The New India Assurance Company Limited analyst Q&A

Thank you. We will now begin with the question-and-answer session. The first question is from the line of Mehak from Emkay Global. Please go ahead.

Yes, hi. Thank you for the opportunity. A couple of questions. So first is on the motor business. So I just wanted to understand how are you looking at the motor business for the coming year, FY26? And what would be your strategy in terms of the Motor TP business if the price hike doesn't come in FY'26? So that would be my first question.

So can I answer now or will you put up the second question also?

Yes ma'am, the two questions I will ask later on.

Okay, so for motor business in the coming year, we will continue our strategy for the last year which has produced results for us. We are targeting the OEM segment where OD is concerned. We are trying to see that we write more private car business and change our mix in favor of private car vis -à-vis commercial vehicles. And this will be the strategy going forward also. Because we find that ICRs are better in this segment. And as far as TP is concerned, I mean, it is a mandated business, so we have no control over TP business. We'll have to continue to do TP business. Even, I mean, we simply cannot have a strategy around it. The only thing we can do, to reduce overall impact is to keep aligning our OD strategy in a way that the entire OD plus TP becomes sustainable. But as I have said before also that the TP premium hike is surely the need of the hour and if that is there, then it will become a survival issue for most companies if it is not relooked into.

Ma'am, my question for the Motor TP strategy was more of from the perspective of the mix between the PVs and the CV business.

So in Motor TP, we have better loss ratios even for the CV business. So we will have a different strategy for Motor TP when it comes to it, because we simply, I mean we can target certain segments. W herever the ratios are better for our book, we will continue to target those segments. But we will see that whenever there is a business that approaches us for TP, I mean we simply can't refuse to do that. This is something that is mandated and therefore while we do write whatever comes to us, we will surely look out for certain portfolios where the TP loss ratios have been favorable to us in the past.

Got it, ma'am. And secondly, just wanted to understand what led to the decline in the operating expenses to Rs. 571 crore during Q4. That would be the first one. And secondly, if I was going through the notes to accounts, so can you just explain to what would be the change in the expense allocation policy, which resulted in the impact of around Rs. 650 crores for the quarter?

Actually, the Regulator has given an EOM policy which gives us a cap on expenses of management where the company is always having expenses of management well within the limits given by the Regulator. But mainly, the two reasons for the decre ase in expenses is one -the company's phasing retirement of many people where we are trying to induct new officers, Recruitment process are already on. So, this will give an impact in the reduction in wages also. And the number of offices compared to previ ous years is now very less. So it will reduce the administrative expenses also in terms of running expenses and rent of building etc. So these factors put together has given a reduction in expenses of management.

Got it, sir. And what would be the explanation for the change in the policy?

No, it is not the policy by the company. It is the regulator has given a year ago from 2024. There is no change in company's EOM policy.

Got it, sir. Thank you so much for the detailed explanation.

We are supposed to cap it at 30. It doesn't affect New India. In any way, we are very well within that already.

Got it, ma'am. Thank you so much.

Ma'am, can you just outline what is the debt versus equity mix of the investment book?

Our GM, Mrs. Chandra here will reply.

Our debt portfolio is around 70% to 72% of our portfolio and equity is somewhere between 15% and 16% of equity portfolio. And the rest is money market.

Ma'am, I wanted to understand - will this combined ratio actually come down and how do we plan to take it down because actually it's 16% cost of capital to raise Rs. 43,000 crores we are paying 16% more. So what is the strategy for that?

Yes, combined ratio for the industry average is at around 113. In non-life segement, this is the way this industry works and the investment income and the underwriting results together create the value for the entire operation. Now, combined ratio has definitely come down from 120 to 117 which is a huge reduction for any insurance company of this size to achieve. So, I mean we are putting in all strategies in place to ensure that combined ratio keeps coming down year-on-year and I am sure that with all the efforts that they're putting in terms of claims management, in terms of selection of the written risk, in terms of speed in settlement of claims, all of this will surely result in better combined ratios as we go.

This 113%, you mentioned was of the Indian market, right?

Yes.

And what is the mix for the foreign operations currently?

Foreign operation is around 9% of our entire book.

Okay. Because internationally I think combined ratios are much lower?

Internationally, combined ratios are within 100, they will not be very low, but yes they are. The investment income doesn't exist over there. There is no investment income. So it is, I mean, so therefore the growth also will be very small. They don't become large very fast. There are a lot of restrictions because of the investment climate in those countries.

Yes. That's it from my side. Thanks a lot.

Thank you.

My first question is, you mentioned the combined ratio has improved to 116.78% in FY'25, and the underwriting loss is reducing by 11%. So what are the specific measures that are driving for this improvement? What is the timeline and roadmap for bringing the combined ratio below 100%?

Yes, so Karan, thanks for this question. So the combined ratio, there are a lot of initiatives that we take because we are in the insurance business and we would definitely like to see the combined ratio reaching below 100%. And in this entire initiative, we also need to remember that our company is around 106 years old and we carry a legacy of so many years that comes down the line. Apart from that, there are a lot of initiatives that we have taken in the last 2 -3 years which is basically on risk selection, whether it is group or indiv idual risk, whether it is retail business. W e have seen to it that & we try and see that there is some value for this company at the end of the day when we write the business at a particular price. Now, in line with this philosophy that we need to have profitable growth, we have even shed so many group accounts on Mediclaim where the pricing did not suit us and definitely we would have made more losses, had we continued to write. So, more than nine hundred such accounts we have left in the last year simply to see that we are more profitable on the business that we do. And therefore I think a lot of this risk selection whether it is Mediclaim business, whether it is other than health, I mean home, motor, in all classes, we have tried to see that there is profitability at the end of the day right from our underwriting itself and not waiting for investment to step in. But having said that, we are in the business of uncertainties and therefore since we insure uncertainties there are many events that sometimes surprises which cause losses and therefore the results are not always bang on as expected but definitely with so many initiatives happening, whether it is intervention of automation, introduction of fraud and audit mechanisms, whether it is putting SOPs in place, making our employees more accountable, seeing to it that we audit our TPAs and all external agencies, put in a timeline for every activity. All of these activities across all lines of businesses, they still result in this kind of an impact that we are seeing this year. It's a huge impact 3.1% on combined ratio is huge and we are very happy to have been able to do that. 11% reduction in underwriting losses is significant from this angle and we hope to bring down the combined ratio significantly year -on-year. For a near future, we would target 110 as our combined ratio which is where we would feel it is possible and achievable . Below 100 is definitely a dream for all of us and I hope and pray that your company is able to achieve that in the shortest possible time.

Okay ma'am, thank you. And my another question is, despite slower premium growth , profitability improved, so do you expect any positive underwriting profits on like the coming quarters.

We are making underwriting profit on certain segments, but overall when you see that is when it goes above 100. So, yes we are putting strategies in place across all lines of business and each line of business is being focused as a separate profit center, profit vertical. We are trying to see that we generate profit out of each of them and then let us see, hope that next year brings in that number.

Okay ma'am. And the last question is, what is the effective ROE for like FY'25 after reinsurance and any target for FY'26?

The ROE based on reported number is around 4.46% but if you remove the impact of the provisions that we have made towards the legacy balances it is in excess of 8%.

Okay, sir. Thank you.

Thank you. The next question is from line of Shobhit Sharma from HDFC Securities Limited. Please go ahead.

Thanks for the opportunity. So my first question is on your expenses, employee expenses for the quarter is almost one third of what it has been. So can you help us understand , what has been the trajectory? I understand that you mentioned there has been retirement of employees. So, can you help us understand the headcount reduction which has happened and how should we think about the trajectory going forward? Secondly, coming to the provision which we have created on the reinsurance side. So, can you help us understand what kind of receivables it was on the reinsurance side? Was it something related to claims or it was a commission? Probably, then I will ask my other questions.

First of all, I would request you to look at the expense number on a full year basis and not just a quarter -to-quarter basis; as we mentioned earlier there has been benefits of a lot of retirements which have happened, net additions have been negative and the new employees have come at a much lower cost than the senior people who have retired. So, all those things have contributed to the lesser amount of expenses on the employee front. Apart from that, we also do the annual valuation of the pension liabilities. We do it once in September, once in March. So, whatever is the impact of that which comes, we take that in the fourth quarter. So, this time around, the impact on the fourth quarter was lesser than what it was in the same quarter last year. So, this was the major two factors. So, I would request you to look at it on an year-to-year basis. But whatever reduction which you see over there, that is kind of a tangible number you can work with.

As regards to second question, what was the other provisions made for legacy issues? Then yes, there were a lot of reinsurance transactions. This is a 106 -year-old company with transactions spanning across several years. And there were these many reinsurance provisioning which were done at certain points of time. Two times, system changes that have happened during this period because of which there were lot of these unreconciled balances. So we have used the guidelines for provisioning(board approved guidelines) and these provisions have been made and we will be giving them a thorough review and taking a call on these provisions in near future.

Just on the employee expenses, a small follow up on that. How should we see employee costs going forward? Should we see a rational 10% to 12% increase in that or should we see a similar run rate as this quarter?

Employee costs will be depending, it will be a function of the number of retirements and the number of inductions and also the wage revision that is on the anvil which will play a part in this. So, it's a function of many parameters and we are also going to recruit people because we are having around 4,000 people retiring in the next 3 to 4 years and we need to plan and start inducting people and therefore, that's already on. So, it depends on the net differential between their salaries after taking into account the effect of the wage revision. So, definitely there will be, it will be a different trajectory and we move every quarter we will keep reporting back to you.

My next question is on your health line of business. So you have improved your loss ratio considerably on those lines. So can you help us understand; what is the mix of that, the loss ratio in retail and group business? And can you help us understand the insurance rate, what you are observing on the retail lines of business and how much is the inflation on those lines?

Yes, our GM, Mrs. Sushma Anupam is present here and she will explain the health side of it.

So Shobit, actually in the health line of business, our portfolios as you would have already seen that the group segment is larger as compared to the retail part of the business. Definitely, there has been overall improvement but we find a good improvement in the retail segment, as always. Definitely, the medical inflation which has been there, it has come down slightly , maybe from 14% to 12%. But nevertheless, the incidence rate as in the past meetings also, I had mentioned that the incidence rate , we find is going up and that has not sett led as far as the pre -COVID days. So, that continues to be as it has been in the past also. Actually, to share the exact numbers would be a bit difficult to say in terms of exact percentages, but I can tell you that the improvement in the retail segment has been almost 10 points compared to the previous year's position. As far as the group segment is concerned, I would say that it has improved by about 3 to 4 points compared to the previous year's performance. Government business, definitely, has seen imp rovement. So, overall if you see combined effect, we have seen good improvement and we feel that this will continue because it is a result of multiple factors. We have been increasing our audits. So, last year , as we mentioned that we had hired medical officers. So with the total strength of the medical officers, we could increase our audits that we conduct. Almost 34% audits were conducted last year. This year also , we have a vision to increase it beyond 50%. So, all other measures like we are participating with the GI council initiatives for cashless everywhere and common empanelment. So, that all will also help in bringing down our ICR further. And we are trying that the cashless percentage goes up for us as it is going up for the industry. And of course, last but the most important factor is about as our CMD madam has mentioned about the quality of the risk and the pricing aspect. So, all these factors together have contributed to this improvement and the changes that are coming out. So, I feel that the tempo will continue in the coming times also. Thank you.

Thanks for that. Just a small fol low up on the elaborate response. On the retail side, the loss ratio has improved significantly by 10 percentage points. So was it because of the price hike which we have undertaken or it was primarily attributable to the audits which we have done during this year?

So actually, very rightly you are asking this question. It's a combination of both because we had come up with the price increase after almost six years and then ad follow up, small change in the pricing strategy for the zone wise pricing and all. So, that is one part of it and the other part is the claims control. So, it's a combination of both the things.

And are we planning any price hike going forward?

So, actually last time, we had shared with all of you all that what we have tried is to have age wise pricing as against the previous pattern - which we used to have of slabs (age slabs). So now with that already in place, immediately we, after seeing more some performance levels, then we may look at revising the prices. But for now, immediately it is not on the anvil.

Thanks. Ma'am, my next question is on your property lines of business. Last year, June onwards, we have seen FLEXA rates declining significantly. So can you help us understand how has been the experience up till now or the rates have been holding up? What kind of growth should we expect in the industry from June onwards?

Yes, so from last year, from May, almost May till end of December, there was a watershed in the property market. It was just tanked and I think we then had the industry sort of understood that this is not going to pull on because this property is mainly driven by reinsurance and the reinsurers are never comfortable with this kind of reduction in rates almost next to nothing (it was the rate). So therefore, I think the rates have corrected after that and they held on very well for the last four months, the fifth month rates are holding on and we believe that this will continue into the future also. And once this continues, I think property as a class of business would be a little bit more comfortable.

Another, there was some circular from IRDAI on the cross -border re-insurance arrangement. So, can you help us understand how have we collaborated with the CBRs in terms the arrangement, whether we are with handling the premiums or they have set up their office in the GIFT City?

Yes, so CBRs do form a big part of our programs also. So, most of the CBRs whom we interact with, they have agreed for a premium withheld option and that has been going very smooth. In fact, we did not experience any resistance or any great challenges during this renewal.

And ma'am, last question is on a broader line. How do you see industry growth going forward as we want to control our loss ratio also? So, what do you think would be the major revenues from where we can improve our loss ratios?

Yes, so industry growth is like, it's being heavily driven nowadays by both the Prime Minister, by all the statutory authorities, you can say even the Regulator. Everyone is driving the growth of the industry in terms of penetration. So, obviously if you penetrate well, growth will also be there and that is what we are working on. We have, in line with the Regulator's vision, have also announced this as the year of the SME for New India and we are working hard on ensuring that we enter either to in the remote corners of the country to ensure that we bring them also into financial inclusion. We have designed several products on the retail space to cover up for this segment of population that is uninsured and we believe that this diversification that we have planned in terms of simple products being sold into the hinterlands, customized to the needs of the population, this is what is going to help us diversify into the retail lines in a big way and this will help us surely bring down the loss ratio of the entire book as a whole.

Okay, ma'am. Thanks for the elaborative response. All the best.

Thank you.

Thank you. We will take the next question from the line of Aditya Chopra, an Individual Investor. Please go ahead.

My questions are somewhat long, so keep patience in hearing it.

Thank you so much.

Okay. Could you please elaborate on how Q4 has shaped up in terms of overall growth especially in the property insurance segment and what growth rate you have seen in this quarter?

For fire, we have had a reduction of 23% in fire for Q4. I mean, that is because of a reduction in premium from Rs. 6,744 crore for '23-'24, it has come down to Rs. 6,225 in '24-'25. Entirely for the last quarter, the reduction is around 7.7% and for the year as a whole it is around 23% reduction.

No, this is a one-time provisioning because it is actually we have been working hard to get back our global credit rating and some of the aspects that have come in the way of getting back our A minus (excellent) rating from AM Best. One of the major issues has been this unreconciled reinsurance balances which are legacy issues and other audit qualifications. So, this has been a major part of it. So, in an attempt to see that we cover up a lot of this ground and we are able to present a cleaner book of accounts and also then aspire for a well -deserved A- excellent rating from AM Best, we have seen to it that we provision for them and we will, in the next couple of months, see how to treat these provisions and with that I think, we will be done with it. I don't think this is going to be ever repeated, furthermore. There are a lot of systemic improvements that we have put around this. We have set up a certain task force, have set up certain cells to monitor those areas because of process defaults, because of which these unreconciled balances were there. So now, as having plugged the gaps . I think this kind of scenario may not happen in the future. And we would be able to convincingly put this across even to our credit rating agencies.

Okay. Ma'am, my last question is, what is the contribution of investment income versus underwriting income to total profitability in Q4, especially considering some recoveries in the equity market? What is contribution of investment income versus underwriting income?

For the last quarter, FY'24-'25 in Q4, the underwriting results is loss of Rs. 1,143 crores and the interest and dividend income is Rs. 1,415 crores. I am sa ying this is the breakup of Rs. 2339 crore breakup. Profit before tax is 526 crore in Q4 2025.

For the last quarter of FY 24-25, the underwriting results is Loss of Rs.1143 crore. The interest and dividend income is Rs.1415 crore and c apital gains is Rs.924 crore. This is the break -up of Rs.2339 crore. The investment income which is Rs.2339 crore, underwriting loss is Rs.1143 crore and deducting other expenses and tax resulted in PAT of Rs.347 crore in 4th quarter.

Thank you so much. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Thank you and over to you.

I would like to take this opportunity to thank all ou r investors, our business partners, our employees, and everyone connected to New India Assurance Company, one way or the other, mainly our customers who are constantly reposing trust in this institution which has stood strong for over 106 years and we will be there strong leading from the front across many more years to come and we would put every effort that is there to see that we keep this trailblazer on. The entire management team and the workforce is working to ensure that we deliver on the promises that we have given to our customers at all times. Should you have any queries please feel free to email us and we shall be swift in responding back to you. Thank you so much for the time and attention that you have given to New India Assurance Company and thank you for being with us on this journey.

Thank you Members of the Management, ladies and gentlemen on behalf of The New India Assurance Company Limited that concludes this conference. We thank you for joining us and you may now disconnect your lines. Thank you.