Ladies and gentlemen, good day, and welcome to Q1 FY 2027 results of Niva Bupa Health Insurance Company Limited. Please note that any statements and comments made in today's call that may look like forward-looking statements are based on the information presently available to the management and do not constitute any indications of any future performance, as future involves risks and uncertainties which could cause results to differ materially from the current view being expressed. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ansuman. Thank you, and over to you, Sir.
Thanks, Atharva. Good evening, ladies and gentlemen. We are extremely delighted to host the Q1 FY 2027 results conference call of Niva Bupa Health Insurance Company Limited. From the management, we have Mr. Krishnan Ramachandran, Managing Director and CEO, Mr. Ankur Kharbanda, Executive Director and Deputy CEO, Mr. Vishwanath Mahendra, Executive Director and CFO, Mr. Bhabatosh Mishra, Chief Operating Officer, and Mr. Vikas Jain, Chief Investment Officer. I now hand over the call to Mr. Krishnan, MD and CEO.
Thank you very much, Ansuman, and thank you to all of you who made time for our Q1 call this evening. I will follow the same format that I've done for a few quarters now, which is to give you a brief update on some of the important industry initiatives and my summary of highlights of performance from a Niva Bupa standpoint. On the industry front, the awareness campaign continues apace. I continue to update on this because I think this is critical to improving lives penetration in retail health insurance. As you all know, the entire industry is collectively committing about INR 120 crores a year towards improving insurance awareness, and about 50% of this budget is towards health. We've had a very successful series of campaigns, very good feedback from a customer standpoint, and specifically the audience metrics around awareness around health insurance need.
The campaign itself has landed quite well. In Q2 as well, we will see a repeat of a campaign as far as this is concerned. We continue to experience GST tailwinds. Retail health at the industry level grew 31.6%, and the overall growth, as far as health is concerned, on a reported basis, was 22.4%. Our own growth continues to comfortably outpace the market growth, I'll come to that in a little bit. I think the other important update is that in Q1, we have fully transitioned to Ind AS. In the past, as you all are aware, we used to update our financial results on an IFRS 17 basis. Again, the regulator is notified, and we are one of the companies that have transitioned to the Ind AS accounting standard. We will continue to report parallel accounts as required by the authority from a public disclosure standpoint.
I think the last update I have from the industry standpoint is the work that's been done as part of the Health Insurance Committee led by Dr. Prakash. Again, to update you all, this group is working on standardization, specifically around care pathways and position statements. In addition to the work that I updated you all last quarter around infections, robotic surgeries, and modern treatments, there's also work, we expect to roll out in collaboration with the association of the ocular group, our position statements on cancer, we're also working at a fairly advanced stage as far as position statements on oncology is concerned. The common empowerment initiative continues to move apace, today we have MoUs with more than 3,000 hospitals. That's a very high-level overview of some of the important initiatives taking place at the industry level.
As far as Niva Bupa's performance is concerned, on a like-to-like basis, overall, we grew at 23%, on a reported basis at 31.7%. The same numbers for retail health are 35.5% and 47.1%. Our retail market share, which is only available on a reported basis, has moved up to 11.1% for Q1. Just a brief comment that we have seen a challenging pricing environment on the group side. Our group growth has actually been flat. We've not had any growth on the group side of our business for Q1. The pricing environment that we discussed last year as well, specifically towards Q3, Q4, we continue to face a challenging pricing environment on the B2B side.
Our profit after tax improved to INR 137.8 crores. In Q1, our combined insurance service ratio improved to 100.2%, which is a significant improvement over the 103.2% that we had for Q1 last year. On people, for the first time, we've broken into the top 50 Great Place to Work in the country. We were ranked 41st. We've also seen good traction and improvement on our NPS scores, 62 on a blended basis across, just to remind all of you, more than 25 critical customer touchpoints. This number is up from 57 last year. On a monthly basis, this represents the voice of more than 20,000 customers who give us their feedback on the various experiences they have of the company, whether that's issuing a policy, renewing a policy, experiencing a cashless process, experiencing a discharge process, what have you. Our claims settlement rate has also improved.
In Q1, our settlement rate was 95.6%. We continue to execute quite strongly on our health partner strategy. We have [5,70,000] odd monthly active users, in Q1, we had more than 62,000 people per month consummating health checkups, diagnostic services through our app. More than 6,600 doctor consults on a monthly basis on our app. We also continue to execute on our preferred provider network strategy, which is now present in 49 cities, encompassing more than 1,000 hospitals. In these cities, to these hospitals, 22% of our claims flows in. Again, just to remind all of you, this is a strategic measure that we've been driving for a few years now to guide our customers to the right care setup, which has the right quality and also the right cost. These would be largely secondary care, secondary care plus hospitals.
I'd say the last comment from my side would be to say that we continue to make progress on intelligent automation, and intelligence now incorporates GenAI. We've gone well beyond the pilots that we updated you a couple of quarters ago, and we do have a number of GenAI initiatives that are in production, these applications have been both built in-house through our AI lab, or we have deployed third-party products, as I mentioned in the past. That's a very brief highlight about performance of Q1, and I'm going to hand over to Vishwanath, our CFO, to talk to you about financial performance.
Thank you, Sir. We start with the board has approved the formation of debt-raising committee, it has also passed enabling resolution to raise up to INR 500 crore in one or more tranches. As you know, we already have NCD of INR 250 crore, which was raised five years back. The call option for that is during this financial year. We're also looking at our growth plans for next two years, and based on that, we will take decision to raise debt. Just to update you, our issuer rating was AAA by ICRA. They rated us sometime back. In terms of financial highlights, the post-tax ROE for last four rolling quarters is 11.8%. Like I mentioned, combined insurance service ratio for last quarter has improved by 300 basis points to 100.2%.
While there's a slight increase in expense ratio by 90 basis points, primarily due to mix change, that is more focus on retail health. This has been more than offset by reduction in loss ratio by 3.8 percentage points, resulting in improvement in CISR. Retail loss ratio has also improved by 90 basis points to 67.5% in Q1. The expense of management ratio has improved to 35.2% from 38% last year, quarter one. The allowable EUM, including additional allowances, comes to 36.2%. We are well within regulatory threshold, and there's a headroom of 100 basis points. Annualized investment yield for Q1 is 7.2%, not accounting for MTM gain on ETF, et cetera, with AUM of INR 9,963 crore on book value basis and over INR 10,000 crore on mark-to-market basis. Solvency ratio is at a healthy level of 2.25 as on March 31st, 2026 against regulatory minimum of 1.50.
This was financial overview of quarter one, FY 2027. Happy to take any questions.
Thank you. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Shreya Shivani from Nomura Holdings. Please go ahead.
Thank you for the opportunity. I have two questions. First is on the loss ratio trajectory of this quarter. It has been quite strong on year-over-year basis, which is more comparable. What has been the trend that you have seen in the month of July? The movement is so fast that what is your outlook on the year to go by? That is my first question. My second question is on the expense ratio bit. I understand that because of the GST portion, your expense ratios were supposed to be slightly elevated in 1Q. However, a big chunk of it is coming from the net reinsurance expense line item. If you can help us understand what is happening over there, because the other operating expenses have sort of been lower. That has also picked up the net reinsurance expense pickup is the sharpest. If you can explain that. Thank you.
Sure. In terms of loss ratio, the July trend is in line with our expectation. Of course, the infection season will start in some time, and we will be able to update you in next quarterly call how the infection is behaving. Otherwise, we have not seen any unusual trends so far in the month of July. Q1 loss ratio improvement year-over-year basis is driven by two factors. One, of course, retail, the new business, as we already mentioned last time. That is one positive trend we are experiencing. Second, on the group, since we have taken the decision not to write any large group account where it is not as per our underwriting philosophy and focus more on whether it is FET group or SMEs. That is the reason for group loss ratio improvement.
In terms of expense ratio, the RI has. Basically, there is nothing structurally different this quarter versus next quarter. RI has a lot of things mixed up. For example, let us say in some cases, the profit commission which is mainly on obligatory or voluntary quota share is booked in one quarter, and sometimes it is in next quarter. Otherwise, structurally, there is nothing which is unusual here. As the year progress, you will find it is more or less converging with historical trend.
Just to follow up on the expense ratio portion. From third quarter onwards, we should see these ratios stabilizing, right? As the entire GST portion goes into base. That understanding is correct, right?
Actually, in case of GST, as far as commission is concerned, which is the main line item that we have already passed on to distributors, any loss on ITC, input tax credit. For expenses, you're right, it will normalize from Q3. After Q3, the results will be comparable YOY basis. Really, there is no sharp increase. In fact, if you see Expenses of Management, it has improved from 38% to 35.2%.
Yeah. Correct. Right. All right. That answers. Thank you so much, and all the best.
Thank you.
Thank you. Before we take the next question, a reminder to all the participants. To ask a question, please press star and one. I repeat, to ask a question, please press star and one. The next question comes from the line of Harsh Shah from HSBC Global Asset Management. Please go ahead.
Yeah. Thank you for the opportunity. Just couple of questions from my end is, one, I heard your opening comments on growth. Again, I understand that quarter on quarter is not the right way to look at it. From a trend perspective, is there any change that you have done to your internal strategy or philosophy which can lead to a sustained higher than your past trend of growth? When I say past trend, I'm comparing or I'm taking the difference between what Niva Bupa grows versus the industry growth. Is there any gap that you are trying to build versus the industry growth that we should be aware about?
I think structurally or strategically, Ankur can add to what I'm saying. In terms of the levers that we have been using to drive growth, they continue to be the diversified multi-channel mix. Last time I mentioned we're doubling down quite seriously on what we refer to as the Bharat initiative, which is to penetrate tier 2, tier 3 towns and beyond. We continue to make the same run rate of investments in driving growth as we have now for six years. This year as well, in terms of distribution expansion, we continue to have the same level of investment, although incrementally it's much smaller given the size of the company today. That's broadly what we are driving, and we do expect to sustain 8-10 percentage points faster than market growth on retail health specifically.
Some of the other engines around product innovation, products for segments, all of those continue apace. Anything you want to add?
Just to add on a few more. We have continuously been adding our advisor network
Across this year also, we are continuously adding in the similar pace of what we did last year. We have added new locations as well in our, as Mr. Krishnan also spoke about, the smaller markets is where we are expanding, and locations also we are expanding there. One is new products. In the month of August last year, we launched a product called ReAssure 2.0. That has got a very good success in the market because that is very uniquely placed there. Last is, while we do all of this on expansion, we are also working on AI-led capabilities to increase productivity of our advisors and of our employees. These are the few things which we are doing strategically to improve our growth and consistently grow better than the market.
Understood. From a retail and group health mix, anything to read again from an annual claim perspective? Is there a range where the idea is to remain between 20%-30%? Or do you think that retail can inch up further as you are planning to grow almost 10%-15% higher than the industry?
Our internal one would be similar in terms of what we said earlier as well. Large part of it, which is around 70%, would be retail and around 30% would be group.
Just to reiterate, we are not at all averse to group business. The only point is the threshold around economics, a combined ratio. We've not been able to stay within that threshold for the last year as well as this quarter. If we see the pricing environment improve, where there are opportunities, we'll certainly capitalize on that. Again, to remind all of you, within that, we are certainly doubling down on the SME opportunity. That is actually growing 50%+. Of course, it's not been able to fully compensate for some of the renewals that we've lost on the B2B side, largely on account of pricing.
Sure. Point well taken. Just to press on this, from group perspective on your renewal business, from pricing perspective, what is hitting you comparatively harder? When I say you, it also may be applicable to other parties. Is it the expense ratio part of it or the claims ratio part of it?
The market is operating at claims minus in terms of pricing. Annualized claims forecasted minus. Obviously, that makes no economic sense.
That's true. Last question from me is, once everything normalizes as earlier participant also alluded, how does your CI SR looks like from Q3 onwards on a normalized basis?
Sorry, you said normalize as in?
CISR is, I mean, there's no normalization required on that front, no?
Yeah. Because it's all amortized. There is earning, which is on one by 65 days, there is amortization and a DAC. It's already normalized.
Okay. Got it.
Yeah, sure.
On that, we stick to our FY 2029 guidance, which is what we've been indicating.
Yeah, sure. No problem. That's it from my end. Thank you, and all the best.
Thank you.
Thank you. The next question comes from the line of Supratim Dutta from Jefferies Investment. Please go ahead.
Hi. Thanks for the opportunity. My first question is on the growth side of things. If you could give us some color within the retail health piece, what would be your fresh business and what would be the renewal business and how both of them are growing, that would be helpful. Wanted to understand that obviously there has been GST tailwinds, you have been making investments in expanding the channels. As you go into the second half of the year, the base becomes fairly elevated. On that elevated base, how are you thinking about growth? What would be the key drivers there? If you could give some color around that would be helpful. Secondly, when I look at your presentation, the contribution from PPN cities, that has been going up. The network has obviously been expanding.
Wanted to understand how does this impact the loss ratio? What kind of benefit are you seeing on the retail loss ratio because of this? If you could give us some color there, that also would be very helpful. Thank you.
Sure. Let me answer the first two, and then I'll ask Dr. Bhabatosh to answer the third one, which is on PPN. Our overall growth for this quarter on retail business is 46.5%, largely driven. It's a mix of both renewal and fresh. The fresh grew by 41% overall. Both our fresh and renewal are growing. In terms of future, do we see growth coming in? July is also looking very good for us. I can't comment a lot in terms of overall forecasting this, but what I can tell you is that we want to grow better than the market as we have been doing. Significantly better than the market. 8%-10% over the market is what we want to grow. Yeah, I'll ask Dr. Bhabatosh to talk about it.
Thank you. Supratim. The preferred provider network, just to reiterate, allows customer to have convenience and savings through free ambulance discounted services, assistance through our SPOC care, et cetera. How does it help in claim ratio is these are, let's say, secondary care plus hospitals. We do notice that a lot of people land up in quaternary, tertiary care hospitals for what is classified or what could be easily be called as a very secondary care treatment, like cholecystectomy, appendix removal, small surgeries, dengue, malaria, et cetera.
The idea is by deploying convenience and exemplary experience and saving to customers, if some of these people can be transferred or choose a PPN network instead of a tertiary care or a quaternary care setup, that results in a nearly 15, 20 percentage point lesser average claim size than the same treatment available in a quaternary or a tertiary setup. That's how it reduces.
Secondly, we have better working relationship with SOPs, with PPN hospitals, which ensures appropriate care is delivered. Lot of times, you would come across that unnecessary abuse of ICU admission, not discharging patient in time, keeping them for longer. These abuses are avoided, both of these go towards reduction of claim cost, resulting in better claim ratios. Does that answer your question?
I just have one thing.
Yeah.
In terms of translating this into claims cost savings, the answer is yes. Does it necessarily mean improving claims ratios? The answer is no, because it just helps us be more price competitive because of all of that we deploy.
Yeah.
We may still maintain or allow the claims ratio to deteriorate and pass back more of this to the customers. Just want to make sure that you may not necessarily see these, and we've had this discussion in the past as well. The claims ratio is also a choice driven by the repricing and the extent of repricing that we need to do. This gives us flexibility on that aspect.
Absolutely. I completely understand that point. Just one clarification. On the tertiary, could you give us the differential in loss ratio between a tertiary or a PPN? What would be the differential in claim cost or loss ratio, however you are quantifying that? That's one. Lastly, on the fresh GWP, thanks for giving us the growth. What proportion of your retail GWP would be fresh, if you could let me know that would be very helpful as well.
Sure. Let me take the first question first. Loss ratio difference cannot be because it is computed on the premium and earning on the premium between a tertiary care setup and secondary care setup. The average claim size differential for like-to-like treatment between a tertiary, quaternary setup vis-à-vis a secondary care setup varies anything between a 15 - 30 percentage point difference, depending on which procedure or which treatment we are talking about.
Understood.
On your question on the fresh versus renewal, around that number, 35% of our business is fresh in retail and 65% is renewal on retail. Around ±1% here and there.
Got it. Thank you.
Thank you.
The next question comes from the line of Prayesh Jain from Motilal Oswal Financial Services Limited. Please go ahead.
Hi, good evening, everyone. Just a few questions. Firstly, if I look at your claims ratio, that has improved by more than 300 basis points. Obviously we had multiple levers here with respect to fresh growth being stronger, pricing actions being taken. How has the loss ratios played out between the fresh book and the older book? You've just mentioned that the ratio is 35 in terms of your fresh and renewal mix in terms of premium. In terms of claims, how would that have panned out? Basically, trying to understand the trajectory on the back book loss ratios.
Yeah. Prayesh, generally, as we mentioned, the renewal loss ratio in retail is around 75%.
Okay.
That's broadly is renewal back book loss ratio. You're right, all those things like pricing action, PPN, all those have contributed a reduction in loss ratio and mix also. A mix between retail and group and other things, yeah.
Got that. Second, I think as an extension to an earlier asked question. I think Harsh had asked this question about normalized CISR. Probably, what he meant, and even why I wanted to understand this was now that second half will have a GST base effect where your growth will slow down and probably fresh growth will look lower, your loss ratios will possibly trend higher because of the mix itself changing towards renewal versus fresh. What is a stable scenario or the unwind out of the net on premium coming out of the long-term book will help you offset that impact? How should we think about it from a second half onwards standpoint where you will not have the advantage of GST tailwind flowing in?
Actually, this is based on earnings is slower than GWP.
Right.
We don't think that that will materially change between H1 and H2, the loss ratio. It's not that they will deteriorate. Even if there is some impact, that will be more than offset by a reduction in expenses. In that sense, like-to-like basis, we really don't see any reason for this to be deteriorated. Of course, if there's something like infection, which is abnormal, then it's a different matter. Otherwise, inherently there is no reason because it is all amortized, both premium and claims and expenses.
Right. Like you mentioned that July has been very strong, has maintained the momentum in terms of premium. How has been the trajectory on the loss ratio in this month?
Claims are quite in line with our plan.
Okay. In terms of any adversities being seen, because there are many areas where we've seen floods and heavy rains. Any adversities so far been seen?
No.
Okay.
See, some upside anyways is built in plan and in previous years. Other than that, nothing, Prayesh.
Okay.
Like Vishwanath said, Prayesh, we'll have to just see through the monsoon.
Right.
Otherwise, at least July is quite range-bound with respect to our planning expectation.
Okay. Last bit on the investment book. Any change in plans to move towards equity? Also, one more point was on the debt raise of INR 500 crore, I think, that you have approval for. Why do we need that?
I'll just first cover debt. Prayesh , we have INR 250 crore NCD, for which call option is due. It was raised five years back when we had a rating of A at that point in time at 10.7% coupon. That's one. We have some growth plans. We are currently evaluating all the options. As I was mentioning, our issuer rating by ICRA currently is AAA and we'll go for instrument rating soon. Given that and our growth plan, we have this enabling resolution, and we'll see when we need to raise how much.
On the investment?
On the investment, Prayesh, there is no major change in our strategy as from what we stated earlier. We continue to be conservative. At the same time, we are mindful of the yield that we need to draw out of our investment book. One thing I would like to point out is, we are sort of investing significantly in the AIF segment, which yields us anywhere between 12%-15%. We are at about 4% of our AUM from our committed capital on the AIF. Maximum permitted by regulator is 5%, we continue to look at relevant opportunities in that space, and we would continue to sort of inch closer to the regulatory limit there.
What we've done is we've increased our exposure and allocation to Nifty ETFs as the market's been very stable now, and that is at around 3 .5 % of our investment book. There is no discussion on investment in direct equity at this stage, we may take a call, depending on the discussion with the board at an appropriate time on that.
Sorry, one more last bit. The AIFs that you mentioned are credit AIFs and would be restricted to performing credit only or would expand to special situations and others also where the yields are even higher?
They are largely performing credit AIFs, Prayesh. If there are good special situation AIFs which are available from pedigree institutions with significant AUM and experience, we are open to investment in those as well. Large part of them are very safe and sound performing credit.
Got that. Thank you so much and wish you all the best.
Thank you.
Thank you. A reminder to all the participants, to ask a question, please press star and one. I repeat, to ask a question, please press star and one. The next question comes from the line of Hitaindra Pradhan from Maximal Capital. Please go ahead.
Yeah. Hi. Am I audible?
Yes.
Yeah. Hi. I'm referring to slide 28, the Ind AS disclosure. Sir, if I look at the insurance revenue, that has grown by 28%, versus the GWP growth of 23% and the GWP 1byN, this is a bit higher than that. Can you explain the divergence here? I mean, how to think about it? Sorry, I'm referring to slide 24.
Sorry. 2024. Your question is the increase in insurance service revenue, which is over last year. This is 29%, close to 29%?
29%. Yes.
Yeah. What was your question?
The GWP growth is like, say, 23%.
From GWP.
Yeah.
Yeah. The divergence between the two.
For this, you should really look at the overall GWP without 1byN, which is 23%. 23% Versus 29%. The reason is this is on earnings basis. All the policies we have written last year and for multi-year policies even two, three years back. This is kind of gross earn premium. It is coming from amortization of those policies on one by 365 basis.
It is to do with the multi-year policy mix, right? I mean, that's what you're trying to say.
Yeah, multi-year two. It will not exactly match with the GWP. It really depends on how much proportion of multi-year was there in Q1 last year, how much here. That way.
Got it. Got it, Sir. The second question is on the loss ratio. On the legacy book, you mentioned the loss ratios are elevated at 70%. How do we think about the risk stratification over there, and how do we price it, and how to think about the pricing here on looking forward. What can be the trajectory of the loss ratio in that book?
You mean to say group book right now?
On the retail portfolio, the renewal book is loss ratio. How do we think about the risk there and stratification there and the pricing that we're going to take?
In retail renewal, loss ratio, 75% is quite acceptable, because expenses are not that much in that book. It is some commission and some renewal expenses, which is not much. Let's say 20% overall, less than 20%. In that sense, if we get 75% loss ratio, it's quite acceptable. In terms of actions to keep it at that level, we have annual price increase in that portfolio. We increase by high single digit every year for renewal book.
Got it. Sir, on the expense ratio side, I think last quarter you mentioned that you are targeting 2%-2.5% improvement. Are we still sticking to that or if anything changed on the expense ratio trajectory?
If you see this quarter compared to last year, there's an increase by 2.8%.
Improvement.
Sorry, improvement. 38% has gone down to 35.2%. At some point in time, it will stabilize between, let's say, closer to 33%, which is quite comfortable. 30%-33%, yeah.
The final one on the ROE. Do we have any kind of target in mind for FY 2027, FY 2028? How to think about the ROE trajectory?
Yeah. ROE, if we just see last four rolling quarters, it is 11.8%. What we guided earlier was by FY 2029 mid to high 10s. We go by that. That trajectory will be very smooth. Because it's in there, everything is amortized, other than if there is some infection, et cetera, in some quarter. Otherwise, it will be smooth trajectory from close to 12% now annualized to mid to high 10s by FY 2029.
Got it, Sir. Thank you. Thank you and all the best.
Thank you. As there are no further questions, I would now like to hand the conference over to management for closing comments. Thank you and over to you.
Thank you. No other comments other than to reiterate a thanks to all of you for making your time this evening, and we'll talk to you next quarter.
Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.