Star Health
BSE SENSEX
60,060
S&P CNX
17,895
8 October 2021
Sector: Financials - Insurance
Compelling business model in a beckoning industry
Financials Snapshot (INR b)
2019
Y/E March
GWP
54.2
Growth (%)
30.1
NEP
35.8
YoY growth (%)
30.7
Underwriting Profit
0.4
YoY growth (%)
-28.5
Operating Profit
1.6
YoY growth (%)
19.1
PAT
1.3
YoY growth (%)
-24.6
2020
68.9
27.2
46.9
31.1
1.6
357.6
3.6
118.9
2.7
112.0
2021
93.5
35.7
50.2
7.0
-13.3
NA
-10.7
NA
-8.3
NA
Star Health and Allied Insurance (STAR), incorporated in 2006, is the largest
private health insurer in India with market share of 15.8% and gross written
premium (GWP) of INR93.5b in FY21.
In FY21, the retail health GWP for STAR was over 3x the retail health GWP of the
next highest retail health insurance market participant. It has market share of
31% in the Retail Health segment.
During FY18–21, STAR outperformed the industry in premium growth, with
31.4%/32.4%/35.3%/8.5% growth in Total Premium / Retail Health / Group
Health / Personal Accident.
Individual agents account for 78%+ of its premium collections, and at 0.43m
agents, it boasts the highest count of agents among the standalone health
insurers (SAHIs). It has a network of 737 branches (pan-India presence) and tie-
ups with 90+ corporate agents.
Its combined ratio has been among the best in the industry at 92–94%, except in
FY21, which was impacted by several one-offs. Its expense ratio saw consistent
decline to 19.6% in FY21 from 26.9% in FY18.
Current Shareholding Pattern (INR b)
Shares
Holding
Pre-IPO shareholding
(In m)
Safecrop Investments/
WestBridge AIF I
249
45%
Rakesh Jhunjhunwala
77
14%
Rekha Jhunjhunwala
18
3%
Others
1
0%
Promoter & Group
Non-Promoter
Total Shareholding
345
204
549
The Health Insurance industry is poised to see a CAGR of 18%/23%/15%/11%
in the Total/Retail/Group/Government segment over FY21–25E (CRISIL
estimates). Stark under-penetration would be the primary driver of the same.
Currently, only 3% of the population is covered under retail health insurance
plans. With government and corporate schemes, the coverage increases to
37% of the population. Relative to other major economies, health insurance
premium as a percentage of GDP (0.36%), density (USD5), and out-of-pocket
63%
health expenditure (63%), India is worse off. Furthermore, the COVID-19
37%
pandemic created a pull for health insurance demand, reflected in 28%/25%
100%
growth in retail health insurance premiums in FY21/4MFY22. Growth was
driven by 1) a surge in the number of individuals subscribing for health
insurance, 2) an increase in the sum assured by existing customers, and 3)
price hikes implemented by companies in the past fiscal.
Retail Health Insurance – a large opportunity
SAHI market share of 46%+ in Retail Health; dominance to sustain
Currently, 21 private insurers, four PSUs, and six SAHIs offer retail health
insurance products in India. However, with market share of 46% in FY21 and
market share gains of 7% since FY18, SAHIs have dominated this space. The
inherent advantage of focusing on a single product allows SAHIs to innovate in
product launches, which are then followed by multi-line insurers. Distribution
is another aspect where SAHIs, with their large agency networks, have made a
difference. Also, corporate agents adopting open architecture are allowed tie-
ups with three SAHIs, along with three multi-line general insurers. Hence, they
prefer to sell the health insurance products of SAHIs and non-health products
of multi-line insurers. While multi-line insurers are vying to emulate the
agency network strategy, we see limited impact over the near term.
Prayesh Jain – Research Analyst
(Prayesh.Jain@MotilalOswal.com)
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com) /
Urmila Bohra
(Urmila Bohra @MotilalOswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors
2021
advised to refer through important disclosures made at the last page of the Research Report.
7 October
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