Waterdrop is a China-leading technology platform dedicated to insurance and healthcare service with a positive social impact. I'm happy to welcome Jasmine Li, Board Secretary, Vice President of Finance, Head of Strategy and Capital Markets. We have 30 minutes today, including the Q&A. If you have any questions, please submit them at the Q&A section at the bottom of your screen. With that, Jasmine, I will let you take over.
Thank you, Aashi. Good morning, everyone. Thank you for attending this meeting. My name is Jasmine Li, and I'm the Board Secretary in VP Finance of Waterdrop. I also have our IR team online together with me. It's a pleasure to share our business and financial performance with you today. I'll go through the deck for an overview, and we're happy to take questions afterwards. So our company was founded in 2016, and we first launched the Waterdrop medical crowdfunding platform to help people in financial shortage to respond for their medical bills that are not covered by social insurance. It is just like a company called GoFundMe in the United States, but specifically for medical causes. It didn't take us a very long time to become the number one medical crowdfunding platform in China, and now it is also a government-endorsed platform.
In 2017, we launched Waterdrop Insurance Marketplace, starting from an online brokerage platform to distribute commercial medical insurance products. This, if you think about it, is actually another format of offering solutions for medical expense payment. We soon became a comprehensive platform with several brands and service models, offering a full range of insurance products and organic growth and acquisition of a small player called Shenlanbao in 2023. And our third business, E-Find, is a platform that helps pharmaceutical companies find or match patients for their clinical trials. This idea originated in 2021 when we observed needs from both ends can be potentially satisfied leveraging our crowdfunding service network in hospitals. And we got listed in NYSE in 2021. Currently, Tencent is still our largest institutional shareholder, followed by Boyu Capital and Swiss Re Insurance Company.
Tencent is a very important partner for traffic and online payment, and Swiss Re also sees us as an innovative force in the China insurance sector. And next page to the management team, we have a very motivated management suite. Our founder, Mr. Shen Peng, is a serial entrepreneur. He used to be the number 10 employee of Meituan and led Meituan to become the number one food delivery platform in China. We also have several core executives sharing a Meituan background. And including Shen Peng, most members of the executive are in their 30s, have both proven experiences in their roles and collectively strong faith in innovation in insurance services. And moving to the next page, as of now, we have three business segments. The first one is the digital insurance brokerage business, which is the largest segment in terms of financial contribution.
Within this segment, we operate under three brands. Waterdrop and Shenlanbao serves mainland China market, and Waterdrop Financial serves Hong Kong market. Also provide additional technical services to insurance companies like intelligent recommendation, risk management, customer relationship maintenance, and so on. Under the crowdfunding segment, apart from the medical crowdfunding operation, we also have a Waterdrop Charity platform. It's for broader philanthropic purpose. On the healthcare part, we not only help recruit patients, but also help manage online patient communities and run digital marketing initiatives for new drugs. Here are the business models for each segment. The insurtech segment primarily earns commission fees from insurers, and technical services fees are a smaller revenue source. The medical crowdfunding business charges a 6% service fee calculated on top of the funding amount we've raised, along with a roughly $1,000 per case per crowdfunding campaign.
An E-Find platform charges pharmaceutical clients a fixed price per patient enrolled, so all above three segments achieve significant industry-wide recognition. We have cumulatively served over 33 million pain insurance users and partnered with over 100 insurance carriers. We helped over three million patients to raise about $10 billion for their medical treatments, and also we have enabled over 1,000 clinical trial programs to enroll 13,000 qualified patients, accelerating the process of medical research. One thing to especially highlight here is that despite medical crowdfunding showing negative profits in financial reports, it actually provides synergies for both of the other two businesses. We pop up recommendations of commercial medical insurance plans to donors after the donation page, thus converting some of the donors to our insurance customers, and also we help some of the patients respond.
Some other patients that our team reaches in hospitals might be interested in a clinical-trial-stage new drug for treatment, and in general, we see our growth and long-term vision in our insurance business because we believe there is great potential in China's life and healthcare insurance market. As you can see from the official stats, it is a market of $600 billion of total premium paid per year and keeps growing steadily. Within this, new policies purchased each year account for about one-third of the total premium, while the remaining is the renewal premium. On the other hand, although China has a social insurance scheme with a 95% population coverage and an already very large-sized commercial insurance premium base, as mentioned, we still see big gaps in healthcare payment. 40% of healthcare expenditure is from residents' out-of-pocket, while only 4% is covered by commercial insurance.
Meanwhile, in the United States, 30% of the expenditure is from insurance payout. And going forward with the aging population and growing healthcare expenditure in China, we see pressure on social insurance and on residents' income will rise with time. So we believe there are strong forces from both the demand side and the government side that will collectively drive industry growth. And also if we look at the distribution channel landscape going back to the left-hand side chart, in China, most insurance policies are still sold by insurer-affiliated agents or through banks. Only 7% are sold by third-party brokerage like us, and therefore even a smaller share for online brokerage. Comparatively, brokerage takes up about a 50% share in the U.S. market, 17% in the U.K., and 30% in Asian developed markets such as Hong Kong and Singapore.
Penetration growth still has a long way to go in China. And in Waterdrop, our brokerage model is to establish a tech-enabled platform that works for non-experienced users to get their first medical policy easily and then provide services for upgraded needs along their lifetime. We acquire customers from various channels and recommend suitable products based on user insights generated from data analytics to maximize conversion rate, therefore resulting in a satisfying ROI in customer acquisition. We also allow users to pay on a monthly basis, making the plans more accessible. After users make their first purchases, many may want to increase their short-term coverage or purchase similar products for their families. Our SCRM will then generate algorithm-driven strategies to distinguish customer-specific needs and provide in-time assistance.
When it comes to more sophisticated needs and products, we also have a dedicated team of online and offline human agents to provide support. And we, of course, will equip them with AI toolkits to maximize productivity. And on the product offering side, we offer a full range of life and health insurance products ranging from medical, accidental plans to critical units, term life, and other life products. And we have three major customer acquisition channels. We do paid marketing on major traffic platforms in China, such as Douyin, which is the China TikTok, WeChat video streaming, and Red Notebook to continuously drive a substantial number of new users to our platforms. As explained earlier, our medical crowdfunding operation also directs traffic to our insurance marketplace.
This cohort of consumers, after they've seen others in severe trouble with medical bills, usually they have stronger awareness and interests, especially in medical plans, resulting in a higher retention in such products. And our third customer acquisition channel, private domain traffic. Many users we already have contacts with. They can be followers of our social media accounts receiving our marketing contents on a regular basis, or they can be returning users whose policy expired a long time ago and want new policies. And these customers have more interaction with us before they made the purchase, therefore have higher LTV. The first two channels also direct leads to this channel, so we can constantly expand our private domain pool. And as of services model, we operate services under three brands.
Waterdrop Insurance Marketplace is the core platform to serve mass market in mainland China, which accounts for over 80% of our total premium. It mainly serves users who have little knowledge or experiences in insurance. Typically, they are family breadwinners from lower-tier cities in China and mostly over 40 years old, and for them, we offer a streamlined automatic purchase experience for short-term medical insurance and then have online sales agents follow up for upselling and cross-selling, and the Shenlanbao brand serves middle-class users. We distribute high-quality insurance content online by managing many KOL accounts in every social media so that people easily come across our educational content when searching on insurance, and these users are typically educated professionals or young generations who are used to online research, and they are attracted by our articles and videos and therefore ask to connect with the Shenlanbao expert for professional advice.
And for this customer cluster, we don't necessarily start with short-term medical insurance. Our product recommendation will be made according to customer's preference and mostly in long-term products. And also we have an offline agent team based in Hong Kong under the brand name Waterdrop Financial, where we provide U.S. dollar-based life products. The customer needs here are more sophisticated. They seek asset allocation in non-RMB insurance products for wealth management purposes. And all in all, to better help everyone to understand our business model, we also listed several U.S. comps here. And these U.S. comps are either insurers or brokerage business in non-life or healthcare insurance sector, all adopting a digital and tech-driven model just like us. And we are mostly the same, but only operating in another big market in China.
Compared with the U.S. comps, our valuation is significantly low considering our profitability, cash reserves, and shareholder return schemes. For the next part, I will quickly walk through our financial highlights for the past quarter. Firstly, on the revenue side, there was a clear upward trend in the past three years. Total revenue for 25Q3 hit a record high of over $136 million. Net profit attributable to ordinary shareholders also showed strong momentum, reaching over $22 million in 25Q3 with a margin of 16%. In terms of the revenue structure, insurance segment is our primary revenue driver, contributing nearly 90% of total revenue. This was followed by medical crowdfunding service fee and digital clinical trial solution income, which contributed 8% and 3% respectively in the past three quarters of 2025.
Moving to cash, we have maintained a positive operating cash flow for the past three years ever since achieving non-GAAP profitability in the fourth quarter of 2021. As of end of September 2025, our cash reserves stood at about $490 million, and we're very committed to shareholder returns too. In early November, we have just completed our fourth cash dividend distribution since IPO with a total payout of around $10.9 million. The dividend per ADS this time increased by 50% to $0.03 per ADS, and we are now executing a semi-annual dividend payout scheme. Regarding the share buyback, we have been conducting annual repurchase programs for five consecutive years.
By the end of November, we had cumulatively repurchased about 58 million ADS in the open market, and we're currently on our fifth annual buyback program, which is up to $50 million on a timeframe from September this year to September 2026. Next is a quick look at our recently announced Q3 results. Our insurance-related business continued to show strong growth, with quarterly revenue increasing 45% year over year to $122 million, and the crowdfunding service segment maintained stable. The digital clinical trial solution segment also delivered great results, with revenue growing 31% year over year to $4.5 million. Together, these numbers together, this dropped our total revenue up by almost 40% on a year-on-year basis. On the operational side, we continue to enhance our operational efficiency and achieve a lower operating expense ratio.
The sales and marketing expense ratio remained flat year over year at a level of under 25%, while the G&A expense ratio dropped from about 16% to 8.7%. At the same time, we stay committed to building AI capabilities and continue to invest in R&D, with R&D expense this quarter amounting to about $8.2 million. On the profit side, the operating profit of our insurance business continues to grow with the revenue, with a stable operating margin, and this contributed to a 4X number in our overall operating profit this year, which in turn drove a 60% year-on-year growth in net profit attributable to ordinary shareholders, and going forward, we will continue to sharpen technology deployment, especially in AI, to enhance customer acquisition capabilities and efficiencies and drive product innovation on the supply side and deliver higher quality business growth.
For this year, we had a guideline of higher than 20% year-on-year growth in both annual revenue and profit numbers. From what we've achieved so far, I think we are more than confident to say that we will beat this guidance solidly. Last, to conclude my presentation, I really think that we are operating on a clear logic to drive further top line and profit growth. Firstly, we operate in a massive and significantly underserved market, and all the macro and micro factors are leading to continuing growth, and that is a certain trend. Secondly, we are a proven leading insurtech platform. Our revenue grew by 27% in the first nine months of 2025, and we're on a fast track to continue this momentum.
And this performance is fueled by our innovative user acquisition approach, our differentiated use of data and AI technology, and our expanding product portfolio. And lastly, this strategy actually translates into consistent profitability and tangible returns for our shareholders. We have demonstrated strong financial discipline, having achieved 15 consecutive quarters of GAAP profitability. Our commitment to shareholder value is further evidenced by our actions. And in summary, I think Waterdrop is uniquely positioned to capture vast opportunities in a growing market with a proven platform, a track record of profitable growth, and a strong commitment to creating value. And with that, I think I'm going to conclude my presentation to you here, and for the remaining time, me and the team are very happy to take any questions you might have.
Thank you so much for the presentation, Jasmine. Thank you. We really appreciate it.
I would like to remind everybody in the audience, if you have any questions, you can shoot them at the Q&A section at the bottom of your screen. We'll start with one of the few questions that we've already got. Your insurance-related revenue is growing quickly, but how much of that is being driven by higher quality, long-duration products versus shorter-term, more volatile policies? And what does the retention look like on each?
Sure. I will address this question accordingly. In terms of the premium, as I mentioned, the products we sell include both short-term medical products, which is a one-year term, and most users will pay on a monthly basis. That means they might cancel the policy within one year or after one year when they renew for the next year.
And then we have the long-term products, which will have a more certain payment, mostly annually, and because it's a long-term product, it's a commitment across multiple years. And if we look at the premium composition, the short-term plans versus the long-term plans, it will be like 70 to the short-term plans will take up about 60%-70% of the total premium. And if we look at the revenue contribution, the short-term versus long-term contribution will be a 50-50 split. With that being said, that is, you can tell there is a lower take rate for the short-term products versus the long-term one. That is partially because the commission rate is lower and also partially because of the retention thing.
And I think in terms of the retention rate, we actually maintaining and running a very stable and forecast model to forecast the retention rate, and we closely monitor this retention rate in daily operations to make sure that the retention is very precisely close to what our forecast is. Therefore, to maintain a healthy ROI model and LTV versus LTV model, and if you talk about the retention look like, I would say about roughly statistics, maybe 50% of the users will, well, the retention rate is about 50%, meaning for the short-term plans, not 100% of the users will pay full client and roll into next year, but for the long-term plans, the retention rate will be as high as higher than 90%. So for the long-term insurance plans, the retention rate is much higher.
Got it.
And how do you expect the mix to change among the short-term, long-term, and specialty insurance products? And how will it evolve in the next three to five years?
Yeah, I think for the mix of short-term and long-term plans, as I introduced earlier, we have a short-term plan to long-term plan transitioning model. The long-term, well, majority of the long-term plans sold are actually from the upselling and the cross-selling for the short-term plan holders. That means there is a lagging effect of the long-term for the long-term products premium to grow after the short-term premium grow. So if we look at this year and the next year, we are investing more in customer acquisition, meaning for the short term, I believe the mix of the portion from short-term plans will increase.
But if we look into two to three years, I think the mix will come back a little bit more because the long-term sales will come up later.
Got it. And you mentioned AI as a major driver of efficiency. Can you elaborate on how AI-driven underwriting and customer acquisition affect risk selection and loss ratios?
Yeah, of course. We actually have a backup slide here.
Okay.
Yeah, here. So yeah, so as you can see on the L2 section, this is what we call as modular enhancement. In general, the AI can be very helpful when selling short-term plans, which is more standardized terms. And in terms of the unit price, it's an easier decision for people to make without human assistance.
And so, for the long-term plans, most customers in China still need human consultations, interactions, at least online, to help them understand the terms and the purchase decision you are making. So the approach we deploy AI is that we break all the whole service procedures into different scenarios. And on each key point along the workflow, wherever the AI applies, we will try to make a small agent, a small application agent to help either replace human work or facilitate human work. For example, in this slide on the customer acquisition and conversion side, we actually use AI agents directly to interact with customers, either through in chat box or through actually telemarketing. And also on the WeChat Enterprise platform, we also use the AI agent to talk to customers for consultation. And also the AI agent can help them to book a consultation with the human agent too.
And for the consultation environment, we actually developed a lot of tools for the online agents to help them to quickly orient the right answer to ask the right answer to help them answer the inquiries from the customers. For example, this underwriting thing, it used to take a human agent five minutes to tell the customer if his or her condition actually works for this insurance product, but now it only takes one second. And also we have this process, ProSales Copilot, meaning every lead comes into the system. We will have the AI agent talk to these customers and to identify potential needs, and we will then distribute the leads to matching online agents to recommend the respective corresponding product type.
Also in the front-end and back-office side, now we have 70% of our customer service requests are processed by AI, and about 60% of all the requests that dealt with by AI agents can be resolved with no further needs of human intervention. Also for the quality control and also for the engineers, we use AI coding. We use AI to hear all the voice recordings to make sure that the sales is with the right quality or the sales team are doing the right thing. On top of that, this quarter, we introduced a local platform called Waterdrop C.AI that is connecting every of the above-mentioned agents so that our employees can deploy customized AI solutions for their own work. That's how we deploy AI in the insurance services.
Right. That's very insightful. Thank you very much.
But are there any regulatory or compliance risks associated with the increased AI reliance? And can you tell us a little bit about how that may differ from the U.S. insurers? And if you can just talk a little bit about your competition as well.
Yeah, so I think in terms of the regulatory risks, well, a frequently asked question is about, in the past few years, there has been some regulation about the commission rate cap in different channels in the insurance sector in China. And especially in the year of 2024, there has been a commission fee cut mostly for the life products. Yeah, that's what happened and affected the whole industry much.
But as of now, we believe the regulatory environment has entered a quite stable cycle because all the commission fee and the other institutional management work has been done in the past, I would say, four years for each of the distribution channels. So it's kind of a conclusion for a past cycle. And now I think we entered a relatively stable cycle. In terms of the competition, as we've shown on the market stats, it's a huge market. And there are some scalable online brokerage platforms just like us. But I would say in the daily business operation, we don't feel a head-to-head fierce competition with each other because the market share and the scale of every one of these digital platforms are still super small compared with the whole market.
So the key here is that if our business model can sustain a healthy P&L and with a healthy acquisition model to make this digital model work, that is the key to scale. It's not about competing or grabbing share from competitors. It's more about driving a more scalable and meanwhile healthy business model to tap into a big market.
Right. And just if you can tell us a little bit about the capital allocation with dividends and buybacks, but how do you decide between reinvesting aggressively in growth versus continuing to hand cash back to shareholders?
Well, I think for the shareholders, for the share buybacks and dividend payout, we have been implementing a very consistent and continuing scheme. And for the cash reserves, in short term, we still see there is, as I said, I think the regulation cycle has been into a quite stable one.
And also with all the technology deployment, we see a further improvement in our customer acquisition model and better ROI. So we believe in the next few years, we will invest more in our customer acquisition and grow faster and be profitable at the same time, of course. And that will require a certain level of cash investment. And also, as I mentioned, we also operate a business in Hong Kong. We are also looking at other insurance and financial-related services in Hong Kong and also in Singapore and other non-Mainland China markets. And we are carefully looking into opportunities to expand overseas international markets. So also about the M&A, we expanded to a different customer segment by acquiring a small player, which has a differentiating model, capability, and customer portfolio. We are open to grow our customer coverage and service model by M&A also.
So I think those are the major business initiatives that may cost us cash.
Okay. Thank you so much. With that, we're at time. So I would like to thank you very much for the presentation and answering all the audience questions. And also, I'd like to thank everybody in the audience for listening and spending time with us today. Thank you.