Fanhua announced that, as part of its transition towards the fee-based property and casualty insurance platform model, it has entered into a share purchase agreement with Beijing Cheche Technology Co., Ltd., which operates an online auto insurance platform. Under this agreement, Fanhua agrees to sell the equity interests in Fanhua Times Sales & Service Co., Ltd., and its P&C insurance subsidiaries, to Cheche for total consideration of approximately RMB222M, which represents RMB130M above the combined net asset value of the P&C Insurance Division. Fanhua's plan to change its P&C insurance business from a commission spread-based profit model to a fee-based platform model was previously announced on August 22, 2017. Under the new model, Fanhua will give all participants in the P&C industry access to CNpad App, through which both P&C insurance providers and purchasers can transact directly with each other. The spin-off of its P&C Insurance Division marks an important step forward towards Fanhua's transition to the P&C insurance platform model. Starting from October 1, 2017, Fanhua will no longer charge insurance companies commissions and pay commissions to sales agents for the P&C insurance business. Instead, it will charge P&C insurance providers platform management and technology service fees based on the actual amount of premiums transacted over CNpad App. As the result of the transition, Fanhua expects a substantial decline in both of its total revenues and commission costs, while its gross margin is expected to improve significantly. The impact on its operating profit and net profit should be limited. From a long-term perspective, the Company expect this move will help elevate its overall profitability.
