Waterdrop Inc.
Q2 2021 Earnings Call Transcript

Published: 8 Sep 2021

[Operator:]

Good morning, ladies and gentlemen. And thank you for standing by for Waterdrop, Inc.'s Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. As a reminder, today's conference call is being recorded. I will now like to turn the meeting over to your host for today's call Ms. Xiaojiao Cui, please proceed. Ms. Cui.

[Xiaojiao Cui:]

Thank you, Operator. Hello, everyone. Thank you for joining Waterdrop second quarter 2021 earnings conference call. Please note that the discussion today will contain forward-looking made under the safe harbor provisions of the US Private Securities and the Litigation Reform Act of . Forward-looking statements are subject to risks and uncertainties that may cause the results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to those outlined in our property filings with the SEC. The Company doesn't uptake any obligation to update any forward-looking statements except as required under applicable law. Also, this call includes discussions of certain non-GAAP measures. Please refer to our earnings release for a reconciliation between non-GAAP and GAAP. Joining us today on the call, are Mr. Shen Peng, our Founder, Chairman, and CEO. Mr. Yang Guang, Co-Founder Director, and the general manager of insurance marketplace. And Mr. Kangping Shi our CFO. We will be available for a Q&A session after the remarks. Now I would like to turn the call over to our CEO, Mr. Shen Peng. Please go ahead.

[Peng Shen:]

[Xiaojiao Cui:]

Hello, everyone. Thank you for joining us on our quarterly earnings conference call today. In the second quarter of this year, we were successfully listed on the New York Stock Exchange and became the first Chinese insurtech Company publicly listed in the U.S. This marked a key milestone since our founding 5 years ago. At the same time, we delivered very excellent results for the second quarter. Despite China's lag in the health insurance market, only posting single-digits year-over-year during the quarter, our premium and operating revenue continued to grow strongly, driven by the strong demand from the lower-tier cities where our business is focused on. Our first-year premiums rate have grown up by 94%, which RMB is 5,357 million for the second quarter. Our net operating revenue for the second quarter rates RMB 939 million up 44.4 year-over-year on a comparable adjusted basis, which is an outstanding performance in the overall insurance industry.

[Peng Shen:]

[Xiaojiao Cui:]

Our line established infrastructure and organizational capabilities to create solid foundation for the sustainable development of Waterdrop. The industry is currently entering a period of transformation with the Waterdrop and other leading players focusing on higher-quality operations and a continued improvement in customer satisfaction. And we will not adopt a low-quality growth model only to pursue short-term results. We firmly believe that we have clear competitive advantages in terms of customer base, business modes, and the brand recognition, where we benefit more against our competitors during the current transformational cycle. However, I know that our sale price has been under pressure post-IPO due to the market concerns over several external uncertainties. But I believe that the current stock price has deviated far away from our fundamental performance. As our organization, we have industry-leading organizational management capabilities. Our core management team are highly experienced in youth under age 35, and all of our business segments are growing in a steady and orderly manner. We firmly believe we will continue to sustain our leading position against the current backdrop of a challenging industry. We also want to take the opportunity during these earnings release to update you about our business performance and the strategies. I would like to start by talking about our three main commitments.

[Peng Shen:]

[Xiaojiao Cui:]

Our first commitment is to actively embrace regulation adhere to compliance and continuously influence user satisfaction. At our inception, the origin of our Company's name Waterdrop came from that sets leveraging technology to make an assurance protection more inclusive and accessible to the public and achieve common prosperity for everyone. Waterdrop symbolizes our belief that little drops of water constructs the mighty oceans and a simple drop of water in good days should have the Pacific Ocean in bad days. Or as the Chinese proverb goes, a drop of water in need will be repaid by a spring indeed. As a technology platform, we will actively connect our partners in the ecosystem, facilitate the national third distributor drive with the diversified offerings of our Waterdrop Medical Crowdfunding, Waterdrop Insurance Marketplace and Waterdrop health platforms to achieve common prosperity for everyone. We believe that with our leading technology, we can help to make donations out of love more transparent and our society more giving.

[Peng Shen:]

[Xiaojiao Cui:]

And so technology innovative Company with strong social responsibility and a close connection to people's likelihood. We pro-actively respond to the regulatory guidelines and requirements heavy into customers satisfaction, we have adjusted and updated our business operations in advance and engaged in taking the lead to improve industry reputation. In the short term, there might be fluctuations in quarterly results or challenges in our operations. But our determination to remain compliant has never changed.

[Peng Shen:]

[Xiaojiao Cui:]

Secondly, we have further refined our operations since this September. Our management are committed and are confident in delivering higher quality operations and results. The Company was previously in a period of rapid expansion, as the insurance protection and health needs of the billions of users in lower-tier cities were under served, which had a vast potential. We positioned ourselves to serve both users and the belief is -- was important for us to build our brand awareness and expand our user base at the beginning. Hence, we pursued rapid business growth during initial stages. With our continuous development, we have now achieved a leading position in terms of business scale in the industry. In the future, we will gradually switch in to a stage of enriching the range of our services and enhancing user value. We believe that refinements of operations is inevitable way to both adapt to the current market environment and achieve our long-term goals. We are confident in balancing between optimizing customer acquisition and the premium's volume growth going forward so as to achieve higher-quality growth.

[Peng Shen:]

[Xiaojiao Cui:]

The serve commitment is on technological innovation and empowerment of the entire business chain by technology. In the second quarter, we continue to explore new technological applications and have completed several breakthroughs. With our intelligence sales system, we can precisely match up our sales person with a potential customer through algorithms analysis. Through search optimization, productivity increased by a range of 20% to 45%, enhancing the sales efficiency.

[Peng Shen:]

[Xiaojiao Cui:]

For our intelligent, underwriting and verification process, we outlined an LP algorithm model to inscribe, summarize and refine the policies from insurance companies, and are combined with actual online reputation data. Based on the -- based on these enhanced process, we design our prerequisite decision modal, soon as there's integration into a CRM system, it's provides supporting physician capability for LP's for verification process. Our LP can rapidly and the precisely makes decisions on policy it's available to specific customers. simultaneously this is some camp more accurately create additional sales leads to a more precept screening process. Our interactive QA system is now able to cover 97% of common diseases that online users inquire about.

[Peng Shen:]

[Xiaojiao Cui:]

In terms of our online marketing services, under the concept needs-based service, we designed our system tools and improve users' awareness of service quality to increase sales conversion. Through our live interactive tool, our sales and the service personnel can share screen remotely with users, which helps build users' and provides them with a lot smoother experience in understanding and the purchasing the policy, especially in lower-tier cities. Leveraging our real timing intelligence sales service assistant tools driven by algorithm features and a user experience, we are able to provide users with a more professional and a higher quality of services.

[Peng Shen:]

[Xiaojiao Cui:]

We continue to increase our investment research and development, and have attracted nearly 100 new talents with the experience in data and algorithms. More technologically innovation will come in the future. We hope to enhance and downstream toners in the in-store industry chain to continuously iterate and update existing intelligence solutions to meet more personalized, customized, and diversifying insurance protection and health needs of users.

[Peng Shen:]

[Xiaojiao Cui:]

We are convinced that Waterdrop's entrepreneurial solutions to leverage technology for the interest of public and a common prosperity, business philosophy, and consistent commitment to doing will have long-term positive value and the contribution to Chinese society. As at the end of the second quarter, a total 372 million users of our platform have made donations of more than RMB 42.8 billion to 2.1 million patients. This is not just a few numbers, but hope for survival of those who have suffered from serious illnesses or accidents and spontaneously transfer of love among the people and a meaningful supplement to the country's policy, our income, primary distribution, and the redistribution. As the largest online medical platform assisting people with serious illnesses to seek help from the public. We expect to contribute more in the income third distribution.

[Peng Shen:]

.

[Xiaojiao Cui:]

In conclusion, we are firmly confident in the strong and sustainable development of our business going forward. Today, with the earnings, we announced the Repurchase Program?, in which we may repurchase up to $50 million worth of our over the next 12 months. This is a decision that was made based on the judgment of the Company's current value and our confidence in our long-term sustainable development. Meanwhile, we plan to reserve repurchased shares for share incentive plan, which will further improve the long-term incentive mechanisms and align the interest of our employees with the growth of our Company. We will adhere to the Company's mission, vision and the users' real needs, always work as and a strive to become the preferred platform for health protection in the minds of the people.

[Peng Shen:]

I will pass to Mr. Yang Guang to give an update on the development of the Waterdrop insurance business.

[Guang Yang:]

Thanks. Hello, everyone. I'm going to walk you through key highlights of the quarter and some recent developments in our market business. Let's start with the product side. The number of interest we offer has totally increased from 240 in the previous quarter to 275. In addition to upgrading of the existing products, we have also developed new products that are aligned with the current marketing demands, including vaccine-related, -related, and other of products. We continue to outflow the concept of selling the general public with insurance coverage, developing products, for different customer groups, and promoting supply side innovation. For instance, our cancer insurance products are available up to the age of 80; and can be upgraded to include general medical insurance for broader coverage if the customer could pass physical examination. Furthermore, our emergency outpatient and insurance product could address the need of users. cost effective making it possible for general public to obtain more practical insurance coverage at -- cost-effectively. We also cooperated with reinsurance companies to develop the industry's first online, non-standardized CA insurance products covering patients with common chronic diseases such as hypertension, diabetes, hepatitis B, and hypolipidemia. These interest difficulties of the sub-optimal health scope in obtaining business coverage. And addressed the of people with multiple disease or abnormal health indicators. So we are the technology co-innovations and -- that being said, disease modeling in premium low and a scenario optimization, each disease can be evaluated by answering three to six questions, which greatly improve the convenience for individuals with sub-optimal housing shifts to get interest coverage. The share of our short-term CI products has increased from 14.9% in Q1 to 17.3% in Q2. We also saw more than 60,000 newly launched outpatient interest products in Q2, showing our progress in diversifying product offering. On the next slide, let me talk about our user growth and channel development. Regarding user base in the second quarter there were 4.2 million customers buying insurance products through our platform, up 53% year-over-year, resulting in the outstanding growth in our FYP of 94%. As of June, the accumulating member of insurance customers of Waterdrop have exceeded 102 million people, among which 24.9 million were paying customers. On top of all the rapid increase in the number of customers, about 1/3 of this paying customers in the second quarter are repeat buyers in Q2. the FYP per customer reached R&D 1,276 compared to R&D 1,165 in Q1. And the overall repeat purchase rate of short-term insurance has increased to the range between 50% to 60%. As supported by our effective managing our existing customers, we have seen positive results in policy repurchase and renewal. Moving on to the channels of a lot of customization. Firstly, weight increase in in third-party traffic channels on the back of our prediction that external facts would be relatively abundant in the second quarter. The periodic increase in new user acquisition from external channels is somewhat lead to a decline in utilization rates. However, at the same time, we have also applied intelligent applications, and automatizing service tools as placements, which has improved our customer acquisition efficiency. So the user AI algorithm, they have been building our big data models, which are used to assess the impact as placement on user clicks, user conversion, retention rate, and the complaint out. The system we use may estimate the potential license that each user request could bring to what a job and get the real-time API to give accurate bidding price for acquiring new users. Such process could improve our return on investments that were filtering out the low -- lower-quality touches and facilitate acquisition or higher-quality traffic with our specific biding mechanics on various customer segments. Currently, our system has been connected to major media RTA and the new strategy has boosted our premium ROI by 8% to 10%. And Secondly, for internal traffic, Waterdrop is no longer simply an age-seeking platform for critical illness or a standalone influence conversion platform, but also multi-functional conversion scenario for healthcare and medical and in-patient services, thereby enhancing our capabilities to launch more house care services for user. Then we continue to reserve traffic and scenario to growing new business trials. At the same time, considering the long-term and the robust developing of our platform, we'll balance various factors including our compliance requirements and the customer experience and to push forward steadily instead of pursuing aggressive about businesses conversion let me talk about our participation in the government-backed housing interest, . Leveraging the competitive advantage of our online interest platform, we have actively acquired a new consumers. So the government-backed health insurance , given that it provides a relatively lower entry barrier for individuals to purchase healthy insurance products. Under this scheme were position has a one-stop insurtech platform, which can provide services such as product design platform, set up marketing, settlement, pharmacy benefit and management, and the patient services moreover by leveraging our sophisticated technology and intermediary licensing. We could help our partners to develop influence infrastructure, personal account payment system for their customer distribution system, or the insurance claims set system and a one-stop settlement system that are fit for At the same time, also constitutes and channel for acquiring new users in markets supplement to our commercial housing insurance. Now, regarding our sales model upgrade, considering the abundance of our product offering, in order to enhance the interest of fairness of our users and the protection quality of our products, we plan to upgrade our sales strategy gradually in the near term. Especially we will replace the medical products which target first-time buyer, first month premiums come with other products that have a lower premiums, higher cost-effectiveness, and a monthly payment. This will help enhance retention and the repurchase rate or our users, thereby increasing the overall LTD per user. Despite that, the upgrade may have some short-term impact on conversion rate for online sales. This could significantly improve customer retention and satisfaction, as well as reducing the reliance on expensive external channels. And we will continue to engage in activities with existing customers, leveraging our experience in online operations and the customer database. to do that we will lead the industry in the upgrading of the short-term interest marketing model further improving our economics. more healthy and sustainable growth. Now onto our claim settlement services. Our claim efficiency is enhanced through our technology combined with personal interactions to improve overall customer experience and satisfaction. Our self-developed AI intelligent claim settlement system could assist customers throughout the entire process, from the moment that they submit claim applications online to the closure of settlement. Our intelligent or adjustment system includes support configuration, monitoring the product changes in the market. And it's such an update the flaws or claims accordingly on a real-time basis. The system also adapts the entitled and data analysis to automatically proceed the calculation in each claiming case of vaulting, manual arrows. It only takes the system millisecond, from the start of a model calculation to January and your claim is of accuracy rate. Obviously some has now reached 99.78%. In addition, we launched our claims bottler service to provide allowing one personal in for business services across the entire claim process. And these include the consultation and upload of a claim materials, case progress tracking, interpretation of our claim conclusion and assist in the dispute settlement. Customer can communicate directly with our claims settlement team. So the enterprise . As of June 30 this year, the 24-hour closure rate for quick settlement cases has reached 98.6%. We also collaborated with our partners to cover other claim settlement-related services such as house consultation, convenient access to hospitals, payment, full process claim assistant and a drug purchase discounts. think with that we will now turn over the call to Kangping, our CFO, to discuss our second-quarter financial performance.

[Kangping Shi:]

Before I go into details on our financial performance, please be reminded that all the number here will be in R&D. And since we referred to our earnings release for additional information on all of our comparative performance on a year-over-year basis. In the second quarter of 2021, our first-year premiums have grown by 94% to RMB of net operating revenue increased by 38% year-over-year to RMB million from RMB 681 million primarily fueled by the brokerage income. Our comparable basis without seeking to management fee income from aid business, we have already achieved in the first quarter, which in the longer contributed to our revenue in the following quarters. Our adjusted net operating revenue achieved a strong year-on-year sales rates of 44.4% significantly outperforming the industry . Our insurance-related income was RMB 899 million, including insurance commission and the technical income, increased by 38.3% from RMB 650 billion in Quarter 2 last year. Calculated our take rate by dividing year-related income to FRT of the same period. Our FRT has grown faster than that of latter revenue, mainly due to the decrease in our take rate by 6.8% points from 23.6% in second quarter of 2020 to 16.8% in second quarter of 2021. And this was a temporarily to buy the fast expansion of our customer base through external traffic channel. As we still see strong demand from our potential customer groups and customer base is key to our business developments. We are confident in that we will be able to be able to maintain our stable going forward. As we can keep personalized interaction with our customers and the services to after their first purchase from our platform. And the explore and they realized higher LTV for each customer regularly. Our calls and the expenses for quarter two increased by 160% to RMB's 1,700 and the 55 million. To break it down, the operating costs were RMB 260 million mainly due to RMB 38 million increase in personnel costs as we rapidly expand over consultants. And the team to support the business growth. We also incurred a RMB 56 million increase in-person -- professional, and off-source customer service fees. Sales on the marketing expenses increased by 217% year-over-year to RMB 1245 million, primarily due to the increase in marketing expenses to third-party channels because of our upsetting rigid business expansion and the branding promotions being in the marketing window for online traffic in Quarter 2, And some traffic was released across sectors. We also have seen intensified competition from tiers in acquiring new customers, firming up our CSD. We have adjusted our crediting plans for further control expenses in third-party traffic. So more refined operational management and a strict cost control. In the third quarter, we expect to materially reduce such expenses. G&A excels increased by 21.8% in the Quarter 2 to RMB 149 million primarily due to the increase in professional service fees and the personnel costs. R&D expense increased by 80.4% to RMB 100 million and excluding share-based compensation. The adjusted R&D expenses will be RMB 90 million, implying an increase of 72.1%, mainly driven by the Increasing R&D personnel costs as our research and development team continues to our competitive capabilities in technology. We incurred a net loss of RMB 656 million GAAP basis and an adjusted net loss of RMB 570 million. This adjusted net margin was negative 16.7% for quarter 2. The expanded negative margin was mainly driven by the increase in sales and marketing expenses as discussed above. For the third quarter of 2021, we expect our to be in the range of RMB 4.3 to 4.6 billion. And maybe reduce our sales and marketing expenses maturely comparative to mid-quarter. facilities based on the current market conditions and reflects our preliminary deal and estimates, which are all subject to change. This concludes our prepared remarks. I will now hand over to the Operator to open the call for the Q&A session. Operator, we are ready to take questions. Thank you.

[Operator:]

We will now begin the question-and-answer session. To ask a question, you may press star then one . . At this time, we will pause momentarily to assemble our roster. The first question comes from Michael Lee with Bank of America. Please go ahead.

[Michael Lee:]

we noticed that in that the CBR, issued document number 87 on Internet Insurance and resell a lot of concern requirement on the internet insurance companies. So can you issue. And what kind of impact will be on your future operation and the results. Before the IPO we talked about the development of Health Care Services, which is an important part of our overall business. May I know the latest growth or strategy, and the progress of this house care services? Thank you.

[Guang Yang:]

Thank you for the question, Michael. This is Yang Guang speaking. I will answer the first question. I think the rectification campaign you mentioned is a follow-up initiative to implement the regulatory marrows on Internet insurance business, which were actually announced in December last year then officially took effect in February this year. I think the regulatory matters aim to promote the healthy development for internet insurance business. the work developments. So we believe at a real benefit development, old compliant, and licensed quality institutions for the long run. I think the relevant requirements the year campaign generally follow the basic framework of the regulatory internet insurance business. Well, with more detailed and in those significant changes in the general policies. So before this campaign was actually launched, we have already been proactively adjusting our business in compliance with the new regulations. And after the detailed came out, we have continued our efforts and we have complete self-inspection and make necessary adjustments accordingly by September 30 this year. This will either have a impact our current business model , NOL to us and a material compliance risk adjustment for certain processes expected to affect our conversion efficiency in the short-term. But in the long term, we believe it is beneficial for our business quality improvements as well as the compliance in the standardization of the whole industry. Hopefully, this answers your question well and I believe your second question to Mr. Shen Peng.

[Peng Shen:]

[Xiaojiao Cui:]

In the second quarter of this year, we continue to explore new growth opportunities across various stuff segments of our healthcare business. So Waterdrop health, which targets healthy customers. We continue to extend the categories of our Consumer Healthcare Services and enrich our product and service offerings, et cetera. These include the launch of new healthcare consumption products, genetic testing services, and early screening for cancer services. We also developed our underwriting with control function and the empowered transaction processes to assist insurance carriers in matching qualified customers.

[Peng Shen:]

[Xiaojiao Cui:]

For Waterdrop Madison as of the end of Q2, we have around 150,000 members and established cooperation’s with more than 1,500 pharmacies. We continue to expand our cooperation with pharmaceutical companies, Insurance institutions, and pharmacies. Leveraging commercial insurance Madison for a public welfare, pharmacy insurance, and innovative payment services. We help our pharmacy partners enhance their competitiveness and the customers picking and reduced patient’s out-of-pocket expenses for Madison.

[Peng Shen:]

[Xiaojiao Cui:]

For our patient management platform, we focus on providing full lifecycle of patient management services outside the hospital serve -- system to patients with critical diseases after surgery. We have built up key services capabilities in this platform, providing our patients with services such as an adverse reaction prevention and management, reminder of hospital revisits, medical report interpretation, prescription, as well as supplying medicine and the nourishments. We drive to become a high-value health care platform benefiting doctors, patients, and pharmacies.

[Peng Shen:]

[Xiaojiao Cui:]

And I hope all of you could continue to take an intention into our segments. Thank you.

[Peng Shen:]

[Xiaojiao Cui:]

Okay, next question.

[Operator:]

Thank you. The next question comes from Thomas Wang with Goldman Sachs. Please go ahead.

[Thomas Wang:]

So . Let me translate my cessation in the first-line on FIT. So have a breakdown between the long-term Shendong product and the growth rate. And secondly, on the increasing acquisition, sales, and marketing expenses, can you give us a little bit color on why the timing of this increase and also comparing to the excess Wells will foster how should we think about on a quarter basis, do we -- should we excite foster sapphire roles next quarter? Thank you.

[Guang Yang:]

Thanks for the question, Thomas. For this quarter, our sales for long-term insurance have grown. although with a slower groceries, and that overall as FIP and closeout, we're Middle-East sold out, we're long-term interest products and a lot more online consultation and traditionally on March and April are the high time pay marketing and assumes people would switch their jobs after the Chinese New Year. It led to temporary decrease in our sales force. Moreover, after our IPO were let go, some of our partnering and the in-house sales force that did not meet our requirements in certain quality and the efficiency. The number of our online consultancies was lower than that industry last year. Overall, service efficiency and premium retention both went up. So the growth slowdown was mainly due to the momentary adjustment we made to our sales team. And due to THE aggressive scale expansion or short-term interest business and the relatively shortage in the sales workforce for long-term initials products, the sales needs for short-term insurance products were not fully utilized. And besides that, due to the rapid scale-up of our short-term insurance business driven by external traffic, the quality of our newly slightly went down and had an adverse impact on our long-term insurance business. So due to the reasons mentioned above, the gross of long-term interest products slowed down but it was only temporary and mostly a result of our own choice. So the improvement of our service quality and customer satisfaction, our long-term goal is to take rate of our long-term interest product is pulled to be improved as a result. Going forward, we view actively develop our sales team and further expand our hiring channels and step up our recruitment efforts. Meanwhile, we have also adjusted our general rules and the incentive mechanism and optimize our team compensation. In the current marketing environment, we believe we will be able to onboard more outstanding sales staff and external institutions, and that we will continue to optimize this margin and improve our conversion efficiency. Our algorithm-based this matching system has improved -- increased the FRT per lead by 20% this quarter. So given the rapid growth of our short-term insurance products in Q2, the great amount of accumulated lease for our long-term insurance will gradually reach more sales potential as we replenish our workforce. And for the second question regarding the marketing expense, I'll hand it over to Kangping, our CFO to answer the question. Thank you.

[Kangping Shi:]

Thomas, thank you for your question regarding sales and marketing expenses. The increase in sales and marketing expenses was mainly due to the increase in the marketing expense for user acquisition and the . There were a few industry factors behind the increase to our sales and marketing incentives in quarter 2. Traffic resources for this industry is fairly sticky coming quarter 2, so which is favorable for the user acquisition. These environments, we maximized our user acquisition efforts while maintaining a relatively healthy ROI. The increase in external traffic investment. We will naturally lead to a frequently interest in our CSD and a compromise in efficiency metrics. We also foresaw that with regulations our whole industry will be heightened. Therefore, we have also demanded compliance our marketing side in order in order to strike a balance among business growth, operating efficiency, and the costs. Although our marketing expenses increased significantly in quarter two, our CSC was still at a relatively low level among the industry. In terms of our customer acquisition efforts, we've conducted bulking algorithms with external platforms, which has started to show positive effect on our ROI since quarter two, yes. We will take rather than members have a lot lower marketing budget focused more outflows, tools, decency and marketing, ROI and use stricter and correct to our select strategy the acquisition platforms. We will also leverage our AI in Howard platform to conduct more intelligence and targeted marketing. We are now pet doing a number of different marketing strategies and have seen some good results. So I hope this are aggressive to your questions, Thomas. Thank you.

[Operator:]

The next question comes from Kui Ma with CICC. Please go ahead.

[Ma Kui:]

My question is about . Our government-backed health insurance. What's the impact of the development of and your strategy in results to the development of it, as well as the potential computation? Thanks.

[Guang Yang:]

Thanks for the question. I think since last year, we have made explorations and our times in the garment bag, housing translate area. So far, we participated in team inclusive of medical insurance program designated by Beijing Municipal Medical Insurance Bureau and supervised by Beijing banking and the insurance regulatory bureau and have made solid progress. Also, we have undertaken the government-backed house insurance program as we operating platform for of Shendong province and other cities in this year. Meanwhile, we kept our frequent and a good communication with major interest companies who joined the government back-end housing interest program, as well as with many local medical insurance bureaus. We participated government-backed health insurance program. You already called due to the following consideration. I think firstly, the demand of consumers as the existing products can now meet the demand of some customers, we always want to use our resources to restore new ways to serve the users. And I think secondly, and by leveraging our on the insurance technology, product design, claim settlement, and the TTP service as well as house care management. We are able to help medical insurance institutions and interest companies save costs and improve efficiencies. To ourselves joining up with new mall. We're connect the products with our interest payment tools and health care services establishing meaningfully pilot version of the uniting house. And studying from the government's perspective, many local medical insurance houses have clarified the position of government-backed housing insurance as a commercial supplementary medical insurance, which can significantly reduce greater than self-pay ratio or medical expenses. For the insurance industry, and that also helps educate people about insurance and the rates via fairness or insurance protection. And it is also on conductive to our exploring customers potential interest in Hughes. And from the Prosecco product design, our government factor house insurance programs introduced TTP service, the direct-to-patient service which provide protection beyond micro-social insurance scope and expand the coverage of commercial insurance. To sense some expands helps solve the problem of poverty due to illness. So both patients and the elderly can participate in the programs which forms a complementary solution for product supplies. So in the short-term, I think the government-backed house insurance program will have a certain impact on the sales, our meeting, medical insurance product, it may that takes some time for people to know these two products. And given to the credit in those by the government, to government-backed housing. First part out, are you here to gain trust, which have certain substitution effect on meeting medical insurance products. I think going forward in the long run. And this two should be a position as differentiated products.

[Guang Yang:]

And the government-backed and housing insurance attracts more patients and older people while meeting medical insurance is more positioned to catching the younger generation in the house , offering a wider coverage outside the medical insurance The two parts are more supplementary rather than substitution. Thank you. That's all for the question.

[Operator:]

We are now approaching the end of the conference call, given the time limit, we will close the call. Thank you for your participation in today's conference. You may now disconnect. Have a good day.