Fast Take Star Health and Allied Insurance

Research evidence excerpt

Fast Take Star Health and Allied Insurance

Forecast returns

Forecast price appreciation -19.0%

Forecast dividend yield 0.0%

Forecast stock return -19.0%

Market return assumption 12.0%

Forecast excess return -31.0%

Company Description

Incorporated in 2006, Star Health and Allied Insurance (Star Health Insurance) is the first

standalone health insurance company in India, providing retail health (88% of the premium

mix as of FY22), group health (10-11%) and personal accident insurance (1-2%). Safecorp

Investments holds a 40.75% stake and the Jhunjhunwala family17.32%.

Valuation Method and Risk Statement

We value Star Health & Allied Insurance using a three-stage economic profit/residual income

methodology, arriving at an implied 2.6x FY26E P/BV. We assume a ‘super-normal’ average

growth run rate of 17.0% over FY27-35E, an average medium-term growth rate of 12.4%

over FY36-45E and an average growth rate of 9.1% in the modest growth period of FY46-

55E, followed by a terminal growth rate of 5%. We assume a CoE of 11.5%.

Risks to our forecasts could arise from an overall economic slowdown and muted household

income, which would imply an inability to spare funds for insurance premiums; continued low

awareness; or segment-specific issues. We assume improving penetration of health

insurance, with scope for growth. If this does not materialise, it would be a risk to our

estimates. Heightened competition in the industry impacting pricing increases is also a risk to

growth and profitability. Further, allowing life insurance companies to create and distribute

indemnity-based health plans, through composite licence if allowed by the regulator could

pose downside risks to our estimates while getting access to manufacture life insurance