GlobeNewswire Inc | May 27, 2021 05:01PM EDT

May 27, 2021

GUANGZHOU, China, May 27, 2021 (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 first quarter ended March 31, 20211.

Financial Highlights for the First Quarter of 2021:

(In thousands, except per ADS) 2020Q1 2021Q1 2021Q1 Change % (RMB) (RMB) (US$)Total net revenues 722,623 1,095,029 167,134 51.5 Operating income 60,044 140,401 21,429 133.8 Net income attributable to 45,793 138,385 21,121 202.2 the Company?s shareholdersBasic and diluted net income per ADS^2 0.85 2.58 0.39 203.5 Cash, cash equivalents and short-term investments (As of March, 31, 1,843,238 1,624,399 247,932 (11.9 )2020 and 2021)

Commenting on the financial results of first quarter of 2021, Mr. Chunlin Wang, chairman and chief executive officer of Fanhua, stated, We are glad to record strong growth across various operating metrics. During the first quarter of 2021, our total insurance gross written premiums (GWP) grew by 27.9% year over year to RMB3.1 billion, of which first year premiums was up 57.0% year-over-year to RMB892.7 million. Our net revenues was up 51.5% year-over-year to RMB1.1 billion and our operating income grew by 133.8% to RMB140.4 million.

Chinas life insurance market is undergoing deep reform which brings about both challenges and opportunities. With our Professionalization, Digitalization and Open Platform strategy, we believe we are well positioned to capture these opportunities. We are glad that weve made steady progress in pushing forward the new strategy. Up to date, we have approved the establishment of nine Yuntong (literally translated as Cloud Phoenixtree)3 branches as part of our efforts to strengthen our sales force and we expect to have two of the Yuntong branches in operation by July. To digitalize our operation, we started to promote our enterprise Wechat application among direct consumers on a trial basis in certain regions, which will help facilitate our agents to engage with their prospective customers more efficiently. In addition, our digital marketing center has so far recruited 100 service representatives to facilitate online and telemarketing transactions. Meanwhile, for open platform initiative, our Cloud Service Division has established partnerships with approximately 16 channel partners and is in the process of facilitating system connections and testing business processes.

For the second quarter of 2021, amid persistent headwinds and a difficult year-on-year comparison due to 2020 Q2 post-Covid recovery, life insurance industry in China overall is expected to record a negative growth in new business. Against this backdrop, we expect our total GWP facilitated to be approximately RMB2.6 billion, representing a year-over-year growth of 6.7%. After considering incremental expenditures required for implementing the new strategy, we expect our operating income will be no less than RMB50 million.

For the second half of 2021, we will continue to step up investment in executing on our new strategy while ensuring the achievement of no less than RMB300 million operating income for the full year of 2021.

Financial Results for the First quarter of 2021

Total net revenues were RMB1,095.0 million (US$167.1 million) for the first quarter of 2021, representing an increase of 51.5% from RMB722.6 million for the corresponding period in 2020.

-- Net revenues for agency business were RMB1,000.1 million (US$152.6 million) for the first quarter of 2021, representing an increase of 53.8% from RMB650.2 million for the corresponding period in 2020. Net revenues for the life insurance business were RMB969.2 million (US$147.9 million) for the first quarter of 2021, representing an increase of 55.0% from RMB625.2 million for the corresponding period in 2020. The increase was mainly due to a year-over-year growth of 64.7% in first year premiums of our life insurance business to RMB822.5 million, primarily reflecting the strong sales of life insurance business during the jumpstart sales season, and the year-over-year growth of 19.1% to RMB2,242.3 million in renewal premiums.During the current period, estimated variable renewal commissions related to long-term life insurance products of RMB81.5 million was recognized in our financial statements. The estimated renewal commissions are contingent on future renewals of initial policies or achievement of certain performance targets. Given the material uncertainty around the subsequent renewal of the insurance policies, the estimated renewal commissions expected to be collected are recognized as revenue only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is subsequently resolved. With the passing of time and accumulation of historical experiences and data, the judgment and assumptions will be continuously re-evaluated and adjusted as needed when more information becomes available. Actual renewal commissions in the future may differ significantly from those previously estimated.Revenues generated from our life insurance business, which includes health insurance, accounted for 88.5% of our total net revenues in the first quarter of 2021.Net revenues for the P&C insurance business were RMB30.9 million (US$4.7 million) for the first quarter of 2021, representing an increase of 23.6% from RMB25.0 million for the corresponding period in 2020. Net revenues for the P&C insurance business are mainly derived from commissions for accident insurance, short-term medical insurance, travel insurance and homeowner insurance products facilitated on Baowang (www.baoxian.com). The increase was primarily due to growth of short-term medical insurance sales through Baowang. Revenues generated from the P&C insurance business accounted for 2.8% of our total net revenues in the first quarter of 2021.

-- Net revenues for the claims adjusting business were RMB94.9 million (US$14.5 million) for the first quarter of 2021, representing an increase of 31.1% from RMB72.4 million for the corresponding period in 2020. The increase was mainly due to the growth in our medical insurance-related claims adjusting business. Revenues generated from the claims adjusting business accounted for 8.7% of our total net revenues in the first quarter of 2021.

Total operating costs and expenses were RMB954.6 million (US$145.7 million) forthe first quarter of 2021, representing an increase of 44.1% from RMB662.6million for the corresponding period in 2020.

Commission costs were RMB737.6 million (US$112.6 million) for the first quarterof 2021, representing an increase of 50.3% from RMB490.9 million for thecorresponding period in 2020.

-- Commission cost for agency business were RMB674.0 million (US$102.9 million) for the first quarter of 2021, representing an increase of 51.8% from RMB444.1 million for the corresponding period in 2020. Costs of the life insurance business were RMB652.7 million (US$99.6 million) for the first quarter of 2021, representing an increase of 52.7% from RMB427.4 million for the corresponding period in 2020. The increase was in-line with the growth in net revenues generated from our life insurance business. Costs incurred by the life insurance business accounted for 88.5% of our total commission costs in the first quarter of 2021.Costs of the P&C insurance business were RMB21.3 million (US$3.3 million) for the first quarter of 2021, representing an increase of 27.5% from RMB16.7 million for the corresponding period in 2020. The increase was in line with the growth in net revenues generated from P&C insurance business. Costs incurred by the P&C insurance business accounted for 2.9% of our total commission costs in the first quarter of 2021.Costs of claims adjusting business were RMB63.6 million (US$9.7 million) for the first quarter of 2021, representing an increase of 35.9% from RMB46.8 million for the corresponding period in 2020. Costs incurred by the claims adjusting business accounted for 8.6% of our total commission costs in the first quarter of 2021. The increase was due to the growth in our medical insurance-related claims adjusting business.

-- Selling expenses were RMB78.4 million (US$12.0 million) for the first quarter of 2021, representing an increase of 27.9% from RMB61.3 million for the corresponding period in 2020. The increase was mainly contributed by i) sales outlet expansion in our claims adjusting and life insurance business; and ii) increased marketing expenditures related to the jumpstart sales campaigns. -- General and administrative expenses were RMB138.6 million (US$21.1 million) for the first quarter of 2021, representing an increase of 25.5% from RMB110.4 million for the corresponding period in 2020. The increase was mainly contributed one-off performance bonus for the jumpstart sales campaigns in the first quarter and the expenditure related to the Companys new strategies.

As a result of the preceding factors, we had an operating income of RMB140.4 million (US$21.4 million) for the first quarter of 2021, representing an increase of 133.8% from RMB60.0 million for the corresponding period in 2020.

Operating margin was 12.8% for the first quarter of 2021, compared to 8.3% for the corresponding period in 2020.

Investment income was RMB10.2 million (US$1.6 million) for the first quarter of 2021, representing an increase of 14.6% from RMB8.9 million for the corresponding period in 2020. The investment income in the first quarter of 2021 consisted of yields from short-term investments in financial products. Our investment income fluctuates from quarter to quarter as investment income is recognized when investments matured or disposed.

Interest income was RMB0.5 million (US$0.1 million) for the first quarter of 2021, representing a decrease of 82.8% from RMB2.9 million for the corresponding period in 2020.

Income tax expense was RMB32.7 million (US$5.0 million) for the first quarter of 2021, representing an increase of 74.9% from RMB18.7 million for the corresponding period in 2020 due to the increase in operating income. The effective tax rate for the first quarter of 2021 was 21.4% compared with 25.3% for the corresponding period in 2020.

Share of income of affiliates was RMB15.4 million (US$2.3 million) for the first quarter of 2021, compared with share of loss of affiliates of RMB12.3 million for the corresponding period in 2020, mainly attributable to the increase in income from CNFinance Holdings Limited.

Net income was RMB135.3 million (US$20.7 million) for the first quarter of 2021, representing an increase of 216.1% from RMB42.8 million for the corresponding period in 2020.

Net income attributable to the Companys shareholders was RMB138.4 million (US$21.1 million) for the first quarter of 2021, representing an increase of 202.2% from RMB45.8 million for the corresponding period in 2020. The increase was mainly due to the increases in operating income.

Net margin was 12.6% for the first quarter of 2021 as compared to 6.3% for the corresponding period in 2020.

Basic and diluted net income per ADS were RMB2.58 (US$0.39) and RMB2.58 (US$0.39) for the first quarter of 2021, respectively, representing increases of 203.5% and 203.5% from RMB0.85 and RMB0.85 for the corresponding period in 2020.

As of March 31, 2021, the Company had RMB1,624.4 million (US$247.9 million) in cash, cash equivalents and short term investments.

Key Operational Metrics for Fanhuas Online Initiatives in the First Quarter of 2021:

-- Lan Zhanggui - Our one-stop insurance service platform:The number of active users of Lan Zhanggui 4 was 46,723 in the first quarter of 2021, as compared to 34,278 in the corresponding period of 2020. The number of active users of Lan Zhanggui who have sold at least one life insurance policy was 30,585 in the first quarter of 2021, as compared to 30,489 in the corresponding period of 2020;Insurance premiums generated through Lan Zhanggui were RMB998.2 million (US$152.3 million) in the first quarter of 2021, consisting of life insurance premiums of RMB810.5 million (US$123.7 million), auto insurance premiums of RMB119.5 million (US$18.2 million) and accidental & health (A&H) insurance premiums of RMB68.2 million (US$10.4 million). Insurance premiums generated through Lan Zhanggui were RMB451.7 million in the first quarter of 2020, consisting of life insurance premiums of RMB438.4 million, auto insurance premiums of RMB13.4 million and A&H insurance premiums of RMB650,000, respectively. -- eHuzhu - Our online mutual aid platform: The number of paying members was 2.8 million as of March 31, 2021, as compared to 3.4 million as of March 31, 2020. -- Baowang (www.baoxian.com) - Our online insurance platform:The number of registered customer accounts was 3.1 million as of March 31, 2021, representing an increase of 9.1% from approximately 2.8 million as of March 31, 2020;The number of active customer accounts5was 59,296 in the first quarter of 2021, representing a decrease of 58.2% from 142,004 in the corresponding period of 2020. The decrease mainly reflected the high base in the first quarter of 2020 due to the provision of complimentary COVID-19 health insurance products during the COVID-19 pandemic.Insurance premiums generated on Baoxian.com was RMB82.7 million (US$9.8 million) in the first quarter of 2021, representing an increase of 19.3% from RMB69.3 million in the corresponding period of 2020.

Recent Developments

-- As of March 31, 2021, Fanhua had 350,565 sales agents and 1,829 professional claims adjusters, compared with 650,065 sales agents and 1,668 claims adjusters as of March 31, 2020. The decrease in the number of sales agents was mainly due to our efforts to streamline sales force and focus more on higher quality sales agents. The number of performing agents6 was 79,194, and the number of performing agents for selling life insurance products was approximately 33,633 in the first quarter of 2021 as compared to 95,932 performing agents and 33,152 performing agents for selling life insurance products in the first quarter of 2020. As of March 31, 2021, Fanhuas distribution network consisted of 771 sales outlets in 23 provinces and 113 services outlets in 31 provinces, compared with 763 sales outlets in 21 provinces and 159 service outlets in 31 provinces as of March 31, 2020.

Business Outlook

Fanhua expects its operating income to be no less than RMB50.0 million for the second quarter of 2021. This forecast is based on the current market conditions and reflects Fanhuas preliminary estimate, which is subject to change caused by various uncertainties.

Conference Call

The Company will host a conference call to discuss its first quarter 2021 financial results as per the following details.

Time: 9:00 PM Eastern Daylight Time on May 27, 2021or 9:00 AM Beijing/Hong Kong Time on May 28, 2021

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: http://apac.directeventreg.com/registration/event/2097592

Additionally, a live and archived webcast of the conference call will be available at Fanhuas investor relations website https://edge.media-server.com/mmc/p/adb5oqrv

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: (1) Lan Zhanggui, an all-in-one platform which allows our agents to access and purchase 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; (2) Baowang (www.baoxian.com), an online entry portal for comparing and purchasing short-term health, accident, travel and homeowner insurance products and (3) eHuzhu (www.ehuzhu.com), a non-profit online mutual aid platform inChina.

As of March 31, 2021, our distribution and service network is consisted of 771 sales outlets covering 23 provinces and 113 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 Companys 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. All information provided in this press release is 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 As of March As of March 31, 31, 31, 2020 2021 2021 RMB RMB US$ASSETS: Current assets: Cash and cash equivalents 245,428 765,657 116,862Restricted cash 83,981 87,970 13,427Short term investments 1,307,865 858,742 131,070Accounts receivable, net 583,116 583,276 89,025Insurance premium receivables ? 559 85Other receivables 50,242 67,177 10,253Other current assets 41,148 34,400 5,250Total current assets 2,311,780 2,397,781 365,972 Non-current assets: Restricted bank deposit ? 20,689 15,711 2,398non-currentAccounts receivable, net ? ? 58,421 8,917non-currentProperty, plant, and equipment, 36,778 39,788 6,073netGoodwill and intangible assets, 109,913 109,894 16,773netDeferred tax assets 10,032 13,697 2,091Investment in affiliates 357,661 373,564 57,017Other non-current assets 33,743 32,847 5,014Right of use assets 200,403 191,957 29,298Total non-current assets 769,219 835,879 127,581Total assets 3,080,999 3,233,660 493,553

Current liabilities: Accounts payable 377,386 356,228 54,371Insurance premium payables 25,421 27,510 4,199Other payables and accrued expenses 188,448 193,213 29,490Accrued payroll 105,739 102,974 15,717Income tax payable 145,983 145,944 22,275Dividend payable ? 87,951 13,424Current operating lease liability 86,233 83,522 12,748Total current liabilities 929,210 997,342 152,224 Non-current liabilities: Accounts payable - non-current ? 30,312 4,627Other tax liabilities 67,219 67,219 10,260Deferred tax liabilities 26,380 48,425 7,391Non-current operating lease liability 103,526 101,166 15,441Total non-current liabilities 197,125 247,122 37,719Total liabilities 1,126,335 1,244,464 189,943 Ordinary shares 8,088 8,088 1,234Statutory reserves 553,911 553,911 84,543Retained earnings 1,306,554 1,356,990 207,117Accumulated other comprehensive loss (34,994) (47,810) (7,297)Total shareholders? equity 1,833,559 1,871,179 285,597Non-controlling interests 121,105 118,017 18,013Total equity 1,954,664 1,989,196 303,610Total liabilities and equity 3,080,999 3,233,660 493,553

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 March 31, 2020 2021 2021 RMB RMB US$Net revenues: Agency 650,211 1,000,104 152,646 Life insurance business 625,205 969,234 147,934 P&C insurance business 25,006 30,870 4,712 Claims adjusting 72,412 94,925 14,488 Total net revenues 722,623 1,095,029 167,134 Operating costs and expenses: Agency (444,097 ) (674,018 ) (102,876 )Life insurance business (427,419 ) (652,682 ) (99,619 )P&C insurance business (16,678 ) (21,336 ) (3,257 )Claims adjusting (46,816 ) (63,639 ) (9,713 )Total operating costs (490,913 ) (737,657 ) (112,589 )Selling expenses (61,255 ) (78,403 ) (11,967 )General and administrative expenses (110,411 ) (138,568 ) (21,149 )Total operating costs and expenses (662,579 ) (954,628 ) (145,705 )Income from operations 60,044 140,401 21,429 Other income, net: ?? ?? ?? Investment income 8,860 10,233 1,562 Interest income 2,895 526 80 Others, net 2,014 1,477 225 Income from operations before income taxes and shareincome of affiliates 73,813 152,637 23,296 Income tax expense (18,657 ) (32,701 ) (4,991 )Share of (loss) income of affiliates, net (12,339 ) 15,362 2,345 Net income 42,817 135,298 20,650 Less: net loss attributable to (2,976 ) (3,087 ) (471 )noncontrolling interestsNet income attributable to the Company?s shareholders 45,793 138,385 21,121

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 March 31, 2020 2021 2021 RMB RMB US$Net income per share: Basic 0.04 0.13 0.02 Diluted 0.04 0.13 0.02 Net income per ADS: Basic 0.85 2.58 0.39 Diluted 0.85 2.58 0.39 Shares used in calculating net income per share:Basic 1,073,891,784 1,073,891,784 1,073,891,784 Diluted 1,074,291,427 1,074,291,239 1,074,291,239 Net income 42,817 135,298 20,650 Other comprehensive income (loss), net of tax:Foreign currency 3,720 (6,378 ) (974 )translation adjustmentsShare of othercomprehensive gain of 850 542 83 affiliatesUnrealized net gains (loss) on available-for-saleinvestments 2,561 (6,980 ) (1,065 )Comprehensive income 49,948 122,482 18,694 Less: Comprehensive loss attributable to the non-controlling interests (2,976 ) (3,087 ) (471 )Comprehensive income attributable to theCompany?s shareholders 52,924 125,569 19,165

FANHUA INC.Unaudited Condensed Consolidated Statements of Cash Flow(In thousands, except for shares and per share data) For The Three Months Ended March 31, 2020 2021 2021 RMB RMB US$OPERATING ACTIVITIES Net income 42,817 135,298 20,650 Adjustments to reconcile net income to net cashgenerated from operating activities: Investment income (5,102 ) (92 ) (14 )Share of loss (income) of affiliates 12,339 (15,362 ) (2,345 )Other non-cash adjustments 33,064 1,257 192 Changes in operating assets and 51,444 (40,650 ) (6,203 )liabilitiesNet cash generated from operating 134,562 80,451 12,280 activitiesCash flows from investing activities: Purchase of short term investments (2,780,732 ) (2,767,430 ) (422,392 )Proceeds from disposal of short term 3,060,832 3,220,073 491,479 investmentsCash received from disposal of nominee ? 10,200 1,557 shareholdingCash paid for loan to a third party (60,000 ) ? ? Others (2,189 ) (7,326 ) (1,118 )Net cash generated from investing 217,911 455,517 69,526 activitiesCash flows from financing activities?? Repayment of borrowing related to nomineeshareholding ? (10,200 ) (1,557 )Net cash used in financing activities ? (10,200 ) (1,557 )Net increase in cash and cash equivalents, andrestricted cash 352,473 525,768 80,249 Cash and cash equivalents and restricted cash atbeginning of period 265,605 350,098 53,435 Effect of exchange rate changes on cash and cashequivalents 8,282 (6,528 ) (997 )Cash and cash equivalents and restricted cash at endof period 626,360 869,338 132,687

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 RMB6.5518 to US$1.00, the effective noon buying rate as of March 31, 2021 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 "ADS refers to our American depositary shares, each of which represents 20 ordinary shares;

3 Yuntong, or Cloud Phoenixtree is a high-end brand designated for our branches for elite and professional sales force in major cities

4 Active users of Lan Zhanggui included users who sold at least one insurance policy through Lan Zhanggui (through either its mobile application or WeChat public account) during the specific period.

5 Active customer accounts are defined as customer accounts that made at least one purchase directly throughwww.baoxian.com, its mobile application, or WeChat public account during the specified period.

6 Performing agents are defined as agents who have sold at least one insurance policy during the specified period.

For more information, please contact:Investor RelationsTel: +86 (20) 8388-3191Email: qiusr@fanhuaholdings.com