Chunlin Wang
[Interpreted]. Hello, everyone. Thank you for joining us on today's conference call. I will begin today's call with a review of our third quarter 2012 financial and operating performance, followed by an update on the progress of our strategic transition. Then Mr. Peng Ge, our CFO, and I will go into the Q&A session. During the first nine months of 2012, China's insurance industry remained in the single-digit growth territory. Despite the challenging market environment, however, we are pleased to see that our total net revenues for third quarter 2012 grew 5% year over year, beating our previous guidance of flat growth. Looking at our three major business lines, Property & Casualty Insurance segment recorded 7% revenue growth year on year in the third quarter. But intensified competition forced us to increase commissions to our sales agents, which resulted in significant drop of our gross margin and weighted heavily upon our bottom line. Life Insurance segment, impacted by subdued sales in insurance industry, witnessed a decline in net revenues in the third quarter, but we're encouraged to see that the recurring life insurance premiums that were distributed continued strong growth momentum into the third quarter with a year-on-year growth of 30%, mainly attributable to long-term effect of life insurance business and high 13-month persistency ratio of over 81%. The growth of our claims adjusting business remained stable in the third quarter 2012, with net revenues increasing 7.9% from the year-ago quarter. Since I took over as CNinsure's CEO last October, I had been navigating the company through a transition and adjustment period during which we rolled out the following initiatives to push forward the strategic transition. I'm pleased that the transition plan has progressed in line with our expectation. Firstly, we had been simplifying our organizational structure in order to strengthen our corporate governance. In October we established CNinsure Sales Service Group Company Limited which is expected to serve as the PRC holding company for all of our affiliated insurance intermediary companies. This offers an effective way for us to move the VIE arrangements and build a [backdrop] to improve our corporate governance in order to further simplify our corporate structure. We plan to gradually change our wholly-owned affiliated insurance agencies into branches of our two nationally operating insurance agencies that are wholly controlled by the group company in the coming three years. Meanwhile, in five years' time we intend to buy out all the minority interests of our majority on affiliate insurance agencies and complete conversion of the subsidiaries into branches. From a regulatory perspective, as the CRIC is nurturing [inaudible] regulatory framework for large professional insurance intermediate companies to consolidate the market and grow stronger, we believe the establishment of the first insurance sales service group company by CNinsure in China enables us to nimbly seize the opportunities that such regulatory trend provides. Secondly, we have set up our efforts to construct the e-commerce platform, which is one of our strategic focuses during the transition period, and expect it to be one of our major drivers for future growth. As a result of our continued efforts, we have made two exciting breakthroughs in e-commerce development this year. In January we successfully launched a B2C customer insurance comparison website baoxian.com, which facilitates the full process transaction for insurance purchase. Nevertheless, in view of the immature insurance B2C market in China, we decided to suspend massive marketing investments in promoting the B2C website and concentrate more efforts to develop the mobile sales support system, a key component of our B2B model. The research and development process over the past two years has been with some difficulties in not only technology arena, but more importantly, the [product ties] capabilities to integrate with our system. Despite all the difficulties, we still [in line of] success and launch CNpad, the device of our mobile sales support system, in October. CNpad features a variety of functions encompassing insurance purchase, business management, information alert and image management. We believe it is a powerful weapon for agents to do business in a more efficient and cost-saving way. Attractive as it is to sales agents, it enables the insurer to reach to millions of sales agent force across China more easily. It also enables the company to break the limitation of traditional sales outlets and speed up sales network expansion through the distribution of CNpad which we believe will largely increase our sales volume. Currently CNpad primarily supports the purchase of all insurance, and we will gradually put other standardized insurance products on shelf, such as [healthcare] insurance, travel insurance and home insurance, etc. Going forward, we also plan to include products and services that require consultation such as life insurance, wealth management products, health management products, and other financial services products on the platform. On top of that, we also intend to integrate the auto insurance claims adjusting support application into CNpad, which we believe will help sales agents strengthen customer relationships and improve the operating efficiency within our auto insurance claims adjusting business. Currently, we are carrying out trial operation of CNpad in Guangdong province and plan to roll out a nationwide distribution by next June. In the coming three years we expect to sell 50,000 to 100,000 CNpads. We believe our strong brand awareness in professional insurance intermediary industry will power up our marketing plan that aims to further penetrate into the market. Thirdly, leveraging on our established life insurance sales network. We've devoted a lot of efforts to build up capabilities to offer comprehensive financial services and products to our clients, which we believe will become another powerful growth driver for CNinsure. While shifting our focus to penetrate into major cities and develop mid to high-end customer base, we started to cross-sell wealth management products early this year through our life insurance sales force. This business has been growing very fast in the past three quarters with the value of wealth management products that were distributed amounting to over RMB100 million per month. For the first nine months of 2012, the aggregate value of wealth management products distributed by CNinsure was approximately RMB590 million and the number of customers that have wealth management products through us was over 890 as of the end of third quarter 2012. Our life insurance business also benefited from strong sales of wealth management products which modestly boosted life insurance sales, and more importantly, substantially improved customer loyalty. Next year we plan to accelerate our network expansion into major cities, leverage on our advantages in diversified product offerings, multiple revenue sources, and flat team structure to attract more sales talents to join CNinsure to build up the best sales team in our life insurance intermediary companies and further expand the cross-sell of life insurance and wealth management products. Fourthly, we have taken various measures to streamline operations to seek quality growth instead of quantity growth. First, we abandoned cooperation with some channels which have lower margins and very high management risks. Second, we shut down sales outlets which are less productive. Third, we cleared out inactive and unproductive sales agents, particularly within our life insurance business segment. Fifthly, in face with the challenging competitive environment, we have chosen to safeguard our market position rather than near-term margin in order to preserve strength for long-term growth. In recent quarters, competition among [top 10 carrier] insurers have exacerbated amid market growth. They were offering higher discount and commissions and set up efforts to engage in direct channels such as telemarketing and online sales to gain market share. According to statistics, contribution from telemarketing in terms of premium was up over 100% for the first nine months of 2012. As a result, market commissions were driven up to an extremely high level and we have to pay more commissions to our sales agents to be competitive, which significantly reduced the gross margin of our P&C business and further squeezed our profit. However, we managed to maintain a positive growth of our property and casualty business despite the measures to streamline the operation. In addition, we believe that our P&C gross margin has hit bottom in the third quarter and we expect it to [enlarge] gradually. As 2012 is coming to an end, we are pleased to see the progress that we've made with the company strategic transition over 2012 which is also in line with our expectation. Looking ahead, we will continue to execute our strategies to bring CNinsure back on the growth track. Now we would like to open the floor for questions.
