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Thank you for standing by for Fanhua's Fourth Quarter and Fiscal Year 2023 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. [Operator Instructions] For your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within 3 hours after the conference is finished. Please visit Fanhua's IR website at ir.fanhgroup.com under the Events and Webcast section. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I'd now like to turn the meeting over to your host for today's conference, Ms. Oasis Qiu, Fanhua's Investor Relations Manager.

Thank you, Andrew. Good morning and good evening, everyone. Welcome to Fanhua's fourth quarter and fiscal 2023 earnings call. A replay will be available on our IR website after today's call. 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. These statements are made based on management's current expectations and beliefs concerning future events impacting the Company and therefore, 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 its forward-looking information, except as required under applicable law. Joining us today are our Vice Chairman and Chief Executive Officer, Mr. Yinan Hu; Chief Financial Officer Mr. Peng Ge; Chief Strategy Officer, Mr. Ben Lin; and Chief Operating Officer Mr. Liu Lichong. Mr. Hu will start the call by sharing his view on recent market trends and our strategy development, followed by Mr. Ben Lin, who will provide a review of financial and operational highlights and discuss our business outlook going forward. There will be a Q&A session after the prepared remarks. Please note that you can find our presentation material relevant to this call from our official website. With that, I will turn the call over to Mr. Hu. You may begin.

Good morning and good evening. Thank you for joining us on our fourth quarter and full year 2023 earnings call. Reflecting on the past year, 2023 proved to be a year of challenges and transformations for the entire life insurance industry in China. To perform changes in regulatory policies, particularly the downward adjustment of the pricing rate, and implementation of Filing and Actual Fee Consistency requirement in the bancassurance channel presented unprecedented test for the industry. Fanhua was no exception. However, it was precisely within this challenging landscape [ph] that we showcase resilience and achieved stable growth. In the full year of 2023, we achieved a total insurance premiums of RMB16.4 billion representing a 28.7% year-on-year growth, continues to outpace the overall industry growth. First year premiums reached RMB3.8 billion marking a 30.3% year-on-year growth. Leveraging the efficiency gains from digitalization and robust cost control measures, we realized an operating income of RMB195.8 million, up 16.1% year-on-year. Net income attributable to shareholders reached RMB280.4 million, reflecting a growth of 179.7% year-on-year. This solid performance demonstrates the successful execution of our strategy. Over the past year, we have continually strengthened our strategy of driving growth through Professionalization, Specialization, Digitalization and Open Platform, using a series of pivotal achievements. For instance, we have consistently bolster our pool of top tier agents, enhancing their professional capabilities with the contribution from top performing agents and increased productivity of our sales team at all levels, serving as a pivotal driver ,,,. Our digital platforms have continued to deliver efficiency gains, empowering our insurance advisors, while also providing our customers with superior service experiences. The diversified service ecosystem that we have built has established a solid foundation for our company's differentiation and long-term development. Furthermore, our open platform and M&A model have also emerged as key drivers of our company's growth. The forthcoming [indiscernible] consistency requirement and the commission cap, although may inevitably posed significant challenges to the industry will also present enormous opportunities. We believe that amidst this phase of deregulatory from accelerating industry transformation, scale driven leading payers, companies able to offer diversified services, and digitally intelligent platform companies will find themselves in a more advantageous position. Leveraging our strategic achievements in specialization, digitalization, and open platforms and service oriented initiatives over the past 2 years, we are confident that Fanhua will emerge as the biggest beneficiary. Meanwhile, our Internationalization strategy is steadily advancing. Hong Kong, serving as the cornerstone of our international expansion efforts, has seen the official launch of two subsidiaries with Asia insurance for business operation, providing a solid foundation for our global business layout. Recently we signed a strategic framework agreement with Singapore White Group, marking a significant milestone in our development journey. The potential collaboration represent a strategic upgrade towards artificial intelligence development and internationalization. [Indiscernible] such as mergers and acquisitions, we will invest in high-quality overseas assets, deepening our presence in family services, including insurance, wealth management, education, health care and family governance. This move aims to achieve horizontal and vertical integration, allowing us to offer comprehensive and efficient family asset allocation services to clients. Moreover, it will accelerate our expansion in international markets, paving the way for border development opportunities and propelling the company to greater heights. Looking ahead, we firmly believe that the industry will gradually move towards consolidation, forming an [indiscernible] geopolitical landscape dominated by a few major players, the services and technology driving the way forward. We are poised to emerge as the one of the biggest beneficiary of this transformation. Embracing the insurance processes plus technology model, we will provide comprehensive products and diversify services to our customers, while leveraging technology to enhance service efficiency. Our focus will be on serving the high net worth customers and MDRT which are also our core assets. The year 2024 will be pivotal for our development. We will further expand our scale to industry leading technology platforms, comprehensive service capabilities, and strong capital to acquire high-quality assets. We believe that in the journey ahead, we will continue to maintain our leading position, create more value for our customers and achieve the long-term development goals of the company. Now I would like to invite Mr. Ben Lin, our Chief Strategy Officer to discuss our business highlights in the fourth quarter and 2023.

Thank you, Mr. Hu, and thank you, Oasis. Let me just walk you through our results for 2023. Some of the numbers that I'm going to quote, you can find them in our results release as well as our online presentation. Impacted by two significant regulatory policy changes in 2023, specifically, the pricing rate change and commission cap at the bancassurance channel, the life insurance industry in China witnessed a roller coaster ride in terms of premium growth. Starting with single-digit growth in the first quarter, it saw two double-digit growth in the second quarter due to the pull forward demand prior to the pricing rate adjustment. What we saw was then a reversion to single-digit growth in the third quarter, and ultimately negative growth in the fourth quarter. Overall, we saw a 10% year-on-year increase for the entire year of 2023 at the industry level. Amidst the [indiscernible] pressures of sluggish performance on both the liability and investment side, major insurers are expected to experience significant decline in profitability, as indicated by the 15% negative growth and average profit of the listed companies in the first 9 months of 2023. Against this backdrop, Fanhua continues to outperform the industry with stellar performance. In 2023, we achieved RMB16.1 billion in total life insurance premium, which is a 30% increase year-on-year and net income to shareholders reached RMB280 million. up almost 180% year-on-year. Overall, we're very pleased with our financial results, given the backdrop of a challenging macro and insurance industry environment in 2023. More importantly, we are particularly proud of the strategic executions we have carried out to achieve these results. Throughout 2023, we successfully executed each strategic initiative as we had planned. We firmly believe that these strategic achievements will set us on a higher quality and sustainable growth path. I would like to highlight four key strategic achievements that we saw in 2023. Firstly, our strategic focus on improving our agent quality and productivity produced significant results and is the major driver of our success in 2023. Our MDRT and 100k Premium agents have emerged as major contributors to our growth. These agents saw productivity increasing by 15% and 10%, respectively. And they accounted for 65% of our total first year premium, up by 9 percentage points from 2022. These achievements, help offset this significant decline in overall agent number, a metric that we're no longer focused on and it's also a industry wide trend. Secondly, we saw significant achievements in our digital technology empowerment. Based on the digital infrastructure build on big data intelligent algorithm, Fanhua has built an industry leading digital empowerment system covering five major systems including operational support and management empowerment, professional growth and IP promotion system, customer management system, customer service system, and transaction support system. Among the many important tools in our digital system, in 2023, Fanhua focus on strengthening digital marketing empowerment for functions such as digital avatar, intelligent recommendation systems, insurance AI systems, and intelligent customer marketing. It helps our salespeople achieve intelligent management across these areas. The cost reduction and efficiency improvement bought by the digital empowerment that we have built, our efficiency increased significantly over 2023. If you look at our operating expense ratio, it decreased from 29.4% to 25.7%. Agents who frequently use our system have productivity that is 1.6x higher than those who did not use the system. Thirdly, our open platform strategy accounted for over 30% of our total new business. By the end of 2023, we have signed contracts with 854 channels, and an increase of 63 from the last quarter of 2020 -- the third quarter of 2023. These partnerships contributed to a total first year premium of over 1.1 billion accounting for over 32% of our total new business. They are also insurance companies, human resource consultancy agencies and numerous other two B channels, expressing their interest in further collaboration with us to use an open platform system and digital tools to sell life insurance in their main business. Fourthly, our service oriented ecosystem continues to take shape with evident results. We have developed a robust ecosystem beyond just life insurance. Covering trust service, family office, health care and wellness, overseas as allocation, education, tax consulting, family affairs, processing et cetera, providing customers with a rich experience scenarios and substantial support to our sales agents in insurance marketing. During 2023, we held 250 -- 256 family office consultants training sessions and salons, certifying more than 1,200 family office advisors who have since served a total of 500 families in assisting them to set up a total of 450 trusts with total asset value exceeding RMB5.6 billion and facilitating approximately RMB100 million inversely a premium. By the end of 2023, more than 20,000 FRP or Fanhua Retirement Planner have been trained and certified. During 2023, nearly 300 visits to our continuing care retirement community were organized helping nearly 1,000 customers locking rates for long-term stays in these retirement communities. And more than 4,000 customers obtain rates for these retirement communities across the nation, helping to achieve over RMB600 million in first year premium. At the end of 2023, Fanhua has trained and certified more than 20,000 policy trusteeship experts serving more than 130,000 policy trustee families with 630,000 policies under trusteeship generating trust sale and upper sales to 30,000 customers facilitating about 550 million in first year premium. Lastly, we have made significant progress in our global expansion strategy. Since the establishment of our two joint ventures with Asia Insurance in Hong Kong, in October, the insurance brokerage company has completed the formation of its core business team and signed contracts with about 10 major insurance companies in Hong Kong, ensuring the ability to meet diverse customer needs. Operations officially commenced in early February for our insurance broker business. On the technology side, we're actively engaging with a number of insurers. And we're confident that our technology business will have its own milestones in 2024. Looking ahead for 2024, the insurance industry has stepped especially the independent intermediary channel will face a series of challenges and opportunities. Due to the significant uncertainties surrounding the specific timing, and extent of the implementation of the requirement for consistency in reported and actual fees in the independent intermediary channel, we are unable to make precise predictions regarding our annual performance targets. However, what can be anticipated is that whilst the regulatory change may lead to short-term [indiscernible] will also bring important opportunities for the development of our open platform. Our strategic focus in 2024 will include, number one, continue to build a professional and specialized sales team. We aim to increase our market share by growing the number of high-quality agents, particularly MDRTs, taking advantage of the market consolidation opportunity that is likely to arise as a result of the commission cap to be implemented. Number two, enhance our capabilities to serve high net worth individual clients. We will continue to view our service ecosystem, supplementing our offerings in financial services through education, elderly care and overseas struggle. Number three, bringing high-quality assets while going global, accelerating our internationalization and digitalization process. We have been invited by a number of insurers to set up operations in Macau and Singapore. And lastly, we will pursue M&A opportunities to achieve horizontal and vertical integration. Given our strong financial position with over RMB1.4 billion in net cash, and the backing of our potential strategic shareholder, Singapore's White Group, we're probably the most well resourced intermediary in the region with the capacity and capability to undertake attractive and accretive M&A opportunities both inside and outside of Mainland China. This concludes my presentation, and I'll hand the session back to Oasis. Thank you.

Thank you. Now the floor opens for Q&A session. Andrew?

[Operator Instructions] And our first question comes from the line of Yuyu Zhang with CICC. Your line is open.

So my first question is about [indiscernible] made a lot of discussions before [indiscernible] be a little bit more precise on this? Beyond your observation, to what extend made a commission revenue [indiscernible] if you're adding numbers you can share with us. My second question is for the overseas business. Could you share some more details on what you've done in 2023 and [indiscernible] 2024 and about my group, how can someone cooperate with you to achieve more market share in Asia? Thank you very much.

Mr. Hu would like to invite our Chief Operating Officer Mr. Liu to take your first question. And the second question actually consists of two parts. So first of all, regarding our national initiative, especially the business in Hong Kong, that this part will be answered by Mr. Ben Lin, our Chief Strategy Officer and the last regarding our potential collaboration with White Group, Mr. Hu, he will answer the question.

So, the requirements for the reported and fire fee consistency in the independent brokers channel is up and coming. Although the regulatory body has not yet given specific timing as to when they will be implemented, but the rumors in the industry is that it will probably be implemented in April. And as for the extent of the commission cap, there is also no specific guidance from the regulatory body yet, but -- and the consensus among a lot of insurance companies that probably the commission rates for the same type of products, the commission rate will probably be down by 30% to 40%. While it's for certain that the business for insurance, independent insurance brokers will be severely impacted, but why now, the insurance companies will have a different product strategy to adapt to this market change, diverting their focus from the whole life insurance product to participating insurance products to make up some of the loss on the commission income for independent brokers. The requirements for commission cap and the reported five be consistency. It's inevitable trend, given the continued decline in interest rates. However, NA will probably bring a short-term path to industry as well for Fanhua, but we are fully prepared for this new changes. And we have also been expanding our platform models. We believe that this regulatory change will result in more small and medium sized insurance intermediate companies to [indiscernible] elaborate, with Fanhua in terms of platform business. And it will help us to continue to drive out market share. Thank you.

Okay. I'll answer the first part of the second question with regard to progress in the Hong Kong market. So we established the two joint ventures with our partner Asia insurance back in late October. So it's been about 5 months. And I'm very pleased to say that we have made very, very significant progress with our two joint ventures. Firstly, in terms of our team setup and office, so we now basically have two offices in Hong Kong. One is our brokerage business and the other one is our technology business. In our brokerage business, we have now built a team of 13 members there, basically, in the administration, in the technical representative areas to facilitate contract signing. In the period of November to January together with the management team from Asia insurance, we met with all the major life insurance in Hong Kong to start the process of contract signing. So far, we have signed contract with 10 insurers. And over the last few weeks, we have received the commission schedule forms, some of the insurers. So very, very pleased to say that we can officially commence business from this week. In terms of where we differentiate in Hong Kong and why we are confident that we can be successful. In our first market of Hong Kong, I think it comes down to really two things. Firstly, we're the only broker in Hong Kong, in the region that's backed by two listed companies with abundant resources. And this provides us with abundant opportunity and capability to offer comprehensive services to our customers. Secondly is on the technology front. As you know, I've highlighted in the past, the broker technology segment in Asia remains very, very underdeveloped. Even in mature markets like Hong Kong, a lot of the contract signing is still very paper based compared to 100% digital or paperless in China. So we're the only broker with more than 200 in house IT support staff that can basically transfer a lot of the know how that were built in the Chinese market to Hong Kong. In the discussions that we had with all the life insurers from the period of November to January, the focus was really on two topics. The first one is obviously contract signing. But more importantly, the second one is really on IT integration. And I'm very pleased to say that all insurers expressed a strong interest not only to work with us, in terms of doing the business of up selling, but they're also very interested in our digital capability and how we can work together to improve the sales technology in the Hong Kong market. And what's interesting is, we're not only trying to work with these insurers to develop technology that would help them to work with brokers. But more importantly, we're now also convincing them that, maybe they could also outsource their in house sales technology to Fanhua, because the reality is we have spent an enormous amount of resources over the last 4, 5 years in ourselves, in our sales technology capability. And a lot of these know how, I think is probably 10 years ahead of the Hong Kong market, even compared to insurance. So we're very, very confident that our technology capability and differentiation is going to be one of our strong, competitive advantages in the Hong Kong market. And although we just commenced our Hong Kong business, we're already invited by a number of insurers to basically start operations in Macau, and also in Singapore, because in these markets, there is also a lack of presence in terms of a major broker, that has strong shareholder backing, as well as technology capability. So, one step at a time, I wouldn't be too surprised that in 2024, we will expand beyond Hong Kong. So the second question, the second part of the second question, Mr. Hu will talk about our progress with Singapore's White Group.

So, first and foremost, what we want to reiterate is that our collaboration will not change the positioning of Fanhua and our strategic direction. Last year, we basically issued our new mission statement for the company. And we made it very clear that our objective going forward is to become the regional service provider for family services, broadening our capability beyond insurance, but into education, retirement, et cetera. So we're advocating is insurance -- a insurance plus model beyond Mainland China. And we think the business [indiscernible] opportunity to have a visit at White Group is very, very timely for us. So the synergy that can bring about what our cooperation White Group is really based on to upgrade in terms of our capability. The first one is that the White -- Singapore's White Group have much better capability in terms of capital raising, particularly in the international market compared to Fanhua. Secondly, is that their track record and capability in mergers and acquisitions is also very evident. Given the history and success, we think these two capabilities serves as important upgrades for Fanhua as we pursue our strategy of going global through organic and inorganic strategies. M&A will be a core part of our strategy, because we think that the opportunity for consolidation in the market not only in China, but across the region is very, very significant. And really we'll focus on two areas. Number one is all our mergers and acquisitions will focus on bringing capabilities to improve, or help us execute on our strategy of developing a professional sales team across the region. And then secondly, is helping us to broaden our services to high net worth clients. So without a doubt, the biggest change to our industry from 2024 onwards, is the commission cap. And we think, if we look at the regulatory purpose of the commission cap is really to drive higher quality growth. Now how do you achieve that? We think, at the end it comes down to upgrading your capability, that can be very, very important. So, we think the commission cap is the right thing for the industry, we fully embrace it. And our strategy is on basically putting the resources on improving our capability, so that in this environment we will become the biggest beneficiary. Thank you.

I'm showing no further questions at this time. So with that, I hand the call back over to Oasis Qiu for any closing remarks.

Thank you for joining us on today's conference call. If you have any further questions, please feel free to contact us. Thank you.

Thank you for participating. This concludes today's program, and you may now disconnect.

Thank you for standing by for Fanhua's Third Quarter 2023 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 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 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 website at ir.fanhgroup.com under Events and Webcast section. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I'd now like to turn the meeting over to your host for today's conference, Ms. Oasis Qiu, Fanhua's Investor Relations Manager.

Thank you. Good morning and good evening, everyone. Welcome to Fanhua's third quarter 2023 earnings call. A replay will also be available on our website after today's call. During this call, we will be discussing some non-GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings release. And finally, please note that the discussion today will contain forward-looking statements made under safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are made based on management's current expectations and beliefs concerning future events may impact the Company and therefore, may be impacted by a number of business risks and uncertainties that could cause our actual results to differ materially from those projected or stated. 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 its forward-looking information, except as required under applicable law. Joining us today are our Co-Chairman and Chief Executive Officer, Mr. Yinan Hu; Co-Chairman and Chief Strategy Officer, Mr. Ben Lin. Mr. Hu will start the call by sharing his view on recent market trends and our strategy proposition, followed by Mr. Ben Lin, who will provide a review of financial and operational highlights and discuss our business outlook going forward. There will be a Q&A session after the prepared remarks. And please note that you can find our presentation material relevant to this call from our official website. With that, I will turn the call over to our Co-Chairman and CEO, Mr. Hu; and Ben Lin, our Co-Chairman, will translate for Mr. Hu. Mr. Hu, you may begin.

Good morning and good evening. Thank you for joining us on our Q3 earnings call. In the wake of the pricing rate change for life insurance products, the life insurance sector has experienced evident fluctuations in premium growth, with a period of very strong growth from second quarter to July followed by a significant slowdown from August to October. But notwithstanding this challenging environment, the execution of our key strategies continue to pay off. Over the past two quarters, both the insurance industry and the intermediary market that we operate in, including our operations, have inevitably faced significant impact from regulatory policy changes. I would like to take this opportunity to discuss our perspective on these changes. Starting from first of August, the life insurance industry has officially entered the era of a 3% pricing rate cap for traditional life insurance products. In the short term, the restoration of customer demand may take some time. However, in the longer term, considering the backdrop of declining bank deposit rates, we believe that traditional insurance products with a 3% guaranteed interest rate remains an attractive defensive asset class. In addition, we also expect that the regulator will extend the recent commission rate changes in the bancassurance channel to the agency and independent broker channels in the coming months. While the short-term impact of both the pricing rate adjustment and the enforcement of commission rate caps could present significant challenges to the entire insurance industry, we maintain the perspective that, in the long term, these policy implementations will steer the industry towards a more higher quality and sustainable growth trajectory. We anticipate that the future development of the industry will shift gradually from being driven by product and sales commission to be predominantly driven by technology and services. This implies that companies with innovative services, technological capabilities and ample capital will enjoy a more favorable position. The strong players are likely to become even more dominant, leading to a trend of consolidation and increased market concentration. This trend is not only evident at the level of insurance companies but is also applicable to the intermediary market. We think the scenario of a few major intermediaries dominating this market is a possible outcome following these regulatory changes. We envision that the future trajectory of the intermediate market will see larger companies transitioning towards platform-based operations, and we expect to see a large number of small- to medium-sized brokers to either exit the market or choose to work with larger broker platforms in order to survive. These collaborations could involve platforms providing essential mid-end and back-end support enabling these companies to lower their fixed costs relating to IT, compliance, operations and training. This allows them to focus more on customer acquisition and relationship management at the forefront and enable them to enhance differentiated service capabilities to achieve sustainable business development. This emerging trend aligns well with our open platform strategy. In fact, this is a catalyst that we previously thought could take years to materialize, but it is now looking more likely to take place in early 2024. In essence, these changes should help expedite our transformation from a sales-focused company to a platform-centric entity. This, in turn, should give us the opportunity to gain more market share and grow our scale advantage. We are also looking to intensify our collaborative efforts with our key product suppliers, the small- and medium-sized insurance companies to foster stronger and mutually beneficial partnerships. Leveraging our stronger capability in sales, technology and customer service, we aim to extend our relationship with our product suppliers beyond sales and distribution but also in IT and services. In turn, we aim to generate a more diversified revenue stream from our insurance partners. With greater scale and market dominance, we aim to work closely with our partners in product development and develop greater pricing power. We remain confident in the future prospects of the industry and firmly believe that our company's strategy positions us well to capitalize on numerous opportunities in the evolving market landscape. We are dedicated to advancing the implementation of our established strategies with a commitment to delivering long-term value for our shareholders. I will go over this in English just to save us time, and we'll allocate more time for the Q&A later. So I'm pleased to present our latest earnings results for the third quarter of 2023. The pricing changes to life insurance products effective from August caused a spike in new business sales in July, which was then followed by a slowdown in sales in August and September as our insurance partners take time to adjust their new product offerings. Despite this disruption, our results over the quarter was solid, and we remain confident that our strategies are working well, allowing us to persevere even under a volatile industry environment. The key highlights of our third quarter results include total life insurance premium grew by 23% year-on-year to RMB3.4 billion. First year premium grew by 10.3% to RMB584 million. Net income attributable to shareholders came to RMB117.7 million, representing a significant year-on-year increase of 382%. This uplift is largely due to an unrealized gain from our investment in Cheche Technology Limited, in which we hold a 2.8% stake and they recently went public. Fanhua disposed our P&C division back in 2017 to Cheche for a combined consideration of cash and convertible loan. We are planning the equity stake in Cheche upon exercise of options to convert part of the convertible loan. Our strategic focus on professionalism, specialization, digitalization and open platform remains the cornerstone of our success. Our operational highlights include: number one, our commitment to digitalization has led to substantial cost reduction and efficiency improvement. Our digital technology platform underwent further intelligent transformation, leveraging artificial intelligence and smart algorithm. Like many of our peers, we are trialing with a lot of AI tools in our business. We introduced AI-enabled digital avatar, AI assistance and smart recommendation system, customer distribution system to assist insurance professionals in offering efficient and personalized solutions to our clients. For the third quarter of 2023, our adjusted operating expense ratio decreased from 32% to 30%, a significant improvement compared to the same period last year despite increased IT investments. Number two, we remain committed to empowering our sales team with the expertise needed to ensure high-quality growth. We persist in conducting our 3F training. As of September 30, the number of individuals trained in 3F, which stands for Fanhua policy custodian, Fanhua retirement planning and family office consultancy, reached over 22,000. The positive impact on agents is increasingly evident with improvements observed in the quantity of our top-performing agents but also led to significant increase in productivity. For the third quarter of 2023, the monthly average per capita productivity of our [100,000] premium agents increased by 23% year-on-year to RMB270,000 and that of our MDRT increased by 27% year-over-year to RMB600,000. The number of MDRT agents also increased by 29%. The proportion of high-performing agents contributing premiums also rose from 46% to 62% compared to the same period last year. In response to the growing demand for diversified and personalized services among high net worth individuals, we launched the family office adviser incubation program built upon our 3F training and certification system. With the specific aim of attracting talent from other professional industries outside of the traditional financial industry, this initiative has garnered significant attention within the industry, and we have already initiated preparations in an Guangdong and Sichuan for the program. Number three, our open platform strategy continues to deliver material results. We have successfully linked with 791 third-party agency companies as of September 30. These collaborations, combined with our M&A, have contributed over 28.3% to our sales volume highlighting the success of our open platform strategy. We have also officially launched the digital tenant system in late October, which has received positive response from the industry. To date, we have received many inquiries from third-party insurance brokers and insurance companies on onboarding the tenant system and so far have signed up two insurance brokerage firms as our digital tenants. We believe that the current market challenges and the focus on digitalization and cost efficiency will bring more business opportunities for our open platform strategy. The fourth point I want to go through is we have made significant progress with overseas expansion, adding a new pillar to our growth strategy. On October 23, we announced a strategic partnership with ASIA Insurance to establish two joint venture companies. In both cases, Fanhua will own 60% controlling interest. The two companies focusing on developing life insurance distribution technology for the Asia Pacific region marked an important milestone for Fanhua in our endeavor to establish our global presence and realize our vision of becoming a globally leading technology-driven financial services platform. By joining forces with ASIA Insurance, we are confident that we'll be able to leverage the strength of both parties to capitalize on the significant growth opportunities in the Asia Pacific region and create long-term value to our shareholders. Finally, as I mentioned earlier, we recognized an unrealized gain from the investment of Cheche during the third quarter of 2023. We would like to remind our shareholders that this is a one-off game in nature, and our holdings in Cheche could continue to cause volatility to our net profit over the short term. The most important implication of Cheche's listing in our view is that we hope you can clear legacy misunderstandings regarding our relationship with Cheche. Our divestment of our P&C business to Cheche and our focus on our core life insurance business have proven to be the right strategic move. We are also delighted for Cheche to be able to complete their listing on the NASDAQ. Looking ahead to the fourth quarter, the anticipated implementation of commission cap is expected to bring about short-term challenges for the entire industry. However, as Mr. Hu highlighted earlier, we also see this as an important catalyst to accelerate the development of our open platform strategy and fast track our transition from a sales-oriented company to a platform oriented. In the Hong Kong market, we will continue our collaboration of ASIA Insurance, seeking business opportunities and assembling teams for our joint venture companies. We're also excited to share that we have started exploring growth opportunities outside of Asia and are actively looking for partnerships similar to that, we have formed with ASIA Insurance. In closing, I would like to say that the life insurance industry in China remains very young, and the intermediary segment is still at its infancy in terms of development. We strongly believe that the market opportunities ahead of us remain very significant. At the same time, we're also conscious that our young industry will no doubt continue to face regulatory changes. As a regulator, continue to direct the industry towards higher-quality growth. Fanhua has been established for 25 years, and we have a strong track record of navigating through changes. This gives us confidence that we can continue to deliver for our shareholders under all market environments. This concludes our presentation. I'll turn the floor over for Q&A.

Amber, we are ready for questions.

[Operator Instructions] Our first question comes from the line of Yuyu Zhang from CICC. Please ask your question.

So my first question is related to the regulation. The regulator mentioned that -- they mentioned [indiscernible] the fee regulation as we call it [Foreign Language] in our agency and brokerage channel. So could you share us some more color on, if it happens, then the impact on the whole industry and Fanhua? And my second question is related to all the overseas expansion. We noticed that Fanhua will establish two subsidiaries with ASIA Insurance. So could you share some color on the strategy, cooperation? And is there any further time line you could share with us? And my last question is about our open platform strategy. So how much digital talent success are on agreements that we have on our open platform? And do we have any further plan to attract more digital tenants?

So on your question about the commission rate impact. So first of all, we're going to state that the policies that you've been hearing coming out of the regulator is very understandable. Obviously, the industry right now, the life insurance industry in China right now is very challenging. We can see a lot of insurance companies are facing difficulties in terms of investment return, given the weak capital market environment. Sales expenses are also very high. So overall, the profitability situation for life insurance in China has been negatively impacted by these issues. The regulated efforts over the last few months have been focusing on: number one, reducing the liability costs by capturing the guaranteed return; and number two is they're trying to reduce the sales expenses. So overall, we think these measures are intended to improve the financial conditions of the life insurance industry, which should be positive over the long term. So for our business, we need insurers to stay profitable. That's an essential ingredient for our survival as well. So we basically embrace these changes that's coming through. The impact for our intermediary market will be that it puts pressure for everyone to lower their policy acquisition costs. We believe the operators with the lowest cost will benefit in this environment going forward. And this will force us to reduce costs on two fronts: number one, through scale or number two, through efficiency improvements. We think there will be two very important criterias for any intermediary to be successful in the upcoming environment: number one, the ability to develop market-leading technology, which should help reduce costs and also increase economies of scale; number two, through professional service. By that, we mean for the high-quality agents, intermediaries that are able to provide a professional development career path will have a competitive advantage in the new environment. And we have the view that right now, the market that we operate in is very fragmented with 2,800 competitors, of which we think only a few companies have the capability to develop these two very important operational abilities that we mentioned about in terms of technology and professional service. So -- and this is why we expect that if these regulations were to be introduced, going forward, we are likely to see the intermediary market in China becoming more concentrated and potentially be dominated by a few large companies. For Fanhua, over the last few years, our strategy has been focusing on transitioning from a pure sales company to a platform-centric company. And as I mentioned earlier, these regulatory changes, we think, is going to accelerate our platform evolution. We have very evident competitive advantages in terms of technology, and our strategy is really leading the market in many sense. We are the first to launch this platform strategy that we think should help lower the IT costs for a lot of the small- to medium-size intermediaries in the market. So overall, the way we think about it is that these regulatory changes fits quite well with what we're trying to do with our company and what we're trying to provide for the industry. In terms of financial impact, however, there will be some short-term pressure. That's for sure, given the commission rates are likely to drop. However, by focusing on accelerating our platform strategy, we aim to increase our market share significantly and gain significant economies of scale. I'll try to say this in English to save time again. So we have basically formed two joint ventures with ASIA Insurance in Hong Kong, both of which Fanhua owns 50%. ASIA Insurance owns 40%. As many of you may know, ASIA Insurance is the insurance subsidiary of Asia Financial Holdings in Hong Kong. The aim of these two joint ventures, in essence, is to launch Fanhua's expansion overseas. And what we intend to do with Asia insurance is mainly focusing on exporting our technological capabilities in China onto the global stage. As many of you may know, sales -- technology adoption in China now is very mature compared to a lot of markets outside of China. 100% of our sales in China right now is basically paperless. It's all driven by our app. In fact, what's different about China and versus Hong Kong is that all of our agents can use Fanhua's app, [indiscernible], to basically issue policy proposal and also complete the entire transaction process. In Hong Kong, where you have 811 brokers, they cannot complete the entire transaction. In Hong Kong, if a broker was to sign an insurance policy for a client, they have to issue the policy on the insurer's platform. So we think there's immense opportunity for Fanhua to export all the IT that we have developed in China over the last 10 years, which cost us billions in RMB in terms of IT spending into Hong Kong. Some of our competitors in Hong Kong are already charging HKD 200,000 per year for very simple apps that basically just does policy illustration, policy comparison. So you can imagine the revenue opportunity that we can gain from expanding into just Hong Kong. And beyond Hong Kong, we're also exploring with ASIA Insurance about expanding into Southeast Asia, where they also have a very strong presence in the P&C business. So that's the essence of what we're really trying to do with ASIA Insurance. What you can expect is that, over the coming months, there will be a few things. Number one, we are at the final stages of completing -- acquiring a local life insurance brokerage license, which should basically enable us to have contracts with up to 17 life insurance companies in Hong Kong, and we'll further increase that. Post acquisition, we will sign up with more insurance companies in Hong Kong. Secondly is we're already at the very early stages of translating our [indiscernible] app in China into traditional Chinese and also English that will be applicable to the Hong Kong market. We are also working very hard on the human resource front, basically recruiting the relevant personnel to launch our business in Hong Kong. So all in all, I think 2024, I have confidence that Hong Kong will potentially be a revenue contributor to Fanhua. Thank you. Okay. So on our open platform, there are basically three types of agreements. Number one is the Fanhua agreement. Number two is the MGA agreement; and number three is the sales agreement. The question was relating to how many tenants that we have is using the sales agreement. What we want to explain is that for the sales agreements, it requires a three-way data exchange agreement between the insurer, the broker and the platform. Right now, we have three tenants that's using their sales agreement in operation because it relates a lot to data security and data exchange, we think that we need about 10 in operation to fully promote this service. But the opportunity is very evident. On the Fanhua [indiscernible] Cloud and also MGA channels, we have a total of 791 connected parties in terms of -- on the IT system. They have their own agreement and is basically our largest pool of potential clients.

[Operator Instructions] I am showing no further questions. I'll now turn the conference back to Ms. Oasis Qiu for any additional comments.

Thank you, Amber. If you have any further questions, please feel free to contact us. Thank you for participating in today's conference call.

Thank you. That concludes today's conference call. Thank you for participating. You may now disconnect.

Thank you for standing by for Fanhua's Second Quarter 2023 Earnings Conference Call. [Operator instructions] For your information, this conference call is now broadcast alive over the Internet. Webcast replays will be available within 3 hours after the conference is finished, please visit Q - Fanhua's IR website at ir.fanhuaholding.com under the Event and Webcast section. Today’s conference is being recorded. I would now like to turn the meeting over to your host for today's conference, Ms. Oasis Qiu, Fanhua's Investor Relations Manager. Please go ahead.

Good morning. Welcome to our second quarter 2023 earnings conference call. The earnings results were released earlier today and are available on our IR website as well as on Newswire. Before we continue, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provision of the US Private Securities Litigation Reform Act of 1995. The accuracy of this statement 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 Co-Chairman and Chief Executive Officer, Mr. Yinan Hu; Co-Chairman and Chief Strategy Officer, Mr. Ben Lin, and Chief Financial Officer, Mr. Peng Ge. Mr. Hu will start a call by sharing his view on recent market trends and our strategy positioning, followed by Ben who will provide a review of our financial and operational highlights and discuss our business outlook going forward. There will be a Q&A session after the prepared remarks. Now, I will turn the call over to Mr. Hu. Ben will translate for Mr. Hu.

Good morning and good evening to everyone in the call. Thank you for joining today’s call. The Chinese economy is currently undergoing a major transformation. Old models of production disintegrating while new models of production are developing. This transition is also the root cause of challenges faced by the Chinese economy at present time. However, with its huge and growing market size, China's economy continues to exhibit strong resilience and great potentials. The fundamentals sustaining China's long-term outlook remains positive and will continue to provide a favorable business environment for all industries and for our company Fanhua. For China's Insurance market, the previously mass agent model is gradually phased out, and the new professional based model catering to customer demand have yet to take center stage. Currently, there are fewer than 1 million truly professional trained salespeople in the insurance industry. However, to meet the substantial demand of China's vast middle class population, an aging society for effective retirement and legacy planning, we estimate that there exists a shortfall of at least 2 million professional advisors in the market. In recent quarters, we have observed an increasing number of quality agents coming from a diverse range of sectors outside of the insurance industry to join our industry, they are in great need of an enabling platform that can support their ongoing development. This factor is yet to become a substantial driving force for the industry's next phase of growth. We believe that Fanhua's strategy of professionalism, specialization, digitalization and open platform fits perfectly well to this emerging trend. Our results over the past few quarters I think it's good evidence that our strategic implementation over the past two years is becoming effective and Fanhua has taken on a fresh new look. As such last week, we officially announced our new mission statement vision and core values, which are intended to solidify the roadmap to guide everyone at Fanhua to work together to propel the company towards achieving sustainable, high quality growth. Fanhua will uphold the highest ethical standards to promote our core values of integrity, professionalism, openness and innovation while striving to become a globally leading technology driven financial services platform dedicated to empowering the growth of independent financial advisors and fostering the sustainable value creation for our clients. This September, Fanhua will celebrate its 25th anniversary since our listing in 2007, the company has consistently delivered substantial returns to shareholders through buybacks and dividends. Looking ahead to the next 25 years, guided by a new mission and vision, we're confident that by continuing to push forward, our defined strategies will continue to create value for our shareholders.

Thank you, Chairman. I joined as many of you know, I joined Fanhua in July. I spent many years in the industry as a sell side insurance analyst and a number of years as an investor at a large US equity fund. My position at Fanhua is to be in charge of our overseas development and also our capital markets work. I hope to bring the years of experience I've had in analyzing the insurance market across the globe to help Fanhua achieve our objective of becoming a globally leading financial services platform. I will now take everyone through our second quarter results, which we are very, very pleased with. So firstly, in terms of revenue growth, we grew 61% over the quarter. And in terms of operating income, the numbers grew basically 177%, beating our prior guidance. In terms of our earnings growth, it came in at 192% in terms of adjusted EPS, in terms of our cash position, total cash and cash equivalents stood at RMB1.6 billion. All of this basically is an illustration that we are basically getting consistent results from the execution of our core strategy. Underpinning these numbers, let me go through in terms of our operational highlights. So if you look at the premiums, our premiums grew 55% year-on-year, which is significantly ahead of the industry growth of 23.7%. More importantly, in terms of life insurance first year premium, we grew 153% year-on-year, while the average of Chinese listed insurers was 89%. So obviously, without doubt, some of our growth in the second quarter came from very strong industry tailwinds, namely the pricing change that took place over the quarter. The most important indicator for us is really the improvement in advisor quality. So the number of MDRTs increased by 228%, while as the premium agent category, which is basically agents selling premiums above RMB100,000 OVER the quarter grew 163% year-on-year, and agents who basically sold more than RMB10,000 over the quarter grew 29%. Without a doubt, these are the three categories that we now will continue to focus on. And in terms of productivity, our MDRT agents grew their productivity by 21.7% to RMB1.3 million over the quarter. In terms of contribution from our top tier agents, they now account for 57% of our premium over the quarter versus 37% last year. In terms of our renewal premium, it also had very, very strong results, increased by 28.7% over the quarter, and that's mainly driven by a significant improvement in our persistency ratio. A 13 month persistency ratio came in at 95.1%, which represented a 3.4 percentage point increase from last year. And our 25 month persistency ratio came in at 88.3%, an increase of three percentage points from last year. Our digitization and open platform strategy continues to deliver in the form of improvement in operational efficiency. So you can see that our digitization and open platform expenses as a percentage of our revenue now is at 28.9%. And including all the other expenses, you can see that our operating expense ratio decreased by 9.7 percentage points year-on-year. We continue to make significant investments in IT. On a quarterly run rate basis, it amounts to about RMB20 million a quarter. The contribution from our open platform strategy is becoming more and more evident. You can see that in terms of organic first year premium, it came in at RMB1 billion, an increase of 90.6%. More importantly, though, our open platform first year premium came in at RMB550 million, an increase of 135% year-on-year. In terms of contributions now, our open platform and acquisitions we made over the last 12 months now account for 35% of our first year premium and 32% of our revenue mix. Lastly, in terms of business outlook, we maintain our life insurance first year premium target of 50% year-on-year growth to RMB3.7 billion and we also maintain our adjusted EBITDA growth target of 50% year-on-year for the full year of 2023. And obviously, there's a lot of questions about the outlook for the industry post the pricing change that we saw in the second quarter and the first month of the third quarter. Our take is that look, this industry has gone through many cycles of pricing rate change over the past decade and we're confident that the industry will continue to develop through these different stages and cycles. The important thing is that the overall return environment of financial products in China is declining. If you look at wealth management products out there in the market, the returns are below 3%. So insurance products, which now has a return being capped at 3%, is still very attractive as a form of savings product in the market. And our view is that this industry downturn presents excellent opportunities for market consolidation and expansion with our significant financial resources and open platform strategy, we think we're well positioned to take advantage of this opportunity to facilitate acquisitions and also invite more third party brokers onto our open platform. Lastly, I want to go through our capital allocation and our overseas expansion plan. So one of the attractions of our business model is that we are very asset light, we're very capital light. And as a result, our business is able to generate very attractive operating cash flows every quarter and each year Over the last 16 years since our listing, Fanhua has generated an accumulated operating cash flow of RMB4 billion. And our cash reserve is now at RMB1.6 billion. And in the past, we have had a strong track record of steady shareholder return through dividend and share buyback on an accumulated basis since our listing, we have returned RMB2.8 billion to our shareholders in the form of dividend and share buyback. A lot of it actually came through in the last five years. Our consideration and capital allocation strategy now are that, number one, we are temporarily suspending our dividend policy. And this is precisely because that we think that we are at a point in time where there are immense consolidation opportunities out there, as well as the opportunity to grow overseas. In terms of our overseas expansion plan, what we want to highlight is that the intermediary sector in Asia remains very small compared to mature markets like the US or Europe. Some of you may know there are basically over 800 brokers in Hong Kong. It's a very fragmented market, a lot of them are subscale, and we think that we are at a point in time where leading technology platforms like Fanhua in China can take some of the expertise and grow overseas. We are looking at expanding into Hong Kong and potentially in Southeast Asia as well because these are markets, we think is very, very underserved by the broker market and what they lack is the technology expertise that we could potentially provide. So that sums up the presentation that we have prepared for you and we now turn to Q &A.

Hello, Maggie. We are ready to open the floor for questions.

[Operator Instructions] Our first question comes from Coco Gong of Morgan Stanley.

Hi, everyone. I'm from Morgan Stanley, Coco. Thanks for management to give me this opportunity to ask the very first question. First of all, congratulations to the company on very excellent results. The very first question from me would be about the expansion to Hong Kong and Southeast Asia markets. Maybe it's more towards then, because we want to understand what would be the specific plans that the company is thinking about, what goals is the company trying to achieve. Maybe you can share with us a little bit of a detail on that. The second would be what is the company seeing from the first line of agents on the economic recovery in China? That's sort of a question that a lot of investors are very curious about. That's all. Thank you.

Okay, so I'll just, if you don't mind, from now on, the Q &A session, I would like to respond in English. If I do have to pass the question on to some of my colleagues, I can help them translate. So I'll take the first question and Chairman Hu will take the second question on the Chinese economy. In terms of our overseas expansion plans, we are at the very early stages of crafting out our strategy. But we can tell you this, we have a very clear focus on what we want to do. It's going to be based on technology export and partnership. We're not looking to build frontline teams in big scale by entering Hong Kong or Singapore, et cetera. That's not what you should expect from us. Having looked at this industry for many, many years, I am a strong believer that the intermediary segment in Asia remains the only greenfield amongst the financial services industry across the region. And my view is that this is a very underserved segment in terms of technology. As you understand, there are some insurance companies like Zhong An or Ping An to export some of the insurer tech to Southeast Asia and the rest of the world. But those are basically mainly catered for insurance companies' needs. There's actually no broker company out there that is developing technology to empower offline and online sales for the traditional industry, for the traditional sales industry. And we see significant market potential in the region. As I mentioned earlier, if you look at Hong Kong, you have 850 brokers in Hong Kong. They're all very, very small. They don't have the capacity to invest in technology. While if you look at China, we are really leading the world now in terms of digital sales of almost everything. So in insurance, you are seeing a growing trend of agents using technology to create their own IT. They do basically lead generation through social media. They basically use their own expertise to create digital IT. And some of the recent trends we're seeing is that there's going to be a trend of using AI to drive a lot of those tasks. And so we think we are at a point where technology can drive consolidation of the brokerage market in Hong Kong and in Southeast Asia. And Fanhua is very well positioned to take advantage of that, given our expertise. We have 25 years of experience of selling P&C and life insurance products online and offline. And we have proven that in China we also have the financial resources to invest in this area. I mentioned earlier, each quarter we're basically spending about RMB20 odd million on technology. So we are very confident that this is the right path. And so please give us some time to find the right partner to pursue this path outside of China.

As Chairman who stated in his opening remarks, right, I mean China right now gone through a transition where old model of production again phased out, and new model of production are developing. So we can share with you four observations. So the staff community in China right now is a bit weak, and it's because the risk appetite for investors has declined. The other observation is in terms of consumption, obviously, consumers in China are cautious coming out of COVID. And there's obviously some evidence that there is a bit of consumption downgrade of daily products. The third point we can share with you is that social stability is still very evident, although the confidence level across industry is facing some challenges, but we are seeing signs that they are recovering. So in conclusion, look, every industry in China is going through a period of transition from old models of production to new models of sustainable production. We are all looking for new engines of growth. This will take one to two years to develop and become evident. What Mr. Wu can share with you all is that this new production process will also involve a lot of new tools, including artificial intelligence. We think that the adoption of new technology and tools will become very apparent over the next two years. So if you take insurance industry, for example, right? The last three years, everybody across the value chain in the insurance industry have been looking for a new way out. Looking for new models to develop sustainable growth. And what you've seen is that there's a growing trend of using technology to meet customer needs. It's becoming very visible that traditional mass agent model, that commission driven sales process needs to change. We see the adoption of artificial intelligence; we see the adoption of customer demand as the key tools to drive higher quality growth looking ahead. So what we are going through in the insurance industry we think really applies to other industries in China. Everybody's basically going from a pretty rough business model or operating model to a more higher quality, sustainable model. We have walked this path over the last three years and from all indications you can see that we are starting to get the results. So we are confident that if we can walk this path, a lot of industries and companies in China can also walk this path as well. So we remain pretty confident on the outlook of the Chinese economy over the long term.

[Operator Instructions] Our next question come from Xue Zhang from CICC.

I have two questions. And the first one is related to the product supply strategy and your sales momentum. We know that the 3.5% pricing traditional life products now is not allowed to sell, and in this case, many insurers and workers have made changes in their product strategy. So could you share some more details on your product strategy for the second half of this year and by far in August? How is the sales momentum of your savings and protection products in your observation? And the second one is about your Open Platform. Could you share or more tell on how you view the growth prospects of the Open Platform strategy, what opportunities and challenges we may face, and also what are the agencies most favorite functions and services in our platform? And what updates will you make in the future? Thanks.

Look, just to answer your question. Obviously, post and pricing change in July, the August sales figures across the industry is not looking too great. It will take time for the industry to adjust. But our view is that going from 3.5% to now, 3% guaranteed products. In this market environment, these products are still attractive. So this change from our point of view, it will not bring catastrophic change to the industry in terms of demand. The reality is that every year in China now you're seeing 20 million people entering the age 60 and above bracket. And over the next few years the projections are every year on an accumulate databases there will be 300 million people entering the age 60 and above category. And this category of elderly population in China, they will still have demand for low risk savings products. And so we're still pretty confident that we will go for a short term adjustment. But the medium to long term outlook in terms of demand for insurance product in China still remains very, very robust. So look, obviously we think these guaranteed return products will put pressure on insurers investment capability in the declining interest rate environment. And as a result, we foresee that we could see some product mix changes going forward as well. For example, we see annuity products as a very attractive product category. We see elderly health insurance as an untapped market. Although, we have a large amount of people in China entering 60 years or above category, this is still a pretty young age group given China's improving life expectancy. And it could be a good risk category for insurers to underwrite health insurance. And lastly, we think the industry will also move towards more customized and differentiated products. We think what will be standardized is really these investment products, but we also see the opportunity for insurers to offer differentiated products through services.

And maybe I'll just add to Mr. Hu's point that obviously there are some voices out there that the regulator should encourage insurers to also develop participating products in a low rate environment. But obviously, the industry concern is miss selling once you go through a period of selling guaranteed products. There's always concern about miss selling when you move towards non-guaranteed products. Our take is that the only way to reduce this risk is through professionalizing the salesforce. And this is an area that we are a very strong advocate of.

So in terms of how we work with our suppliers, our upstream, the manufacturers insurance companies, we are taking a more defensiated approach now. We want to work with suppliers who have strong solvency margin, good investment capability and service capability. And with those suppliers, our intent is to codevelop defensiated products and services to meet the demands of our clients. So in terms of the challenges facing by our Open Platform, the challenge is really also the opportunity for us. Right now the sales process over the last decade, the sales process in China has been driven by the mass agent model, and the focus on digital tools was not very prevalent. It's all about recruiting. And so that has led to a series of problems and challenges that's facing by the industry right now. But we think that these constraints are basically opportunities for us, right? So for a lot of the brokers, they're constrained by capital, in terms of capital investment into technology, they're also constrained by the fact that in a lot of the commission agreements they have with insurance companies. There is no specific mandate for them to invest in technology. But we think as the industry goes from mass agent to professional agency with a small number of insurers serving still the same size market or growing market there will be a need for automation of the sales process. And so we think the industry needs to invest in infrastructure to support digital and also artificial intelligent based selling. And that's an area where Fanhua we think we have the resources and the experience to do this. I mean, what we're doing in terms of Open Platform is obviously something that's quite new, not only in China, in my view, but across the region. But as you can see from our results over the last two quarters. Our execution on our Open Platform strategy is leading to more and more people recognizing that it is a very viable strategy. It is now one third of our business in a very, very short period of. So since August, obviously the industry numbers are pretty bad, and we recognize that a lot of our peers are basically facing growth challenges. They're looking for new modes of growth. They're looking for new tools to help them grow. So on the 25 September in Xinjing at 1010 headquarters, we are going to host Fanhua’ Open Platform Day to basically illustrate all our capabilities and what we can bring from them. Okay. To answer your question about what value do we bring to these independent brokers from our Open Platform? We would like to share with you five things. Firstly is obviously the products and services they can get from our platform insurance products, mutual funds, retirement products, et cetera. And then secondly is digital operation. So we provide them the tools to conduct transaction digital training, et cetera. And then thirdly is professional training. We basically offer a comprehensive training schedule from risk management to retirement needs as well as family consultation. So for a lot of these agents, what we want to do is basically develop a full time career path for them so that they become competent not only in selling insurance, but a full range of financial services products. And then fourthly is capital support, and we think that's going to become increasingly more important. Some of you probably aware that the regulator has already started changing the commission structure of the bank assurance channel. We think it's likely that they're going to change the commission structure for the broker channel as well. We think that they're likely to reduce the first year commission and put more weighting on renewal commissions. And as a result, that's going to bring challenges for a lot of our peers, particularly the smaller ones that lack capital and scale. And we think this is an area where we could, without significant capital resources, could provide support. And then lastly is in terms of future technology and tools. We think that we are at a juncture where artificial intelligence and large data modeling is becoming an essential part of the sales process for our business. And so this is an area where we're going to continue to invest. Some of you may know, to give an example, we were speaking to some insurance executives from overseas recently who are in China for a tour, and we show them Suzuzen, digital avatar, basically insurance agents providing in front of a camera, but turn themselves into a digital person where they can sell insurance through TikTok or Douyin in China. In the past, they have to go to a studio to record this, and they can probably only sell during a certain period of time, but through artificial intelligence now we basically can create these contents with speed and more importantly, with flexibility. So these are the use cases of artificial intelligence that could be adopted in our industry. Thank you.

Thank you. I see no further questions at this time. I will turn the call back to Oasis Qiu. Thank you.

Thank you. Thank you for participating in today's conference call. If you have any further questions, please feel free to contact us. Thank you.

This concludes today's conference call. Thank you all for participating. You may now disconnect.

Thank you for standing by for Fanhua's First Quarter 2023 Earnings Conference Call. [Operator instructions] I would now like to turn the meeting over to your host for today's conference, Ms. Oasis Qiu, Fanhua's Investor Relations Manager.

Good morning. Welcome to our first quarter 2023 earnings conference call. The earnings results were released earlier today and are available on our IR website as well as on Newswire. Before we continue, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provision of the US Private Securities Litigation Reform Act of 1995. The accuracy of this statement 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 Chairman and Chief Executive Officer, Mr. Yinan Hu; Chief Financial Officer, Mr. Peng Ge; Chief Operating Officer, Mr. Lichong Liu. Mr. Hu will provide a review of our financial and operational highlights in the first quarter 2023. There will be a Q&A session after the prepared remarks. Now, I will turn the call over to Mr. Hu.

Good morning and good evening. Thank you for joining today's conference call. I will be repeating some of the highlights of our first quarter results reported last week in our earnings release. As we mentioned, with the positive macro and industrial environment over the first quarter of 2023, Fanhua achieved strong results over the period with solid growth across various key operating metrics. Total premiums up by 29% to RMB4.4 billion, significantly outpacing life insurance industry premium growth of 8.9%. New business premiums up by 51.4% to RMB851.9 million, significantly above the 15% growth rate achieved by the listed Chinese life insurers. Total revenues up by 20.6% year-on-year to RMB827.7 million, and operating income was up by 193.1% to RMB60.4 million, significantly exceeding our previous estimate. For this quarter, we have express service hours relative to our industry and key list to insurance peers we have made this comparison to demonstrate that we are executing on our well-defined strategy of driving sustainable growth in our business through professionalism, specialization, digitalization and open-platform. This strategy is starting to set us apart from our competitors as demonstrated by our first quarter results. Next, please allow me to go over three key operation highlight that are direct results from the execution of our strategy. Firstly, our strategic focus on quality growth produces significant increase in agent quality and productivity. Our number of 100k premium agents and Million-Dollar Round Table members professional agents grew 27% year-on-year. The productivity of this high performing agents also grew by 18% and 37% year-on-year, respectively. And together, they accounted for 42% of our sales over the period, up from 32% in the same period last year. Secondly, we are already seeing material contribution from our open-platform and our acquisitions over the past two quarters. As at the end of the quarter, our Open Cloud Service Business division has connected with over 300 external institutions and grew new business premiums by over 100% to over RMB80.6 million. We are also executing on that strategy of consolidating the industry through M&A and made three acquisitions over the period, including [indiscernible], a leading managing general agent in China, as well as two other leading agency companies. Looking ahead, we aim to utilize the managing general agent model to accelerate the consolidation of license small to medium insurance intermediaries in the market. As of the end of the quarter, [indiscernible] is connected with 400 licensed brokers and contributed RMB119 million in new business premium over the quarter. Finally, our strategic focus on digitalization is also delivering material operational gain. The execution of our digital strategy is not only leading to higher productivity for agents on our platform, but also helping us drive improvement in customer service and business quality. During the quarter, both the 13 months and 25 months persistency ratios improved to industry-leading levels of 93% and 87%, respectively. Achieving higher persistency ratios translate to higher quality of business for our insurance clients, and in turn drives renewal bonuses for our business. The digital focus when combined with the open-platform strategy has allowed us to deliver significant economic scale and operational efficiency improvements. This is reflected in a substantial reduction in operating expense ratio to 25.9% from 31.3% in the same period last year, despite significant increases in investment, in digitalization and open-platform initiatives to RMB21.3 million in the first quarter 2023, up from [indiscernible] in the same period last year. And here we like to mention that the acquisitions we have thus far have only delivered revenue contribution, instead of operating income contribution, as we are still in the process of integrating this acquired entities into Fanhua, and the results were not yet reflected in our financial results in the first quarter. However, as the integration of IT and [indiscernible] system completed in the second half of this year, we expect to see material expense synergies and revenue synergies to be reflected in our future results. Our operational target for 2023 is to grow our life insurance policy premium and operating profit by 50% and no less than 50% year-on-year. We believe the first quarter's strong [indiscernible] will lay a solid foundation for us to achieve this full year target. And we are also confident that for the second quarter, we will also be able to achieve or exceed our target, and we're also make improved preparation for the third quarter and the second half. To fully prepare for the second half, and as well as our future -- in the future year, in the next few years, we will continue to stick to our strategy of pursuing sustainable growth through professionalism, specialization, digitalization and open-platform. And in the coming quarters, we will focus on the strategy execution on the following initiatives. Firstly, we continue to expand our service offerings to establish our differentiated competitive advantages, focusing on serving the diverse needs of our customers and their families over the entire cycle -- entire lifecycle by facilitating insurance sales in various service settings, leveraging on our abundant [indiscernible] resources, including insurance trusts, health care, elderly care services, and education solutions. Secondly, we plan to train 3,000 external candidates as Fanhua's Family Office Consultants, or FOC, thereby helping us to attract top talent in the industry. And this year we plan to increase spending on hosting this FOC training courses for the -- the insurance trust training courses to train and certify 3,000 external elite agents, Increasing professionalism and providing another point of differentiation. Thirdly, we will implement full license holder plan among our agents. In response to the regulatory requirements for Tier [ph] management of agents, we will provide targeted training to our top agents including those who are MDRT members, according to their personal professional levels, to help them obtain financial professional qualifications and certifications so as to further improve their professional image and productivity. Firstly, we intend to accelerate market consolidation through open-platform strategy and M&A. We plan to fully open our platform to the industry to develop digital talents, particularly targeted and dedicated independent sales teams who can bring in high-quality business. For 2023, our target is to migrate by 100 of our platforms institutional customers to our digital tenant system. 2023 is an important year for Fanhua. It marks the 25th anniversary of our company. It is a milestone that fills each and every one of us at Fanhua, which we are truly proud for. Over the past 25 years, we are proud that we have navigated through China's economic and financial industry cycles, this time emerging stronger than before. For me personally, this is my second time being Chairman and CEO of Fanhua, having led the position of being CEO of the company in 2011 and now the position of being Chairman of the company in 2017. This is a company I founded 25 years ago. By no exaggeration, it's my second child and I have always had the best interest of the company at heart. Looking ahead, we intend to invest significantly in our human resources capability to attract the best individual talents in the market, across all levels, from the Board level, to senior managers, to our frontline agents, we are confident that was the right strategy, the right team and the right execution, Fanhua -- we will create over the next 25 years and beyond we will be able to deliver the results expected from all our stakeholders. This concludes my presentation. Now the floor will open for your questions. Thank you.

[Operator Instructions] Our first question comes from the line of Yuyu [ph] Zhang from CICC. Please go ahead, Yuyu.

So the first question was related to the finished product demand [ph]. So previously, China insurance regulator has asked insurers to lower estimated returns for new products. So do you see those [indiscernible] products? And how do you expect the momentum of savings product sales? And the second question, we also see in the last year and the Q1, the average take rate of the [indiscernible] so strong gradually. We know it's mainly due to the changing product mix and reduced [indiscernible] commission. I think it's a really a negative impact on our brokerage income, while our FYP [ph] has a really good performance. So could you share some more color on how you see the future agenda of your take rate and what actions [indiscernible]. And last question is in terms of the open-platform strategy. In the previous conference call you said you plan to invest or acquire around 10 small or middle sized insurance agencies and [indiscernible]?

Thank you for the questions, Yuyu. This is CEO Mr. Yinan Hu. Mr. Hu, will like to invite Mr. Liu Lichong, our Chief Operating Officer to address the first question. And our CFO to answer your second question regarding the trend in our commission rate, and he himself will answer your third question regarding to the M&A progress.

So with the imminent downward adjustment in the guarantee returns from life insurance products in the new product pricing, we do see very strong demand for savings products, including annuity and whole life insurance products. However, in the second half, how will that change? We still believe that for the longer term, the demand will remain robust for savings products because of the three contributing factors. Firstly, we've seen the acceleration in ageing populations and lower risk appetite among consumers. And why the ageing population still have very strong demands for products that can cater to their needs in their retirement. And then secondly, we have seen the downward trend in interest rate in the long-term. So even though the [indiscernible] interest rate for new product pricing are [indiscernible] downward to 3%, that still provides a quite attractive returns. And thirdly, with the softening economy, we're seeing a kind of consumption downgrade and also investment product downgrade in terms because of the softening economy did not mainly attractive in that [indiscernible] choices, or why insurance do offers a safe as a kind of safe asset class. Thank you.

CFO would like to answer this question. First of all he would like to clarify on the definition of commission rates. And from insurance point of view we've actually seen that the commission rate will probably in the downward trend to be in line with the international practice as well as regulators requirements, or regulators wish to lower the costs -- financial costs for financial institutions in China. And then for Fanhua -- and because we sell a wide variety of products, so, product, the changes in product mix as well as the term that customers choose to pay their premiums will have impact on the overall commission rate. However, if on the basis of annualized equivalent -- annualized premium equivalent basis, our first year commission rates remains quite high. And -- but having said that, I would like to emphasize that the key operating matches that the company ought to focus on our first year premiums, net revenues and gross margin, as well as persistence ratio. I think this are the better operating matches to measure the company's financial health. As Mr. Liu mentioned that there will be some changes in savings products with the upcoming transition to the new product pricing, which means that the cost for insurance company will be lower. And for -- probably that will impact our sales capabilities in the short-term. However, in the longer term, we still believe that the demand for savings products will remain robust. And also, having said that, we still believe that for established -- for insurance intermediaries the key -- their key competitive advantage should be on the ability to offer a comprehensive service or comprehensive solutions to address customers diverse demands, instead of simply selling insurance products. As Mr. Liu mentioned that we are actually -- would like to offer -- further broaden our service offerings to include trust services, health care, and now [indiscernible] as well as education solutions to customers. And we believe this is -- are the key for us to further enhance our competitive advantages. Mr. Hu also mentioned that we target at growing our first year premiums and operating income by 50% year-over-year for 2023. I believe that if we can achieve this 50% full year target, we will also see a continued improvement in our gross margin, net profit margin as well as persistency ratio.

And this is Mr. Hu, CEO of the company. He would like to address your questions on our M&A strategy. Basically, the industry is evolving towards the [indiscernible] of high-quality growth, which means that higher business quality with lower costs. What's happening in the market right now is actually in favor of our M&A strategy. Or i.e. created a much more favorable environment for us to pursue acquisitions. So we will stick to our open-platform strategy and M&A strategy. There's no change to our acquisition target for this year. M&A is not purely business combination. I think the basis for our acquisitions, moving light on technology, our digital capabilities and AI technology applications. In the longer term, we believe that technology will be a key contributors to drive business growth for insurance intermediary. And just found -- I'm quite confident that Fanhua has stayed far ahead of our peers in terms of IT investments and technological capabilities in China, as well as in Asia. However, right now in China, and in other Asian markets that we observed, technological investment is not really enough. And that's the key reason that restricts the further growth of insurance intermediaries. However, we believe that the demand for technology is quite strong. While we are also seeing that a lot of licensed insurance intermediary companies as well as independent agents cannot really afford to invest in IT systems on their own. So, the core of our M&A to export our digital technological advantages and digital capabilities. So that we can allow more insurance intermediary companies to benefit from Fanhua's technological advantages and help them to double their sales capabilities by lowering the operating expenses and building momentum for sustainable growth. And for our future M&A targets, we are actually looking at technological empowerment to this acquired entities and we pursue quality in data -- quality instead of quantity. Thank you.

Thank you. Our next question comes from the line of Dan Wong from JPMorgan. Please ask your question, Dan?

So, the questions from JPMorgan's. He has three questions. The first question is regarding our agents productivity. And the first quarter, we see a strong improvement in agent productivity. But probably that's because of a low base last year. And he will wonder whether or not the high productivity of our agents will be sustainable in view of the fees competition in the market. And the second question is regarding the company's share buyback plan to progress. The company announced a share buyback plan in December last year, but now that was the company's M&A strategy, probably the company would like to reserve a more cash in to pay for the acquisition. How the company's capital deployment plan to [indiscernible] and what's the plan for share buybacks? And the third question is regarding regulation. The regulator has adopted quiet time regulations to supervise the insurance intermediary markets. But we believe that with a more stringent compliance framework and a more stricter supervision on business quality of the company that will help the company to improve sales volume as well as lower risk. So what's the opportunity there for the company? Again, the three question will be divided among the management, our CEO Mr. Lu answer your first question regarding agent productivity. And Mr. Ge will answer the second question regarding share buybacks and Mr. Hu himself will answer your third question regarding litigation [ph]. We are actually seeing that over the past few years the number of agents that have dropped significantly in the market. And on the contrary the productivity of agents per capita per activity actually have been increasing. I believe that there are two reasons. First of all, the demand -- the customers demand has transitioned from kind of relatively lower end products, i.e. critical illness products to higher value products -- savings type of products. And for this type of statements product the ticket size is larger. And then secondly, because this product are more complicated and required a more comprehensive financial knowledge or knowledge involves management areas. So usually this type of products are so by higher agent, a higher end agent. And then secondly, for the critical illness products. They just kind of [indiscernible] has some work kind of replaced by online medical insurance products. And for those ages, who can only sell to critical Illness products, will naturally be repaid as well. So only those who are knowledgeable enough who have more comprehensive knowledge can stay in the industry. Fanhua has shifted our focus to serving middle class or high net worth individuals or ultra high net worth individuals. And this customers groups require more professional service by hired and customers or more professionals as agents. So that's why in the past few years, we have set up investments to recruit professional agents and to train professional agents, as well as increase our investment in digitalization to increase the empowerment to our agents to help them to improve their professional capabilities. And as a result, we have sought -- we have seen a 50% growth in a number of MDRT agents in the past years. And in the first quarter, we also see substantial growth in a number of MDRT agents. So we have this right strategy. And in addition to that, we believe that service is those acquiring food quite crucial. So that's why we have considered insurance plus services or insurance plus wealth management, Elderly cared insurance trust as this as important part of our overall strategy. The bleeder with this service offerings, our agents, our top agents will be able to serve the offerings, our agents, our top agents will be able to serve the diverse demands of our high-end customers. So with the customer demand and with the ability of the top agents, I believe that the policy amount of our -- the product that was out and so and also the productivity of our agents, men at quite high-level.

So Mr. Ge would like to answer your second question on share buyback. So, I believe that Fanhua is a quite responsible company to shareholders. I have recap on the use of capital no since IPO. We have spent around RMB1.7 billion on cash dividends since our IPO and spend around RMB700 million on share buyback, totaling RMB2.4 billion, which represented over 50% of our total operating cash flow, amounting to like RMB4 billion. So that shows our commitment to maximize shareholder returns. In the past 3 years since 2020, due to the COVID-19 and a softening economy, the industry has undergone substantial changes. Fanhua, however, has sticked to our strategy. And we have saw material contributions on execution of a strategy in the first quarter of 2023. In my view, I believe that our cash should be earmarked to build momentum for sustainable rapid growth in the future in the longer term. So including our initiatives, such as M&A. And because of what's happening in the past 3 years, our stock has been significantly undervalued. We believe that share buyback will be a much more efficient means to maximize shareholder returns compared to dividends. So that's why we announced a 20 million share buyback plan last December. And despite the restriction of the window [ph] period, and the restriction on the trading volume that company can buy, we have purchased about [indiscernible] ADS amounting to US$600,000. That's the progress that we've made in terms of our share buyback. I would like to add a comment on your first question. And this is also the strategy that we have that fit to over the past 15 years. We believe that no matter how its professional or how elite the sales agents are, if they only sells insurance products properly, it will not be sustainable for them to sustain high productivity by solely selling insurance products. So transition to become a financial advisors that can offer more comprehensive solutions to their customers covering not just insurance, but also insurance trusts, tax planning, or legal advisors, that will enable them to better serve customers demand and sustain higher productivity. And I believe that is a irreversible trend for agents to transition or transform themselves to become a financial advisors for their customers. So that will require a much higher -- that pose out to be a much high requirements on the compliance of the companies and on regulate -- on regulatory compliance. This is a huge challenge. But at the same time, it also pose great opportunities for the company. I believe that any companies who can help other institutions or independent agents to address the compliance issues, they will have the future. My long-term vision has been to transform the company from a sales insurance -- sales insurance intermediaries into a platform company or infrastructure platform provider to the industry. And this is what we've been pushing forward in the past few years. We're like we're dedicated to providing a infrastructure platform to the whole industry. And we're also working on building a unified compliance model and a unified risk management modeled on the basis our digital technology. Right now our existing organizations contributed 80% of our revenues. I'm hoping that in the future 60% of the revenues will be generated by the services or the platform services that was provided to the industry. The new regulation changes pose great challenges to a lot of industry players. However, we see it as a great opportunities for Fanhua. And in response to the market changes and [indiscernible] capture the market opportunities, we have returned Boston Consulting Group as our consultants to give us advices on our open-platform strategy. And so far, BCG has completed their first Phase of work, and this has had three helpers greatly and deliver great results. And I believe that this will be helpful for us to view our digital compliance model and digital risk management model going forward. Thank you.

Thank you. I'm showing no further questions. I'll now turn the conference back to Ms. Oasis Qiu for closing remarks.

Thank you for participating in our conference call. If you have any further questions, please feel free to contact us. Thank you.

Thank you. That concludes today's conference call. Thank you for participating. You may now disconnect.

Thank you.