What Is Behind Nuvama’s Positive Outlook on Star Health?
Nuvama maintains a Buy rating on Star Health with a higher target of ₹550 as underwriting profitability improves and loss ratios fall. Explore key performance metrics and outlook for FY26–28.
About Star Health
Star Health and Allied Insurance is one of India’s largest standalone health insurers. The company has maintained leadership in retail health insurance, focusing on product innovation, digital distribution, and steady underwriting performance even amid regulatory transitions to Ind-AS accounting.
Nuvama’s Key Takeaways
| Metric | Performance | Remarks |
|---|---|---|
| Target Price / Rating | ₹550 (vs ₹490) | Maintain Buy | Higher target reflects improving underwriting efficiency and sustainable growth visibility. |
| Adjusted Gross Written Premium (GWP) | ↑ 11.5 % YoY | Steady policy renewals and new product launches boosted growth. |
| Loss Ratio | ↓ 190 bps YoY to 71.8 % | Improved claim management and favorable pricing mix reduced losses. |
| Ind-AS Combined Ratio (CoR) | ↓ 380 bps YoY to 101 % | Operational discipline and scale leverage drove efficiency. |
| Underwriting Profit | ₹210 Cr (↑ 8.3× YoY) | Significant improvement after earlier losses; validates strong risk control. |
| Investment Yield | 6.4 % | Lower yield reduced reported APAT to ₹54.9 Cr. |
Earnings and Outlook
- FY26–28E APAT revised to –13.9 %, –2.2 %, and +0.4 % respectively, factoring in investment yield normalization.
- Policy renewal rates remain strong above 90 %, with growing contribution from digital channels and bancassurance partnerships.
- Company maintains focus on Tier-II and Tier-III market expansion for incremental policy penetration.
- Operational cost efficiencies under Ind-AS regime expected to improve profitability over FY27–28.
SWOT Analysis and Key Risks
- Strength: Market leadership in retail health segment; high renewal persistency.
- Weakness: Lower investment yield and volatile claim ratios could impact near-term profit.
- Opportunity: Growing penetration of retail health insurance post-COVID offers structural growth tailwinds.
- Threat: Regulatory changes and higher reinsurance costs remain watch factors.
Investment Verdict
Nuvama maintains a positive stance on Star Health, citing visible operational turnaround and steady premium growth. While short-term profitability is influenced by investment income, core underwriting strength provides medium-term confidence. Long-term investors may accumulate on dips for stable compounding potential.
Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, observes that Star Health continues to deliver consistent underwriting gains and remains a strong structural compounder in the insurance space. The brokerage consensus underlines a sustainable growth runway led by operational leverage.
Discover more insights at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
Related Queries on Star Health
- What are the latest earnings estimates for Star Health in FY26–28?
- How is Star Health improving underwriting profitability?
- What risks do lower investment yields pose for insurers?
- Is Star Health stock a long-term buy for 2025?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
