Star Health and Allied Insurance Company Ltd

NSE:STARHEALTH

Earnings Call Transcript 2023-Q1

[Operator]

Good morning, ladies and gentlemen. Welcome to the Star Health and Allied Insurance Company Limited Q1 FY '23 Earnings Conference Call. [Operator Instructions]

I now hand the conference over to Mr. Pratik Patil from Adfactors PR, Investor Relations team. Thank you, and over to you, sir.

[Pratik Patil]

Thank you, Lisanne. Good morning, everyone. From the senior management, we have with us Dr. S. Prakash, Managing Director; Mr. Anand Roy, Managing Director; Mr. Nilesh Kambli, Chief Financial Officer; and Mr. Aneesh Srivastava, Chief Investment Officer.

Before we begin the conference 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 financial 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 call may involve risks and uncertainties.

Thank you, and over to you, Mr. Anand Roy, sir.

[Anand Roy, executive]

Thank you, Pratik, and a very good morning to all of you. Thank you for joining the Earnings Conference Call of Star Health and Allied Insurance Company for Q1 2023. My name is Anand Roy. I'm the Managing Director of this company. I will give you a brief overview of the industry trends and developments that we have witnessed in the last few months as well as walk you through the company's performance in terms of premium and distribution. My colleague, Dr. Prakash, will cover the financial performance and aspects related to claims, including the steps that are underway to manage them.

In quarter 1 2023, the health and peer industries, the size was INR 22,833 crores with a growth rate of about 20.6%. The growth was driven by 27% growth in group health, 33% growth in government health. Retail health insurance grew at 11.1% in quarter 1 FY '23 on a very high pace in the last year. The 4-year CAGR of the retail health segment has been 18%.

Now coming to respect with -- to Star Health Insurance. Our GWP grew by 13% in quarter 1 FY '23 over quarter 1 of FY '22 to INR 2,466 crores with the retail health segment growing by 20.3% in the same period versus industry retail health growth of 11.1%. So we have grown at double the size of the industry as far as retail health segment is concerned. In quarter 1 FY '23, Star Health has registered 32% market share in retail health, which is 3x the second largest player in the industry. We have also increased our market share by almost 300 basis points in the quarter 1, as far as retail health business is concerned.

As far as premium accretion share is concerned, Star Health has registered 53% retail health accretion market share, which is the highest for us in the last 3 quarters. Agency business has continued to contribute around 81% of the overall business. Our agency strength has increased to 566,000 with an addition of approximately 17,000 agents in the first quarter of FY '22. Corporate agents, banks and other tie-ups have picked up momentum, and the premium from this segment has grown by 57%.

The highlights in Q1 FY '23 for us were as follows. Premium and distribution, we introduced a product Star Women Care Policy and Star Premier Policy. The products launched in the Q4 of FY '22 are doing very well. Our contribution from specialized products has increased to 17% in quarter 1 of 2023, and we continue our journey of premiumization of our product portfolio. This contribution is the highest ever we have recorded. The average sum assured of new policies has increased by 19% on a year-on-year basis to INR 8.7 lakhs per policy.

We have introduced one new product that is Star Health Assure Insurance. This product is an upgraded version of our Family Health Optima policies, which is one of our leading products. The Star Health Assure product has extended features and with much better pricing. We have taken a price revision in Star Medi Classic Insurance Policy. This product contributes 6% of our retail premium. The price increase is approximately 25% and is effective from July 22 onwards on the new premium.

We have recently tied up with Common Services Centers under Ministry of Electronics and Information Technology. There are over 5 lakh CSCs functioning across the country as delivery points of government and public services for the rural population in rural, semi-urban and urban areas. This tie-up is a step towards increasing our health insurance penetration in rural markets. And the rural business for us is growing in excess of 75% with increasing contribution coming from online policy issuance in these markets also.

We also continue to focus on strengthening our bancassurance distribution for both indemnity and benefit products. We have recently tied up with IDFC FIRST Bank for distribution of various health insurance solutions. The health benefit plans, including groups such as critical illness and hospicash, grew by 30% in quarter 1 2023.

As discussed in our previous quarterly earnings call, we have exited large group health insurance business, as demonstrated by the 41% reduction in group health premium during first quarter of 2023. This segment is currently characterized by poor lifetime value, and we are very selective in this particular line of business. As reiterated previously, we remain very positive on the SME segment and non-employer-employee groups. The non-employer-employee group policies are largely sold to the retail customers of our banks and NBFC tie-ups. And if we continue these policies -- or if we include these policies, our overall retail growth would be 22% for the first quarter.

We intensified our digital initiatives during the quarter. Some of the outcomes of the digital initiatives were our app downloads have reached 1.56 million downloads. 73% of our active agents are now using our digital solutions. Digital policy issuances have gone up to 64% in the first quarter of FY '23 versus 60% in FY '22. Digital sourcing, defined as premium collected directly from our website as well as from our third-party web aggregators and online brokers, has grown by 29% year-on-year and now accounts for 8% of our overall GWP for first quarter FY '23.

Now I hand over to my colleague, Dr. S. Prakash, to handle the claims and other related matters.

[Prakash Subbarayan, executive]

Thanks, Anand. A very good morning to all of you. With regard to claims, on the cashless side, the share of hospitals with some form of pricing arrangement is close to 85%, and we are addressing our cashless claims with a turnaround time of around 90%. We have also initiated the process of identifying hospitals called valuable service providers. Currently, we have all over India 1,559 hospitals as valuable service providers. And this VSP helps our customers to get hassle-free medical attention and quick processing of claims. Over time, we expect to have better control on claims traffic to the valuable service providers by negotiating better price and offering a superior experience.

We have stepped up our teleconsultation. We call it Talk to Star. We have done close to 7 lakh consultations till date and wellness programs. Talk to Star cut claims cost by giving customers access to experienced doctors for a second opinion and alternate medical solutions.

Coming to the financial performance. The combined ratio for Q1 FY '23 has improved to 98.2% versus 121.1% in Q1 of FY '22. The improvement in combined ratio is achieved through claims ratio improvement. The claims ratio in Q1 of FY '23 has improved to 66.3% versus 91% in Q1 of FY '22. The current period claims ratio has 0.7% impact of COVID claims. In quarter 1, FY '23, there is an element of claims inflation for non-COVID claims due to hospital charging for RT PCR tests, masks, gloves and other protective equipment. Expense ratio for Q1 2023 increased by 1.8 percentage points to 32% from 30.1% of Q1 FY '22 due to lower premium base and claims processing cost of 3% in Q1 2022 versus 1% in Q1 2023.

So in terms of profitability, Q1 2023 was a profitable quarter for us with a profit before tax of INR 288 crores and profit after tax of INR 213 crores, 2-1-3 crores. So the gross COVID claims incurred during the quarter amounted to just INR 20 crores, and nonbusiness ESOP costs was INR 55 crores. Profit after tax before nonbusiness ESOP cost is INR 255 crores.

Our investment assets have grown to INR 11,463 crores in Q1 2023 versus INR 8,302 crores in Q1 2022. Investment leverage, which is investment booked to network, is now 2.3x as on 30th June 2022. Solvency as on 30th June 2022 is 1.87x compared to 1.67 as on 31st March 2023. With the normalization of claims, our solvency is shifting to premium basis as discussed during previous calls. This solvency is achieved through -- obligatorily through mandatory 4% for reinsurance. All things being said, on the premium basis of solvency, our solvency as on June 30, 2022, would have further improved by approximately 20 points.

We appreciate the steps taken by Insurance Regulatory and Development Authority of India which will catalyze greater penetration and expand total addressable market for the entire industry. It will make the industry more competitive based on market-determined rather than regulatory-determined rules. The regulator's recent exception of the use-and-file guidelines to all health insurance products will enable the industry to launch innovative and customized products at a faster frequency.

To conclude, our focus on the attractive retail health segment continued during the quarter, and our efforts are in progress to manage and control claims, outgrow -- and claims inflation. We believe that we are in a good position to take advantage of the industry's long growth run rate. Thank you all.

[Operator]

Should we open up for questions?

[Prakash Subbarayan, executive]

Yes, please.

[Operator]

[Operator Instructions] The first question is from the line of Swarnabha Mukherjee from B&K Securities.

[Swarnabha Mukherjee, analyst]

Congrats for a great set of numbers. Sir, my first question is on the claims side. So 2 parts to that. First of all, you mentioned that there has been a claims inflation in terms of additional costs that the hospitals are charging. Does this mean that this could be something that will continue? And would that mean that you would continue to expect a slightly higher loss ratio than you have guided previous? That is the first part of the question.

The second part is on the COVID claims. So this INR 20 crores of COVID claims that you highlighted, is this from the claims raised in current quarter? Or is this some old claims? And given that we are going through some wave of COVID right now, so do we expect this to spill over to the current quarter, that is Q2 as well? So that is my first question.

[Pratik Patil]

Fine. So the impact of COVID claims, the 0.7%, which you are trying to mention, it is for this quarter, the disease that occurred in this quarter, claims that have come in this quarter and what we have paid in this quarter.

And with regard to these hospitals charging for the RT PCR test and other stuff, protective equipment, this has become a routine given that the long run of the pandemic. And we have taken all efforts to see that a very, very basic price is paid for these protective activities. So hence, going forward, I don't think that it should have a big impact on the average we pay for any hospitalization cost.

[Swarnabha Mukherjee, analyst]

Sir, impact of that on the loss ratio, if you could throw some light on.

[Pratik Patil]

It's only 0.7% in this quarter and going forward. So the real impact of COVID is 0.7%. But the non-COVID impact, it's a small percentage, maybe, I can say, some 2% to 4% in every claim will be the cost of this non-COVID-related -- the COVID-related tests done on medical admissions and surgical admissions.

[Swarnabha Mukherjee, analyst]

Sure. Sure, sir. Sir, and 2 clarifications from your opening remarks, if I could ask. One, in terms of OpEx ratio, what you mentioned, if I understood correctly, it is because of a lower scale in the first quarter that has resulted in the numbers booked slightly higher or anything else [ to be done ] to that? That is the first one.

And second is on the solvency. So you mentioned that you were moving to a premium method. So this quarter, you will completely apply the premium method? Or if we move fully to a premium method, should we have like that increase you have highlighted?

[Anand Roy, executive]

Yes. So Swarnabha, the first thing on the expense ratio, Q1 is a small quarter. So it's a low premium base, whereas the expenses are fixed. So Q1 will always have a slightly higher expense ratio compared to the full year average. Second thing is we used to transfer 3% costs from OpEx to claims till last year. We changed this method in quarter 2 to 1% so -- which is applied in the current period as well. Most of quarter 1, we still had transferred 3% OpEx from -- cost of OpEx from -- OpEx to claims. So that's a slight anomaly in quarter 1, which will get corrected quarter 2 onwards. These are the 2 reasons on the expense ratio. On the...

[Swarnabha Mukherjee, analyst]

Sir, if you could -- sorry to interrupt, sir. If you could kindly explain the rationale for moving 3% of the cost to -- from claims to OpEx? I'm sorry, I'm not aware, if you could just explain that a bit.

[Anand Roy, executive]

Swarnabha, we can take this off-line. Basically, the logic is that our PPE is in-house, okay? So when it's an external PPE, to pay the cost of the PPE, you book it indirectly. But because we have an in-house PPE, we have our own set of doctors who are employed, we transfer these costs from OpEx to claims. That's what companies do who have in-house PPEs. So with scale, this cost is reduced, which we have taken the impact in quarter 2 onwards.

On the solvency ratio, currently, we are still on the claims basis of solvency. What we mentioned in the script that there is still some headway left between premium and claims. And if we do currently on a premium basis, the solvency will further improve by 20 points. So the convergence will happen by September. As we keep on growing the premiums and the claims ratio starts to normalize, we believe that around September, it should converge.

[Swarnabha Mukherjee, analyst]

So sir, 20 points means from INR 187-odd crores, around INR 207-odd crores, that is what you mean.

[Anand Roy, executive]

Yes.

[Operator]

The next question is from the line of Sanketh Godha from Spark Capital.

[Sanketh Godha, analyst]

Here is -- I have a simple accounting question. This NEP unexpired risk reversal thing or the reserve release which happened, should we assume this will be a common phenomena in first quarter? Because fourth quarter is such a big quarter. So you -- should we expect that this reversal will consistently happen in first quarter of every year and which will lead to a higher NEP probably even better than GWP number?

[Anand Roy, executive]

Not exactly. This will be a feature of the first quarter every year on 1 by 365 basis because quarter 1 is small compared to quarter 4. That is where we see a lot in quarter 4. So the combined and everything is fine because we don't have the concept of that in quarter 4, in spite of having a good combined ratio. There is always an underwriting neutral or loss similarly in quarter 1 because the earnings come. The release happens in quarter 1. The quarter 1 GWP is smaller. This will always be a phenomenon in quarter 1. This was there in last year as well. On a 1 by 365 basis, the AWP is lower compared to the net earned premium.

[Sanketh Godha, analyst]

Sir, secondly, is it safe to assume or is it okay to tell that if there is a URR increase every quarter on quarter -- from second, third, fourth quarter, then if you remain at kind of 65%, 66% kind of a loss ratio for 2Q, 3Q, 4, the quantum of underwriting profit which we would make, 95%, 96% combined, will be lower compared to what we have made in Q1 FY '23 there?

[Anand Roy, executive]

So the combined ratio of 95%, 96% will give a present underwriting profit for the whole year, once you do the whole year number. It will not be dependent to quarter 1. It will start to normalize.

[Sanketh Godha, analyst]

Okay. Okay. Okay. Got it. The -- another question, which was that in the current quarter, if you see, the ANH claims, that is claims after the certified network hospitals, has come down to 56% compared to 64% in the last year. So just this is an anomaly or this reduction from 64% to 56% is also one of the reasons why our claims ratio came a little higher? Maybe we were expecting around 65%. We came at 66%. So sir, just wanted to check, that played a role or this is just a quarter aberration?

[Prakash Subbarayan, executive]

Sanketh, so here, when it comes to pricing arrangement with the hospital, that 56% refers to the number of hospitals which have case for surgical procedures with us. But there are hospitals specializing in surgical procedures. There are multi-specialty hospitals and those that do mostly medical and pediatric cases only. So in medical and related conditions, we have what is called an early [ SOC ] arrangement, where we fix the cost from the professional charges, the room rate and the common diagnostic tests that are done. So -- and there are hospitals which give us an overall discount on the total amount.

So I'm trying to say that overall, the pricing arrangement is what we discussed. And 56%, what is mentioned is the pricing that we -- surgical package that we have with the hospitals. But for your understanding, overall, our pricing arrangement with the hospitals is under progress, and we are able to control our average claims paid quarter-on-quarter. And we are able to see that we are progressing in that direction.

[Sanketh Godha, analyst]

Got it, sir. Sir, out of the total claims paid in the current quarter, how much would be cashless and how much would be reimbursement? Because this 56% is referred only to the cashless part, right?

[Prakash Subbarayan, executive]

Cashless is around 65% to 70%. Usually, we have cashless, by number, around 65% to 70%. And if you look at the medical inflation, which we have as the average increase in the claims that we take, you will observe that we are able to have a much lesser price hike compared to the inflation. And that is because we are in the industry for 15 years. We know the language. We talk to hospitals, and we have the strength of large numbers.

[Sanketh Godha, analyst]

Got it, sir. Sir, second thing, I just wanted to confirm what you said. Now we have a [ defined ] way of repricing these products, and you alluded to the point that the average claims size for the same claims length structurally probably has gone up because of the procedures adopted by hospitals to treat a patient they are seeing because probably, they are doing mandatory RT PCR, they are doing some other tests, which previously were not done. So there is an inflation in the claims size. So I mean, repricing in the products, will we see very frequently? And even Anand, when he said that we have seen a price hike -- we have taken price hikes of around 20% in Medi Classic product, which is 6% of the total business, is it actually done under recent financing? And we can see these kind of changes happening more frequently compared to what we have experienced in the past and before. Therefore, we have a better control on the loss ratios going ahead.

[Anand Roy, executive]

No. So see, repricing of the product will be constant phenomena. We will be evaluating our internal loss ratios and combined ratios and then taking corrective measures. But having said that, the company has always been very, very judicious in pricing its products and repricing them also. So we are very well aware of the market dynamics, and we do not intend to make repricing as the only option. Our agenda is to negotiate with the hospitals, bring the medical inflation under control and also simultaneously look at pricing products appropriately. So Medi Classic product is being repriced after 3 years, and I think the value that the product provides justifies the repricing.

[Sanketh Godha, analyst]

But sir, this price hike in Medi Classic is...

[Operator]

[Operator Instructions]

[Sanketh Godha, analyst]

Okay. Yes.

[Operator]

[Operator Instructions] The next question is from the line of Prayesh Jain from Motilal Oswal.

[Prayesh Jain, analyst]

Yes. Sir, firstly, what would be your guidance for the claims ratio and combined ratio for this fiscal now? Earlier, you were alluding to something like a 64% kind of a loss ratio and a combined of around 92% -- or 90%, 92% for the full year. Do you think that the claims can be achieved now given the Q1 number?

My next question is on the premium growth for the full year. Again, you have alluded to in the past of growing the retail health book by 25%, and we are still below that for the first quarter. So do you think that the premium growth can also -- will also be -- have to be trending down? I mean that, again, we've already seen a 19 -- 18%, 19% growth in some assured per policy. You've taken a price hike of around 20% in one of the classic products. You have taken a 15% price hike last year in one of your -- again, one of the key products. So putting all -- so pricing and your [ potential ] for increase and number of customers, how do you see this will play out when you give a guidance for the premium growth in this year? That would be my question.

[Anand Roy, executive]

So as far as our guidance for claims ratio is concerned for the full year, we checked for original guidance of around 63% to 65%. There will be seasonality. Claims ratios are not a straight line. Health insurance claims go up and down, depending on various [indiscernible]. But we maintain our guidance of 63% to 65%. As far as our combined ratio guidance is concerned, we have -- basically, we are still looking at 93% to 95% of the overall combined ratio for the full year. [indiscernible].

[Operator]

Sorry to interrupt. Mr. Jain, there's a lot of disturbance from your line. Can you mute your line while you're not speaking?

[Prayesh Jain, analyst]

I'll mute myself.

[Anand Roy, executive]

Yes. As far as the premium growth is concerned, Star Health will continue to be a retail-focused company, and we have grown double than the industry's growth rate as far as the first quarter is concerned in the retail business. And we are going to be very selective as far as underwriting large corporate business is concerned while focusing on the SME and the smaller, midsized corporates. Growth in premium, we are very confident of the guidance that we have given in terms of retail business. We will be able to grow at more than the industry's growth rate, and we hope that we will be able to achieve between 20% to 25% growth rate in the retail segment.

As far as overall growth is concerned, there might be a muted growth because of the group segment, but then that is by design and not by any other -- it's not because of a challenge. The growth opportunities in the business is substantial. The awareness of health insurance is, as you are aware, is -- has become very, very high. We have opened up new vistas of growth like rural markets. We are investing big time into the rural strategy, and we expect a good growth to come from there. Our bancassurance partnerships are also taking shape very well. We are signing up new banks every quarter. And we expect that this, plus rural and also our digital business, which is our core focus area, apart from the agency model that we have, obviously, as a mainstay of our business, all of these put together, we are very confident of doing very well on the retail business growth and growing much, much faster than the industry. And that is going to be our game plan.

[Prayesh Jain, analyst]

Yes. How -- what would be the quality of the retail book that you are sourcing from rural India today? Do you think that the loss ratios there could be higher? Or how would you rate that book?

[Anand Roy, executive]

So the rural markets, we are -- the initial -- the signs that we are getting is very positive. We are seeing that it's not -- your average ticket size in the rural business is also very close to what we are seeing in the semi-urban and urban markets. Of course, metro cities will be quite larger. But we are very positive because the quality of business coming in is very good. Our loss ratios are definitely much better right now. But we are also looking at very, very granular distribution in the rural markets. We have opened up close to 300 bespoke locations and 200 branch offices. So there are already about 500 distribution outlets in the rural markets. And then I speak -- when I say rural, I mean really rural. These are not small towns, but we are going into cities which are listed -- I mean, villages and towns which have less than 1 lakh population. And I think we are very excited about this particular growth.

[Operator]

The next question is from the line of Madhukar Ladha from Elara Capital.

[Madhukar Ladha, analyst]

Congratulations on a good set of numbers. First, I think you mentioned in your opening remarks that you've taken a price increase in a product of about 25%. I missed what product is it. And what is the share of this product in the GWP that we write, if you can give that?

Second, if you can talk a little bit about the CSC initiative and the tie-up and how large it can potentially be in the next sort of couple of years, that will be helpful.

And third, on the ESOP expenses, I believe this quarter, that's about INR 55-odd crores. What is the time line for this? So how much will it be over FY '23, '24, if you can give those numbers out? Yes, those would be my 3 questions.

[Anand Roy, executive]

So the Medi Classic product is a product we have taken a price hike. This is basically one of our oldest and most popular products, but it contributes close to 6% of our retail GWP. And we have taken a price hike on that.

What we have -- about -- your second question about the CSC, now CSC, as you are aware, is a government of India initiative. And there are about 5 lakh functioning outlets across the country. And Star Health is the only SAHI company which is on their platform. The opportunity is very large. We have just finished our technology integration on their platform. So training activities of all these CSC members and the village-level entrepreneurs is going on. We will be able to give you more guidance about exactly what numbers we are planning probably in the future. But right now, we believe that given the distribution and the brand of Star Health and the service capabilities of ours in the rural markets, we will definitely be able to garner substantial market share here.

As far as the ESOP expenses is concerned, I request Nilesh to...

[Nilesh Kambli, executive]

Yes. So Madhukar, in terms of ESOP, we have expensed around INR 55 crores. As discussed during the last call, this is a 1-year vesting period, started from 1st September '21 and which will end on 30th November '22. So for the rest of the year, there will be another impact of around INR 74 crores. Q2 will be 55%, and Q3 will be 36%. That will be the end of it. There'll be no impact in '23, '24. It will be from 1st April to 30th November '22, a total impact of INR 145 crores for the current year.

[Operator]

The next question is from the line of Shreya Shivani from CLSA.

[Shreya Shivani, analyst]

Sir, I have 3 questions. First is on your net commission rate. So that has come at around 13.7% for the first quarter. This is in line with the full year FY '22 numbers. Now given that the loss ratio is declining and the reinsurance commission that you earn is on a rolling basis, shouldn't this net commission ratio would have been lower because your reinsurance commission should have been higher? That's my first question.

Second is on the net profit. So the net profit, I understand, first quarter is going to be a little weaker, so that there will be a reserve reversal. So going ahead, should we expect as the momentum of business increases, your reserves will go up? So should we expect first quarter PAT to be the highest among all 4 quarters? I mean, I just wanted to understand the sustainability of INR 200 crores of PAT over the quarters.

And the last question is a little more macro [indiscernible]. It's about your rural business. So as far as we understand that there are so many government policies, government insurance plan, and what is your -- how do you expect to grow in the rural market when more number of people would be covered by the government insurance plan? Do you think they will need the private players' insurance policy? So the sustainability of the rural business is the last question.

[Anand Roy, executive]

So in terms of net commission, we only have obligatory reinsurance, which is now 4%. In obligatory reinsurance, the commission rate is fixed, unlike sliding scale, which is available in quota share treaty. So for us, even though the loss ratio is improved, the net commission ratio will be in that range because 98% of that cost is the commission paid to the agents. And obligatory 4% is -- obligatory on that, we get 15% commission.

So we don't see any change that will happen in spite of the reduction in the loss ratio in that segment. Of course, with more and more benefit products, the reinsurance commissions will improve, and that will have an impact on the overall commissions ratio. So that's the focus on the benefit business, which will help in the reduction in the net commission ratio.

In terms of profit after tax for quarter 1, yes, quarter 1 will be the highest -- a better profit quarter compared to the other 3 quarters. But the true profitability for the insurance company is the combined ratio, which keeps on normalizing as we keep on moving forward. And that's the potential of the business. As long as we are able to maintain the combined ratio at the level that we had talked about, 93% to 95%, the investment income continues to be robust. We'll be meeting the guidance that we have given in terms of profitability. On macro, [ it's you ].

[Prakash Subbarayan, executive]

So as far as the rural business is concerned, we are extremely positive about the opportunity here because we are seeing good demand. And as I told you, the average ticket size in the rural business is also relatively higher than what we had initially expected. We believe that the rural markets do have a good potential because the awareness and the need for quality health treatment is being felt even in those areas. Government businesses are not our direct competitor because they are catering to a different segment of the society. We are targeting the rural middle income group and the rural upper income group. So we are not looking at the below poverty line segment, which the government scheme generally targets. So we are very, very confident about our rural strategy, and we expect that this will be a good profitable growth driver for the organization.

[Operator]

The next question is from the line of Ajox Frederick from Unifi Capital.

[Ajox Frederick H., analyst]

Congrats on a very good set of numbers. Sir, I just have one question, particularly the regulatory front, where the regulator might allow life insurers to sell reinsurance products. So what is our take, number one? Number two is, if at all, let's say, they come out with the guidance, what is our next step after that?

[Prakash Subbarayan, executive]

See, health insurance, we always believe it is service-intensive. And the capabilities that we have built in, we have the experience of handling more than 8 million claims. And we are very confident that we can prove our efficiency through our services and continue to remain as a market leader.

[Ajox Frederick H., analyst]

Sir, but still, I mean, I was coming from the angle that agency, particularly LIC agents who have a good overlap, might tilt towards LIC, right, or, for that matter, any other life insurers?

[Prakash Subbarayan, executive]

That's why I'm trying to say that something which creates stickiness for the agent is the service efficiency of the organization, the scale and reach, their presence, their brand image, which we all have a mile of that.

[Ajox Frederick H., analyst]

Got it, sir. And what is your sense, sir? Like will it happen like if at all? Any indications on the regulator?

[Prakash Subbarayan, executive]

That we have to wait and see. It's not our division primarily.

[Operator]

The next question is from the line of Neeraj Toshniwal from UBS.

[Neeraj Toshniwal, analyst]

Just wanted your thoughts in terms of claims ratio between the retail portfolio and the group portfolio, if you can share. And the growth of 20% in the retail portfolio, if you can split further between the price hike and the growth in terms of like volume and value, that would be helpful. Because if I look at the claims on a sequential basis, it has been very flattish despite -- obviously, due to the technical unwinding of the reserves, it looks optically much lower. But otherwise, it's there -- almost there where it was. So just wanted your thoughts about these 2 things, then I can ask another question.

[Subbarayan Prakash, executive]

The loss on group portfolio, like it all depends on so many factors. The underwriting philosophy that we follow, the type of group, as my colleague, Anand was pointing out, we are trying to do a very selective approach to acceptance of a group cover. We are looking at SME and medium corporates, and we are trying to look at the burning costs and our valuation and then trying to accept the group. So -- and we have started this strategy from mid-January, and we are able to see a good progress and a very, very profitable group drop issue after we have started following this strategy. So our mix of retail and group as we have been watching like watching us committing here that we are going to be more dominant in the profitable retail segment. And we are there with all on-demand covered and the technological efficiency to create the continuous profit in this retail segment.

[Neeraj Toshniwal, analyst]

So, but -- can we have the number in terms of the loss experience between the group and the retail?

[Nilesh Kambli, executive]

So that's not in the public domain, the group and retail loss ratios.

[Neeraj Toshniwal, analyst]

Sure. Okay. So the unwinding of the group portfolio, how much delta we are expecting to come in the improvement of the loss ratio going ahead that you can give some color on that?

[Nilesh Kambli, executive]

Not able to get the question. The overall loss ratio guidance that we have given is 63% to 65% as group keeps on declining. It will have an impact on the overall loss ratio of the company.

[Neeraj Toshniwal, analyst]

Okay. And the spread between the price and the volume -- price against the volume it can get then more on that in terms of the 20% growth in retail portfolio, how much would be coming from price hike?

[Nilesh Kambli, executive]

Typically around 7% to 9% the value growth that happens on account of the natural increase in the age buckets, some in should increase that we have taken the price increase that we have taken and the balance is the volume growth that's happening?

[Neeraj Toshniwal, analyst]

7% to 9% is the income price right?. And given this launch of new products, the new upgraded version started this year from Family Health Optima, any price increase we have taken? Or how with the new features in terms of the viability, I just wanted to understand because the major product for us -- how will things change in terms of overall growth and the premium growth and the loss ratio going forward?

[Prakash Subbarayan, executive]

See, in the new products like, Health Assure, Women Care, and Star Premier, we have come up with a lot of innovative features, which are much secure in the current status. Like you know, we have included a lot of upcoming specialties. We are trying to give cover for baby born from day 1. We are including specialties, upcoming specialties in medicine like rehabilitation, medicine, hospital care, pain medicine. And so we are looking into the growth and success of the health care services and the requirement of a common man, and we have incorporated all those value addition -- value-added features in these new products and the new products are also priced appropriately.

So we are very confident that we are going to grow more on this new product and this can essentially help us to increase our average premium and also control our lot.

[Operator]

The next question is from the line of Jayant Kharote from Credit Suisse.

[Jayant Kharote, analyst]

I just had 1 question on the Young Star product. How has it done in the first quarter? And if you could talk in general, the direction of the average age for the incremental business, is it better than at the portfolio level? Or how is it moving?

[Subbarayan Prakash, executive]

Sir, the product which is well received, and we are seeing the loss ratio also in between the calculated numbers. And we see that there are a lot of traction on this product. Lot of youngsters are showing interest. And we are also giving a discount on the premium for people maintaining good health in this product. So that's a very -- that's a very well received. And we could see that youngsters today, contributes around 12% of the performance compared to [ other policies ].

[Jayant Kharote, analyst]

Sir, is the growth in Young Star better than overall retail growth or in line?

[Subbarayan Prakash, executive]

It's more than what we expected as we launched this product. We can call Young Star as one of our successful products.

[Operator]

The next question is from the line of Avinash Singh from Emkay Global.

[Avinash Singh, analyst]

First question, I mean, moving forward, if the losses come back by expectation. Lastly, I mean, by end of Q2, you are going to move to claims. So by year-end, of course, there were 2 moving parts, you will have sort of organic capital -- as well as solvency moving from claims to premium at the same time, premium growth. So by year-end, I mean broadly if things go as per guidance, where will solvency end up at FY '23, more closer to 200% or 190%? So that's the first question. And second one, I mean, going forward which -- I mean the kind of relatively degrowth in group that largely happened, but still overall growth is going to be a bit or slightly on the lower side because of the group impact. By year-end, of course, once this quarterly thing normalizes and your OpEx at a moment, what will be the ex commission OpEx ratio that you would see in FY '23?

[Nilesh Kambli, executive]

So in terms of solvency, what we live by year-end as we keep on moving towards a premium basis and quarter 4, which is the biggest quarter, we believe the solvency should be in the range of 193% to 198% in that range by year-end. In terms of expense ratio, we have been a guidance 93% to 95%, we believe -- and with the losses of [indiscernible] we believe our expense ratio will be around 30%, by the end of the year. It will be better than last year.

[Operator]

The next question is from the line of Bharti from Mirae Asset.

[Bharti Sawant, analyst]

Sir, my question was more on the channel growth fund. Just wanted to follow. So just wanted to understand, within the digital channel growth of 29%, which you have shared, what would be the growth of our own channel and what kind of growth would be coming from web aggregators or other platforms?

[Anand Roy, executive]

So our own direct channel is growing faster than channel partners. So we are noticing close to more than 35% growth on our direct channel. And we are investing more on our direct business because as you are aware, the direct business is more profitable in the long run because there are no trailing commissions and we are also able to control the quality of business. So that is going to be the main focus area for us. Today, the direct business is almost 60% of our overall digital business. and all other channel partners have skewed the balance 40%. So that's the kind of business that we are driving. Other channel partners have grown, I think, around 20% -- on online sales.

[Bharti Sawant, analyst]

Okay. Okay. Understood. And sir, just 1 more question. On the regulator front, wherein they have allowed the banca channel to opt for 9 or as they can go for the 9 insurance. So does that help us in growing the off-line mode faster? Or our focus is more to -- on the online side only?

[Anand Roy, executive]

No, definitely, it's a very positive move for Star Health Insurance because we are growing our banca channel exponentially and much growing much faster than our overall business. And if new partnerships can come through because of this -- if this happens, the opening up of the regulation happens, I'm sure that being a market leader, there will be a lot of partners who will naturally gravitate towards Star Health Insurance. And we already have enough inquiries, which we are not able to get into because of these restrictions currently. But I think this will open up a good opportunity for us.

[Operator]

The next question is from the line of Sahej Mittal from HDFC Securities.

[Sahej Mittal, analyst]

Congratulations on a great set. Sir, a couple of questions from my side. Virtual products or any if you could quantify the number of products which are already in pipeline for repricing, even if you could not aim them, but at least give us some sense if there are some products in the pipeline for repricing? Second was on what is the median age of the new book which we are writing, given the kind of increase in the sum assured. So I mean, what's the median age of the new book versus what's the median age of the existing book? And also what's the median sum assured of the new book which we are writing and the third one was on the new product, which we have relaunched, so any pricing differential compared to the Family Health Optima, which was earlier there.

[Anand Roy, executive]

See as far as price divisions of other products are concerned, we will not be able to comment on that right now because these are not something that we would like to comment in advance, we are a company where we are constantly reviewing our products. And if at all, it is required to take a price revision, we take an overall comprehensive view, and then we take a decision to go ahead with it. And as you know, right, currently, with the new use and file regulations, this has become even more -- we are more agile towards this particular price revision. So we do not intend to make any comments on that. But as far as our average median age and medium sum insured is concerned, the median age right now is around 41 years, if I'm not mistaken, when median sum insured of the new products that we are seeing is around INR 8.5 lakhs which we have disclosed already in the presentation.

[Sahej Mittal, analyst]

And what would be the median age of the new book, which you are writing?

[Anand Roy, executive]

It would be similar to 41 years.

[Sahej Mittal, analyst]

Got it. And if you could quantify the total cash less claims from network plus non-network hospitals that would be great.

[Subbarayan Prakash, executive]

So the focus is more on encouraging customers to go with network hospitals because in the network hospitals, we are aware of their [indiscernible], their performance, their quality, their expertise and their level of infrastructure and their activity is on stage. So we always encourage customers to go to network hospitals. And our participation to non-network hospitals is gradually declining, declining year-on-year and quarter-on-quarter. We would see that at 13% to 15% of the outlook happens to non-network hospitals.

[Sahej Mittal, analyst]

Got it. And this decree -- and this decrease in the share of cash led business, a conscious approach which Star is taking to curtail the share of cashless claims, given the kind of ordinance claims which are being reported in the industry and just to get a sense?

[Anand Roy, executive]

See, Sir, what you mentioned is the ANH part is what we have shown in the presentation is 56%. So -- so total cash less is 80%. Out of the INR 1,800 crores of claims that we have paid cashless is 80%, out of the cashless 56% is towards agreed network hospital. So we keep on increasing the penetration, there are certain kind of illnesses, which are not available for agreed network hospitals kind of a thing. That is what Dr. Prakash had mentioned.

[Operator]

Thank you, ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Nilesh Kambli for his closing comments.

[Nilesh Kambli, executive]

Thank you all for joining this call on Saturday. It was a good quarter for us, and we are confident we'll be able to achieve the guidance that we have given for the next 9 months and the whole year. Thank you all for the participation.

[Operator]

Thank you. Ladies and gentlemen, on behalf of Star Health Allied Insurance Company Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.