Go Digit General Insurance Ltd (NSE: GODIGIT) Q4 2025 Earnings Call dated Apr. 28, 2025
Corporate Participants:
Kamesh Goyal — Chairman
Ravi Khetan — Chief Financial Officer
Analysts:
Supratim Datta — Analyst
Nidhesh Jain — Analyst
Dipanjan Ghosh — Analyst
Anirudh Agarwal — Analyst
Satvik Kanabar — Analyst
Rachana — Analyst
Sanketh Godha — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Go digit General Insurance Co. Ltd. Q4FY25 earnings conference call hosted by ICICI Securities. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a
Kamesh Goyal — Chairman
The meeting on the 17th of February 25th. The presentation was also uploaded on the stock exchange websites BSE and NSE the same day.
The three points which I wanted which we had covered there and I just wanted to quickly take them as to first was to say combined ratio. We have always said on IID combined ratio doesn’t have any link to roe. So we had said that combined ratio on net on premium basis makes most sense. The only caveat in this is that insurance companies which give lot of reinsurance especially long term and book the commission upfront, the results can actually look better compared to companies who do not take this long term reinsurance commission upfront. And we had actually shown an example of a company which is whose results are in this direction that if digit had done this, what the impact on combined ratio and profitability has been.
In the same spirit, we will now start declaring our combined ratio on NEP basis, net on premium basis. So our combined ratio in financial year 2324 on NEP basis was 112.2%. When we see this for 2425 this combined ratio would be 110.8. So basically you can see there is an improvement of 1.4% on the combined ratio on a quarter by quarter basis. The combined ratio in Q4F24 on NEP basis would be 110.9 while in Q4FY25 the combined ratio is 110 an improvement of 0.9%. And when you will compare, and we’ll come to that later, when you compare this on combined ratio on IIDA basis you actually don’t see an improvement at all while the profits have increased quarter on quarter from 53 crores to about 116 crores this year. So this was the first point.
The second point which we had showed was that lower combined ratio with high commission is worse from ROE perspective compared to lower commission and higher COR business. And higher COR business typically will come from third party business. This is really true for third party business. And in this case we had also mentioned, we had shown an example, clear cut example as to how this plays out. And we had also briefly mentioned that company is consciously wherever they are finding opportunities, they are trying to go towards a business where the submission is a bit lower and expenses, the claims might be a bit higher. So on cor it might look worse but from ROE perspective this is better. And I think to some extent this gets shown in terms of lower expenses and slightly higher loss ratio in our Q4 result.
The third point we had said was that our industry lot of companies have actually relied in the last four to six quarters on booking, realizing capital gains from equity portfolio that the market was fairly robust and that in a tough market and the February 25 market was going through a bit of a turmoil at that time that. This would not be possible. I think in case of digit. If you look at in our entire year which is the whole financial year 2425 we actually have no capital gains. In fact we have a capital loss of 3.4 crores.
You might recall this had come in the first quarter when we had booked some losses in fixed income where we sold some mark to market losses in the fixed income to increase our duration on the bond portfolio. Economically it made sense to do that but in the short term it obviously had a loss. So I think that also I would say seems to be playing out today when you look at results of companies which have declared there are no realized gains on the equity to the extent they were booking in the earlier years.
Now coming back to our slide deck, all of you are familiar with this deck. So the premium is 10,220 2,082 crores. This is including one buy in and we will actually come back without one buy in also a bit later. Market share on GWP basis is 3.3. Motor is 5.92. Its number of partners have now increased to 17,870 and assets under management are now closer to 20,000 crore. And our customer satisfaction score continues to be in claims continues to be quite high.
Moving to the next sheet if you look at these are IGAAP numbers. If you look at here the premium without I would say one by n would actually be 10,419 crores. You can see that at the bottom in bold. And for Q4 the premium would actually be 2652 crores compared to 2576 which is mentioned. Combined ratio including 1N is 109.3 for the year and Q4 is 111.3. And compared to full financial year last year it was 108.7. So as I mentioned for the full year combined ratio has improved a lot on NEP basis but not on IRDA basis.
But as soon as we move to 1N you can actually see the combined ratio has improved. And the reason is that there is about 30 crores of commission which is there on account of the long term business. But that 30 crores the premium has not been accounted for in GWP. But that 30 crores in our case is already like BY Q3 is already accounted for. So the combined ratio with 1n and without 1 by n actually economically is having the same outcome.
So this again is I think a point. Just wanted to say that I day combined ratio from that perspective looks a bit strange. Overall profit for the year increased to 425 crores. For the quarter 116 crores ROE in the fourth quarter is 3.1%. For the entire year it is about 13%. Net worth has crossed 4000 crore for the first time and solvency ratio is now 2.24% which has also improved if I remember correctly from 219% in Q3 to 224%. So that’s really the result.
Now moving on to the growth. If you look at GWP for the entire year without 1 yn our growth rate would be 15.6. With 1 y n growth rate for the year is 14% and for the quarter the growth rate is 13.5%. So, so that really is the growth rate. You can also see on the right hand side the GWP mix quarter on quarter on that basis and you can also see in the middle the overall growth rate of the industry for the financial year overall growth rate for the industry git1n is 6% and in case of digit this growth rate is about 14%.
In terms of mix, if you actually see there is a slight increase in the mix overall on the health, travel and PA segment and the TP has reduced. Otherwise the mix is also more or less similar. The only thing again I would just Repeat is that 30.7 crore of acquisition costs for 136 crore of premium which was not accounted for has already been provided for in the books. So the premium is not accounted for but acquisition cost has already been accounted for.
Now in tp as I already mentioned, the market share last year for the whole year was 5.96. This year the market share is 5.92. I think we had said that especially in the first quarter last year when market share in TP had actually dropped from 6.2% to 5.26%. We had said that you would expect the year to have a similar sort of a market share and I think it seems to be in that direction. We will see how motor business moves now in Q1 of New Year.
Moving on to the next slide. Now here again if you look at we have already discussed the number you can also see the number without 1n so overall there is an improvement for the year for Quantum Soldiers compared to last year. There is a slight increase in the combined ratio on the fourth quarter without one buy in pat for the year has more than doubled from 182 crores to 425. At this stage we are still not paying any taxes. I think the taxes should start coming in in the year 2526. For quarter four our profit is 116 which is more than two times the profit. And again just to repeat, this profit has no capital gains booked in. In fact it has a capital loss of about 3 crores. So this is core profitability from the insurance operations. And I think this is also something which we had discussed on February 7.
Now moving to the next slide. I think here again you can see the AUM movement how this year if you look at we have generated close to about 2,850 crores which is similar to 2,750 crores of AUM generated in the previous year. And overall if you again look at our yield, our yield in quarter four purely coming in from fixed income without any capital gains is about 1.8 annualized basis we get at 7.2. And I think if you’ll compare this yield with other insurance companies I think in quarter four the yield will actually look better because other companies will have capital gains.
Now moving on to the next one I think in our calls we have been saying that we have now sufficient solvency margin and given the market opportunities we would actually like to increase our equity allocation up to 10% of our assets. I think in the month of in this quarter quarter four, especially in the month of February we got some opportunity to increase our allocation. So as of December 31st, if you see the note below the bottom line, bottommost line, our equity allocation was only 2.9%. And as of the 31st of March equity allocation has actually now moved to 6.4. So we have been able to now come to within two thirds of our initial target of 10% in the equity. So this quarter in the investment this has been a big change.
Other than that all our allocations in investment have actually been Similar maybe one point I can mention on the investment is that even the equity investments we bought in Q4 they actually had a very had a small mark to market gain as of 31st March. So I think this seemed to have played well. Our thought process why we did not move to 10% was that we felt that the market was very volatile especially due to this tariff and geopolitical situation. So we felt that if market drops comes to another level we will actually then go for the balance 3.5 to go totally up to 10%. That opportunity didn’t come, but which I would say is expected because we felt that even at 6.4 if market runs up from here at least we have been able to increase our at a decent valuation.
Now moving to the loss ratios, I think we always say that the loss ratio should be seen from a three year perspective. So if you look at loss ratio in OD and again if you look at a three year average for almost all lines of business and I’ll cover each line motor is from a three year perspective it’s that average level. TP also from a three years perspective would probably be 1 or 2% higher because and we have explained this in the past in detail that FY24 the TP loss ratio looked lower especially due to a slightly higher increase as a percentage of premium and reserves in shelf.
I think we have seen a good development in growth as well as on the loss ratio which is 83.8%. And here I may say that since now long term premium is being declared separately by all companies. If you think that attachment products only have a loss ratio of 15%, retail health has a loss ratio of 70 and if you take a loss ratio of 95 97% in employer employee and if you try and take a weighted average based on this portfolio mix of different companies, you’ll actually find that our health loss ratio overall is quite competitive.
So the only point I want to bring across here is that in terms of both underwriting as well as from a claim settlement capability, I think we are rightly positioned. Despite relatively smaller size, our loss ratios and underwriting looks good as and when we see an opportunity in the market where the pricing looks decent, we would be able to increase this business substantially because all this looks good. So that’s the point I wanted to bring across in fyer.
Our loss ratio again over a three year period would be more or less. In this range, what happened in Q4 will again we had some like some bigger losses which increased the loss ratio in Q4 to 84% to 81%. But I mean fire last year our premium retention was. Net premium was only about 1819 percent so the net is relatively small. The combined ratio everything will still be very, very good, highly profitable. And if we just see it from a perspective of loss ratios of our reinsurers or we should look at loss ratio on a gross basis.
In previous year 23, 24, gross loss ratio in FHIR was 84% due to various five NETCAT events which we have covered in the past in detail. This year the loss ratio on a gross basis is only 56.8%. So. So just wanted to bring across that overall profitability of this commercial line of business is driven more around gross loss ratios. You also get profit commission on that. You also get reinsurance commission net though increasing each year. But it still is small. So one or two losses can actually move the loss ratio up. And I think the good news for us this year was that we have been able to increase our capacities in our reinsurance treaties in general across almost all kinds of treaty, but especially in property. And our terms have also become slightly better.
Then we look at marine, I would say loss ratio is continuously improving. I think the book is also increasing year by year. And our focus now in marine is also to move towards more retail portfolio engineering. Again on that basis as I expire. As I said in engineering, when you write a project which takes three or four years to complete, if losses come in between, the premium hasn’t come in. So engineering has that peculiar situation. And the loss ratios can be very volatile. And you can actually see in quarter four the loss ratio is only 40.3. But overall for the year it was 103, but on FY24 it was only 130. But on a gross basis this business also is profitable. In others the loss ratio increased slightly due to a bit of a mix change.
So on the loss ratio again, if you look at total, our loss ratio I would say on a three year is around 70. And if we are able to move towards this direction where we can reduce the commission and the loss ratio slightly goes up, this would be positive. And I think we’ll obviously keep you posted every quarter as the results come. This is normally a slide which we show every time. So this is something where I think we continue to move more and more business through APIs. Some new relationships were also started. Their APIs would take a bit of a time but there we use docs for policy issuance.
Now we will go a bit further. This is IFRS results. We had said that once a year we’ll get the results audited. So these are the IFRS audited results. Later I think if anyone wants to discuss they can reach out to Piyush if they want to have a discussion on that. I wanted to move to triangles in that case because triangles as you know are only published once a year. This is the whole account which means every single line of business is included in this digit issued its first policy I think in October or November 17th. So the business was really small. And if you look at each year we have a reserve release coming in every single year on the poll account.
The next table shows you only for tp. Again I think to refresh memory, first year where the earned premium was very small we had got one large claim where I believe the claim amount was close to about 4 and a half or 5 crore. The claim is still not settled. So overall if you actually look at our reserves have come down but we still have a small 60 lakh rupees of unfavorable development coming in only from one claim. But each subsequent year if you look at we have been having more than adequate results and you can also see this trend.
Actually the claim was NEP was only for 1718. NEP was only 7 and a half crore and we had two large losses coming out of one claim. So that was the reason. Once the claim gets settled I will see whether even this 60 lakhs will stay or this will go away. The next angle is whole account excluding motor tp. But this also gives you an idea that again if we exclude TP also we are more than adequately reserved in every single year. So like whole account, whole account excluding tp. I think reserving is something which is comfortable from a digits perspective. And for us reserving is something which is very very important from that basis.
So that was a brief from my side. We’ll now be more than happy to answer any questions that you may have.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may Press star and one on the Touchstone telephone. If you wish to withdraw yourself from the question queue, you may press Star and two participants are requested to use handset while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. First question is from the line of Supratheem Dutta from Ambit Capital. Please go ahead.
Supratim Datta
Thanks for the opportunity. I wanted My first question was on the growth front. So, you know, wanted to understand that, you know, going into next year, how are you looking at growth? I understand that you have, you know, made investments in certain areas, but from the light, you know, from the data, it suggests that motors could see a slowdown going into next year. So just wanted to understand which are the categories you are looking at which could offset any further slowdown on the group motor side. And if you could give us some color on how the group health business is playing out. It was very competitive this year, but given the April renewals are now over, if you could give us some color on that, how that category is tracking, that would be very helpful.
The second question is on the motor TP losses. Now, if I remember correctly, in the third quarter you had indicated that the reserve releases till the third quarter was lower as compared to last year and hence there was a potential of higher reserve releases in the fourth quarter versus last year. But from the looks of it, that hasn’t played out. So if you could help us understand what has happened there or what am I missing, that would be very helpful. Those are my two questions. Thank you.
Kamesh Goyal
Sure. So I think on the motor, I would say that if you look at our trend for January, February, March, I think it will give you a bit of an idea as to what’s happening on the motor growth Sukhetan, since we don’t give a guidance. So I don’t want to exactly speak as to what we are looking at, but if you look at February, March, it should give you some indication on the motion. I think our sense in April, in whatever days we have seen, and I would say this is too early to see this as a trend, but I think it seems that motor in the first fortnight has been okay for us from a growth perspective.
On gmc I think again, this is a very dynamic portfolio and based again on all the discussions I have not, and this is a qualitative feedback I’m giving both on motor and gnc. Not really looking at the data. What I’m hearing is that on April 1, when the big renewals were due, we have actually seen, I would say that we have seen very high competition on SL1, but I think the smaller policies which were due now say during the month, not exactly on 1st of April there I would say we have seen some improvement in the pricing and I believe that there has been, it has been slightly better from that perspective.
My personal view is, and I explained this in our health loss ratio, if you look at even companies which have higher proportion of non employer employee business attachment business which comes at a very low loss ratio, you will actually see that their overall loss ratios are not looking as good. So we feel that we are now positioned from underwriting and claims perspective that if there is a bit of a correction in the GMC market, we will actually be able to increase this business.
Now coming in for TP I think Suprathan, last year if I give you exact proportion previous year we had high reserve release in quarter two. So I think if you look at for the quarter two the reserve release was about 37% of the NEP. And for the whole year if we look at on TP impact on loss ratio last was about 8.1% this year on TP our overall TP reserve on the overall loss ratio the impact is about 5.3. And if you look at one more large PNC player last year they were at about 4.6 and this year it was 4.6.
So if we remove that quarter two which had about 37% of the yearly reserves I would say and the fourth quarter only had 14% this year our reserve release in terms of proportion has been around 25 for all the four quarters. Quarter four is 21. All the other three quarters were 26, 25, 28. So on the TP I would say the trend line for us is actually fine other than that outlier and 23, 24 in quarter two.
Supratim Datta
Understood. Thank you.
Kamesh Goyal
Thank you.
Operator
Thank you. Before we move to the next question, a reminder to the participants to ask a question. You may press star and one next question is from the line of Nitesh Jain from Investec. Please go ahead.
Nidhesh Jain
Thanks for the opportunity sir. So first question is on again on the growth front, if you look at till FY24 we are growing significantly faster than the industry. But in FY25 the growth has broadly converged with the industry on GDPI basis. So I understand that we have also slowed down motor TP consciously. But from a medium, let’s say three to five year perspective, how should we think about our growth related not in a. Not in absolute percentage but related to the industry.
Kamesh Goyal
Thanks. So if we look at, I think in our case we always focus on gwp, not really on the gdp, gdpi because the simple reason is that revenue is revenue. Some lines of business you want to write more on an inverse fact basis, some you want to write more on a direct basis. And wherever you see opportunity or a better risk reward mechanism, that is where you go on. And if you look at on a GWP basis, our growth rate would be even if the GWP of all the companies and the information should come in the next three months, my sense is we would still be about 1.7, 1.8%, 1.7 1.8 times of the industry’s GWP growth.
So growth from a relative perspective I would say is decent. I think last year if we look at what changed obviously was there was a price competition on FIRE which I think was not really expected. There is no increase in TP rates. So these were the two reasons. This year I think I’m a bit optimistic about the industry’s growth rate because in FIRE premium rates have increased basically from January. But from February we have seen the impact. The real impact of this will start coming in more from July onwards because last year, July onwards, July to December is when the industry had seen intense competition in fire.
And secondly, I think we would also expect some increase in the third party premium rates. We would not hazard a guess whether this would happen from July or September, but there should be some increase in the third party rates. So assuming the economic growth rate in the country stays similar to what last year is, I would still expect the growth rate of the industry to be about 3 to 4% higher compared to last year.
Does that answer your question?
Nidhesh Jain
Yes, sure, sure. And secondly, so our market share in the motor segment has been pretty healthy at around 5 to 6% range which are the other segment where we think we will be able to reach similar sort of market share again from a medium term perspective.
Kamesh Goyal
So again, since we don’t give any guidance, but I would say this year again you should be looking at on quarter by quarter basis what is happening on the fhir, what sort of a growth rate we can have in FHIR compared to the industry. So I would say that definitely is one area. And within motor also I would say I would be curious to see month on month how the growth rate plays out, especially in both OD and TP side because here also So last year due to a certain confusion in the third party obligation where a lot of companies assumed that if you pick up renewals of other companies it will actually go towards meeting the third party obligation quota. And this got clarified by IDA sometime in February that you only will get credit for your quota if there is a gap of 30 days.
So we feel that last year a lot of companies in this misunderstanding and trying to meet the TP quota went a bit more aggressive. We would expect a slightly less aggression even on the TP side. New own damage is a bit difficult to hazard guess in terms of new vehicle sales. But I think the trajectory of interest rates continues to be down. That maybe that is a segment which can also pick up.
Nidhesh Jain
Sure. And lastly a bookkeeping question. Can you share the mix of motor in terms of new versus old?
Kamesh Goyal
We don’t track new versus old but what maybe we can do is that we have said this in already in our I think earlier conversation if I remember but motor actually if you look at Overall motor is 100% of the portfolio then we said that typically car would be about 40, 41, 42% of the business and two wheeler and commercial vehicle will be around 30, 30 each. So that is really a portfolio.
And within two wheeler and commercial vehicle I would say within two wheeler most of the portfolio would be new vehicles because this is 1 plus 5. CV I would say would be more like 80% would be more towards older vehicles. These are not exact numbers I’m giving Based on my understanding of business and in private car I think our mix will keep improving towards non new because every year now we’ll have a substantial renewal base. So our renewals will keep increasing. So the hope is that this would actually change our mix more and more towards older vehicles in motor business.
Nidhesh Jain
Sure. And that will automatically lead to lower expense ratio and higher loss ratio which you have alluded in the start of the call.
Kamesh Goyal
I would not say that. I think that is more pronounced towards CV and two wheeler business, private car. Obviously a higher share will reduce your expenses in two wheeler. If I just give an example, in two wheeler proportion of business is relatively higher than most companies. Now since you are writing one plus five and you have to pay upfront commission 1% mix change actually increases, reduces your ROE. So I think two wheeler business also plays an important role from an expense perspective. So until every company has accounting from that perspective and which is only possible in ifrs, it is difficult to reach this.
But what you said is true. Between all the three lines, private car, two wheeler and commercial vehicle. Private car has the lowest expense ratio in terms of own damage loss ratio. CV would have the highest own damage loss ratio than private car and two wheeler. And I would say even TP loss ratio would also be similar. CV highest then private car and then two wheeler. So that is how this business plays. Private cars normally would not have a higher TP loss ratio or OD loss ratio than commercial vehicles. That would be my understanding. Commercial vehicle is a whole block and private car as a whole block and two wheeler as a whole block.
Nidhesh Jain
Sure, sure. Thank you. That’s it. From my side
Kamesh Goyal
And we have also discussed this in the past that as private car keeps. The renewal book keeps getting older. So you have third year renewal, you have renewal, you have fifth year renewal, your loss ratios also improve. Now obviously that benefit to us will start coming. I would say more in the next three years then we can say. A decent part of our book is now more than five year old renewals. So we are still three, four, five years away from maturity. From that perspective.
We can take the next question.
Operator
Yes, sir. Next question is from the line of Deepanjan Ghosh from Citigroup. Please go ahead.
Dipanjan Ghosh
Hi, good evening sir.
Operator
Please use your headset, sir.
Dipanjan Ghosh
It feel better?
Kamesh Goyal
Slightly better, yeah
Dipanjan Ghosh
Sure. So I was just asking that, you know, since the public disposal were not out for the fourth quarter. Just wanted to get some sense of the business that you have underwrited through inward feeding. Is it through more on the government health or group health of crop? So that would be the first session.
Second on the commercial lines you mentioned that, you know, while on the April initial renewals or the lumpy renewals, there was significant competition going ahead. On the smaller lines of businesses, the competition has kind of been relatively benign. So maybe if I were to just look at, let’s say for the. For the year FY26 are going ahead, what would be your ambitions in terms of kind of increasing that line of business?
And third on your overall health portfolio, if you can split the claims ratio number between retail and employer employment.
Kamesh Goyal
Sorry, the last one I did not get it.
Dipanjan Ghosh
The last question was if you can split the claims ratio number for the health business between employer employee and others.
Kamesh Goyal
Sure. So dependent. I think as I said that in GNC most of our business would be employer employee. Last year even in quarter four the loss ratios what I have given, I have said attachment products is typically 15%. Employer employee would be significantly higher. It could be anywhere between 85 to 90. I’m talking more from industries perspective and retail health would be closer to about 70% for the industry. So since all these numbers will come and it’s also available from in the public disclosures and the point I was making there is to say if you look at the loss ratios of different companies on this basis and you look at their actual mix, our health loss ratios will look fairly good. That is the point we were actually making.
Now your second point in terms of commercial lines. Yes. We expect commercial lines to grow for the industry as well as for digit last year if you look at industry had a slightly negative growth rate in fhir portfolio. This already changed in quarter four when the industry saw little growth. So our sense is that commercial lines of business should grow and commercial line is beyond fire. It also includes marine and liability and others. And our expectation based on where we are today, no real guidance that since we have also increased our treaty capacities we would expect a slightly better growth in commercial lines. Our mix in the last four, five years in terms of motor and non motor has actually been moving anyway more and more towards non motor.
Dipanjan Ghosh
Hello.
Kamesh Goyal
I said did I answer all your questions?
Dipanjan Ghosh
So that’s one follow up. If I made for the fourth quarter if you could give the inward feeding mix is it more tilted towards government health or crop or anything else?
Kamesh Goyal
I said more towards employer employee, not government health.
Dipanjan Ghosh
Got it. Thank you sir and all the best.
Kamesh Goyal
Thank you so much.
Operator
Thank you. Next question is from the line of Aniruddh Agarwal from Valuequest Investment Advisors. Please go ahead.
Anirudh Agarwal
Yeah, thanks for the opportunity. First question was on the pnl. So just trying to do some math and correct me if I’m wrong but if I add up the underwriting loss, the investment income and then try to correlate that with the reported part. There seems to be a 50 odd crore gap. What is that? On account of
Kamesh Goyal
Sorry, under it your voice wasn’t. Now I can’t hear you at all. You said
Anirudh Agarwal
Can you hear me now?
Kamesh Goyal
Yeah, yeah, I can hear you.
Anirudh Agarwal
Yeah. So I was saying I was adding up the underwriting loss of 180 crores. The overall investment income of about 350 crores. So that adds up to a net profit of about you know, 165. 170 crores. However, reported PAT is like 50 crores lower than this. So couldn’t fully understand the reason for that. You know, differential.
Kamesh Goyal
My sense is you want to answer CFO is answering it
Ravi Khetan
180 number. What you are taking is not correct that you can reconcile. It should be around 220. Then your number will reconcile with the net profit 20.
Kamesh Goyal
Maybe you can after the call you can connect with Piyush and. And just reconcile the numbers.
Anirudh Agarwal
Sure, sure. And second question was on the OPEC side. So again reported OPEC seems to be materially lower. Is that to do with some reclassification or anything more to read into that?
Kamesh Goyal
So I think our overall, you’ll see the details here. Overall there has been a reduction in the overall OPEX expenses towards commission to gwp, if you will. Once the full results come get published, you will be able to see that the commission to gross return premium would have reduced in quarter four.
Anirudh Agarwal
Got it. And Kamesh, finally on the EOM glide path. So you know, how do you think we are placed in terms of, you know, meeting our efforts? 26 quarterly commitments on EOM incrementally.
Kamesh Goyal
Sure. So I think I’ll give some numbers on the eom. But I’ll put one caveat. Every quarter after the board meeting we are supposed to update irda. So the details of that letter will go in the next 15 days to IRDA. But I’ll share some numbers. So last year as per UN our expense ratio was 36.3%. This year on the same basis, I.e. without 1 by N our expense ratio has reduced to 33.4. But there is a reduction of 2.9% on the overall expenses for the whole year. If we do this 24, 25 with 1N then this 33.4 will become 33.9.
Based on what we have seen the trend in the first three months, first three quarters of the industry, our sense is that this There would only be four or five companies at best who would have reduced the EOM compared to previous year. And within that to have a reduction of close to about 3% in EOM, my senses would actually be rare. Now this year, obviously we have to reduce the EOM further and that is what we will try and do. The full update will go to IIDA every quarter it goes. It will again go to IIDA this year.
And as we had also said in the initial earlier calls, I think it was after Q2, if I remember, we had said that this, Ilda’s objective of coming out with EOM guidelines was to reduce commission expenses. And I think everyone would agree that this is very much required. It is in customers benefit and commissions should actually go down. However, in reality, since in both 2324 and 2425 actually went up now, IADA obviously would be very serious about this and this is my personal opinion that I would expect IADA to take some corrective actions on EOM so that they can actually achieve the objective of lower commissions.
So I think we are on the path of reducing eom. Reduction has been decent. Industry trend is otherwise, especially with one, most of a lot of companies would actually be seeing increase in eum. Bigger or smaller ones? Both. So I think on that relative basis I would say we are on a good path.
Anirudh Agarwal
Got it, Got it. Final question was on overall underwriting as you look at it next year. Obviously we’re not looking at the reported combined ratio, etc. But what are the levers that you see across different lines, terms of, you know, further improvement on the underwriting front on an NEP basis?
Kamesh Goyal
I would say two, three things here. So one is that when the rate itself goes up for the same risk, so that itself will lead to improvement in the loss ratio. So I’m now talking more from a perspective of property business. The second thing is as a renewal book increases, especially in private car, that should be good from an overall profitability perspective. Third, we should see some increase even if the increase is only 5, 6% in TP rates. And we obviously have no, we have no idea as to what the increase will be, but I think the newspapers seem to suggest that there will be some increase and IAD and government Ministry of Road Transport are in discussions. So even if the increase is only 4.55% also that should also help on the profitability side.
Besides that we have taken some other steps in terms of looking at flood exposure which is very important in property. And overall I think we keep on taking different initiatives which also shows in the loss ratio whether you look at motor OD or you look at health. So if you look at motor ODN health where the competition has been very intense, look at last three years, our trend line has also been decent on that. So these are the things which the company is doing in terms of looking at overall profitability.
The last thing I would say is that which I think I have repeated in every column, I’ll repeat here now also that our profits have actually doubled when the combined ratio improvement was about 1.8% on NEP basis. So in our business model where the leverage AUM to net worth is still 4.9 times, which is the highest in the industry. Actually in our business model we don’t need very substantial improvement in combined ratio to increase profitability. So as long as I think, and I’m not saying that we will not improve like this year already improved by 1.8% on NEP, every small improvement actually adds up to the profit and the leverage is anyway quite decent. And we are not dependent again to repeat, we are not dependent on capital gains from that perspective.
Anirudh Agarwal
Perfect, Perfect. Thanks and all the best.
Kamesh Goyal
Thank you.
Operator
Thank you. Next question is from the line of Satwik from Jefferies. Please go ahead.
Satvik Kanabar
Hi Kanish, thank you for the opportunity. Just two questions from my side. So we understand that PSU insurance have become more competitive in the motor and the health segment, especially on commissions and as well as pricing. Some of the larger players actually pointed this out during 4Q so can you please share your views on this and impact on digit. And the second question, any clarity on EOM whether any change in timelines or reference to whether it will be allowed with or without one by n. Thank you.
Kamesh Goyal
So on the EUM actually we don’t know what the changes will be if any. So we don’t really want to second guess here. I think on the motor and health I have already actually said this and maybe I’ll say it again. If you look at our loss ratios in od we I think still grew more than the industry. Loss ratios are pretty good in tp. Our market share over remained similar. So from 5.96 in previous year, this year it was 5.92. And despite whatever competition we are talking about, we still could maintain market share.
Loss ratio is decent there in health. We could actually grow this business. And despite market being very competitive, we also reduced our loss ratio. So I think again even in health and I’m sorry to repeat this, please look at mix of each company, group health 85 to 90% loss ratio, retail health at 70, attachment or long term products at 15% and you will actually see our health loss ratio is pretty good. And we have never ever spoken about that. We are big here. We get discounts from the hospital and this and that without doing any of this.
I’m not saying we are not doing any of this. I’m just saying that because of what we have now executed on the fraud side, how we are looking at claims now in health from a leakage side, how we are actually underwriting especially groups in retail. We have always been fairly conservative. We actually feel, I would say comfortable with this competitive intensity. And now somebody might say PSUs are getting aggressive. If you go back to quarter one of 24, 25 and you look at the market share in the first four months of last financial year the market share gain was by some large private companies at the cost of PSUs.
So we actually don’t really satvik look at PSU or private from that perspective. We actually see what is it that one can do and then drive business from that perspective. I already mentioned that the competition on health was terrible on April 1st. We lost a lot of our own renewals in group health, large ones. But when we look at on the retail side smaller we are actually seeing some changes and our renewal ratios are better post 1st of April in the month of April.
So to us it seems that the higher health loss ratios which companies are seeing almost all of them, it is biting them and there should be some improvement relating to this. But we know at what profitability we are ready to write a business and if it doesn’t come we will not write as simple as that. And health business especially doesn’t add much to your AUM also. So it’s not that you can increase the AUM and write business from that perspective. So whatever the situation Southwick is, I wouldn’t say as of now we are concerned about it. To us it seems and all this is again very early to say this April seems to be better than April 24, but it’s not over yet.
Satvik Kanabar
Very, very clear. Thank you so much and all the best.
Kamesh Goyal
Thank you.
Operator
Thank you. Next question is from the line of Rachna from SRMPL pms. Please go ahead.
Rachana
Hello. Thank you for the opportunity. Hello.
Kamesh Goyal
Yes, please go ahead. Rachana.
Rachana
Yes, I have a bookkeeping question and a data related question. And correct me if I’m wrong. If I look at the breakup of Commission for the nine month FY25, FY24 and FY23 there is a steep. There is a high increase in the reward component. For example in FY23 it was around 74 crores. In FY24 it was around thousand crores. And as per nine months FY25 it is 966 crores. So I just wanted to understand the reason behind the the reward component increasing so much. And how does this reward component align with the goal of maintaining a control cost structure from a long term perspective. And could you also tell that is that. That this dependency on rewards might hold a risk to the sustainability of premium growth. That’s it.
Kamesh Goyal
So Rachna, I would suggest that you please look at commission as a whole block and not really look at it divided between rewards and things like that. Because the way commission is steered and discussed is on an overall basis. Now the components of them can be different. But you should look at commission on an overall basis and that to commission as a percentage of gross return premium. That will actually give you the right picture than anything else.
What was the second question.
Rachana
Just wanted to understand the reason behind the increase. Increase in reward. That was
Kamesh Goyal
I would say if you talk to some other people also. Till 2223. Till 2223 there were certain ways in which rewards had to be given and there was something was to be given on commission. Now all of that actually went away from 2324 onwards. So if you see it for anyone in the industry you will actually see those commission components have changed a lot. So till 2223 you should look at overall expenses even including management expenses as a percentage of gross return premium. 23:24 onwards you can actually look at this commission separately and management expenses separately. Within that don’t look at the component because I would say it wouldn’t have much logic based on that. So look at overall commission.
Rachana
Okay. Thank you.
Kamesh Goyal
Thank you.
Operator
Thank you.
Kamesh Goyal
Maybe one or two more questions.
Operator
Yes sir. The last question is from the line of Sanket Goda from Avendus Park. Please go ahead.
Sanketh Godha
Yeah, thank you for the opportunity. Your um, at 33.9 probably was because of the lower motor contribution in the current year because, because you intentionally slowed down the TP business because of the rising competitive environment. So tomorrow, for example, growth comebacks in this particular segment and we will not hesitate to grow that segment. Then are you confident that your EOM for 26 will be still better than 25? If yes, what are the likely levers you have?
Kamesh Goyal
Sanket? I think overall, if I look at. So as you know that we don’t really want to predict what the mix will be this year and we have said this in the past that the mix depends, the EOM actually depends on the mix. So crop, government, health, employer, employee health have the lowest commission in the eom. Then you come to fire this, which also has lower EOM compared to others. So it is difficult for us to hazard a guess.
But what one can say as a thumb rule is that the commission or EOM is lower in non motor compared to motor because motor is a higher EOM and motor is typically retained. So that is one thumb rule. And as is obvious from our number, our non motor business or proportion has been increasing, I would say quarter by quarter or year by year for the last four, five years.
Now the second is if you look at commissions per se, commissions are a function of the competition intensity. And even if you look at maybe the largest companies in the sector, the top two or the top two or top three private companies also even then this also we had discussed this on February 17th and we had uploaded it also in our disclosures that if you actually look at just motor EOM, we were, if I remember offhand, only 4% higher than the maybe a very large motor insurer.
And within that, if we actually have their mix of private car, commercial vehicle and two wheeler, then difference would have actually come down to less than 2%. So basically commission will always be a function of the market. No one can substantially pay more than the market and no one can substantially pay less than the market. So as long as we see that market intensity reduces. This would actually should not change things.
Secondly also as I said that the intention of IIDA was to reduce commission which hasn’t happened. So I am personally I would say very hopeful that IIDA will take steps to ensure that the market commission actually go down because they are coming at the cost of the retail customers. And if that happens then it will benefit everyone in the industry and then automatically digit soon EOM will actually come down on motor two.
Sanketh Godha
But just comment. If I look at your loss ratio last year I.e. 23, 2425 it kept on increasing by almost 200 odd basis point or 250 basis point every year. But the counter to that was it was an improvement in the expense ratio because the mix moved away from retail. So just to understand that if if the mix goes wholesale or more commercial, is it fair to say that your new normal in loss ratios are more 70 to 73 rather than being 68? 70 is what you used to report.
Kamesh Goyal
Not really Sankesh. I think if you look at own damage we have been growing more than the market which is a retail business. Our loss ratio in 24:25 is actually lower than 22:23. And you know that price competition has been there compared to 223 compared to 2425. Now in fact if you look at we know that in 2425 our loss ratios went up because of five major events. This has come down to 68. But even in 68 quarter four was bad. I also explained that the net loss ratio in commercial lines, especially fire, liability etc. Has much lesser impact on the profitability.
Now if you look at marine and loss ratios have improved, engineering has been volatile as I said and others we have seen a bit of an increase. So we have always said that the loss ratio at which we are writing business is around 70. Now it will move Sanket in the range of plus minus 2 based on what the catastrophic event and some large losses etc. Are like. But again I think as we said that when we explained this in February 17th and I also said this at the beginning that even if combined ratio goes up and your commissions is lower it actually improves the roe. It improves the profit.
And if you also look at from an AUM increase perspective from a business side though the growth was lower this year compared to the earlier year on slide 8 you actually see we have grown the Aum by 2,856 crores compared to 2,746 crores in the previous year. So my sense is that one should look at profitability on NEP basis and if one can also moderate it along with the reinsurance commission which people are taking especially from long term motor as an example that could actually give you the right perspective on the profitability. And there as I said we have improved our and if you combined ratio by 1.8% compared to the previous year.
Sanketh Godha
Got it last two ones the insurance acceptance in the year 25 grew by almost 70% year on year. If I look at GDPI growth it is 7 and the reinsurance accepted led to that growth of 14. So now the base is very big. So just want to check that on such a big day which is 80% of the total portfolio how confident are that this growth will continue? That’s the one question I had.
And second I think Aniruddh asked this question maybe if you can respond the 53 crores additional expense in shareholder account which explains the difference between the investment income and the underwriting Profit what the 53 crores in fourth quarter is related to.
Kamesh Goyal
So I think if you look at on the Anirud’s question the 53 crores is from a profitability perspective this is anyway accounted for from the shareholders
Sanketh Godha
It is recognized in shareholder account. Just wanted to understand this 53 crore is related to what line item because it seems to be a substantial number.
Kamesh Goyal
I was just coming to that Sankesh. So I would say it has two major components. One is that we as a company have been now decided to spend a bit of money on the brand and that is in general on the brand. It is not from a perspective of one line of business and things like that. So the idea is that company wants to invest in the brand and the board felt that we can continue to spend this money without allocating it to the policyholders.
Second is it also includes some cost rating to esops where when you award esops it has a certain cost and then again that is seen from a long term perspective because in our case ESOPs also get vested after four years. So we had decided, the board decided to get these costs also allocated to the shareholders account. It actually doesn’t change anything on the P and L perspective and as I also said earlier even 30 crores of commission, future commission which is not booked against advanced premium even that is also included in our P and L. So that is really on this.
On the other hand on the reinsurance side I think if you look at, everyone knows that retaining more premium in India is what the regulator and the government have always intended to do. Reinsurance guidelines have also undergone changes this year because of the requirement of collateral etc. So our sense is that for the entire industry we should actually see more premium being written. In fact this year because dealing with cross border reinsurers has become more tedious.
And it is also difficult for the cross border reinsurers because if you retain the premium with yourself and don’t give them the premium then they have loss of investment income. So then they would want to change the terms and conditions to compensate for that. And as soon as they do that and for each by each slip basis then writing business within India becomes more attractive from the company who is giving reinsurance also. So based on that Sanket, we don’t really see that as a challenge. In fact I personally foresee that almost all large companies would actually be writing more inward sac business.
Now obviously one will have to see does your TT allow that? Maybe in fhir they might not be able to write that much. They might write more on the health side where they don’t have a requirement of a treaty. But in commercial lines people will still write a bit more. They will be handicapped definitely by reinsurance treaty, non corporate lines or non property liability lines. I definitely foresee them writing more reinsurance business because that is in their own hands. They don’t really have to depend on the reinsurers for that.
Sanketh Godha
Got it. Perfect.
Kamesh Goyal
So I think I’ll just take maybe two minutes to brief with the closing remarks. Our overall performance and profitability has improved on me basis. When we look at our investment income, our investment income unlike anyone else is actually without any capital gains and and this is now has investment yield of 7.2 in quarter four we could actually increase from 2.9 to 6.4% or asset allocation towards equity. The amount invested in Q4 has as of 31st March has given a small surplus. So it seems that in hindsight it seems that what we did is right.
Combined ratio without one by n and and with one by n has actually no economic difference because 30 crores of commission has already been accrued. And when we look at combined ratio last year which was also IADA combined ratio which was without buying one by N there again on a full year basis we have seen improvement though as I said always that this combined ratio has no impact on profitability in fire business. We are seeing decent rates, reinsurance treaties capacities have increased for all commercial lines of business. Terms have become slightly better.
In Group Health. The 1st of April was tough but post that we have started seeing some semblance of changes. Our reserving continues to be very strong across whole account separately for TP and whole account excluding third party. So the reserving is robust. Very comfortable with that and we are likely to see some increase in TP increase premium rates. This year
On EOM we have reduced our EOM as to GWP by close to 3%. We feel that this would be amongst the highest decrease in EOM by any company and most companies, including big ones have actually seen in the EOM rather than reduced. And here again we expect IRDA to take some action to reduce the commission which is being paid on retail lines of business and I think it is very much required and if that happens that will also help us. Our ROE on the entire year basis was 13% and please remember that this was only our seventh full year of starting the company from scratch.
So thanks everyone for joining. If you have any additional questions please do reach out to our colleagues in investor relations. That is piyush. Thanks a lot for joining and look forward to your participation in our future events too. Thank you so much.
Operator
Thank you on behalf of ICICI Securities. That concludes this conference. Thank you all for joining us and you may now disconnect your lines.