Correspondence 0001104659-24-093608 from Noah Holdings Ltd (NOAH) (CIK 0001499543) (NOAH)
Noah Holdings Ltd (NOAH) (CIK 0001499543)
Date: Aug. 28, 2024 · CIK: 0001499543 · Accession: 0001104659-24-093608
AI Filing Summary & Sentiment
File numbers found in text: 001-34936
Referenced dates: August 15, 2024
Letter
VIA EDGAR Division of Corporation Finance Office of Finance Securities and Exchange Commission Washington, D.C. 20549 Re: Noah Holdings Limited (the “Company”) Form 20-F for the Fiscal Year Ended December 31, 2023 File No. 001-34936
Dear Mr. Thomas and Ms. Empie:
This letter sets forth the Company’s responses to the comments contained in the letter dated August 15, 2024 from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) regarding the Company’s annual report on Form 20-F for the fiscal year ended December 31, 2023 filed with the Commission on April 24, 2024 (the “2023 Form 20-F”). The Staff’s comments are repeated below in bold and are followed by the Company’s responses thereto. All capitalized terms used but not defined in this letter shall have the meaning ascribed to such terms in the 2023 Form 20-F.
Form 20-F filed April 24, 2024
Item 5. Operating and Financial Review and Prospects
Components of Results of Operations
Revenues, page 112
1. Please provide us with and revise, in future filings, to include a detailed discussion of the Company’s business of referring clients to purchase insurance products from insurance companies. You should address the following:
· types of insurance companies in which the company has relationships,
· the types of insurance products being purchased by the Company’s customers,
· the range of commissions being recognized on the different types of insurance products being purchased, and
· the nature and terms of the contractual arrangements with the insurance companies.
Division of Corporation Finance
Office of Finance
Securities and Exchange Commission
August 28, 2024
Page 2
Response:
The Company acknowledges the Staff’s comments. In response to the Staff’s comments, the Company intends to add disclosure in substantially the same form as follows in future filings at a place equivalent to the end of page 64 of the 2023 Form 20-F, with the added disclosure underlined for ease of reference:
Referral of Insurance Products
We distribute insurance products by referring clients to purchase insurance products and earn commissions from insurance companies. We focus on referring long-term life insurance products to our high-net-worth individual clients to fulfill their diversified investment needs.
We primarily partner with reputable international or regional insurance companies in Hong Kong, Singapore, United States, Bermuda and mainland China with the most competitive long-term life insurance products.
The insurance products we distribute for our partners are mainly life and health insurance products. Such products can be broadly classified into the categories set forth below. Due to constant product innovation by insurance companies, some of the insurance products we distribute combine features of one or more of the categories listed below:
· Individual Whole Life and Annuity Insurance. The individual whole life insurance products we distribute provide insurance coverage for the insured person’s entire life in exchange for the periodic payment of fixed premiums over a pre-determined period, generally ranging from five to 20 years, or until the insured reaches a certain age. The face amount plus accumulated interest is paid upon the death of the insured. The individual annuity products we distribute generally provide annual benefit payments after the insured attains a certain age, or for a fixed time period, and provide a lump sum payment at the end of the coverage period. In return, the purchaser of the annuity products makes periodic payments of premiums during a pre-determined accumulation period.
· Participating Insurance. The participating insurance products we distribute not only provide insurance coverage but also pay dividends generated from the profits of the insurance company providing the policy. The dividends are typically paid on an annual basis over the life of the policy. In return, the insured makes periodic payments of premiums over a pre-determined period, generally ranging from five to 25 years.
· Individual Health Insurance. The individual health insurance products we distribute primarily consist of critical illness insurance products, which provide guaranteed benefits when the insured is diagnosed with specified serious illnesses, and medical insurance products, which provide conditional reimbursement for medical expenses during the coverage period. In return, the insured makes periodic payments of premiums over a pre-determined period.
Division of Corporation Finance
Office of Finance
Securities and Exchange Commission
August 28, 2024
Page 3
The commission rate that we receive from insurance companies is determined based on various factors such as the type of insurance products, the payment schedule of the insurance policy, the region in which the insurance products are sold, and the particular insurance company. In general, for the insurance policies that we distribute with a periodic payment schedule, insurance companies will pay us a first-year commission and fee based on a percentage of the first-year premiums, and subsequent commissions and fees based on smaller percentages of the renewal premiums paid by the insured during the first few years of renewal term. As such, once we distribute a life and health insurance policy with a periodic payment schedule, we expect it to bring us a steady flow of commission and fee during the renewal term as long as the insured fulfills his or her premium payment commitment and continuously renews the policy. Since our referral service is substantially completed on day one, we record revenue from commission income as one-time commissions which includes the first-year commission and a best estimate of the commissions we may be entitled to receive during the renewal periods.
We enter into framework referral service agreements with insurance companies for the insurance product that we distribute. Under these agreements, we typically undertake to refer and recommend the relevant insurance products offered by the insurance company to our clients, in return for a commission from the insurance company. We deliver the services as an independent contractor and undertake to exercise due care and skill in our services. Each party may have the right to terminate the framework agreement with advance notice or immediately in certain specified circumstances. We are typically subject to confidentiality obligations and obligations to protect the intellectual property of the insurance company under the framework agreement.
With respect to the third point (the range of commissions being recognized on the different types of insurance products being purchased), the commission rate for each insurance product with each insurance company is negotiated individually, based on various factors such as the type of insurance products, the payment schedule of the insurance policy, the region in which the insurance products are sold, as well as the Company’s bargaining power vis-à-vis the particular insurance company. As a result, the commission rates vary significantly across different products and different insurance companies. Disclosing a wide range of commission rates would not provide investors with meaningful information. The Company also considers commission rates to be competitively sensitive information and is not aware of other comparable public companies with a similar business disclosing such information. Furthermore, the Company is bound by confidentiality obligations under its agreements with insurance companies that prevent it from disclosing confidential information such as commission rates, as such information is considered competitively sensitive by insurance companies as well. Instead of disclosing the range of commissions, the Company, as proposed above and below, intends to describe qualitatively how the commission rates are generally determined and disclose the revenue generated from the distribution of insurance products during the past three years and details of the insurance products, insurance companies and other key aspects of this business. The Company believes that such disclosure contains the material information about this business and is sufficient for investors to understand this business and gauge its scale and quality as a source of revenue.
Division of Corporation Finance
Office of Finance
Securities and Exchange Commission
August 28, 2024
Page 4
2. Further, please provide us with and revise your disclosures, in future filings, to include a detailed discussion as well as quantifying, each of the different types of one-time commissions and the renewal commissions recognized on each of the wealth management products offered in addition for the periods presented.
Response:
The Company acknowledges the Staff’s comments. The Company respectfully advises the Staff that other than the renewal commissions from insurance products, the Company does not earn any renewal commissions from other investment products. As explained in response to comment #1 above, for insurance products, both the first-year commission and the renewal commissions are recognized as one-time commissions for revenue presentation.
The Company intends to add a table and discussion in substantially the same form as follows in future filings at a place equivalent to below the third paragraph on page 114 of the 2023 Form 20-F, with the added disclosure underlined for ease of reference:
The table below sets out one-time commissions of the different types of investment products that we distributed during the years indicated:
Years Ended December 31,
(in thousands of RMB)
One-time Commissions
Private secondary products(1) 49,911 37,974 [*]
Private equity products(1) 88,808 26,467 [*]
Mutual fund products(1) 16,761 10,445 [*]
Insurance products(2) 525,458 1,014,267 [*]
Others(1) [*]
Total 681,447 1,089,203 [*]
(1) One-time commissions generated on these types of products represent the one-off fees we receive for distributing such products. Clients typically make an upfront payment at the beginning for subscribing for these products, and we receive a commission based on a percentage of the subscription price from the product providers or the funds. No renewal payment needs to be made from clients.
(2) One-time commissions generated on insurance products represent the aggregation of the first-year commission and a best estimate of the commissions we may be entitled to receive during the renewal periods. In general, for the insurance policies that we distribute with a periodic payment schedule, insurance companies will pay us a first-year commission and fee based on a percentage of the first-year premiums, and subsequent commissions and fees based on smaller percentages of the renewal premiums paid by the insured during the first few years of renewal term.
In 2022, 2023 and 2024, we generated one-time commissions of RMB681.4 million, RMB1,089.2 million and RMB[*] million, respectively. All revenue generated from the distribution of insurance products was recorded as one-time commissions, contributing 77.1%, 93.1% and [*]%, respectively, of the total one-time commissions during these years. With the easing of pandemic-related travel restriction in mainland China in late December 2022, more mainland Chinese clients were able to travel to Hong Kong and Singapore to purchase insurance products, leading to a 93.0% increase of one-time commissions generated from insurance products in 2023. In line with a 70% decrease of transaction value of private equity products, the one-time commissions generated from distributing private equity products also decreased by 70.2% from 2022 to 2023. The one-time commissions from private secondary products and mutual fund products decreased by 23.9% and 37.7%, respectively, mainly due to decreases in fee rates from 2022 to 2023. [To discuss material fluctuations between 2023 and 2024]
Division of Corporation Finance
Office of Finance
Securities and Exchange Commission
August 28, 2024
Page 5
3. Please provide us with and revise, in future filings, to address the reasons for the changes in interest income recognized as a result of the changes in the interest earning assets and weighted averages interest rates earned during the periods presented.
Response:
The Company acknowledges the Staff’s comments. In response to the Staff’s comments, the Company intends to revise the disclosure, in future filings, in substantially the same form as the following paragraph (located on page 118 of the 2023 Form 20-F) , with the added disclosure underlined for ease of reference:
Interest Income. The interest income increased by 163.7% from RMB61.4 million in 2022 to RMB161.9 million in 2023. The interest income from cash and cash equivalents denominated in Renminbi increased by 9.0% from RMB53.3 million to RMB58.1 million, mainly due to a 5.2% increase of cash balances denominated in Renminbi and weighted average interest rate is around 2.0% in 2022, and 2.1% in 2023. The interest income from cash and cash equivalents denominated in US dollars increased significantly from RMB8.1 million to RMB103.9 million due to the fact that (i) our cash balances denominated in US dollars increased by 58.4% from 2022 to 2023; and (ii) our weighted average interest rate for US dollars also increased from 0.6% in 2022 to 4.3% in 2023 benefiting from multiple interest rate raises by the US Federal Reserve.
Division of Corporation Finance
Office of Finance
Securities and Exchange Commission
August 28, 2024
Page 6
Note 2. Summary of Principal Accounting Policies
(w) Loans Receivable, net, page F-25
4. Please provide us with and revise, in future filings, to include accounting policies which includes the accounting guidance being followed, for both loan charge-offs and the acquisition of purchased credit impaired loans.
Response:
The Company acknowledges the Staff’s comments. In responses to the Staff’s comments, the Company respectfully advises the Staff that it intends to revise the disclosure in Note 2(w)
Show Raw Text
CORRESP
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filename1.htm
Noah Holdings
Limited
No. 1226, South Shenbin Road, Minhang District,
Shanghai, People’s Republic of China
+86 (21) 8035-8292
August 28, 2024
VIA EDGAR
Mr. Marc Thomas
Ms. Lory Empie
Division of Corporation Finance
Office of Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Noah Holdings Limited (the “Company”)
Form 20-F for the Fiscal Year Ended December 31, 2023
File No. 001-34936
Dear Mr. Thomas
and Ms. Empie:
This letter sets forth the Company’s responses
to the comments contained in the letter dated August 15, 2024 from the staff (the “Staff”) of the Securities
and Exchange Commission (the “Commission”) regarding the Company’s annual report on Form 20-F for the fiscal
year ended December 31, 2023 filed with the Commission on April 24, 2024 (the “2023 Form 20-F”). The
Staff’s comments are repeated below in bold and are followed by the Company’s responses thereto. All capitalized terms used
but not defined in this letter shall have the meaning ascribed to such terms in the 2023 Form 20-F.
Form 20-F filed April 24, 2024
Item 5. Operating and Financial Review and Prospects
Components of Results of Operations
Revenues, page 112
1. Please provide us with and revise, in future filings, to include
a detailed discussion of the Company’s business of referring clients to purchase insurance
products from insurance companies. You should address the following:
· types
of insurance companies in which the company has relationships,
· the
types of insurance products being purchased by the Company’s customers,
· the
range of commissions being recognized on the different types of insurance products being
purchased, and
· the
nature and terms of the contractual arrangements with the insurance companies.
Division of Corporation Finance
Office of Finance
Securities and Exchange Commission
August 28, 2024
Page 2
Response:
The Company acknowledges the Staff’s comments. In
response to the Staff’s comments, the Company intends to add disclosure in substantially the same form as follows in future filings
at a place equivalent to the end of page 64 of the 2023 Form 20-F, with the added disclosure underlined for ease of reference:
Referral of Insurance Products
We distribute insurance products by referring clients
to purchase insurance products and earn commissions from insurance companies. We focus on referring long-term life insurance products
to our high-net-worth individual clients to fulfill their diversified investment needs.
We primarily partner with reputable international
or regional insurance companies in Hong Kong, Singapore, United States, Bermuda and mainland China with the most competitive long-term
life insurance products.
The insurance products we distribute for our partners
are mainly life and health insurance products. Such products can be broadly classified into the categories set forth below. Due to constant
product innovation by insurance companies, some of the insurance products we distribute combine features of one or more of the categories
listed below:
· Individual
Whole Life and Annuity Insurance. The individual whole life insurance products we distribute
provide insurance coverage for the insured person’s entire life in exchange for the
periodic payment of fixed premiums over a pre-determined period, generally ranging from five
to 20 years, or until the insured reaches a certain age. The face amount plus accumulated
interest is paid upon the death of the insured. The individual annuity products we distribute
generally provide annual benefit payments after the insured attains a certain age, or for
a fixed time period, and provide a lump sum payment at the end of the coverage period. In
return, the purchaser of the annuity products makes periodic payments of premiums during
a pre-determined accumulation period.
· Participating
Insurance. The participating insurance products we distribute not only provide insurance
coverage but also pay dividends generated from the profits of the insurance company providing
the policy. The dividends are typically paid on an annual basis over the life of the policy.
In return, the insured makes periodic payments of premiums over a pre-determined period,
generally ranging from five to 25 years.
· Individual
Health Insurance. The individual health insurance products we distribute primarily consist
of critical illness insurance products, which provide guaranteed benefits when the insured
is diagnosed with specified serious illnesses, and medical insurance products, which provide
conditional reimbursement for medical expenses during the coverage period. In return, the
insured makes periodic payments of premiums over a pre-determined period.
Division of Corporation Finance
Office of Finance
Securities and Exchange Commission
August 28, 2024
Page 3
The commission rate that we receive from insurance
companies is determined based on various factors such as the type of insurance products, the payment schedule of the insurance policy,
the region in which the insurance products are sold, and the particular insurance company. In general, for the insurance policies that
we distribute with a periodic payment schedule, insurance companies will pay us a first-year commission and fee based on a percentage
of the first-year premiums, and subsequent commissions and fees based on smaller percentages of the renewal premiums paid by the insured
during the first few years of renewal term. As such, once we distribute a life and health insurance policy with a periodic payment schedule,
we expect it to bring us a steady flow of commission and fee during the renewal term as long as the insured fulfills his or her premium
payment commitment and continuously renews the policy. Since our referral service is substantially completed on day one, we record revenue
from commission income as one-time commissions which includes the first-year commission and a best estimate of the commissions we may
be entitled to receive during the renewal periods.
We enter into framework referral service agreements
with insurance companies for the insurance product that we distribute. Under these agreements, we typically undertake to refer and recommend
the relevant insurance products offered by the insurance company to our clients, in return for a commission from the insurance company.
We deliver the services as an independent contractor and undertake to exercise due care and skill in our services. Each party may have
the right to terminate the framework agreement with advance notice or immediately in certain specified circumstances. We are typically
subject to confidentiality obligations and obligations to protect the intellectual property of the insurance company under the framework
agreement.
With respect to the third point (the range of commissions
being recognized on the different types of insurance products being purchased), the commission rate for each insurance product with each
insurance company is negotiated individually, based on various factors such as the type of insurance products, the payment schedule of
the insurance policy, the region in which the insurance products are sold, as well as the Company’s bargaining power vis-à-vis
the particular insurance company. As a result, the commission rates vary significantly across different products and different insurance
companies. Disclosing a wide range of commission rates would not provide investors with meaningful information. The Company also considers
commission rates to be competitively sensitive information and is not aware of other comparable public companies with a similar business
disclosing such information. Furthermore, the Company is bound by confidentiality obligations under its agreements with insurance companies that prevent it from disclosing
confidential information such as commission rates, as such information is considered competitively sensitive by insurance companies as
well. Instead of disclosing the range of commissions, the Company, as proposed above and below, intends to describe
qualitatively how the commission rates are generally determined and disclose the revenue generated from the distribution of insurance
products during the past three years and details of the insurance products, insurance companies and other key aspects of this business.
The Company believes that such disclosure contains the material information about this business and is sufficient for investors to understand
this business and gauge its scale and quality as a source of revenue.
Division of Corporation Finance
Office of Finance
Securities and Exchange Commission
August 28, 2024
Page 4
2. Further, please provide us with and revise your disclosures,
in future filings, to include a detailed discussion as well as quantifying, each of the different
types of one-time commissions and the renewal commissions recognized on each of the wealth
management products offered in addition for the periods presented.
Response:
The Company acknowledges the Staff’s comments. The
Company respectfully advises the Staff that other than the renewal commissions from insurance products, the Company does not earn any
renewal commissions from other investment products. As explained in response to comment #1 above, for insurance products, both the first-year
commission and the renewal commissions are recognized as one-time commissions for revenue presentation.
The Company intends to add a table and discussion in substantially
the same form as follows in future filings at a place equivalent to below the third paragraph on page 114 of the 2023 Form 20-F,
with the added disclosure underlined for ease of reference:
The table below sets out one-time commissions of the
different types of investment products that we distributed during the years indicated:
Years Ended December 31,
2022
2023
2024
(in thousands of RMB)
One-time Commissions
Private secondary products(1)
49,911
37,974
[*]
Private equity products(1)
88,808
26,467
[*]
Mutual fund products(1)
16,761
10,445
[*]
Insurance products(2)
525,458
1,014,267
[*]
Others(1)
509
50
[*]
Total
681,447
1,089,203
[*]
(1) One-time commissions generated on these types
of products represent the one-off fees we receive for distributing such products. Clients typically make an upfront payment at the beginning
for subscribing for these products, and we receive a commission based on a percentage of the subscription price from the product providers
or the funds. No renewal payment needs to be made from clients.
(2) One-time commissions generated on insurance
products represent the aggregation of the first-year commission and a best estimate of the commissions we may be entitled to receive
during the renewal periods. In general, for the insurance policies that we distribute with a periodic payment schedule, insurance companies
will pay us a first-year commission and fee based on a percentage of the first-year premiums, and subsequent commissions and fees based
on smaller percentages of the renewal premiums paid by the insured during the first few years of renewal term.
In 2022, 2023 and 2024, we generated one-time commissions
of RMB681.4 million, RMB1,089.2 million and RMB[*] million, respectively. All revenue generated from the distribution of insurance products
was recorded as one-time commissions, contributing 77.1%, 93.1% and [*]%, respectively, of the total one-time commissions during these
years. With the easing of pandemic-related travel restriction in mainland China in late December 2022, more mainland Chinese clients
were able to travel to Hong Kong and Singapore to purchase insurance products, leading to a 93.0% increase of one-time commissions generated
from insurance products in 2023. In line with a 70% decrease of transaction value of private equity products, the one-time commissions
generated from distributing private equity products also decreased by 70.2% from 2022 to 2023. The one-time commissions from private
secondary products and mutual fund products decreased by 23.9% and 37.7%, respectively, mainly due to decreases in fee rates from 2022
to 2023. [To discuss material fluctuations between 2023 and 2024]
Division of Corporation Finance
Office of Finance
Securities and Exchange Commission
August 28, 2024
Page 5
3. Please provide us with and revise, in future filings, to address
the reasons for the changes in interest income recognized as a result of the changes in the
interest earning assets and weighted averages interest rates earned during the periods presented.
Response:
The Company acknowledges the Staff’s comments. In
response to the Staff’s comments, the Company intends to revise the disclosure, in future filings, in substantially the same form
as the following paragraph (located on page 118 of the 2023 Form 20-F) , with the added disclosure underlined for ease of reference:
Interest Income. The interest income increased by
163.7% from RMB61.4 million in 2022 to RMB161.9 million in 2023. The interest income from cash and cash equivalents denominated in Renminbi
increased by 9.0% from RMB53.3 million to RMB58.1 million, mainly due to a 5.2% increase of cash balances denominated in Renminbi and
weighted average interest rate is around 2.0% in 2022, and 2.1% in 2023. The interest income from cash and cash equivalents denominated
in US dollars increased significantly from RMB8.1 million to RMB103.9 million due to the fact that (i) our cash balances denominated
in US dollars increased by 58.4% from 2022 to 2023; and (ii) our weighted average interest rate for US dollars also increased from
0.6% in 2022 to 4.3% in 2023 benefiting from multiple interest rate raises by the US Federal Reserve.
Division of Corporation Finance
Office of Finance
Securities and Exchange Commission
August 28, 2024
Page 6
Note 2. Summary of Principal Accounting Policies
(w) Loans Receivable, net, page F-25
4. Please provide us with and revise, in future filings, to include
accounting policies which includes the accounting guidance being followed, for both loan
charge-offs and the acquisition of purchased credit impaired loans.
Response:
The Company acknowledges the Staff’s comments. In
responses to the Staff’s comments, the Company respectfully advises the Staff that it intends to revise the disclosure in Note
2(w)