Fanhua Inc., (Nasdaq: FANH), (the “Company” or “Fanhua”), a leading
independent financial services provider in China, today announced
its unaudited financial results for the second quarter and first
half ended June 30, 20201.
Financial Highlights for
the Second Quarter of 2020:
|
(In thousands, except per ADS) |
2019Q2(RMB) |
2020Q2(RMB) |
2020Q2(US$) |
Change % |
|
Total net revenues |
898,419 |
881,545 |
124,775 |
(1.9) |
|
Operating income |
77,363 |
96,942 |
13,722 |
25.3 |
|
Share of income of affiliates |
28,830 |
4,487 |
635 |
(84.4) |
|
Net income attributable to the Company’s shareholders |
98,009 |
99,313 |
14,057 |
1.3 |
|
Diluted net income per ADS |
1.78 |
1.85 |
0.26 |
3.9 |
|
Cash, cash equivalents and short-term investments (As of June 30,
2019 and 2020) |
1,881,288 |
1,655,866 |
234,373 |
(12.0) |
Financial Highlights for the First Half
of 2020:
|
(In thousands, except per ADS) |
First Half 2019(RMB) |
First Half 2020(RMB) |
First Half 2020 (US$) |
Change % |
|
Total net revenues |
1,870,073 |
1,604,168 |
227,055 |
(14.2) |
|
Operating income |
203,786 |
156,986 |
22,220 |
(23.0) |
|
Share of income (loss) of affiliates |
54,243 |
(7,852) |
(1,111) |
(114.5) |
|
Net income attributable to the Company’s shareholders |
245,277 |
145,106 |
20,538 |
(40.8) |
|
Diluted net income per ADS |
4.42 |
2.70 |
0.38 |
(38.9) |
“Despite the headwind from COVID-19 on China’s
macro economy and the insurance market, Fanhua still delivered
results that beat our previous estimates across various major
metrics in the second quarter of 2020, fully demonstrating the
sustainability and resilience of our business model.” Commenting on
the financial results of second quarter of 2020, Mr. Chunlin Wang,
chairman and chief executive officer of Fanhua, stated, “With the
gradual resumption of offline business activities since early May,
our life insurance business have been steadily growing
month-by-month. In June 2020, new life insurance business in
annualized premiums equivalent (“APE”) has exceeded RMB180 million,
returning to normal levels from before the pandemic. In the second
quarter of 2020, our operating income increased 25.3%
year-over-year to RMB96.9 million and our life insurance business
grew 19.2% year-over-year to RMB2.3 billion in gross written
premiums (“GWP”), of which first year regular premiums exceeded
RMB611.9 million and renewal premiums grew 37.9% year-over-year to
RMB1.7 billion while APE increased 25.3% quarter-over-quarter to
RMB385.6 million in the second quarter of 2020. In addition, our
claims adjusting business recorded stellar growth of 36.1%
year-over-year in the second quarter of 2020, contributed by the
breakthrough that we've made in medical-insurance related claims
adjusting business.
“As the pandemic is getting under control in
China, we have full confidence in achieving year-over-year and
quarter-over-quarter positive growth in GWP, total net revenues,
APE and non-GAAP operating income excluding share-based
compensation expenses in the third quarter of 2020.”
Financial Results for the Second
Quarter of 2020
Total net revenues were
RMB881.5 million (US$124.8 million) for the second quarter of 2020,
representing a decrease of 1.9% from RMB898.4 million for the
corresponding period in 2019.
- Net revenues for
the life insurance
business were RMB728.5 million (US$103.1 million)
for the second quarter of 2020, representing a decrease of 5.6%
from RMB771.6 million for the corresponding period in 2019. The
decrease was mainly due to the decline of 13.9% year-over-year in
first year commission from RMB584.8 million in the second quarter
of 2019 to RMB503.5 million in the second quarter of 2020, offset
by the growth of 20.5% year-over-year in renewal commissions from
RMB186.8 million in the second quarter of 2019 to RMB225.0 million
in the second quarter of 2020 as a result of the accumulation of
renewal business and high persistency ratio. Revenues generated
from our life insurance business accounted for 82.6% of our total
net revenues in the second quarter of 2020.
- Net revenues for the
P&C insurance business were RMB37.3 million (US$5.3
million) for the second quarter of 2020, representing a decrease of
10.8% from RMB41.8 million for the corresponding period in 2019.
Revenues for the P&C insurance business mainly derived from
commissions generated from Baowang (www.baoxian.com). The decrease
was primarily due to the decrease in the sales of accident and
travel insurance products distributed through Baowang
(www.baoxian.com), offset by the growth in the sales of short term
health insurance products. Revenues generated from the P&C
insurance business accounted for 4.2% of our total net revenues in
the second quarter of 2020.
- Net revenues for the claims
adjusting business were RMB115.8 million (US$16.4 million)
for the second quarter of 2020, representing an increase of 36.1%
from RMB85.1 million for the corresponding period in 2019. 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 13.2% of our total
net revenues in the second quarter of 2020.
Total operating costs and
expenses were RMB784.6 million (US$111.1 million) for the
second quarter of 2020, representing a decrease of 4.4% from
RMB821.1 million for the corresponding period in 2019.
- Commission costs were RMB599.7 million
(US$84.9 million) for the second quarter of 2020, representing an
increase of 1.6% from RMB590.5 million for the corresponding period
in 2019.
- Costs of the life insurance
business were RMB506.8 million (US$71.7 million) for the
second quarter of 2020, representing a decrease of 1.5% from
RMB514.3 million for the corresponding period in 2019. The decrease
was in line with the decline in net revenues generated from our
life insurance business. Costs incurred by the life insurance
business accounted for 84.5% of our total commission costs in the
second quarter of 2020.
- Costs of
the P&C insurance business
were RMB28.6 million (US$4.1 million) for the second quarter of
2020, representing an increase of 4.4% from RMB27.4 million for the
corresponding period in 2019. The costs of the P&C insurance
business mainly represent commission costs we incurred for
operating Baowang (www.baoxian.com). Costs incurred by the P&C
insurance business accounted for 4.8% of our total commission costs
in the second quarter of 2020.
- Costs of claims adjusting
business were RMB64.3 million (US$9.1 million) for the
second quarter of 2020, representing an increase of 31.8% from
RMB48.8 million for the corresponding period in 2019. Costs
incurred by the claims adjusting business accounted for 10.7% of
our total commission costs in the second quarter of 2020. The
increase was due to the growth in our medical insurance-related
claims adjusting business.
- Selling expenses
were RMB70.1 million (US$9.9 million) for the second quarter of
2020, representing a decrease of 27.7% from RMB97.0 million for the
corresponding period in 2019. The decrease was mainly due to the
decrease of share-based compensation expenses related to shares
subscribed by sales team leaders under the Company’s 521 Plan to
approximately RMB70,000 from RMB28.6 million in the corresponding
period in 2019. Adjusted selling expenses which excluded
share-based compensation expenses were RMB70.1 million (US$9.9
million) in the second quarter of 2020, representing an increase of
2.3% from RMB68.5 million for the corresponding period of 2019. The
increase was mainly due to the combined impact of the increase in
sales outlets and decreases in travel and conference expenses as a
result of fewer offline sales activities affected by the
pandemic.
- General
and administrative
expenses were RMB114.7
million (US$16.2 million) for the second quarter of 2020,
representing a decrease of 14.1% from RMB133.6 million for the
corresponding period in 2019. The decrease was mainly due to
reduced travel and conference expenses affected by the pandemic and
the decrease of share-based compensation expenses related to shares
subscribed by key managerial personnel under the Company’s 521 Plan
to approximately RMB28,000 from RMB11.4 million in the
corresponding period in 2019. Adjusted general and administrative
expenses which excluded share-based compensation expenses were
RMB114.7 million (US$16.2 million) in the second quarter of 2020,
representing a decrease of 6.1% from RMB122.2 million in the
corresponding period in 2019.
As a result of the preceding factors, we had an
operating income of RMB96.9 million (US$13.7 million) for the
second quarter of 2020, representing an increase of 25.3% from
RMB77.4 million for the corresponding period in 2019.
Non-GAAP operating income2,
which excluded share-based compensation expenses, was RMB97.0
million (US$13.7 million) for the second quarter of 2020,
representing a decrease of 17.3% from RMB117.4 million for the
corresponding period in 2019.
Operating margin was 11.0% for
the second quarter of 2020, compared to 8.6% for the corresponding
period in 2019.
Non-GAAP operating margin3 was
11.0% for the second quarter of 2020, compared to 13.1% for the
corresponding period in 2019.
Investment income was RMB5.3
million (US$0.7 million) for the second quarter of 2020,
representing a decrease of 67.1% from RMB16.1 million for the
corresponding period in 2019. The investment income in the second
quarter of 2020 consisted of yields from short-term investments in
financial products. The decrease in yields from short-term
investments in financial products was mainly due to (i) changes in
composition of our short-term investment portfolio, with increased
allocation to wealth management products issued by banks which
offer relatively lower yields as compared to other financial
products in the portfolio; (ii) a year-over-year decrease in yields
from wealth management products issued by banks; and (iii) a
decrease in cash available for investment in short-term investment
products due to the share buyback program implemented in 2019. Our
investment income fluctuates from quarter to quarter because
investment income is recognized when investments matured or
disposed.
Interest income was RMB5.1
million (US$0.7 million) for the second quarter of 2020,
representing an increase of 218.8% from RMB1.6 million for the
corresponding period in 2019. The increase in interest income in
the second quarter of 2020 was mainly due to short-term loans
amounting to RMB90.0 million with 10% annual interest rate.
Income tax expense was RMB30.0
million (US$4.2 million) for the second quarter of 2020,
representing a decrease of 18.7% from RMB36.9 million for the
corresponding period in 2019. The effective tax rate for the second
quarter of 2020 was 22.9% compared with 35.0% for the corresponding
period in 2019. The decrease in effective tax rate was mainly due
to (i)exemption from income tax for investment income derived from
certain fund product; and (ii) higher share-based compensation
expenses in the same period in 2019 which were non-tax
deductible.
Share of income of affiliates
was RMB4.5 million (US$0.6 million) for the second quarter of 2020,
representing a decrease of 84.4% from RMB28.8 million for the
corresponding period in 2019, mainly attributable to the decrease
in income from CNFinance Holdings Limited (“CNFinance”).
Net income was RMB105.2 million
(US$14.9 million) for the second quarter of 2020, representing an
increase of 8.0% from RMB97.4 million for the corresponding period
in 2019.
Net income attributable to the Company’s
shareholders was RMB99.3 million (US$14.1 million) for the
second quarter of 2020, representing an increase of 1.3% from
RMB98.0 million for the corresponding period in 2019. The increase
was mainly due to the combined impact of the increase in operating
income and decreases in investment income and share of income of
affiliates.
Non-GAAP net income attributable to the
Company’s shareholders4 was RMB99.4 million (US$14.1
million) for the second quarter of 2020, representing a decrease of
28.0% from RMB138.0 million for the corresponding period in 2019.
The decrease was mainly due to the combined effect of the decrease
in non-GAAP operating income and the decreases in investment income
and share of income from affiliates.
Net margin was 11.3% for the
second quarter of 2020 as compared to 10.9% for the corresponding
period in 2019.
Non-GAAP net margin5 was 11.3%
for the second quarter of 2020, compared to 15.4% for the
corresponding period in 2019.
Basic and
diluted net income per ADS were RMB1.85
(US$0.26) and RMB1.85 (US$0.26) for the second quarter of 2020,
respectively, representing decreases of 3.4% and 3.9% from RMB1.79
and RMB1.78 for the corresponding period in 2019.
Non-GAAP basic6 and
diluted net income per ADS7 were RMB1.85
(US$0.26) and RMB1.85 (US$0.26) for the second quarter of 2020,
respectively, representing decreases of 26.3% and 26.3% from
RMB2.51 and RMB2.51 for the corresponding period in 2019.
As of June 30, 2020, the Company had RMB1,655.9 million
(US$234.4 million) in cash, cash
equivalents and short-term
investments.
Financial Results for the First Half of
2020
Total net revenues were
RMB1,604.2 million (US$227.1 million) for the first half of 2020,
representing a decrease of 14.2 %from RMB1,870.1 million for the
corresponding period in 2019.
- Net revenues for
the life insurance
business were RMB1,353.7 million (US$191.6
million) for the first half of 2020, representing a decrease of
17.0% from RMB1,630.8 million for the corresponding period in 2019.
The decrease was mainly due to the decline of 29.2% in first year
commission from RMB1,255.0 million to RMB888.7 million, offset by
the growth of 23.7% in renewal commissions from RMB375.8 million to
RMB465.0 million as a result of the growth of our renewal business
and high persistency ratio. Revenues generated from our life
insurance business accounted for 84.4% of our total net revenues in
the first half of 2020.
- Net revenues for the
P&C insurance business were RMB62.3 million (US$8.8
million) for the first half of 2020, representing a decrease of
22.0% from RMB79.9 million for the corresponding period in 2019.
Revenues for the P&C insurance business are mainly derived from
commissions generated from Baowang (www.baoxian.com). The decrease
was primarily due to the decrease in the sales of accident and
travel insurance products distributed through Baowang
(www.baoxian.com), offset by the growth in the sales of short term
health insurance products. Revenues generated from the P&C
insurance business accounted for 3.9% of our total net revenues in
the first half of 2020.
- Net revenues for the claims
adjusting business were RMB188.3 million (US$26.6 million)
for the first half of 2020, representing an increase of 18.1% from
RMB159.4 million for the corresponding period in 2019. 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 11.7% of our total net revenues in
the first half of 2020.
Total operating costs and
expenses were RMB1,447.2 million (US$204.8 million) for
the first half of 2020, representing a decrease of 13.1% from
RMB1,666.3 million for the corresponding period in 2019.
- Commission costs
were RMB1,090.6 million (US$154.4 million) for the first half of
2020, representing a decrease of 13.4% from RMB1,259.1 million for
the corresponding period in 2019. The decrease in commission cost
was mainly in line with the decrease of life insurance
business.
- Costs of the life insurance business were
RMB934.3 million (US$132.2 million) for the first half of 2020,
representing a decrease of 16.3% from RMB1,115.8 million for the
corresponding period in 2019. The decrease was in line with the
decline in net revenues generated from our life insurance business.
Costs incurred by the life insurance business accounted for 85.6%
of our total commission costs in the first half of 2020.
- Costs of the P&C
insurance business were RMB45.3 million (US$6.4 million)
for the first half of 2020, representing a decrease of 12.9% from
RMB52.0 million for the corresponding period in 2019. The costs of
the P&C insurance business mainly represent commission costs we
incurred for operating Baowang (www.baoxian.com). The decrease was
in line with the decrease in net revenues generated from our
P&C insurance business. Costs incurred by the P&C insurance
business accounted for 4.2% of our total commission costs in the
first half of 2020.
- Costs of claims adjusting business were
RMB111.1 million (US$15.7 million) for the first half of 2020,
representing an increase of 21.6% from RMB91.4 million for the
corresponding period in 2019. Costs incurred by the claims
adjusting business accounted for 10.2% of our total commission
costs in the first half of 2020.
- Selling expenses
were RMB131.4 million (US$18.6 million) for the first half of 2020,
representing a decrease of 18.7% from RMB161.7 million for the
corresponding period in 2019. The decrease was mainly due to the
decrease of share-based compensation expenses related to shares
subscribed by sales team leaders under the Company’s 521 Plan to
approximately RMB140,000 from RMB30.9 million in the corresponding
period in 2019. Adjusted selling expenses which
excluded share-based compensation expenses were RMB131.3 million
(US$18.6 million) in the first half of 2020, representing an
increase of 0.4% from RMB130.8 million for the corresponding period
of 2019. The increase was mainly due to the combined impact of the
increase in sales outlets and the decrease in travel and conference
expenses.
- General
and administrative
expenses were RMB225.2
million (US$31.9 million) for the first half of 2020, representing
a decrease of 8.3% from RMB245.5 million for the corresponding
period in 2019. The decrease was mainly due to reduced travel and
convention expense affected by the pandemic, and the decrease of
share-based compensation expenses related to shares subscribed by
key managerial personnel under the Company’s 521 Plan to
approximately RMB56,000 from RMB12.4 million in the corresponding
period in 2019. Adjusted general and administrative
expenses which excluded share-based compensation expenses
were RMB225.1 million (US$31.9 million) in the first half of 2020,
representing a decrease of 3.4% from RMB233.1 million in the
corresponding period in 2019.
As a result of the preceding factors, we had an
operating income of RMB157.0 million (US$22.2
million) for the first half of 2020, representing a decrease of
23.0% from RMB203.8 million for the corresponding period in
2019.
Non-GAAP operating income2, which
excluded share-based compensation expenses, was RMB157.2
million (US$22.2 million) for the first half of 2020, representing
a decrease of 36.4% from RMB247.1 million for the corresponding
period in 2019.
Operating margin was 9.8% for
the first half of 2020, compared to 10.9% for the corresponding
period in 2019.
Non-GAAP operating margin3 was
9.8% for the second quarter of 2020, compared to 13.2% for the
corresponding period in 2019.
Investment income was RMB14.1
million (US$2.0 million) for the first half of 2020, representing a
decrease of 73.3% from RMB52.9 million for the corresponding period
in 2019. The investment income in the first half of 2020 consisted
of yields from short-term investments in financial products. The
decrease in yields from short-term investments in financial
products was mainly due to (i) changes in composition of our
short-term investment portfolio, with increased allocation to
wealth management products issued by banks which offer relatively
lower yields as compared to other financial products in the
portfolio; (ii) a year-over-year decrease in yields from wealth
management products issued by banks; (iii) a decrease in cash
available for investment in short-term investment products due to
the share buyback program of 2019. Our investment income fluctuates
from quarter to quarter because investment income is recognized
when investments matured or disposed.
Interest income was RMB7.9
million (US$1.1 million) for the first half of 2020, representing
an increase of 295.0% from RMB2.0 million for the corresponding
period in 2019. The increase in interest income in the first half
of 2020 was mainly due to short-term loans amounting to RMB90.0
million with 10% annual interest rate.
Income tax expense was RMB48.6
million (US$6.9 million) for the first half of 2020, representing a
decrease of 39.0% from RMB79.7 million for the corresponding period
in 2019. The effective tax rate for the first half of 2020 was
23.8% compared with 29.5% for the corresponding period in 2019.
The decrease was mainly because (i) investment income derived
from certain fund product was exempted from income tax; and (ii)
share-based compensation expenses are non tax-deductible.
Share of loss of affiliates was
RMB7.9 million (US$1.1 million) for the first half of 2020,
compared with share of income of affiliates of RMB54.2 million for
the corresponding period in 2019, mainly attributable to a loss
from CNFinance for the first half of 2020, due to the increase in
its provision for credit losses mainly attributable to a combined
effect of (i) the impact of the new current expected credit loss
(CECL) model that took into account the deterioration in the
economic outlook caused by the COVID-19 pandemic, and (ii) an
increase in the amount of non-performing loans as a result of the
inefficient legal proceedings under the COVID-19 pandemic.
Net income was RMB148.0 million
(US$20.9 million) for the first half of 2020, representing a
decrease of 39.6% from RMB245.1 million for the corresponding
period in 2019.
Net income attributable to the Company’s
shareholders was RMB145.1 million (US$20.5 million) for
the first half of 2020, representing a decrease of 40.8% from
RMB245.3 million for the corresponding period in 2019. The decrease
was mainly due to the decreases in operating income, investment
income and share of loss of affiliates.
Non-GAAP net income attributable to the
Company’s shareholders4 was RMB145.3 million (US$20.6
million) for the first half of 2020, representing a decrease of
49.6% from RMB288.6 million for the corresponding period in
2019.
Net margin was 9.0% for the
first half of 2020 as compared to 13.1% for the corresponding
period in 2019.
Non-GAAP net margin5 was 9.1%
for the first half of 2020, compared to 15.4% for the corresponding
period in 2019.
Basic and
diluted net income per ADS were RMB2.70
(US$0.38) and RMB2.70 (US$0.38) for the first half of 2020,
respectively, representing decreases of 38.9% and 38.9% from
RMB4.42 and RMB4.42 for the corresponding period in 2019.
Non-GAAP basic6 and
diluted net income per ADS7 were RMB2.71
(US$0.38) and RMB2.71 (US$0.38) for the first half of 2020,
respectively, representing decreases of 47.9% and 47.9% from
RMB5.20 and RMB5.20 for the corresponding period in 2019.
Key Operational Metrics for Fanhua’s
Online Initiatives in the Second Quarter of
2020:
- Lan Zhanggui - Our one-stop insurance service
platform:
- The number of registered
users of Lan Zhanggui was 1,203,577 as of June 30, 2020,
representing an increase of 48.2% from 812,097 as of June 30,
2019;
- The number of active users
of Lan Zhanggui8 was 38,321 in the second quarter of 2020,
as compared to 56,993 in the corresponding period of 2019. The
number of active users of Lan Zhanggui who have sold at least one
life insurance policy was 35,277 in the second quarter of 2020, as
compared to 50,006 in the corresponding period of 2019;
- Insurance
premiums generated through Lan Zhanggui
were RMB602.7 million (US$85.3 million) in the second quarter of
2020, among which life insurance premiums was RMB581.2 million
(US$82.3 million) and non-life insurance premiums were RMB21.5
million (US$3.0 million), respectively, as compared to RMB693.2
million total insurance premiums generated through Lan Zhanggui
which included RMB670.0 million life insurance premiums and RMB23.2
million non-life insurance premiums in the corresponding period of
2019.
- eHuzhu - Our online mutual
aid platform:
- The number of paying members was 3.2 million
as of June 30, 2020, as compared to 3.7 million as of June 30,
2019.
- Baowang
(www.baoxian.com) - Our direct-to-consumer
(“DTC”) online insurance platform for Accident & Short Term
Health insurance(“A&H”), travel and homeowner
insurance:
- The number of registered
customer accounts was 2.9 million as of June 30, 2020,
representing an increase of 16.0% from approximately 2.5 million as
of June 30, 2019;
- The number of active
customer accounts9 was 78,570 in the second quarter of
2020, representing a decrease of 31.8% from 115,251 in the
corresponding period of 2019;
- Insurance premiums
generated on Baoxian.com was RMB91.6 million (US$13.0
million) in the second quarter of 2020 as compared to RMB93.4
million in the corresponding period of 2019.
Recent Developments
- As of June 30, 2020, Fanhua had
629,773 sales agents and 1,620 professional claims adjusters,
compared with 812,097 sales agents and 1,199 claims adjusters as of
June 30, 2019. The decrease in the number of sales agents was
mainly due to our efforts to streamline sales force and focus more
on better performing sales agents. The number of performing
agents10 was 96,614, and the number of performing agents for
selling life insurance products was approximately 35,539 in the
second quarter of 2020. As of June 30, 2020, Fanhua’s distribution
network consisted of 775 sales outlets in 21 provinces and 118
services outlets in 31 provinces, compared with 733 sales outlets
in 21 provinces and 144 service outlets in 31 provinces as of June
30, 2019.
- In July 2020, Fanhua ranked 20th
among the “Top 20 Global Insurance Brokers” ranking in 2019,
according to Best’s Review, a monthly magazine published by A. M.
Best, one of the most prestigious insurance rating agencies in the
world. Fanhua first made the list in 2009 and is the only Asian
insurance broker on the list. The ranking was based on total
revenues in 2019.
Business Outlook
Fanhua expects its operating income to be no
less than RMB110 million for the third quarter of 2020. This
forecast is based on the current market conditions and reflects
Fanhua’s preliminary estimate, which is subject to change caused by
various uncertainties, including those related to the ongoing
COVID-19 pandemic.
Conference Call
The Company will host a conference call to
discuss its second quarter 2020 financial results as per the
following details.
Time: 9:00 PM Eastern Daylight Time on August 24, 2020
or 9:00 AM Beijing/Hong Kong Time on
August 25, 2020
Conference ID: 2618618
Due to the outbreak of COVID-19,
operator-assisted conference calls are not available at the moment.
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/2618618
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/oy68sqcs
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
in China.
As of June 30, 2020, our distribution and
service network is consisted of 775 sales outlets covering 21
provinces and 118 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. 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.
About Non- GAAP Financial
Measures
In addition to the Company’s consolidated
financial results under GAAP, the Company also provides adjusted
selling expenses, adjusted general and administrative expenses,
non-GAAP operating income, non-GAAP operating margin, non-GAAP net
income attributable to the Company’s shareholders, non-GAAP net
margin and non-GAAP basic and diluted net income per ADS, all of
which are non-GAAP financial measures. Adjusted selling expenses
are defined as selling expense before share-based compensation
expenses related to shares owned by sales team leaders under the
Company’s 521 Plan. Adjusted general and administrative expenses
are defined as general and administrative expense before
share-based compensation expenses related to shares owned by
employees under the Company’s 521 Plan. Non-GAAP operating income
is defined as operating income before share-based compensation
expenses associated with the Company’s 521 Plan. Non-GAAP operating
margin is defined as Non-GAAP operating income as a percentage of
net revenue. Non-GAAP net income attributable to the Company’s
shareholders is defined as net income attributable to the Company’s
shareholders before share-based compensation expenses associated
with the Company’s 521 Plan. Non-GAAP net margin is a non-GAAP
measure that is defined as Non-GAAP net income attributable to the
Company's shareholders as a percentage of net revenue. Non-GAAP
basic net income per ADS is a non-GAAP measure and is defined as
net income attributable to the Company’s shareholders before
share-based compensation expenses associated with the Company’s 521
Plan divided by total weighted average number of ADS outstanding of
the Company during the period. Non-GAAP diluted net income per ADS
is a non-GAAP measure and is defined as net income attributable to
the Company’s shareholders before share-based compensation expenses
associated with the Company’s 521 Plan divided by total weighted
average number of diluted ADS outstanding of the Company during the
period. The Company believes that both management and investors
benefit from referring to these non-GAAP financial measures in
assessing the Company’s performance and when planning and
forecasting future periods. One limitation of using these non-GAAP
financial measures is that such measures exclude items that were
significant in the second quarter and first half of 2019.
In light of these limitations, the presentation
of these non-GAAP financial measures is not intended to be
considered in isolation or as a substitute for the financial
information prepared and presented in accordance with GAAP. We
encourage investors and other interested persons to review our
financial information in its entirety and not rely on a single
financial measure. For more information on these non-GAAP financial
measures, please see the tables captioned “Reconciliations of GAAP
Financial Measures to Non-GAAP Financial Measures” set forth at the
end of this release.
FANHUA INC.
Unaudited Condensed Consolidated Balance
Sheets (In thousands)
|
|
As of December
31, |
|
As of June
30, |
|
As of June
30, |
|
|
2019 11 |
|
2020 |
|
2020 |
|
|
RMB |
|
RMB |
|
US$ |
|
ASSETS: |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
169,653 |
|
670,900 |
|
94,960 |
|
Restricted cash |
95,952 |
|
100,594 |
|
14,238 |
|
Short term investments |
1,612,351 |
|
984,966 |
|
139,413 |
|
Accounts receivable, net |
682,171 |
|
633,126 |
|
89,613 |
|
Insurance premium receivables |
5,067 |
|
571 |
|
81 |
|
Other receivables |
61,570 |
|
148,590 |
|
21,031 |
|
Other current assets |
54,987 |
|
57,377 |
|
8,121 |
|
Total current assets |
2,681,751 |
|
2,596,124 |
|
367,457 |
|
|
|
|
|
|
|
|
Non-current assets: |
|
|
|
|
|
|
Restricted bank deposit - non current |
— |
|
15,243 |
|
2,158 |
|
Property, plant, and equipment, net |
40,806 |
|
37,381 |
|
5,291 |
|
Goodwill and intangible assets, net |
110,191 |
|
109,951 |
|
15,562 |
|
Deferred tax assets |
7,327 |
|
9,477 |
|
1,341 |
|
Investment in affiliates |
363,414 |
|
356,420 |
|
50,448 |
|
Other non-current assets |
46,917 |
|
46,462 |
|
6,576 |
|
Right of use assets |
190,437 |
|
202,209 |
|
28,621 |
|
Total non-current assets |
759,092 |
|
777,143 |
|
109,997 |
|
Total assets |
3,440,843 |
|
3,373,267 |
|
477,454 |
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
382,882 |
|
349,968 |
|
49,535 |
| Insurance
premium payables |
7,901 |
|
37,434 |
|
5,298 |
| Other
payables and accrued expenses |
220,290 |
|
210,555 |
|
29,802 |
| Accrued
payroll |
101,664 |
|
84,615 |
|
11,976 |
| Income
tax payable |
155,251 |
|
151,741 |
|
21,478 |
| Current
operating lease liability |
79,986 |
|
84,416 |
|
11,948 |
|
Total current liabilities |
947,974 |
|
918,729 |
|
130,037 |
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
Refundable share rights deposits |
266,901 |
|
270,862 |
|
38,338 |
| Other tax
liabilities |
70,350 |
|
67,219 |
|
9,514 |
| Deferred
tax liabilities |
7,898 |
|
17,398 |
|
2,463 |
|
Non-current operating lease liability |
103,252 |
|
106,275 |
|
15,042 |
|
Total non-current
liabilities |
448,401 |
|
461,754 |
|
65,357 |
|
Total liabilities |
1,396,375 |
|
1,380,483 |
|
195,394 |
|
|
|
|
|
|
|
|
Ordinary shares |
9,235 |
|
9,235 |
|
1,307 |
|
Treasury stock |
(1,146) |
|
(1,146) |
|
(162) |
|
Additional paid-in capital |
393 |
|
590 |
|
84 |
|
Statutory reserves |
508,739 |
|
508,739 |
|
72,007 |
|
Retained earnings |
1,479,494 |
|
1,408,247 |
|
199,324 |
|
Accumulated other comprehensive loss |
(65,429) |
|
(48,928) |
|
(6,925) |
|
Total shareholders’ equity |
1,931,286 |
|
1,876,737 |
|
265,635 |
|
Non-controlling interests |
113,182 |
|
116,047 |
|
16,425 |
|
Total equity |
2,044,468 |
|
1,992,784 |
|
282,060 |
|
Total liabilities and equity |
3,440,843 |
|
3,373,267 |
|
477,454 |
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 Six Months Ended |
|
|
|
|
|
|
June 30, |
|
June 30, |
|
|
2019 |
|
2020 |
|
2020 |
|
2019 |
|
2020 |
|
2020 |
|
|
RMB |
|
RMB |
|
USD |
|
RMB |
|
RMB |
|
US$ |
|
Net revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
813,360 |
|
765,707 |
|
108,379 |
|
1,710,664 |
|
1,415,918 |
|
200,410 |
|
Life insurance business |
771,593 |
|
728,455 |
|
103,106 |
|
1,630,778 |
|
1,353,660 |
|
191,598 |
|
P&C insurance business |
41,767 |
|
37,252 |
|
5,273 |
|
79,886 |
|
62,258 |
|
8,812 |
|
Claims adjusting |
85,059 |
|
115,838 |
|
16,396 |
|
159,409 |
|
188,250 |
|
26,645 |
|
Total net revenues |
898,419 |
|
881,545 |
|
124,775 |
|
1,870,073 |
|
1,604,168 |
|
227,055 |
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
(541,691) |
|
(535,468) |
|
(75,790) |
|
(1,167,788) |
|
(979,565) |
|
(138,648) |
|
Life insurance Business |
(514,313) |
|
(506,845) |
|
(71,739) |
|
(1,115,795) |
|
(934,264) |
|
(132,236) |
|
P&C insurance Business |
(27,378) |
|
(28,623) |
|
(4,051) |
|
(51,993) |
|
(45,301) |
|
(6,412) |
|
Claims adjusting |
(48,762) |
|
(64,250) |
|
(9,094) |
|
(91,359) |
|
(111,066) |
|
(15,720) |
|
Total operating costs |
(590,453) |
|
(599,718) |
|
(84,884) |
|
(1,259,147) |
|
(1,090,631) |
|
(154,368) |
|
Selling expenses |
(97,037) |
|
(70,144) |
|
(9,928) |
|
(161,679) |
|
(131,399) |
|
(18,598) |
|
General and administrative expenses |
(133,566) |
|
(114,741) |
|
(16,241) |
|
(245,461) |
|
(225,152) |
|
(31,869) |
|
Total operating costs and expenses |
(821,056) |
|
(784,603) |
|
(111,053) |
|
(1,666,287) |
|
(1,447,182) |
|
(204,835) |
|
Income from operations |
77,363 |
|
96,942 |
|
13,722 |
|
203,786 |
|
156,986 |
|
22,220 |
|
Other income, net: |
|
|
|
|
|
|
|
|
|
|
|
|
Investment income |
16,099 |
|
5,269 |
|
746 |
|
52,924 |
|
14,129 |
|
2,000 |
|
Interest income |
1,550 |
|
5,050 |
|
715 |
|
1,969 |
|
7,944 |
|
1,124 |
|
Others, net |
10,445 |
|
23,373 |
|
3,308 |
|
11,894 |
|
25,388 |
|
3,593 |
|
Income from operations before income taxes
and share income
of affiliates |
105,457 |
|
130,634 |
|
18,491 |
|
270,573 |
|
204,447 |
|
28,937 |
|
Income tax expense |
(36,865) |
|
(29,967) |
|
(4,242) |
|
(79,728) |
|
(48,624) |
|
(6,882) |
|
Share of income (loss) of affiliates |
28,830 |
|
4,487 |
|
635 |
|
54,243 |
|
(7,852) |
|
(1,111) |
|
Net income |
97,422 |
|
105,154 |
|
14,884 |
|
245,088 |
|
147,971 |
|
20,944 |
|
Less: net income (loss) attributable to noncontrolling
interests |
(587) |
|
5,841 |
|
827 |
|
(189) |
|
2,865 |
|
406 |
|
Net income attributable to the Company’s
shareholders |
98,009 |
|
99,313 |
|
14,057 |
|
245,277 |
|
145,106 |
|
20,538 |
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 Six Months Ended |
| |
June 30, |
|
June 30, |
| |
2019 |
|
2020 |
|
2020 |
|
2019 |
|
2020 |
|
2020 |
|
|
RMB |
|
RMB |
|
US$ |
|
RMB |
|
RMB |
|
US$ |
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
0.09 |
|
0.09 |
|
0.01 |
|
0.22 |
|
0.14 |
|
0.02 |
|
Diluted |
0.09 |
|
0.09 |
|
0.01 |
|
0.22 |
|
0.14 |
|
0.02 |
|
Net income per ADS: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
1.79 |
|
1.85 |
|
0.26 |
|
4.42 |
|
2.70 |
|
0.38 |
|
Diluted |
1.78 |
|
1.85 |
|
0.26 |
|
4.42 |
|
2.70 |
|
0.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in calculating net income per share:
Basic |
1,097,540,729 |
|
1,073,891,784 |
|
1,073,891,784 |
|
1,109,847,348 |
|
1,073,891,784 |
|
1,073,891,784 |
|
Diluted |
1,098,214,541 |
|
1,074,291,378 |
|
1,074,291,378 |
|
1,110,703,833 |
|
1,074,291,402 |
|
1,074,291,402 |
| Net
income |
97,422 |
|
105,154 |
|
14,884 |
|
245,088 |
|
147,971 |
|
20,944 |
|
Other comprehensive income, net of tax: Foreign
currency translation adjustments |
8,137 |
|
137 |
|
19 |
|
3,390 |
|
3,857 |
|
546 |
|
Share of other comprehensive gain of affiliates |
1,401 |
|
9 |
|
1 |
|
123 |
|
859 |
|
122 |
|
Unrealized net gains on available-for-sale investments |
— |
|
9,224 |
|
1,306 |
|
— |
|
11,785 |
|
1,668 |
| Comprehensive
income |
106,960 |
|
114,524 |
|
16,210 |
|
248,601 |
|
164,472 |
|
23,280 |
|
Less: Comprehensive (loss) income attributable to
the noncontrolling interests |
(587) |
|
5,841 |
|
827 |
|
(189) |
|
2,865 |
|
406 |
|
Comprehensive income attributable to the
Company’s shareholders |
107,547 |
|
108,683 |
|
15,383 |
|
248,790 |
|
161,607 |
|
22,874 |
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 Six
Months Ended |
| |
June 30, |
|
June 30, |
| |
2019 |
|
2020 |
|
2020 |
|
2019 |
|
2020 |
|
2020 |
| |
RMB |
|
RMB |
|
US$ |
|
RMB |
|
RMB |
|
US$ |
| OPERATING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
| Net income |
97,422 |
|
105,154 |
|
14,884 |
|
245,088 |
|
147,971 |
|
20,944 |
| Adjustments to reconcile net income to net cash
generated from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| Investment income |
(12,458) |
|
— |
|
— |
|
(45,357) |
|
(5,102) |
|
(722) |
| Share of income of affiliates |
(28,830) |
|
(4,487) |
|
(635) |
|
(54,243) |
|
7,852 |
|
1,111 |
| Other non-cash adjustments |
72,235 |
|
37,873 |
|
5,360 |
|
97,087 |
|
70,937 |
|
10,041 |
| Changes in operating assets and liabilities: |
(249,683) |
|
(98,533) |
|
(13,945) |
|
(317,077) |
|
(47,090) |
|
(6,665) |
| Net cash (used in)
generated from operating
activities |
(121,314) |
|
40,007 |
|
5,664 |
|
(74,502) |
|
174,568 |
|
24,709 |
| Purchase of short term investments |
(1,563,780) |
|
(1,827,390) |
|
(258,650) |
|
(3,168,680) |
|
(4,608,122) |
|
(652,237) |
| Proceeds from disposal of short term investments |
1,678,095 |
|
2,190,382 |
|
310,028 |
|
3,502,317 |
|
5,251,214 |
|
743,261 |
| Cash paid for loan receivables to a third party |
— |
|
(30,000) |
|
(4,246) |
|
— |
|
(90,000) |
|
(12,739) |
| Others |
(4,158) |
|
(3,554) |
|
(503) |
|
(8,562) |
|
(5,743) |
|
(813) |
| Net cash generated from
investing activities |
110,157 |
|
329,438 |
|
46,629 |
|
325,075 |
|
547,349 |
|
77,472 |
| Proceeds of employee and grantee subscriptions |
— |
|
— |
|
— |
|
111,305 |
|
— |
|
— |
| Dividends paid |
(206,742) |
|
(208,830) |
|
(29,558) |
|
(206,742) |
|
(208,830) |
|
(29,558) |
| Repurchase of shares from open market |
(247,310) |
|
— |
|
— |
|
(329,691) |
|
— |
|
— |
| Proceeds of cash consideration related to disposal of
subsidiaries |
14,463 |
|
— |
|
— |
|
19,463 |
|
— |
|
— |
| Others |
4 |
|
— |
|
— |
|
4 |
|
— |
|
— |
| Net cash used in
financing activities |
(439,585) |
|
(208,830) |
|
(29,558) |
|
(405,661) |
|
(208,830) |
|
(29,558) |
| Net increase (decrease)
in cash, cash
equivalents and restricted cash |
(450,742) |
|
160,615 |
|
22,735 |
|
(155,088) |
|
513,087 |
|
72,623 |
| Cash, cash
equivalents and restricted cash
at beginning of period |
1,139,296 |
|
626,359 |
|
88,655 |
|
848,166 |
|
265,605 |
|
37,594 |
| Effect of exchange rate changes on cash and cash
equivalents |
13,510 |
|
(237) |
|
(34) |
|
8,986 |
|
8,045 |
|
1,139 |
| Cash, cash
equivalents and restricted cash
at end of period |
702,064 |
|
786,737 |
|
111,356 |
|
702,064 |
|
786,737 |
|
111,356 |
FANHUA
INC.Reconciliations of GAAP Financial Measures to
Non-GAAP Financial Measures (In RMB in
thousands, except shares and per share data)
|
|
For The Three Months Ended June 30 |
|
|
2019 |
|
2020 |
|
|
|
|
GAAP |
|
Share-based compensation
expenses |
|
Non-GAAP |
|
GAAP |
|
Share-based compensation
expenses |
|
Non-GAAP |
|
Change% |
| Net
revenues |
898,419 |
|
— |
|
898,419 |
|
881,545 |
|
— |
|
881,545 |
|
(1.9) |
| Selling
expenses |
(97,037) |
|
(28,571) |
|
(68,466) |
|
(70,144) |
|
(70) |
|
(70,074) |
|
2.3 |
| General and
administrative expenses |
(133,566) |
|
(11,429) |
|
(122,137) |
|
(114,741) |
|
(28) |
|
(114,713) |
|
(6.1) |
| Income from
operations |
77,363 |
|
(40,000) |
|
117,363 |
|
96,942 |
|
(98) |
|
97,040 |
|
(17.3) |
| Operating
margin |
8.6% |
|
— |
|
13.1% |
|
11.0% |
|
— |
|
11.0% |
|
(16.0) |
| Net income
(loss) attributable to the Company’s shareholders |
98,009 |
|
(40,000) |
|
138,009 |
|
99,313 |
|
(98 ) |
|
99,411 |
|
(28.0) |
| Net
margin |
10.9% |
|
— |
|
15.4% |
|
11.3% |
|
— |
|
11.3% |
|
(26.6) |
| Net income
per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
0.09 |
|
— |
|
0.13 |
|
0.09 |
|
— |
|
0.09 |
|
(30.8) |
| Diluted |
0.09 |
|
— |
|
0.13 |
|
0.09 |
|
— |
|
0.09 |
|
(30.8) |
| Net income
per ADS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
1.79 |
|
— |
|
2.51 |
|
1.85 |
|
— |
|
1.85 |
|
(26.3) |
| Diluted |
1.78 |
|
— |
|
2.51 |
|
1.85 |
|
— |
|
1.85 |
|
(26.3) |
| Shares used
in calculating net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
1,097,540,729 |
|
— |
|
1,097,540,729 |
|
1,073,891,784 |
|
— |
|
1,073,891,784 |
|
— |
| Diluted |
1,098,214,541 |
|
— |
|
1,098,214,541 |
|
1,074,291,378 |
|
— |
|
1,074,291,378 |
|
— |
|
|
For The Six Months Ended
June 30 |
|
|
2019 |
|
2020 |
|
|
|
|
GAAP |
|
Share-based compensation
expenses |
|
Non-GAAP |
|
GAAP |
|
Share-based compensation
expenses |
|
Non-GAAP |
|
Change% |
| Net
revenues |
1,870,073 |
|
|
|
1,870,073 |
|
1,604,168 |
|
— |
|
1,604,168 |
|
(14.2) |
|
Selling expenses |
(161,679) |
|
(30,931) |
|
(130,748) |
|
(131,399) |
|
(140) |
|
(131,259) |
|
0.4 |
|
General and administrative expenses |
(245,461) |
|
(12,373) |
|
(233,088) |
|
(225,152) |
|
(56) |
|
(225,096) |
|
(3.4) |
| Income from
operations |
203,786 |
|
(43,304) |
|
247,090 |
|
156,986 |
|
(196) |
|
157,182 |
|
(36.4) |
| Operating
margin |
10.9% |
|
|
|
13.2% |
|
9.8% |
|
|
|
9.8% |
|
(25.8) |
| Net income
(loss) attributable to the Company’s shareholders |
245,277 |
|
(43,304) |
|
288,581 |
|
145,106 |
|
(196) |
|
145,302 |
|
(49.6) |
| Net
margin |
13.1% |
|
— |
|
15.4% |
|
9.0% |
|
— |
|
9.1% |
|
(40.9) |
| Net income
per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
0.22 |
|
— |
|
0.26 |
|
0.14 |
|
— |
|
0.14 |
|
(46.2) |
| Diluted |
0.22 |
|
— |
|
0.26 |
|
0.14 |
|
— |
|
0.14 |
|
(46.2) |
| Net income
per ADS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
4.42 |
|
— |
|
5.20 |
|
2.70 |
|
— |
|
2.71 |
|
(47.9) |
| Diluted |
4.42 |
|
— |
|
5.20 |
|
2.70 |
|
— |
|
2.71 |
|
(47.9) |
| Shares used
in calculating net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
1,109,847,348 |
|
— |
|
1,109,847,348 |
|
1,073,891,784 |
|
— |
|
1,073,891,784 |
|
— |
| Diluted |
1,110,703,833 |
|
— |
|
1,110,703,833 |
|
1,074,291,378 |
|
— |
|
1,074,291,378 |
|
— |
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 RMB7.0651 to
US$1.00, the effective noon buying rate as of June 30, 2020 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 Non-GAAP
operating income is defined as operating income before share-based
compensation expenses.
3
Non-GAAP operating margin is defined as Non-GAAP operating income
as a percentage of net revenue.
4 Non-GAAP net
income attributable to shareholders is defined as net income
attributable shareholders before share-based compensation
expenses.
5
Non-GAAP net margin is defined as non-GAAP net income attributable
to shareholders as a percentage of net revenue.
6
Non-GAAP basic net income per ADS is defined as non-GAAP net income
attributable to the Company’s shareholders divided by total
weighted average number of ADS outstanding of the Company during
the period.
7 Non-GAAP diluted
net income per ADS is defined as non-GAAP net income attributable
to the Company’s shareholders divided by total diluted weighted
average number of ADS outstanding of the Company during the
period.
8 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.
9 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.
10 Performing
agents are defined as agents who have sold at least one insurance
policy during the specified period.
11 In June
2016, FASB issued ASU No. 2016-13, “Financial Instruments-Credit
Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments”. This standard requires entities to measure all
expected credit losses of financial assets held at a reporting date
based on historical experience, current conditions, and reasonable
and supportable forecasts in order to record credit losses in a
timelier manner. ASU 2016-13 also amends the accounting for credit
losses on available-for-sale debt securities and purchased
financial assets with credit deterioration. ASU 2016-13 adds to
U.S. GAAP an impairment model (known as the current expected credit
loss (CECL) model) that is based on expected losses rather than
incurred losses. The Company adopted the ASU No. 2016-13 on a
modified-retrospective basis, the cumulative-effect adjustment
reduce opening retained earnings balance by approximately RMB7.4
million in the statement of financial position as of January 1,
2020.
For more information, please contact:
Investor Relations
Tel: +86 (20) 8388-3191
Email: qiusr@fanhuaholdings.com
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