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
are
1
 Motilal Oswal Financial Services
Star Health
STAR – largest retail player with 31% market share
STAR is by far the largest Retail Health market player with 31% market share and the
second largest player with 10% market share. Over the past four years, STAR has
increased its market share in retail health by 8.3%, with the premium CAGR at 31%
v/s the industry CAGR of 18%. Among the key drivers of these gains in market share
has been its product suite – it has the highest number of retail health products
empaneled with the IRDAI. Its distribution strength is unmatched with the highest
number of agents among SAHIs (0.43m) and tie-ups with ~90 corporate agents. It
has a pan-India presence with 737 health insurance branches spanning 26 states and
four union territories. It has been steadily growing its hospital network tie-ups and
now has 10,870 hospitals under its umbrella. The management pedigree at STAR is
strong, with Mr Venkataswamy Jagannathan (erstwhile CMD of United India
Insurance) at the helm. Other key management persons also have vast experience in
the Insurance industry.
Strong profitability track record, combined ratio better v/s most peers
Empirically, STAR has reported a claims ratio of 60–66% and combined ratio of 92–
94%, better v/s most peers. The outperformance has been possible on the back of 1)
a higher share of retail health in its product mix v/s the industry, 2) a higher focus on
SMEs in the Group Health segment, and 3) higher agent productivity vis-à-vis other
SAHIs. FY21 was an exceptional year, which saw several one-offs denting
performance; these consist of 1) the discontinuation of the Reinsurance Voluntary
Quota Sharing Treaty (VQST), which led to an impact of INR9b on NEP – as an
additional unexpired risk reserve was created as per IRDAI rules, 2) the shift to the
1/365 calculation of unexpired risk reserve v/s the 50% method earlier, and 3) high
COVID claims. Adjusted for these one-offs, the incurred claims ratio stood at 67% v/s
the reported incurred claims ratio of 87%. Its expense ratio saw steady decline to
19.6% in FY21 (from 27.8% in FY17), primarily on the back of scale benefits. This was
further reflected in healthy average RoE of 18% during FY17–20.
Deserves premium valuations, led by high growth and healthy profitability
STAR Health would be the first SAHI to be listed in India. Among the general
insurers, ICICI Lombard and New India Assurance are direct plays on the overall
general insurance growth story, whereas GIC Re is an indirect play. However, STAR
offers a unique proposition to play the fastest growing segment in the General
Insurance space. Relatively better profitability, with a combined ratio of 92–94% on
a steady-state basis (ICICI Lombard: 100%, New India: 113%, GIC Re: 112%), a
healthy product suite, a strong distribution network, and management pedigree are
moats that call for premium valuations. At INR400b (USD5.3b), the valuation would
stand at 33x FY24E base case earnings.
Key risks
While the COVID-19 pandemic did result in a pull for demand for health
insurance, it also led to a higher claims ratio. Therefore, a third COVID wave may
prove detrimental to earnings given the severity of COVID-19 claims is 2x non-
COVID-19 claims.
Increased competition from multi-line general insurers may pose a risk to
growth for STAR.
The extension of the coverage of government schemes, such as Ayushman
Bharat, to those beyond the BPL category may slow the industry growth rate.
2
8 October 2021
 Motilal Oswal Financial Services
Star Health
Story in charts
Exhibit 1: Lower health insurance penetration and density
provide huge headroom for growth
5%
3%
2%
0%
Penetration
Density
2700
1800
900
0
FY18
Source: MOFSL, Company
377
Exhibit 2: Industry growth strong historically
Health Insurance (INRb)
586
YoY Growth
34%
455
517
21%
14%
FY19
FY20
13%
FY21
246
4m FY22
Source: MOFSL,GIC
Exhibit 3: Gradual gains in Retail Health share by SAHIs
Share of SAHI in Retail Health
49%
44%
40%
46%
49%
Exhibit 4: Star Health gaining share in Overall Health pie
Star Health Market share in Retail Health
31%
28%
26%
23%
31%
FY18
FY19
FY20
FY21
4m FY22
FY18
FY19
FY20
FY21
4m FY22
Source: MOFSL, GIC
Source: MOFSL, GIC
Exhibit 5: Better profitability for Star Health, with lower
claims ratio
Exhibit 6: …along with declining opex
FY18
FY21
Source: MOFSL, Company
Source: MOFSL, Company
8 October 2021
3
 Motilal Oswal Financial Services
Star Health
Contents: Star Health and Allied Insurance: Compelling business
model in a beckoning industry
Compelling business model in a beckoning industry ....
Error! Bookmark not defined.
Story in charts ...................................................................................................... 3
Company overview............................................................................................... 5
Industry overview .............................................................................................. 11
Financial analysis and valuations ........................................................................ 17
Peer comparison ................................................................................................ 21
Valuation argument ........................................................................................... 22
Issue details ....................................................................................................... 23
Scenario analysis ................................................................................................ 25
Risk factors ........................................................................................................ 28
Financials and valuation ..................................................................................... 29
8 October 2021
4
 Motilal Oswal Financial Services
Star Health
Company overview
Star Health, established in 2006, is India’s first SAHI company.
It is the largest private health insurer in India, with market share of 15.8%, GWP of
INR93.5b in FY21, Retail Health market share of 31%, and Group Health share of 3.6%
Retail Health and Group Health accounted for 89.3% and 10.7%, respectively, in FY21.
The retail health GWP was over 3x the retail health GWP of the next highest retail
health insurance market participant.
The FY18–21 CAGR stood as follows: Overall – 31.4%, Retail – 32.4%, Group – 35.3%,
and Personal Accident (PA) – 8.5%.
The average retail health sum insured CAGR came in at 11.7% over FY19–21.
Exhibit 7: Business mix dominated by Retail Health
Health Retail
3%
7%
12%
90%
3%
Health Group
3%
10%
Personal Accident
2%
11%
2%
13%
Others
2%
11%
85%
FY17
87%
86%
85%
FY20
88%
FY16
FY18
FY19
FY21
Source: MOFSL, Company
Exhibit 8: Highest share of business from Retail Health among large players
100%
75%
50%
25%
0%
Health-Retail
Health-Group
Health-Govt
Overseas Medical
P.A.
Source: MOFSL, Company
8 October 2021
5
 Motilal Oswal Financial Services
Star Health
Exhibit 9: Among fastest growing companies in Retail Health…
94%
52%
FY18-21 CAGR
38% 31%
29% 25%
21% 15% 14%
12% 10% 10% 10% 7%
7%
-12%
Source: MOFSL, Company, GIC
Exhibit 10: …in spite of being the largest player
FY18 Retail Market share
FY21 Retail Market share
Source: MOFSL, Company, GIC
Wide bouquet of product offerings, with family floater dominating the mix
In the Retail Health segment, STAR’s product portfolio comprises individual
(along with floater), family floater, and specialized policies – based on the age of
the customers (such as Star Senior Citizens Red Carpet and Young Star) as well
as on the disease-profile of customers with pre-existing conditions (such as
Diabetes Safe, HIV Care, and Star Cardiovascular Care). Such a wide product
portfolio has been a key enabler for market share gains. In fact, STAR has the
highest number of health products empaneled with IRDAI.
In FY21, family floater policies accounted for 60.5% of STAR’s total retail health
GWP, whereas individual and individual/floater policies accounted for 28.3%.
The share of specialized policies increased to 11.2% in FY21 from 9.5% in FY19.
Exhibit 11: Declining share of family floater
Family floater
10%
23%
Ind/Ind floater
9%
25%
Specialised
11%
28%
67%
66%
61%
FY19
FY20
FY21
Source: MOFSL, Company
8 October 2021
6
 Motilal Oswal Financial Services
Star Health
In the Group segment, STAR has adopted the strategy of being selective in
undertaking risks. It has focused primarily on SMEs to avoid aggressive pricing
and increased competition in the wider mass market. STAR intends to increase
its focus on the SME segment in the Group Health Insurance sector, wherein the
GWP CAGR stood at 46.6% over FY19–21 and the loss ratio at 77.3% in FY21 (v/s
the loss ratio of 117.9% for the Non-SME Group segment).
Exhibit 13: …as claims ratios favorable for SME business
118%
Exhibit 12: Continuous increase in share of SME segment…
SME
Non SME
69%
65%
60%
77%
40%
FY21
Source: Company, MOFSL
SME
Non SME
Source: Company, MOFSL
31%
FY19
35%
FY20
Wide distribution reach; agency accounts for 79% of premiums
Distribution plays a major role with regard to market share gains, especially in
the Retail segment. STAR Health drives its distribution primarily through the
agency channel, which accounted for 78.9% of the GWP in FY21. It has the
strength of 0.46m individual agents, the highest amongst the SAHI companies.
It is focusing strongly on improving its agent productivity. For this, the company
has created a separate category of agents who are trained, called sponsored
agents. Resultantly, the productivity of such agents has turned out to be much
higher v/s regular agents. The share of sponsored agents in STAR’s network has
increased to 12.7% (0.06m), with a CAGR of 44.7%, in the past few years.
Exhibit 14: Distribution mix for Health industry
Brokers
Corp Agents Non Banks
Direct Sale - Other than Online
35%
29%
33%
28%
32%
29%
Corp Agents Banks
Direct Sale - Online
Individual Agents
30%
29%
31%
34%
29%
34%
26%
FY15
24%
FY16
28%
FY17
25%
FY18
22%
FY19
23%
FY20
Source: MOFSL, Company
8 October 2021
7
 Motilal Oswal Financial Services
Star Health
Exhibit 15: Distribution mix for Star Health dominated more by individual agents
Individual Agents
Direct Sale
7%
14%
Corp Agents Banks
Brokers
10%
10%
Corp Agents Non Banks
Others
8%
9%
77%
76%
79%
FY19
FY20
FY21
Source: MOFSL, Company
Exhibit 16: Highest number of individual agents among SAHIs
FY18
FY19
FY20
Q3 FY21
Star Health
Max Bupa
CARE Health
ManipalCigna
Health
Aditya Birla Health
Source: MOFSL, Company
Exhibit 17: Highest in per agent productivity
INR '000
FY18
FY19
FY20
FY21*
Max Bupa
Star Health
CARE Health
ManipalCigna Health
Aditya Birla Health
Source: MOFSL, Company
*Annualized premium based on Q3 Fiscal 2021 premium per Individual Agent;
Apart from individual agents, STAR has tied up with banks such as Bank of
Baroda, Punjab National Bank, and Karur Vysya Bank. STAR has also engaged
with other corporate agents, such as Paytm and ICICI Securities. Overall, it has a
network of 90+ corporate agents.
As of 31
st
March 2021, its distribution network had grown to 737 health
insurance branches spanning 26 states and four union territories in India.
Existing branches are further supplemented by an extensive network of over
750 sales manager stations (SMS; small individual service centers) and over
7,000 in-house sales managers.
8
8 October 2021
 Motilal Oswal Financial Services
Star Health
Deep association with 11k+ hospitals
STAR has tied up with over 11k hospitals, of which it has entered into pre-
agreed arrangements with over 7k hospitals. More than 55% of the cashless
claims processed have been through the agreed network hospitals.
The advantage of agreed network hospitals is that they typically offer better
negotiated package based pricing, and the average claims amount in these
hospitals is lower than the average claims amount in non-agreed network
hospitals.
Best-in-class claims and expense ratios
STAR has complete in-house claims management capabilities, which has been a
key customer service proposition.
In FY21, STAR settled and paid 0.15m claims related to COVID-19, amounting to
gross paid claims of INR15,286m. Excluding one-offs, the claims ratio for FY21
stood at 67%, better than that of most players in the industry. However, the
claims ratio has been rising akin to industry trends.
The net expense ratio was 30.1%, 27.4%, and 27.8% in FY19, 2020, and 2021,
respectively.
While the expense ratio has been on the decline, led by benefits of scale, these
gains have been offset by the increasing claims ratio. Resultantly, the combined
ratio has been in the range of 93–94%.
Exhibit 18: Among lowest claims ratio percentage (avg for FY18, FY19, FY20, 9MFY21)
(highlight)
109%105%102%
101% 98%
87% 84% 80%
72% 71% 67% 67%
62% 59% 59% 58% 56%
Source: MOFSL, Company
8 October 2021
9
 Motilal Oswal Financial Services
Star Health
Exhibit 19: Claims payout has seen a marginal rise
Claims Paid as % of GWP
56.4%
57.1%
53.1%
51.9%
50.2%
FY16
FY17
FY18
52.2%
FY19
FY20
FY21
Source: MOFSL, Company
Exhibit 20: Among lowest combined ratios, one-offs in FY21
FY18
FY19
FY20
FY21
Star Health
Max Bupa
CARE Health
ManipalCigna
Health
Aditya Birla Health
Source: MOFSL, Company
Exhibit 21: Improving expense and combined ratio
Combined Ratio
Expense Ratio
114.8%
92.5%
93.0%
94.3%
93.2%
27.8%
FY17
26.9%
FY18
23.7%
FY19
20.9%
FY20
19.6%
FY21
Source: MOFSL, Company
8 October 2021
10
 Motilal Oswal Financial Services
Star Health
Industry overview
Significant industry under-penetration provides headroom for growth
The health insurance penetration (premium as a percentage of GDP) in India at
0.36% is significantly lower v/s the world average of 2%. India’s health insurance
density (measured as premium per person) stands at USD5, much lower v/s
global peers – China stands at USD66 and the US at USD2,679.
India spends ~3.5% of GDP on Healthcare vis-à-vis the world average of ~10%.
Healthcare expenditure comprises healthcare goods and services consumed
each year, paid either by the government, insurance companies, or the
concerned individual.
In India, the out-of-pocket expenditure on healthcare was nearly 63% of the
total health expenditure as of 2018 v/s the world average of 18%. Furthermore,
in India, insurance cover does not cover out-patient treatments.
Healthcare inflation was consistently higher than the overall CPI inflation
between FY18 and FY20. With COVID-19, treatment costs of non-COVID
ailments have also increased owing to a few mandatory tests and higher
consumables.
The total number of lives covered stood at ~500m at the end of FY20. However,
in the Retail business, the number of lives covered stood at 43m in FY20,
accounting for just 3% of the population.
Exhibit 22: Health insurance penetration (2019)
Penetration
4.1%
2.7%
2.3%
0.9% 0.8% 0.7% 0.6% 0.6%
0.4% 0.4% 0.4% 0.2% 0.2% 0.2% 0.1% 0.0%
Source: MOFSL, Company
Exhibit 23: Health insurance density (2019)
Density
2679
1095 1052
264 258 242 122
91
77
66
39
33
22
20
5
2
Source: MOFSL, Company
8 October 2021
11
 Motilal Oswal Financial Services
Star Health
Exhibit 24: Rising overall coverage…
33%
No of lives covered - overall (In mn)
36%
As % of population
36%
35%
Exhibit 25: …as well as that for the Retail segment
No of lives covered - Retail (In mn)
As % of population
3.1%
1.9%
2.2%
2.4%
2.5%
3.1%
22%
27%
288
FY15
359
FY16
438
FY17
482
FY18
472
FY19
499
FY20
25
FY15
29
FY16
32
FY17
33
FY18
42
FY19
43
FY20
Source: Company, MOFSL
Source: Company, MOFSL
Deep-dive into the growth trajectory
In FY21, overall premium collections for the industry in the Health business
stood at INR580b, of which PSU players accounted for 47%, whereas private and
SAHIs accounted for 27% and 26%, respectively. Among the different segments,
the share of the Group business stood at 48%, while Retail and Government
share came in at 45% and 7%, respectively.
With regard to growth, while FY21 was exceptionally strong for the Retail
business (which grew 28%), the Group business moderated (with 10% growth)
and the Government business posted decline (of 14%). During FY18–21, the
Retail/Group/Government business posted a CAGR of 18%/15%/5%, taking the
overall growth in the Health business to 16%.
Growth has come on the back of 1) huge underpenetration, 2) the pull created
by the pandemic environment, 3) the launch of new products by insurers, 4) an
increase in the sum assured by existing customers, and 5) price hikes taken by
companies.
In the Retail Health business, the market share of SAHIs increased from 40% in
FY18 to 46% in FY21, whereas private players gained market share of 2%. Gains
were at the cost of government players losing market share of 8%. On the other
hand, in the Group business, SAHIs increased their share in the business by 2%
to 11%, whereas private multi-line insurers were the biggest gainers with a 12%
market share increase to 33%. PSU insurers lost 14% market share during this
period.
With regard to future growth, the share of households falling in the income
bracket above INR0.2m is estimated to go up to 35% in FY22 (from 23% in FY17),
providing the potential target segment for healthcare service providers.
Over the past five years, TPAs have enrolled with 57,453 hospitals to 172,995 –
this has improved the claims settlement process for customers, especially the
availability of cashless claims. Resultantly, awareness and word of mouth would
lead to an increase in the number of health insurance products.
Going ahead, we expect the growth momentum to sustain on the following
factors: 1) customers depending only on corporate insurance policies would
start choosing individual policies as well; 2) as per capita income improves, the
affordability of buying health insurance would improve further; 3) Internet
penetration, along with the usability of the same, would improve in lower tier
8 October 2021
12
 Motilal Oswal Financial Services
Star Health
towns; and 4) insurers, along with the regulator, would aim to simplify their
products as much as possible.
Future growth: CRISIL expects an 18% CAGR over FY21–25, within which Retail
would be 23%, Group 15%, and Government 11%. However, we would not be
surprised to see the industry clocking higher growth than this based on the
aforementioned factors.
Distribution: For the Retail Health business, the agency channel plays a vital role
as it accounts for three-fourths of the premium collections. Considering this,
SAHIs increased their agent count to 681,145 in FY20 from 405,924 in FY18. For
the Group business, brokers contributed the maximum share with 42% of the
total premiums, whereas 33% of the business came from direct sales (other than
online). The share of bancassurance is relatively high for the Group business at
12% (Retail stands at 8%).
Exhibit 26: Health insurance premium growth trend
37%
Health (INRb)
% yoy
25%
The six-year industry CAGR
stands at 19% –
SAHI at 39%,
Private Insurers at 21%,
and PSU insurers at 13%.
84
FY10
115
FY11
17% 16%
21%
14%
15%
22%
21%
13%
13%
134
FY12
156
FY13
178
FY14
205
FY15
249
FY16
311
FY17
379
FY18
457
FY19
517
FY20
586
FY21
Source: MOFSL, Company
Key advantages for SAHIs
Single product focus helps SAHI better cater to customer requirements.
There is a strong focus on the underpenetrated and relatively profitable Retail
business segment.
Corporate agents adopting open architecture are allowed to have an association
with three SAHIs over and above three multi-line general insurance companies.
Exhibit 27: Rising SAHI market share in the Retail Health segment
Share of SAHI in Retail Health
49%
44%
40%
46%
49%
FY18
FY19
FY20
FY21
4m FY22
Source: MOFSL, Company
8 October 2021
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 Motilal Oswal Financial Services
Star Health
Improving cost and claims ratio for SAHIs
With regard to operating expenses as a percentage of gross premium, SAHIs
stood at 26% v/s 19% for the overall health industry. Costs have been higher due
to the Retail focus, where customer acquisition costs are much higher v/s the
Group business. However, notably, SAHIs saw the cost ratio reducing to 26% in
FY20 from 35% in FY15. Digitalization could aid further decline in the future.
Private companies and SAHIs had claims ratios of 82% and 66%, respectively, as
of FY20, while the claims ratio was much higher at 102% for public insurers.
Within the Retail segment, the claims ratio remained relatively better for SAHIs
at 59% as of FY20 v/s 67% and 92% for private and public insurers, respectively.
The share of TPAs in the total health insurance claims paid decreased to 69% in
FY20 from 74% in FY16. In-house claims processing is relatively faster as the
insurer is better equipped to explain the expenses not covered directly to the
policyholder, enabling the quicker redressal of grievances.
Exhibit 28: Brief industry overview
Industry Size
Overall GI:
Health Insurance:
INR2t US$30b
INR600b US$8b
10yr CAGR
15%
18%
FY21 growth
5%
13%
Source: MOFSL, Company
Exhibit 29: Industry summary
Ind Size (INR b)
Ind Size (USD b)
FY21 growth
Star Health Size (INR b)
Star Health Size (USD b)
Market share FY21
SAHI
PSU
Private
STAR
Mix FY21
SAHI
PSU
Private
Industry
STAR
Claims ratio average
SAHI
PSU
Private
Industry
STAR
Retail
260
3.5
28%
82
1.1
46%
30%
24%
31%
80%
30%
40%
45%
89%
50%
95%
70%
70%
60%
Corporate
280
3.7
8%
10
0.13
11%
57%
33%
4%
20%
60%
55%
47%
11%
75%
110%
85%
110%
100%
Govt
40
0.5
-10%
0
Total
600
8
13%
92
1.23
26%
47%
28%
16%
0%
84%
16%
0%
0%
10%
5%
7%
0%
60%
100%
80%
97%
66%
Source: MOFSL, Company
8 October 2021
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 Motilal Oswal Financial Services
Star Health
Exhibit 30: Health Insurance – segmental performance
Overall Health (INR b)
Retail
% of Total Health
YoY Growth
Group
% of Total Health
YoY Growth
Others
% of Total Health
YoY Growth
Total Health
YoY Growth %
FY18
158
42%
180
48%
38
10%
377
FY19
183
40%
16%
205
45%
14%
66
15%
73%
455
21%
FY20
205
40%
12%
256
49%
25%
56
11%
-15%
517
14%
FY21
263
45%
29%
277
47%
8%
46
8%
-19%
586
13%
4m FY22
92
37%
25%
125
51%
23%
30
12%
247%
246
34%
4m FY21
73
40%
101
55%
9
5%
183
Source: MOFSL, IRDAI
Exhibit 31: Performances of industry players in Retail Health segment
Retail Health (INR b)
General Insurers
Pvt General Insurers
Bajaj Allianz
Bharti AXA
Cholamandalam MS
Future Generali
HDFC ERGO
ICICI –Lombard
IFFCO –Tokio
Royal sundaram
SBI General
Tata-AIG
Others
PSU General Insurers
National
New India
Oriental
United India
SAHI
Aditya Birla
HDFC ERGO Health*
ManipalCigna
Max Bupa
Care Insurance
Star Health
FY18
95.8
35.2
5.3
0.1
2.2
0.4
7.8
10.8
1.2
1.7
1.0
2.6
2.0
60.6
14.9
21.4
14.1
10.2
62.6
0.8
10.8
2.2
6.3
6.2
36.3
FY19
101.7
36.2
6.1
0.1
2.3
0.6
5.4
9.7
1.4
2.0
1.8
4.4
2.4
65.6
16.3
23.4
15.3
10.6
81.5
2.0
13.9
2.7
7.4
8.7
46.8
FY20
105.1
36.4
6.9
0.2
2.4
0.9
8.9
5.9
1.6
2.2
2.9
1.8
2.9
68.7
17.4
23.7
15.5
12.1
99.6
3.5
14.5
3.1
8.7
11.4
58.3
FY21
141.7
62.6
8.0
0.2
2.9
1.6
27.2
7.4
2.1
2.0
3.5
3.2
4.6
79.1
20.8
26.0
18.6
13.6
121.3
5.6
0.0
3.9
13.6
16.2
82.1
3Yr CAGR
14%
21%
15%
34%
10%
56%
52%
-12%
19%
4%
52%
7%
31%
9%
12%
7%
10%
10%
25%
94%
-100%
21%
29%
38%
31%
4m FY22
47.1
20.9
2.8
0.1
0.8
0.4
8.9
2.7
0.6
0.7
1.0
1.4
1.6
26.1
7.2
8.8
5.8
4.4
44.6
2.1
0.0
1.4
6.3
6.2
28.5
4m FY21
YTD Growth
41.4
14%
18.0
16%
2.3
18%
0.1
28%
0.8
-4%
0.4
5%
7.8
14%
2.2
23%
0.6
8%
0.6
8%
0.9
9%
0.9
48%
1.4
16%
23.3
12%
5.7
25%
8.0
10%
5.5
6%
4.1
5%
32.1
39%
1.8
21%
0.0
0%
1.2
16%
3.8
68%
4.6
34%
20.7
38%
Source: MOFSL, IRDAI
8 October 2021
15
 Motilal Oswal Financial Services
Star Health
Exhibit 32: Performances of industry players in Group Health segment
Group Health (INR b)
General Insurers
Pvt General Insurers
Bajaj Allianz
Bharti AXA
Cholamandalam MS
Future Generali
HDFC ERGO
ICICI –Lombard
IFFCO –Tokio
Royal sundaram
SBI General
Tata-AIG
Others
PSU General Insurers
National
New India
Oriental
United India
SAHI
Aditya Birla
HDFC ERGO Health*
ManipalCigna
Max Bupa
Care Insurance
Star Health
FY18
164.8
37.0
7.9
1.0
0.4
1.8
1.9
7.3
4.6
1.1
3.7
1.5
5.8
127.8
33.6
39.7
21.4
33.1
15.6
1.5
4.9
1.1
1.0
3.1
4.0
FY19
182.6
59.9
12.3
2.2
0.4
2.2
6.1
12.9
6.0
1.5
3.4
1.9
10.9
122.6
21.0
45.9
23.3
32.4
22.7
2.3
5.8
2.0
1.7
4.9
5.9
FY20
225.2
79.4
11.6
2.5
0.9
3.0
6.7
21.1
9.1
1.7
4.5
6.6
11.7
145.8
19.8
63.9
27.2
34.9
30.5
4.1
5.9
2.5
3.1
6.0
8.9
FY21
247.5
90.3
11.3
3.7
1.4
2.9
10.1
19.0
10.0
1.5
9.0
7.5
13.8
157.3
29.6
77.0
26.6
24.1
29.6
6.1
0.0
3.5
3.1
6.9
10.0
3Yr CAGR
15%
35%
13%
57%
49%
16%
73%
38%
30%
10%
34%
73%
34%
7%
-4%
25%
8%
-10%
24%
58%
-100%
49%
44%
31%
35%
4m FY22
111.3
37.8
4.6
1.0
0.5
1.2
3.2
8.7
4.7
0.7
2.5
2.3
8.5
73.5
10.3
39.0
11.9
12.3
13.2
2.3
0.0
1.4
1.6
3.5
4.4
4m FY21
YTD Growth
93.6
19%
32.5
16%
3.8
22%
1.4
-29%
0.7
-34%
0.7
76%
2.3
35%
7.6
15%
4.1
14%
0.5
21%
2.9
-13%
2.2
8%
6.4
34%
61.1
20%
8.7
19%
32.0
22%
9.0
33%
11.4
8%
7.6
73%
1.5
59%
0.0
0%
0.9
70%
0.6
169%
2.0
69%
2.7
64%
Source: MOFSL, IRDAI
8 October 2021
16
 Motilal Oswal Financial Services
Star Health
Financial analysis and valuations
Financial performance adversely impacted by one-offs in FY21
The discontinuation of the Reinsurance Voluntary quota share treaty VQST on a
clean-cut basis with effect from 1
st
April 2021 led to the one-time impact of a
reduction in net premiums of INR4,833m – on account of portfolio entry without
corresponding portfolio withdrawal. The discontinuation of said reinsurance
treaty further resulted in the creation of additional unearned premium reserve
(UPR) of INR4,371m, with a corresponding increase in loss before tax and a
reduction in ‘Reserves and Surplus’ as of 31
st
March 2021.
IRDAI Circular on clean cut reinsurance treaties
Creation of UPR and Outstanding Claims Reserve (Including IBNR/IBNER) for
Premium Ceded under Clean-cut Reinsurance Treaties.
It is observed that some insurers enter into one-year Quota Share Reinsurance
Treaty on Clean-cut basis. The provision towards the unexpired premium reserve /
IBNR / IBNER, on such treaties, is neither provided by Direct insurer (cedant) nor by
the reinsurer(s).
It is hereby advised that Direct insurers (cedant) shall create the adequate reserves,
as follows, in accordance with the IRDAI (Assets, Liabilities and Solvency Margin of
General Insurance Business) Regulations, 2016:
Unearned Premium Reserve and Premium Deficiency Reserve towards the
unexpired risk at the end of the treaty period; and Outstanding Claims Reserve
(including IBNR/IBNER) towards the outstanding claims on the date of expiry of the
treaty.
https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo38
16&flag=1
During the year, the company changed its accounting policy for the provisioning
of UPR from the 50% method to the 1/365 method effective from 31
st
March
2021. This necessitated a reduction in the net premium earned by INR5,761m.
COVID-19 net paid claims have an average claims paid size of INR0.08m
(compared with an average non-COVID-related net paid claims size of
INR0.04m) due to longer hospitalization days and the severity of the COVID-19
disease. The higher average claims paid on account of COVID-19 claims resulted
in an exceptional net incurred claims impact of INR6,158m in FY21.
In FY21, 2,453,190 shares were issued as sweat equity to the Chairman & CEO at
a face value of INR10 per share, for which experts determined a fair value of
INR182 per share. The difference between the fair value and issue price of
INR421.95m is accounted as ‘Compensation Cost’ in the P&L account and
credited to ‘Reserves and Surplus’. The said difference is taxable as perquisites
in the hands of the Chairman. Moreover, as authorized by the shareholders, the
income tax of INR181.40m paid thereafter has been accounted for as
‘Compensation Cost’ in the P&L account.
8 October 2021
17
 Motilal Oswal Financial Services
Star Health
Exhibit 33: Adjusted incurred claims ratio
Particulars
1/365 change
VQT discontinuance Premium hit
VQT discontinuance IBNR hit
Total UPR Hit
Actual Unexpired risk reserve
Net off one time
Actual NEP
Add: one time hit
Adjusted NEP
Incurred claims
Incurred claims ratio – actual
Incurred claims ratio – adjusted
COVID Claims
Net off COVID Claims
Incurred claims ratio – adjusted
INR m
5,761
4,833
4,371
14,965
21,219
6,254
50,228
14,965
65,193
43,695
87.0%
67.0%
6,158
37,537
57.6%
COVID Claims
No of claims settled (mn)
Gross claims
Per claim (INR)
Outstanding claims
Gross incurred claims
Net incurred claims
Reinsurance claims
Impact of higher ticket size of COVID claims
INR m
0.15
15,286
1,01,909
1,103
16,390
12,061
4,329
6,158
Source: MOFSL, Company
Strong growth in gross premiums; trajectory to continue
STAR saw a strong CAGR of 36% over FY16–21, led by a 36% CAGR in Retail
Health, 48% CAGR in Group Health, and 36% CAGR in Personal Accident. For
policies issued, the CAGR stands at 26% in Health and 15% in PA. The per policy
premium in the Health business posted a CAGR of 8% and 7% in the PA business.
Overall, we expect the momentum in STAR’s business to sustain given the
expected industry growth and drive a further increase in market share – as the
company increases its reach with individual agents and improves its productivity
by increasing the share of sponsored agents, which is one of the key focus areas.
Also, considering the pandemic situation and rising loss ratios, price hikes in the
Health business are expected to come through with new product filings.
Resultantly, we expect STAR to report a gross premium CAGR of 28% over FY21–
24E.
Cost ratios improve substantially in past five years
STAR has seen a significant improvement in cost ratios over the past five years –
employee costs as a percentage of NWP reduced to 16.4% in FY21 from 21.2% in
FY17. Other expenses as a percentage of NWP fell by half to 3.2% in FY21 from 6.6%
in FY17. The benefits have primarily come from scale advantage on the back of
strong premium growth. We expect the trend in cost ratios to head south
considering the strong growth in premium collections.
8 October 2021
18
 Motilal Oswal Financial Services
Star Health
Exhibit 34: Lowest expense ratio among the SAHIs
FY18
54%
27%
36%
20%
57%
41%
29%
24%
17% 20%
21%
26%
38%
25%
FY21
Source: MOFSL, Company
Gross claims as a percentage of gross premiums increased to 57.1% in FY21 from
50.2% in FY17. A large portion of the spike was seen in FY20 and FY21, which were
impacted severely by COVID claims. Going ahead, we expect the claims ratio to
increase in FY22 due to the second wave. Assuming there is no third COVID wave,
we expect the claims ratio to normalize going ahead.
Exhibit 35: Gross premium remains strong
Gross premium (INRm)
47%
41%
30%
68,907
27%
54,154
FY19
FY20
FY21
FY17
FY18
FY19
FY20
FY21
YoY Growth %
93,490
Claim ratios on the rise, especially in FY20 and FY21, due to COVID
Exhibit 36: Claims ratio at comfortable levels
Claims Ratio
87.0%
36%
60.5%
61.8%
64.2%
65.8%
41,611
29,600
FY17
FY18
Source: MOFSL, Company
Source: MOFSL, Company
As highlighted before, exceptional items in FY21 drove the combined ratio of STAR
to 114.8% in FY21 v/s 93.2% in FY20. Adjusted for one-offs, the combined ratio
would have been 94.8%. While we expect the reversal of one-offs in FY22, a higher
claims ratio would continue to dent the combined ratio (FY22E: 101%). However,
going ahead, we expect sustained improvement in the ratio.
Combined ratio among best in class, except in FY21
8 October 2021
19
 Motilal Oswal Financial Services
Star Health
Exhibit 37: Combined ratio to normalize
Combined Ratio
114.8%
92.5%
FY17
93.0%
FY18
94.3%
FY19
93.2%
FY20
FY21
Source: MOFSL, Company
Solvency ratio moderated on the back of strong premium growth
The Health Insurance business is a high capital consumption business, and with high
growth, the need for capital only increases. With a premium CAGR of 36%, the
capital requirement or required solvency margin has seen a CAGR of 33%. The
solvency ratio, resultantly, has been weaker at 1.5–1.6 over FY18–20, against the
regulatory requirement of 1.5. In FY21, following the capital raise from promoters
and other entities amounting to INR26,446m, solvency increased to 2.23. However,
higher claims ratio dented the ratio in 1QFY22 to 1.65.
Exhibit 38: Healthy Solvency Ratio
Solvency Ratio
2.2
1.5
1.5
1.7
1.6
FY18
FY19
FY20
FY21
1QFY22
Source: MOFSL, Company
8 October 2021
20
 Motilal Oswal Financial Services
Star Health
Peer comparison
Exhibit 39: Health Insurance in India – peer comparison
Star Health
FY18
Mix
Retail
Group
Govt
PA
Others
Mkt Share
Retail
Group
Govt
PA
GWP (INR b)
NWP (INR b)
NEP (INR b)
Ratio
Claims
Commission
Expense
Combined
U/W profit (INR b)
87%
10%
0%
3%
0%
23%
2%
0%
3%
41.6
32.0
27.4
62%
4%
27%
93%
0.5
FY21
88%
11%
0%
2%
0%
31%
4%
0%
3%
93.5
71.4
50.2
87%
8%
20%
115%
-13.3
Care Health
FY18
56%
28%
0%
9%
5%
4%
2%
0%
2%
10.9
8.2
6.8
51%
-5%
53%
99%
-0.7
FY21
63%
27%
0%
9%
1%
6%
2%
0%
4%
25.6
19.8
17.3
55%
1%
36%
93%
0.3
Max Bupa
FY18
84%
14%
1%
1%
0%
4%
1%
0%
0%
7.5
5.1
5.8
50%
5%
57%
111%
-0.3
FY21
77%
18%
0%
5%
0%
5%
1%
0%
2%
17.5
13.5
11.5
56%
5%
41%
102%
-1.1
ICICI Lom
FY18
44%
30%
2%
18%
7%
7%
4%
1%
10%
23
16.3
13.5
68%
-20%
29%
77%
2.1
FY21
24%
63%
0%
11%
2%
3%
7%
0%
7%
30.2
26
25.6
78%
1%
24%
103%
-0.9
New India
FY18
29%
53%
12%
6%
0%
14%
22%
28%
11%
76.6
68.5
64.8
103%
8%
17%
128%
-19
FY21
23%
68%
4%
5%
0%
10%
29%
10%
12%
115.7
107.4
102.6
93%
7%
20%
120%
-21
BAGIC
FY18
31%
46%
3%
12%
8%
3%
5%
2%
4%
16.9
15.7
13.3
78%
8%
21%
107%
-1.5
FY21
35%
49%
6%
9%
1%
3%
4%
3%
4%
24
18.3
18.2
77%
6%
26%
109%
Tata AIG
FY18
36%
20%
0%
24%
21%
2%
1%
0%
4%
7.2
5
4.2
60%
-19%
38%
80%
FY21
24%
58%
0%
12%
6%
1%
3%
0%
3%
13
11.2
9.1
67%
9%
25%
101%
-1.7
0.7
-0.8
Source: MOFSL, Company
Exhibit 40: Global Health Insurance – peer comparison
United Health Group Inc
Cigna Corp
Centene Corp
Humana Inc
Anthem Inc
Molina Healthcare Inc
Revenue (USD m)
CY20
CY21
2,57,141
2,83,994
1,60,067
1,69,400
1,11,115
1,24,050
75,801
82,993
1,21,867
1,37,345
19,423
26,366
PAT(USD m)
CY20
CY21
15,403
17,893
8458
7,000
1808
3,028
3367
2,777
4,572
6,295
673
754
ROE
CY20
25.0
17.7
9.4
26.1
14.1
33.2
CY21
25.0
14.0
10.7
19.0
17.4
30.5
P/E
P/BV
CY21
CY21
22.3
5.4
10.4
1.5
12.2
1.4
18.8
3.5
14.4
2.5
19.8
6.2
Source: MOFSL, Bloomberg
Exhibit 41: Forward P/E chart (CY21)
22.3
19.8
18.8
14.4
12.2
10.4
Source: MOFSL, Bloomberg
8 October 2021
21
 Motilal Oswal Financial Services
Star Health
Valuation argument
STAR health will be the first SAHI to be listed in India. Amongst general insurers,
ICICI Lombard and The New India Assurance are direct plays whereas GIC Re is
indirect play on the overall general insurance growth story. However, STAR offers a
unique proposition to play the fastest growing segment in the general insurance
space. Relatively better profitability with combined ratio of 92-94% on steady state
basis (ICICI Lombard 100%, New India 113%, GIC Re 112%), healthy product suite,
strong distribution network and management pedigree are moats which call for
premium valuation. At INR400b (USD5.3b), the valuation will be at 33x FY24E base
case earnings.
Positives
High growth segment; premium CAGR for past 5 years at 33% and next five
years at 26%; market share gains
Underwriting profit – most general insurance players do not report underwriting
profit
Strong distribution network – peers looking to mirror the same
RoE profile: equity dilution; loss in FY21 and FY22E; medium term: 12–15%
Single-segment player; ILOM diversified; further risk of COVID
No dividend payments
Neutral
Negative
8 October 2021
22
 Motilal Oswal Financial Services
Star Health
Issue details
The fresh issue of equity shares aggregates up to INR20,000m.
The offer for sale is for equity shares upto 60,104,677
Number of Equity shares outstanding prior to the offer were 548,679,767
The net proceeds are proposed to be deployed in FY22 towards the
augmentation of the company’s capital base.
Exhibit 42: OFS sellers
Name
Safecrop Investments India LLP
Konark Trust
MMPL Trust
Apis Growth 6 Limited
University of Notre Dame DU LAC
MIO IV Star
MIO Star
ROC Capital Pty Limited
Sai Satish
Venkatasamy Jagannathan
Berjis Minoo Desai
Total
Category
Promoter
Promoter Group
Promoter Group
Others
Others
Others
Others
Others
Others
Others
Others
Selling Stake
3,06,83,553
1,37,816
9,518
76,80,371
74,38,564
41,10,652
41,10,652
25,09,099
18,04,312
14,76,140
1,44,000
6,01,04,677
Current Stake
24,86,64,543
11,16,889
77,132
3,18,90,328
2,47,95,215
2,75,25,843
1,82,79,632
1,14,94,908
35,66,693
53,04,240
2,15,145
37,29,30,568
Stake sale
12.3%
12.3%
12.3%
24.1%
30.0%
14.9%
22.5%
21.8%
50.6%
27.8%
66.9%
16.1%
Source: MOFSL, Company
8 October 2021
23
 Motilal Oswal Financial Services
Star Health
Exhibit 43: SWOT analysis
Strengths:
1. Distribution reach,
especially through
individual agents
2. In-house claims
settlement process aids
strict vigilance over
fraudulent claims and
control over costs
3. Tie-ups with hospitals
across the country
4. Wide variety of
products, addressing all
customer segment needs
5. One of the few
companies in the Health
segment to report
underwriting profit
6. Strong management
Weaknesses:
1. Higher revenue
concentration on one
product could pose risk
2. Capital requirement is
huge
Opportunities:
1. Highly underpenetrated
market, with just 3% of the
population covered under
individual schemes
2. COVID-19 has increased
awareness among
customers and there is a
strong pull
3. Digitalization of health
records would provide
easier access and enable a
smoother claims process
4. New platforms are
enabling the easier
Threats
1. High competitive
intensity in the segment
with overall 30 players (24
Pvt + 4 PSUs + 5 SAHIs)
2. Another COVID-like
pandemic could
significantly dent
profitability
3. Pricing in Group
segment continues to be a
challenge given stiff
competition
processing of health
insurance applications
Source: Company, MOFSL
8 October 2021
24
 Motilal Oswal Financial Services
Star Health
Scenario analysis
Base case
We expect Retail Health / Group Health / Personal Accident GWP to grow by
35%/12%/12% in FY22.
We assume claims paid as a percentage of GWP at 62% and 53% for FY22 and
23E respectively.
Investment yields are assumed at 6.2% each year.
The resultant combined ratio is estimated to be 99.4% and 92.5% in FY22 and
FY23 respectively.
We estimate PAT of INR2.3b in FY22.
Bull case
We expect Retail Health/ Group Health / Personal Accident GWP growth to be
higher by 3% for FY22 and 23E each.
We assume claims paid as a percentage of GWP to be lower by 1% each year for
FY22 and 23E.
Investment yields v/s base assumptions are assumed to be higher by 20bps
every year.
The resultant combined ratio is expected to improve by 146bps and 180bps in
FY22 and FY23 respectively.
Compared with the base case assumption of PAT of INR2.2b, we see PAT of
INR5.0b in FY22.
Bear case
We assume Retail Health / Group Health / Personal Accident GWP growth to be
lower by 3% for FY22 and FY23E each.
Claims paid as a percentage of GWP are expected to be higher by 1% each year
for FY22 and 23E.
Investment yields v/s base assumptions are assumed to be lower by 20bps each
year over FY22–23E.
The resultant combined ratio is estimated to increase by 146bps and 180bps in
FY22 and FY23 respectively, v/s our base case assumption.
Compared with the base case assumption of PAT of INR2.2b, we see PAT of
INR844m in FY22.
8 October 2021
25
 Motilal Oswal Financial Services
Star Health
Exhibit 44: Scenario analysis
GWP
Growth (%)
NEP
YoY growth (%)
Underwriting Profit
YoY growth (%)
Operating Profit
YoY growth (%)
PAT
YoY growth (%)
Claims ratio
Commission ratio
Expense ratio
Combined Ratio
Actual
FY21
93.5
35.7
50.2
7.0
-13.3
NA
-10.7
-NA
-8.3
NA
87.0
8.2
19.6
114.8
Base case
FY22
123.6
32.2
104.6
108.2
-2.6
NA
1.1
NA
2.3
NA
72.0
11.7
15.7
99.4
FY23
158.4
28.1
125.1
19.6
3.0
NA
8.2
632.1
8.3
265.7
65.7
11.7
15.0
92.5
Bull case
FY22
126.4
35.2
107.0
113.0
-1.1
NA
2.8
NA
5.1
NA
70.8
11.7
15.5
98.0
FY23
165.8
31.1
130.9
22.4
5.7
NA
11.2
294.2
11.1
117.3
64.5
11.7
14.5
90.7
FY22
FY23
120.8
151.2
29.2
25.1
102.2
119.4
103.5
16.8
-4.1
0.6
NA
NA
-0.5
5.4
NA
NA
0.8
5.9
NA
595.6
73.2
67.0
11.7
11.7
16.0
15.6
100.9
94.3
Source: MOFSL, Company
Bear case
8 October 2021
26
 Motilal Oswal Financial Services
Star Health
Exhibit 45: Key management personnel
Key Management Personnel Position
Venkatasamy Jagannathan
Chairman and CEO
Subbarayan Prakash
Managing Director
Anand Shankar Roy
Managing Director
Nilesh Kambli
CFO
Aneesh Srivastava
CIO
Kannaiyapillai Harikrishnan
Sr Exe Director
- Marketing
Sriharsha Anant Achar
Chief HR Officer
Margabandhu RadhakrishnanChief Risk Officer
Chandra Shekhar Dwivedi
Appointed Actuary
Experience
He holds a master’s degree in economics.
He has previously worked with United India Insurance Company in the
capacity of Chairman and Managing Director.
He holds a bachelor’s degree in medicine and surgery and a master’s
degree in surgery in the branch of general surgery.
He has previously worked with Saudi Operation & Maintenance
Company Limited as a Specialist in General Surgery/Traumatology.
He holds a bachelor’s degree in commerce and a post-graduate diploma
in management.
He has 21 years of experience in the Insurance industry and has
previously worked with American Express Travel Related Services and
ICICI Lombard General Insurance Company Limited.
He holds a bachelor’s degree in commerce from the University of
Mumbai. He has cleared the final examination held by the Institute of
Chartered Accountants of India.
He has previously worked with Bharti AXA General Insurance Company
Limited, Citicorp Finance (India) Limited, and ICICI Lombard General
Insurance Company Limited.
He holds a bachelor’s degree in science and a master’s degree in
business administration and is a member of the Council of Chartered
Financial Analysts.
He has previously worked with Bajaj Allianz Life Insurance Company
Limited, IDBI Fortis Life Insurance Company Limited, India Advisory
Partners Private Limited, and Sahara India.
He holds a bachelor’s degree and master’s degree in veterinary sciences
from the Tamil Nadu Agricultural University.
He has previously worked with United India Insurance Company
Limited.
He holds a bachelor’s degree in engineering and a Doctor of Business
Administration degree in human resource management.
He has previously worked with HDFC ERGO General Insurance Company
Limited and Apollo Munich Health Insurance Company Limited.
He holds a master’s degree in commerce from the University of Madras.
He has previously worked with Reliance General Insurance Company
Limited.
He holds a bachelor’s degree in technology from Kanpur University and
a Master of Business Administration degree from the Sikkim Manipal
University, Sikkim.
He has previously worked with Universal Sompo General Insurance
Company Limited and KA Pandit Consultants and Actuaries.
Source: MOFSL, Company
8 October 2021
27
 Motilal Oswal Financial Services
Star Health
Risk factors
The advent of a potential third COVID wave could result in higher COVID claims
and thus acutely impact the profitability of the company.
Failure to accurately estimate incurred medical expenses or the frequency of
claims used in the pricing of products could have a materially adverse effect on
the business.
Catastrophic events, such as natural disasters, could materially increase the
claims liabilities by policyholders, resulting in losses.
Adverse movement in investment yields could impact investment income.
8 October 2021
28
 Motilal Oswal Financial Services
Star Health
Financials and valuation
Income Statement
Y/E March
Gross premium
% Change
Net written premium
% Change
Net earned premium
% Change
Incurred claims
As % of NEP
Net commission
As % of NWP
Employee expense
Other expenses
Underwriting profit
Operating profit
PBT
Tax
PAT
% Change
FY18
41,611
40.6
31,961
40.0
27,397
43.3
16,921
61.8
1,366
4.3
6,291
2,322
497
1,384
1,712
10
1,702
44.2
FY19
54,154
30.1
41,415
29.6
35,795
30.7
22,976
64.2
2,637
6.4
7,220
2,607
355
1,648
1,823
540
1,283
-24.6
FY20
68,907
27.2
52,614
27.0
46,930
31.1
30,874
65.8
3,409
6.5
8,536
2,484
1,626
3,608
4,134
1,415
2,720
112.0
(INR m)
FY21
93,490
35.7
71,448
35.8
50,228
7.0
43,695
87.0
5,838
8.2
11,750
2,264
-13,318
-10,712
-10,460
-2,204
-8,256
NA
Balance Sheet
Y/E March
Share capital
Share app money
Reserves & Surplus
Debit balance in P&L
Net worth
Fair value change shareholders
Fair value change policyholders
Borrowings
Current liabilities
Provisions
Total liabilities
Investments – shareholders
Investments – policyholders
Fixed Assets
Def tax assets
Current assets
Cash & Bank
Total Assets
FY18
4,556
-
5,745
-705
9,596
-
-
2,500
5,374
16,000
33,470
8,658
12,988
969
0
5,834
5,021
33,470
FY19
4,556
3,500
5,871
-1,644
12,282
-
-
2,500
9,003
24,939
48,725
9,523
20,778
981
1,420
7,093
8,930
48,725
FY20
4,906
-
11,530
-
16,437
20
11
2,500
11,794
30,506
61,267
14,782
28,117
1,019
1,467
9,767
6,114
61,267
FY21
5,481
-
36,758
-7,245
34,996
-47
-29
2,500
15,643
51,946
1,05,010
26,321
42,046
990
4,213
12,650
18,790
1,05,010
8 October 2021
29
 Motilal Oswal Financial Services
Star Health
Financials and valuation
Ratios
Y/E March
Growth (%)
GWP
NWP
NEP
PAT
Claims ratio
Commission ratio
Expense ratio
Combined ratio
RoE
Solvency
40.6
40.0
43.3
44.2
61.8
4.3
26.9
93.0
19.5
1.6
30.1
29.6
30.7
-24.6
64.2
6.4
23.7
94.3
11.7
1.5
27.2
27.0
31.1
112.0
65.8
6.5
20.9
93.2
18.9
1.5
35.7
35.8
7.0
NA
87.0
8.2
19.6
114.8
-32.1
2.2
FY18
FY19
FY20
FY21
8 October 2021
30
 Motilal Oswal Financial Services
Star Health
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MOFSL also earns DP income from clients which are not considered in above disclosures.
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This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be
altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is
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The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research
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Disclosure of Interest Statement
Star Health
Analyst ownership of the stock
No
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and
Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity
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8 October 2021
31
 Motilal Oswal Financial Services
Star Health
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Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.
CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022
7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI:
ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579 ;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration
No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.:
INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,
NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered
through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk
Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk,
read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law
Tribunal, Mumbai Bench.
8 October 2021
32