AIX Reports First Half 2024 Unaudited Financial Results

Mr. Yinan Hu, Founder and Chief Executive Officer, commented: “In the first half of 2024, the implementation of the ‘UnifiedCommissions and Fees inReporting andUnderwriting'policy in the agency and broker channel has caused unprecedented disruption in thesector. Against this backdrop,we took a series of proactive measures andsteadily advanced our strategy of ‘professionalization, service ecosystem development, intelligence, open platform, and internationalization’ toensure stablebusinessoperations. In the first half of 2024, we achieved gross written premiums of RMB8.8 billion, with first year premiums of RMB1.4 billion, fully demonstrating our resilience.

“We are pleased that the first AI model in the insurance industry, 'Du Xiaobao' L2, co-developed byAIX and Baidu Smart Cloud, was launched for trial operation and has been well received among sales agents.We firmly believe that artificial intelligence will play an increasingly important role in insurance distribution. It will not only enhance the overall customer experience but also reshape the traditional insurance sales model, bringing new growth momentum to the industry. ‘Du XiaoBao’ is central to our intelligence strategy and will play a crucial role in driving our future competitiveness, propelling the Company toward greater growth and new breakthroughs.

- The number of platform professional users who used our Open Platform reached963 as ofJune 30,2024, generating RMB322.7 million in first year premiums, which accounted for26.8% of our life insurance FYP.

On July 4, 2024, the Board authorized the expansion of the Company's share repurchase program by an additional US$20 million, bringing the total authorized amount of share repurchase to US$40 million. Under the Company's previously authorized share repurchase program,as of June 30, 2024, the Company had repurchased an aggregate of 726,616 ADSs, at an average price of approximately US$7.5 per ADS for a total amount of approximately US$5.4 million.

Total net revenueswere RMB1.1 billion (US$154.0 million) for thefirst half of2024, representing a decrease of 42.7% from RMB2.0 billion for the correspondingperiodin2023.

l Net revenues for agency business were RMB901.0 million (US$124.0 million) for thefirst half of 2024, representing a decrease of48.6% from RMB1.8 billionfor the corresponding period in 2023. Total GWPwasRMB8.8 billion for the first half of 2024, remaining stable compared to the same period of 2023, of which FYP decreased by43.7% year-over-year to RMB1.4 billion while renewal premiums grew by16.7% year-over-year to RMB7.4 billion.

u Net revenues for the life insurance businesswere RMB828.6 million (US$114.0million) for thefirst half of2024, representing a decrease of50.2% from RMB1.7 billion for the corresponding period in 2023.The decreasewas mainly due to i) the decrease in commission rates paid by insurance companies and decline in sales volumn as the result ofthe implementation ofthe "Unified Commissions and Fees in Reporting and Underwriting"policy which imposed a commission cap in thebroker and agency channel and ii) a relatively high base from the sales spike before the downward pricing rate adjustment of life insurance products from 3.5% to 3%. Total life insurance GWPdecreased by0.7% year-over-year to RMB8.6 billion,of which life insurance FYP decreased by48.3% year-over-year to RMB1.2 billion while renewal premiums grew by16.7% year-over-year to RMB7.4 billion.

Net revenues generated from our life insurance business accounted for73.8% of our total net revenues in thefirst half of2024, as compared to84.8% in the same period of2023.

u Net revenues for the non-life insurance business (formerly categorized as “property and casualty insurance business”) were RMB72.4 million (US$10.0 million) for thefirst half of2024, representing adecrease of18.9% from RMB89.3 million for the corresponding period in2023. Net revenues generated from the non-life insurance business accounted for6.4% of our total net revenues in thefirst half of2024, as compared to4.6% in the same period of2023.

l Net revenues for the claims adjusting business were RMB222.1 million (US$30.6 million) for thefirst half of2024, representing an increase of7.0% from RMB207.6 million for the corresponding period in2023. The increase was mainly due tothe growth inauto insuranceclaims adjusting business. Net revenues generated from the claims adjusting business accounted for19.8% of our total net revenues in thefirst half of2024, as compared to10.6% in the same period of2023.

Total gross profitwas RMB424.6million (US$58.4 million) for thefirst half of2024, representing a decrease of29.0% from RMB597.7 million for the corresponding period in2023. By product line, the results were:

l Life insurance businessrecorded a gross profit of RMB323.8 million (US$44.6 million), representing a decrease of35.2% from RMB500.0 million for thefirst half of2023.The decrease was largely in line with the decrease in net revenues.Gross margin for the period was39.1%, as compared with30.1% in the same period of2023.

l Non-life insurance businessrecorded a gross profit of RMB26.1 million (US$3.6 million), representing an increase of10.6% from RMB23.6 million for thefirst half of2023, primarily due to the increased contribution from higher margin insurance brokerage business. Gross margin for the period was36.0%, as compared with26.4% in the same period of2023.

l Claims adjusting businessrecorded a gross profit of RMB74.8 million (US$10.3 million), representing an increase of0.8% from RMB74.2 million for thefirst half of2023. Gross margin for the period was33.8%, as compared with35.7% in the same period of2023.

Selling expenseswere RMB110.1 million (US$15.2 million) for thefirst half of2024, representing adecrease of15.8% from RMB130.8 million for the corresponding period in2023. The decrease wasprimarily due to cost savings from personnel optimization and decreasednumber of our sales outlets.

General and administrative expenseswere RMB259.6 million (US$35.7 million) for thefirst half of2024, representing adecrease of19.0% from RMB320.5 million for the corresponding period in2023.Thedecrease was mainly due topersonnel optimization anddecreased rental costs of branch offices at provincial level.

As a result of the foregoing factors, we recorded operating incomeof RMB54.9 million (US$7.6million) for thefirst half of2024, representing a decrease of62.5% from RMB146.4 million for the corresponding period in2023.

Operating margin was4.9% for thefirst half of2024, compared to7.5% for the corresponding period in2023.

Loss from fair value change was RMB73.7 million (US$10.2 million) for thefirst half of2024, whichprimarilyrepresented an unrealized holding loss of RMB82.5 million (US$11.4 million) in thefirst half of2024, to reflect the change in the fair value ofthe Company's 2.8% equity interests inCheche Group Inc. (“Cheche”), which was partially offset by anunrealizedincome of RMB8.8 million (US$1.2 million) representing the fair value change of thecontingentconsideration in regards to business combinations in the first quarter of 2023.

Investment income was RMB24.5 million (US$3.4 million) for thefirst half of2024, representing adecrease of2.0% from RMB25.0 million for the corresponding period in2023.Thedecrease reflects the periodic fluctuation in yields from short-term investments in financial products as it is recognized when the investment matures or is disposed of.

Income tax expense was RMB6.7 million (US$0.9 million) for thefirst half of2024, representing a decrease of82.5% from RMB38.3 million for the corresponding period in2023.

As a result of the foregoing factors,net income attributable to the Company’s shareholders was RMB4.7 million (US$0.7 million) for thefirst half of2024, representing a decrease of 96.6% from RMB137.0 million for the corresponding period in2023.

Net margin was 0.4% for thefirst half of2024, as compared to7.0% for the corresponding period in2023.

Adjusted EBITDA2 was RMB77.7million (US$10.7million) for thefirst half of2024, representing a decrease of56.4%from RMB178.2million for the corresponding period in2023.

Adjusted EBITDA margin was 6.9% for thefirst half of2024, as compared to9.1% for the corresponding period in2023.

Basicand dilutednetincome per ADS were RMB0.09 (US$0.01) and RMB0.09 (US$0.01) for thefirst half of2024, respectively,representing a decrease of 96.5% and 96.5% fromRMB2.54 and RMB2.54 for the corresponding period in2023, respectively.

Basic and diluted adjusted EBITDA per ADS were RMB1.45(US$0.20) and RMB1.45 (US$0.20) for thefirst half of2024, representing a decrease of56.2% and56.2% from RMB3.31and RMB3.31for the corresponding period in2023, respectively.

As of June 30,2024, the Company had RMB770.1 million (US$106.0 million) incash, cash equivalents and short-term investments, as compared with RMB1.6 billionas of June 30, 2023. The decrease was due to loans provided to third parties amounting to RMB705 million in the aggregate, among which loans of RMB610 million have been pledged with equity interests as collaterals and fully guaranteed by the controlling shareholder of the debtor as of the date of this announcement. The loans to third parties all have one-year term with an average annual interest rate of 5%.

l As ofJune 30, 2024, excluding newly acquired entities,AIX’s distribution network consisted of539 sales outlets in 24 provinces and69 services outlets in 31 provinces as ofJune 30, 2024, compared with 606 sales outlets in 24 provinces and89 services outlets in 31 provinces as ofJune 30, 2023. The decrease in the number of sales outlets reflected our focus on growing profitable branches, coupled with the challenging decisions to close those which were not yielding profits. The number of the Company's in-house claims adjustors was2,457 as ofJune 30, 2024, compared with2,120 as ofJune 30, 2023.

Driven by its digital technologies and professional expertise in the insurance industry,AIX Inc. is the leading independent financial service provider in China, focusing on providing insurance-oriented family asset allocation services that covers customers’ full lifecycle and a one-stop service platform for individual sales agents and independent insurance intermediaries.

This press release contains statements of a forward-looking nature. These statements, including the statements relating to the Company’s future financial and operating results, are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as “will,” “expects,” “believes,” “anticipates,” “intends,” “estimates” and similar statements. Among other things, management’s quotations and the Business Outlook section contain forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections aboutAIX and the industry. Potential risks and uncertainties include, but are not limited to, those relating to its ability to attract and retain productive agents, especially entrepreneurial agents, its ability to maintain existing and develop new business relationships with insurance companies, its ability to execute its growth strategy, its ability to adapt to the evolving regulatory environment in the Chinese insurance industry, its ability to compete effectively against its competitors, quarterly variations in its operating results caused by factors beyond its control including macroeconomic conditions in China. Except as otherwise indicated, all information provided in this press release speaks as of the date hereof, andAIX undertakes no obligation to update any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. AlthoughAIX believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that its expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results. Further information regarding risks and uncertainties faced byAIX is included inAIX’s filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F.

In addition to the Company’s consolidated financial results under generally accepted accounting principles in the United States (“GAAP”), the Company also providesadjusted EBITDA,adjusted EBITDA margin and basic and diluted adjusted EBITDA per ADS, all of which are non-GAAP financial measures, as supplemental measures to review and assess operating performance. Adjusted EBITDA is defined as net income before income tax expense, share ofloss of affiliates, investment income, interest income, financial cost, depreciation, amortization of intangible assets, share-based compensation expenses andchange infair valueofequity investmentsand contingent consideration. Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of net revenues. Basic adjusted EBITDA per ADS is defined as adjusted EBITDA divided by total weighted average number of ADSs of the Company outstanding during the period. Diluted adjusted EBITDA per ADS is defined as adjusted EBITDA divided by total weighted average number of diluted ADSs of the Company outstanding during the period. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company’s performance and when planning and forecasting future periods.The Company’s non-GAAP financial measures do not reflect all items of income and expenses that affect the Company’s operations. Specifically, the Company’s non-GAAP measures excludeinterest income, investment income, financial cost, income tax expense, depreciation, amortization of intangible assets,share ofloss of affiliates, share-based compensation expenses andchange infair valueofequity investments and contingent consideration. Further, these non-GAAP financial measures may not be comparable to similarly titled measures presented by other companies, including peer companies. The presentation of these non-GAAP financial measures has limitations as analytical tools, and investors should not consider them in isolation from, or as a substitute for analysis of, the financial information prepared and presented in accordance with GAAP. We encourage investors and other interested persons to review our financial information in its entirety and not rely on a single financial measure.

“Reconciliations of Net Income to Adjusted EBITDA and Adjusted EBITDA Margin” set forth at the end of this press release.