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spk01: standing by for FANHUA's first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. All lines have been placed on mute to prevent background noise. After the management's prepared remarks, there will be a question and answer session. Please follow the instructions given at the time if you would like to ask a question. For your information, this conference is now being broadcast live over the internet. Webcast replay will be available within three hours after the conference is finished. Please visit Fan Hua's IR website at ir.fanhuaholdings.com under the events and webcast section. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Ms. Oasis Kew, Fan Hua's investor relations manager.
spk03: Good morning. Welcome to our first quarter 2021 Endings Conference Call. The Endings results were released earlier today and are available on our IR website as well as on Newswire. Before we continue, please know that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The accuracy of the statements may be impacted by a number of business risks and uncertainties that could cause our actual results to differ materially from those projected or anticipated. Such risks and uncertainties include but not limited to those outlined in our filing with the FCC, including our registration statements and some 20Fs. We do not undertake any obligation to update this forward-looking information, except as required under applicable law. Joining us today are our Chief Executive Officer, Mr. Chenlin Wang, Chief Financial Officer, Mr. Peng Ge, and Board Secretary, Li Li Li. Mr. Wang will provide a review of our financial and operational highlights in the first quarter of 2021, There will be a Q&A session after the prepared remarks. Now I return the call over to Mr. Wang.
spk04: In 2021, the first quarter,
spk03: For the first quarter of 2021, we once again de-estimate the solid results. For the first quarter of 2021, we facilitate 3.1 billion RMB total gross premiums up 27.9% year-over-year, of which first quarter, the first year premiums grew by 57% year-over-year to 892.7 million RMBs. Business quality remains strong, with 13 months' persistency ratio at over 91%. As a result of the stellar growth in life insurance business, our net revenues reached 1.1 billion RMB, representing a growth of 51.5% year-over-year, and operating income reached 144.4 million RMB, up 133.8% from a year ago. Not income attributable to shareholders were 138.4 million RMB, up 220% year-over-year.
spk04: One, there has been a fundamental change in customer demand. In the past six years, with the rapid growth and drive of the consumer organization and the Internet, health insurance has been more widespread in China. With the launch of Puhui and Huimingbao, it has further weakened the long-term loss of customers.
spk03: Secondly, in industry outlook analysis, China's life insurance industry remains gloomy as it undergoes deep reform and transformation, which poses those challenges and opportunities. There has been a fundamental change in customer demand in the past six years since the live insurance pricing liberation, with the rapid growth in the number of sales agents in China, and the emergence of the Internet channel, the penetration rate of health insurance products in China has been relatively high. The popularity of government-backed medical insurance in recent years has also absorbed a large portion of demand for health insurance products, and eroded the upside potential for commercial long-term health insurance in China.
spk04: On the other hand, there
spk03: We still see huge potential in the market segment of investment and savings-type insurance products. China's middle-class population now stands at 400 million. As investment and savings insurance products constitute an indispensable component in middle-class family asset allocation, with the continued expansion of the middle-class population, there will be explosive demand for this type of insurance product. The biggest opportunity lies in how one can stimulate immediate implicit demand. Secondly, there has been fundamental change to insurance agent organizations. The traditional organization and pyramid structure can no longer meet customers' evolving demands, which leads to sharp contraction in traditional insurance sales organizations and shortage of qualified talent in recent years. the professionalization of insurance sales organizations has become unimperative. Digital capacity capability is now a prerequisite to compete and thrive in the long term. Digital transformation reaches every aspect of business operation, from customer demand insights to targeted marketing, customer experience optimization, operating efficiency improvements, and operating cost savings.
spk04: The new strategic strategy of professionalization, digitalization, and open platform will certainly win the market's favor. Currently, it is actively advancing according to the set goals.
spk03: One, the strategic strategy... Thirdly, with Funhua's professionalization, digitalization, and open platform strategy, we're well-positioned to capture market opportunities. We're making steady progress in rolling out our various strategy initiatives as scheduled. Firstly, professionalization strategy. As of today, we have approved the establishment of nine Yuntong branches. Yuntong, which is literally translated as cloud industry, is a high-end brand that we established specifically for our professional elite brancheses. We expect two of these branches will be ready for operation by July. digitalization strategy, our digital marketing center has so far recruited around 100 service representatives, which will be dedicated to providing intelligent services to our customers and facilitating Italian marketing transactions. In addition, we started to roll out Fanhua Enterprise WeChat application and launched Fanhua Roam's digital assistant application on a trial basis in Hubei province, which we believe will provide more efficient way for our agents to engage with their prospective customers.
spk04: Three, open platform strategy. We fully utilize Fanhua's existing advantages to firmly export our products Seriously, our open platform strategy, leveraging on our well-proven advantages in technology and bargaining power with insurance companies,
spk03: we will continue to open our platform to all qualified market participants. As of today, we have established partnerships with 16 channel partners. As we are in the process of facilitating system connection and testing business process, approximately 1.5 million will be facilitated through these channel partners in the first quarter.
spk04: This is the second quarter of 2021. In the second quarter of 2021, the market growth of the retail market fell to the bottom, and the growth of the new unit in the entire industry has been set. Due to this impact, we expect the company's total insurance fee of 26 billion yuan in the second quarter to increase by 6.7%. Due to the impact of the new strategic investment, the company expects that the operating profit of the second quarter will not be lower than 50 million yuan. In the second half of 2021, we will increase investment, promote professionalization, digitalization, and open platform strategic landing under the premise of achieving a profit target of less than 300 million yuan a year.
spk03: Firstly, for the outlook in the second quarter and 2021. For the second quarter of 2021, amid persistent headwinds and a difficult year-on-year comparison due to 2020 Q2 post-COVID-19 boost, China's life insurance industry is widely expected to experience negative growth in new businesses. Against this backdrop, we expect our total GWP facilitated to be approximately 2.6 billion RMB representing a yearly growth of 6.7%. After considering incremental expenditures required for implementing the new strategy, we expect our operating income will be no less than 50 million RMB. For the second half of 2021, we will continue to step up investment in executing on our new strategy while ensuring the achievement of no less than $300 million operating income for the full year of 2021.
spk04: Okay, let's go back to the questions. Thank you.
spk03: This concludes my presentation. Now the floor will open for your questions.
spk01: Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question today, please press star 1 on your telephone. And to withdraw your question, please press the pound or hash key. And your first question today comes on the line of Queen Ying Mao from CICC. Please go ahead.
spk02: 那我简要的用英语翻译一下。 Thanks, management. First of all, congrats for the exciting results. We have seen some negative effects caused by the switch of critical units definition among peers. How about上华? When do you think this effect would fade away? 重极险。
spk04: This time, the cancellation of the high-level election should be said to be the new rule of the high-level election. It's a big event that happened in the entire industry. It should have a great impact on the industry. So, this time, the high-level election of the first quarter, this is January. The high-level election of the cancellation of the high-level election on January 31st He transitioned from the old critical illness definition framework from the old one to the new one. It's a big event for the industry overall and also has caused a huge impact.
spk03: And before the suspension of the old critical illness products in February the 1st, there has been strong sales in critical illness products in January.
spk04: I don't know you got done she did you get you would I think that I'm I'm I'm I'm I'm I'm I'm I'm I'm I'm I'm I'm The demand of consumers for heavy-duty shoes
spk03: It has been a particular characteristic in the Chinese life insurance market, which is that every time before the suspension of a product, there will be a strong sell, followed by a slowdown for a period of time. So this time has no exception. And in addition to that, we believe that the penetration rate for critical illness products is relatively high in China. As of date, there has been 300 million outstanding critical illness policies in China. Apart from that, recently the government has rolled out some short-term medical insurance products, which is more affordable. And this type of product has also become quite popular among consumers, which in certain ways also absolves some of the demands for critical industry products.
spk04: In order for the critical illness products to fully recover, I think it will require a lot of innovation and customization of products in order to boost customers' demands.
spk03: and create opportunities for up-selling. But we believe that critical illness may not be the main driver for the growth of the life insurance industry for a longer time.
spk04: This product customization should be the mainstream direction for the future. In addition, in the second quarter, in April, I mean that I mean things are probably how they're trying to sell so that she won't be due to tell woman that I don't have to think I should buy a phone so what does she see the don't go think I don't see that. Don't buy it. I thought woman can probably how you can sell so probably I don't care what. Don't go there. I think I just want to think I don't think that we should stop. I don't want.
spk03: We believe that product innovation and customization will be the main trend in the future. In April, actually, we cooperated with E.ON to customize, customer design a product, critical units products, which is called Huawei number one. And as of today, we have sold out of the 20 million in terms of the new first-year premiums. which is much higher than the total premium sold by Sinute in the same period, according to our visit to Sinute recently. 未来总个的中介来自泛华,要有高速的增长,必将专注于核心的
spk04: For the longer term, no matter for Fanhua or the overall insurance intermediary market,
spk03: In order to attempt rapid growth, it's important to focus on savings and investment type of products. And this is also the key part that we will focus on in terms of building up our offline sales capability and digital capability.
spk04: Right now, there are 400 million middle class population in China, and this population has strong demand, potential demand for savings type of product. So it's our job to stimulate this implicit demand. Thank you.
spk02: Thank you.
spk01: Once again, if you wish to ask a question today, it's Star 1 on your telephone. Seeing that we have no further questions on the line today, I will now again call back to management for closing remarks.
spk03: Thank you for participating in today's call. If there are any further questions, please feel free to contact us. Thank you.
spk01: Ladies and gentlemen, that does conclude our conference for today. We thank you all for your participation.
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