UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

FORM 6-K

 

 
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of November 2020

 

Commission File Number: 001-33768

 

 
FANHUA INC.

 

 
27/F, Pearl River Tower
No.15 West Zhujiang Road
Tianhe District, Guangzhou 510623
People’s Republic of China
(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☒ Form 40-F ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Fanhua Inc.
	By:	/s/ Chunlin Wang
	Name:  Title:	Chunlin Wang Chief Executive Officer

 

Date: November 25, 2020

 

 

Exhibit Index

 

Exhibit No.		Description.
Exhibit 99.1		Press Release
Exhibit 99.2		Press Release

 

 

2

 

Exhibit 99.1

 

 

 

Fanhua Reports Third Quarter 2020 Unaudited Financial Results

 

GUANGZHOU, China, November 24, 2020, Eastern Standard Time, (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 third quarter ended September 30, 2020¹.

 

Financial Highlights for the Third quarter of 2020:

 

(In thousands, except per ADS)		2019Q3 （RMB）				2020Q3 (RMB)				2020Q3 (US$)				Change %
Total net revenues			823,351				812,003				119,595				(1.4	)
Operating income			151,447				73,326				10,800				(51.6	)
Non-GAAP operating income2			111,623				72,736				10,713				(34.8	)
Net income attributable to the Company’s shareholders			168,332				75,322				11,094				(55.3	)
Non-GAAP net income attributable to the Company’s shareholders3			128,508				74,732				11,007				(41.8	)
Diluted net income per ADS			3.12				1.40				0.21				(55.1	)
Non-GAAP diluted net income per ADS4			2.38				1.39				0.20				(41.6	)
Cash, cash equivalents and short- term investments (As of September 30, 2019 and 2020)			1,760,966				1,700,472				250,453				(3.4	)

 

Commenting on the third quarter results, Mr. Chunlin Wang, chairman and chief executive officer said, “In the third quarter of 2020, our life insurance gross written premiums achieved RMB2.4 billion, with a year-on-year increase of 15.5%, outpacing the industry growth rate of 9.2%. During the same period, first year premiums reached RMB582.7 million and annualized premiums equivalent⁵ were RMB333.5 million while renewal premiums exceeded RMB1.8 billion. The decline in new policies written is mainly attributable to the ongoing impact from the pandemic, the industry-wide downward pressure and slower recruitment in new agents, which partially offset the increase in renewal premiums.

 

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 RMB6.7896 to US$1.00, the effective noon buying rate as of September 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 net income attributable to the Company’s shareholders is defined as net income attributable to the Company’s shareholders before share-based compensation expenses.

 

4

Non-GAAP diluted net income per ADS is defined as net income attributable to the Company’s shareholders before share-based compensation expenses divided by total weighted average number of diluted ADS outstanding of the Company during the period.

 

5

Annualized premiums equivalent is a measure used by the Company to compare annual premiums received from life insurance policies with differing tenures by normalizing annual premiums into the equivalent annual premium of a policy with a tenure of 20 years.

 

 

 

 

“In recent years, we’ve seen a gradual transformation in the Chinese insurance industry, catalyzed by the sweeping impact of digital technology, a trend that has been further accelerated by the pandemic. In order to lead Fanhua into the post Covid-19 era, we have adopted a strategy of ‘a professional sales force, digital capability and open platform’. We believe that this strategy will enable Fanhua to strengthen its position as a market leader in the professional intermediary industry. The Company plans to upgrade its sales organization by selecting and developing high-caliber, productive and professional insurance advisor teams in economically developed cities in China. We also intend to build an integrated digital platform utilizing artificial intelligence, big data and cloud computing, enabling us to optimize the use of data to provide the most appropriate products for existing and potential customers and increase agent productivity. Finally, we will build an open platform to facilitate a closer cooperation with various third parties who can monetize their existing customer resources and to strengthen our value proposition to the market.

 

“While the immediate future remains challenging for the industry, we anticipate year-on-year growth in the first quarter next year and significant incremental contribution from the strategy to our results in the second half of 2021. We are confident in our ability to retain the Company’s position as a leader in the professional insurance intermediary sector over the long run.”

 

Financial Results for the Third quarter of 2020

 

Total net revenues were RMB812.0 million (US$119.6 million) for the third quarter of 2020, representing a decrease of 1.4% from RMB823.4 million for the corresponding period in 2019.

 

●

Net revenues for the life insurance business were RMB652.4 million (US$96.1 million) for the third quarter of 2020, representing a decrease of 6.3% from RMB696.0 million for the corresponding period in 2019. The decrease was mainly due to the 13.6% year-over-year decline in first year commission from RMB502.1 million in the third quarter of 2019 to RMB433.6 million in the third quarter of 2020, offset by 12.8% year-over-year growth in renewal commissions from RMB193.9 million in the third quarter of 2019 to RMB218.8 million in the third 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 80.3% of our total net revenues in the third quarter of 2020.

 

●

Net revenues for the P&C insurance business were RMB39.2 million (US$5.8 million) for the third quarter of 2020, representing an increase of 20.2% from RMB32.6 million for the corresponding period in 2019. Revenues for the P&C insurance business, mainly derived from commissions generated from Baowang (www.baoxian.com), increased primarily due to a higher proportion of higher-commission insurance products. Revenues generated from the P&C insurance business accounted for 4.8% of our total net revenues in the third quarter of 2020.

 

 

 

 

●

Net revenues for the claims adjusting business were RMB120.4 million (US$17.7 million) for the third quarter of 2020, representing an increase of 27.0% from RMB94.8 million for the corresponding period in 2019. The increase was mainly due to growth in our medical insurance-related claims adjusting business. Revenues generated from the claims adjusting business accounted for 14.9% of our total net revenues in the third quarter of 2020.

 

Total operating costs and expenses were RMB738.7 million (US$108.8 million) for the third quarter of 2020, representing an increase of 9.9% from RMB671.9 million for the corresponding period in 2019.

 

●

Commission costs were RMB541.4 million (US$79.7 million) for the third quarter of 2020, representing an increase of 2.0% from RMB530.8 million for the corresponding period in 2019.

 

u

Costs of the life insurance business were RMB447.6 million (US$65.9 million) for the third quarter of 2020, representing a decrease of 0.3% from RMB449.0 million for the corresponding period in 2019. The decrease reflects lower first year premiums. Costs incurred by the life insurance business accounted for 82.7% of our total commission costs in the third quarter of 2020.

 

u

Costs of the P&C insurance business were RMB24.9 million (US$3.7 million) for the third quarter of 2020, representing an increase of 10.2% from RMB22.6 million for the corresponding period in 2019, in line with our increased revenue and favorable product mix. 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 4.6% of our total commission costs in the third quarter of 2020.

 

u

Costs of claims adjusting business were RMB68.9 million (US$10.1 million) for the third quarter of 2020, representing an increase of 16.6% from RMB59.1 million for the corresponding period in 2019, corresponding to the increase in the medical insurance-related claims adjusting business. Costs incurred by the claims adjusting business accounted for 12.7% of our total commission costs in the third quarter of 2020.

 

●

Selling expenses were RMB78.5 million (US$11.6 million) for the third quarter of 2020, representing an increase of 99.7% from RMB39.3 million for the corresponding period in 2019. Excluding the benefit of a fair value adjustment of RMB28.4 million which reflected the lower share-based compensation expenses related to the Company’s 521 Plan in the third quarter of 2019, adjusted selling expenses which excluded share-based compensation expenses in the third quarter of 2020 increased by 16.4% from RMB67.7 million for the corresponding period of 2019 to RMB78.9 million (US$11.6 million) due to increased sales events related to our claims adjusting segment.

 

 

 

  

●

General and administrative expenses were RMB118.9 million (US$17.5 million) for the third quarter of 2020, representing an increase of 16.8% from RMB101.8 million for the corresponding period in 2019. Excluding the benefit of a fair value adjustment of RMB11.4 million which reflected the lower share-based compensation expenses related to the Company’s 521 Plan in the third quarter of 2019, adjusted general and administrative expenses which excluded share-based compensation expenses in the third quarter of 2020 increased by 5.1% from RMB113.2 million in the corresponding period in 2019 to RMB119.0 million (US$17.5 million) due to an increase in operating lease expenses.

 

As a result of the preceding factors, we had an operating income of RMB73.3 million (US$10.8 million) for the third quarter of 2020, representing a decrease of 51.6% from RMB151.4 million for the corresponding period in 2019.

 

Non-GAAP operating income², which excludes share-based compensation expenses, was RMB72.7 million (US$10.7 million) for the third quarter of 2020, representing a decrease of 34.8% from RMB111.6 million for the corresponding period in 2019.

 

Operating margin was 9.0% for the third quarter of 2020, compared to 18.4% for the corresponding period in 2019.

 

Non-GAAP operating margin⁶ was 9.0% for the third quarter of 2020, compared to 13.6% for the corresponding period in 2019.

 

Investment income was RMB12.9 million (US$1.9 million) for the third quarter of 2020, representing a decrease of 23.2% from RMB16.8 million for the corresponding period in 2019. The investment income in the third quarter of 2020 consisted of yields from short-term investments in financial products. Our investment income fluctuates from quarter to quarter because investment income is recognized when investments matured or disposed.

 

Interest income was RMB3.2 million (US$0.5 million) for the third quarter of 2020, representing an increase of 433.3% from RMB0.6 million for the corresponding period in 2019.

 

Income tax expense was RMB21.3 million (US$3.1 million) for the third quarter of 2020, representing a decrease of 29.5% from RMB30.2 million for the corresponding period in 2019. The effective tax rate for the third quarter of 2020 was 22.9% compared with 18.0% for the corresponding period in 2019.

 

Share of income of affiliates was RMB9.3 million (US$1.4 million) for the third quarter of 2020, representing a decrease of 71.5% from RMB32.6 million for the corresponding period in 2019, mainly attributable to the decrease in income from CNFinance Holdings Limited.

 

Net income was RMB80.8 million (US$11.9 million) for the third quarter of 2020, representing a decrease of 52.5% from RMB170.2 million for the corresponding period in 2019.

 

6

Non-GAAP operating margin is defined as Non-GAAP operating income as a percentage of net revenue.

 

 

 

 

Net income attributable to the Company’s shareholders was RMB75.3 million (US$11.1 million) for the third quarter of 2020, representing a decrease of 55.3% from RMB168.3 million for the corresponding period in 2019.

 

Non-GAAP net income attributable to the Company’s shareholders³ was RMB74.7 million (US$11.0 million) for the third quarter of 2020, representing a decrease of 41.8% from RMB128.5 million for the corresponding period in 2019.

 

Net margin was 9.3% for the third quarter of 2020 as compared to 20.4% for the corresponding period in 2019.

 

Non-GAAP net margin⁷ was 9.2% for the third quarter of 2020, compared to 15.6% for the corresponding period in 2019.

 

Basic and diluted net income per ADS were RMB1.40 (US$0.21) and RMB1.40 (US$0.21) for the third quarter of 2020, respectively, representing decreases of 55.1% and 55.1% from RMB3.12 and RMB3.12 for the corresponding period in 2019.

 

Non-GAAP basic⁸ and diluted net income per ADS⁴ were RMB1.39 (US$0.20) and RMB1.39 (US$0.20) for the third quarter of 2020, respectively, representing decreases of 41.8% and 41.6% from RMB2.39 and RMB2.38 for the corresponding period in 2019.

 

As of September 30, 2020, the Company had RMB1,700.5 million (US$250.5 million) in cash, cash equivalents and short-term investments.

 

Key Operational Metrics for Fanhua’s Online Initiatives in the Third Quarter of 2020:

 

●

Lan Zhanggui - Our one-stop insurance service platform:

 

Ø

The number of active users of Lan Zhanggui9 was 45,635 in the third quarter of 2020, as compared to 50,248 in the corresponding period of 2019. The number of active users of Lan Zhanggui who have sold at least one life insurance policy was 27,908 in the third quarter of 2020, as compared to 42,051 in the corresponding period of 2019;

 

Ø

Insurance premiums generated through Lan Zhanggui were RMB693.2 million (US$102.1 million) in the third quarter of 2020, among which life insurance premiums was RMB552.3 million (US$81.3 million) and non-life insurance premiums were RMB140.9 million (US$20.8 million), respectively, as compared to RMB684.4 million total insurance premiums generated through Lan Zhanggui which included RMB665.8 million life insurance premiums and RMB18.6 million non-life insurance premiums in the corresponding period of 2019.

 

7

Non-GAAP net margin is defined as non-GAAP net income attributable to shareholders as a percentage of net revenue.

 

8

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.

 

9

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.

 

 

 

 

 

●

eHuzhu - Our online mutual aid platform:

 

Ø

The number of paying members was 3.0 million as of September 30, 2020, as compared to 3.4 million as of September 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:

 

Ø

The number of active customer accounts10 was 93,374 in the third quarter of 2020, representing a decrease of 41.0% from 158,275 in the corresponding period of 2019;

 

Ø

Insurance premiums generated on Baoxian.com was RMB81.7 million (US$12.0 million) in the third quarter of 2020 as compared to RMB86.6 million in the corresponding period of 2019.

 

Recent Developments

 

●

Given the impact of Covid-19 and the recent evolving dynamics of the insurance industry, the Company estimated that it is not probable that the participants can achieve the performance condition of the 521 Plan for 2020. Accordingly, the Company plans to terminate the 521 Plan. This will include returning the subscribed shares by the Participants to the Company, refunding the share rights deposits amounting RMB260.3 million received by the Company back to the Participants, and terminating the Participants' obligation to repay the Company the non-recourse loan principal and interest by the end of 2020. The returned shares will be cancelled subsequently.

 

●

On October 16, 2020, Fanhua Insurance Sales Service Group Company Limited was awarded the "Value Star of Insurance Intermediary Brand of the Year 2020" by Insurance Today, a prestigious online insurance trade media. The award was selected by a panel of experts and online and offline media, aiming at researching the industry from various dimensions of insurance companies, insurance intermediaries, insurance products and services and third-party technology support.

 

●

As of September 30, 2020, Fanhua had 424,510 sales agents and 1,615 professional claims adjusters, compared with 658,145 sales agents and 1,319 claims adjusters as of September 30, 2019. The number of performing agents11 in the third quarter of 2020 was 95,101, including approximately 28,135 selling life insurance products, , compared with 111,486 performing agents as of September 30, 2019, including 43,470 selling life insurance products. As of September 30, 2020, Fanhua’s distribution network consisted of 764 sales outlets in 22 provinces and 121 services outlets in 31 provinces, compared with 755 sales outlets in 22 provinces and 144 service outlets in 31 provinces as of September 30, 2019.

 

10

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.

 

11

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

 

 

 

 

Business Outlook

 

Fanhua expects its operating income to be no less than RMB50 million for the fourth 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 COVID-19 pandemic.

 

Conference Call

 

The Company will host a conference call to discuss its third quarter 2020 financial results as per the following details.

 

Time: 8:00 PM Eastern Daylight Time on November 24, 2020 or 9:00 AM Beijing/Hong Kong Time on November 25, 2020

 

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/3674096

 

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/2enqmuag

 

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 September 30, 2020, our distribution and service network is consisted of 764 sales outlets in 22 provinces and 121 services outlets in 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 third quarter 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 September 30,				As of September 30,
		2019				202012				2020
		RMB				RMB				US$
ASSETS:
Current assets:
Cash and cash equivalents			169,653				208,324				30,683
Restricted cash			95,952				94,593				13,932
Short term investments			1,612,351				1,492,148				219,770
Accounts receivable, net			682,171				527,369				77,673
Insurance premium receivables			5,067				530				78
Other receivables			61,570				155,053				22,837
Other current assets			54,987				42,584				6,272
Total current assets			2,681,751				2,520,601				371,245
Non-current assets:
Restricted bank deposit - non current			—				15,243				2,245
Property, plant, and equipment, net			40,806				36,374				5,357
Goodwill and intangible assets, net			110,191				109,932				16,191
Deferred tax assets			7,327				10,217				1,505
Investment in affiliates			363,414				364,146				53,633
Other non-current assets			46,917				45,567				6,711
Right of use assets			190,437				218,356				32,160
Total non-current assets			759,092				799,835				117,802
Total assets			3,440,843				3,320,436				489,047
Current liabilities:
Accounts payable			382,882				302,605				44,569
Insurance premium payables			7,901				32,454				4,780
Other payables and accrued expenses			220,290				189,931				27,974
Accrued payroll			101,664				90,873				13,385
Income tax payable			155,251				157,211				23,155
Current operating lease liability			79,986				88,933				13,098
Total current liabilities			947,974				862,007				126,961
Non-current liabilities:
Refundable share rights deposits			266,901				260,299				38,338
Other tax liabilities			70,350				67,219				9,900
Deferred tax liabilities			7,898				21,991				3,239
Non-current operating lease liability			103,252				119,140				17,547
Total non-current liabilities			448,401				468,649				69,024
Total liabilities			1,396,375				1,330,656				195,985
Ordinary shares			9,235				9,235				1,360
Treasury stock			(1,146	)			(1,146	)			(169	)
Additional paid-in capital			393				—				—
Statutory reserves			508,739				508,739				74,929
Retained earnings			1,479,494				1,391,705				204,976
Accumulated other comprehensive loss			(65,429	)			(40,262	)			(5,930	)
Total shareholders’ equity			1,931,286				1,868,271				275,166
Non-controlling interests			113,182				121,509				17,896
Total equity			2,044,468				1,989,780				293,062
Total liabilities and equity			3,440,843				3,320,436				489,047

 

¹² In September 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 RMB7.5 million in the statement of financial position as of January 1, 2020.

 

 

 

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 Nine Months Ended
		September 30,												September 30,
		2019				2020				2020				2019				2020				2020
		RMB				RMB				US$				RMB				RMB				US$
Net revenues:
Agency			728,524				691,593				101,861				2,439,188				2,107,511				310,403
Life insurance business			695,968				652,370				96,084				2,326,746				2,006,030				295,456
P&C insurance business			32,556				39,223				5,777				112,442				101,481				14,947
Claims adjusting			94,827				120,410				17,734				254,236				308,660				45,461
Total net revenues			823,351				812,003				119,595				2,693,424				2,416,171				355,864
Operating costs and expenses:
Agency			(471,668	)			(472,512	)			(69,593	)			(1,639,456	)			(1,452,077	)			(213,867	)
Life insurance Business			(449,020	)			(447,634	)			(65,929	)			(1,564,815	)			(1,381,898	)			(203,531	)
P&C insurance Business			(22,648	)			(24,878	)			(3,664	)			(74,641	)			(70,179	)			(10,336	)
Claims adjusting			(59,102	)			(68,851	)			(10,141	)			(150,461	)			(179,917	)			(26,499	)
Total operating costs			(530,770	)			(541,363	)			(79,734	)			(1,789,917	)			(1,631,994	)			(240,366	)
Selling expenses			(39,309	)			(78,460	)			(11,556	)			(200,988	)			(209,859	)			(30,909	)
General and administrative expenses			(101,825	)			(118,854	)			(17,505	)			(347,286	)			(344,006	)			(50,667	)
Total operating costs and expenses			(671,904	)			(738,677	)			(108,795	)			(2,338,191	)			(2,185,859	)			(321,942	)
Income from operations			151,447				73,326				10,800				355,233				230,312				33,922
Other income, net:
Investment income			16,761				12,910				1,901				69,684				27,039				3,982
Interest income			620				3,196				471				2,590				11,140				1,641
Others, net			(1,028	)			3,359				494				10,866				28,747				4,234
Income from operations before income taxes and share income of affiliates			167,800				92,791				13,666				438,373				297,238				43,779
Income tax expense			(30,241	)			(21,286	)			(3,135	)			(109,969	)			(69,910	)			(10,297	)
Share of income of affiliates			32,596				9,279				1,367				86,839				1,427				210
Net income			170,155				80,784				11,898				415,243				228,755				33,692
Less: net  income attributable to noncontrolling interests			1,823				5,462				804				1,634				8,327				1,226
Net income attributable to the Company’s shareholders			168,332				75,322				11,094				413,609				220,428				32,466

 

 

 

 

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 Nine Months Ended
		September 30,												September 30,
		2019				2020				2020				2019				2020				2020
		RMB				RMB				US$				RMB				RMB				US$
Net income per share:
Basic			0.16				0.07				0.01				0.38				0.21				0.03
Diluted			0.16				0.07				0.01				0.38				0.21				0.03
Net income per ADS:
Basic			3.12				1.40				0.21				7.53				4.11				0.60
Diluted			3.12				1.40				0.21				7.52				4.10				0.60
Shares used in calculating net income per share:
Basic			1,077,381,239				1,073,891,784				1,073,891,784				1,098,906,389				1,073,891,784				1,073,891,784
Diluted			1,077,780,976				1,074,291,392				1,074,291,392				1,099,443,163				1,074,291,409				1,074,291,409
Net income			170,155				80,784				11,898				415,243				228,755				33,692
Other comprehensive income, net of tax: Foreign currency translation adjustments			2,631				6,302				928				6,021				10,159				1,496
Share of other comprehensive gain of affiliates			1,147				(1,553	)			(229	)			1,270				(694	)			(102	)
Unrealized net gains on available-for-sale investments			3,964				3,917				577				3,964				15,702				2,313
Comprehensive income			177,897				89,450				13,174				426,498				253,922				37,399
Less: Comprehensive income attributable to the noncontrolling interests			1,823				5,462				804				1,634				8,327				1,226
Comprehensive income attributable to the Company’s shareholders			176,074				83,988				12,370				424,864				245,595				36,173

 

 

 

 

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 Nine Months Ended
		September 30,												September 30,
		2019				2020				2020				2019				2020				2020
		RMB				RMB				US$				RMB				RMB				US$
OPERATING ACTIVITIES
Net income			170,155				80,784				11,898				415,243				228,755				33,692
Adjustments to reconcile net income to net cash generated from operating activities:
Investment income			(11,298	)			(8,030	)			(1,183	)			(56,655	)			(13,132	)			(1,934	)
Share of income of affiliates			(32,596	)			(9,279	)			(1,367	)			(86,839	)			(1,427	)			(210	)
Other non-cash adjustments			859				31,153				4,587				97,946				102,090				15,035
Changes in operating assets and liabilities:			993				32,625				4,806				(316,084	)			(14,465	)			(2,128	)
Net cash  generated from operating activities			128,113				127,253				18,741				53,611				301,821				44,455
Purchase of short term investments			(2,780,221	)			(2,326,840	)			(342,706	)			(5,948,901	)			(6,934,962	)			(1,021,410	)
Proceeds from disposal of short term investments			2,460,289				1,827,416				269,149				5,962,606				7,078,630				1,042,570
Cash paid for loan receivables to a third party			—				—				—				—				(90,000	)			(13,256	)
Others			1,512				(3,832	)			(564	)			(7,050	)			(9,575	)			(1,410	)
Net cash (used in) generated from investing activities			(318,420	)			(503,256	)			(74,121	)			6,655				44,093				6,494
Dividends paid			(115,078	)			(91,865	)			(13,530	)			(321,820	)			(300,695	)			(44,288	)
Repurchase of shares from open market			(154,325	)			—				—				(484,016	)			—				—
Others			(3,790	)			—				—				126,982				—				—
Net cash used in financing activities			(273,193	)			(91,865	)			(13,530	)			(678,854	)			(300,695	)			(44,288	)
Net (decrease) increase in cash, cash equivalents and restricted cash			(463,500	)			(467,868	)			(68,910	)			(618,588	)			45,219				6,661
Cash, cash equivalents and restricted cash at beginning of period			702,064				786,737				115,874				848,166				265,605				39,119
Effect of exchange rate changes on cash and cash equivalents			13,469				(709	)			(104	)			22,455				7,336				1,080
Cash, cash equivalents and restricted cash at end of period			252,033				318,160				46,860				252,033				318,160				46,860

 

 

 

 

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 September 30
		2019												2020
		GAAP				Share-based compensation expenses				Non-GAAP				GAAP				Share-based compensation expenses				Non-GAAP				Change %
Net revenues			823,351				—				823,351				812,003								812,003				(1.4	)
Selling expenses			(39,309	)			28,446				(67,755	)			(78,460	)			421				(78,881	)			16.4
General and administrative expenses			(101,825	)			11,378				(113,203	)			(118,854	)			169				(119,023	)			5.1
Income from operations			151,447				39,824				111,623				73,326				590				72,736				(34.8	)
Operating margin			18.4	%			—				13.6	%			9	%			—				9	%			(33.8	)
Net income attributable to the Company’s shareholders			168,332				39,824				128,508				75,322				590				74,732				(41.8	)
Net margin			20.4	%			—				15.6	%			9.3	%			—				9.2	%			(41.0	)
Net income per share:
Basic			0.16				—				0.12				0.07				—				0.07				(41.7	)
Diluted			0.16				—				0.12				0.07				—				0.07				(41.7	)
Net income per ADS:
Basic			3.12				—				2.39				1.40				—				1.39				(41.8	)
Diluted			3.12				—				2.38				1.40				—				1.39				(41.6	)
Shares used in calculating net income per share:
Basic			1,077,381,239				—				1,077,381,239				1,073,891,784				—				1,073,891,784				—
Diluted			1,077,780,976				—				1,077,780,976				1,074,291,392				—				1,074,291,392				—

 

 

 

 

		For the Nine Months Ended September 30
		2019												2020
		GAAP				Share-based compensation expenses				Non-GAAP				GAAP				Share-based compensation expenses				Non-GAAP				Change %
Net revenues			2,693,424				—				2,693,424				2,416,171				—				2,416,171				(10.3	)
Selling expenses			(200,988	)			(2,486	)			(198,502	)			(209,859	)			281				(210,140	)			5.9
General and administrative expenses			(347,286	)			(994	)			(346,292	)			(344,006	)			113				(344,119	)			(0.6	)
Income from operations			355,233				(3,480	)			358,713				230,312				394				229,918				(35.9	)
Operating margin			13.2	%			—				13.3	%			9.5	%			—				9.5	%			(28.6	)
Net income  attributable to the Company’s shareholders			413,609				(3,480	)			417,089				220,428				394				220,034				(47.2	)
Net margin			15.4	%			—				15.5	%			9.1	%			—				9.1	%			(41.3	)
Net income per share:
Basic			0.38				—				0.38				0.21				—				0.20				(47.4	)
Diluted			0.38				—				0.38				0.21				—				0.20				(47.4	)
Net income per ADS:							—												—
Basic			7.53				—				7.59				4.11				—				4.10				(46.0	)
Diluted			7.52				—				7.59				4.10				—				4.10				(46.0	)
Shares used in calculating net income per share:
Basic			1,098,906,389				—				1,098,906,389				1,073,891,784				—				1,073,891,784				—
Diluted			1,099,443,163				—				1,099,443,163				1,074,291,409				—				1,074,291,409				—

 

 

 

For more information, please contact:

 

Investor Relations

 

Tel: +86 (20) 8388-3191

 

Email: qiusr@fanhuaholdings.com

 

Source: Fanhua Inc.

 

 

Page 15 of 15

Exhibit 99.2

 

 

 

Fanhua Announces Quarterly Cash Dividend of US$0.25 per ADS for the Third Quarter of 2020

 

GUANGZHOU, China, November 24, 2020, Eastern Daylight Time, (GLOBE NEWSWIRE) -- The board of directors of Fanhua Inc. (“Fanhua” or “the Company”) (Nasdaq: FANH), a leading independent financial services provider in China, today announced that its Board of Directors (the “Board”) has declared a quarterly dividend of US$0.0125 per ordinary share, or US$0.25 per ADS for the third quarter of 2020. The dividend is payable on or around Dec 23, 2020 to shareholders of record on Dec 9, 2020.

 

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 health, accident, travel and homeowner insurance products and (3) eHuzhu (www.ehuzhu.com), a non-profit online mutual aid platform in China.

 

As of September 30, 2020, our distribution and service network are consisted of 764 sales outlets covering 22 provinces and 121 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.

 

CONTACT: Investor Relations

Tel: (8620) 83883191

Email: qiusr@fanhuaholdings.com