Ladies and gentlemen, welcome to the conference call of the New India Assurance Company Limited, arranged by Concept Investor Relations to discuss its Q2 and H1 FY26 results. We have with us today Mrs. Girija Subramanian , Chairman and Managing Director; Mrs. Smita Srivastava , Executive Director; Mrs. Kasturi Sengupta, Executive Director, General Managers, and Chief Financial Officer, among other SD Management members. At this moment, all participant lines are in listen-only mode. Later, we will conduct a question-and-answer session. At that time, if you have a question, please press star and one on your telephone keypad. Please note that this conference is being recorded. I would now like to hand the floor to Mrs. Girija Subramaniam, Chairman and Managing Director. Thank you. Ma'am, the floor is yours.
Good afternoon, everyone, and thank you for joining the New India Assurance Company Limited conference call to discuss our financial and operational performance for the second quarter and first half of the financial year 2025-2026. I'm Girija Subramaniam, Chairman, Managing Director, and I'm joined by my colleagues, Executive Directors Mrs. Mitha Srivastava and Mrs. Kasturi Sengupta, our General Managers and our Chief Financial Officer. We deeply appreciate your continued trust and confidence in our company. We want to start by reaffirming our fundamental institutional strength. We have consistently been designated by the IRDAI as a domestic systemically important insurer, DSII, underscoring our crucial role in the Indian financial system. Furthermore, we maintain a highest possible domestic credit rating of CRISIL AAA stable and a strong AM Best Financial Strength rating of B++ good.
These ratings are a testament to our financial stability and capacity to honor all policyholder obligations globally. The New India Assurance Company Limited stands today honoring a corporate legacy that spans over 106 years, conceptualized by Sir Dorabji Tata in 1919. We have played a pivotal role in shaping India's general insurance landscape. Our market-leading position is sustained by our extensive pan-India network and operations across 25 countries, ensuring we remain the largest non-life insurer in the country by gross direct premium and a key contributor to the nation's financial resilience. The first half of FY26 has been a period of significant achievement and resilience for New India Assurance, and I'm pleased to report that our gross written premium reached INR 23,875 crore, reflecting a healthy year-on-year growth of 11.5%. Crucially, our domestic premium growth surpassed the industry rate, enabling us to expand our market share from 12.60% to 13.75%.
This momentum was primarily fueled by robust performance across our health, property, and miscellaneous segments. This sustained market leadership demonstrates the strength of our underwriting approach and distribution network. Despite the strong top-line performance, the operating environment has certainly been dynamic. We faced an unusually prolonged monsoon season and several localized flood events, which naturally placed pressure both on our motor and property portfolios. Furthermore, we instituted a necessary one-time provision for wage revision arrears and corresponding adjustment to employee benefit liabilities during this period. As expected, this provision temporarily impacted our underwriting margins and combined ratio. However, our strategic focus on prudent underwriting and critically the exceptional performance of our investment portfolio allowed us to effectively mitigate these pressures. Our robust investment income, supported by diligent portfolio management, more than offset the impact of the one-time provision and the elevated claims from natural events.
Consequently, we delivered a phenomenal result on the bottom line, a 57.7% increase in profit after tax for the half year. This performance underscores the fundamental stability and financial strength of our company. Our solvency ratio remains robust at 1.79 times, comfortably above the regulatory requirement. Our balance sheet continues to strengthen, reflecting overall improvements in net worth and general reserves. This balanced performance, achieving aggressive growth while navigating significant challenges and boosting our net profitability, is a testament to the hard work and dedication of every employee, or as we call them, New Indians. We remain confident in our strategy of pursuing growth with profit. We are committed to continuous improvement in our underwriting discipline, operational efficiency, and digital initiatives to ensure an even better performance in the period ahead, and we are strategically focused on driving underwriting excellence to complement our investment income. Financial performance summary, H1 FY26.
The gross written premium global stands at INR 23,875 crore in H1 FY26 as compared to INR 21,408 crore in H1 FY25. Net premiums earned global reported at INR 18,768 crore in H1 FY26 as compared to INR 17,028 crore in H1 FY25. Net profit after tax stands at INR 454 crore in H1 FY26 as compared to INR 288 crore in H1 FY25. Now coming to the important ratios for H1 FY26, they are reported as follows: Net incurred claim ratio of 104.22%, commission ratio 9.36% of net written premium compared to 9.41% in H1 FY25. Expense ratio 13.64% of net premium income compared to 11.67% in H1 FY25. Combined ratio 127.21% compared to 120% in H1 FY25. Solvency ratio 1.79 times as compared to 1.81 times in H1 FY25. ROE ratio 4.18%. With this, I come to the conclusion of my opening remarks and invite our General Manager of Finance, Mrs. Mary Abraham, to provide a detailed overview of our financial performance.
Good afternoon. I would just like to quickly go through the significant figures and the ratios since Madam has already covered quite a lot of the figures. Just looking at the gross written premium, we have a year-on-year growth of 11.52% as compared to the half year for the period 2024-2025. Remarkably, the GWP of the industry, though it grew at only 7.31% for the first half year up to September 2025, New India's GWP grew at 12.86%. Looking at the incurred claims ratio, the ICR, yes, did go up by 5%, but this was due to a few factors like the multiple floods in North India where each individual event was not very significant, but where cumulatively they did impact our net. Health claims also increased due to the prolonged monsoon season and the resultant diseases that followed.
Miscellaneous lines of business had some cellular network losses and also bankers' indemnity claims. Commission, there was a fall from 9.41% to 9.36% in the half year of 2025-2026. Operating expenses, yes, this increased, but this was mainly because we had made a provision of INR 1,680 crore towards the arrears regarding wage revision, though it has not been notified as a prudent insurer we have provided for this. Out of this INR 1,680 crore, we have taken INR 1,118 crore to the revenue account because those pertain to employees who are active, whereas INR 562 crore has been taken to the profit and loss account because they do not directly contribute to the operations of the company. Investment income is significantly higher this half year, this quarter, and this helped us to mitigate the additional operating expenses that we incurred due to the wage revision.
In fact, removing the impact of the wage revision, the operating expenses have in fact come down, and this is because of office optimization through mergers and closures and the negative net addition of employees. Overall, despite the high incurred claims and the provision that we had made, we ended with a profit after tax of INR 454 crore, which was 57.7% higher than the profit of the half year 2024-2025. Coming to the segment-wise performance, in fire, we had a year-on-year increase of the premium increase of 21.32%. Fire did very well. Health also did well with a 15.12%, and miscellaneous as well grew by 16.05%. The ICRs, however, as mentioned earlier, were adverse, mainly in fire due to the multiple flood events in North India, as was mentioned earlier. Health also, the ICR worsened slightly from 103.61 to 105.78.
In miscellaneous too, there was a worsening of the ICR from 61.11% to 87.72% due to the cellular network claims. Motor continued to worsen. The ICR continued to worsen. One of the reasons for that was also the premium increase in motor TP, which was long awaited but has still not come. Performance of New India with respect to the industry. The general insurance industry grew by 7.32% in the half year, the financial year 2025-2026, whereas NIACL's GDP grew by 12.86%, outpacing the industry growth. Our market share has increased from 12.6% to 13.25%. The growth momentum continued in October 2025 with company outpacing the industry growth. Segment-wise market share. In fire, we have a market share of 16.4%. Marine, our market share is 17.31%. Motor, 9.63%. Health, 16.54%. Others, 17.4%. Our overall market share is 13.25%. Yeah. The distribution mix.
Through the agency, we have done 24.4% of premium. Through brokers, it was 37.83%. Direct, it was 31.01%. Through dealers, 6.19%. Bank assurance, 0.57% of our premium. These are the main figures. I would now hand it back to our Chairman and Managing Director.
I think we have given a presentation on the financial performance. Moderator can take it forward from here for the question and answer session.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of M.W. Kim from JP Morgan. Please go ahead.
Yeah. Thank you so much for this opportunity. I have two questions. Firstly, I have a question regarding the underwriting. The combined ratio indicates that the capital allocation appears less attractive across the most business line. Should we expect that the potential premium hike in health or the motor insurance in the near future, or do we expect that the similar underwriting trend may last for a while? Secondly, could you also provide an update on the timeline for IFRS 17 adoption and risk-based capital adoption schedule? If we assume the IFRS 17 basis, should we expect an improvement in the combined ratio compared to the current disclosure format? Additionally, is there any potential for the stronger solvency capital on the new risk-based capital framework? Thank you.
Thank you. Thank you for the question. I think on the underwriting part, for the combined ratio, looking at the combined ratio, you were wanting to know whether the potential premium, there would be a potential premium hike in health and motor because of the way the books have performed. I would like to tell you that there is no, suddenly there will not be a hike at such a small period of time. I think motor, we are using our strategies on the field to ensure that we pick up the right risks that we want to write in the right segments so that the ICR will then reflect the quality of the risk that we have picked up.
We expect that since this is an ongoing process and we have been trying this out for the last two quarters, the ICR basically is a result of the URR provisioning that has been done for a premium, which is on the earned premium basis. Basically, this is also a reflection of the previous year and this year's business that we have underwritten, and therefore this is not the right reflection of the way the business is going. Normally, by this thing, by the end of the fourth quarter, we get to know the right actual ICR that the portfolio has. Since we are undergoing some kind of strategic changes in terms of what risk we want to write, therefore in motor, you are not able to gauge since the.
Ladies and gentlemen, we have lost the line of the management. Please stay connected while I reconnect the management. Thank you. Ladies and gentlemen, we have the management line reconnected. Ma'am, you can proceed. Thank you.
Yeah. In motor, it's basically a strategy that we are following, and we'll have to wait and watch for the next two quarters before we decide to make any drastic changes. On health, basically on the group, we are already correcting rates across the last whole year, last two years in fact, and this journey is continuing at this point of time. The increase in ICR is basically because of the extended monsoon season this time with increased hospitalizations on account of dengue and other infectious diseases. Therefore, the ICR has been high. Otherwise, the premium hike is on the group business that's already there. On the retail, we have got a table normally of premium that we charge, and we normally do not, in fact, increase that very frequently.
There is no, but we see that this trend in ICR, the correct ICR reflection will be there by the end of the year. We are quite sure that we will be improving in the trends with respect to last year. As regards the second question on the timeline for IFRS 17 adoption, the timeline determined by the regulator is it will be implemented in total from April 1, 2027. During the year 2026-2027, we will be having a parallel run along with our current accounting system. Obviously, I mean, in order to determine that this software and other aspects that we are adopting, they go smooth, this one-year gap is given for us to see that we do a parallel run. From April 1, 2027, we are mandated to go live on this IFRS 17. Actually, Mr. Sharad Ram Narayanan will explain a little bit more on this.
Regarding your question on the combined ratio under IFRS 17, of course, the way it is, the results are drawn where you get credit for the investment income and the operating results. There will be an improvement in the combined ratio equivalent of IFRS 17, so to speak. Right now, we are not in a position to tell you exactly how much it will be, but there will definitely be an improvement in the equivalent combined ratio, I can say. Coming to RBC, that is also the regulator has to notify. We are yet to hear from them, but they are actually collecting data on the various different kinds of models that they have rolled out. The first quantitative impact study is done, and the second one has also been submitted.
The final version, once it comes and when they will roll it out, it is for the regulator to notify. We do expect RBC to be rolled out shortly. In terms of impact, of course, until the final version is out, it will be too early to say. For the kind of assets the company is having, we do not foresee any kind of solvency strain because of RBC.
Yeah. That's very clear. Thank you so much for the detailed explanation.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. A reminder, ladies and gentlemen, if you wish to ask a question, please press star and one. We take the next question from the line of Rahul Sahu, who is an individual investor. Please go ahead.
Thank you for the invitation.
Rahul, please go ahead.
Good afternoon, everyone. Yeah. Am I audible?
Yes.
Hello.
Yes, you're audible, Mr. Rahul.
Yes. Yes. Thank you. My first question is like, could you walk us through the key drivers behind the year-on-year movement in the net profit during the quarter? Hello?
Yes, yes. What do you want us to do?
I just wanted to know the key drivers behind the year-on-year movement happened in the net profit during this quarter.
Yeah. The net profit during the quarter, this quarter has been impacted because of provisioning for one-time provisioning for the wage revision of our employees, which is to the tune of INR 1,680 crore. In this quarter, this is a one-time exceptional provisioning wherein we are doing a wage revision arrears provisioning, which is effective from 1 August 2022 to date till the time of the notification. Basically, the amount that has been provisioned, INR 1,680 crore, is on account of that. Out of this, around INR 562 crore was taken to the profit and loss account because this relates to provisioning on account of retired employees who are no more in active service and who do not contribute to the business of the community.
The rest of INR 1,118 crore is taken to the revenue account, and therefore, it impacts both the combined operating ratio as well as the profit before tax. In this quarter, this is a major factor that has impacted our results. Otherwise, if you see last year's, the ICR gets impacted because of the. So the ICR is also impacted profit. One of the reasons why the.
Minimum profit is also impacted by the ICR increase.
The ICRs have gone up in this quarter because of, as I told you, in health, because of increase in incidence of infectious diseases as well as increased hospitalization on account of that. In case of motor, the third-party rates have not increased. This has been the case for many quarters now. This quarter, again, the ICR has gone up because of TP premiums not being sufficient. These two reasons. At fire, there have been sporadic events of CAT losses across the country wherein the CAT losses have caused huge losses to small establishments and businesses, which did not get recovered under a reinsurance program. The entire losses on account of these CAT losses, which are around seven or eight in number, have been absorbed by a net account without any reinsurance support, and that has also contributed highly to the ICRs.
Now, the first two quarters of any year normally are exposed to these kinds of losses because the rainy season and the affected seasons normally they operate during this period of April to September. This time, there has been extended rains, as you know. It has gone even into November. Therefore, the impact is a little bit more. The third and the fourth quarter of any year, normally they balance out the ICRs of the previous two quarters, and we expect this year also to be nothing different. It will balance out, and we expect a better result in the progressive quarters. Having said that, the growth that the company has shown in the last two quarters has been phenomenal, and we have outpaced the industry. The industry grew at 7.85%, and we grew at 13.45%.
I think we have beaten the industry, and I think to this in all lines. Despite this huge provisioning for wage revision, we still have an underwriting, we still have a profit after tax as well as a profit before tax, so positive numbers. We also maintained our solvency almost at the levels that was there earlier at 1.81, which was earlier. Now it is at 1.79 times, which is a very small dent compared to the huge provisioning that we've had to do for this wage revision.
All in all, I believe the story that we have to tell for the last two years has been phenomenal, and it just shows the resilience and robust financial stability of New India that we are able to meet such kind of shocks, such kind of huge exposures, and still show very, very sound results for our people who invest in us, for people, for our insurers, for all our stakeholders, that this company remains strong despite these kinds of very strong winds blowing against us. Does this answer your question?
Yes, ma'am. Thank you. Another question I have. How is the digital transformation journey progressing, and which are the areas seeing the highest adoption?
Yeah. The digital transformation journey is going very well. We have huge focus on the digital transformation in our company. We have initiated several steps towards automation of routine and standard processes using artificial intelligence tools like optical character recognition, intelligent character recognition. Optical character recognition project is far ahead, and we are in the test stage, and very soon, this has already been used, in fact, by the motor digital service providers. This is going to enhance the TAT of the claims on motor to a large extent. The intelligent character recognition, which converts the handwritten documents into a machine-readable format, will take some time. It is still that we are trying out certain softwares and testing them on our claims.
Once we get a complete proof of concept from our vendor and are able to do a lot of testing around this, we'll be deploying this. I think this will be a game changer for us since we are having an increased trust in retail as a segment. I think this is going to be helping us to reduce our claim processing time significantly and allow us to go digital both on the underwriting, the accounting, as well as on the claim side. In another effort, the company has onboarded fintechs and insurtech startups for advanced data analytics so that we are able to take informed calls regarding product pricing and risk analysis on price-sensitive lines like motor, like health, retail.
This is something we want to do so that we are able to pick policies and pick risks at the right price, and we are able to bring in huge savings to the company and reduce costs. The company is in the process also of finalizing a vendor for the fraud, waste, and abuse control and using algorithm tools to analyze fraudulent transactions and detect anomalies for saving insurance fraud costs, which will significantly save us from paying fraudulent claims. This is going to help us in a big way in the health underwriting, mainly in the health and motor areas. The company has in place already digital platforms, WhatsApp, and AI-powered chatbots offering 24x7 self-service options for policy management, claims filing, and customer support in eight languages.
This reduces the need for extensive human intervention, lowering administrative costs and customer acquisition costs while increasing customer retention and customer delight. We are in the process of optimizing use for a customer portal and app to ensure that customer interface is user-friendly and reduces the acquisition cost considerably. With the digitization, the printing cost, storage costs, operational costs in managing huge office space is expected to go down, and also the travel costs for spot surveys in case of digital claims that can be easily done by using these automation tools. We expect that with all these initiatives that we are doing, we'll bring down the cost for the company as well as increase customer delight in a big way, as well as reduce the claims TAT around most of our retail segments. Now, I think this should have answered most of your queries. Should I give some more examples?
Yes, yes. No, no. It's a noted one. I just have a last question. Are there any new products or the renewal plan under the new IRDAI reforms?
Yes. New India, as a proven leader in the market, we have actually this year introduced many new products in the market. As you might be aware, we have had two different verticals within the company this year. One is for serving the MSME sector, which is a focus area for us. For this, we have come out with focused products that address the SME sector as well as women entrepreneurs also who are into this sector in a big way. For this, we have extensively partnered with news agencies and media agencies to ensure that we bring in awareness among these communities for protection, insurance protection. We are going at, I mean, all lengths to ensure that we cover the huge yawning gap of 90% uninsured units among the SMEs.
This is one big area, I think, which we intend to cover by this SME product, which covers not only the property and assets, but also the business interruption, the PA, the workmen's compensation, and several other aspects with many more add-ons that we could offer, including cyber for these kinds of enterprises. Now, with regards to there is one more big first that New India brought this year and which we believe is going to bring in a revolution of sorts in the insurance industry in the near future.
That is the Nishchit Suraksha product, which is a parametric product which allows us to pick up huge groups of insureds and insure them against weather-related perils for which there is reliable data vetted by the government, which is maintained by a third party, which is vetted and recognized by the government so that we ensure that the trigger that is there because of a weather-related event is absolutely very authenticated by a third-party agency. On the happening of the trigger, we sort of pay the claim to the policyholder direct benefit transfer to their bank account within hours or within days as compared to the normal way of assessment, which takes days and several days to give. This is expected to bring in a revolution of sorts in the way insurance is looked at in this market.
There are going to be a lot of the informal sector, like the casual laborers, maybe the people who are normally the gig workers who are normally not looked at very safe for insurance, to get protected under this product. We are going to bring in financial inclusion by way of this product in a big way. Governments and related entities are looking at this product with a lot of interest, and we expect that in the near future, people will buy this product, and we will have many people covered under this product. This is one more first which New India has done. Another one that we did recently was to give a business interruption cover on the occurrence of a pandemic, which is the first time such a cover is being given in the country.
When we had COVID, many shops without any fire or burglary or any such incident suffered heavy losses simply because they couldn't operate. That is called business interruption loss. This will be covered by this particular product that we have come out with. We've done it with one of the leading malls in Bombay, and we will continue to hope to get more such interest from related entities for this cover. This is something that will help in the case of another pandemic, if at all it were to happen in the near future. These are three things which New India has got. There's one more that is happening, but which I cannot talk about since we haven't introduced it in the market. These three we already introduced, and I think no other company in India has introduced so many products in a single year.
Thank you, ma'am. Thank you.
Thank you. We take the next question from the line of Julia Kim from JPMorgan. Please go ahead.
Good afternoon. Thank you for your earnings presentation and for taking my call. I have a few questions on a topic, so I'll just quickly go over it. The first question, we had a question about crop insurance. Since crop insurance is a significant market opportunity we see, and there's a growing expectation, and we think there might be some expectations for companies to demonstrate social responsibility by developing this agricultural insurance and crop insurance underwriting in India. Could you share with us the reasons or the company's stance behind underwriting the crop insurance and whether there are any plans to reconsider such underwriting segment in the future? My second question is on the company's risk management practices.
Given the current underwriting stance and the profitability of the company, could you please update us on if there's any major changes on your excess of loss or the reinsurance XOL arrangements in this year? If you have any strategies or thresholds being implemented going forward to enhance your risk management strategy? That's my second question. The third question is about capital gains. Very briefly, do you have any specific targets for capital gains amounts in this quarter and in the year? We would like to understand this for projecting the company's future profit generation capabilities. Thank you.
Yeah. Thank you so much for your question. Regarding the first one, the crop insurance, yeah, I totally agree that it's a social responsibility of the company to be participating in the crop insurance scheme. Having said that, crop insurance, being a very specific line, requires a lot of feet on the floor and some people who can attend to this as a field job, and you need a specific field force only to attend to crop. This is something that New India right now, the human resources that are present, are found wanting even to cater to the current level of work and the growth that we have. Therefore, putting so many people exclusively for crop is something which right now the company is finding it difficult to do.
Having said that, since we have a parametric product now in place, we will definitely consider doing crop on a parametric product basis by which we do not need to deploy so many people on the floor, and this could be done with more efficiency and more authenticity at our end. Definitely, we will be contributing to the social responsibility of the country in a much more authentic way. Now, with regards to risk management policies of the company, the risk management department of the company is very strong on its risk management policies as regards the, I mean, we have got our own risk mapping and the exposure to major risks and review of these risks at frequent intervals. With regards to the reinsurance purchases, the XOL arrangements are reviewed every year.
This year also, the XOL arrangements were reviewed before purchase, and we have done a lot of changes to the structure, and we've had an increased and improved structure with us for reinsurance this year. In fact, we moved to a multi-year contract on the layer one and layer two of our CAT XOL purchase, which we got at a very good price efficiency. The point is that at the bottom, since we are a company in operation for 106 years, there is a level of net retention or level of retention beyond which reinsurers themselves are not willing to give us the cover. For this net retention part, we have to retain it to a net account.
We cover this by way of the CAT XOL, but the absolute net is something for which we have to actually think this year whether we need to buy some aggregate XOL cover because the number of CAT losses that we've had, the extended monsoons have caused us a few losses this year, and we'll be reviewing the cover again this year to see whether we need to buy something else at the bottom. I think last year also some such effort was made, but then the price discovery that happened did not encourage us to go further into that road. This year, anyway, since we are paying a heavy price for so many CAT sporadic events, I think we'll have to look into this part again, and we'll be seriously giving it a look.
The last part is about maintaining the profitability of the company, looking at the way, as I already told you, that the growth has been phenomenal. The risk selection has been tested this time because we have moved on in motor from segments that we did not want to write, and we have not been writing them. The ICR that you see is because of the URL and the earned premium impact that is there, and the ICR, the claim issues also reflect a part of the last year's premium that we have written, and therefore the ICR is very high. Having said that, this year, I think as the quarters go by, you will see a marked improvement in the performance of the company across all segments.
Since I believe we have seen the last of the CAT sporadic events this year, possibly we could expect next quarters to be a little bit more reasonable on such kind of surprises, and we will see better results coming forward.
Capital gains.
Capital gains.
Capital gains are a big share as well.
Upon market opportunity, yeah. We will be, even as far as a normal routine is concerned, we use the equity market very efficiently. Depending on the kind of volatility that is there in the market, the opportunities that the market presents, we will be utilizing the market dynamics to the benefit of New India. On the investment front also, I'm sure we'll perform better like we have done excellently in quarter two, and it has helped us to tide over this wage revision provisioning. In future, I'm sure that we will continue to do that, and we'll get best yield for New India out of the funds we have. Does this answer your query?
Thank you so much.
Thank you. We take the next question from the line of S. Ramesh, who is an individual investor. Please go ahead.
Thank you, and good afternoon, and thank you for the presentation. The first thought is in terms of the reduction in GST to NIL, so there must have been some impact in Q2, and you must still be in the process of reconciling that with your pricing and the growth. How much would have been the impact of the reduction in the benefit of the input tax credit in the second quarter? On the current GST regime, what is the kind of incremental growth that you expect in terms of the health policies over the next two quarters, and how would that benefit your growth in the second half?
Actually, the reduction in GST was something that the insurance industry and non-life has been asking from the ministry for a very long time because the health premiums being already high because of the claims, the claims performance, other claims ratios, claims that have been seen across age groups in the last few years, mainly because of hospitals not being regulated. Because of that, claims have been pouring into the health sector. We have been asking for this reduction in GST, at least for the senior citizens group, because it will help them pay the premiums in a more affordable way. Now the finance ministry has agreed for an entire waiver of 18% on all the retail insurance covers for health, and we welcome this, and we have actually given the entire benefit to customers. The hit for this to our account would be around INR 100 crore because we have not distributed this to any of our agents.
We have been only paid this in September.
Our agents normally, the other companies have passed on this to the agents, part of this to the agents, but since already our agents are not as highly paid or highly remunerated as the private sector, we thought it was not proper to punish them for this GST waiver, and therefore we have taken it to our account. We believe that this gesture has gone very well with the public, and many of we've seen a lot of interest around our products. We hope to see a lot of growth. Our retail element of the health is just 20%, and it's a long-term target to see that it goes up to 50% of our book and the immediate target in the near term to be around 30% of our book. I think these targets will more or less be able to achieve in the next few quarters because of this gesture. We expected overall around INR 100 crore hit to the book because of this input tax credit not being available to us.
Okay. So did you follow up to that is in terms of your distribution cost, do you see any change in the distribution cost because of this change in GST in the third and fourth quarter? The second thing is, if you look at your overall distribution mix, 30% is in-house, rest is outsourced. What is the difference in the cost as a percentage of your overall business between the in-house distribution of 30% and the balance 70%, which is through agents and brokers and others?
Ladies and gentlemen, we have lost the line of the management. Please stay connected while I reconnect the management. Thank you. Ladies and gentlemen, thank you for your patience. We have the management line reconnected. Ma'am, you can proceed.
Yeah. So we're here to complete this question, Mr. Ramesh.
Yeah. Just follow up to that question was regarding the distribution cost. As a result of the change in the GST reduction to NIL, how do you see that impacting your overall distribution cost? Because the distributors also face the same impact, right? How do you see that impacting your distribution cost as a percentage of your business? The second thought is in your distribution mix, 30% is in-house, rest is through brokers and agents. How does this mix impact your overall cost as a percentage of revenue between the in-house distribution as well as through third-party distribution?
Actually, as I told you, we have waived that 18% GST, wherein we are not getting any, we have given it completely to the customer. The input tax credit, we are not able to avail, which we have taken to a P&L. We have not disturbed the agents, and we will not be charging it to them in the third and fourth quarter as well. It will continue to be entirely to us, and I think this is going to impact the company positively because the agents have seen a renewed sense of trust and understanding with the company, and I think this will get us more growth on the retail side.
In terms of your distribution mix, as I asked, between that in-house distribution and third-party distribution, what is the difference in the percentage distribution cost as a percentage of revenue between these two channels?
Between broker, you mean in-house? What do you mean in-house? In-house is direct.
Direct.
Direct has no cost because we do it ourselves. When I exit this way, you have to give the agency commission. For broker, we have to give brokerage. For the direct and bancassurance, of course, you have corporate commissions, but direct is absolutely a NIL commission.
The entire 99% of distribution cost is for third-party distribution. Okay. One last thought, in terms of your operating expenses for the second first half, if you remove the INR 1,186 crore of arrears paid on wage revision, you are actually seeing a year-over-year decline. This lower operating expense on absolute terms and Rupee value is a kind of something which you can assume as a run rate for the third and fourth quarter, which means your overall full-year operating cost will be possibly showing a decline. Is that kind of predictive?
Yes, yes. There is a decline in operating ratio if you remove the INR 1,680 crore of provisioning. That is why, because there has been a concerted effort. We have been closing certain offices in the country because they are redundant, and they do not cater to much of customers. There used to be two, three offices in the same area which would cater to the same customers. In order to make the most efficient use of human resource as well as space, we had taken a board decision to close some of them. That has also reduced the cost to a large extent. Basically, we have done well on the operating ratio bit of it, but which has been camouflaged because of this one-time big provisioning we had to do for the.
With this operating ratio, will it be sustainable, say, in FY 2027 as well, if you see this reduced run rate?
Yeah, it will because offices have been closed forever. Obviously, the expense that we got rid of has been done forever. It will continue.
Thank you very much. Thank you very much, and wish you all the best.
Thank you.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. Ladies and gentlemen, as there are no further questions, I will now hand the conference over to the management for their closing comments.
Thank you all once again for your insightful participation and questions today. Before we conclude, I would like to leave you with a key message from our H1 FY 2026 performance. New India Assurance delivered strong and resilient growth, recording 11.5% increase in GWP and a remarkable 57.7% rise in profit after tax. This was achieved despite the one-time wage revision provision and elevated weather-related claims. Our investment portfolio continued to perform exceptionally well and significantly supported the bottom line. The company remains financially robust with a healthy solvency ratio of 1.79 times. Thank you very much for joining us today. As we approach the new year, we extend our warm wishes to you and your families for a safe, peaceful, and fulfilling year ahead. The management team and I remain fully committed to strengthening operational excellence.
During the first half of the year, we continued to apply firm underwriting discipline with particular attention to segments where loss ratios were temporarily elevated, including health and property. We also maintained our focus on enhancing process efficiency through digital and technology-driven improvements, supporting better claims management and wider distribution enablement. These ongoing efforts reflect our continued emphasis on balanced growth and underwriting discipline. Thank you once again for your time and engagement. We look forward to staying connected. Wishing you and your families a wonderful start to the new year.
Thank you. On behalf of the New India Assurance Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.