GUANGZHOU, China, Nov. 25 /PRNewswire/ -- CNinsure Inc., (Nasdaq: CISG), a leading independent insurance intermediary company operating in China, today announced its unaudited financial results for the third quarter ended September 30, 2008.[1]
[1] This announcement contains translations of certain Renminbi (RMB)
amounts into U.S. dollars (US$) at specified rates solely for the
convenience of the reader. Unless otherwise noted, all translations
from RMB to U.S. dollars are made at a rate of RMB6.7899 to US$1.00,
the effective noon buying rate as of September 30, 2008 in The City of
New York for cable transfers of RMB as certified for customs purposes
by the Federal Reserve Bank of New York.
Financial Highlights for Third Quarter 2008：
-- Total net revenues: RMB211.0 million (US$31.1 million), representing an
increase of 80.5% from the corresponding period of 2007.
-- Income from operations was RMB56.8 million (US$8.4 million),
representing an increase of 42.7% from the corresponding period of
2007.
-- Net income was RMB52.2 million (US$7.7 million), representing an
increase of 23.0% from the corresponding period of 2007.
-- Basic and diluted net income per ADS were RMB1.144 (US$0.169), and
RMB1.144 (US$0.169), respectively.
Commenting on the third quarter results, Yinan Hu, Chairman and CEO of CNinsure Inc. stated, "We are pleased with our operating results during the third quarter of 2008, despite the slowdown of business activities during the Olympics Games and the implementation of the new regulation issued by the China Insurance Regulatory Commission (CIRC) which tightens control over the Property and Casualty (P&C) insurance market. Our fundamentals remain strong and improvements were seen across our major business lines, as we further differentiated ourselves by expanding our product portfolio to include more custom-designed products and launching more value-added services. While commissions and fees revenues from our life insurance business, one of our long-term focuses, recorded a growth of 206.7% over the corresponding period of last year, the claims adjusting business, which we started in the first quarter of this year, also exceeded our expectations with a 51.6% increase in commissions and fees revenues over the second quarter."
He added, "Undeniably, the global economic environment has become more challenging in recent months and the growth of the Chinese economy is slowing down. Amid the gloomy macro environment, the Chinese insurance market is facing more uncertainties in its growth prospect. In particular, premiums derived from investment-linked insurance products are expected to slide downwards due to equity market turbulence. On the other hand, we anticipate that there will be continued growing demand for individual protection-oriented insurance products as the factors driving the growth of the individual protection-oriented insurance market, which include GDP growth, aging population, high saving deposits and expanding domestic consumption, remain unchanged. As these kinds of products have been our strength and account for nearly 100% of CNinsure's business, we are confident that we will continue to outperform the industry as a whole for many quarters to come."
"We are dedicated to expanding our distribution channels to achieve better synergies, by growing our existing operations, establishing joint ventures with entrepreneurial agents and through acquisitions. With a strong financial position and no debt, we are well positioned to explore more opportunities for expansion at lower cost, which we expect to become more abundant due to the possible economic downturn in 2009. Such expansion will not only promise us another year of strong growth in revenues, but also drive the continued rapid growth in the coming few years."
Financial Results for the Third quarter 2008
Total net revenues for the third quarter ended September 30, 2008 were RMB211.0 million (US$31.1 million), representing an increase of 80.5% from RMB116.9 million for the corresponding period of 2007. The growth was mainly driven by the increases in commission rates, the number of sales agents and productivity of existing sales agent, as well as contributions from newly acquired entities.
Total operating costs and expenses were RMB154.2 million (US$22.7 million) for the third quarter of 2008, representing an increase of 100.0% from RMB77.1 million for the corresponding period of 2007.
Commissions and fees expenses were RMB110.3 million (US$16.2 million) for the third quarter of 2008, representing an increase of 77.4% from RMB62.2 million for the corresponding period of 2007. The increase largely tracked the increase in net revenues from commissions and fees.
Selling expenses were RMB4.1 million (US$0.6 million) for the third quarter of 2008, representing an increase of 77.5% from RMB2.3 million for the corresponding period of 2007. The increase was primarily due to sales growth and the increase in expenses incurred by newly acquired entities.
General and administrative expenses were RMB39.7 million (US$5.9 million) for the third quarter of 2008, representing an increase of 216.3% from RMB12.6 million for the corresponding period of 2007. The increase was primarily due to increases in salaries for administrative staff as a result of increased headcount, share-based compensation expenses and expenses for ongoing professional services, and SOX compliance-related expenses.
As a result of the foregoing factors, income from operations was RMB56.8 million (US$8.4 million) for the third quarter of 2008, representing an increase of 42.7% from RMB39.8 million for the corresponding period of 2007. Operating margin was 26.9% for the third quarter of 2008 as compared with 34.0% for the corresponding period of 2007.
Interest income for the third quarter of 2008 was RMB12.9 million (US$1.9 million), representing an increase of 379.7% from RMB2.7 million for the corresponding period of 2007. The increase was primarily attributable to the proceeds from our initial public offering in October 2007.
Income tax expense for the third quarter of 2008 was RMB16.4 million (US$2.4 million), representing an increase of 1,917.9% from RMB0.8 million for the corresponding period of 2007. The increase was primarily attributable to the expiration of income tax exemptions for some subsidiaries starting from January 1, 2008. Effective income tax rate was 23.5% for the third quarter of 2008 compared to 1.9% for the corresponding period of 2007.
Net income was RMB52.2 million (US$7.7 million) for the third quarter of 2008, representing an increase of 23.0% from RMB42.4 million for the corresponding period of 2007. Net margin was 24.7% for the third quarter of 2008 as compared with 36.3% for the corresponding period of 2007.
Fully diluted net income per ADS was RMB1.144 (US$0.169) for the third quarter of 2008, compared with RMB1.244 for the corresponding period of 2007.
As of September 30, 2008, the Company had RMB1,611.4 million (US$237.3 million) in cash and cash equivalents.
Business Highlights
CNinsure continued executing its growth strategy, with the following highlights for the third quarter ended September 30, 2008:
-- Solidifying Leading Position in the Chinese Insurance Intermediary
Sector
As of September 30, 2008, CNinsure had 23,042 sales professionals as
compared with approximately 11,000 sales professionals as of September
30, 2007. Its distribution network consisted of 33 insurance agencies,
4 insurance brokerages and 3 claims adjusting firms with 305 sales and
services outlets operating in 15 provinces as of the end of September
2008, as compared with 17 insurance agencies and 4 insurance brokerages
with 171 sales and service outlets operating in 8 provinces as of the
end of 2007. In addition, CNinsure's insurance claims adjusting
business had 641 professional adjusters as of September 30, 2008.
-- Geared for Expansion
The highly fragmented nature of the independent insurance intermediary
sector in China offers CNinsure substantial opportunities for
consolidation. CNinsure intends to expand its distribution network
through selective acquisitions and establishment of joint ventures with
entrepreneurial agents. On September 18, 2008, CNinsure announced the
acquisition of 55% equity interests in Beijing Fanhua Datong Investment
Management Co., Ltd., a life insurance intermediary company operating
nationwide. CNinsure expects that this acquisition will help it to
expedite the expansion of its life insurance distribution network and
contribute significantly to the achievement of its life insurance
revenue targets.
-- Improving Business Structure
CNinsure is dedicated to improving its business structure with more
focus on life insurance business and further expansion into claims
adjusting business while continuing to grow its P&C insurance business.
Commissions and fees revenues derived from P&C insurance, life
insurance and claims adjusting business each contributed 72.4%, 14.4%
and 13.2% of its total commissions and fees revenues in the third
quarter ended September 30, 2008.
-- Upgrading Unified Operating Platform to Support Future Growth
As we continue to grow in size and enter into new regions, CNinsure has
continued to improve its operating platform to facilitate a
standardized business process and expedite expansion. CNinsure has
initiated the final stage User Acceptance Testing (UAT) of key
applications, including financial and accounting ERP (Enterprise
Resource Planning) system, human resource system as well as e-learning
online training system. The first phase of its Core Life Insurance
Business System has been launched in some of the affiliated agencies on
trial basis.
-- Strengthening Relationships with Leading Insurance Companies and
Diversifying Product Offerings
On September 2, 2008, CNinsure announced the signing of an exclusive
distribution agreement with Sino Life Insurance Company Ltd. ("Sino
Life Insurance") for the sales of a participating whole life insurance
product. This is the second time that CNinsure announced strategic
cooperation with leading insurers in China for exclusive distribution
arrangements, following the announcement of a similar arrangement with
Ping An Life Insurance Company of China, Ltd. in the first quarter of
2008. The new life insurance product, underwritten by Sino Life
Insurance, and custom-designed by Swiss Reinsurance Company for
CNinsure, became available exclusively over CNinsure's distribution
network, starting from September 1, 2008.
Business Outlook
For the fourth quarter 2008, CNinsure expects its total net revenues to be in the range of RMB235 million (US$34.6 million) and RMB250 million (US$36.8 million), reflecting the expected slight decline of our commissions and fees revenues from the P&C insurance business due to the implementation of the Working Scheme on Further Regulating the P&C Insurance Market issued by CIRC, which has reduced the commission rate for compulsory third party (CTP) auto liability insurance paid out to insurance intermediaries. We expect this regulation to have minimal impact on our net income, as this only applies to a portion of the P&C commissions and we will largely offset the reduction via lower commission expenses to our sales agents. The scheme came into effect on September 1, 2008. The foregoing forecast reflects CNinsure's current and preliminary view, which is subject to change.
Conference Call
The Company will host a conference call to discuss the third quarter of 2008 results at
Time: 8:00 pm Eastern Standard Time on November 24, 2008
or 9:00 am Beijing/Hong Kong Time on November 25, 2008
The Toll Free dial-in numbers:
United States: 1866-549-1292
United Kingdom: 0808-234-6305
Canada: 1866-8691-825
Singapore: 800-852-3576
Taiwan: 0080-185-6004
China (Mainland): 800-701-1223
Hong Kong & Other Areas: +852-3005-2050
China (Mainland) local dial-in number: 400-681-6949
Password: 885507#
A replay of the call will be available for three days as follows:
+852-3005-2020 (Hong Kong & other areas)
PIN number: 136443#
Additionally, a live and archived web cast of this call will be available at:
http://www.corpasia.net/us/CISG/irwebsite/index.php?mod=event
About CNinsure Inc.
CNinsure is a leading independent insurance intermediary company operating in China. CNinsure's distribution network reaches many of China's most economically developed regions and affluent cities. The Company distributes a wide variety of property and casualty and life insurance products underwritten by domestic and foreign insurance companies operating in China, and provides insurance claims adjusting as well as other insurance-related services.
Forward-looking Statements
This press release contains statements of a forward-looking nature. These statements 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, the outlook for the fourth quarter of 2008 and the 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 CNinsure and the industry. Potential risks and uncertainties include, but are not limited to, those relating to CNinsure's limited operating history, especially its limited experience in selling life insurance products, 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 Chinese insurance industry, its ability to compete effectively against its competitors, and quarterly variations in its operating results caused by factors beyond its control. All information provided in this press release is as of November 24, 2008, and CNinsure 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 CNinsure 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 CNinsure is included in CNinsure's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F.
CNINSURE INC.
Condensed Consolidated Balance Sheets
As of As of As of
December September September
31, 2007 30, 2008 30, 2008
RMB RMB USD
(Audited)(Unaudited)(Unaudited)
(In thousands, except for shares and per share data)
ASSETS:
Current assets：
Cash and cash equivalents 1,544,817 1,611,387 237,321
Restricted cash 12,748 11,644 1,715
Accounts receivable 18,150 85,581 12,604
Insurance premium receivable 541 99 15
Other receivables, net 30,703 46,709 6,879
Amounts due from related parties -- 2,345 345
Other current assets 1,297 2,379 350
Total current assets 1,608,256 1,760,144 259,229
Non-current assets：
Property, plant, and equipment, net 11,148 54,411 8,014
Goodwill 9,165 31,692 4,667
Intangibles 4,325 38,166 5,621
Deferred tax assets 1,936 1,823 269
Other 5,334 6,605 973
Total assets 1,640,164 1,892,841 278,773
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable 10,138 37,842 5,573
Insurance premium payable 12,748 11,644 1,715
Other payables and accrued expenses 20,945 66,290 9,763
Accrued payroll 6,949 10,129 1,492
Income tax payable 2,085 19,900 2,931
Amounts due to related parties 369 369 54
Current portion of long-term borrowings 103 31 5
Total current liabilities 53,337 146,205 21,533
Non-current liabilities:
Long-term borrowings 57 1,433 211
Other tax liabilities 1,160 1,632 240
Deferred tax liabilities 374 4,852 715
Total liabilities 54,928 154,122 22,699
Commitments and contingencies
Minority interests 18,324 64,097 9,440
Common stock 7,036 7,036 1,036
Additional paid-in capital 1,621,064 1,636,118 240,964
Statutory reserves 47,903 48,136 7,089
Accumulated (deficit) surplus (87,941) 59,703 8,793
Accumulated other comprehensive loss (21,150) (76,371) (11,248)
Total shareholders' equity 1,566,912 1,674,622 246,634
Total liabilities and owners' equity 1,640,164 1,892,841 278,773
CNINSURE INC.
Unaudited Condensed Consolidated Statements of Operations
For The Three Months
Ended September 30,
2007 2008 2008
RMB RMB USD
(In thousands, except for shares and per share data)
Net revenues:
Commissions and fees 116,154 210,577 31,013
Other service fees 745 414 61
Total net revenues 116,899 210,991 31,074
Operating costs and expenses:
Commissions and fees (62,205) (110,322) (16,248)
Selling expenses (2,333) (4,141) (610)
General and administrative expenses (12,562) (39,739) (5,853)
Total operating costs and expenses (77,100) (154,202) (22,711)
Income from operations 39,799 56,789 8,363
Other income (expense), net:
Investment income -- (86) (13)
Interest income 2,679 12,851 1,893
Interest expense (4) (29) (4)
Others, net (62) 135 20
Income before income taxes 42,412 69,660 10,259
Income tax expense (812) (16,385) (2,413)
Net income before minority interest 41,600 53,275 7,846
Minority interest 841 (1,069) (157)
Net income 42,441 52,206 7,689
Net Income per share:
Basic 0.062 0.057 0.008
Diluted 0.062 0.057 0.008
Net Income per ADS:
Basic 1.247 1.144 0.169
Diluted 1.244 1.144[2] 0.169
Shares used in calculating Net
income per share
Basic 680,491,991 912,497,726 912,497,726
Diluted 682,136,595 912,497,726 912,497,726
[2] There is no dilutive effect for the three months ended September 30,
2008 as the stock options were anti-dilutive.
For The Nine Months Ended
September 30,
2007 2008 2008
RMB RMB USD
(In thousands, except for shares and per share data)
Net revenues:
Commissions and fees 288,477 561,757 82,734
Other service fees 983 700 103
Total net revenues 289,460 562,457 82,837
Operating costs and expenses:
Commissions and fees (149,480) (290,727) (42,818)
Selling expenses (6,529) (11,105) (1,635)
General and administrative expenses (38,477) (100,450) (14,794)
Total operating costs and expenses (194,486) (402,282) (59,247)
Income from operations 94,974 160,175 23,590
Other income (expense), net:
Investment income -- (1) (0)
Interest income 4,659 36,553 5,383
Interest expense (70) (66) (10)
Others, net (47) 127 19
Income before income taxes 99,516 196,788 28,982
Income tax expense (988) (46,755) (6,886)
Net income before minority interest 98,528 150,033 22,096
Minority interest 2,603 (2,156) (317)
Net income 101,131 147,877 21,779
Net Income per share:
Basic 0.153 0.162 0.024
Diluted 0.150 0.162 0.024
Net Income per ADS:
Basic 3.063 3.241 0.477
Diluted 2.995 3.241[3] 0.477
Shares used in calculating Net
income per share
Basic 660,275,689 912,497,726 912,497,726
Diluted 675,435,546 912,497,726 912,497,726
[3] There is no dilutive effect for the nine months ended September 30,
2008 as the stock options were anti-dilutive.
