Star Health and Allied Insurance Co., backed by billionaire investor Rakesh Jhunjhunwala, will raise Rs 7,247 crore by selling shares, joining a myriad of companies in their race to list on the bourses in a record year for India’s initial public offers.
Business
Established in 2006, Star Health is India’s largest private health insurer with a market share of 15.8% in fiscal ended March 2021, the IPO prospectus said citing Crisil Research. Its gross written premium was at Rs 9,348.95 crore for 2020-21 and Rs 5,069.78 crore for the six months ended September 2021.
Coverage Options:
Retail health insurance — paid for by private individuals or families through out-of-pocket expenses or private insurance.
Group health insurance — paid for by employers, typically in the form of company health insurance plans that may involve co-payments by the employee.
Government health insurance — paid for by the government, typically in the form of central or state government health insurance programmes (in fiscal 2020 to low-income households).
Personal accident
Travel insurance
Star Health’s retail health gross written premium was more than three times that of the next highest retail health insurer in 2020-21, the prospectus said citing Crisil Research.
Its distribution network as of September comprised 779 health insurance branches spread across 25 states and five union territories in India.
The company has also tied up with 11,778 hospitals for health insurance as of September. Of this, it has pre-agreed arrangements with 7,741 hospitals, or 65.7% of the total number.
Financial Highlights
Solvency Ratio
As of September 2021, Star Health had a solvency ratio of 1.52 compared with the insurance regulator’s prescribed level of 1.50.
Covid-19 Claims
The company settled and paid 1.5 lakh Covid-19 claims amounting to Rs 1,528.6 crore in FY21.
For the six months ended September, it settled and paid 1.9 lakh Covid-19 claims amounting to Rs 1,786.5 crore.
Combined Ratio
Combined ratio, referring to total expenses and losses/claims, was 114.8% in FY21 against 93.2% in FY20.
For the half year ended September, it stood at 119.2% compared with 91.9% a year earlier.
Liabilities
As of September, the company had Rs 650 crore of outstanding debt liabilities.
Assets Under Management
Total investment assets/ assets under management amounted to Rs 7,116.58 crore, which earned a realised return of 7.1% in FY21.
For the half year ended September, AUM stood at Rs 8,812.6 crore with a realised portfolio return of 9.78%.
Peers
Star Health has listed peers such as ICICI Lombard General Insurance Co. and New India Assurance Co.
The company in the IPO prospectus, however, said ICICI Lombard may not be strictly comparable as it operates under general insurance with health insurance not forming a significant component. Star Health is a standalone health insurance provider. To be sure, New India Assurance, too, is a general insurer.
Key Risks
Any potential future waves and effects of the Covid-19 pandemic on customers in terms of infection and the need for hospitalisation will result in higher claim payments.
Inadequate estimation of future claims liabilities.
Inability to maintain relationships with existing hospital network where pre-negotiated rates tend to result in lower-than-average claims.
Failure to attract new network hospitals.
Failure to develop and grow distribution network of agents in a cost-effective manner.
Fall in interest rates could negatively impact investment portfolio as 98.4% of total investment assets, by carrying value, was invested in fixed income assets and mutual funds as on Sept. 30, 2021.
Outstanding legal cases against the company.
Regulatory notices could harm reputation and unfavourable government policies and regulations.
Increased competition in the space could lead to aggressive pricing and negatively impact business.
Watch The Interview With Star Health Here:
RECOMMENDED FOR YOU
POPULAR