Fanhua Inc.
Q1 2019 Earnings Call Transcript

Published: 23 May 2019

[Operator:]

Thank you for standing by for Fanhua's First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. All lines have been placed on mute to prevent background noise. After the management's prepared remarks, there will be a question-and-answer session. [Operator Instructions] For your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within three hours after the conference is finished. Please visit Fanhua's IR website at ir.fanhuaholdings.com under the Events & Webcasts section. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I'd now like to turn the meeting over to your host for today's conference, Ms. Oasis Qiu, Fanhua's Investor Relations Manager.

[Oasis Qiu:]

Good morning. Welcome to our first quarter 2019 earnings conference call. The earnings results were released earlier today and are available on our IR website as well as on Newswire. Before we continue, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of U.S. Private Securities Litigation Reform Act of 1995. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause our actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but are not limited to those outlined in our filings with the SEC, including our registration statement on Form 20-F. We do not undertake any obligation to update this forward-looking information except as required under applicable law. Joining us today are our Chief Executive Officer and Chairman, Mr. Chunlin Wang; Chief Financial Officer, Mr. Peng Ge, and Board Secretary, Lily Lee. Mr. Wang will provide a review of financial and operational highlights in the first quarter 2019. He, Mr. Ge and Mrs. Lee will take your questions after the prepared remarks. Now I will turn the call over to Mr. Wang.

[Chunlin Wang:]

[Foreign language] Thank you for joining us on today's conference call. Here with me we have our Chief Financial Officer, Mr. Peng Ge and our Board Secretary, Mrs. Lily Lee. We will begin today's call by just a brief analysis about recent market developments followed by an overview of our first quarter 2019 financial and operation results. There will be Q&A session after the report. Firstly, an industry analysis in the first quarter 2019, in order to guide China's insurance industry to achieve a healthier and more orderly development, the insurance regulator has started cleanup and ratification initiatives focusing on viewing the life insurance industry back to its fundamental function of providing protection to the society since October 2017. The regulator has issued a series of strict rules and measures and has strengthened efforts to investigate and punished malpractices, which has expect of the corrupt irregularities in the industry. In 2019, the tightening regulatory supervision is expected to deepen. Therefore, we expect that the industry's cleanup and ratification may continue to bring pressure on most of the industry within a certain period of time. However it will definitely lay a solid foundation for the healthy and rapid development of the insurance industry in the long run and bring back clarity to the development of those enterprises, which have CAT Compliance with laws and regulations. In the first quarter of 2019, total personal insurance premiums in China reached RMB1.3 trillion, up 18% year-over-year, while many life insurance companies saw a sharp decline in their first year regular life insurance premiums and a continued drop in sales headcount. It is expected that the life insurance industry may continue to feel pressure to deliver growth and is highly possible that the industry-wide job in first year regular life insurance premiums may continue into the second quarter of 2019. Secondly, financial and operating balance of Fanhua in the first quarter 2019, in the first quarter of 2019, Fanhua's life insurance business registered a strong growth of 45.1% year-over-year to RMB2.2 billion in terms of total insurance premiums, of which first year premiums increased by 45.6% year-over-year to RMB809.1 million, annualized insurance premiums equivalent increased by 20.9% year-over-year to RMB533 million and renewal insurance premiums grew by 44.9% year-over-year to approximately RMB1.37 billion respectively. Our operating profit reached RMB126.4 million, with a year-over-year increase of 40.2%, in line with our prior expectations. Our net income per ADS grew by 31% year-over-year to RMB2.62. In the first quarter 2019, while many major insurers reported [indiscernible] improvement, Fanhua's sales continued a steady growth of 20,000 to 30,000 people per month. As of March 31, 2019 the number of registered sales agents in Fanhua has exceeded 860,000 among which the number of performing sales agents in the first quarter of 2019 was over 123,000 including 53,309 sales agents for selling life insurance policies. In the first quarter of 2019, we were pleased to see improvement in our life insurance product mix. Annuity insurance products as a percentage of our total annualized life insurance premiums increased to 24% from a year ago, while health insurance accounted for 69.8%, endowment insurance accounted for 2.9% and home life insurance and term life insurance accounted for about 3.2%. In the first quarter 2019, there was a big change in the structure of our life insurance partnership through the proportion of sales in terms of APE generated by our top five life insurance company partners is as follows. Aeon accounted for 33.5%, Huaxia 18.8%, Tian'an 17.6%, Taikang 13.5%, Greatwall 4% and Evergrand 42.7%. Thirdly, the development of our online platforms in the first quarter of 2019, our online platforms maintained a good growth momentum. Firstly the [indiscernible] the number of active rated accounts hit 860,000 times as of March 31, 2019. In the first quarter of 2019, the number of active users was 61,468 and insurance premiums generated through Lan Zhanggui were RMB887.5 million representing a growth of 40.6% from a year ago. Secondly, CNpad auto insurance app the number of activated accounts has reached 568,367 times as of March 31, 2019 representing an increase of 35.9% year-over-year. Insurance premiums generated through CNpad auto insurance app were at RMB423 million in the first quarter 2019. Thirdly, Baoxian.com, the number of registered customer accounts on Baoxian.com was approximately 2.3 million as of March 31, 2019 up 42.2% from a year ago. In the first quarter of 2019, the number of active customer count was 82,859 up 33.4% from a year ago and insurance premiums generated on Baoxian.com through direct sales was RMB90.2 million in the first quarter 2019 with an year-over-year increase of 63%. The eHuzhu maintained steady development strategy as of March 31, 2019, the number of effective registered members was 3.5 million representing an increase of 13.4% from a year ago. The number of total is requirements is 2,193 and accumulated amount of pay hours is RMB377 million. Firstly, the Baoxian.com number of effective registered client service representatives on [indiscernible] was more than 16,000 as of March 31, 2019 with accumulated orders of approximately 1.8 million. Fourthly, other major developments during the quarter; first is dividend payout. As previously announced by the Board of Directors, the company's annual dividend would be increased by 20% from $1 per ADS in 2018 to $1.2 per ADS in 2019, which will be paid on a quarterly basis. The dividend in 2019 first quarter is $0.3 per ADS and would be paid on or around June 20, 2019 to shareholders of record on June 06, 2019. Secondly, the share buyback program in March 2019, the Board authorized the management to repurchase up to 200 million of the company's ADS by December 31, 2019. From March 2019 to May 17, 2019 an aggregate of 1.4 million ADS have been repurchased for approximately USD36.8 million persuaded through the company's share buyback programs implemented in 2018 and 2019, the company has repurchased a total of 2.8 million ADS for approximately USD73.1 million. Management will continue to execute outstanding share buyback patents. Thirdly, Special Committee on May 21, 2019, the company received a report from the Special Committee concerning the result of the independent review to which the Special Committee of the Board of Directors has completed its review of certain allegations raised by sellers, the Special Committee concluded that the sellers allegations that characterize the company as during business designed to in which sellers through a series related party and sub doing transactions were unsubstantiated. The short seller report proved to contain baseless speculations and misleading and inaccurate obligations. The conclusions indicated that the company has strictly capped compliance with SEC rules and regulations on listing companies, including requirements for public, transparent and through disclosures. Management is pleased with the result. Going forward, management will put this behind and wholeheartedly focus on the company's development and operations to create more value for our shareholders in the long run. Firstly, the business outlook in the second quarter 2019, we expect our annualized insurance premiums bond right through their life insurance products to maintain positive growth and our operating income to increased by not less than 20% in the second quarter 2019. Thank you. Now our management will open the floor for your questions. Hi Rachel.

[Operator:]

[Operator Instructions] Your first question comes from the line of Yuan Xue from CICC. Please ask your question.

[Yuan Xue:]

The question is from Yuan Xue from CICC. Congratulations to the management for its good results and Yuan Xue has one question regarding the recent regulatory development. And later required insurance intermediately companies and insurance companies to prune up no active sales agents and he is wondering what the impact will be on Fanhua?

[Chunlin Wang:]

First of all, this regulation is targeted at the whole industry including insurance companies and insurance intermediary companies and it is possible that it may bring some impact on the increase in total number of agents and in the short term, it will also bring some impact on business development to the whole industry as well as Fanhua, but we believe that in the medium and long term, it will also create more available market environment for the development of more regulated companies and companies that would strong strength.

[Operator:]

There are no further questions at this time. I would now like to hand the conference back to Ms. Oasis Qiu. Please continue.

[Oasis Qiu:]

Thank you for participating in today's conference call. If you have any further questions, please feel free to contact the company. Thank you.

[Operator:]

Ladies and gentlemen, this does conclude our conference for today. Thank you for participating. You may now all disconnect.