-- Operating Income for the Third Quarter of 2022 Grew 14.2% YOY --
GUANGZHOU, China, Nov. 21, 2022 (GLOBE NEWSWIRE) -- Fanhua Inc. (Nasdaq: FANH) (the “Company” or “Fanhua”), a leading independent financial services provider in China, today announced its unaudited financial results for the third quarter ended September 30, 20221.
Financial Highlights for the Third Quarter of 2022
(In thousands, except per ADS data) | 2021Q3(RMB) | 2022Q3(RMB) | 2022Q3(US$) | Change % | |
Total net revenues | 683,537 | 624,746 | 87,825 | (8.6 | ) |
Operating income | 28,163 | 32,165 | 4,522 | 14.2 | |
Net income attributable to the Company’s shareholders | 34,250 | 35,371 | 4,972 | 3.3 | |
Diluted net income per ADS | 0.64 | 0.66 | 0.09 | 3.1 | |
Cash, cash equivalents and short-term investments and others (as of September 30, 2021 and 2022) | 1,397,727 | 1,296,9262 | 182,319 | (7.2 | ) |
Mr. Yinan Hu, chairman and chief executive officer of Fanhua, commented on the financial results of third quarter of 2022, “Despite macroeconomic and industry headwinds, Fanhua maintained steady growth in the third quarter of 2022, reflecting continued resilience in our business. Gross written premiums (“GWP”) of our life insurance business grew by 6.2% year-over-year to RMB2.8 billion, of which our regular life insurance first-year premiums (“FYP”) increased by 9.1% year-over-year to RMB529.7 million. While we continued to increase investments in technology and training, we delivered an operating income of RMB32.2 million, representing a growth of 14.2% year-over-year, in line with our previous expectation.”
“We are pleased to witness a continuous improvement in the quality of our sales force during the third quarter. In accordance with our plan, the total number of performing agents declined, while the per capita productivity of performing agents grew by nearly 20% year-over-year. The contribution from high-performing agents increased even further, with the number of ‘100K Premium Agents’3 growing by 46% year-over-year, representing 48% of our FYP during the quarter, compared to 39% for the corresponding period in 2021. This is yet another testament to the positive effects of our professionalization and career-based strategies.”
“Centering around the needs for high-quality senior care, wealth management and inheritance solutions from the mass affluent and high-net-worth families, Fanhua continues to focus on magnifying our platform’s empowering capabilities through the following initiatives: i) supporting our agents to provide whole life journey services by offering a wide spectrum of product and services that match the demands throughout customer’s lifecycle; ii) empowering our agents to achieve professional growth through a combination of our 3F (‘Family Officer Consultant, Fanhua Retirement Planner and Family Policy Custodian’) professional trainings, scenario-based marketing and the support from 3R (‘Account Responsibility, Solution Responsibility and Fulfillment Responsibility’) marketing model, leveraging on our resources in trust and health care services and our proprietary insurance policy custody technology; and iii) improving the efficiency of customer services through our digitalization efforts.”
“For the fourth quarter of 2022, considering the ongoing resurgences of COVID-19 cases across the country, the growth prospect of Chinese insurance industry remains challenging. Against this backdrop, Fanhua will continue with our established development strategies to empower agents and create value for customers.”
Financial Results for the Third Quarter of 2022
Total net revenues were RMB624.7 million (US$87.8 million) for the third quarter of 2022, representing a decrease of 8.6% from RMB683.5 million for the corresponding period in 2021.
Total operating costs and expenses were RMB592.6 million (US$83.3 million) for the third quarter of 2022, representing a decrease of 9.6% from RMB655.4 million for the corresponding period in 2021.
As a result of the foregoing factors, we recorded an operating income of RMB32.2 million (US$4.5 million) for the third quarter of 2022, representing an increase of 14.2% from RMB28.2 million for the corresponding period in 2021.
Operating margin was 5.1% for the third quarter of 2022, compared to 4.1% for the corresponding period in 2021.
Investment income was RMB2.8 million (US$0.4 million) for the third quarter of 2022, as compared to investment income of RMB8.8 million for the corresponding period in 2021. The investment income in the third quarter of 2022 consisted of yields from short-term investments in financial products, and is recognized when the investment matures or is disposed of.
Income tax expense was RMB8.6 million (US$1.2 million) for the third quarter of 2022, representing a decrease of 7.5% from RMB9.3 million for the corresponding period in 2021. The effective tax rate for the third quarter of 2022 was 20.2% compared with 21.4% for the corresponding period in 2021.
Net income was RMB33.2 million (US$4.7 million) for the third quarter of 2022, representing a decrease of 9.8% from RMB36.8 million for the corresponding period in 2021.
Net income attributable to the Company’s shareholders was RMB35.4 million (US$5.0 million) for the third quarter of 2022, representing an increase of 3.3% from RMB34.3 million for the corresponding period in 2021.
Net margin was 5.7% for the third quarter of 2022 as compared to 5.0% for the corresponding period in 2021.
Basic and diluted net income per ADS were RMB0.66 (US$0.09) and RMB0.66 (US$0.09) for the third quarter of 2022, respectively, representing increases of 3.1% and 3.1% from RMB0.64 and RMB0.64 for the corresponding period in 2021, respectively.
As of September 30, 2022, the Company had RMB1,296.9 million (US$182.3 million) in cash, cashequivalents, short-term investments and others. The amount included short term loans to third parties of RMB189.0 million and an advance payment of RMB190.0 million for the purchase of short-term investment products.
Other Key Operational Metrics:
Recent Developments
Business Outlook
Fanhua expects its operating income to be no less than RMB30.0 million for the fourth quarter of 2022. This forecast is based on the current market conditions and reflects Fanhua’s preliminary estimate, which is subject to change caused by various factors.
Conference Call
The Company will host a conference call to discuss its third quarter 2022 financial results as per the following details.
Time: 8:00 p.m. Eastern Standard Time on November 21, 2022 or 9:00 a.m.Beijing/Hong Kong Time on November 22, 2022
Please pre-register online in advance to join the conference call by navigating to the link provided below and dial in 10 minutes before the call is scheduled to begin. Conference call details will be provided upon registration.
Conference Call Preregistration: https://register.vevent.com/register/BI1b627f239d87469890614c8be638bfd4
Additionally, a live and archived webcast of the conference call will be available at Fanhua’s investor relations website: https://edge.media-server.com/mmc/p/5mcc7ydk
About Fanhua Inc.
Fanhua Inc. is a leading independent financial services provider. Through our online platforms and offline sales and service network, we offer a wide variety of financial products and services to individuals, including life and property and casualty insurance products. We also provide insurance claims adjusting services, such as damage assessments, surveys, authentications and loss estimations, as well as value-added services, such as emergency vehicle roadside assistance.
Our online platforms include: (i) Lan Zhanggui, an all-in-one platform which allows our agents to access and purchase for their policy holders a wide variety of insurance products, including life insurance, auto insurance, accident insurance, travel insurance and standard health insurance products from multiple insurance companies on their mobile devices; (ii) Baowang (www.baoxian.com), an online entry portal for comparing and purchasing short term health, accident, travel and homeowner insurance products and (iii) eHuzhu (www.ehuzhu.com), a non-profit online mutual aid platform in China.
As of September 30, 2022, our distribution and service network consisted of 697 sales outlets covering 23 provinces, autonomous regions and centrally-administered municipalities and 100 service outlets covering 31 provinces.
For more information about Fanhua Inc., please visit http://ir.fanhuaholdings.com/.
Forward-looking Statements
This press release contains statements of a forward-looking nature. These statements, including the statements relating to the Company’s future financial and operating results, are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as “will,” “expects,” “believes,” “anticipates,” “intends,” “estimates” and similar statements. Among other things, management’s quotations and the Business Outlook section contain forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about Fanhua and the industry. Potential risks and uncertainties include, but are not limited to, those relating to its ability to attract and retain productive agents, especially entrepreneurial agents, its ability to maintain existing and develop new business relationships with insurance companies, its ability to execute its growth strategy, its ability to adapt to the evolving regulatory environment in the Chinese insurance industry, its ability to compete effectively against its competitors, quarterly variations in its operating results caused by factors beyond its control and macroeconomic conditions in China, future development of COVID-19 outbreak and their potential impact on the sales of insurance products. Except as otherwise indicated, all information provided in this press release speaks as of the date hereof, and Fanhua undertakes no obligation to update any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although Fanhua believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that its expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results. Further information regarding risks and uncertainties faced by Fanhua is included in Fanhua’s filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F.
FANHUA INC.Unaudited Condensed Consolidated Balance Sheets(In thousands)
As of December 31, | As of September 30, | As of September 30, | ||||||
2021 | 2022 | 2022 | ||||||
RMB | RMB | US$ | ||||||
ASSETS: | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | 564,624 | 377,310 | 53,041 | |||||
Restricted cash | 76,303 | 64,949 | 9,130 | |||||
Short term investments | 870,682 | 540,591 | 75,995 | |||||
Accounts receivable, net | 653,757 | 582,905 | 81,943 | |||||
Other receivables | 60,755 | 279,627 | 39,309 | |||||
Other current assets | 39,947 | 220,901 | 31,054 | |||||
Total current assets | 2,266,068 | 2,066,283 | 290,472 | |||||
Non-current assets: | ||||||||
Restricted bank deposit – non-current | 15,595 | 20,578 | 2,893 | |||||
Contract assets, net - non-current | 192,114 | 323,137 | 45,426 | |||||
Property, plant, and equipment, net | 46,800 | 103,233 | 14,512 | |||||
Goodwill and intangible assets, net | 109,869 | 109,997 | 15,463 | |||||
Deferred tax assets | 18,728 | 22,035 | 3,098 | |||||
Investment in affiliates | 335,808 | 4,877 | 686 | |||||
Other non-current assets | 31,459 | 31,310 | 4,401 | |||||
Right of use assets | 225,677 | 175,849 | 24,720 | |||||
Total non-current assets | 976,050 | 791,016 | 111,199 | |||||
Total assets | 3,242,118 | 2,857,299 | 401,671 |
Current liabilities: | ||||||||
Accounts payable | 377,558 | 294,935 | 41,461 | |||||
Insurance premium payables | 24,054 | 18,614 | 2,617 | |||||
Other payables and accrued expenses | 178,157 | 184,049 | 25,873 | |||||
Accrued payroll | 111,672 | 94,825 | 13,330 | |||||
Income tax payable | 130,222 | 121,610 | 17,096 | |||||
Current operating lease liability | 87,012 | 72,495 | 10,191 | |||||
Total current liabilities | 908,675 | 786,528 | 110,568 | |||||
Non-current liabilities: | ||||||||
Accounts payable – non-current | 97,869 | 164,617 | 23,141 | |||||
Other tax liabilities | 73,213 | 45,788 | 6,437 | |||||
Deferred tax liabilities | 73,716 | 93,413 | 13,132 | |||||
Non-current operating lease liability | 128,283 | 93,270 | 13,111 | |||||
Total non-current liabilities | 373,081 | 397,088 | 55,821 | |||||
Total liabilities | 1,281,756 | 1,183,616 | 166,389 | |||||
Ordinary shares | 8,089 | 8,091 | 1,137 | |||||
Additional Paid-in capital | — | 162 | 23 | |||||
Statutory reserves | 557,221 | 557,221 | 78,333 | |||||
Retained earnings | 1,311,715 | 1,023,641 | 143,901 | |||||
Accumulated other comprehensive loss | (39,140 | ) | (28,468 | ) | (4,002 | ) | ||
Total shareholders’ equity | 1,837,885 | 1,560,647 | 219,392 | |||||
Non-controlling interests | 122,477 | 113,036 | 15,890 | |||||
Total equity | 1,960,362 | 1,673,683 | 235,282 | |||||
Total liabilities and equity | 3,242,118 | 2,857,299 | 401,671 |
FANHUA INC.Unaudited Condensed Consolidated Statements of Income and Comprehensive Income(In thousands, except for shares and per share data)
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2021 | 2022 | 2022 | 2021 | 2022 | 2022 | ||||||||||||
RMB | RMB | USD | RMB | RMB | US$ | ||||||||||||
Net revenues: | |||||||||||||||||
Agency | 562,127 | 522,702 | 73,480 | 2,139,684 | 1,714,096 | 240,964 | |||||||||||
Life insurance business | 525,241 | 480,605 | 67,562 | 2,037,264 | 1,609,833 | 226,307 | |||||||||||
P&C insurance business | 36,886 | 42,097 | 5,918 | 102,420 | 104,263 | 14,657 | |||||||||||
Claims adjusting | 121,410 | 102,044 | 14,345 | 328,801 | 300,153 | 42,195 | |||||||||||
Total net revenues | 683,537 | 624,746 | 87,825 | 2,468,485 | 2,014,249 | 283,159 | |||||||||||
Operating costs and expenses: | |||||||||||||||||
Agency | (367,452 | ) | (324,164 | ) | (45,570 | ) | (1,405,090 | ) | (1,098,865 | ) | (154,476 | ) | |||||
Life insurance Business | (341,577 | ) | (298,915 | ) | (42,021 | ) | (1,331,519 | ) | (1,030,418 | ) | (144,854 | ) | |||||
P&C insurance Business | (25,875 | ) | (25,249 | ) | (3,549 | ) | (73,571 | ) | (68,447 | ) | (9,622 | ) | |||||
Claims adjusting | (73,426 | ) | (69,253 | ) | (9,735 | ) | (205,182 | ) | (202,329 | ) | (28,443 | ) | |||||
Total operating costs | (440,878 | ) | (393,417 | ) | (55,305 | ) | (1,610,272 | ) | (1,301,194 | ) | (182,919 | ) | |||||
Selling expenses | (71,627 | ) | (69,323 | ) | (9,745 | ) | (229,352 | ) | (210,952 | ) | (29,655 | ) | |||||
General and administrative expenses | (142,869 | ) | (129,841 | ) | (18,253 | ) | (409,292 | ) | (418,321 | ) | (58,807 | ) | |||||
Total operating costs and expenses | (655,374 | ) | (592,581 | ) | (83,303 | ) | (2,248,916 | ) | (1,930,467 | ) | (271,381 | ) | |||||
Income from operations | 28,163 | 32,165 | 4,522 | 219,569 | 83,782 | 11,778 | |||||||||||
Other income, net: | |||||||||||||||||
Investment income | 8,847 | 2,770 | 389 | 25,388 | 9,044 | 1,271 | |||||||||||
Interest income | 468 | 7,938 | 1,116 | 1,510 | 9,775 | 1,374 | |||||||||||
Others, net | 6,116 | (488 | ) | (69 | ) | 24,111 | 8,920 | 1,254 | |||||||||
Income from operations before income taxes and share of income of affiliates | 43,594 | 42,385 | 5,958 | 270,578 | 111,521 | 15,677 | |||||||||||
Income tax expense | (9,315 | ) | (8,562 | ) | (1,204 | ) | (57,906 | ) | (22,551 | ) | (3,170 | ) | |||||
Share income of affiliates | 2,486 | (621 | ) | (87 | ) | 28,813 | (68,755 | ) | (9,665 | ) | |||||||
Net income | 36,765 | 33,202 | 4,667 | 241,485 | 20,215 | 2,842 | |||||||||||
Less: net income (loss) attributable to non-controlling interests | 2,515 | (2,169 | ) | (305 | ) | 1,445 | (9,441 | ) | (1,327 | ) | |||||||
Net income attributable to the Company’s shareholders | 34,250 | 35,371 | 4,972 | 240,040 | 29,656 | 4,169 |
FANHUA INC.Unaudited Condensed Consolidated Statements of Income and Comprehensive Income-(Continued)(In thousands, except for shares and per share data)
For The Three Months Ended | For The Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2021 | 2022 | 2022 | 2021 | 2022 | 2022 | ||||||||||||
RMB | RMB | US$ | RMB | RMB | US$ | ||||||||||||
Net income per share: | |||||||||||||||||
Basic | 0.03 | 0.03 | 0.01 | 0.22 | 0.03 | 0.01 | |||||||||||
Diluted | 0.03 | 0.03 | 0.01 | 0.22 | 0.03 | 0.01 | |||||||||||
Net income per ADS: | |||||||||||||||||
Basic | 0.64 | 0.66 | 0.09 | 4.47 | 0.55 | 0.08 | |||||||||||
Diluted | 0.64 | 0.66 | 0.09 | 4.47 | 0.55 | 0.08 | |||||||||||
Shares used in calculating net income per share:Basic | 1,073,891,784 | 1,074,291,784 | 1,074,291,784 | 1,073,891,784 | 1,074,193,616 | 1,074,193,616 | |||||||||||
Diluted | 1,074,291,210 | 1,074,500,364 | 1,074,500,364 | 1,074,291,220 | 1,074,262,500 | 1,074,262,500 | |||||||||||
Net income | 36,765 | 33,202 | 4,667 | 241,485 | 20,215 | 2,842 | |||||||||||
Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments | (279 | ) | 3,950 | 555 | (7,968 | ) | 4,746 | 667 | |||||||||
Share of other comprehensive (loss) income of affiliates | 197 | — | — | (299 | ) | 4,688 | 659 | ||||||||||
Unrealized net gains on available-for-sale investments | 4,469 | 1,848 | 260 | 1,775 | 1,238 | 174 | |||||||||||
Comprehensive income | 41,152 | 39,000 | 5,482 | 234,993 | 30,887 | 4,342 | |||||||||||
Less: Comprehensive income (loss) attributable to the non-controlling interests | 2,515 | (2,169 | ) | (305 | ) | 1,445 | (9,441 | ) | (1,327 | ) | |||||||
Comprehensive income attributable to the Company’s shareholders | 38,637 | 41,169 | 5,787 | 233,548 | 40,328 | 5,669 |
FANHUA INC.Unaudited Condensed Consolidated Statements of Cash Flow(In thousands, except for shares and per share data)
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2021 | 2022 | 2022 | 2021 | 2022 | 2022 | ||||||||||||
RMB | RMB | US$ | RMB | RMB | US$ | ||||||||||||
OPERATING ACTIVITIES | |||||||||||||||||
Net income | 36,765 | 33,202 | 4,667 | 241,485 | 20,215 | 2,842 | |||||||||||
Adjustments to reconcile net income to net cash generated from operating activities: | |||||||||||||||||
Investment income | (1,736 | ) | (1,133 | ) | (159 | ) | (3,163 | ) | (2,931 | ) | (412 | ) | |||||
Share of income of affiliates | (2,486 | ) | 621 | 87 | (28,813 | ) | 68,755 | 9,665 | |||||||||
Other non-cash adjustments | 38,694 | 35,027 | 4,924 | 102,880 | 115,076 | 16,177 | |||||||||||
Changes in operating assets and liabilities | (53,532 | ) | (47,929 | ) | (6,738 | ) | (254,307 | ) | (218,280 | ) | (30,685 | ) | |||||
Net cash generated from (used in) operating activities | 17,705 | 19,788 | 2,781 | 58,082 | (17,165 | ) | (2,413 | ) | |||||||||
Cash flows from investing activities: | |||||||||||||||||
Purchase of short term investments | (1,510,370 | ) | (452,760 | ) | (63,648 | ) | (7,255,010 | ) | (1,993,760 | ) | (280,278 | ) | |||||
Proceeds from disposal of short-term investments | 1,842,576 | 653,531 | 91,872 | 7,798,830 | 2,487,862 | 349,738 | |||||||||||
Prepayment for acquisition of short-term investments | — | (240,000 | ) | (33,739 | ) | — | (340,000 | ) | (47,797 | ) | |||||||
Cash lent to third parties | — | (105,800 | ) | (14,873 | ) | — | (205,800 | ) | (28,931 | ) | |||||||
Repayment of loan receivables from a third party | — | 20,000 | 2,812 | — | 20,000 | 2,812 | |||||||||||
Others | (2,841 | ) | (26,091 | ) | (3,668 | ) | (10,032 | ) | (94,247 | ) | (13,249 | ) | |||||
Net cash generated from (used in) investing activities | 329,365 | (151,120 | ) | (21,244 | ) | 533,788 | (125,945 | ) | (17,705 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||||
Dividends paid | (51,958 | ) | — | — | (191,427 | ) | (52,069 | ) | (7,320 | ) | |||||||
Dividend distributed to non-controlling interest | — | — | — | (7,580 | ) | — | — | ||||||||||
Others | — | — | — | (10,200 | ) | 3 | — | ||||||||||
Net cash used in financing activities | (51,958 | ) | — | — | (209,207 | ) | (52,066 | ) | (7,320 | ) | |||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 295,112 | (131,332 | ) | (18,463 | ) | 382,663 | (195,176 | ) | (27,438 | ) | |||||||
Cash, cash equivalents and restricted cash at beginning of period | 429,330 | 592,425 | 83,282 | 350,098 | 656,522 | 92,292 | |||||||||||
Effect of exchange rate changes on cash and cash equivalents | (343 | ) | 1,744 | 245 | (8,662 | ) | 1,491 | 210 | |||||||||
Cash, cash equivalents and restricted cash at end of period | 724,099 | 462,837 | 65,064 | 724,099 | 462,837 | 65,064 |
Source: Fanhua Inc.
_______________ | |
1 | This announcement contains currency conversions of certain Renminbi (“RMB”) amounts into U.S. dollars (US$) at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB7.1135 to US$1.00, the effective noon buying rate as of September 30, 2022 in The City of New York for cable transfers of RMB as set forth in the H.10 weekly statistical release of the Federal Reserve Board. |
2 | The amount includes short term loans to third parties of RMB189.0 million as recorded in other receivables and an advance payment of RMB190.0 million for the purchase of short-term investment products as recorded in other current assets. |
3 | “100K Premium Agents” refers to agents who have contributed more than RMB100,000 annualized premiums equivalent during the reporting period. |
4 | Active users of Lan Zhanggui in a given period refer to users who sold at least one insurance policy through Lan Zhanggui (through either its mobile application or WeChat public account) during such period. |
5 | Active customer accounts in a given period refer to customer accounts that made at least one purchase directly through www.baoxian.com, its mobile application, or WeChat public account during such period. |
6 | Performing agents in a given period refer to agents who sold at least one insurance policy during such period. |