AIFU, Inc. Q2 FY2022 earnings call

• Executed the Professionalization, Career-based, Digitalization and Open Platform strategy, with positive improvements in operating metrics. • Insurance business growth driven by an increase in high-performing agents' numbers and per capita productivity; total performing agents decreased by 37.6% in Q2 2022 by reducing non-performing ones. • Claims adjusting segment was affected by COVID-19, Yuntong branches investment led to a loss, but excluding these, operating income showed growth. • Future strategic initiatives: recruitment and training of top talents, expanding FOC/FRP training and initiating FPC training; providing scenario-based trust, healthcare, and elderly care services; upgrading the Lan Zhanggui app for digitalization to enhance operational efficiency.

In the second quarter of 2022, Fanhua's insurance business achieved gross written premiums of RMB2.9 billion, a year-over-year growth of 12.2%. The life insurance first year premiums reached RMB615.7 million, up 43.7% year-over-year and 25% quarter-over-quarter. The claims adjusting segment incurred a loss of RMB7 million due to COVID-19 impacts during the quarter. There was an investment loss of RMB15 million in the Yuntong branches segment and RMB10.3 million was spent on refining IT infrastructure. Excluding these impacts, operating income would have been approximately RMB63 million, representing a 34% year-over-year growth.

• Management is confident in achieving positive growth in the second half of 2022 with an operating income of no less than RMB30 million. • Continued investment in technology and training in the near-term, expected to show benefits over time, and the growth momentum is anticipated to pick up in the third and fourth quarters and beyond.

• Adverse impact from the resurgence of COVID-19 in the third quarter. • Regulatory requirement for double-recording in some key markets. • Product mix with mostly short-term products which may affect income growth. • Agent structure with a majority in the 40-60 age group, some with low education level, though efforts are being made to recruit higher education and younger agents.

Q: How do you expect the company's revenue and profit in the second half of this year?

A: New strategies are effective in driving business growth, but product mix and COVID resurgence may pose impacts, however, growth momentum is expected to pick up over time.

Q: What is the profile of the sales agents in terms of region, age, education, etc.?

A: Currently, ~60% of agents are aged between 40 to 60 years old, mostly in second-tier cities with some having low education level. 25% are in the 30-40 age group with higher education. Productivity of effective agents was ~RMB20,000 per agent in Q2, a 60% year-over-year improvement from ~RMB12,000 per agent in the same period last year.

Q: Share the current product mix and expectations for the demand for savings products?

A: In Q2, whole-life insurance and annuity products accounted for 79% of first year premiums, up from 68% in the same period last year. Savings products are likely to have strong demand due to the aging population in China, and efforts will be made to optimize the product mix with healthcare, elderly care, and longer payment period products.