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Operator
Good day and welcome to the NOAA holding second quarter and half year 2024 earnings conference call. All participants will be in a 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 will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone. And to withdraw your question, please press star then two. This event is being recorded. I would now like to turn the conference over to Mr. Melo Si, Investor Relations Director. Please go ahead, sir.
Melo Si
Thank you, operator. Good morning and welcome to NOAA's 2024 Second Quarter Earnings Call. Joining me today on the call today are Ms. Wang Jingbo, our co-founder and chairlady, and Mr. Zander Ng, our co-founder, director, and CEO, and Mr. Grant Pan, our CFO. Mr. Ng will begin with an overview of our recent business highlights, followed by Mr. Pan, we'll discuss our financial and operational results. They'll all be available to take your questions in the Q&A session that follows. Before we begin, please note that this discussion today will contain forward-looking statements that are subject to risk 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. With that, I would like to pass the call over to Mr. Yin. Please go ahead.
Yin
Thank you, Melo. Good morning, NOAA investors and analysts. In the past few days, we have made a more clear distinction between domestic and international business. The operating model and organizational structure, financial teams, and other changes in business models China has undergone a major change compared to the past. Starting from this quarter, we will report financial data based on the new organizational structure and business structure, which is more in line with our actual situation. Therefore, on the agenda of today's phone conference, I will directly divide the performance of the second quarter of 2024 into domestic and international reports, and then share with you our strategy for domestic and international business development. In the past few years, the domestic sector They can only run their own main business and customers. At the asset level, we are responsible for promoting company brand market activities, revenue and investment education, but do not recommend specific financial products. At the international level, we have launched a new wealth management brand called ARK Wealth Management, which continues to expand the team of private bankers in Hong Kong, Singapore, the United States, etc., to provide comprehensive wealth management services to local Chinese people. Currently, we have 113 financial advisors in ARK at the international level. At the international asset management level, we have launched a new brand, OLIO Asset Management. Currently, the main task is to build a more complete product system of different asset categories around the world. We have also established the U.S. Product Center and gradually established a large customer sales team. Currently, there are nine sales teams and institutional sales teams. We can see that this year's first half of the year, the work done by Olive has produced certain results. In the second half of the year, the first quarter of the year, the U.S. dollar level 1 product achieved 3.4 billion US dollars, which increased by 40.2%. The U.S. dollar level 1 AUM and AUA also achieved 14.9% and 5.5% respectively. On the insurance and comprehensive service side, we launched a new brand, Glory Family Heritage, mainly focusing on building global insurance trust and identity planning product capabilities. Glory has also started to establish a new overseas non-profit agent team, and has also made some progress. Currently, there are about 20 non-profit agents, and there is a lot of performance. At the international online financial management, we have established an independent business team, focusing on online customer service. Through iARC and IHP, we have established an online service team, including the latest version of Singapore, to serve local Chinese, Chinese institutions, and IFA and EAM. After achieving better results at some operating points, there will be special output. In the domestic market, although investment and monitoring environment are more and more challenging, the demand for high-tech customers' renminbi is still abundant. We still have confidence in the future of this industry.
Melo Si
Thank you, and good morning or evening to everyone. Our domestic business model has undergone significant structuring lately, including the clear separation between our domestic and international business, optimization of our operating model, and adjustments to our organizational structure and relationship manager team. As a result, we are adjusting our financial reporting disclosures, Starting this quarter, we'll begin reporting financial data based on this new organizational structure, which we believe will provide a more accurate reflection of the progress we're making during this transition. Therefore, on today's conference call, I will go over our second quarter results, separating them into domestic and international segments, followed by an overview of our growth strategies for both. Domestically, We have been adjusting our client service model and deepening the organizational restructuring in recent years to comply with the evolving regulatory requirements, including dividing and deploying sales personnel to specific independent and licensed business units, namely NOAA upfront fund distribution, glory insurance brokerage, and gopher asset management. Each sales personnel is able to only recommend products and service clients of that specific independent business unit. At a group level, our branding and business development departments are responsible for branding, marketing activities, client acquisition, investor education, and other tasks, but will not directly recommend financial products. In the global market, we launched a new wealth management brand called ARK Wealth Management and continue to expand its overseas RM team, with 113 currently on board. Through its offices in Hong Kong, Singapore, and the U.S., Arc provides comprehensive wealth management and value add services targeting the local Mandarin speaking population. Likewise, we launched a new overseas asset management brand, Olive Asset Management, which is focused on building a more comprehensive product matrix covering different asset classes globally. We have recently established a US product center to deepen the relationship with local GPs. Under Olive, We're also gradually building out its own dedicated RM team targeting its institutional clients with nine currently on board. In the first half of 2024, we raised US$338 million for overseas private equity products, private equity, private credits, and other primary market products, a significant 40.2% year-on-year increase as a result of the above. Additionally, US dollar primary AUM and AUA also grew 14.9% and 5.5% year-on-year, respectively. We also launched a new overseas insurance and comprehensive services arm, Glory Family Heritage, which is primarily focused on building global insurance, trust, and identity planning products and capabilities. Glory has also began establishing a new commission-only agency team and has made notable progress. 20 agents are already onboarded, with each one already starting to make contributions. On the International Online Wealth Management Fund, we established a dedicated team focusing on serving clients through online channels. With the roll-up of iARC app in different countries and regions, including Singapore most recently, we are providing services to local Mandarin speaking clients, institutions, as well as IFAs, RIAs, and EAMs, and have already made notable progress. I'll go into more detail on their operational performance during the quarter later. Domestically, while the investment and regulatory environment is becoming increasingly challenging, demand for RMB asset allocation from high net worth clients remains strong. We are confident that this industry will continue to generate growth opportunities for us Our core strategy is client-centric. Survival is the bottom line. So client-centric in this sense means prioritizing protection of clients' assets and allocating them to achieve long-term returns, which is central to all of our efforts. Survival is the bottom line, emphasizes our commitment to absolute compliance, managing our team and operations conservatively, even stricter than regulatory requirements. Long-term sustainability is our fundamental goal as we continue to refine our domestic operations.
Yin
In terms of financial data, in the second quarter of 2024, the total revenue of the company was 6.2 billion yuan, down 34.3% and down 5.1%. The main reason is that we actively reduced the investment of domestic products. In this quarter, we have newly added revenue information divided by business B.U. to more effectively reflect the operating situation of the group's various business units. In the future, in my business report, we will also focus on various business B.U.s, such as the performance and operating status of investment updates. CFO Panqing will provide you with a screenshot of the overall financial performance of the group. First is the domestic market. Around the domestic strategy, our main strategy is to insist on investment education, choose products that can protect customers' interests for a long time, effectively reduce costs, and fully harmonize health development. In the fund sales business version, the main products are public funds and private securities and other public market products. Through NOEA to carry out the entire industry, the version is in The second quarter achieved a total income of 120 million yuan, with a decline of 20.8%. By the end of the first half of the year, we had more than 10,600 customers with a volume of more than 1 million. Due to the excellent performance of our selection managers, we created more than 4 billion yuan of revenue for our customers in the first half of the year. The overall revenue of our customers accounted for 86%. In the domestic public market, Turning to our financials for the quarter, total revenues were RMB 621 million.
Melo Si
a decrease of 34.3% year-on-year and 5.1% sequentially, primarily due to our strategic decision to reduce the distribution of various products domestically. Starting this quarter, we have broken down revenues by business units, or BUs, to more accurately reflect the progress we're making in each area. Going forward, I will use these BUs as the primary framework for updating investors on the performance and operations of each business unit. units. Following my remarks, our CFO, Mr. Pan, will provide an analysis of our overall financial performance. Firstly, we roll out initiatives to align domestic business with our adjusted strategic direction. These initiatives include a persistent focus on investor education, selecting products that can safeguard client interest in the long term, effectively reducing costs, and ensuring compliance to drive healthy growth. In the public security segments, the primary products offered are mutual funds and private secondary products, which are distributed through NOAA Upright. This segment generated RMB 118 million in revenue RMB during the quarter, a decrease of 20.8% year-on-year. By the end of the first half of the year, NOAA Upright had over 10,600 clients with assets over RMB 1 million. Thanks to the outstanding performance of the carefully selected fund managers, we generated over RMB 4 billion profits for our clients during the first half, with 86% of the clients achieving overall positive investment returns. In domestic public markets, we advise our clients to invest in QDII and QDLP products denominated in RMB to generate beta returns from global markets. During the first half of 2024, our QD products generated transaction value of RMB 3.1 billion, with AUM totaling RMB 3.8 billion. The percentage of clients who achieved overall positive investment returns was 82.7%.
Yin
In the asset management section, it is mainly the RMB private equity fund and RMB private stock fund managed by Gefei. In the second quarter, the share price of the share price of the share price of the share price of the share price of the share price of the to find a chance to withdraw. In the first half of the year, we achieved a withdrawal of about $40 billion of first-class market assets. In the second-class market, the private fund products managed by Gefei are also mainly focused on using RMB assets to obtain global market beta revenue through domestic cross-border ETFs. The insurance news section achieved a total income of $1.175 million in the second quarter, and a down of $93.1 million. The main reason is that we are concerned about the health of the bottom-up assets of insurance company products. In the first half of the year, we suspended domestic insurance products, completely sorted and banned the risk situation of stored insurance products. In the first half of the year, we redefined the strategy of the insurance economy company, and determined to promote medical insurance and pension insurance as strategic products. Currently, we have clearly introduced insurance products based on pension, In the domestic asset and management segment,
Melo Si
Our key products include RMB-denominated private equity funds and RMB private secondary funds managed by Gopher Asset Management. This segment generated total revenue of RMB 198 million in the second quarter, a decrease of 5.4% year-on-year. In the primary market, our investment team has been actively expanding exit strategies. We strengthened the daily supervision and management of our portfolio funds and projects, exploring diverse exits and enhancing dividends of underlying assets to improve DPI. Additionally, the investment team is proactively broadening buyers' market, pursuing exit opportunities through asset acquisition or secondary fund transactions, successfully generated approximately RMB 4 billion in primary market exits during the first half of the year. In the secondary market, private secondary products managed by Gopher primarily focused on deploying RMB to invest in onshore cross-border ETFs, aiming to capture beta returns from the global market. In the domestic insurance brokerage segment, total revenue during the quarter was RMB 12 million, a 93.1% year-on-year decrease, which was primarily due to concerns over the underlying asset quality of insurance firms. which resulted in us temporarily suspending the distribution of domestic insurance products in the first half, while we conducted thorough due diligence on these existing insurance products and underlying assets. During this period, we repositioned the strategic focus of our insurance business, identifying medical and retirement caring insurance as key products to drive our efforts forward. We have clearly defined the strategic direction of our business domestically, launched insurance products centered on retirement and global healthcare solutions. We're confident in this new positioning as these products align well with the needs of NOAA clients, entrepreneurs and business leaders born in the age of 1950s, 60s and 70s era who are seeking retirement, healthcare and elderly care resources for themselves and their aging parents.
Yin
In terms of international strategy, our main strategy is to improve product certification, improve operating efficiency, and serve the Chinese and local Chinese who have set out to sea and are preparing to go out to sea. The key to success is to store and increase the volume. In overseas wealth management, we have launched a new brand. The offline brand is Arc Wealth Management. The online platform is iARC. We use Hong Kong, Singapore, and the U.S. as the center of international offline accounts. We provide services and expand our services. We focus on Chinese customers who are connected to us. We continue to expand the team of private bankers overseas, improve the strategy of professional service capabilities, and strengthen the ability of local self-employed customers overseas. In the end, we improve the influence and share of wallets among Chinese high-ranking customers overseas. By the end of the second quarter of 2024, In addition, Hong Kong and Singapore have 113 financiers, with a growth rate of 101.8% and a return growth rate of 24.2%. The overseas AUA, which includes retail products, has reached $85.3 billion, with a growth rate of 7.4% in total. Japan and Dubai are expected to complete the establishment before the end of the year. We are also actively expanding the US business map, With the establishment of the U.S. Product Center, our business has covered the active management of VC fund, rental apartment fund, fund fund, and third-party products, as well as insurance and trust and other comprehensive services. The U.S. wealth management business is also actively setting up. It is expected to complete preparation work within the year. By the end of the second quarter, there will be more than 16,700 international registered customers in Norway. In the second quarter, the total income of 7.25 million was achieved, with a growth of 221.9%. We have already put iARC and APP on the ground in Singapore. Other countries will also continue to implement this strategy. As a result, the value of our online products is rich, and our customer type is also growing. From customers on the C-end to customers on the B-end and A-end, we can already provide different solutions. In terms of customers on the C-end of the international online management, during the second quarter of 2024, The number of active and high-quality overseas customers has reached 3,244, with a growth of 62.8%. The total revenue has reached 10.9 billion dollars, with a growth of 40.4%. Among them, the number of active customers of the U.S. public fund has reached 2,822, with a growth of 108.1%. The total revenue has reached 4.8 billion dollars, with a growth of 80.5%. In terms of overseas Chinese institutions' customers,
Melo Si
Internationally, our strategic direction is squarely focused on expanding the global market. Key initiatives include enhancing our product matrix, improving operational efficiency, and serving both Mandarin-speaking clients and business already overseas and those preparing to move abroad. Successfully serving our existing clients while driving new client acquisition growth is crucial to our success. In our overseas wealth management business, we launched two new brands, ARC Wealth Management for offline services and iARC for online services. Our offline international wealth management operations focused on Hong Kong, Singapore, and the US, where we serve existing clients and expanding our businesses by targeting Mandarin-speaking clients. We continue to expand our overseas RM team and enhance our professional service capabilities to strengthen local client acquisition capabilities and capture a larger share of their wallets. As of the second quarter of 2024, NOAA had 113 relationship managers in Hong Kong and Singapore, an increase of 101.8% year on year and 24.2% sequentially. Overseas AUAs, including distributed products, reached US$8.5 billion, a 7.4% year-on-year increase. For overseas new market expansion, we expect to complete the establishment of our branch offices in Japan and Dubai by the end of the year. We're also actively expanding our footprint in the US. With our U.S. product center, our service now in the U.S. encompasses actively managed VC funds, rental apartment funds, fund of funds, and external partner products, also comprehensive services like insurance and family trusts. Establishments of our wealth management business in the U.S. are also well on their way, and we anticipate completing the groundwork within this year. By the end of the second quarter, the number of overseas registered clients exceeded 16,700, an increase of 23% year-on-year. The number of clients who purchased our cash management products reached 5,047, a remarkable increase of 101.2% year-on-year. While the number of discretionary investment clients reached 959, an increase of 103.6% year-on-year. Our online international wealth management business, which includes money market mutual funds and securities trading, generated total revenue of RMB 7 million during the quarter, an increase of 221.9% year-on-year. We have already successfully launched iARC app in Singapore and will continue to implement the same in other regions. As our online product expands, our client base is also growing. allowing us to provide tailored solutions for both individual and institutional clients. In the second quarter, the number of the overseas active high net worth clients reached 3,244, an increase of 62.8% year-on-year. Total transaction value during the same period reached US dollar 1.1 billion, up 40.4% year-on-year. The number of active clients for U.S. dollar mutual funds reached 2,822, an increase of 108.1% year-on-year. The transaction value with the transaction value of U.S. dollar $484 million up 80.5% year-on-year. In terms of overseas transaction value for corporate institutional clients reached U.S. dollar $70 million in the second quarter, an increase of 84.8% year-on-year, while the AUA reached US$185 million, a year-on-year increase of 46%. Our online international wealth management business began trial operations for agency clients in late 2023, empowering EAM, IRAs, and family office clients with the SaaS platform integrated with our whole suite of products. To date, we have signed more than 20 agency clients.
Yin
In terms of international asset management, it mainly includes overseas active management and selection of other types of investment products and non-currency public fund products. During this period, the U.S. private sector first-class products accounted for $1.5 billion, which is a significant increase of 46.2%. The U.S. private sector second-class investment products, including hedge funds and structuralized products, The total net worth is $4 billion, which is a 23.4% increase. Since the end of the second quarter, overseas AUM, which actively manages products, has reached $53.8 billion, which is a 14.1% increase. The total AUM ratio has also increased from 21.8% to 25.4%. Overseas capital stocks and other first-class markets have reached $40.7 billion, which is a $4.7 billion increase. with a growth of 14.9%. Our goal is to increase the US dollar AUD from the current $80 billion to more than $20 billion in the next three to five years. We will provide global insurance and other comprehensive solutions to customers through the Glory brand to ensure that the total revenue of the second quarter is 100 billion, with a drop of 52.6% in the same ratio. The main reason for the decrease in income is due to the competitive furniture of the Hong Kong market. The product is predetermined to be homogenized, which has something to do with the malignancy of market competition. In order to respond to this challenge, we have strengthened the service of customized products for large customers. We have cooperated with insurance companies to develop customized and specialized products. We have proposed comprehensive solutions for large customers, such as B and C-end, such as health insurance for large customers. And in Singapore, the United States, Baimu University, etc., local continuous comprehensive product combination, provide customers with a global-specific insurance configuration solution, and enhance our competitive advantage in differentiating products and professional services. At the same time, we are also excited to see that the Hong Kong Insurance Regulatory Agency has strengthened the management and punishment of malicious competition such as large-scale refurbishment. In the long term, we believe that customers will benefit from a healthier industry and business environment. By using such standardized institutions such as NOEA to carry out wealth management and insurance and other comprehensive configuration,
Melo Si
on the international asset management front, our key offerings include actively managed and externally managed alternative investment products, as well as non-money market mutual fund products. During the second quarter, transaction value for U.S. dollar private equity products reached U.S. dollar 152 million, a significant increase of 46.2% year-on-year. Transaction value of U.S. dollar private secondary products, including hedge funds and structure products, reached U.S. dollar 401 million, an increase of 23% year-on-year. At the end of the second quarter, AUM for overseas products reached U.S. dollar 5.4 billion, a 14% year-on-year increase, and accounting for 25% of the total revenue, total AUM, compared with 21.8% during the same period last year. AUM for overseas private equity and other primary market funds reached U.S. dollar 4.1 billion, a 14.9% year-on-year increase. Our goal is to increase U.S. dollar AUA, including externally managed products, from the current U.S. dollar 8 billion to over 20 billion within the next three to five years. In the insurance product segment, we provide comprehensive solutions, including global insurance products to clients through our Lori Grant. This segment generated total revenue of RMB 101 million in the second quarter, a decrease of 52.6% year-on-year, primarily due to the intensified competition in Hong Kong market, increasing product homogeneity, and the prevalence of malicious market competition for commission rebates. To address these challenges, we strengthened our customized product services for key clients and partnered with leading insurance companies to develop exclusive and customized products. We also launched comprehensive businesses and individual solutions, such as VIP insurance for major clients, and continued to build a diverse product portfolio in Singapore, the US, and Bermuda, providing clients with globally tailored insurance solutions. These efforts have enhanced our competitive edge through differentiated products and professional services. Additionally, we're encouraged by the Hong Kong Insurance Regulatory Authority's efforts to strengthen the management and penalties for malicious competition, such as excessive commission rebates. In the long run, we believe customers will benefit from a healthier competitive environment in the industry. By utilizing regulated institutions like NOAA for integrated wealth management and insurance solutions, clients can expect lower costs and better service.
Yin
In the past and in the future, due to external and internal changes, the company's overall business has slowed down. But for us, this is a process that must be passed. We have made it clear that we are working on a domestic and international strategy, and we still have firm confidence in the wealth management market of high-end Chinese customers. We have separated domestic and international business completely, which is more beneficial to our customer service and is more reasonable. We believe that Financial management is a long-term business. Our business will bring long-term value to customers, shareholders, and managers. Based on the confidence of the management and board of directors for the future service of the global Chinese financial management market, and the long-term support of the shareholders in the long-term support of the shareholders in the long-term support of the shareholders in the long-term support of the shareholders in the long-term in the regular shareholder repayment program with a net profit of 50% per year. In addition, we have added a $50 million-worth of stock return plan. We believe that based on the valuation that is seriously underestimated at the moment, through stock return, it will be very effective in improving the efficiency of the company's ROE and capital configuration, and it will also create great value for the long-term support of NOEA shareholders. Next, I would also like to invite Pan Xin to introduce to you in detail
Melo Si
In summary, while we anticipate a slowdown in the performance of our business overall in the next few quarters due to external challenges and our internal transformation, we view this as a necessary phase in our growth trajectory. We have clearly defined our strategy of refining the domestic market and expanding the international market. and we remain confident in the wealth management opportunities available for global HANA WorkManager speaking clients. The separation of our domestic and international businesses enhances our ability to serve clients and ensures better compliance. We believe that wealth management segment is a long-term endeavor, and the initiatives we have implemented will deliver long-term value to our clients, shareholders, and management teams. Given the management team and the board of directors' confidence in the expansive opportunities in the wealth management industry for global Mandarin-speaking clients, we are rewarding long-term shareholders who have supported NOAA's development during this transition phase through enhanced shareholder return initiatives. Leveraging our healthy balance sheet, the board has authorized the US dollar $50 million share repurchase program. The share repurchase plan does not form a part of our corporate action budget under our new capital management and shareholder return policy. We believe that our stock is deeply undervalued, and this share repurchase program will effectively enhance our ROE and capital allocation efficiency, while also reflecting our unwavering commitment to prioritizing shareholder interest and delivering sustained returns. I would now like to turn the call over to Grant to go over financial results in more detail, as well as the details of the repurchase program. Thank you, everyone.
AUA
Thanks, Melo. And thank you, Xander. And greetings to everyone joining us today. During the first half of 2024, our total revenues were RMB 1.3 billion, a decrease of 27.5% year-over-year. The short-term pressure on the performance is mainly due to the challenges brought about by the transformation, as just described by our CEO, Xander. As you noted, we're undergoing a profound transformation on the RM service model and are actively adjusting the business directions of several business units. This decision-making process has been thoughtful, but it has taken some time to ensure that we're making strategic choices that align with our long-term vision and client interest. While the path forward is clear now, it also takes some time to optimize the processes involved and ensure that they could smoothly integrate it into our sales and service activities. In the short term, the integration of the new sales processes are indeed more intricate and time consuming. It's crucial for our sales team to have the time needed to adapt to these changes and their new roles. This transition, however, will lead to greater success in terms of serving the client's interest, but with a temporary dip in sales efficiency and short-term pressure. Now let's get into the details of financials. Starting this quarter, we have included additional disclosures of revenues by product category and global metrics in the supplemental information section of our release. This enhanced disclosure will provide a more precise picture of our strategic direction, enabling investors to track our business development efforts on a global basis, assess the development stages and financial contributions of our various businesses, and see how they align with our resource allocation. The encouraging sign that our U.S. dollar investment products performed well, generating stronger transaction values, and increasingly contributing to revenues. As the Fed's hire for longer interest rate lasted, the demand for U.S. dollar cash management products remained strong in the first half of the year, with revenues increasing 278% year over year. And the revenue growth in U.S. dollar alternative investment products were also impressive. On a comparable basis, excluding the impact of one-off performance-based income, The revenue contribution of U.S. dollar alternative investment products increased by 9.3% year-over-year to RMB 245 million during the first half. In addition, their share of total one-time commissions and recurring service fees increased from 14.9% to 21%. However, revenue from global insurance products slowed down due to the higher competitive market environment. Continuing on the positive side, our overseas total net revenues in the first half reached RMB 585 million, accounting for 46% of the total net revenues, up from 41% during the same period last year. For our domestic business, the revenue decline was significant, mainly attributed to the strategic realignment of our business focuses. In line with our CIO House view, we have slowed down the distribution of domestic investment insurance products and also RMB RTE products. The focus of RMB secondary products has been shifted towards QDII and QDLP offerings for our clients to capture growth opportunities elsewhere in the globe, especially in a stronger U.S. equity market. On a quarterly basis, our total net revenues were RMB $616 million during the second quarter, a decrease of 34.6% year-over-year and 5.2% sequentially. By revenue type, one-time commissions fell 26.9% sequentially to RMB $136 million, mainly due to reduced insurance product distributions. Recurring service fees dipped slightly, 2.9% sequentially, to RMB $404 million, primarily influenced by decrease in onshore AUM. Performance-based income saw a robust 95% sequential increase to RMB $28 million, driven by exits from private equity investments, notably CS1PE RMB secondary funds, managed by Gopher generated carry income of RMB 12 million, reflecting our continuing efforts in exiting domestic PE products and thereby delivering substantial returns to our clients. In terms of transaction value, we distributed RMB 33.3 billion products during the first half of the year. down 5% year-over-year, reflecting a continuous shift towards USD products. Specifically, RMB transaction values fell 30% year-over-year to RMB $17 billion, where transaction value of US dollars increased by 45.6% to USD $2.3 billion. The proportion of US dollar products in our total transaction value has increased significantly, therefore, from 31% last year to 49% this year. This quarter, we also observed the clear trend that our clients are increasingly interested in a wider array of U.S. dollar investment products, moving beyond just cash management solutions. In particular, our long-term alternative U.S. dollar investment products, including private equity, private security, and private credit products, have seen a notable increase in demand, raising U.S. dollar $463 million in the first half. a substantial 39% increase year-over-year. These products are set to deliver a consistent flow of recurring service fees for us in the longer term. Our AUM and AUA remain stable overall, with a decline in the RMD AUM and AUA due to ongoing exits, while the USR AUM and AUA ticked off its growth. At the end of second quarter, our US dollar AUM grew significantly by 14% year-over-year and 4.4% sequentially. And US dollar AUA grew by 7.4% year-over-year and 2.5% sequentially, reflecting our ability to capture a larger share of clients' US dollar wallets. Moving on to the income statement, operating costs and expenses fell by 18.7% year-over-year during the quarter and almost 10% year-over-year during the first half of 2024, reflecting continuing efforts of controlling costs. Compensation and benefits decreased significantly by over 20%, both year-over-year and sequentially. As mentioned last quarter, we're continuing to consolidate our network centers in smaller cities and further improve human capital efficiency by reducing overhead costs. While the financial benefits of these optimizations might not be immediately fully apparent, we're now starting to see the cost savings in our latest financials. Selling expenses, general and administrative expenses fell sharply by 19% year-over-year and increased 6.3% sequentially. The slight sequential increase was primarily driven by technology-related costs. Operating profit for the quarter increased by 10.3% sequentially to RMB $134 million, while operating margin expanded by 3.1% to 21.8%. For the first half this year, operating profit was RMB $256 million and operating margin was 20.2%. Total other income increased to RMB $62 million during the quarter and RMB $117 million during the first half of the year due to continued optimization of treasury management. Non-GAAP net income was RMB $106 million for the quarter and RMB $267 million for the first half of the year. As our global business accelerates, our overseas client base has obviously experienced robust growth. with overseas registered clients now exceeding 16,000, up 23.0% year-over-year. The total number of overseas diamond and black card clients, which require minimum investments with U.S. dollars $2 million and $5 million respectively, continue to grow this quarter, exceeding 1,500. Overseas active clients reached 3,244, increasing 62.8%. and 18.2% sequentially. Turning to the balance sheet, we have a maintained healthy liquidity position and very strong cash reserves with our current ratio of 3.0 times debt to asset ratio at 22%, with zero interest-bearing debt. We have RMB 4.6 billion in cash after the distribution of $1 billion dividend, providing ample resources. to support our global expansion plans and allocate further to shareholder returns, which remains a priority for the board. As you know, in August, we paid out the annual dividends and special dividends for 2023, totaling RMB $1 billion, an equivalent to 100% of our annual net income last year. Based on the share price before the ex-dividend date, the total dividend yield reached and exceeded 20%. This reflects our strong liquidity position and confidence in our long-term growth prospects. While China's wealth management industry is facing a challenging time and is undergoing a transition mode, we remain very confident of NOAA's unique advantage, benefiting from our deep understanding of high net worth individuals' demands and capability to deliver products and services to the still-growing client base. but one of the few independent firms that still have access through years of investor education, access to the largest group of qualified individual investors who are still seeking professional services. Hence, we believe that our stock is deeply undervalued, which doesn't reflect the growth prospects, robust balance sheet and cash reserve, or our special bonds to this client group all over the world. I'm very pleased to report that our board has approved the share repurchase program on top of already existing capital policy, which will allow the company to buy back up to U.S. dollar $50 million of its ADMs effective immediately. It's worth noting that this program is separate from the corporate actions budget for 2024 under the new shareholder return policy announced last year in November. The specifics of 2024 budget will be determined later on. We're very excited about the prospects ahead and believe our value will be fairly reflected by the market. We value the long-term and new shareholders and are committed to continue to share our successes with them through more proactive capital allocation policies in the future. In conclusion, 2024 is a year of significant transformations. Our performance this quarter clearly reflects the progress we're making and at the same time, the pressure we're facing. We recognize this transformation will take time, but are confident that these adjustments will lay a solid foundation for future growth. Once again, thank you all for your trust and support. I'll now open the floor for questions.
Operator
We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Peter Chong with JP Morgan. Please go ahead.
Peter Chong
Thank you for the opportunity to ask me a question. I have two questions. The first one is that I noticed that there is a loss of RMB 50 million in the second quarter of our performance. I would like to ask the reason behind it. Then the second question is that the management will mention that the company's business may slow down in the next few seasons because we are in a transitional period. But in the long term, the management also expects that overseas AOAs will From $80 billion to $200 billion. This also shows that the management team is very confident in the long-term development of NOAA. I would like to ask how long the management team is expected to last during this period of income slowdown. And how will we achieve this? Let me do a translation. Sample management giving me the opportunity to ask questions. This is Peter Zhang from JP Morgan. I have two questions. The first question is I wish to understand what's the a driver behind the 50 million loss from equity affiliates record in our second quarter result. My second question is management mentions that overseas AUA will increase from 8 billion RMB in this quarter to 20 billion US dollar in this quarter to 20 billion US dollar in next three to five years. But in the meantime, we also expect our business remain relative slow in next few quarter due to the external and internal environment. I wish to understand How long will the transition period be? And in the medium to longer term, what will be the driver behind the strong increase in this overseas AUA? How will NOAA achieve the growth? Thank you.
AUA
Thank you, Peter. I will answer the first question. on the Lianying Gongzi Shouyi Zhe Kuan, it's more or less related to, you know, as the general partner of many, many fund of funds, Gopher actually has co-investments in these funds. And sometimes when the valuation of the underlying funds adjusted down, it will be reflected proportionately onto our balance sheet as equity pick-up. So this quarter reflects that equity pick-up. some of the underperformance of the following underlying funds. Then on the second question, and we're, you know, obviously have very high confidence in terms of the ample growth, the depth, actually, the market of high net worth individuals in the future, and especially how we'll be able to maintain the growth on both, you know, the quality of service as well as the accumulation of AUM and AUA, especially on the US dollar side. And the second question is, in the next few seasons, we can probably see stabilization and performance, and then the goal of $2 billion, and this may be more related to the strategy, and then we may see a kind of supplementation or expansion.
Yin
Thank you. In fact, the main reason for the decline of our performance in this quarter is a adjustment of our product structure. As you can see, one is domestic insurance. In domestic insurance, we have slowed down the investment of insurance products and re-designed a product in the process of designing a new product. So in this quarter, in fact, the challenge of our domestic insurance business is very big. The main reason is that we put the protection of our clients' assets at the first level. uh, In the process of transformation and landing, the team will also do some more landing and operation processes. There will be some changes in the way of sales model. From this perspective, the impact of the performance of this quarter will be greater. In the future, we have already put insurance, as you can see, in a large environment, uh uh There is a 10% return rate. I think this ratio is relatively high. In the 4-3-4 seasons, as these businesses gradually land, I believe the business will be in good shape. So in the future, we may need a gradual adjustment of 2-3 seasons and then climb up again. As for Taiwan, you know, just told me that I saw a bus, you know, you know, you know, you know, you know, you know, you know, you know, you know, foreign customers. In the opening of the local market, we tried a little bit, and found that it still has a great effect, including the growth performance of data from online accounts, as well as the performance of our local businesses. If you look at it, the past investment of Chinese customers actually has a great demand for dissatisfaction. This is also a growth point for us in the future. At the same time, Thank you, Zander. Okay, let me translate it.
Melo Si
Thank you, Xander, and thank you, Peter, for the question. Regarding the second question, first of all, I guess the near-term challenges, a few aspects that were previously mentioned during the call as well, that causing the near-term financial performance slowdown, first of all, is I guess on the domestic market, driven from our, I guess, fundamental is to protect our clients' assets. So we'd rather lose the client than losing our client's assets. So we basically, during the first half of the year, we suspended the distribution of domestic insurance products due to aforementioned reasonings. And secondly, in the overseas market, as mentioned before, the competition for Hong Kong insurance market has become quite, I guess, competitive. We're glad to see that the regulatory authorities have implemented various adjustments to limit the malicious competition aspect. Internally, we're also implementing the transformation of our sales functions. the sales personnel are being adjusted or have been adjusted into different independent business units. So I guess the sales network or the sales model has been significantly changed. So these are the near-term challenges. I guess looking forward to the future, first of all, in terms of domestic insurance, the strategic direction has been very clear now. We are positioning ourselves to our clients' healthcare as well as retirement wellness position products. And, you know, we have already started the marketing process and we see very high interest among our clients. So basically we take a lot of our clients to these offline senior care facilities and we are seeing that the transition or the clients subscription rate is about 10%. So we expect this business to slowly pick up starting from the third quarter and we think that the product is well suited for our clientele. In terms of overseas, we have very high client stickiness and We understand our clients' demand. A lot of our clients are going outbound for their businesses as well as their investment allocation needs. And also in the overseas market, there are a lot of local Mandarin-speaking high-net-worth clients as potential clients for NOAA who are, you know, I guess underserved in their asset allocation demand and needs. So we have done some early stage attempt, including acquiring new clients and servicing clients online, acquiring clients offline. And we realized that this is a very, I guess, a blue ocean market for us to further capture. In terms of the product competitiveness, as mentioned, we established our US product center, I guess, in the overseas market. our strategy is to increase our product competitiveness and also increase the, expand the coverage of global top tier GPs, including, you know, VCs, TEs, you know, hedge fund managers and so forth. 您总,王总看看你们还有是否有其他的补充。
Xander
I would like to add that we are still very confident in the growth of overseas business. In addition to the need of local Chinese people, we also see that many large companies in the international market are also developing high-quality customers for private wealth management as a very important business. In the past, these large companies were mainly institutional customers. Now, basically, they all want to be able to their customers at least 30% become private and high-end customers. And the Shimoku Fund is a long-term project of Loya. Our overseas financiers are also familiar with this business after our training. But other private companies have just started. So we think that in this asset category, we are on the same starting line. Even Loya is relatively ahead because our customers have such
Melo Si
Thank you, Chair Lady. Thank you, Chair Lady. So overall, we are very confident in our overseas business growth or global business growth. Aside from the local overseas local Mandarin speaking clients and their high demand for wealth management services, especially from Chinese background wealth managers like us. On the supply of product side, we're also seeing that basically all of the top-tier global GPs are putting more resources in their private wealth channel. Whereas before, their fundraising efforts were mainly driven by institutional LPs. But before, I guess the private wealth channel only account for less than 10% of their overall new fundraising amounts. but they're aiming to increase this percentage to over 30%. So I guess NOAA, due to our product specialty, we are known as an alternative wealth asset manager and wealth manager. So comparing with a lot of, I guess, global private banks, or competitors who are less familiar with PrEP equity, venture capital, and just alternative products overall, we do have an edge when we compare to those local peers. Operator, turning back to you.
Operator
Thank you. If you have a question, please press star, then 1. And this will conclude our conference call as well as our question and answer session. Wanted to thank everyone for your participation today. You may now disconnect.
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