This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk03: Thank you for standing by for FANHUA's first quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. All lines have been placed on mute to prevent background noise. After 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 call is now being broadcasted 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. And I'd like to turn the meeting over to your host for today's conference, Ms. Oasis Chou, Sanhua's Investor Relations Manager.
spk04: Good morning. Welcome to our first quarter 2023 Endurance Conference Call. The Endurance results were released earlier today and are available on our IR website as well as on NewsRile. Before we continue, please note that the discussion today will contain forward-looking statements may under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The accuracy of this statement 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 including our registration statement on some 20th. We do not undertake any obligations updated for 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 of our financial and operational highlights in the first quarter of 2023. There will be a Q&A session after the prepared remarks. Now I will turn the call over to Mr. Hu.
spk07: Good morning and good evening. Thank you for joining today's conference call. The company released its first quarter financial report last week. I hope to share some of the highlights of the report with you. As we mentioned in the previous quarter, with the development of the macroeconomic environment and insurance industry, Fanhua also achieved good performance in the first quarter.
spk04: I will be repeating some of the highlights of our first quarter results reported last week in our earnings release. As we mentioned, with the positive macro and industrial environment over the first quarter of 2023, Fanhua achieved strong results over the period with solid growth across various key operating metrics.
spk07: In the first quarter, the total balance sheet of China reached RMB44.4 billion, which is 29% of the total growth, which is 8.9% of the total growth of the industry. The new unit balance sheet is 8.5 billion, which is 51.4% of the total growth, which is 15% of the total growth of the domestic market. Total premiums up by 29% to 4.4 billion RMB, significantly outpacing live insurance industry premium growth of 8.9%.
spk04: New business premiums up by 51.4% to 851.9 million RMB, significantly above the 15% growth rate achieved by the listed Chinese life insurers. Total revenues up by 20.6% year-on-year to 827.7 million RMB, and operating income was up by 193.1%, to 60.4 million RMB, significantly exceeding our previous estimate.
spk07: Here, we have compared the performance of the first quarter with the growth of the industry. It is also a better way to show that through the implementation of professionalization, professionalization, digitalization, and open platform strategies, we can achieve the huge results of sustainable development.
spk04: For this quarter, we have expressed our results relative to our industry and key listed insurance peers. We have made this comparison to demonstrate that we are executing on our well-defined strategy of driving sustainable growth in our business through professionalism, specialization, digitalization, and open platform. This strategy is starting to set us apart from our competitors as demonstrated by our first quarter results. 下面我将向大家介绍一下范华在一季度战略实施所带来的主要经营亮点。 Next, please allow me to go over three key operation highlights that are direct results from the execution of our strategy.
spk07: 首先,泛华聚焦高质量增长,推动队伍的质量及产能显著提升。 2023年的第一季度,泛华10万批人力和MDRT 为代表的核心人力数量增长。 Firstly, our strategy focuses on quality growth
spk04: produced a significant increase in agent quality and productivity. Our number of 100K premium agents and Million Dollar Roundtable members professional agents grew 27% year-on-year. The productivity of this high-performing agent also grew by 18% and 37% year-on-year, respectively. And together, they accounted for 42% of our sales over the period, up from 32% in the same period last year.
spk07: 其次,过去两个季度, 并购和开放平台战略的突出贡献持续显现。 截至第一季度末, 泛华云服事业部连接超过300家的B端渠道。 The first quarter has contributed more than 8058 million yuan, which is the same as the increase of 100%. At the same time, Sanhua has accelerated the development of open platform by purchasing. The first quarter completed three purchases, including the leading MGA platform in China, and two regional investment intermediary companies. Secondly, we are already seeing material contributions from our open platforms.
spk04: in our acquisitions over the past two quarters. As at the end of the quarter, our open cloud service business division has connected with over 300 external institutions and grew new business premiums by over 100% to over 80.6 million RMB. We're also executing on a strategy of consolidating the industry through M&A and made three acquisitions over the period. including Zhonglong Huijin, a leading managing general agent in China, as well as two other leading agency companies. Looking ahead, we aim to utilize the managing general agent model to accelerate the consolidation of licensed small to medium insurance intermediaries in the market. As of the end of the quarter, Zhonglong Huijin is connected with 400 licensed brokers and contributed 119 million RMB in new business premium over the quarter.
spk07: Finally,
spk04: Our strategic focus on digitalization is also delivering material operational gains. The execution of our digital strategy is not only leading to higher productivity for agents on our platform, but also helping us drive improvement in customer service and business quality. During the quarter, both the 13-month and 25-month persistency ratios improved to industry-leading levels of 93% and 87% respectively. Achieving higher-persistency ratios translates to higher quality of business for our insurance clients and in turn drives renewal bonuses for our business.
spk07: Digitalization and the implementation of open platform strategies bring significant scale effects to Fanhua, and increase the efficiency. In the first quarter of 2023, although digitalization and open platform investment increased from 17.3 million to 21.3 million in the same period last year, the operating cost rate still dropped significantly, from 31.3 million in the same period last year to 25.9 million. I would like to make a point here. The acquisition we have made so far has only contributed to our income. The items we have acquired have not contributed to our business profits. The main thing is that we are now in the process of integration. The integration effect has not yet been reflected in our financial statements. The digital focus, when combined with the open platform strategy,
spk04: have allowed us to deliver significant economies of scale and operational efficiency improvement. This is reflected in the substantial reduction in operating expense ratio to 25.9% from 31.3% in the same period last year. Despite significant increases in investments in digitalization and open platform initiatives to 21.3 median RMB in the first quarter of 2023, up from 17.3% million in the same period last year. And here I would like to mention that the acquisitions we have thus far have only delivered revenue contributions instead of operating income contributions, as we are still in the process of integrating these acquired entities into Fan Hua. And the results were not yet reflected in our financial results in the first quarter. However, as the integration of our IT and back-end systems completed in the second half of this year, we expect to see material expense synergies and revenue synergies to be reflected in our future results.
spk07: In the beginning of the year, we proposed that our goal for 2023 would be double 50s, which is our new unit cost and business profits. have achieved more than 50% growth. The good start of the first quarter has set a solid foundation for us to complete our full-year mission. In the second quarter, we have seen that we will exceed our expected goal. At the same time, we have also set a solid foundation
spk04: Our operational target for 2023 is to grow our life insurance for CPM and operating profit by 50%, but no less than 50% year-on-year. We believe the first quarter's strong results will lay a solid foundation for us to achieve this full-year target. And we are also confident that for the second quarter, we will also be able to achieve a CR target. And we are also making food preparation for the third quarter and the second half.
spk07: We are also confident that for the second quarter, we will also be able to achieve a CR target. To fully prepare for the second half and as well as our future in the future year in the next few years.
spk04: We will continue to stick to our strategy of pursuing sustainable growth through professionalism, specialization, digitalization, and open platform. And in the coming quarters, we will focus on the strategic execution on the following initiatives.
spk07: First, we will focus on the strategic execution on the following initiatives. First, we will focus on the strategic execution on the following initiatives. Firstly, we continue to expand our service offerings to establish our differentiated competitive advantages, focusing on serving the diverse needs of our customers
spk04: and their families over the entire life cycle by facilitating insurance sales in various service settings, leveraging on our abundant services resources, including insurance trusts, healthcare, elderly care services, and education solutions. 第二是啟動信託孵化雲計畫,以吸引高數字的人才,
spk07: In 2023, FANHUA will invest more in the development of the insurance credit trust. The goal is to train 3,000 non-industrial elites in the next year to complete the course certification of FANHUA's insurance credit trust family wealth consultant with the unique advantage of professional rich people to establish FANHUA.
spk04: Secondly, we plan to train 3,000 external candidates as San Juan Family Office Consultants, or FOC, thereby helping us to attract top talent in the industry. This year, we plan to increase funding and hosting this FOC training courses for the the insurance trust training courses to train and certify 3,000 external elite agents, increasing professionalism and providing another point of differentiation.
spk07: Thirdly, we will implement full license holder plan among our agents.
spk04: In response to the regulatory requirements for tier management of agents, we will provide targeted training to our top agents including those who are MDRT members, according to their personal professional levels, to help them obtain financial professional qualifications and certifications, so as to further improve their professional image and productivity.
spk07: Fourth, through open platform and purchase, we accelerate market integration. We plan to promote the development We intend to accelerate market consolidation through open platform strategy and M&A. We plan to fully open our platform to the industry
spk04: to develop digital tenants, particularly targeted and dedicated independent sales teams who can bring in high-quality business. For 2023, our target is to migrate 500 of our platform's institutional customers to our digital tenant system.
spk07: 2023 has an important meaning for Fanhua. FanHua will be established for the 25th anniversary. This is a milestone that every member of FanHua deserves to be proud of. What makes us proud is that in the past 25 years, FanHua has passed through the economic and industry cycles many times. FanHua has become stronger every time. For me personally, this is my Since I became the chief executive officer of FanHua in 2011, and since I became the chairman of FanHua in 2017, this is my second time as the chairman and chief executive officer of FanHua. FanHua was founded by me 25 years ago, and without exaggeration, FanHua is my second child. I have always put the biggest interest of the company in the first place.
spk04: 2023 is an important year for Fanhua. It marks the 25th anniversary of our company. It is a milestone that fills each and every one of us at Fanhua, which we are truly proud for. Over the past 25 years, we are proud that we have navigated through China's economic and financial industry cycles, each time emerging stronger than before. For me personally, this is my second time being chairman and CEO of FanHua, having left the position of being CEO of the company in 2011, and left the position of being chairman of the company in 2017. This is a company I founded 25 years ago. By no exaggeration, it's my second child, and I have always had the best interest of the company at heart.
spk07: We will invest more talent to attract the most outstanding talent in the market to join FanHua. From FanHua's board of directors, executives, to the first-tier agents, we will fully optimize FanHua's talent team. We believe that as long as we have the right strategy, the right people, and the right execution, in the next 25 years,
spk04: Looking ahead, we intend to invest significantly in our human resources capability to attract the best individual talents in the market across all levels, from the board level to senior managers to our frontline agents. We are confident that with the right strategy, the right team, and the right execution, the fan hua we will create over the next 25 years and beyond will be able to deliver the results expected from all our stakeholders. This concludes my presentation. Now the floor will open for your questions. Thank you.
spk03: Thank you. We will now begin the question and answer session. To ask a question, please press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. Once again, that's star 11 for questions. Our first question comes from the line of Yu Yu Zhang from CICC. Please go ahead, Yu Yu.
spk02: Hello, I am Zhang Yuyi from Zhengjing. First of all, congratulations on your very good performance. I have three small questions for you. The first question is about the demand for savings. We can see that the company has been observing the demand for savings recently. How do we look at the demand for savings in the second half of the year? The second question is also about our cash flow. In fact, in the past year, we may have seen that the average cash flow of the overall cash flow rate has dropped a little bit. If the company judges the development trend of the cash flow in the future, can we see a straight and steady attitude? So the first question is related to the savings products, the bonds. Previously, China's insurance regulator has offered insurers to lower estimated returns for new products. Do you see a boost in savings product demand, and how do you expect the momentum of savings product sales? And the second question, we also see in the last year and Q1, the average take rate of the whole project goes down gradually. We know it's mainly due to the changing product mix and the reduce of our renewal commission. I think it's really an active impact on our brokerage income while our FYP has a really good performance. So, to do so, some more color on how you see the future trend of your take rate and what actions will you take to raise it? And a lot of questions in terms of the open platform strategy. In the previous conference call, you said you plan to invest or acquire around 10 small or middle-sized insurance agencies, and is this plan in change? Thanks.
spk07: Okay, thank you. We have three questions. Let's have our chief operator, Liu Lichong, answer the first question. Thank you for the questions, Yimingyi.
spk04: This is our CEO, Mr. Yinan Hu. Mr. Hu would like to invite Mr. Li Chong, our Chief Operating Officer, to address the first question. And I'll ask him to answer your second question regarding the trend in our commission rate. And he himself will answer your third question regarding to the M&A progress.
spk06: Hello, everyone. In the second quarter, we found that the customer's demand for Chuxi County, including Zhongshenshou County and Nianjing County, has been significantly improved. This demand is very, very abundant. So, in the second half of the year, what will happen if the fixed interest rate goes up and down? We think that the demand for Chuxi County in the second half of the year China's aging rate is still rising. We can see from three points. First, aging. China's aging rate is accelerating. This is a certain trend. Then, with aging, people's risk of investment has also begun to decrease. And the demand for retirement is rising. We can see that for the long-term interest rate in the future, the downturn is a main trend. Although the fixed interest rate dropped to 3.0, 3.0 is still a very good long-term investment product. The third is that as the entire economy develops, consumption is declining, especially in investment products. With the imminent downward adjustment in the guaranteed returns from life insurance products in the new product pricing,
spk04: we do see very strong demands for savings products, including annuity and home life insurance products. However, in the second half, how will that change? We still believe that for the longer term, the demand will remain robust for savings products because of the three contributing factors. We are seeing the acceleration in aging populations and lower risk appetite among consumers and why aging populations still have very strong demands for products that can cater to their needs in their retirement. And then secondly, we are seeing the downward trend in interest rate in the long term. So even though the assumed interest rate for new product pricing adjusted downward to 3%, that still provides quite attractive returns. And thirdly, with the softening economy, we're seeing a kind of consumption downgrade and also investment product downgrade in terms of because of the softening economy, there are not many attractive investment choices. while insurance still offers a kind of a safe asset class. Thank you.
spk07: Mr. Ge, please answer the second question. Hello, everyone.
spk05: I'm Ge Peng, the founder of Funhouse. Let me answer the question about the commission rate. First of all, I would like to clarify what the concept of commission rate refers to. From the perspective of the insurance company, I think the decline in the commission rate is a general trend. This trend is, on the one hand, to meet the total cost of the international insurance company, and on the other hand, to reduce the cost of financial institutions according to some national financial policies. So the overall income rate is a downward trend. But this is from the perspective of the insurance company. But for us, because we sell different products from different insurance companies, different products have different fees, different pay deadlines, and customers choose different payment methods, it will affect the ratio of our income. In the past, we actually emphasized our standard insurance fees. So, in fact, if we use a unified calculation standard, according to the standard balance, our net profit is actually still at a fairly high level. So, I want to clarify it again with you here. The core data indicators of the company are actually not just looking at the total net profit of a calculation. The core four indicators should be the balance scale of our new orders every year, the operating income, the profit and loss rate, and the continuation rate. And these four indicators represent the core operating capabilities of the company.
spk04: CFO would like to answer this question. First of all, he would like to clarify on the definition of commission rate. And from insurance point of view, we are actually seeing that the commission rate will probably, in the downward trend, to be in line with the international practice. as well as regulators' wish to lower the cost, financial cost for financial institutions in China. And then for Fanhua, because we sell a wide variety of products, so the changes in product mix, as well as the terms that customers choose to pay their premiums, will have impact on the overall commission rate. However, if on the basis of annualized premium equivalent basis, our first-year commission rate remains quite high. But having said that, I would like to emphasize that the key operating matches that the company actually focused on are first-year premiums, net revenues, growth margin, as well as persistence ratio. I think these are the better operating matches to measure the company's financial health.
spk05: As we discussed about the products in the future, based on these products, the cost and cost of the future insurance company payment is actually a downward trend. Under such a trend, in the short term, it may lead to some of our sales capabilities. But in the long term, as Mr. Li said, in the long term, this type of product is still a product that customers are focusing on. So we think that in the long term, sales capabilities will not decline. At the same time, this also requires that in this industry, The sales theme is no longer just for the sale of insurance products, but more for customer service. As Mr. Hu just mentioned, our future strategy is to promote insurance, plus trust, plus support, plus education, or plus other services, etc. The comprehensive service capability is the core competitiveness of this industry service provider.
spk04: As Mr. Liu mentioned that there will be some changes in savings products with the upcoming transition to the new product pricing, which means that the cost for insurance companies will be lower. And probably that will impact our sales capabilities in the short term. However, in the longer term, we still believe that the demand for savings products will remain robust. And also, having said that, we still believe that for insurance intermediaries, their key competitive advantage should be on the ability to offer a comprehensive service or comprehensive solutions to address customers' diverse demands instead of simply selling insurance products. As Mr. Hu mentioned that we are actually, would like to offer, further broaden our service offerings to include trust services, health care, and elderly care, as well as education solutions to customers. And we believe this is the key for us to further enhance our competitive advantages.
spk05: According to the double 50 growth target mentioned by Mr. Hu, if our entire operating system can achieve such a target, we can actually see the four core data that I mentioned just now, especially the interest rate and profit rate, including the sustainability of our product quality. In fact, we can see that our interest rate and profit rate are stabilizing and continuing to grow.
spk04: Mr. Hu also mentioned that we target at growing our first-year premiums and operating income by 50% year-over-year for 2023. I believe that if we can achieve this 50% full-year target, you will also see a continued improvement in our growth margin, net profit margin, as well as persistency ratio.
spk07: Thank you, everyone. Okay, I'm Huilin. Let me answer the third question. Regarding the company's procurement strategy and future procurement measures, first of all, we believe that the direction of industry change is towards high-quality development. Its essence is a lower cost of purchasing and higher
spk04: And this is Mr. Hu, CEO of the company. He would like to address your questions on our M&A strategy. Basically, the industry is evolving towards the pursuit of high-quality growth, which means that higher business quality with lower costs.
spk07: What's happening in the market right now is actually in favor of our M&A strategy.
spk04: or i.e. create a much more favorable environment for us to pursue acquisitions. So we will stick to our open platform strategy and M&A strategy. There's no change to our acquisition target for this year. M&A is not purely business combination. I think the basis for our acquisitions will rely on technology, our digital capabilities in AI technology applications.
spk07: In the future, technology will be the most important factor in the development of the intermediary industry. And our investment and ability in this area can be said to be the most important factor
spk04: In the long term, we believe that technology will be a key contributor to drive business growth for insurance intermediaries. And in this front, I'm quite confident that Sanhua has stayed far ahead of our peers in terms of IT investment and technological capabilities. in China as well as in Asia.
spk07: The entire intermediary industry and even the entire Asian market has a serious lack of technology investment. This is also a major bottleneck for the high-quality development of the insurance sales and service industry. The market needs are also very abundant. However, right now in China and in other Asian markets that we observed, technological investment is not really enough.
spk04: And that's a key reason that restricts the further growth of insurance intermediaries. However, we believe that the demand for technology is quite strong, while we are also seeing that a lot of licensed insurance intermediary companies, as well as independent agents, cannot really afford to invest in IT systems on their own.
spk07: So the core of Fanhua's acquisition is the ability to output digitalization, so that more intermediary companies and industry entrepreneurs can share Fanhua's technological advantage, and encourage the acquisition target to greatly reduce the burden and cost of sales, and support the acquisition target
spk04: So the core of our M&A is to export our technological advantages and digital capabilities so that we can allow more insurance intermediary companies to benefit from Fanhua's technological advantages and help them to double their sales capabilities while lowering their operating expenses and building momentum for sustainable growth.
spk07: Thank you. Thank you, everyone. In terms of the development of the procurement, our focus is on technology and energy. The quality of the procurement And for our future M&A targets, we are actually looking at, you know, technological empowerment to these acquired entities, and we pursue quality
spk04: quality instead of quantity.
spk07: Thank you.
spk04: Thank you.
spk03: Thank you. Our next question comes from the line of Dan Wong from JP Morgan. Please ask your question, Dan.
spk01: Okay. Thank you, Ms. Guan, for giving me the opportunity to ask this question. I have three small questions I would like to ask. The first one is actually about the capacity of the agents. In fact, from the report of the first quarter, we can see that the capacity of the agents has actually been greatly improved in the first quarter. There may be a reason why we have a large number of low-capacity agents last year. The question I want to ask here is that Guan Lixin believes that This is the first question. The second question is about this, this, this, this, this, this, this, this, this, this, The third question is about supervision. We see that the Bank of China has used a more strict supervision measure for the insurance intermediary market. In fact, from the perspective of the company, under a more mature framework system, the company has always ensured the requirement of compliance and improvement of business quality. This is actually conducive to expanding the company's scale and reducing the corresponding risks. My question is, from the company's point of view, the opportunity of the insurance industry in the future may be ahead of some aspects. Thank you.
spk04: So the question is from JP Morgan. He has three questions. The first question is regarding our agents' productivity. In the first quarter, we see a strong improvement in agents' productivity, but probably that's because of the low base last year. And he would wonder whether or not the high productivity of our agents will be sustainable in view of the fees competition in the market. And the second question is regarding the company's share buyback plan to progress. The company announced a share buyback plan in December last year, but now that with the company's M&A strategy, probably the company would like to reserve more cash to pay for the acquisition. How the company's capital deployment plan will be? and what's the plan for share buybacks. And the third question is regarding regulation. The regulator has adopted quiet tie regulations to supervise the insurance intermediary market. But we believe that with a more stringent compliance framework and more stricter supervision on business quality of the company that will help the company to improve sales volume as well as lower risk. So what's the opportunities there for the company?
spk07: I would like to ask our chief operator, Mr. Liu Lichun, to answer this question. The second question is about the resale. Mr. Ge or Li Li, you can answer this question. The third question is about the supervision. I will answer this question. Mr. Chong, please go first.
spk04: Again, the three questions will be divided among the management. Our COO, Mr. Liu, will answer your first question regarding agent productivity. And Mr. Guo will answer the second question regarding share buybacks. And Mr. Hu himself will answer your third question regarding the regulations.
spk06: Okay. Regarding the entire agent productivity, I think in the past two years, with the decrease in the number of agents in the entire industry, Then the ability of the agent is often improved. There are two reasons for this. The first is that the entire insurance demand has been shifted from low-end to high-end savings insurance and pension insurance. Then such a product involves a relatively large amount of money. The second is The concept of long-term investment and the analysis of the needs of the elderly is very profound. So you need to have relevant investment, financial, family heritage, and even trust asset management and other such wealth management knowledge. So these must be the high-end agents who can have it. The second reason is that simple heavy-duty insurance and simple medical insurance have been replaced by the simple sales model of the Internet. Therefore, low-performance agents who sell simple products will naturally be replaced. We are actually seeing that over the past few years, the number of agents has dropped significantly in the market.
spk04: And on the contrary, the productivity of agents per capita productivity actually have been increasing. I believe that there are two reasons. First of all, the customer's demand has transitioned from relatively lower end products, i.e. critical illness products, to higher value products, savings type of products. And for this type of savings product, the ticket size is larger. And then secondly, because these products are more complicated and require a more comprehensive financial knowledge or knowledge in management area, so usually this type of products are sold by higher end agents. And then secondly, for the critical illness products, this counterpart has some work kind of replaced by online medical insurance products. And for those agents who can only sell critical illness products, will naturally be replaced as well. So only those who are knowledgeable enough, who have more comprehensive knowledge, can stay in the industry.
spk06: For FanHua, we have been targeting the customer group, from medium-sized to high-end or even ultra-high-end customers, as a customer target. We know that these customers We need professional and professional agents to serve them. So, in the past few years, Fanhua has been increasing the recruitment and training of professional talents, and increasing the investment in digitalization. In the past few years, the growth of MDRT has been more than 50%. In the first quarter of this year, We have a good growth. So our strategy is in that direction. At the same time, we also put our insurance plus service, insurance plus wealth as our important strategy and means of development in the future. Combining services such as nursing care and health care, and the wealth service including insurance and trust, I believe we will Thank you.
spk04: Fanhua has shifted our focus to serving middle class or high net worth individuals or outer high net worth individuals. And these customers groups require more professional service by hired end customers, more professional sales agents. So that's why in the past few years, we have developed investments to recruit professional agents and to train professional agents, as well as increase our investment in digitalization to increase the empowerment to our agents to help them to improve their professional capabilities. And as a result, we have seen a 50% growth in a number of MDRT agents in the past years. And in the first quarter, we also see substantial growth in the number of MDRT agents. So we have this right strategy. And in addition to that, we believe that service is also quite crucial. So that's why we have considered insurance plus services or insurance plus wealth management elderly care insurance trust services as an important part of our overall strategy. We believe that with this service offering, our top agents will be able to serve the diverse demands of our high-end customers. So with the customer's demands and with the the ability of this top agent, I believe that the policy amount of our, the product that we sell and also the productivity of our agents will remain at quite high level.
spk05: Actually, as Mr. Hu said, FanHua is a company that is very responsible for shareholders and investors. When I mentioned this issue just now, I also briefly reviewed some of the circumstances of the company since its launch. What I saw was that since its launch, the company has accumulated more than 1.7 billion yuan in shares for shareholders. The total amount of RMB 700 million was used to buy back the shares. The total amount was RMB 2.4 billion. What is the concept of RMB 2.4 billion? Since FanHua was listed, the total amount of cash flowed in was RMB 4 billion. That is to say, more than half of the RMB 4 billion that FanHua has flowed in has been returned to shareholders in a way of split or buyback. So I think this is really based on So I believe that Fanhua is a quite responsible company to shareholders. I have recapped on the use of capital no since IPO.
spk04: We have spent around $1.7 billion on cash dividends since our IPO and spent around $700 million on share buyback, so totaling $2.4 billion RMB, which represented over 50% of our total operating cash flow, amounting to $4 billion. So that shows our commitment to maximize shareholder returns.
spk05: Since 2020, during these three years, the effects of the pandemic, the changes in the economic environment, as well as the changes in the quality of the insurance products and the requirements of supervision have had a very big impact on the industry. But during these three years, We have been working on a strategy for the future. We have invested a lot in this area. In the first quarter of 2023, we have seen the data. It shows the three years that we have been working on. At present, we believe that the company's funds should be used In the past three years since 2020, due to the COVID-19 and the softening economy,
spk04: The industry has undergone substantial changes. Fanghua, however, has sticked to our strategy, and we have saw material contributions on execution of our strategy in the first quarter of 2023. In my view, I believe that our cash should be earmarked to build momentum for sustainable rapid growth in the future in the longer term, so including our initiatives such as M&A.
spk05: In addition, we believe that in such a situation, repurchase, in fact, due to the various situations in the past three years, has actually made our stock price and the actual value of our company are considered to be underestimated by the market. Therefore, we believe that repurchasing should be the best return for shareholders. So, at the end of December 2022, we announced a new repurchase plan of $20 million to continue repurchasing the company's stock. As of now, due to the impact of the window period or the amount of transactions, we have repurchased 720,000 shares of ADS.
spk04: And because of what's happening in the past three years, our stocks have been significantly undervalued. We believe that share buyback will be a much more efficient means to maximize shareholder returns compared to dividends. So that's why we announced a 20 million share buyback plan last December. And despite the restriction of the window period and the restriction on the trading volume that company can buy, we have purchased about 72,000 ADS amounting to 600,000 US dollars.
spk05: That's the progress that we've made in terms of our share buyback.
spk07: whether it's a professional or an experienced agent. But if we only sell insurance, I think it's not sustainable. Whether it's in terms of quantity or capacity, I think Mr. Liu's conclusion is that if we only sell insurance, it's not sustainable. So we've been pushing our insurance agents to develop in terms of wealth management. It's not just insurance products that are provided to customers, but also family assets, legal, tax, inheritance, and other services. So insurance agents are developing in the field of wealth management. This has become a trend. So this growth, whether it's from the number of growths or from the growth of production, we think this is continuous.
spk04: And I would like to add a comment on your first question. And this is also the strategy that we have stick to over the past 15 years. We believe that no matter how professional or how elite the sales agents are, if they only sell products, probably it will not be sustainable for them to sustain high productivity by solely selling insurance products. So transition to become a financial advisor that can offer more comprehensive solutions to their customers, covering not just insurance, but also insurance trusts, tax planning, or legal advisors. That will enable them to better serve the customer's demands and sustain higher productivity. And I believe that is an irreversible trend for agents you know, to transition or transform themselves to become a financial advisor for their customers. So that will require much higher, that pose actually much higher requirements on the compliance of the companies and on, you know, on regulatory compliance. This is a huge challenge, but at the same time, it also poses great opportunities for the company. I believe that any companies who can help other institutions or independent agents to address the compliance issues, they will have the future.
spk07: When people see Sanhua, they think of it as a sales company. In the next two or three years, I want to turn Sanhua into a platform company that serves the entire industry. Under this definition, we will establish a unified framework through digitalization. My long-term vision has been to transform the company from a sales insurance intermediary
spk04: into a platform company or an infrastructure platform provider to the industry. This is what we have been pushing forward in the past few years. We're dedicated to providing an infrastructure platform to the whole industry. and we are also working on building a unified compliance model and a unified risk management model on the basis of our digital technology.
spk07: Currently, our direct profit contribution is more than 80%. In the future, I hope that our service industry
spk04: Right now, our existing organizations contributed 80% of our revenues. I'm hoping that in the future, 60% of the revenues will be generated by the services or the platform services that we provided to the industry.
spk07: This is all a challenge. For Fanhua, I think TACA is a great opportunity, and even a great motivation. For this reason, we also hired a Bosnian consulting company. This is not an advertisement for Bosnia and Herzegovina. Bosnia and Herzegovina is our open platform for consulting. The first stage of the work is over. Our assessment of Boston's construction of an open platform for the company is very helpful. The effect is very good. We pay great attention to the two digitalized models that we will build in the future, namely the digitalized harmonized model and the digitalized sealed model.
spk04: The new regulation changes pose great challenges to a lot of industry players. However, we see it as a great opportunity for Fanhua. In response to the market changes and also to capture the market opportunities, we have retained Boston Consulting Group as our consultant to give us advice on our open platform strategy. BCG has completed their first phase of work. And this has actually helped us greatly and delivered great results. And I believe that this will be helpful for us to build our digital compliance model and digital risk management model going forward.
spk07: Thank you.
spk03: Thank you. I'm showing no further questions. I'll now turn the conference back to Ms. Oasis-Chill for closing remarks.
spk04: Thank you for participating in our conference call. If you have any further questions, please feel free to contact us. Thank you.
spk03: Thank you. That concludes today's conference call. Thank you for participating. You may now disconnect.
Disclaimer