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Fanhua Inc. (NASDAQ: FANH) This autumn 2021 earnings name dated Mar. 28, 2022
Company Contributors:
Oasis Qiu — Investor Relations Supervisor
Yinan Hu — Chief Government Officer & Chairman
Analysts:
Susan Wang — CICC — Analyst
Presentation:
Operator
Thanks for standing by for Fanhua’s Fourth Quarter and Fiscal 12 months 2021 Earnings Convention Name. Presently, all members are in a listen-only mode. All traces have been positioned on mute to forestall any background noise. After the administration’s ready remarks, there might be a question-and-answer session. Please comply with the directions given at the moment if you want to ask a query.
To your info, this convention name is now being broadcasted dwell over the Web. Webcast replay might be obtainable inside three hours after the convention is completed. Please go to Fanhua’s IR web site at ir.fanhuaholdings.com below the Occasions and Webcasts part. Right this moment’s convention is being recorded. When you have any objections, you could disconnect right now.
I might now like to show the assembly over to your host for right this moment’s convention, Ms. Oasis Qiu, Fanhua’s Investor Relations Supervisor.
Oasis Qiu — Investor Relations Supervisor
Good morning and good night. Welcome to our fourth quarter and monetary yr 2021 earnings convention name. The earnings outcomes had been launched earlier right this moment and can be found on our IR web site, in addition to on Newswire.
Earlier than we proceed, please notice that the dialogue right this moment will comprise forward-looking statements made below the secure harbor provisions of the US Non-public Securities Litigation Reform Act of 1995. The accuracy of the statements could also be impacted by various enterprise dangers and uncertainties that would trigger our precise outcomes to vary materially from these projected or anticipated. Such dangers and uncertainties embody, however not restricted to these outlined in our filings with the SEC, together with our registration assertion on Kind 20-F. We don’t undertake any obligation to replace this forward-looking info besides as required below relevant regulation.
Becoming a member of us right this moment are our Chairman and Chief Government Officer, Mr. Yinan Hu; Chief Monetary Officer, Mr. Peng Ge. Mr. Hu will present a overview of monetary and operational highlights within the fourth quarter and monetary yr 2021. There might be a Q&A session after the ready remarks.
Now I’ll flip the decision over to Mr. Hu.
Yinan Hu — Chief Government Officer & Chairman
[Foreign Speech] Good morning and good night. That is Yinan Hu. Thanks for becoming a member of right this moment’s convention name. I want to start the decision by sharing a few of my ideas on present trade developments. Then I’ll talk about our strategic focuses in 2022.
[Foreign Speech] In 2021, China’s life insurance coverage trade began off nicely however ended up on a downward monitor. Premium progress continued to decelerate after the transition to the brand new essential sickness definition framework within the first quarter of 2021 and gross written premiums or GWP dropped year-over-year. The resurgences of COVID-19 and tightened laws clearly performed a job, however we imagine the foremost value lies within the provide facet as neither the standard of insurance coverage merchandise nor the skilled capabilities of insurance coverage gross sales brokers can totally meet buyer wants.
[Foreign Speech] Towards the backdrop of trade transformation, regardless of mounting challenges, we additionally see super alternatives. In 2022, individuals reaching the retirement age are anticipated to develop from 9 million in 2021 to 25 million in China. Greater than 25 million persons are anticipated to retire within the subsequent 10 years every year, ranging from 2022, including as much as 300 million individuals. With an accelerating getting older society, there may be burgeoning demand for aged care, asset preservation, tax planning and legacy administration amongst quickly to be retirees. In the meantime, based mostly on expertise realized from mature markets with the rise of the center class within the enhance in customers’ disposal revenue, increasingly persons are shifting their demand for insurance coverage from guaranteeing fundamental safety to extra complete plans for household based mostly asset allocation. These altering shopper calls for are driving the following period of robust progress, however such calls for require salespeople to be geared up with larger capabilities and extra skilled data. [Foreign Speech] Statistics from each the trade and Fanhua in the previous few years additionally affirm this pattern.
[Foreign Speech] From the premium combine perspective, essential sickness gross sales have suffered a steady decline after the transition of CI definition framework. The identical applies to Fanhua. For 2021, essential sickness gross sales facilitated on Fanhua’s platforms have dropped quarter-by-quarter, displaying a downward pattern basically with these gross sales of savings-type merchandise comparable to complete life insurance coverage and annuity have been on the rise as a substitute, clearly reflecting the modifications in insurance coverage demand.
[Foreign Speech] To check out brokers, the entire variety of brokers throughout China’s insurance coverage trade has plummeted from the 9 million to six million, leaving a polarized gross sales power. As on the one hand, numerous low performing brokers are leaving the trade and alternatively, excessive performing salespeople are extra steady and productive. From Fanhua’s standpoint, regardless of a fall in Fanhua’s complete numbers of brokers and performing brokers, the final 4 years witnessed a rise within the variety of Fanhua’s excessive performing brokers with annual first yr premiums of RMB100,000 and above, from 3,230 in 2018 to five,432 in 2021, suggesting a distinctly rising momentum basically. And productiveness of our excessive performing brokers has additionally grown year-by-year as their per capita common annual premiums grew from RMB250,000 in 2018 to RMB320,000 in 2021. All this means that our brokers are additionally diverging with Fanhua’s core gross sales power remaining steady and rising in high quality.
[Foreign Speech] As for purchasers. the variety of Fanhua’s excessive premium clients was over RMB100,000 annual premiums has additionally proven a distinctly upward momentum because the variety of new excessive premium clients every year has been rising and the premiums contributed by repeated purchases have been rising accounted for greater than 30% of the entire. This means that the center class has been rising quickly and the variety of excessive web value clients has been rising as nicely.
[Foreign Speech] In 2021, regardless of a drop of 0.3% within the trade life insurance coverage GWP, Fanhua managed to register RMB11.6 billion of complete GWP, a year-over-year enhance of 12.3%. First yr premiums reached RMB2.8 billion, a year-over-year enhance of 4.1%, amongst which first yr premiums of complete life insurance coverage grew by over 64% year-over-year. This once more confirms the modifications in buyer demand and the contribution of extremely productive excessive performing gross sales power to enterprise progress in addition to the truth that the standard enchancment of brokers are in a position to offset the adversarial affect of downsizing and it additionally sheds gentle on Fanhua’s future path for growth.
[Foreign Speech] The 2 datas that additional confirming this pattern; firstly, excessive performing excessive premium clients and new premiums of over RMB100,000 annual premiums contributed roughly 34% of our complete first yr premiums in 2021. After which variety of brokers who contributed over RMB100,000 first yr premiums in 2021 amounted to about 5,000 of them contributed round 65% over complete first yr premium.
[Foreign Speech] Primarily based on our judgment on the trade, Fanhua applied in full energy the brand new technique of professionalism, digitalization and open platform in 2021 in an try to completely empower and domesticate skilled skills and in addition empowered the trade to take full benefit of the good alternatives introduced by the rising demand for aged care and household legacy administration. In 2022, we are going to additional execute growth technique of professionalism, digitalization and open platform with a concentrate on the next initiatives.
[Foreign Speech] We’re planning to faucet into excessive web value market by providing referral of insurance coverage belief and household belief providers with a goal to finish over 1,000 giant ticket household legacy administration insurance policies and enhance the quantity of premiums contributed by excessive worth clients who’ve paid at least RMB100,000 premiums yearly by 30% and that is made based mostly on earlier judgment on the trade and we depart that the contribution of high-value clients is on the rise, in order that we pay our first concentrate on high-value clients demand. And our level right here is to ensure to fulfill their demand for household legacy administration first.
[Foreign Speech] Second, as excessive performing brokers with RMB100,000 FYP contributes about 60% of the entire FYP in Fanhua, we are going to concentrate on fostering and recruiting extra productive brokers by way of skilled empowerment, buyer assets providing and digital empowerment to fulfill the goal of 30% progress in first yr premiums contributed by extremely performing brokers with a RMB100,000 FYP inside our present gross sales power in Fanhua.
[Foreign Speech] Three, we anticipate to speed up the development of the open platform technique, benefiting from the favorable setting after the brand new laws on Web insurance coverage took impact, by way of which we glance to attain the goal of producing 10% of our first yr premiums in 2022.
[Foreign Speech] Our objective is to rework Fanhua right into a model new digitalized and specialised firm that show excessive progress within the subsequent two years. 2022 might be a yr of capability constructing, laying the bottom work for Fanhua to get again on monitor for sustained and excessive revenue progress.
[Foreign Speech] This concludes my presentation and now the ground will open to your questions. Thanks.
Questions and Solutions:
Operator
[Operator Instructions] Our first query comes from Susan Wang of CICC. Your line is open.
Susan Wang — CICC — Analyst
[Foreign Speech] First, congrats to the spectacular outcomes of administration in This autumn and I’ve two questions. First, after the brand new laws of Web insurance coverage [Technical Issues] 2022 efficiency outlook.
And subsequent one is concerning the product. We are able to see a speedy progress within the financial savings sort merchandise. Do we expect it is a short-term adjustment or it’s nonetheless to that the demand for defense product have picked. So how may we do higher [Technical Issues] merchandise and fee fee up sharply decrease than that of the safety sort. Thanks.
Yinan Hu — Chief Government Officer & Chairman
[Foreign Speech] Regarding your first query concerning the affect of the Web life insurance coverage laws, we do observe that a number of small and medium sized insurance coverage firm have extra optimistic perspective in direction of cooperating with this in addition to designing new merchandise. And so we imagine that this new regulation is optimistic to our enterprise growth basically. Along with that, we’re observing that the mixing between on-line and offline enterprise has additionally proven the numerous progress. And after the brand new laws, a number of on-line channels who used to distribute their enterprise by way of Web channels are keen to pursue cooperation with our open platform [Indecipherable]. Final yr, we now have generated about RMB40 million first yr premiums by way of our open platform technique and this quarter within the first quarter, we now have already achieved about RMB30 million first yr premiums and our goal for 2022 is to ship about RMB300 million to RMB500 million first yr premiums. So in conclusion, we imagine that this new regulation is unquestionably fairly favorable to our growth.
[Foreign Speech] To your second query concerning the product combine, we do observe a drastic change in our product combine prior to now quarters and the previous yr. Within the fourth quarter, complete life insurance coverage and annual life insurance coverage collectively accounted for 70% of our complete first yr premium as in comparison with 20% contributed by essential items merchandise as in comparison with — within the first quarter, the proportion of complete life and annuity as in comparison with CI product is far decrease. And likewise within the second quarter and third quarter, we’re already seeing that the proportion of complete life and annuity has already [Indecipherable] CI merchandise. This has clearly mirrored the altering calls for in clients.
As for whether or not or not essential sickness product has reached its ceiling, we won’t say that, however we do imagine that the expansion of essential sickness insurance coverage will decelerate. And sooner or later, financial savings merchandise comparable to annuity, pension insurance coverage and complete life insurance coverage will develop into the principle merchandise. In response to this altering demand, we can even tackle our strategies of promoting and initially, our goal group will change to these individuals within the age of 40 to 70 years and notably these within the age of fifty to 60 years who’re going into retirement, this group of individuals, the principle beneficiary of China’s financial growth after the opening up some and this additionally, different group of people that personal the [Indecipherable] of the household. In order they’re going into retirement, they’ve robust calls for for aged look after legacy on the administration and many others. As this individuals additionally, the proprietor of the household wealth, they’re the principle patrons or they’re the individuals who pay for household insurance coverage insurance policies. So this group of individuals might be our most important goal clients.
As I discussed simply now, every year there might be 215 million individuals going into retirement. So going ahead, we’re going to handle our gross sales methodology to evaluate this individuals’s wants for household as allocation providers by providing retirement and legacy administration providers. And as I discussed simply now, there concerning the repeated purchases fee amongst our present clients for complete dwell and annuity merchandise are about 30%, which signifies that 70% of our present clients haven’t on complete life and annuity merchandise earlier than, in order that signifies important room for additional progress. Thanks.
Hope that answered your query.
Susan Wang — CICC — Analyst
[Foreign Speech]
Operator
I present no additional questions in queue.
Oasis Qiu — Investor Relations Supervisor
Okay. Thanks to your attendance. When you have any follow-up questions, please be at liberty to contact me. Thanks.
Operator
[Operator Closing Remarks]
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