Key Takeaways:
Waterdrop looks set to return to strong revenue growth this year, ending three consecutive years of declines
The company's new technical services segment is recording explosive growth, going from nearly nil last year to supplying 23% of its revenue in the third quarter
The old adage "If a tree falls in the forest but no one hears it, does it make any sound?" seems to summarize the case with the latest financial results from insurance broker Waterdrop Inc. (NYSE:WDH). Despite posting some very impressive growth in a difficult operating environment, the company's shares barely budged in the next two trading days after the results announcement, rising slightly on Wednesday, only to give back the gains and a little more the next day.
In Waterdrop's case, another adage, "If you can't stand the heat, get out of the kitchen," also seems to apply. The insurance brokerage business that provides the bulk of the company's revenue is getting increasingly tough, as China rolls out a steady stream of new regulations limiting the profits companies can make from that middleman business.
In response, Waterdrop has been turning to providing services to insurance companies to help them run their business more efficiently. That business looks far more lucrative and is likely to receive state support, or at least less government interference, since most insurance companies in China are state owned. Many of those insurers are currently struggling due to a slowing economy, which may partly explain why China is taking steps to shore up their business by limiting the fees that insurance middlemen like Waterdrop can collect.
Waterdrop, which deals mostly in health insurance, is also using its extensive databases to help drug companies identify patients for their clinical trials, another area that ...
