Star Health loses grip in May; maintaining market share is key
Star Health and Allied Insurance Co. Ltd has started FY24 on a good note. So far in FY24 (2MFY24), the company reported a 20% year-on-year (y-o-y) growth in gross direct premium income (GDPI) underwritten, as per the data from General Insurance Council.
GDPI is one of the key metrics of growth for general insurance companies. But note that Star’s GDPI growth was relatively slower in May at 16% y-o-y. In April, growth stood at 25%.
A similar trend was seen in the retail health segment, with growth in April being comparatively better than growth in May. Analysts point out that during the early months of the year the insurance business is slightly weak before it picks up in the second half of the year.
Star is the market leader in the retail health segment. In terms of GDPI, its market share in retail health improved month-on-month to 32.4% in May, though it is marginally lower than 33% seen in May 2022.
Avinash Singh, analyst at Emkay Global Financial Services said, “Monthly fluctuations happen so there is nothing much to read (month-on-month). We will have to wait for a quarter or two for any trends for FY24 to emerge.”
Meanwhile, other standalone health insurance companies Niva Bupa and Care saw relatively faster retail health premium growth in May at 26% and 44% y-o-y, respectively.
Madhukar Ladha, director, Nuvama Institutional Equities, said, “Rise in competition is one of the main concerns for the company.
Recently, with the changes in the regulation of expenses of management (EoM), there is a possibility that other insurers could have increased commission to their agents. It could increase the competition in the retail health segment going forward.”
Shares of Star Health are down by 4% so far in 2023 to ₹541 apiece. The company had fared well in FY23. Its combined ratio improved to 95.3% in FY23 from 117.9% in FY22.
The agency business continues to contribute around 82% of the overall business.
In FY24, the management expects benefits from the company’s increasing focus on digitization and portfolio expansion to specialised products to play out in the coming quarters. In general, investors must keep a tab on renewal rates in the medium-term.
“Whether the company can sustain or improve its market share is a key monitorable in the long run,” added Ladha
Know your inner investor
Do you have the nerves of steel or do you get insomniac over your investments? Let’s define your investment approach.
Download The Mint News App to get Daily Market Updates.
Updated: 19 Jun 2023, 09:42 PM IST
