Whalesbook
Consistent Claims Ratio Improvement
Star Health's fourth-quarter results showed a significant recovery, mainly thanks to a 440 basis point improvement in its claims ratio year-over-year, now at 64.8%. This positive trend has held steady over recent quarters, driven by strong growth in new premiums, strategic annual price adjustments, and careful management of its insurance portfolio. The company's wellness and homecare programs, plus stronger fraud prevention efforts, also contributed.
Profitability and Growth Outlook
The insurer's combined ratio improved to 94.8%, benefiting from lower claims costs. Management expects this trend in claims ratio improvement to continue, backed by ongoing price increases and strategies to acquire new premiums. While profitability is key, Star Health aims for high-teen premium growth and mid-to-high-teen return on equity (RoE).
Analyst Revisions and Target Price
Following these Q4 results, Emkay Global Financial has updated its financial forecasts. The firm raised its Gross Written Premium (GWP) projections by about 2% and lowered its claims ratio (CoR) estimates by 70-90 basis points. These changes lead to an expected 6-8% rise in Profit After Tax (PAT) for FY27-28. As a result, Emkay is keeping its 'BUY' rating and has increased its price target by 24% to Rs 650 from Rs 525. This new target suggests a Price/Earnings (P/E) multiple of roughly 30 times for FY28, showing strong analyst confidence.