Niva Bupa targets 6-7% growth rate above market average in FY26: CFO Mahendra

The growth in your hospital network has not been much this fiscal year. Why is that?

The number of hospitals in our network, approximately 10,000-10,500, has indeed plateaued over the past three years, and not all of them are actively utilised in FY25.

We don’t view the sheer number of hospitals as a proxy for value. Instead, our focus is on ensuring accessibility for our insured members. We evaluate how far a policyholder must travel to access a quality hospital in his city or area. If this analysis indicates a need for additional hospitals in a specific region, we expand our network accordingly. However, simply increasing the number of hospitals without a clear customer benefit isn’t our goal. Current utilisation remains limited to a couple of thousand hospitals, and we prioritise quality and proximity over quantity.

What is your Assets Under Management (AUM) mix between debt and equity?

Out of our total AUM of approximately Rs 8,200 crore, our exposure to equity is minimal. We have a passive investment in Nifty ETFs, amounting to Rs 70-80 crore. Beyond that, we have no direct exposure to equities. The remainder of our portfolio is primarily in debt instruments.

In FY25, your group segment grew faster than your retail segment. How did this happen?

Our portfolio mix is approximately 65.5 percent retail and 34.5 percent group health insurance. To provide context, group health comprises two segments: employee-employer policies and affinity groups. The affinity group segment is quasi-retail in nature. Within the group segment, roughly 60 percent is B2B2C (affinity groups), and 40 percent is traditional B2B (employee-employer). Last year, we wrote two large group accounts that met our underwriting criteria, which contributed to the faster growth in the group segment.

Looking into FY26, we expect the portfolio mix to remain similar, with potential variations of one percentage point either way. We’ll continue to look for opportunities in group accounts that align with our pricing and underwriting standards, but retail will remain our primary focus. We are comfortable with the current portfolio mix, as this ratio is by choice and design.

The IRDAI mandates that the Expense of Management (EoM) for standalone health insurers should be 35 percent or below. Your current EoM is 37.4 percent. Are you confident of meeting the regulatory target in FY26?

Our EoM has improved significantly, dropping from 39.3 percent in FY24 to 37.4 percent in FY25, a reduction of 190 basis points. We are confident of further reducing it to up to 36 percent in the current financial year, aligning closely with the IRDAI’s requirement. Our ongoing efforts to enhance operational efficiency and scale our business position us well to achieve this target in FY26.

There were projections that the company aims to reduce its combined ratio to 95-96 percent over the next five years from the existing 100.9 percent. Is that still the goal, and how has the recent accounting change impacted this?

The combined ratio is indeed improving and will continue to do so. (The combined ratio is a key insurance metric that measures underwriting profitability by dividing the sum of incurred losses and expenses by earned premiums, typically expressed as a percentage). However, the accounting change, effective October 1 last year, did introduce some complexity. For multi-year policies, such as a three-year policy, we are now mandated to recognise only one-third of the premium each year. This has created noise in how ratios are reported. In statutory accounts, our combined ratio rose from 98.8 percent in FY24 to 101.2 percent in FY25, a 2.5 percent increase, largely due to this accounting change. However, if we apply the old accounting method, the FY25 combined ratio would have been 96.1 percent, reflecting a marked improvement, driven primarily by a better expense ratio.

Can you provide some guidance for FY26?

Our goal is to continue growing across all distribution channels, including agency, direct sales, and partners. Over the past three years, we’ve made significant investments in distribution and branch expansion, and this will continue. We aim to grow 6-7 percent faster than the market growth rate. Additionally, we are focused on increasing our retail market share, which improved from 9.1 percent in FY23 to 9.4 percent in FY24. Our endeavour is to keep building on this number.

If Foreign Direct Investment (FDI) in insurance in increased to 100 percent, will your promoter, Bupa, increase its stake from the current 56 percent?

If it becomes law (in the upcoming monsoon session), Bupa’s decision will depend on the company’s needs. Bupa values this franchise highly and is committed to acting in the company’s best interest. We may not be open to it, if liquidity is sufficient.