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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 Govt 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. Right now, all members are in a listen-only mode. All strains have been positioned on mute to forestall any background noise. After the administration’s ready remarks, there will likely be a question-and-answer session. Please observe the directions given at the moment if you want to ask a query.
On your info, this convention name is now being broadcasted dwell over the Web. Webcast replay will likely be accessible 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. As we speak’s convention is being recorded. In case you have any objections, chances are you’ll disconnect at the moment.
I’d now like to show the assembly over to your host for immediately’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 12 months 2021 earnings convention name. The earnings outcomes had been launched earlier immediately and can be found on our IR web site, in addition to on Newswire.
Earlier than we proceed, please word that the dialogue immediately will comprise forward-looking statements made below the secure harbor provisions of the US Personal Securities Litigation Reform Act of 1995. The accuracy of the statements could also be impacted by quite a lot of enterprise dangers and uncertainties that might 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 legislation.
Becoming a member of us immediately are our Chairman and Chief Govt Officer, Mr. Yinan Hu; Chief Monetary Officer, Mr. Peng Ge. Mr. Hu will present a assessment of monetary and operational highlights within the fourth quarter and monetary 12 months 2021. There will likely be a Q&A session after the ready remarks.
Now I’ll flip the decision over to Mr. Hu.
Yinan Hu — Chief Govt Officer & Chairman
[Foreign Speech] Good morning and good night. That is Yinan Hu. Thanks for becoming a member of immediately’s convention name. I wish to start the decision by sharing a few of my ideas on present trade tendencies. Then I’ll talk about our strategic focuses in 2022.
[Foreign Speech] In 2021, China’s life insurance coverage trade began off effectively however ended up on a downward observe. Premium development continued to decelerate after the transition to the brand new important 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 rules clearly performed a task, however we imagine the foremost price lies within the provide facet as neither the standard of insurance coverage merchandise nor the skilled capabilities of insurance coverage gross sales brokers can absolutely meet buyer wants.
[Foreign Speech] In opposition to 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 individuals are anticipated to retire within the subsequent 10 years every year, ranging from 2022, including as much as 300 million individuals. With an accelerating ageing 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 discovered from mature markets with the rise of the center class within the enhance in customers’ disposal earnings, increasingly individuals are shifting their demand for insurance coverage from making certain fundamental safety to extra complete plans for household based mostly asset allocation. These altering client calls for are driving the following period of robust development, however such calls for require salespeople to be geared up with increased capabilities and extra skilled data. [Foreign Speech] Statistics from each the trade and Fanhua in the previous couple of years additionally verify this pattern.
[Foreign Speech] From the premium combine perspective, important sickness gross sales have suffered a steady decline after the transition of CI definition framework. The identical applies to Fanhua. For 2021, important sickness gross sales facilitated on Fanhua’s platforms have dropped quarter-by-quarter, displaying a downward pattern usually with these gross sales of savings-type merchandise corresponding to entire life insurance coverage and annuity have been on the rise as a substitute, clearly reflecting the modifications in insurance coverage demand.
[Foreign Speech] To try brokers, the whole variety of brokers throughout China’s insurance coverage trade has plummeted from the 9 million to six million, leaving a polarized gross sales pressure. As on the one hand, a lot of low performing brokers are leaving the trade and then again, excessive performing salespeople are extra secure and productive. From Fanhua’s standpoint, regardless of a fall in Fanhua’s whole 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 12 months premiums of RMB100,000 and above, from 3,230 in 2018 to five,432 in 2021, suggesting a distinctly rising momentum usually. 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 pressure remaining secure 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 growing accounted for greater than 30% of the whole. This implies that the center class has been rising quickly and the variety of excessive web value clients has been growing as effectively.
[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 whole GWP, a year-over-year enhance of 12.3%. First 12 months premiums reached RMB2.8 billion, a year-over-year enhance of 4.1%, amongst which first 12 months premiums of entire 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 pressure to enterprise development 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 mild on Fanhua’s future path for improvement.
[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 whole first 12 months premiums in 2021. After which variety of brokers who contributed over RMB100,000 first 12 months premiums in 2021 amounted to about 5,000 of them contributed round 65% over whole first 12 months premium.
[Foreign Speech] Primarily based on our judgment on the trade, Fanhua applied in full power the brand new technique of professionalism, digitalization and open platform in 2021 in an try to completely empower and domesticate skilled abilities 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 improvement 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 verify to satisfy their demand for household legacy administration first.
[Foreign Speech] Second, as excessive performing brokers with RMB100,000 FYP contributes about 60% of the whole FYP in Fanhua, we are going to concentrate on fostering and recruiting extra productive brokers by way of skilled empowerment, buyer sources providing and digital empowerment to satisfy the goal of 30% development in first 12 months premiums contributed by extremely performing brokers with a RMB100,000 FYP inside our present gross sales pressure 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 rules on Web insurance coverage took impact, by way of which we glance to attain the goal of producing 10% of our first 12 months premiums in 2022.
[Foreign Speech] Our objective is to remodel Fanhua right into a model new digitalized and specialised firm that reveal excessive development within the subsequent two years. 2022 will likely be a 12 months of capability constructing, laying the bottom work for Fanhua to get again on observe for sustained and excessive revenue development.
[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 rules of Web insurance coverage [Technical Issues] 2022 efficiency outlook.
And subsequent one is in regards to the product. We will see a speedy development within the financial savings sort merchandise. Do we predict this can be 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 Govt Officer & Chairman
[Foreign Speech] Regarding your first query relating to the affect of the Web life insurance coverage rules, we do observe that lots of small and medium sized insurance coverage firm have extra constructive angle in the direction of cooperating with this in addition to designing new merchandise. And so we imagine that this new regulation is constructive to our enterprise improvement usually. 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 rules, lots of on-line channels who used to distribute their enterprise by way of Web channels are prepared to pursue cooperation with our open platform [Indecipherable]. Final 12 months, we have now generated about RMB40 million first 12 months premiums by way of our open platform technique and this quarter within the first quarter, we have now already achieved about RMB30 million first 12 months premiums and our goal for 2022 is to ship about RMB300 million to RMB500 million first 12 months premiums. So in conclusion, we imagine that this new regulation is certainly fairly favorable to our improvement.
[Foreign Speech] On your second query relating to the product combine, we do observe a drastic change in our product combine previously quarters and the previous 12 months. Within the fourth quarter, entire life insurance coverage and annual life insurance coverage collectively accounted for 70% of our whole first 12 months premium as in comparison with 20% contributed by important items merchandise as in comparison with — within the first quarter, the share of entire life and annuity as in comparison with CI product is way decrease. And likewise within the second quarter and third quarter, we’re already seeing that the share of entire 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 important sickness product has reached its ceiling, we is not going to say that, however we do imagine that the expansion of important sickness insurance coverage will decelerate. And sooner or later, financial savings merchandise corresponding to annuity, pension insurance coverage and entire life insurance coverage will grow to be the primary merchandise. In response to this altering demand, we will even tackle our strategies of promoting and to start with, 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 primary beneficiary of China’s financial improvement 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 so forth. As this individuals additionally, the proprietor of the household wealth, they’re the primary patrons or they’re the individuals who pay for household insurance coverage insurance policies. So this group of individuals will likely be our fundamental goal clients.
As I discussed simply now, every year there will likely 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 in regards to the repeated purchases fee amongst our present clients for entire dwell and annuity merchandise are about 30%, which signifies that 70% of our present clients haven’t on entire life and annuity merchandise earlier than, in order that signifies vital room for additional development. 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. In case you have any follow-up questions, please be at liberty to contact me. Thanks.
Operator
[Operator Closing Remarks]
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