Waterdrop Inc.

Good morning, ladies and gentlemen, and thank you for standing by for WaterDrop, Inc.' 's fourth quarter and fiscal year 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to Ms. Jasmine Lee. Please proceed, Ms.

Lee. Please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities and the Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to those outlined in our public findings with the SEC. The company does not undertake any obligation to update any forward-looking statement except as required and applicable law. Also, this call includes discussion of certain land-gap measures. Please refer to our earnings release for reconciliation between land-gap and gap. 今天与会的公司管理层有公司创始总事长兼首席执行官沈鹏 Hello, everyone. Thank you for participating in the 4th quarter of the company's 4th quarter of 2024, which is the year-end conference.

Looking back at the year 2024, the 5 cents of each business of the company have achieved good results. With a unique and rich scene ecology, and the long-term development of AI technology, we have completed the full upgrade from product to service, ran from the old AI industrialization to the new way of landing, and handed out a satisfying order. In 2024, the company's annual revenue reached RMB 27.7 billion, with a growth of 5.4%. In the fourth quarter, the total revenue of the company was about 6.87 billion yuan. In terms of profits, the total revenue of the company was about 9,960 million yuan. Overall, the company has achieved financial success throughout the year, and has maintained a positive performance in the 12 consecutive quarters. I am also very happy to announce that According to the company's status document in the second half of 2024, the company will launch its third cash-out in the near future. At the end of April to the end of May, the company will launch its third cash-out in the near future. At the end of April to the end of May, The company also promised that from the beginning of 2025, under the premise of healthy business, the company plans to distribute a share every six months in return for shareholders and investors' support. In addition to the share, the company also continues to actively buy back in the public market. By the end of February 2025, The company has bought back about 5,210,000 units of ADS in the public market, with a profit of about $1.04 billion. The underwater company also actively repays and builds up society, and persists in sustainable development. As of December 31, 2024, the underwater engineering platform has managed to open and cooperate with 115 public-private enterprises. and more than 150,000 industrial projects. The company also won the annual ESG Sustainable Development Top 15. Now, in the annual ESG rating, it is ranked A. On October 14, 2024, the Ministry of Finance issued an announcement about the selection of individual assistance service platforms. to actively embrace legislation and supervision, and fully prepare for various requirements. In the end, at the end of 2024, the Chinese Ministry of Civil Affairs successfully selected the first personal assistance network service platform. The industry enters a new phase with a more healthy standard. Since the Spring Festival this year, DeepSeq has aroused global attention, bringing new ideas to the AI industry in China and all over the world. We believe that the combination of AI and industrial Internet will bring about a new productivity revolution. As a technology company that provides deep-rooted special insurance services, we will continue to invest firmly and lead the industry with advanced technology. During 2024, we will continuously polish and launch a number of applications based on large-scale assistant and micro-technical applications, as well as the full chain of energy-saving business. Especially in the field of online sales and service for managers, we have gained a wide range of recognition in the industry. Recently, we have also taken a step-by-step approach to further promote the company's AIA. In the second half of today's press conference, our team will also help the company to share our thoughts and the latest business progress in terms of AIA plus insurance business scenarios and applications. In 2015, The company's business development is expected to grow. We expect that in 2025, the annual revenue will increase by 20%. The increase in business will be gradually reflected in each quarter. At present, the performance of the first quarter of 2025 will still be stable. At the same time, it will maintain excellent operating capacity. In the following quarter of this year, As the company's income increases, resources may be invested more and more, and it will have a certain impact on the rest of the power. So I'll stop here. Now it's time for our financial advisor, Xu Xiaoying, to share with you the financial experience of the company.

Thank you, Shen Peng. Hello, everyone. Next, I will briefly introduce the financial performance of the mobile company in this period. Please note that all financial data mentioned above are based on RMB units. In addition, financial data as well as balance sheet conditions can be further referred to the information released by the company's RR website. From the total income, the company's business performance is still strong in the fourth quarter. The total income reached 6.87 billion yuan, which is 4.2% of the total growth. In the previous year, the company's income in 2024 reached 27.7 billion yuan. In the third quarter, the insurance business contribution income reached about 23.6 billion yuan. Compared to maintaining a steady growth, non-safety business can contribute about 14.7% of the income. Among them, the service fee of the blood cell is about 2.7 billion yuan. The income of the digital clinical experiment resolution project is about 91.1 billion yuan. The income is more diverse. With the help of AI education, additional business mechanism management and other multiple measures, in 2024, the overall operating cost of the four seasons will be about 6.34 billion yuan, which was basically the same as last year. In terms of the whole year, The total cost has dropped by 1.7% in the past two or three years. The operating cost of this quarter reached 3.24 billion yuan, which increased by 7.2% compared to the same period last year. As long as the recommended service fee of this period is about 3,910,000 yuan, the human resources cost has also dropped. The sales cost is about 1.82 billion yuan. In the fourth quarter, the company actually expanded at the customer end, which made the third-party flow investment cost increase by about 3,020,000 yuan in the same period last year. At the same time, the cost of human resources has dropped by 22.8 million yuan. In total, the cost of consumption has increased by 4.1%. The management cost of this system is 73.7 million yuan, which has dropped by 23.2%. This is due to the decrease in the preparation of the company and the decrease in the professional service fee. The annual cost is 54.3 million yuan, which has decreased by 9.3%. . . . . . . . . . The current cash flow of this quarter continues to be positive. Until the end of 2024, the company's cash reserve on the account remained abundant, about 36.7 billion yuan, and provided strong support for the subsequent growth. The above is the financial situation of the company in the fourth quarter of 2024. Next, I will introduce the latest progress of various business in this quarter by the secretary-general of the board of directors.

Thank you, Xiao Ying. Next, I will report to you the latest movements of various business lines this quarter. In the 4th quarter of 2024, Shidi Insurance's insurance sales increased by 24.5% in the first year with a 19-billion RMB net profit, and fell by 7% in the second year. Its insurance revenue increased by 5.8 billion RMB, and fell by 0.9% in the second year, and fell by 3% in the second year. Its operating profit was 1.03 billion RMB, and its operating profit rate was 18%. Its first year net profit was 14.3 billion RMB, and increased by 44.2% in the second year, and fell by 4.7% in the second year. From the growth of the balance sheet, it mainly comes from the continuous breakthrough of public goods and goods customers. The company actually adjusts the investment strategy in multiple channels and explores a new balance sheet payment model to achieve a significant growth in the balance sheet of Q4 new balance sheet balance sheet. In the supply of insurance products, we insist on surrounding the needs of the vulnerable people to make new innovations, and continue to introduce 0 to 100 years old eligible for the treatment version of cancer-free medical insurance, as well as millions of heavy-duty insurance that can be used to treat diseases. The supply of medical insurance and heavy-duty insurance in the field market is lacking. In the fourth quarter, we contributed over 200 million yuan to the first year of the first-year scale. In the long term, the first-year scale has reached 4.6 billion yuan, and the ratio has dropped. This is mainly due to the impact of the shutdown of products in the Q3 industry and the shutdown of Q4. In the face of the short-term pressure of demand, the online sales team's dynamic growth and low-performance manpower and manpower are maintained at a higher level than the year-round. In terms of food and beverage, food and beverage products have shown strong performance, and Q4's cost has exceeded 90 million yuan, and the ratio has increased by 17%. In the quarter, the company faces a new high-end special disease insurance long-term version for middle-aged and elderly people, which covers 10 types of special insurance, insurance premiums according to age, insurance premiums according to age increase, and other insurance terms. The company is also continuing to develop the online planner mode. Shilanbao's independent contribution to the quarter is about 90 million yuan. . . . . Safety, risk, and control have always been the top priority of platform operations. From the perspective of efficiency and performance, we have currently built a technical framework for large and small models. On the one hand, in terms of detecting false materials, small models that are more cost-efficient, more economic, and more lightweight have achieved pixel-level recognition and good-second reaction on the picture PS, significantly increasing the efficiency of sampling. This quarter, we have compressed the error rate of false picture recognition from a third to a one-third of the industry's leading level. On the other hand, hydroponics is a larger model that uses reasoning ability to avoid the use of capital. From the cases that have accumulated in the past eight years, it summarizes the experience and summarizes more than 1,700 characteristics. Support medical consultants to realize the reasonable prediction of the development of the city, reduce the risk of fraud and abuse. With the fall of the management method during 2024 and the announcement of the official designated platform of the Ministry of Civil Affairs, the development of the future industry will be more standardized and interesting. As the largest personal assistance network service platform in the industry, in 2025, WaterDiChou will still be in awe of the new generation, do a good job of leading the demonstration, use sincere service users, use technology to protect kindness. In the medical business segment, in this quarter, the medical-related business of Shui Di Company's overall stable development, the number of cooperation drugs and CLOs reached 177, and the number of new cooperation projects reached 79, and the quality of the project continued to increase. In the fourth quarter, the digitized clinical trial business successfully recruited about 880 patients, and since the establishment of the business, the total number of recruiters has exceeded 10,000. The digitalized clinical trial business income in the region has increased by 22.9% and the efficiency has been greatly improved. In addition, the platform uses the various scenarios of large-model, deep-duty, negative-energy medical services, including patient health management, the production of health science content, digital science, etc. There are many projects that have been signed and landed. Under the premise of ensuring high-quality compliance, the efficiency and user experience have been greatly improved. This is the key progress of the company's business conditions in this quarter. Next, I would like to invite the General Manager of the Insurance Technology Industry Group, Ran Wei, to share with us a special issue, which is a deep-dive into the evolution and strategic layout of water-based companies in the AI energy insurance industry.

Thank you, Jiaru. Hello, investors and friends. It is a great honor to take this opportunity to talk to you in detail about the process and results of water-based company AI technology in the field of insurance technology. First of all, it's our AI layout and long-term advantages. From 2019, Shady Company started to deploy AI. At the beginning, we learned the algorithm of the machine, OCR image recognition, NLP, cloud analysis, and other technologies are used in the smart recommendation of insurance products. The smart matching of online inquiries and insurance clues, as well as the different scenarios such as LiPay and Zoom, greatly improve the efficiency of insurance software transformation and service operation. At the same time, by relying on AI technology, we have built a series of digitized infrastructure, such as data center, smart marketing, smart CRM system, and smart Zoom system. . . . . . Our advantages are reflected in the following four aspects. First of all, it is the ability to interact with multiple models in the whole scene. We have created an ecosystem of innovative forms such as integrated intelligence, text-to-speech, voice-to-speech, digital service, and so on. It can cover many types of communication channels such as small programs, corporate WeChat, and intelligent external calls. In the post-traumatic era, this scenario survivability not only allows users to switch between different scenarios, but can also accumulate more dimension data. The next step is the closure of the whole cycle of intelligence service. In the insurance service process, we have formed from demand identification, product matching, intelligence and security, to the whole chain of system integration and digitalization capabilities, which are different from the dialogue capabilities of general large models. Now, we can complete tens of thousands of high-compatibility insurance inquiries every day. On the other hand, the first stage of the industry is the data asset pool. After eight years of accumulation, we have the leading private data assets in the insurance industry, covering 1.2 billion images, more than 7,000 financial intelligence funds, a large amount of language materials, including voice, text, and many other data forms. These are data assets that have been verified by actual businesses and used legally, and they are the irreplaceable training materials for the use of large-scale insurance industry. The fourth advantage is the expert knowledge of the vertical field. It is different from the universal large model of the three-dimensional network. WaterDi has established a deep knowledge framework for insurance trading scenarios, focusing on smart recommendation, demand survey, and conversion of these three core dimensions. In the nodes of hundreds of interoperability operations, there are family insurance shortage analysis methods, consumption decision psychology, Thank you. When the communication big model is still under the control of fantasy problems, our industry model can give accurate and definite answers in the consulting scene. In short, this business model that integrates many scenes and online data has opened a new gateway for insurance intelligentization. In the competition of industry big models, we have this irreplaceable strategic advantage and value. On the second hand, I would like to talk about and the accumulation of insurance technology technology. Especially in the past two years, we have actively studied and introduced the most advanced infrastructure technology and leading open source technology. On the other hand, we have integrated our own business scenarios to develop AI application technology. Let me give you a few examples. First of all, we have built an insurance intelligent structure that has the ability to calculate sales decisions in a short period of time, including autonomous decision making. It is built from perception to reasoning to decision-making to execution. It can use a variety of intelligent cooperation techniques. For example, it can implement a full process of autonomous decision-making that can be done in less than 50 minutes. For example, a call will complete the user's need for understanding, health, risk, structure, modeling, terms, interpretation, and the entire process is automated. For example, We have a dynamic task-solving mechanism. We can do real-time coordination work such as insurance, insurance fee inspection, sales strategy production, etc. through a modular intelligent unit such as insurance, insurance fee inspection, sales strategy production, etc. We can support the flexible exchange of medical insurance, car insurance, etc. We can analyze more than 7,000 products and serve the response speed within two seconds. . . . . . . . . . . This is our specific 1.5 scene. This is an example of self-explanatory technology. In the past two years, we have accumulated and the company has successfully applied for 48 large-scale related patents. We have accumulated and applied for more than 100 patents in the field of artificial intelligence. There are also nearly 100 ideas for innovation. We are also in the insurance industry. First of all, let AI Agents be able to independently complete sales, service, and delivery of insurance technology companies. In the third aspect, I would like to share with you the landing scene and the landing results of different user scenarios. During the entire process of constructing large-scale applications, we followed the principle of from one to the other, first from a simple service or a single product, and then from a short-term scenario. With the continuous development of infrastructure large-scale technology, . . . . We can also do a comprehensive analysis of our analysis. Now, the accuracy of the diagnosis has reached 88% of the artificial diagnosis, and it can fully cover various operations such as voice, text, and chat. We expect the use of the AI diagnosis assistant to increase the efficiency of the first-hand diagnosis service by more than 40%. The economic performance of the diagnosis work is greatly improved. The second is our Sales Copilot. Sales Copilot is mainly to improve sales efficiency. By using large models, powerful data analysis and summary capabilities, it can quickly identify users' intentions and introduce product plans according to users' needs. This application improves the quality and sales efficiency of sales teams, so that sales personnel can better meet customers' needs and achieve sales goals. From the face-to-face, directly to the AI insurance expert of users, we did a AI medical insurance expert. He can directly face these customers, through voice form, conduct medical insurance consultation and communication. The three conversations can reach up to 50 minutes. The service efficiency is even higher than the initial service level. The unit can give the company millions of other medical insurance amount of money. And by the end of the year, it is expected to achieve tens of millions of other amount of money. In addition, based on this technology, we have developed AI car insurance expert, which has already been introduced into We also have an online AI insurance service expert. The company has an online AI insurance online customer service service on the customer service scene. This application is integrated into the app of the small program of Waterfall. It can respond to this user at any time in 24 hours. About the insurance consultation and insurance management, it can answer a request. At the end of 2025, compared to AI insurance customers, AI insurance customers can reduce the flow rate of online problems by 50% and improve service efficiency by 50%. At the same time, we are also building more complex AI insurance planning experts. We use the long-term thinking and reasoning ability of DeepSeq and other natural technologies to create AI insurance planning experts that can provide users with high-quality and family-based insurance product consultation and planning services. In this way, we can improve the efficiency and business experience at the same time, and we can bring about the potential for business growth. These are some of the actual results of our large-model AI applications. If we look at the next three or five years, we will continue to strengthen data and data barriers in terms of technology. Based on historical data and online AI interaction operation data, we will build a large-scale, focused insurance industry, strengthen learning and intelligent technology to maintain a leading position in the industry. In terms of applications, we will create AI insurance experts with the same level as human experts AI insurance assistant. Through small procedures, letters, phone calls, and other channels, in the form of text, voice, and digital people, we will provide real-time high-quality health care product consultation, planning, sales, and training services, and service to a wide range of water users. At the same time, we will do good service for the industry. The above is a comprehensive sharing of AI.

Okay, then the next press conference will enter the QA session. We will now begin the Q&A session. If you have any questions, please press the signal button on the phone and then press 1. If you want to withdraw a question, please press the signal button and then press 2. In addition, this meeting will also be broadcast on the Jiamen Financial platform. If you are participating through the Jiamen platform, you can also ask questions through text on the platform. My first question is from Edwin Liu, a CLFA analyst. The problem is that the company's insurance business has increased by 1% in 2024, but the net profit has decreased by 9.6%. I would like to ask why the management layer has changed. Thank you for your question, Edwin.

Let me answer this question. In the year of 2024, the first-year insurance premium reached 74.7 billion yuan, which increased by 5% compared to the same rate in 2023. In this regard, both the short-term and long-term premiums have increased. However, when it comes to income, on the one hand, the company is trying to use low-wage products to make the short-term take-away decrease. On the other hand, due to the fall of the year-end insurance agreement, the long-term take-away premiums have also been suppressed. So in general, the increase in income is not as much as the increase in premiums. And in terms of cost, this year the company has invested more in the investment, to promote the growth of the new unit. At the same time, we have also increased our investment in the AI industry in 2024, so it has a certain impact on current financial profits.

Thank you. Thank you, Xiaoyin. The next question is from Thomas Wang from Kaohsiung. I would like to ask the management level, what are the current insurance growth strategies?

As for the growth of insurance business. Okay, thank you. I will answer this question. In terms of short-term goods, we will continue to strengthen the operating advantage of public goods, deepen the cooperation with the headquarter content platform, and increase the transfer efficiency of goods through the new type of delivery, and increase the basic plate of business in the short-term. In terms of long-term transfer, we will use both sides of the content and service. On the one hand, rely on high-quality insurance content evidence to strengthen user reliability and product knowledge. On the other hand, to improve the configuration capability of the business team, to create a high-quality, strong-willed business team to be more effective in meeting the needs of the users. In recent years, we have also seen the diversification of water-based business products, and our user circle has also become younger. For this part of the third-party market, we are also closely developing the system of industry partners. The plan is that in 2025, to launch a variety of all-round products. For example, we will have a project to launch all-round insurance products such as new products for young middle-class communities, which can be protected, covered, and drug-free, in order to directly control and manage users, etc. The above are some strategies for product innovation. In terms of technical performance, we will continue to grasp the wave of AI technology changes in the next two or five years, Thank you, everyone. This question is for the audience online. We are now in the Q&A section of the press conference.

If you have any questions, you can call the signal button on the phone and press 1. If you have any social problems, you can call the signal button and press 2. In addition, this meeting will also be broadcast on the Jinmen Finance platform. If you are participating through the Jinmen platform, you can also ask questions on the platform. We have a new question about the application of AI. It's from Zhao Muyao from Guo Tai Juan. The question is, the company expects that in 2025, with the landing of AI applications, what will be reflected in the financial statements?

Thank you for your question, Mr. Muyao. I will answer this question. The previous committee has also introduced the company's layout and some key developments in AI this year in detail. I will make a brief introduction here. The current company is very focused on the AI strategy. In that case, AI assistant business is continuously improving. In 2024, it has achieved initial results. The internal operating efficiency continues to increase, but the corresponding cost cost has decreased by 14% compared to last year. In 2025, the company will continue to use AI automated capabilities to improve the operating efficiency of business. In addition, in the insurance sales scene, we are helping business growth through AI application landing. Currently, our AI medical insurance experts We hope to contribute millions of dollars in medical insurance. We estimate that with the gradual improvement of AI capabilities, this application will have the potential to save tens of millions of dollars a year, and will continue to expand steadily this year. In terms of foreign industries, we have developed an AI car insurance expert. Currently, it has entered the data training stage with two financial insurance insurance companies. Each project has launched an internal test of the user's small traffic to try to create a standard solution with industry influence. Thank you. Thank you for your response.

Thank you for your attention. Thank you.