GUANGZHOU, China, Feb. 02, 2024 (GLOBE NEWSWIRE) -- FANHUA Inc. ("FANHUA" or the "Company") (NASDAQ:FANH), a leading independent financial services provider in China, today announced that Mr. Stephen Markscheid has tendered his resignation as an independent director of the Company due to personal reasons, effective on February 1, 2024. Accordingly, Mr. Markscheid will cease to be a member of each of the audit committee, the corporate governance and nominating committee and the compensation committee of the ...

Fanhua Inc. (NASDAQ:FANH) Q3 2023 Results Conference Call November 20, 2023 8:00 PM ET Company Participants Oasis Qiu - Investor Relations Manager Yinan Hu - Co-Chairman and Chief Executive Officer Ben Lin - Co-Chairman and Chief Strategy Officer Conference Call Participants Yuyu Zhang - CICC Operator Thank you for standing by for Fanhua's Third Quarter 2023 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. Aft ...

[Company Overview & Highlights](index=1&type=section&id=Company%20Overview%20%26%20Highlights) FANHUA's Q3 2023 saw significant financial and operational growth, driven by strategic initiatives and improved agent efficiency [Third Quarter 2023 Financial Highlights](index=1&type=section&id=Third%20Quarter%202023%20Financial%20Highlights) FANHUA achieved significant Q3 2023 financial growth, with net income attributable to shareholders up 382.6% and diluted net earnings per ADS up 381.8% Q3 2023 Financial Highlights | Metric (RMB in thousands) | 2022Q3 (RMB) | 2023Q3 (RMB) | 2023Q3 (US$) | Change % | | :------------------------ | :----------- | :----------- | :----------- | :------- | | Total Net Revenues | 624,746 | 634,620 | 86,982 | 1.6 | | Operating Income | 32,165 | 33,196 | 4,549 | 3.2 | | Net Income Attributable to Shareholders | 35,371 | 170,699 | 23,396 | 382.6 | | Diluted Net Income per ADS | 0.66 | 3.18 | 0.44 | 381.8 | | Period-end Cash, Cash Equivalents, Short-term Investments | 917,901 | 1,498,417 | 205,375 | 63.2 | Q3 2023 Key Operating Metrics | Metric (RMB in thousands) | 2022Q3 (RMB) | 2023Q3 (RMB) | Change % | | :------------------------ | :----------- | :----------- | :------- | | Life Insurance Gross Written Premiums (GWP) | 2,789,859 | 3,437,045 | 23.2 | | - First Year Premiums (FYP) | 529,720 | 584,437 | 10.3 | | - Renewal Premiums | 2,260,139 | 2,852,608 | 26.2 | | Number of Active Life Insurance Agents | 7,598 | 5,117 | (32.7) | | FYP per Active Life Insurance Agent | 59,113 | 81,081 | 37.2 | [Management Commentary & Strategic Initiatives](index=1&type=section&id=Management%20Commentary%20%26%20Strategic%20Initiatives) Management noted industry challenges but highlighted strategic progress in open platforms, overseas expansion, M&A integration, and investment income [CEO's Industry Outlook & Company Vision](index=1&type=section&id=CEO's%20Industry%20Outlook%20%26%20Company%20Vision) - CEO Hu Yinan noted that the life insurance industry faces pressure from pricing interest rate changes, but the company's strategic initiatives show significant progress and operational resilience[3](index=3&type=chunk) - The company anticipates an industry shift from product and expense-driven to technology and service-driven, favoring innovative service and technology-capable companies and increasing industry concentration[6](index=6&type=chunk) [CSO's Q3 Strategic Developments](index=2&type=section&id=CSO's%20Q3%20Strategic%20Developments) - CSO Lin Bin highlighted several significant Q3 developments: * First Open Platform Day with Tencent Cloud, signing two independent brokers as digital tenants * Established two non-wholly owned subsidiaries with Asia Insurance Co. Ltd., holding **60%** equity, marking expansion beyond mainland China * Completed most IT integration for Zhongrong Huijin (ZRHJ), expecting annual IT cost savings of no less than **RMB 5 million** by 2024 * Unrealized fair value change gain from equity investment due to Cheche Group Inc.'s Nasdaq listing, significantly boosting net income from the company's **2.8%** stake[7](index=7&type=chunk)[8](index=8&type=chunk)[9](index=9&type=chunk)[10](index=10&type=chunk) - Future strategic focus remains on driving open platform and digital tenant growth, exploring value-added integration opportunities, and achieving organic growth by enhancing distribution team quality[11](index=11&type=chunk) [Business Outlook and Guidance](index=3&type=section&id=Business%20Outlook%20and%20Guidance) The company projects a 50% year-over-year increase in life insurance first-year premiums and adjusted EBITDA for 2023 - The company expects life insurance first-year premiums to increase by **50%** year-over-year in 2023[15](index=15&type=chunk) - The company expects adjusted EBITDA to increase by **50%** year-over-year in 2023[15](index=15&type=chunk) [Share Repurchase Program](index=3&type=section&id=Share%20Repurchase%20Program) As of September 30, 2023, the company repurchased 495,459 ADSs totaling approximately **$3.9 million** - As of September 30, 2023, the company repurchased **495,459 ADSs**[14](index=14&type=chunk) - The average repurchase price was approximately **$7.9 per ADS**, totaling approximately **$3.9 million**[14](index=14&type=chunk) [Detailed Financial Performance Analysis](index=3&type=section&id=Detailed%20Financial%20Performance%20Analysis) This section provides an in-depth analysis of the company's Q3 2023 revenues, gross profit, operating expenses, and net income [Revenues](index=3&type=section&id=Revenues) Total net revenues increased by 1.6% year-over-year to **RMB 634.6 million** in Q3 2023, with varied performance across business segments Q3 2023 Total Net Revenues | Metric (RMB in thousands) | 2022Q3 (RMB) | 2023Q3 (RMB) | 2023Q3 (US$) | Change % | | :------------------------ | :----------- | :----------- | :----------- | :------- | | Total Net Revenues | 624,746 | 634,620 | 86,982 | 1.6 | [Agency Business Revenues](index=3&type=section&id=Agency%20Business%20Revenues) Agency Business Net Revenues | Metric | 2022Q3 (RMB in millions) | 2023Q3 (RMB in millions) | 2023Q3 (US$ in millions) | Change | | :----- | :----------------------- | :----------------------- | :----------------------- | :------------- | | Agency Business Net Revenues | 522.7 million | 524.1 million | 71.8 million | Relatively stable | | Total Premiums (GWP) | - | 3,525.1 million | - | 22.8% YoY | | First Year Premiums (FYP) | - | 672.5 million | - | 10.1% YoY | | Renewal Premiums | - | 2,852.6 million | - | 26.2% YoY | - Life insurance business net revenues remained relatively stable at **RMB 483.8 million** compared to the prior year, primarily due to a slowdown in August and September after a July surge in new business sales driven by pricing interest rate changes, and the net impact from newly acquired entities[17](index=17&type=chunk) - Life insurance business net revenues accounted for **76.2%** of total net revenues, slightly lower than **76.9%** in Q3 2022[19](index=19&type=chunk) - Non-life insurance business net revenues decreased by **4.3%** year-over-year to **RMB 40.3 million**, representing **6.4%** of total net revenues[19](index=19&type=chunk) [Claims Adjusting Business Revenues](index=4&type=section&id=Claims%20Adjusting%20Business%20Revenues) Claims Adjusting Business Net Revenues | Metric | 2022Q3 (RMB in millions) | 2023Q3 (RMB in millions) | 2023Q3 (US$ in millions) | Change % | | :----- | :----------------------- | :----------------------- | :----------------------- | :------- | | Claims Adjusting Business Net Revenues | 102.0 million | 110.5 million | 15.1 million | 8.3 | - The growth in claims adjusting business revenue was primarily driven by post-pandemic business recovery[20](index=20&type=chunk) - Claims adjusting business net revenues accounted for **17.4%** of total net revenues, up from **16.3%** in Q3 2022[20](index=20&type=chunk) [Gross Profit](index=4&type=section&id=Gross%20Profit) Total gross profit increased by 1.7% year-over-year to **RMB 235.2 million** in Q3 2023, with mixed segment performance Q3 2023 Total Gross Profit | Metric | 2022Q3 (RMB in millions) | 2023Q3 (RMB in millions) | 2023Q3 (US$ in millions) | Change % | | :----- | :----------------------- | :----------------------- | :----------------------- | :------- | | Total Gross Profit | 231.3 million | 235.2 million | 32.2 million | 1.7 | [Gross Profit by Business Segment](index=4&type=section&id=Gross%20Profit%20by%20Business%20Segment) Gross Profit and Margin by Business Segment | Business Segment | 2022Q3 Gross Profit (RMB in millions) | 2023Q3 Gross Profit (RMB in millions) | 2023Q3 Gross Profit (US$ in millions) | 2022Q3 Gross Margin | 2023Q3 Gross Margin | Change % (Gross Profit) | | :--------------- | :------------------------------------ | :------------------------------------ | :------------------------------------ | :------------------ | :------------------ | :---------------------- | | Life Insurance Business | 181.7 million | 182.0 million | 24.9 million | 37.8% | 37.6% | 0.2 | | Non-life Insurance Business | 16.8 million | 12.8 million | 1.8 million | 40.0% | 31.8% | (23.8) | | Claims Adjusting Business | 32.8 million | 40.4 million | 5.5 million | 32.1% | 36.6% | 23.2 | - The decrease in non-life insurance gross margin was primarily due to changes in product mix[21](index=21&type=chunk) [Operating Expenses](index=5&type=section&id=Operating%20Expenses) Selling expenses decreased by 14.6% in Q3 2023 due to optimization, while management expenses rose 10.1% from acquired businesses Q3 2023 Operating Expenses | Expense Type | 2022Q3 (RMB in millions) | 2023Q3 (RMB in millions) | 2023Q3 (US$ in millions) | Change % | | :----------- | :----------------------- | :----------------------- | :----------------------- | :------- | | Selling Expenses | 69.3 million | 59.2 million | 8.1 million | (14.6) | | General and Administrative Expenses | 129.8 million | 142.9 million | 19.6 million | 10.1 | - The decrease in selling expenses was primarily due to personnel optimization and a reduction in sales outlets, partially offset by increased sales training activities and **RMB 5 million** in share-based compensation expenses related to the MDRT equity incentive plan[25](index=25&type=chunk) - The increase in general and administrative expenses was primarily due to approximately **RMB 19.6 million** in expenses from acquired businesses consolidated since Q1 2023, partially offset by personnel optimization and branch reductions[26](index=26&type=chunk) [Operating Income & Margin](index=5&type=section&id=Operating%20Income%20%26%20Margin) Operating income increased by 3.2% year-over-year to **RMB 33.2 million** in Q3 2023, with a slight margin improvement Q3 2023 Operating Income and Margin | Metric | 2022Q3 (RMB in millions) | 2023Q3 (RMB in millions) | 2023Q3 (US$ in millions) | Change % | | :----- | :----------------------- | :----------------------- | :----------------------- | :------- | | Operating Income | 32.2 million | 33.2 million | 4.5 million | 3.2 | | Operating Margin | 5.1% | 5.2% | - | 0.1 pp | [Other Income & Expenses](index=5&type=section&id=Other%20Income%20%26%20Expenses) Q3 2023 saw a **RMB 164.3 million** unrealized gain from equity investment, impacting income tax and effective tax rate - Due to Cheche Group's listing in September 2023, the company's **2.8%** equity stake generated an unrealized gain of **RMB 164.3 million** (**$22.5 million**) from fair value change in equity investment[27](index=27&type=chunk) Q3 2023 Investment Income and Income Tax | Metric | 2022Q3 (RMB in millions) | 2023Q3 (RMB in millions) | 2023Q3 (US$ in millions) | Change % | | :----- | :----------------------- | :----------------------- | :----------------------- | :------- | | Investment Income | 2.8 million | 1.9 million | 0.3 million | (31.9) | | Income Tax Expense | 8.6 million | 16.1 million | 2.2 million | 87.2 | | Effective Tax Rate | 20.2% | 9.1% | - | (11.1) pp | - The decrease in effective tax rate was primarily due to the recognition of **RMB 164.3 million** in non-taxable unrealized gain from equity investment[28](index=28&type=chunk) [Net Income & EPS](index=5&type=section&id=Net%20Income%20%26%20EPS) Net income and net income attributable to shareholders significantly increased by over 380% in Q3 2023, driven by equity investment gains Q3 2023 Net Income and Net Income per ADS | Metric | 2022Q3 (RMB in millions) | 2023Q3 (RMB in millions) | 2023Q3 (US$ in millions) | Change % | | :----- | :----------------------- | :----------------------- | :----------------------- | :------- | | Net Income | 33.2 million | 160.8 million | 22.0 million | 384.3 | | Net Income Attributable to Company Shareholders | 35.4 million | 170.7 million | 23.4 million | 382.6 | | Net Profit Margin | 5.7% | 26.9% | - | 21.2 pp | | Basic Net Income per ADS | 0.66 | 3.18 | 0.44 | 381.8 | | Diluted Net Income per ADS | 0.66 | 3.18 | 0.44 | 381.8 | [Adjusted EBITDA (Non-GAAP)](index=6&type=section&id=Adjusted%20EBITDA%20(Non-GAAP)) Adjusted EBITDA decreased by 32.0% to **RMB 24.9 million** in Q3 2023, primarily due to a credit loss provision Q3 2023 Adjusted EBITDA | Metric | 2022Q3 (RMB in millions) | 2023Q3 (RMB in millions) | 2023Q3 (US$ in millions) | Change % | | :----- | :----------------------- | :----------------------- | :----------------------- | :------- | | Adjusted EBITDA | 36.6 million | 24.9 million | 3.4 million | (32.0) | | Adjusted EBITDA Margin | 5.9% | 3.9% | - | (2.0) pp | | Basic Adjusted EBITDA per ADS | 0.68 | 0.46 | 0.06 | (32.4) | | Diluted Adjusted EBITDA per ADS | 0.68 | 0.46 | 0.06 | (32.4) | - Adjusted EBITDA下降主要由于2023年第三季度计提了**RMB 18.5 million**的其他应收款预期信用损失准备[30](index=30&type=chunk) [Financial Position and Cash Flow](index=9&type=section&id=Financial%20Position%20and%20Cash%20Flow) This section details the company's balance sheet and cash flow activities as of and for Q3 2023 [Balance Sheet](index=9&type=section&id=Balance%20Sheet) As of September 30, 2023, total assets reached **RMB 4.005 billion**, an approximate 29.6% increase from year-end 2022 Key Balance Sheet Data (As of September 30) | Metric (RMB in thousands) | 2022年12月31日 | 2023年9月30日 | | :------------------------ | :------------- | :------------- | | Cash and Cash Equivalents | 567,525 | 554,897 | | Short-term Investments | 347,754 | 943,520 | | Total Current Assets | 2,293,574 | 2,446,928 | | Net Contract Assets - Non-current | 385,834 | 643,571 | | Goodwill and Net Intangible Assets | 109,997 | 476,672 | | Total Assets | 3,089,516 | 4,005,455 | | Total Current Liabilities | 951,976 | 1,000,889 | | Total Non-current Liabilities | 406,209 | 596,222 | | Total Liabilities | 1,358,185 | 1,597,111 | | Equity Attributable to Company Shareholders | 1,623,403 | 2,139,968 | | Total Equity | 1,731,331 | 2,408,344 | [Cash Flow Statement](index=13&type=section&id=Cash%20Flow%20Statement) Q3 2023 operating cash flow was **RMB 12.8 million**, with investing and financing activities reflecting strategic movements Q3 2023 Cash Flow (RMB in thousands) | Cash Flow Type (RMB in thousands) | 2022Q3 | 2023Q3 | | :-------------------------------- | :----- | :----- | | Net Cash from Operating Activities | 19,788 | 12,826 | | Net Cash from Investing Activities | (151,120) | (33,991) | | Net Cash from Financing Activities | — | (7,114) | | Period-end Cash, Cash Equivalents, and Restricted Cash | 462,837 | 633,006 | - Cash outflows from investing activities primarily included **RMB 815.3 million** for purchasing short-term investments and **RMB 125 million** for purchasing long-term investments, partially offset by **RMB 909.2 million** from the disposal of short-term investments[56](index=56&type=chunk) - Cash outflows from financing activities primarily included **RMB 2.89 million** for repayment of bank and other borrowings, **RMB 2.3 million** for interest payments, and **RMB 1.93 million** for common stock repurchases[56](index=56&type=chunk) [Operational Metrics & Network](index=3&type=section&id=Operational%20Metrics%20%26%20Network) This section reviews key operational metrics and the company's distribution network performance in Q3 2023 [Key Operating Metrics](index=3&type=section&id=Key%20Operating%20Metrics) Q3 2023 saw life insurance GWP up 23.2% and FYP per active agent up 37.2%, despite a decrease in active agents Q3 2023 Key Operating Metrics | Metric (RMB in thousands) | 2022Q3 (RMB) | 2023Q3 (RMB) | Change % | | :------------------------ | :----------- | :----------- | :------- | | Life Insurance Gross Written Premiums (GWP) | 2,789,859 | 3,437,045 | 23.2 | | - First Year Premiums (FYP) | 529,720 | 584,437 | 10.3 | | - Renewal Premiums | 2,260,139 | 2,852,608 | 26.2 | | Number of Active Life Insurance Agents | 7,598 | 5,117 | (32.7) | | FYP per Active Life Insurance Agent | 59,113 | 81,081 | 37.2 | - The number of open platform professional users reached **791** as of September 30, 2023, contributing **RMB 165.6 million** in first-year premiums in Q3, accounting for **28.3%** of life insurance first-year premiums[13](index=13&type=chunk) - Entities acquired within the past 12 months contributed **21.6%** of life insurance first-year premiums and **21.3%** of life insurance business net revenues[13](index=13&type=chunk) [Distribution Network](index=6&type=section&id=Distribution%20Network) FANHUA's distribution network, excluding new acquisitions, saw a reduction in sales outlets, reflecting a focus on profitable branches Distribution Network Overview (As of September 30) | Metric | 2022年9月30日 | 2023年9月30日 | Change | | :----- | :------------- | :------------- | :----- | | Number of Sales Outlets | 697 | 592 | Decrease | | Number of Service Outlets | 100 | 81 | Decrease | | Number of In-house Claims Adjusters | 2,221 | 2,215 | Stable | - The reduction in sales outlets reflects the company's strategy to focus on developing profitable branches and closing unprofitable ones[31](index=31&type=chunk) [Additional Information](index=7&type=section&id=Additional%20Information) This section provides background on FANHUA Inc., forward-looking statements, non-GAAP financial measures, and contact details [About FANHUA Inc.](index=7&type=section&id=About%20FANHUA%20Inc.) FANHUA Inc. is a leading independent Chinese financial services provider, focusing on insurance-oriented family asset allocation and a one-stop intermediary platform - FANHUA Inc. is a leading independent financial services provider in China, focusing on providing insurance-oriented family asset allocation services and a one-stop sales agency and independent insurance intermediary platform[35](index=35&type=chunk) - The company's strategic focus is on long-term life insurance products, offering a wide range of insurance products, claims services, and value-added services[35](index=35&type=chunk) - The company operates an online insurance platform, Baowang (www.baoxian.com), providing customers with a one-stop insurance shopping experience[35](index=35&type=chunk) [Forward-looking Statements](index=7&type=section&id=Forward-looking%20Statements) This press release contains forward-looking statements subject to known and unknown risks and uncertainties, with no obligation to update them unless legally required - Forward-looking statements in this press release are protected by the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995[36](index=36&type=chunk) - Forward-looking statements involve known and unknown risks and uncertainties, including attracting and retaining agents, maintaining business relationships with insurance companies, executing growth strategies, adapting to regulatory changes, effective competition, and macroeconomic conditions[36](index=36&type=chunk) - The company undertakes no obligation to update any forward-looking statements unless required by law[36](index=36&type=chunk) [Non-GAAP Financial Measures](index=8&type=section&id=Non-GAAP%20Financial%20Measures) The company provides adjusted EBITDA and related non-GAAP metrics as supplementary performance measures, not as substitutes for GAAP information - The company provides adjusted EBITDA, adjusted EBITDA margin, and basic and diluted adjusted EBITDA per ADS as supplementary non-GAAP financial measures[39](index=39&type=chunk) - Adjusted EBITDA is defined as net income excluding income tax expense, share of loss from equity method investments, investment income, interest income, finance costs, depreciation, amortization of intangible assets, share-based compensation expenses, and fair value change of equity investments[39](index=39&type=chunk) - These non-GAAP financial measures may not be comparable to similar measures used by other companies and should not be considered in isolation or as a substitute for GAAP financial information[39](index=39&type=chunk) [Conference Call Details](index=6&type=section&id=Conference%20Call%20Details) The company held a conference call on November 20/21, 2023, to discuss Q3 2023 financial results, with webcast links provided - The conference call was held on November 20, 2023, at 8:00 PM U.S. Eastern Time (9:00 AM Beijing/Hong Kong Time on November 21, 2023)[32](index=32&type=chunk) - Pre-registration links for the conference call and archived webcast links were provided[34](index=34&type=chunk) [Investor Relations Contact](index=16&type=section&id=Investor%20Relations%20Contact) Investors can contact FANHUA Inc.'s Investor Relations department via phone or email for further information - Investor Relations contact phone: **+86 (20) 8388-3191**[63](index=63&type=chunk) - Investor Relations contact email: **qiusr@fanhgroup.com**[63](index=63&type=chunk) [Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements for Q3 2023 [Unaudited Condensed Consolidated Balance Sheets](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) This section presents the unaudited condensed consolidated balance sheets as of December 31, 2022, and September 30, 2023 Unaudited Condensed Consolidated Balance Sheets (As of September 30, 2023) | Metric (RMB in thousands) | 2022年12月31日 | 2023年9月30日 | | :------------------------ | :------------- | :------------- | | **ASSETS:** | | | | Total Current Assets | 2,293,574 | 2,446,928 | | Total Non-current Assets | 795,942 | 1,558,527 | | **TOTAL ASSETS** | **3,089,516** | **4,005,455** | | **LIABILITIES:** | | | | Total Current Liabilities | 951,976 | 1,000,889 | | Total Non-current Liabilities | 406,209 | 596,222 | | **TOTAL LIABILITIES** | **1,358,185** | **1,597,111** | | **EQUITY:** | | | | Equity Attributable to Company Shareholders | 1,623,403 | 2,139,968 | | Non-controlling Interests | 107,928 | 268,376 | | **TOTAL EQUITY** | **1,731,331** | **2,408,344** | [Unaudited Condensed Consolidated Statements of Income and Comprehensive Income](index=11&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) This section presents the unaudited condensed consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2023 Unaudited Condensed Consolidated Statements of Income and Comprehensive Income (For the Three Months Ended September 30, 2023) | Metric (RMB in thousands) | 2022年 | 2023年 | | :------------------------ | :----- | :----- | | Total Net Revenues | 624,746 | 634,620 | | Total Operating Costs and Expenses | (592,581) | (601,424) | | Operating Income | 32,165 | 33,196 | | Investment Income | 2,770 | 1,925 | | Fair Value Change of Equity Investments | — | 164,326 | | Income Tax Expense | (8,562) | (16,113) | | Net Income | 33,202 | 160,771 | | Net Income Attributable to Company Shareholders | 35,371 | 170,699 | | Basic Net Income per ADS | 0.66 | 3.18 | | Diluted Net Income per ADS | 0.66 | 3.18 | [Unaudited Condensed Consolidated Statements of Cash Flow](index=13&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flow) This section presents the unaudited condensed consolidated statements of cash flow for the three and nine months ended September 30, 2023 Unaudited Condensed Consolidated Statements of Cash Flow (For the Three Months Ended September 30, 2023) | Cash Flow Type (RMB in thousands) | 2022年 | 2023年 | | :-------------------------------- | :----- | :----- | | Net Cash from Operating Activities | 19,788 | 12,826 | | Net Cash from Investing Activities | (151,120) | (33,991) | | Net Cash from Financing Activities | — | (7,114) | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | (131,332) | (28,279) | | Period-end Cash, Cash Equivalents, and Restricted Cash | 462,837 | 633,006 | [Reconciliations of Net Income to Adjusted EBITDA and Adjusted EBITDA Margin](index=15&type=section&id=Reconciliations%20of%20Net%20Income%20to%20Adjusted%20EBITDA%20and%20Adjusted%20EBITDA%20Margin) This section provides reconciliations of net income to adjusted EBITDA and its margin, detailing adjustments from GAAP net income to non-GAAP adjusted EBITDA Reconciliation of Net Income to Adjusted EBITDA (For the Three Months Ended September 30, 2023) | Metric (RMB in thousands) | 2022年 | 2023年 | | :------------------------ | :----- | :----- | | Net Income | 33,202 | 160,771 | | Income Tax Expense | 8,562 | 16,113 | | Share of Loss from Equity Method Investments | 621 | 223 | | Investment Income | (2,770) | (1,925) | | Interest Income | (7,938) | (3,374) | | Finance Costs | — | 2,666 | | Depreciation | 4,796 | 3,912 | | Amortization of Intangible Assets | — | 4,864 | | Share-based Compensation Expenses | 162 | 6,006 | | Fair Value Change of Equity Investments | — | (164,326) | | **Adjusted EBITDA** | **36,635** | **24,930** | | Total Net Revenues | 624,746 | 634,620 | | **Adjusted EBITDA Margin** | **5.9%** | **3.9%** | | Basic Adjusted EBITDA per ADS | 0.68 | 0.46 | | Diluted Adjusted EBITDA per ADS | 0.68 | 0.46 |

FANHUA Q2 2023 Earnings Release [Financial & Operational Highlights](index=1&type=section&id=Financial%20%26%20Operational%20Highlights) FANHUA achieved strong Q2 2023 results with total net revenues up 61.1% to RMB 1,132.6 million and operating income up 177.3% to RMB 86.0 million, driven by strategic execution and a surge in savings product sales ahead of regulatory changes, with plans for international expansion Q2 2023 Key Financial Metrics (YoY) | Metric | Q2 2022 (RMB M) | Q2 2023 (RMB M) | Change % | | :--- | :--- | :--- | :--- | | Total net revenues | 703.1 | 1,132.6 | 61.1% | | Operating income | 31.0 | 86.0 | 177.3% | | Net income attributable to shareholders | 32.1 | 76.5 | 138.2% | | Adjusted EBITDA | 35.7 | 104.1 | 191.6% | | Diluted net income per ADS (RMB/ADS) | 0.60 | 1.42 | 136.7% | Q2 2023 Key Operating Metrics (YoY) | Metric | Q2 2022 (RMB M) | Q2 2023 (RMB M) | Change % | | :--- | :--- | :--- | :--- | | Total life gross written premiums (GWP) | 2,778.1 | 4,340.0 | 56.2% | | - First year premium (FYP) | 615.7 | 1,558.1 | 153.1% | | FYP per life insurance performing agent (RMB/Agent) | 47,671 | 122,436 | 156.8% | - Growth was driven by a combination of a well-defined strategy and a regulatory-mandated pricing rate change for traditional life insurance products, which spurred sales of certain savings products[3](index=3&type=chunk) - The company is exploring opportunities to expand its strategy to markets beyond mainland China, including Hong Kong and Southeast Asia, leveraging its strong financial position with over **RMB 1.6 billion** in cash reserves[7](index=7&type=chunk) [Business & Strategic Developments](index=3&type=section&id=Business%20%26%20Strategic%20Developments) FANHUA's open platform and acquisitions boosted life insurance FYP, while the company continued share repurchases, acquired minority interests in Censhi, and issued strong full-year 2023 guidance for 50% YoY growth in life insurance FYP and adjusted EBITDA - The open platform generated **RMB 546.1 million** in first-year premiums, accounting for **35.0%** of the total life insurance FYP in Q2 2023[9](index=9&type=chunk) - Acquisitions made within the past 12 months generated **26.2%** of life insurance FYP and **25.3%** of net revenues for the life insurance business[9](index=9&type=chunk) - As of June 30, 2023, the company had repurchased approximately **US$3.6 million** worth of its ADSs under its **US$20 million** share repurchase program[10](index=10&type=chunk) - The company entered into agreements to acquire **10%** of minority interests in Ningbo Censhi Insurance Agency Co., Ltd., with rights to increase its shareholding to **60%**[11](index=11&type=chunk) - **2023 Full-Year Guidance:** The company expects to achieve **50%** year-over-year growth in both life insurance first-year premiums and adjusted EBITDA[12](index=12&type=chunk) [Detailed Financial Analysis](index=3&type=section&id=Analysis%20of%20our%20Financial%20Results%20for%20the%20Second%20Quarter%20of%202023) This section provides a detailed breakdown of FANHUA's financial performance, covering revenue, gross profit, operating expenses, net income, non-GAAP measures, and financial position for Q2 2023 [Revenues](index=3&type=section&id=Revenues) Total net revenues increased 61.1% YoY to RMB 1,132.6 million, primarily driven by a 70.2% surge in the agency business, particularly life insurance, with modest growth in claims adjusting Q2 2023 Net Revenues by Segment (RMB in millions) | Segment | Q2 2022 (RMB M) | Q2 2023 (RMB M) | YoY Change % | | :--- | :--- | :--- | :--- | | **Total Net Revenues** | **703.1** | **1,132.6** | **61.1%** | | Agency Business | 603.4 | 1,027.2 | 70.2% | | - Life Insurance | 570.7 | 980.1 | 71.7% | | - Non-life Insurance | 32.7 | 47.1 | 43.6% | | Claims Adjusting Business | 99.7 | 105.5 | 5.8% | - The increase in life insurance revenue was attributed to strong sales of higher-interest rate savings products ahead of a pricing rate change, effective strategy implementation, and **RMB 247.8 million** in revenue from acquisitions completed in Q1 2023[14](index=14&type=chunk) [Gross Profit](index=4&type=section&id=Gross%20profit) Total gross profit increased 31.3% YoY to RMB 323.1 million, primarily from life insurance, though its gross margin declined from 35.5% to 27.9% due to a newly acquired lower-margin agency Q2 2023 Gross Profit & Margin by Segment | Segment | Gross Profit (RMB M) | YoY Change % | Gross Margin Q2 2023 | Gross Margin Q2 2022 | | :--- | :--- | :--- | :--- | :--- | | Life Insurance | 273.2 | 34.8% | 27.9% | 35.5% | | Non-life Insurance | 12.2 | 28.4% | 25.9% | 28.9% | | Claims Adjusting | 37.7 | 11.2% | 35.8% | 34.0% | [Operating Expenses & Income](index=5&type=section&id=Operating%20expenses) Operating income surged 177.3% YoY to RMB 86.0 million, expanding the operating margin to 7.6%, despite increased G&A expenses from acquisitions, due to a 3.7% decrease in selling expenses from cost optimization - Selling expenses decreased by **3.7%** to **RMB 64.3 million** due to personnel optimization and fewer sales outlets, partially offset by share-based compensation expenses[21](index=21&type=chunk) - General and administrative expenses increased by **16.6%** to **RMB 172.8 million**, mainly due to **RMB 23.2 million** in expenses from acquisitions completed in Q1 2023[22](index=22&type=chunk) Q2 2023 Operating Income & Margin | Metric | Q2 2022 (RMB M) | Q2 2023 (RMB M) | YoY Change % | | :--- | :--- | :--- | :--- | | Operating Income | 31.0 | 86.0 | 177.3% | | Operating Margin | 4.4% | 7.6% | +3.2pp | [Net Income & Earnings Per Share (EPS)](index=5&type=section&id=Net%20Income%20%26%20Earnings%20Per%20Share) Net income attributable to shareholders significantly increased 138.2% YoY to RMB 76.5 million, resulting in a 136.7% rise in diluted net income per ADS to RMB 1.42 Q2 2023 Net Income Metrics (RMB in millions) | Metric | Q2 2022 (RMB M) | Q2 2023 (RMB M) | YoY Change % | | :--- | :--- | :--- | :--- | | Investment Income | 2.2 | 12.3 | 459.1% | | Net Income | 28.7 | 82.9 | 188.9% | | Net Income Attributable to Shareholders | 32.1 | 76.5 | 138.2% | Q2 2023 Earnings Per ADS | Metric | Q2 2022 (RMB/ADS) | Q2 2023 (RMB/ADS) | YoY Change % | | :--- | :--- | :--- | :--- | | Basic Net Income per ADS | 0.60 | 1.42 | 136.7% | | Diluted Net Income per ADS | 0.60 | 1.42 | 136.7% | [Non-GAAP Measures (Adjusted EBITDA)](index=6&type=section&id=Non-GAAP%20Measures%20%28Adjusted%20EBITDA%29) Adjusted EBITDA grew 191.6% YoY to RMB 104.1 million, with the margin improving to 9.2% from 5.1%, reflecting enhanced operational efficiency Q2 2023 Adjusted EBITDA Performance | Metric | Q2 2022 (RMB M) | Q2 2023 (RMB M) | YoY Change % | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | 35.7 | 104.1 | 191.6% | | Adjusted EBITDA Margin | 5.1% | 9.2% | +4.1pp | | Diluted Adjusted EBITDA per ADS (RMB/ADS) | 0.66 | 1.93 | 192.4% | [Financial Position & Distribution Network](index=6&type=section&id=Financial%20Position%20%26%20Distribution%20Network) As of June 30, 2023, FANHUA maintained a strong liquidity position with RMB 1,611.6 million in cash and investments, while optimizing its distribution network by reducing sales outlets to 606 for profitability focus - The company had **RMB 1,611.6 million (US$222.2 million)** in cash, cash equivalents, and short-term investments as of June 30, 2023[27](index=27&type=chunk) - The distribution network was streamlined, with the number of sales outlets decreasing from **712** to **606** year-over-year, reflecting a focus on profitable branches[27](index=27&type=chunk) [Financial Statements](index=9&type=section&id=Financial%20Statements) This section presents the unaudited condensed consolidated balance sheets, statements of income, and statements of cash flow for the reported periods [Unaudited Condensed Consolidated Balance Sheets](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2023, the balance sheet reported total assets of RMB 4,154.1 million, total liabilities of RMB 1,906.8 million, and total equity of RMB 2,247.3 million, reflecting a significant increase in assets from year-end 2022 Key Balance Sheet Items (RMB in millions) | Item | Dec 31, 2022 (RMB M) | June 30, 2023 (RMB M) | | :--- | :--- | :--- | | Total Assets | 3,089.5 | 4,154.1 | | Total Liabilities | 1,358.2 | 1,906.8 | | Total Equity | 1,731.3 | 2,247.3 | [Unaudited Condensed Consolidated Statements of Income](index=11&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) The income statement for the three months ended June 30, 2023, details the components leading from total net revenues of RMB 1,132.6 million to a net income attributable to shareholders of RMB 76.5 million - This section provides the detailed unaudited consolidated statements of income and comprehensive income for the three and six months ended June 30, 2023 and 2022[41](index=41&type=chunk)[43](index=43&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flow](index=13&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flow) For the six months ended June 30, 2023, cash flow analysis shows RMB 33.6 million provided by operating activities, RMB 164.8 million used in investing activities, and RMB 137.9 million provided by financing activities - This section provides the detailed unaudited consolidated statements of cash flow for the three and six months ended June 30, 2023 and 2022[46](index=46&type=chunk)[47](index=47&type=chunk) [Non-GAAP Financial Measures Reconciliation](index=8&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) This section details the reconciliation of GAAP Net Income to non-GAAP Adjusted EBITDA, showing how Q2 2023 Net Income of RMB 82.9 million was adjusted to arrive at an Adjusted EBITDA of RMB 104.1 million - The company provides non-GAAP measures like Adjusted EBITDA to supplement GAAP results, believing they are useful for assessing operating performance. These measures exclude items like income tax, interest, depreciation, amortization, and share-based compensation[35](index=35&type=chunk) Q2 2023 Reconciliation of Net Income to Adjusted EBITDA (RMB in millions) | Line Item | Amount (RMB M) | | :--- | :--- | | Net income | 82.933 | | (+) Income tax expense | 20.202 | | (-) Share of income of affiliates | (0.209) | | (-) Investment income | (12.325) | | (-) Interest income | (3.770) | | (+) Financial cost | 2.723 | | (+) Depreciation | 4.241 | | (+) Amortization of intangible assets | 4.864 | | (+) Compensation expenses (stock option) | 5.064 | | **Adjusted EBITDA** | **104.141** | [Other Information](index=7&type=section&id=Other%20Information) This section provides logistical details for the Q2 2023 earnings conference call, a corporate overview of FANHUA as a leading independent financial service provider in China, and the standard safe harbor statement regarding forward-looking statements - A conference call to discuss the results was scheduled for **9:00 p.m. Eastern Daylight Time** on **August 30, 2023**[30](index=30&type=chunk) - FANHUA is a leading independent financial service provider in China, focusing on insurance-oriented family asset allocation services and operating the online platform Baowang (www.baoxian.com)[31](index=31&type=chunk) - The press release contains forward-looking statements made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995, which involve known and unknown risks and uncertainties[32](index=32&type=chunk)

Financial Data and Key Metrics Changes - Revenue grew by 61% quarter-over-quarter, with operating income increasing by 177%, surpassing prior guidance [10] - Adjusted EPS saw a growth of 192%, and total cash and cash equivalents stood at RMB1.6 billion [10] Business Line Data and Key Metrics Changes - Premiums increased by 55% year-on-year, significantly outpacing the industry growth of 23.7% [11] - Life insurance first-year premiums surged by 153% year-on-year, compared to an average of 89% for Chinese listed insurers [11] - The number of MDRT agents rose by 228%, while premium agents selling over RMB100,000 grew by 163% year-on-year [11] - Renewal premiums increased by 28.7%, driven by a persistency ratio of 95.1% for 13 months, up 3.4 percentage points from last year [13] Market Data and Key Metrics Changes - The Chinese insurance market is transitioning from a mass agent model to a professional-based model, with a shortfall of at least 2 million professional advisors needed to meet demand [5][6] - The overall return environment for financial products in China is declining, making insurance products still attractive as savings options [15] Company Strategy and Development Direction - The company aims to become a globally leading technology-driven financial services platform, focusing on professionalism, specialization, digitalization, and an open platform strategy [7][8] - Fanhua is temporarily suspending its dividend policy to capitalize on consolidation opportunities and overseas growth [16] - The company plans to expand into Hong Kong and Southeast Asia, leveraging its technology expertise to address the underserved intermediary sector [17] Management's Comments on Operating Environment and Future Outlook - The management acknowledges the challenges in the Chinese economy but remains confident in the long-term outlook due to the growing middle class and aging population [4][5] - The company expects a short-term adjustment in sales following recent pricing changes but maintains a robust medium to long-term demand outlook for insurance products [27][29] Other Important Information - Fanhua will host an Open Platform Day to showcase its capabilities and attract independent brokers [34] - The company has returned RMB2.8 billion to shareholders through dividends and buybacks since its listing [16] Q&A Session Summary Question: Expansion plans for Hong Kong and Southeast Asia - The company is in early stages of crafting its strategy, focusing on technology export and partnerships rather than building large frontline teams [21] Question: Observations on economic recovery in China - Management noted that consumer confidence is recovering, but there are challenges due to cautious spending post-COVID [23] Question: Product supply strategy and sales momentum - Post-pricing change, August sales figures are not strong, but demand for low-risk savings products remains robust due to demographic trends [27][29] Question: Growth prospects of the Open Platform strategy - The Open Platform strategy is gaining recognition, contributing to one-third of the business in a short period, with a focus on providing technology and support to independent brokers [33][36]

Fanhua Inc. (NASDAQ:FANH) Q1 2023 Earnings Conference Call June 5, 2023 8:30 AM ET Company Participants Yinan Hu - Chairman and CEO Lichong Liu - Chief Operating Officer Peng Ge - Chief Financial Officer Oasis Qiu - IR Manager Conference Call Participants Daniel Wong - JPMorgan Operator Thank you for standing by for Fanhua's First Quarter 2023 Earnings Conference Call. [Operator instructions] I would now like to turn the meeting over to your host for today's conference, Ms. Oasis Qiu, Fanhua's Investor Rela ...

[Executive Summary & Financial Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Financial%20Highlights) Fanhua reported strong Q1 2023 financial results with significant growth in operating income and net revenues, driven by improved agent productivity and strategic initiatives, while also outlining key non-GAAP measures [Q1 2023 Financial Highlights](index=1&type=section&id=Q1%202023%20Financial%20Highlights) Fanhua reported strong financial results for Q1 2023, with operating income surging by 193.1% year-over-year, significantly exceeding prior guidance. Total net revenues increased by 20.6% year-over-year, driven by robust growth in gross written premiums (GWP) and first-year premiums (FYP) Q1 2023 Key Financial Highlights (RMB thousands) | Metric | 2022Q1 (RMB) | 2023Q1 (RMB) | Change % | | :------------------------------------------- | :----------- | :----------- | :------- | | Total net revenues | 686,387 | 827,737 | 20.6 | | Operating income | 20,589 | 60,355 | 193.1 | | Non-GAAP operating income | 20,589 | 63,474 | 208.3 | | Net income (loss) attributable to shareholders | (37,838) | 60,452 | N/A | | Non-GAAP net income attributable to shareholders | 40,439 | 63,571 | 57.2 | | Diluted net income (loss) per ADS | (0.70) | 1.13 | N/A | | Non-GAAP diluted net income per ADS | 0.75 | 1.18 | 57.3 | - Total gross written premiums (GWP) grew by **29.0%** year-over-year to **RMB 4.4 billion**, significantly above the life insurance industry's premium growth rate of 8.9%[2](index=2&type=chunk) - First year premiums (FYP) grew by **51.4%** year-over-year to **RMB 851.9 million**, substantially exceeding the average growth rate of approximately 15% achieved by listed Chinese life insurers[2](index=2&type=chunk) [CEO Commentary & Strategic Overview](index=1&type=section&id=CEO%20Commentary%20%26%20Strategic%20Overview) CEO Yinan Hu attributed the strong Q1 2023 performance to improved agent quality and productivity, contributions from acquisitions, the open-platform strategy, and operational gains from digitization. The company is committed to its 'Professionalization, Specialization, Digitalization, and Open Platform' strategy and aims for 50% YoY growth in life insurance new business sales and non-GAAP operating income for 2023, focusing on enhancing value-added services, talent acquisition, market consolidation, and professional development - The impressive figures were combined results of significant increase in agent quality and productivity, material contribution from acquisitions and open-platform strategy as well as material operational gains from digitization[3](index=3&type=chunk) - The company is executing on its well-defined strategy of driving sustainable growth through 'Professionalization, Specialization, Digitalization, and Open Platform'[3](index=3&type=chunk) - Fanhua aims to achieve **50%** year-over-year growth in life insurance new business sales and non-GAAP operating income for 2023[6](index=6&type=chunk) - Future strategic focus areas include: i) enhancing unique competitive edge through optimizing value-added service offerings, ii) attracting top talents via Family Office Consultant (FOC) training programs, iii) accelerating market consolidation through acquisitions and digital tenant expansion, and iv) supporting Million-Dollar Round Table (MDRT) members in obtaining relevant financial qualifications[6](index=6&type=chunk) [Non-GAAP Financial Measures Definitions](index=1&type=section&id=Non-GAAP%20Financial%20Measures%20Definitions) This section provides definitions for the non-GAAP financial measures used in the report, clarifying how non-GAAP operating income, net income attributable to shareholders, and diluted net income per ADS are calculated by excluding specific items like share-based compensation expenses and impairment on investment in an affiliate - Non-GAAP operating income is defined as income of operation before share-based compensation expenses[4](index=4&type=chunk) - Non-GAAP net income attributable to the Company's shareholders is defined as net income attributable to the Company's shareholders before share-based compensation expenses and impairment on investment in an affiliate[4](index=4&type=chunk) - Non-GAAP diluted net income per ADS is defined as non-GAAP net income attributable to the Company's shareholders divided by total weighted average number of diluted ADSs outstanding[4](index=4&type=chunk) [Detailed Financial Results (Q1 2023)](index=2&type=section&id=Detailed%20Financial%20Results%20(Q1%202023)) Fanhua's Q1 2023 financial performance was marked by a significant increase in total net revenues, driven by strong agency business growth, particularly in life insurance, alongside a detailed breakdown of operating costs and improved profitability metrics - Total net revenues were **RMB 827.7 million (US$120.5 million)** for Q1 2023, an increase of **20.6%** from RMB 686.4 million in Q1 2022[8](index=8&type=chunk) [Net Revenues Breakdown](index=2&type=section&id=Net%20Revenues%20Breakdown) Fanhua's total net revenues for Q1 2023 increased by 20.6% year-over-year to RMB 827.7 million. This growth was primarily driven by the agency business, particularly the life insurance segment, which saw significant increases in GWP and FYP, and also by the P&C insurance business due to recent acquisitions [Agency Business Revenues](index=2&type=section&id=Agency%20Business%20Revenues) Agency business revenues saw a substantial increase, primarily driven by robust growth in both life and P&C insurance segments, with life insurance GWP and FYP showing strong year-over-year growth - Net revenues for agency business increased by **23.4%** year-over-year to **RMB 725.5 million (US$105.6 million)**[8](index=8&type=chunk) - Net revenues for the life insurance business grew by **22.3%** year-over-year to **RMB 683.4 million (US$99.5 million)**, primarily due to increased new policy sales and acquisitions[9](index=9&type=chunk) - Life insurance GWP increased by **29.1%** year-over-year to **RMB 4,359.8 million**, with life insurance FYP increasing by **55.9%** year-over-year to **RMB 767.8 million**[9](index=9&type=chunk) - Net revenues for the P&C insurance business increased by **43.2%** year-over-year to **RMB 42.1 million (US$6.1 million)**, mainly due to a brokerage firm acquisition in H2 2022[12](index=12&type=chunk) [Claims Adjusting Business Revenues](index=3&type=section&id=Claims%20Adjusting%20Business%20Revenues) Claims adjusting business revenues experienced modest growth, though its contribution to total net revenues slightly decreased compared to the prior year - Net revenues for the claims adjusting business increased by **3.9%** year-over-year to **RMB 102.2 million (US$14.9 million)**[12](index=12&type=chunk) - Claims adjusting business accounted for **12.3%** of total net revenues in Q1 2023, down from 14.3% in Q1 2022[12](index=12&type=chunk) [Operating Costs and Expenses Breakdown](index=3&type=section&id=Operating%20Costs%20and%20Expenses%20Breakdown) Total operating costs and expenses for Q1 2023 increased by 15.3% year-over-year to RMB 767.4 million. Commission costs, particularly for the life insurance business, rose significantly due to new acquisitions and a shift in business model. Selling expenses decreased due to personnel optimization and reduced rental costs, while general and administrative expenses increased primarily due to acquisitions - Total operating costs and expenses were **RMB 767.4 million (US$111.7 million)** for Q1 2023, an increase of **15.3%** from Q1 2022[13](index=13&type=chunk) [Commission Costs](index=3&type=section&id=Commission%20Costs) Total commission costs rose significantly, driven by increased expenses in both life and P&C insurance businesses, with life insurance costs impacted by acquisitions and a new business model - Total commission costs increased by **22.7%** year-over-year to **RMB 553.1 million (US$80.5 million)**[13](index=13&type=chunk) - Costs of the life insurance business increased by **25.6%** year-over-year to **RMB 456.6 million (US$66.5 million)**, mainly due to commission costs associated with new acquisitions and a lower gross profit margin from a newly acquired entity's managing general agency platform model[14](index=14&type=chunk) - Costs of the P&C insurance business increased by **54.8%** year-over-year to **RMB 30.8 million (US$4.5 million)**[15](index=15&type=chunk) - Costs of claims adjusting business decreased by **2.1%** year-over-year to **RMB 65.8 million (US$9.6 million)**[15](index=15&type=chunk) [Selling and G&A Expenses](index=3&type=section&id=Selling%20and%20G%26A%20Expenses) Selling expenses decreased due to personnel optimization and reduced rental costs, while general and administrative expenses increased primarily due to acquisitions - Selling expenses decreased by **11.2%** year-over-year to **RMB 66.5 million (US$9.7 million)** due to personnel optimization and decreased rental costs, partially offset by increased sales events and share-based compensation[16](index=16&type=chunk) - General and administrative expenses increased by **5.3%** year-over-year to **RMB 147.7 million (US$21.5 million)**, mainly due to acquisitions, offset by savings from personnel optimization and a decrease in the number of branches[17](index=17&type=chunk) [Profitability and Other Financials](index=4&type=section&id=Profitability%20and%20Other%20Financials) Fanhua achieved significant profitability improvements in Q1 2023, with operating income surging by 193.1% and operating margin improving to 7.3%. The company also reported a turnaround from a net loss to a net income attributable to shareholders, alongside substantial growth in investment income. Cash and short-term investments remained strong - Operating income was **RMB 60.4 million (US$8.8 million)**, an increase of **193.1%** year-over-year[18](index=18&type=chunk) - Non-GAAP operating income was **RMB 63.5 million (US$9.2 million)**, an increase of **208.3%** year-over-year[18](index=18&type=chunk) - Operating margin improved to **7.3%** for Q1 2023, compared to 3.0% for the corresponding period in 2022[18](index=18&type=chunk) - Net income attributable to the Company's shareholders was **RMB 60.5 million (US$8.8 million)**, a significant turnaround from a net loss of RMB 37.8 million in Q1 2022[19](index=19&type=chunk) - Investment income increased by **207.3%** year-over-year to **RMB 12.6 million (US$1.8 million)**[18](index=18&type=chunk) - As of March 31, 2023, the Company had **RMB 1,654.2 million (US$240.9 million)** in cash, cash equivalents, short-term investments and others[21](index=21&type=chunk) [Operational Performance & Outlook](index=5&type=section&id=Operational%20Performance%20%26%20Outlook) Fanhua strategically refined its agent network to focus on high-performing individuals, leading to increased per-agent productivity, while its online mutual aid platform expanded its reach and the company provided optimistic financial guidance for Q2 and full-year 2023 [Insurance Sales and Service Network](index=5&type=section&id=Insurance%20Sales%20and%20Service%20Network) Fanhua strategically shifted its focus to high-end customers and elite agents, resulting in a decrease in the total number of performing life insurance agents but a substantial increase in premiums facilitated per agent. The company also adjusted its physical distribution and service network - The number of performing agents for selling life insurance products decreased to **6,941** in Q1 2023 from 9,371 in Q1 2022, a **26%** reduction[22](index=22&type=chunk) - Insurance premiums facilitated per performing agent for life insurance products grew by **95.1%** year-over-year to **RMB 82,448**[22](index=22&type=chunk) - The decrease in agents was due to a shifted focus to serving high-end customers and high-performing agents, maintaining an elite-based agent pool[22](index=22&type=chunk) - Fanhua's distribution network consisted of **631** sales outlets and **92** service outlets as of March 31, 2023, down from 717 sales outlets and 109 service outlets in Q1 2022[23](index=23&type=chunk) [Recent Developments](index=5&type=section&id=Recent%20Developments) Fanhua's online mutual aid platform, eHuzhu, continued to expand its reach, providing alternative risk-protection programs and significant financial assistance to lower-income groups - As of March 31, 2023, eHuzhu had approximately **1.8 million** paying members[24](index=24&type=chunk) - eHuzhu assisted **11,862** families in raising approximately **RMB 1.3 billion** to cover medical costs[24](index=24&type=chunk) [Business Outlook](index=5&type=section&id=Business%20Outlook) Fanhua provided guidance for Q2 2023 non-GAAP operating income and reaffirmed its full-year 2023 targets for life insurance first-year premiums and non-GAAP operating income, both projecting significant year-over-year growth - Fanhua expects its non-GAAP operating income to be no less than **RMB 46 million** for the second quarter of 2023[25](index=25&type=chunk) - The company reaffirms its full-year life insurance first year premiums target of no less than **RMB 3.7 billion** for 2023, representing a year-over-year growth of **50%**[25](index=25&type=chunk) - Fanhua reaffirms its full-year non-GAAP operating income target of no less than **RMB 253 million** for 2023, representing a year-over-year growth of **50%**[25](index=25&type=chunk) [Company Information & Disclosures](index=6&type=section&id=Company%20Information%20%26%20Disclosures) This section provides an overview of Fanhua Inc.'s business model and market position, along with important disclaimers regarding forward-looking statements and the use of non-GAAP financial measures [About Fanhua Inc.](index=6&type=section&id=About%20Fanhua%20Inc.) Fanhua Inc. is a leading independent financial services provider in China, specializing in insurance-oriented family asset allocation services and a comprehensive platform for insurance agents. The company focuses on long-term life insurance products, claims adjusting, and value-added services, supported by a broad distribution network and its online platform, Baowang - Fanhua Inc. is a leading independent financial services provider in China, focusing on insurance-oriented family asset allocation services and a one-stop service platform for individual sales agents and independent insurance intermediaries[28](index=28&type=chunk) - The company offers a broad range of insurance products, claims adjusting services, and various value-added services, including operating Baowang (www.baoxian.com), an online insurance platform[28](index=28&type=chunk) - As of March 31, 2023, Fanhua's distribution and service network consisted of **631** sales outlets covering 24 provinces and **92** service outlets covering 31 provinces[29](index=29&type=chunk) [Forward-looking Statements](index=6&type=section&id=Forward-looking%20Statements) This section serves as a disclaimer, indicating that the press release contains forward-looking statements subject to known and unknown risks and uncertainties. It cautions investors that actual results may differ materially from expectations due to various factors, including operational and macroeconomic conditions - This press release contains statements of a forward-looking nature, made under the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995[30](index=30&type=chunk) - These statements involve known and unknown risks and uncertainties, including those related to attracting and retaining agents, maintaining business relationships with insurance companies, executing growth strategy, adapting to regulatory environment, competition, and macroeconomic conditions in China[30](index=30&type=chunk) - Investors are cautioned that actual results may differ materially from anticipated results[30](index=30&type=chunk) [About Non-GAAP Financial Measures](index=6&type=section&id=About%20Non-GAAP%20Financial%20Measures) This section elaborates on the non-GAAP financial measures used by Fanhua, explaining their definitions, the rationale for their inclusion as supplemental measures for assessing performance, and their inherent limitations. It emphasizes that these measures should not be considered in isolation from or as a substitute for GAAP financial information - Non-GAAP financial measures (operating income, net income attributable to shareholders, net margin, and basic/diluted net income per ADS) are provided as supplemental measures to review and assess operating performance[31](index=31&type=chunk) - These non-GAAP measures exclude impairment on investment in an affiliate and share-based compensation expenses[31](index=31&type=chunk) - The presentation of these non-GAAP financial measures has limitations as analytical tools and should not be considered in isolation from, or as a substitute for, GAAP financial information[31](index=31&type=chunk) [Financial Statements](index=7&type=section&id=Financial%20Statements) This section presents Fanhua's unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flow statements, along with reconciliations of GAAP to non-GAAP measures for Q1 2023 [Unaudited Condensed Consolidated Balance Sheets](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) The unaudited condensed consolidated balance sheets present Fanhua's financial position as of December 31, 2022, and March 31, 2023. Key changes include an increase in total assets, driven by short-term investments and goodwill, and corresponding increases in total liabilities and equity Key Balance Sheet Figures (RMB thousands) | Metric | Dec 31, 2022 (RMB) | Mar 31, 2023 (RMB) | | :--------------- | :----------------- | :----------------- | | Total assets | 3,089,516 | 3,903,667 | | Total liabilities| 1,358,185 | 1,734,530 | | Total equity | 1,731,331 | 2,169,137 | - Short term investments increased from **RMB 347.754 million** to **RMB 696.401 million**[34](index=34&type=chunk) - Goodwill and intangible assets, net, increased from **RMB 109.997 million** to **RMB 481.300 million**[34](index=34&type=chunk) [Unaudited Condensed Consolidated Statements of Income and Comprehensive Income](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) This statement details Fanhua's financial performance for the three months ended March 31, 2022, and 2023, highlighting a significant increase in total net revenues and a positive shift from a net loss to a net income attributable to the company's shareholders Key Income Statement Figures (RMB thousands) | Metric | 2022Q1 (RMB) | 2023Q1 (RMB) | | :------------------------------------------- | :----------- | :----------- | | Total net revenues | 686,387 | 827,737 | | Income from operations | 20,589 | 60,355 | | Net (loss) income attributable to shareholders | (37,838) | 60,452 | - Basic and diluted net income per ADS were **RMB 1.13** for Q1 2023, compared to a net loss of RMB 0.70 per ADS in Q1 2022[37](index=37&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flow](index=10&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flow) The unaudited condensed consolidated statements of cash flow outline the cash movements from operating, investing, and financing activities for the three months ended March 31, 2022, and 2023. It shows a reduced cash outflow from operating activities and a substantial increase in cash generated from financing activities in Q1 2023 Key Cash Flow Figures (RMB thousands) | Metric | 2022Q1 (RMB) | 2023Q1 (RMB) | | :------------------------------------------- | :----------- | :----------- | | Net cash used in operating activities | (87,074) | (18,736) | | Net cash generated from (used in) investing activities | 151,683 | (134,439) | | Net cash generated from financing activities | 3 | 168,455 | | Cash, cash equivalents and restricted cash at end of period | 721,388 | 660,781 | - Proceeds from bank and other borrowings significantly increased cash from financing activities to **RMB 170.268 million** in Q1 2023[40](index=40&type=chunk) [Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures](index=11&type=section&id=Reconciliations%20of%20GAAP%20Financial%20Measures%20to%20Non-GAAP%20Financial%20Measures) This section provides a detailed reconciliation between GAAP and non-GAAP financial measures, illustrating the adjustments made for impairment on investment in affiliates and share-based compensation expenses to derive non-GAAP figures, which show higher profitability metrics GAAP to Non-GAAP Reconciliation (RMB thousands) | Metric | GAAP (2023Q1) | Adjustments (2023Q1) | Non-GAAP (2023Q1) | Change % (Non-GAAP) | | :------------------------------------------- | :------------ | :------------------- | :---------------- | :------------------ | | Income from operations | 60,355 | (3,119) | 63,474 | 208.3 | | Net income attributable to shareholders | 60,452 | (3,119) | 63,571 | 57.2 | | Operating margin | 7.3% | | 7.7% | 155.6 | | Net margin | 7.3% | | 7.7% | 30.4 | - Adjustments primarily include share-based compensation expenses of **RMB 3.119 million** for Q1 2023[42](index=42&type=chunk)[43](index=43&type=chunk)

Financial Position - As of December 31, 2022, the company had cash and cash equivalents of RMB567.5 million (US$82.3 million) and short-term investments of RMB347.8 million (US$50.4 million) [493] - As of December 31, 2022, the company had aggregate undistributed earnings of approximately RMB1,399.7 million (US$202.9 million) available for distribution [509] - The company experienced a foreign currency translation gain of RMB3.7 million (US$0.5 million) in 2022 due to fluctuations in exchange rates [492] Cash Flow and Operating Activities - Net cash generated from operating activities for the year ended December 31, 2022 was RMB137.8 million (US$20.0 million), with a net income of RMB85.7 million (US$12.4 million) [499] - The company anticipates that its cash flow from operations will be sufficient to meet its cash needs for at least the next 12 months [495] Investment Activities - Net cash used in investing activities for the year ended December 31, 2022 was RMB127.6 million (US$18.5 million), primarily due to cash used for purchasing short-term investment products [501] - The company incurred capital expenditures of RMB77.7 million (US$11.3 million) for the year ended December 31, 2022, primarily for IT infrastructure and online platforms [506] Financing Activities - Net cash used in financing activities was RMB20.4 million (US$3.0 million) for the year ended December 31, 2022, mainly for dividend payments totaling RMB52.1 million (US$7.5 million) [504] Business Strategy and Marketing - The company expects to require cash for ongoing business needs, particularly for acquisitions of quality insurance intermediary companies and expansion of its distribution network [494] - The company plans to increase spending on marketing and advertising to enhance brand recognition and promote online platforms [494] Revenue Recognition and Estimates - The constraint applied to the total estimated renewal commissions for long-term life insurance products decreased from 86% as of December 31, 2021, to 69% as of December 31, 2022 [519] - The company has accumulated sufficient historical data and experiences to make reasonable estimates of variable considerations starting from January 1, 2021 [517] - The estimated renewal commissions are recognized as revenue only when it is probable that a significant reversal in cumulative revenue recognized will not occur [517] - The company continues to reassess the estimated constrained values on a quarterly basis to ensure the reasonableness of applied assumptions [521] - The estimation of variable consideration is influenced by factors such as limited history of selling current life insurance products and the complexity of renewal rate estimates [519] Accounting Practices - The company uses the equity method of accounting for investments where it can exercise significant influence but does not have controlling interest [522] - Fair values of investments in equity investees are determined using valuation techniques based on the best available information, including projected revenue growth rates and profit margins [523] - The company has not adopted any recently issued accounting pronouncements that may impact its financial position and results of operations [524]

Financial Data and Key Metrics Changes - In Q4 2022, total gross written premiums (GWP) reached approximately RMB3.6 billion, an increase of 11.7% year-over-year, with first-year premiums (FYP) growing by 19.6% year-over-year [12][14] - For the full year 2022, total GWP facilitated by Fanhua grew by 10.3% year-over-year to RMB12.9 billion, while FYP reached RMB2.9 billion, up by 3.5% year-over-year [14] - Non-GAAP net income attributable to shareholders grew by 76.1% year-over-year to RMB70.9 million, with operating income for 2022 reaching RMB168 million [13][14] Business Line Data and Key Metrics Changes - The number of premium agents increased year-over-year for three consecutive quarters, with their contribution to new business rising to 56% in 2022, up from 45% the previous year [12] - The affiliated fund RONS Open Platform division achieved profitability one year into operation, connecting with over 130 institutional clients and facilitating over RMB250 million in first-year premiums, representing a sixfold growth from 2021 [12] Market Data and Key Metrics Changes - The insurance industry in China is undergoing a transformation, with a shift towards more elite, personalized, and fragmented sales organizations [5][19] - The competition is expected to focus on digital technology and AI-driven platforms, leading to a concentration of support platforms for independent agents [6][22] Company Strategy and Development Direction - Fanhua's strategy includes professionalization, career-based development, digitalization, and an open platform approach, aiming to transform from a traditional distributor to a digital technology-based platform company [6][14] - The company plans to enhance its digital operation capabilities and accelerate strategic acquisitions, targeting at least 50% year-over-year growth in both life insurance FYP and operating income in 2023 [15][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of China's economy post-pandemic, which is expected to provide a favorable environment for the insurance industry's transformation [14][15] - The competitive landscape is evolving, with a trend towards the consolidation of support platforms and the need for independent agents to join these platforms for sustained growth [19][22] Other Important Information - Fanhua has completed the construction of its open platform, which has shown encouraging results in agent support and productivity [7][11] - The company has initiated several acquisitions to accelerate the expansion of its open platform strategy, with plans to acquire 10 insurance intermediate companies in 2023 [14][24] Q&A Session Summary Question: Outlook for the insurance agent and brokerage industry in China - Management noted that the competitive landscape is undergoing fundamental changes, with sales organizations becoming more elite and fragmented, requiring support from digital platforms [19][20] Question: Details on the open platform strategy and future acquisitions - Management confirmed that they have announced three acquisitions and have 10 more in the pipeline, with plans to acquire 20 to 30 regional leading insurance intermediate companies over the next two years [24]

Exhibit 99.1 Financial Highlights for the Fourth Quarter of 2022: Financial Highlights for Year 2022: IR-372 Fanhua Reports Fourth Quarter and Fiscal Year 2022 Unaudited Financial Results -- Net Income Attributable to Shareholders for the Fourth Quarter of 2022 up 545.0% YoY -- GUANGZHOU, China, March 13, 2023, Eastern Daylight Time, (GLOBE NEWSWIRE) Fanhua Inc. (Nasdaq: FANH) (the "Company" or "Fanhua"), a leading independent financial services provider in China, today announced its unaudited financial res ...