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spk04: The conference will begin shortly. To raise your hand during Q&A, you can dial star 1-1. Thank you for standing by.
spk02: for FANWA's third quarter 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 would like to ask a question. For your information, this conference call is now being broadcasted live over the internet. Webcast replay will be available within three hours after the conference is finished. Please visit FanHua'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 Chu, FanHua's Investors Relations Manager.
spk06: Good morning. Welcome to After Quarter 2022 and its conference call. The annual 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 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 this forward-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. Liu will provide a review of financial and operation highlights in the third quarter of 2022. There will be a Q&A session after the prepared amount. Now I will turn the call over to Mr. Liu.
spk03: Hello, everyone. Good morning and good evening. Thank you for joining today's conference call. The decline in industrial manpower is still continuing, including the decline in sales manpower of many large insurance companies. On the other hand, we also see that the overall growth of the insurance intermediary is stable. Although the overall manpower has also declined, the productivity has clearly improved. In addition, more and more insurance companies have opened intermediary channels to present a more open attitude to the model of intermediary cooperation.
spk05: In the third quarter of 2022, challenges and opportunities coexist. On the one hand, with multiple factors such as the macroeconomic uncertainties, restrained consumption, resurgences of COVID-19 cases, and regulatory requirements for nationwide double recording at play, the growth rate and premiums of China's life insurance industry merely recorded a low single digital growth of 1.3% year-over-year, representing a sharp decline in the growth rate compared with the second quarter of 2022. The decline in the number of insurance sales agents in the industry also continued, with substantial declines in Salesforce numbers reported by many large insurers. On the other hand, we are encouraged to see a steady growth momentum among insurance intermediaries as a whole, driven by significant growth in agent productivity despite an overall decline in sales force. In addition, more and more insurers are engaging intermediary channels and showing a more open attitude towards the mode of cooperation with independent insurance intermediaries, suggesting greater development opportunities awaiting intermediaries like us.
spk03: FANHUA has shown strong vitality in the逆境 and achieved steady growth in business. The risk-saving fee has reached 27.9 billion yuan, which is a 6.2% increase. The risk-saving new unit fee of Qijiao is 5.3 billion yuan, which is a 9.1% increase. In the case of continuing to expand technology and training investment, FANHUA still achieves a operating profit of 3,216.5 million yuan, reaching the expected
spk05: Despite challenging external environment, Fanhua showed resilience with steady business growth during the third quarter of 2022. Our life insurance premiums grew by 6.2% year-over-year to 2.8 billion RMB, of which regular life insurance first-year premiums reached 529.7 million RMB. up by 9.1% year-over-year. Even with the continued investment in technology and training, our operating income beat expectations to achieve 32.2 million RMB, representing a growth of 14.2% year-over-year.
spk03: In the third quarter of 2022, FANFA's team attitude continues to improve. Although the total number of new employees has decreased, the number of new employees has increased by nearly 20%. The quality of our sales force continued to improve during the quarter. While total number of performing agents declined in accordance with our plan, the per capita productivity of performing agents
spk05: grew by nearly 20% year-over-year. The contribution from high-performing agents increased even further, with the number of 100,000 premium agents growing by 46% year-over-year, contributing 48% of our total first-year premiums in the quarter, up from 39% for the corresponding period in 2021. 圍繞中國中產及富裕家庭的品質養老 Addressing the needs for high-quality senior care, wealth management, and inheritance solutions by Chinese master fluent and high net worth families, Fanhua has continued our focus on magnifying our infrastructure platform's capability to empower agents to better serve clients.
spk03: Fanhua has implemented the insurance as a service model by pooling quality trust and healthcare service resources in the market on top of a wide spectrum of insurance products
spk05: to match customers' evolving needs throughout their life cycle, and support agents to provide whole-life services to their customers.
spk03: For trust services, as of the end of third quarter of 2022, Fanhua facilitated setting up nearly 150 trust accounts with over 1.7 billion RMB in trusted assets, covering over 270 new insurance policies.
spk05: contributing 85 million RMB of total insurance premiums. In the third quarter alone, Fanhua facilitated setting up nearly 60 trust accounts with 510 million RMB in trusted assets, contributing 27 million RMB in insurance premiums.
spk03: In the third quarter of 2022, Fanhua continued to expand, expand, health care services in the third quarter of 2022.
spk05: Fan Hua continued to increase its efforts to expand health care service resources covering customers' entire life journey, including introducing high-quality life care service resources in the industry. We have also set up 14 health care service experience centers across the country to showcase the health management and elderly care community resources linked by Fan Hua across the country. to improve customer experience and facilitate business conversion.
spk03: FANHUA's interoperability, interoperability support, and FANHUA's security and control technology, FANHUA is working hard to promote the 3F training certification system nationwide. We will help our agents to improve their skills and improve their professional skills. At the same time, through the 3R marketing model and service scene marketing, from training to training activities, customer service resources, project design, and final delivery of services, helping agents to deal with and serve customers more easily. At present, Fanhua has developed nearly 200 FOC and FRP training certificates nationwide, with more than 1.3 million training personnel, and has become the main force of Fanhua's assistance to customers in the development of trust and sales, as well as annual money products. In the third quarter of 2022, Leveraging on the trust and health care service resources and Fanhua's insurance policy custody technology,
spk05: We've established a triple F representing family office consultant, retirement planner, and family policy custodian training and certification system to help agents improve professional skills in a tiered approach. This is based on the triple R representing account responsibility, solution responsibility, and fulfillment responsibility, marketing model, and service scenario marketing. We also established a closed loop of services from training to customer engagement activities, service resource facilitation, solution design, and final transactions to support agents to engage with their customers and drive conversion more easily. Up to now, Fan Hua has carried out nearly 200 FOC and FRP training and certification programs nationwide, with a cumulative total of more than 13,000 certified trainees who have become the major force to assist customers in setting up trust accounts and selling whole life and energy insurance products. In the third quarter of 2022, FOC and FRP certified trainees contributed about 66% of SanHua's first-year life insurance premiums, and the per capita productivity was much higher than that of non-trainees. Building on the success of the FRP training programs in the third quarter, We have accelerated our training with an additional 3,000 trainees completing our training course in October.
spk03: By the end of the third quarter of 2022, Fanhua has largely finished the construction of its IT infrastructure to support digital operations. We continue rolling out various frontline digital tools for wider adoption among sales agents across the country.
spk05: and continuously optimizing the functionalities and user experience. Specifically, our Insurance Policy Custody System Version 2.0 and Insurance Service Butler Workstation, our proprietary customer engagement platform, were both rolled out in larger scale during the third quarter. Currently, we operate a full suite of digital tools to provide all the support that agents need to manage their book of business online from customer engagement, transaction, customer services, to personal professional growth, enabling significant efficiency improvement.
spk03: Since the fourth quarter of 2020, the epidemic has spread across the country. The retail industry is still facing greater growth pressure. FanHua will continue to promote the positive development strategy, and provide value to customers.
spk05: For the first quarter of 2022, in view of the ongoing resurgences of COVID-19 cases across the country, the growth prospect of Chinese insurance industry remains challenging. Against this backdrop, Fanhua will continue with our established development strategy in the fourth quarter to empower agents and create value for customers. The management expects our operating income to be no less than 30 million RMB in the fourth quarter of 2022. This concludes my presentation, and now the floor will be open for your questions.
spk02: Thank you. Thank you. As a reminder, to ask a question, you would need to press star 11 on your telephone.
spk01: If you have a question at this time, please press star 11. And I show our first question comes from the line of Yu Yu Zhang from CICC.
spk02: Please go ahead.
spk04: Thank you for giving me the opportunity to ask this question. I have three questions I would like to ask. The first question is to ask how much is the ratio of savings in this company's product range? The ratio of savings is mainly suitable for which companies will cooperate more. and how much this product can provide. The second question is about our company's customer image. Please share with us in detail what the current company's customer image is like. What is the status of some high-end customers, including customers with medium to high-end permits? The third question is about our marketing team. What is our current support strategy? Is it relatively difficult to provide support? Here I have three questions, and the first one is, what's your current product mix, especially with the proportion of your savings products? And in terms of the savings products, what type of insurers do you work with more often, and what is the current take rate for such products? And secondly, could you share some more color on your profile of the customers, and especially what's the proportion of your high-end customers? And the last question is about your sales force. Could you give us some more details on your strategy after recruitment? Is it difficult to recruit high-quality agents currently? Thanks.
spk03: Let me answer the first question. In the third quarter, the total cost of the new unit for the annual income and the two full-time income is 87.5% compared to the growth of 83.6% in the same period last year. According to the new unit cost plan, the main product suppliers in the third quarter are mental health, Let me get back to your first question first. In the third quarter, whole life insurance products, annuity, and endowment, such savings products accounted for 87.5% of our total first year premiums, as compared to 83.6% in the same year last year.
spk06: And in terms of first-year premium, our major product suppliers are Sinute, Great War, and Agon Tif, Aviva, Costco, and Hua Xia, respectively accounting for 27.3%, 24.8%, 11%, 5.5%, and 4.6% of our first-year premiums, respectively.
spk03: The new long-term implementation has a big limitation on the scale of the insurance company's growth. Long-term ability cannot be used to pay the capital. So the growth in the scale of the insurance will be limited to the capital of the insurance company. It is also this factor that we used to cooperate more in a 3D way. We also mentioned that more and more insurance companies have opened intermediary channels. The mode of cooperation between intermediaries is more open-minded.
spk06: With the implementation of the CROS Phase 2, many life insurance companies are actually subject to greater restriction in terms of growing their business as the new accounting principles lower the recognition of life insurance policies profits as core capital, which also resulting a lower solvency ratio, therefore subjecting them to greater growth pressures, capital pressure. And this is also one of the reasons that even though Cinetech remains to be our largest supplier, the shares in terms of our first year premiums has actually contracted from last quarter As we also mentioned earlier, more and more insurance companies have been engaging with insurance intermediary channels and adopted a more open attitude towards the cooperation with independent intermediaries. We expect that our product supply as well as our insurance company partners will become more diversified next year.
spk03: the first-year commission rate is about 90% to 98%. If you calculate it in 20 years, the first-year commission rate of the savings account is 138% to 145%. There is a certain difference between each company. But because the savings account has a shorter pay deadline, usually it is more than three years, five years, or ten years, the first-year commission rate is larger and the temporary rate is smaller. In fact, the commission rate is not that high. The termination period of the heavy-duty insurance is generally long. The annual commission is slightly lower than that of the temporary insurance. However, the total income of the temporary insurance plus the joint loan is higher, and the value of the unit insurance is higher. This is what we hope to improve. By leading the product to be sold in the ten-year period and above, and at the same time developing new products with the insurance company and the insurance company to improve the value of the product,
spk06: Based on 10 years APE, annualized premium equivalent, the first year commission rate of savings products is in the range of 90% to 98%. But in terms of 20 years APE, the first year commission rate for savings product can be as high as 138% to 145%, varying from one insurance company to another. However, savings insurance products, the payment periods are generally much shorter, typically three years, five years, or 10 years. So even though the first year commission rate is higher, but the renewal commissions are actually much lower than other type of products, such as critical units products. And on the other hand, critical illness products have much longer payment periods, and the first year commissions rate is relatively lower than that of the savings products, but the total amount of revenues generated from renewal commissions from critical illness products are actually much higher, which means that it has higher value for the company. This is also what we were trying to improve by encouraging the sales of more longer-term products, as well as by partnering with insurance companies to design new products with high value to improve the overall value creation.
spk03: What is the proportion of high-quality customers? Currently, the total number of customers in Fanhua is 30% of the total number of customers. The cost of building gold is 4,800 yuan. The proportion of women is 66%. The proportion of 30-40-year-olds is 46%. The annual payment is less than 5,000 yuan. In the case of middle-aged and pensioners, the women's ratio is 76, and the 40- to 59-year-old people's ratio is more than 60, and the military insurance fee is 4.8 million yuan. This shows that the 40- to 59-year-old community is more willing to provide for themselves and their families with middle-aged and pensioners. The demand for pension and education savings has significantly increased. Basically,
spk06: As for the second question regarding our customer profile and the percentage of the mass affluent and high net worth customers, currently about 30% of our total customer groups are critical illness policy holders. per policy amount of approximately $4,800. And of the critical illness policyholders, 66% are female, while 46% of them are in the age group of 30 to 40 years old, with annual first year premiums amounting to approximately $5,000. insurance policy holders for savings products such as whole life insurance and annuity insurance. The female accounted for 76% and over 60% of them are in the age group of 40 to 59 years old with per policy premiums of $48,000. So this means that the age group in the range of 40 to 59 years old, this age group population, are more willing to purchase whole life and annuity insurance for themselves and their family members to cater to their needs for both elderly care, legacy management, as well as savings for children education. So this basically aligns with our current strategy to serve the mass affluent and high net worth customers.
spk03: And currently, there are about 300 million high net worth individuals in China.
spk06: with the age in between 40 to 60 years old.
spk03: Last year, more than 100,000 New Year New Year New Year New Year New Year New Year New Year New Year New Year New Year New Year New Year In 2021, the insurance policy holders who paid over 100,000 first-year premiums annually accounted for approximately 1% of our total
spk06: insurance policy holders for the long-term life insurance products. However, this more percentage of customer groups actually contributed to over 30% of our total first-year premiums. I believe that the numbers as well as the percentage of those higher net worth customers are actually increasing significantly on an over-year basis.
spk03: I will answer the third question. What is the current strategy for increasing resources? Is it difficult to increase resources? In 2022, the focus of our company's resources and organization development is to increase and reduce resources, which has raised the standard of real money for the increase of resources. With the impact of the pandemic this year, there is indeed a decline and slowdown in the number of new people. but the proportion of new recruits has significantly improved. Of the new recruits in the third quarter, the number of new recruits, which is 25,000 recruits per quarter, is 26% compared to last year. This year, it has greatly increased to 43%. In the third quarter, the number of new recruits is 22,000, which is 20,000 yuan. Compared to the same period of 14,000 yuan last year,
spk06: For 2022, we have shifted our agent recruitment focus towards a lead-based agent tool. We have increased the standards for agent recruitment. And compounding with the impact of COVID-19, We do see a slowdown of agent recruitment this year. However, we encourage to see that the contribution of the percentage of higher performing agents among new crews are actually increasing significantly. In the third quarter in particular, the percentage of the number of high performing agents, which are defined as those who contributed $25,000 during the quarter in terms of first-year premiums accounted for an increase from 26% in the same period last year to 43% this year. And the per capita productivity of our effective agents during the quarter also improved both year-on-year basis and on a quarter-over-quarter basis. from $14,000 in the same period last year and $20,000 in the second quarter to $22,000 in the third quarter.
spk03: In the middle-to-high-level customers' high demand for retirement, Fanhua will continue to assist Fanhua in the advantage of insurance credit service, health care service, and platform rich energy. The goal this year is to reach 500 people in MDRT. Last year, it was 302 people. At the same time, through the internal and external training of 100,000 people, the goal is to increase from 1,655 people in 2021 to more than 30% and reach more than 2,000 people. As of the end of the third quarter, it only depends on the performance of the previous nine months. Building on our advantages in insurance, trust services, as well as health care services resources, as well as the empowering capacity of our platform,
spk06: as well as leveraging on the trend of the rising demands among the mass afferents and high net worth individuals for healthcare and elderly care services. We will step up efforts to introduce more MDRT or Million Dollar Roundtable members. Our target for this year is to increase the number of MDRT from 302 last year to 500 by the end of this year. In addition, we also put a lot of focus to both recruit and to trend our agents with more agents that can contribute over 100,000 premiums annually. And our target is to increase the number from roughly 1,600 to 2,000. So that's representing a growth rate of 3% year-over-year. By the end of this quarter, by the end of the third quarter, solely based on the performance of nine months in the first nine months of this year, there are already 300 agents reaching the standards of becoming MDRT. And about 1,200 agents have reached the standards of contributing 100,000 premiums annually. So with the upcoming full quarter results with the contribution of their fourth quarter performance, we believe that there's still high chance for us to achieve this target. Thank you.
spk01: Thank you.
spk02: As a reminder, if you have a question at this time, please press star
spk01: on your telephone.
spk02: I'm showing no further questions at this time. I'd like to turn the call back over to Ms. Oasis Chiu for closing remarks.
spk06: Thank you, Jerome. So if you have any further questions, please feel free to contact us. Thank you for joining on today's conference, of course. Thank you.
spk02: Thank you. Thank you. This concludes today's conference call. Thank you for participating.
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