 2020, RMB14.0 million in 2021 and nil in 2022. The subsidiaries of the VIE repaid the loan in a total amount of RMB32.7 million in 2021 and RMB46.7 million (US$6.8 million) in 2022. For the years ended December 31, 2020, 2021 and 2022, no assets other than cash were transferred between our Cayman Islands holding company and a subsidiary, no subsidiaries paid dividends or made other distributions to the Cayman Islands holding company, and no dividends or distributions were paid or made to U.S. investors. We intend to settle service fees under our contractual arrangements with the VIE when there is a business need and as our WFOE sees fit. For details of the financial position, cash flows and results of operations of the VIE and its subsidiaries, see “Item 3. Key Information—Financial Information Related to the Consolidated Variable Interest Entity.”

As a Cayman Islands holding company, we may receive dividends from our PRC subsidiary through Hong Kong Smart Choice Ventures Limited. The Enterprise Income Tax Law of the PRC, or the EIT Law, and its implementing rules, provide that dividends paid by a PRC entity to a nonresident enterprise for income tax purposes is subject to PRC withholding tax at a rate of 10%, subject to reduction by an applicable tax treaty with China.

Dividends paid by our wholly foreign-owned subsidiary in China to our intermediate holding company in Hong Kong will be subject to a withholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the Arrangement between China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and receives approval from the relevant tax authority. If our Hong Kong subsidiary satisfies all the requirements under the tax arrangement and receives approval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding tax at the standard rate of 5%. Effective from November 1, 2015, the above mentioned approval requirement has been abolished, but a Hong Kong entity is still required to file application package with the relevant tax authority, and settle the overdue taxes if the preferential 5% tax rate is denied based on the subsequent review of the application package by the relevant tax authority. Furthermore, effective from January 1, 2020, a Hong Kong entity is entitled to judge by itself that it meets the conditions for entitlement to such treaty benefits. It could obtain such entitlement by itself at the time of making tax returns, or at the time of making withholding declarations via withholding agents. At the same time, the Hong Kong entity shall collect, gather and retain relevant materials for future reference in accordance with applicable rules, and shall accept the follow-up administration of tax authorities. In addition, there is no assurance that the PRC government will not intervene or impose restrictions on our ability to transfer cash in the future. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure—We may rely principally on dividends and other distributions on equity paid by our WFOE to fund any cash and financing requirements we may have, and any limitation on the ability of our WFOE to pay dividends to us could have a material adverse effect on our ability to conduct our business.”

 

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If our holding company in the Cayman Islands or any of our subsidiaries outside of the mainland of China were deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.”

For purposes of illustration, the following discussion reflects the hypothetical taxes that might be required to be paid within China, assuming that: (i) we have taxable earnings, and (ii) we determine to pay dividends in the future:

 

    

Taxation Scenario(1)
Statutory Tax and Standard

Rate

 

Hypothetical pre-tax earnings(2)

     100

Tax on earnings at statutory rate of 25%(3)

     (25 %) 

Net earnings available for distribution

     75

Withholding tax at standard rate of 10%(4)

     (7.5 %) 

Net distribution to Parent/Shareholders

     67.5

 

Notes:

 

(1)

For purposes of this example, the tax calculation has been simplified. The hypothetical book pre-tax earnings amount, not considering timing differences, is assumed to equal Chinese taxable income.

(2)

Under the terms of the contractual arrangements among our WFOE, the VIE and its Shareholders, our WFOE may charge the VIE for services provided to the VIE. These fees shall be recognized as expenses of the VIE, with a corresponding amount as service income by our WFOE and eliminate in consolidation. For income tax purposes, our WFOE and VIE file income tax returns on a separate company basis. The fees paid are recognized as a tax deduction by the VIE and as income by our WFOE and are tax neutral.

(3)

For purposes of this hypothetical example, the table above reflects a maximum tax scenario under which the full statutory rate of 25% would be effective.

(4)

The EIT Law of the PRC imposes a withholding income tax of 10% on dividends distributed by a Foreign Invested Enterprises (“FIE”) to its immediate holding company outside of China. A lower withholding income tax rate of 5% is applied if the FIE’s immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement with China, subject to a qualification review at the time of the distribution. For purposes of this hypothetical example, the table above assumes a maximum tax scenario under which the full withholding tax rate of 10% would be applied.

The table above has been prepared under the assumption that all profits of the VIE will be distributed as fees to our WFOE under tax neutral contractual arrangements. If in the future, the accumulated earnings of the VIE exceed the fees paid to our PRC subsidiaries (or if the current and contemplated fee structure between the intercompany entities is determined to be non-substantive and disallowed by Chinese tax authorities), the VIE could, as a matter of last resort, make a non-deductible transfer to our WFOE for the amounts of the stranded cash in the VIE. This would result in such transfer being non-deductible expenses for the VIE but still taxable income for our WFOE.

Under PRC laws and regulations, we are subject to restrictions on foreign exchange and cross-border cash transfers, including to U.S. investors. Our ability to distribute earnings to the holding company and U.S. investors is also limited. We are a Cayman Islands holding company and we may rely on dividends and other distributions on equity paid by our PRC subsidiary, which in turn relies on consulting and other fees paid to us by the VIE, for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. When any of our PRC subsidiary incurs debt on its own behalf, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

Our WFOE, being a foreign-invested enterprise established in China, is required to make appropriations to certain statutory reserves, namely, a general reserve fund, an enterprise expansion fund, a staff welfare fund and a bonus fund, all of which are appropriated from net profit as reported in its PRC statutory accounts. Our WFOE is required to allocate at least 10% of its after-tax profits after making up the previous year’s accumulated losses each year, if any, to a general reserve fund until such fund has reached 50% of its respective registered capital. Appropriations to the enterprise expansion fund and staff welfare and bonus funds are at the discretion of the board of directors of the PRC subsidiary.

 

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Under PRC laws and regulations, our WFOE, the VIE and its subsidiaries are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets to us. The amounts restricted include the paid-up capital and the statutory reserve funds of our PRC subsidiaries and the net assets of the consolidated variable interest entity in which we have no legal ownership.

In addition, our WFOE, the VIE and its subsidiaries generate their revenue primarily in Renminbi, which is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of our PRC subsidiaries to pay dividends to us. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure—We may rely principally on dividends and other distributions on equity paid by our WFOE to fund any cash and financing requirements we may have, and any limitation on the ability of our WFOE to pay dividends to us could have a material adverse effect on our ability to conduct our business,” and “—Government control of currency conversion and future fluctuation of Renminbi exchange rates could have a material adverse effect on our results of operations and financial condition, and may reduce the value of, and dividends payable on, our Shares in foreign currency terms.”

Financial Information Related to the Consolidated Variable Interest Entity

The following tables present the condensed consolidating schedule of financial position for the consolidated variable interest entity and other entities as of the dates presented.

 

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Selected Condensed Consolidated Statements of Income Information

 

     For the Year Ended December 31, 2020     For the Year Ended December 31, 2021     For the Year Ended December 31, 2022  
     Parent
company
RMB’000
    Subsidiaries
of parent
company
RMB’000
    WFOE
RMB’000
    VIE and its
subsidiaries
RMB’000
    Elimination
(Note 1)
RMB’000
    Consolidated
RMB’000
    Parent
company
RMB’000
    Subsidiaries
of parent
company
RMB’000
    WFOE
RMB’000
    VIE and its
subsidiaries
RMB’000
    Elimination
(Note 1)
RMB’000
    Consolidated
RMB’000
    Parent
company
RMB’000
    Subsidiaries
of parent
company
RMB’000
    WFOE
RMB’000
    VIE and its
subsidiaries
RMB’000
    Elimination
(Note 1)
RMB’000
    Consolidated
RMB’000
 

Operating revenue

                                    

Brokerage commission income

     —         —         —         1,215,434       —         1,215,434       —         865       —         2,231,388       —         2,232,253       —         1,562       —         1,107,090       —         1,108,652  

Other income

     228       —         —         4,560       —         4,788       1,269       —           11,494       —         12,763       1,553       —         —         49,223       (1,520     49,256  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenue

     228       —         —         1,219,994       —         1,220,222       1,269       865       —         2,242,882       —         2,245,016       1,553       1,562       —         1,156,313       (1,520     1,157,908  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses

     —         —         —         —         —         —               —             —         —         —         —         —         —    

Cost of revenue

     —         —         —         (813,507     —         (813,507     —         (317     —         (1,687,770     —         (1,688,087     —         (942     —         (705,067     —         (706,009

Other cost

     —         —         —         (2,846     —         (2,846     —         —         —         (2,670     —         (2,670     —         —         —         (28,282     —         (28,282
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs

     —         —         —         (816,353     —         (816,353     —         (317     —         (1,690,440     —         (1,690,757     —         (942     —         (733,349     —         (734,291

Selling expenses

     —         —         —         (230,438     —         (230,438     —         (4,268     —         (346,305     —         (350,573     —         (1,250     (1,520     (230,414     1,520       (231,664

General and administrative expenses

     (4,611     (8,668     (7     (136,921     —         (150,207     (5,994     (18,751     (52     (172,822     —         (197,619     (4,614     (13,514     (68     (136,519     —         (154,715

Research and development expenses

     —         —         —         (49,135     —         (49,135     —         —         —         (120,478     —         (120,478     —         —         —         (80,911     —         (80,911
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     (4,611     (8,668     (7     (1,232,847     —         (1,246,133     (5,994     (23,336     (52     (2,330,045     —         (2,359,427     (4,614     (15,706     (1,588     (1,181,193     1,520       (1,201,581
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss)/income

     (4,383     (8,668     (7     (12,853     —         (25,911     (4,725     (22,471     (52     (87,163     —         (114,411     (3,061     (14,144     (1,588     (24,880     —         (43,673
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income/
(expenses)

                                    

Interest (expenses)/income

     11       645       —         (1,813     —         (1,157     4       840       42       (4,092     —         (3,206     —         525       5       (5,592     —         (5,062

Unrealized exchange (loss)/income

     421       (14     5       (421     —         (9     —         (59     —         —         —         (59     —         (84     5       —         —         (79

Investment income

     —         —         —         137       —         137       —         (3,959     —         (1,369     —         (5,328     —         (2,784     —         568       —         (2,216

Others, net

     —         24       —         10,153       —         10,177       —         —         —         12,627       —         12,627       —         257       1,292       17,941       —         19,490  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit before income tax, and share of (loss)/income of equity method investee

     (3,951     (8,013     (2     (4,797     —         (16,763     (4,721     (25,649     (10     (79,997     —         (110,377     (3,061     (16,230     (286     (11,963     —         (31,540
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense

     —         —         —         (1,768     —         (1,768     —         —         —         —         —         —         —         —         —         —         —         —    

Share of income/(loss) of equity method investee

     —         —         —         239       —         239       —         —         —         2,660       —         2,660       —         —         —         (2,200     —         (2,200

Share of income/(loss) of subsidiaries and VIE

     (14,341     (6,328     (6,326     —         26,995 (i)      —         (102,945     (77,296     (77,286       257,527 (i)      —         (28,126     (11,896     (11,610     —         51,632       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

11


Table of Contents
     For the Year Ended December 31, 2020     For the Year Ended December 31, 2021     For the Year Ended December 31, 2022  
     Parent
company
RMB’000
    Subsidiaries
of parent
company
RMB’000
    WFOE
RMB’000
    VIE and its
subsidiaries
RMB’000
    Elimination
(Note 1)
RMB’000
    Consolidated
RMB’000
    Parent
company
RMB’000
    Subsidiaries
of parent
company
RMB’000
    WFOE
RMB’000
    VIE and its
subsidiaries
RMB’000
    Elimination
(Note 1)
RMB’000
    Consolidated
RMB’000
    Parent
company
RMB’000
    Subsidiaries
of parent
company
RMB’000
    WFOE
RMB’000
    VIE and its
subsidiaries
RMB’000
    Elimination
(Note 1)
RMB’000
    Consolidated
RMB’000
 

Net profit/(loss)

     (18,292     (14,341     (6,328     (6,326     26,995       (18,292     (107,666     (102,945     (77,296     (77,337     257,527       (107,717     (31,187     (28,126     (11,896     (14,163     51,632       (33,740
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net profit/(loss) attributable to non-controlling interests

     —         —         —         —         —         —         —         —         —         (51     —         (51     —         —         —         (2,553     —         (2,553

Net profit/(loss) attributable to Huize Holding Limited

     (18,292     (14,341     (6,328     (6,326     26,995       (18,292     (107,666     (102,945     (77,296     (77,286     257,527       (107,666     (31,187     (28,126     (11,896     (11,610     51,632       (31,187
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Redeemable preferred shares redemption value accretion

     (4,274     —         —         —         —         (4,274     —         —         —         —         —         —         —         —         —         —         —         —    

Allocation to redeemable preferred shares

     1,074       —         —         —         —         1,074       —         —         —         —         —         —         —         —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss)/profit attributable to common shareholders

     (21,492     (14,341     (6,328     (6,326     26,995       (21,492     (107,666     (102,945     (77,296     (77,286     257,527       (107,666     (31,187     (28,126     (11,896     (11,610     51,632       (31,187
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net profit/(loss)

     (18,292     (14,341     (6,328     (6,326     26,995       (18,292     (107,666     (102,945     (77,296     (77,337     257,527       (107,717     (31,187     (28,126     (11,896     (14,163     51,632       (33,740

Foreign currency translation adjustment, net of tax

     (22,386     451       —         —         (451 )(ii)      (22,386     (5,323     1,742       —         —         (1,742 )(ii)      (5,323     9,600       (14,324     —         —         14,324 (ii)      9,600  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income/(loss)

     (40,678     (13,890     (6,328     (6,326     26,544       (40,678     (112,989     (101,203     (77,296     (77,337     255,785       (113,040     (21,587     (42,450     (11,896     (14,163     65,956       (24,140
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income/(loss) attributable to non-controlling interests

     —         —         —         —         —         —         —         —         —         (51     —         (51     —         —         —         (2,553     —         (2,553

Comprehensive income/(loss) attributable to Huize Holding Limited

     (40,678     (13,890     (6,328     (6,326     26,544       (40,678     (112,989     (101,203     (77,296     (77,286     255,785       (112,989     (21,587     (42,450     (11,896     (11,610     65,956       (21,587
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Note 1:

 

(i)

The elimination represents equity pick-up of net profits and losses in the subsidiaries of the parent company, WFOE and the VIE and its subsidiaries.

(ii)

The elimination represents equity pick-up of other comprehensive income in the subsidiaries of the parent company.

 

12


Table of Contents

Selected Condensed Consolidated Balance Sheets Information

 

     As at December 31, 2021     As at December 31, 2022  
     Parent
company
RMB’000
     Subsidiaries
of parent
Company
RMB’000
     WFOE
RMB’000
     VIE and its
subsidiaries
RMB’000
     Elimination
(Note 2)
RMB’000
    Consolidated
RMB’000
     Parent
company
RMB’000
     Subsidiaries
of parent
Company
RMB’000
     WFOE
RMB’000
     VIE and its
subsidiaries
RMB’000
     Elimination
(Note 2)
RMB’000
    Consolidated
RMB’000
 

Assets

                                 

Current assets

                                 

Cash and cash equivalent

     16,291        34,783        7,073        323,011        —         381,158        5,613        65,124        650        205,781        —         277,168  

Restricted cash

     —          56,093        —          127,315        —         183,408        —          43,459        —          55,458        —         98,917  

Contract Assets, net of allowance for doubtful accounts

     —          —          —          —          —         —          —          —          —          49,888        —         49,888  

Accounts receivable, net of allowance for impairment

     —          207        —          777,055        —         777,262        —          429        —          250,238        —         250,667  

Insurance premium receivables

     —          —          —          1,217        —         1,217        —          —          —          1,792        —         1,792  

Amount due from related parties

     106        22        —          —          —         128        149        —          —          340        —         489  

Prepaid expense and other receivables

     291,666        2,812        128,000        106,865        (451,832 )(i)      77,511        316,172        641        129,005        96,987        (470,987 )(i)      71,818  

Total current assets

     308,063        93,917        135,073        1,335,463        (451,832     1,420,684        321,934        109,653        129,655        660,484        (470,987     750,739  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Non-current assets

                                 

Restricted cash

     —          19,738        —          24,680        —         44,418        —          —          —          —          —         —    

Property, Plant and Equipment, net

     —          661        —          47,800        —         48,461        —          385        —          38,133        —         38,518  

Intangible assets, net

     —          2,647        —          18,979        —         21,626        —          2,647        —          50,851        —         53,498  

Deferred tax assets

     —          —          —          605        —         605        —          —          —          —          —         —    

Long-term investments

     —          13,551        —          59,450        —         73,001        —          11,055        —          66,250        —         77,305  

Investment in subsidiaries

     76,030        239,113        —          —          (315,143 )(ii)      —          44,307        237,613        —          —          (281,920 )(ii)      —    

Investment in VIE

     —          —          109,172        —          (109,172 )(ii)      —          —          —          107,958        —          (107,958 )(ii)      —    

Operating lease right-of-use assets

     —          5,939        —          241,880        —         247,819        —          —          —          162,180        —         162,180  

Goodwill

     —          —          —          461        —         461        —          —          —          461        —         461  

Contract Assets, net of allowance for doubtful accounts

     —          —          —          —          —         —          —          —          —          6,634        —         6,634  

Other Assets

     —          —          —          379        —         379        —          —          —          279        —         279  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total non-current assets

     76,030        281,649        109,172        394,234        (424,315     436,770        44,307        251,700        107,958        324,788        (389,878     338,875  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

     384,093        375,566        244,245        1,729,697        (876,147     1,857,454        366,241        361,353        237,613        985,272        (860,865     1,089,614  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities, and Shareholders’ Equity

                                 

Short-term borrowings

     —          —          —          216,710        —         216,710        —          —          —          150,000        —         150,000  

Accounts payable

     —          186        —          680,183        —         680,369        —          273        —          261,993        —         262,266  

Insurance premium payables

     —          —          —          124,019        —         124,019        —          —          —          27,567        —         27,567  

Contract liabilities

     4,555        —          —          2,681        —         7,236        3,332        —          —          702        —         4,034  

Other payables and accrued expenses

     17,892        292,602        5,132        207,461        (451,832 )(i)      71,255        17,892        316,210        —          195,136        (470,987 )(i)      58,251  

Payroll and welfare payable

     1,357        —          —          92,094        —         93,451        4,138        126        —          39,674        —         43,938  

Income taxes payable

     —          —          —          2,440        —         2,440        —          —          —          2,440        —         2,440  

Operating lease liabilities

     —          2,524        —          12,362        —         14,886        —          —          —          10,075        —         10,075  

Amount due to related parties

     —          —          —          11,875        —         11,875        —          —          —          495        —         495  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     23,804        295,312        5,132        1,349,825        (451,832     1,222,241        25,362        316,609        —          688,082        (470,987     559,066  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Non-current liabilities

                   —                     

 

13


Table of Contents
     As at December 31, 2021     As at December 31, 2022  
     Parent
company
RMB’000
    Subsidiaries
of parent
Company
RMB’000
    WFOE
RMB’000
    VIE and its
subsidiaries
RMB’000
    Elimination
(Note 2)
RMB’000
    Consolidated
RMB’000
    Parent
company
RMB’000
    Subsidiaries
of parent
Company
RMB’000
    WFOE
RMB’000
    VIE and its
subsidiaries
RMB’000
    Elimination
(Note 2)
RMB’000
    Consolidated
RMB’000
 

Long-term borrowings

     —         —         —         20,000       —         20,000       —         —         —         —         —         —    

Deferred tax liabilities

     —         437       —         4,455       —         4,892       —         437       —         12,054       —         12,491  

Operating lease liabilities

     —         3,787       —         245,396       —         249,183       —         —         —         176,032       —         176,032  

Payroll and welfare payable

     225       —         —         —         —         225       —         —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-current liabilities

     225       4,224       —         269,851       —         247,300       —         437       —         188,086       —         188,523  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     24,029       299,536       5,132       1,619,676       (451,832     1,496,541       25,362       317,046       —         876,168       (470,987     747,589  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity

                        

Common shares

     —         —         129,989       44,766       (174,755 )(ii)      —         —         —         129,989       44,766       (174,755 )(ii)      —    

Class A common shares

     62       —         —         —         —         62       62       —         —         —         —         62  

Class B common shares

     10       —         —         —         —         10       10       —         —         —         —         10  

Treasury stock

     (9,545     —         —         —         —         (9,545     (15,306     —         —         —         —         (15,306

Additional paid-in capital

     896,772       511,805       504,922       460,157       (1,476,884 )(ii)      896,772       904,935       522,532       515,318       470,553       (1,508,403 )(ii)      904,935  

Accumulated other comprehensive loss

     (27,295     2,196       —         —         (2,198 )(ii)      (27,295     (17,695     (12,128     —         —         12,128 (ii)      (17,695

Accumulated (deficit)/equity

     (499,940     (437,971     (395,798     (395,751     1,229,520 (ii)      (499,940     (531,127     (466,097     (407,694     (407,361     1,281,152 (ii)      (531,127
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity attributable to Huize Holding Limited shareholders

     360,064       76,030       239,113       109,172       (424,315     360,064       340,879       44,307       237,613       107,958       (389,878     340,879  

Non-controlling interests

     —         —         —         849       —         849       —         —         —         1,146       —         1,146  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     360,064       76,030       293,113       110,021       (424,315     360,913       340,879       44,307       237,613       109,104       (389,878     342,025  

Total liabilities and shareholders’ equity

     384,093       375,566       244,245       1,729,697       (876,147     1,857,454       366,241       361,353       237,613       985,272       (860,865     1,089,614  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Note 2:     (i)    The elimination mainly represents inter-company loans that the parent company grant to the subsidiaries of the parent company.

                (ii)    The elimination represents offsetting entries for investment of the parent company against the equities of the subsidiaries of parent company and the VIE.

Selected Condensed Consolidated Cash Flows Information

 

     For the Year Ended December 31, 2020     For the Year Ended December 31, 2021     For the Year Ended December 31, 2022  
     Parent
company
    Subsidiaries
of parent
company
    WFOE     VIE and its
subsidiaries
    Elimination
(Note 3)
     Consolidated     Parent
company
    Subsidiaries
of parent
company
    WFOE     VIE and its
subsidiaries
    Elimination
(Note 3)
     Consolidated     Parent
company
     Subsidiaries
of parent
company
    WFOE     VIE and its
subsidiaries
    Elimination
(Note 3)
     Consolidated  
     RMB’000     RMB’000     RMB’000     RMB’000     RMB’000      RMB’000     RMB’000     RMB’000     RMB’000     RMB’000     RMB’000      RMB’000     RMB’000      RMB’000     RMB’000     RMB’000     RMB’000      RMB’000  

Net cash provided by/(used in) operating activities

     (6,128     (24,429     (2     168,225       —          137,666       (4,576     (18,487     (10     (152,844     —          (175,917     18,473        (34,064     (382     (69,094     —          (85,067
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Cash flows from investing activities:

                                        

Purchase of long-term investment

     —         —         —         (22,450     —          (22,450     —         (11,013     —         (22,601     —          (33,614     —          —         —         (10,000     —          (10,000

Purchase of property, equipment and intangible assets

     —         (34     —         (8,162     —          (8,196     —         (702     —         (37,359     —          (38,061     —          (50     —         (16,773     —          (16,823

 

14


Table of Contents
     For the Year Ended December 31, 2020     For the Year Ended December 31, 2021     For the Year Ended December 31, 2022  
     Parent
company
    Subsidiaries
of parent
company
    WFOE      VIE and its
subsidiaries
    Elimination
(Note 3)
    Consolidated     Parent
company
    Subsidiaries
of parent
company
    WFOE     VIE and its
subsidiaries
    Elimination
(Note 3)
    Consolidated     Parent
company
    Subsidiaries
of parent
company
    WFOE     VIE and its
subsidiaries
    Elimination
(Note 3)
    Consolidated  
     RMB’000     RMB’000     RMB’000      RMB’000     RMB’000     RMB’000     RMB’000     RMB’000     RMB’000     RMB’000     RMB’000     RMB’000     RMB’000     RMB’000     RMB’000     RMB’000     RMB’000     RMB’000  

Proceeds from disposal of property, equipment and intangible assets

     —         —         —          —         —         —         —         19       —         961       —         980       —         4       —         1044       —         1,048  

Acquisition of subsidiary, net of cash paid

     —         —         —          (569     —         (569     —         (2,487     —         (11,805     —         (14,292     —         —         —         (25,964     —         (25,964

Disposal of subsidiary

     —         —         —          —         —         —         —         —         —         —         —         —         —         —         —         —         —         —    

Investment in subsidiaries from parent

     (245       —          —         245 (i)      —         (247     —         —         —         247 (i)      —         —         —         —         —         —         —    

Investment in WFOE from subsidiaries

     —         (485     —          —         485 (ii)      —         —         (129,504     —         —         129,504 (ii)      —         —         —         —         —         —         —    

Payments of inter-company balances

     (139,123     —         —          —         139,123 (iii)      —         (161,216     —         (128,000     (5,050     294,266 (iii)      —         (23,376     —         (6,041     —         29,417 (iii)      —    

Proceeds from disposal of investments

     —         —         —          —         —         —         —         2,930       —         890       —         3,820       —         —         —         700       —         700  

Cash received for disposal of subsidiary

     —         —         —          —         —         —         —         —         —         —         —         —         —         —         —         3,640       —         3,640  

Advances to a third party

     —         —         —          —         —         —         —         —         —         —         —         —         —         —         —         (26,000     —         (26,000

Repayment from a third party

     —         —         —          —         —         —         —         —         —         —         —         —         —         —         —         16,000       —         16,000  

Interests received

     —         —         —          —         —         —         —         —         —         —         —         —         —         —         —         876       —         876  

Others

     —         —         —          137       —         137       —         —         —         241       —         241       —         —         —         237       —         237  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by/(used in) investing activities

     (139,368     (519     —          (31,044     139,853       (31,078     (161,463     (140,757     (128,000     (74,723     424,017       (80,926     (23,376     (46     (6,041     (56,240     29,417       (56,286
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

                                     

Proceeds from borrowings

     —         —         —          105,400       —         105,400       —         —         —         184,000       —         184,000       —         —         —         270,200       —         270,200  

Repayments of borrowings

     —         —         —          (61,266     —         (61,266     —         —         —         (40,503     —         (40,503     —         —         —         (367,524     —         (367,524