Star Health and Allied Insurance Company Ltd (STARHEALTH) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Star Health and Allied Insurance Company Limited Q2 and H1 FY '27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. 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, ma'am.
Devyanshi Dave (Adfactors PR): Good morning, everyone. From the senior management, we have with us Mr. Anand Roy, Managing Director and Chief Executive Officer; Mr. Amitabh Jain, Executive Director and Chief Operating Officer; Mr. Himanshu Walia, Executive Director and Chief Marketing Officer; Mr. Nilesh Kambli, Chief Financial Officer; Mr. Aneesh Srivastava, Chief Investment Officer; and Mr. Sombit Bhattacharya, Head Investor Relations. Before we begin,
Devyanshi Dave (Adfactors PR): 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 financials 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 in today's conference may involve risks and uncertainties. Thank you and over to you, Mr. Roy.
Anand Roy (Star Health and Allied Insurance Company Ltd): Thank you. Thank you, Debyanshy and a very good morning to everyone and thank you for joining Star Health's earnings call for the second quarter and the first half of the financial year '26-'27. As we enter the festive season, let me also wish you and your loved ones a very Happy Diwali in advance. My remarks today will comprise three parts. First we will talk about our operating performance for quarter two and H1 of financial year '27. Second, we will also see what how the second half and beyond is shaping up for Star Health, and finally we will also just give a brief perspective on the recent regulatory developments, which all of you are much aware of. So, let me begin with the first part, our operating performance for quarter two and the first half of the year FY '26-'27. recal- recalibration of our strategy that we started last year has delivered a turnaround in underwriting performance in FY '26, and the run has continued through H1 of FY '27. Quarter two of FY '27 has marked the fifth successive quarter of improvement in our loss ratios and underwriting results. This is a clear evidence of a structural turnaround in our operating performance. The highlights of our performance for quarter two and H1 FY '27 are as follows: the gross written premium on reported 1/N basis increased 19% year-on-year to 5,275 crores for quarter two and for and also by 19% year-on-year to 9,562 crores for the H1. The fresh retail health GWP sustained its growth momentum. On the reported 1/N basis, the fresh retail health has grown by 35% year-on-year for the quarter, and 36% year-on-year for the half year. The new-to-insurance mix rose to 93% for the quarter from 89% in quarter two FY '26, reflecting our continued focus on first-time buyers of health insurance and selecting, you know, more healthier pools. The growth during the quarter was led by both volume and value, with the number of new-to-insurance policies growing over 10% year-on-year and the average sum insured also rising 13% year-on-year. A brief note getting into financial numbers. From this quarter, we have discontinued the practice of recognition of insurance finance charges. The previous periods have also accordingly been re- re-restated for comparability. There is no impact on of this treatment on profitability metrics such as PAT and underwriting results. Now, coming to the underwriting results for the quarter was 99 crores, compared to a loss of 40 crores in quarter two of last financial year. This is a positive swing of about 139 crores for the quarter. For H1 FY '27, our underwriting results stood at 210 crores as against a loss of 24 crores in H1 of FY '26, giving a positive swing of 234 crores for H1. Now, the underwriting results for H1 FY '27 surpassed the full year FY '26 underwriting results of 198 crores. The combined insurance service ratio, CISR, improved by 2.9% to 98% in quarter two FY '27 and by 2.4% to 97.9% for H1 of FY '27. The profit after tax for the quarter increased over threefold to 265 crores from 80 crores of the last year same quarter. And the PAT for the half year increased by 57% year-on-year to 815 crores. To provide the right perspective on profitability, insulated from short term mark-to-market volatility, we report the normalized PAT, pegged at a normalized annualized investment yield of 8%.
Anand Roy (Star Health and Allied Insurance Company Ltd): highlighted earlier, the reported market share continues to be influenced by the share of long-term policies and the consequent one-by-n reporting and like-for-like comparability will be restored only by FY '28. More fundamentally, our scale reflects our deliberate focus on preferred segments and our conscious avoidance of riskier pools. Our proprietary channels, agency and digital D2C, contributed over 90% of our retail business, giving us greater control over customer selection, quality of sales, and the economics of acquisition. We added 39,000 new agents during H1 FY '27, taking our network to 8.7 lakh agents. Our agency productivity improved by 19% year-on-year during H1. The agency continues to deepen penetration where it matters most, with fresh business growth from semi-urban and rural geographies at over 3x that of metro and urban geographies. Our proprietary digital D2C channel remains the fastest growing, with 137% year-on-year growth in H1, led by younger customers, higher sum insured levels and rising participation from non-metro and tier 2 markets. Our D2C channel continues to have superior combined ratios. Beyond our proprietary channels, bancassurance and alternate channels remain focused on profitable segments, while our group SME business through our agency network remains our priority within this segment. Our sustained trajectory of underwriting profitability reflects the rigorous execution of core levers that we have deployed, which is enhanced risk selection, portfolio optimization towards preferred segments, and our risk-based pricing strategy, our robust mitigation of fraud, waste and abuse, and the scaling up of our wellness-focused consumer ecosystem. In a seasonally demanding quarter, as you all know, the quarter 2, our expanded home healthcare and telemedicine capabilities gained significant traction and served as a critical mechanism to manage our fever and infected infection-related cases. Our customer-focused metrics continue to demonstrate improvement. Our retail claims settlement ratio increased by over 1% to 92.4% for H1 FY '27. Our renewal ratio improved by 4% to 102%, and overall company-level NPS also improved by 4 points to 65 as of September 2026. We settled 22.5 lakh claims during the first half of this year, and 83% of those claims were settled on a cashless mode, which is probably the highest in the industry. Digital and AI remain central to our long-term growth strategy, serving as key drivers of operating leverage and productivity. During the quarter, we upgraded our core customer relationship management platform to Salesforce. This upgrade optimizes our D2C acquisition by enhancing the lead management precision and conversion. We have also scaled up deployment of AI bots across both our customer acquisition and service channels. Initial trends are highly encouraging. The bots processed over 7.5 million minutes of call volume while operating at less than 20% of the cost of equivalent human deployment. To further refine our digital acquisition strategy, we scaled our AI-driven quality assurance capabilities, analyzing over 10 million minutes of customer interaction across 9 languages. Concurrently, our service bots operated autonomously, independently resolving over 1,000 customer interactions per day. On the distribution side, ecosystem engagement on our proprietary ATOM PRO platform continued to deepen, and with more than 50% of our active agents are utilizing the platform. In underwriting and claims, our partnership with Amplify Health has gone live with automation of FWA capabilities. Sharper analytics is increasingly refining our risk selection and claims decisions, and our detection of fraud, waste and abuse has been considerably strengthened across billing, tariff, and medical necessity parameters. Our analytics capabilities rest on extensive proprietary data which remains an enduring competitive advantage for Star Health. Details of our operational and financial performance are provided in our quarterly update presentation, which is available on the stock exchanges and on or on our website as well. We would request you to refer to it for a more detailed analysis. Now let me come to the second part of my remarks, our preparation for H2 and beyond. As we enter the second half, last year's GST-led growth becomes part of the base, and headline growth rates will start to normalize for the industry as well as for Star Health. What matters most is the quality and durability of our operating performance, and we believe it is structurally sound and resilient for the following reasons. First, our underwriting performance is anchored in the strength of our vintage book, which accounts for about 80% of our portfolio. The improvement in our underwriting performance began in quarter 2 of FY '26, well before the GST-led growth set in, and it has now sustained for 5 successive quarters.
Anand Roy (Star Health and Allied Insurance Company Ltd): detection through our data and analytics, and our high highly efficient claims processing and FWA savings, our provider relationship and our negotiation with them, and also the strong wellness program that we run for our customers. Second, the share of the multiyear policies in our portfolio has risen steadily over the last few quarters. Premium on these policies is earned over the term of the contract, and a growing portion of our future earned premium is already contracted. This lends visibility and stability to our earned revenue base, while multi-tenure policies also strengthen persistency. Third, our growth engine is proprietary. We continue to add agents and expand our distribution network at a very consistent pace, deepening our presence in semi-urban and rural markets, and, at the same time, scaling our D2C channel amongst the digitally native segments, such as the younger customers and salaried professionals. Excuse me. More than nine in ten of our fresh customers are new to insurance, drawn from preferred geographies and segments. This is a profile of a franchise that expands the market rather than one dependent on an external catalyst alone. We therefore enter H2 from a position of strength and confidence. The GST exemption demonstrated how strongly affordability unlocks demand for retail health insurance, particularly amongst the first-time buyers, and we believe the distribution reforms proposed by the authority represent the next lever of afford- affordability. This brings me to the third part of my remarks, our perspective on the recent regulatory developments. The IRDAI has set out an ambitious reform agenda for the sector over the past few months, and let me touch upon the key developments. We welcome the proposed Public Insurance Registry, envisaged as the digital public infrastructure for insurance, by enabling policyholders, insurers and other participants to discover, verify and exchange information in a consistent manner. The PIR can meaningfully reduce information asymmetry, strengthen underwriting controls, simplify claims processing, and strengthen fraud detection across the ecosystem. It marks a decisive step towards a more transparent and efficient insurance market, and we look forward to participating in its development. Turning to the IRDAI's consultation paper, Recalibrating Economics of Insurance Distribution, released on 23rd September, on which we have already submitted our views to the authority. At the outset, we welcome the direction of the proposed reforms and support the intent of better outcomes for customers. The framework envisaged in the paper is closely aligned with the distribution model that Star Health has built over two decades. We are prepared to meet the new requirements and play our part to contribute meaningfully towards the national ambition of insurance for all by 2047. Our core business model is very resilient, with over 90% of our retail business being sourced through proprietary channels. Individual agents remain the better-rewarded distributors under the proposed framework, and we are engaging closely with our agents to sustain and enhance their earnings through higher productivity. As commercials cease to be a differentiator, insurers will increasingly focus on the strength of a product and product proposition, claims experience, service, and brand and distribution, in which we believe we are very strongly positioned. Several other proposals are also encouraging. Porting commissions aligned to renewal rates removes incentive for commission-driven churn between insurers, which we see happening in large numbers, as you know. This shift will encourage insurers to expand insurance penetration by enrolling new customers as against market cannibalization through higher commissions. Equally, the proposed higher commissions for smaller towns and rural areas and the requirement that an agent represent only one insurer with a product segment are well-aligned with our distribution footprint. Our internal estimates indicate a credible path to the proposed expense of management limits as a combination of prudent management, operating leverage, and productivity enhancements through our digitization and automation initiatives. Star Health has a consistent track record of demonstrating compliance with EOM requirements and is committed to maintaining that standard in the future as well. We are cognizant of the authority's sharp focus on dark patterns in digital journeys, and we fully share the emphasis on consumer trust. As digital channels account for a growing share of how consumers buy and service their policies, we continue to review our digital journeys and will ensure full alignment with the evolving framework. We believe that consent-led data collection, transparent access to product features and pricing, and clear disclosures will over time reinforce the advantage of trusted and direct brands. Our comments pertain to the consultation paper in its current form, and we await the final regulations.
Anand Roy (Star Health and Allied Insurance Company Ltd): Thank you so much.
Moderator: Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question comes from the line of Swarnabha Mukherjee with 361 Capital. Please go ahead, sir.
Swarnabha Mukherjee (360 ONE Capital): Hi, sir. Thank you for the opportunity and congratulations for the superb performance this quarter. I have two questions. First of all, sir, it is very encouraging to see the level of fresh growth that is panning out for a few quarters now. Just wanted to understand that now that the GST change, etcetera in the base in October, how are you seeing the quantum of fresh growth particularly in the agency channel, and if you could call out maybe, you know, how you are seeing through in the different channels, that would be very helpful. That is one. And secondly, specifically for this quarter, your you know, how the markets have moved, both the yield curves as well as the equity markets. I just wanted to understand it seems that, you know, from your asset mix, how you know, your investment performance has come out to be significantly better than what we would have estimated. So, just wanted to understand that whether on either on the fixed income side or the equity side, you have done any active positioning to manage the you know, how the portfolio performance will play out in terms of, say, maybe some duration movement or active equities. If you could highlight that, sir, that would be very helpful. Yeah, these will be my two questions, sir. Thanks.
Anand Roy (Star Health and Allied Insurance Company Ltd): Thank you, Swarnabha. I think coming I'll I'll request Anish to handle the second question, but let me answer your first question on the fresh growth. See, the GST reforms last year was a very significant development, and it led to a huge growth in the market, as you all are aware. So, that base is available for quarter two quarter three and quarter four for all the players. So, some some kind of moderation on the growth rate will definitely happen optically, but we are looking at, you know, the number of policies that we sell and the number of activation of agents and of digital platforms. So, as a as a company, we aspire to grow by 20% plus on fresh business consistently for a long period of time. We hope to maintain that for this year as well. On the investment side, I'll request Anish to add. Anish?
Aneesh Srivastava (Star Health and Allied Insurance Company Ltd): Yeah. Yeah, Anand. So, Swarnabha, we when we invest in markets, we are basically looking at the markets from long term perspective given the fact that we have a continuous growth in the AUMs and the portfolios. From this perspective, our equity positions have remained where they were in last quarter as you are aware that we have around slightly less than 14% exposure in equities. And at this point of time, we have not done any incremental purchases, but we may we may decide to do it depending upon the attractiveness of the asset classes. Because, you know, today given the fact that the yields have gone up, see, many of the asset classes are trading at very, very attractive levels, you know? So, so that that is one. Secondly, in terms of your your question regarding the duration, yes, we have increased the duration of the portfolio given the fact that G-sec yields have substantially shot up. We have taken some long-duration assets in the portfolio. Our desire is to be somewhere between around four four four years duration for the portfolio. Currently, we are somewhere there. But if if yields continue to increase, which is the possibility given the fact that we still expect policy rate hikes by RBI, so we may we may start looking at relatively longer-duration assets in this environment. So, this is what. The only thing that we have changed today is that we have started looking at longer durations. We have taken some G-sec calls on longer durations. Otherwise, broadly, the strategy remains the same.
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