Ladies and gentlemen, thank you for standing by for Fanhua’s First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. All lines have been placed on mute to prevent background noise. After the management’s prepared remarks, there will be a question-and-answer session. Please follow the instructions given at that time if you would like to ask a question. For now your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within three hours after the conference is finished. Please visit Fanhua’s IR Web site at ir.fanhuaholdings.com under the Events & Webcasts section. Today’s conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to hand and to turn over the meeting to your first host for today, Ms. Oasis Qiu, Fanhua’s Investor Relations Manager.

Good morning. Welcome to our first quarter 2018 earnings conference call. The earnings results were released earlier today and are available on our IR Web site as well as on Newswire. Before we continue, 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. The accuracy of these statements 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, but not limited to, those outlined 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 law. Joining us today are our Chief Executive Officer, Mr. Chunlin Wang; and Chief Financial Officer, Mr. Peng Ge. Mr. Wang will walk you through our financial results in the first quarter of 2018. He and Mr. Ge will then take your questions after the prepared remarks. Now, I will turn the call over to Mr. Wang. Please begin.

[Interpreted] Thank you for joining us on today’s conference call. Here with me, we have our Chief Financial Officer, Mr. Peng Ge. We will begin today’s call with a review of our first quarter 2018 financial results and the progress that we’ve made during the quarter, followed by a brief discussion of our business outlook for the second quarter 2018. Then we will have a Q&A session after the report. Firstly, the first quarter 2018 financial and operational performance; our financial results for the first quarter of 2018 once again beat our expectation with operating income growing by 63.3% year-over-year to RMB90.2 million, and net income attributable to shareholders increasing by 86.7% year-over-year to RMB130.2 million. Our various business segments also delivered solid performance that exceeded our expectations. Firstly, our life insurance business; total life insurance premiums grew by 40.1% from a year ago, outpacing industry growth, primarily attributable to 186.5% year-on-year growth in renewal premiums during the quarter, reflecting the attractive business nature of the long-term life insurance business, i.e. the snowball effect created by the continued accumulation of renewal business. The strong growth in the renewal business was also one of the key drivers behind the rapid increase in our operating income. First year annualized premiums equivalent on the other hand were down 12% year-over-year. The decline was consistent with our prior expectation and it was mainly affected by the continued adjustment in annuity products in the industry and the high base in the same period of last year. Notably, the fundamentals of our life insurance operations remain quite solid, as the key operational matches have maintained solid growth momentum. For instance, firstly, we are seeing continued improvement in our business mix. First year annualized premiums equivalent derived from health insurance products grew by over 40%, outperforming the…

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. Your first question comes from the line of Hsieh Yen from CICC [ph]. Please ask.

The question is from Hsieh Yen and he congratulates the company for the good results and he has two questions. The first question is regarding our gross outlook for the annualized premiums. The annualized insurance premiums on life insurance business in the first quarter declined. What’s the gross outlook for the annualized insurance premiums for the next three quarters? And the second question he asked about in the industry, while the insurance company has faced difficulty in recruiting sales agents in the first quarter and how Fanhua managed to grow the number of our sales agents by over 10%?

In 2015 to 2017 over the rapid growth in the past three years, the life insurance company and the insurance intermediary has a quite high base. I think it’s time for the industry and also for the intermediary status to adjust themselves for a better growth in the future and believe this is a positive thing for a healthier development in the overall industry. As for Fanhua, even though the first year annualized premium equivalent declined 12% year-over-year in the first quarter, we also noticed that the fundamentals of our life insurance operations remain quite solid in terms of the various key operational metrics. So we are confident that we will be able to make positive growth in the second quarter of this year in terms of the annualized insurance premiums as well as positive growth for the whole year. As for the second question, in the first quarter in March we have finished a net increase of 30,000 agents per month, despite a rising slowdown in February due to the Spring Festival and we believe that we will be able to maintain this growth momentum, i.e. the 30,000 sales agents per month and it is also a testament of our judgment of the trend that – the trend of decoupling of manufacturing from distribution and the trend of agent migration are accelerating. And the agent migrating is not just happening within the sales agents but also for the management teams with the life insurance companies. They are also attracted to see more opportunities in the independent insurance intermediary sector. And Fanhua is well positioned to capitalize on this growing trend. Thank you.

Your next question comes from the line of MW Kim from JPMorgan. Please ask.

Thank you management for taking my question. First of all, congratulations for the very strong Q1 in challenging market conditions from the year beginning. I want to ask just three questions. The first is about the outlook. The company guided positive first year life APE growth in Q2. We note that the industry’s life stage looks in a recovering state based on the April premium disclosure and also Mr. Wang mentions about the healthier industry growth outlook. So I say that there are perhaps more opportunities in terms of the new sales growth and also the company’s enjoying the snowball from the existing policy. So the question is, do you have any plan to revise up your annual operating income guidance in 2018? It seems that the business is likely to be much better for the rest of the year. The next question is about the sales agents. So this is I just want to confirm, so are still confident on the 1 million sales headcount by the end of 2019? The last one is about the life insurance market opening. So China is opening up the ownership limit in the life insurance market and also Mr. Wang mentioned about the decoupling of the manufacturing and distribution channel. So my question will be, what would this potential change impact on the company’s future business in terms of a partnership and then the growth outlook? Thank you.

Regarding the questions about our profit growth outlook and the business growth outlook, Mr. Wang says his view is that we believe that the life insurance industry is on track for healthier development. And in view of the current trends for the industry’s transition towards protectional-oriented business, we believe that the trend may not be on the track for rapid growth but a track for a normalized business development. And as for the current trends of the industry shifting towards protection-oriented business and more focused on health insurance products, we think this is a positive thing for Fanhua since these are the business types that we know and good at. And so we are confident that we will be able to achieve positive growth in 2018 in terms of the annualized premiums equivalent and also we are confident that we will be able to achieve more than 40% in operating profit in 2018. So based on our current views on the market trends, we don’t see the necessary – we see the need to adjust upwards of our operating profit by a huge margin. And as for the third question, the number of sales force is a key metric to measure the performance of the life insurance business growth. And in view of the current pace of 30,000 agents per month, we believe that we will be able to achieve that 1 million sales agents target by the end of 2019. And as for the openings of foreign investments, we believe that – we actually welcome that new development. And if foreign investment companies is able to play a more positive growth or pay a more active growth in terms of introducing better products or more competitive products to consumers, it will help drive the sales for independent agents. So this new change is definitely positive for both Fanhua and independent insurance intermediaries as a whole. Thank you.

Thank you.

[Operator Instructions]. We have a question from Michael Chu from Franklin Templeton. Please ask.

The question is from Michael Chu from Franklin Templeton. His question is what’s Mr. Wang’s views on the potential price wars related to the health insurance products especially critical illness products? Will that affect the commissions’ payout to our agents?

We do expect the competition in the sales of health insurance products and critical illness products may intensify. And this is basically in line with the regulators’ determination to direct the industry back to the focus on health insurance products and back to protection-oriented products. And we do see that every insurance company is stepping up efforts to sell more the critical illness products. But there’s one good benefit – a good advantage with regard to life insurance products is that both insurance companies and the intermediaries will stick to one bottom line which is the commission payout agents will never exceed 100%, otherwise it will cause a huge systematic risk for the business of life insurance companies. And then secondly, all life insurance products need to be signed with the regulators before they can be launched to the market. So we don’t think any too aggressive products can get approval from the regulators. So in view of this we believe that the current situation is still manageable and is – I think it’s a positive thing. Thank you.

[Operator Instructions]. We don’t have any other questions as of the moment. Presenters, please continue. One moment, I’m sorry. We do have another one from Kang Shu from Hua Yang Securities [ph]. Please ask.

The question is from Shu, Kang and he congratulates the company on the good results and has one question. The question is that in view of the current difficulties in the industry by life insurance companies to recruit agents, basically currently every insurance company is stepping up efforts to recruiting agents, including [indiscernible] and China Life and they have basically emphasized that the focus in the second quarter and third quarter will be more – grow in the number of sales agents. So in light of the difficulty or the competition in number of sales agents, will that impact Fanhua and how do we cope with the changes and would there be any pressure on our business outlook?

During the road shows, a lot of investors asked me one question which is who are our major competitors? And my answer is that our major competitors are actually life insurance companies with big sales force. So we do notice that in the first quarter a lot of life insurance companies have become more protective of their sales agents. However, even despite of the challenges we still see that we managed to maintain a very steady growth in a number of sales agents, primarily driven by the unstoppable change of the decoupling of manufacturing from the distribution. So right now we can see that the growth of our sales agents is basically consistent with our expectations and we do expect that we will be able to achieve our target in terms of the number of agents in the future. And we believe that we are well positioned to capitalize on the market opportunities because we have established leading advantages over our competitors in terms of the product offerings, technology support, service support and system support. So we believe that we are the best choice for agents who are migrating from life insurance companies to the independent channels. And our advantage is in strong capital reserve and our brand recognitions are also one of the key reasons to attract more agents to join Fanhua. Thank you.

We don’t have any other questions as of the moment. Presenters, please continue.

Thank you for joining the call today. If you have any further questions, please feel free to contact us. Thank you.