Waterdrop Makes NYSE Debut, Aims to become China’s UnitedHealth Group in 10 Years

Shares of Waterdrop Inc. debuted on the New York Stock Exchange on Friday. (Source: Waterdrop)

Chinese online insurance technology company Waterdrop Inc. said it will focus on expanding its user base in China’s lower-tier cities and growing its online insurance business, as the firm’s shares debuted on the New York Stock Exchange on Friday.

The Tencent-backed company is aiming to raise $360 million in its initial public offering (IPO) by selling 30 million American depositary shares (ADS) priced at $12 each, the company said in a press release. Shares of the firm closed down 19% at $9.76 on Friday.

“In the next decade, we hope to team up with more insurance companies, medical institutions and pharmaceutical companies to create China’s version of UnitedHealth Group,” Shen Peng, Waterdrop’s founder and chief executive said in an interview.

Founded in 2016 by Shen, a former executive at food-delivery giant Meituan, the Beijing-headquartered company runs an online insurance policy marketplace and a medical crowdfunding platform that helps people facing significant medical bills raise money. It also used to operate a popular mutual aid platform that ceased operations in March.

“Waterdrop Medical Crowdfunding Platform is a personal help platform and fundraising tool for seriously ill patients. In order to help more families with financial difficulties and reduce their burden, we chose not to charge any processing fees and bear all costs involved in the platform’s operation. We are not a charity organization, but we are taking an active role in social responsibility,” Shen said. Right now, the crowdfunding platform is generating nearly zero revenue.

As of the end of last year, the crowdfunding platform had helped raise 37 billion yuan ($5.7 billion) in donations from 340 million people, according to its prospectus filed with the U.S. Securities and Exchange Commission (SEC).

Claiming to be the largest independent third-party life and health insurance distribution platform in China, the company added in its US filing that it has collaborated with 62 insurance carriers to offer 200 types of health and life insurance products online to nearly 80 million customers as of the end of last year. The number of users on Waterdrop Insurance Marketplace jumped from 1.6 million in 2018 to 12.6 million in 2020.

Compared to traditional insurance companies, Waterdrop boasts strong data analysis capabilities using algorithms, models and data analysis tools. The company said it has been building user profiles with 494 basic labels and 2,464 algorithm labels, which enables it to effectively assess users’ needs and risk profile, as well as detect fraudulent claims.

However, despite having doubled its revenue thanks to its rapid user growth, the company’s net loss widened to 663 million yuan in 2020 from 322 million yuan in 2019, according to its prospectus. The firm primarily generates its revenue from brokerage income associated with commission fees charged to insurance carriers.

Waterdrop Co-founder Yang Guang said in the interview that the company hopes to expand further into healthcare businesses to diversify its income.

Yang also added the firm is focused on user growth rather than on profit in the short term.

“The company is growing rapidly in terms of business operations and scale. Profitability is not our top priority at present,” he said.

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Waterdrop hoped that the fresh funds will help standardize the firm’s business operations, expand its technology capabilities and increase the company’s transparency under public supervision.

Shen added that the company will remain focused on the Chinese market and has no immediate plans to expand internationally.

“In the short term, we will focus on our domestic business and provide better services in China’s third-tier and lower cities, including the Internet user class in middle-aged and young adults. The market is huge and many users aren’t properly covered. We plan to perfect our current services before turning to the overseas market,” said Shen.