Tencent-backed Waterdrop registers over 35% rise in Q1 growth

Chinese insurance technology company Waterdrop Inc reported a 35.1 percent year-on-year increase in net operating revenue in the first quarter of this year, continuing to see strong growth in the number of paying insurance consumers.

Unaudited results show the Tencent-backed company's first-quarter net operating revenue reached 883.4 million yuan ($136.9 million), primarily driven by the growth of insurance brokerage income and technical service income. Excluding the impact from the cessation of mutual aid business in March 2021, the adjusted net operating revenue rose by 43.2 percent year-over-year.

NYSE-listed Waterdrop primarily generates brokerage income from selling insurance policies underwritten by insurance carriers. First-year premiums generated through its Waterdrop Insurance Marketplace jumped 42.7 percent year-on-year to 4.47 billion yuan in the first quarter.

The number of insurance customers and FYP per customer both grew rapidly. Waterdrop's cumulative paying insurance customers reached 21.9 million as of the end of March, while the FYP per customer increased to 1,165 yuan, up 32.1 percent year-on-year.

Looking into the second quarter, the company expects the FYP generated through Waterdrop Insurance Marketplace to grow more than 50 percent.

"Among all products we offer to customers and by FYP contribution, over 90 percent are customized and co-designed by us and insurance carriers," said Yang Guang, co-founder of Waterdrop Inc.

Yang, who is also director and general Manager of Waterdrop Insurance Marketplace, said, "In light of the introduction of the new regulatory definition of critical illness, we shifted our product offerings to adapt to the new definition and requirements to better cater to customer needs, and ensure our sustainable growth. In addition, we consistently diversify our customer acquisition channels, and the contribution from natural traffic and repeat purchases as a percentage of total FYP continued its upward trend."

According to the company, its operating loss for the first quarter hit 460.6 million yuan, compared with the 111.1 million yuan operating loss for the same period of 2020. And it registered a net loss of 370.2 million yuan in the first quarter, compared with the number of 120.7 million yuan for the same period of 2020.

Shi Kangping, chief financial officer of Waterdrop, said the increase in operating costs and expenses were mainly attributable to expenses related with the cessation of mutual aid business. "For 2021, we expect our FYP and top line to grow rapidly, and we will continue to improve our unit economics performance by optimizing our customer acquisition strategy."

Citing the double-digit year-on-year growth in both FYP and net operating revenues, Shi said the company reported a sound business performance in the first quarter, fueled by the enabling business environment, people's rising earnings，increasing urbanization and Waterdrop's unique business model and technology-driven growth.

Seeing the huge growth potential of China's health insurance and service sector, Shi said the company will mainly focus on increasing investment and rapidly upscale its businesses and boosting sales.

According to an iResearch report, the total healthcare service expenditures in China reached 7 trillion yuan in 2019, among which 4.7 trillion yuan was not covered by the social medical insurance, commercial insurance, or other supplemental medical protection.

As per the report, Waterdrop has become the largest independent third-party insurance platform in China in terms of life and health insurance first year premiums. Through its medical crowdfunding and its insurance marketplace, Waterdrop has built a massive social network of protection and support for people, raising awareness of insurance and ultimately providing insurance and healthcare service to consumers in China, iResearch said.