India’s insurance sector, with a market size of $131 billion in 2023, has seen rapid growth, driven by increasing awareness and regulatory support. The life insurance penetration rate stands at 3.2% of GDP, while non-life insurance is at 1%, indicating significant potential for further expansion in this burgeoning industry.
With a market capitalization of Rs 30,737.42 crore, the shares of Star Health and Allied Insurance Company Ltd were trading at Rs 525.00 per share, increasing around 0.81 percent as compared to the previous closing price of Rs 520.80 apiece.
Examining the company’s financial performance, revenue magnified by 18 percent from Rs 3,131 crore in Q4FY23 to Rs 3,689 crore in Q4FY24, during the same time frame, net profit soared by 39 percent from Rs 102 crore to Rs 142 crore.
Motilal Oswal, one of the well-known brokerages in India, gave a ‘Buy’ call on the insurance stock with a target price of Rs 730 apiece, indicating a potential upside of 39 percent from Monday’s closing price of Rs 525 per share.
Here is the reason for such a bullish movement of 39%:-
● In FY23, the Indian insurance industry handled 27.5 million health insurance claims and 2.3 million life insurance claims. Standalone Health Insurers (SAHIs) have developed strong claims processing capabilities and extensive hospital networks. They provide specialist solutions like cancer and diabetes treatment by using substantial medical data, which is difficult for life insurers to reproduce.
● Between FY20 and FY24, life insurance companies increased their agency count by 27%, with private players up 38% and LIC up 17%. In FY23, 73% of retail health distribution was through the agency channel, predominantly linked to life insurers, complicating potential shifts if composite licenses are allowed.
● Star Health aims to double the share of credit-linked products via bancassurance from 5% in FY24. The share of long-term policies has risen to 6%, improving the combined ratio as URR unwinds into net earning premium (NEP). Price hikes for Family Health Optima renewals will benefit NEP in FY25.
● Star Health has the widest branch presence among SAHIs and private players, covering 17,106 of India’s 19,000 pin codes. The ratio of hospitals with agreements rose from 65% in FY21 to 74% in FY23, boosting cashless claims processing from 55% to 74% by FY24.
Star Health and Allied Insurance Company Ltd is an India-based health insurance provider. The company offers health, personal accident, and abroad trip insurance. Its product categories include health, accident, and travel insurance.
Written by:- Abhishek Singh
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