AIFU Inc. Q3 FY2023 earnings call

• Digitalization led to substantial cost reduction and efficiency improvement. Adjusted operating expense ratio decreased from 32% to 30% in Q3 2023 despite increased IT investments. Leveraged AI and smart algorithms, introduced AI-enabled digital avatar, etc.
• Committed to 3F training: over 22,000 individuals trained in Fanhua policy custodian, Fanhua retirement planning and family office consultancy. Monthly average per capita productivity of top-performing agents and MDRT agents increased. Launched family office adviser incubation program.
• Open platform strategy successful: linked with 791 third-party agency companies. Digital tenant system launched, with two insurance brokerage firms signed up as digital tenants.
• Overseas expansion: strategic partnership with ASIA Insurance to establish two joint venture companies, aiming to export China-developed technology to global markets, with plans for Hong Kong and Southeast Asia expansion.

Total life insurance premium grew by 23% year-on-year to RMB3.4 billion. First year premium grew by 10.3% to RMB584 million. Net income attributable to shareholders came to RMB117.7 million, representing a significant year-on-year increase of 382%. This uplift is largely due to an unrealized gain from the investment in Cheche Technology Limited.

• Anticipates commission cap implementation will bring short-term challenges but accelerate open platform strategy. Hong Kong is expected to be a revenue contributor in 2024.
• Overseas expansion plans include acquiring local life insurance brokerage license in Hong Kong, translating China app for Hong Kong market, and recruiting personnel for Hong Kong business launch.

• Regulatory changes could impact the insurance industry and Fanhua, including potential short-term pressure from commission rate changes. Volatility in net profit due to holdings in Cheche Technology.

Q: Related to regulation, impact on industry and Fanhua if fee regulation extends to agency and brokerage channel; color on overseas expansion strategy with ASIA Insurance and timeline; and open platform strategy digital talent and attraction of more digital tenants.

A: On commission rate impact, regulations aim to improve industry financial conditions. Fanhua's platform strategy aligns with regulations, with short-term pressure but long-term scale benefits. With ASIA Insurance, formed two joint ventures to export China's tech to global markets, with plans to acquire license, translate app, and recruit personnel. On open platform, 3 types of agreements, 3 tenants using sales agreement, with plan to attract more tenants