AIFU Inc. Q2 FY2023 earnings call

Yinan Hu's Remarks - Chinese economy is undergoing transformation; insurance market moving from mass agent to professional model. Fanhua's strategy of professionalism, specialization, digitalization, open platform aligns with trends. - Company's strategic implementation over past two years is effective, with new mission, vision, and core values established. ### Ben Lin's Remarks - Q2 revenue, operating income, earnings, and cash position highlighted. - Operational highlights: premium growth outpacing industry, advisor quality improvement, persistency ratio increase, digitization and open platform efficiency, open platform premium growth. - Business outlook: maintained life insurance first year premium and adjusted EBITDA growth targets. - Capital allocation: temporarily suspending dividend policy to pursue consolidation and overseas expansion. - Overseas expansion plan: targeting Hong Kong and Southeast Asia using technology expertise.

Revenue grew 61% over the quarter. Operating income grew 177%, beating prior guidance. Adjusted EPS came in at 192%. Total cash and cash equivalents stood at RMB1.6 billion. Premiums grew 55% year-on-year, with life insurance first year premium growing 153% year-on-year. Number of MDRTs increased by 228%, premium agents selling above RMB100,000 grew 163% year-on-year, and agents selling above RMB10,000 grew 29%. Renewal premium increased by 28.7% over the quarter, with a 13-month persistency ratio of 95.1% (3.4 percentage points increase from last year) and a 25-month persistency ratio of 88.3% (3 percentage points increase from last year). Digitization and open platform expenses as a percentage of revenue are at 28.9%, and the operating expense ratio decreased by 9.7 percentage points year-on-year. Organic first year premium came in at RMB1 billion, an increase of 90.6%, and open platform first year premium was RMB550 million, an increase of 135% year-on-year. Open platform and acquisitions over the last 12 months account for 35% of first year premium and 32% of revenue mix.

- Maintain life insurance first year premium target of 50% year-on-year growth to RMB3.7 billion. - Maintain adjusted EBITDA growth target of 50% year-on-year for the full year of 2023. - Plan to expand into Hong Kong and potentially Southeast Asia, leveraging technology and partnership to address underserved broker markets in these regions.

- Business risks and uncertainties outlined in SEC filings, including those from the Chinese economic transition, industry cycle risks (e.g., pricing changes), and regulatory changes that could impact commission structures and market competition.

Q: About expansion to Hong Kong and Southeast Asia markets, what are the specific plans and goals?

A: We are in early stages of crafting strategy, focusing on technology export and partnership. Asia's intermediary sector is underserved technologically, and we aim to leverage our 25 years of experience and financial resources to consolidate brokerage markets in these regions.

Q: About product supply strategy and sales momentum post 3.5% pricing change?

A: Post-pricing change, industry adjustment needed, but guaranteed products still attractive. We focus on working with suppliers with strong solvency, etc., to co-develop products. Open Platform faces challenges but also opportunities, as industry moves from mass agent to professional agency, creating need for automated sales processes and technology investment.