ANGEL BROKING RECOMMENDS ‘SUBSCRIBE’ TO STAR HEALTH AND ALLIED INSURANCE COMPANY LIMITED IPO

Press Release

• 30-11-2021

Angel Broking has recommended subscribe to Star Health And Allied Insurance Company Limited (Star Health) from a long term perspective. It considers that the Rakesh Jhunjhunwala backed Star Health stands out among other standalone health insurers (SAHI) in terms of size, strong growth rates (32% Gross Written Premium CAGR over FY18-21) and better operational performance which is reflected in pre-Covid numbers for the company (~93% combined ratio).

From being the first Standalone Health Insurance ("SAHI") company established in India in 2006, they have grown into the largest SAHI Company in the overall health insurance market in India, as per Axis Capital IPO note on Star Health. Star Health, says the Axis note, offers a range of flexible and comprehensive coverage options primarily for retail health, group health, personal accident and overseas travel. Their comprehensive health insurance product suite insured 2.05 crore lives in Fiscal 2021.

On valuation, the Angel Broking IPO note has concluded that the valuations commanded by Star Health at ~5.5x FY21 MCap/GWP, are in-line with recent deals in the SAHI space and appears fair considering its positioning.

Star Health and Allied Insurance Company Limited, the largest private health insurance company and the largest retail health insurance company in India by health GWP, with a 15.8% overall health insurance market share and a 31.3% retail health insurance market share in fiscal 2021, stands to benefit from positive industry growth trends given its leadership position in the attractive retail health segment according to IPO note released by Religare Broking.

The Company has one of the largest and well-spread distribution networks in the health insurance industry and an integrated ecosystem. It offers a range of flexible and comprehensive coverage says the Religare Broking note.

As per the Axis Capital IPO note, Star Health has also successfully built one of the largest health insurance hospital networks in India, with more than 11,778 hospitals as of September 30, 2021. Out of the total number of hospitals in their network, they have entered into pre-agreed arrangements with over 7,741 hospitals, or 65.7%, of the total number of hospitals in their network, says the Axis Capital IPO note.

Another research firm Choice Securities in its IPO note has termed that macros of the health insurance segment is very positive. Moreover, because of pandemic, awareness of the health insurance is at all-time high. It believes, Star Health being a dominant player focusing on the retail health insurance is well placed to benefit from the expansion in the market.

B&K Securities In its flash note prepared based  its interaction with the management, has termed Star Health and Allied Insurance Company Ltd as a Dominant player in the under penetrated health insurance market . Referring to Star Health as the largest pure-play health insurer in India with a market share of 15.8% (FY21), B&K Securities IPO note on the company says that Star Health is confident of maintaining the growth momentum demonstrated in the pre-pandemic period and being a bottom-line focused company, Star Health will ensure that underwriting quality remains under control and that the growth will not come at the expense of profitability.

 The Company has indicated that its solvency post the Rs. 20.0 billion infusion will remain at a comfortable level of 2.5x and the company will not need to raise additional capital for the next 3-5 years, says B&K in its IPO.

On digitalisation, the Religare broking believes that investments in digitization would help the company achieve higher operational efficiencies and better customer service. However as per flash note released by B&K Securities, the company is of the opinion that while digital channels will gain prominence, the importance of face-to-face interactions before closing sales of health insurance (due to complex nature of products requiring assisted sales) highlights the importance of traditional channels. Management does not expect fintech companies to be major disruptor in the retail health insurance space.

Going forward, the company intends to enhance its market leadership by leveraging its strong brand. It aims to enhance existing distribution channels and develop alternative channels. It also intends to focus on product innovation and provide value-added services indicates the IPO note released by Religare Broking.

As of September 30, 2021 Star Health’s distribution network had grown to 779 health insurance branches spread across 25 states and 5 union territories in India, as per the Axis Capital IPO note. Their existing branches are also supplemented by an extensive network of over 562 Sales Managers Stations (“SMS”) and over 6,892 in-house sales managers.

10 THINGS TO KNOW ABOUT STAR HEALTH AND ALLIED INSURANCE COMPANY LIMITED

• Star Health and Allied Insurance Company Limited is the largest private health insurance company and the largest retail health insurance company in India by health GWP, with a 15.8% overall health insurance market share and a 31.3% retail health insurance market share in fiscal 2021, according to CRISIL Research.
• Company has been consistently ranked first in the retail health insurance market in India based on retail health GWP over the last three fiscal years. Retail health GWP was over three times the GWP of the next highest retail health insurance market participant in fiscal 2021, according to CRISIL Research.
• Company’s comprehensive health insurance product suite insured 20.5 million lives in fiscal 2021 in retail health and group health, which accounted for 89.3% and 10.7%, respectively, of our total health GWP in fiscal 2021.
• Company is strategically focused on the retail health market segment and had retail health GWP of Rs. 8,215.09 crores and Rs. 4,339.92 crores in fiscal 2021 and the six months ended September 30, 2021, respectively.
• From being the first standalone health insurance ("SAHI") company established in India in 2006, it has grown into the largest SAHI insurer in India and the only SAHI Company among the top five health insurance businesses in India in fiscal 2021.
• As of March 31, 2021, the company had the largest number of individual agents among SAHI insurers, at approximately three times that of the SAHI Company with the next highest number of agents, according to CRISIL Research.
• Company has led the non-public health insurance market in terms of number of new branch openings since fiscal 2018.  Its branch network was over two and a half times the number of the next largest non-public health insurance provider as of March 31, 2021, according to CRISIL Research.
• Company has successfully built one of the largest health insurance hospital networks in India, with 11,778 hospitals as of September 30, 2021. Out of the total number of hospitals in its network, company has entered into pre-agreed arrangements with 7,741 hospitals, or 65.7%, of the total number of hospitals in network as of September 30, 2021.
• Company’s distribution network includes the largest branch network among non-public health insurance providers in India, as of December 31, 2020, which as of September 30, 2021 included 779 health insurance branches spread across 25 states and 5 union territories in India as of September 30, 2021.
• Company processed 0.33 million and 0.25 million claims and in fiscal 2021 and the six months ended September 30, 2021 respectively or 55.0% and 62.0%, respectively of its total number of cashless claims, through our agreed network hospitals.

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