The following discussion of the results of operations and financial condition
should be read in conjunction with our condensed consolidated financial
statements and notes thereto included in Item 1 of this part. This report,
including the information incorporated by reference, contains forward-looking
statements as defined in the Private Securities Litigation Reform Act of 1995.
The use of any of the words "believe," "expect," "anticipate," "plan,"
"estimate," and similar expressions are intended to identify such statements.
Forward-looking statements include statements concerning our possible or assumed
future results. The actual results that we achieve may differ materially from
those discussed in such forward-looking statements due to the risks and
uncertainties described in the Risk Factors section of this report, in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, and in other sections of this report, as well as in our annual
report on Form 10-K. We undertake no obligation to update any forward-looking
statements.

Overview


The Company primarily provides two broad categories of insurance products, life
insurance products and property and casualty insurance products, in Taiwan and
People's Republic of China ("PRC"). The Company also provides reinsurance
brokerage services and insurance consulting services in Hong Kong and Taiwan.
The percentage of reinsurance brokerage services and insurance consulting
services is less than 1% of our total revenue. The insurance products that the
Company's subsidiaries sell are underwritten by some of leading insurance
companies in Taiwan and PRC, respectively.

(1) Life Insurance Products




Total revenue from Taiwan life insurance products were 88.1% and 89.7% of total
revenue for the three months ended March 31, 2021 and 2020, respectively. Total
revenue from PRC life insurance products were 6.0% and 4.8% of total revenue for
the three months ended March 31, 2021 and 2020, respectively.

In addition to the periodic premium payment schedules, most of the individual
life insurance products we distribute also allow the insured to choose to make a
single, lump-sum premium payment at the beginning of the policy term. If a
periodic payment schedule is adopted by the insured, a life insurance policy can
generate periodic payment of fixed premiums to the insurance company for a
specified period of time. This means that once the Company sells a life
insurance policy with a periodic premium payment schedule, they will be able to
derive commission and fee income from that policy for an extended period of
time, sometimes up to 25 years. Because of this feature and the expected
sustained growth of life insurance sales in China and Taiwan, we have focused
significant resources ever since the incorporation of Anhou and Law Broker on
developing our capability to distribute individual life insurance products with
periodic payment schedules. We expect that sales of life insurance products will
continuously be our primary source of revenue in the next several years.

(2) Property and Casualty Insurance Products




Total revenue from Taiwan property and casualty insurance products were 5.2% and
4.7% of total revenue for the three months ended March 31, 2021 and 2020,
respectively. Total revenue from PRC property and casualty insurance products
were 0.4% and 0.2% of total revenue for the three months ended March 31, 2021
and 2020, respectively.

As COVID-19 and its duration remain uncertain, we have been monitoring and will
continue to measure and modify our business to protect our customers, sales
professionals and employees. The extent of the COVID-19 impact to the Company
will depend on numerous factors and developments. Consequently, any potential
impacts of COVID-19 remain highly uncertain and cannot be predicted with
confidence.

Critical Accounting Policies and Estimates


A critical accounting policy is one that is both important to the portrayal of
our financial condition and results of operation and requires our management's
most difficult, subjective or complex judgments, often as a result of the need
to make estimates about the effect of matters that are inherently uncertain. We
have had no changes to our Critical Accounting Policies as described in our most
recent Form 10-K for the year ended December 31, 2020 and believe that of our
significant accounting and reporting policies, the more critical policies
include our accounting for revenue recognition, stock-based compensations, and
estimate of income taxes. Our significant accounting policies are described in
Note 2 of "Summary of Significant Accounting Policies" included within this
Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission.

                                       25

  Table of Contents

Results of Operations- Three Months ended March 31, 2021 Compared to Three Months ended March 31, 2020

The following table shows the results of operations for the three months ended March 31, 2021 and 2020:






                                              Three Months Ended March 31,
                                                  2021              2020
                                                (Unaudited)       (Unaudited)       Change        Percent
Revenue                                     $     30,530,117    $  28,523,210    $   2,006,907        7.0 %
Cost of revenue                                   18,973,432       19,499,924        (526,492)      (2.7) %
Gross profit                                      11,556,685        9,023,286        2,533,399       28.1 %
Gross profit margin                                     37.9 %           31.6 %            6.3 %     19.9 %

Operating expenses:
Selling                                              579,777          490,030           89,747       18.3 %
General and administrative                         6,090,254        6,984,554        (894,300)     (12.8) %
Total operating expenses                           6,670,031        7,474,584        (804,553)     (10.8) %

Income from operations                             4,886,654        1,548,702        3,337,952      215.5 %

Other income (expenses):
Interest income                                       83,998          110,891         (26,893)     (24.3) %
Interest expenses                                   (42,470)         (59,282)           16,812     (28.4) %
Foreign currency exchange gain (loss),
net                                                  328,466         (55,937)          384,403    (687.2) %
Other - net                                          178,940         (96,802)          275,742    (284.9) %
Total other income (expenses), net                   548,934        (101,130)          650,064    (642.8) %

Income before income taxes                         5,435,588        1,447,572        3,988,016      275.5 %
Income tax expense                               (1,398,806)      (1,111,287)        (287,519)       25.9 %

Net income                                         4,036,782          336,285        3,700,497    1,100.4 %
Net income attributable to the
noncontrolling interests                         (1,626,396)        (625,522)      (1,000,874)      160.0 %
Net income (loss) attributable to China
United's shareholders                       $      2,410,386    $   (289,237)    $   2,699,623    (933.4) %




Revenue

As a distributor of insurance products, we derive our revenue primarily from
commissions and fees paid by insurance companies, typically calculated as a
percentage of premiums paid by our customers to the insurance companies in among
Taiwan, People's Republic of China ("PRC") and Hong Kong. We generate revenue
primarily through our sales force, which consists of individual sales agents in
our distribution and service network. For the three months ended March 31, 2021
and 2020, the revenues generated from our operations in Taiwan, PRC and Hong
Kong are as follows:


Geographic Areas                     Three Months Ended March 31,
                             2021            2020          Change       Percent
Revenue
Taiwan segment           $ 28,467,663    $ 27,025,294    $ 1,442,369        5.3 %
Percentage of revenue            93.2 %          94.7 %
PRC segment                 1,951,469       1,429,297        522,172      

36.5 %
Percentage of revenue             6.4 %           5.0 %
Hong Kong segment             110,985          68,619         42,366       61.7 %
Percentage of revenue             0.4 %           0.3 %

Total revenue            $ 30,530,117    $ 28,523,210    $ 2,006,907        7.0 %




                                       26

  Table of Contents

Overall revenue from our Taiwan segment increased by $1.4 million from $27.0
million for the three months ended March 31, 2020 to $28.5 million for the three
months ended March 31, 2021. Due to our continued growth in the sales of
insurance products in the past years, we continue to receive more contingent
commissions, which include trailing commissions, persistency rate linked bonuses
and some other service allowance, for the three months ended March 31, 2021.
However, the revenue growth was partially offset by decreases in the sales of
long-term care and disability insurance products because of the discontinuations
of these products in the year 2020.

Overall revenue from our PRC segment increased by $0.5 million to $2.0 million
for the three months ended March 31, 2021 from $1.4 million for the three months
ended March 31, 2020. Such increase in revenue of the PRC segment was mainly due
to the adverse impact on the outbreak of COVID-19 that restricted to a
significant extent our sales agents' in-person selling activities in the first
quarter of 2020. The operations in the PRC segment had been fully resumed in the
second quarter of 2020.

The revenue in the Hong Kong Segment was primarily derived from reinsurance
commission on sales of insurance products from other insurers to Taiwan Life
Insurance Co., Ltd. ("Taiwan Life") for risk management. Overall revenue from
our Hong Kong segment for the three months ended March 31, 2021 remained
consistent with the same period in 2020.

Cost of revenue and gross profit



The cost of revenue mainly consists of commissions paid to our sales
professionals. The cost of revenue for the three months ended March 31, 2021
decreased by $0.5 million, to $19.0 million compared to $19.5 million for the
three months ended March 31, 2020. Decreases in the cost of revenue were due to
fewer insurance policies sold during the first quarter of 2021 compared to the
same period of 2020, which result in a decrease in the direct commission costs
paid to sales professionals for the first-year commissions.

Consequently, the gross profit margin increased from 31.6% for the three months ended March 31, 2020 to 37.9% for the three months ended March 31, 2021.

Selling expenses



Selling expenses were mainly incurred by Law Broker and Uniwill in connection
with online marketing and advertising. Overall selling expenses for the three
months ended March 31, 2021 remained consistent with the same period in 2020.

General and administrative expenses

General and administrative ("G&A") expenses are principally comprised of salaries and benefits for our administrative staff, office rental expenses, travel expenses, depreciation and amortization, entertainment expenses, and professional service fees.



For the three months ended March 31, 2021, our G&A expenses were $6.1 million,
reflecting a decrease of $0.9 million, compared with $7.0 million for the three
months ended March 31, 2020. Our G&A expenses decreased for the three months
ended March 31, 2021 because the Company recognized costs of $1.0 million
related to stock-based compensation arrangements during the first quarter of
2020.

Other income (expenses)

Other income (expense) mainly consisted of interest income, interest expenses,
gain or loss on valuation of financial assets, and foreign currency exchange
gain or loss. Net other income for the three months ended March 31, 2021 was
$0.5 million, reflecting an increase of $0.7 million, compared with net other
expense of $0.1 million for the three months ended March 31, 2020. The increases
in other income for the three months ended March 31, 2021 was due to foreign
currency exchange gain recognized because of the depreciation of the New Taiwan
Dollar against the US dollar during the first quarter of 2021.

Income tax expense



For the three months ended March 31, 2021, income tax expense was $1.4 million,
reflecting an increase of 25.9%, compared with the income tax expense of $1.1
million for the three months ended March 31, 2020. The increase was mainly due
to more taxes on undistributed earning accrued because of more revenues
generated in the Taiwan segment during the first quarter of 2021.

                                       27

Table of Contents

Liquidity and Capital Resources

The following table represents a comparison of the net cash provided by operating activities, net cash provided by (used in) investing activities and net cash provided by financing activities for the three-month periods ended March 31, 2021 and 2020:




                                               Three Months Ended March 31,
                                                  2021               2020           Change       Percent
Net cash provided by operating activities    $    6,445,228     $    3,340,811    $ 3,104,417       92.9 %
Net cash provided by (used in) investing
activities                                          199,142

(5,335,582) 5,534,724 (103.7) % Net cash provided by financing activities 2,171,143 1,579,759 591,384 37.4 %






Operating activities

Net cash provided by operating activities during the three months ended March
31, 2021 was $6.4 million, an increase of 92.9% in comparison with $3.3 million
net cash provided by operating activities during the three months ended March
31, 2020. The increase was mainly due to a strong business performance for the
three months ended March 31, 2021 compared with that of the same period in 2020.

Investing activities


Net cash provided by investing activities was $0.2 million during the three
months ended March 31, 2021 as compared with the net cash used in investing
activities of $5.3 million for the three months ended March 31, 2020. Increases
in the cash inflows for the investing activities resulted from sales of stock
mutual funds during the first quarter of 2021.

Financing activities


Net cash provided by financing activities was $2.2 million during the three
months ended March 31, 2021, which increased by $0.6 million from $1.6 million
during the same period of 2020. The increase was mainly due to increases in the
net proceeds from additional borrowings under the revolving credit agreements
during the first quarter of 2021.

Contractual Obligations

There have been no significant changes to the Company's contractual obligations as disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

Off Balance Sheet Arrangements

The Company had no off-balance sheet arrangements as of March 31, 2021.

© Edgar Online, source Glimpses