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spk03: Thank you for standing by for Sandhurst second quarter and first half 2022 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 that time if you'd like to ask a question. For your information, this conference call is now being broadcast live over the internet. The webcast replay will be available within three hours after the conference is finished. Please visit Sanhua's IR website at irsanhuaholdings.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'd now like to turn the meeting over to your host for today's conference, Ms. Oasis Chiu, Van Huys Investor Relations Manager.
spk06: Good morning. Welcome to our second quarter and first half 2022 earnings conference call. The earnings results were released earlier today and are available on our IR website as well as our news file. Before we continue, please know that the discussion today contain forward-looking statements made under the safe harbor provisions of the U.S. Private Security Litigation Reform Act of 1995. The accuracy of these 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 filings with the FCC, including our registration statement on Firm 20F. We do not undertake any obligation to update the score-looking information except as required under applicable law. Joining us today are our Chairman and Chief Executive Officer, Mr. Yi-Nan Hu. Chief Financial Officer, Mr. Peng Ge, and Chief Operating Officer, Mr. Li Chong Liu. Mr. Hu will provide a review about financial and operation highlights in the second quarter of 2022. There will be a Q&A session after the prepared remarks. Now I will turn the call over to Mr. Hu. Hello, everyone.
spk01: I am Hu Yilan. Thank you very much for attending today's press conference.
spk02: Good morning and good evening. This is Hu Yinan. Thank you for joining today's conference call.
spk01: In the second quarter of 2022, FANHUA will steadily promote the development strategy of professionalization, professionalization, digitalization, and open platform. With the landing of various strategic projects, FANHUA's multi-property indicators will generally show a continuous trend, and new strategic implementation effects will appear.
spk02: In the second quarter of 2022, as we continued executing on our professionalization, career-based, digitalization, and open platform strategy and implemented a series of strategic initiatives, the efforts started to show some encouraging results with positive improvements across various operating metrics.
spk01: In the second quarter of 2022, Fanhua achieved a total balance of 28.5 billion yuan, a growth of 12.2%. Among them, the risk of new single balance of 6.2 billion yuan, a growth of 43.7 billion yuan, and a growth of 25%. The core driving force of growth lies in Fanhua's high-capacity manpower.
spk02: Our insurance business grew 12.2% year-over-year to 2.9 billion RMB in gross written premiums, of which our life insurance first-year premiums reached 615.7 million RMB, up by 43.7% year-over-year and 25% quarter-over-quarter. The growth was primarily driven by substantial increases in the number of high-performing agents in their per capita productivity.
spk01: The number of people in the high-income areas shows a significant increase in the number of people in the low-income areas. Among them, the number of people in the low-income areas increased by 23.6% in three months. The number of people in the low-income areas increased by 33.3%. The number of people in the low-income areas increased by 41.2%. The number of people in the low-income areas increased by 6.3%. During the quarter, both the number of high performing agents and the per capita performance indicators have enjoyed great improvement on a year-over-year basis. The number of three-month
spk02: 10,000 premium agents, who are defined as those contributing over 10,000 RMB annualized premiums equivalent, or APE, monthly for three consecutive months during the quarter, increased by 23.6% year over year, with per capita productivity up by 33.3% year over year. While the number of 100,000 premium agents who are defined as those contributing over 100,000 RMB APE during the quarter increased by 41.2% year-over-year, with per capita productivity growing 6.3% year-over-year. Correspondingly, as we purposely reduced the number of non-performing and low-performing agents The total number of Fanhua's performing agents reduced by 37.6% in the second quarter of 2022. These are clear signs of the positive effects of our strategic focuses on serving mid- to high-end customers and high-performing agents. 得益于新建立的实施,新单业务同比实现大幅增长,经营利润,
spk01: 3,102.8 million yuan, far exceeding the previous management level. Although it is still the same decline, it is mainly affected by the following factors. The first factor is the impact of the pandemic on business. In some major areas, it is not possible to do business for a long time. This quarter, There was a loss of 6.8 million yuan. Compared with the same period last year, the profit was 3.5 million yuan. That is to say, one positive and one negative, it affected the operating profit of this company of 10 million yuan. The second aspect, due to the strategic investment of the new strategic cloud division, the second stage of the same ratio increased the loss of 15 million yuan. The third aspect, Fanhua continues to increase the investment in technology to promote digitalization, to provide support to the front-line team industry. The number of digital investments has increased by about 10.3 million. Although the following two investments have brought a certain pressure on the company's profits in the short term, it is important to build the company's long-term competitive advantage. If we deduct the impact of these three factors, the company's operating profit is about 63 million, which is 34% of the growth.
spk02: With the steady progress in executing our new strategy, we were proud to deliver robust growth in our new business during the quarter, while operating income reached 31 million RMB, well exceeding our prior expectation. The year-over-year decrease in operating income was mainly due to One, a loss of 7 million RMB within our claims adjusting segment due to impact of COVID-19 during the quarter. Especially in our major business areas, we have failed to operate for quite a long time. And also, we have a profit of 3.5 million RMB in the same period of last year. That is to say, we have been impacted in income due to COVID-19 for about 10 million RMB in claims adjusting segment. Two, an increase of investment in our Yuntong branches, which correspondingly incurred a loss of 15 million RMB during the quarter. And three, our increased expenditure amounting to 10.3 million RMB on refining our IT infrastructure to support digitalization of our operation and empower frontline operation of our agents. Although such investments may have increased our cost pressure, we believe it is necessary investment to strengthen capabilities. If excluding the impact of the above-mentioned factors, our operating income would have been approximately 63 million RMB. representing a growth of 34%, which again demonstrates that we are on track for future sustained growth. After over a year of implementation and continued refinement, our strategy is clear and pragmatic, and the preliminary results have contributed to significant improvements of our brand image in the industry, further boosting the morale and confidence of our staff and sales force. 在上半年初步取得阶段性成果的基础上, 2022年的下半年,我们将聚焦以下几项工作,进一步强化泛华的核心竞争力。 Building on the preliminary achievements in the first half of 2022, we will focus on pushing forward the following strategic initiatives to further solidify our core competitiveness.
spk01: 第一,增优培优,构建高级优的队伍。 What?
spk02: Recruitment and training of top talents to build a highly productive sales force.
spk01: 首先,办法将继续扩大在极优人群中的 FOC家庭财富规划师和 FRP养老传承顾问技能培训的覆盖, 同时启动FPC家庭保单的管家认证培训。
spk02: Firstly, further expanding the coverage of family office consultants, or FOC, and family retirement planners, or FRP, training programs among high-performing agents, while starting to initiate training and certification programs for family policy managers, or FPC, which focus on helping agents to develop the ability to offer policy custody services so as to help our agents transform from focused experts on insurance products to broader experts on family-based asset allocation and then expanding to experts on elderly care and legacy management. 其次,借助泛滑在康养服务和保险金信托服务的优势,
spk01: Secondly, leverage our advantages in insurance trust services and healthcare services with the support of our well-proven triple R marketing model, i.e. account responsibility,
spk02: solution responsibility, and fulfill responsibility, and step up efforts to attract industry top talents, especially million-dollar roundtable members, or MDRT, to achieve the target of 30% year-over-year growth in 100,000 premium agents.
spk01: Second, the scenario of landing KANGYANG and信托服务, the standardization of 3R marketing process,
spk02: Two, providing scenario-based trust, healthcare, and elderly care services facilitated by standardized RRR marketing procedures.
spk01: 12.3 billion yuan. 215 new vouchers. 1 voucher in average. 2 vouchers in total. A total of 300,000 vouchers. FanHua has established a good reputation in the industry. FanHua has formed a competitive advantage. In the second half of 2022, Fanhua will combine the FOC training and 3R image model to scale up the high-class salon to assist the customer manager, project manager, and delivery manager. The ability of the three talents to completely cover the client connection, asset configuration planning, and solution project design, the establishment of insurance trust, Firstly, trust plus insurance. As of the end of June 2022, Fanhua has organized over 100 customer engagement activities.
spk02: and facilitated in setting up 123 trust accounts for over 1.2 billion RMB in trusted assets, covering 215 new insurance policies, with each trust account contributing one to two insurance policies on average and 30,000 RMB APE per policy. Our strategy of offering referral of insurance trust and family trust services to meta high net worth customers have delivered significant results, establishing a good reputation in the industry and standing out with a competitive advantage. In the second half of 2022, in combination with our FOC training programs and the RRR marketing model, we plan to widely organize high-end customer engagement activities with the professional support of the RRR talents to provide a full suite of services from customer engagement, asset allocation planning and solution making, setting up insurance trust accounts, to fulfillment and post-sale services. As such, we expect to offer a closed loop of insurance trust services, making insurance trust accounts a new competitive mode for Fanhua.
spk01: Second, health and health insurance. Last year, Fanhua established the Ministry of Health Management, which is dedicated to connecting high-quality medical, health, and nursing services in the market as partners, agents, and customer service providers. In the first half of 2022, in addition to promoting diversified customer-involved products, connecting life-saving banks, high-end medical services, etc., FANHUA's Health Management Department has also made significant breakthroughs in the field of nursing community service resources, and has signed a deep cooperation agreement with Yangqi's nursing community. This is also a key step in connecting the public service platform of FANHUA as a small and medium-sized insurance company to the third-party nursing service resources. In the second half of 2022, FANHUA will make full use of these services and resources to combine them with the actual scenes. Secondly, health and elderly care plus insurance. Established in 2021, Fanhua's Health Management Business Unit
spk02: is dedicated to pooling quality resources of medical and elderly care on the market to empower our partners, agents, and customers. In the first half of 2022, Fan Hua has launched a wide spectrum of customer acquisition products and collaborated with providers of quality services such as cord blood banks and high-end medical service providers. Furthermore, we have made a breakthrough in securing access to quality elderly care facilities by sealing an in-depth cooperation agreement with the state-owned enterprise. It also marks the first step for BanHua to become an open platform for connecting small and medium-sized insurers with third-party health and elderly care service facilities. Into the second half of the year, we will make full use of these resources to facilitate scenario-based marketing by organizing on-site visits to healthcare and elderly care facilities for customers to experience quality lifestyles and related services, so as to stimulate their demand for wellness, health, retirement, and legacy management solutions, and thus boost sales of insurance products.
spk01: In the first half of 2022, NanJangGui 3.0 completed the upgrade. NanJangGui 3.0 includes customer management, customer service, product transaction, online and offline operation and management, professional growth, and IP creation. The five negative energy systems are integrated to ensure efficient service. The efficiency of the operation has significantly improved since the introduction of the male manager 3.0. Multiple key indicators have been improved. Among them, the number of active agents on the male manager has increased by about 50%, and continues to rise. Through digital operating tools, the ability of the client's agents to manage customers is nearly 1.5 times that of those who do not use digital tools. Thirdly, upgraded Lan Zhan Gui app to support digitalized operation. In the first half of 2022, our Lan Zhan Gui app has been upgraded to a 3.0 version, a comprehensive platform that integrates customer engagement
spk02: customer service, trading support, online and offline operation, and professional training and personal branding. With the release of the Lan Zhan Gui 3.0, we have observed significant improvement in the operational efficiencies with key performance indicators of the platform, also showing remarkable improvements. Specifically, the number of active agents on the platform were up by about 50% and has continued to increase. The productivity of agents using our digital tools was nearly 1.5 times that of agents otherwise, and the productivity of agents that have become a guanjia or insurance service butler was about 20% higher than that of those otherwise. All this shows that our digitalization efforts have been paying off.
spk01: In the second half of 2022, FanHua will continue to improve user experience by further optimizing key functions and making the system more stable and easier to use
spk02: so as to support agents' activities more efficiently.
spk01: In the third quarter of 2022, despite the influence of external factors such as the pandemic and the double road, Fanhua will continue to deepen its development strategy, capture market opportunities, and enhance company value. In the case of continuing to increase technology and training investment, the management level is still confident in achieving
spk02: In the third quarter of 2022, while external factors such as COVID-19 and double recording may continue to exert a negative impact, Fanhua will continue to further implement our development strategy and work to improve company value by aggressively pursuing the enormous market opportunity. After considering our plans continued increased investment in technology and training in the near term, which will take time to fully show their benefits, the management is confident in achieving positive growth with an operating income of no less than 30 million RMB. 下面我们将回答大家的提问。 This concludes my presentation and now the floor will open for your questions.
spk03: Thank you. Thank you. We will now begin the question and answer session. If you'd like to ask a question please press star then 11 on your telephone keypad and wait for your name to be announced. Once again that's star then 11 to ask a question.
spk04: Please stand by while we will compile the Q&A roster. Our first question comes from Yiyu Zhang at CICC. Please go ahead.
spk05: I have three questions I'd like to ask. The first one is, as you can see, the growth of the company's R&Q, income, and FIPH. I'd like to ask if there are any specific insights about the company's income in the second half of the year. The second one is, I'd like to ask about the current company's What is the image of the agent? For example, what is the situation in the region, age, and education? What is the overall production capacity now? The third question is, I would like to ask about the current product combination of the company. What is the current situation? Currently, the sales of Chuxixian is relatively good. Please ask the management level how to view the demand of Chuxixian So the first question, how do you expect the company's revenue and the profits in the second half of this year? And the second one is about the agent's force. So what is the portrait of our sales agents in respect of region, age, education, et cetera? How about their income and their productivity? And the last one, can you share with your current product mix how to expect the demand for savings products? Does the bridge of those products are sustainable? Thanks.
spk01: Okay, thank you. The first question is about the company's income and profit situation in the second half of the year. The company's new strategy has been is very effective and has a relatively strong driving force. The core is the company's focus on the double-high strategy. The so-called double-high is that we focus on serving high-end customers and we create high-end salespeople at the same time providing digital wealth. In the past few months, it has become more and more obvious that to show its driving force. In the second quarter, we also saw that even though our initial manpower decreased by more than 30%, but our output, the total cost, did not decrease, but increased significantly. This means that our internal driving force is already clear, so we Thank you for the questions. For the first one, regarding the outlook for our commission income and profit guidance in the second half of this year.
spk06: Our new strategies have been proven to be quite effective in driving our business growth. And a key part of this strategy is our focus on double high, which means that we focus on high-end customers as well as high-performing agents with digital empowerment. And these strategies have been proven to be quite effective in driving our business growth. over the past quarters. As we can see that even though the total performance ages, the number of total performance ages has dropped by roughly 30%, however, our first year premium continued to increase substantially, which proves the internal driving force remains strong. And as we continue to execute our strategies, we believe that we will see our momentum will pick up over time in the third quarter, fourth quarter, and next year?
spk01: That's true, but there are two factors that have an impact on our financial data. The first factor is the structure of the current product. Although we have seen a significant growth in the balance sheet, the deadline for these premiums is relatively short. So, the value of the content, as for our intermediary company, its value of content has actually dropped. This is also why our commission income and profit growth are not comparable to the growth of premiums. The second aspect is that we also see that the epidemic has appeared in the third quarter, which is the epidemic across the country. However, we do notice that there are two factors may pose adverse impact on our business results. Firstly, our product missed.
spk06: Even though we maintain strong growth in our first-year premium, however, the products are mostly short-term products, which means that this product has lower value for the company. So that's why our commission income and profit growth are not exactly in line with the growth of our first-year premium. And the second factor is the resurgence of COVID cases in many regions in the third quarter, as well as the regulatory requirement for double recording in some key markets, particularly in our major markets, which may pose some pressures on our business growth. 一正一負兩個方面的效應的對沖
spk01: net net wise i would believe that we're um
spk06: bottoming out, and we don't believe that we will see any further substantial decline in our business.
spk01: In between 40 and 60 years old, more than 60%. So this is a match for us to focus on high-end and low-end customers. Now the high-end and low-end customers, that is, the rich people we are talking about, are also in their 40s to 60s. Especially the people who are 50 to 60 years old, there are nearly 300 million people. These people are people who have a strong need for pension and inheritance. Our salespeople are in line with the age of this group. The second question, the guardian agent's profile.
spk06: Currently, about 60% of our agents are in the age of between 40 to 60 years old. This also aligns with our current strategy, our strategy focus on high-end customers. As many of the wealthy populations or the affluent populations are also in the age of 40 to 60 years old. Especially for those in the age group of 50 to 60 years old, there are about 300 million of them who have strong demands for elderly care and legacy management. So the age profile of our agents are actually basically aligned with our customer group, which is a positive thing for us to execute our strategy.
spk01: Most of our agents are located in the second tier cities, and to be honest, not very high education level. and professionalize the sales behavior. The agents are only responsible for bringing customers to our workplace, and the professional people trained by us provide them with professional customer design and help them make customer deals.
spk06: In order to make up for the shortcomings of some of these agents, we launched a 3R marketing model, which is basically to separate the whole sales process into several steps and with several rules to be played by different agents. For those agents that do not have very professional skills, they are responsible for customer engagement why more professional agents will be responsible for providing solution designs and to execute the transaction.
spk01: uh, uh, In the meantime, we are also stepping up efforts to recruit higher education agents and younger generation of agents to become
spk06: professional solution managers or fulfillment managers to support the operations or support the customer services of those relatively ordinary agents. Currently, about 25% of our self-schools are in the age group of 30 to 40 years old, and this age group of agents have typically higher education level and better learning abilities. In the first half of this year, we hosted a lot of FOC and FRP training sessions in order to improve the professional skills of our sales force to support the customer services.
spk01: As for the capacity, our data shows that in the second quarter, As for productivity in the second quarter, the productivity of our effective agents were about 20
spk06: per agent as compared to 12,000 per agent in the same period last year. So that's a 60% improvement year-over-year.
spk01: The third question is about the current product combination of the company and about the demand and growth of the supply chain. At present, in the second quarter, the balance of the New Year's money and New Year's money is 79%, and the balance of the savings is 79%. In the same period last year, it was 68%. In the same period last year, the balance of the savings is 20%, and in the second quarter of this year, it is only 7%.
spk06: And the third question regarding to our product mix as well as the demand and sustainability of growth for savings products. In the second quarter, whole life insurance and annuity products accounted for 79% of our first year premiums as compared to 68% in same period last year, while critical units products accounted for only 7% as compared to 20% in the same period last year.
spk01: That's also the reason why we deliver strong first year premiums, but commission income was not exactly in line with the strong growth in first year premiums. As for the demand for savings and the sustainability of the growth of savings, we believe that at least in the next 10 years, there will be a relatively strong demand, or a strong and sustainable demand. The reason is that the 60-year-old baby boom brought the retirement boom 60 years later. From 1962, 60 years ago, There are more than 25 million people born every year. That means that from this year on, more than 25 million people every year enter retirement at the age of 60. So this part of the people, their needs, their psychology, is more about pension, how to quality pension, the value of wealth, rather than real value. and the inheritance of their wealth. The core is here. So in the next ten years, a large number of people will enter the age of 60. So the needs of the related savings and this aspect, which is based on the needs of pension, welfare and inheritance, will be a major and obvious drive of the entire industry.
spk06: As for the savings product demand as well as sustainability of the growth, we believe that in the next 10 years we'll continue to see strong demand for savings products driven by the aging population in China. Well, 60 years ago in China there was a baby boomer trend, which means means that 60 years ago, roughly every year, 20 million people were born. So that means that starting from this year, there will be 20 million people every year going into the retirement age. And the key demands for this age group of people are for quality retirement, lifestyle and for wealth appreciation as well as legacy management. So believe that in the next 10 years, the people in this age group, the strong demands for savings products which may cater to their needs for retirement and legacy management will become a key trend.
spk01: This is especially due to the strong demand in the market, and due to the shortage of the value of our domestic products. So we have taken three measures. One is to increase the supply of health care products. Through the supply of health care products, we can meet the needs of customers' retirement. And we create a trust service to meet the needs of the client's wealth management and inheritance. The third aspect is to guide, especially in the product introduction aspect, to guide our products in the direction of ten years. uh, uh, uh, uh, uh, This product has the same effect as the heavy-duty line. Many customers buy products that are more than 10 years old, 10 years old, 20 years old, even 30 years old, to improve the internal value of our sales.
spk06: Based on the strong market demands, as well as considering the potential adverse impact of the increased contribution from savings products in our total mix, we will step up efforts to introduce our health care and elderly care services to cater to people's needs for quality retirement lifestyle. as well as to step up efforts to expand our insurance trust services, which may help people to cater to their needs for wealth management as well as legacy management. And secondly, we also make efforts to optimize our product mix by encourage the sales of products with a longer payment period, particularly for products with over 10 years payment period. And thirdly, we will also design new products by cooperating with reinsurance companies to improve the product in value. For example, we're recently cooperating with Aviva, to introduce a leveraged style whole life insurance product. For this type of product, customers typically prefer a longer payment period between 10 years to 20 years. So this will help improve the overall value of our product.
spk01: Thank you.
spk04: Thank you. We have no further questions in queue, but once again, if you would like to ask a question, please press star then 11 on your telephone keypad. If there are no further questions, I will hand back to management for closing remarks.
spk06: Thank you for participating in today's conference call. If you have any further questions, please feel free to contact us. Thank you. Have a good day.
spk03: Thank you so much. This does conclude today's conference call. Thank you all for joining. You may now disconnect.
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