AIFU, Inc. Q1 FY2022 earnings call

Cost reductions and efficiency improvements: Strictly controlled costs by optimizing staffing, closing low-performing institutions, downsizing inefficient outlets, and improving employee efficiency. General and administrative expenses decreased by 17.2% year-over-year excluding increases in digitalization investments. ### Trust services for high-net-worth clients: Hosted about 1500 Family Office Consultants training sessions, completed certification for over 1,500 elite sales agents, and organized over 20 customer engagement activities for high-net-worth customers, facilitating 50 large-ticket insurance policies with over RMB32 million in first-year premiums. ### Sales team skill improvement: Finished establishing course framework for family retirement planners, with relevant training and certification programs to roll out in Q2; planned training for policy managers in H2 2022. ### Recruiting high-performing elites: Over 500 elites and their teams joined since 2021, contributing ~RMB45 million in first-year premiums in Q1; over 410 Yuntong advisors and financial planners, contributing ~RMB15 million in first-year premiums. ### Lanzhanggui APP upgrade: Finalized preparation for launch of version 3.0 on May 20, 2022, upgrading to a one-stop digital operation platform. ### Standard operating procedures: Working on establishing standard operating procedures featuring a three R marketing model. ### Open platform development: First-year premiums facilitated on Fanhua’s RONS open platform reached about RMB40 million in Q1, up 62.3% quarter-over-quarter.

In the first quarter of 2022, Fanhua's life insurance business GWP grew by 10.1% year-over-year despite the industry's downward trend. First-year premiums of life insurance dropped, but operating income reached RMB20.6 million. The life insurance business's GWP contributed significantly to the overall performance, with the 13-month persistence ratio remaining above 91%.

Second quarter challenges: Still face tremendous challenges in Q2 due to COVID-19 affecting sales agents' offline activities and the upcoming double recording regulation in Hebei and other areas. ### Confidence in Q2 profit: Management is confident in making operating profit in Q2 2022. ### Full-year outlook: Faced with external macro environment uncertainties, it's difficult to give very accurate full-year business outlook; hope to have a better idea of future outlook by Q2; internally, seeing sequential improvement in operating matches, especially continued improvement in productivity of high-performing agents.

COVID impact: Omicron variant led to cancellation of one third of training programs and customer activities, claims adjusting business almost halted in COVID-stricken areas like Zhejiang and Shanghai, resulting in a loss in Q1. ### Consumer demand: COVID resurgences and economic uncertainties restrained release of consumer demands for insurance. ### Industry base effect: High base effect from transition to new critical illness definition framework in Q1 2021 affected life insurance industry GWP. ### Regulatory impact: Double recording regulation set to be implemented in Hebei and other areas starting from June expected to temporarily impact the whole industry including Fanhua.

Q: About the saving product, share Q1 numbers, future outlook of saving products and commission rate for agents.

A: First year premium of saving products is flattish year-over-year but percentage of total first year premium is higher than previous quarter/year. Commission income for savings products has characteristics of large policy amount and relatively short renewal terms, conversion rate from first-year premium to APE declined to ~30%, efforts to improve conversion rate by improving product structure and renewal periods. Full-year guidance is difficult due to external uncertainties, but internally operating matches show sequential improvement, especially productivity of high-performing agents.

Q: New sales regulation limiting commission rate and restarting agent exam, evaluate influence on sales force and future commission income.

A: New measures aim to regulate industry and promote healthy development, welcomed. Object to competing by increasing commission rate, believe should provide better services and products. High-performing agents' commission income increased due to productivity increase, initiatives show positive trend.