Why Fanhua Inc (NASDAQ: FANH) stock is under pressure

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Fanhua Inc (NASDAQ: FANH) stock fell over 3.26% on 26th May, 2020 (As of  4:00 pm GMT-4 ; Source: Google finance) after the company  in the first quarter of FY 20 has reported 25.6% decline in the total net revenues to RMB722.6 million (US$102.1 million) for the first quarter of 2020. The operating income fell 52.5% to RMB60.0 million (US$8.5 million) for the first quarter of 2020, from RMB126.4 million for the corresponding period in 2019. Operating margin contracted to 8.3% for the first quarter of 2020, compared to 13.0% for the corresponding period in 2019. The company has reported 71% fall in the net income to RMB42.8 million (US$6.0 million) for the first quarter of 2020 and 68.9% fall in the net income attributable to the Company’s shareholders to RMB45.8 million (US$6.5 million) due to the decreases in operating income and investment income and share of loss of affiliates. At the end of March, 2020, the Company had RMB1,843.2 million (US$260.3 million) in cash, cash equivalents and short-term investments.

Moreover, the number of registered users of Lan Zhanggui was 1.2 million as of March 31, 2020, which reflects an increase of 35.9% from 860,550 as of March 31, 2019. Insurance premiums generated through Lan Zhanggui had fallen to RMB451.7 million (US$63.8 million) in the first quarter of 2020, among which life insurance premiums was RMB438.4 million (US$61.9 million) and non-life insurance premiums were RMB13.4 million (US$1.9 million), respectively, as compared to RMB887.5 million total insurance premiums generated through Lan Zhanggui which included RMB757.4 million life insurance premiums and RMB130.0 million non-life insurance premiums in the corresponding period of 2019. The number of registered customer accounts on Baowang grew 21.7% to 2.8 million as of March 31, 2020 from approximately 2.3 million as of March 31, 2019. Insurance premiums generated on Baoxian.com has fallen to RMB69.3 million (US$9.8 million) in the first quarter of 2020 as compared to RMB90.2 million in the corresponding period of 2019.

Furthermore, Investment income has fallen by 75.8% to RMB8.9 million (US$1.3 million) for the first quarter of 2020 from RMB36.8 million for the corresponding period in 2019.

Additionally, the company has declared a quarterly dividend of US$0.0125 per ordinary share, or US$0.25 per ADS for the first quarter of 2020,  which will be payable on or around Jun 24, 2020 to shareholders of record on Jun 10, 2020.

For the second quarter of 2020, Fanhua expects its operating income to be no less than RMB70.0 million.

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