A Summer Internship Project Report on

“Study of financial summary and analysis of star health with other stand
alone companies”

Undertaken at

Star Health and Allied Insurance Company Ltd.

Submitted to

In partial fulfilment of the requirement for the degree of

Post-Graduation Diploma Programme

By

Pranav Sawhney

(HRD1815339)

SBS- Finance

Under the esteem guidance of

FACULTY MENTOR

Mr. Tushar Padale

COMPANY MENTOR

Mr. Kashish Jerath

(branch manager star health and allied insurance company ltd.)

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CERTIFICATE

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 DECLARATION

I, hereby declare that the report entitled “Study of financial summary and
analysis of star health with other stand alone companies” is based on my
learning at Star health and allied . I further declare that this project report is
submitted as per requirement of PGDM curriculum, is my original work and
based on the findings during the project. This project reportwould not be
submitted in any institute for any award of any other degree, diploma,
fellowship or other similar title or prizes. This project report would not be
submitted in any degree in future andno other person will be allowed to copy
from this project in any other form. If I am found to be guilty of not fulfilling
the above promises, my submission can be declared invalid and college has the
right to reject this report.

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 PREFACE

This project report attempts to bring under one cover the entire hard work and
dedication done by me in the completion of the project work in “Study of
financial summary and analysis of star health with other stand alone
companies” of Star health and allied. I have made sincere attempts and taken
every care to present this matter in precise and compact form, the language
being as simple as possible. I am sure that the information contained in this
volume would certainly prove useful for better insight in the scope and
dimension of this project in its true perspective. The task of completion of this
project though being difficult was made quite simple, interesting and successful
due to deep involvement and complete dedication of my colleagues. All
constructive feedback is cordially invited.

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 ACKNOWLEDEGEMENT

I take this opportunity to thank all the people who have helped me through the
course of my journey towards completing this report. I sincerely thank my
mentor, Mr. Kadir (sales manager) for his guidance and encouragement in
carrying out this project work.
I also wish to express my gratitude to Mr. Kashish (branch manager), who was
always there with me whenever I needed during the course of the project. I
would also like to thank all the other employees at Star health and allied who
rendered their help during the period of my project work.
I would like to thank Prof. Dr. G. Gopalakrishnan, Director, BIMHRD for their
assistance and continuous help towards successful completion of this project. At
last I would like to acknowledge the support and encouragement of my friends
and family. This project would not have been possible without the confidence,
endurance and support of them.

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 TABLE OF CONTENT

S.NO TOPIC PAGE

NO.

1. Executive summary 7

2. Introduction 8

3. Objective of the study 26

4. Research methodology 27

5. Literature review 28

6. Share capital and balance sheet of company 32

7. Financial ratios 34

8. Analysis 44

9. Financial summary of star health 49

10. Findings 50

11. Limitations 52

12. Recommendations 53

13. Bibliography 54

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 EXECUTIVE SUMMARY
This project report is based on financial summary and analysis of star health ,
effective planning and financial management are the key to run a successfully
stable business ratio analysis is critical for helping you understand the financial
statements, for identifying trends over time and for measuring the overall
financial state of business . In addition, lenders and potential investors often rely
on ratio analysis while making the investment and lending decisions.

Ratios are critical quantitative analysis tools. One of their most important
functions lies in their capacity to act as lagging indicators in identifying positive
and negative financial trends. The information a trend analysis provides allows
to you to make and implement ongoing financial plans and when necessary make
course corrections to short-term and long-term financial plans.

Ratio analysis also provides ways for you to compare the financial state of your
business against other businesses within your industry or between your business
and businesses in other industries.

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 INTRODUCTION TO INSURANCE
In India, insurance has a deep-rooted history. It finds mention in the writings of
Manu ( Manusmrithi ), Yagnavalkya ( Dharmasastra ) and Kautilya
( Arthasastra ). The writings talk in terms of pooling of resources that could be
re-distributed in times of calamities such as fire, floods, epidemics and famine.
This was probably a pre-cursor to modern day insurance. Ancient Indian history
has preserved the earliest traces of insurance in the form of marine trade loans
and carriers’ contracts. Insurance in India has evolved over time heavily
drawing from other countries, England in particular.

1818 saw the advent of life insurance business in India with the establishment
of the Oriental Life Insurance Company in Calcutta. This Company however
failed in 1834. In 1829, the Madras Equitable had begun transacting life
insurance business in the Madras Presidency. 1870 saw the enactment of the
British Insurance Act and in the last three decades of the nineteenth century, the
Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were
started in the Bombay Residency. This era, however, was dominated by foreign
insurance offices which did good business in India, namely Albert Life
Assurance, Royal Insurance, Liverpool and London Globe Insurance and the
Indian offices were up for hard competition from the foreign companies.

In 1914, the Government of India started publishing returns of Insurance

Companies in India. The Indian Life Assurance Companies Act, 1912 was the
first statutory measure to regulate life business. In 1928, the Indian Insurance
Companies Act was enacted to enable the Government to collect statistical
information about both life and non-life business transacted in India by Indian
and foreign insurers including provident insurance societies. In 1938, with a
view to protecting the interest of the Insurance public, the earlier legislation was
consolidated and amended by the Insurance Act, 1938 with comprehensive
provisions for effective control over the activities of insurers.

The Insurance Amendment Act of 1950 abolished Principal Agencies.

However, there were a large number of insurance companies and the level of
competition was high. There were also allegations of unfair trade practices. The
Government of India, therefore, decided to nationalize insurance business.

An Ordinance was issued on 19th January, 1956 nationalising the Life

Insurance sector and Life Insurance Corporation came into existence in the
same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as also 75
provident societies—245 Indian and foreign insurers in all. The LIC had
monopoly till the late 90s when the Insurance sector was reopened to the private
sector.
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 The history of general insurance dates back to the Industrial Revolution in
the west and the consequent growth of sea-faring trade and commerce in the
17th century. It came to India as a legacy of British occupation. General
Insurance in India has its roots in the establishment of Triton Insurance
Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian
Mercantile Insurance Ltd, was set up. This was the first company to transact all
classes of general insurance business.
1957 saw the formation of the General Insurance Council, a wing of the
Insurance Associaton of India. The General Insurance Council framed a code of
conduct for ensuring fair conduct and sound business practices.

In 1968, the Insurance Act was amended to regulate investments and set
minimum solvency margins. The Tariff Advisory Committee was also set up
then.

In 1972 with the passing of the General Insurance Business (Nationalisation)

Act, general insurance business was nationalized with effect from 1st January,
1973. 107 insurers were amalgamated and grouped into four companies, namely
National Insurance Company Ltd., the New India Assurance Company Ltd., the
Oriental Insurance Company Ltd and the United India Insurance Company Ltd.
The General Insurance Corporation of India was incorporated as a company in
1971 and it commence business on January 1sst 1973.

This millennium has seen insurance come a full circle in a journey extending
to nearly 200 years. The process of re-opening of the sector had begun in the
early 1990s and the last decade and more has seen it been opened up
substantially. In 1993, the Government set up a committee under the
chairmanship of RN Malhotra, former Governor of RBI, to propose
recommendations for reforms in the insurance sector.The objective was to
complement the reforms initiated in the financial sector. The committee
submitted its report in 1994 wherein , among other things, it recommended that
the private sector be permitted to enter the insurance industry. They stated that
foreign companies be allowed to enter by floating Indian companies, preferably
a joint venture with Indian partners.

Following the recommendations of the Malhotra Committee report, in 1999,

the Insurance Regulatory and Development Authority (IRDA) was constituted
as an autonomous body to regulate and develop the insurance industry. The
IRDA was incorporated as a statutory body in April, 2000. The key objectives
of the IRDA include promotion of competition so as to enhance customer
satisfaction through increased consumer choice and lower premiums, while
ensuring the financial security of the insurance market.

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 The IRDA opened up the market in August 2000 with the invitation for
application for registrations. Foreign companies were allowed ownership of up
to 26%. The Authority has the power to frame regulations under Section 114A
of the Insurance Act, 1938 and has from 2000 onwards framed various
regulations ranging from registration of companies for carrying on insurance
business to protection of policyholders’ interests.

In December, 2000, the subsidiaries of the General Insurance Corporation

of India were restructured as independent companies and at the same time GIC
was converted into a national re-insurer. Parliament passed a bill de-linking the
four subsidiaries from GIC in July, 2002.

Today there are 31 general insurance companies including the ECGC and
Agriculture Insurance Corporation of India and 24 life insurance companies
operating in the country.

The insurance sector is a colossal one and is growing at a speedy rate of

15-20%. Together with banking services, insurance services add about 7% to
the country’s GDP. A well-developed and evolved insurance sector is a boon
for economic development as it provides long- term funds for infrastructure
development at the same time strengthening the risk taking ability of the
country.

DEFINITION OF INSURANCE :-
Insurance is defined as the equitable transfer of the risk of a loss, from one
entity to another, in exchange for a premium, and can be thought of as a
guaranteed small loss to prevent a large, possibly devastating loss.
Insurance is nothing but a system of spreading the risk of one onto the shoulders
of many. While it becomes somewhat impossible for a man to bear by himself
100% loss to his own property or interest arising out of an unforeseen
contingency, insurance is a method or process which distributes the burden of
the loss on a number of persons within the group formed for this particular
purpose.Basic Human trait is to be averse to the idea of risk taking. Insurance,
whether life or non-life, provides people with a reasonable degree of security
and assurance that they will be protected in the event of a calamity or failure of

10
any sort.Insurance may be described as a social device to reduce or eliminate
risk of loss to life and property. Under the plan of insurance, a large number of
people associate themselves by sharing risks attached to individuals. The risks,
which can be insured against, include fire, the perils of sea, death and accidents
and burglary. Any risk contingent upon these, may be insured against at a
premium commensurate with the risk involved. Thus collective bearing of risk
is insurance.
INSURANCE INDEMNIFIES ASSETS & INCOME
Every Asset has a value and generates Income to its Owner. There is a normally
expected Life-time for the Asset during which time it is expected to perform. If
the Asset gets lost earlier, being destroyed or made Non-functional through an
Accident or other unfortunate event the Owner is Prejudiced. Insurance helps to
reduce CONSEQUENCES of such Adverse Circumstances which are called
Risks.
INSURANCE IS THE SCIENCE OF SPREADING OF THE RISK
It is the system of spreading the losses of an Individual over a group of
Individuals
INSURANCE IS A METHOD OF SHARING OF FINANCIAL LOSSES
Of a few from a common fund formed out of Contribution of the many who are
equally exposed to the same loss.What is uncertainty for an Individual becomes
a certainty for a Group. This is the basis of All Insurance Operations. Thus
insurance convert uncertainties to certainty

Commercially insurable risks typically share seven common Characteristics:-

• Limited risk of catastrophically large losses.
• Calculable Loss
• Affordable Premium
• Large Loss
• Accidental Loss
• Definite Loss
• A large number of homogeneous exposure units

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There are two types of insurance covers:
1. Life insurance
2. General insurance
Life insurance
This sector deals with the risks and the accidents affecting the life
of the customer. Alongside, this insurance policy also offers tax planning and
investmentreturns. There are various types of life Insurance Policy India: -

a.Endowment policy
b.Whole Life Policy
c.Term Life Policy
d.Money-back Policy
e.Joint Life Policy
f.Group Insurance Policy

General Insurance
This sector covers almost everything related to property,vehicle, cash,
household goods, health and also one's liability towards others. Themajor
segments covered under general Insurance Policy India are:

a.Home Insurance
b.Health Insurance
c.Motor Insurance
d.Travel Insurance

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PARTICULARS Unit 2013-14 2014-15 2015-16 2016-17 2017-18
PROFILE
Segment Wise
Gross Direct
Premium
(Within India )
Fire ( ₹ Crore) 7362,63 8056,54 8731,46 9538,01 10780,70
Marine ( ₹ Crore) 3161,80 3020,06 2984,38 2917,47 2894,66
Motor ( ₹ Crore) 33822,75 37379,32 42300,86 50250,53 59246,11
Health ( ₹ Crore) 19634,30 22636,57 27457,30 34526,61 41980,56
Others ( ₹ Crore) 13572,34 13593,24 14905,37 30895,72 35760,09
Total ( ₹ Crore) 77553,81 84685,73 96379,37 128128,34 150662,13

Incurred Claims
Ratio
Fire In Percent 76,54 73,78 74,44 84,38 82,35
Marine In Percent 63,37 67,44 72,05 74,98 65,30
Motor In Percent 79,50 77,14 81,18 88,17 83,45
Health In Percent 97,05 96,93 98,46 101,05 92,21
Others In Percent 72,96 73,91 75,91 81,91 78,90
Total- All
In Percent 81,98 81,70 85,06 90,91 85,26
Segments

This shows the regular growth in the health sector year by year. People have
now started paying attention to this sector and now customer base is increasing
year by year. Soon health insurance sector will be the major premium collector
in general insurance

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Health Care Insurance

The term health insurance is generally used to describe a form of insurance that
pays For medical expenses.

A health insurance policy is a contract between an insurance company and an

Individual, By estimating the overall risk of healthcare expenses, a routine
finance structure (such as a monthly premium or annual tax) is developed,
ensuring that money is available to pay for the healthcare benefits specified in the
insurance agreement. The type and amount of health care costs that will be
covered by the health plan are specified in advance, in the member contract or
Evidence of Coverage booklet.

The concept of health insurance was proposed in 1694 by Hugh the Elder
Chamberlain from the Peter Chamberlain family. Accident insurance was first
offered in the United States by the Franklin Health Assurance Company of
Massachusetts. This firm, founded in 1850, offered insurance against injuries
arising from railroad and steamboat accidents. Before the development of medical
expense insurance, patients were expected to pay all other health care costs out
of their own pockets, under what is known as the fee-for-service business model.
During the middle to late 20th century, traditional disability insurance evolved
into modern health insurance programs.

Today, most comprehensive private health insurance programs cover the cost of
routine, preventive, and emergency health care procedures, and also most
prescription drugs, but this is not always the case.
The basic concept of health insurance is population solidarity. There are inherent
risks in a population but the population absorbs the cost of risks to an individual
by spreading the impact of incurred costs amongst the insured population.
However, if the population is split into insured and uninsured groups, or into
selectively groups (as with private insurance with pre-insurance selection either
by the insurance company or the insured) the concept of population solidarity
breaks down. The insurance balances costs across a large, random sample of
individuals. For instance, an insurance company has a pool of 1000 randomly
selected subscribers, each paying Rs.100 per month. One person becomes very ill
while the others stay healthy, allowing the insurance company to use the money
paid by the healthy people to pay for the treatment costs of the sick person.
However, when the pool is self-selecting rather than random, as is the case with
individuals seeking to purchase health insurance directly, adverse selection is a
greater concern. Insurance systems must then typically deal with two inherent
challenges: adverse selection and ex-post moral hazard.

14
Because of adverse selection, insurance companies employ medical underwriting,
using a patient's medical history to screen out those whose pre-existing medical
conditions pose too great a risk for the risk pool. Before buying health insurance,
a person typically fills out a comprehensive medical history form that asks
whether the person smokes, how much the person weighs, whether the person has
been treated for any of a long list of diseases and so on. In general, those who
present large financial burdens are denied coverage or charged high premiums to
compensate.
Moral hazard occurs when an insurer and a consumer enter into a contract under
symmetric information, but one party takes action, not taken into account in the
contract, which changes the value of the insurance. A common example of moral
hazard is third-party payment—when the parties involved in making a decision
are not responsible for bearing costs arising from the decision. An example is
where doctors and insured patients agree to extra tests which may or may not be
necessary. Doctors benefit by avoiding possible malpractice suits, and patients
benefit by gaining increased certainty of their medical condition. The cost of these
extra tests is borne by the insurance company, which may have had little say in
the decision. Co-payments, deductibles, and less generous insurance for services
with more elastic demand attempt to combat moral hazard, as they hold the
consumer responsible.
Insurance companies like to compare buying health insurance after being
diagnosed with a serious medical condition like HCV to trying to buy fire
insurance on a burning house. That sounds really logical….except….most fire
insurance policies are never used as most houses don’t burn down. Everyone has
medical problems, however, at one time or another.
To prevent a person from buying health insurance only when they need it, the
insurance.Industry uses a procedure called “medical underwriting.” Loosely
translated into plain English, it means “discriminating against anyone we feel
may cost us money.” And this type of discrimination against people with health
problems is perfectly legal.
The French model of health insurance has been ranked by the World Health
Organization as the best in the world, because it permits a high quality of care
and nearly total patient freedom. . It was a compromise between Gaullist and
Communist representatives in the French parliament. The Conservative Gaullists
were opposed to a state-run healthcare system, while the Communists were
supportive of a complete nationalization of health care along a British Beverage
model. The resulting programme was profession-based. All people working were
required to pay a portion of their income to a health insurance fund, which
mutualised the risk of illness, and which reimbursed medical expenses at varying
rates. Children and spouses of insured people were eligible for benefits, as well.
Each fund was free to manage its own budget and reimburse medical expenses at
the rate it saw fit.

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 Buying health insurance for yourself and your family serves the purpose of

• Protecting your health

• Giving you access to quality health care and

• Enjoying tax benefits

The Income Tax Act 1961 regarded health insurance as an important investment
and hence you can enjoy tax deductions under Section 80D of the Act.
According to this section, deductions are offered towards policies on self,
spouse and children and also towards non-senior citizen parents and towards
senior citizen parents provided, the premium is paid in any mode other than
cash.

The total deductions you can claim under Section 80D is as follows:

Self, Spouse
Parents (whether Total
&
Description dependent or Deduction u/s
Dependent
not) 80D
Children
No one has attained the age of 60
Rs. 25,000 Rs. 25,000 Rs. 50,000
yrs
Assessee and his family is less than
60 years & Parents are above 60 Rs. 25,000 Rs. 50,000 Rs. 75,000
years of age
Assessee and his parents have
attained the age of 60 years and Rs. 50,000 Rs. 50,000 Rs. 1,00,000
above
Note
In a case where premium for health insurance for multiple years has been paid
in one year, the deduction shall be allowed (from the assessment year 2019-20)
on proportionate basis for the number for years for which the benefit of health
insurance is provided.
Invest in a Star Health Insurance policy and gain tax benefits.

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Example 1
If you would insure your parents with the Star Senior Citizen Red Carpet policy
for Rs.2 lakhs, you will be paying a premium of Rs.19,956/- (Rs.9,978/- each).
Under the section 80D, you can avail tax benefits of upto Rs.50,000.
Example 2
If you would insure yourself with the Star Health Gain policy for Rs.5 lakhs,
you will be paying a premium of Rs.17,700/-. Under section 80D, you can avail
tax benefits of upto Rs. 25,000.

Health Care Insurance Scenario In India

The health care system in India is characterized by multiple systems of medicine,

mixed
ownership patterns and different kinds of delivery structures. During the last 50
years India has developed a large government health infrastructure with more
than 150 medical colleges, 450 district hospitals, 3000 Community Health
Centers, 20,000 Primary Health Care centers and 130,000 Sub-Health Centers.
On top of this there are large number of private and NGO health facilities and
practitioners scatters though out the country. Over the past 50 years India has
made considerable progress in improving its health status.

Public sector ownership is divided between central and state governments,

municipal
and Panchayat local governments. Public health facilities include teaching
hospitals,
Secondary level hospitals, first-level referral hospitals (CHCs or rural hospitals),
dispensaries; primary health centres (PHCs), sub-centres, and health posts. Also
included are public facilities for selected occupational groups like organized work
force (ESI), defense, government employees (CGHS), railways, post and
telegraph and mines among others.

The private sector (for profit and not for profit) is the dominant sector with 50 per
cent of
people seeking indoor care and around 60 to 70 per cent of those seeking
ambulatory care (or outpatient care) from private health facilities.

17
 India spends about 6% of GDP on health expenditure. Private health care
expenditure
is 75% or 4.25% of GDP and most of the rest (1.75%) is government funding. At
present, the insurance coverage is negligible. Most of the public funding is for
preventive, promotive and primary care programes while private expenditure is
largely for curative care. Over the period the private health care expenditure has
grown at the rate of 12.84% per annum and for each one percent increase in per
capital income the private health care expenditure has increased by 1.47%.
Number of private doctors and private clinical facilities are also expanding
exponentially.

Indian health financing scene raises number of challenges, which are:

1) Increasing health care costs,

2) High financial burden on poor eroding their incomes,

3) Increasing burden of new diseases and health risks and

4) Neglect of preventive and primary care and public health

functions due to under funding of the government health
care.

Around 24% of all people hospitalized in India in a single year fall below the
poverty linedue to hospitalization (World Bank, 2002). An analysis of financing
of hospitalization shows that large proportion of people; especially those in the
bottom fourincome quintiles borrow money or sell assets to pay for
hospitalization (World Bank, 2002).

Market size and share of health insurance sector in India.

Company name Year 2017 Year 2018 Hospital tie ups

Star health 2960.05 4161.11 9300+
Apollo 1301.93 1717.51 5000+
Relegare 726.07 1091.61 5420+
Max Bupa 593.93 754.47 4000+
Cigna TTK 221.8 346.40 3600+
Aditya Birla 54.04 243.17 5700+
total 5857.83 8314.28

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Star is the market leader for the stand-alone companies in the health insurance
sector. No company is even near it or even half of its revenue. It has the highest
hospital networks which are spread all over the country.

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STAR HEALTH AND ALLIED INSURANCE COMPANY

INTRODUCTION: -
Health insurance which is considered to be a taboo among the insurance
companies, due to the perennial losses it produced, Star health insurance have
been setup exclusively for health insurance. They step in to the insurance field
as standalone health insurance company in the year 2006.It started its operations
on18th May 2006 foraying into the area of health, accident and travel insurance.
The company established full-scale in-house direct claims setting facility,
dispensing with the services of Third-party administrators.
Safecrop Holdings Pvt. Ltd., a consortium with WestBridge AIF, Rakesh
Jhunjhunwala and Madison Capital, has signed definitive agreements with the
shareholders of Star Health & Allied Insurance Company Ltd. (Star Health or
the Company) to purchase their shares in Star Health, India’s leading Private
Health Insurer. Existing shareholders of Star Health include Star Health
Investments Pvt. Ltd. and funds managed/ or advised by ICICI Venture, Tata
Capital and Apis Partners. The transaction is subject to regulatory and certain
other approvals. Kotak Investment Banking, Evercore and Mizuho Securities
(Singapore) acted as the financial advisors to Star Health and its shareholders.
Nishith Desai Associates and Trilegal acted for the purchasers and Platinum
Partners acted for the Company. Speaking on the investment, Mr. Jagannathan,
Chairman cum Managing Director, said, “We have started from a humble
beginning and have come to this level with an excellent team work. We feel
new investors, with their abundance experience and golden touch, will enable
the Company to scale further heights.” “We are really excited about Star Health,
a dominant market leader in the retail health insurance industry. We believe the
retail health insurance industry will continue to grow at a healthy pace in the
coming decade, driven by increasing penetration. This aligns well with
WestBridge’s investing philosophy and long-time horizon. We are highly
confident of Star’s business model and believe that Star will continue to lead the
retail health insurance space” said Sumir Chadha, Co-Founder & Managing
Director, WestBridge Capital. “The management of Star Health has built its
leadership position in private health insurance through innovation, perseverance
and excellence. I believe health insurance is a key tool for every citizen towards
financial stability. I am proud to be associated with Star Health and believe it is
best equipped to serve the country’s healthinsurance needs” said Rakesh
Jhunjhunwala.

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Star Health is the largest health insurance company with a market share of
10.6% in health insurance across all the general insurance companies in India as
on 31st March, 2018. Star Health, based in Chennai, was founded in 2006 and
provides health insurance, overseas mediclaim and personal accident policies.
Company is based in Chennai and employs ~11,000 people providing insurance
coverage to ~1 crore lives as on 31st March, 2018. Star Health has a pan-India
distribution platform and an integrated ecosystem to tap the retail health
insurance opportunity with 434 branches/ offices, ~2.4 lakh agents and tie- up
with ~8,500 network hospitals. Led by its Chairman cum Managing Director,
Mr. V. Jagannathan, the Company has created an institutional framework of
systems and processes and maintained a professional management approach. It
has a strong and an experienced management team, which will continue to drive
the business and operations of the Company. The Company has a written a
direct premium of INR 4,161 crores (41% YoY growth) with profit after tax of
INR 171 crores and a networth of INR 960 crores as on/ for the year ended 31st
March, 2018

VISION AND MISSION

Star health insurance is started in India with a vision of becoming the
largest and most preferred health insurance company in India and to provide
financial security for health care management.
The mission of Star health insurance company is:
· To provide prompt, courteous and quality service to customers.
· To offer wide range of innovative products and services.
· To leverage state of art technology for customer satisfaction.
· To adopt best management practices in business operations

21
SPECIAL FEATURES OF THE COMPANY
-> Star health insurance is India’s trusted specialist in health insurance and
provides quality service at best rates.
-> It is the India’s first standalone health insurance company and one of the
largest among the private sector companies.
-> No third party administrator is involved in claim settlement. Star Health
Company directly involved and settles the claim.
-> Customers can avail cashless hospitalization and reimbursement facility in
the network hospitals which is more than 6000 all over India.
-> Wide range of health insurance products to choose from family floater
schemes to senior citizen health coverage. The company has policy to
everyone.
-> The company provides free medical consultation of experts over phone.
-> Information on health through free health magazine.
-> 24*7 toll free helpline is available.
-> The company maintains personal health records in electronic format.

Products of star health: -

FAMILY HEALTH OPTIMA
Eligibility: -
Proposer -> Any person aged between 18 years and 65 years, residing in India,
can take this insurance.
A Child above 16 days of age can be covered as part of the family.
Family -> Proposer, spouse, dependent children from 16 days up to 25 years
(Children who are dependent on their parents).
Tax benefits up to Rs. 25000 in case of age of policy taker is below 60 and if it
covers person of above 60 additional benefit of Rs. 50000.
Sum insured: - 3 lakh,4 lakh,5 lakh,10 lakh,15 lakh,25 lakh
Premium is to be calculated at the age of eldest person.

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BENEFITS: -
1.Ambulance
*Ambulance Charges:
* Air Ambulance Cover:
* Emergency domestic medical evaluation:

2.Room
*Room, Boarding, Nursing Expenses as given below:
* ICU expenses are fully received
3. Pre & Post Hospitalization: -
* Pre-hospitalization medical expenses incurred up to 60 days are payable.
* Post-hospitalization medical expenses incurred up to 90 days are payable.
4. No claim bonus: -
In respect of a claim free year of Insurance, for the Basic Sum Insured options
Rs.3,00,000/- and above, the insured would be entitled to benefit of bonus of
25% of the expiring Basic Sum Insured in the second year.
Additional 10% of the expiring Basic sum Insured for the Next years.
The maximum allowable bonus shall not exceed 100%.
5. Free health check up
6. Automatic Restoration: -
*There shall be automatic restoration of the Basic Sum Insured immediately
upon exhaustion of the limit of coverage which has been defined during the
policy period.
* Such Automatic Restoration is available 3 times at 100% each time, during
the policy period.
* Each restoration will operate only after the exhaustion of the earlier one.
* It is made clear that such restored Sum Insured can be utilized only for illness
/ disease, unrelated to the illness / diseases for which claim was / were made.

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7. Recharge: - (given only by star)
the limit of coverage under the policy is exhausted / exceeded during the policy
period, additional indemnity up to the limits stated
3 lakhs to 4 lakh -> 25% of sum insured
5 lakh and above -> 1.5 lakh benefit
8. AYUSH Treatment
9. Additional Sum Insured for Road Traffic Accident (RTA)
10. Newborn Baby cover
11. Organ donor expenses are given up to 10% of sum insured or 1 lakh
whichever is less.
12. Shared Accommodation
13. Assisted Reproduction Treatment
14. All day care: -Star provides cover for the patients who visit hospital for less
time like 3-4 hrs. discharge sheets are observed.

COMPREHENSIVE INDIVIDUAL POLICY

Eligibility: -
* Entry age between 3 months and 65 years
* Lifelong renewals guaranteed.
* No exit age
* Dependent children (those who are economically dependent on their parents)
can be covered up to 25 years of age.
only if parents have policy in star.
This policy is for both individual and family
The policies are for 5 lacs 7.5 lacs 10 lacs 15 lacs 20 lacs 25 lacs

24
Policy benefits
1. Hospitalisation cover policies expenses for a minimum of 24 hours
including room rent, nursing and boarding charges , surgeon Anesthetist,
Medical practioner, consultants, specialist fees, cost of medicines and drugs.
2. Ambulance charges and pre- hospitalization expenses up to 30 days prior to
admission.
3. Post hospitalization expenses upto 60 days after discharge.
Delivery and new born cover
4. Expenses for normal delivery or by caesarean including pre and post natal
checkup to the limit specified.
5. Coverage for new born including vaccination expenses, available after 36
months of continuous coverage.
6. Out-patient dental ophthalmic Elective dental / ophthalmic treatments as an
out- patient once in a block of every three years.

25
 OBJECTIVE OF THE STUDY

Primary objective:

To analyze the financial summary of Star health and allied insurance ltd. and
provide inputs.

Second objective:

To understand the key ratios and the calculations of insurance companies

Third objective:

To analyze the gap and recommend the future cource of action.

26
 RESEARCH METHODOLOGY

The methodology adopted for the present study regarding source of data, period
of study, data analysis, sample size and research tools and techniqes.

• Source of the data is mainly based on the secondary data.

• They were collected from company annual report, magazines, journals and
newspapers.
• Research tools and techniques are used for ratio analysis in the year period
of study 2014-2015 to 2017-2018.
Annual reports of apollo Munich Health Insurance Company Ltd and Aditya
Birla Health Insurance Co Ltd are used for comparison with star health and
allied insurance company.

27
 LITERATURE REVIEW

A number of studies both conceptual and empirical have been conducted

regarding various aspect of health insurance in India and abroad. The review of
these studies has been done to explore the concept, framework and state of health
insurance. Hence for the purpose of present study, the review of literature has
been divided broadly in four sections. It deals with the review of studies in
relation to performance evaluation, covers the review of studies in relation to
Community Health insurance (CHI), It includes the review of studies in relation
to Third Party Administrators (TPAs) and covers the review of studies in relation
to customers’ perception

Chang (2006) conducted a study on solvency and continuous growth of insurance

companies and provided that both depend on their performance. For this a data
set consisted of 20 insurance companies in Taiwan were used. Beside this, an
effort was made to calculate separately 19 items of financial ratio into five
operation indicators, which can be used as performance evaluation variables of
insurance companies. These five indicators are: Capital Structure; Profitability;
Solvency; Management Efficiency; and Capital Operational Capability. The
results of the study indicated that overall performance of insurance companies
were significant in the short run during the period 2000-2002 and concluded that
both return on assets and sign of profitability influence a heavier financial ratio
as well as operating index on performance

Cummins, Turchetti and Weiss (1996) provided benchmark statistics to facilitate

the comparisons of efficiency and productivity under the new European
regulatory regime, when data on more recent periods become available. In
addition, the production frontier results were used to test hypotheses about two
major issues in industrial organization: the coexistence of alternative product
distribution systems and organizational form in an industry. The results indicated
that technical efficiency in the Italian insurance industry ranged from 70 to 78
percent during the sample period. There was almost no efficiency change over
the sample period, i.e., on average Italian insurers operated at about the same
distance from the production frontier throughout the sample period. However,
productivity declined significantly over the sample period, with a cumulative
decline of about 25 percent. The decline was attributable almost exclusively to
technological regress, implying that insurers needed more inputs to produce their
outputs at the end of the sample period than at the beginning. Although
improvements in both technical efficiency and technical change appear to be
needed, the main problem at present appears to be the adverse shift in the
production frontier.
28
Fukuyama (1997) investigated the productive efficiency and productive changes
of Japanese life insurance companies with primarily focus upon the ownership
structure and economic conditions. The results of the study revealed that mutual
and stock companies possess identical technologies, but the productive efficiency
and productive performance changes from time to time across the stock and
mutual under different economic conditions.

Rama and Baru (1994) examined the structure of health care provision existed in
public; private; and voluntary sectors and utilization patterns for both inpatient
and outpatients care across states. For this data obtain from the World Bank’s
Country Report on India, “India: health sector financing-coping with adjustment;
opportunities for reforms” and World Development Report 1993. The study
showed the presence of much variation in the availability of non-government
health services across states. In most of the states, public sector was the main
source of provider of curative services and private and voluntary sector marked
by uneven spread and regional variations. However, there were some states in
which private and voluntary sector was achieving the significant growth and
supplementing the public services. However, the suggested that the private and
voluntary sector should move only into those areas, where they can show better
results and get profit. Moreover, majority of socio economic groups depend on
public provisions. Therefore the cut back of public services will results in
disparities of access between rural-urban, advanced-backward areas and across
classes.

Ahuja (2004) examined the more suited arrangement for providing health
insurance to poor people in India and also explored how the reforms in insurance
sector alter health insurance prospects facing the poor in developing countries
and what changes have happened or likely to happen as a result of insurance
sector reforms. In developing countries, community based arrangement is more
suited for providing health insurance to low income people. Insurance sector
reforms lead to development of private health insurance, at the same time reforms
can affect the low income people through its effect on the provision and financing
of health care services. The study concluded in India, CBHI will play an
important role, but there is need to be encouraged by government’s interventions
in order to guide and direct health insurance market, so as to minimize the cost
escalation of health care provision.

Devadasan et al. (2004) conducted study on Indian community health insurance

schemes; context in which they are operational; their design and management;
administrative challenges faced by them; and their impact. Earliest scheme started
in Kolkata in 1952. Currently, in India more than 20 CBI schemes are operating,
but the study based on 12 such schemes. The study reflected that there are three

29
basic designs of CBI schemes depending upon the insurer, in most of schemes
enrollment is individual and membership is voluntary. The main barrier in
development of CBI schemes is to find an appropriate provider and financial
sustainability. So the government should come forward to subsidies this equitable
health financing mechanism. Therefore, CBHI in India offer valuable lesson for
the policy makers and practitioners in the field of health care

Ahuja and Narang (2005) provided an overview of existing forms and emerging
trends in health insurance for low income segment in India with focus on both the
demand and supply side factors promoting this development, and provided that
three conditions essential for extending health insurance to low income segment.
Further based on the efforts of the central government by way of its Universal
Health Insurance (UHI) schemes as well as on the three insurance pilots of United
Nation Development Programme (UNDP), some designs of health insurance for
low income groups were drawn. The study concluded that these schemes have
considerable scope of improvement for a country like India by providing
appropriate incentives and bringing these under the regulatory ambit. Currently
public health services are weak and inefficient, private and voluntary health care
is unregulated and scattered. The study suggested that in order to develop health
insurance for poor in a big way, health care provisions need to be engthened and
streamlined as well as coordination among multiple agencies is needed.

Kharva (2008) observed the purposefulness of cashless hospitalization and initial

hardship associated with its implementation. For this, analysis of VIMO Self
Employed Women’s Association, the insurance unit of SEWA was done. Initially
the scheme provides reimbursement after hospitalization but later on provide
reimbursement while they were still in the hospital. The scheme incorporates
health insurance as a crucial programme. Based on the positive experience of
scheme in Gujarat in Jan 2006, the scheme extended in Ahemdabad city and
renamed as “cashless” (CL) hospitalization. In Ahmedabad, this method of
reimbursement was optional for members for the first year. However in 2007, it
was made mandatory and members were required to go only to one of selected
hospital to use cashless reimbursement system. It showed that cashless system
has reduced the claim processing period as it takes only the number of days the
members is hospitalized while in the normal system, it takes more than that. Thus
CL system has been successful in making is members access low cost quality care
a reasonable rates

Gupta, Roy and Trivedi (2004) examined the role of TPAs and the issues that
required to be taken into consideration while evaluating their usefulness and
functioning in India. The study based on a series of meetings, discussions and
interviews with various TPAs, insurance companies and providers. No doubt, the
TPAs face different barriers in terms of capital, capacity and connections but still

30
they are providing cashless transaction at the time of service delivery to the
customers. The IRDA and Health Ministry should come together so as to ensure
TPAs which in turn will ensure active role of the TPAs in Community and
Universal Health Insurance Schemes. Moreover, the study concluded that TPAs
can play an important role in making insured health care availability smoother,
but neither can it be seen as a panacea for all the problems, nor it can be blamed
for these problems of health sector. The TPAs system should be regulated and
checked in order to take care off consumers’ interest.

31
SHARE CAPITAL OF THE COMPANY
Star health insurance has a capital base of Rs.1402 crores. As India’s first
stand-alone health insurance company, they offer products for personal
accident, health insurance and overseas travel insurance.which is more than
sufficient to form a general insurance company.

Share capital of Star health and allied insurance company

Year Share Capital in Rs. (000’s)
2006-2007 1050000
2007-2008 1086000
2008-2009 1093000
2009-2010 1643300
2010-2011 2029900
2011-2012 2787724
2012-2013 3269462
2013-2014 3338605
2014-2015 3621441
2015-2016 3869921
2016-2017 4555761
2017-2018 4555761

32
STAND-ALONE HEALTH INSURERS : BALANCE SHEET ( 31st
March 2018)

Aditya CIGNA RELIGAR

APOLLO MAX STAR TOTAL
birla TTK E
PARTICULARS
2018 2018 2018 2018 2018 2018 2018

SOURCES OF
FUNDS

SHARE CAPITAL 132,88 357,89 364,73 926,00 594,83 455,58 2831,90

RESERVES AND
247,62 260,43 322,58 574,56 1405,19
SURPLUS - -
SHARE
APPLICATION 0,00 0,00 0,00
MONEY - - - -
CREDIT/[DEBIT]
FAIR VALUE
0,01 0,16 0,02 0,11 (0,65) (0,36)
CHANGE
ACCOUNT -
BORROWINGS -
80,00 43,00 - -
250,00 373,00

TOTAL 380,51 698,48 730,32 926,11 594,18 1280,14 4609,73

APPLICATION
OF FUNDS

INVESTMENTS 210,07 1168,64 335,55 665,79 927,92 2164,72 5472,69

LOANS

FIXED ASSETS 49,98 32,71 6,81 36,88 45,91 96,96 269,26

DEFERRED TAX
ASSET/(LIABILIT 14,98 14,98
Y) - - - - -
CURRENT
ASSETS
Cash and Bank
30,16 230,73 40,73 28,49 24,65 502,00 856,76
Balances
Advances and
44,30 123,72 44,73 89,67 100,87 583,50 986,78
Other Assets
Sub-Total (A) 74,46 354,45 85,46 118,17 125,51 1085,49 1843,54
CURRENT
128,48 384,32 120,20 267,36 420,81 537,49 1858,67
LIABILITIES
PROVISIONS 116,63 682,60 165,92 297,52 402,48 1600,09 3265,24

Sub-Total (B) 245,11 1066,92 286,12 564,89 823,29 2137,58 5123,91

NET CURRENT
(200,66 (446,72 (3280,37
ASSETS (170,65) (712,47) (697,78) (1052,09)
) ) )
(C) = (A - B)
DEBIT BALANCE
IN PROFIT AND 291,10 194,62 588,62 670,16 318,13 70,54 2133,17
LOSS ACCOUNT
TOTAL 380,51 698,48 730,32 926,11 594,18 1280,14 4609,73

33
Financial Ratios – Insurance Sector
Financial ratios are used to make a holistic assessment of financial performance
of the entity, and also help evaluating the entity’s performance vis-à-vis its
peers within the industry. Financial ratios are not an ‘end’ by themselves but a
‘means’ to understanding the fundamentals of an entity. There is a standard set
of ratios for evaluating Insurance companies. These can be divided into five
categories:
-> Earnings
-> Liquidity Ratios
-> Solvency
These are given in detail below:
A. Earnings ratios
Profitable operations are necessary for insurance companies to operate as a
going concern. Our measurement of earnings focuses on an insurers’ ability to
efficiently translate its strategies and competitive strengths into growth
opportunities and sustainable profit margins. we analyses the profitability of the
underwriting and investment functions separately: -

1. Gross Premium Growth Rate: -

Indicates growth in business undertaken by the insurance entity.

Gross Premium Written (Y1) - Gross Premium Written (Y0) x 100/ Gross
Premium Written (YO)

2. Gross Premium to net worth ratio: -

it indicates the ratio of premium earned by the company in a particular to its net
worth.
Gross premium for the current year/ net worth or (paid up capital + reserves)

34
3. Growth rate of shareholders’fund: -
increase in percentage of the shareholders fund in current year from the
previous year.
Shareholders fund (Y1)/ Shareholders fund (Y0)

4. Net Retention Ratio: -

Indicates the level of risks retained by the insurer. Reinsurance plays an
essential role in the risk spreading process.
Net premium Written/ Gross Premium written

5. net incurred claim to net earned premium: -

The ratio measures the company’s loss experience as a proportion of premium
income earned during the year. The loss ratio is a reflection on the nature of risk
underwritten and the adequacy or inadequacy of pricing of risks
Net claims Incurred x 100/ Net Premium Earned

6. Expense of Management to net written Premium Ratio: -

Expense ratio reflects the efficiency of insurance operations. Expense ratio for
an insurer would be analyzed by class of business, along with the trend of the
same
Management Expenses +/ (-) Net commission paid/ (earned) x 100/ Net
Premium Earned

7. Combined Ratio: -
Combined ratio is a reflection of the underwriting expense as well as operating
expenses structure of the insurer.
net incurred claim to net earned premium+ Expense of Management to net
written Premium Ratio

35
8. Net Commission Ratio: -
Ratio of commission on the net premium collected
Commission / net premium
9. Expense of Management to Gross Direct Premium Ratio: -
It reflects the efficiency of insurance operations
Management Expenses +/ (-) Net commission paid/ (earned) x 100/ gross
Premium Earned

10. Underwriting balance ratio: -

Underwriting profit / net premium earned

11. Return on net worth ratio: -

return on Networth is a ratio developed from the perspective of the investor and
not the company. By looking at this, the investor sees if entire net profit was
passed on to him, how much return would he be getting. It explains the
efficiency of the shareholder’s capital to generate profit.
Profit after Tax/Average Net worth

36
Description of Ratios: -

Sl Ratio Calculation
No.
A New business premium income growth (segment- (NB prem CY -
wise) NB prem PY) /
NB prem PY
Description of ratio:
(i) Data taken from segmental reporting of Schedul
1 of Revenue account
(ii) The segments being those shown in Schedule1.
Eg. Linked, non-linked, pension, health.
(iii) Numerator: (FY prem + Single prem) both net
of service tax for current year
(iv) Denominator: (FY prem + Single prem) both
net of service tax for previous year.
B Net retention ratio Net prem /
Gross prem
Description of ratio:
(i) Data taken from Revenue account (i.e
policyholder's or technical account) under the title
'Premiums earned -- Net'
(ii) Numerator: Total gross premium net of
reinsurance ceded and accepted
(iii) Denominator: Total gross premium i.e, without
considering reinsurance business.
C Ratio of expenses of management Expenses of
management /
Total gross
direct premium
Description of ratio:
(i) Data taken from Schedule1, Schedule 2 and
Schedule 3 of Revenue account
(ii) Numerator: Gross commission (schedule 2) +
Operating Expenses related to insurance business
(schedule 3)
(ii) Denominator: Total gross premium (Schedule 1)
net of service tax

37
D Commission ratio Gross
commission
paid / Gross
prem
Description of ratio:
(i) Data taken from Schedule1 and Schedule 2 of
Revenue account
(ii) Numerator: Gross commission paid (schedule 2)
(iii) Denominator: Total gross premium (Schedule 1)
net of service tax
E Growth rate of shareholders' funds ((CY
shareholders'
funds-PY
shareholders'
funds) / PY
shareholders'
funds))*100
Description of ratio:
(i) Data taken from Balance sheet. Shareholders'
funds is as described in point (5(iii)) above.
(ii) Numerator: Current year's shareholders' funds
less Previous year's shareholders' funds
(ii) Denominator: Previous year's shareholders' funds
F Ratio of surplus to policyholders' liability Surplus /
policyholders'
liability
Description of ratio:
(i) Data taken from segmental reporting of Revenue
account
(i) Numerator: Surplus / defitcit as shown in revenue
account
(ii) Denominator is as described in point (5 (ii))
above
G Change in net worth CY
shareholders'
funds - PY
shareholders'
funds
Description of ratio:
(i) Data taken from Balance sheet
(ii) Shareholders' funds is as described in point (5 (i)

38
B. Liquidity ratios
Good liquidity helps an insurance company to meet policyholder’s obligations
promptly. An insurer’s liquidity depends upon the degree to which it can satisfy
its financial obligations by holding cash and investments that are sound,
diversified and liquid or through operating cash flows. A high degree of
liquidity enables an insurer to meet the unexpected cash requirements without
untimely sale of investments, which may result in substantial realized losses due
to temporary market conditions and/or tax consequences.
The liquidity ratios considered are:
1. Liquid Assets to liabilities ratio: -
This ratio indicates an insurer’s ability to settle its current liabilities without
prematurely selling long term investments or to borrow money. If this ratio is
less than one, then the insurer’s liquidity becomes sensitive to the cash flow
from premium collections.

Liquid assets/Current liabilities

2. Technical Reserves to net premium ratio: -

Technical reserves are reserves created to take care of ‘expected’ claims that
may arise. While an insurer may not be expected to maintain liquid assets equal
to technical reserves, a higher proportion of liquid assets would help the insurer
in taking care of these ‘expected’ claims.
Technical reserve/net premium

C. Solvency Parameters

Adequacy of solvency margin forms the basic foundation for meeting

policyholder obligations. All insurance companies are required to comply with
solvency margin requirements of the regulator as prescribed from time to time.
Currently, IRDA has prescribed 1.5 times ‘Solvency Margin’ for insurance
companies in India. ‘Solvency Margin’ for insurance companies is akin to
‘Capital Adequacy Ratio’ of Banks.

1. Solvency Margin: -

Adequacy of solvency margin forms the basic foundation for meeting

policyholder obligations. All insurance companies are required to comply with
solvency margin requirements of the regulator as prescribed from time to time.
Total average solvency margin/ Total required solvency margin

39
2. Operationg Profit Ratio: -
This ratio indicates current as well as potential underwriting capacity through an
analysis of a firm’s Operating Leverage
Net premiums Written/ Net worth

STAR HEALTH AND ALLIED RATIOS

PARTICULARS 2015 2016 2017 2018

Gross Premium Growth Rate 35% 37% 47% 41%
Gross Premium to net worth
10.36 5.57 4.34 .75
ratio
Growth rate of
-25% 154% 22% 119%
shareholders'fund
Net Retention Ratio 85% 77% 77% 77%
net incurred claim to net earned . . . .
premium .64 .54 .61 .62
Expense of Management to net . . . .
written Premium Ratio .49 .47 .43 .43
Net Commission Ratio 8% 4% 4% 4%
Expense of Management to . . . .
Gross Direct Premium Ratio .42 .36 .33 .33
. . . .
Combined Ratio
.113 .101 .104 .105
Underwriting balance ratio -15% 12% 1% 2%
( . . .
Return on net worth ratio
(.99) .38 .15 .18

PARTICULARS 2015 2016 2017 2018

Liquid Assets to liabilities . . . .
ratio .39 .37 .27 .32
Technical Reserves to net . . . .
premium ratio .69 .58 .68 .66

40
 PARTICULARS 2015 2016 2017 2018
Available Solvency Margin Ratio to
1.5 2.4 1.61 1.77
Required Solvency Margin Ratio
Operationg Profit Ratio -11% 17% 5% 5%
- 9 5 5
net earning ratio
-11% 9% 5% 5%

ANALYSIS OF STAR HEALTH AND ALLIED

1. There is a continuous growth in Gross Premium Growth Rate which shows
company is growing well.
2. the Gross Premium to net worth ratio of star health and allied from 2015 to
2018 has decreased. As we can see premium is increasing every year, so we can
conclude net worth has increased at much more rate.
3. There was a negative percentage in 2015 but from 2016 to 2018 the
percentage is positive and there is a good growth in shareholders’ funds in 2016
and 2018.
4. the Net Retention Ratio Indicates the level of risks retained by the insurer so
we can see star health and allied has maintained its net retention ratio at 77%
from last 3 years.

5. The return on net worth has decreased from the year 2016 to 2018, but it is
still not bad. star health has a good profit.

6. Net commission ratio is being maintained at 4% which is also good rate.

7. Star has guided that it would maintain stronger capital buffers in the form of
higher equity solvency margins of 1.5x at all times.

8.Star has maintained low Liquid Assets to liabilities ratio. They have
maintained it between 30%-40%.

41
 APOLLO MUNICH HEALTH INSURANCE

apollo Munich Health Insurance Company Ltd. is a private sector health

insurance company in India. Founded on 8 August 2007, it is a joint venture
between the Apollo hospital group and Munich Health, one of the three business
segments of Munich re, a leadingreinsurance company based in Germany
Apollo Munich Health Insurance has 180+ physical offices all over India and
more than 3,200+ employees.
Apollo Hospitals group is a pioneer and leader in corporate healthcare in India
and currently owns and manages 42 large tertiary care hospitals, 60 primary
care clinics, and the largest retail pharmacy chain of over 600.
HDFC Ltd, India’s largest mortgage financier, has agreed to acquire the entire
50.8% stake of Apollo Hospitals Group in a health insurance joint venture with
German reinsurer Munich Re Group as part of its strategy to tap this potential
growth market.

PARTICULARS 2015 2016 2017 2018

Gross Premium Growth Rate 16% 27% 27% 32%
Gross Premium to net worth ratio 316% 372% 320% 406%
Growth rate of shareholders'fund 12% 8% 48% 4%
Net Retention Ratio 79% 78% 82% 84%
net incurred claim to net earned
63% 65% 65% 62%
premium
Expense of Management to net written
50% 46% 46% 43%
Premium Ratio
Net Commission Ratio 7% 6% 9% 8%
Expense of Management to Gross
43% 39% 38% 36%
Direct Premium Ratio
Combined Ratio 113% 106% 97% 99%
Underwriting balance ratio (0.09) (0.08) 00.01 (0.01)
Return on net worth ratio 0.26% 2.7% 32.4% 3.61%

42
PARTICULARS 2015 2016 2017 2018
Liquid Assets to liabilities ratio 0.72 0.56 0.45 0.54
Technical Reserves to net premium
0.76 0.72 0.56 0.58
ratio

PARTICULARS 2015 2016 2017 2018

Available Solvency Margin Ratio
to Required Solvency Margin 1.72 1.51 1.74 1.9
Ratio
Operationg Profit Ratio -3% -2% 17% 5%
net earning ratio .10% .86% 12.38% 1.06%

ANALYSIS OF APOLLO: -
1. The Gross Premium Growth Rate Is a little low but not so bad.
2. There is a huge decrease on Return on net worth ratio in 2018, from 32.4% in
2017 it fell to 3.61% in 2018.
3. There is a continuous increase in its retention ratio which shows a favorable
business.
4. solvency margin ratio is good. which tells the basic foundation for meeting
policyholder obligation is also good.
5. there is a big fall in Operationg Profit Ratio and net earning ratio
6. the company has maintained its net incurred claim to net earned premium
which shows its earning profits.
7. the company has maintained a well Liquid Assets to liabilities ratio of above
50% which is very good.

43
ADITYA BIRLA HEALTH INSURANCE CO.
Aditya Birla Health Insurance Co Ltd (ABHI), a standalone health insurer, is
eyeing break-even in financial year 2022-23, a top company official said.
“Typically it takes six to seven years for a standalone health insurer to break-
even. We are on track to break-even in 2022-23,” Mayank Bathwal, Chief
Executive Officer, ABHI.
ABHI, which started operations in October 2016, is a 51:49 joint venture
between Aditya Birla Group and MMI Holdings, a diversified financial services
company in South Africa.
Bathwal said ABHI wants to position itself as a “health influencer” and “health
partner” and not as a pure play health financing company.
For the nine months period ended December 31, 2018, ABHI recorded a gross
written premium of ₹316 crore, up 83 per cent over ₹172 crore GWP recorded
in same period last year.
The health insurer has bancasurance tie-ups with nine banks, and is open to
bring more on board, Bathwal added. Banca tie-ups are with HDFC Bank, DCB,
RBL Bank , Deutsche Bank, AU Bank, KVB, SVC, and AB Payments Bank.
RATIOS: -

PARTICULARS 2015 2016 2017 2018

Gross Premium Growth Rate NA NA NA 350%
Gross Premium to shareholders'
NA NA 37% 272%
fund ratio
Growth rate of
NA NA 5102% -39%
shareholders'fund
Net Retention Ratio NA NA 95% 94%
Net Commission Ratio NA NA 6% 8%
Expense of Management to
NA NA 161% 93%
Gross Direct Premium Ratio
Combined Ratio NA NA 263% 188%
Underwriting balance ratio NA NA -667% -138%
Return on net worth ratio NA NA -60% -212%

44
 PARTICULARS 2015 2016 2017 2018
Liquid Assets to liabilities N N
1.61 0.22
ratio NA NA
Technical Reserves to net N N
0.95 0.6
premium ratio NA NA

PARTICULARS 2015 2016 2017 2018

Available Solvency Margin
Ratio to Required Solvency NA NA 2.88 1.67
Margin Ratio
Operationg Profit Ratio NA NA -623% -131%
net earning ratio NA NA -169% -83%

ANALYSIS OF ADITYA BIRLA HEALTH INSURANCE: -

1.Aditya Birla health insurance co. (ABHI) has a Gross Premium Growth Rate
of 350% in the year 2018 which shows it has made a great place in in health
insurance sector.
2. ABHI has a normal Available Solvency Margin Ratio to Required Solvency
Margin Ratio like other stand alone companies.

3.ABHI has not reached its break even yet so its some ratios like Return on net
worth, operating profit ratio, etc are negative.

4. ABHI has a decent commission ratio.

5. the Liquid Assets to liabilities ratio is very low in 2018, it can cause shortage
of liquid cash to pay current liabilities.

6. ABHI has a very high net retention ratio which indicates it has a ability to
manage risk and remain profitable.

7. Gross Premium to shareholders fund ratio is very high in 2018 which shows
the company is performing well.

45
 Analysis between Star health and allied, Apollo Munich
Health Insurance and Aditya Birla Health Insurance: -
Return on net worth
100

50

0
2015 2016 2017 2018
-50

-100

-150

-200

-250

STAR APOLLO ABHI

Net Retention Ratio

100
90
80
70
60
50
40
30
20
10
0
2015 2016 2017 2018

STAR APOLLO ADITYA

46
 COMMISSION RATIO
10
9
8
7
6
5
4
3
2
1
0
2015 2016 2017 2018

STAR APOLLO ADITYA

1. star has good Gross Premium Growth Rate than others, ABHI being a new
company started in 2016 had 350% growth but the premium collection is much
behind than Star.
2. Growth rate of shareholder funds is again much better in star for 2018, ABHI
also did well but Apollo was not so well.
3. ABHI net retention ratio is very good for both 2017 and 2018. Apollo also
had a decent retention ratio but star had only 77% which is not that good.
4. Apollo has maintained a very well Liquid Assets to liabilities ratio , whereas
star and ABHI have a little low ratio which can cause shortage of liquid cash to
pay current liabilities.
5. All the companies are having almost same net incurred claim to net earned
premium which shows its earning profits
.
6. ABHI had a very high Expense of Management to Gross Direct Premium
Ratio, may be because it is a new company. Star had maintained its Expense of
Management to Gross Direct Premium Ratio very well.

7. All the three companies are maintaining a very well solvency ratio of more
than 1.5 times.

8. Star has a decent and maintained net earnings ratio where as there is a great
fall in Apollo and ABHI being new is negative.

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9. ABHI has not reached its break even yet whereas star and Apollo have
crossed it.

10. Star had the best return on net worth ratio which is increasing every year ,
whereas others are falling year by year.

11. Star has the lowest Net Commission Ratio which is very good. It will
increase the profits.

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 FINANCIAL SUMMARY OF STAR HEALTH

Particulars FY18 FY17 FY16

Gross written premium (INR million) 41,611 29,600 20,073.4
Total equity (INR million) 12,094 7,892 360
Net profit (INR million) 1,712 1,179 1,365.7
Solvency margin (%) 1.77 1.61 5.99
Combined ratio as reported (%) 0.93 0.93 0.90
Return on net worth (%) 18 15 38

Conclusion: - Star is a leader in the retail health insurance space with a market
share of 51.2% in the standalone health segment and 10.9% in the overall health
insurance space. The gross written premium increased at a CAGR of 39.7%
over FY14-FY18 as against the market CAGR growth of 18%. The company,
over the years, has moved away from the government business and has been
focussing on the retail health segment which forms 86.8% of the gross written
premium and would continue to do so.

The ratings remain supported by the company’s long and established track
record in health insurance, reasonable in-house claim processing efficiency,
large team of doctors and empanelled hospitals to drive a strong underwriting
process. The company has a strong distribution network and a diversified mix of
network of agents, bancassurance, brokers and alternate channels such as
online, direct marketing and tele-calling, which act as strong enablers to growth
of Star’s health business.

Star had adequate capital buffers in FY18, supported by its sizeable net worth and
solvency margin. In the past, Star received capital from its promoters as it is
backed by marquee investors including ICICI Venture, Sequoia Capital and Tata
Capital Growth Fund, and APIS Partners LLP. However, with the change in
promoters, Star’s shareholding would be distributed among three largest
shareholders, who would be infusing capital for future growth needs.

Moreover, its investment book portfolio quality was robust with more than 99.7%
of its debt securities rated ‘AAA’ as of FY18. Also, Star maintains comfortable
liquidity position with 45.5% of debt investments (based on book value) in
government securities. Thus, the company’s liquidity profile of the investment
book remains stable to cater to the needs of policyholders

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 FINDINGS / INTERPRETATION

• Star has a well-developed risk management framework to identify, assess,

and monitor risks across the health segment with a strong focus on retail
health policyholders. The company has a specialised underwriting team,
comprising segment experts, which enables quick and efficient assessment
and management of business specific risks. However, the company needs
to focus on developing complete in-house actuarial team with head
actuary’s appointment on full time role to maintain strong monitoring and
risk control with scaling business process.

• Star is a leader in the retail health insurance space with a market share of
51.2% in the standalone health segment and 10.9% in the overall health
insurance space. The gross written premium increased at a CAGR of
39.7% over FY14-FY18 as against the market CAGR growth of
18%. The company, over the years, has moved away from the
government business and has been focussing on the retail health segment
which forms 86.8% of the gross written premium and would continue to
do so.

• Star settles 82.8% of the claims on cashless basis in the health segment. Its
strong underwriting performance is reflected in its overall combined ratio
remaining below 100% since FY15. Associations with high quality
reinsurers also limit risks on book. Though risk management practices
enable Star to maintain a stable operating performance and solvency
margins, a further gradual improvement in the underwriting profit with
increase in scale over the medium term and favourably impact the solvency
margin.

• Star achieved a breakeven in underwriting policy level during FY16-

FY18 with investment income adding to profits. The company reported a
claim ratio of 61.8% in FY18 (FY17: 60.5%). The expense ratio is likely
to stabilise at 30%-36% in the coming years (FY18: 36.4%, FY17:
38.2%). Star’s FY18 combined ratio (based on net earned premium) stood
at 98.2%, higher than the industry average. The improvement in the
combined ratio and profitability has led to an improvement in the
company’s capital base (FY18 net worth: INR12.1 billion). The capital
base is likely to increase further owing to a capital infusion of about
INR3.5 billion in FY19, following the change in the company’s
promoters resulting from the stake sale.

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• There is still much scope to explore the market as the city population is
above 30,00,000 & only 2 – 5% of population is covered under any kind
of health insurance coverage.

• Various marketing activities are done to promote the company.

• Underwriting procedures are done cautiously for overall risk assessment &
if found out of the box full efforts are taken to cover that person under some
different plan

• Personal freedom is given to the Sales Managers to explore his / her talent
and generate business by his / her innovative ideas.

• Underwriting guidelines are user friendly and fitted into the software called
PREMIA.

• The software sometimes becomes trouble creator due to inefficiency of

either internet connectivity or continuous power supply.

• Medical underwriting is taken care by qualified doctors at Pune due to

under load of work.

• Company possesses reminder software which generates alerts before

expiry of the
policy after one year for renewal.

• There is a fixed prototype of policy underwriting due to software in which

changes can only occur through higher centers.

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 LIMITATIONS

• Limitations are always accompanied with any work. I had

completed his study within short span of 8weeks & it was not
possible to understand practically all aspects of the subjects.
Each and every factor has been carried out carefully as much as
possible limitation to the study are beyond control.
• The recent deal going on in 2019, this year is not taken into
consideration.
• The project report is based on the data from the year 2015 to
2018.
• Aditya Birla health being a new company which entered the
market in 2016 can’t be compared with the old companies
properly.

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 RECOMMENDATIONS

• Star should open its own hospitals being the market leader they van open
new or make some partners

• Still rigorous marketing activities can be undertaken for grabing attention

of the market.

• As the work load goes up unedrwritting procedures should be more

cautiously done for not accepting doubtful cases so the repudiation rate of
the claims can also be reduced thereby reducing disappointment for the
policy holders.

• Medical underwriter can be appointed after the workload exceeds limit of

around 12 15 cases per day reduce the turn around time required for policy
issuing.

• Non-network hospitals should be empanelled as soon as possible after

confirming their genuiness to reduce incidences of moral hazards.

• The company totally depends on web services for their underwriting, there
should be some backup if the system fails to continue the work.

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 BIBLIOGRAPHY
https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?page=Pag
eNo3729&flag=1
https://www.adityabirlacapital.com/healthinsurance/#!/downloads
https://www.apollomunichinsurance.com/Miscellanous/Public-
Disclosures/Annual-reports.aspx
https://www.starhealth.in/media-center

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