Insurtech Acko Shrinks FY25 Loss by 37% on Strong Revenue, Faces IRDAI Scrutiny

Insurtech unicorn Acko has reported a notable improvement in its financial performance for the fiscal year 2025 (FY25), managing to trim its consolidated net loss by 36.7% to INR 424.4 Crore from INR 669.9 Crore in FY24. This reduction in loss was primarily fueled by robust revenue growth and enhanced margins.

Operating revenue saw a substantial increase of 34.7%, climbing to INR 2,836.8 Crore in FY25 from INR 2,106.3 Crore in the previous fiscal year. Total income, including other income, rose by 33.7% to INR 2,887.5 Crore.

The company's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) loss also narrowed significantly to INR 404.1 Crore from INR 650.2 Crore, with the EBITDA margin improving from -31% to -14% in FY25.

ACKO's total expenses grew by 17% to INR 3,311.9 Crore in FY25. Notably, employee benefit expenses decreased by 5.7%, and advertising expenses dropped by 11.7%. However, miscellaneous expenses saw a rise of 32%.

Impact

This financial performance is positive for investors and stakeholders, indicating a move towards profitability. However, the company faces significant regulatory headwinds.

Rating: 7/10

Regulatory Challenges:

Despite the financial gains, Acko is under intense scrutiny from the Insurance Regulatory and Development Authority of India (IRDAI). The regulator rejected Acko's requests for relaxation from the mandatory Expenses of Management (EoM) limits. Insurers in India must adhere to these limits, which cap expenses relative to gross written premium to ensure financial stability and the ability to pay claims.

IRDAI has mandated Acko to submit a business plan compliant with EoM rules by FY26 and has rejected a revised plan that sought compliance by Q4 FY27. This puts Acko under tighter regulatory oversight.

Additionally, IRDAI previously penalized Acko INR 1 Crore for payments made to Ola Financial Services, which were deemed rewards for soliciting insurance policies without proper authorization.

Difficult Terms Explained:

• Consolidated Net Loss: The total loss incurred by a company and its subsidiaries after all expenses, taxes, and other costs are deducted from its total revenue. Acko's loss has decreased.
• Operating Revenue: Income generated from the company's core business operations, such as selling insurance policies.
• EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. It's a measure of a company's operating performance before accounting for certain expenses.
• EBITDA Margin: The ratio of EBITDA to total revenue, expressed as a percentage. It shows how efficiently a company is managing its operations.
• Expenses of Management (EoM) Limits: Regulations set by the IRDAI that cap the operational expenses of insurance companies as a percentage of their gross written premium. These are designed to prevent excessive spending and ensure solvency.
• Gross Written Premium (GWP): The total amount of premium written by an insurer before deducting reinsurance costs or other expenses.