Fanhua Inc. (Nasdaq:FANH) (the "Company" or "Fanhua"), a leading
independent financial services provider operating in China, today
announced that its board of directors (the "board") has approved a
“521 Development Plan”, aimed at achieving its goals of generating
RMB2 billion annual net income and RMB10 billion annual first year
premiums of life insurance business after five years. The board is
confident this will further strengthen its cash generation
capabilities and allow Fanhua to pay steady dividends.
Pursuant to the 521 Development Plan, Fanhua
intends to set up a “Fanhua Entrepreneurial Fund”, or the Fanhua
Fund, to invest in the Company’s stocks. At least 10% of the total
subscription cost of the Fanhua Fund will be contributed by the
eligible participants and the remaining portion will be funded by
loans granted to the participants by the Company, which will bear
interest at a rate of 8% per annum. American depositary shares
representing 20 ordinary shares of the Company (“ADS”) held by the
Fanhua Fund will be pledged to the Company to secure the payment of
loans by the participants.
The Fanhua Fund will consist of three
components, Fanhua Fund A, Fanhua Fund B and Fanhua Fund C.
Fanhua Fund A will be used to purchase 5 million
ADSs of the Company, and will be available to 800 of Fanhua’s
existing entrepreneurial team leaders. These participants must
fulfill a performance goal to double the amount of new life
insurance premiums they bring in after three years , which we
anticipate will result in RMB5 billion in annual new insurance
premiums by the end of 2021 and RMB6.5 billion by the end of
2023.
Fanhua Fund B will be used to purchase 5 million
ADSs of the Company, and will be available to the general managers
of Fanhua’s 27 provincial branches or subsidiaries. These
participants must fulfill performance goals to recruit a certain
number of new entrepreneurial sales teams, which we anticipate will
result in an additional RMB4 billion in annual new insurance
premiums by the end of 2023.
Fanhua Fund C will be used to purchase 4 million
ADSs of the Company, and will be available to key managerial
personnel at all levels, excluding senior management. The
participants must fulfill performance goals to provide all
necessary support towards achieving the overall target of the 521
Development Plan.
Each of the ADSs held by either fund will be
subject to a five-year lock-up period. At the end of this period,
if a participant has met his or her performance goals they will be
able to enjoy the full increase in the value of the ADSs. If they
fail to achieve their performance goals, the gains they receive
will be proportionally adjusted downwards.
In the meantime, as part of the Company’s 521
Development Plan, management of Fanhua, consisting of the Chief
Executive Officer and Chairman, Chunlin Wang, and Chief Financial
Officer, Peng Ge, and certain members of its board of directors,
intend to use their personal funds to purchase 1 million ADSs of
the Company.
Of the 14 million ADSs available to participants
in any Fanhua Fund and the 1 million ADS to be purchased by
management and board members, 8.5 million ADSs have been purchased
from a principal shareholder at $29.0 per ADS, representing the
average closing price of the 30 trading days prior to June 14,
2018, pursuant to share transfer agreements entered into between
companies established on behalf of the participants of Fanhua Fund
(the “Employee Companies”) and the shareholder on June 14, 2018.
The remaining 6.5 million ADSs will be issued to the Employee
Companies at the same price. The newly issued ADSs will represent
9.1% of the expanded share capital outstanding post-closing. These
transactions are expected to close by the end of 2018, subject to
customary closing conditions.
The Company anticipates the impact of the Fanhua
521 Development Plan on its financial statements will be as
follows:
i) a maximum of US$365.4 million loans are
expected to be granted to the participants by the Company for the
purchase of 14 million ADSs in the Fanhua Fund. As a result, the
Company will see a cash outflow of approximately US$176.9 million,
net of cash to be received from the participants for the purchase
of the newly issued shares;
ii) as the loans will bear interest at a rate of
8% per annum, the Company expects the interest income from the
loans will offset the decline in investment income due to decrease
in available cash for short term investments;
iii) the interest rate of the loans is
determined with reference to fair market prices and therefore,
according to the Company's preliminary assessment, no material
expenses will be incurred as a result of the 521 Development
Plan.
Mr. Chunlin Wang, Chief Executive Officer and
Chairman of the Company, commented: “With the expanding middle
class, rising disposable income of China’s residents, pricing
deregulation on insurance products and the further opening of the
financial service sector in China, we expect the insurance
penetration and density ratio to increase significantly and the
life insurance market to see a double-digit growth within the next
ten years. Amid this backdrop, Fanhua, as the largest independent
insurance distribution company, must make bold strategic
deployments to ensure that we become the biggest beneficiary of the
emerging growth opportunities in the life insurance
industry.
“Fanhua has made a series of major strategic
adjustments to pivot our focus towards our life insurance business.
As a result, Fanhua has recorded strong growth in its life
insurance business in the past three years, with first year
insurance premiums from its life insurance business climbing from
RMB266 million in 2015 to RMB2.5 billion in 2017. With the
extensive sales network coverage and proven operational capability
of our life insurance operations, we are well positioned to capture
opportunities for rapid development. Built upon this solid
foundation, the board and management believe that it is imperative
for us to take bold actions and seize the market opportunities to
grow Fanhua’s annual first year life insurance premium sales to
over RMB10 billion.
“The 521 Development Plan enables us to mobilize
all of our manpower, material and financial resources to focus on
the growth of the highly valuable long-term life insurance
business, which can bring in strong and steady cash flow to the
Company. It allows us to fully capitalize our position as the only
independent insurance intermediary company in China publicly-listed
in the main board of any stock exchanges and we believe that it
will be a powerful weapon to incentivize our existing sales teams
to uphold their entrepreneurial ambitions, attract more talents in
the insurance industry to join Fanhua and inspire our key managers
at all levels. This will enable us to build a strong competitive
barrier against all future followers.
“We have strong cash position and expect
stronger cash generation capabilities as a result of the 521
Development Plan. Therefore, we remain committed to paying regular
cash dividends to shareholders.”
About Fanhua
Inc.
Fanhua Inc., formerly known as CNinsure Inc., is
a leading independent online-to-offline financial services
provider. Through our online platforms and offline sales and
service network, we offer a wide variety of financial products and
services provided by over 90 insurance companies to individuals and
businesses, including property and casualty and life 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) CNpad, a mobile
sales support application; (2) Baoxian.com, an online entry portal
for comparing and purchasing health, accident, travel and homeowner
insurance products; (3) eHuzhu (www.ehuzhu.com), a non-profit
online mutual aid platform in China and (4) 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.
As of March 31, 2018, our distribution and
service network consisted of 683 sales and service outlets covering
30 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, Fanhua’s ability to attract and retain key personnel
and productive 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 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.
For more information about Fanhua Inc., please visit
http://ir.fanhuaholdings.com/.
Contact: Oasis QiuInvestor Relations ManagerTel: (8620)
83883191Email: qiusr@fanhuaholdings.com
Source: Fanhua Inc.
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