Broker’s call: Star Health (Buy)

Target: ₹738

CMP: ₹637

Demand expected to drive growth momentum Star Health and Allied Insurance Co commenced operations in 2006 and is India’s first standalone health insurance provider. It offers health, personal, accident and travel (both domestic and overseas) insurance. It has one of the largest health insurance networks in India with more than 14,340 hospitals.

In Q1-FY25, net earned premium (NEP) grew 15.7 per cent y-o-y to ₹3,520 crore with growth in retail health premium and enhanced contribution from new business. However, the combined ratio deteriorated 140bps y-o-y to 99.2 per cent, owing to a 220 bps y-o-y rise in claims ratio.

The company’s efforts to enrich the customer experience by digitalising internal processes should further strengthen its brand image and drive demand for products.

Growth in the banca partnerships and contribution from agency businesses would help capture fresh business. Additionally, the company is looking to bolster its sales distribution network, which could boost the business in the near term. Further, the implementation of wellness and prevention programmes may help control claim ratios in the long term. While a price hike may have a minimal impact on the company’s strong brand image, it is expected to deliver robust results going ahead.