Care Health Insurance, one of India’s fast-growing standalone health insurers, reported a significant jump in its Gross Written Premium (GWP) for FY25, rising from ₹6,864 Cr in FY24 to ₹8,318 Cr in FY25 — a healthy 21% year-on-year growth. However, despite the impressive growth in topline, the company saw a sharp decline in its profitability. Net profit (PAT) dropped by 49% and EPS halved. This raises a critical question: Why did profitability suffer when premium income surged?

1. Claims Incurred Outpaced Premium Growth One of the clearest reasons for declining profitability is the steep rise in claims incurred. Care Health reported claims of ₹4,096 Cr in FY25, up from ₹3,074 Cr in FY24 — a 33% increase. This is higher than the growth rate in Premium Earned, which stood at just 19% (from ₹5,329 Cr to ₹6,347 Cr).

This indicates that for every rupee of premium collected, more was paid out as claims in FY25 compared to the previous year. This could be due to:

• Increased hospitalization costs

• A higher share of high-claim policies in the portfolio

• Pricing pressure and competitive undercutting

2. Commission Expenses Rose Sharply Commission costs rose from ₹1,070 Cr to ₹1,357 Cr, growing 27% YoY. This suggests increased dependence on agents and distribution networks to acquire customers, possibly due to aggressive growth strategies. While this may have supported top-line growth, it has evidently eaten into the operating margin.

3. Operating Profit Nearly Wiped Out Operating profit dropped significantly from ₹356 Cr in FY24 to just ₹49 Cr in FY25. This 86% decline in operating profit underscores that core business operations became far less efficient. Even though NEP grew from ₹6,047 Cr to ₹6,733 Cr, the benefits of this growth were offset by higher claims and commissions.

4. Decline in Other Revenue Streams "Other Revenue" plummeted from ₹81 Cr in FY24 to just ₹9 Cr in FY25. While this component is small compared to core premiums, the reduction indicates fewer auxiliary income opportunities or one-time gains.

5. PAT and EPS Slashed by Half The final impact of all these pressures is seen in bottom-line metrics. PAT dropped from ₹305 Cr to ₹155 Cr and EPS fell from 3.14 to 1.59. Even a rise in income from investments (₹143 Cr to ₹173 Cr) couldn't arrest the fall in net profits.

Conclusion Care Health Insurance's FY25 performance highlights the importance of not just growing premium volumes, but doing so profitably. The company needs to relook at its underwriting practices, customer acquisition costs, and claims management strategies. Unless operating metrics improve, continued GWP growth will not translate into value for shareholders.

For investors and analysts, the FY25 numbers are a cautionary tale that topline growth must be accompanied by margin discipline. As competition intensifies in India's health insurance sector, sustainable profitability will matter more than just scale.