Fanhua Inc. (FANH) Q4 2020 Earnings Call Transcript

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Fanhua Inc. (FANH 1.14%)
Q4 2020 Earnings Call
Mar 17, 2021, 9:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by for Fanhua's Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. [Operator Instructions] After the management's prepared remarks, there will be a question-and-answer session. Please follow the instructions given at that time, if you'd like to ask a question. For your information, this conference call is now being broadcast live over the Internet. Webcast replay will be available within three hours after the conference is finished. Please visit Fanhua's IR website at ir.fanhuaholdings.com under the Events & Webcasts section. Today's conference is being recorded, if you have any objections you may disconnect at this time.

I would now like to turn the meeting over to your host for today's conference, Ms. Oasis Qiu, Fanhua's Investor Relations Manager.

Oasis Qiu -- Investor Relations Manager

Good morning. Welcome to our fourth quarter and full year 2020 earnings conference call. The earnings results were released earlier today and are available on our IR website, as well as on newswire.

Before we continue, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation act of 1995. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause our actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but are not limited to those outlined in our filings with the SEC, including our registration statement on Form 20-F. We do not undertake any obligation to update this forward-looking information, except as required under applicable law.

Joining us today are our Chief Executive Officer, Mr. Chunlin Wang; Chief Financial Officer, Mr. Peng Ge. Mr. Wang will provide a review of our financial highlights in fourth quarter and fiscal year 2020, there will be a Q&A session after the prepared remarks.

Now I will turn the call over to Mr. Wang.

Chunlin Wang -- Chief Executive Officer & Chairman

[Foreign Speech]

Thank you for joining us on today's conference call. Here with me, we have our Chief Financial Officer, Mr. Peng Ge, and our Board Secretary, Lily Li [Phonetic]. On today's call, I will share with you our new strategy initiatives and some key progress, followed by our financial forecast for 2021. Mr. Ge and I will take your questions after the report.

[Foreign Speech]

Part one; in 2020, while the China's life insurance industry was hit hard by the COVID-19 pandemic, Fanhua was still protected and maintained healthy development. In 2020, despite the continued challenges from COVID-19, Fanhua accomplished another major milestone with our gross written premiums on regular life insurance business exceeding RMB10 billion, representing a year-over-year growth of 16.3% and operating profit reaching RMB300 million. In the fourth quarter of 2020, the gross written premiums of our regular life insurance business increased 21% year-over-year to RMB2.9 billion, operating profit reached RMB71.9 million, exceeding our previous expectations.

[Foreign Speech]

Now to our strategy assessment; first, although the growth of China's life insurance market slowed down in 2020 due to the impact from COVID-19 pandemic, we still believe that China's life insurance industry will maintain a long-term rapid growth trend unchanged, and that the development of insurance intermediaries, will be faster than that of the insurance industry as a whole.

Second, currently, there are various business models in China's insurance intermediary market, including agent-oriented model, business-oriented model and direct-to-consumer model, with evolving technologies and changing market environment, these business models on a stand-alone basis, may face difficulty to maintain enduring vitality over the long-term, only those which can facilitate best customer services, extend customers' lifecycle and enable repeated transactions can thrive and prosper in the future.

[Foreign Speech]

Part three, 2021 master first full year for implementing the strategy of professionalization, digitalization and open platform, which we believe will help build new growth engines for Fanhua for 2022 and beyond.

[Foreign Speech]

Our strategy of professionalization, digitalization and open platform is built upon our existing business model, looking to enhancing the productivity and income of our sales agents, and solidifying our existing strengths in offline sales and service capabilities, while in the meantime, strengthening our capabilities on to B and to C fronts to build Fanhua into an open digital platform, with greater compatibility and more growth potential. We believe that this new strategy will enable us to build a sustainable business model, with enduring vitality.

[Foreign Speech]

In 2020, as part of our plan to professionalize our sales force, we have established an interim business division [Technical Issues] the establishment of three city level branches. For digitalization, we've established a digital business division, and now digital marketing center has been in operation since the end of January 2021. As for open platforms, we've established a cloud service division, which has so far, some partnership with six cooperative partners and started operating on a trial basis. We expect that the new strategy will start to yield more meaningful positive results in 2022, to drive rapid growth of our business in 2022 and the years ahead.

[Foreign Speech]

Fourthly, financial forecast for 2021; looking ahead to 2021, we expect gross return premium of our regular life insurance business to be no less than RMB12 billion. The initial investments for carrying our premium strategy in 2021, is expected to be around RMB100 million. Therefore, our operating income is expected to be no less than RMB300 million in 2021.

For the first quarter of 2021, we expect our regular life insurance GWP to be no less than RMB3 billion, and operating income no less than RMB120 million. We believe that the new strategy will contribute greater value to the company, and generate higher returns to our shareholders over the long run.

[Foreign Speech]

Fifthly, dividend plan; the company is committed to maintaining a regular cash dividend policy. Based on our earnings expectation and the amount of expenditure required for enhancing our professional and digital capabilities in 2021, and our dividend for 2021 will be no less than $0.60 per ADS payable in four quarterly installments, was $0.15 per ADS for each quarter.

[Foreign Speech]

Thank you. This concludes my presentation. Now the floor is open for your questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Xing Xiangdao [Phonetic] from CICC. Please ask your question.

Xing Xiangdao -- CICC -- Analyst

[Foreign Speech]

Two questions from Xing Xiangdao [Phonetic] at CICC. The first question is with regard our guidance on the GWP of our regular life insurance business in the first quarter, which sounds quite strong growth. She's wondering whether this strong performance is due to the transition of the critical illness definition framework? And then after the new critical illness framework takes a step [Phonetic] in February the 1st, how is the sales of the new critical illness products so far?

Chunlin Wang -- Chief Executive Officer & Chairman

[Foreign Speech]

Firstly, in the first quarter, after the new critical illness framework takes steps [Phonetic], the jump-start sales commenced in the first quarter, and the industry has actually been performing pretty well, largely thanks to the transition of the critical illness of framework transition. And for Fanhua, we believe that we have been outperforming the industry.

[Foreign Speech]

It has been an industrial norm that, each time after a major regulation or a policy issue, which resulted a change to insurance products, it will have of course a huge impact on the industry. We do expect that after the transition of the critical illness framework, it will probably take the industry some time to fully recover.

[Foreign Speech]

We've been proceeding with the transition of the products scheduled, and we've been making preparations for our next marketing campaigns, which is in April and June and May.

[Foreign Speech]

For the next marketing campaign, our major products will focus on annuity and whole life products, while we will also make efforts to educate our customers on the new critical illness products.

[Foreign Speech]

Thank you.

Xing Xiangdao -- CICC -- Analyst

[Foreign Speech]

Thank you.

Operator

[Operator Instructions] There's no more question at this time. Our speakers you may continue.

Oasis Qiu -- Investor Relations Manager

Thank you for joining us on today's conference call. If you have any further questions, please feel free to contact us. Thank you.

Operator

[Operator Closing Remarks].

Duration: 22 minutes

Call participants:

Oasis Qiu -- Investor Relations Manager

Chunlin Wang -- Chief Executive Officer & Chairman

Xing Xiangdao -- CICC -- Analyst

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