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

Ladies and gentlemen, good morning, and welcome to the Star Health and Allied Insurance Company Limited Q3 and 9M FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Devyanshi Dave from Adfactors PR, Investor Relations team. Thank you, and over to you, Ms. Devyanshi.

Good morning, everyone. From the senior management, we have with us Mr. Anand Roy, Managing Director and Chief Executive Officer; Mr. Amitabh Jain, Chief Operating Officer; Mr. Himanshu Walia, Chief Marketing Officer; Mr. Nilesh Kambli, Chief Financial Officer; Mr. Aneesh Srivastava, Chief Investment Officer; Mr. Aditya Biyani, Chief Strategy and Investor Relations Officer; and Mr. Sombit Bhattacharyya, Head, Investor Relations. 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 filed in our nature, including those related to the future financial and operational 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 in today's call may involve risks and uncertainties. Thank you, and over to you, Mr. Roy.

Thank you very much, and a very good morning to all of you, and thank you for joining Star Health's earnings call for the third quarter FY '26. I know we are late in January, but I would take this opportunity to wish you and you loved ones a very happy New Year, '26. So let me send the context. India's insurance industry is moving beyond penetration catch-up zone to a phase of sustained compounding reinforcing its role in the core pillar of economic infrastructure. We welcome the recent Sabka Bima Sabki Raksha. That is the amendment of the insurance laws built 2025, and we believe it is a significant policy milestone towards further deepening of insurance penetration. The bill institutionalize this trust through the establishment of policyholder education and protection fund, strengthening the foundations for sustainable trust-led development. We believe that health insurance in India is entering a structurally advantaged phase with policy tailwinds and rising consumer intent, translating into sustained demand growth. Health insurance is already the largest and the fastest-growing segment within the non-life industry. Within this, retail health is the most consequential value pool. Voluntarily purchase by families across the country to protect their household balance sheets from medical shorts. IRDAI's annual report for FY '24, '25 reinforces this momentum with the lives covered under retail health has grown at 7.7% year-on-year versus 5.6% year-on-year in FY '23/'24. The number of lives covered exceeded INR 6 crores by March 31, 2025. So on the policy front, the recent landmark GST exemption on retail health has been a structural catalyst, lowering the all-in insurance cost for households. This is already visible in the category growth. While overall non-life insurance grew at 11.5% in quarter 3 FY '26, retail health insurance grew 33.6%. That is 3x more over the same period. Amidst this conducive backdrop, I think Star Health remains focused on maintaining its leadership in retail health and compounding a durable value accretive franchise anchored on our 4 pillars, which is a risk-based -- risk-first approach, a consistent focus on ROE, customer-centric execution and a digital first mindset. With this, let me come to the quarterly performance highlights of our company. Before I share the updates on our quarterly performance, I would just like to kindly remind you that we continue to take all our business and investment decisions based on the Ind AS accounting, which is aligned with the IFRS principles. IFRS is designed to capture the value creation over the policy lifetime. rather than a short-term accounting outcome, and we have been following the IFRS aligned reporting structure consistently. So now coming to the headline statements for quarter 3 FY '26. In quarter 3 FY '26, our top line, that is the GWP on end basis, increased by 23% year-on-year to INR 5,047 crores. We ensured full pass-on of GST benefits to our customers with very strong distribution alignment on the revised economics and absorption of the input tax credit impact. On the Ind AS PAT for the third quarter, increased from INR 87 crores for quarter 3 FY '25 to INR 449 crores for quarter 3 FY '26. We reported Ind As underwriting profit of INR 46 crores in quarter 3 FY '26 as compared to an underwriting loss of INR 79 crores in quarter 3 FY '25. This was driven by improvement in the combined ratio by almost 320 basis points from 102.1% in quarter 3 FY '25 to 98.9% in quarter 3 FY '26. As in the previous quarters, we have demonstrated loss ratio declined continuously in successive quarters with a 301 basis points decrease from 71.8% in quarter 3 FY '25 to 68.8% in quarter 3 FY '26. The retail loss ratios also have decreased by 103 basis points year-on-year to 68.4% in this quarter. Also, as in the previous quarters, our expense ratio declined further to -- by 16 basis points from 30.3% in the last year to 30.1% in quarter 3 FY '26. So the headline statements for 9 month FY '26, I would like to mention here. On a YTD basis, our top line, the GWP increased by 16% year-on-year to INR 13,856 crores. And our Ind AS PAT increased 87% year-on-year from INR 516 crores during 9 months FY '25 to INR 966 crores for 9 months FY '26. We reported Ind AS underwriting profit of INR 20 crores in 9 month FY '26 as compared to a loss of INR 227 crores in 9 month '25. This was driven by significant improvement in combined ratio by 222 basis points from 102.1% in 9 months FY '25 to 99.8% in our current 9-month FY '26. The improvement in combined ratio was driven as a mix of both expense and loss ratio. Our loss ratio has improved by 124 basis points to 70%, and our expense ratio also improved by close to 100 basis points to 29.8% for the 9-month period. Our PAT growth was driven by both operating profit and investment income. We registered an investment yield of 9.6% for 9 months FY '26, supported by a diversified profile of assets. As of 31st December 2025, 18.7% of our book was in high-yielding assets such as equities, ETFs, REITs and InvITs. We believe our quarter 3 and 9-month performance reflects our disciplined execution and the positive impact of the corrective actions that we have been taking, both on the underwriting and the claims management side. Now coming to the business details. Operationally, we continue to build a very diversified and granular retail franchise while maintaining the category leadership. Our market share in retail health segment was 31.3% for 9 months FY '26. As the market leader, we view insurance penetration augmentation as both an opportunity and a responsibility. Continuing with end basis on the business metrics during the quarter, our gross premium increased 23% year-on-year by fresh business growth of 45% and the renewal premium growth of 17%. On the 9-month basis, our GWP growth stood at 16% with fresh premium growing at 18% and renewal premium growing at 16%. We remain focused on certain deferred geographies, certain demographics and products and channels that maintain and meet our defined ROE thresholds. Our preferred segments are growing faster at 1.3x than the company's average on the overall fresh business. Coming to the details of our distribution channels, let me start with agency, which is the backbone of our business with 83% business contribution coming from our agency force. Our GWP and agency channel grew 19% year-on-year during 9 months FY '26. Our fresh business in agency channel grew 35% year-on-year in the 9-month basis. We registered an accelerated growth of almost more than 66% in quarter 3 of FY '26, which are supported by both a very robust 16% growth in fresh policies -- in the number of policies growth. So our granular market reach continues to convert consumer demand into growth with 60% fresh business emerging from semi-urban and rural markets. So Star Health is, as you know, very strong in the semi-urban and rural markets as well. And we continue to invest in the agency channel with overall agent count exceeding 8 lakh by December 31, 2025. Coming next to our Digital distribution channel, which continues to grow from [indiscernible]. Digital business is structurally our most profitable channel with digital D2C operating at industry-leading scale. In the terms of mix, 77% of our Digital business emanates from our in-house digital channel, D2C channel while the remaining business comes from our strong digital partners. Digital channel contributed 9% of our overall business and 20% of the fresh business for 9 months FY '26. Our GWP from digital channel grew 35% year-on-year basis for 9 months driven by a strong fresh premium growth of more than 46%. Coming next to our bancassurance channel. banca contributed 7% of our overall GWP and 5% growth on a year-on-year basis. We have deliberately upgraded the mix of our bancassurance products towards certain preferred products, which is now making almost 94% of our fresh premium contribution in 9 month FY '26, which used to be 766% in last year 9 months. We continue to expand our base of banca partnerships. We have added 6 new banker partners during the current fiscal. Our corrective action on certain loss-making accounts in this channel will fully reflect in our profitability during the coming quarters. On the corporate distribution, Corporate contributed 1% of our overall GWP, owing to a recalibrated channel strategy as we have articulated earlier. In this space, we are focusing on the higher quality SME segment with 73% of the Corporate business coming from the SME segment during this 9 months compared to 44% in the previous year. Our corporate group loss ratios have significantly improved from 94.6% in 9 months FY '25 to 83.5% in 9 months FY '26. This is a result of our recalculation on the group distribution, which we have mentioned before as well. So coming to the overall portfolio maintenance and calibration. We have implemented diligent measures towards qualitative recalibration of our portfolio and ensuring delivery of sustainable ROE outcomes. On a YTD basis, our retail to group business mix was 95:5 as against 91:9 for 9 months FY '25. So 95% of our business now comes from retail across all the channels mentioned earlier. Our claims ratio for the retail book declined further to 6.4% in 9 months FY '26 as a result of our targeted underwriting, pricing and associated corrective strategies being implemented since the last year. We continue to invest towards enhancement of our vigilance and reduction of FWA, which is fraud, waste and abuse as a core operational priority. Medical inflation in India continues to be at a very elevated levels. Various studies conducted by leading firms like Aon and Willis Tower Watson, expect medical inflation in India to be higher than 12% to 30% in 2026. Unless there is a structural cost moderation through government interventions, price increases by insurance companies would be essential to preserve sustainability. So Star Health's continues to serve our customers with utmost fairness with outcomes demonstrated in the consumer behavior. We have settled more than 2 million claims amounting to INR 8,900 crores during 9 months FY '26. These numbers will give you an idea about the operational rigor and the efficiencies of this organization. Our claim settlement ratio consolidated at 90% for 9 month FY '26. Our grievance ratios per 10,000 policies reduced from 22 in 9 months FY '25 to 20 for 9 months FY '26. Our renewal retention trends, which is also an indicator of the consumer satisfaction were robust during 9 months FY '26 with 99.2% persistency value-wise. Our claims NPS improved to 63 at December 2024. More importantly, our cash less claims and NPAs improved to 72 from 63 during the same period last year. So our cash is claims NPS coverable is the industry leading right now with 72 points. Our overall company-level NPS improved from 55 at December 24 to 64 at December 2025. This continued lift in persistency and NPS, coupled with the reduction in incidence of grievances are validated of improved customer experience and strengthens our results to compound this momentum with more disciplined execution. And coming finally to our digital initiatives on the both service side and the sales side, as you know, we have been making significant investments in technology. Probably we are the largest investor in technology in the health insurance business. So we are able to see deliver tangible progress on both productivity and service outcomes. Digital is now embedded across the value chain through our modernization of legacy platforms our workflow automation and enablement of multiple straight-through journeys at scale. Let me give you some numbers. Starting with the streamlining of acquisition. 94% of our new policies are now originating digitally. 76% of the premiums were collected through the digital route during the year. In quarter 3, our distribution which is Atom facilitated 85% of the fresh policy acquisitions, indicating very high digital adoption amongst our distribution partners as well. On the claims and wellness side, our AI-powered claims platform continues to scale and has now enabled migration of around 57% of our claims traffic translating to better productivity outcomes and also reduction in FWA. We expanded our home health care services to more than 300 locations from around 250 at the close of last quarter. Expansion of doctors and specialties has driven 73% growth in our telemedicine numbers, indicating strong adoption of our wellness initiatives by our consumers. On our customer app, we are happy to let you know that with the enhanced features and increased adoption, our customer add downloads have crossed 13 million by December '25 and our monthly active users have also scaled more than 1.5 million mark. So this is becoming more important in the way we are servicing our customers. We have observed that desirable levels of self-service adoption with 60,000-plus claims have been submitted on our customer app. There is an absolute digital experience on claim submission on the customer app, which is actually more than double of what we did last in the last year 9 months. And more than 3 lakh policies are renewed through the app now. So stitching together everything, as we enter into the last quarter of the current fiscal, our priorities remain very clear to deliver value-driven growth, disciplined underwriting, very strong fraud analytics, deeper partnership with our hospital partners and distributors and sharper customer engagement across the life cycle touch points. We remain steadfast in our mission to deliver responsible, resilient and customer-centric health insurance. I again thank you very much for your continued trust in Star Health. And with that, now we open the floor for Q&A. While before we go into Q&A, I would also like to take this opportunity to introduce Sombit, who has joined us as the Head of Investor Relations, and he'll be interacting with all of you. And I would like to also take this opportunity to thank Aditya who have been your face of the company, meeting all of you. He will continue to be with Star Health to play a very important role on the business side of things. All of us are always available to all of you for any questions you may have about the business. Thank you so much. Look forward to your questions.

[Operator Instructions] The first question is from the line of Swarnabha Mukherjee from B&K Securities.

Congrats on a good set of numbers. I have three questions. First of all, I just wanted to understand the trajectory of earned premium growth because I think last year, from 3Q onwards, you had started increasing the price across products. And by Jan, you had repriced 65% of the portfolio. However, I think on an earned premium basis, the growth is still lower than what our top line growth is. So just wanted to understand when do we see that playing out that last year's price hike in the earned premium growth? So that's the first one. Second is on the fresh business growth and I think a commendable numbers, sir, I just wanted to understand the commissions for this fresh business, how it will be placed vis-a-vis renewal business? And if -- so what I also noticed is that net commissions have remained stable even despite the cash growth, but that has come off in the IFRS. So I just wanted to understand what how -- should I read this or whether we are doing lesser proportion of long-term products now if you go for some light. Thirdly, in terms of agency, I think, sir, you have mentioned that fresh grew -- am I audible?

Yes, yes, please.

Okay. Yes. So in terms of agency, I think you have reported 6% fresh NOP growth while premium growth is 35%. So is this led by higher ticket sized products, what is happening if you can throw some light on this? Yes, these will be my question.

Yes. Thanks a lot. Thanks a lot for the question, and thanks for your good wishes. So see, the NEP growth is a factor of multiple things. One is on the group side, as you know, we have recalibrated our business strategy, and that is also reflecting on the NAV growth. On the retail side of things, while we are on a conservative 1/365 accounting, and as a result of which the NEP growth flows into the books over a period of time, but if you look at the way the growth is coming in terms of top line and also our renewal retention, NEP growth will improve in the coming quarters, and I'm sure that will be demonstrated. On the commission side, on fresh, we are paying commissions. Our long-term business has increased, and this is -- we have spoken in the past, customers are preferring long-term plans and which we are quite happy to offer. For the simple reason, it is a -- I believe, it's a win-win for all stakeholders. So commissions are paid to agents and distributors on long-term plans depending on certain business outcomes that they have to deliver. So as you have rightly mentioned, despite growth in business, significant growth in business, our net commissions have remained stable. And under the IFRS accounting, the deferred acquisition cost is not the main contributors, which helps us to achieve this. And finally, on the 6% NOP growth, I think we have been focusing on profitable growth, the growth with profit has been our agenda. Certain markets, we have taken some calibration. But this is on a YTD basis. If you look at our growth for quarter 3, it is significantly higher. So I think we will be we are delivering more than 16% growth in volume in quarter 3. So things are improving on the OP as well.

Okay. So very useful. Just one last follow-up. So in the presentation, the some assured number, which you have provided average some assured, last quarter, it was around 17 lakh. That has come down to 12 lakh for 9 months. This is because we are now excluding group from the calculation, that my understanding is correct?

Yes, the group is excluded. Correct.

We have the next question from the line of Prayesh Jain from Motilal Oswal Financial Services Limited. Please go ahead.

Congrats on a great set of numbers. Firstly, on the loss ratio, how much of the improvement would you attribute to the fact that we have a very strong fresh growth and probably that kind of comes in the impact or probably the loss ratio on that kind of increases going ahead? But what I'm basically trying to figure out is how is the loss ratio panning out in the renewal book, whether what's the trajectory there because the fresh contribution has gone up and that could have played its part in reducing the loss ratio. So is the loss ratio kind of coming down also on the renewal book is my question.

Yes. Prayesh, yes, the impact of price changes last year is clearly showing, and we are seeing a reduction in the loss ratio of our renewal book as well. Of course, increasing the fresh will also have a role in terms of bringing down the loss ratio, but that will play out over a period of time because the fresh growth has gone up significantly in this quarter. So on the [indiscernible].

Got it. Could you give some numbers on your, say, a 3-year book loss ratio? Or what would be the 3-year loss ratio compared to, say, a year back and today?

Fresh, I think these things, we can have it offline. You can come and meet us.

Okay. Got that. Second question was attention to what Snam asked earlier on the commission bid. There is a stark improvement on the commission ratios. Given that the fresh growth was so strong, what really kind of played into it to bring down the commission ratios into that quantum?

So Prayesh, when you talk about commission ratio, what you are looking at IGAAP numbers, the gross commission [indiscernible]. So if you see quarter 2, it is 17.1%. For quarter 3 also is 17%. So it is consistent. The reductions that we had done on the senior citizen that is playing out, which is getting offset with the long-term business that we're writing. And long-term business, a large part of it still is on a one-by-one basis. So it doesn't impact the commission ratios.

Okay. Okay. And the last question is on again, on the regulations where now there is much discussion on commission [indiscernible] that commission capital brought down in the system. And the other part is the health care system, right? What are the developments on both the brands with respect to negotiations with hospitals or anything that you can share on what are the developments both on the commission front as well as what are the regulators taking about commission front as well as the health care regulator front?

Yes. So see, Prayesh, that's a good question. Both on the commission front and on the expenses of management. I think there is we expect that the regulator maybe reviewing this. This is what we have been also hearing we wait for some final clarity on that. But at a natural level, I think in the larger interest of the consumers, expenses of management have to be agreed to and we believe that it has to be implemented very, very strictly. This is something that is definitely desirable for the industry performance on a sustainable basis. So if any reduction in expense of management is articulated by the regulator, obviously, will be prepared for it. As far as the hospital negotiations are concerned, this is an ongoing process. We are seeing good interaction with hospitals with multiple partners like HBI and all of that. We are talking to all of them. We are meeting them. And we are also able to see some acceptance of -- from their side to find a solution, which is a win-win for all of us. And there is a lot of work going on at the GI Council level, as you know, in terms of common empanelment of hospitals and so on. So I think in the next few months and years, we should see some good movement in this area.

We have the next question from the line of Avinash Singh from Emkay Global.

Good set of numbers. Anand question, I will stick to one, particularly on the claims ratio side. Certainly, there is improvement, if you see sequentially on a Y-o-Y basis. But if you look at more on a 9-month basis, and the retail claims ratio because a significant portion of improvement has come from group. Now on the retail side, I mean, versus 69.6% of last 9 months or to this 9 months, 69.4%, the improvement is there, but it's kind of a minimal and it is on the back of also the price hike have been taking a lot of remedial excess I would take in. So the question is that, okay, if I mean, we were to look say, over maybe 2, 3 years kind of a thing, where maybe a desirable number for you on the claims side would be even lower from here. So how do you see this panning out? I mean -- given that, I mean, the apparently medical inflation has started to get up or pull down in recent quarters. You have taken a price hike and remedy election yet in the retail and you also have a very impressive flex growth and overall growth. Yet -- so improvement over the 9 months Y-o-Y basis on retail side is still 20 basis points? So how do you see the journey over the next 2, 3 years? And where would you see or your desire to settle these claims is piece?

Yes. Thanks, Avinash. So see, I think on the retail claim ratio, you have to -- I mean, obviously, you understand equally well. The price revisions that we have taken and all the underwriting changes that we have made, these things to flow into the loss ratio and earned premium takes 18 to 24 months. So we are still not even 12 months done. I think more importantly, you have to look at the quarter 3 claim ratio of retail. And if you see the trends of the quarter 3, there is 103 basis point improvement over last year. So on the trend side, we are seeing encouraging signs. But on the Y-o-Y, yes, the decrease may not be that sharp. But we believe that this will trend downwards going forward. Now as I told, we are not targeting any specific loss ratio as such. We are hoping to deliver a mid-teens ROE business. And that is what we are focusing on. And this will be a blend of both loss ratio and combined ratio. So the we are able to meet those objectives.

We have the next question from the line of Nitin Chawathe from Kotak.

This is essentially on the acquisition ratio. This ratio has gone up to around 26.9% versus 23% in the second quarter or probably even 23% in the third quarter last year. So how should one think about this?

So Nischint, on the IFRS side, the fresh growth that we had in the current quarter had some impact in terms of the tax ratio. So it will keep on normalizing as the growth come [indiscernible].

So at a cohort level, has the acquisition expense ratio gone up?

No, not really. But yes, I think the fresh cohort for this quarter will have a higher acquisition cost, which will pan out over a period of time.

So that the market rate commissions would be higher.

Correct. Should normalize.

And in terms of GST impact?

So as we have mentioned, we have passed on the GST to our intermediaries. There is no impact of GST in this. All the commissions that we have paid are inclusive of GST.

We have the next question from the line of Sanketh Godha from Avendus Park.

My first question is again on the loss ratio for the third quarter. See, we have a reserve release of INR 142 crores and that played a significant role for delta improvement in the loss ratio. If I ignore the reserve release, then your loss ratios probably are very similar to what you reported in second quarter. So just wanted to understand this release, how sustainable it is and from which product you have seen this release? And because the numbers the release clearly benefited on the loss ratio is my read. And the second question is that even if the improvement has happened in loss ratio, any role was played by the GST cut with respect to consumable on the bills, which I believe is around 20%, 25% as of every bill on an average? The GST cut of around 7% change had any additional benefit on the overall loss ratio, what you reported in the third quarter? That's my first question on loss issue.

Yes. So Sanketh, the outstanding claims is the functions of the claims repaid during the period because 85% of the claims are cashless why the customer is discharged, the hospital payment happens with a lag of 1 month. So whatever we have paid in the current quarter is the claim outstanding as on 30th September. So whenever the claim ratio goes down, it's automatically the outsetting claims also goes down because the claim outstanding or the claims reported during the quarters are lower and has outstanding claim is lower and the pay for the last year. So there is no impact of the reserve release or the outstanding claims reduction on the loss ratio. In fact, we have been strengthening our IBNR quarter-on-quarter to take care of any volatility. On the side GST side.

On the GST side, we have seen some impact of that coming on the bills. But see the overall ratio of that vis-a-vis our overall spend on places is a very significant amount. I mean it will have some role in offsetting some of our other GST outlook in the areas where services, GST, et cetera, we'll have some extra costs. But to that extent, the loss ratio improvements are more structural in nature in terms of our pricing improvements, our continuous work on improving our loss cost in terms of managing our book better.

Understood. Maybe the part might be getting reflected in the OpEx side. So only on commissions was -- sorry, only on the claims, whether you had 20, 30 basis, 40-odd basis point positive above because of the GST benefit.

No, no, not because of GST.

Understood. Understood. And other two questions are basically, given your growth has been very strong in the new business. I just wanted to understand the color of the mix in the new business. How much it's long term compared to previous quarter or even maybe 3Q to 3Q and 9 months to 9 months? How much delta has been driven by increase in the contribution of long-term plans? That's one thing I wanted to understand. And second thing is on the investment book side, in the IFRS INR 413 crores of fair value change what you have reported, it is largely related to equity or it includes fair value change meaningfully coming from bonds too?

So let me answer the long-term proportion answer first. So we are definitely seeing an uptick in our long-term policies. Such policies are beneficial for both consumers and the company because the consumers are protected against the price hike for the tenure that they have opted for and there is continuity, which is intact and the health is secured. Additionally, we are able to lock in the customer early, especially at [indiscernible] stage where generally the tension at a better. Further, long-term policy also improve our capital efficiency as the customers pay upfront. So from a business standpoint, our approach is very clear. We go for businesses, which meets our ROE thresholds. Now coming to specific numbers of long-term policies. On the fresh side, it has contributed to about 23% versus 14% in terms of NOP. And in terms of GWP, it is at 51% versus 34% on a 9-month basis.

Sorry, can you repeat on WP basis?

On GWP basis, it is 51% versus 34% of 9 months last year.

Understood. Understood. And on the investment book side on IFRS 13 crores of valuations?

Yes, on at our fixed income book is held to maturity IFRS. Any change, any mark-to-market change in equities, REITs in which an AIF flows through profit and loss. But this is how the accounting of IFRS term.

So what you're trying to say the [indiscernible] [ 45 crores ] is only related to equity market, nothing to do with the bonds?

Equities, AF and REITs and REITs.

Understood. But the proxy equity to Okay. Understood. Understood.

We have the next question from the line of Shobhit Sharma from HDFC Securities Limited.