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Fanhua Inc. (FANH 0.28%)
Q4 2021 Earnings Call
Mar 28, 2022, 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 2021 earnings conference call. [Operator instructions] For your information, this conference call is now being broadcasted 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 and webcast 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 Qui, Fanhua's investor relations manager.
Oasis Qiu -- Investor Relations Manager
Good morning and good evening. Welcome to our fourth quarter and fiscal year 2021 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 Reform 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 not limited to those online 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.
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Joining us today are our chief chairman and chief executive officer, Mr. Yinan Hu; chief financial officer, Mr. Peng Ge. Mr.
Hu will provide a review of financial and operational highlights in the fourth quarter and fiscal year 2021. There will be a Q&A session after the prepared remarks. Now, I will turn the call over to Mr. Hu.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
Good morning, and good evening. This is Yinan Hu. Thank you for joining today's conference call. I would like to begin the call by sharing some of my thoughts on current industry trends, then I will discuss our strategic focuses in 2022.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
In 2021, China's life insurance industry started off well but ended up on a downward track. Premium growth continued to slow down after the transition to the new critical illness definition framework in the first quarter of 2021, and gross written premium, or GWP, dropped year over year. The resurgences of COVID-19 and tightened regulations clearly played a role, but we believe the major cause lies in the supply side as neither the quality of insurance products nor the professional capabilities of insurance sales agents can fully meet customer needs.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
Against the backdrop of industry transformation, despite mounting challenges, we also see tremendous opportunities. In 2022, people reaching the retirement age are expected to grow from 9 million in 2021 to 25 million in China. More than 25 million people are expected to retire in the next 10 years each year starting from 2022, adding up to 300 million people. With an accelerating aging society, there is burgeoning demand for elderly care, asset preservation, tax planning and legacy management among soon-to-be retirees.
Meanwhile, based on experience learned from mature markets with the rise of the middle class and the increase in consumers' disposal income, more and more people are shifting their demand for insurance from ensuring basic protection to more comprehensive plans for family based asset allocation. These changing consumer demands are driving the next era of strong growth, but such demands require salespeople to be equipped with higher capabilities and more professional knowledge.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
Statistics from both the industry and Fanhua in the last few years also confirm this trend.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
From the premium mix perspective, critical illness sales have suffered a continuous decline after the transition of CI definition framework. The same applies to Fanhua. For 2021, critical illness sales facilitated on Fanhua's platforms have dropped quarter-by-quarter, showing a downward trend in general with those sales of savings-type products such as whole life insurance and annuity have been on the rise since then clearly reflecting the changes in insurance demand.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
To take a look at agents, the total number of agents across China's insurance industry has plummeted from 9 million to 6 million, leaving a polarized sales force as, on the one hand, a large number of low-performing agents are leaving the industry, and on the other hand, high-performing salespeople are more stable and productive. From Fanhua's standpoint, despite a fall in Fanhua's total numbers of agents and performing agents, the last four years witnessed an increase in the number of Fanhua's high-performing agents with annual first year premiums of RMB 100,000 and evolved from 3,230 in 2018 to 5,432 in 2021, suggesting a distinctly growing momentum in general. And productivity of our high-performing agents has also also grown year by year as their per capita average annual premiums grew from RMB 250,000 in 2018 to RMB 320,000 in 2021. All this indicates that our agents are also diverging with Fanhua's core sales force remaining stable and growing in quality.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
As for customers, the number of Fanhua's high-premium customers with over RMB 100,000 annual payments has also shown a distinctly upward momentum, as the number of new high-premium customers each year has been growing. And the premiums contributed by repeated purchases have been increasing, accounted for more than 30% of the total. This suggests that the middle class has been rising rapidly, and the number of high-net worth customers has been increasing as well.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
In 2021, despite the drop of 0.3% in the industry life insurance GWP, Fanhua managed to register RMB 11.6 billion of total GWP, a year-over-year increase of 12.3%. First-year premiums reached RMB 2.8 billion, a year-over-year increase of 4.1%, among which, first-year premiums of whole life insurance grew by over 64% year over year. This, again, confirms the changes in customer demand and the contribution of highly productive, high-performing sales force to business growth, as well as the fact that the quality improvement of agents are able to offset the adverse impact of downsizing, and it also sheds light on Fanhua's future path for development.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
The two data that's further confirming this trend is, firstly, a high-premium customers with annual premiums of over 100,000. Annual premiums contributed roughly 34% of our total first-year premiums in 2021. And the agents, the number of agents, who contributed over 100,000 first-year premiums in 2021, amounted to about 5,000 of them, contributed around 65% of our total first-year premiums.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
Based on our judgment on the industry, Fanhua implemented in full strength the new strategy of professionalism, digitalization and open platform in 2021, in an attempt to fully empower and cultivate professional talent and also empower the industry to take full advantage of the great opportunities brought by the rising demand for elderly care and family legacy management. In 2022, we will further execute the development strategy of professionalism, digitalization and open platform, with a focus on the following initiatives.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
We plan to tap into high-net worth market by offering referral of insurance trust and family trust services, with a target to complete over 1,000 large-ticket family legacy management policies and increase the amount of premiums contributed by high-value customers, who pay no less than RMB 100,000 premiums annually by 30%. And this is made based on previous judgment on the industry, and we believe that the contribution of high-value customers is on the rise, so that we pay our first focus on high-value customers' demand. And our point here is to make sure to meet their demand for family legacy management. First.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
Second, as high-performing agents with RMB 100,000 FYP contributes about 65% of the total FYP in Fanhua, we will focus on fostering and recruiting more productive agents through professional empowerment, customer resources offering and digital empowerment to meet the target of 30% growth in first-year premiums, contributed by highly performing agents with RMB 100,000 FYP, within our existing sales force and Fanhua Yuntong.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
Three, we expect to accelerate the advancement of the open-platform strategy, benefiting from the favorable environment after the new regulations on Internet insurance took effect, through which we look to achieve the target of generating 10% of our first-year premiums in 2022.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
Our goal is to transform Fanhua into a brand-new, digitalized and specialized company that demonstrates high growth in the next two years. 2022 will be a year of capacity building, laying the groundwork for Fanhua to back -- to get back on track for sustained and high-profit growth.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
This concludes my presentation. And now, the floor will open for your questions. Thank you.
Questions & Answers:
Operator
[Operator instructions] Our first question comes from Susan Wang of CICC. Your line is open.
Susan Wang -- CICC -- Analyst
[Foreign language] First, congrats to the impressive results of our management in Q4. And I have two questions. First, after the new regulation of Internet insurance, so many small- and medium-size insurance companies cannot do online business. Can we see stronger revenues for them to cope with us? And will it affect our 2022 performance outlook? And next one is about the product.
We can see a rapid growth in the savings-type product. Do we think this is a short-term adjustment or is it due to the demand for protection products has peaked? So how could we do better in savings-type products? And is the commission rate of saving-type should be lower than the protection type? Thanks.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
Concerning your first question regarding the impact of the internet life insurance regulations, we do observe that a lot of small and medium-sized insurance companies have more positive attitude toward cooperating with us, as well as designing new products. So we believe that this new regulation is positive to our business development, in general. In addition to that, we are observing that the integration between online and offline business has also shown a significant progress. And after the new regulations, a lot of online channels and -- who used to distribute their business through internet channels, are willing to pursue cooperation with our open-platform business as well.
Last year, we have generated about 40 million first-year premiums through our open-platform strategy. And this quarter, in the first quarter, we have already achieved about RMB 30 million first-year premium, and our target for 2022 is to deliver about 300 million to 500 million first-year premium. So in conclusion, we believe that this new regulation is definitely quite favorable to our development.
Yinan Hu -- Chief Financial Officer
[Foreign language]
Oasis Qiu -- Investor Relations Manager
For your second question regarding the product mix, we do observe a drastic change in our product mix in the past quarters and the past year. In the fourth quarter, whole life insurance and annual life insurance collectively accounted for 70% of our total first-year premium, as compared to 20% contributed by critical units products as compared to in the first quarter, the percentage of whole life and annuity, as compared to CI product, is much lower. And also, in the second quarter and third quarter, we're already seeing that the percentage of whole life and annuity has already surpassed that of CI products. This has clearly reflected the changing demand in customers.
As for whether or not the critical illness product has reached its ceiling, we will not say that, but we do believe that the growth of critical illness insurance will slow down. And in the future, savings products such as annuity, pension insurance and whole life insurance, will become the main products. In response to this changing demand, we will also adjust our methods of selling. And first of all, our target group will change to those people in the age of 40 to 70 years old and particularly those in the age of 50 to 60 years old, who are going into retirement.
This group of people are the main beneficiaries of China's economic development after the opening-up is firm, and this also -- other group of people, who own the wealth of the family. So as they're going into retirement, they have strong demand for elderly care, for legacy management, etc. As these people are also the owner of the family wealth, they are the main buyers or they're the people who pay for family insurance policies. So this group of people will be our main target customers.
As I mentioned just now, each year, there will be 250 million people going into retirement. So going forward, we're going to adjust our sales methods to assess these people's needs for family asset allocation services by offering retirement and legacy management services. And as I mentioned just now, there are about -- the repeat purchases among our existing customers for whole life and annuity products are about 30%, which means that 70% of our existing customers have now owned whole life and annuity products before. So that indicates a significant room for further growth.
Thank you. I hope that answer your question.
Susan Wang -- CICC -- Analyst
[Foreign language]
Oasis Qiu -- Investor Relations Manager
And that's it.
Operator
I show no further questions in queue.
Oasis Qiu -- Investor Relations Manager
OK. Thank you for your attendance. If you have any follow-up questions, please feel free to contact me. Thank you.
Operator
[Operator signoff]
Duration: 38 minutes
Call participants:
Oasis Qiu -- Investor Relations Manager
Yinan Hu -- Chief Financial Officer
Susan Wang -- CICC -- Analyst
