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United States securities and exchange commission logo
November 12, 2020
Peng Ge
Chief Financial Officer
Fanhua Inc.
27/F, Pearl River Tower
No. 15 West Zhujiang Road
Guangzhou, Guangdong 510623
People's Republic of China
Re: Fanhua Inc.
Form 20-F for the
Fiscal Year Ended December 31, 2019
Filed April 29,
2020
File No. 001-33768
Dear Mr. Ge:
We have reviewed your October 30, 2020 response to our comment
letter and have the
following comments. In some of our comments, we may ask you to provide
us with information
so we may better understand your disclosure.
Please respond to these comments within 10 business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your response to these comments, we may have
additional
comments. Unless we note otherwise, our references to prior comments are
to comments in our
September 10, 2020 letter.
Form 20-F for the Year Ended December 31, 2019
Notes to the Consolidated Financial Statements
Note 2: Summary of Significant Accounting Policies
(r) Revenue Recognition
Insurance agency services revenue, page F-21
1. We acknowledge your
response to prior comment 2. Please tell us whether you accrue the
costs of your post-sale
administrative services upon policy effectiveness as required by
ASC 606-10-25-16A. If
not:
Tell us why you
have not done so;
Tell us the amount
of such costs that should have been accrued at:
Peng Ge
FirstName
Fanhua Inc.LastNamePeng Ge
Comapany 12,
November NameFanhua
2020 Inc.
November
Page 2 12, 2020 Page 2
FirstName LastName
oJanuary 1, 2018 adoption of ASC 606;
oDecember 31, 2018;
o December 31, 2019 and
o June 30, 2020; and
Provide us your analysis under SAB 99 as to whether this under
accrual is material.
2. We acknowledge your response to prior comment 3. Please elaborate on
why you fully
constrain the trailing commission variable consideration. In your
response reference for
us, where appropriate, the authoritative literature you rely upon to
support your position
and tell us:
Why you are in the early stages of developing your life insurance
agency business
when on page 35 you disclose that you entered this business in
2006 when you
acquired three life insurance agencies and that these companies
presumably had
operations before this time.
Why the up to over 20-year renewal term on many of the policies
you sell apparently
precludes you from making reasonable estimates of trailing
commissions to be earned
in the immediate future. In this regard, it appears that the
operation of the constraint
in ASC 606-10-32-11 recognizes in the transaction price for
performance obligations
already delivered the minimum amount of revenue not likely to
reverse.
In conjunction with the preceding bullet, why you apparently
cannot make reasonable
estimates of trailing commissions, at a minimum, over the next
year or two and
continue a rolling assessment of this variable consideration each
year under the
guidance in ASC 606-10-32-14.
Whether you apply a higher standard in applying the variable
consideration guidance
in ASC 606-10-32-11 as your proposed disclosure indicates that
you "cannot
conclude it is highly probable that a significant reversal...of
cumulative revenue will
not occur" when the referenced standard includes only a probable
notion.
3. Regardless of the outcome of the preceding comment, please:
Revise your proposed disclosure from prior comment 3 to remove the
word "highly"
from the phrase quoted in the last bullet of the preceding comment.
Provide us proposed revised disclosure that indicates the amount
of renewal premium
trailing commissions received (or changes in trailing premium
estimates recorded in
prior periods) in each period as the adjustment of transaction
price for performance
obligations delivered in prior periods as stipulated in ASC
606-10-50-10b and 50-
12A.
You may contact Mark Brunhofer at (202) 551-3638 or Sharon Blume at
(202) 551-3474
with any questions.
Sincerely,
Peng Ge
Fanhua Inc.
November 12, 2020
FirstName
Page 3 LastNamePeng Ge
Comapany NameFanhua Inc.
Division of Corporation Finance
November 12, 2020 Page 3 Office of Finance
FirstName LastName