Waterdrop, a Chinese insurance technology firm, started trading at the New York Stock Exchange last week under Fintech Zoom WDH. In its initial public offering, the Tencent-backed firm raised $360 million, pricing shares at $12 apiece.
WHY IT MATTERS
Waterdrop was launched in 2016 through software developer Zongqing Xiangqian. It currently runs an insurance marketplace and a medical crowdfunding platform; in end March, it shuttered its mutual aid business due to China’s tightening of financial technology regulations.
The proceeds from the IPO will be used “to enhance and expand our operation in healthcare service and insurance business”, said the company in a corporate filing with the US Securities and Exchange Commission on April 30.
Cornerstone investors of the company include affiliates of Boyu Capital, which initially committed to subscribe to $100 million worth of shares.
Waterdrop claims it is “well-positioned” to capture China’s uninsured population. “Our market opportunity is significant as the medical protection need in China is largely underserved amid growing demand for access to better healthcare by large population,” it said.
In 2019, out of the RMB 7 trillion (around $1.08 trillion) in total healthcare service spending in the country, RMB 4.7 trillion (about $726 billion) were uncovered by any protection, according to consulting firm iResearch. “The substantial gap indicates strong growth potentials for commercial insurance,” Waterdrop said.
Such spending is projected to reach RMB 11.4 trillion ($1.76 trillion) by 2024, growing at a 10.2% CAGR due to China’s ageing population and reform in its medical security system.
Despite opportunities, the company has not been earning in the past three years. In 2020 alone, it faced a net loss of RMB 663.9 million ($101.7 million).
As of the first quarter of 2021, the company generated first-year premiums worth RMB 4.47 billion or $691.3 million, an increase of 42.7% compared to the same period last year.
THE LARGER TREND
Waterdrop’s US listing followed Oscar Health’s debut in the same New York bourse in February. Last year, similar insurtech companies also raised investments through funding rounds, including Bright Health, BestDoctor, Sidecar Health and Alignment Healthcare.
In China, Waterdrop says it faces “intense” competition with other online third-party insurance brokers like Jack Ma’s Ant Group and WeSure, which is run by Tencent. It also competes with other Chinese insurers such as Fanhua, Everpro and Datong.