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Operator
Good day and welcome to NOAA Holdings' third quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there may be an opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the conference over to Melo Zee, Investor Relations Director. Please go ahead.
Melo Zee
Thank you, operator, and good morning and welcome to NOAA's 2023 Third Quarter's Earnings Call. Joining me on the call today are Ms. Wang Jingbo, our co-founder, chairlady, and CEO, and Mr. Graham Pan, our CFO. Ms. Wang will begin with an overview of our recent business highlights, followed by Mr. Pan, who will discuss our financial and operational results. They will both be available to take your questions in the Q&A session that follows. I'd like to generally remind you that we just held our annual investor day on November 14 in Hong Kong, where NOAA's executive management team provided an in-depth review of the business and laid out our strategic priorities for the future. The presentations and the panel discussions focused on our resilient standardized product offering, overseas expansion plans, solution-driven advisory services, global product leadership, as well as the client service strategies. A full replay of the event and presentation materials can be found on our Investor Relations website, which I encourage all of you to watch. Before we begin, please note that discussion today will contain forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from those in our forward-looking statements. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the ICC and the Hong Kong Stock Exchange. NOAA does not undertake any obligation to update any forward-looking statements, except as required under applicable law. In addition, today's call will include discussions of certain non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures can be found in our earnings release. Lastly, this call should not be interpreted as a solicitation to sell or purchase an interest in any NOAA or NOAA-affiliated products. Please also be aware that the link to a live webcast with presentation materials is available on our Investor Relations website. With that, I would like to pass the call to Ms. Wang. Please go ahead.
Wang Jingbo
Today's call meeting, I would like to first share with you the observation of the recent face-to-face exchange with Loya customers, as well as the development of the overseas business in the financial management industry, and report the development of the three-season results and several major business models. Over the past two months, we have held a number of Roya customer meetings. Starting in Shanghai, we have received more than 1,200 domestic customers in our new headquarters. We have also conducted medical check-ups for the health of the family assets. According to the actual situation of the customers, we have provided suggestions for the adjustment of the asset allocation for the customers. Later, in Hong Kong and Singapore, we have had meetings and exchanges with more than 150 and 800 international black cards and super black customers to understand their understand and analyze their needs and promote Loya International Services. Based on our close observation and communication, we can see that high-quality customers of Loya Services are becoming more and more mature in their demand for wealth management and asset allocation. In the past, they focused on specific products, focused on revenue, and are now changing to consider asset security, the production plan of enterprises and families, and the strategic asset allocation of the world. Especially Loya International's customers basically went from product-driven to asset-driven wealth management needs. In the past two or three years, It is also the transition period from product drive to solution drive. We set up a CIO office at the international tax office, a customer strategy CSO office, and a product solution ITS office. Through the CCI system, we have moved from the red-light house to the customer demand configuration. The combination of product and service solution solutions has increased the service quality of all financial services through organizational construction and increased the satisfaction of customers. Thank you all for joining us. I would like to begin today's call by sharing some recent insights gleaned from the face-to-face interactions I had with NOAA clients
Melo Zee
and my thoughts on the state of the wealth management industry. After that, I'll cover the recent progress in our overseas business, provide a comprehensive overview of our third quarter performance, and go over some updates from our business segments. Over the past two months, we have held numerous annual meetings with over 1,200 domestic clients at our new headquarters in Shanghai. where we offered each of them an asset allocation assessment, paired with strategic advice tailored to their unique circumstances. Subsequently, in Singapore and Hong Kong, we held meetings with over 150 and over 800 international black card clients, respectively, allowing us to gain valuable insights into their needs while promoting NOAA International's product and service offerings. Our close discussions revealed an encouraging evolution in the wealth management needs of NOAA's high-net-worth clients. In particular, there has been a noticeable shift in focus from specific products and returns to a broader array of considerations encompassing asset security, enterprise and family succession plans, and global strategic asset allocation. This transition is particularly pronounced among NOAA's international clients, reflecting their journey from product-centric to asset allocation-driven wealth management needs. Over the past two to three years, NOAA has overhauled its offering, transitioning from a product-driven to a solution-driven approach. In our international wealth management segment, we roll out the CCI model, comprising of the chief investment office, client strategy office, and investment and product solution office. Through the CCI model, we directly align our macro house views with the client demand to build product and solutions and improve relationship manager service standards and client satisfaction. NOAA International Wealth Management's product offering and services, Matrix, provides high-net-worth clients with our four global account allocation schemes embedded in our technology infrastructure, significantly enhancing the ability of NOAA's relationship managers to provide asset allocation advice and continuity of service.
Wang Jingbo
We believe that the key factors for the success of the asset management and the asset management company are, first of all, to have a happy performance and a rich product price, I think this is also the core reason why Loya maintains good cooperation with customers for a long time. We believe to achieve success, wealth and asset management firms
Melo Zee
must have a solid track record, offer a diverse product portfolio, maintain efficient sales channels, and build high-quality AUM base. At NOAA, we recognize the pivotal role of talent and focus on cultivating a strong team through a long-term talent screening and development system. We also believe it's crucial to have a mission, vision, and values that resonate with our clients. Our organizational and technological architecture underscores our commitment to providing high-quality, client-centric services, with client satisfaction serving as the cornerstone of our long-term relationships. NOAA remains dedicated to serving high-net-worth Chinese clients globally. Leveraging Hong Kong as a hub, we have begun building teams of relationship managers in key locations, such as Singapore, Europe, and the United States, to cater to Chinese clients' comprehensive asset allocation needs. As the international wealth management team continues to mature, we're confident that we'll sustain our growth and expand our reach to serve a growing number of clients globally.
Wang Jingbo
In terms of financial history, in the first three seasons of 2023, the total revenue of the company's overall revenue was 25.1 billion yuan, which increased by 11.9%. Among them, China's domestic business contributed 15 billion yuan, which is 59.9%, which fell by 11.6%. With the increase in the demand for global asset allocation of customers and the continuous investment of international channels in products and comprehensive services, overseas business contributed 10.1 billion yuan, which increased by 85.1% compared to the growth, and the total income ratio increased from 24.3% last year to 40.1%. In terms of branches, the financial management branch contributed 18.9 billion yuan, which increased by 20.9% compared to the growth, and the domestic business contributed 11 billion yuan, which decreased by 0.2% compared to the decline. overseas business contribution is 7.8 billion yuan, which is equal to the growth of overseas product acquisition scale and comprehensive service revenue, which is 72.3% higher than before. As for asset management, the contribution is 5.8 billion yuan, which is 5.4% lower than before. Among them, domestic business contribution is 3.6 billion yuan, which is 31.8% lower than before. Overseas business contribution is 2.2 billion yuan, which is 150.3% higher than before, mainly due to the growth of overseas AUA and AUM. In the comprehensive service sector, high-end customers and families still have a strong need for wealth protection and inheritance. In the first three seasons of this year, domestic insurance economic business revenues increased by 63.4%, and overseas insurance trust and other comprehensive service revenues increased by 381.8%. In the third season, the number of active customers increased by more than 4 times. In the past few seasons, we have increased our digital investment in insurance and comprehensive service systems. Our technology team has continued to open up technology systems in the world and around the world. Now turning to our financial performance for the first three quarters of 2023.
Melo Zee
We generated total revenues of RMB 2.5 billion and year-on-year increase of 11.9%. The domestic business contributed RMB 1.5 billion and year-on-year decrease of 11.6%, accounting for 59.9% of the total net revenues. The growing client demand for global asset allocation, coupled with NOAA's ongoing investments in channels, products, and comprehensive services, propelled overseas revenues to RMB 1 billion, and year-on-year increase of 85.1%, accounting for 40.1% of revenue, up from 24.3% in the previous year. Breaking it down by segments, wealth management contributed RMB 1.9 billion, a significant year-on-year increase of 20.9%. The domestic wealth management business contributed RMB 1.1 billion, a slight year-on-year decrease of 0.2%. The overseas wealth management business contributed RMB $784 million, a year-on-year increase of 72.3%, as it benefits from the growth in overseas conduction value and comprehensive services income. The asset management segment contributed RMB $582 million, a year-on-year decrease of 5.4%. The domestic asset management business contributed RMB $358 million, a year-on-year decline of 31.8%, while the overseas business contributed RMB 223 million, a year-on-year increase of 150.3%, primarily driven by the growth of overseas AUA and AUM. On the comprehensive services front, we continue to see robust demand for wealth protection and inherited solutions from high-net-worth clients. Our domestic insurance brokerage business achieved a remarkable year-on-year growth of 63.4% in the first three quarters of 2023. Meanwhile, revenues from overseas insurance trusts and other comprehensive services surged 381.8% year-on-year. The number of active overseas insurance clients increased more than fourfold in year-on-year Q3. Over the past quarter, we have increased our investments in digitalizing our insurance and comprehensive services programs. Our technology team has begun integrating our systems with insurance companies worldwide, making us the first company in Hong Kong market to offer fully digital insurance applications and premium payments through a NOAS nominee account. This has made insurance application a significantly more efficient experience for our clients while enhancing our ability to provide high quality fulfillment services. For the first three quarters of 2023, Operating profits stood at RMB 877 million, with an operating profit margin of 35.2%.
Wang Jingbo
It provides customers with the ability to generate CCI reports, asset allocation checks, and other functions, and improves customers' storage experience, and drives the production of new businesses in the storage service. Three years ago, the revenue of the three-year public fund exceeded 36.9 billion yuan, with a growth of 19.3%. The revenue of real estate products exceeded 14.2 billion yuan, with a growth of 46.2%. In terms of legal customers, in 2022, CX微小私库SaaS platform served nearly 6,000 small and medium-sized enterprises and financial institutions, In the previous three seasons, the number of private and public customers increased by 73.7% and the number of customers increased by more than 600,000 people. In terms of international accounts, we continue to implement the private banker recruitment plan in Hong Kong and Singapore. By the end of the third season, 77 customer managers from Hong Kong and Singapore have returned 37.5% of their accounts and are steadily achieving the recruitment goal of 120 customer managers throughout the year. In addition, we successfully opened the Los Angeles Customer Service Station in the third season of 2023. and re-launched U.S. insurance products. Li Bai's office is also in active construction, striving to better cover and meet the needs of Chinese wealth management. As of 2023, the number of opening customers in Hong Kong and Singapore has achieved 12.8% and 315.2% growth. The number of international customers has exceeded 14,200 yuan. The stock of cash management products has reached US$5.7 billion, with a growth of 14.4%. The number of current trading customers has increased by 30.3%. The total number of customers has reached 2,598, with a return growth of 3.5%. The number of customers with pre-borrowing methods has reached 300 million yuan, with a return growth of 15.1%. The number of current trading customers has a return growth of 40.5%. The total number of customers has reached 653, with a return growth of 38.6%. We continue to enrich the product price of Fangzhou Daxu HT in the international online stock market. Thank you. The share price has risen by 105.6% to US$2.7 billion. The share price has risen by 50%. The share price has risen by 50%. The share price has risen by 50%. The share price has risen by 50%. The share price has risen by 50%. The share price has risen by 50%. Our domestic wealth management strategy continues to focus on first-tier and other highly populated cities in China. We have also implemented optimizational structure adjustments to ensure business compliance.
Melo Zee
As of the end of the third quarter, the number of domestic relationship managers increased by 6.7% year-on-year and 0.9% quarter-on-quarter to 1,331. Our domestic wealth management funds, we have continuously invested in technology infrastructure, rolling out functions such as CCI portfolio reports in one click and asset allocation review through our mobile app. This enhances the client experience while generating new business leads within the fulfillment service program process. In the first three quarters, the transaction value of mutual funds exceeded RMB 36.9 billion, a year-on-year increase of 19.3%. The transaction value of private secondary products exceeded RMB 14.2 billion, a substantial year-on-year increase of 46.2%. In terms of corporate and institutional clients, The small treasury platform that launched in 2022 has successfully onboarded nearly 6,000 clients. In the first nine months of 2023, active clients increased by 73.7% year-on-year, with an average client AUA exceeding on the 600,000. On the international wealth management side, we continue to recruit private bankers in Hong Kong and Singapore. As of the end of the third quarter, we had 77 relationship managers in Hong Kong and Singapore, up 37.5% quarter-on-quarter, as we make steady progress towards our annual recruitment goal of 120 overseas relationship managers. Additionally, in the third quarter of 2023, we opened a client service center in Los Angeles, relaunched our U.S. insurance products, and continued setting up our Dubai office to better serve the wealth management needs of Chinese clients around the world. As of the third quarter of 2023, NOAA International had more than 14,200 international clients, with the number of clients in Hong Kong and Singapore growing by 12.8% and 315.2% year-on-year, respectively. Cash management product AUM reached US$570 million, reflecting a quarter-on-quarter increase of 14.4%, with the number of active clients in Q3 increasing by 30.3% quarter-on-quarter, and the number of cumulative clients reaching 2,598, up 3.5% quarter-on-quarter. Clients AUA with NOAA on a discretionary investment basis reached US$300 million, up 15.1% quarter-on-quarter, with the active clients during the quarter increasing 40.5% quarter-on-quarter, and cumulative number of clients hitting 653, up 38.6% quarter on quarter. In terms of international online wealth management, we continue to expand the product offerings on our wealth management app, expanding the client service categories to provide different solutions to individual clients, institutions, and in particular, agency clients, which we have made significant progress during the quarter. In Q3, the number of overall access overseas clients increased by 78.6% year-on-year and 14.6% quarter-on-quarter to 2,284. Overseas transaction value reached U.S. dollar 957 million, reflecting on year-on-year increase of 106.9% quarter-on-quarter and quarter-on-quarter increase of 22.9%. The number of active clients in the U.S. dollar mutual funds reached 1,758, reflecting a year-on-year increase of 105.6%, with transaction value reaching US dollar 269 million, up 59% year-on-year. As of the end of Q3, we have successfully attracted more than 210 overseas corporate and institutional clients. The transaction value of overseas mutual funds reached over US dollar 120 million year-to-date. In addition, the international online wealth management business began trial operations for its two-agent business, which drives the development of EAMs and multifamily offices, leveraging a SaaS platform and NOAA's comprehensive product offering. Our objective is to develop diverse sales channels and targeting the goal of serving 300 overseas EAMs and multifamily offices.
Wang Jingbo
In the private sector, Gefei's asset management total has dropped by 0.9% in 1548.7 billion yuan. This is mainly due to the withdrawal of private sector teams such as Fondofang and other private equity assets and the decline of some second-rate market products. During the third quarter, RMB AM has dropped by 5% and reached 1,193.8 billion yuan. During the third quarter of 2023, the second-rate market fluctuated significantly. The stock market index and Shenzhen level fell 4.12% and 9.39% respectively. The target strategy of Hefei's initiative management team is to ensure a balance of return fluctuation control and long-term revenue for the general public. The target strategy for the end of the third quarter of this year aims to achieve annual revenue of minus 1.63%, annual fluctuation rate of 5.98%, price ratio of minus 0.52%, balanced annual revenue of 3.08%, annual fluctuation rate of 5.74%, price ratio of 0.28%, We have completed the construction of the DSG model in the VC ecosystem. Our goal is to continue to improve the ecosystem in a wider range and with more asset types in the future. By the end of the third quarter, overseas PUA will reach 38.2 billion US dollars, which is 5.7% of the total growth. In terms of the second-tier market, we are strengthening the supply and coverage of overseas top-end hedge funds. Currently, there are 10 of the top 50 hedge fund managers in the top row. In addition, there are 9 more in the short term. Our coverage strategy is also more diversified, with multiple heads, neutral hedge funds, 70 minutes of multiple strategies, etc.
Melo Zee
In terms of asset management, Gopher's total AUM was RMB 154.9 billion, representing a year-on-year decrease of 0.9%, driven by the continued exit of RMB private equity funds and decrease in NAV of some public market security products. As of the end of the third quarter, RMB AUM decreased by 5% year-on-year, reaching RMB 119.4 billion. The third quarter of 2023 was categorized by significant volatility in public markets, with the Shanghai Composite Index and Shenzhen Component Index falling by 4.1% and 9.4% respectively. Gopher's actively managed target strategy product team remains committed to balancing drawdown volatility and maximizing long-term yields. As of the end of the third quarter, annualized returns for active investment products was negative 1.6% with the volatility of 6% and the Sharpe ratio of negative 0.5. The balanced investment products generated an annualized return of 3.1% with volatility of 5.7% and a Sharpe ratio of 0.3. Stable investment products generated annualized return of 8.2% with volatility of 2.1 and a Sharpe ratio of 3.2. Internationally, we are fully committed to enhancing our global investment product matrix. The overseas AUM of actively managed products reached US$4.9 billion, reflecting a year-on-year increase of 13.4%, and its proportion of groups' total AUM also increased to 22.9%. In the primary markets, beyond traditional PEVC products, we have gradually launched infrastructure, GP stake, private credit, secondary funds, and resulting in a more comprehensive product matrix. Varying the domestic strategy, our DSG strategy deployed across the Silicon Valley VC ecosystem focused on fundraising from the top GPs first, followed by investing as an LP through a fund of funds, with a goal to ultimately establishing a long cooperative relationships with GPs to secure co-investment opportunities. We expect to deploy our DTSC strategy across a wider spectrum of product segments in the future. As of the end of the third quarter, overseas PE AUM reached US dollar 3.8 billion, reflecting a year-on-year increase of 5.7%. In public markets, we have intensified our screening and coverage of top hedge fund managers worldwide, Ten of the top 50 hedge fund managers globally have been onboarded, with nine more in the due diligence process. Our offering encompasses a diverse range of strategies, including long, neutral, hedging, trend following, and multi-strategy. At the same time, our investment team is developing new actively managed products such as fund of hedge funds and discretionary investment products.
Wang Jingbo
On ESG, as a financial advisor, Loya's management is more concerned about the effectiveness of company governance and organization decision-making mechanism. We always insist on the operation of various BOs and the implementation of collective leadership to improve Loya's organizational people and organizational activity. In terms of data security, the security and safety of customer information data is ranked in the priority order. Through the establishment of a core data center and a strict customer information use review mechanism, we realize the strong isolation of core data and the strong management of customer data. Loya, as an independent wealth management organization, The core ability is due to the depth of customer insight and convincing performance. At the same time, we improve customer experience and customer experience through digitized ability and infrastructure construction. Through the comprehensive investment perspective, we can improve the high-compatibility asset configuration program for customers. We believe that in the financial management industry, the interaction between people, the relationship between trust and personality, even in the era of high-speed development of artificial intelligence, it is still very important for high-tech customers with complex needs. As a financial management and asset management, Our basic company focuses on creating real and long-term customer value. Living as a customer is the baseline. It is the foundation and foundation of Luo Ya culture. We believe that only the success of customers will have the success of Luo Ya's business. To create long-term value for shareholders. At the Luo Ya board meeting just held, we passed a proposal to improve the shareholding mechanism of shareholders. The plan will use 50% of the company's annual long-term income to fund and buy back. This represents the management's confidence in the company's long-term stability and growth.
Melo Zee
In terms of our ESG efforts, NOAA's management places premium on promoting effective corporate governance and organizational decision-making mechanisms. We employ a committee-based operations and collective leadership decision-making program across our business units to ensure that NOAA remains a dynamic organization and an industry leader. We maintain our strong focus on data security as well and prioritize in the confidentiality and security of client information. We have established separate domestic and foreign data centers governed by stringent client data usage audit mechanism to create a robust firewall between domestic and foreign data and ensure that we safeguard client privacy at all times. In conclusion, as an independent wealth management institution, NOAA's core competitive advantage stems from its profound client insights and strong track record. We're firmly committed to investing in the digital capabilities and infrastructure needed for our relationship managers to grow the business and provide the best client experience. We pride ourselves in providing high-quality asset allocation solutions rooted in prudent research-based house views. While acknowledging the significant role of technology, we recognize that a human touch, trust, and personalized relationship remains indefensible, particularly in meeting the complex needs of NOAA's high-net-worth clients. Our core competencies are centered on creating real and long-term client value encapsulated in the ethos of client-centric with survival as the bottom line. We firmly believe that only by helping our clients thrive can we succeed as a business and thereby creating enduring value for our shareholders. Finally, a note on our updated shareholder return policy. NOAA's Board of Directors recently approved a plan to allocate up to 50% of companies' annual non-GAAP net profits towards dividends and share repurchases. This strategic decision underscores management's confidence in the company's stable operations and long-term growth potential. I'll now hand over to Mr. Graham Pan for a detailed overview of our third quarter financial results. Thank you, everyone.
Graham Pan
Thank you, Mello, and thank you, Chair Lady, for working through the quarter three operations. Good morning, investors, analysts, and good evening. For today's presentation, I'd like to start by sharing the latest insights of our client's profile and how NOAA's strategy has been adapting to meet their needs in order to drive the growth of business. According to a recent survey, more than half the clients are engaged in the past in export-oriented manufacturing, trade, or internet industries with very deep foreign currency assets already, including cash, equity, and stock options. Age-wise, most of the black card and diamond card clients are in their mid-50s or even 60s. They predominantly reside in China's major metropolitan centers, echoing our recent strategy of consolidating operations in key cities. In terms of their wealth management objectives, we're seeing two key shifts in investment appetite taking place among our client base. China's first-generation entrepreneurs continue to be the primary tradition makers within their families. and are seeking more balanced and security-driven allocation strategies for their wealth. This is marked by distinct shifts from the rather aggressively seeking high returns on investment in the past to a focus on wealth protection. Secondly, many of our clients are now entering a new phase of globalization in business and also capital. Not only is their personal demand for global asset allocation services increasing, but their enterprise sites need to enter global markets as entrepreneurs is also growing. This will lead to an accelerated wealth accumulation effect for a high-net-worth client in the coming years. According to a survey, 70% of the clients demand global asset allocation, and as a result, the ability to provide global solutions is a key requirement for wealth management firms. With years of in-depth experience in building a business in the high net worth wealth management industry, we now possess a deep understanding of our clients and is capable of providing comprehensive solutions for their globalization needs. Our results for the first three quarters of 2023, which featured solid revenue growth driven by insurance product sales and robust expansion in our overseas business, demonstrated how we're successfully meeting Ron's demands in both situations. Furthermore, our healthy financial position ensures we are well positioned to further expand with close to RMB 5 billion cash on our balance sheet, a healthy debt-to-asset ratio, and zero interest-bearing debt on the balance sheet. Crucially, we also have a very clean AUA free from any legacy domestic private credit or residential real estate exposures. In addition, we have a deep bench of talents across our key functions, product investments, sales teams, both domestically and globally. These factors give us confidence that NOAA is ideally positioned to meet the ever-evolving needs of Mandarin-speaking high-net-worth individuals in the next phase of China's globalization. With that, let's get into the details of our quarter three financial performance. In the third quarter, our top line continues to see a robust year-over-year growth, with net revenues reaching RMB $750 million, close to 10% increase compared to the same period last year. Traditionally, our third quarters are relatively quiet due to seasonality, as our sales and marketing teams prepare for the red opening season, at the beginning of the fourth quarter. Net revenues for the first three quarters of 2023 increased by 12.5% year-over-year to RMB 2.5 billion, mainly driven by the 90% year-over-year growth of one-time commission fees, which amounted to RMB 780 million. Insurance products contributed 94% of total one-time commission fees in quarter three and have emerged as an important component of our revenue structure. This can be attributed to the more defensive position being adopted by our clients with an emphasis of safeguarding assets and wealth in light of ongoing market volatility and geopolitical factors. We believe the trend of clients increasing allocation towards protection-driven products will continue for the near future. That being said, we'll continue to strengthen our overseas alternative product offerings, including global primary markets and hedge fund solutions to provide clients with more balanced solutions that can deliver long-term return while minimizing volatility and risks. Overseas net revenues accounted for 39% of total net revenues during the third quarter, a figure we anticipate will continue to grow going forward. Notably, we officially opened our Los Angeles office in the third quarter, which will provide client service interface for local clients in the United States, expanding our US insurance business and promote our investment business. Additionally, we have an exciting lineup of events planned for our clients, including a flagship annual conference exclusively for esteemed BlackRock clients. In addition, we recently began establishing a dedicated product selection team based in New York City, specifically focusing on U.S. hedge fund managers. We expect overseas revenue contribution to increase further as we continue to expand our global footprint. Recurring service fees, which are a key stabilizer in our revenue mix, were RMB $1.4 billion year-to-date, a slightly decrease of 3.2% year-over-year due to a decrease in our AUM as we continue to exit RMB investments. Performance-based income was RMB 125 million in the first nine months of 2023, down 45% year-over-year. This decline can be attributed to the relatively low valuation of assets resulting from a high yield environment. That being said, our Silicon Valley team was still able to achieve exits in this tough market, contributing to the performance-based income for this year. Other service fee income in the first nine months of the year was RMB $205 million, up 37.2% year-over-year, primarily due to more value-added services provided to our clients. Operating profit for third quarter was RMB $250 million, up 7.4% year-over-year, and down 28% quarter-over-quarter. Operating profit margin for the third quarter remained largely stable year-over-year at 33.2%. Our compensation and operating expenses decreased by 15% quarter-over-quarter, but increased by 10% year-over-year, mainly due to the high-based effect created by COVID-19 lockdown in 2022, which curtailed both marketing activity and business travel, as well as the increased international travel this year in support of our global expansion. In addition, we incurred a number of one-time expenses related to the relocation to the Shanghai headquarters and the consolidation of our domestic network, among others amounting to RMB 40 million. Over the long term, however, we would expect to reduce annual cost savings by RMB 50 million. Government subsidies for the quarter were RMB 105.3 million, a sharp increase of 141% year-over-year, but slaps on a year-to-date basis due to the delay in the distribution of government subsidies across various regions this year. Non-GAAP profit for quarter three was RMB 232 million, up 21.8% year-over-year, and RMB 785 million year-to-date, down 8.7% year-over-year due to a soft first quarter earlier this year. Transaction values reached RMB 22.3 billion in the third quarter, representing a strong increase of 24% year-over-year and 21% quarter-over-quarter. By region, the total domestic transaction value in the first three quarters of 2023 was RMB 15.3 billion, up 4.5% year-over-year and 20% quarter-over-quarter. The total overseas transaction value was US$957 million, up 106.9% year-over-year and 22.9% quarter-over-quarter. The increase in transaction value was primarily driven by mutual funds and overseas private secondary products, thanks to the introduction of U.S. dollar cash management and structured products. In the third quarter, mutual funds contributed RMB 14.9 billion in transaction value, up 28.1% year-over-year. A total transaction value for overseas private secondary products was US$530 million in the third quarter, up 17 times year-over-year, 65%, quarter-over-quarter driven, mainly by strong demand for discretionary investment products and structure products. Going forward, we expect to increase the share of global investment products and foster the growth of overseas AUMs. As of September 30th, our overseas AUM grew 13.4% year-over-year to US$4.9 billion. Turning to the results of each segment in the first nine months, net revenues from wealth management were RMB $1.9 billion, and net revenues from asset management were RMB $0.6 billion, accounting for 75% and 23% of total revenues, respectively. As of end of quarter, we had 7,461 diamond card clients and 2,250 black card clients. The total number of diamond and black card clients were 9,711, up 0.3% quarter over quarter and down 0.7% year over year, rather flat. The number of active clients of quarter three was 9,489, down 58% year over year, primarily due to individual clients adopted a rather conservative approach towards RMB public security priorities. In light of a 4.1% and 9.2% flop in Shanghai Securities Compositive Index and Shenzhen Securities Compositive Index, respectively, during the third quarter. That being said, transaction value during the quarter was not negatively impacted by this as our corporate and institutional clients continued to transact with us On the other hand, overseas active clients increased close to 80% year-over-year to 2,284 as we continue to build up our overseas distribution channels with 77 overseas IRMs by end of this quarter. Turning to the balance sheet, our debt-to-asset ratio and current ratio improved sequentially. We have maintained a very healthy liquidity position with our current ratio at 3.5 times and our debt-to-answer ratio at 18.4% with zero interest-bearing debt. We have RMB 5.0 billion in cash and cash equivalents, providing ample resources to support our global expansion plans. We also saw a decrease in accounts receivable in quarter three, primarily due to accelerated collection of domestic insurance commissions. The Board has always placed shareholder return and capital management efficiency as a priority based on strong and clean balance sheet and strong liquidity position. And after considering the necessary investments associated with our global expansion plan, the Board has authorized new shareholder return policy where we will allocate up to 50% of total annual non-GAAP net income attributable to shareholders to corporate actions budget to be used for purposes including dividends and share repurchases. Under this new policy, we will allocate no less than 35% of its annual non-debt attributable to shareholders towards dividends subject to various factors. The final dividend payout ratio for fiscal year 2023 and still in timing of any share repurchase program will be determined at the company's fourth quarter board meeting in March 2024 and announced thereafter. To sum up, we remain optimistic for the high net worth individual wealth management industry. The third quarter showcased our ability and resilience to drive robust revenue growth and generate strong cash flow, even in a relatively quiet market environment. Looking ahead, with a robust balance sheet and nearly $5 billion in cash and cash equivalent, ample liquidity, and a standardized product offering and AUA, we're well positioned to fuel future growth and execute our strategy as well as increase returns for shareholders. Our other balance sheet, quote unquote, a clean AUA with no legacy private credit or residential real estate exposure has built us a solid reputation as trusted advisor to our clients, which were leveraging to drive our global expansion as demand for global asset allocation grows. We'll continue to scale our international operations following a successful launch of the office in the third quarter. I'm still preparing to commence operations in Dubai and continue to recruit relationship managers in Hong Kong and Singapore and other towns actively As we continue to execute our growth strategy, we will embrace the evolving landscape and maintain our corporate flexibility. In the long term, we're very confident that our diverse offerings and commitment to globalization will enable us to meet the needs of global clients, investors, and continue creating value for our shareholders. Thank you for listening. We'll now open the floor for questions.
Operator
Thank you. We'll now begin the question and answer session. Ask a question. Press star then one on your touchstone phone. To withdraw your question, please press star then two. If you're using a speakerphone, please pick up your handset before pressing the keys. We'll now momentarily pause to assemble the roster. First question will be from Helen Lu of UBS. Please go ahead.
Helen Lu
Thanks, management. This is Helen from UBS. I have two questions, if I may. First, the growth increase in Gopher AUM was RMB 4.7 billion in the third quarter, almost double that of the second quarter. But why did one-time commissions from Gopher managed funds decline sharply to RMB 32,000? That's my first question. And second question, In terms of the transaction value mix, I noticed that the proportion of Gopher products increased to 21% in the third quarter. I'm just wondering whether you have any longer-term target for the transaction value mix from Gopher products, and what are Gopher's product pipelines for the fourth quarter and into next year? Thank you. Thank you very much, Guan Licheng. I have two questions. The first one is a question on the accounting side. This is mainly to ask Mr. Pan. I saw that Gopher's AUM increased by 47 billion yuan in the third quarter. This is basically three times more than the second quarter of this year. But in the third quarter of this year, Gopher's, which is the front end of the fund managed by Gopher, has actually dropped significantly to 32,000 yuan. I don't know why. The second question is actually to ask Mr. Wang. This is in the third quarter of this year. In fact, from this point of view, in fact, the contribution of this product to the supply of grain is up to 21 percent. I don't know if our company has a long-term plan for how much grain is compared to the product. And then in the fourth quarter of this year and next year, we are a product of this piece. What are the Thank you.
Gopher
Thank you, Helen. I will answer the first question first. The first question is about the growth of AOM. It is mainly due to overseas fixed-term products or cash-based products.
Graham Pan
The AOM in this area will actually continue to generate management fees.
Gopher
To Helen, I'll explain your question. So basically, a good chunk of the AUM increase
Graham Pan
And the gopher product actually came from U.S. dollar cash management products and some of the discretionary portfolio investments for deposits. So basically, majority of the revenue structure will come from management fees going forward. The same quarter revenue actually doesn't reflect as we actually don't charge a very high so-called subscription fee for this type of product.
Gopher
Okay, Mr. Wang, why don't you answer Helen's second question?
Wang Jingbo
In the case of Gefei, we will continue to expand Gefei's founder fund and initiative management. At present, in addition to the products that we directly sell, we are still actively constructing Gefei's Taiwan Taiwan Taiwan Taiwan Taiwan but it is definitely one of our most important strategies.
Melo Zee
Thank you, Helen. I will translate for Chair Lady. So in terms of Gopher's international front, we are committed to increasing our capabilities in actively managed product space, including primary, secondary, public securities, as well as cash management. So, that is kind of more of a long-term process. Now, in terms of the third-party distributed products versus our actively managed products, we don't have quite a clear picture in terms of the split yet. But then, going forward, it will be depending on what the client really needs. And also, you know, our investment in increasing our research and investment capabilities in gopher's overseas market. Alan?
Helen Lu
Yeah, thank you, Alan.
Melo Zee
Operator, I believe we have Peter lining up in the queue as well.
Operator
Yes, thank you. Again, to ask a question, press star then one. Next question will be from Peter Chung. JP Morgan, please go ahead.
Peter Chung
Thank you for giving me the opportunity. I have two questions I would like to ask. The first is, I think we have a bright point this quarter, which is the amount of transactions of our financial products. I would like to ask, if this part can help us disassemble it, it is mainly the international The second question is... I have two questions. First one is on the wealth management transaction volume. We noticed that the transaction volume increased sequentially in the third quarter. We wish to understand what's the driver behind, is it mainly driven by the transaction of, say, from international clients, overseas clients. And Matthew also mentioned that NOAA engaged with a client in third quarter. What's the latest client investment sentiment you'll get back? This is the first question. Our second question, we noticed that on the cost side for third quarter, there's a large contribution from the government subsidiary, which helped you reduce the OPEC in third quarter. We wish to understand what does that represent? What's the driver behind it? And what's the trend going forward? Thank you.
Graham Pan
Peter, the first question, the contribution actually mainly came from the U.S. dollar side, which we managed to actually distribute around 1 billion U.S. dollars in the transaction value, which has seen a significant increase, about 132% year over year. At the same time, we'll maintain a rather healthy distribution on RMB side, which is attributable to the corporate client transactions, from small treasury that account for about 100, actually 12.9 billion of RMB mutual funds transactions. So both actually added and contributed to a rather healthy transaction values this year. And your second question in terms of, I'll leave the client sentiment observation to Chair Lady and also I will share a little bit of my insights as well. The second question in terms of the government subsidy, the total year to date actually remained pretty stable the first three quarters comparing to last year. But the timing of the grant of the actual cash, the timing usually is I would say pretty spontaneous based on the government's fiscal situation. So this year we happened to receive the subsidies in the third quarter, but the total amount actually remained rather stable from the last period of the year.
Peter
Then there is a question about the client's entire situation. We actually just completed the Shanghai, Singapore and Hong Kong war with the entire black card year.
Graham Pan
In general, our customers are relatively rational about the entire economy. More of them are still seeking a balance in asset management. Secondly, we also pay attention to the past, relatively speaking, customers are more concerned about single product or single asset type performance. Now more of them are looking for a more complete solution. Maybe not just I think we can't talk about emotions. Customers are still taught by the market.
Melo Zee
Yeah, so I'll try to translate. Yeah, I'll try to translate for both Grant and Chair Lady. So, you know, we have held various conferences and annual gala events in the past couple of months in Shanghai, Singapore, and Hong Kong, and we have interacted with over 1,000 clients lately. So, you know, what we have witnessed was that, first, overall, that the clients have remained rather rational and they are seeking kind of a more balanced solution and diversity in their global asset management or global asset allocation needs and also we have witnessed a very obvious shift from focusing on product and recent returns from the past comparing to now that the clients are more focusing on the comprehensive solution on their overall wealth management needs including their family and enterprise inheritance and succession plans. And we have seen that basically the maturity and sophistication of clients have increased, which is the good news for independent wealth managers like NOAA. We have spent quite a lot of resources in investor education and building our internal research capabilities. So now that we can, it's easier for us to reach a consensus with our clients. And, you know, Chair Lady has also commented that, you know, in the past year or so, you know, basically the general market or high net worth individuals in China in general, not just only NOAA's clients, have seen, you know, many risk related events in the past. And their demands and needs have become more clear and more focusing on asset protection and security and more focusing on global macro views, including currency risk and such. So we're spending more time to do investor education on those funds. Hope that answers your question, Peter.
Peter Chung
Thank you, Mr. Guang. I would like to ask about government subsidies. Mr. Pan mentioned that the amount of year-to-date and last year's amount were more stable. Can we say that in the future, the amount of year-to-date government subsidies may be stable, but there may be some seasonal fluctuations? Let me do the translation, so I have a follow-up question on government subsidiary. Because Mr. Pan just mentioned that the year-to-date amount has been stable from previous level. Can I say that going forward, the annual amount likely to be stable while there can be a seasonality in quarter-by-quarter? Thank you.
Graham Pan
Peter, I think for 2023 is probably the right way to put it. Going forward, I think it's very hard to say in terms of the government subsidies, which is a form of refund of taxes or actually some of that is associated with the job creation. So depending on the structure, going forward on the RMB revenue and income that we actually make domestically. I'm not sure whether or not it's safe to say that it will remain consistent. It's pretty hard to predict. So if we do have an increased revenue going forward on the domestic side, we'll probably see a higher subsidy. But if not, we'll see a little bit of volatility in that. But I guess, you know, from what we have seen, I believe, at least this year, the government is still, you know, honoring their subsidies to us.
Peter Chung
Yeah. Thank you.
Operator
Thank you, Peter. Thank you. Next question will be from Chael Joang of Morgan Stanley. Please go ahead.
Peter
Thank you for your introduction. I'm Chi-Yao from MoneyStyle. I'd like to ask about the Black Card annual meeting held recently. From the perspective of the transaction volume, how is it going? Do you think it can support the 4G revenue? The second question is about NINBAO. Let me translate briefly. The first question is follow up on the black card. It took place in several cities recently. Just wondering what's the progress in terms of the transaction value generated, and would it provide quite strong support to the 4Q revenue? And the second question is regarding the insurance commission rate. We saw some adjustment, actually quite notable adjustment on the bank assurances. So could the management expect the commission rates in NOAA would also face some potential changes going forward and that could potentially impact the revenue? Thank you.
Graham Pan
Thank you. I'll take the first question. We actually see a very good turn up of attendance for the past three stops and we have two more to go for the annual gala, but probably will take place in next year, early next year. From what we have seen for first three stops with the high attendance, I would believe the total creation of revenue or placement of financial products, we're pretty optimistic about what's going to come. But in terms of transaction value, as much as we understand It's a pretty key metric in terms of, you know, to measure how much of client's wallet share you're taking. We are not aggressively pushing for any specific type of products, but we're mainly focusing on, as we mentioned earlier, the total solution for our clients. So basically, if the client prefers to allocate more towards insurance products, you probably wouldn't see as high as transaction values as in traditional investment products. But we're okay with that. I think we're pretty comfortable with the strategy of as long as, you know, it caters to our clients' real need, as we believe that they are much more sophisticated than before. But with that said, we do have very ample supplies of investment products, especially on the overseas side. We believe our clients are still are very globally minded compared to the past. They are more, I think, more sophisticated and deeper understanding how the global investment products play as compared to years back. I believe there is a second question. Can you remind me what the second question is? No? That's the only one.
Peter Chung
Yes, without the insurance, the commission rate will change.
Peter
Are there any risks for the insurance commission?
Wang Jingbo
Yes, this part is possible. The insurance is now a guide fee. We don't have it in the agent channel yet, but it doesn't mean we don't have it in the future. 我觉得海外的保险应该没有这个问题,国内的保险如果它统一的有政策出来的话,那我们也只能跟随。 Yeah, so on the insurance commission side, in terms of the insurance brokerage commission decline, right now the regulation is mainly focused on bank insurance channels.
Melo Zee
So the independent insurance brokers are not affected yet. But if the regulation should change in the future to include the independent brokerage, then we would be, you know, have no choice but to follow. But, you know, in terms of a global scale, we're not seeing any regulatory changes in the overseas insurance brokerage business or market. So that part should not be affected. And, you know, in fact, that, you know, after COVID, the overseas insurance brokerage business has been generating more revenue share comparing to our domestic business at the moment.
Peter
Thank you.
Operator
Thank you, Chia. Thank you. That concludes our question and answer session. That also concludes our conference for today. Thank you for attending today's presentation. You may now disconnect.
Melo Zee
Thank you all.
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