Earnings Outlook
Underwriting loss, high claims may hit Star Health PAT
This story was originally published at 15:46 IST on 24 April 2025
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By Sachi Pandey
MUMBAI – Star Health and Allied Insurance Co. Ltd. is likely to report weak earnings for the March quarter, dragged down by high claims and continued underwriting losses, according to estimates by three brokerages. Despite some support from investment income, profitability is likely to stay under pressure, brokerages said. The company is scheduled to detail its quarterly earnings on Tuesday.
Estimates from brokerages for the March quarter range from a loss of INR 30.00 million to a net profit of INR 1.50 billion, compared with a net profit of INR 1.42 billion in the same quarter a year ago. In the December quarter, net profit had fallen almost 26% to INR 2.15 billion on account of underwriting losses of INR 489.8 million.
In the March quarter, Kotak Institutional Equities expects underwriting losses to rise sharply to INR 3.40 billion. YES Securities also expects higher underwriting losses despite a sequential improvement in the loss ratio due to seasonal effects. Motilal Oswal Financial Services echoed the weak outlook, and said while the loss ratio may improve quarter-on-quarter due to seasonality, it will remain elevated on a yearly basis.
Motilal Oswal Financial Services also pointed at weak market share trends, saying, "Market share trajectory is weak as other SAHIs (standalone health insurance companies) outpace Star." Despite this, the brokerage has retained a 'buy' rating on the stock with a target price of INR 345.
Kotak Institutional Equities expects the combined ratio--a key indicator of underwriting efficiency--to rise to 100.3% from 92.8% a year ago, and marginally better than 103.3% in the December quarter. The combined ratio in insurance is a measure of profitability, calculated by adding the loss ratio and the expense ratio.
YES Securities sees further pressure on premium growth, estimating a 1.7% decline in net earned premium, based on gross premium trends till February. It also expects profit after tax to fall nearly 30% sequentially. However, it noted that investment income could help limit the loss.
The brokerage firms have pegged the net premium income of the company in the range of INR 37.34 billion to INR 38.20 billion. A quarter ago, the company had reported a net premium income of INR 38.00 billion.
Adding to the pressure, the company recently came under regulatory scrutiny. In March, the Insurance Regulatory and Development Authority of India reportedly found lapses in Star Health's claim settlement practices. While the investigation is ongoing, the regulator is expected to take action. The company has dismissed media reports as "speculative and motivated in nature" and said it has not received any communication from the regulator. On Thursday, shares of the company closed 0.7% lower at INR 403.05 on the National Stock Exchange.
Following are the Jan-Mar earnings estimates for Star Health and Allied Insurance Co., based on reports compiled by Informist from three brokerages:
Brokerage Name | Net Premium Income (in million rupees) | Net Profit (in million rupees) |
Kotak Institutional Equities | 37,539.00 | (30) |
Motilal Oswal Financial Services Ltd. | 38,200.00 | 1,200.00 |
YES Securities (India) Ltd. | 37,335.00 | 1,514.00 |
End
Edited by Ashish Shirke
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