Star Health & Allied Insurance Company Ltd:Annual Report 2023-24 Analysis

Star Health and Allied Insurance: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

• Established in 2006 as India’s first standalone health insurance company.
• Founded with the objective of providing affordable and comprehensive health insurance solutions to individuals and families.

Headquarters Location and Global Presence:

• Headquartered in Chennai, India.
• Primarily operates within India.

Company Vision and Mission:

• Vision: To be the most preferred health insurance company in India.
• Mission: To provide quality healthcare solutions at affordable prices, ensuring customer satisfaction and stakeholder value.

Key Milestones in Their Growth Journey:

• 2006: Commenced operations.
• 2013: Surpassed INR 1,000 crore in Gross Written Premium.
• 2019: Surpassed INR 5,000 crore in Gross Written Premium.
• 2021: Initial Public Offering (IPO).

Stock Exchange Listing Details and Market Capitalization:

• Listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
• Market capitalization fluctuates based on market conditions; refer to current stock market data for the most up-to-date information.

Recent Financial Performance Highlights:

• Review the company’s official financial reports and investor presentations for the most recent financial performance data (revenue, profit, claims ratio, etc.).

Management Team and Leadership Structure:

• Anand Roy is the Managing Director and CEO.
• The company has a board of directors comprising experienced professionals from diverse fields.

Notable Awards or Recognitions:

• Star Health frequently receives awards and recognitions for its performance, customer service, and innovation in the health insurance sector. (Check recent press releases for details.)

Their Products #

Complete Product Portfolio with Categories:

• Individual Health Insurance: Plans for individuals, families, and senior citizens.
• Family Health Insurance: Comprehensive coverage for entire families.
• Senior Citizen Health Insurance: Tailored plans for elderly individuals.
• Accident Care Insurance: Coverage for accidental injuries and related expenses.
• Critical Illness Insurance: Lump-sum payout upon diagnosis of a critical illness.
• Travel Insurance: Coverage for medical emergencies and travel-related risks.
• Group Health Insurance: Plans for corporate employees and groups.
• Micro Insurance: Affordable health coverage for economically weaker sections.
• Arogya Sanjeevani Policy: A standard health insurance policy as per IRDAI guidelines.

Flagship or Signature Product Lines:

• Star Comprehensive Insurance Policy: Comprehensive plan with a wide range of benefits and coverage options.
• Star Family Health Optima Plan: A popular family floater plan offering comprehensive coverage.
• Star Senior Citizen Red Carpet Health Insurance Plan: Designed specifically for senior citizens.

Any Unique Selling Propositions or Technological Advantages:

• Direct In-House Claim Settlement: Eliminates third-party administrators, speeding up the claim process.
• Wide Network of Hospitals: Extensive network of empanelled hospitals across India.
• Cashless Hospitalization: Facilitates cashless treatment at network hospitals.

Recent Product Launches or R&D Initiatives:

• Star Health consistently updates its product portfolio and invests in R&D to cater to evolving customer needs.

Primary Customers #

Target Industries and Sectors:

• Individuals, families, senior citizens.
• Corporate employees (through group health insurance).
• Small and medium-sized enterprises (SMEs).

Geographic Markets (Domestic vs. International):

• Primarily focused on the Indian market.

Distribution Network and Sales Channels:

• Agents: A large network of individual and corporate agents.
• Branch Offices: A wide network of branch offices across India.
• Online Channels: Direct sales through the company website.
• Partnerships: Tie-ups with banks, NBFCs, and other financial institutions.

Major Competitors #

Direct Competitors in India:

• HDFC Ergo Health Insurance (formerly Apollo Munich Health Insurance)
• ICICI Lombard General Insurance
• Bajaj Allianz General Insurance
• New India Assurance
• United India Insurance
• Oriental Insurance Company
• Max Bupa Health Insurance (now Niva Bupa Health Insurance)

Comparative Market Share Analysis:

• Market share data is dynamic and subject to change. Refer to reports from IRDAI and other industry analysis firms for current market share figures.

Competitive Advantages and Disadvantages:

• Advantages: Focus on health insurance, direct claim settlement, wide network of hospitals, strong brand reputation.
• Disadvantages: Susceptible to fluctuations in the healthcare sector, intense competition, regulatory changes.

How They Differentiate From Competitors:

• Focus on health insurance.
• Direct in-house claim settlement.
• A wide array of product offerings.
• Strong presence in tier II and tier III cities.

Industry Challenges and Opportunities:

• Challenges: Rising healthcare costs, increasing competition, regulatory compliance, fraud prevention.
• Opportunities: Growing health insurance awareness, increasing demand for specialized health plans, technological advancements in healthcare.

Market Positioning Strategy:

• Positions itself as a leading specialist in health insurance.
• Focuses on providing affordable and comprehensive health solutions.
• Emphasizes customer service and ease of claim settlement.

Future Outlook #

Expansion Plans or Growth Strategy:

• Expanding its network of hospitals and branches.
• Increasing its digital presence.
• Developing innovative products and services.
• Focusing on customer acquisition and retention.

Industry Trends Affecting Their Business:

• Increasing awareness of health insurance.
• Rising healthcare costs.
• Technological advancements in healthcare.
• Changing regulatory landscape.

Long-Term Vision and Strategic Goals:

• To be the most preferred health insurance company in India.
• To provide quality healthcare solutions at affordable prices.
• To ensure customer satisfaction and stakeholder value.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Gross Written Premium (GWP) grew at a CAGR of 19.74%, from ₹9,388.54 crore in FY 2021-22 to ₹15,254.45 crore in FY 2023-24.
• Net Earned Premium rose from ₹11,261.59 crore in FY 2022-23 to ₹12,938.27 crore in FY 2023-24.
• Profit After Tax (PAT) increased by 37% to ₹845 crore in FY 2023-24, up from ₹618.59 crore in FY 2022-23.
• The combined ratio improved from 95.33% in FY 2023-24 to 96.67% in FY 2023-24, indicating better underwriting performance.
• Solvency ratio was maintained above the regulatory requirement, standing at 2.21 times as of March 31, 2024.
• Return on Equity (IFRS RoE) reached 17.7% in FY 2023-24.
• The expense ratio was at 37%

Business Segment Performance #

• Retail Health Insurance remains the dominant segment, contributing 91.46% of the total GWP in FY 2023-24.
• Group Health products constituted 7.12% of GWP, Personal Accident products 1.39%, and Overseas Travel products 0.04%.
• Specialized products showed growth, with the GWP for Star Cancer Care, Star Cardiac Care, and Star Critical Illness Multipay policies increasing over the three-year period.
• The agency channel remained the primary distribution channel, contributing 84.66% of GWP in FY 2023-24.
• Digital channels contributed about 7% of total GWP
• Bancassurance partnerships increased, now comprising 4.99% of GWP and showing growth exceeding 30.79% in new business.

Major Strategic Initiatives and Progress #

• Expansion into rural and semi-urban markets, with 33% of branches (284 out of 881) located in these areas.
• Planned opening of 194 new branches in the next five years, with 79% (153) in locations with populations less than one lakh.
• Launch of six new products in FY 2023-24, including digital-only health indemnity products and specialized covers.
• Integration with the National Health Claim Exchange (NHCX) and Ayushman Bharat Digital Mission (ABDM) stacks.
• Customer engagement initiatives such as home healthcare services in 34 cities, wellness programs, and a revamped customer app, with app downloads increasing by 174% in FY 2023-24.
• ISO:27001 certified for ISMS and ISO:22301 for BCMS.

Risk Landscape Changes #

• Implementation of risk-based supervision to align with regulatory changes and enhance risk oversight.
• Adoption of a risk-based underwriting strategy, including differential underwriting guidelines for portability proposals and risk-based loading for specialized products.
• Integration of climate risk assessment into the enterprise-wide risk management framework.
• Enhancements in cybersecurity measures, including regular security assessments and employee training programs.

ESG Initiatives and Metrics #

• ESG considerations are integrated into business strategy, with policies addressing environmental, social, and governance factors.
• Secured a score of 43 in the S&P Global Corporate Sustainability Assessment 2023.
• Environmental initiatives include digital service enhancements to reduce paper usage, waste reduction, and energy-saving measures.
• Social initiatives focused on financial inclusion through CSR, employee mental well-being programs, and customer welfare commitments.
• Governance initiatives included strengthening the board with diverse and independent directors and adopting new policies on governance and ethics.

Management Outlook #

• Focus on “Insurance for All by 2047” by expanding presence in rural and semi-urban markets.
• Emphasis on growth with profitability, including a Digital First ecosystem, improving product mix, and expanding distribution channels.
• Continued investment in technology, talent, and partnerships to enhance customer trust and shareholder returns.

Detailed Analysis #

Financial Position Analysis #

Balance Sheet Analysis #

3-Year Comparative Analysis of Assets, Liabilities, and Equity #

(₹ ‘000)

Significant Changes in Major Line Items (>10% YoY) #

• Investments - Shareholders: Increased by 18.53% from ₹53,458,643 thousand in FY 2022-23 to ₹63,361,135 thousand in FY 2023-24.
• Investments - Policyholders: Increased by 13.78% from ₹80,462,380 thousand in FY 2022-23 to ₹91,547,721 thousand in FY 2023-24.
• Fixed Assets: Increased by 57.29% from ₹1,113,355 thousand in FY 2022-23 to ₹1,751,255 thousand in FY 2023-24.
• Deferred Tax Asset: Decreased by 37.04% from ₹5,688,997 thousand in FY 2022-23 to ₹3,581,824 thousand in FY 2023-24.
• Current Assets: Increased by 51.12% from ₹11,537,711 thousand in FY 2022-23 to ₹17,435,426 thousand in FY 2023-24.
• Current Liabilites: Increased by 22.05% from 20,300,897 thousand in FY 2022-23 to 24,778,513 thousand in FY 2023-24.
• Provisions: Increased by 15.21% from ₹72,687,410 thousand in FY 2022-23 to ₹83,746,895 thousand in FY 2023-24.
• Fair Value Change Account-Shareholders: Increased by 354.55% from ₹93,198 thousand in FY 2022-23 to ₹423,639 thousand in FY 2023-24.

Working Capital Trends #

(₹ ‘000)

• Net Current Assets have been negative for all years which indicated that current liabilities are greater than current asset.

Debt Structure and Maturity Profile #

(₹ ‘000)

Off-Balance Sheet Items #

There is contingent liabilities, other than policy related, amounting to ‘2,855,372 thousand (Previous Year 275,131 thousand) in FY 2023-24.

Operating Performance #

Income Statement #

Revenue Breakdown #

Segment-wise Revenue #

The Company primarily operates within the Health insurance segment, encompassing retail health, group health, personal accidents, and overseas travel. In FY 2023-24:

• Retail health: 91.46% of GWP
• Group health: 7.12% of GWP
• Personal accidents: 1.39% of GWP
• Overseas travel: 0.04% of GWP

Geographical Revenue #

The Company operates across India, covering 25 states and 5 Union Territories, with penetration in 17,106 out of 19,000+ PIN codes. No specific geographical revenue breakdown is provided.

Growth Rates #

• Overall Gross Written Premium (GWP) grew by 18% in FY 2023-24, reaching ₹15,254.45 Crore from ₹12,952.47 Crore in FY 2022-23.
• Retail health premium grew with a notable increase in specialized products like Star Cancer Care Platinum Insurance Policy, Star Cardiac Care Insurance Policy-Platinum, and Star Critical Illness Multipay Insurance Policy.

Distribution Channels #

• Rural Penetration: 33% of the company branches (284 of 881) are in semi-urban/rural areas.
• Agency Channel Contribution: 84.66% of the total GWP.
• Bancassurance Segment: Accounts for 4.99% of GWP and grew by 30.79%.
• Digital Business: Contributes 7% of total GWP and has a growth of 33%.

Cost Structure Analysis #

• Claims Incurred (Net): ₹8,599.94 Crore in FY 2023-24 (66.47% of Net Earned Premium).
• Commission: ₹1,853.65 Crore in FY 2023-24.
• Operating Expenses: ₹2,394.42 Crore in FY 2023-24, representing 30.65% of the gross direct premium, which is below the IRDAI-mandated limit of 35%. Employee costs are a significant part of operating expenses.
• In-house claim processing contributes to cost management, with 94.8% of cashless claims settled in less than two hours.

Margin Analysis #

• Operating Profit: ₹7,309.336 Crore for FY 2023-24, a 3.52% increase from FY 2022-23.
• Operating Profit Margin: 5.65% in FY 2023-24.
• Net Profit After Tax (PAT): Increased by 37% to ₹845.01 Crore in FY 2023-24 from ₹618.59 Crore in FY 2022-23.
• Net Profit Margin: 5.53%
• Claims Ratio: 66.47%.
• Combined Ratio: 96.67%

EPS Analysis #

• Basic Earnings Per Share (EPS): ₹14.48 for FY 2023-24, compared to ₹10.70 for FY 2022-23.
• Diluted Earnings Per Share (EPS): ₹14.19 for FY 2023-24, compared to ₹10.41 for FY 2022-23.

Quarterly Trends #

• Real GDP Growth: Q1 FY 2023-24: 8.2%, Q2: 8.1%, Q3: 8.6%, Q4: 7.8%.

Financial Analysis of Star Health and Allied Insurance Co. Ltd. (FY 2023-24) #

Cash Flow Analysis (in ‘000) #

Operating Cash Flow (OCF) #

• Receipts from other entities carrying on insurance business (Including Reinsurers) & Co insurers: (3,559,126)
• Payments of claims: (89,234,671)
• Payments of commission and brokerage: (20,728,616)
• Payments of other operating expenses: (25,990,078)
• Premium Received from policyholders, including advance receipts & payables to policy holders: 177,220,853
• GST(Net GST-ITC): (23,277,245)
• Income Tax: (982,441)
• Net OCF: 13,099,612

Investing Cash Flow (ICF) #

• Purchase of /fixed assets: (1,234,924)
• Proceeds from sale of /fixed assets: 9,015
• Purchases of investments: (1,785,406,625)
• Sales of investments: 1,765,092,807
• Interest, Dividend & Rent received: 9,793,553
• Expenses related to investments: (20,911)
• Net ICF: (11,767,085)

Financing Cash Flow (FCF) #

• Proceeds from issuance of share capital: 640,981
• Interest/Dividends Paid: (411,250)
• Net FCF: 229,731

Working Capital Management #

• The company states that it settles 88% of claims as cashless and 94.80% of cashless claims are settled in less than two hours.

Dividend and Share Buyback #

• The company has not declared any dividend for FY 2023-2024.

Debt Service Coverage #

• The company has issued Non-Convertible Debentures (NCDs) worth ’ 4,700,000 thousand.
• Interest paid on NCDs during the year: ’ 412,097 thousand.

Liquidity Position #

• Current Assets (as of March 31, 2024): ’ 17,435,426 thousand.
• Current Liabilities (as of March 31, 2024): ’ 24,778,513 thousand.
• Cash and Bank Balances (as of March 31, 2024): ’ 4,445,825 thousand.
• Cash and cash equivalents have increased by ’ 1,562,258 from the beginning of the year.

Financial Analysis: 3-Year Trends #

Profitability Ratios #

• ROE (Return on Equity): FY24: 13.33%, FY23: 11.39%, FY22: Negative. Trend shows strong improvement.
• Operating Profit Margin: FY24: 5.65%, FY23: 6.27%, FY22: -14.64%.
• Net Profit Margin: FY24: 6.01%, FY23: 5.02%, FY22: -9.63%.

Liquidity Metrics #

• Current Ratio: FY24: 0.67, FY23: 0.57. Slight improvement.
• Cash Ratio: FY24: 0.18, FY23: 0.15. Slight improvement.

Efficiency Ratios #

• Asset Turnover: FY24: 0.79, FY23: 0.74. Good improvement.

Leverage Metrics #

• Debt/Equity Ratio: FY24: 0.07, FY23: 0.08. Very low and slightly declining.

Working Capital #

• Negative working capital.

Star Health Financial Analysis: FY24 Performance #

Revenue and Profitability #

• Gross Written Premium (GWP): ₹15,254.45 crore (18% growth from FY23’s ₹12,952.47 crore).
• Net Earned Premium: ₹12,938.27 crore (increase from FY23’s ₹11,261.59 crore).
• Net Incurred Claims: ₹8,599.94 crore (up from FY23’s ₹7,320.40 crore).
• Profit After Tax (PAT): ₹845.01 crore (37% growth from ₹618.59 crore in FY23).
• Operating Profit/Loss from Miscellaneous Business: ₹7,309,336 thousands for FY24, ₹7,060,331 for FY23.
• IFRS ROE: 17.7% in FY24.

Market Share and Competitive Position #

• Retail Health Insurance: 33.06% market share among all general insurance companies, and 56.01 % SAHI (Standalone Health Insurers) market share in GIC(General Insurance Council). Ranked #1.
• Overall Health Insurance: 13.80% market share among all general insurance companies. Ranked #2. 29.68 % SAHI market share in GIC.
• Overall General Insurance: 5.26% market share among all general insurance companies, moved from 10th to 7th position in GIC rankings. 11.43% SAHI market share in GIC.
• Standalone Health Insurers (SAHI): 59.02% market share.

Key Products/Services Performance #

• Retail Health Products: Account for 85% of the retail health business. Key contributors include Family Health Optima Insurance Plan, Star Comprehensive Insurance Policy, Star Health Assure Insurance Policy, and Young Star Insurance Policy.
• Specialized product premium GWP has seen consistent growth from ₹764.66 Cr in FY 2021-22 to ₹1,344.49 Cr in FY 2023-24.
• New Products Launched in FY24: Six new products were launched, including Young Star Extra Protect Add-on Cover, Smart Health Pro (digital-only), and Star Group OPD Care.
• Channel-wise Premium (FY24): Agency: ₹128,937 million, Bancassurance: ₹7,609 million, Digital: ₹10,377 million.

Geographic Distribution and Market Penetration #

• Branch Network: 881 branches across 25 states and 5 Union Territories as of March 31, 2024.
• Rural/Semi-Urban Focus: 33% of branches (284 out of 881) are in semi-urban/rural locations.
• Expansion Plans: 194 new branches planned in the next five years, with 79% (153) in locations with populations less than one lakh.
• PIN Code Coverage: Presence in 17,106 out of 19,000+ PIN codes in India.
• Region-wise Branch Mix: Metro:242 Urban:355, Semi-urban:284.

Capital Work in Progress (CWIP) #

• CWIP involves “Intangible Assets” as IT Software and “Tangible Assets” such as Buildings, Furniture & Fittings, Information Technology Equipment, etc.

Operational Efficiency Metrics #

• Claims Ratio (Loss Ratio): 66.47% in FY24.
• Combined Ratio: 96.67% in FY24.
• Expense Ratio: 20.73% for FY 2023-24.
• Solvency Ratio: 2.21 times the regulatory requirement as of March 31, 2024.
• Claims Settlement: 94.8% of cashless claims settled in less than two hours in FY24.
• Number of lives Insured: 22,988,449 in FY 2023-24.

Growth Initiatives and Challenges #

• Growth Initiatives:
  • Expansion in rural and semi-urban markets, aligned with IRDAI’s vision of ‘Insurance for All by 2047’.
  • Digital transformation, including integration with NHCX and ABDM stacks.
  • New product development catering to diverse customer needs, including specialized products.
  • Strengthening multi-channel distribution, with a focus on agency and Bancassurance channels.
  • Investment in technology and digitization to enhance customer experience and operational efficiency.
• Revenue per Employee: 95.85 Lakhs.
• Employee Retention Ratio: 84%
• Challenges:
  • Low health insurance penetration in India.
  • Managing risks associated with regulatory changes, customer experience, and market-wide risks.
  • Climate change awareness potentially increasing insurance demand and post-disaster payouts.

Risk Framework #

Comprehensive Risk Assessment #

Strategic Risks #

• Severity: High. The company faces risks from new business lines or market segments without prior experience.
• Likelihood: Medium. The risk is assessed based on probability and severity, categorized into significant, high, medium, and low-risk categories.
• Trend: Increasing. The company is expanding into rural and semi-urban markets.
• Mitigation Strategies: Differential underwriting guidelines for portability proposals. Process optimization to reduce turnaround time through technology integration, deployment of standard operating procedures (SOPs), and underwriter support and training. Enhanced risk assessment is conducted as per the customer risk profile, with segmentation based on the identified risk factors.
• Control Effectiveness: Partially Effective. The implemented strategies are ongoing.
• Potential Financial Impact: High, potential investment losses and reputational damage.

Operational Risks #

• Severity: High. Risks from ineffective governance, internal systems, processes, and procedures failures.
• Likelihood: Medium. Assessed through Annual risk assessments and categorized into strategic, insurance, market/credit, operational, regulatory/legal, business, and reputational risks.
• Trend: Stable, due to proactive management and implementation of mitigation measures.
• Mitigation Strategies: ISO 22301 certified business continuity and disaster recovery plans, Risk Control Self-Assessment (RCSA), operational loss data collection, incident management framework, control reports, thematic risk reviews, and Key Risk Indicators (KRIs).
• Control Effectiveness: Effective. The widespread changes in the regulatory environment and improving customer experience.
• Potential Financial Impact: High, business disruption and financial loss.

Financial Risks #

• Severity: Medium. The company faces risks related to liquidity, investment/market, and credit.
• Likelihood: Low. Investment portfolio strategically managed with a focus on fixed-income instruments and moderate portfolio duration of approximately 3.7 years.
• Trend: Stable, due to diversification of the investment portfolio and maintenance of sufficient liquidity.
• Mitigation Strategies: 80-85% of the portfolio is invested in medium to long-term fixed income instruments, with 66% in G. Sec., T-Bills, SDLs, AAA-rated bonds & TREPs. Exposure limits for securities and monitoring for interest rate risk and rating migration risk.
• Control Effectiveness: Effective, with continuous evaluation of capital requirements and a large buffer to raise sub-debt. CARE Ratings assigned AA+ to the Company and AA to the sub-debt.
• Potential Financial Impact: Solvency impacted beyond a level and inability to meet financial obligations.

Compliance/Regulatory Risks #

• Severity: High. Risk of non-compliance with legal and regulatory requirements.
• Likelihood: Low, due to robust compliance mechanisms and policies.
• Trend: Stable. Regular monitoring and updating of compliance measures.
• Mitigation Strategies: Timely dissemination of regulatory notifications, compliance reviews of key business changes, evaluation of system changes, and providing training to ensure adherence to regulations. ISO 27001 and ISO 22301 compliance.
• Control Effectiveness: Effective, as demonstrated by proactive adaptation to regulatory changes and widespread compliance training.
• Potential Financial Impact: Substantial financial penalties, and increased regulatory scrutiny.

Emerging Risks #

Climate Change Risk #

• Severity: Medium. Growing impact of climate change on health insurance claims.
• Likelihood: Increasing. Post-disaster payouts becoming more substantial with growing insurance penetration.
• Trend: Increasing, due to greater climate change awareness post-COVID-19.
• Mitigation Strategies: Regularly updating the risk management framework to include climate considerations, implementing sustainable practices, investing in climate-resilient infrastructure. Engagement with stakeholders and advocacy for environmental sustainability policies.
• Control Effectiveness: Partially Effective. Early stages of incorporating climate risk, with ongoing efforts to enhance assessment and mitigation.
• Potential Financial Impact: Medium to High. It is still difficult to quantify the financial impact of climate change on pricing and investment strategy.

Cybersecurity Risk #

• Severity: High. Increased reliance on digital platforms and technologies.
• Likelihood: Medium. Constant monitoring and assessment of cyber threats.
• Trend: Increasing. Rise in cyber threats and regulatory requirements.
• Mitigation Strategies: Comprehensive Information and Cyber Security Policy, regular employee training, strict data governance policies, periodic Business Continuity, and IT Disaster Recovery drills. ISO 27001 and ISO 22301 compliance.
• Control Effectiveness: Effective. Continuous monitoring, proactive threat assessment, and regular audits.
• Potential Financial Impact: High, potential for significant financial losses due to data breaches and operational disruptions.

Strategic and Management Analysis of Star Health Insurance #

Long-Term Strategic Goals and Progress #

• The Company’s vision is to be the most admired health insurance company in India, aligning with IRDAI’s vision of ‘Insurance for All by 2047’.
• Strategic focus includes expanding presence in rural and semi-urban markets to increase insurance penetration.
• There is a growing focus on specialized products, demonstrated by a three-year upward trend in the retail premium mix for products like Star Cancer Care, Star Cardiac Care, and Star Critical Illness Multipay.
• 79% of the next planned branches (153 of 194) will be located where the population is less than one lakh.

Competitive Advantages and Market Positioning #

• The company is ranked #1 in the Retail Health Insurance segment and #2 in the Overall Health Insurance segment.
• Star Health holds a 33.06% market share in retail health among all general insurance companies and a 56.01% market share among standalone health insurers (SAHI).
• The Company’s branch network, as of March 31, 2024, was 3.40 times larger than the second-largest private health insurance provider.
• Star Health’s agency network, with 701,000 agents and 881 branches, exceeds competitors.
• Maintains an Expense of Management (EoM) below the IRDAI-mandated 35% norm, indicating cost leadership.

Innovation Initiatives and R&D Effectiveness #

• The company has an innovation focus on customized product offerings to serve specific customer segments.
• Launched six new products in FY 2023-24, including a digital-only health indemnity product (Smart Health Pro).
• Increased focus on specialized products shown by the growth of GWP in Crore from specialized product.
• Investments in technology and digitalization are highlighted by the integration of NHCX and ABDM stacks.
• Star Health leverages AI/ML modeling.

Management’s Track Record in Execution #

• The Company has achieved a record 37% increase in Profit After Tax (PAT) to ’ 845 Crores.
• IFRS RoE reached 17.7%.
• GWP grew by 18% to ‘15,254 Crores.
• The Company settled over 1 crore claims since inception, totaling ~‘44,000 Crore, with 88% being cashless.
• The solvency ratio is maintained at 2.21 times the regulatory requirement.
• The Company has a strong focus on customer satisfaction and operational efficiency.

Capital Allocation Strategy #

• 80-85% of the investment portfolio is in medium to long-term fixed-income instruments, with 66% in G. Sec., T-Bills, SDLs, AAA-rated bonds & TREPs.
• The current portfolio duration is approximately 3.7 years.
• The company has increased exposure to AAA-rated bonds of REITs and InvITs.
• Equity exposure is mainly through the ETF/basket route, limited to a maximum of 15% of AUM, with the current portfolio at approximately 10%.
• The company maintains sufficient liquidity to meet payout requirements, defined by historical cash flow variability.
• Continuous evaluation of capital requirements help plan for adequacy of the growth capital.

ESG Framework #

Environmental Metrics and Targets #

• The Company is in the process of obtaining Green Building Certification.
• Appliances with a BEE rating of 3 & above are being purchased.
• The Company is transitioning to e-claims to reduce paper waste, effective October 2023.
• Single-use plastic is banned at the corporate office, and a buffet lunch system has replaced plastic plates.
• E-waste is disposed of through an authorized third party.
• Guidelines have been issued to improve the lifespan of laptops, aiming to reduce waste.
• The Company did not quantify Scope 3 emissions for FY23 but it did for FY24.
• The Company will be publishing its Sustainbility Report based on GRI standards by Sep 2024.

Social Responsibility Programs #

• The Company spent ’ 1.67 crore on CSR initiatives, exceeding the regulatory requirement due to a net loss.
• CSR initiatives focus on health clinics aligned with UN Sustainable Development Goals.
• Over 40,000 lives have been touched through CSR activities.
• The Company provided rural discounts of 20% on the Arogya Sanjeevani policy.
• The Company has undertaken community welfare activities and is expanding rural services.
• 100% of employees received training on health and safety.
• The Company promotes workplace diversity, with 28% female representation in the total workforce and 7% in senior positions, 22.22% in the Board.
• Employee well-being programs include mental health support and workplace stress management initiatives.
• The Company settled 94.80% of cashless claims in less than two hours.
• The Company offered Home healthcare services in 34 cities.
• Star Health’s revamped app downloads surged by 174% in FY23-24.
• Telemedicine usage saw a 45% increase in FY23-24

Governance Structure and Effectiveness #

• The Board of Directors, along with core committees, oversees business operations.
• The Company maintains a Code of Conduct and Ethics, an Anti-Bribery & Anti-Corruption Policy, and a Whistle Blower Policy.
• The Board includes nine members with diverse expertise.

• ISO 22301 and ISO 27001 certified management systems are in place for business continuity and information security.
  

• 22.22% of the Board comprises of Female representation.

Sustainability Investments and ROI #

• The Company invested in new technologies to achieve underwriting excellence and is adopting differential underwriting guidelines.
• Digital transformation is a core focus, with investments in a revamped customer app, BOT-based renewal technology, and a digital-only product (Smart Health Pro).
• 80-85% of the company’s portfolio is invested in /fixed income instruments.
• The company increased it’s exposure in AAA rated bonds of REIT’s and InvITs.
• 10% of the Company’s portfolio is in Equities and has a maximum limit of 15% of AUM for investment in equities.

ESG Ratings and Peer Comparison #

• Star Health secured a score of 43 in its first year of participation in the S&P Global Corporate Sustainability Assessment 2023.
• Kantar (April 2024) ranked Star Health 2nd in customer advocacy among SAHIs.

Regulatory Compliance and Future Preparations #

• The Company has complied with the SEBI LODR norms.
• IRDAI’s vision of ‘Insurance for All by 2047’ is being addressed through plans to expand in rural and semi-urban markets.
• The Company has integrated the National Health Claim Exchange (NHCX) and Ayushman Bharat Digital Mission (ABDM) stacks.
• A Double Materiality Assessment and Human Rights Assessment, along with ESG training, have been conducted or planned.
• The Company has 881 branches of which 33% are in semi-urban / rural areas.
• The Company is ISO 27001 and ISO 22301 compliant.

Future Projections and Guidance #

Segment-Wise Financial Analysis: Star Health and Allied Insurance Co. Ltd. #

Retail Health Insurance #

Management Guidance and Assumptions #

• Management assumes continued market leadership, leveraging its extensive agent network and branch presence, particularly in semi-urban and rural areas, to align with IRDAI’s vision of ‘Insurance for All by 2047’.
• Focus is on specialized products and maintaining cost leadership.

Market Growth Forecasts #

• The Indian health insurance market is projected to reach USD 30 billion by 2030.
• Star Health holds a 33% market share in retail health.

Planned Strategic Initiatives #

• Expansion in rural and semi-urban markets.
• Integration with NHCX and ABDM stacks.
• Opening new Sales Manager Stations.
• Emphasis on digital-first approaches.
• Product innovation will continue, focusing on specialized offerings for pre-existing conditions, and special needs.

Capital Expenditure Plans #

• Plan to include 153 branches (79% in locations with population less than 1 lac ) in next five years.
• Plan to open 1000 sales manager stations.

Efficiency Improvement Targets #

• Continued optimization of the claims ratio through efficient claims processing and network negotiation.
• Maintaining EoM below the IRDAI-mandated 35% norm.
• Cost optimization and improved product mix.

Potential Challenges and Opportunities #

• Low health insurance penetration in India is presented as both a challenge and a growth opportunity.
• Increasing consumer awareness in semi-urban and rural areas also represents an opportunity.
• Competition from other private health insurance providers.

Scenario Analysis & Sensitivity to Assumptions #

• Scenario 1 (Optimistic): Successful expansion in rural/semi-urban markets and high adoption of digital platforms, combined with favorable regulatory changes, lead to increased market share and profitability.
• Scenario 2 (Base Case): Steady growth in line with market projections, driven by increasing health awareness and product innovation.
• Scenario 3 (Pessimistic): Increased competition, slower-than-expected rural/semi-urban market penetration, and unfavorable regulatory changes result in lower growth.

Sensitivity Analysis #

• Changes in Claims Ratio: A 5% increase in claims ratio will affect the Net Profit.
• Digital Adoption Rate: Slower than expected Digital adoption rates in Rural markets will impact the success of planned initiatives.

Group Health Insurance #

Management Guidance and Assumptions #

• Focus is on profitability through stringent underwriting guidelines and risk-based pricing.
• Collaboration with corporate agents, banks, brokers, and online channels is assumed to continue.

Market Growth Forecasts #

• Growth is anticipated to be driven by SMEs and employer/employee groups, as well as non-employer/employee groups.

Planned Strategic Initiatives #

• Leveraging partnerships in the Bancassurance segment and developing customizable product offerings for various group types.

Efficiency Improvement Targets #

• Process optimization, technology integration, deployment of SOPs, and underwriter support to reduce turnaround time.

Potential Challenges and Opportunities #

• Competition within the group health segment and potential economic downturns impacting employer-sponsored health plans.

Personal Accident and Overseas Travel Insurance #

Management Guidance and Assumptions #

• Personal accident coverage is a benefit-based offering.
• Overseas travel products cover emergency hospitalization and travel inconveniences.

Market Growth Forecasts #

• The India Travel Insurance Market is projected to grow at a CAGR of 12% between 2024 and 2029, with Indian travelers expected to take 5 billion more trips by 2030.
• The personal accident insurance market is projected to grow, driven by regulatory support, innovations in policy offerings, and an emphasis on financial planning and security.

Planned Strategic Initiatives #

• Launched Star Domestic Travel Insurance Policy and Star Group Domestic Travel Insurance Policy to capture growth in domestic travel.
• Antyodaya Shramik Suraksha Yojana is a specialized personal accident cover to be offered by India Post Payments Bank.

Potential Challenges and Opportunities #

• The personal accident coverage segment benefits from the increase of road accidents.
• Competition and lack of policy awareness is a challenge in this segment.

Audit & Compliance: Star Health Financial Analysis #

Auditor’s Opinion and Qualifications #

• The auditors issued an unmodified opinion on the financial statements, affirming compliance with the Insurance Act, 1938, IRDAI regulations, and applicable Accounting Standards.
• No audit qualifications or adverse remarks were reported by the Statutory Auditors, Secretarial Auditors, or Internal Auditors for FY 2023-24.

Key Accounting Policies and Changes #

• Premium Recognition: Premium income (net of Goods and Services Tax) is recognized over the contract period or period of risk. Revisions or cancellations are accounted for in the period they occur.
• Investment Income: Interest income is recognized on an accrual basis. Accretion of discount and amortization of premium on debt securities are recognized on a straight-line basis.
• Claims Incurred: Includes claims paid, estimated liabilities for outstanding claims, and provisions for Incurred But Not Reported (IBNR) and Incurred But Not Enough Reported (IBNER) claims, based on actuarial estimates.
• Premium Deficiency: Premium deficiency has been determined based on the expected claim costs, related expenses and maintenance cost, being higher than the related unexpired risk
• Fixed Assets: Fixed assets are stated at cost less accumulated depreciation, with depreciation provided on a straight-line method based on the economic useful life as prescribed in Schedule II of the Companies Act, 2013.
• Employee Stock Option Plan (ESOP): The intrinsic value method is followed for computing compensation cost for options granted.
• No significant changes in accounting policies were noted that materially departed from applicable standards.

Internal Control Effectiveness #

• The company maintains an internal financial control system with entity-level and process-level controls.
• Risk and control matrices (RACM) and risk control self-assessment (RCSA) are employed.
• The Audit Committee reviews risk management and internal control effectiveness quarterly.
• The internal audit department conducts periodic reviews to ensure the robustness of the control systems.
• The company is ISO certified for business continuity

Regulatory Compliance Status #

• The company complied with the terms and conditions of registration stipulated by IRDAI.
• The company has an established code of conduct for directors and employees.
• The Board and senior management affirmed compliance with the company’s code of conduct for FY 2023-24.
• The solvency margin was maintained at 2.21 times, exceeding the regulatory requirement of 1.5 times.
• The company is compliant with the Expenses of Management (EOM) regulations.

Legal Proceedings and Potential Impact #

• Contingent Liabilities: Disputed statutory demands/liabilities, mainly related to GST and income tax, amount to INR 2,855.372 million.
• Income Tax Disputes: The Company has challenged assessment orders with demands aggregating to INR 626.758 million, related to the applicability of Section 115JB of the Income Tax Act.
• GST Disputes: Demand orders for non-payment of GST on reinsurance commission and other issues are under dispute.
• Management Assessment: The management, based on legal advice, believes these demands are unsustainable and has made no provisions.

Related Party Transactions #

• Related party transactions were reviewed and approved by the Audit Committee.
• No material transactions were identified that required member approval or specific disclosure in Form AOC-2.
• Key transactions included remuneration to Key Managerial Personnel and routine transactions with entities having significant influence.

Subsequent Events #

• No subsequent events were reported that required adjustment to or disclosure in the financial statements.

Analysis of Accounting Quality and Regulatory Risk Assessment #

• Accounting Quality: The company follows a consistent and prudent approach in recognizing revenue and expenses. Use of actuarial valuations for claims, including IBNR and IBNER, reflects standard industry practice.
• Regulatory Risk Assessment: The company’s solvency ratio is well above the regulatory requirement. Compliance with expense of management norms, as per IRDAI regulations, indicates prudent operational controls. The main regulatory risks appear to be related to disputes over tax and GST liabilities, although management, supported by counsel, views these demands as contestable.