Fanhua, subsidiary of Highest Performances Holdings Inc., Expands its Share Repurchase Program and Announces Management Share Buyback Program

Rhea-AI Summary

Fanhua announced an expansion of its share repurchase program by an additional $20 million, raising the total to $40 million. As of June 30, 2024, the company had repurchased approximately 726,616 ADS for $5.4 million since December 2022. This highlights Fanhua's confidence in its long-term growth and commitment to enhancing shareholder returns.

Additionally, senior executives, including CEO Yinan Hu and CFO Peng Ge, will personally buy up to $5 million worth of Fanhua shares over the next 12 months. The repurchases will be funded via available cash reserves and personal funds.

The company's proactive measures and strong cash reserves ensure stability amid industry challenges. Fanhua's AI agent 'Du Xiaobao' will launch in August, enhancing customer service and operational efficiency. These steps aim to sustain long-term growth and value creation.

Positive

• Expansion of share repurchase program to $40 million, indicating strong confidence in long-term growth.
• Personal investment by senior executives worth up to $5 million, reflecting commitment to the company's future.
• Strong cash generation capabilities and robust balance sheet ensure financial flexibility.
• Launch of AI agent 'Du Xiaobao' to enhance customer service and operational efficiency.

Negative

• Challenges due to the implementation of a commission cap in the insurance intermediary industry, causing short-term stock price fluctuations.

Insights

Financial Analyst

Fanhua Inc.'s decision to expand its share repurchase program by an additional $20 million is a strong signal of confidence in its financial stability and long-term growth prospects. By increasing the total authorized buyback amount to $40 million, the Company aims to enhance shareholder value. Share repurchase programs can reduce the number of outstanding shares, potentially increasing earnings per share (EPS) and often leading to a positive impact on the stock price. These actions suggest that Fanhua believes its stock is currently undervalued.

From a financial standpoint, the Company has already bought back approximately 726,616 American Depository Shares for around $5.4 million since the program began in December 2022, utilizing a fraction of the authorized amount. This suggests that Fanhua has substantial financial flexibility, underlined by its strong cash reserves. This ability to repurchase shares without financial strain is a positive indicator of the Company’s liquidity and operational efficiency. Investors should note that the funding of the repurchase program is sourced from available cash reserves, which minimizes the risk of increased leverage or debt.

Additionally, the management's personal investment of up to $5 million in the Company’s shares emphasizes their commitment and belief in the strategic direction and intrinsic value of Fanhua. This is particularly reassuring for investors as it aligns the interests of the management with those of the shareholders.

Market Research Analyst

The announcement of the expanded share repurchase program comes at a strategic time for Fanhua, amidst regulatory changes in the insurance intermediary industry in China. The implementation of the commission cap has posed challenges, but the company's proactive measures have been highlighted as steps to adapt to the new market conditions. The emphasis on the unique advantages of insurance intermediaries and the expected growth of insurance assets as defensive assets provides a positive outlook for the industry.

Fanhua's mention of its AI agent 'Du Xiaobao,' developed in collaboration with Baidu Smart Cloud, is noteworthy. The introduction of this AI technology is anticipated to enhance customer service capabilities and operational efficiency. In the broader context, this move aligns with the industry trend of integrating advanced technology to drive growth and improve service delivery. Investors might see this as a pivotal innovation that could differentiate Fanhua from its competitors, potentially leading to market share gains.

The management’s personal share buybacks also signal strong confidence in the company's future, which is likely to be perceived positively by the market. Such insider buying often serves as a bullish indicator, reassuring investors about the company's prospects.

GUANGZHOU, China, July 8, 2024 /PRNewswire/ -- Fanhua Inc. (Nasdaq: FANH) (the "Company" or "Fanhua"), a leading independent technology-driven financial services provider in China, today announced that its board of directors (the "Board") has authorized the expansion of the Company's share repurchase program by an additional US$20 million, bringing the total authorized amount of share repurchase to US$40 million. The share repurchase program was intended to enhance shareholder returns and signals the Company's confidence in its long-term growth prospects.

As of June 30, 2024, approximately 726,616 American Depository Shares had been repurchased at an aggregate purchase price of approximately US$5.4 million since the inception of the share repurchase program in December 2022.

Alongside the Company's expansion of the share repurchase program, several of Fanhua's senior executives including Mr. Yinan Hu, founder and Chief Executive Officer, Mr. Peng Ge, Chief Financial Officer, and Mr. Ben Lin, Chief Strategy Officer, and Mr. Allen Lueth, independent director and chairman of the Audit Committee of the Board, have indicated that they will increase their personal shareholdings of Fanhua. Over the next 12 months, they intend to purchase up to US$5 million worth of shares of Fanhua.

The share repurchases will be made from time to time in the open market at prevailing market prices and/or in privately negotiated transactions, depending on market conditions and in accordance with applicable rules and regulations and the Company's insider trading policy. Fanhua plans to fund the corporate share repurchase program with its available cash reserve while the senior executives and director will use their personal funds.

Commenting on the expanded share repurchase program and management share buyback, Mr. Yinan Hu, founder and Chief Executive Officer of Fanhua, said, "The Board's authorization to expand the share repurchase program demonstrates its confidence in our strategic plan for long-term growth and commitment to shareholder value. We firmly believe that the current stock price is significantly undervalued, as the stock trades at a substantial discount to our net cash value and net asset value and fails to reflect our long-term growth potential."

"While the implementation of the commission cap since the second quarter of 2024 has posed significant challenges to the insurance intermediary industry in China, causing short-term fluctuations in our stock price, we believe the market is gradually adapting to these changes, and a new balance is forming. We remain confident in the robust prospects of China's insurance industry. Insurance assets, as defensive assets, will continue to grow, and insurance intermediaries, as independent third parties, possess unique advantages, serving as indispensable sales channels for both insurance companies and consumers. The deep integration of technology, particularly advancements in artificial intelligence, will drive down consumer acquisition costs, improve operational efficiency, and become a powerful catalyst for industry growth.

He continued, "In response to the rapid changes in the industry, we have implemented proactive and effective measures to maintain stable operations. Bolstered by our strong cash generation capabilities, our balance sheet remains robust, providing us with significant financial flexibility to execute our growth strategies for sustainable long-term growth. Additionally, we have made notable progress in our intelligent strategic upgrades. Our AI agent 'Du Xiaobao,' developed in collaboration with Baidu Smart Cloud, will officially launch in August. This innovation is expected to significantly enhance our customer service capabilities and operational efficiency, further solidifying our leading position and continuously creating value for our shareholders."

"Our decision to invest personal funds in Fanhua reflects our strong belief in the company's future and our dedication to driving sustainable growth. We are confident in our strategic direction and are committed to delivering long-term value to our shareholders." said Mr. Hu.

About Highest Performances Holdings Inc. (NASDAQ: HPH)

HPH was founded in 2010 with the aim of becoming a top provider of smart home and enterprise services. Its mission is to improve the quality of life for families worldwide, focusing on two main driving forces: "technological intelligence" and "capital investments."HPH has a global strategic perspective and identifies high-quality enterprises with global potential for investment and operations. Its areas of focus include asset allocation, education and study tours, cultural tours, sports events, healthcare and elderly care and family governance.

HPH currently holds controlling interests in two leading financial service providers in China, namely Fanhua Inc., a technology-driven platform, and Fanhua Puyi Fund Distribution Co., Ltd., an independent wealth management service provider.

Highest Performances Holdings Inc., formerly known as Puyi Inc., was renamed on March 13, 2024 to reflect its strategic transformation.

About Fanhua

Established in Guangzhou in 1998 and listed on NASDAQ in 2007 (Nasdaq: FANH), Fanhua is a leading independent financial services provider in China with strong technology capabilities and a commitment to empowering financial advisors and fostering sustained value creation for customers.

Our mission revolves around creating an inclusive and collaborative platform for independent financial advisors, as well as various insurance/financial sales organizations, enabling our partners to optimize their practices by offering them end-to-end business solutions spanning compliance, technology, products, services, operations, capital flow, and professional training.

Leveraging advanced technology, artificial intelligence, and data-driven insights, Fanhua is at the forefront of revolutionizing financial services delivery, accelerating digital transformation, and driving industry growth.

With a comprehensive approach to financial services, we connect millions of Chinese families with various financial institutions and service providers, offering a diverse range of opportunities and personalized solutions for insurance protection, retirement planning, health management, asset management, and family governance services, covering the full lifecycle of our customers' needs.

Forward-looking Statements

This press release contains statements of a forward-looking nature. These statements, including the statements relating to the Company's future financial and operating results, are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "will", "expects", "believes", "anticipates", "intends", "estimates" and similar statements. Among other things, management's quotations contain forward-looking statements. 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. Potential risks and uncertainties include, but are not limited to, those relating to its ability to attract and retain productive agents, especially entrepreneurial agents, its ability to maintain existing and develop new business relationships with insurance companies, its ability to execute its growth strategy, its ability to adapt to the evolving regulatory environment in the Chinese insurance industry, its ability to compete effectively against its competitors, quarterly variations in its operating results caused by factors beyond its control and macroeconomic conditions in China and their potential impact on the sales of insurance products. Except as otherwise indicated, all information provided in this press release speaks as of the date hereof, and 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.

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SOURCE Highest Performances Holdings Inc.

FAQ

What is the new amount allocated for Fanhua's share repurchase program?

Fanhua has expanded its share repurchase program by an additional $20 million, bringing the total to $40 million.

How many shares has Fanhua repurchased as of June 30, 2024?

As of June 30, 2024, Fanhua has repurchased approximately 726,616 ADS at an aggregate purchase price of $5.4 million.

What is the purpose of Fanhua's share repurchase program?

The share repurchase program aims to enhance shareholder returns and demonstrates the company's confidence in its long-term growth prospects.

Which Fanhua executives are participating in the share buyback program?

CEO Yinan Hu, CFO Peng Ge, CSO Ben Lin, and independent director Allen Lueth are participating in the share buyback program.

How much will Fanhua executives invest in the company's shares?

Fanhua executives intend to invest up to $5 million in the company's shares over the next 12 months.

What is the impact of the commission cap on Fanhua's business?

The implementation of the commission cap has posed significant challenges, causing short-term fluctuations in Fanhua's stock price.

What is 'Du Xiaobao' and when will it launch?

'Du Xiaobao' is Fanhua's AI agent, developed in collaboration with Baidu Smart Cloud, and it will launch in August.