Star Health and Allied Insurance Company Ltd
NSE:STARHEALTH
Star Health and Allied Insurance Company Ltd
NSE:STARHEALTH
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Ladies and gentlemen, good day, and welcome to the Star Health and Allied Insurance Company Limited's Q4 and FY 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Pranay Premkumar from Adfactors PR, Investor Relations team. Thank you, and over to you, Pranay.
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; Mr. Himanshu Walia, Chief Marketing 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 may involve risks and uncertainties.
Thank you, and over to you, Mr. Anand Roy.
Thank you so much, and good morning to all of you. Thank you for joining the Star Health Insurance earnings call. It's been a year of ups and downs for us and we closed the year FY '25 on a positive note. And to give you the script, I'm asking -- requesting my colleague, Aditya, to take over, and then we will take your questions and answers as well. Thank you.
Thank you, Anand. Good morning, everyone, and thank you for joining us on our Q4 and FY '25 earnings call. Firstly, wishing everyone a very happy Akshaya Tritiya. We closed financial year '25 by further strengthening our position as India's largest stand-alone health insurer. We continue to lead decisively in the retail health insurance segment, commanding a 33% market share, nearly 3x that of our nearest competitor as per GI Council data. This performance underscores our clear and consistent leadership in retail health, a segment that remains a primary growth engine for the health insurance industry. Our deep domain expertise in indemnity products, combined with our strong distribution network and digital-first approach, reinforces our position as the preferred partner for customers seeking comprehensive health coverage.
In FY '25, India's general insurance industry reported a 6.2% growth in GDPI year-on-year. Health insurance segment remains the largest segment within the general insurance industry, with total premium reaching INR 1.18 lakh crores in FY '25, marking a 9% increase from last year. Retail health insurance segment recorded the fastest growth, expanding by 12% to INR 47,000-odd crores, accounting for 40% of the total health insurance premiums. In FY '25, the insurance sector has embarked on a path of comprehensive reforms aimed at realizing the goal of insurance for all by 2047. The introduction of the master circular has emphasized customer centricity, aiming to improve transparency, simplify insurance products and standardize claims processes. These initiatives are designed to foster greater trust and accessibility for policyholders.
Complementing these regulatory strides, the Union Budget 2025 has introduced pivotal reforms to fortify the insurance sector. The FDI cap in insurance has increased from 74% to 100%, a move anticipated to attract global capital and expertise. The GST Council also had discussions around rationalization of GST on insurance premiums. Currently, health insurance premium attracts an 18% GST, which possesses a challenge to affordability, particularly for middle income and vulnerable groups. Reducing or exempting GST on retail health insurance and micro insurance products will not only promote wider insurance adoption, but also align with the government's vision of universal health coverage and strengthened financial protection.
Furthermore, the budget has placed strong emphasis on health care with increased allocations aimed at strengthening medical infrastructure, expanding coverage under schemes like Ayushman Bharat and promoting digital health initiatives. These measures are expected to enhance insurance penetration and awareness across the country. As a leading stand-alone health insurer, we have proactively aligned our strategies with these reforms. Our sustained investments in technology and customer-centric solutions position us well to capitalize on the evolving regulatory environment and to continue delivering value to our stakeholders. As awareness and demand for retail health insurance continue to rise across India, especially in the semi-urban, rural and smaller towns, we are well positioned to capitalize on this structural growth opportunity.
Coming to our business performance numbers for financial year '25, we would like to highlight that we'll be presenting our numbers without 1/N to provide greater clarity. FY '25 was a year of focused execution where we made measurable progress across key focus areas. Despite external challenges, we delivered strong growth in our core retail business, saw healthy traction in new products and continued to strengthen customer engagement. We saw strong growth in our fresh retail GWP, which grew by 25% for the year. This success was driven by renewed agent productivity, sharper campaign and the acceleration of our digital channels.
A key product innovation this year was the launch of our Super Star policy, which has garnered more than INR 550 crores in financial year '25. This product offers 21 optional covers and unique features like freeze your age and limitless care. It did become a top seller across digital platforms too. Its customization, wellness integration and competitive pricing set it apart in the market. We also made significant improvements in our claims Net Promoter Score, which was driven by enhancement in service quality, faster turnaround times and technology-based pre-authorizations.
While we recorded strong gains across many areas, there were some challenges that impacted our performance. Our overall claim ratio stands at 70.3%, driven by higher severity and frequency of claims, particularly with increased surgical intervention and hospitalization rates. The group segment, though a smaller portion of our portfolio, continued to face pressure. Loss ratio rose to 89.8% from 77.3% last year. We strategically recalibrated our group segment strategy since quarter 2 financial year '25. The contribution of this segment to our total GWP has reduced to 7% as on quarter 4 financial year '25 from 9% as on quarter 2 financial year '25.
In financial year '25, our overall GWP has grown by 15%. Our fresh GWP grew by 22%. Our [Technical Difficulty] GWP premium growth was at 12.5%. The fresh retail number of policy grew by 11%. Our renewal growth in number of policy grew by 5%. The overall number of policy growth stood at 6% for the financial year '25. This clearly emphasizes our focus on both volume and value growth. The average sum insured of new policies has increased by 10% to INR 16 lakh per policy. INR 5 lakhs and above sum insured now constitute to 87% of our overall portfolio versus 83% in financial year '24. The share of long-term policy has increased to 10% in financial year '25 versus 7% in financial year '24. The ratio of fresh to renewal has improved to [ 23 is to 77 ] in financial year '25 from [ 22 is to 78 ] in financial year '24.
Now moving on to our 4 engines of growth, ABCD. Firstly, Agency. Our agency channel continues to be the cornerstone of our business, contributing 82% to our overall gross written premium in financial year '25. Agency fresh business growth stood at 16%. We would also like to highlight that for quarter 4 fresh growth from this channel stood at 19%, thus reflecting the channel's strong momentum and productivity. During the year, we added 74,000 new agents, taking our total agent count to 7.75 lakh. Over the next 3 years, we aim to expand this network to 1 million agents. This expansion is a key lever in our strategy to deepen insurance penetration, particularly across non-metro cities and emerging towns.
Coming to Banca. For the financial year '25, the Banca channel contributed 7% to our overall business with fresh business growing by 13% year-on-year. We are privileged to have an access to a robust network of over 20,000 partner branches, offering us significant opportunities to scale distribution and enhance reach. Bancassurance has traditionally been a strong distribution channel. The 1/N guideline and the Department of Financial Services views on this segment has led banks to concentrate more on refining their core banking products. As a result, bancassurance growth had moderated with banks prioritizing regulatory compliance and core business focus over insurance distribution. Given the evolving health care needs and rising awareness, indemnity health insurance products remain our core offering to the banks, supporting both customer demand and business growth.
On Corporate business, this segment, we are focusing primarily on serving micro, small and medium enterprises. In financial year '25, the corporate business contributed 3% to our overall portfolio with fresh business from this group segment growing by 21% year-on-year. This reflects our continued efforts to deepen engagement and drive value within the MSME ecosystem. Our proprietary over-the-counter SME calculator has strengthened our association with agents who have been generating new business focusing on SME and MSME business segment. Coming to the Digital segment. Our digital business comprises of our own direct-to-consumer, online brokers and web aggregators, which contributed to 8% in financial year '25 to our overall business. Our own direct-to-consumer channel contributed 72% to our digital business and the remaining 28% comes from online brokers and web aggregators. The fresh business from digital channel grew by 71%.
Coming to the financial performance for financial year '25 as per IFRS. Our combined ratio in financial year '25 stood at 101.1% compared to 97.3% in financial year '24. Claim ratio stood at 70.7% in financial year '25 compared to 66.5% in financial year '24. The expense ratio in financial year '25 stood at 30.4% compared to 30.7% in financial year '24. Investment income in financial year '25 has grown to INR 1,260 crores versus INR 1,171 crores in financial year '24. The yield for financial year '25 stood at 7.7%. Our investment assets have grown by 15.5% and has reached INR 17,898 crores in financial year '25.
For financial year '25, our profit before tax stood at INR 1,054 crores versus INR 1,480 crores in financial year '24. Our PAT for financial year '25 stood at INR 787 crores compared to INR 1,103 crores in financial year '24. Our ROE for financial year '25 stood at 9.5%. Solvency of the company as on March 31, 2025 was 2.21x compared to the regulatory requirement of 1.5x. I would just like to highlight some key highlights for financial year '25. We launched India's first health insurance policy in Braille, making protection more accessible for the visually impaired. Star was rated as India's most sustainable insurer in S&P Global's 2024 Assessment with an ESG score of 53 for financial year '24. Our NPS company score stands at 54 for financial year '25 versus 42 in financial year '24. Our claims NPS stands at 55 for financial year '25 versus 47 in financial year '24. In terms of claims amount, our cashless claims lesser than 3 hours was 96% in financial year '25. Our claim rejection has come down to 10% in financial year '25 versus 13% in financial year '24.
We have been consistently increasing our engagement with customers on prevention and wellness. Our preventive health checks have increased by 48% in financial year '25. Our home health care initiative expanded to 156 cities, helping reduce hospitalization and lowering treatment cost. This is another step in making health care more accessible and affordable for our customers. We continue to yield savings in terms of claims out-go due to our anti-fraud digital initiatives, which are proprietary to Star Health. In terms of savings, we are able to attribute 2.6% to the claims out-go. Our app has seen strong traction with total downloads reaching 1 crore as of financial year '25, up from 57 lakhs in financial year '24. Our substantial investments in technology and automation enables us to achieve industry-leading metrics for low operating cost and exceptional customer experience. We also took repricing on 6 products this financial year '25, constituting to around 60% of our portfolio.
Looking ahead, financial year '26 marks a pivotal chapter in our journey and we are defining it as the Year of the Customer, reflecting our strong focus on delivering protection that is personal, relevant and seamless for every individual we serve. Our road map is built on 3 strategic pillars. First is profitable growth driven by sharp underwriting, focus on high-return markets and stricter pricing discipline. Smarter cohort-based pricing and deeper actuarial insights will help us balance margin expansion with affordability. Second is customer-centric innovation. We will introduce tailored products for Gen Z, early earners, seniors and underserved geographies designed around life stage needs, health trends and regional insights. Third is digital-first execution. Financial year '26 will bring a more seamless digital experience with real-time claims, AI-led pre-authorization and robust self-service on our app. This will enable customers to access care, wellness and support anytime, anywhere. Lastly, we are moving from a transactional to a transformational service model. Referral-led growth, loyalty programs and faster turnaround time will be core to this shift. Every customer touch point will reflect our belief that health insurance must be personal, inclusive and future-ready.
Thank you so much. And with all these updates, we can now open the floor for question-and-answers.
Than you very much, sir. We will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Shreya Shivani from CLSA.
So my first question is on the claims. I was also looking at the outstanding claims reserve and the IBNR reserves. I mean, the combined number that you give out in the 4Q result, that as a percentage of the claims paid is now 14%. This trend -- this number used to be about 11%, 12% earlier. So I wanted to understand, have we built -- because I don't have the breakup of IBNR reserves. So have we built higher IBNR reserves? Are we concerned about more claims coming through? And does that mean that any improvement in loss ratio in the coming years is under a question right now? I mean, how much can 70.3% move to in FY '26 and '27? Some idea on that would be useful.
Second, I wanted to get an update from you on the Common Empanelment that GIC Council was working on. There was a media article recently that it's progressed a bit. If you can help us understand how that's moving? And how much benefit can it give to us? And third, if you can help me understand the IFRS ROE is lesser than the IGAAP ROE. And I'm guessing it's because the deferred acquisition cost got impacted by the long-term regulation on long-term policy. But if you can help us understand that math as well, it will be useful.
Shreya, Amitabh here. Yes, we have seen an elevated frequency and severity that we observed in Q3 also, so largely led by carcinoma, obstetrics and [ gynec ] cases. So the preference for hospitalization over conservative treatments aided by easier access, availability, early screenings and of course, the cashless availability is all playing their role. So that is one of the reasons why we see those loss ratios. Yes, we have strengthened our reserves this quarter and that's -- see, we don't have to go by one particular quarter. This business is not about quarterly numbers. It's annual business. In fact, more than annual, it can be a business which corrects over a period of time. So we are seeing some of those trends, and we are ensuring that we have healthy reserves to meet any exigency.
On the GI Council Common Empanelment, there has been substantial progress on that. And there are various subcommittees and groups created, which are now divided geographically to reach out to a set of hospitals that we are targeting in the first round and substantive talks have happened at various levels and we are seeing some early signs of some breakthroughs. I wouldn't want to add further to that at this point in time and the GI Council spokesperson would be the right person to talk about that. But it's a good progress. And not only that, the industry is also trying to work out on various other measures on the fraud control perspective and as well as building better efficiencies. So I think all of this will play a big role in the coming year.
On the ROE question, I would request Nilesh to respond.
So, Shreya on the ROE part, it is largely marginal reduction was because of the -- because when it comes to IFRS, the mark-to-market of the investment portfolio is also considered. So there was a slight decline in Q4, which had resulted in lower ROE in IFRS compared to Indian GAAP.
Yes. But even the deferred acquisition cost was [ 525 ] last year and that has come down. Is there something to read over there?
No, absolutely not. See that's a function of the 1/N because now the booking itself is not coming. [Technical Difficulty] So that's the reason, nothing to do with...
Got it. Got it. And just a follow-up on the first question on the loss ratio on building reserves and I understand that you might have built reserves basis the trend you're seeing right now. But any guidance or any outlook on how the loss ratios can move over next year or anything on that side would be helpful.
So while we wouldn't want to give a guidance [Technical Difficulty] the measures we have taken on improving our fresh business. So our fresh business is really growing strongly now. We've done pricing corrections on the retail side at more than 60% of our portfolio. We've done pricing corrections on our banker portfolio as well in the range of 20% to 40%. And along with that, we've taken a lot of measures on micro segmenting our markets, focusing on profitable markets ensuring that we are picking up risks more prudently. So some of those measures will also play out because underwriting efficiencies build over a period of time.
On the claims side, what we have done is that now we have digitized more than 50% of our hospital billings and those efficiencies will start to flow in. Also, we are undertaking a complete transformation of our core claim system, which will happen by Q2. That will help us, again, better efficiencies in claims processing, preventing leakage and better fraud control. So all of that, I think, will help us manage the situation much better going forward.
Okay. And sir, you said 20% to 40% price hike, is it?
I'm sorry to interrupt you. I would request you to rejoin the queue for follow-up questions. There are others waiting. [Operator Instructions] The next question is from the line of Krishnan ASV from HDFC Securities.
This has been an extremely disappointing performance. But I just wanted to understand kind of what you answered to the previous query as well. You said 20% to 40% hike. You have taken price corrections in the Agency portfolio, in the Banca portfolio. And this 70% loss ratio is despite all of that. You've been taking price corrections for nearly 2, 2.5 years now, starting from the family floater. I just want to understand how bad the current portfolio is? Is it largely back book underwriting, which had gone wrong, which is now crossing all the pain? Have you -- is there any reason to believe that your flow in the book that you have seen in the last year, 1.5 years is any better?
Yes. So see, I think the price corrections that we have taken over the last few years has helped us to retain the loss ratios where we are today. We are an 18-year-old organization and we are operating at currently at 68% loss ratio on the retail side and overall 70%. There has been an increase in loss ratios for all players in the industry, if you would compare. And I would say that amongst most others, we are comparatively much better off. But having said that, we agree to your point that the loss ratios have elevated because of reasons which Amitabh had mentioned in the earlier answer as well.
How confident are we on maintaining the overall loss ratios and overall combined ratios? We are quite confident because we have seen significant green shoots in our new business growth in the amount of the loss ratios of the different cohorts that we monitor. So there is -- health insurance business is undergoing a lot of transformation and we have to accept that. There are multiple interventions from various regulatory bodies, from various government bodies. So this is a period of some kind of transformation, which the industry is going through and this is some pain that we have to live with in the short term. But the corrective measures that we are taking, we believe that in the long term, we will be much better off.
Understood. The other thing is you mentioned both severity and frequency, which have seen structural changes. Can you just walk us through or quantify this a little bit for us? What do you see on ground today vis-a-vis what you expected, say, 3 years back, both in terms of frequency as well as in terms of severity? Because what we find is incidence rates have gone up. But I just want to understand if you could kind of help us quantify that. What did you expect say 3 years back, where is the reality today?
So on the frequency, the increase is -- while it's still in single digits, but it is closer to 10%, I mean on the higher side of the single digits. And that's why that's a bit of an increasing trend than what we have earlier observed in the previous year. So I wouldn't be able to comment exactly on 3 years, but used to see not more than 3% to 4% increases in frequency earlier. So that's the change. And on severity, yes, while the market continues to see medical inflation at 15% plus, but we are holding that to well below 10% as of now. And in fact, ours would be one of the better controlled book as far as medical inflation is concerned.
I mean, I'm sorry to interrupt you. I think -- I mean, I find that this is a misconception. I don't think anybody in the industry is close to 15%. Whether it's a listed company, whether it's an unlisted company, whether it's a TPA listed TPA, all of them are actually claiming that medical inflation is actually in mid-single digits, right? So I can't understand this misconception around why you believe the industry is at 15% and you're doing any better.
No. So medical inflation in terms of what the industry is maintaining versus what we see actually happening in the hospitals, that's what I'm talking about. Any published number on medical inflation, if you come across, it talks about well about anywhere between 10% to 15%. I'm not commenting on what the insurance industry is maintaining it. Obviously, all the players are doing their bit to keep it at sustainable levels.
Okay. So you're seeing severity is not a big problem. At least Star Health has controlled severity far better than the industry. That's your assumption today.
See, it is not to the levels that we want to. I mean, obviously, we -- that's why we are not seeing the impact that we want to see on the loss ratios, right? So I'm not saying that it is at the level that we want, but it is much lower than what the overall industry trends are. Even within the industry, I think while you are saying -- and I'm going by what you are stating, but in terms of our numbers, I think we are maintaining at a number which is better than most other players.
I do have a suggestion, if you don't mind a constructive suggestion, when things do go wrong, I think it's better not to place -- I mean, a smoke and mirrors. You might as well own up. I think the deck doesn't help. Unfortunately, whatever changes you have done in the deck doesn't really help. I think you probably should be upfront because you are the market leader. It helps when you own up where things went wrong.
We'll take the next question from the line of Dipanjan Ghosh from Citigroup.
A few questions from my side. First, obviously, I mean, when you took the price hike first time around, I think the quantum was high. Also it led to adverse selection in hindsight after 24 months almost. So now given that you have been taking price hikes for the past 5 to 6 months, just wanted to get some sense of the quality of persistency now in terms of over the last few months, where the cohorts you have taken price hikes. You would have done some analysis of the customers who have been retained versus those who have probably folded out. So just some qualitative color on the cohort t that remains with you versus the trends that you saw in FHO once you have taken the price hike for the first time versus this time around? And second, what would be the policy persistency levels after the price hike?
The second question would be on this entire rise in claims ratio for FY '25, if you can split it between FHO and non-FHO. I mean we'll get the data in the disclosures, but it would be great if you can kind of split that up. And 2 more small data keeping questions. One, given that now your new business growth has revised, would you be categorical in explaining the gap between less than 3- or 4-year bucket claims ratio versus more than that? I mean that will give us some color in terms of how to extrapolate this new business growth to claims ratio trajectory. And lastly, on the claims frequency, what would be for you guys? I mean, you quoted that it has been increasing at 5%, 6%, but what would be the annualized number?
So on the persistency, let me just take that question first. When we took the price correction in the traditional manner 3 years ago -- 2 years ago in FHO, we found that customers, obviously, every time we take a price correction, we have always articulated that 5% to 6% of consumers do drop off. Now who are these consumers that dropped off earlier and who are the consumers that drop off now in the latest manner in which we have taken the price correction, there's a big difference that we are noticing. Because this time, we have done it in a little bit more nuanced fashion where we have given discounts to customers who have had better claims experience. So we are seeing a much better persistency on consumers who have not made claims because their price corrections have not been that much higher.
So I would say that -- the FHO price correction last year -- last time was -- this time, we are seeing much better results as far as underwriting standards are concerned. As far as the loss ratio of FHO is concerned, it continues to be on the higher end of -- closer to 80-odd percent. And we hope that with this price correction, that will come down 2 to 3 percentages. So we have to understand that every price correction that we take actually takes 12 months for it to fully get reflected on the books of the company. And only then the whole NEP earnings comes in and then the future must reflect the loss ratios of that particular book. So it is a long process, but it is something that we have to be more proactive. And that's why when we made our opening remarks, we have told you that we have taken price revisions in almost 60% of our products. And we expect that given the way the industry and the markets and also, to some extent, the guidance we have been receiving from the regulator, we will be taking a soft annual price increase to keep up with the medical inflation that we notice on our books.
On the claims frequency, I think, Amitabh, if you want to add to it.
So as I told you in the last question, basically, we are experiencing higher frequencies and the annual increase is upwards of 7% in frequency. And that's primarily led by, as I told earlier, movement from secondary to tertiary care hospitals, also more preference for hospitalization vis-a-vis conservative treatments, more accessibility and screenings happening. We have seen a lot of increase in cancer frequency because early screenings are happening now. So some of those trends have come in. And obviously, that will take its time to settle in and as a new sort of benchmark for us to price because all of these when they show up in the data and actuarial methods kind of go through those trends and then build that as part of our pricing. So some of those corrections happen with time and we hope that, that will settle at a level where we can sustain it at this pricing and the new future pricing corrections.
I'm sorry, the question on claims ratio in the newer cohorts of less than 3, 4 year versus others, what would be the gap? I mean -- and has that materially changed?
Dipanjan, we will take this question offline on the fresh and the renewal vintage loss ratios.
The next question is from the line of Prayesh Jain from Motilal Oswal.
Just trying to connect the dots out here. You had taken a Family Health Optima price hike of 25% a couple of years back. And at that time, we were told that the benefit of that will start flowing in a year's time. And while we haven't seen those benefits any time, now you are saying that you've taken a price hike and over and above that, you would be giving discount to good customers. So from a claims loss ratio perspective, does the -- even the current price hike benefit us in any form in the terms of loss ratio going ahead?
Yes. I mean, see, that price hike helped us to an extent and we managed the book in the last 1.5 years basis that. What we realized is that the way some of the price hikes are happening also leads to challenges in retentions of good risks, which are non-claiming customers. So that's why there's an importance to have cohort-based pricing where you can incentivize non-claimants. And that's what we have done in the recent change that we did. And since it has been done very recently, obviously, the impact will come only next year. The price hike, the latest hike happened only in January for FHO. So that will take its time to build, but we are seeing good trends as far as retentions are concerned in that particular hike.
Amitabh, honestly, we -- the only point that we have been trying to ask is the previous benefits have not come in. And what kind of confidence do you have that these price hikes will help you to maintain loss ratios or even improve for that matter? And just another question on that. At the beginning of this year, FY '25, you had guided for a 100% improvement in combined ratio, 50 basis points on loss ratio and 50 basis points on the OpEx. None of them seems to have come through in this year. What should we think about it from FY '26 or from a longer-term perspective? How should we think about loss ratios and combined ratios going ahead?
So see, Prayesh, we had guided for 50 basis points improvement in OpEx and 50 basis points on claims. On the OpEx, we have achieved that. But of course, because of the 1/N reporting, the data -- optically, it may not be available. But we can -- if you look at the overall GWP reporting basis, it is definitely something that we have worked on. And as you know, there has been a consistent improvement in OpEx every year year-on-year. So we continue to focus on that through our investments in tech and automation. We believe that, that will continue to happen in the future years as well.
As far as loss ratio is concerned, of course, this has been a bad year for us. We saw that the loss ratio deteriorated by 400 basis points to where we wanted to be. We have told you that the loss ratios are now broken into 3 different cohorts, right? There's retail, there is group and there is the bancassurance piece. On all these 3 areas, we have taken corrections. And we are quite confident that going forward, loss ratios will only improve from here. And we have been seeing that trend for the last 3 quarters. Every quarter, there has been an improvement over the previous quarter. But I don't want to give any guidance for the future. We have also guided for an FY '28 medium-term kind of a vision where we would be doubling our top line and tripling our profit on the IFRS basis. We continue to stand by that guidance.
Just one last question. Could you please mention the loss ratios on the renewal and the new business separately for the retail book?
Sure. We'll do that to you offline. And I can tell you that ours was very -- we are very, very encouraging and we can share that with you offline.
We'll take the next question from the line of Madhukar Ladha from Nuvama Wealth Management Limited.
So just on the loss ratio, they continue to be elevated. And even from a 9 months to a full year, the loss ratios have only increased. So 9 months, this was about 340 basis points and now it's again up to sort of 380 basis points. So on a year-over-year basis, when should this trend start looking better, where this is actually sort of coming off? And in the group business, especially there should be some -- group business should be an easier fix. So -- and over there, loss ratios are elevated. So what sort of improvement can we build at least on the group side, that will be useful to know.
And just a data keeping questions because your deck -- the deck has changed substantially and the consistency of information is lost every sort of quarter. So while you've given a lot of channel-wise fresh business growth, but I've tried to do some back calculation. The fresh -- total fresh business for FY '25 is about [ INR 40 billion ]. Is that correct? And finally, if you could give your ABCD split and GW split between -- GWP split between retail and group for FY '25, that would be helpful.
Yes, Madhukar, so your second question, your numbers are somewhat correct in terms of the volume of business that you are projecting of INR 40 billion fresh. I think on the loss ratio side, we have -- over last year, there has been a 400 basis point increase for the full year, which was 66.5%. This year, we landed a bit around 70.1%. So I think there's no -- there has -- it has been a bad year in terms of the elevated loss ratios. What we are trying to articulate here is that quarter-on-quarter basis, if you look at the previous quarter versus this quarter, we have seen improvements in loss ratios. And we believe that all the interventions that we have taken will improve the loss ratios further going ahead. So we are -- we remain to be very, very positive. Loss ratios increase has multiple reasons, but there's no point in discussing those reasons again. I just want to tell you that the steps the company has taken in terms of pushing new business, in terms of underwriting strategies of retail versus group as well as provider management that we are doing with our hospitals, I think we are quite well placed to have better outcomes in the future years.
And any comments on the group side because group should be more easily fixable, right? And the loss ratios of there has also increased substantially.
Absolutely. So group, we have -- our ratios of group business has come down significantly. We have been very highly selective on the group business for the last 3 quarters and loss ratios will come down on that since we are writing better business and being very, very selective about it.
So Madhukar, we have been showcasing our overall loss ratio split into retail and group. Retail obviously stood around 68-odd percent and we have consciously recalibrated our group business since quarter 2 '25. And from quarter 1 '26, our large group business contribution will go down in a big way from a top line and earned premium. So obviously, this will help our LR in the coming year. Our retail fresh growth, along with the price hike taken is of almost 60%, 65% of our portfolio. And this will be followed by our annual repricing also. So the full impact on NEP due to 1 by 365 accounting will at least take probably a 12-month period. But we are very confident that all the proactive actions which we have taken in the last 6 months will show good results in the coming days. Our fresh growth has been very encouraging and that also will be a very big point. Coming to the retail and group split, just in quarter 4, our retail contribution to the total premium was 95% and the group was only 5%.
And what is that number for the full year?
I'm sorry to interrupt you. I would request you to rejoin the queue for follow-ups, please. We'll take the next question from the line of Avinash Singh from Emkay Global.
The question is more, I would say, broader level. I mean, if we see, again, I'm going back to the pre-COVID era to now almost 5-odd years. And if we look at the industry level, of course, whatever change in the frequency and severity is known, I mean, partly due to hospital. Now my question is very kind of a basic. Now if we see even not you, your peers also when the sort of a growth slows down, there is a reasonable spike in claims cost and the claims ratios have been going upward. Now in this -- all these changes in frequency and severity, I mean, is there a fundamental shift? I mean, because at the end of the day, even retail or group, it is all about the health care cost, so frequency and severity. Is there a fundamental change that you are witnessing in population cohort in terms of the lifestyle or chronic diseases?
I mean how has been the medium-term trend pre-COVID, post-COVID. I mean, are these spikes led by, say, typical your Dengue, Malaria or Chikungunya kind of a thing that is seeing extreme rise? Or is it that, okay, a cardiac care, cancer care, these kind of lifestyle chronic diseases because both will kind of have a different repurpose pricing impact. If there is a kind of a structural change in morbidity profile of your cohort, whether due to pollution or whatever, if there is a kind of the outcomes of frequency in cardiac cancer and all these life-threatening lifestyle increasing, then probably this is going to be a chicken and egg scenario where I mean price hike and expectation claim experience [ watching ]. So what has been -- I mean, if you analyze the data over 5 years because, of course, you are the largest one, what kind of a thing or which bucket of the morbidity has changed -- seen a bigger change? I mean, is it the life -- chronic diseases or it is just some spike coming just because of some incidences of the summer heat or Chikungunya, Dengue kind of a thing?
So for the quarter, if you're talking about, we've seen more incidents on the surgical interventions, not so much on the medical. And for the year also, while there has been increase both on medical and surgical, but we've seen a larger increase on the surgical incidences. And this is led by more of cancer, [ gyne ], obstetrics and urological issues. Whether it's a structural change or not, we will come to know only with some passage of time because we are still observing some building up and trend changes. So whether it is reset to a new normal is something that we'll know. And usually, actuarial pricing is based on trends over a period of time and that's what it takes into account when we do any repricing of a portfolio.
So whatever changes in frequency or severity that happens, that is generally accounted for in all pricing changes that we undertake. Now sometimes there could be some surprises in that when the expected frequencies go up more than the actuarial estimated while pricing the product. So that could be one of the issues. But largely, whenever a reset happens, mostly it settles down in a year or 2, generally, that's the trend. We will continue to monitor this very closely and ensure that we are taking adequate precautions on both sides. One, on the underwriting side, as we said, we continue to focus to ensure that we are micro segmenting our risk. We are focusing on the profitable cohorts, taking due precautions in whatever we underwrite. On the other side, as I said, we continue to negotiate and ensure that we get the best pricing arrangements at the hospitals and ensure that our ability to leverage on claims analytics with all our data, all our last 18 years of understanding of this business helps us stay ahead. So that's what the effort is.
So Avinash, just to add to that, I mean, to what Amitabh said. We have to understand that health insurance is a business that is almost -- it's not an optional business -- I mean, not an optional coverage anymore. People have to buy health insurance and we are glad that, that kind of understanding has come into the population. And more and more awareness, more and more people are coming forward to buy health insurance and that's why all health insurance companies continue to grow. Now how can this growth be profitable and how can this growth be sustainable is something that we are -- that is the challenge we are facing for the last 2 years.
But yes, people buy health insurance because they want to go for higher quality of treatment. And there are multiple studies which shows that people who have health insurance have better health outcomes in the long run because obviously, they are -- they seek timely treatment, which otherwise they would not have. So I think it is something that is evolving. What we would like to tell you is that we are studying these trends and we are definitely pricing products and restructuring our underwriting to make sure that we stay ahead of the curve and not play a catch-up game at all times.
The next question is from the line of Varun from Kotak Securities.
I just had a question on the divergence between fresh and overall growth that we have been reporting. So if you look at fresh growth, retail growth, you're saying that it is about 35% for the year and that translates to about 33% for the quarter. So when we look at renewal rates, they seem to be on a decline, particularly in 4Q. Is there anything off in the base that is causing this decline? Like I think it's about coming to close to 90% instead of 95%, 97% is what is there for the full year?
No. So Varun, let me just reassure that the 25% growth is on without 1/N. Coming to the renewal, I had already mentioned that the renewal growth has -- in value terms has been 12.5%. And on the volume side, it's been on 6% on the number of policies. So the growth has been on volume and value both.
Yes. That's -- I think the number you're talking about is for the full year. I'm saying in 4Q there is a trend of a sharp decline in renewal rates. Are you seeing the same? Or is there something else?
See renewal ratio in Q4 also continues to be 98% for us.
Yes.
Okay. And in terms of investment yield, there's a slight moderation in investment yield. I think bond markets have rallied. So what is the reason for this moderation?
Varun, this is Aneesh here. See, if you would look at the book, what we have done in last, so to say, 1.5 years is that as our solvency levels have stabilized, we have started building equity book. So equity book was 6.7% of the AUM at the beginning of the year. This is at the end of last quarter of last financial year. And today, this stands at approximately 15%. So what happens is that if we get an opportunity in between to book profits, that gets counted. Declining yield is not a good scenario, but we are fully invested as far as fixed income is concerned. And I don't think that we would be needing to buy too much of incremental fixed income, except for the maturities that would come in.
So now if you dissect the last 4 quarters, we have booked INR 33 crores kind of investment profit -- book profit. Second quarter was INR 85 crores and third quarter was INR 55 crores. Intent of booking profit was that there had been exuberance in the market. And hence, we had paid down some exposures. We were not expecting that we would get reinvestment opportunities so quickly. But fortunately, we got in the fourth quarter reinvestment opportunities and we have scaled back our exposures. That's the reason why in fourth quarter, we have just booked INR 11 crores and we have not booked large quantum because that was time when we were re-increasing our equity investment book.
So because of INR 11 crores of book profit only as compared to INR 85 crores and INR 55 crores in the previous quarters, you are seeing that overall investment income for fourth quarter is low. But what you have to look at is that full year. Full year is INR 1,281 crores investment income out of which INR 184 crores is the book profit. And overall investment yield is 7.8%. 7.8% actually is a good yield from an insurance perspective. So this is where we stand. And what I would say is that given the fact that we have equity book now and we may not very consistently book profits, we would see as and when there are opportunities in the market, we will pay down equities or book profits, else there may be some variability. But from a fixed income perspective, I don't think that there would be any variability. 15% of the portfolio would be a function of how market behaves. So that's the reason why you are seeing this, so to say, relatively lower income as compared to the previous quarters. But if you look at 7.8% kind of a yield, this is, I think, the highest in last 4 years. So this is where we stand. And I think we continue to do well as far as this investment book is concerned.
Ladies and gentlemen, due to time constraint, that was the last question for today. I would now like to hand the conference over to Mr. Nilesh Kambli for closing comments. Thank you, and over to you, sir.
Thank you, everyone, for joining the call early morning. We are geared up and confident for a profitable FY '26. Thank you very much.
Thank you, members of the management. On behalf of Star Health and Allied Insurance Company Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.