Star Health and Allied Insurance Company Limited (STARHEALTH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Star Health and Allied Insurance Company Limited Q3 and 9 Months FY 2025 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Pratik Patil from Adfactors PR Investor Relations team. Thank you, and over to you.

Thank you, Ashushli. Good morning, everyone. From the senior management, we have with us: Mr. Anand Roy, Managing Director and Chief Executive Officer; Mr. Nilesh Kambli, Chief Financial Officer; Mr. Aneesh Srivastava, Chief Investment Officer; Mr. Amitabh Jain, Chief Operating Officer; and Mr. Aditya Biyani, Chief Strategy and Investor Relations Officer. Before we begin the conference call, I would like to mention that some of the statements made during the course of today's call may be forward-looking in nature, including those related to the future financial and operating performances, benefits and synergies of the company's strategies, future opportunities and growth of the market of the company's services. Further, I would like to mention that some of the statements made today in conference call may involve risks and uncertainties. Thank you, and over to you, Mr. Anand Roy.

Thank you, Pratik, and a very good morning to all of you. As we begin today's earnings call, let me take a moment, first of all, to wish everyone a happy and prosperous New Year 2025. I know it's towards the end of January, but it's the first time we are connecting. So it's a privilege to connect with you today as we step into what promises to be a year of very positive changes and welcoming regulations for our industry. To take you through the details, I would like to hand over the mic to our colleague, Aditya. Aditya, over to you, please.

Thank you, Anand. Good morning, everyone. I'm wishing everyone a very happy and prosperous 2025. The insurance landscape is evolving rapidly, shaped by significant regulatory and accounting developments. These changes, while complex, are a reflection of our industry's maturing framework, one that emphasizes transparency, global alignment and customer-centric approach. Let me take a moment to outline how each of these regulatory changes will impact the industry and why they are critical. Firstly, the new reporting framework for long-term policies effective October 1, 2024, marks a shift in premium recognition. Previously, insurers could account for the entire premium of a long-term policy in a single year, reflecting a higher gross written premium. Under the new framework, the premiums will be annualized, with the total premium divided by the policy tenure and recorded proportionately for each year. For instance, for a 3-year policy, only 1/3 of the total premium will be recognized in the first year's gross written premium. This change will lead to a reduction in the reported gross written premium, which, in turn, will reflect changes in net earned premium and net return premium having an impact on the expense ratio and loss ratio of the insurer. At Star Health, we are following 1 by 365 unexpired risk reserve method, resulting in no deviation in net earned premium under the new regulatory framework. Secondly, the adoption of IFRS standard is on the cards for implementation in the next couple of years, which marks a pivotal shift and now ensures aligned revenue and expenses. This transition will enhance clarity in key financial metrics, including net earned premium, investment income and acquisition costs. Under IFRS, net acquisition costs will be deferred in line with the policy tenure and will reflect true economic return on equity. Additionally, these updated standards will enable greater transparency and improve comparability between industry players with implementation of [ 1 by N ] methodology mentioned about, there is a partial move towards the IFRS reporting in terms of net acquisition cost, which gets accounted in the future. Thirdly, the expenses of management regulations, which came into full from 1st April 2023, mandates maintaining an EOM to gross written premium cap of 35% for SAHI players. At Star Health, we are well below this requirement, which enables us to strategically focus on retail market expansion and an enhanced service delivery. Moving on to the industry performance on [ 1 by N ] basis. In 9 months FY '25, health insurance industry has grown by 11% and has reached INR 94,908 crores. This robust growth was driven by 14.3% growth in retail health and 12.4% growth in group health. In order to maintain consistency, clarity and comparability of numbers, we will be showcasing our business numbers in [ 1 by N ] and with our [ 1 by N ] for this financial year. Coming to Star Health performance. In 9 months FY '25, results [ 1 by N ] stream work on an overall basis, our GWP has grown by 16%, and the French GWP grew by 27%. Coming to our retail health segment, our overall business has grown by 14%, and the fresh retail health GWP grew by 22%. We have retained our retail health market share, which now stands at 32.2%, which is 3x larger than the second player in the industry. Fresh retail number of policy growth stood at 13%, emphasizing our focus on volume growth and value growth. Our fresh to renewal ratio for 9 months FY '25 is 24:76 as against 22:78 over the same corresponding period last year. We continue our focus on the "Risk first, growth later," strategy and these numbers are in context of this strategy with the prudent and tighter underwriting standards. Now moving on to our 4 engines of growth, A, B,C, D, without [ 1 by N ] basis for the first 9 months. Firstly, I would like to highlight, A, agency. Our agency vertical contributed around 80% of our overall business in 9 months FY '25. Our agency strength has increased to 7,61,000 agents with net addition of 19,000 agents in the December quarter. The agent recruitment number has now reached 66,000 in the first 9 months of this financial year. We have also seen a strong 14% increase in fresh GWP in 9 months FY '25 over last year through this channel. Agency activation for 9 months FY '25 has grown by 13% over 9 months FY '24. Coming to banca in 9 months FY '25, our banca channel contributed 8% to our total business, and the business has grown by 20% on an overall basis. Our number of banca partners now stands at 69%. In this quarter, we added names like Bajaj Finance and NeoGrowth to our portfolio. C is for corporate. In 9 months financial year '25, our corporate business contributed 4% to overall business. Our proprietary over-the-counter SME calculator has strengthened our association with intermediaries who have been generating new business focusing on SME and MSME business segment. Coming to digital business. Our digital business comprises of our own direct-to-consumer online brokers and web aggregators, which contributed to 8% to our overall business in 9 months financial year '25. Our own direct-to-consumer channel contributes 72% to the digital business, and the remaining 28% comes from online brokers and web aggregators. Our fresh business from digital grew by 58%. Coming to the financial performance for 9 months FY '25 on [ 1 by N ] basis. Our combined ratio for 9 months FY '25 stood at 101.8% versus 98.3% in 9 months FY '24. I would just like to highlight our combined ratio without 1 by N, stands at 101.3% for 9 months FY '25. Our claims ratio for 9 months FY '25 stood at 70.7% versus 67.3% in 9 months FY '24. We would also like to highlight our retail loss ratio for 9 month FY '25, which stands at 69.2% and group loss ratio is 90.4%. Expense ratio for 9 months FY '25 stood at 31.2% versus 31% in 9 months FY '24. I would like to highlight the expense ratio on without 1 by N, it stands at 30.6% for 9 months FY '25. For 9-month FY '25, PBT stood at INR 862 crores. PAT for 9 months FY '25 stood at INR 645 crores. Our non-annualized ROE for 9 months FY '25 stood at 9.7%. Our investment income in 9 months FY '25 has grown to INR 996 crores versus INR 790 crores in 9 months FY '24. Our investment assets have grown by 15% and have reached INR 16,666 crores in 9 months FY '25. Solvency of the company, as on December '24, was 2.22x compared to the regulatory requirement of 1.5x. Coming to the other key highlights. Our NPL score stands at 56% for the quarter ended on December '24. Our claims NPA stands at 63% as of December 31, 2024, versus 53% on September 30, 2024. Our claims reduction rate stands at 10.22% for the quarter ended December 31, 2024. Our renewal persistency has improved to 87% on a number of qualities. Our app downloads have reached 8.6 million as on 9-months FY '25. Our monthly active users have crossed 1 million as of December '24. The organic traffic to our website has grown by 28% over the last 9 months. The digital issuance as a percentage of premium collection stands at 70% in 9 months FY '25 versus 65% in 9 months FY '24. The PSC and wellness contribution to total claims out growth stands at 0.6%. Our home health care initiative has now been expanded to 100 locations and has been widely embraced by customers steadily gaining recognition. With support of trusted partners like Apollo, [ Max @ Home Health ] and Fortis, we ensure reliable personalized care that meets the diverse needs of customers across India. The average sum insured of new policies has increased by 10% to INR 10,06,000 per policy. INR 5,00,000 and about uninsured policies now constitute 82% of our retail health portfolio versus 77% in 9 months FY '24. The share of long-term policy within our GWP has increased to 10% in 9 months FY '25 versus 7% in 9 months FY '24, all without [ 1 by N ]. We have had to align our product pricing strategy to match the market reality. Up to Jan '25, we have implemented price increase across 5 products, which is approximately 65% of our retail health portfolio. Our recently launched new product, Super Star, offering [ unbound ] flexibility and customization offers 21 optional covers in addition to its exhaustive list of rates covered. Unique benefits such as Freeze Your Age, limitless care, Super Star covers, wellness programs and Premium Waiver make it stand out in the market. We are proud to share that Super Stars has achieved remarkable success, driving fresh growth for the business. It has also become the top-selling product on our digital platform and also on the leading well aggregated digital partners. And with all these updates, we can now open the floor for Q&A. Thank you.

[Operator Instructions] We'll take our first question from the line of Shreya Shivani from CLSA.

Am I audible now?

Yes, please go ahead.

Yes. Okay. Sure. I have 2 questions. First, I wanted a clarification. You mentioned that your GWP growth without [ 1 by N ] is 16%. However, in your sub notes in the P&L, you've given that about 3 -- you've given the exact amount of claims that have been deferred because of this [ 1 by N ] accounting. If I adjust for that, your -- which is about INR 30,00,000 or so. If I adjust for that, the growth will look more like 13.5% to 14%. I just wanted a clarification if what I heard was correct. Second, what I wanted to understand was on the commissions and how it may have paid out in this quarter. So clearly, your reinsurance also got deferred along with the [ 1 by N ] long-term policies, which means that the income that you were earning from the reinsurance commission has become smaller. So ideally, your commission absolute amount should have picked up in the quarter. Should have been larger than at least the last quarter. I mean, that was the rough math I was arriving at, but that's not the trend that has come up about. So if you can help me understand how that -- why that hasn't played out? And also the way the expense ratios have become elevated, it's fair to say that this is going to be the standard and going ahead? So are we looking at a fourth quarter where we usually -- the reserves are added, which means our PAT can be much, much lower. In fact, it could be a very weak quarter going into fourth quarter. Those are my questions.

Shreya, so on the GWP growth, the number you're talking about is quarter 3, which is 13.7%. For the 9 months, with the [ 1 by N ] impact, it is 16%. In terms of RI commission for longer, there's no RI commission. But if you're comparing it with last year, last year, we had the IR commission taking -- which came in Q3, which was effective 1st April '23, from April '23 to December '23. That's a onetime impact in Q3 last year, which is spread out in all the quarters this time. And in Q3, we had an impact, because the bottom by end on long-term policies, there is no saving, as well as there is no interest commission.

Okay. So the reinsurance treaty itself as during this time, there is no change because of the way the accounting is done. Is that -- is my understanding correct?

No. There is a bit -- because of the change in accounting, there is a deferment of reinsurance cushion, which has happened. Because I'm not booking the topline and hence, there is no saving and no IR commission. There is a change.

Okay. Okay. Got it. And this -- the reinsurance period is about 6.2% or so. Will this be the steady state going ahead?

Yes, it will be in the similar range with the mix of [ products ].

Got it. Got it. And on the fourth quarter -- yes.

On the fourth quarter, with the speeding -- with the 1 bank accounting coming in, there will be a deployment of cost in terms of the long-term policies. So there will not be much impact on the package what we see, the top IR commission and the cost also getting deferred.

Yes. But see, this quarter, we got a bit of support because it's a quarter where third quarter is when we renewed the reserves. The URR is changing, URR is negative. Both quarters -- usually when this -- that number becomes much bigger, right, so the PAT is always sequentially -- our fourth quarter PAT is always weaker. Now your expense ratios are also elevated, unless there is a very sharp deferred improvement in the loss ratio in the quarter can this be [ released ], right?

Yes. Shreya, I explained to you on a one-on-one basis, but what will happen is you are -- because there is a deferment of GWP, there will be a lesser impact on the URR aspect. The earned payment is not changed. Expenses stood only -- accounting number, because of the lower -- actually, the expense ratio shows an increase. On a like to like basis, there is no increase. In fact, we are doing well on the expense ratio.

We'll take our next question from the line of Avinash Singh from Emkay Global.

The first question, again, kind of for data keeping. If we look at this impact on GWP from [ 1 by N ], that's close to INR 300-odd crores of -- or like say, 8% decline in the quarter. I mean, if I do sort of a very, very crude simple math, assuming that, okay, the AFS long-term policy to be 3 years, is it correct to assume that nearly close to 12% of your entire GWP in this quarter was kind of that impacted by this [ 1 by N ] accounting. So broadly, that -- okay, the 12% is a figure for [ 1 by N ]? So that's question one. And secondly, more again, I mean, this is more from, I would say, a very, very fundamental investment perspective that you have been kind of taking excess in terms of pricing or whatever you can do with your network hospital, yet the claims ratio remains way beyond the comfort zone of -- for a model as a standalone health insurer. I mean you would like it to at least go below say 67-odd percent. Currently, you are running even for the 9 months, near 70% or so, 70-plus. So the question is that, okay, I mean, how long do you see this that [indiscernible] and the market reality is going to take before, I mean we are anywhere closer to what is the desirable sort of range in terms of claims raise. I mean, of course, expense and all are sorted. So there is not much, I think, that, okay, you can do there. So for you, it becomes a kind of an imperative to whatever you can do on the claims side. And there, of course, despite your access, things are not kind of improving the way you would like to. So I mean, what kind of a time line would you see before these things start to play -- I mean, play out and the numbers look somewhere where you could be comfortable relatively so to that effect.

Yes. So on your second question, the -- regarding the loss ratio, if you look at, sequentially, the loss ratio has come down from quarter 2 to quarter 3 by almost 1.4%. But if you look at further if we segregate between retail, and retail has actually come down by almost close to 2%, roughly 180 basis points. So clearly, there is improvement. Yes, we would like it to be better than this, and some of the actions that we've been taking are towards that. But there's been a consistent increase in frequency and severity, largely driven by heightened awareness and cashless availability, accessibility, active reach out by hospitals and generally, a more higher preference for going for surgical interventions rather than wait for conservative treatments and all. So keeping that in mind, we've taken consistent price increases across our products. And by the time we enter Q4, which is our biggest quarter, we already repriced close to 65% of our retail portfolio. So to that extent, I think whatever we need to do, given all the changes we are seeing, we have done most of that, and we should start seeing the impact of this coming in the next few quarters. And as far as the bank and group business is concerned, yes, there has been more worsening on that side. And those are annual policies where we can intervene much faster and do corrections much faster. So those corrections we've already taken in Q3, and therefore, going forward, that would look better.

Yes. Avinash, in terms of your first question, there is a mix of 2 years and 3 years as well. So the long term for Q3 will be 9% of our portfolio, 91% continues to be [ valuable ].

So just as a follow-up. If it was 9% than the impact timing, because of on [ YN ], that is coming close to 7%, 8%. So I mean if it was 9%, then typically, you will account nearly say, assuming that took it 2, 3 years. So 3-odd percent will come to impact should have been lesser because the impact appears to be 2% or 2.8% of your reason, that's why I sort of asked that to keep this higher.

Yes, it will be for normalizing as we keep on booking the premium going forward.

And just -- again, just a quick follow-up. I mean how had been the growth trend looking so far in Jan? Because, I mean, today, we are on 29, you would have senses. Because December for whatever reason, despite there's more [ YN ] was weaker industry. So how has been -- because you are -- sort of you've taken the price hike as well. So how has been kind of a growth trend looking in the month of Jan?

Anand here. As you rightly said, there has been a lot of changes in the quarter 3, both from regulatory framework as well as the macro situation. So we saw some disturbance at that time. But quarter 4, January growth looks very, very positive. In fact, on all the areas on the retail side, we are doing very well, and we hope to close this year on a very, very positive note.

[Operator Instructions] We'll take a next question from the line of Prayesh Jain from Motilal Oswal.

My first question is on the expense ratio, right? That has stagnated around 30% and we've been growing at 15%, 16%. Do we conclude out of this that the incremental acquisition is coming at a higher expense cost versus the -- what was the trend previously? And this is the levels or possibly even we can see some increase as the price-to-renewal ratio kind of increases further? Do you think that this expense of management ratio will continue to -- or trend flattish? Or we can see some scale benefits if we grow at 15%, 16%?

Yes. So what we have seen is budget growth flattish. We have been improving our share of banca business, which is benefit product, which is a higher procurement cost. The second type is for retail business, also the proposal of long term has been increasing for us. So from April and September also has a proportion of long-term business. So as that was accounted upfront under our expense report, [ 1 by N ] tool. Hence, the expectation looks to be flattish as we implement [ 1 by N ], as we're getting scale benefits, this will keep on coming down as we speak. So we see -- we continue to get into the 0.5%, 0.7%, 0.5% benefit going ahead, specifically on [ 1 by N ] implementation.

So you're saying including [ 1 by N ] there will be still benefits of 0.5%, 0.7%.

No. No, we have to normalize it for [ 1 by N ]. And on a like-for-like basis, there will be a benefit which will come in. It will move. If the weight has moved up and then it will keep on coming down again because of these [ virtues ].

Okay. Second question is on your -- the combined ratio of each of these segments, if you can share that, you shared loss ratios, but the combined ratios in each of these segments, the retail and the group for 9 months, that would be helpful. And secondly, just a suggestion, if you could report [ 1 by N ] numbers on a monthly -- excluding [ 1 by N ] numbers on a monthly basis, that would be pretty helpful to us.

We'll take the next question from the line of Supratim Datta -- should we take the next question, sir?

Prayesh, can you repeat your question again, please?

One second, sir.

The second question?

Prayesh?

Yes, sir. Can you hear me?

Yes. Right now, audible.

Asking the combined ratio of group and retail for the 9 months. If you can share that, that would be helpful. And a suggestion was to start giving [ 1 by N ] numbers on a monthly -- excluding [ 1 by N ] numbers on a growth basis on a monthly basis, that would be helpful to us. That was a suggestion, but question is on the combined ratio of group and retail.

Duly noted, I think we've already shared the retail loss ratios and group loss ratios. Considering retail is more driven by an agency, we are a retail-driven organization. So more or less, if you see a combined ratio for the organization will reflect the retail loss ratios, too -- retail combined ratios, too. And in the future, we will make a note of it. And if possible, we will try to share the combined ratios, too, but no commitment right now on the conference call.

We'll take our next question from the line of Supratim Datta from AMBIT.

My first question is on the loss ratio, and I understand that you have...

[ Supratim ], can you use your handset mode, please? You are not very clear.

Yes. Can you hear me now? Is this better?

Can you speak a bit louder, please?

Is this better?

Yes, please go ahead.

Yes. So what I'm saying is you have repriced 65% of your portfolio and you expect that to positively impact loss ratio. But if I remember last year as well, you had repriced the FHO product, which contributed around 40% of your portfolio by around 25%. However, we haven't seen that positive impact come in this year. Your retail loss ratios for 9 months is around 300, 350 basis points higher than what we were doing last year. So just wanted to understand why do you think this and the pricing actions will be different from what happened last year? If you could give us some color on that. Because from a regulatory side, what we have seen is the regulator keeps tightening, be it the kind of policies that you underwrite, that there is tightening on that or on the claims and claim repudiations, there seems to be more focus on that, both from a regulatory as well as political standpoint. So in this backdrop, how -- why should -- why do you think these current price hikes should be sufficient to drive an improvement? If you could give us some color on that. That's the first question. On the second one, if I look at the group business of yours, you went out of this in FY '23. Again, you went in, in FY '24. The idea was that SMEs will result in better loss ratios. However, that experience hasn't really played out. Now then from here, do you think that we expected to exit this business again? Or do you think a price hike will be sufficient enough to address this? Because this is, again, a very highly competitive business and -- at the overall level. So I just wanted to understand what is our strategy going to be here from this point onwards. That, again, would give us some clarity. And lastly, on the new business growth and the fresh business growth that you pointed out, last half -- second quarter, you had indicated that the first half fresh business growth was around 31%. And this time, you are saying 9 months is around 22%. So third quarter, has there been a slowdown? Or how should we read that? Or have I gotten my data wrong. If you could give some clarity on that, that would be helpful.

Supratim, Amitabh here. So what is very clear is that pricing alone cannot solve for the entire portfolio loss ratio management. And therefore, along with price increases, we are taking various portfolio corrective -- correction measures based on micro segmentation of our portfolio, which is to do with which products, which markets, what kind of add-ons, et cetera, also the overall strategy on what we do for specific markets in terms of the way we handle our distribution. So all of that will go along with pricing to make some of these impacts. And of course, the work that is happening on the supply side, which is how we deal with the providers and so on. So it's all -- it's a 360-degree approach that we have to take and we are working on all of that to make things happen. We are aware that pricing alone won't solve for it. And see, we also have to be conscious that price increases beyond the point can be counterproductive because they might lead to either lower retentions or impacting fresh sales. So that also has to be kept in mind while we are doing this. The whole idea is that we get to a cycle of good growth on the fresh side as well as have good retentions with the desired yield that we have designed in the increases. So that's how we are approaching it.

So Supratim, on the -- on your other 2 questions on group and new business growth, I think we are quite -- on the group side, the strategy was always very clear to focus on the SME and mid-corporates, and that's what we have been doing. But as you have rightly pointed out, even in those areas, we have seen an elevated loss ratio compared to what we had initially planned for. And that's largely -- if you consider the whole industry's loss ratio on the group side, it has increased and Star Health also has felt the impact, of course. So we continue with our strategy. There is no change in the strategy. We will keep focusing on the SME and the mid-corporate segments. And as we have already mentioned in our opening remarks, it's a small portion of our overall business plan, but we will continue the same strategy. As far as new business is concerned, we are growing very well. In fact, we are very confident of doing much, much better as we go forward because this new product of Super Star has really taken off very well for us on all the channels, and we expect this to become even better going forward. So first half and second half comparison cannot be maintained because bulk of the business comes in second half. So growth rate on new business seems to be very, very comfortable for us.

Supratim, does that answer your question? Supratim, I think you're on mute. Since there is no response -- sorry. Since there is no response, we'll move on to the next question from the line of Madhukar Ladha from Nuvama Wealth Management.

First, what is the extent of price hike that we are looking at? And this again gives me some fear that we may lose market share as a result of taking continuous price hikes. I think we're taking a price hike on Family Health, Optima. Last year, we had taken 25% on top of it. Again, we are taking a price hike right now. So how are we going to contain that element? Also, can you also -- maybe I missed this, what is the fresh business growth for 9 months and for Q3, if you can give those 2 numbers? And lastly, your loss issues remain sort of elevated. So what is your expectation of the trajectory going forward into '26 and '27. So some sort of guidance of there could help us as to what sort of numbers, we as management, probably -- you as management are probably going to be looking at or are working with. Yes, those would be my questions.

Madhukar, it is Anand here. See, price hike is a reflection of the market reality, which for us, mostly obviously driven by medical inflation. As long as India continues to have a very high medical inflation, insurance companies will have to keep pace with that. So this is not the first quarter call as we have always mentioned. But even if you look at it, the annualized yield that we are targeting on a -- every product price that we do is between 10% to 12%. So I think inflation is a reality and customers have to, unfortunately, pay for that. And that is how we are planning our strategies. But we are very mindful of the sensitivity of this whole business. We know that retaining customers, making sure that they don't feel aggrieved. So we have also designed our pricing strategy in that manner so that most customers are do not feel aggrieved by this whole incident. As far as FHO is concerned, yes, we had taken a price increase 2 years ago, but we have decided to take 1 more this year, so that will continue. As far as retail fresh is concerned, we have grown at 22% on 9 months on a DWP basis and 13% on NOP basis. So our strategy continues to be pushing, both on the volume side and the value side net growth, which will continue. And we are very happy to see these numbers coming back on track.

And on the loss ratio, so what should we sort of start thinking? How should we think about it over '26, '27? Any, like, improvement numbers that we should target at?

So Madhukar, the price hikes have been taken. And as we follow 1 by 365 method, the impact will be seen in the next 18 to 24 months. What's more important is our claim rejection rates have gone down and our customer NPS has gone up. So we are very cognizant of the fact that how the customer service delivery can be enhanced in these times. Price hikes have been taken only to mitigate the medical inflation, and this will continue going forward, too. So we will have to wait and see how it goes. The initial numbers, which is when we have taken a price hike, the retention has been good. So we don't see any issue in our retention portfolio in the coming years.

Got it. Just 1 more, if I could squeeze in 1 more question on the commission side. So I understand that the larger aggregators still are not willing to accept yearly commissions. And IRDA does not allow deferring of this cost. In that context, how have we dealt with this? It seems that we've managed to convert this for ourselves to a sort of yearly commission payment mechanism. So -- but I would like to hear your comments on that. And second is given this, do you see industry dynamics changing in any way because your -- the AUM ratios for your competitors would then go up a lot more sharply than they would go up for yours, so does that help you in any way? Yes.

So Madhukar, I think you answered the question yourself. The AUM -- the regulations do not put any cap on the payment of commissions. The accounting method for your gross written premium is what is changed. So on a case-to-case basis, we are discussing with our partners, and we are taking decisions based on what is beneficial to Star Health. So yes, we do have some headroom on the AUM side as compared to some of our peers when we will utilize it strategically wherever needed.

We'll take the next question from the line of Uday Pai from Investec.

I have a couple of questions. First one is can you quantify the blended impact of the price hike that you have taken in FY '25 on your total portfolio? And second would be, you had introduced premium discounting for customers with no claims, so a product such -- with that feature. So can you share what is the contribution of that product to GWP? And also, if I can squeeze in last one, what would be the loss ratios in the banca channel? You mentioned that it is a high procurement cost channel, but can you also share the loss issues in that channel? Those would be my questions.

The price hikes that we have taken are in the range of 8% to 9% on a blended basis. In terms of banca, we maintained a combined ratio target, which is below certain levels. So very difficult to comment on the loss issue, but these are very, very low loss issues as these are attachment products, which are very beneficial to the customers. And in the case of rates, these claims are paid out.

Yes. On the contribution of the no-claims premium discounting product?

So [ in the use ] for 1 of the products, which is 30% of our portfolio as of now. It is for a special product.

We'll take a next question from the line of Prakash Kapadia from Spark PMS.

If I were to look at the 9 months, combined ratio is 101.8 versus 98.2. This is largely due to higher loss ratios. And this quarter, we have seen OpEx and commission being higher. You partly alluded to the [ 1 by N ] impact, which has started recently. So what I wanted to understand, we are already following 1 by 365. So what is the impact of [ 1 by N ] for us? And from here on, how does the trajectory of combined ratios look forward on a '26 or near-term basis for us? Because we were already 1 by 365 in terms of revenue recognition. So with [ 1 by N ] is the impact still there, lesser? Are we better off? If you could give some insights that'll will be helpful.

Okay. So when we calculate the loss issue, it's -- the numerator is claims and the denominator is net earned premium. And hence, for loss ratio purposes, the onetime change did not create an impact. When it comes to expense ratios that denominator is net return premium. So while the NEP does not get impacted because of 1 bank, the net retail premium does get impacted because -- it doesn't mean it's going down. And hence, the loss issue looks to be -- the expense ratio looks to be elevated by 1.6% for the quarter. So that is on a like-for-like basis. We see that the expense issue is flat.

Okay. So you're saying for Q3, if I were to take this impact, it is higher by 1.6%?

Yes, because of the [ 1 by N ] impact. Otherwise, it is -- last year, it was 30.3% expense ratio. Now it is 30.2%, which is flattish.

Okay. Okay. And as we build the book and we are looking at growth coming forward from Q4 onwards. So what ideally should we look at the direction of -- I'm not looking at a specific guidance, the direction of the combined ratios going forward, how lower can they be? Some kind of a direction.

See, Prakash, right now, when we started this year, we had given that we would like to double our top line and work towards an IFRS path. Right now, at this critical juncture when there are so many regulatory and accounting changes happening. I think what's more important is whether the segment is growing and we as retail players, whether the fresh business is going up or not. I think that is where the agency, the digital, the banca, retail, everyone is focusing on it. And our growth has been very, very good. In fact, our retail fresh growth has been almost in the range of 22-odd-percent and followed by a very good volume growth. So more than anything, I think we should be focusing more on the IFRS path towards financial year '28 and whether we can keep growing at the rate, what we have envisaged, which is 18-odd percent, reaching and doubling our top line from financial year '24.

We'll take a next question from the line of Dipanjan Ghosh from Citi.

Just a few questions. First, when I look at your renewal premium growth, that tends to be in the retail health side, my calculations say that it should be around the 10% to 13% range. And you also mentioned the blended price hikes that you have taken over the last 9 months is around 8% to 10%. So broadly, could you help us all understand, how is the retail persistency ratio has been holding up if I look at the number of policies? That would be my first question. My second -- what I understand is in your group business, you have scaled up the banca business over the past maybe 8 to 10 quarters. Despite that, the claims is standing at like more than 80%. So I just wanted to understand on the employer-employee side, what would be the mix today in your group? And then how has that segment really be shipped, including large corporate and SMEs? And last question, one is on the overall book, let's say, that you originated post, let's say, FY '22 or maybe in the last 10 to 12 quarters, what would be the composition of this new book or the book...

We got cut? Hello?

You're audible.

We're audible? Okay. So renewal persistency, let me just answer that. We have seen definitely an improvement in the renewal persistency this year at 87% on -- in the number of policies as compared to 84% in the last quarter of FY '24. So I think the focus is on ensuring that customers renew their plans. We do put significant efforts in reaching out to customers, giving them the ease of payment options. And also most of these renewals happens digitally. So I think this is something that we will continue to focus on. Aim is to make sure customers continue to get the benefit of having a standard policy and do not fall out of the franchise. On the banca side, there has been a slowdown in the PSU banks. You are aware of it. There has been multiple challenges on the bancassurance business in terms of regulatory interventions, in terms of oversight by the ministry, on insurance sales and banks. So all of this has definitely affected the business growth in terms of -- than what we had planned. But we are very, very positive of the partners that we have. We continue to add new partners on the bancassurance space. And definitely, I think this is an area which we will keep focusing on. On the group side, you had mentioned about -- I had mentioned in my opening remarks, it's a small business. It's 4% of our portfolio focusing largely on SME and mid-corporates. But yes, there has been a deterioration in the loss ratio on the group side for the industry and as well as for Star Health. So we are taking some corrective measures in terms of our pricing and selection of business so that this business can continue to be profitable in the long run.

Dipanjan, does that answer your question?

[indiscernible]

I'm sorry. We'll take our next question from the line of Jayant Kharote from Jefferies. Mr. Kharote, can you go ahead now, please?

First question is regarding volume growth. If you could give us -- I mean, if you could quantify the volume growth for this quarter for the firm and for the 9 months? And how is that shaping up? I'll come back with the second one.

So our volume growth, 50% continues to be volume growth for the first 9 months and 50% is the value growth that we are seeing. With the price increase, which is effective on December and Jan, we'll see a higher proportion of [ valuable ] going forward, but for the 9 months, it is complete.

Sir, can you just quantify the number for the quarter for the retail health?

It's around 7% volume growth and 7% is the value growth.

Great. And now coming to -- yes, on the claims side, so Nilesh, I think 1 thing is clear that the claims is not a start issue. It's a broader industry issue over the last 3 quarters. It's becoming more and more apparent. So a slightly longer-term question that how do we address this issue that there's no dispersion of patients across hospitals. And of course, ratio of supply of the bed, right? We see a lot of PE investments coming in for the next -- but these hospitals take time to scale up and mature. So what role can you, as the market leader, play to sort of accelerate these hospital maturity cycles so that, that supply of beds increases and at least the severity can, if not decline, at least stop growing at this pace?

So this is a great question. This is something that us and, of course, the industry is really taking time to kind of get solutions, and it is not one particular thing or one particular strategy that will work. But one of the things that we've been working with the [ A council ] is to get to a discussion with the major hospital groups to agree on certain basic hygiene. For example, the way billing happens, the kind of billing heads that get billed to customers and to insurers, what could be the basic protocol for medical admissions. Because we're seeing a heightened reach out to have admissions, even for very basic medical requirements like example, fever, and so on, so one is that. Two is, of course, how we sort of combine, as an industry, to look at what we can do on getting more awareness amongst customers to be more aware of wellness and health conditions. And make that as the first quarter call, right? In the long run, ultimately, a healthy customer base will lead to a healthy portfolio. So those are some of the things that we are doing. Third is specifically, Star is going all out to kind of use all the preventive measures that can be done. So for example, we've been running a program on containing readmission rates, where we have seen a very appreciable movement of roughly a 20% reduction in readmissions that we've been driving post admission happens. So those are the kind of measures, 360-degree approach that we'll have to take to kind of contain some of this. And of course, we've been talking to the government for a regulator for the hospital industry, which is, I think, very essential for some of these things to fall in place.

Ladies and gentlemen, we'll take that as a last question for today. I now hand the conference over to Mr. Nilesh Kambli from Star Health and Allied Insurance Company Limited for closing comments. Over to you.

Thank you, everyone, for joining. We are experiencing a good growth in our retail business with expansion in our product and distribution profile. We are excited about quarter 4, which is the largest quarter in terms of the premium for us. With the pricing intervention taken in December and Jan '25, the financials will continue to improve going ahead. Thanks for joining us. Thank you very much.

Thank you. On behalf of Star Health and Allied Insurance Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.