Ladies and gentlemen, good morning, and welcome to the Star Health and Allied Insurance Company Limited Q3 and nine-month FY 2026 earnings conference call. 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Miss Devanshi Dave from Adfactors PR, Investor Relations Team. Thank you, and over to you, Miss Devanshi.
Good morning, everyone. From the senior management, we have with us Mr. Anand Roy, Managing Director and Chief Executive Officer, Mr. Amitabh Jain, Chief Operating Officer, Mr. Himanshu Walia, Chief Marketing Officer, Nilesh Kambli, Chief Financial Officer, Mr. Aneesh Srivastava, Chief Investment Officer, Mr. Aditya Biyani, Chief Strategy and Investor Relations Officer, and Mr. Sombit Bhattacharya, Head, Investor Relations. Before we begin the conference call, I would like to mention that some of the statements made during the course of today's call may be forward-looking in nature, including those related to the future financial and operational performances, benefits and synergies of the company's strategies, future opportunities and growth of the market of the company's services. Further, I would like to mention that some of the statements made in today's call may involve risks and uncertainties. Thank you, and over to you, Mr. Roy.
Thank you very much, and a very good morning to all of you. Thank you for joining Star Health's earnings call for the third quarter of FY 2026. I know we are late in January, but I would take this opportunity to wish you and your loved ones a very happy New Year 2026. Let me set the context. India's insurance industry is moving beyond penetration catch-up zone to a phase of sustained compounding, reinforcing its role in the core pillar of economic infrastructure. We welcome the recent Sabka Bima Sabki Raksha, that is the Amendment of the Insurance Laws Bill 2025, and we believe it is a significant policy milestone towards further deepening of insurance penetration. The bill institutionalizes trust through the establishment of Policyholders' Education and Protection Fund, strengthening the foundations for sustainable trust-led development.
We believe that health insurance in India is entering a structurally advantaged phase, with policy tailwinds and rising consumer intent translating into sustained demand growth. Health insurance is already the largest and the fastest-growing segment within the non-life industry. Within this, retail health is the most consequential value pool, voluntarily purchased by families across the country to protect their household balance sheets from medical shocks. IRDAI's annual report for FY 2024-2025 reinforces this momentum, with the lives covered under retail health has grown at 7.7% year-on-year, versus 5.6% year-on-year in FY 2023-2024. The number of lives covered exceeded 6 crore by March 31, 2025. So on the policy front, the recent landmark GST exemption on retail health has been a structural catalyst, lowering the all-in insurance cost for households. This is already visible in the category growth.
While overall non-life insurance grew at 11.5% in quarter three, FY 2026, retail health insurance grew 33.6%. That is three times more over the same period. Amidst this conducive backdrop, I think Star Health remains focused on maintaining its leadership in retail health and compounding a durable, value-accretive franchise anchored on our four pillars, which is a risk-first approach, a consistent focus on ROE, customer-centric execution, and a digital-first mindset. With this, let me come to the quarterly performance highlights of our company. Before I share the updates on our quarterly performance, I would just like to kindly remind you that we continue to take all our business and investment decisions based on the Ind AS accounting, which is aligned with the IFRS principles.
IFRS is designed to capture the value creation over the policy lifetime rather than a short-term accounting outcome, and we have been following the IFRS-aligned reporting structure, consistently. So now coming to the headline statements for quarter 3, FY 2026. In quarter 3, FY 2026, our top line, that is the GWP on 1/N basis, increased by 23% year-on-year to INR 5,047 crores. We ensured full pass-on of GST benefits to our customers with very strong distribution alignment on the revised economics and absorption of the input tax credit impact. On the Ind AS front for the third quarter, increased from INR 87 crores for quarter 3, FY 2025, to INR 449 crores for quarter 3, FY 2026.
We reported Ind AS underwriting profit of INR 46 crore in quarter three, FY 2026, as compared to an underwriting loss of INR 79 crore in quarter three, FY 2025. This was driven by improvement in the combined ratio by almost 320 basis points from 102.1 in quarter three, FY 2025, to 98.9 in quarter three, FY 2026. As in the previous quarters, we have demonstrated loss ratio decline continuously in successive quarters with a 301 basis points decrease from 71.8 in quarter three, FY 2025 to 68.8 in quarter three, FY 2026. The retail loss ratios also have decreased by 103 basis points, year-on-year to 68.4% in this quarter.
Also, as in the previous quarters, our expense ratio declined further to, by 16 basis points from 30.3 in the last year to 30.1 in, quarter 3, FY 2026. So the headline statements for nine-month FY 2026, I would like to mention here. On YTD basis, our top line, the GWP, increased by 16% year-on-year to INR 13,856 crores. Our Ind AS PAT increased 87% year-on-year from INR 516 crores, during nine-month FY 2025, to INR 966 crores for nine-month FY 2026. We reported Ind AS underwriting profit of INR 20 crores in nine-month FY 2026, as compared to a loss of INR 227 crores in nine-month 2025.
This was driven by significant improvement in combined ratio by 222 basis points from 102.1 in nine-month FY 2025 to 99.8 in our current nine-month FY 2026. The improvement in combined ratio was driven as a mix of both expense and loss ratio. Our loss ratio is improved by 124 basis points to 70%, and our expense ratio also improved by close to 100 basis points to 29.8% for the nine-month period. Our PAT growth was driven by both operating profit and investment income. We registered an investment yield of 9.6% for nine-month FY 2026, supported by a diversified profile of assets. As on 31st December 2025, 18.7% of our book was in high-yielding assets such as equities, ETFs, REITs, and InvITs.
We believe our quarter three and nine-month performance reflects our disciplined execution and the positive impact of the corrective actions that we have been taking, both on the underwriting and the claims management side. Now, coming to the business details. Operationally, we continue to build a very diversified and granular retail franchise while maintaining the category leadership. Our market share in retail health segment was 31.3% for nine-month FY 2026. As the market leader, we view insurance penetration augmentation as both an opportunity and a responsibility. Continuing with end basis on the business metrics during the quarter, our gross premium increased 23% year-on-year by fresh business growth of 45%, and the renewal premium growth of 17%. On the nine-month basis, our GWP growth stood at 16%, with fresh premium growing at 18% and renewal premium growing at 16%.
We remain focused on certain preferred geographies, certain demographics, and products, and channels that maintain and meet our defined ROE thresholds. Our preferred segments are growing faster at 1.3 times than the company's average on the overall fresh business. Coming to the details of our distribution channels, let me start with agency, which is the backbone of our business, with 83% of business contribution coming from our agency force. Our GWP in agency channel grew 19% year-on-year during nine-month FY 2026. Our fresh business in agency channel grew 35% year-on-year in the nine-month basis. We registered an accelerated growth of almost more than 66% in quarter three of FY 2026, which was supported by both, well, you know, a very robust 16% growth in fresh policies, in the number of policies growth.
Our granular market reach continues to convert consumer demand into growth, with 60% fresh business emerging from semi-urban and rural markets. Star Health is, as we know, very strong in the semi-urban and rural markets as well, and we continue to invest in the agency channel, with overall agent count exceeding 800,000 by December 31, 2025. Coming next to our digital distribution channel, which continues to grow from strength to strength. Digital business is structurally our most profitable channel, with digital D2C operating at industry-leading scale. In terms of mix, 77% of our digital business emanates from our in-house digital channel, D2C channel, while the remaining business comes from our strong partner digital partners. Digital channel contributed 9% of our overall business and 20% of the fresh business for nine-month FY 2026.
Our GWP from digital channel grew 35% year-on-year basis on for nine months, driven by a strong fresh premium growth of more than 46%. Coming next to our bancassurance channel. Bancassurance contributed 7% of our overall GWP and 5% growth on a year-on-year basis. We have deliberately upgraded the mix of our bancassurance products towards certain preferred products, which is now making almost 94% of our fresh premium contribution in nine-month FY 2026, which used to be 76% in last year, nine months. We continue to expand our base of banca partnerships. We have added 6 new banca partners during the current fiscal. Our corrective action on certain loss-making accounts in this channel will fully reflect in our profitability during the coming quarters.
On the corporate distribution, corporate contributed 1% of our overall GWP, owing to our recalibrated channel strategy, as we have articulated earlier. In this space, we are focusing on the higher quality SME segment, with 73% of the corporate business coming from the SME segment during this nine months, compared to 44% in the previous year. Our corporate group loss ratios have significantly improved from 94.6 in nine months FY 2025, to 83.5 in nine months FY 2026. This is a result of our recalibration on this group distribution, which we have mentioned before as well. Coming to the overall portfolio maintenance and calibration, we have implemented diligent measures towards qualitative recalibration of our portfolio and ensuring delivery of sustainable ROE outcomes.
On a YTD basis, our retail to group business mix was 95-5, as against 91-9 for nine months FY 2025. So 95% of our business now comes from retail across all the channels mentioned earlier. Our claims ratio for the retail book declined further to 69.4% in nine months FY 2026, as a result of our targeted underwriting, pricing, and associated corrective strategies being implemented since the last year. We continue to invest towards enhancement of our vigilance and reduction of FWA, which is fraud, waste, and abuse, as a core operational priority. Medical inflation in India continues to be at a very elevated levels. Various studies conducted by leading firms like Aon and Willis Towers Watson expects medical inflation in India to be higher than 12%-13% in 2026.
Unless there is a structural cost moderation through government interventions, price increases by insurance companies would be essential to preserve sustainability. Star Health continues to serve our customers with utmost fairness, with outcomes demonstrated in the consumer behavior. We have settled more than 2 million claims, amounting to INR 8,900 crore during nine months FY 2026. These numbers will give you an idea about the operational rigor and the efficiencies of this organization. Our claim settlement ratio consolidated at 90% for nine months FY 2026. Our grievance ratios per 10,000 policies reduced from 22 in nine months FY 2025 to 20 for nine months FY 2026. Our renewal retention trends, which is also an indicator of the consumer satisfaction, were robust during nine months FY 2026, with 99.2% persistency value-wise.
Our claims NPS improved to 63 at December 2024. More importantly, our cashless claims in NPS improved to 72 from 63 during the same period last year. So our cashless claims NPS probably is the industry leading right now with 72 points. Our overall company level NPS improved from 55 at December 2024 to 64 at December 2025. This continued lift in persistency and NPS, coupled with the reduction in incidents of grievances, are validated of improved customer experience, and strengthens our resolve to compound this momentum with more disciplined execution. Coming finally to our digital initiatives on the both service side and the sales side. As you know, we have been making significant investments in technology. Probably, we are the largest investor in technology in the health insurance business.
So we are able to see, you know, deliver tangible progress on both productivity and service outcomes. Digital is now embedded across the value chain through our modernization of legacy platforms, our workflow automation, and enablement of multiple straight-through journeys at scale. Let me give you some numbers. Starting with the streamlining of acquisition, 94% of our new policies are now originating digitally. 76% of the premiums were collected through the digital route during the year. In quarter three, our distribution app, which is ATOM, facilitated 85% of the fresh policy acquisitions, indicating very high digital adoption amongst our distribution partners as well. On the claims and wellness side, our AI-powered claims platform continues to scale and has now enabled migration of around 57% of our claims traffic, translating to better productivity outcomes and also reduction in FWA.
We expanded our home healthcare services to more than 300 locations from around 250, the close of last quarter. Expansion of doctors and specialties has driven 73% growth in our telemedicine numbers, indicating strong adoption of our wellness initiatives by our consumers. On our customer app, we are happy to let you know that with the enhanced features and increased adoption, our customer app downloads have crossed 13 million by December 2025, and our monthly active users have also scaled more than 1.5 million mark. So this is becoming more and more important in our the way we are servicing our customers. We have observed that desirable levels of self-service adoption, with 60,000+ claims have been submitted on our customer app.
There is an absolute digital experience on claim submission on the customer app, which is actually more than double of what we did last, in the last year, nine months. More than 300,000 policies are renewed through the app, now. So stitching together everything, as we enter into the last quarter of the current fiscal, our priorities remain very clear: to deliver value-driven growth, disciplined underwriting, very strong fraud analytics, deeper partnership with our hospital partners and distributors, and sharper customer engagement across the lifecycle touchpoints. We remain steadfast in our mission to deliver responsible, resilient, and customer-centric health insurance. I again thank you very much for your continued trust in Star Health, and with that, now we open the floor for Q&A.
Before we go into Q&A, I would also like to take this opportunity to introduce Sombit, who has joined us as the Head of Investor Relations, and he'll be interacting with all of you. And at this, I would like to also take this opportunity to thank Aditya, who has been, your, you know, face of the company, meeting all of you. He will continue to be with Star and to play a very important role on the business side of things. All of us are always available to all of you for any questions you may have about the business. Thank you so much. Look forward to your questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants, you 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 is from the line of Swarna Mukherjee from B&K Securities. Please go ahead.
Hi, sir. Good morning. Thank you for the opportunity, and congrats on a good set of numbers. I have three questions. First of all, I just wanted to understand the trajectory of earned premium growth, because I think last year from Q3 onwards, you had started increasing the price across products, and by January, you had repriced 65% of the portfolio. However, I think on an earned premium basis, the growth is still, you know, lower than what our, you know, top-line growth is. So just wanted to understand, when do we see that playing out, that last year's price hike in the earned premium growth? So that's the first one.
Second is on the fresh business growth, and I think commendable numbers, sir. I just wanted to understand the commissions for this fresh business, how it will be placed vis-a-vis renewal business. And if you know so what I also noticed is that net commissions have remained stable you know despite the fresh growth but DAC has come up in the IFRS period. So I just wanted to understand what how should I read this, or whether we are doing lesser proportion of long-term products, ma'am, if you could throw some light. Thirdly in terms of agency, I think, sir, you have mentioned that fresh NOP growth... Hello, am I audible?
Yeah, yeah, please go ahead.
Oh, okay. Yeah. So in terms of agency, I think, you have reported, 6% fresh NOP growth, while premium growth is 35%. So is this, led by, you know, higher ticket size products? What is happening, if you can throw some light on this? Yes, sir, these are my questions.
Yeah, thanks a lot. Thanks a lot for those questions, and thanks for your good wishes. So see, the NOP growth is a factor of multiple things. One is, you know, on the group side, as you know, we have recalibrated our business strategy, and that is also reflecting on the NOP growth. On the retail side of things, while we are, we are, you know, on a conservative 1 by 365 accounting, and as a result of which the NOP growth flows into the books over a period of time. But if you look at the, you know, the way the growth is coming in terms of top line and also our renewal retention, NOP growth will improve in the coming quarters, and I'm sure that will be demonstrated.
On the commission side, on fresh, we are paying, you know, commissions. Our long-term business has increased, and this is, we have spoken in the past. Customers are preferring long-term plans and which we are quite happy to offer. For the simple reason, I believe it's a win-win for all stakeholders. So commissions are paid to agents and distributors on long-term plans, depending on certain business outcomes that they have to deliver. So as you have rightly mentioned, despite growth in business, significant growth in business, our net commissions have remained stable. And under the IFRS accounting, the deferred acquisition cost is, you know, one of the main, you know, contributors which helps us to achieve this.
Finally, on the 6% NOP growth, I think, we have been, you know, focusing on profitable growth. The growth with profit has been our agenda. Certain markets, we have taken some calibration, but this is on a YTD basis. If you look at our growth for quarter three, it is significantly, you know, high. So I think, we will be. We are delivering more than 16% growth in volume in quarter three. So things are improving on the NOP as well.
Okay, sir. Got it. Very useful. Just one last follow-up. So, in the presentation, the sum assured number, which you have provided, average sum assured, last quarter, it was around INR 17 lakh, that has come down to around INR 12 lakh for nine months. This is because we are now excluding group from the calculation. Would that my understanding correct?
Yes, the group is excluded. Correct.
Okay. Okay. Understood. Yeah. Okay. Thank you so much, sir, and all the best.
Thank you. We have the next question from the line of Prayesh Jain from Motilal Oswal Financial Services Ltd. Please go ahead.
Yeah. Hi, good morning, everyone. Congrats on a great set of numbers. Firstly, on the loss ratio. How much of the improvement would you attribute to the fact that we have a very strong fresh growth, and probably, you know, that kind of comes in, the impact or, or probably, you know, the, loss ratio on that, kind of, increase is going on. But what I'm basically trying to figure out is: how is the loss ratio panning out in the renewal book? Whether, what's the trajectory there, where—because the fresh contribution has gone up, and that would have played its part in reducing the loss ratio. So is the loss ratio kind of coming down also on the renewal book, is my question.
Yeah. Hi, Prayesh. Yes, the impact of price changes last year is clearly showing, and we are seeing a reduction in the loss ratio of our renewal book as well. Of course, increasing of fresh will also have a role in terms of bringing down the loss ratio, but that will play out over a period of time, because the fresh growth has gone up significantly in this quarter. So on non-premiums, it will show up in some-
Yeah. Could you give some numbers on your, you know, say, a three-year book loss ratio, or what would be the three-year loss ratio compared to, say, a year back and today?
Prayesh, I think these things we can have it offline. You can come and meet us, and-
Okay.
Yeah.
Okay, got that. Second question was, you know, extension towards on our earlier on the commission bit. You know, there is a stark improvement on the commission commission ratios. Given that, you know, fresh growth was so strong, what really kind of played played into it to bring down the commission ratios in to that quantum?
So, Prayesh, when you talk about commission ratio, what you are looking at IFRS numbers, the gross commission to GWP?
Yeah, yeah.
So if you see quarter two, it is 17.1%. For quarter three also, it is 17%. So it is consistent, you know, the reductions that we had done on the senior citizen, that is playing out, which is getting offset with the long-term business that we're writing. And long-term business, a large part of it still is 1/N basis, so, you know, it doesn't impact the commission ratios.
Okay. Okay. And, the last question is on, again, you know, the regulations where now there's so much discussion on commission bit, that commission have to be brought down in the system. And the other part is the health, the healthcare system, right? What are the developments on both the fronts, with respect to negotiations with hospitals or any, anything that you can share on what are the developments both on the commission front as well as, what are the regulators talking about commission front as well as the healthcare, regulator front?
Yeah. So see, Prayesh, that's a good question. On both on the commission front, and on the expenses of management, I think there is-- we expect that the regulator may be reviewing this. This is what we have been also hearing. We await for some, you know, final clarity on that. But, at a macro level, I think in the larger interest of the consumers, expenses of management have to be adhered to, and we believe that it has to be, you know, implemented very, very strictly. This is something that is definitely desirable for the industry, you know, performance on a sustainable basis. So if any reduction in expense of management is articulated by the regulator, obviously we'll be prepared for it. As far as the hospital negotiations are concerned, this is an ongoing process.
We are seeing good interaction with hospitals, with multiple partners like AHPI and all of that. We are talking to all of them. We are meeting them. And we are also able to see some acceptance of, you know, from their side to find a solution which is win-win for all of us. And there is a lot of work going on at the GI Council level, as you know, in terms of common empowerment of hospitals and so on. So I think in the next few months and years, we should see some good movement in this area.
Got that. Thank you so much, and wish you all the best.
Thank you.
Thank you. We have the next question from the line of Avinash Singh from Emkay Global. Please go ahead.
Yeah, hi. Good morning. Thanks for the opportunity. Good set of numbers. Anand, question, I will stick to the one, particularly on the claims ratio side. Certainly there is an improvement, if you see sequentially on a Y-Y basis. But if you look at more on the nine-month basis, on the retail claims ratio, because a significant portion of improvement has come from group. Now, on the retail side, I mean, versus 69.6% of last nine months to this nine months, 69.4%. The improvement is there, but it's kind of a minimal, and it is on the back of also the price hike have been taken, a lot of remedial exercise have been taken.
So the question is that, okay, if, I mean, we were to look, say, over maybe, two, three years kind of a thing, where maybe a desirable number, for you on the claim side, would be even lower from here. So how do you see this panning out? I mean, given that, I mean, you know, the apparently medical inflation has started to a bit of a cool down in recent quarters. You have taken a price hike and remedial action, yet the retail and you also have a very, very impressive fresh growth and overall growth, yet, you know, the claim ratio improvement over these nine months, on Y-Y basis on retail side is still, 20 basis points.
... So, how do you see the journey over the next, you know, two, three years? And where would you see or you would desire to, you know, settle these claims ratio, please? Thanks.
Yeah. Thanks, Avinash. So see, I think on the retail claim ratio, you have to-- I mean, obviously, you understand equally well the price revisions that we have taken and all the underwriting changes that we have made, these things to flow into the loss ratio and the unearned premium takes, you know, 18-24 months. So we are still not even 12 months done. I think, more importantly, you have to look at the quarter three claim ratio of retail. And, if you see the trends of the quarter three, there is a 103 basis point improvement over last year.
So on the trend side, we are seeing encouraging signs, but, on the YOY, yes, the decrease may not be that sharp, but we believe that this will trend downwards going forward. Now, as I have told, we are not targeting any specific loss ratio as such. We are hoping to deliver a mid-teens ROE business, and that is what we are focusing on, and this will be a blend of both loss ratio and combined ratio, so that, you know, we are able to meet those objectives.
Got it. Thank you.
Thank you. We have the next question from the line of Nischint Chawathe from Kotak. Please go ahead.
Hi, thanks for taking my question. You know, this is essentially on the acquisition ratio. You know, this ratio has gone up to around 26.9, you know, versus 23 in the second quarter, or probably even 23 in the third quarter last year. So how should one think about this?
So, Nischint, on the IFRS side, you know, the fresh growth that we had in the current quarter had some impact in terms of the DAC ratio. So it will, it will keep on normalizing, you know, as the growth normalizes.
And, uh,
It depends on-
So at a cohort level, has the acquisition expense ratio gone up?
No, not really. But yes, I mean, the fresh cohort for this quarter will have a higher, acquisition cost, you know, which will pan out over a period of time. So-
Yeah, that's because-
There will be a margin.
The fresh commissions would be higher.
Correct, correct.
Okay.
Which will keep on normalizing.
Sure. And in terms of GST impact?
As we have mentioned, you know, we have passed on the GST to our intermediaries. There is no impact of GST on this. All the commissions that we have paid are inclusive of GST.
Got it. Got it. Thank you very much.
Thank you. We have the next question from the line of Sanket Godha from Avendus. Please go ahead.
Thank you for the opportunity. My first question is again on the loss ratio for the third quarter. See, we have a reserve release of INR 142 crore, and that played a significant role for delta improvement in the loss ratio. If I ignore the reserve release, then your loss ratios probably are very similar to what you reported in second quarter. Just wanted to understand this release, how sustainable it is, and from which product you have seen this release. And because that numbers are the release clearly benefited on the loss ratio, is my read.
The second question is that even if the improvement has happened in loss ratio, any role was played by the GST cut with respect to consumer goods on the bills, which I believe is around 25% of every bill on an average. The GST cut of around 7% change had any additional benefit on the overall loss ratio what you reported in the third quarter? That's my first question on loss ratio.
Yeah. So, Sanket, you know, the outstanding claims is the functions of the claims prepared during the period, because, you know, 85% of the claims are cashless. While the customer is discharged, the hospital payment happens with a lag of one month. So whatever we have paid in the current quarter is the claim outstanding as on 13th September. You know, so whenever the claim ratio goes down, it's automatically the outstanding claims also goes down, because the claim outstanding or the claims reported during the quarter are lower, and hence the outstanding claim is lower, and the paid is for the last period. So there is, there is no impact of the reserve release or the outstanding claims reduction on the loss ratio. In fact, we have been strengthening our IBNR, quarter on quarter, you know, to take care of any volatility.
On the GST side...
On the GST side, we have seen, you know, some impact of that coming on the bills. But see, the overall ratio of that vis-à-vis our overall spends on claims is a very insignificant amount. I mean, it will have some role in offsetting some of our other GST outflow in the areas where our services, GST, et cetera, we'll have some extra costs. But to that extent, the loss ratio improvements are more structural in nature in terms of our pricing improvements, our continuous work on improving our loss cost in terms of managing our book better.
Understood. No, maybe that part might be getting reflected in the OpEx side. So only on commission side was— Sorry, only on the claims, whether you had 20, 30, 40 odd basis points positive or above because of the GST benefit?
... No, no, not because of the GST benefit.
Understood, understood. And, other two questions are basically, given your growth has been very strong in the new business, I just wanted to understand the color of the mix in the new business. How much, it's long term compared to previous quarter or even, maybe 3Q to 3Q and nine months to nine months, how much delta has been driven by increase in the contribution of, long-term plans? That's one thing I wanted to understand. And second, thing is, on investment book side, in the IFRS INR 413 crores of fair value change, what you have reported, it is largely related to equity or it includes, fair value change meaningfully coming from bonds, too?
So let me answer the long-term proportion, answer first. So we are definitely seeing an uptick in our long-term, policies. You know, such policies are beneficial for, both consumers and the co- and the company, because the consumers are protected against the price hike for the tenure that they have opted for, and there is continuity which is intact and, their health is secured. Additionally, we are able to lock in the customer early, especially at R one, R two stage, where generally the retention rates are better. Further, long-term policies also improve our capital efficiency as the customers pay upfront. So from a business standpoint, our approach is very clear. We go for businesses which meets our, ROE thresholds.
Now, coming to specific numbers of long-term policies, on the retail side, it has contributed to about 23% versus 14% in terms of NOP. And in terms of GWP, it is at 51% versus 34% on nine-month basis.
Sorry, can you repeat on GWP basis? Sorry, it's,
On GWP basis, it is 51% versus 34% of nine months last year.
Understood. And on the investment book side, on IFRS, INR 413 crore of fair value change?
Yeah, so our fixed income book is held to maturity in IFRS. Any change, any mark-to-market change in equities, REITs and InvITs in AIF, flows through profit and loss. But this is how the accounting of IFRS is done.
Okay. So in simple words, what you're trying to say that entire INR 413 crore is only related to equity market, nothing to do with the bonds?
Equities and equities, AIFs and REITs in which.
Understood. But the proxy equities, I mean to say. Okay, understood. Understood. Thanks, thanks. That's it from my side.
Thank you.
Thank you. We have the next question from the line of Shobhit Sharma from HDFC Securities Ltd. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. So my first question is on the GWP side. So if you can give some color around the RI acceptance, which we have done during the quarter. Is this, does this relate to group business, and if it pertains to group business, what kind of... what is the nature of that business, business? Is this employer-employee or non-employer employee? Now, second, coming to the commission ratio, it has improved drastically if you look at it. So what, what is driving that? Is this because of the first installment of the long-term premium, which we have received this year, or is this something else? Because we have not returned any kind of group business also, major group business during the quarter. So just want to understand that. On the expenses side, it seems to have elevated a lot during the quarter.
So can you, can you give some light on that? Because there is some impact of the labor code also there, and there seems to be some ESOP cost which has been accounted for. So if you can help us understand that. And lastly, on your slide number 13, you have mentioned number of claims which has been paid during the first nine months. If I compare that in the full FY 2025 number of claims, that seems to be significantly lower, almost 50% of what you had paid in FY 2025. So can you help us understand that as well? Yeah, these are, these are my questions. Thank you.
So on the reinsurance inward side, you know, for the quarter, the number reported is INR 22 lakhs. So we had some treaty, treaty done in the last year. There is, you know, some adjustment because this treaty will get over on 31st July. There is no new treaty that is written, and it's hardly INR 22 lakh number that is got reported in the current quarter. In terms of labor code, the impact for the quarter, one-time impact for the quarter is INR 16.5 crores, which is reported in OpEx. And that's again, you know, which is a 0.4 impact on the expense ratio for the quarter. In terms of number of claims reported in the investor PPT for nine months, nine months, there is a typo. I think, it's only the IPD claims, so including OPD, we'll just revise it.
You know, it is higher for nine months period, while the last numbers are including OPD and IPD.
What's the ESOP cost which has been accounted during the quarter, sir?
Sorry, which one? ESOP.
ESOP cost.
ESOP cost is, gets accounted under, IFRS.
IGAAP.
Is the ESOP-
In the IGAAP.
IGAAP, there is no impact of ESOP cost on IGAAP. It's always a reporting. Only if you have issued the ESOP less than the market value, there is an impact with the IGAAP numbers. We have not been doing that. In the past, I think it's hardly again, INR 5 lakh-INR 10 lakh when there was a timing difference. That impact is coming, but nothing substantial.
Okay. Sir, on the claims ratio, like, it has improved now on the retail side as well. So what kind of loss ratio, if you look at on a sustainable basis, would, would you be looking at? Would it be the mid-60s kind of a range, or would it stay, at the current levels only? I'm talking from a next 2, 3 years point of view, not, on a short-term basis.
No, so see, this is what we don't want to give any number and be guided for that. We are looking at running this business at a little, you know, combined ratio, which is viable, and mid-teens ROE. That is our targets that we are focusing on. To achieve that, claim ratio and expense ratio, both will play a role. So I don't want to give any number on that. Yeah.
... Okay, sir. Thank you, and all the best.
Thank you.
Thank you. We have the next question from the line of Dipanjan Ghosh from Citigroup. Please go ahead.
Hi, good morning, sir. Few questions from my side. First, you know, in terms of, obviously, you took the last round of price hike somewhere from October 24 to, maybe March 25. Now, we are almost 12 months down the road. So in terms of your incremental price hike strategy on the back book and, what can we expect out there? Maybe, blended price hikes or claimant versus non-claimant portion or portion of the book that will, you know, see a price hike. The second question is, a data keeping question in terms of your, new business mix within the net earned premium, how would that look like from 3Q to 3Q or 9M to 9M?
Third question is, you know, we are already like, 12 months out in terms of repricing of FHO based on claimant and non-claimant. So just, you know, early indicators on persistency and claims ratio of the book.
So on pricing, you know, we took up the last year in Q4, and we will be following the annual price cycle as it is. As far as the cohort-based pricing approach that we took for FHO, that has given us very good results. We are clearly seeing a good lift in terms of, you know, the non-payments and the risk that are healthy, you know, giving us better retentions. So that's clearly playing out. And you know, we will follow this approach going forward as well.
In terms of-
Yeah.
In terms of new business earned premium, you know, the growth in business does not get reflected in the earned premium immediately. So if you see, it will gradually keep on growing. The proportion is in the range of around twenty percent fresh NEP and eighty percent renewal NEP. And that ratio has been in a similar range, you know, because whenever we take a price increase in renewal business, you know, that also leads to higher earned premium on renewal business. You know, as long as it's a healthy mix and the loss ratios are coming down, we are happy to manage that.
Got it. Sir, just one follow-up. I mean, could you quantify the price hikes anticipated in this calendar year?
So Dipanjan, the guidance is that 10% senior citizen is a number that has been guided by the regulator. So you can assume that that will be the number for almost all the products in that range, maybe slightly higher or lower, depending on the product portfolio.
Got it. Thank you, and all the best.
Thank you.
Thank you. We have the next question from the line of Anshuman Deb from ICICI Securities. Please go ahead.
Yeah, hi. Thanks for the opportunity. My question is on the mix of long-term as well as the mix of high-yielding assets on the AUM. Long-term is now, as you said, around 23% and high-yielding assets around 19%. From a balancing act, there would be a certain limit to these two numbers because otherwise, at some point, we might have some other related issues. So I was just wondering, is there any limit which we are working on these two fronts?
So Anshuman, high-yielding assets, as of now, we consider equity, REITs, InvITs, and AIF as high-yielding assets. For equities, currently, we have kept this cap of 15%, and obviously, it would be a function of opportunities. So that is one. From as far as REITs and InvITs are concerned, there's a regulatory cap of 3%. We are currently operating close to 3%, and that book has about approximately 21% of position at this point of time. On AIFs, we have started investing. Drawdowns are small, but we do have intent to scale up the book slowly. So REITs and InvITs capped at, say, 3%. AIFs, we have started just the activities. Equity is capped at 15%. This is where we stand today.
Broadly, only in exceptional situations, we would take any aggressive step on equities from here on.
And on the IFRS, you know, some MTM losses on equity can happen on Q4. It will continue as it is. But on a steady-state basis, yeah, we would ideally, non-equity mix should yield around 6.5%, whereas the rest will be a function of equity. Is the right understanding?
Not exactly. Non-equity has two components. One is a core fixed income, and another one is the liquidity that we maintain to for day-to-day operations. As far as core fixed income is concerned, we are currently operating at 7.71.
Okay. So subsequently, any rate which you can tell us in terms of like the non-equity portfolio?
... I mean, see, linearly, we would not like to give any comment on this because it's a function of opportunity. Say, for example, if, as you are seeing today in market, that there is a lot in the G-Secs, long, long end of the bond curve or long end of the yield curve of G-Sec is extremely attractive. So maybe that I will- if I build up my book there, you would find that there would be some pressure, and then maybe that yield should marginally decline from 7.71. But that would give me an opportunity tomorrow when credit spreads expand, at that time, I would ramp up my credit book. So it's a function of opportunity.
It would not be very linear, but, but as and when opportunities are there, we try to tap those segments so that, 7.71 is sustained. Now, it's also a function of maturing book. You know, maturing book may have a higher yielding assets, so if we are in position to replace those assets with, equally or a higher yielding assets, then it would sustain. Broadly, our endeavor is to maintain it to 7.71 or take it higher, but there may be time gaps and mismatches here and there.
This 7.7 you are saying is we will try to maintain that on the non-equity, or maybe it will go up also?
Depending upon the opportunities, yes, absolutely.
Okay.
Yeah. Yeah.
Okay. Okay, and on the, long-term, mix, any limits we are-
See, on the long-term business, you know, we don't work on any limits. As, as mentioned earlier, we look at all our businesses on, you know, the decisions are made on IFRS basis, and we go behind businesses which make ROE, meet our ROE thresholds, and we believe that long-term business, is delivering, mid-teen ROEs.
Okay, thank you. That will be all.
Thank you. We have the next question from the line of Satvik from Jefferies. Please go ahead.
Thank you for the opportunity, and, congrats on a good set of results. Just a couple of bookkeeping questions from my end. Firstly, on, you know, which share of long-term policy mix in Q3 and what was it in Q2 and what was it last year, if you could help with? And the second one on how much, of advance premiums is the-- are, are we carrying now versus 1H and last year? That'll be, it from my end.
Can we, can we take this separately with you offline?
Sure, sure. No problem. Thank you.
Thank you.
Thank you. We have the next question from the line of Raghvesh from JM Financial. Please go ahead.
Yeah. Hi, good morning, sir. Congrats on a good quarter. Just wanted to understand the one-off quarterly growth, which was released from the outstanding claims. So, how do we look at this number going forward in terms of, is it in that we have paid a lot of the claims which are outstanding from earlier, or is it a function of, say, the tax for the company itself reducing? And going forward, should the numbers, the total IBNR number, as a percentage of the net earned premium, be lower than the 8%-9% where we have traditionally operated?
Yeah. See, outstanding claims is a function of seasonality. You know, Q2, where the claims ratio is higher, you know, the claims get reported, and they stay in the books till the time it is paid. 30th September, there is an outstanding which gets paid in October. So as the loss ratio reduces, there is an impact on the outstanding, but it's also a function of the business volume. You know, as we keep on growing the business and the number of claims, earned premium grows, the number of claims grows, it will keep on increasing. So there is no value to it. You know, it's a function of quarterly, claims reporting that happens and the payment of claims that happen, in a period. But we believe it should be the, in that range of 8.5%-9.5%, 10%.
You know, it should operate in that range on a... So we try and do on a trailing twelve-month basis also, you know, which is the right metric for this.
Okay, sir. Thanks. Just one thing, like, have you seen a meaningful reduction in the tax, which should reduce this number sustainably?
See, see, there are two things. One is, the cashless claims continues to be, continues to be 85% of our book. The customer gets discharged from the hospital. The claim payment to the hospital happens within the, you know, defined time limits on the contracts with the hospital. It can be 15 days, it can be 30 days also. So that happens subsequently, the customer is discharged. So the tax and the claim payment is independent, because of the cashless and the payment to the hospital.
Okay, sir. Got it. Thanks. Thanks a lot.
Thank you. We have the next question from the line of Nidhesh from Investec. Please go ahead.
Thanks for the opportunity. First question, if you can share the break-up of investment book in terms of government securities, central government securities, state government securities, corporate bonds, and equity. That would be useful.
Okay. So it's like this, that as on 31st December, central government securities would be approximately 22% of the book. Central government and state government put together would be approximately... So, so basically, IRDA defines it that minimum central government has to be 20%. So we are keeping minimum 22%, and so as of now, 22 point, marginally higher, 22 point something. On central government and state government put together, IRDA says that should be 30%. It would be somewhere around 33%.... Rest is all corporate bonds and equity, as you know, that is around 14.9%, and REITs in which I have another four point seven percent. So total-- sorry, three point eight percent, so total is 18.5%. This is how the breakup of book is.
Sir, what are the plans to take up the equity share higher? Is there a plan to further increase the share of equity and REITs, InvITs in the book?
REITs and InvITs cannot be because regulation says that we can be up to 33%, sorry, up to 3%, so we are there. Regulator has talked about increasing this up to 6%, but we are waiting for the final regulations on this. So REITs and InvITs as of now, at the upper cap. As far as equity is concerned, we have some internal models where we do risk appetite testing and based on which we ultimately take a call that how much of equity exposures that we would take. So there would be a possibility that, yes, we can increase equities by some quantum. It's a function of the solvency of the company and the capital requirement of the business.
So broadly, these are the factors which determine that how much of risk assets that we can take in the book. This is where we stand as of now, currently capped at 15%.
Sure, sure, sure. Secondly, on the long-term policy, is the, is the share of long-term policy at 51% of GWP today in Q3, or?
It's share of fresh.
Of fresh, it's 51.
Yes.
So the in the IFRS accounting because the deferred acquisition cost acquisition cost is getting deferred but let's say I'm assuming that most of these will be three-year long-term policies so the loss ratios will keep on increasing. So in IFRS does it give a true picture of the profitability of long-term policies or it overstates the profitability in the first year and then second second third year we will see slightly lower profitability on these policies because loss ratios may increase in year two year three?
See, there are two things. One is the deferment happens over the policy period, but the, the operating cost is very high in the first year itself, which is in the P&L in the first year. So on a combined ratio basis, it's still in a, in a similar range. You know, while the commission ratio and, loss ratios like, commission ratios remain stable, loss issue increases. There is no OpEx in the second and third year, you know, which is there only in the first year.
Sure, sure, sure. And the last question is on IFRS. Thanks for the detailed disclosure on IFRS, Ind AS financials. So, sir, two, two, three questions. One is that, how should we look at the investment income? Should we remove the, let's say, mark-to-market gains and then look at the profitability? Or we should look at the reported profitability, that is number one. Second is, what is the difference between insurance service ex- insurance revenue and NEP? I thought that insurance revenue and NEP would be similar, in, in case of IFRS.
So I'll answer the second question first. Insurance revenue is typically the gross earned premium. You know, the NEP is net of reinsurance. In IFRS, if you see net results of reinsurance is a single line, you know, so.
Okay.
The claim reported is gross claims. You know, the RI, the acquisition cost is the commission, paid or deferred over a period of time. The RI ceding, the RI claims, the claims, the RI recovery on claims and the RI commission is as a single line item as net results of reinsurance, basically. So that's the difference between earned, earned premium and insurance revenue. On the investment income, what I would suggest is, while there'll be volatility, you know, we have been talking about, to take zero is not the correct thing. You know, we have INR 3,000 crore of equity portfolio. One can take an average return of 10% and calculate, you know, a stable revenue or, or the profits over a period of time. That's, that's how one can look at it, which is also quite strong.
So, Nilesh-
Sure, understood.
Nilesh, see, we have to understand this, that, equity markets would remain volatile. But what we have realized is over a longer period of time, equity returns are largely related and, or very closely correlated to, nominal GDP growth. So on an average, we can assume that 10%-11% kind of nominal growth would be there, and hence, that would get translated into equity returns as well. But, yeah, quarter-over-quarter, there would be a volatility. That's the problem of IFRS, you know, that, P&L accounts would become volatile. But that does not mean that we should stay away from high-yielding assets, especially when we are long-term investors in the market.
So, so that is what our approach is, that we look at this asset class as, and from 7% moving to, say, 11% kind of, asset class, and that's a perfect fit for long-term investors. So this is what we are trying to do. And, we are reasonably hopeful that, that over a longer period of time, this 15% or 19% of book would deliver reasonably, reasonably good returns, much higher than what the fixed income book would deliver.
Sure, sir. Very useful. Thank you, sir.
Thank you very much. Ladies and gentlemen, due to time constraint, that was the last question for today. I now hand the conference over to Nilesh Kambli for the closing comments.
Look, so we have experienced a strong quarter in terms of top-line growth and an improvement in our operating results, both through reduction of loss ratio and expense ratio. We are focused on, you know, execution and to maintain consistency of performance. Thank you everyone for joining the call.
Thank you very much. On behalf of Star Health and Allied Insurance Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.