Fanhua Stock Closes 3% Higher on Life Insurance Sales, Quarterly Dividend

Despite a strong quarter, Fanhua's CEO expressed concerns over regulations in the industry and the Sino-U.S. trade war.

Anthony Russo
    Nov 21, 2019 5:25 PM  PT
Fanhua Stock Closes 3% Higher on Life Insurance Sales, Quarterly Dividend
author: Anthony Russo   

The stock in Fanhua Inc. (Nasdaq: FANH) rose 3% to $26.92 per American depositary share on Thursday after the company announced strong results from its life insurance business in the third quarter.

The Guangzhou-based insurance provider said in a statement on Wednesday after markets closed that in three months through September its revenue reached $115.2 million, up 5% year-over-year. Its life insurance business drove the revenue growth in the period, reaching $97.4 million, represented an increase of 34% year-over-year, according to the report. 

Net income in the third quarter was $23.8 million, or 44 cents per ADS, compared with $28.7 million in the same period last year.

Despite the growth in the quarter, Chunlin Wang, the chairman and chief executive officer of Fanhua noted some concerns with regulations in the industry the company may face going forward.

Wang said in a conference call to analysts yesterday, "Amid the ongoing U.S.-China trade war, there has been no sign of relaxation in regulatory supervision in China's financial market."

He added, "Negative growth is expected in new premiums for regular individual life insurance business in the industry for the full year of 2019. If the trade war drags on and the regulatory environment remains tightened, we expect that the life insurance industry may remain under huge pressure to deliver growth in 2020".

Just yesterday, Chinese state-run news agency Xinhua reported the People's Bank of China will regulate 17 new technologies across the financial industry, including artificial intelligence, blockchain, big data and cloud computing.

In addition, trade war tensions have picked back up this week, as U.S. President Donald Trump threatened to implement higher tariffs if China fails to make a deal, CNBC reported on Tuesday.

If the trade war continues with tightened regulations, three factors will affect Fanhua, Wang said in the company's statement. They are: a lack of product innovation, a decrease in demand from consumers and the challenges in recruiting sales agents, he said.

On its website, Fanhua claims it is the largest technology and insurance agency in China. As of September, Fanhua had 658,145 sales agents, at a year-over-year decrease of 58%, due to the China Banking Regulatory Commission's requirements, Oasis Qiu, the Investor Relations Manager of the company noted in a conference call.

"We have followed strictly followed the requirement of the local CBRC bureau. After the sales force cleanup, we also have a more clear direction on clear targets in terms of the growth in our sales force and we expect to continue to maintain a steady pace of new crews going forward and to expect that to grow approximately 50,000 per quarter going forward," Qiu said in the call with analysts.

Fanhua also announced in a separate statement yesterday that it will pay out a quarterly cash dividend of 30 cents per ADS. The dividend will be paid on Dec. 19 to shareholders of record as of Dec. 5, according to the report.