Thank you for standing by for Fanhua's Fourth Quarter and Fiscal Year 2023 Earnings Conference Call. [Operator Instructions] After management's prepared remarks, there will be a question-and-answer session. [Operator Instructions] For your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within 3 hours after the conference is finished. Please visit Fanhua's IR website at ir.fanhgroup.com, under the Events and Webcast section. Today's conference is being recorded.

If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Ms. Oasis Qiu, Fanhua's Investor Relations Manager.

Thank you, Andrew. Good morning and good evening, everyone. Welcome to Fanhua's fourth quarter and fiscal 2023 earnings call. A replay will be available on our IR website after today's call. Please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are made based on management's current expectations and beliefs concerning future events impacting the company and therefore, may be impacted by a number of business risks and uncertainties that could cause our actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, are not limited to those online in our filings with the SEC, including our registration statement on Form 20-F. We do not undertake any obligation to update this forward-looking information, except as required under applicable rules.

Joining us today are our Vice Chairman and Chief Executive Officer, Mr. Yinan Hu; Chief Financial Officer, Mr. Peng Ge; Chief Strategy Officer, Mr. Ben Lin; and Chief Operating Officer, Mr. Liu Lichong. Mr. Hu will start the call by sharing his view on recent market trends and our strategy -- strategy development, followed by Mr. Ben Lin, who will provide a review of financial and operational highlights and discuss our business outlook going forward. There will be a Q&A session after the prepared remarks. Please note that you can find our presentation material relevant to this call from our official website. With that, I will turn the call over to Mr. Hu. Mr. Hu, you may begin.

[Foreign Language]

I will translate for Mr. Hu.

[Interpreted] Good morning and good evening. Thank you for joining us on our fourth quarter and full year 2023 earnings call. Reflecting on the past year, 2023 proved to be a year of challenges and transformation for the entire life insurance industry in China. The performed changes in regulatory policies, particularly the downward adjustment of the pricing rate and implementation of fire and actual fee consistency requirement in the bancassurance channel presented unprecedented test for the industry. Fanhua was no exception.

However, it was precisely within this challenging landscape that we showcase resilience and achieved stable growth. In the full year of 2023, we achieved a total insurance premiums of RMB 16.4 billion, representing a 28.7% year-on-year growth, continues to outpace the overall industry growth.

First year premiums reached RMB 3.8 billion, marking a 30.3% year-on-year growth. Leveraging the efficiency gains from digitalization and robust cost control measures, we realized an operating income of RMB 195.8 million, up 16.1% year-on-year. Net income attributable to shareholders reached RMB 280.4 million, reflecting a growth of 179.7% year-on-year. This solid performance demonstrates the successful execution of our strategy.

Over the past year, we have continually strengthened our strategy of driving growth through professionalization, specialization, digitalization and open platform, using a series of pivotal [ treatment ].

For instance, we have consistently bolstered our pool of top-tier agents, enhancing their professional capabilities with the contribution from top-performing agents and increased productivity of our sales team at all levels, serving as a pivotal driver of growth.

Our digital platforms have continued to deliver efficiency gains, empowering our insurance advisers while also providing our customers with superior service experiences. The diversified service ecosystem that we have built has established a solid foundation for our company's differentiation and long-term developments. Furthermore, our open platform and M&A model have also emerged as a key driver of our company's growth. The forthcoming de-consistency requirements and the commission cap, although may inevitably pose significant challenges to the industry, will also present enormous opportunities. We believe that amidst this phase of deregulatory from accelerating industry transformation, scale-driven leading players, companies able to offer diversified services and digitally intelligent platform companies will find themselves in a more advantageous position. Leveraging our strategic achievements in specialization, digitalization and open platform and service-orient initiatives over the past 2 years, we are confident that Fanhua will emerge as the biggest beneficiary. Meanwhile, our internationalization strategy is steadily advancing. Hong Kong serving as the cornerstone of our international expansion efforts has obtained the official launch of 2 subsidiaries with Asia Insurance for business operations, providing a solid foundation for our global business layout. Recently, we signed a strategic summer agreement with Singapore White Group, marking a significant milestone in our development journey. The potential collaboration represents a strategic upgrade towards artificial intelligence development and internationalization. [indiscernible] such as mergers and acquisitions, we will invest in high-quality overseas assets, deepening our presence in family services, including insurance, wealth management, education, health care and family governance. This moves aims to achieve horizontal and vertical integration, allowing us to offer comprehensive and efficient family asset allocation services to our clients. Moreover, it will accelerate our expansion in international markets, paving the way for broader development opportunities and propelling the company to greater heights.

Looking ahead, we firmly believe that the industry will gradually move towards consolidation [indiscernible] geopolitical landscape dominated by a few major players with services and technology driving the way forward.

We are poised to emerge as one of the biggest beneficiaries of this transformation. Embracing the insurance cost service plus technology model, we will provide comprehensive products and diversify services to our customers while leveraging technology to enhance service efficiency.

Our focus will be on serving the high net worth customers and MDRTs, which are also our core assets. The year 2024 will be pivotal for our development.

We will further expand our scale through industry-leading technology platform, comprehensive service capabilities and strong capital to acquire high quality assets. We believe that in the journey ahead, we will continue to maintain our leading position, create more value for our customers and achieve the long-term development goals of the company.

Now, I would like to invite Mr. Ben Lin, our Chief Strategy Officer, to discuss our business highlights in the fourth quarter and 2023.

Thank you, Mr. Hu, and thank you, Oasis.

Let me just walk you through our results for 2023.

Some of the numbers that I'm going to quote, you can find them in our results release as well as our online presentation. Impacted by 2 significant regulatory policy changes in 2023, specifically, the pricing rate change and commission cap at the bancassurance channel, the life insurance industry in China witnessed a roller-coaster ride in terms of premium growth. Starting with single-digit growth in the first quarter, it soared to double-digit growth in the second quarter due to the pull-forward demand prior to the pricing rate adjustment. What we saw was then a reversion to single-digit growth in the third quarter and ultimately negative growth in the fourth quarter. Overall, we saw a 10% year-on-year increase for the entire year of 2023 at the industry level. Amidst the dual pressures of sluggish performance on both the liability and investment side, major insurers are expected to experience a significant decline in profitability, as indicated by the 15% negative growth in average profit of the listed companies in the first 9 months of 2023. Against this backdrop, Fanhua continues to outperform the industry with stable performance. In 2023, we achieved RMB 16.1 billion in total life insurance premium, which is a 30% increase year-on-year. And net income to shareholders reached RMB 280 million, up almost 18% year-on-year. Overall, we are very pleased with our financial results given the backdrop of a challenging macro and insurance industry environment in 2023.

More importantly, we are particularly proud of the strategic execution we have carried out to achieve these results. Throughout 2023, we successfully executed each strategic initiative as we had planned. We firmly believe that these strategic achievements will set us on a higher quality and sustainable growth path. I would like to highlight 4 key strategic achievements that we saw in 2023.

Firstly, our strategic focus on improving our agent quality and productivity produced significant results and is the major driver of our success in 2023.

Our MDRT and [ 100,000 ] premium agents have emerged as major contributors to our growth. These agents saw productivity increasing by 15% and 10%, respectively, and they accounted for 65% of our total first year premium, up by 9 percentage points from 2022. These achievements helped offset the significant decline in overall agent number, a metric that we are no longer focused on and is also an industry-wide trend.

Secondly, we saw significant achievements in our digital technology empowerment. Based on the digital infrastructure built on big data intelligent algorithm, Fanhua has built an industry-leading digital empowerment system, covering 5 major systems, including operational support and management empowerment, professional growth and IT promotion system, customer management system, customer service system and transaction support system. Among the many important tools in our digital system, in 2023, Fanhua focused on strengthening digital marketing empowerment for functions such as digital avatar, intelligent recommendation systems, insurance AI assistance and intelligent customer marketing. It helps our salespeople achieve intelligent management across these areas. The cost reduction and efficiency improvement brought by the digital empowerment that we have built, our efficiency increased significantly over 2023.

If you look at our operating expense ratio, it decreased from 29.4% to 25.7%. Agents who frequently use our system have productivity that is 1.6x higher than those who do not use the system.

Thirdly, our open platform strategy accounted for over 30% of our total new business. By the end of 2023, we have signed contracts with 854 channels and an increase of 63% from the last quarter of -- the third quarter of 2023. These partnerships contributed to a total first year premium of over RMB 1.1 billion, accounting for over 32% of our total new business. There are also insurance companies, human research consultancy agencies and numerous other 2B channels expressing their interest in further collaboration with us to use our open platform system and digital tools to sell life insurance in their main business. Fourthly, our service-oriented ecosystem continues to take shape with evident results.

We have developed a robust ecosystem beyond just life insurance, covering trust service, family office, health care and wellness, overseas asset allocation, education, tax consulting, family affairs processing, et cetera, providing customers with a rich experience scenarios and substantial support to our sales agents in insurance marketing.

During 2023, we held 256 family office consultants training sessions [indiscernible], certifying more than 1,200 family office advisers who have since served a total of 500 families in assisting them to set up a total of 450 trusts with total asset value exceeding RMB 5.6 billion and facilitating approximately RMB 100 million in first year premium. By the end of 2023, more than 20,000 FRP or Fanhua Retirement Planners have been trained and certified.

During 2023, nearly 300 visits to our continuing care retirement community were organized, helping nearly 1,000 customers lock-in rights for long-term stays in these retirement communities. And more than 4,000 customers obtained rights for these retirement communities across the nation, helping to achieve over RMB 600 million in first year premium. At the end of 2023, Fanhua has trained and certified more than 20,000 policy trusteeship experts serving more than 130,000 policy trustee families with 630,000 policies under trusteeship, generating cross-sell and upper sales to 30,000 customers, facilitating about RMB 550 million in first year premium.

Lastly, we have made significant progress in our global expansion strategy. Since the establishment of our 2 joint ventures with Asia Insurance in Hong Kong in October, the insurance brokerage company has completed the formation of its core business team and signed contracts with about 10 major insurance companies in Hong Kong, ensuring the ability to meet diverse customer needs. Operations officially commenced in early February for our insurance broker business.

On the technology side, we are actively engaging with a number of insurers and we're confident that our technology business will have [indiscernible] milestones in 2024.

Looking ahead, for 24, the insurance industry, especially the independent intermediary channel will face a series of challenges and opportunities. Due to the significant uncertainties surrounding the specific timing and extent of the implementation of the requirement for consistency in reported and actual fees in the independent intermediary channel, we are unable to make precise predictions regarding our annual performance targets.

However, what can be anticipated is that whilst the regulatory change may lead to short-term pains, you also bring important opportunities for the development of our open platform.

Our strategic focus in 2024 will include number one, continue to build a professional and specialized sales team. We aim to increase our market share by growing the number of high-quality agents, particularly MDRTs, taking advantage of the market consolidation opportunity that is likely to arise as a result of the commission cap to be implemented. Number two, enhance our capabilities to serve high net worth individual clients.

We will continue to build out our service ecosystem, supplementing our offerings in financial services to education, elderly care and overseas travel. Number three, bring in high-quality assets, while going global, accelerating our internationalization and digitalization process.

We have been invited by a number of insurers to set up operations in Macau and Singapore. And lastly, we will pursue M&A opportunities to achieve horizontal and vertical integration.

Given our strong financial position with over RMB 1.4 billion in net cash and the backing of our potential strategic shareholder, Singapore White Group, we are probably the most well resourced intermediary in the region with the capacity and capability to undertake attractive and accretive M&A opportunities, both inside and outside of Mainland China. This concludes my presentation, and I'll hand the session back to Oasis. Thank you.

Thank you.

Now, the floor open for Q&A session. Andrew?

Thank you. [Operator Instructions] Our first question comes from the line of Yuyu Zhang with CICC.

So, my first question is about [indiscernible].

You've made a lot of discussions before [indiscernible] and can give a little bit more appetite on this beyond your observation to what extent made commission revenue be cut. If there are any numbers you can share with us? My second question is for the overseas business. Could you share some more details on what you've done in 2023 and will do in 2024? And about White Group, how can Fanhua cooperate with it to achieve more market share in Asia?

[Interpreted] So, Mr. Hu would like to invite our Chief Operating Officer, Mr. Liu to take your first question. And the second question actually consists 2 parts.

So, the first part regarding our international initiatives, especially the business in Hong Kong, this part will be answered by Mr. Ben Lin, our Chief Strategy Officer and the last part regarding our potential collaboration with White Group, Mr. Hu, he will answer the question.

[Interpreted] Well, the requirement for the reported and fire fee consistency in the independent, the brokerage channel is up and coming.

Although the regulatory body has not yet given a specific timing as to when it will be implemented, but the rumors in the industry is that it will probably be implemented in April. And as for the extent of the commission cap, there is also no specific guidance from the regulatory body yet. But the consensus among a lot of insurance companies is that probably the commission rate for the same type of products, the commission will be probably be down by 30% to 40%. Well, it's for certain that the business for insurance, independent insurance focus will be severely impacted. But right now, the insurance companies will have a different product strategy to adapt to this market change, diverting their focus from the whole life insurance products to participating insurance products to make up some of the loss on the commission income for independent brokers. Well, the requirement for commission cap and the reported and fire fee consistency is an inevitable trend given the continued decline in interest rates.

However, and it will probably bring a short-term [indiscernible] to industry as well for Fanhua, but we are fully prepared for these new changes. And we have also been expanding our platform model. We believe that this regulatory change will result in more medium-sized intermediate companies to collaborate with Fanhua in terms of platform business, and it will help us to continue to drive our market share. Thank you.

Okay. I'll answer the first part of the second question with regard to our progress in the Hong Kong market.

So, we established the 2 joint ventures with our partner, Asia Insurance back in late October.

So, it's been about 5 months. And I'm very pleased to say that we have made very, very significant progress with our 2 joint ventures.

Firstly, in terms of our team set up in office, so we now basically have 2 offices in Hong Kong. One is our brokerage business and the other one is our technology business. In our brokerage business, we have now built a team of 13 members. They're basically in the administration, in the technical presentative areas to facilitate contract signing. In the period of November to January, together with the management team from Asia Insurance, we met with all the major life insurers in Hong Kong to start the process of contract signing.

So far, we have signed contract with 10 insurers. And over the last few weeks, we have received the commission schedule from some of the insurers.

So, I'm very, very pleased to say that we can officially commence business from this week.

In terms of where we differentiate in Hong Kong and why we are confident that we can be successful in our first market of Hong Kong, I think it comes down to really 2 things.

Firstly, we are the only broker in Hong Kong, in fact, in the region that's backed by 2 listed companies with abundant resources. And this provides us with abundant opportunity and capability to offer comprehensive services to our customers.

Secondly is on the technology front.

As I've highlighted in the past, the broker technology segment in Asia remains very, very underdeveloped even in mature markets like Hong Kong, a lot of the contract signing is still very paper-based compared to 100% digital or paperless in China.

So, we're the only broker with more than 200 in-house IT support staff that can basically transfer a lot of the know-how that we've built in the Chinese market to Hong Kong. In the discussions that we had with all the life insurers from the period of November to January, the focus was really on 2 topics.

The first one is obviously contract signing. But more importantly, the second one is really on IT integration. And I'm very pleased to say that all insurers expressed a strong interest not only to work with us in terms of doing the business of selling, but they're also very interested in our digital capability and how we can work together to improve the sales technology in the Hong Kong market. And what's interesting is we're not only trying to work with these insurers to develop technology that would help them to work with brokers. But more importantly, we're now also convincing them that maybe they could also outsource their in-house sales technology to Fanhua because the reality is we have spent an enormous amount of resources over the last 4, 5 years in our sales technology capability. And a lot of this know-how, I think, is probably 10 years ahead of the Hong Kong market even compared to insurers.

So we're very, very confident that our technology capability and differentiation is going to be one of our strong competitive advantages in the Hong Kong market. And although, we just commenced our Hong Kong business, we're already invited by a number of insurers to basically start operations in Macau and also in Singapore. Because in these markets, there is also a lack of presence in terms of a major broker that has strong shareholder backing as well as technology capability.

So one step at a time, I wouldn't be too surprised that in 2024, we will expand beyond Hong Kong.

So, the second question -- the second part of the second question, Mr. Hu will talk about our progress with Singapore White Group.

[Interpreted] So look, first and foremost, what we want to reiterate is that our collaboration will not change the positioning of Fanhua and our strategic direction. Last year, we basically issued our new mission statement for the company and we made it very clear that our objective going forward is to become the regional service provider for family services, broadening our capability beyond insurance, but into education, retirement, et cetera.

So what we're advocating is insurance plus model beyond Mainland China. And we think this opportunity to have a reason White Group is very, very timely for us.

So the synergy that can bring about with our cooperation with White Group is really based on 2 upgrades in terms of our capability.

The first one is that the Singapore's White Group have much better capability in terms of capital raising, particularly in the international market compared to Fanhua.

Secondly is that their track record and capability in mergers and acquisitions is also very evident given their history and success. We think these 2 capabilities serves as important upgrades for Fanhua as we pursue our strategy of going global through organic and inorganic strategies. M&A will be a core part of our strategy because we think that the opportunity for consolidation in the market, not only in China but across the region is very, very significant. And really, we will focus on 2 areas. Number one is all our mergers and acquisitions will focus on bringing capabilities to improve or help us execute on our strategy of developing a professional sales team across the region. And then secondly, it's helping us to broaden our services to high net worth clients.

So without a doubt, the biggest change to our industry from 2024 onwards is the commission cap. And we think if you look at the regulatory purpose of the commission cap is really to drive higher quality growth.

Now how do you achieve that? We think, at the end, it comes down to upgrading your capability. That's going to be very, very important.

So, we think the commission cap is the right thing for the industry. We fully embrace it. And our strategy is on basically putting the resources on improving our capability so that in this environment, we will become the biggest beneficiary. Thank you.

And I'm showing no further questions at this time.

So with that, I'll hand the call back over to Oasis Qiu for any closing remarks.

Thank you for joining us on today's conference call.

If you have any further questions, please feel free to contact us. Thank you.

Thank you for participating. This concludes today's program and you may now disconnect.