Star Health and Allied Insurance Company Ltd

NSE:STARHEALTH

Earnings Call Analysis

Star Health Q1 FY '25 Results: Strong Growth and Profitability

In Q1 FY '25, Star Health reported strong financial performance with an 18% growth in Gross Written Premium (GWP) to INR 3,476 crores. Profit before tax increased by 11% to INR 426 crores. The company's combined ratio was 99.2%, and the claims ratio rose to 67.6%. Significant improvements were seen in digital issuance (72%) and cashless claims (74%). Investment income grew by 18% to INR 295 crores. Looking forward, the company plans to double the GWP to INR 30,000 crores and triple the PAT to INR 2,500 crores by FY '28.

Navigating a Changing Landscape

Star Health and Allied Insurance Company Limited is operating in a dynamic environment shaped by regulatory changes and a growing focus on customer-centric services. In the recent earnings call, the management emphasized their commitment to adapt to new regulatory requirements while ensuring that the company's services remain accessible and comprehensible to consumers. The company is aligning its goals with the 'Insurance for All' initiative mandated by the Insurance Regulatory and Development Authority of India (IRDAI), which aims to extend insurance coverage throughout the nation.

Impressive Growth Metrics

The company reported a robust growth trajectory, with a compound annual growth rate (CAGR) of 23% in its gross written premium (GWP) from FY 2019 to FY 2024. This performance reflects their strategic focus on balancing risk and growth, leading to an underwriting profit with a growth rate of 24% during the same period. For the current quarter (Q1 FY 2025), the growth indicators remain strong, buoyed by increasing customer engagement and a heightened focus on health insurance products.

Premium and Claims Insights

In Q1 FY 2025, the average sum insured for new policies increased by 8% year-over-year, reaching approximately INR 10 lakhs. Notably, policies with sums insured of INR 5 lakhs and above now represent 81% of the retail health portfolio, up from 76% the previous year. While growth in the overall business is encouraging, there was a noted increase in claims, with a slight rise in the loss ratio attributed to medical inflation and intensified claims frequency. This has prompted management to prepare for potential price adjustments in their insurance products to align with current market dynamics.

Operational Efficiency and Customer Engagement

Star Health's commitment to efficiency is reflected in the digital shift of operations, with 72% of premium collections through digital channels in Q1 FY 2025, a notable increase from 66% in the previous year. Customer engagement initiatives have also seen significant increases, with a 156% rise in preventive health checks and a 51% increase in telemedicine usage compared to Q1 FY 2024. Moreover, the company's NPS score stands at 16, indicating positive customer sentiment.

Strategic Future and Market Positioning

Looking ahead, Star Health is preparing for further growth opportunities, particularly through the potential introduction of composite licenses that would enable them to offer innovative protection plans across both life and non-life segments. Their extensive distribution network positions the company favorably for capitalizing on market growth while ensuring customer satisfaction through tailored insurance products. The management's proactive approach in digital enhancements and wellness programs underscores their commitment to maintaining a competitive edge in the industry.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Star Health and Allied Insurance Company Limited Q1 FY 2025 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, Steve. Good morning, everyone. From the senior management we have with us Mr. Anand Roy, Managing Director and Chief Executive Officer; Mr. Nilesh Kambli, Chief Financial Officer; Mr. Aneesh Srivastava, Chief Investment Officer; Mr. Amitabh Jain, Chief Operating Officer; and Mr. Aditya Biyani, Chief Strategy and Investor Relations 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 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.

[Anand Roy, executive]

Thank you, Pratik, and a very good morning to all of you on this Wednesday morning. Thank you for taking time and joining this conference call of Star Health Insurance. At our company, we continue to focus on our planned journey of growth with profit while maintaining the leadership in the health insurance domain. These are very interesting times for the industry with multiple regulatory changes being taught about focusing on customer centricity and also how to improving the services of the industry in general. We are gearing up for meeting those regulatory changes, and we are already ahead of the curve in many of those areas. We are totally committed to delivering on the insurance for all guideline, which the regulator has set for the industry. And we are taking multiple steps to increase our distribution and penetration.

I will now request my colleague, Aditya, to give you a brief about the company's performance in the Quarter 1, and then we are hoping to post questions and answers from your side. Thank you so much.

[Aditya Biyani, executive]

Thank you, Anand. A very good morning to all of you. Thank you very much for joining us today for the earnings conference call of Star Health and Allied Insurance Company Limited for Q1 2025. Before delving into the company specifics, I would like to give you a brief overview on the industry trends and developments that we have witnessed in the last few months and then walk you all through the company's strategic vision and our performance.

The RBI's economic survey has banked India's GDP growth at 6.5% to 7% for the current financial year, which is a testament to the India growth story. On the other hand, for a burgeoning nation on track to become an economic power hauls, there is a hidden wonder [indiscernible]. While the nation is rapidly searching forward, a majority percentage of individuals and households are exposed to financial risks by virtue of the uninsured or underinsured. On an individual level, this potentially limit access to quality health care thus giving an opportunity to the health insurance segment with a long headroom for growth. However, there are further complications, which are likely to become more acute as we move forward, like, for example, climate change, which is the biggest challenge that we all are facing today. A very cursory glance of empirical data shows the increase in climate change-related diseases across the globe. This has to be proactively addressed by the health care industry through innovative products and services.

Having said that, the Indian insurance industry is quite resilient and ready to face these challenges. The initiative of insurance for all by 2047, driven by the Insurance Regulatory and Development Authority of India. [ Supply individual's ] steadfast growth of the Indian economy provides an opportune period for the expansion of the insurance sector. In line with this vision, IRDAI has issued a market circular on insurance. This emphasizes on customer simplicity by mandatory insurance to design and offer products that are fair, transparent and easy to understand, ensuring that customers are well informed about the features and benefits of their quality. This approach aims to enhance customer trust and satisfaction, promoting a customer first culture within the insurance industry. We have welcomed this change to invest more on customer-centric projects.

In the last couple of years, we have consciously embarked on the journey of putting risk first and growth later. Our CAGR of 23% between financial year '19 to financial year '24 and overall business performance of gross written premium and the underwriting profit, which grew at a rate of 24% during the same period demonstrates the effectiveness of the execution of strategy we had adopted. This trust to performance at a calibrated risk undertaken has enabled us to shift towards growth with profits very effectively.

As outlined previously during our Analyst Day, we have 4 engines of growth, namely A, B, C, D. A for agency. Our agency business contributed around 80% of our overall business for the 3 months ended June '24. Our agency strengths have increased to 718,000 agents with a net addition of 17,000 agents in the June quarter. B is for banca. As regards banca partnerships and corporate agencies, we now have 61 tariffs in the banks and NBFC space. This channel contributes to around 8% to our GWP in Q1 FY '25, including alternate channels. C is for corporate and the corporate business found via individual agents, banks and brokers. This channel contributed 5% of our overall business in Q1 FY '25. The top [ grosser ] banks are already our partners and along with our agency force, we are getting an opportunity to work with SMEs and MSMEs for this business. Lastly, D for digital. The digital business comprising of our own direct-to-consumer and online brokers and web aggregators contributed to around 7% of our overall GWP in Q1 FY '25. At a more granular level, 70% of our GWP comes from our own direct-to-consumer channel and the balance 30% comes from our online brokers and web application.

In [indiscernible] with our 4 growth engines, we have seen competitive advantages. The first competitive advantage which we have is of cost leadership. Streamlining internal processes, leveraging technology and fostering growth consciousness has resulted in maximizing efficiency and minimizing waste. These steps have ensured that we are able to keep our expenses of management well below the 35% norm as mandated by IRDAI. The second competitive advantage we have resolved unparalleled distribution. Along with agency, which is our core competence, our diversification to banca, corporate and digital is our 4-pronged distribution strategy to service the insurance needs of all customer segments. Lastly, we have the best in-house in claims servicing. Our in-house claim management system and adoption of newest technology has enabled us to process 92% claimed in less than 2 hours and a 24/7 service availability for a seamless experience, along with our 30,000-plus health care provider network. With the 8 of the 4 growth engines and 3 competitive modes, by FY '28, we acquired to double our GWP to INR 30,000 crores and triple our PAT to INR 2,500 crores.

Coming to our Q1 FY '25 performance for the 3 months ended June '24, our GWP grew at a rate of 18% to INR 3,476 crores compared to INR 2,949 crores during the same period last year. We are the largest standalone health insurance company in India and our share of GWP is close to 42% of the entire standalone health insurance industry. Our market share for Q1 FY '25, amongst all general insurance company is up by 20 bps to 4.8% versus 4.6% in the previous year. In Q1 FY '25, we tick all the boxes as far as fresh business is concerned. The ratio of threats to renew our business in Q1 FY '25 improved to 25:75 as compared to 23:77 in the same quarter last year. Retail freshers premium and the agent activation rate also grew in the mid-teens in Q1 FY '25.

Coming to banca. Fresh business grew by 25%, with an uptick in the partner count to 61. We expect the share of this channel to keep increasing in the coming quarters. As regards to corporate channel, other than banca, the fresh business growth was 110%. The digital channel grew by 25% in Q1 FY '25 in fresh business terms. With 50% market share in the direct-to-consumer space, we will continue to leverage this trend for further growth.

In order to increase penetration in semi-urban and rural geographies, we have added 165 sales manager stations during the quarter, taking the total to 1,319 sales manager stations, which are small individual service centers. During the quarter, the total number of rural agents have gone up by 30% on Y-o-Y basis. The number of rural agents active on retail fresh is also up by 40%. With 887 branches, we have 2,000-plus customer touch points to ensure better service. Of the 19,000-plus pin codes in India, we are present in 17,253 pin codes via our sales distribution network.

While keeping our focus on growth levers, we will continue our focus to further strengthen our customer centricity and take strident sting true to our belief that all citizens have a right to get access to affordable health insurance. In line with this, we have recently launched our Home Health Care Service segment. This facility will be available to our policyholders at no extra premium. However, the expenses incurred will be deducted from the sum insured. We have collaborated with 4 home health care service providers, which has enabled us to provide this facility in more than 50 cities in the country.

I can now talk about some of our claims initiatives and the outturns. In terms of claims, 90% of the paid claims in Q1 FY '25 were cashless versus 84% in Q1 FY '24. The auto adjudication of claims helps us in drastically reducing the turnaround time. 33% of agreed network hospitals that equate to 76% of the cashless claim have been onboarded under our authorized adjudication initiative. Our anti-fraud rate and abuse AI and machine learning models continue to yield savings for us. In terms of claims outlook, we were able to save 2.4% of the reported claims as a result -- as a direct result of these measures.

Let me now elaborate further on the financial performance of the company. The combined ratio for Q1 FY '25 is 99.2% versus the combined ratio for the same period last year, which was 97.8%. The claims ratio in Q1 FY '25 was 67.6% versus 65.4% in Q1 FY '24. The preventive health checkup, telemedicine, OPD and wellness contribution in the claims ratio was 0.66% in Q1 FY '25. The expense ratio for Q1 FY '25 stood at 31.6% versus 32.4% for the corresponding quarter last year.

Turning to our investment income. Our investment assets are close to INR 15,802 crores in Q1 FY '25, showing a growth of 19% year-on-year. The yield for Q1 FY '25 was 7.5% versus 7.4% in Q1 FY '24. The investment income during Q1 FY '25 grew by 18% to INR 295 crores versus INR 250 crores in the same period last year.

Coming to our profitability. Our profit before tax of INR 426 crores for Q1 FY '25 was up by 11% from the same period last year. Our PAT for Q1 FY '25 came in at INR 319 crores, and this represents a year-on-year growth of 11%. The non-annualized ROE for Q1 FY '25 has come in at 4.9% versus 5.2% in Q1 FY '24.

Coming to our solvency. We have a strong capital base and our solvency as on 30 June 2024 is 2.29x compared to the regulatory requirement of 1.5x.

Now for some key highlights of Q1 FY '25. In Q1 FY '25, the average sum insured of new policies has increased by 8% on a year-on-year basis to INR 10 lakhs approximately. INR 5 lakhs and above sum insured now constitute 81% of the retail health portfolio versus 76% in Q1 FY '24. The share of the long-term policies within retail GWP has increased to 7% in Q1 FY '25 versus 5% in Q1 FY '24. Furthering our customer-centric approach, our NPS score stands at 16 for the quarter ended June '24. The digital issuance as a percentage of premium collection stands at 72% in Q1 FY '25 versus 66% in Q1 FY '24. The proportion of cashless claim with agreed network hospitals has gone up to 74% versus 61% in Q1 FY '24.

Coming to our prevention and wellness, our engagement with customers on prevention and wellness has seen a significant jump. Preventive health check has increased by 156% in Q1 FY '25. On customers using telemedicine, there has been a 51% increase this quarter over Q1 FY '24. On wellness enrollment, there has been a 100x jump in Q1 FY '25 over the same quarter last year. And because the Star Health app, our customer app downloads have increased to 6.6 million plus in Q1 FY '25 versus 5.7 million as of FY '24. Our monthly active users has increased by 26% compared to FY '24. The organic traffic to the website grew by 57% in Q1 FY '25 over the same period last year.

Lastly, if the regulator goes ahead with the rollout of composite licenses, we would certainly like to explore offering newer protection plans in life and nonlife segments in the future. We would be well positioned to cater to the strong customer adjacencies and would be able to expedite leveraging our proprietary distribution for cross-sell and upsell to our existing customers. Our vast network and footprint will help us in greater monetization of assets and tap new customers as well. Our extensive experience and understanding of the customer needs will empower us to innovate on integrated products. We are already working with a leading consultant to explore various strategies on the opportunities ahead of us.

To conclude, we at Star Health continue to believe and invest in the profitable and sustainable growth opportunities available in the health insurance segment and we are on our desired path of realizing the same. Thank you for attending the call. We are happy to take your questions now.

[Operator]

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

[Swarnabha Mukherjee, analyst]

Three questions. Firstly on the claim side, if you could highlight -- the claims with the number has some increase in the early fourth quarter. So is there any one-off here or is this like a steady state number and should we kind of move [ in demo ] with upcoming quarters particularly on this...

[Aditya Biyani, executive]

Swarnabha, we are not very clear. Can you just articulate the question again, please?

[Swarnabha Mukherjee, analyst]

So my first question was on the claims part. The claims numbers have -- those seen some inflation, I think last quarter, it was around slightly lower than INR 2,200 crores. So this is almost as much as INR 2,400 crores. So is there any one-off here? Or is this some steady state and should we think about the upcoming 3 quarters of this fiscal year based on this number? And consequently, what would be your expectation number for the remaining part of -- remaining part of the year? That is my first question.

Second is on the NEP growth. So this quarter, still NEP growth lags the overall GWP growth. So wanted to understand when do you expect this NEP growth or basically the price hike impact in NEP to flow in this year?

And lastly, in terms of the renewal premium. So the renewal -- retail health renewal premium ratio has gone down to around 93%. So what is playing out there? Is there any challenging renewals and I would like to get your comments on those. Those will be my questions.

[Anand Roy, executive]

Hi Swarnabha, on the claim part, what we said that the team -- trending sector [Technical Difficulty] as far as some of the medical [Technical Difficulty] and related cases, we use -- never used to be part of the Quarter 1 experience earlier. So this is the first time occurring that has happened, that's for -- which we have slightly higher-than-expected number.

Let me also give you a context about the overall increase of the loss ratio. So what has happened is that if you look at the non-health part of the portfolio, that has contributed to about close to 1% of the overall -- which is a reason because of some of higher PA and hospitalization cost, personal accident cost as well as [Technical Difficulty] going out further on our wellness and prevention activities. So overall, if you look at on the health side, the actual increase is just above 1%. So that's how the [Technical Difficulty].

[Swarnabha Mukherjee, analyst]

So just a follow-up on that. So in terms of then -- this being -- this looks like that this would be a steady state sector and that way we can issue -- should we expect that loss ratios in second, third and fourth quarter be slightly above what we had recorded last year given that these things like a trend? And also wanted to understand the rationale of these higher expenses in the wellness side of things, whether this is booked under the claims part as opposed to the expected part, if you could explain that also.

[Anand Roy, executive]

Yes. So see, so how this will sort of turn out [Technical Difficulty] but clearly, it seems that the cycle has moved up in terms of what we do see [Technical Difficulty] starting from sometime in end of June and July and going further. Maybe this time it has started sometime in May. So that base plan despite this get over by August or September, which last year, for example, last year, it went up to October and some part of November. So we still have to wait and see how it pans out. But we are obviously getting ready in terms of -- given this increase, how to deal with this for the rest of the year, we're getting ready for that.

As far as our spend on wellness and prevention is concerned, the costs are much lower than the benefits that we are seeing, the initial trends that are there. But these are long-term investments and they pan out over a period of time, but the cost for the benefit is clearly favoring us.

[Swarnabha Mukherjee, analyst]

Yes, please -- the rest of the queries, if you could address.

[Anand Roy, executive]

On the NEP growth side, NEP growth for the quarter is 16%, the extra NEP growth after [Technical Difficulty] what we see is, there's an improvement in the alternative growth. This could have been slightly helped, but for the long-term reinsurance benefit that we have -- for the long-term business we have 50% reinsurance ceiling, which is impacting [indiscernible] but the benefit is coming to the reinsurance commission. If you see the reinsurance commission against last year of INR 34 crores, we have reinsurance commission of INR 117 crores. So there's a benefit coming to the expense ratio.

[Swarnabha Mukherjee, analyst]

Okay, sir, understood. And in terms of the renewal premium ratio, so what is happening in case of renewals?

[Anand Roy, executive]

Renewal ratio is 93%. If you remember, last year there was SHO price history, which has taken the renewable ratio up to 97%. Our historical average is between 96% and 95%, and we continue to maintain that. What we are trying is that -- growth in terms of number of policies and that continues to see a good improvement. Because there is no price increase, this is in line with our historical averages.

[Operator]

[Operator Instructions] The next question is from the line of Avinash Singh from Emkay Global.

[Avinash Singh, analyst]

A couple of questions. First one, more sort of acuity I want. I mean, if I recall clearly, that's due to renewal policy breakup, you said 25% to 75%, I believe that's the policy count. In premium terms, if I see that was in and around 23% to 92%. I mean, your 92% premium is renewal from last year, and you have 15% order growth. So basically 23% -- out of the 115 premium in retail 23% is coming from new business and 92% from renewal. This we broadly implies that I mean every ticket size for the new policy to be closer to 20% lower than existing again, not really surprising because [indiscernible] will also be kind of a yield and all. But is my understanding broadly correct that the new pool -- size is kind of a 30% lower than the existing stock of renewal policy if you can take that?

[Aditya Biyani, executive]

Avinash, can you again repeat the question in a crisp manner? It wasn't a clear view.

[Avinash Singh, analyst]

New to renewal policy, our breakup is 25% to 75%. The 25% policy are new to 75% of renewal. If I go and look in premium terms, you have a 15% retail premium growth and you have 92% renewal premium from -- coming from your existing. So basically, in the 115%, the breakup will be something like a 23% premium is coming from your new and 92% is coming from your existing book. So basically, the 75% policy -- existing policy contributing to INR 92 a premium, and this 25% contributing INR 23. So that broadly ballpark gives me a new prep policy ticket sizes, 20% lower than existing. That's partly possible because, I mean, typically, your acquisition is younger. But just I want to understand that, yes, is the understanding correct broadly, then every ticket size of new policy is 20% lower than my stock or average ticket size of my stock or renewal policy. That's the first question.

[Aditya Biyani, executive]

Avinash, as we mentioned, the fresh numbers have ticked in all the boxes, including agency, including banca, including corporate and digital. Coming to your particular thing, we can always take it offline, and we can deep dive into this question. Can we have the second question, please?

[Avinash Singh, analyst]

Yes. Now second is that given where sort of the claims or issues are moving, the price hikes are largely done and dusted. And there are some kind of, I would say, tweaking around some of those parameters in this new market of low around health insurance product and some kind of [ turnkey ] in the parameter that might have some, I guess, at the margin, some impact on cost and all. In this backdrop, do you see -- I mean, if this claim doesn't continues and all, are you okay with your usual pricing? Or again, we'll have to sort of look for a fresh price hike?

[Anand Roy, executive]

So, Avinash, we have planned on a couple of product price increases already, as you are aware, which one product has gone live, two more products will go live in the next one month's time. So we have already planned for that. Given the new master circular, which has come in, we are still evaluating the impact of that. On the specific lines, we see that most of them are related to operations and turnaround times, but there are certain conditions, which may have long-term impact on the pricing. For example, reduction in the moratorium period, reduction in the preexisting disease periods and so on. So we will take price increases if required. We're looking at the impact of these changes in the larger products. But as we speak, we are looking at 2, 3 products to be replaced already.

[Avinash Singh, analyst]

Okay, clear. And just finally, I mean, with this Q1 in backdrop and now Q2 development, 1 month, you would have an idea in sort of the 50 basis point claims we saw improvement and 50 basis point OpEx improvement Y-o-Y very much on track. Or will there be some rethinking on that?

[Anand Roy, executive]

No, we remain on track, Avinash. We already spoke to you about that at the end of June, we were aware of the situation, and we are remaining on track as far as that particular commitment is concerned.

[Operator]

The next question is from the line of Supratim from AMBIT Capital.

[Supratim Dutta, analyst]

Now coming back to the question of retail health renewal premium ratio. Now if I see in FY '22/'23, you had a ratio of around 94%, 95%. Compared to that, this time, it has dropped to around 92.8%. And if I take into consideration that you had the price hike that you have taken in May, 1 month of the price impact also flowed into this quarter. So the renewal ratio would have been even lower. Now I just wanted to understand here, which cohorts are actually moving out where you are still quoting happening outwards.

Two, my second question was that when I look at your retail IT business at [indiscernible] improvement in trends, which had started in the fourth quarter and continued in the first quarter. So I wanted to understand what would be the breakup of indemnity policies? And if you could -- and within that, you could give us what is kind of growth you're getting from quoting invoice that's happening for you, that would be very helpful.

And lastly, on commissions, like you rightly pointed out that the insurance contract that you enter for long-term policies that has contributed to the insurance commissions going up significantly. Despite that, the common ratio moved up by around 40 basis points for this quarter. So wanted to understand has there been any renegotiation with respect to caution structure? Or is new business that you were acquiring coming from higher cost channels?

[Anand Roy, executive]

So a couple of things. One is, as far as retail is concerned, we're happy to let you know that our policy-wise retention remains constant and in fact, it has improved by a percentage point. So we track quality-wise retention, which is the true picture of our customers are building in our services and products.

As far as the drop in -- GWP detection is concerned, our averages have been around [ 94%, 95% ] by end of the year. As the business mix is changing moving more towards digital and alternate and bancassurance, there are -- these channels typically have a little lower retention rate as compared to our traditional liquidity channel. So there may be a little bit of a trough and given the business mix change. But however, we are very mindful of customer retention and we ensure that we are up there. So we are happy to report that more than 50% of our customers are renewing their policies online through our digital channels without any intervention of human being. So we are investing a lot in technology and processes to improve our retention.

As far as our commission rates are concerned, both are largely driven because the new business growth is higher, and it might be a reflection of that. There is no specific negotiation in terms of higher commissions or anything. It's like -- aim is to reduce wherever [indiscernible] and not go higher.

And what are the other question? I'm sorry. Does that answer your questions?

[Supratim Dutta, analyst]

No. I had just one last question that in the fresh business growth that you are reporting and that has been an improvement. Just wanted to understand what would be the proportion of quoting inward within that space?

[Anand Roy, executive]

Inward quoting, honestly, as we have articulated in the past, we have been a little conservative as far as inward quoting is concerned. It is still less than 10% of our overall business -- new business coming in. But having said that we are definitely creating strategies to go more aggressive in this area given the changes in the regulation, especially in the markets that we are comfortable with the loss ratios. So that is what we are planning to do, and you will see some action in this area going forward.

[Operator]

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

[Shreya Shivani, analyst]

I have one question regarding the larger health ecosystem. So last year, we had heard that the hospital rate had revised upwards after the COVID and they never corrected and they remained elevated. Has there been any movement in hospital rate, hospital prices that you are seeing this year, this quarter? Any trend that you can help us understand? And is that one of the reasons why you're taking another price hike or -- that's my question.

[Aditya Biyani, executive]

Very, very relevant question in terms of the overall ecosystem in which we operate. We see continued activity or rather focus by the entire industry on this side in terms of attempts to boosting the revenue and come across lots of cases of based on abuse as well as efforts to smart buildings and inflation, optimize and so on. But we are up to the task and we've been managing it. But yes, there is a concern on this side. And therefore, the larger issue of pricing of products effectively has to get that, and that's what we are doing with the kind of plans we have on some of the products.

At the same time, if you look at some of the other activities that we've been doing on the wellness and prevention side is a way to ensure that we can see our customers healthier and [indiscernible]. That's what the overall attempt is and keep working on these efficiencies.

[Shreya Shivani, analyst]

So are you -- sir, is there any color that you can give us on whether the hospital prices are worth or increasing in the Metro Tier 1 cities, more in Tier 3, 4 cities? Or does it vary by geography? Or do you see all India, pan-India, there is an increase in pricing or jack-up and pricing for hospitals. Is there any color you can help us with on this?

[Aditya Biyani, executive]

There are multiple factors that go into it. We see it happening more in the metros and in some metros as of now, but also a function of the demand and supply, right? So there are specific geographies where there could be monopolistic situations of one good hospital or 2 good -- weaker than in the geography and they're trying to dictate us. So all of that happens, but then there are ways of managing that. So we also are trying to work for influencing our customers to choose wisely as to which type of to go to.

[Shreya Shivani, analyst]

Correct. And sir, just trying to understand if the health insurers like the PSU health insurers have this one group where they negotiate with the hospitals, I think it's called GIPSA or something. So do the private health insurers, private general insurers, do you guys also have certain or are you planning to have like, I don't know what to call it, like a group which can negotiate with the hospital bodies or -- because if you individually keep negotiating, obviously, the negotiation power decreases, but is there anything of that thought and plan?

[Aditya Biyani, executive]

Yes. So you would be aware that the GI Council has taken this initiative. And as an industry, we want to sort of take this up across the segment and work on a common platform. Some progress has happened on that, but given the nature of the complex issue, it will take some time for it to sort of start manifesting. But yes, that's an effort that we're making along with the [indiscernible].

[Operator]

The next question is from the line of Madhukar Ladha from Nuvama Wealth Management.

[Madhukar Ladha, analyst]

First, in volume terms, can you tell me what is the renewal rate? And second, what is the total volume growth year-over-year? Yes, that's my first question.

And second, can you tell me what is the equity percentage in the investment book? And what were the capital gains this year versus last year?

And lastly, you've reclassified the channel mix. You've got A,B,C,D now. So if you could give me comparable numbers on a year-over-year basis and also similar numbers for FY '23 and '24, that would be helpful.

[Nilesh Kambli, executive]

Let me answer this question on equity. Our current nonfixed income book is approximately 12% of the portfolio. And this is having approximately 11% to 12% kind of gains mark-to-market.

[Madhukar Ladha, analyst]

So 12% of portfolio and gain, so this is on cost basis that you're seeing? And then 11%, 12% addition, I didn't understand that, I'm sorry.

[Nilesh Kambli, executive]

So market prices divided by cost price, so the gain which we calculate, the gain divided by the cost price is 12%, approximately.

[Madhukar Ladha, analyst]

And on cost and market value basis, it is 12% of the portfolio.

[Nilesh Kambli, executive]

Yes, yes. No, no, not market value. When we calculate, we calculate based on the book value. All the calculations on book value. Book value basis, it is 12% of the AUM and mark-to-market gains are approximately 11% to 12% of the book value.

[Madhukar Ladha, analyst]

Understood. And what is the capital gains proportion in the P&L?

[Nilesh Kambli, executive]

In the P&L, capital gains proportion would be slightly less than -- put together, slightly less than 25 basis points.

[Madhukar Ladha, analyst]

Can you give an absolute number, sorry, for this quarter versus last quarter?

[Nilesh Kambli, executive]

Versus, I don't have the data in front of me. This quarter, absolute gains in the book put together is approximately INR 12 crores.

[Madhukar Ladha, analyst]

Okay. Then moving to the next question.

[Anand Roy, executive]

The volume -- so the retail business, we have grown at 15%. The volume and the value growth is in -- it's 50%. And that is a growth [indiscernible] price increase last year it was in favor of value growth but we see volume growth coming in for the current year.

[Madhukar Ladha, analyst]

So I think total volume growth is about 7.5%.

[Anand Roy, executive]

Yes. [ 7.5% ] valuable.

[Madhukar Ladha, analyst]

Okay. And in renewal business, what is the volume renewal per center, if you could give that?

[Anand Roy, executive]

See, the historical average is around 86% to 88% to continue to win that range of renewal growth. Last year it was slightly lower because of FHO outflow but this year again is back on track.

[Madhukar Ladha, analyst]

86% to 88%. Okay. Great. And finally, on the A,B,C,D, if you could give like historical reclassified numbers.

[Anand Roy, executive]

See, the channel mix continue to be the same. So agency, which was 82% is now 84% for this quarter. Banca and alternate is in the range of 6% to 7%. So while this smaller set has grown faster, the proportion is still in the range of last year, in 1% or 2% shift between Agency, Banca and Digital.

[Operator]

The next question is from the line of Aditi Joshi from JPMorgan.

[Aditi Joshi, analyst]

Just I have 1 question. And actually it was very interesting to hear from you that we've started planning for the composite licensing scenario, if at all it happens. So just firstly, can you please help us elaborate more as in what sort of product structure you're planning under this scenario as in likely in terms of, let's say, duration or just broadly mortality, morbidity sort of structure, whatever you can share at this point.

And secondly, related to this one, in terms of time line as we will do -- can you please share your thoughts, Anand, by when, if at all, this happens -- could happen. So these are my questions.

[Anand Roy, executive]

Thank you for the question. I think -- see, as far as the composite business opportunity is concerned, we are very seriously evaluating our adjacencies because we believe that amongst all insurance companies, Star Health had the maximum engagement with its customers, more than customer's will, customers know the bandwidth. And so if there are any opportunities to cross-sell and sell additional protection plans to give a more comprehensive protection, we are definitely up for it.

As Aditya mentioned in his opening remarks, we have engaged BCG to develop the strategy for us. And we are looking at an overall strategy and various profit pools available in the life insurance business or the general insurance business where we can have a play. I think this is work under progress. So it may take a few months for us to give you more insights about what we intend to do.

As far as the regulations are concerned, this has been under discussion for the last 2 years or so. And the expectation is that it will come into the parliament very soon. The bill will be presented but we do not know that it's only for the government to act upon. But we are keeping our imperatives totally ready. And whenever it becomes a reality, we will be ready to go.

[Operator]

The next question is from the line of Nidhesh from Investec.

[Nidhesh Jain, analyst]

First is, what is the growth in fresh premium in this quarter?

[Aditya Biyani, executive]

So as mentioned, the retail health fresh premium growth was in the mid-teens. And the overall growth was in the range of 18-odd-percent turnover.

[Nidhesh Jain, analyst]

And secondly, the cost of around 66 basis points that we have allocated in the claims. So does it mean that claims ratio has structurally increased by 50, 60 basis points because this cost will always be claims versus previous years?

[Aditya Biyani, executive]

Sorry, I couldn't get the question fully. You mean the cost of the wellness activities you mean?

[Nidhesh Jain, analyst]

Yes, the cost of wellness activities that we are allocating to claims ratio, does it mean that the claims ratio will be 60 basis points higher than the previous year because of this allocation and the like-to-like comparison is 60 basis points lower. Is that right way to look about it or...

[Anand Roy, executive]

So the increase that we showed in compared to last year Q1, we had increase of initiatives in the later part of the year. So on a year-on-year basis, the increase will not be that much. It's Q1 versus [ Q4 comparison as of now ].

[Nidhesh Jain, analyst]

So on a year-on-year basis, last year 66 basis for -- there was no wellness costs, which was allocated to claims. This year 66 basis points allocated to claims, right?

[Anand Roy, executive]

For the quarter.

[Nidhesh Jain, analyst]

For the quarter. Hello?

[Anand Roy, executive]

Yes, for the Quarter 1 if you [indiscernible].

[Nidhesh Jain, analyst]

And going forward, also the similar cost will be allocated to that, sir?

[Anand Roy, executive]

So yes, as we keep investing in this wellness and prevention activities, there will be allocation of these costs to claims as we keep investing. But we will showcase this separately to give a better clarity on actual claims and investments in prevention and wellness.

[Operator]

The next question is from the line of Dipanjan Ghosh from Citigroup.

[Dipanjan Ghosh, analyst]

Just 3 questions from my side. Firstly, it has been almost kind of 14 months now, I think you took price hike on the FHO. And in this quarter, you have at least 2 full months of where the NAP has flowed into your books. Have you done some back testing in terms of how the customer cohort that stayed back with you is behaving compared to, let's say, pre-price hike versus post-price hike, just from a P&L claims ratio perspective. The reason I ask is because this will give us some ideas, analysts or investors, to really understand the -- how price hike cycles really behave from a P&L standpoint, from a 12- to 24-month period.

Second, your renewal ratio on the retail side, what you mentioned is that your policy persistency has gone up by 100 bps. So what -- and while the overall persistency numbers are down, which basically means that the high ticket customers or high sum insured customers were coming into either banca or maybe digital has kind of gone. So can you give some color how this changing dynamics on the persistency side versus also on the new business growth side really have an implication on your claims ratio going ahead.

And finally, on your reporting strategy, you mentioned that you have devised a new strategy where we will be refocusing a bit for inward reporting. Now I wanted to understand that your historical view on that has been that reporting can lead to some of the profitability dilution given that there is no waiting period and all those things. So what's the new strategy you're devising? Which channels will be driving it out there?

And one data keeping question. You used to give a number of SME mix within your group health business as per MIS. can you share that data?

[Anand Roy, executive]

What was the last point, please correct.

[Dipanjan Ghosh, analyst]

You used to mention the SME business mix within your group health business, that is [ for your presentation in the slide ] historically. So just wanted to get that number for the first quarter.

[Anand Roy, executive]

Yes, we'll share that number with you. As far as our renewal retention are concerned, we have clarified now, we are very watchful of our renewals, and we do not see any deterioration in our renewal book. In fact, we are seeing an improvement in the number of policies. As far as -- because the GWP renewals, the -- value growth is largely because of the price increase that we had by base effect that is playing out this year. But as I've mentioned, the traditionally digital channels and bancassurance channels have a little lower intention base persistency for the entire industry as well as the rest. So as that book is becoming larger, it is showing some effect on the overall persistency. But we are very confident that our customers' retention is on track and we do not see any threat there.

As far as reporting strategy is concerned, we continue to maintain our standard portability as the highest business. But with the data and the learnings that we have and the distribution we have in all parts of the country, we are quite aware of areas where we should avoid portability areas [ and co-existence ]. So we are planning to go aggressive with those areas where we believe the loss ratio will not be adverse. As by our business strategy, very clearly growth risk profits and we are not going to dilute that strategy at any cost.

[Dipanjan Ghosh, analyst]

On the FHO question, which is the first question.

[Nilesh Kambli, executive]

See, on the FHO price increase, we have seen an improvement in the premium. Now if you see increase in loss ratio on an industry by phenomenon, published result is that the loss ratio has increased anywhere between 3% to 6%. But on our health portfolio -- while overall loss ratio increase is 2.2%. Split between health and personal accident, loss ratio has increased around 1.3% -- which is also as part of [Technical Difficulty] in terms of preventive health care. So we see a good benefit coming in terms of [indiscernible] improvement, and either we are able to control the loss issue vis-a-vis the market development.

[Dipanjan Ghosh, analyst]

Sir, my question was basically, let's say, if you were to just hypothetically, have we done with the x-ratio on that testing, if you just kind of like a super impose similar sort of incidents on the existing customer cohort that remains with you. And now that you have seen a 14-month window, would the portfolio behavior be better after the price hike or significantly better any quality we commit without going into the numbers?

[Anand Roy, executive]

See, I mean on a like-for-like basis, with the price increase, the loss ratio has come down. But if you talk only about FHO as a product, there are certain ways the portfolio clear. It's a function of new and old. And what we have been maintaining is purchase only had -- FHO as a signal -- family floater product. Now we have comprehensive health insurance family floater products. The new business is coming into this product, while the old business continues to be FHO. So there are some certain change in dynamics of the product portfolio as well. So to just pinpoint the number on FHO loss ratio and is a very difficult thing. But we see an improvement in the overall loss ratio because of the pricing.

[Dipanjan Ghosh, analyst]

And just on the SME mix, would you give it now or I can take it later on?

[Anand Roy, executive]

We'll give it to you later.

[Operator]

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

[Sanketh Godha, analyst]

I have 3 key questions. So Anand, you said that reporting these closer to 10% of the new business premium, and you also highlighted that new business premium growth is around 18-odd percentage. So if I remove porting from your new business numbers, on like-to-like basis, X of porting compared to last year, whether the growth will be lower than the overall growth that you have reported in retail of 15-odd percentage?

[Anand Roy, executive]

No, Sanketh. Last year also, we had some share of voting, they are not [indiscernible]. So our books are always less than 10%, but continues to be centric. But as we speak, I think we are going to go a little aggressive in certain markets where we see the opportunities and the loss ratios more profitable.

[Sanketh Godha, analyst]

When you say the few geographies largely to the South India because it is believed that South India is relatively healthy compared to North on claims at least, I need to say.

[Anand Roy, executive]

You're right. South India, East India, North India, porting is like an industry. That is how it is going on there. So that's not what we want to get into. We are more selective in our business on boarding.

[Sanketh Godha, analyst]

Got it. And you said that your claims have increased to 66 bps is -- or your wellness cost is 63 bps of your declaimed ratio. So if I do a back calculation, it is around INR 23 crores, INR 24 crores. So if I annualize that number, it is like INR 100-odd crores or INR 95 crores to INR 100-odd crores. So sir, just wanted to understand how you want to see this number to behave? I mean, is this INR 100 crore number? If it is annual number, how it will play and eventually this will increase the claims on the top line but the improvement in the claims or -- I mean how do you compensate this INR 100 crores, what you are going to spend on wellness going ahead?

[Anand Roy, executive]

So see, wellness and prevention is a long-term play. We do not expect any immediate returns. But what we track is, are we able to get data, which can help us in better customer engagement in terms of making sure that the health profile of these customers improves, that's what the team drives.

Second thing is, are we also able to make sure that our condition financial programs are reducing repeat hospitalization. These are the numbers that we're tracking right now. But in the long term, I think these investments will pay off. So right now, we are not looking at an immediate ROI on what the investments are going to deliver, but we believe that in the long-term interest of the business, this is essential.

[Sanketh Godha, analyst]

Got it. And one more. You said that you will take 2, 3 products price hike in the current year. So if you can quantify what proportion of your total premiums come from the products where you will take price hike?

[Anand Roy, executive]

Approximately 30% of our product portfolio.

[Aditya Biyani, executive]

We're planning to take the price hike at about 30% plus of our current portfolio and the average price hike we're looking at between 10% to 15%. So roughly about anywhere between around 4% on the overall portfolio.

[Sanketh Godha, analyst]

Got it. But just wanted to understand, though it is [indiscernible], but typically, customers switch from one particular product to another product when the price hike happens. So if I factor in that impact, which you might have historically done it. So whether this price hike will be even still 4%, 4.5% or it will be marginally lower time than that benefit?

[Aditya Biyani, executive]

This is the realized hike that we are looking at. And we've had our license basis the last year's experience. So we want to optimize the increase so as to maximize the yield out of the overall increase.

[Operator]

Mr. Sanketh, could you please fall back in the question queue? The next question is from the line of Nischint Chawathe from Kotak Securities.

[Nischint Chawathe, analyst]

This 0.66% of OPD telemedicine, et cetera, does this also include claims management expenses?

[Anand Roy, executive]

Sorry, could you be a bit louder, please?

[Nischint Chawathe, analyst]

Yes. Does this also include claims management expenses?

[Anand Roy, executive]

Yes, yes. The overall -- and you mean the overall loss ratio, right?

[Nischint Chawathe, analyst]

No, no, no. I mean the 0.66% where you say that this is OPD telemedicine and net, et cetera, does this include claims management? Or is that separate?

[Anand Roy, executive]

No. Nischint, claims management expense is separate. That is 1% of our TW. This is over and above.

[Nischint Chawathe, analyst]

And that 1% would have been sort of almost similar last year and this year.

[Anand Roy, executive]

Yes, that's right.

[Nischint Chawathe, analyst]

And this 0.66% is completely additional this quarter, which was probably not there last year. Is that what we're trying to say?

[Anand Roy, executive]

Yes. I mean a very small percentage last time because we had started with these initiatives in Q1. But yes, in comparison to last year, this is additional.

[Nischint Chawathe, analyst]

Okay. And just one, you seem to have stepped up on the group business. So the increase in group business numbers that you can see, this is all employer-employee?

[Anand Roy, executive]

This is a combination of employer-employee as well as nonemployer-employee in terms of Banca segment. There is a lot of focus on the benefit plus or benefit products to the NBFC sector, which are profitable. So it's a combination of employer-employee and nonemployer-employee.

[Nischint Chawathe, analyst]

So if I have to sort of look at the loss ratios in both the products, the loss ratios will be more or less similar, if you can quantify the impact of this product portfolio change on the loss ratio for the quarter.

[Anand Roy, executive]

There is some impact because like the loss issue should be higher in the employer-employee segment, the expense ratio is lower. It's around 0.1% -- 1.12% when it comes to quarter 1 in terms of shift within operational and expense ratio.

[Nischint Chawathe, analyst]

Sorry, so the point what you're trying to say is that probably your claims ratio would have been lower by 15 basis points if the product portfolio has been similar? Is that what you're trying to say?

[Anand Roy, executive]

That's correct.

[Operator]

Ladies and gentlemen, due to time constraint, that was the last question for today's conference call. I would now like to hand the conference over to Nilesh Kambli for closing comments.

[Nilesh Kambli, executive]

Thank you very much for joining the call early morning. We continue to grow our business with a focus on profitability and excluding wellbeing India. And we look forward to coming quarters. Thank you very much.

[Operator]

On behalf of Star Health and Allied Insurance Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.