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spk12: Thank you for standing by for FANHUA's fourth quarter and fiscal year 2023 earnings conference call. At this time, all participants are in a listen-only mode. All lines have been placed on mute to prevent any background noise. After 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.fanhgroup.com under the Events and Webcast section. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Ms. Oasis Kew, Fan Hua's Investor Relations Manager.
spk23: Thank you, Andrew. Good morning and good evening, everyone. Welcome to Fan Hua's Fourth Quarter and Fiscal 2023 Annual School. A replay will be available on our IR website after today's call. Please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. These statements are made based on management's current expectations and beliefs concerning future events impacting the company and therefore 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 and are not limited to those outlined in our filings with FDC, including our registration statement on Form 20F. We do not undertake any obligation to update this forward-looking information except as required under applicable rules. Joining us today are our Vice Chairman and Chief Executive Officer, Mr. Yi-Nan Hu, Chief Financial Officer, Mr. Peng Ge, Chief Strategy Officer, Mr. Ben Lin, and Chief Operating Officer, Mr. Li Chong Liu. Mr. Hu will start the call by sharing his view on recent market trends and our strategy development followed by Mr. Ben Lin, who will provide a review of financial and operational highlights and discuss our business outlook going forward. There will be a Q&A session after the prepared remarks. Please know that you can find our presentation materials relevant to this call from our official website. With that, I will turn the call over to Mr. Hu.
spk22: Mr. Hu, you may begin.
spk09: I will translate for Mr. Hu. Good morning and good evening. Thank you for joining us on our first quarter and through year 2023 at our school. Looking back at the past year, 2023 has been a year full of challenges and changes for the entire human resources industry. The profound change in the policy of supervision, especially the downfall of the jade land and the implementation of the silver and treasure channels, and the unification of the typhoons have brought unprecedented challenges to the industry. Fanhua is no exception, but it is in such an environment that we have shown endurance and achieved steady growth.
spk23: Reflecting on the past year, 2023 proved to be a year of challenges and transformations for the entire life insurance industry in China. The profound changes in regulatory policies, particularly the downward adjustment of the pricing rate and the implementation of fire and actual fee consistency requirements in the Bank Assurance Channel, presented unprecedented tests for the industry. Fanhua was no exception. However, it was precisely within this challenging landscape that we showcase resilience and achieve stable growth.
spk09: In the whole year of 2023, Fanhua's total insurance fee reached 164.4 billion yuan, which is 28.7% of the total growth rate, and continues to excel in the overall performance of the industry. A total of 38.1 billion yuan for the new unit, with a growth of 30.3% in total. With the efficient improvement of digitalization and effective cost control measures, Banhua achieved a net profit of 1.95 billion yuan, with a growth of 16.1% in total. The shareholder net profit achieved 2.8 billion yuan, with a growth of 179.2%. In the full year of 2023, we achieved a total insurance premium of 16.4 billion RMB, representing a 28.7% year-on-year growth, continuing to outpace the overall industry growth.
spk23: First-year premiums reached 3.8 billion RMB, marking a 30.3% year-on-year growth. Leveraging the efficiency gains from digitalization and robust cost-control measures, we realized an operating income of 195.8 million RMB, up 16.1% year-on-year, net income attributable to shareholders rich 280.4 million RMB, reflecting a growth of 179.7% year-on-year. This solid performance demonstrates the successful execution of our strategy.
spk09: In the past year, we have continuously strengthened the strategy of professionalization, professionalization, digitalization, and open platform, and achieved a series of key results. For example, we continue to grow and improve our professional capabilities. The contribution and potential improvement of our professional capabilities is an important driving force for our performance growth. Digital platform continues to play an effective role, providing our marketing partners with benefits, and at the same time providing customers with better service experience. The diversified service ecosystem that we have built has formed the differentiating competitiveness of our company. Over the past year, we have continually strengthened our strategy of driving growth through professionalization, specialization, digitalization, and open platform, using a series of pivotal achievements.
spk23: For instance, we have consistently bolstered our pool of top tier agents, enhancing their professional capabilities with the contribution from top performing agents and increased productivity of our sales team at all levels, serving as the pivotal drivers of our growth. Our digital platforms have continued to deliver efficiency gains, empowering our insurance advisors while also providing our customers with superior service experiences. The diversified service ecosystem that we have built has established a solid foundation for our company's differentiation and long-term development. Furthermore, our open platform and M&A model have also emerged as the key drivers of our company's growth.
spk09: Although it will inevitably bring great challenges to the industry, we have also seen great opportunities. We believe that the deep change in this round of monitoring policies will accelerate the transformation of the industry, and the realization of large-scale investment enterprises, and comprehensive enterprises that can provide diversified services, and the realization of digitalized and intelligent platform-based companies will be in a stronger position. The forthcoming deconsistency requirement and the commission cap, although may inevitably pose significant challenges to the industry,
spk23: will also present enormous opportunities. We believe that amid this phase of deregulatory from accelerating industry transformation, scale-driven leading players, companies able to offer diversified services, and digitally intelligent platform companies will find themselves in a more advantageous position. Leveraging our strategic achievements in specialization digitalization, open platforms, and service-oriented initiatives over the past two years, we are confident that Farhua will emerge as the biggest beneficiary.
spk09: At the same time, our international strategy is also steadily advancing. Hong Kong, as the bridgehead of our international layout, and two companies in Asia's insurance, two companies in joint venture,
spk23: Meanwhile, our internationalization strategy is steadily advancing. Hong Kong, serving as the cornerstone of our international expansion efforts, has sustained the official launch of two subsidiaries with Acer Insurance for business operations. providing a solid foundation for our global business layout.
spk09: family services, including insurance, finance, education, health, retirement, family management, and other areas, to achieve horizontal and vertical and vertical development. This not only means that we will be able to provide customers with more comprehensive and efficient family asset configuration services, but will also accelerate our expansion in the international market to create a wider space for development for us.
spk23: Recently, we signed a strategic framework agreement with Singapore White Group, marking a significant milestone in our development journey. The potential collaboration represents a strategic upgrade towards artificial intelligence development and internationalization through means such as mergers and acquisitions, We will invest in high-quality overseas assets, deepening our presence in family services, including insurance, wealth management, education, health care, and family governance. This move aims to achieve horizontal and vertical integration, allowing us to offer comprehensive and efficient family asset allocation services to our clients. Moreover, it will accelerate our expansion in international markets, paving the way for broader development opportunities, and propelling the company to greater heights.
spk09: Looking forward to the future, we believe that the development of the industry will gradually focus on the formation of an industry monopoly. Service and technology will become the main driving force. and FanHua will be the biggest beneficiary of this change. We will actively explore the insurance, service, and technology models to provide customers with comprehensive products and diversified services, and at the same time use technology to improve service efficiency. We will focus on serving high-end customers and MDRT high-end groups. This will be our core asset. 2024 will be the key year for our development. We will rely on the leading science and technology platforms, comprehensive service capabilities and capital strength, network and high-quality assets to further achieve scale development. We believe that in the future, we will continue to maintain the leading position to create more value for customers and achieve the long-term development goals of the company.
spk23: Looking ahead, we firmly believe that the industry will gradually move towards consolidation, forming an overly geopolitical landscape dominated by a few major players, with services and technology driving the way forward. We are poised to emerge as one of the biggest beneficiaries of this transformation. Embracing the insurance plus services plus technology model We will provide comprehensive products and diversify services to our customers while leveraging technology to enhance service efficiency. Our focus will be on serving the high net worth customers and MDRTs, which are also our core assets. The year 2024 will be pivotal for our development. We'll further expand our scale through industry-leading technology platforms, comprehensive service capabilities and strong capital to acquire high-quality assets. We believe that in the journey ahead, we will continue to maintain our leading position, create more value for our customers, and achieve the long-term development goals of the company.
spk09: Next, please let our Chief Strategist, Ben Lin, to discuss the situation of our previous year.
spk23: Now I would like to invite Mr. Ben Lin, our Chief Strategy Officer, to discuss our business highlights in the fourth quarter and 2023.
spk16: Thank you Mr. Hu and thank you Oasis. Let me just walk you through our results for 2023. Some of the numbers that I'm going to quote, you can find them in our results release as well as our online presentation. Impacted by two significant regulatory policy changes in 2023, specifically the pricing rate change and commission cap at the bank assurance channel, the life insurance industry in China witnessed a roller coaster ride in terms of premium growth. Starting with single digit growth in the first quarter, it soared to double digit growth in the second quarter due to the pull forward demand prior to the pricing rate adjustment. What we saw was then a reversion to single digit growth in the third quarter. and ultimately negative growth in the fourth quarter. Overall, we saw a 10% year-on-year increase for the entire year of 2023 at the industry level. Amidst the due pressures of sluggish performance on both the liability and investment side, major insurers are expected to experience significant decline in profitability, as indicated by the 15% negative growth in average profit of the listed companies in the first nine months of 2023. Against this backdrop, Fanhua continues to outperform the industry with stellar performance. In 2023, we achieved RMB $16.1 billion in total life insurance premium, which is a 30% increase year on year, and net income to shareholders reached 280 million RMB, up almost 180% year on year. Overall, we are very pleased with our financial results given the backdrop of a challenging macro and insurance industry environment in 2023. More importantly, we are particularly proud of the strategic executions we have carried out to achieve these results. Throughout 2023, we successfully executed each strategic initiative as we had planned. We firmly believe that these strategic achievements will set us on a higher quality and sustainable growth path. I would like to highlight four key strategic achievements that we saw in 2023. Firstly, our strategic focus on improving our agent quality and productivity produced significant results and is the major driver of our success in 2023. Our MDRT and 100K premium agents have emerged as major contributors to our growth. These agents saw productivity increasing by 15% and 10% respectively, and they accounted for 65% of our total first year premium, up by 9 percentage points from 2022. These achievements help offset the significant decline in overall agent number, a metric that we're no longer focused on, and is also an industry-wide trend. Secondly, we saw significant achievement in our digital technology empowerment. Based on the digital infrastructure built on big data intelligent algorithm, Fanghua has built an industry-leading digital empowerment system, covering five major systems, including operational support and management empowerment, professional growth and IP promotion system, customer management system, customer service system, and transaction support system. Among the many important tools in our digital system, in 2023, Faohao focused on strengthening digital marketing empowerment for functions such as digital avatar, intelligent recommendation systems, insurance AI assistance, and intelligent customer marketing. It helps our salespeople achieve intelligent management across these areas. The cost reduction and efficiency improvement brought by the digital empowerment that we have built, our efficiency increased significantly over 2023. If you look at our operating expense ratio, it decreased from 29.4% to 25.7%. Agents who frequently use our system have productivity that is 1.6 times higher than those who do not use the system. Thirdly, our open platform strategy accounted for over 30% of our total new business. By the end of 2023, we have signed contracts with 854 channels and an increase of 63 from the last quarter of 2020. 2020, the third quarter of 2023. These partnerships contributed to a total first year premium of over $1.1 billion, accounting for over 32% of our total new business. There are also insurance companies, human resource consultancy agencies, and numerous other 2B channels expressing their interest in further collaboration with us to use the open platform system and digital tools to sell life insurance in their main business. Fourthly, our service-oriented ecosystem continues to take shape with evident results. We have developed a robust ecosystem beyond just life insurance, covering trust service, family office, healthcare, and wellness, overseas asset allocation, education, tax consulting, family affairs processing, etc. providing customers with rich experience scenarios and substantial support to our sales agents in insurance marketing. During 2023, we held 256 family office consultants training sessions and salons, certifying more than 1,200 family office advisors who have since served a total of 500 families in assisting them to set up a total of 450 trusts, with total asset value exceeding 5.6 billion RMB, and facilitating approximately 100 million RMB in first-year premium. By the end of 2023, more than 20,000 FRP, or Fanhua Retirement Planners, have been trained and certified. During 2023, nearly 300 visits to our continuing care retirement community were organized, helping nearly 1,000 customers lock in rights for long-term stays in these retirement communities and more than 4,000 customers obtain rights for these retirement communities across the nation, helping to achieve over RMB 600 million in first year premium. At the end of 2023, Fanhua has trained and certified more than 20,000 policy trusteeship experts, serving more than 130,000 policy trustee families with 630,000 policies under trusteeship. generating cross-sale and upper sales to 30,000 customers, facilitating about $550 million in first-year premium. Lastly, we have made significant progress in our global expansion strategy. Since the establishment of our two joint ventures with Asia Insurance in Hong Kong in October, the insurance brokerage company has completed the formation of its core business team and signed contracts with about 10 major insurance companies in Hong Kong, ensuring the ability to meet diverse customer needs. Operations officially commence in early February for our insurance broker business. On the technology side, we're actively engaging with a number of insurers, and we're confident that our technology business will have its own milestones in 2024. Looking ahead for 2024, the insurance industry, especially the independent intermediary channel, will face a series of challenges and opportunities. Due to the significant uncertainty surrounding the specific timing and extent of the implementation of the requirement for consistency in reported and actual fees in the independent intermediary channel, we are unable to make precise predictions regarding our annual performance targets. However, what can be anticipated is that whilst the regulatory change may lead to short-term pains, you also bring important opportunities for the development of our open platform. Our strategic focus in 2024 will include, number one, continue to build a professional and specialized sales team. We aim to increase our market share by growing the number of high quality agents, particularly MDRTs, taking advantage of the market consolidation opportunity that is likely to arise as a result of the commission cap to be implemented. Number two, enhance our capabilities to serve high net worth individual clients. We will continue to build out our service ecosystem, supplementing our offerings in financial services to education, elderly care, and overseas travel. Number three, bringing high quality assets while going global, accelerating our internationalization and digitalization process. We have been invited by a number of insurers to set up operations in Macau and Singapore. And lastly, we will pursue M&A opportunities to achieve horizontal and vertical integration. Given our strong financial position with over 1.4 billion RMB in net cash and the backing of our potential strategic shareholder, Singapore's White Group, we are probably the most well-resourced intermediary in the region with the capacity and capability to undertake attractive and accretive M&A opportunities both inside and outside of mainland China. This concludes my presentation and I'll hand the session back to Oasis. Thank you.
spk02: Thank you. Now the floor opens for Q&A session. Andrew.
spk12: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.
spk19: Once again, to ask a question, please press star 1-1. And our first question comes from the line of Yuyu Zheng with CICC.
spk12: Your line is open.
spk21: The first question is still about the health insurance. We may have discussed a lot of negative effects before. I would like to ask the manager to explain it to us. Let's observe how much the health insurance may have for the decline in income. Will there be some initial numbers? My second question is about the expansion of overseas business. What is the latest progress? What are the plans for the next 24 years? What role will the strategic framework established by the Yuhua Group play in this? Let me simply translate my two questions. So my first question is about the peacekeeping agreement. We've made a lot of discussions before about the peacekeeping agreement. Can we be a little bit more precise on this? Beyond your observation, to what extent made the Commission revenue cuts? If there are any numbers you can share with us? My second question is for the overseas business. Could you share some more details on what you've done in 2023 and will do in 2024 and about White Group? How can Fenhua cooperate with it to achieve more market share in Asia? Thank you very much.
spk05: Thank you. I will answer the first question. The second question is divided into two small questions.
spk09: The first question is about our international progress in Hong Kong. I would like to ask Ben to introduce the investment of Huade Group. I will answer. Especially Mr. Chong.
spk23: So, Mr. Hu would like to invite our chief operating officer, Mr. Liu, to take your first question. And the second question actually consists of two parts. So, the first part regarding our international initiative, especially the business in Hong Kong, this part will be answered by Mr. Liu. our Chief Strategy Officer. And the last part regarding our potential collaboration with Y Group, Mr. Hu, he will answer the question. Okay.
spk06: Regarding the blackout, we actually have to adjust the sound for half a year. But as of now, there hasn't been a very clear uh uh uh uh so um well the requirement for fee and the reported and fire fee consistency uh in the independent brokerage channel is up and coming um
spk23: Although the regulatory body has not yet given a specific timing as to when it will be implemented, but the rumors in the industry is that it will probably be implemented in April. And as for the extent of the commission cap, there is also no specific guidance from the regulatory body yet um but um and the but the consensus among a lot of insurance companies is that probably the commission rate uh well for the same type of product the commission rate will probably be down by 30 to 40 percent um
spk06: Xiaoqiu.
spk23: Well, it's for certain that the business for insurance, independent insurance brokers will be severely impacted. But right now, the insurance companies will have a different product strategy to adapt to this market change, diverting their focus from the whole life insurance product to participating insurance products to make up some of the loss on the commission. income for independent brokers.
spk06: As for FanHua, we have also made sufficient preparations for the newsroom merger. I believe that the platform-based layout will promote our cooperation with the entire small and medium-sized brokerages to increase the share of the market. Well, the requirements for...
spk23: commission cap and the reported 5B consistency is an inevitable trend given the continued decline in interest rates. However, and it will probably bring a short-term plan to industry as well for Fan Huang, but we are fully prepared for these new changes. And we have also been been expanding our platform model. We believe that this regulatory change will result in more and more medium-sized and intermediate companies to collaborate with FanHua in terms of platform business. And it will help us to continue to drive our market share.
spk03: Thank you.
spk16: I'll answer the first part of the second question with regard to our progress in the Hong Kong market. We established the two joint ventures with our partner, Asia Insurance, back in late October. It's been about five months. I'm very pleased to say that we have made very, very significant progress with our two joint ventures. Firstly, in terms of our team setup and office, so we now basically have two offices in Hong Kong. One is our brokerage business and the other one is our technology business. In our brokerage business, we have now built a team of 13 members. They're basically in the administration, in the technical representative areas to facilitate contract signing. In the period of November to January, together with the management team from Asia Insurance, we met with all the major life insurers in Hong Kong to start the process of contract signing. So far, we have signed contract with 10 insurers, and over the last few weeks, we have received the commission schedule from some of the insurers. So very, very pleased to say that we can officially commence business from this week. In terms of where we differentiate in Hong Kong and why we are confident that we can be successful in our first market of Hong Kong, I think it comes down to really two things. Firstly, we are the only broker in Hong Kong, in fact in the region, that's backed by two listed companies with abundant resources. And this provides us with abundant opportunity and capability to offer comprehensive services to our customers. Secondly is on the technology front. As I've highlighted in the past, the broker technology segment in Asia remains very, very underdeveloped. Even in mature markets like Hong Kong, a lot of the contract signing is still very paper-based compared to 100% digital or paperless in China. So we're the only broker with more than 200 in-house IT support staff. that can basically transfer a lot of the know-how that were built in the Chinese market to Hong Kong. In the discussions that we had with all the life insurers from the period of November to January, the focus was really on two topics. The first one is obviously contract signing, but more importantly, the second one is really on IT integration. And I'm very pleased to say that all insurers expressed a strong interest not only to work with us in terms of doing the the business of selling, but they're also very interested in our digital capability and how we can work together to improve the sales technology in the Hong Kong market. And what's interesting is we're not only trying to work with these insurers to develop technology that would help them to work with brokers, but more importantly, we're now also convincing them that maybe maybe they could also outsource their in-house sales technology to Fanhua. Because the reality is we have spent an enormous amount of resources over the last four, five years in our sales technology capability. And a lot of this know-how, I think, is probably 10 years ahead of the Hong Kong market, even compared to insurers. So we're very, very confident that our technology capability and differentiation is going to be one of our strong competitive advantages in the Hong Kong market. And although we just commenced our Hong Kong business, we're already invited by a number of insurers to basically start operations in Macau and also in Singapore. Because in these markets, there is also a lack of presence in terms of a major broker that has strong shareholder backing as well as technology capability. So, you know, one step at a time, I wouldn't be too surprised that in 2024, we will expand beyond Hong Kong. The second part of the second question, Mr. Hu will talk about our progress with Singapore's Light Group.
spk09: First of all, the strategic investment of Huade Group will not change the strategic positioning of Fanhua itself. Last year, in 2023, Fanhua made it clear that Fanhua's vision is a global leading intelligent financial service platform. So Huade Group's strategic investment is to enrich and strengthen or help us to achieve
spk16: So first and foremost, what we want to reiterate is that our collaboration will not change the positioning of Fanhua and our strategic direction. Last year, you know, we basically issued our new mission statement for the company. And we made it very clear that our objective going forward is to become the regional service provider for family services, broadening our capability beyond insurance, but into education, retirement, etc. So what we're advocating is an insurance plus model beyond mainland China. And we think this opportunity to have a reason, a white group, is very, very timely for us.
spk09: Thank you. So the synergy that can bring about without cooperation or white group is really based on
spk16: to upgrade in terms of our capability. The first one is that Singapore's white group have much better capability in terms of capital raising, particularly in the international market, compared to Fanhua. Secondly is that their track record and capability in mergers and acquisitions is also very evident, given their history and success. We think these two capabilities serves as important upgrades for Fanhua as we pursue our strategy of going global through organic and inorganic strategies.
spk09: 订购的项目将紧紧地围绕着 Fanhua的愿景展开, 围绕着 Fanhua的两个核心资产来进行。 两个核心资产就是专业化、职业化的销售队伍,
spk16: So M&A will be a core part of our strategy because we think that the opportunity for consolidation in the market, not only in China, but across the region is very, very significant. And really we'll focus on two areas. Number one is all our mergers and acquisitions will focus on bringing capabilities to improve or help us execute on our strategy of developing a professional sales team across the region. And then secondly is helping us to broaden our services to high-net-worth clients.
spk09: We know that the biggest change in the industry is the policy of unified reporting. The essence of this policy is to monitor to promote the high-quality development of the industry. So how to achieve high-quality development? This is the development of Fanhua's capabilities. It is also to achieve the high-quality development of the industry. So we think that Baoqing Unified So without a doubt, the biggest change to our industry from 2024 onwards is the commission cap.
spk16: And we think if you look at the regulatory purpose of the commission cap is really to drive higher quality growth. Now how do you achieve that? We think at the end it comes down to upgrading your capability. That's going to be very, very important. So we think the commission cap is the right thing for the industry. We fully embrace it. And our strategy is on basically putting the resources on improving our capability so that in this environment, we will become the biggest beneficiary.
spk15: Thank you.
spk12: I'm showing no further questions at this time. So with that, I'll hand the call back over to Oasis Q for any closing remarks.
spk23: Thank you for joining us on today's conference call. If you have any further questions, please feel free to contact us. Thank you.
spk12: Thank you for participating. This concludes today's program, and you may now disconnect. you you Thank you. Thank you.
spk17: Bye.
spk12: Thank you for standing by for FANHUA's fourth quarter and fiscal year 2023 earnings conference call. At this time, all participants are in a listen-only mode. All lines have been placed on mute to prevent any background noise. After 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.fanhgroup.com under the Events and Webcast section. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Ms. Oasis Kew, Fan Hua's Investor Relations Manager.
spk23: Thank you, Andrew. Good morning and good evening, everyone. Welcome to Fan Hua's fourth quarter and fiscal 2023 end of school. A replay will be available on our IR website after today's call. Please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. These statements are made based on management's current expectations and beliefs concerning future events impacting the company and therefore 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 and are not limited to those outlined in our filings with SEC, including our registration statement on Fund 20F. We do not undertake any obligation to update this forward-looking information except as required under applicable rules. Joining us today are our Vice Chairman and Chief Executive Officer, Mr. Yi-Nan Hu, Chief Financial Officer, Mr. Peng Ge, Chief Strategy Officer, Mr. Ben Lin, and Chief Operating Officer, Mr. Li Chong Liu. Mr. Hu will start the call by sharing his view on recent market trends and our strategy development. followed by Mr. Ben Lin, who will provide a review of financial and operational highlights and discuss our business outlook going forward. There will be a Q&A session after the prepared remarks. Please note that you can find our presentation materials relevant to this call from our official website. With that, I will turn the call over to Mr. Hu.
spk22: Mr. Hu, you may begin.
spk09: I will translate for Mr. Hu. Good morning and good evening. Thank you for joining us on our fourth quarter and through year 2023 and in school. Looking back at the past year, 2023 has been a year full of challenges and changes for the entire human resources industry. The profound changes in the policy of supervision, especially the downfall of the foreign exchange rate and the implementation of the monetary channel, and the unification of the insurance sector, have brought unprecedented challenges to the industry. Fanhua is no exception, but it is in such an environment that we have shown endurance and achieved steady growth.
spk23: Reflecting on the past year, 2023 proved to be a year of challenges and transformations for the entire life insurance industry in China. The profound changes in regulatory policies, particularly the downward adjustment of the pricing rate and the implementation of fire and actual fee consistency requirements in the Bank Assurance Channel, presented unprecedented tests for the industry. Fanhua was no exception. However, it was precisely within this challenging landscape that we showcase resilience and achieve stable growth.
spk09: In the whole year of 2023, Fanhua's total cost of maintenance reached 164.4 billion yuan, which is 28.7% of the total growth, and continues to be superior to the overall performance of the industry. A total of 38.1 billion yuan for the new unit, which is 30.3% of the total growth. With the efficient improvement of digitalization and effective cost control measures, Banhua has achieved a net profit of 1.95 billion yuan, which is 16.1% of the total growth, and its shareholder net profit of 2.8 billion yuan, which is 179.1% of the total growth. In the full year of 2023, we achieved a total insurance premium of 16.4 billion RMB, representing a 28.7% year-on-year growth, continuing to outpace the overall industry growth.
spk23: First-year premiums reached 3.8 billion RMB, marking a 30.3% year-on-year growth. Leveraging the efficiency gains from digitalization and robust cost-control measures, we realized an operating income of 195.8 million RMB, up 16.1% year-on-year. Net income attributable to shareholders rich 280.4 million RMB, reflecting a growth of 179.7% year-on-year. This solid performance demonstrates the successful execution of our strategy.
spk09: In the past year, we have continuously strengthened the strategy of professionalization, professionalization, digitalization, and open platform, and achieved a series of key results. For example, we continue to grow and improve our professional ability. The contribution and potential improvement of our professional ability is an important driving force for our performance growth. Digital platform continues to play an effective role, providing our sales partners with a better life, and at the same time providing customers with a better service experience. The diversified service ecosystem that we have built has formed the differentiating competitiveness of our company. Over the past year, we have continually strengthened our strategy of driving growth through professionalization, specialization, digitalization, and open platform, using a series of pivotal achievements.
spk23: For instance, we have consistently bolstered our pool of top tier agents, enhancing their professional capabilities with the contribution from top performing agents and increased productivity of our sales team at all levels, serving as the pivotal drivers of our growth. Our digital platforms have continued to deliver efficiency gains, empowering our insurance advisors while also providing our customers with superior service experiences. The diversified service ecosystem that we have built has established a solid foundation for our company's differentiation and long-term development. Furthermore, our open platform and M&A model have also emerged as the key drivers of our company's growth.
spk09: Although it will inevitably bring great challenges to the industry, we have seen great opportunities. We believe that the deep change in this round of monitoring policies will accelerate the transformation of the industry, and the realization of large-scale leading enterprises and comprehensive enterprises that can provide diversified services, and the realization of digitalized and intelligent platform-based companies will be in a stronger position. The forthcoming deconsistency requirement and the commission cap, although may inevitably pose significant challenges to the industry,
spk23: will also present enormous opportunities. We believe that amid this phase of deregulatory from accelerating industry transformation, scale-driven leading players, companies able to offer diversified services, and digitally intelligent platform companies will find themselves in a more advantageous position. Leveraging our strategic achievements in specialization digitalization, open platforms, and service-oriented initiatives over the past two years, we are confident that Fanhua will emerge as the biggest beneficiary.
spk09: At the same time, our international strategy is also steadily advancing. Hong Kong, as the bridgehead of our international layout, and two companies in Asia's insurance and capital,
spk23: 已经正式投产,为我们在全球范围内的业务布局提供了坚实的基础。 Meanwhile, our internationalization strategy is steadily advancing. Hong Kong, serving as the cornerstone of our international expansion efforts, has sustained the official launch of two subsidiaries with Acer Insurance for business operations. providing a solid foundation for our global business layout.
spk09: family services, including insurance, finance, education, health, retirement, family management, and other areas, to achieve horizontal and vertical and multidimensional development. This not only means that we will be able to provide customers with more comprehensive and efficient family asset configuration services, but it will also accelerate our expansion in the international market and open up a wider space for development for us.
spk23: Recently, we signed a strategic framework agreement with Singapore White Group, marking a significant milestone in our development journey. The potential collaboration represents a strategic upgrade towards artificial intelligence development and internationalization. Through means such as mergers and acquisitions, We will invest in high-quality overseas assets, deepening our presence in family services, including insurance, wealth management, education, health care, and family governance. This move aims to achieve horizontal and vertical integration, allowing us to offer comprehensive and efficient family asset allocation services to our clients. Moreover, it will accelerate our expansion in international markets, paving the way for broader development opportunities, and propelling the company to greater heights.
spk09: Looking forward to the future, we believe that the development of the industry will gradually focus on the direction, forming a framework for industry monopoly. Service and technology will become the main driving force. and FanHua will be the biggest beneficiary of this change. We will actively explore the insurance, service, and technology models to provide customers with comprehensive products and diversified services, and at the same time use technology to improve service efficiency. We will focus on serving high-end customers and the MDRT double group. This will be our core asset. The year of 2024 will be the key year for our development. We will rely on the leading technology platforms, comprehensive service capabilities and capital strength, network, and high-quality assets to further achieve scale development. We believe that in the future, we will continue to maintain the leading position, create more value for customers, and achieve the company's long-term development goals.
spk23: Looking ahead, we firmly believe that the industry will gradually move towards consolidation, forming an overly geopolitical landscape dominated by a few major players with services and technology driving the way forward. We are poised to emerge as one of the biggest beneficiaries of this transformation. Embracing the insurance plus services plus technology model, We will provide comprehensive products and diversify services to our customers while leveraging technology to enhance service efficiency. Our focus will be on serving the high net worth customers and MDRTs, which are also our core assets. The year 2024 will be pivotal for our development. We'll further expand our scale through industry-leading technology platforms, comprehensive service capabilities and strong capital to acquire high-quality assets. We believe that in the journey ahead, we'll continue to maintain our leading position, create more value for our customers, and achieve the long-term development goals of the company.
spk09: Next, please welcome our Chief Strategist, Ben Lin, to discuss the situation of our previous year.
spk23: Now I would like to invite Mr. Ben Lin, our Chief Strategy Officer, to discuss our business highlights in the fourth quarter and 2023.
spk16: Thank you Mr. Hu and thank you Oasis. Let me just walk you through our results for 2023. Some of the numbers that I'm going to quote, you can find them in our results release as well as our online presentation. Impacted by two significant regulatory policy changes in 2023, specifically the pricing rate change and commission cap at the bank assurance channel, the life insurance industry in China witnessed a roller coaster ride in terms of premium growth. Starting with single digit growth in the first quarter, it soared to double digit growth in the second quarter due to the pull forward demand prior to the pricing rate adjustment. What we saw was then a reversion to single digit growth in the third quarter, and ultimately negative growth in the fourth quarter. Overall, we saw a 10% year-on-year increase for the entire year of 2023 at the industry level. Amidst the due pressures of sluggish performance on both the liability and investment side, major insurers are expected to experience significant decline in profitability, as indicated by the 15% negative growth in average profit of the listed companies in the first nine months of 2023. Against this backdrop, Fanhua continues to outperform the industry with stellar performance. In 2023, we achieved RMB $16.1 billion in total life insurance premium, which is a 30% increase year on year, and net income to shareholders reached 280 million RMB, up almost 180% year on year. Overall, we are very pleased with our financial results, given the backdrop of a challenging macro and insurance industry environment in 2023. More importantly, we are particularly proud of the strategic executions we have carried out to achieve these results. Throughout 2023, we successfully executed each strategic initiative as we had planned. We firmly believe that these strategic achievements will set us on a higher quality and sustainable growth path. I would like to highlight four key strategic achievements that we saw in 2023. Firstly, our strategic focus on improving our agent quality and productivity produced significant results and is the major driver of our success in 2023. Our MDRT and 100K premium agents have emerged as major contributors to our growth. These agents saw productivity increasing by 15% and 10% respectively, and they accounted for 65% of our total first year premium, up by 9 percentage points from 2022. These achievements help offset the significant decline in overall agent number, a metric that we're no longer focused on, and is also an industry-wide trend. Secondly, we saw significant achievement in our digital technology empowerment. Based on the digital infrastructure built on big data intelligent algorithm, Fanghua has built an industry-leading digital empowerment system, covering five major systems, including operational support and management empowerment, professional growth and IT promotion system, customer management system, customer service system, and transaction support system. Among the many important tools in our digital system, in 2023, Faohao focused on strengthening digital marketing empowerment for functions such as digital avatar, intelligent recommendation systems, insurance AI assistance, and intelligent customer marketing. It helps our salespeople achieve intelligent management across these areas. The cost reduction and efficiency improvement brought by the digital empowerment that we have built, our efficiency increased significantly over 2023. If you look at our operating expense ratio, it decreased from 29.4% to 25.7%. Agents who frequently use our system have productivity that is 1.6 times higher than those who do not use the system. Thirdly, our open platform strategy accounted for over 30% of our total new business. By the end of 2023, we have signed contracts with 854 channels and an increase of 63 from the last quarter of 2020. 2020, the third quarter of 2023. These partnerships contributed to a total first year premium of over $1.1 billion, accounting for over 32% of our total new business. There are also insurance companies, human resource consultancy agencies, and numerous other 2B channels expressing their interest in further collaboration with us to use the open platform system and digital tools to sell life insurance in their main business. Fourthly, our service-oriented ecosystem continues to take shape with evident results. We have developed a robust ecosystem beyond just life insurance, covering trust service, family office, healthcare and wellness, overseas asset allocation, education, tax consulting, family affairs processing, etc. providing customers with a rich experience scenarios and substantial support to our sales agents in insurance marketing. During 2023, we held 256 family office consultants training sessions and salons, certifying more than 1200 family office advisors who have since served a total of 500 families in assisting them to set up a total of 450 trusts, with total asset value exceeding 5.6 billion RMB, and facilitating approximately 100 million RMB in first-year premium. By the end of 2023, more than 20,000 FRP, or Fanhua Retirement Planners, have been trained and certified. During 2023, nearly 300 visits to our continuing care retirement community were organized, helping nearly 1,000 customers lock in rights for long-term stays in these retirement communities and more than 4,000 customers obtain rights for these retirement communities across the nation, helping to achieve over RMB 600 million in first year premium. At the end of 2023, Fanhua has trained and certified more than 20,000 policy trusteeship experts, serving more than 130,000 policy trustee families with 630,000 policies under trusteeship. generating cross-sale and upper sales to 30,000 customers, facilitating about $550 million in first-year premium. Lastly, we have made significant progress in our global expansion strategy. Since the establishment of our two joint ventures with Asia Insurance in Hong Kong in October, the insurance brokerage company has completed the formation of its core business team and signed contracts with about 10 major insurance companies in Hong Kong ensuring the ability to meet diverse customer needs. Operations officially commence in early February for our insurance broker business. On the technology side, we're actively engaging with a number of insurers, and we're confident that our technology business will have its own milestones in 2024. Looking ahead for 2024, the insurance industry, especially the independent intermediary channel, will face a series of challenges and opportunities. Due to the significant uncertainty surrounding the specific timing and extent of the implementation of the requirement for consistency in reported and actual fees in the independent intermediary channel, we are unable to make precise predictions regarding our annual performance targets. However, what can be anticipated is that whilst the regulatory change may lead to short-term pains, you also bring important opportunities for the development of our open platform. Our strategic focus in 2024 will include, number one, continue to build a professional and specialized sales team. We aim to increase our market share by growing the number of high quality agents, particularly MDRTs, taking advantage of the market consolidation opportunity that is likely to arise as a result of the commission cap to be implemented. Number two, enhance our capabilities to serve high net worth individual clients. We will continue to build out our service ecosystem, supplementing our offerings in financial services to education, elderly care, and overseas travel. Number three, bringing high quality assets while going global, accelerating our internationalization and digitalization process. We have been invited by a number of insurers to set up operations in Macau and Singapore. And lastly, we will pursue M&A opportunities to achieve horizontal and vertical integration. Given our strong financial position with over 1.4 billion RMB in net cash and the backing of our potential strategic shareholder, Singapore's White Group, we are probably the most well-resourced intermediary in the region with the capacity and capability to undertake attractive and accretive M&A opportunities both inside and outside of mainland China. This concludes my presentation and I'll hand the session back to Oasis. Thank you.
spk02: Thank you. Now the floor opens for Q&A session. Andrew.
spk12: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.
spk19: Once again, to ask a question, please press star 1-1. Our first question comes from the line of Yuyu Zheng with CICC.
spk12: Your line is open.
spk21: The first question is still about the insurance policy. We may have discussed a lot about the negative impact before. I would like to ask the manager to explain it to us. We have observed that the insurance policy will probably have some initial numbers for the rate of income reduction. My second question is about the expansion of overseas business. What is the latest progress? What are the plans for the next two years? What role will the strategic framework of the Yuhua Group Group have in this? Let me simply translate my two questions. So my first question is about the peacekeeping agreement. We've made a lot of discussions before about the peacekeeping agreement. Can we be a little bit more precise on this? Beyond your observation, to what extent made the Commission revenue cuts? If there are any numbers you can share with us? My second question is for the overseas business. Could you share some more details on what you've done in 2023 and will do in 2024? And about White Group, how can Fenhua cooperate with it to achieve more market share in Asia? Thank you very much.
spk05: Thank you. I will answer the first question.
spk09: Yes, the first question is for the Chief Operating Officer, Mr. Liu Licheng. The second question is divided into two small questions. The first is about our international progress in Hong Kong. Please, Mr. Ben, introduce the investment of Huade Group. I will answer it. Okay, Mr. Chong, please.
spk23: So, Mr. Hu would like to invite our chief operating officer, Mr. Liu, to take your first question. And the second question actually consists of two parts. So, the first part regarding our international initiative, especially the business in Hong Kong, this part will be answered by Mr. Zeng. our chief strategy officer and the last part of regarding our potential collaboration with Y Group, Mr. Hu, he will answer the question. Mr. Hu, he will answer the question.
spk06: Mr. Hu, he will answer the question. Mr. Hu, he will answer the question. Mr. Hu, he will answer the question. Mr. Hu, he will answer the question. uh uh uh uh so um well the requirement for fee and the reported and fire fee consistency in the independent brokerage channel is up and coming um
spk23: Although the regulatory body has not yet given a specific timing as to when it will be implemented, but the rumors in the industry is that it will probably be implemented in April. And as for the extent of the commission cap, there is also no specific guidance from the regulatory body yet um but um and the but the consensus among a lot of insurance companies is that probably the commission rate uh well for the same type of product the commission rate will probably be down by 30 to 40 percent um
spk06: Xiaoqiao.
spk23: Well, it's for certain that the business for insurance, independent insurance brokers will be severely impacted. But right now, the insurance companies will have a different product strategy to adapt to this market change, diverting their focus from the whole life insurance product to participating insurance products to make up some of the loss on the commission. income for independent brokers.
spk06: In terms of prosperity, we have also made sufficient preparations for the news conference. I believe that the platform-based layout will promote the entire small and medium-sized sector and our cooperation. In this way, we can increase the share of the market. Well, the requirements for
spk23: commission cap and the reported 5B consistency is an inevitable trend given the continued decline in interest rates. However, and it will probably bring a short-term plan to industry as well for Fanhua, but we are fully prepared for these new changes. And we have also been been expanding our platform model. We believe that this regulatory change will result in more and more medium-sized and intermediate companies to collaborate with San Juan in terms of platform business. And it will help us to continue to drive our market share.
spk03: Thank you.
spk16: I'll answer the first part of the second question with regard to our progress in the Hong Kong market. We established the two joint ventures with our partner, Asia Insurance, back in late October. It's been about five months. I'm very pleased to say that we have made very, very significant progress with our two joint ventures. Firstly, in terms of our team setup and office, so we now basically have two offices in Hong Kong. One is our brokerage business and the other one is our technology business. In our brokerage business, we have now built a team of 13 members. They're basically in the administration, in the technical representative areas to facilitate contract signing. In the period of November to January, together with the management team from Asia Insurance, we met with all the major life insurers in Hong Kong to start the process of contract signing. So far, we have signed contract with 10 insurers, and over the last few weeks, we have received the commission schedule from some of the insurers. So I'm very, very pleased to say that we can officially commence business from this week. In terms of where we differentiate in Hong Kong and why we are confident that we can be successful in our first market of Hong Kong, I think it comes down to really two things. Firstly, we are the only broker in Hong Kong, in fact in the region, that's backed by two listed companies with abundant resources. And this provides us with abundant opportunity and capability to offer comprehensive services to our customers. Secondly is on the technology front. As I've highlighted in the past, the broker technology segment in Asia remains very, very underdeveloped. Even in mature markets like Hong Kong, a lot of the contract signing is still very paper-based compared to 100% digital or paperless in China. So we're the only broker with more than 200 in-house IT support staff. that can basically transfer a lot of the know-how that were built in the Chinese market to Hong Kong. In the discussions that we had with all the life insurers from the period of November to January, the focus was really on two topics. The first one is obviously contract signing. But more importantly, the second one is really on IT integration. And I'm very pleased to say that all insurers expressed a strong interest not only to work with us in terms of doing the the business of selling, but they're also very interested in our digital capability and how we can work together to improve the sales technology in the Hong Kong market. And what's interesting is we're not only trying to work with these insurers to develop technology that would help them to work with brokers, but more importantly, we're now also convincing them that maybe maybe they could also outsource their in-house sales technology to Fanhua. Because the reality is we have spent an enormous amount of resources over the last four, five years in our sales technology capability. And a lot of this know-how, I think, is probably 10 years ahead of the Hong Kong market, even compared to insurers. So we're very, very confident that our technology capability and differentiation is going to be one of our strong competitive advantages in the Hong Kong market. And although we just commenced our Hong Kong business, we're already invited by a number of insurers to basically start operations in Macau and also in Singapore. Because in these markets, there is also a lack of presence in terms of a major broker that has strong shareholder backing as well as technology capability. So, you know, one step at a time, I wouldn't be too surprised that in 2024, we will expand beyond Hong Kong. The second part of the second question, Mr. Hu will talk about our progress with Singapore's Light Group.
spk09: First of all, the strategic investment of Huade Group will not change the strategic positioning of Fanhua itself. Last year, in 2023, Fanhua made it clear that Fanhua's vision is a global leading smart financial service platform. So Huade Group's strategic investment is to support and strengthen or help us to achieve
spk16: So first and foremost, what we want to reiterate is that our collaboration will not change the positioning of Fanhua and our strategic direction. Last year, we basically issued our new mission statement for the company. And we made it very clear that our objective going forward is to become the regional service provider for family services, broadening our capability beyond insurance, but into education, retirement, etc. So what we're advocating is an insurance plus model beyond mainland China. And we think this opportunity to have a risen white group is very, very timely for us.
spk09: Yeah. So the synergy that can bring about without cooperation or white group is really based on
spk16: to upgrade in terms of our capability. The first one is that Singapore's white group have much better capability in terms of capital raising, particularly in the international market, compared to Fanhua. Secondly is that their track record and capability in mergers and acquisitions is also very evident, given their history and success. We think these two capabilities serves as important upgrades for FANHUA as we pursue our strategy of going global through organic and inorganic strategies.
spk09: 并购的项目将紧紧地围绕着 FANHUA的愿景展开, 围绕着 FANHUA的两个核心资产来进行。 两个核心资产就是专业化、职业化的销售队伍,
spk16: So M&A will be a core part of our strategy because we think that the opportunity for consolidation in the market, not only in China, but across the region is very, very significant. And really we'll focus on two areas. Number one is all our mergers and acquisitions will focus on bringing capabilities to improve or help us execute on our strategy of developing a professional sales team across the region. And then secondly is helping us to broaden our services to high-net-worth clients.
spk09: We know that the biggest change in the industry is the policy of integrated reporting. The essence of this policy is to monitor We hope to promote the high-quality development of the industry. How to achieve high-quality development? This is the development of Fanhua's capabilities. It is also about achieving the high-quality development of the industry. So we think that Baoqing Unified So without a doubt, the biggest change to our industry from 2024 onwards is the commission cap.
spk16: And we think if you look at the regulatory purpose of the commission cap is really to drive higher quality growth. Now how do you achieve that? We think at the end it comes down to upgrading your capability. That's going to be very, very important. So we think the commission cap is the right thing for the industry. We fully embrace it. And our strategy is on basically putting the resources on improving our capability so that in this environment, we will become the biggest beneficiary.
spk15: Thank you.
spk12: I'm showing no further questions at this time. So with that, I'll hand the call back over to Oasis Q for any closing remarks.
spk23: Thank you for joining us on today's conference call. If you have any further questions, please feel free to contact us. Thank you.
spk12: Thank you for participating. This concludes today's program, and you may now disconnect.
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