Thank you. We will now begin with the question-and-answer session. The first question comes from the line of Shreya Shivani from Nomura Holdings. Please go ahead.

Yes, thank you for the opportunity. I have two questions. First is on the loss ratio trajectory of this quarter. It's been quite strong on Y-o-Y basis, which is more comparable. What has been the trend that you've seen in month o f July? The movement is so fast that what is your outlook on the year to go by? That's my first question.

My second question is on the expense ratio bit. I understand that because of the GST portion, your expense ratios were supposed to be slightly elevate d in 1Q. However, a big chunk of it is coming from the net reinsurance expense line item. So if you can help us understand what's happening over there, because the other operating expenses have also picked up, but the net reinsurance expense pickup is the sharpest. So if you can explain that. Thank you.

Sure, Shreya. So in terms of loss ratio, the July trend is in line with our expectation. Of course, the infection season will start in some time and we'll be able to update you in next quarterly call how the infection is behaving. But otherwise, we have not seen any unusual tre nd so far in the month of July. Q1 loss ratio improvement Y -o-Y basis is driven by two factors , one of course, retail, the new business as we already mentioned las t time. So that's one positive trend we are experiencing. Second, under group, since we have taken decision not to write any large group account where it is not as per our underwriting philosophy, and focus more on whether it's, affinity group or SMEs, so that is the reason for group loss ratio improvement. In terms of expense ratio, the RI has; basically there is nothing structurally different this quarter versus next quarter. RI has a lot of things mixed up. For example, let's say, in some cases, the profit commission, which is mainly on obligatory or voluntary quota share, is booked in one quarter, in some time it is in next quarter. But otherwise, structurally there is nothing, which is unusual here. So as the year progress, you will find it is more or less converging with historical trend.

Right. And from just a follow -up on the expense ratio portion, so from third quarter onwards, we should see these ratios stabilizing, right, as the entire GST portion goes into base? That understanding is correct, right?

Yes. Actually, in case of GST, as far as commission is concerned, which is the main line item that we have already passed on to our distributors. Any loss on ITC, Input Tax Credit for expenses, you're right, it will normalize from Q3. After Q3, the results will be comparable Y-o- Y basis. But really, there is no sharp increase. In fact, if you see expense of management, it has improved from 38% to 35.2%.

Correct. Correct. Right. All right. That answers. Thank you so much and all the best.

Thank you.

Thank you. The next question comes from the line of Harsh Shah from HSBC Global Asset Management. Please go ahead.

Yes, thank you for the opportunity. Just a couple of questions from my end is one, I heard your opening commentary on growth, and again, I understand that quarter-on-quarter is not the right way to look at it, but from a trend perspective, is there any change that you have done to your internal strategy or philosophy which can lead to a sustained higher than your past trend of growth?

And when I say past trend, I'm comparing or I'm taking the difference between what Niva Bupa grows versus the industry growth. So is there any gap that you're tryi ng to build versus the industry growth that we should be aware about?

No, I think structurally or strategically, and, Ankur can add to what I'm saying, in terms of the levers that we have been using to drive growth, they continue to be the diversified multi-channel mix. And last time I mentioned, we're doubling down quite seriously on what we refer to as the Bharat initiative, which is to penetrate Tier 2, Tier 3 towns and beyond. And we continue to make the same run rate of investme nts in driving growth as we have now for six years. So this year as well, in terms of distribution expansion, we continue to have the same level of investment, although incrementally it's much smaller given the size of the company today. So that's, that's broadly what we are driving, and, we do expect to sustain 8 to 10 percentage points faster than market growth on retail health specifically. And some of the other engines around product, product innovation, correct products for segments, all of those conti nue apace. Anything you want to add?

Just to add on few more, we have continuously been adding our advisor network across. This year also we are continuously adding in the similar pace of what we did last year. We've added new locations as well in our, as Mr. Krishnan also spoke about, the smaller markets is where we are expanding, and locations also we are expanding there. One is new products. We've launched in the month of August last year, we launched a product called Reassure 3.0. That has got a very good success in the market because that is very uniquely placed there. And last is, while we do on all of this on expansion, we are also working on AI -led capabilities to increase productivity of our advisors and of our employees. These are the few things which we are doing strategically to improve our growth and consistently grow better than the market.

Understood. And from a retail and group health mix, anything to read again from an annual trend perspective, means is there a range where the guidance is to remain between 70% to 30% or you think that retail can inch up further as you're planning to grow almost 10% to 15% higher than the industry?

Our internal one would be similar in terms of what we said earlier as well. Large part of it, which is around 70% would be retail, and around 30% would be group.

Yes, and just to reiterate, we are not at all averse to group business. I think the only point is the threshold around economics, combined ratio, we have not been able to stay within that threshold for the last year as well as this quarter. But if we see the pricing environment improve where there are opportunities, we will certainly capitalize on that. And again, to remind all of you, wit hin that, we are certainly doubling down on the SME opportunity, and that is actually growing 50% plus. But of course, it is not been able to fully

compensate for some of the renewals that we have lost on the B2B side largely on account of pricing.

Sure. Point well taken. Just to press on this, from group perspective on your renewal business, I mean, from pricing perspective, what is hitting you comparatively harder? When I say you, it also may be applicable to other sides. Is it the expense rat io part of it or the claims ratio part of it?

The market is operating at claims minus in terms of pricing, annualized claims forecasted minus. Obviously, that makes no economic sense.

Yes, that's true. And last question from me is, once everything normalizes as earlier participant also alluded, how does your CISR look like from Q3 onwards on a normalized basis?

Sorry, you said normalized as in?

As CISR is, mean there's no normalization required on that front, no?

Yes, because it's all, amortized. There is earning, which is on 1/365, there is amortization and DAC. So it is already normalized, so...

Okay. Got it.

And on that, we stick to our FY29 guidance, which is what we have been indicating.

Sure, sure. No problem. That is it from my end. Thank you and all the best.

Thank you.

Thank you. The next question comes from the line of Supratim Datta from Jefferies Investment. Please go ahead.

Hi, thanks for the opportunity. My first question is on the growth side of things. If you could give us some color within the retail health piece, what would be your, you know, fresh business, and what would be the renewal business, and how both of them are growing? That would be helpful. And wanted to understand that, obviously there has been GST tailwinds, you have been making investments in expanding, the channels, but as you go into, the second half of the year, the base becomes, fairly elevated. So on that elevated base how are you thinking about growth? What would be the key drivers there, and yes, if you could give some color around that, that would be helpful. Secondly, when I lo ok at your presentation, the contribution from PPN cities, you know, that has been going up; the network has obviously been expanding. Wanted to understand how does this impact the loss ratio, what kind of benefit are you seeing on the retail loss ratio because of this? If you could give us some color there, that also would be very helpful. Thank you.

Sure. Let me answer the first two, and then I will ask Dr. Bhabatosh to answer the third one, which is on PPN. Our overall growth for this quarter on retail business is 46.5%, largely driven, it is a mix of both renewal and fresh. The fresh grew by a 41% overall. So both our fresh and renewal are growing. In terms of future, do we see growth coming in? July is also looking very good for us. I can't comment a lot in terms of overall forecasting this, but what I can tell you is that we want to grow better than the market as we have been doing, significantly better than the market, 8% to 10% over the market is what we want to grow. I will ask Dr. Bhabatosh to talk about it.

Thank you. Supratim, the preferred provider network, just to reiterate, allows customer to have convenience and savings through free ambulance, discounted services, assistance through a SPOC layer, etcetera. How does it help in claim ratio is, these are, let's say, secondary / secondary care plus hospitals, and we do notice that lot of people land up in quaternary , tertiary care hospitals for what is classified or what could be easily be called as a very second ary care treatment like a cholecystectomy, appendix removal, small surgeries, dengue, malaria, etcetera. The idea is by deploying convenience and exemplary experience and saving to customers, if some of these people can be transferred or choose a PPN netwo rk instead of a tertiary care or quaternary care setup, that results in a nearly 15% to 20% point lesser average claim size than the same treatment available in a quaternary or a tertiary setup. That's how it reduces. Secondly, we have better working relationship with SOPs with PPN hospitals, which ensures appropriate care is delivered. And lot of times you would come across that unnecessary abuse of ICU admission, not discharging patient in time, keeping them for longer, these abuses are avoided, and both of these go towards reduction of claim cost, resulting in better claim ratios. Does that answer your question?

I will just add one thing. In terms of translating this into claims cost savings, the answer is yes. Does it necessarily mean improving claims ratios? The answer is no, because we may choose, it just helps us be more price competitive because of all of this that we deploy. We may still maintain or allow the claims ratio to deteriorate, and pass back more of this to the customer. So just want to make sure that we, you may not necessarily see these, and we have had this discussion in the past as well. Claims ratios is also a choice driven by the repricing and the extent of repricing that we need to do. This gives us flexibility, on that aspect.

Absolutely. I completely understand that point. Just one, clarification , could you give us the differential in loss ratio between, a tertiary or, a PPN, what would be the differential in claim cost or loss ratio, however you are quantifying that? That is one. And lastly, on the fresh GWP, thanks for giving us the growth, what proportion of your retail GWP would be fresh, if you could, let me know that, that would be very helpful as well.

Let me take the first question first. Loss ratio difference cannot be because it is computed on the premium and earning on the premium between a tertiary care setup and, secondary care setup.

The average claim size differential or like-to-like treatment between a tertiary/quaternary setup vis-a-vis a secondary care setup varies anything between 15 to 30 percentage point difference, depending on which procedure or which treatment we are talking about.

And on your question on the retail versus, sorry, fresh versus renewal, 35% around that number, 35% of our business is fresh in retail and 65% is renewal in retail, around plus -minus 1% here and there.

Got it. Thank you.

Thank you. The next question comes from the line of Prayesh Jain from Motilal Oswal Financial Services Limited. Please go ahead.

Yes, hi. Good evening, everyone. Just a few questions. Firstly, if I look at your claims ratio that has improved by more than 300 basis points, and obviously we had m ultiple levers here with respect to fresh growth being stronger, pricing actions being taken. So how have the loss ratios played out between the fresh book and the older book? You've just mentioned that the ratio is 35 /65 in terms of your fresh and renewal mix in terms of premium. But in terms of claims, how would that have panned out? I am trying to understand the trajectory on the back book loss ratios?

Yes. So, Prayesh, generally, as we mentioned, the renewal loss ratio in retail is around 75%. So that's broadly is a renewal book loss ratio, back book loss ratio. And you are right, all those things like pricing action, PPN, all those have contributed to reduction in loss ratio and mix also, mix between retail and group and other things, yes.

Got it. And second, I think this is an extension to an earlier asked question, I think Harsh had asked this question about normalized CISR. Probably, what he meant and even I want to understand this was, now that, second half will have a GST base effect where your growth will slow down and probably fresh growth will look lower, loss ratios will possibly trend higher because of the mix itself, the mix itself changing towards renewal versus fresh. So what is a, in a stable scenario, or t he unwind out of the net earned premium coming out of the long -term book, will help you offset that impact? How should we think about it from a second half onwards standpoint where you will not have a -- the advantage of GST tailwind kind of flowing in?

Actually, this is based on earnings, and earnings is slower than GWP. So we don't think that that will materially change between H1 and H2, the loss ratio. So it's not that they will deteriorate. And even if there is some impact, that wi ll be more than offset by reduction in expenses. So in that sense, like-to-like basis, we really don't see any reason for this to be deteriorated. Of course, if there is something like infection, which is abnormal, then it's a different matter. But otherwise, inherently there is no reason because it is all amortized, both premium and claims, actually.

Right. Like you mentioned that July has been very strong in terms of has maintained the momentum in terms of premium, how has been the trajectory on the loss ratio in this month?

Okay. But in terms of any adversities being seen, because there are many areas where we've seen floods and heavy rains, any adversities so far we've seen?

No, no. See, some upside anyways is built in plan and in previous years, so other than that, nothing, Prayesh.

But as Vishwanath said, Prayesh, we'll have to just see through the monsoon, but otherwise, at least July is quite range-bound with respect to our planning expectation.

Okay. Okay. And last bit on the investment book any change in plans to move towards equity? And also one more point was on the debt raise of INR500 crore s, I think that you have kind of approval for, why do we need that?

So I'll just first cover debt. So, Prayesh, we have INR250 crore s NCD for which call option is due, so it was raised 5 years back when we had rating of A at that point in time at 10.7 coupon. So that's one, and we have some growth plans. So we are currently evaluating all the options, and as I was mentioning, our issuer rating by ICRA currently is AAA, and we'll go for instrument rating soon. So given that and our growth plans, we have this enabling resolution, and we'll see when we need to raise how much.

Yes, on the investment Prayesh, there is no major change in our strategy as from what we stated earlier. We continue to be conservative, at the same time, we are mindful of the yield that we need to churn out of our investment book. One thing I would like to point out is we are sort of investing significantly in the AIF segment, which yields us anywhere between 12% to 15%. We are at about 4% of our AUM from a committed capital on the AIF, maximum permitted by regulator is 5%, and we continue to look at relevant opportunities in that space and we would continue to sort of inch closer to the regulatory limit there. Plus also what we've done is we've increased our exposure and allocation to Nifty ETFs as the markets have been very stable now, and that is at around 3.5% of our investment book. There is no discussion on investment in direct equity at this stage, but we may take a call depending on the discussion with the board at an appropriate time on that.

And sorry, one more last bit. The AIF that you mentioned, are credit AIFs and would be restricted to performing credit only, or would it expand to special situations and others also where the yields are even higher?

So they are largely performing credit AIFs, Prayesh, but if there are good special situation AIFs which are available from pedigreed institutions with significant AUM and experience, we are open to investment in those as well, but large part of them are very safe and sound performing credit.

Got that. Thank you so much and wish you all the best.

Thank you. The next question comes from the line of Hitaindra Pradhan from Maximal Capital. Please go ahead.

Yes, hi. So am I audible?

Yes.

Yes, hi. So I'm referring to slide 28, the Ind AS disclosure. So, sir, if I look at the insurance revenue, so that is grown by 28% versus the GWP growth of 23 and the GWP one by N basis is bit higher than that. So can you explain the divergence here? I mean, how to think about it? Sorry, I'm referring to slide 24. Slide 24.

Slide 24, and your question is increase in insurance revenue, which is over last year. This is 29%, close to 29%.

29%, yes, yes.

Yes, and what was your question, so?

And the GWP growth is like, say, 23%. Yes, so the divergence if you can explain.

And for this, you should really look at overall GWP without one by N, which is 23%. So 23% versus 29%, and the reason is this is on earnings basis. So all the policies we have written in last year and for multiyear policies even 2, 3 years back, so this is kind of gross earned premium. It is coming from amortization of those policies on 1/365 basis.

So it's to do with the multiyear policy mix, right? I mean, that's what...

Multiyear too. So it will not exactly match with GWP. It really depends on, yes, how much proportion of multiyear were there in Q1 last year, how much here, so that way.

Got it. Got it, sir. So second question is on the loss ratio. So on the legacy book, I mean, you mentioned the loss ratios are elevated at 75%. So how do we think about the risk stratification over there, and how do we price it, and the -- how to think about the repricing year -on-year looking forward? And so what can be the trajectory of the loss ratio in that book?

You mean to say group portfolio?

On the retail, on the retail portfolio, the renewal book, this loss ratio. So how do we think about the risk there and stratification there, and the pricing that we're going to take?

Yes. So in retail, renewal loss ratio 75% is quite acceptable because expenses are not that much in that book. It is some commission and some renewal expenses, which is not much. So let's say 20% overall, less than 20%. So in that sense, if we get 75% loss ratio, it's quite acceptable. In terms of actions to keep it at that level, we have -- annual price increase in that portfolio. We increase by high single digit every year for renewal book.

Got it. Got it. So on the EOM side, I think last quarter you mentioned that you are targeting 2 to 2.5% improvement. I mean, are we still sticking to that or if anything changed on the EOM trajectory, expense ratio trajectory?

So if you see, this quarter compared to last year, there's an increase by 2.8%, sorry, improvement, 38 has gone down to 35.2 %. At some point in time, it will stabilize between, let's say, 33 -- closer to 33%. So which is quite comfortable, 32% to 33%, yes.

And the final one on the ROE, I mean, do we have any kind of target in mind for FY '27, FY '28, I mean, how to think about the ROE trajectory?.

So ROE, if we just see last 4 quarters, rolling quarters, it is 11.8%. What we guided earlier was by FY '29 mid to high teens, and we go by that. So that trajectory will be very smooth, and because it's Ind AS, everything is amortized, so that other than if there is some infection, etc. So in some quarter, otherwise, it will be smooth trajectory from close to 12% now, annualized, to mid to high teens by FY '29.

Got it, sir. Thank you. Thank you, and all the best.

Thank you. As there are no further questions, I would now like to hand the conference over to management for closing comments. Thank you, and over to you.

Thank you. No, no other comments other than to reiterate thanks to all of you for taking your time this evening, and we'll talk to you next quarter.

Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.