Forefront | Waterdrop Group goes public in the United States, how far is the Chinese version of "UnitedHealth Group"?

Forefront | Waterdrop Group goes public in the United States, how far is the Chinese version of “UnitedHealth Group”?

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After five years of running wildly, Waterdrop finally listed on the New York Stock Exchange.

At 9:30 pm on May 7th, Beijing time, Water Drop Company was officially listed on the New York Stock Exchange under the stock code “WDH”. It issued 30 million American Depositary Shares through an initial public offering at a price of US$12, which is the offering range. The upper limit. After the opening on the first day, the water drop reported $10.25, a drop of 15%. As of the close of the first day, the stock price fell 18.67%, and the current market value is approximately US$3.8 billion.

According to the latest prospectus, the company’s founder and CEO Shen Peng, co-founders Yang Guang, and Hu Yao total 24.4% equity, Tencent holds 20.4%, Boyu Capital, Gaorong Capital, and Swiss Re hold 11% and 6 shares respectively. % And 5.2%.

Before the IPO, the prospectus also announced the list of some cornerstone investors. Investors including Boyu Capital, Hopu Capital, and Meituan founder Wang Huiwen have subscribed for USD 210 million worth of shares in Waterdrop.

Source: Water Drop Company

Since its establishment in 2016, Water Drop Company currently has two main businesses, namely, the network critical illness help platform “Water Drop” and the health insurance technology platform “Water Drop Insurance”, which provide users with solutions that span pre-illness protection and post-illness support.

For the general public, the water drop company is mostly known by the donation links in the circle of friends, and the water drop company also started out as a fundraising and mutual aid business in a serious illness scenario. As of December 31, 2020, more than 340 million people have donated more than 37 billion yuan to more than 1.7 million severely ill patients through water chip funding.

Based on the three major sectors of “fundraising + mutual assistance + insurance”, this has been called the “three-level rocket” of water drop growth for a long time, that is, attracting a large amount of traffic through scenarios such as fundraising and mutual assistance. And then through the insurance business to realize the flow of money, so as to support the company’s rapid growth.

Although the impression of public welfare and mutual assistance is deeply rooted in the hearts of the people, from the perspective of income structure, Waterdrop has long been an insurance intermediary service provider. After a year of rapid development through fundraising and mutual assistance scenarios, and after accumulating a large number of users, Waterdrop launched the insurance business “Waterdrop Insurance” in 2017, and it has rushed forward in the past three years. From 2018 to 2020, it achieved 973 million and 6.668 billion respectively. And the first-year premium income of RMB 14.426 billion has become the second largest insurance distribution channel in China after Ant.

According to the prospectus, the commission income of Water Drop Insurance is the main income of Water Drop Company. In 2020, the net income of Waterdrop Company was 3.028 billion yuan, a year-on-year increase of 100.4%; of which, commission income was 2.695 billion yuan, accounting for 89.1% of the revenue. As of December 31, 2020, Water Drop Company has reached cooperation with 62 insurance companies to provide 200 types of health and life insurance products.

Before and after the listing, the market’s doubts about Water Drop were concentrated at the level of loss and supervision. And this year, the closure of the Water Drop Mutual Aid Program also allowed the market to pay more attention to the impact on its business.

According to the prospectus, from 2018 to 2020, Waterdrop achieved operating income of 238 million yuan, 1.511 billion yuan, and 3.028 billion yuan respectively, corresponding to net losses of 209 million yuan, 322 million yuan and 664 million yuan. In this regard, Shen Peng, the founder and CEO of Waterdrop, said in an interview with the media that the loss rate of Waterdrop has been declining in the past three years, and the current business situation is not bad. Waterdrop does not prioritize profitability. First, ensure better business development.

“We are fully capable of choosing to achieve profitability when we deem appropriate.” Shen Peng said.

In addition, as an insurance brokerage service provider, the marketing cost of Waterdrop has also become one of the focuses of attention. From 2018 to 2020, the marketing expenses of Water Drop were 185 million yuan, 1.056 billion yuan, and 2.131 billion yuan, respectively. In 2020, marketing expenses accounted for 70.4% of revenue.

Yang Guang, the co-founder of Water Drop Company, said that for the problem of excessive marketing expenses and losses, the investment in marketing expenses is necessary during the rapid development of the business, and it drives the company’s overall revenue growth. The loss rate of water droplets on the income statement is also shrinking year by year, and more sources of income come from the income brought by new users. With the repurchase of old users deposited on the platform, the efficiency of customer acquisition will become higher and higher. Many companies move from revenue to breakeven, relying on revenue growth to drive down other management expenses, and the better and better marginal effect will help Waterdrop to make better profits.

With the increase in marketing expenses, the conversion ratio of water droplets’ internal traffic is declining. From 2018 to 2020, the proportion of water droplets from third-party traffic channels is 1.9%, 34.8%, and 44.9% respectively. Does this mean the water droplets’ own traffic? Operational efficiency is declining? Yang Guang responded that attracting users through different channels, depositing users, providing users with value, and bringing income to the platform is the same as the internal scene conversion effect from a commercial point of view. Waterdrop is more concerned about which platform the user is deposited on. on. Judging from the current situation, the customer acquisition of Waterdrop has maintained the best level in the industry in different channels.

At the regulatory level, Waterdrop also terminated the mutual assistance program on March 31 during the mutual assistance shutdown that swept the industry this year, but Waterdrop emphasized that despite the shutdown of the mutual assistance program, the waterdrop mutual assistance platform will continue to operate.

“In the long term, the mutual assistance business still has some uncertainties. It is not a commercial insurance. In order to provide users with more comprehensive and stable protection, we have upgraded the original mutual assistance plan and provided each member with a commercial insurance. Medical insurance has transformed mutual assistance members into insurance users, providing them with more commercial insurance and health and medical-related services, and continuing user protection.” Yang Guang said, “In this process, both the scale of users of the entire company and the Well, from the perspective of business income, it doesn’t actually have a big impact on the company.”

From a long-term perspective, the story behind the water droplets is toward the big health sector.At the IPO conference, CEO Shen Peng explained the stock code “WDH”. The first meaning of WDH is “Water Drop Health”, which represents Water Drop’s vision to become the Chinese version of United Health. UnitedHealth was established in the United States in 1974. It is a comprehensive health service group integrating insurance and health care services. In 2020, its annual turnover has reached 242.155 billion US dollars.

The market and challenges are huge. According to the data from iResearch, China’s demand for medical security is as high as trillions, and insurance penetration and insurance density are still far lower than those of developed countries. Since last year, Waterdrop has also aggressively entered the health field, and has successively tested businesses such as “Waterdrop Health” and “Waterdrop Good Medicine Payment”. Waterdrop Health provides Internet medical and health management services for healthy and sick people, and Waterdrop Health provides Internet medical treatment and health management services for healthy and sick people. It mainly provides services such as insurance innovative payment and health management for sick patients. Four months after launching last year, it has covered 1,123 DTP (Direct To Patient) pharmacies in 202 cities in 29 provinces in China, and will cooperate with dozens of pharmaceutical companies. A pharmaceutical company project was launched, serving more than 30,000 patients in total.

On the other hand, with the termination of the network mutual assistance program and the transformation of business sectors, the supervision of mutual assistance, Internet insurance and other new things will continue to strengthen; after the listing, Waterdrop needs to maintain the reputation and quality of the waterdrop chip business. In addition, in the pharmaceutical field, many startups have been cultivating for many years. The one-stop health management platform of “insurance + health service” that Waterdrop hopes to establish is still long.


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