- Gross Written Premium (GWP): INR 3,476 crores, up 18% YoY.
- Market Share: 42% of the standalone health insurance industry; 4.8% among all general insurance companies, up 20 bps YoY.
- Combined Ratio: 99.2% in Q1 FY25 vs. 97.8% in Q1 FY24.
- Claims Ratio: 67.6% in Q1 FY25 vs. 65.4% in Q1 FY24.
- Expense Ratio: 31.6% in Q1 FY25 vs. 32.4% in Q1 FY24.
- Investment Assets: INR 15,802 crores, up 19% YoY.
- Investment Income: INR 295 crores, up 18% YoY.
- Yield: 7.5% in Q1 FY25 vs. 7.4% in Q1 FY24.
- Profit Before Tax (PBT): INR 426 crores, up 11% YoY.
- Profit After Tax (PAT): INR 319 crores, up 11% YoY.
- Return on Equity (ROE): 4.9% in Q1 FY25 vs. 5.2% in Q1 FY24.
- Solvency Ratio: 2.29x vs. regulatory requirement of 1.5x.
- Agency Business Contribution: 80% of overall business; 718,000 agents with a net addition of 17,000 agents in Q1 FY25.
- Banca Channel Contribution: 8% of GWP; 61 partnerships.
- Corporate Channel Contribution: 5% of overall business.
- Digital Channel Contribution: 7% of overall GWP; 70% from direct-to-consumer, 30% from online brokers and web aggregators.
- Sales Manager Stations: 1,319, with 165 added in Q1 FY25.
- Branches: 887 branches with 2,000+ customer touch points.
- Claims Processing: 92% processed in less than 2 hours; 90% of paid claims were cashless.
- Anti-Fraud Savings: 2.4% of reported claims saved.
- Average Sum Insured: Increased by 8% YoY to INR 10 lakhs.
- Long-Term Policies: 7% of retail GWP in Q1 FY25 vs. 5% in Q1 FY24.
- Digital Issuance: 72% of premium collection in Q1 FY25 vs. 66% in Q1 FY24.
- Preventive Health Checkups: Increased by 156% YoY.
- Telemedicine Usage: Increased by 51% YoY.
- Wellness Enrollment: Increased by 100x YoY.
- Customer App Downloads: 6.6 million+ in Q1 FY25 vs. 5.7 million in FY24.
- Website Organic Traffic: Increased by 57% YoY.
Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Star Health and Allied Insurance Co Ltd (BOM:543412, Financial) reported a Gross Written Premium (GWP) growth of 18% year-on-year to INR 3,476 crores.
- The company maintained its leadership position with a 42% market share in the standalone health insurance industry.
- The agency business, contributing around 80% of overall business, saw a net addition of 17,000 agents in the June quarter.
- Investment income grew by 18% year-on-year to INR 295 crores, with a yield of 7.5%.
- The company has a strong solvency ratio of 2.29x, well above the regulatory requirement of 1.5x.
Negative Points
- The combined ratio increased to 99.2% in Q1 FY25 from 97.8% in Q1 FY24, indicating higher overall expenses.
- The claims ratio rose to 67.6% from 65.4% year-on-year, driven by higher medical and personal accident costs.
- The renewal premium ratio for retail health dropped to 93%, down from historical averages of 94-95%.
- The expense ratio, although slightly improved, remains high at 31.6%.
- The company faces challenges from rising hospital costs and regulatory changes, which may impact future profitability.
Q & A Highlights
Q: The claims numbers have seen some inflation. Is there any one-off here, or is this a steady state? What would be your expectation for the remaining part of the year?
A: We have seen higher-than-expected frequency in some medical cases, which is a new occurrence for Q1. The overall increase in the loss ratio is partly due to higher PA and hospitalization costs. We are monitoring the situation and preparing to manage it for the rest of the year.
Q: The NEP growth lags the overall GWP growth. When do you expect the NEP growth to catch up?
A: NEP growth for the quarter is 16%, and after reinsurance, it is 13%. The long-term reinsurance benefit impacts this, but the reinsurance commission has increased, benefiting the expense ratio.
Q: The renewal premium ratio has gone down to around 93%. What is causing this?
A: The renewal ratio is 93%, down from last year's 97% due to a price hike. Our historical average is between 96% and 95%. The current ratio is in line with our historical averages, and we continue to focus on policy growth.
Q: Given the claims trends and recent price hikes, do you foresee the need for further price increases?
A: We have planned price increases for a couple of products, with one already live and two more expected soon. We are evaluating the impact of new regulations and will take further price increases if necessary.
Q: Has there been any movement in hospital rates this year?
A: We see continued efforts by hospitals to boost revenue, leading to inflation in medical costs. This is more prevalent in metros and specific geographies with monopolistic situations. We are managing this through customer education and strategic pricing.
Q: What is the growth in fresh premium this quarter?
A: The retail health fresh premium growth was in the mid-teens, and the overall growth was around 18%.
Q: The cost of wellness activities is allocated to claims. Does this mean the claims ratio has structurally increased?
A: The increase in wellness costs is a long-term investment. While it adds to the claims ratio, the benefits in terms of customer health and reduced repeat hospitalizations are expected to outweigh the costs over time.
Q: Can you elaborate on your strategy for composite licensing if it happens?
A: We are evaluating adjacencies and engaging with consultants to develop a strategy. We aim to leverage our customer engagement to offer comprehensive protection plans. The regulatory changes are expected soon, and we are preparing to act when they become a reality.
Q: What is the equity percentage in the investment book, and what were the capital gains this year versus last year?
A: Our non-fixed income book is approximately 12% of the portfolio, with gains of around 11% to 12% on a book value basis. The capital gains in the P&L for this quarter are approximately INR12 crores.
Q: What is the renewal rate in volume terms, and what is the total volume growth year-over-year?
A: The retail business has grown at 15%, with volume growth around 7.5%. The renewal rate in volume terms is historically around 86% to 88%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
