Fanhua Inc. (FANH) Q4 2020 Revenue Conversation Transcript


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Fanhua Inc. (NASDAQ: FANH)
Fourth quarter 2020 results conference call
March 17, 2021, 9:00 p.m. ET

Contents:

  • Prepared remarks
  • questions and answers
  • Call participant

Prepared Notes:

operator

Thank you for participating in the Fanhua Fourth Quarter and Fiscal 2020 results conference call. [Operator Instructions] After the prepared remarks by management, a question-and-answer session takes place. Please follow the instructions at this point if you have a question to ask. For your information, this conference call will now be broadcast live over the Internet. The webcast replay will be available within three hours of the conference ending. Please visit Fanhua’s IR website at ir.fanhuaholdings.com under the Events & Webcasts section. Today’s conference will be recorded, if you have any objections, you can disconnect at this time.

I would now like to hand the meeting over to your host of today’s conference, Ms. Oasis Qiu, Fanhua Investor Relations Manager.

Qiu oasisInvestor Relations Manager

Good Morning. Welcome to our conference call on fourth quarter and full year 2020 results. Earnings results were released earlier today and are available on our IR website and on Newswire.

Before we proceed, please note that today’s discussion will contain forward-looking statements made under the safe harbor provisions of the US Private Securities Litigation Act of 1995. The accuracy of these statements can be affected by a number of business risks and uncertainties that could cause our actual results to differ materially from those projected or expected. These risks and uncertainties include, but are not limited to, those in our filings with the SEC, including our registration statement on Form 20-F. We assume no obligation to update this forward-looking information unless required by applicable law.

We are joined today by our Chief Executive Officer, Mr. Chunlin Wang; Chief Financial Officer, Mr. Peng Ge. Mr. Wang will give a review of our financial highlights in the fourth quarter and in the 2020 financial year, after the prepared statements there will be a question-and-answer session.

Now I’ll hand the call over to Mr. Wang.

Chunlin WangCEO & Chairman

[Foreign Speech]

Thank you for participating in today’s conference call. Here with me we have our Chief Financial Officer, Mr. Peng Ge, and our Executive Secretary, Lily Li. [Phonetic]. In today’s conference call, I’ll share our new strategic initiatives and some key advances with you, followed by our financial guidance for 2021. Mr. Ge and I will answer your questions about the report.

[Foreign Speech]

Part One; In 2020, while China’s life insurance industry was badly hit by the COVID-19 pandemic, Fanhua was still protected and able to sustain healthy development. In 2020, Fanhua achieved another important milestone in spite of the ongoing challenges posed by COVID-19, with our gross written premiums in regular life insurance business exceeding 10 billion RMB, representing a growth of 16.3% over the previous year and an operating profit of 300 million RMB. In the fourth quarter of 2020, gross written premiums in our regular life insurance business rose 21% year-on-year to RMB 2.9 billion, and operating profit reached RMB 71.9 million, exceeding our previous expectations.

[Foreign Speech]

Now to our strategy assessment; First, although the growth of the Chinese life insurance market slowed in 2020 due to the impact of the COVID-19 pandemic, we still believe that the Chinese life insurance industry will maintain its long-term rapid growth trend unchanged and that the development of insurance intermediaries will be faster than the insurance industry as a whole.

Second, there are various business models in the Chinese insurance intermediation market currently, including an agent-oriented model, a business-oriented model and a direct-to-consumer model, with developing technologies and a changing market environment, these business models on a stand-alone basis, may have difficulty in making lasting Maintaining vitality in the long run, only those who provide the best in customer service, extend customer life cycle, and enable repeat transactions can thrive and prosper in the future.

[Foreign Speech]

Part three, 2021 masters the first full year to implement the strategy of professionalization, digitization and open platform, which we believe will help build new growth engines for Fanhua for 2022 and beyond.

[Foreign Speech]

Our strategy of professionalization, digitization and open platform builds on our existing business model and aims to increase the productivity and income of our sales force and to consolidate our existing strengths in offline sales and service while we build our skills in the meantime to B and to C fronts to make Fanhua an open digital platform with greater compatibility and more growth potential. We believe that this new strategy will enable us to build a sustainable business model with lasting vitality.

[Foreign Speech]

As part of our plan to professionalize our sales, we established an interim division in 2020 [Technical Issues] the establishment of three branches at city level. We have set up a digital division for digitization; the center for digital marketing has been in operation since the end of January 2021. For open platforms, we have set up a cloud services division, with which we have so far entered into a number of partnerships, six cooperation partners and started trial operations. We anticipate that the new strategy will produce more meaningful positive results in 2022 to drive rapid growth of our business in 2022 and in the years to come.

[Foreign Speech]

Fourth, financial forecast for 2021; Looking ahead to 2021, we expect our regular life insurance business to have a gross return premium of no less than 12 billion RMB. The initial investment for the implementation of our premium strategy in 2021 is expected to be around 100 million RMB. Therefore, our operating profit is expected to be no less than 300 million RMB in 2021.

For the first quarter of 2021, we expect regular life insurance GWP of not less than 3 billion RMB and an operating profit of not less than 120 million RMB. We believe the new strategy will add greater value to the company and higher returns for our shareholders over the long term.

[Foreign Speech]

Fifth, dividend plan; The company is committed to a regular cash dividend policy. Based on our earnings expectation and the amount of expenses required to improve our professional and digital skills in 2021 and our dividend for 2021 will be no less than $ 0.60 per ADS, payable in four quarterly installments, was 0.15 USD per ADS for each quarter.

[Foreign Speech]

Thanks very much. This concludes my presentation. The floor is now open to your questions.

Questions and answers:

operator

[Operator Instructions] Our first question comes from the lineage of Xing Xiangdao [Phonetic] by CICC. Pleas e ask your question.

Xing XiangdaoCICC Analyst

[Foreign Speech]

Two questions from Xing Xiangdao [Phonetic] at CICC. The first question concerns our forecast for the GWP of our regular life business in the first quarter, which sounds like quite strong growth. She wonders if this strong performance was due to the transition in the critical disease definition framework? And then after the new critical illness framework takes a step [Phonetic] on February 1st, how has sales of the new critical illness products been so far?

Chunlin WangCEO & Chairman

[Foreign Speech]

First, in the first quarter after the new critical illness framework took steps [Phonetic], sales started in the first quarter, and the industry has actually done pretty well, largely thanks to the frame transition critical illness transition. And for Fanhua, we believe we have outperformed the industry.

[Foreign Speech]

It is an industry standard that, of course, every time major regulation or a political issue has resulted in a change in insurance products, it will of course have a huge impact on the industry. We anticipate that after the critical illness framework is changed, it will likely take the industry some time to fully recover.

[Foreign Speech]

We pushed ahead with the planned product changeover and made preparations for our next marketing campaigns in April, June and May.

[Foreign Speech]

For the next marketing campaign, our main products will focus on annuity and life insurance products, while we also endeavor to educate our customers about the new major illness products.

[Foreign Speech]

Thanks very much.

Xing XiangdaoCICC Analyst

[Foreign Speech]

Thanks very much.

operator

[Operator Instructions] At the moment there is no more question. Our speakers can continue.

Qiu oasisInvestor Relations Manager

Thank you for participating in today’s conference call. If you have any further questions, please do not hesitate to contact us. Thanks very much.

operator

[Operator Closing Remarks].

Duration: 22 minutes

Call participant:

Qiu oasisInvestor Relations Manager

Chunlin WangCEO & Chairman

Xing XiangdaoCICC Analyst

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