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MOSL: STAR HEALTH: NEP surprises positively, claims remain elevated

.  STAR HEALTH: NEP surprises positively, claims remain elevated

(STARHEAL IN, Mkt Cap USD5.4b, CMP INR742, TP INR850, 15% Upside, Buy)

• Net underwriting profit stood at INR1.6b in 1QFY23 (v/s our underwriting loss estimate of INR415b). The beat was led by a 25% outperformance on NEP, which was driven by a release in unexpired risk reserve.
• Incurred claims came in 29% higher than our expectation at INR17.8b. Resultantly, incurred claims ratio stood at 66% (est. 64%).
• Overall, the combined ratio stood at 98.2% (est. 94.5%) v/s 121%/98.4% in 1Q/4QFY22.
• PAT, at INR2.1b, was higher than our forecasts of INR1.4b. The solvency ratio stood at 1.9 as compared to 1.7 in 4QFY22.

 

Subdued premium growth with a decline in Group premium

• Total GWP stood at INR24.6b (7% lower than our estimate), a growth of 13% YoY. Within GWP, Retail Health saw decent growth of 13% YoY to INR22.7b, thereby maintaining its share in overall premium to 92%. The Group Health business declined by 43% YoY to INR1.6b. Personal Accident premium grew 31.5% YoY to INR358m.
• STARHEAL saw an improvement in the Retail Health renewal ratio to 94% in 1QFY23 v/s 90% in 1QFY22.
• Investment income at INR1.2b was 4% below our estimate, denoting a growth of 40% YoY.

 

Elevated claims impact the combined ratio

• Incurred claims remain elevated at INR17.8b. It declined by 13% YoY, but remained flat sequentially. The loss ratio stood at 66% v/s 91%/68.1% in 1Q/4QFY22.
• Commission ratio, at 13.7%, was marginally higher than our forecast (13.5%). Expense ratio, at 18.2%, was also above estimate of 17%. Overall, the combined ratio, at 98.2%, was higher than our forecast of 94.5%. The combined ratio remained flat sequentially, but improved by 2,300bp.
• The company reported to underwriting profit of INR1.6b in 1QFY23, after reporting an underwriting loss for the past many quarters.