Fanhua Inc. (Nasdaq:FANH) P&C Life Claims Adjusting Wealth Mgmt. Mutual-Aid
Disclaimer This presentation does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire securities of Fanhua Inc. ( Fanhua or the Company, formerly known as CNinsure Inc. ) in any jurisdiction or an inducement to enter into investment activity, nor may it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. Specifically, this presentation does not constitute a prospectus within the meaning of the U.S. Securities Act of 1933, as amended. Any decision to purchase securities in the proposed offering should be made solely on the basis of the information contained in the statutory prospectus in due course in relation to the proposed offering. This presentation has been prepared by the Company solely for use at investor meetings. The information contained in this presentation has not been independently verified. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Company or any of its affiliates, advisors or representatives will be liable (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation. The company may alter, modify or otherwise change in any manner the content of this presentation, without obligation to notify any person of such revision or changes. This presentation contains statements of a forward-looking nature. These statements which are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995, include descriptions regarding the intent, belief or current expectations of the Company or its officers with respect to the consolidated results of operations and financial condition of the Company. You can identify these forward- looking statements by terminology such as expects, plans, will, estimates, projects, intends, or words of similar meaning. 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. 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. By attending this presentation, participants agree not to photograph, copy or otherwise reproduce these materials in any form or pass on these materials to any other person for any purpose.
Table of Contents I. Fanhua at a Glance II. Fanhua s Opportunities III. Fanhua s Competitive Advantages IV. Financial Information V. Additional Information
Fanhua at a Glance Founded in 1998 Leading Independent Financial Services Provider in China Insurance Intermediary Other Financial Services P&C Business [71.8%] (1) Life Business [21.1%] (1) Claims Adjusting [7.1%] (1) Consumer Finance (2) Wealth Management (3) No.1 P&C insurance agency Leading Insurance broker for commercial insurance Leading life insurance agency One of the largest claims adjusting service provider for auto-insurance & non-auto P&C insurance Note: (1) Data as of December 31, 2016; (2) FANH held 20.6% equity interests in China Financial Services Group Limited as of March 31, 2017; (3) FANH held 15.4% equity interest in Fanhua Puyi Fund Sales Co., Ltd as of March 31, 2017. Asset Mgmt. Micro Loan Services Asset Mgmt. Wealth Mgmt. Product Distribution
Highlights of 2016 Total insurance premiums up 49.7 % YoY to RMB14.6 billion, outpacing industry growth New term life insurance premiums up 307.5% YoY to approximately RMB1.1 billion Life insurance business persistence ratio over 91%, comparable with top insurance companies Total Insurance Premiums New-term Life Insurance Premiums 14.6 8.2 9.8 3.1 3.4 3.7 4.4 ( in RMB billion) ( in RMB billion)
Highlights of 2016 Total revenues up 66.2% to RMB4.7 billion, representing five years of accelerating growth Optimized revenue structure due to explosive growth of life insurance business : life insurance business contributed approximately RMB1 billion revenues, accounting for 21.1% of total revenues in 2016 as compared to 11.3% in 2015 Total Revenues Revenue Breakdown for 2016 4,701 2,150 2,828 908 1,066 1,192 1,535 (in RMB million)
Table of Contents I. Fanhua at a Glance II. Fanhua s Opportunities III. Fanhua s Competitive Advantages IV. Financial Information V. Additional Information
The Golden Age for Insurance Intermediaries Favorable regulatory policies on insurance intermediary sector Deepening pricing reform on auto and life insurance products Growing number of insurance sales agents, with an evolving trend for tied agents from insurance companies to become independent and migrate to insurance intermediaries Growing awareness and demand for insurance and wealth management products among Chinese consumers Insurance penetration (1)(2) and density rates in China are still much lower than developed countries and regions A Comparison of Insurance Penetration Rate Insurance Penetration Rate 2015 Taiwan 18.97% Hong Kong 14.76% Finland 11.86% UK 9.97% Canada 7.40% U.S. 7.28% Note:(1) Insurance penetration rate refers to the amount of a nation s total insurance premiums as a percentage of GDP. (2) Data Source: Swiss Re insurance report 2015.
Well Positioned to Capture Huge Growth Opportunities Over RMB14.6 billion insurance premiums 1 generated in 2016 (comparable to mid-size P&C insurance companies) Landscape of Chinese Insurance Market Market Potential Total insurance premiums in China in 2015: RMB2.4 trillion Insurance premiums contributed by individual agents and independent intermediaries: RMB1, 096 billion Market Potential: about 45.1% of total insurance premiums in China Note: (1) Data as of December 31, 2016 (2) Data Source: 2016 Yearbook of China s Insurance, CIRC.
Table of Contents I. Fanhua at a Glance II. Fanhua s Opportunities III. Fanhua s Competitive Advantages IV. Financial Information V. Additional Information
Fanhua s Competitive Advantages Integrated online and offline ecosystem Comprehensive financial product offerings + pioneering online platforms Unique entrepreneurial culture and program 959 sales/service outlets Over 280 thousand sales agents and service representatives Provinces covered by Fanhua s sales/service outlets Note (1) Data as of March 31, 2017;
Nationwide Sales and Service Network1 Market presence in 29 provinces Expansion into 5 new markets in 2016, including Anhui, Guangxi, Yun nan, Inner Mongolia and Qingdao 810 sales outlets 149 service outlets 280,916 agents 1,241 claim adjustors Provinces covered by Fanhua s sales/service outlets Note (1) Data as of March 31, 2017 Provinces newly covered by Fanhua s sales/service outlets in 2016
Diversified Product and Service Offerings Diversified Product and Service Offerings Partnership with over 90 Insurance Carriers 1 P&C Life Customers Claims Adjusting Finance Note: (1) As of March 31, 2017
Pioneer in Industry s Online Migration with Innovative Online Initiatives CNpad App A one-stop mobile transaction platform for independent sales agents The first and largest App that enables mobile transaction of diversified insurance products from multiple insurance companies in the nationwide 4,000.0 3,802.0 100.0% 212,317 3,500.0 3,000.0 2,946.8 90.0% 80.0% 2,500.0 2,000.0 1,500.0 1,000.0 500.0 1,275.6 800.1 976.1 30.2% 750.2 29.0% 25.9% 26.6% 28.6% 22.0% 70.0% 60.0% 50.0% 40.0% 30.0% 63,591 78,216 109,784-2015 2016 1Q 2016 2Q 2016 3Q 2016 4Q 2016 Insurance Premiums Generated Via CNpad As of Total Insurance Premiums 20.0% Active Users Accumulated Downloads 2015 2016 (in RMB million)
Pioneer in Industry s Online Migration with Innovative Online Initiatives Baoxian.com A vertical platform for direct customers to compare and purchase insurance products Offering over 300 kinds of accidental, health, travel and homeowner insurance policies from over 30 insurance underwriters 727,718 Accumulate d registered Accounts 1 91.2 mn Transaction Volume 1 (in RMB million) Note: (1) Data for the fiscal year of 2016.
Pioneer in Industry s Online Migration with Innovative Online Initiatives ehuzhu : the largest 1 and most influential online mutual-aid platform in China July, 2014 Aug., 2014 Jan., 2015 June, 2016 Nov., 2016 Dec., 2016 Initiation over 100 thousand registered members 1 st valid claim 100 th valid claim 200 th valid claim over 1 million registered members Mar., 2017 appr. 1.6 million registered members 332 valid claims Amount of contribution 55.8 million Note: (1) In terms of valid claims
Table of Contents I. Fanhua at a Glance II. Fanhua s Opportunities III. Fanhua s Competitive Advantages IV. Financial Information V. Additional Information
Financial Information for the Fourth Quarter and Fiscal Year 2016 (in RMB thousand, except for per 2015 2016 YoY Change% 4Q 2015 4Q 2016 YoY Change% ADS and margin) (RMB) (RMB) (RMB) (RMB) Net Revenues 2,828,308 4,700,622 66.2% 860,003 1,534,462 78.4% Total Operating Costs and Expenses 2,749,786 4,686,582 70.4% 827,176 1,499,766 81.3% Total Operating Costs 2,150,506 3,610,526 67.9% 642,661 1,169,288 81.9% Selling Expenses 1 143,279 588,822 311.0% 56,609 185,210 227.2% Marketing Expenses 20,712 415,492 19,503 134,670 G&A Expenses 456,001 487,234 6.8% 127,906 145,268 13.6% Share Option Expenses 17,653 4,937 2,829 0 Adjusted Operating Expense Ratio 19.8% 13.9% -29.7% 18.9% 12.8% -32.3% Operating Income 78,522 14,040-82.1% 32,872 34,696 5.5% Operating Margin 2.8% 0.3% -89.2% 3.8% 2.3% -40.8% Net Income attributable to Shareholders 210,086 157,047-25.2% 55,089 74,594 35.4% Net Margin 7.4% 3.3% -55.0% 6.4% 4.9% -24.1% Basic Net Income per ADS 3.65 2.71-25.9% 0.96 1.28 34.1% Note: (1) Selling expenses in the fourth quarter and fiscal year of 2016 included RMB134.7 million and RMB415.5 million marketing expenses, respectively. (2) Adjusted operating expenses ratio is defined as operating expenses excluding marketing and share-based compensation expenses divided by total net revenues.
Accelerating Revenue Growth
Improved Operating Income and Operation Efficiency Positive operating income 1 for two quarters in a row in 2 nd half of2016 Significant improvement in adjusted operating expense ratio 2 in 2016 Note: (1) An impairment loss of RMB1.1 billion was recognized on goodwill and intangible assets for the year 2011. (2) Adjusted operating expenses ratio is defined as operating expenses excluding marketing and share-based compensation expenses divided by total net revenues.
Table of Contents I. Fanhua at a Glance II. Fanhua s Opportunities III. Fanhua s Competitive Advantages IV. Financial Information V. Additional Information
Appendix 1 Fanhua s Milestones Founded in Guangzhou as auto insurance and auto loan distributor Expanded to life insurance business Expanded to claims adjusting business Commenced insurance brokerage services for corporate clients (May) CNpad App available for free download (July) Launched www.ehuzhu.com 1998 2002 2006 2007 2008 2010 2011 2012 2014 2016 Expanded to nonauto P&C insurance Listed on NASDAQ Started online insurance distribution Launched www.baoxian.com and CNpad App (Dec.) change of company name to Fanhua Inc. and trading ticker to FANH
Appendix 2 Fanhua s Board & Management HU Yinan, Master of Economics Chairman, Founder The 60 Greatest Insurance Leaders in 60 Years of New China s History China Insurance News Leading figure in Innovation and Entrepreneurship for Year 2015 Association of Chinese Economic Press Allen Lueth Independent Director Former GE Consumer Finance CFO (Taiwan) and representative (China) Stephen Markscheid Independent Director Former management of GE Capital, Chase Manhattan TANG Yunxiang Independent Director Former GM of PICC, Chairman of PICC P&C and vice chairman of CIRC YIN Mengbo Independent Director Dean of Finance School in SUFEC and Head of Postgraduate Department WANG Chunlin Executive Director, CEO Rich insurance industry experience, Working nearly 20 years in Fanhua GE Peng, MBA Executive Director Co-founder, CFO Nearly 20 years of insurance industry experience 22
Appendix 3 Net Revenue Breakdown of Insurance Partners (1) P&C Life PICC P&C 35.5% CPIC P&C 13.0% Ping'an P&C 9.3% CIC 4.6% China Life P&C 4.5% Others 33.1% Huaxia 52.3% Tian'an 19.0% Taikang 7.6% Aviva-Cofco 6.3% Aegon-THTF 5.6% Others 9.2% Claims Adjusting Ping'an P&C 28.0% CPIC P&C 14.8% PICC P&C 14.7% China Life P&C 3.7% Taiping P&C 3.2% Others 35.6% Note: (1) For the fiscal year of 2016.
Appendix 4 Chetong Network Chetong Network: an open platform providing claims adjusting service for the insurance industry adopting the form of sharing economy.
Appendix 5 Fanhua s Stock Performance Trading Ticker: FANH (Nasdaq) As of April 21, 2017 Share Price: 8.61USD/ADS Market Cap: USD503 million As of Dec. 31, 2016 Cash Value per ADS: 7.54 USD As of Mar. 31, 2017 Total shares outstanding: 58.4 million ADS Diagram: Stock Performance for the 6 months till April 21, 2017
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