We are confident that we will meet the regulatory standard for management costs for this fiscal year: Niva Bupa Health Insurance CFO

Niva Bupa Health Insurance posted an operating loss of around ₹62 crore for the second quarter of this fiscal, against an operating profit of ₹58.47 crore for the same period last fiscal. What were the factors that contributed to this?

The business loss is largely caused by a change in accounting and not by business performance. From October 1, 2024, multi-year policies must be accounted for on a 1/n basis under I-GAAP. While claims and costs remain unchanged, reported profits for the quarter are lower as a result of this transition. On the other hand, under IFRS – where both premium and acquisition costs are amortized over the term of the policy – ​​our underlying performance is clearly visible. On an IFRS basis, our net profit for the second quarter more than doubled to ₹62 crore, compared to ₹24 crore in the same quarter last year. India is moving towards Ind AS, which mirrors IFRS, so this will become the standard from April 1, 2027. We already report under both I-GAAP and IFRS, and the IFRS numbers reflect real business momentum.

The Expenses of Management (EoM) ratio fell from 40 percent in the same period of the previous fiscal year to 36.3 percent in the first half of this fiscal year. When does the company expect to comply with statutory EoM ratio guidelines?

We improved our EoM ratio by 3.7 percentage points between the first half of FY25 and the first half of FY26, and we are confident that we will achieve the regulatory threshold for the full fiscal year. The limit is 35 percent, with an additional allowance for insurtech and insurance awareness costs, bringing the effective limit to approximately 35.8 percent. Our overhead costs have grown by single digits, while premiums have grown by 23 percent in the first half (on a non-1/n basis). Now that premiums are rising faster than costs, economies of scale are emerging. Over the past three years, we have consistently seen an improvement of 150 to 200 basis points annually. The trajectory remains strong and sustainable.

Under IFRS, the total loss ratio in H1FY26 showed an increase of 100 basis points year-on-year to 66 percent. What caused the loss ratio to increase?

The increase is mainly due to the business mix. Retail loss ratios remain stable: 60 percent in the first half of last year versus 60.1 percent this year, a negligible shift of 10 basis points. The increase comes from the Group segment due to changes in the mix, although even there the loss ratio remains at a comfortable level. Importantly, the higher loss ratio was offset by a reduction in expense ratio of more than 200 basis points. As a result, our combined ratio improved from 104 percent in H1 FY25 to 103 percent in the first half of FY26. If this trend continues, as we expect, combined ratios should soften further.

During the earnings conference call, management said the company has fully passed on the impact of the Value Added Tax (ITC) benefit to its distributors. What was the reason behind this move?

The GST impact affects us in two areas: overhead and commissions. We have chosen to absorb the ITC loss on our overhead costs and compensate with other levers, such as a reduction in VAT on the pharmacy and volume growth. We do not pass this part on to distributors. However, we have passed on the GST impact in relation to commissions as we believe this is the fairest way to distribute the impact. Some players may take a different stance based on their commission level, but our approach is anchored in value creation and fairness across the ecosystem. Although commission rates on a single policy may appear lower, the overall revenue opportunities for distributors remain high. With higher volumes and improved persistence, absolute income should more than offset the GST impact. We plan to remain consistent with this strategy going forward.