Fanhua Inc. (FANH) Accused of Engaging in Irregular Accounting
According to the complaint, Fanhua Inc.(FANH) boasted that its first quarter 2018 financial results beat expectations. Fanhua further predicted that the company would achieve positive growth in annualized life insurance premiums in 2018, while anticipating that fast growth in its renewal business would continue. On August 27, 2018, SeekingAlpha reported that Fanhua was engaging in unsustainable and questionable business practices and described a history of alleged fraud within the company. The report accused Fanhua of grossly exaggerating its number of insurance sales agents and potential for growth and noted sharp discrepancies between operating income, earnings and operating cash flows, shedding doubt on Fanhua’s reported margins. On this news, Fanhua’s ADS price fell over 10%, to close at $23.40 on August 27, 2018.
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