Star Health and Allied Insurance Company Ltd

NSE:STARHEALTH

Earnings Call Transcript 2024-Q4

[Operator]

Ladies and gentlemen, good evening, and welcome to Star Health and Allied Insurance Company Limited's Q4 and FY '24 Earnings Conference Call. [Operator Instructions]

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

[Pratik Patil]

Thank you, Sagar. Good evening, 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'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. Roy.

[Anand Roy, executive]

Thank you so much, and a very good evening to all of you. Thank you very much for joining us today for the earnings conference call of Star Health and Allied Insurance Company for Q4 '24, and for the entire 12 months of the financial year '24. It gives me great pleasure to interact with all of you as we closed another successful financial year, in which we gained 3 spots over the last financial year to become the seventh largest nonlife insurance company in the country.

The Indian economy has continued its growth trajectory, suggesting a healthy economic growth for FY '25. Despite strong economic growth, we still have significant out of our operation ensured and underinsured, which uses our financial risk to households and potentially limits their access to quality health care. This offers a huge opportunity for the sector to work towards the stated mission of insurance for all by 2047 by the regulator.

In line with the IRDAI vision and to be future ready, Star Health has successfully completed all milestones of National Health Claims Exchange and Ayushman Bharat Digital Mission platform integrations. Star Health custom built the entire NHCX and ABDM stack with its in-house engineering team. In the last 2 financial years, we have embarked on a conscious journey of putting risk first and growth later. Some of the key initiatives that we undertook are focused on growth with profitability through robust underwriting guidelines.

We realigned the distribution and product mix to cater to the emerging verticals, along with our core agency vertical. We built multiple operational efficiencies and focused on productivity improvement and cost optimization measures. We recalibrated the portfolio across verticals and locations and portability and pricing, et cetera. Our hospital management network management measures are diligent and our efforts in rationalizing the [indiscernible] of network hospitals and focused on increasing the agreed pricing arrangements in network hospitals.

On technology, we made multiple investments. We are one of the leading companies in terms of big investments in the DI space. Our investment in technology, digital and analytics have improved our customer experience And prevention of fraud, waste and abuse by deploying new edge technologies has resulted in better management in these areas. The above initiatives have helped us in chopping on a path towards secular growth for the years to come. This is reflected in our retail health market share of 33% for FY '24. We continue our leadership as the largest player with a size that is 3x the size of the next largest player in the retail health segment.

On the service and distribution front, our agency network, with 701,000 agents, 881 branches, 20,000-plus health care footprint, including 14,200 network hospitals stands testimony to our mission to providing the best services to our customers. One more important measure of the Star Health stands distinguished is on the cost leadership, with an expense of management, which is well below the 35% norm as managed by IRDAI.

I'm happy to share that our customer set a growth recognition, we have settled more than INR 1 crore claims since our inception in 2006, first for any health insurance, amounting to a disbursal of INR 44,000 crores over the last 18 years. Our in-house claims management system and adoption of new waste technologies has enabled us to process 95% of our claims in less than 2 hours and a 24/7 availability for a seamless experience. With strengthened fundamentals, we are now poised to focus on higher growth with profit.

Let me now elaborate further on the financial performance of the company. Coming to the premium and distribution, for the 12 months ended March '24, our gross written premium grew at a rate of 18% to INR 15,254 crores, compared to INR 12,952 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 46% of the entire SAHI insurance space.

Our market share for the 12 months ended '24 amongst all general insurance company, is up by 22 basis points to 5.26% versus 5.04% in the previous year. Our agency business contributed around 82% of our overall business for the 12 months ended March '24. Our agency strength has increased to 701,000 agents, with a net addition of 16,000 agents in the March quarter and 75,000 agents in the last 12 months.

As accessibility is the key to providing exceptional customer service, we have synergized our presence in bancassurance and digital channels with our existing physical presence, which empowers us to cater to the needs of India, including rural India that is Bharat. In order to increase penetration in the semi-urban and rural geographies, we have 1,154 sales manager stations, which are small individual service centers. With 884 branches, we have 2,000-plus customer touch points to ensure better service.

Of the 19,000-plus pin codes in India, Star Health is present in 17,106 pin codes via our sales distribution network. As regards to corporate agency tie-ups, we have now 58 tie-ups in the banks and NBFC space. This channel has contributed to around 5% of our GWP and it's growing at a healthy pace of more than 39% as far as fresh premium is concerned. We expect this growth to accelerate as we move forward.

Our digital business contributes to around 6% of our overall GWP. The digital channel, which comprises of our own channels as well as third-party aggregators have been growing at a brisk clip of 34% in fresh business. At a more granular level, 75% of our digital GWP comes from our own B2C channels and the balance 25% comes from our online brokers and [ data aggregators ].

For FY '24, we have grown by 108% in the fresh employer/employee group segment with improvement in pricing and prudent risk selection, this segment also offers opportunities for substantial growth in the coming years. We have received approval to start our GIFT City operations, which will help us serve the needs of NRI customers as well as underwrite business for foreign countries. This will further boost our growth prospects in the future years.

I will now talk about some of our claims initiatives and the outcomes. In terms of claims amount, 87% of the paid claims in 12-month FY '24 went cashless versus 80% in the period in the previous year. Auto adjudication of claims through technology has helped us and drastically reducing our runaround times, 34% of agreed network hospitals that equates to 75% of the overall cash-less claims have been onboarded on our auto adjudication platforms.

Our anti-fraud, waste and abuse AI/ML models, which are proprietary to Star Health continue to yield savings for us in terms of claims outlook. In terms of savings, we were able to attribute 1.5% of the gross earned premium as a direct result of these measures.

I will now talk about our financial performance. Combined ratio, combined ratio for 12 months ended March '24 was 96.7%, and the combined ratio for the fourth quarter of FY '24 was 92.7%. Claim ratio for 12 months ended March '24 was 66.5% and 64.1% in Q4 of FY '24. Expense ratio for 12 months stood at 30.2%. And for the fourth quarter of FY '24, it was 28.6%.

Investment income, our investment assets have grown to INR 15,491 crores in Q4 of FY '24, showing a growth of 16% year-on-year. The yield for 12-month FY '24 was 7.7% versus 6.9% in the previous year. The investment income during FY '24 grew 34% to INR 1,084 crores versus INR 835 crores in the previous year. The investment income during Q4 also grew by 34% to INR 293 crores versus INR 218 crores in the previous year.

Coming to our profits. Our PBT of INR 190 crores for Q4 of FY '24 was 39% higher than the same period last year. The Q4 PAT came in at INR 142 crores with a growth rate of 40% over the same period last year. The 12-month FY '24 recorded PBT of INR 1,129 crores showcased a growth of 37% over the same period of last year, and PAT for 12-month FY '24 was INR 845 crores. This is the highest in our company's history and represents a growth of 37% over the previous year.

The ROE for 12 months ended March '24 has increased to 14.4% versus 12.4% of the previous year. On an IFRS basis, our PAT for FY '24 stands at INR 1,080 crores with an ROE of 17.7%. Solvency, we have a very strong capital base and our solvency as of 31st March '24 is 2.21x compared to the regulatory requirement of 1.5x.

Couple of key highlights of Q4 and FY '24 business, I will end my speech. We registered a growth of 41% in agency-based business in Q4 FY '24 over Q3 versus 21% of the same corresponding period of last year. The average sum insured of new policies has increased by 10% on a year-on-year basis to INR 9.87 lakhs. INR 5 lakhs and above sum insured now constitute 77% of our portfolio, retail portfolio versus 70% of the previous year. Our digitally native policy, Smart Health Pro is showing good promise and the quarter-on-quarter growth is approximately 33% in this product. The share of our long-term policies within the retail GWP has increased to 6% in FY '24 versus 4% in FY '23.

Furthering our customer-centric approach, an external agency has measured our overall NPS for the company at 56 points. We are about to complete 1 full cycle in our FHO price hike and the renewal numbers are holding as per our [indiscernible] plans.

Home Health Care program is now live in 50 cities. Star Health customers can now avail home health services by speaking with our doctors and medical professionals, who will visit their homes to provide them clinic services. Prevention and wellness, our engagement with customers on our prevention and business program has seen a significant jump. Preventive health checks, PHCs has increased by 250% in FY '24. Our customers are using telemedicine like never before. There has been a 45% increase in telemedicine services this year.

Our Condition Management Program has found wide acceptance across the country. Customers -- as regards to our Star Health customer app, we have launched a new version of this app in August '23. Our customer app downloads have increased by 174% in FY '24 to more than 5 million plus downloads. And our monthly active users is now more than 700,000, almost, I think, 800,000 per month, average users per month. Our app rating is 4.4 on the Google Playstore and 4.6 on the iOS store. The average age of our customers over the number of lives covered is 31 years in FY '24 as compared to 32 years in the previous year. Organic traffic to the website grew by 46% in FY '24 over the same period last year.

Star Health is a certified ISO:22301 company for business continuity and management systems, BCMS, and ISO:27001 for Information Security Management Systems, ISMS, which clearly affects our robust governance framework at an enterprise level. To demonstrate our ESG focus, we are able to score 43 points in the first year of active participation in the 2023 S&P Global corporate sustainability assessment.

I would really like to thank all my Star Health family members and for their dedication and strong support for our shareholders and board members, and last most important, the massive trust placed on us by our valued customers and partners that have enabled to achieve this success. Thank you very much for joining this call today.

[Operator]

[Operator Instructions] Our first question is from the line of Madhukar Ladha from Nuvama Wealth.

[Madhukar Ladha, analyst]

Congratulations on a good set of numbers. I had a couple of questions. First, on the claims ratio, so we've seen some improvement in Q4 after of Q3, but it's still higher than Q4 FY '23 levels. So what is our sense in terms of how this number should be over the next couple of years, given what happened in FY '24? Yes, that's my first question.

Next, can you -- just a data keeping question. Can you split the GWP between Travel and PA for the full year? I think you used to give that was point in this time around. Yes, that's the other one.

[Anand Roy, executive]

Madhukar, on the claims ratio, see, let us all be clear, we are in the business of paying claims, and we tried to make sure that our games processes are the best in the industry. As we speak, our claims ratio for the fourth quarter has definitely -- is at 64.1% and the full year is 66.5%. We are very confident with all the measures that we are taking in terms of our technology interventions and in terms of our network management, we will be able to breakdown this claim ratio substantially going forward. But we are not going to compromise on customer services while we are doing that, and that is the direction given to the team.

As far as the GWP is concerned, our travel business is still very nascent. We are growing the book. We have less than, I think, INR 10 crores in travel insurance and our PA business is around [ INR 225-odd ] crores. We expect to double down on the personal accident business and grow it faster.

[Operator]

The next question is from the line of Swarnabha Mukherjee from B&K Securities.

[Swarnabha Mukherjee, analyst]

So I have 3 questions. First, sir, I just wanted to understand from the net earned premium front. So net earned premium has lagged the GDPI growth in this financial year. Now that we are moving into FY '25, just wanted to understand that assuming that, say, the GDPI growth remains stable at [indiscernible] around 17%,18% in that is, how should we think about the net earned premium growth? Would it be higher than the GDPI growth this year around as the benefits of the price size comes in? Or it will be something in the similar way if you could highlight that? That is the first question.

Second is also I wanted to understand what the internal targets would you have for this year in terms of how we want to improve and where you want to see the combined ratio for FY '25? And in terms of growth, so that FY '24 had a large component coming from that is growth. So how are we planning to accelerate our growth on the volume side next year, if you could give some color?

And lastly, I have a data keeping question. There has been a reserve release on the IBNR side. So if you could highlight what it was that for? And is this a onetime thing, or should we expect something like that to recur in future?

[Nilesh Kambli, executive]

Swarnabha, good evening. So on the on-premium growth, you can see for the full year, the demand has grown by 15%, and it's an average of growth of last year. Last year, we had grew our business by 13%. This year it is 18%. So next year, it will be an average of the growth of the 2 years. So we are expecting a growth in line with the growth in business for next year.

In terms of value growth and volume growth. This year, we had taken a substantial price increase in our factory product, which has led to higher value growth. But with the expansion that we have done in our agency footprint, with focus on digital business banker businesses, we expect volume growth to pick up in this year.

[Swarnabha Mukherjee, analyst]

Sir, would it be possible to maybe give a split between how much for the full year, the value and the volume components were in the growth and how we can think about in the next year?

[Nilesh Kambli, executive]

Traditionally, the value and volume growth in a year where we are not taking a price increase, it is typically 50%, 50%. So this year, it was still more towards value growth, but typically, it will be 50%, 50% in terms of value and volume.

[Swarnabha Mukherjee, analyst]

Okay. Very helpful. On the growth and combined ratio aspiration, if you could give some color?

[Nilesh Kambli, executive]

The aspiration is to grow higher than the market growth rate. We expect market to grow in mid-teens when it comes to retail health business. In the group health segment, we are focusing a lot on the SME and MSME segment. We have 2% market share, and that segment offers a huge opportunity for growth.

In terms of combined ratio, as Anand sir, mentioned, currently, we're at 96.5% both on the expense ratio as well as the claims ratio, we have taken numerous initiatives, which we will ensure that we'll improve on this combined ratio.

[Swarnabha Mukherjee, analyst]

Okay, sir. So just to rephrase the question. So this year, there were, I think, higher than anticipated claims that had come in the second quarter, I think partly in the third quarter. If we were to strip that out and try to understand what could be a normalize number of combined ratios, where should we -- or what should that number be?

[Nilesh Kambli, executive]

See, it's very difficult to comment on that. But I mean, you know the historical loss issues for us. And this year was an exception so...

[Swarnabha Mukherjee, analyst]

Okay. Okay. Got it. And lastly, on the IBNR review, if you could...

[Nilesh Kambli, executive]

Yes. So what we published is the claim outstanding in IBNR number, which has shown a reduction compared to December, it's a concern of the claims ratio. December, we have seen a higher claims ratio of 68%, in March, it's 64%. As of inflow of claim producers, there is a decrease in the outstanding claims, because we pay the claims in less than 1 month. And in terms of cashless claims, we are set on a 30 days basis with the hospitals and -- so it's a function of the claims issue, the outstanding claims in IBNR.

[Swarnabha Mukherjee, analyst]

Okay. So if I understood currently, it is basically the provisions are now resulted in actual fees, which has -- further flow has happened?

[Nilesh Kambli, executive]

That's correct. The outstanding claims are what pain over a period of time.

[Operator]

[Operator Instructions] Our next question is from the line of Shreya Shivani from CLSA.

[Shreya Shivani, analyst]

Sir I have 2 questions. First is on the reinsurance side. So last quarter, the reinsurance as a percentage is probably the gross premium was at about 13%, I think, this time it's lower -- the percentages. So I'm not sure because you guys have said that you've changed your plan and now a bigger -- because of the higher long-term policy you've increased the amount of book that you're reinsuring. So where will that percentage settle down, whether it be a 5%, 10%, 13%? Some clarity on that will be useful.

Sir, second is on the reserve ratio. So for -- you guided earlier that usually our reserve ratio will be at about in the range of 57%, maybe 58% or so net premium. But for this year also it's coming in at a little higher at 59% -- more than 59%. So is that a steady state we should expect? Or this was this one-off year, where was the reserve ratio as percentage of net premium [indiscernible]?

[Nilesh Kambli, executive]

So, Shreya, last December, it was a 9-month financials. We had done a retrospective treaty effective 1st April. So that the reason for the quarter, the premium was higher, but on a 9-month basis, this premium ratio was 92%, which is maintained for the full year as then because Q4, we have treated a similar percentage. Based on the current mix of business of long-term and benefit products where we have reinsurance arrangement, it should be in the range of around 8% -- 8% to 8.5% when it comes to reinsurance fee.

[Shreya Shivani, analyst]

Okay. So on overall book for annual year, 8% to 8.5% is something that we could continue to assume, right?

[Nilesh Kambli, executive]

Correct. Correct. On the reserve ratio, I understand what you're referring to is the outstanding compared to the NWP.

[Shreya Shivani, analyst]

Correct, [indiscernible] are the variable net premiums -- net return premium, yes.

[Nilesh Kambli, executive]

Net return premium, so it was 59% last year. It continues to be 59% in the current year as well. So while we have a higher growth in the long-term policies, because we have done a treaty for the long-term business, the ratio has been constant at 59%.

[Shreya Shivani, analyst]

So this 59%, we should assume that this is the run rate, right? Because earlier, I think at the time of IPO something I remember we are building 57% and you were working with 57%. So I just wanted to understand why the 57% moved to 59% and whether this will persist?

[Nilesh Kambli, executive]

Yes. So basically, there are 2 things. One is our proportion of group business was around 12%; and two, business is done typically in the first half of the year. That's the reason the result to NWP ratio was lower. With a higher proportion of retail business and long-term policies, it has slightly shifted in the favor of 59% compared to 57% 2 years back. It's a function of the products and the business that we're writing.

[Operator]

The next question is from the line of Prayesh Jain from Motilal Oswal.

[Prayesh Jain, analyst]

Just a follow-up question on one of the previous participants. So if you look at your long-term policy that how much would have accounted for in FY '24? And also in conjunction with the price hike that we have taken and the impact of which would have been seen in the fourth quarter, largely on the renewal policy. I would ideally assume that the unwinding would happen from URR to NEP at a much higher pace in the next year. So wouldn't the ratio be NEP to say GWP or NEP to NWP would be on the higher side? That would be one.

Second, on the loss ratio, again, in the 3Q towards -- in the 3Q call, we had highlighted that there is significant improvement that we had seen and the loss ratios were much lower. But eventually, the quarter loss ratios have come in at 64% probably higher than what we would have been thinking. Any adverse movement that happened towards the later part of the quarter that kind of impacted the loss ratio?

And lastly, any thoughts on growth in premiums and combined ratios for FY '25? How should we think about them? And those will be a question.

[Nilesh Kambli, executive]

So Prayesh, on the loss ratio front, you mentioned there was improvement from 68% in quarter 3, it has moved to 64%, which is a 4% reduction when it comes to loss ratio. In terms of NWP to NEP and the correlation to the price increase, so whatever price increase we do, it gets [indiscernible] GWP and NWP as well, which flows into on premium. So it's a function of the growth in business, which will be reflecting the on premium.

In terms of growth, I think we mentioned that we want to grow higher than the market growth rate. We expect market to grow in mid-teens, and we'll continue to improve our market share. There are few opportunities in the group and business as well and we will continue to improve on the combined ratio as well. It was 96.5% with our expense initiatives as well as loss ratio initiatives, we'll have an improvement in both of these segments.

[Prayesh Jain, analyst]

Nilesh, just on that, on the URR date -- so definitely, I agree to the point that the GWP, GDPI definitely and even for that matter NWP sees the benefit of the price hike, but a large part of it would go into URR, right, in the month of March. And that would kind of unwind into NEP next year. So that was the question of even on price side as well as the share of long-term policy that you would have written through the period. And would -- added to that, would it also benefit the combined ratio in any sense for next year?

[Nilesh Kambli, executive]

Yes, absolutely. Prayesh, any price increase is done to have an improvement in the on premium, which results in a lower loss ratio, because the claims tend follows the actual experience in the market whereas price increase gets affected in the on premium. So it will definitely have a benefit in the coming year.

[Operator]

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

[Nidhesh Jain, analyst]

Firstly, if you can share the data on premium growth for the quarter and for the year? And secondly, what is the price hike you have taken, if any, in this year or you are taking -- planning to take in FY '25? These are the 2 questions.

[Anand Roy, executive]

The first question? Can you repeat the first question, please?

[Nidhesh Jain, analyst]

The first question is the new premium growth for FY '24 and Q4 FY '24.

[Anand Roy, executive]

Okay. So see, our new premium growth is very, very strong in Q4 of FY '24. We won't disclose that data. We can talk on a one-to-one basis. But right now, we are seeing very strong new business growth, both on the retail side in mid-teens and also on the corporate new business side, we are seeing substantial growth. So there are multiple channels which are firing for us. One is the agency channel, then we have our digital channels and, of course, our bancassurance channel. We have also strongly activated our broker channels, the retail booking piece, which we call as alternate channels, which is also shaping up well, and we expect that these 4 verticals, which is driving growth for us, will give a good performance for the years to come.

As far as the repricing of many products are concerned, yes, we do have some plans to reprice a couple of our products. We had thought about our senior citizen red carpet policy and another product for Young Star insurance policy. Both of these products combined contributed close to 10% of our GWP. We expect to take a price hike in both of these products in the first quarter itself.

[Nidhesh Jain, analyst]

What would be the [indiscernible] price hike upon these products?

[Anand Roy, executive]

Typically, as you have seen in the past, our price hikes are -- varies between 15% to 25-odd percent. So we expect something in that range. We are working it out right now.

[Operator]

Our next question is from the line of in Nischint Chawathe from Kotak Institutional Equities.

[Nischint Chawathe, analyst]

First of all, the price hike that we took effective this year, how much of this benefit is shown in this year and how much probably some of it will roll over next year? So if you could kind of give some color on that?

[Anand Roy, executive]

So on a portfolio basis, we would have April as the last month, which will have a direct impact on the price side, but as far as the net earned premium is concerned, that will flow throughout this financial year also because of all the policies that got renewed over the last 12 months. So there will be some positive impact on the NEP. But on a GWP basis, April would be the last month because we launched the price hike in May of last year, if that answers your question.

[Nischint Chawathe, analyst]

Got it. If you could give some color in terms of proportion of business that kind of got bolted in and some color in terms of proportional basis that ported out to peers?

[Anand Roy, executive]

So we are very selective about [ invoice ] portability. And unlike many other peers in this business, our focus is more on expanding the market and creating fresh business opportunities rather than putting insurance from other companies. Having said that, it's not that we do not accept portability, we do. But less than 7% of our book is new business book is coming from portability and more than 90% is actually new to insurance business, which we believe is a better underwriting strategy in the long run to make it a sustainable growth.

[Nischint Chawathe, analyst]

And any sense in terms of how much would be ported out? I mean, if let's say, this was not ported out, how much could your growth be? Or some color on that? I am sure there is a way you plan that.

[Anand Roy, executive]

So ported out as such, we do have internal trackers, but we do not have any official information, but let me just give you some picture of this. Star Health has the best persistency rates in the industry. Last year also it was no different, more than -- we were able to secure more than 98% in terms of value of our renewal book. As far as our volume-wise retention is concerned, we had predicted that because of the significant price hike we have taken on the Family Health Optima products that there would be a drop off. We saw the drop off happening between 4% to 5% as we have predicted. [indiscernible] things are porting down and how many of them did not renew itself, that data, though we have some internal understanding, unfortunately, we will not be able to disclose here because we don't have the data right [indiscernible].

[Nischint Chawathe, analyst]

No, no issue. Just one small technical question. Finally, I was looking at Slide 17 on IFRS disclosure, and what I see is that the deferred expenses on procurement costs. Now this amount has gone up, I think, almost 32% year-on-year. So when your overall business is growing at 18% and this is growing at 32%, how should we really think of it?

I think your overall expenses for submissions this year has gone up by 14%.

[Anand Roy, executive]

Yes. So Nischint, yes, it's a function of FY '22 expenses, which were booked in FY '23 and FY '23 going further to FY '24. So it's like an on premium something coming from last year, something going from this year as well. It's a technical thing, and this also shows our investment in business by 18% is overall growth, in digital business, banca business we have grown much, much faster and that requires investment in terms of acquisition cost.

[Nischint Chawathe, analyst]

No sir, deferred expenses on procurement costs, essentially got essentially in fact given the expenses that under IFRS, I mean, what you spent this year, and what technically has life which you can kind of defer over a period of time. So I believe this pertains to the business that we have done in this year. It has no opening balance and sort of roll forward.

[Nilesh Kambli, executive]

That's correct, Nischint, but whatever was deferred last year come to this year and whatever business we have done in the current year will get deferred to next year. So the growth in business that we have seen in quarter 4, the digital business that we have done, it requires a huge investment. So those get deferred to for the future period.

[Nischint Chawathe, analyst]

So these are net numbers is what you are saying?

[Anand Roy, executive]

Exactly, exactly.

[Operator]

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

[Supratim Dutta, analyst]

So just wanted to understand the group business has increased as a proportion of your overall GWP. If you could give us some color how the loss ratio in the group business is currently? And how different is it from FY '22 when you did this business pretty frequently? So if you could give us some color on that? And what are your aspirations of building this group business as a proportion of overall GWP going forward? That's the first question.

Coming to my second question, currently, we have seen over the last few months, a number of changes on the product design, be it lower beating period for CED or moratorium. I wanted to understand what kind of new product development opportunities does this get and how does this change the profitability of the product? That would be my second question.

And lastly, when it comes to the investment this year has been very strong when it comes to investment income. Just wanted to understand what proportion of your book is now equities and what is the tenure of your bond book? That would be very helpful.

[Anand Roy, executive]

I will take the group business question, and I will request Aneesh to handle the investment question. [indiscernible] business actually is divided into 2 portions. I mean, we do underwrite acquire implied groups, mostly focused on the MSME and SME segment, and that's where the aspirations to grow the businesses. And we have seen very, very healthy loss ratios and very profitable book. Most of this business comes from our agency channel currently. But as this week, we are really opening up the bancassurance and broking channels as well as this particular vertical is concerned and also our digital channels.

So as you rightly put it, we have a very significant experience of [indiscernible] large corporates and grow businesses in the past. So we definitely recalibrated our strategy to go down any loss-making business opportunities. We will focus on the profit opportunities in the MSME and SME and [indiscernible].

[Aneesh Srivastava, executive]

So Supratim, our investment group, which is there in equities as of 31st March was approximately 4.5%. And over and above that, we had around 2.2% investment in [indiscernible] and some exposures in [ AF ]. So that's how the book is around 6.5%. And in terms of -- as I understand you're asking about the duration of the portfolio. So our core fixed income portfolio duration is 3.7, and if we include the liquidity, so the duration would be around 3.3 years.

[Supratim Dutta, analyst]

And just one follow-up here. What would be the unrealized gain sitting on the book?

[Aneesh Srivastava, executive]

Unrealized gain as on 31st March is approximately 95 crores, 99 crores.

[Supratim Dutta, analyst]

And on the regulatory basis, if you could give some color over there?

[Anand Roy, executive]

Yes. So there are multiple regulatory developments happening as we speak. Many of them are in glass stages and consultation. As far as products are concerned, the regulator is keen to reduce the moratorium period in terms of -- from 8 years to 5 years. There is some discussion about reducing the pre-existing disease, waiting periods, reduction from 4 years to 3 years and so on and so forth. So I think all of these changes, we will -- we are obviously watching them closely and we are designing our strategies. The regulator also does allow insurance companies to take price revisions [indiscernible]. So if that is needed to recalibrate the ages, we will definitely evaluate that at point of that.

[Operator]

[Operator Instructions] Our next question is from the line of Anirudh Shetty from Solidarity Investment Managers.

[Anirudh Shetty, analyst]

Sir my first question was essentially, we aspire to grow faster than industry like we've even done in the past. But given the current context is that we are a very permanent leader with 32% market share. Over time there is a possibility that composite license comes through the industry to get more competitive with life insurance getting in. So how does one think about just the levers of ability to keep growing faster on this space and the industry dynamics change?

[Anand Roy, executive]

So we are going in line with our expectations. We do want to improve our market share, but as I've already articulated, we are growing with a very cautious approach of putting underwriting quality first and growth later. As you can imagine it's not a very difficult business to showcase growth for the sake of growth. This is not very difficult for us to do that. But how do you grow with quality on a sustainable basis in some question in front of us. And we believe that we have got the right [indiscernible] who keep doing that.

So we do have, as I mentioned earlier, 4 major channels, which we doubled on, one is the agency channel, which is the main contributor, then we have the digital channel, and of course, the bancassurance channel. This year, we are also looking at the group channel [ DMC channel ] in a larger way.

As far as the composite license is concerned, I think this has been going on for long time now, and we have articulated our views in the past. We believe that this may happen, may not happen. We can't comment on that. But if it does happen, Star Health will be prepared to grab opportunities that comes along with this change in regulations. I think the kind of distribution that Star Health has, the kind of brand reforms that we have, the affinity with our distributors and customers across the country, we are quite well positioned to look at our other lines of businesses also, because we believe that if this opportunity does arise, we will grab it with both hands.

[Anirudh Shetty, analyst]

Got it. And my second question is in our group business of, say about, FY '24 INR 1,100 crores, how much would be SMEs vis-a-vis the large corporate?

[Anand Roy, executive]

Well, it's very insignificant, because we are not a large player in the large corporate space. As I mentioned earlier, we are MSME and SME a mid corporate player. And that INR 1,100 crores, which you are talking about also includes our bancassurance groups, which are largely retail businesses, but reported under groups.

[Anirudh Shetty, analyst]

And just one final question is we've done a lot in terms of [indiscernible] analytics to reduce our claim ratios. Do you see further scope for improvement here to just moving this analytics going forward? Or you kind of maxed out on our ability to take it out [indiscernible]?

[Aneesh Srivastava, executive]

So this is -- as you rightly said, this is a continuous activity and endeavor, right? So as we get deeper into various layers of our business and understand where opportunities could be to further either improve our trains, assessment quality or our efficiencies in managing those claims or our network management abilities. So I think we keep discovering new, new aspects, and I think this will be a journey, and this is not the end.

[Operator]

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

[Dipanjan Ghosh, analyst]

Sir, just 1 or 2 questions. First on this non-agency-lead retails side business that you're originating incrementally, just trying to get some sense of how you kind of envisage the combined ratio in this business a few years out? I would assume that the current origination cost in this business will be that higher what probably you would be expecting a favorable claims trend incrementally, which should probably offset that. So just wanted to get some color on how you see the combined evolving in the non-agency segment for the retail side of the business getting originated incrementally?

Second, a data keeping question. If you can give the data on the share of business or number of policies with vintage of more than 4 years currently versus less than what it has been, let's say, in 2021 or 2022, 2, 3 years back?

And lastly, you alluded to the fact that you'll be focusing on underwriting quality versus growth. And we have also seen kind of sort of ramping up for some of the channels out there. So just wanted to get some sense why you kind of may not kind of give a guidance, but is it fair to assume that as a vintage of the book increases, and given that the [indiscernible] price hikes will be taking in less than, say, the next 18 months will be lower than what you took in the last 18 months, is it a fair assumption that the overall gross premium growth numbers can see then on the growth aspect from what you have seen currently in the last, let's say, 2, 3 quarters? Those are my 3 questions.

[Anand Roy, executive]

So non-agency led growth largely comes from our digital channels, D2C and the aggregator partnerships that we have. It also comes from our bancassurance and alternate channels through retail brokers.

As far as the combined operating ratios of these channels are concerned, they are very, very healthy. In fact, we are investing a lot of our time and energy in growing our D2C piece, because it has the best ROEs amongst all our business channel. So we believe that these are definitely worth investing for a long period of time. And we will continue to do so.

As far as the share of business of policy is greater than 4 years is concerned, we don't disclose that data, but we do disclose what is our persistency. I'm sure you can figure it out. But having said that, we are -- we track different cohorts very closely. We make sure that every cohort is profitable on a combined ratio basis, and we take necessary interventions whenever it is needed in terms of price hikes, in terms of calibrating our commissions and incentives and so on and so forth.

So we are an 18-year-old company. We have all kinds of cohorts already built into our business. So we don't really worry about renewal cohorts. What we worry about is how do we make sure that customers have a good experience with us, and how do we make sure that we keep servicing them better?

And the regulations today allow us enough flexibility to price our products as we need to. And I think that is something that we will keep doing as we go forward.

[Dipanjan Ghosh, analyst]

Sir, on the growth part, how should one think of it, given that next year, the year after the quantum of price hike will be lower than, let's say, the last 18 months?

[Anand Roy, executive]

Our growth has always been led by value growth, 50% and volume growth 50%. So we are back to that. We expect that with the strategies that we have put in place in terms of our agency business as well as our bancassurance and digital business, we expect that growth will be higher than the industry. And definitely, we hope that with our strategies, if we execute well, we will keep improving our market share as we go every year forward.

[Dipanjan Ghosh, analyst]

Just one follow-up on the first question. Is it that the return ratios on these new channels are more profitable than your legacy channel. So when you kind of make this statement, it adjusted for vintage, I mean, on a similar like-for-like vintage cohort basis, you're kind of making this statement, right?

[Anand Roy, executive]

Absolutely. Absolutely.

[Operator]

Our next question is from the line of Shobhit Sharma from HDFC Securities.

[Shobhit Sharma, analyst]

I have 2 questions. One is on the number of policies growth. So for the 9-month period, the number of policies growth reported was close to 2%, wherein we have seen agency has shown a growth of only 4% and the digital channels seems to have a flattish growth. So what kind of growth are you looking towards these kind of channels?

[Anand Roy, executive]

As I mentioned in my opening speech, our digital channels has growth to 40% plus in terms of ind premiums. So that number will even [indiscernible].

[Shobhit Sharma, analyst]

Second question, sir, is on the loss ratio. We have reported a better loss ratio down 4% quarter-on-quarter. So can you give us the sense that why this loss ratio is down? Is this because of the claims inflation, which has reduced? Or is there a fall in incident rates?

[Aneesh Srivastava, executive]

There is an overall increase, yes. But the loss ratio also consists of our expenses on things like the preventive health takeup, our wellness initiative, the OPD business and claims. Also, the share of group health business has grown where it works on a higher loss ratio, while on the combined still works for us, because the expense ratios there are lower. So all of those have contributed to the increase in loss ratio. And some of these are like the numbers you would have seen in the initial address on preventive takeup and teleconsultations. They're very, very significant increases that have happened, and this is all an investment in the future so that our future book can be much better. And those are the kind of things we are doing. So nothing really is a major cause over it.

[Operator]

Ladies and gentleman, we will take that as a last question for today. I would now like to hand the conference over to Mr. Nilesh Kambli for closing comments.

[Nilesh Kambli, executive]

Thank you, everyone, for joining the call. It was a year of transition for us with a new CEO starting FY '24. The price increase -- significant price increase that we took in the [indiscernible] segment the introduction of EoM regulations and the various initiatives of the regulator as well. With 37% growth impact, we have -- in FY '24 we are fully geared up for -- to deliver stronger growth and a strong financial performance for FY '25. Thank you very much.

[Operator]

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