NIVABUPANSEFebruary 10, 2025

Niva Bupa Health Insurance Company Limited

7,757words
84turns
13analyst exchanges
7executives
Management on call
Krishnan Ramachandran
MANAGING
Vishwanath Mahendra
CHIEF FINANCIAL
Ankur Kharbanda
CHIEF DISTRIBUTION
Bhabatosh Mishra
DIRECTOR-CLAIMS,
Dhiresh Rustogi
CHIEF TECHNOLOGY
Vikas Jain
CHIEF INVESTMENT OFFICER – NIVA BUPA HEALTH INSURANCE COMPANY LIMITED
Ansuman Deb
ICICI SECURITIES
Key numbers — 40 extracted
INR5,011 crore
GWP on a like-to-like basis without making this change for the nine months gone by, we closed at INR5,011 crores, which is a growth rate of 30.2% over last year. The same thing factoring in for the accountin
30.2%
this change for the nine months gone by, we closed at INR5,011 crores, which is a growth rate of 30.2% over last year. The same thing factoring in for the accounting change for nine months was INR4,68
INR4,683 crore
f 30.2% over last year. The same thing factoring in for the accounting change for nine months was INR4,683 crores, a growth rate of 21.7%. Our profit after tax on an IGAAP basis for the nine months that went by
21.7%
hing factoring in for the accounting change for nine months was INR4,683 crores, a growth rate of 21.7%. Our profit after tax on an IGAAP basis for the nine months that went by was INR7.4 crores. But i
INR7.4 crore
growth rate of 21.7%. Our profit after tax on an IGAAP basis for the nine months that went by was INR7.4 crores. But importantly, and we have consistently reiterated that the right set of accounts that reflec
RS,
ed that the right set of accounts that reflect the underlying economic value of our business is IFRS, transition of which for the industry is on the anvil. So on an IFRS basis for the nine months go
INR119.5 crore
dustry is on the anvil. So on an IFRS basis for the nine months gone by, our profit after tax was INR119.5 crores. In terms of the various elements of our strategy, our product mix is largely unchanged from the
67%
our strategy, our product mix is largely unchanged from the nine months of the prior year, about 67% retail and the balance being group, personal accident, and travel. There has been a marginal incr
9.6%
in our book. We continue to improve our market share. Our market share on retail health grew to 9.6% compared to 9% of the preceding nine months last year. During the quarter, we launched a produc
9%
continue to improve our market share. Our market share on retail health grew to 9.6% compared to 9% of the preceding nine months last year. During the quarter, we launched a product, a tiered netwo
7.2 million
wn income segment. We continue to drive our 360 health and wellness proposition. We are now up to 7.2 million downloads of our customer app with a monthly active user base that has increased to 4.4 lakhs. An
4.4 lakh
o 7.2 million downloads of our customer app with a monthly active user base that has increased to 4.4 lakhs. And as I mentioned last time, we continue to see healthy volumes of health journeys that our cu
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Guidance — 16 items
Supratim Datta
qa
“I just wanted to know what is the pricing differential here, how much are the premiums lower and what are additional facilities that you plan to give?”
Vishwanath Mahendra
qa
“For this year as well as next year, the regulator has asked us to conform to the glide path that has been approved by the Board, which means that the expense of management definition will be on a full basis.”
Vishwanath Mahendra
qa
“So with that clarification, we feel comfortable that we are well on track to meet the glide path that has been approved by our Board and has been sent to the regulator.”
Prayesh Jain
qa
“But broadly, as I mentioned, in terms of the fundamental economics of the business, if I looked at IFRS or the old accounting, we would be on track to deliver to our five- year plan.”
Prayesh Jain
qa
“But could you help us, whether it will be driven by scale advantage?”
Vishwanath Mahendra
qa
“Same time next year, our renewal book would be sizable.”
Prayesh Jain
qa
“And the last question from my side would be, the senior citizens bit, I don't know whether you alluded to this when you were opening the comments, but the restriction of 10% price hike, how do you think this will be kind of, I understand you have a strategy of increasing the prices on an annual basis either way.”
Nischint Chawathe
qa
“When do we really start kind of -- do we say that next year's negotiations will be done jointly with healthcare companies?”
Vishwanath Mahendra
qa
“Now, we will only earn 50% of the first year GWP or NWP after reinsurance and the 50% will be earned over next year.”
Vishwanath Mahendra
qa
“And the next year GWP that will flow in from here, that also will earn 50% and 50% will go to next to next year.”
Risks & concerns — 4 flagged
I wanted to understand from your distribution mix, I can see that maybe there has been a slight decline in the Banca channel mix, etc., but that's very marginal between 1H and nine months.
— Shreya Shivani
We heard a lot of concern from that channel, though it was more on the life insurance side.
— Shreya Shivani
And is there any concern or change in processes that you are noting in that channel?
— Shreya Shivani
Is there a decline in ticket size in these new channels?
— Rachna
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Q&A — 13 exchanges
Q
Thanks for the opportunity. On the combined ratio and the combined ratio increase that we have seen, could you break down whether the loss ratio now, have you moved that also to a 1 by 365 or does that continue to be on 1 by 50? If that continues and only the GWP has moved to a 1 by N, could you give us what would be the corresponding claims ratio now if it moves to 1 by 365? That's the first question that I wanted to understand. The second bit to it was now that your expense ratio has increased because of this 1 by N impact, how do you get down to that regulatory threshold of 36%? Is there so
Vishwanath Mahendra
Supratim, I'll take the first question. We are still on 50% method of accounting as far as UPR is concerned. The numbers which are given here is where GWP is proportionally reduced basis 1 by N. Whatever GWP is coming, we calculate NWP and 50% of that we provide as UPR. So these numbers are on that basis. We have given both the loss ratio by both the methods. For the first 9 months, 61.1% is basis old accounting without 1 by N and 63.4% is 6 months old accounting and 3 months new accounting. Now, coming to 1 by 365… Vishwanath, just on this, can you give us the corresponding 1 by 365 method? W
Q
A good set of numbers, loss ratio and combined ratio improving on a Y-o-Y basis. That too significant improvement. But could you chart out the path for us in terms of how should we look at the combined ratio from here on, on a reported basis as to how the combined ratio and loss ratio could trend from here on? Krishnan Ramachandran: The thing is, if you were to ask me on a like-to-like basis, our combined ratio trajectory on a steady state, we would have answered 95 -- in the ballpark of 95%. But because of this transition, we're still going through the planning process at this point. And I'd
Prayesh Jain
The second question was, if you could give us a loss ratio on 1-by-N basis, including without a 1-by-N basis for nine months? Yes. So with 1-by-N basis, it is 63.4%. Without 1-by-N basis, it is 61.1%. For nine months? For nine months, yes. And the third question is on the expense of management. You mentioned that there are some leeways given by the regulators. But could you help us, whether it will be driven by scale advantage? Where in which line items you would see the most significant improvement in terms of expense rate improvement from here on? I think that, you know, I am sure that you w
Q
Yes, thanks for the opportunity; good performance. I just had a couple of questions. First is relating to this FDI increase that was talked about on Saturday. How does this benefit or change course for Bupa as a support model? So that's the first question. And secondly, relating to opex and operating leverage, under IFRS basis, how do you think operating cost to premiums stabilizes, let's say, FY '28 or so, '27-'28, if you give a glide path around that, that would be useful. So absolute opex would be fine, but just directionally, how do you think it would be? So those are two questions. Krishn
Vishwanath Mahendra
Yes, so in terms of IFRS, if we have a steady-state combined ratio of, let's say, 97%, 98%, we can make ROE in high teens, and we are very confident that on a steady-state basis, we'll be able to achieve this. Now, expense and loss ratio, there may be some -- because of mix change, there may be some play here. But broadly, expense would be around 32% to 33% and balance is loss ratio. And when you say steady-state, that would be a FY '26 or so or it takes longer? Krishnan Ramachandran: Longer than that.
Q
So I have two or three questions. So, first is, while the company is following 50-50 accounting method, so can you give any color on the impact on the NEP on account of the change in the 1- by-N regulation? That is one. Second, I would like to ask, can you give the proportion of the long-term policies which you have? And thirdly, have you changed any kind of product structures, particularly due to the 1-by-N regulation change?
Vishwanath Mahendra
Yes. So, your first question was on NEP. So, on GWP, the impact is around INR327 crores, which we have disclosed. We have not disclosed anywhere the financials in terms of old accounting, but combined ratio is something we have disclosed, which I can tell you is 100.9%. And the proportion of multi-year policies is, let's say, in early 20s. That's the rate we are experiencing. Doc, you want to talk about? Yes. In terms of long-term products specifically, there is no significant change that is there. That is why the numbers appear stable, as you could see. So, there is no significant change. How
Q
This is actually on the point that we were just discussing earlier about the regulator kind of probably capping the inflation on premium. But I think at the same time, the regulator is somewhere nudging the industry to get together and have a common platform for negotiation with hospitals. Do you really see that happening, or is it like very early days right now? Krishnan Ramachandran: I think, Nischint, you captured perhaps what could be the most impactful line in that entire circle that they recently released, that they have said that the insurance industry shall endeavour to put in place a
Nischint Chawathe
But do you see that sort of getting rolled out through IRDA or is it still early days? When do we really start kind of -- do we say that next year's negotiations will be done jointly with healthcare companies? Krishnan Ramachandran: I can't comment on exact timing, Nischint, but what I can say is that there's a lot of impetus and urgency to actioning this. I mean, a lot of impetus and urgency. And just one small one is, if you could just remind us on the reinsurance that you do on long- term policies, to what extent are we sort of ceding these policies and how are we treating the inward commis
Q
This is the first time I'm interacting with you guys. Maybe my knowledge about the company is a little bit more basic, so this question is a little bit more basic. I wanted to understand this one thing. We do 50-50 accounting. And so, the 1-by-N, how is that changing the NEP in 50-50 accounting? So, even the long-term policies, how do we sort of account for it? Because my understanding was at least for 1 by 365 accounting, NEP does not change irrespective of how the 1-by-N for the long-term policies is taken. So, why does NEP change in this accounting?
Vishwanath Mahendra
Yes, sure. So, in terms of treatment of long-term policies, so earlier it was considered whole amount as GWP and let's say we were earning 50% of that and paying whole commission upfront. Now what happens, this premium gets spread over the number of years. Let's say if it's two-year policy, so premium will get spread over two years. Now, we will only earn 50% of the first year GWP or NWP after reinsurance and the 50% will be earned over next year. And the next year GWP that will flow in from here, that also will earn 50% and 50% will go to next to next year. So, there's a change. So, what's ha
Q
I'm not on hands-free. Is this better?
Vishwanath Mahendra
No, it's not better.
Q
I hope I'm audible. I wanted to understand from your distribution mix, I can see that maybe there has been a slight decline in the Banca channel mix, etc., but that's very marginal between 1H and nine months. But I wanted to understand how has the dynamics in the Banca channel been for you? We heard a lot of concern from that channel, though it was more on the life insurance side. But what has been your experience in this channel with your different bank partners? And is there any concern or change in processes that you are noting in that channel? Thank you.
Ankur Kharbanda
Yes, hi. So on the Banca side, as you said, the difference is marginal in terms of the channel mix. And that is also to do with the 1-by-N methodology. Otherwise, if you look at without 1- by-N, it remains the same. There's no difference so to say. In terms of bancassurance model working, the bank's acceptance, their preference, priority on selling insurance, I think the only change which has happened is now it's getting more prudent day by day. The selling processes, they're refining the selling processes, which helps the customer, which helps us and the service as well. But from perspective
Q
My question was on the technology front. So the last part of the presentation speaks a lot about the superior tech stack data analytics. So do you see this translating into a better combined ratio when compared to your peers, either in terms of superior underwriting and the loss ratio or more efficient expense ratio?
Vishwanath Mahendra
Yes, definitely. So if you see we have automated every leg of customer journey, right from onboarding to customer sourcing, automated underwriting, claims management with zero human touch and renewal process. And these metrics have been moving upwards in the last two, three years. And this is already yielding us results in terms of flattening the cost curve. So this is helping us and going to help us going forward. Krishnan Ramachandran: So in the company, we run -- enabled through technology and analytics, we run an initiative that we call Zero Human Touch. So whether you look at customer sou
Q
I wanted to understand the accounting of the long-term products better. I'm not sure if this was discussed earlier in the call. I joined late, so apologies for the repetition.
Vishwanath Mahendra
Yes, so the accounting effective 1st October is we are only considering in GWP the proportional premium. For example, if it's two-year policy, INR100 rupees for two year policies. We consider INR50 GWP this year and INR50 next year. And commission in most of the cases is also on 1 by N basis. There may be some exception and that's something which is under discussion. And similarly, the reinsurance is also on that proportion only in this example, INR50. So we get NWP and the rest of the accounting is similar in terms of calculating earned premium, etc. Krishnan Ramachandran: So the one thing I
Q
So I just wanted to know, where does the large part of our growth come from? Is it from the renewal premiums or new business? And if it is from the new business, what proportion of new business growth is expected to come from porting inwards? So that's my first question. Second question is, how do the ticket sizes for retail health policies in newer channels like digital or bancassurance compare to the agency-driven products previously? Is there a decline in ticket size in these new channels? And third question would be, what proportion of your retail portfolio is expected to be repriced in th
Ankur Kharbanda
Sorry, I've not understood your first question fully. But on your second question on channel-by- channel ticket size, digital and agency are largely similar. It's not very different. Bancassurance is a little lower, 10% to 15% lower. But digital and agency are in the same range of ticket size. Can you repeat your first question so that I can answer this? So where does the large part of your growth come from? Is it from the renewal or is it from the new business? And what proportion of new business growth is expected to come from porting? So if you look at our growth rates, largely you would se
Q
I have two follow-ups. So firstly, on the loss ratio, you gave the nine-month FY'25 IFRS numbers. Could you give us the nine-month FY'24 IFRS numbers as well? That would be very helpful. And secondly, there was a question on hospital tariffs, which was previously asked? And you indicated that there is significant impetus on getting everybody on board and bargaining with hospitals. But do you think, till date, the bargaining or hard bargaining by insurance companies has been somewhat counterproductive? Because what has happened is the smaller hospitals have folded up or been acquired by larger
Vishwanath Mahendra
Sure. So Supratim, on your first question, the loss ratio, which we mentioned for this year, 64.2. The last year, for nine months, was similar, 20-30 basis point here and there. Otherwise, more or less similar. On the second point, two parts. One is there is, as Krishnan sir mentioned, there is a lot more focus, urgency with regards to negotiating standardized tariff across provider network in India, largely driven by the recent directive of the regulator. And the regulator has been nudging the industry to do so. There has been some progress made, but we do see the pace of progress to move up
Q
So, I don't know if I missed a little bit of the call. So, just on yours, I wanted to get a sense of the split, your GWP split. So, of this 30.8%, which is a Group, how much of it is the employer employee, and how much is credit linked? And could you also help me understand where is the credit linked coming from? And we have a direct business of brokers of about, sorry, brokers of about 29%. So, which type of business do we get mainly from brokers? And what is this others channel, which is also quite big at 20%? Oh, sorry, that's a small part. Others is small, less than 1%. But yes, the broker
Madhukar Ladha
Two-third is asset linked, okay. And where do you get most of this 20% from? Krishnan Ramachandran: It's across banks, non-banks. So, it's a fairly diversified mix of partners that we get. But mainly would be banks and corporate agents? Krishnan Ramachandran: Banks as well as non-banks, both. Non-banks would be in corporate agents, right? Krishnan Ramachandran: So, it could be NBFCs - NBFCs, Yes. They could be brokers or corporate agents, depends. Okay. And then of that 29%, which is brokers, a large part of it would be, what part of that would be corporate? And what part of that would be reta
Speaking time
Vishwanath Mahendra
19
Moderator
16
Madhukar Ladha
10
Prayesh Jain
6
Supratim Datta
5
Ankur Kharbanda
5
Pranav Gupta
4
Bhabatosh Mishra
3
Nischint Chawathe
3
Shreya Shivani
3
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Opening remarks
Ansuman Deb
Thanks, Rayo. Good evening, ladies and gentlemen. On behalf of ICICI Securities, we welcome you all to the Q3 and nine-month FY '25 results conference call of Niva Bupa Health Insurance Company Limited. We have with us the senior management of the company represented by Mr. Krishnan Ramachandran, MD and CEO; Mr. Vishwanath Mahendra, CFO; Mr. Ankur Kharbanda, Chief Distribution Officer; Mr. Bhabatosh Mishra, Director, Claims Underwriting and Product; Mr. Dhiresh Rustogi, Chief Technology Officer; and Mr. Vikas Jain, Chief Investment Officer. I now hand over the call to Mr. Krishnan for his opening remarks, post which we will open the floor for Q&A. Over to you, sir. Krishnan Ramachandran: Thank you, Ansuman, and a very, very warm welcome to all of you who are participating in this call, and thank you for making time for us this evening. To refresh memories, I thought it would be useful to summarize the six pillars of our strategy as Niva Bupa. Pillar one is building a granular, growth-o
Vishwanath Mahendra
Thank you, sir. Good evening, everyone. So like Mr. Krishnan talked about this, without 1 by- N impact, the GWP registered a growth of 30% YTD on a like-to-like basis. Net earned premium also grew by the same percentage, 30% to INR3,367 crores in the first nine months compared to the last financial year. IFRS PAT has more than tripled from INR18 crores to INR60 crores for the quarter 3. And the IGAAP profit for standalone quarter three has also improved from INR4.6 crores last year to INR13.2 crores this year. The combined ratio for nine months FY '25 is 100.9% without 1-by-N impact, with an improvement of 230 basis points from nine months FY '24 on like-to-like basis. COR for current year on 1-by-N basis is 105%. Expense of management ratio for nine months is 39%, with an improvement of 50 basis points over the same period last year. Annualized yield in current financial year is 7.4%, with AUM of INR7,311 crores. Solvency ratio is at a healthy level of 3.03 as on 31 December 2024, aga
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