Star Health and Allied Insurance Co Ltd (STARHEALTH) Q4 FY23 Earnings Concall Transcript

Star Health and Allied Insurance Co Ltd (NSE:STARHEALTH) Q4 FY23 Earnings Concall dated Apr. 28, 2023.

Corporate Participants:

Prateek Patil — Investor Relations

Anand Roy — Managing Director

Prakash Subbarayan — Managing Director

Nilesh Kambli — Chief Financial Officer

Aneesh Srivastava — Chief Investment Officer

Analysts:

Avinash Singh — Emkay Global — Analyst

Sahej Mittal — HDFC Securities — Analyst

Swarnabha Mukherjee — B&K Securities — Analyst

Prayesh Jain — Motilal Oswal Financial Services Limited — Analyst

Shreya Shivani — CLSA — Analyst

Anirudh Shetty — Solidarity Investment Managers — Analyst

Sanketh Godha — Avendus Spark — Analyst

Ansuman Deb — ICICI Securities — Analyst

Supratim Datta — Ambit Capital — Analyst

Devansh Nigotia — SIMPL — Analyst

Pallavi Deshpande — Sameeksha — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Star Health and Allied Insurance Company Limited’s Q4 and FY ’23 Earnings Conference Call. [Operator Instructions]

I now hand the conference over to Mr. Prateek Patil from Adfactors PR, Investor Relations team. Thank you, and over to you, Mr. Prateek Patil.

Prateek Patil — Investor Relations

Thank you, Darvin. Good evening, everyone.

From the senior management, we have with us Dr. S. Prakash, Managing Director; Mr. Anand Roy, Managing Director; Mr. Nilesh Kambli, Chief Financial Officer; and Mr. Aneesh Srivastava, Chief Investment 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 call may involve risk and uncertainties.

Thank you, and over to you, Mr. Roy.

Anand Roy — Managing Director

Thank you, and good evening to all of you. This is Anand Roy here. Thank you for joining the earnings conference call of Star Health and Allied Insurance Company for Q4 ’23 and also for the full 12-months of financial year ’23. I would like to first highlight that we have achieved an underwriting profit of INR204 crores with a combined ratio of 95.3% and an overall PAT of INR619 crores, which is the highest in our history. We have achieved an EBITDA of INR1,027 crores. For Q4 FY ’23, we have achieved a combined ratio of 91.3%.

We have also made a very strong start to the new financial year in FY ’24 as we speak up to the date, our premium growth on — for the month is more than 27%, and we expect to close this month with around 25% growth. And our loss ratios for the month is also on the — better than the previous year.

This being the first full year post-COVID and post-listing, we are happy to announce that we have been able to achieve our full-year guidance that we have given you. This also gives an assurance of the robust retail health insurance business model that the Company has built over the last 17 years. I will now give you a brief overview of the industry trends and the developments that we have witnessed in the last few months, as well as walk you through the Company’s performance in terms of premium and distribution. My colleague, Dr. Prakash, will cover the financial performance and aspects related to claims including the steps that are underway to manage them. In Q4 ’23, the health insurance industry, including PA, has grown by 25.4% driven largely by 28% growth in group health and 16% growth in retail health.

Now, we will talk about the growth in market share of Star Health. For 12 months FY ’23, our retail health has grown by close to 18% versus the industry’s retail health growth of 15.3%. That is, we have been able to grow at 1.17 times the industry’s growth rate, despite a very large base. In Q4 ’23, our retail health segment grew by 15.2% versus the industry’s retail health growth of 16%. In Q4 of FY ’23, Star Health registered 35% market share in retail health, which is three times the second largest player in the industry. For FY ’23, our retail market share is 34%, against 33% of the last financial year. We continue to aspire to grow higher than the market growth rate and increase our retail health market share every year. As far as our acquisition share is concerned, Star Health has registered close to 40% retail health acquisition market share in FY ’23.

Agency business continues to contribute around 82% of the overall business. Our agency strength has increased to 6,25,860 agents, with a net addition of 16,165 agents in the Q4 of FY ’23. For the full year FY ’23, we have added approximately 76,000 new agents over the previous year. For the full year FY ’23, our partnerships with corporate agents, banks, and other tie-up continues to grow aggressively, and is very strong and this premium contributed from these channels has grown by 43% during the year.

Some of the highlights in Q4 for us were as follows. As compared to — as regards premium and distribution, we continue to focus on the digital initiatives. The digital sourcing from our web sales and tele sales models has grown by 28% in FY ’23 to INR625 crores over the previous year. Our app downloads have reached 2 million downloads. Organic traffic to the website has grown by 95% in Q4 ’23 over the same period last year, and 39% growth sequentially over Q3 of FY ’23.

We have tied up with some leading banks, named Standard Chartered Bank, India Post Bank, and ESAF Small Finance Banks for distribution of Star Health products through their platforms. This will further expand our reach, and also strengthen the sales of our higher sum assured products. With the new EOM guidelines, this provides an immense opportunity for growth and we are sure to capture on this.

The average sum assured of new policies has increased by 13% on a year-on-year basis to INR9 lakh per policy. INR5 lakh sum insured and above now constitute 70% of the health insurance portfolio, which was 64% in the last financial year. The premium from benefit products has grown by 53% in FY ’23 over FY ’22. The share of such products within the overall GWP has increased by 61 bps to 2.3% in FY ’23 from 1.7% in FY ’22.

We have launched two new products in quarter four, which is Star Special Care Gold and Star Group Health Benefit Plus. Special Care Gold is a product tailored specifically for individuals with disabilities and those who are HIV-positive. The Star Group Health Benefit plan offers critical illness cover up to 54 critical illnesses, to personal accident cover, hospital cash cover, and EMI protect due to hospitalization. It also covers health indemnity and health indemnity top-ups.

We are launching a new wellness proposition for our customers as well as non-customers, who will benefit from our telemedicine expertise, and also earn rewards from leading healthy lifestyle. We have already begun work with an InsurTech firm to provide wellness benefits to our customers. We see this as a big opportunity area in the near future.

I will now request Dr. Prakash to talk about claims, and the financial part of it.

Prakash Subbarayan — Managing Director

Thanks, Anand.

I’m going to talk about claims initiatives and the outcome. We are working on a four-pronged approach to effectively manage claims outgrowth. Number one being prudent claims settlement, based on our rich medical expertise and insurance system. Number two, well negotiated volume-based pricing arrangement with our network hospitals, which gives us operating leverage in terms of lower average claim paid per policy — average paid per claim, sorry. Number three being technology-enabled fraud detection and mitigation. And number four, risk-based pricing through micro-segmentation of portfolio.

So, with regards to cashless, 73% of number of paid claims in the financial year ’23 are through cashless versus 63% in the previous financial year. In terms of amount paid through cashless, it is 80% in FY ’23 compared to 71% of FY ’22. Cashless turnaround time, that is claims settled within two hours, came in around 90%. We also have auto adjudication of claims and this helps drastically in improving the turnaround time and thereby customer satisfaction. 21% of hospitals representing 59% of cashless claims have been onboarded successfully under this initiative. The number of such claims settled has risen to 45,000 in Q4 FY ’23, a growth of 13% versus Q3 FY ’23.

We continue to improve on claims-related milestones. Within overall cashless claims, the share of hospitals with proper pricing arrangement, what we call as agreed network hospitals, the cashless claims is 67% versus 64% in FY ’22.

As you will be aware, fraud control is one of the critical factors to address in a retail business. Our anti-fraud digital initiative has become operational this year and has started to produce savings in claims also. There is a 1.3% incremental benefit in terms of lower claims ratio in FY ’23 versus FY ’22 and SaaS platform has assisted in 55% of those cases. This is in line with our expectation of more than 1% reduction in claims ratio mentioned in the previous results call.

Let me talk about our financial performance. We are focused on sustainable, profitable growth, and taking decision to achieve that goal. Our combined ratio for full year FY ’23 has improved to 95.3% versus what was 117.9% in FY ’22. This improvement in combined ratio is achieved through claims ratio and expense ratio improvement. Combined ratio for the quarter Q4 FY ’23 is 91.3% versus 98.4% in Q4 of FY ’22.

Claims ratio for FY ’23 has improved to 65% versus 87.1% in FY ’22. FY 2023 claims ratio has 0.4% impact of COVID-related claims. The claims ratio in Q4 FY ’23 has improved to 62% versus 68.1% in Q4 of FY ’22. So the expense ratio has fallen in FY ’23 to 30.3% versus 30.8% for FY ’22 on account of efficient cost control and management. For Q4 FY ’23, expense ratio has reduced to 29.4% from 30.3% in Q4 FY ’22. You will appreciate that the expense ratio has improved in spite of a significant cutback in the group business and group business as you all know has a lesser expense ratio.

Our investment assets has grown to INR13,392 crores in FY ’23 versus INR11,373 crores in FY ’22. With the rise in interest rates, fresh investments were deployed at a higher yield, leading to the fixed income portfolio yield for Q4 FY ’23, rising to 7.34% versus 6.71% of Q4 FY ’22. We continue to invest in equity portfolios through ETFs. The investment income in Q4 FY ’23 grew by 21% over Q4 FY ’22 to INR218 crores over INR180 crores in Q4 of FY ’22. And for the financial year ’23, investment income grew to INR835 crores versus INR793 crores for FY ’22. So, FY ’23 recorded a profit before tax of INR826 crores and profit after tax of INR619 crores.

Adjusted profit after tax, excluding non-business ESOP cost and COVID is INR768 crores for financial year ’23. For Q4 2023, the profit before tax is INR136 crores and profit after tax is INR102 crores. Solvency as on 31st March 2023 is 2.14 times compared to the regulatory requirement of 1.50 times. This solvency is achieved despite our reinsurance mandatory is only 4%.

To conclude, we continue to believe in the profitable growth opportunities available in the retail health segment, and we are on our desired path of realizing the same. Thank you.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Avinash Singh from Emkay Global. Please go ahead.

Avinash Singh — Emkay Global — Analyst

Yeah, hi. Good evening. A couple of questions. First one is — again, first one is on rather broader growth trend. I mean, if we see the growth for March, you’re still — despite the fact that you took a price hike on new products, yet the growth was sort of a softer. So, I mean, what sort of a growth outlook you have considered that, okay, from May onwards, you will also apply price hike on renewals? So that’s on the growth.

Second is on terms of your profitability side. If, I mean — so what would be your kind of expectation for FY ’24 in terms of combined and if at all any improvement versus FY ’23 considering the market dynamics on the commission and expenses and you growth escalation? What sort of improvement you would expect on the claims, as well as on the opex side? Thank you.

Anand Roy — Managing Director

Okay. Thanks, Avinash for the question. On the growth side, the Company, as you know, has been beating the industry as far as our retail growth is concerned. We believe that we will continue to grow faster than the industry’s growth on the retail side. And as you can — as I’ve already disclosed, our April performance seems to be very, very promising and we expect to maintain the momentum. Though we are not giving any particular guidance, but we will grow faster than the industry’s growth.

As far as the combined is concern, definitely, as you mentioned along with the price hike and all the efficiencies that we are building and through technology and other initiatives that we’re taking, the combined operating ratio will definitely be lesser than what we have achieved last financial year, and we hope to achieve that through all the initiatives that we are driving.

Avinash Singh — Emkay Global — Analyst

Thank you.

Operator

Thank you. The next question is from the line of Sahej Mittal from HDFC Securities. Please go ahead.

Sahej Mittal — HDFC Securities — Analyst

Hi, good evening. Congratulations on good set. So, two questions from my side. So roadmap on any new clients ESOP issuances? That is one. Second is, looking at the product level loss ratios, do you plan to take a price hike in any other product? Yeah, that is second.

Prakash Subbarayan — Managing Director

So, basically, new ESOPs will be issued, but they will be issued at market price, which will not have an impact on the profit and loss account of the Company, the way it was happened for the last ESOP. But ESOPs will be issued at market price. On the product level loss ratio, Sahej, we continue to monitor all the products. And whenever a product reaches a threshold level, we go in for a price increase and that’s a continuous process. So we’ll continue to monitor the loss ratio of every product.

Sahej Mittal — HDFC Securities — Analyst

Right. And if you could split out the 25% growth in the month of April, what is on back of new product, new policy sales, and what is on — due to the rise in premiums?

Prakash Subbarayan — Managing Director

We are in the middle of the month, Sahej. We’ll get back to you with specifics. We are in the initial period of this month.

Sahej Mittal — HDFC Securities — Analyst

Got it. Got it. Thanks and all the best.

Operator

Thank you. The next question is from the line of Swarnabha Mukherjee from B&K Securities. Please go ahead.

Swarnabha Mukherjee — B&K Securities — Analyst

Thank you for the opportunity and good evening, sirs. So, three, four questions from my side. First of all, in terms of your recent growth, so just wanted your thoughts or if you could give some color on what happened in March in retail health that result in a slower month, and also April number, whether this 25% kind of number which you highlighted, is this in retail or is end of the two, if you could give us a breakdown between retail and group, even indicative number if you can share, which one is growing by how much. So that is the first question.

Second is in, so in the fourth quarter, the new business growth looks very strong vis-a-vis what was in the earlier quarter. So if you could give some color on any trends that you are seeing? Thirdly, I wanted to know your thoughts on the group-related strategy. So, what is different in the group-related strategy right now vis-a-vis how it was before we have started to bring it down in the previous cycle?

And lastly, a very quick small thing that I wanted to understand was that, it looks that when you started the year, our share of specialized product was higher than 17% in the mix. Towards the end of the year, it has come down to 15.5%. So, anything to read into that? So these are the four questions, sir. Thank you.

Anand Roy — Managing Director

Thanks. So, to answer your first question, the retail growth in the month of March, I think the growth rate in the month of March was good. If you look at the picking order of the volume of business generated by all general insurance companies, I think Star Health is Number 1 or Number 2, even considering all lines of business for others in terms of the volume. So, the business continues to grow fast. And April month, we are looking at more of a heterogeneous growth from all lines of business, both from retail as well as from our group businesses.

As I have mentioned earlier in my previous calls that the group business strategy of running down the book was up to the last financial year. We are continuing to focus on profitable groups, which is largely the SME segment, and so the growth is coming back on those group business also. So there is a growth across all those segments.

As far as the specialized products which you asked about, specialized product continues to be our focus area. It has come down probably because of certain underwriting costs we took on one or two products, but that is part of our overall strategy and our focus continues to be on specialized products.

Nilesh Kambli — Chief Financial Officer

The decrease is also only relative because we have included some of new products in Health Assure and Premier in Women Care. Since people are preferring those new products, probably there is a relative decrease. But otherwise, the focus is on all profit making products.

Swarnabha Mukherjee — B&K Securities — Analyst

Sure. Sure sir. That is helpful. Again, just a follow-up on the first question in terms of the April month growth, so would it be fair to assume that this is like fairly broad based, right, the 25% kind of a number you mentioned?

Anand Roy — Managing Director

Yes, yes, absolutely correct.

Swarnabha Mukherjee — B&K Securities — Analyst

Yeah. Okay. That’s very helpful. Thank you so much, sir, and all the best.

Anand Roy — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Prayesh Jain from Motilal Oswal Financial Services Limited. Please go ahead.

Prayesh Jain — Motilal Oswal Financial Services Limited — Analyst

Yeah, hi. Thank you. Firstly, could you break down FY ’23 retail health growth in terms of the number of policies and premium and value growth?

Prakash Subbarayan — Managing Director

Basically, it’s 50%, 50% value and volume growth.

Prayesh Jain — Motilal Oswal Financial Services Limited — Analyst

The number of policies would have grown by how much?

Prakash Subbarayan — Managing Director

50% is value growth and 50% is volume growth.

Prayesh Jain — Motilal Oswal Financial Services Limited — Analyst

Now, can you quantify the number of policy growth?

Prakash Subbarayan — Managing Director

So, number of policy growth is 9%. We have grown by 18% in retail health business.

Prayesh Jain — Motilal Oswal Financial Services Limited — Analyst

Okay.

Prakash Subbarayan — Managing Director

9% is policy growth and 9% is value growth.

Prayesh Jain — Motilal Oswal Financial Services Limited — Analyst

Okay, perfect. And in the past, you have mentioned that your loss ratios will be in the range 62% to 65% and combined will be in 93% to 95% range. And when you mentioned that for the April month your loss ratios are better than last year, do you mean the exit rate of last year or the entire of last year? And what could be your guidance for FY ’24 on the similar zone?

Anand Roy — Managing Director

So, Prayesh, we’ll maintain that we’ll improve the loss ratio compared to full last year number. I mean, 65% is what we mentioned. We’ll improve on that loss ratio in the current year. When we talk about April loss ratio, it is compared to full year loss ratio.

Prayesh Jain — Motilal Oswal Financial Services Limited — Analyst

Okay. Okay. So you — and what about your guidance? Do you think 62% to 65% still holds and — or it can be better than that?

Prakash Subbarayan — Managing Director

So, Prayesh, we’ll continue to maintain that we’ll improve it compared to last year.

Prayesh Jain — Motilal Oswal Financial Services Limited — Analyst

Okay. Okay. And so, from a — if we start thinking from a FY ’24 growth perspective with the price hike that has been implemented, how should we think about number of policy growth from insurance growth and price hike? How these three will have an interplay in terms of your growth? What — how would you see that?

Prakash Subbarayan — Managing Director

So one is, as Anand sir had mentioned that we’ll continue to go higher than the industry growth rate and continue to improve on the market share. In terms of volume and value growth, it will be similar. A slightly higher value growth this year because we have taken a price hike. It can be around 55% to 60% value growth and 40% to 45% volume growth.

Prayesh Jain — Motilal Oswal Financial Services Limited — Analyst

Okay. And in the past, you have also mentioned about getting into more affluent categories in terms of population. What are the initiatives that we’re taking there and how is that progress happening?

Anand Roy — Managing Director

So, the fact that our average sum assured of our policies has gone up by more than 10% this — the last financial year gives an indication that the customers that we are now targeting are more affluent than what they were earlier. And also, the awareness of health insurance and appropriate coverage has also kind of been established in the society at large. So, I think a combination of both these things will help us to keep growing our average ticket size, as well as the average sum insured, which we hope to achieve this year also.

Prayesh Jain — Motilal Oswal Financial Services Limited — Analyst

Okay. Got that. I’ll get back in the queue.

Operator

Thank you. The next question is from the line of Shreya Shivani from CLSA. Please go ahead.

Shreya Shivani — CLSA — Analyst

Yeah, thank you for the opportunity. I have two questions. First is on the share of Agreed Network Hospitals. So this number has varied quite a lot this year, like it was 56% in first quarter and first half, it was 66%; nine months, it was 76%; and now, its 67%. So I just want to understand how frequently do you rearranged your agreement with hospitals. Why does — why did this number vary so much this year versus last year? Every quarter it didn’t vary so much. So that’s my first question.

Second is on the wellness program. Just wanted to understand how elaborate would this program be? Are you just partnering with your — with some other fintech or are you planning to launch your own separate web portal or if you can give us a little more details about this. And also one last question is, can you share the share of longer-term policies in your entire book, as in the policies which are more than one year, two years or three years — the two year, three year policy, the share of that? Thank you.

Prakash Subbarayan — Managing Director

With regard to the share of agreed network hospital to the overall hospital, every month, you should understand that there are lot of hospitals showing an interest to be part of our empanelment. So, we get around 200 plus applications from different hospitals. So, naturally the number keeps increasing. When the overall number increases, the share of ANH to the overall number will definitely alter. Apart from the — there is an exclusive team in Star, to talk to hospitals, and arrive at a fair pricing for identified surgical procedures, and also to fix a proper price for medical management, room rents, professional charges, common diagnostic tests, and all that. So, our pricing arrangement with the hospitals will depend on the geography, the nature of hospital, whether they are surgical oriented or medical oriented. There are lot of formulas involved to arrive at a pricing with the hospital.

So, the sum and substance is, new hospitals show lot of interest to be part of our panel. So, there is a constant increase in the number of hospitals, and our empanelment — empaneled hospitals have crossed 14,000, and there is a constant effort to convert most of these empaneled hospitals into our agreed pricing, and this strategy is also continuing. That is the reason why you are seeing a different percentage.

But overall, the financial transaction and turnover, as we could say, it is more with hospitals where we have a pricing arrangement. So, more number of claims are processed in hospitals where there is a proper pricing arrangement. Second, with regards to wellness, we are having a programmed structured way of organizing wellness rewards for young customers who want to be our policyholders. We want to recognize maintenance of good health, and give them discount on the premium, so based on the scores that they could achieve.

Second thing is, the number of people who are with elderly people, people who are suffering from lot of comorbid conditions, we have condition management programs, and structured wellness program to educate them, to rehabilitate them, and encourage them to have a proper diet and lifestyle changes, so that they don’t fall victim to diseases. Through this strategy, we have also found that our readmission rates are coming less, and we could address myriads of like geographies where our customers live with multiple comorbids and we are trying to decrease the frequency rate of claims in those areas. So, there is a structured and organized way of conducting our wellness program, and we are closely monitoring the outcome.

Shreya Shivani — CLSA — Analyst

Sir, my question here on the wellness program is that, this program is for your existing insurance — the policyholders. It’s not like you’re opening a platform to all set of customers, and from there, you want to convert them into insurance holders. Which way is it?

Anand Roy — Managing Director

So, see, it is a mix of both the things that you mentioned. For our policyholders, we have a structured wellness program on — as part of the policies, as Dr. Prakash mentioned by which if they’re taking care of their health, and they’re able to demonstrate those results on our application, then, we give them a premium discount at the time of renewal. But even for non-customers who are not yet with Star Health, we have wonderful free telemedicine service which gives advice and guidance to anybody for various kinds of illness that they may have, and it is absolutely free of cost. This definitely is a channel by which we are able to generate leads for potential customers and we intend to scale that up even significantly.

We also do have a tie-up with a fintech firm for the services of all or wellness related program in case of how they can have the technology integration of their IoT devices into our app, so that we can submit their data.

As far as your last question of the long-term policies is concerned, about 2.5% of our policies are coming from long-term plans, which are more than one-year-old, but this is an area where we are going to focus more and we have seen that on the online platform or digital channels, almost 50% of our new customers in the recent past is coming from long-term plans. So, we will be focusing on these plans going forward.

Shreya Shivani — CLSA — Analyst

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Anirudh Shetty from Solidarity Investment Managers. Please go ahead.

Anirudh Shetty — Solidarity Investment Managers — Analyst

Yeah, hi. Thanks for taking my questions. Sir, my question was more on our return on equity, which for FY ’23 is around 12.5%, which is very close to cost of capital, despite us getting our loss ratio to the upper end of our target of 63% to 65%. Sir my question is, for us to get to a healthy ROE of, say, at least 15%, 16%, what needs to improve for us? And also, if you could give us any timelines on by when do you think you can get to that number?

Nilesh Kambli — Chief Financial Officer

See, the ROE of 12.4% is basically after the ESOP cost, which is the one-time non-business cost. So, if we exclude that, the ROEs are much higher. So next year again will be one full year with price increase that we have taken we should return to healthy ROEs of 16% to 18% that we have been talking about.

Anirudh Shetty — Solidarity Investment Managers — Analyst

Got it, so 16% to 18%. And sir, right now there is also a bit of an accounting anomaly because of the mismatch. So this 16% to 18%, if one were to look at it at a — there is a proper matching, or say if there was IFRS implemented, how would this ROE look like in that scenario?

Nilesh Kambli — Chief Financial Officer

So, once we implement IFRS, cost is deferred over the policy period. Today, only the premium is deferred, there is a cost is upfront. If we defer the cost also over the policy period, this should improve by another 300 basis points to 400 basis points. The ROE will further improve.

Anirudh Shetty — Solidarity Investment Managers — Analyst

And could there also be an implication of, say, the risk-based kind of solvency is introduced. Then, given the nature of the business that we’re in, very granular, could that also be ROE accretive?

Nilesh Kambli — Chief Financial Officer

See, the risk-based solvency will ensure that the solvency for us will be very, very comfortable. I mean indirectly, it will benefit us because today, it being a growth business, and to keep on doing the business we need to keep capital. But once the solvency come in, and we are profitable, we will be in a position to pay dividend as well. This will — that is we can maintain a healthy solvency. We can pay out dividend as well.

Anirudh Shetty — Solidarity Investment Managers — Analyst

Got it. And just one final question. At this point in time, how much of our portfolio would be in equities? And over time, where do we see that number heading to?

Aneesh Srivastava — Chief Investment Officer

So — hi. This is Aneesh here. So, as of now 4.1% of the portfolio is in ETFs. We have decided to increase the ETF exposure. Maybe that we would go up to 7% and then decide what comes later.

Anirudh Shetty — Solidarity Investment Managers — Analyst

Got it, okay. Thank you for taking my questions.

Operator

Thank you. The next question is from the line of Sanketh Godha from Avendus Spark. Please go ahead.

Sanketh Godha — Avendus Spark — Analyst

Thanks for the opportunity. Anand, you said that the growth in April is coming from both group and retail. And probably in FY23, the Group contribution was all — is at the lowest level in the last five, six years. So, is the Group going to contribute around 10% to 11% on the total GWP in FY ’24? Then, is it safe to assume because Group invariably has a higher loss ratio that 65% loss ratio could be — still be maintained in FY ’24 because sheer change in the product mix?

Anand Roy — Managing Director

Yeah, Sanketh, so see, as I’ve mentioned in the past, our business strategy is very clearly focused on growth with profit. So, we do not intend to write groups which are loss-making in nature. So our focus on groups are also on the SME as I mentioned. It’s a quasi-retail model. The Group business also comes through our traditional channels like agency and digital channels. So, we are very confident that even with the 10% Group that we intend to write, our loss ratios should not go beyond what we are envisaging.

Sanketh Godha — Avendus Spark — Analyst

Sir, is it safe to assume, Anand, that in previous — when we did that business around 10% to 11% [Phonetic], the loss ratio experienced in group is very similar to retail or it was tad higher?

Prakash Subbarayan — Managing Director

Should look at combined.

Sanketh Godha — Avendus Spark — Analyst

Okay. Yeah, yeah, fair point. I should look at combined because the opex associated [Technical Issues].

Operator

Thank you.

Sanketh Godha — Avendus Spark — Analyst

Hello?

Operator

The next question is from the line of Ansuman Deb from ICICI Securities. Please go ahead.

Ansuman Deb — ICICI Securities — Analyst

Yeah, hi. Thanks for the opportunity. My question is first on the combined ratio guidance. So, we’re saying it is lower expected compared to FY ’23 for FY ’24. Is it backed by any improvement in experience as far as severity and frequency is concerned? And maybe, some of the fraud prevention practices that we have been incorporating because is it an industry-level phenomenon, or a company-level phenomenon, if you could help us understand that?

And secondly on the growth that you are expecting in FY ’24, does it factor any benefit from expansion of tie-ups with new branches or any regulatory benefits are being factored within this assumption? These are the two questions. Thanks.

Nilesh Kambli — Chief Financial Officer

So, basically the combined ratio improvement will happen on account of the strategic initiatives that we’ve been taking and that will bear fruit in terms of the financial outcomes, the product mix, business mix change that we have done over the last year and we continue to do. As we have been saying, the UN regulations will be beneficial because UN regulations as well as the opening up of the banca and banca business to nine players. That is something which we look as a big opportunity areas, which will help us to get into newer channels and continue to grow our profitable mix of business.

Ansuman Deb — ICICI Securities — Analyst

Thanks. Thank you. That’s it for me.

Operator

Thank you. The next question is from the line of Sanketh Godha from Avendus Park. Please go ahead.

Sanketh Godha — Avendus Spark — Analyst

Thanks for giving the opportunity. Dr. Prakash, you said that around 1.3% improvement in the loss ratio happened because of the fraud detection in FY ’24 which was — FY ’23, which was a new initiatives. Sir, just wanted to understand that low-hanging fruits with respect to the fraud detection exercise is almost exploited, or there is, in your opinion, how much headroom is further available to reduce the loss ratio just by better fraud management?

Prakash Subbarayan — Managing Director

See, one cannot determine the headroom because there is always newer trends of fraud that are emerging in the market. We are keeping our eyes closed. With our experience of handling more than 90 lakh claims, we have identified probable areas which are prone for fraud abuse and leakage. And using those intelligence, we have created a rule engine, and we are able to identify those vulnerable claims, which are more prone for fraud, and deep dive and study them, so that we can filter those frauds in claims as they come to us.

Sanketh Godha — Avendus Spark — Analyst

Got it, sir.

Nilesh Kambli — Chief Financial Officer

To add — yeah, to just add one more thing, this initiative started in the second half of the year, so 2024 will be the first full year of benefit that we come through on account of the fraud initiative.

Sanketh Godha — Avendus Spark — Analyst

Got it. Got it, Nilesh. And last one, if you can respond to this that in your experience what is the average ticket size claim difference for ANH hospital versus other hospital? And related to it, today, 67% is ANH. What do you aspire that number to be in FY ’24? Like, maybe upwards of 70% or any internal target you have to achieve that particular number?

Prakash Subbarayan — Managing Director

See, this cannot be an apple-to-apple comparison, because the average network hospital based on specialty. I should compare the average decrease in outgo between the hospitals of ANH doing only cardiac, doing only cancer treatment, doing only trauma and orthopedic, something like that. So overall, it will be very difficult for us to arrive at what is the value addition, but there is a greater financial benefit that we could see when, like, more and more transactions happen through Agreed Network Hospitals.

Sanketh Godha — Avendus Spark — Analyst

Got it, sir. And then, this 67%, what you expect it to be in ’24, given its benefits in loss ratio, sir?

Prakash Subbarayan — Managing Director

Sanketh, we’ll keep on improving on that initiative. We have not set any target for a one-year period because these benefits, some of them are tangible, some of them are intangible. So it’s very difficult to measure and tell you. But overall, we are seeing a lot of improvement and benefit on that.

Sanketh Godha — Avendus Spark — Analyst

Got it, sir. Thanks. Thanks for answering my questions.

Operator

Thank you. The next question is from the line of Supratim Datta from Ambit Capital. Please go ahead.

Supratim Datta — Ambit Capital — Analyst

Thanks for the opportunity. [Indecipherable] so it looks like the URR to constant URR for the year FY ’23 to the NWP, that ratio is around 58%. And you had previously dictated that would be around 56%. So just wanted to understand what resulted in this higher ratio in FY ’23?

Nilesh Kambli — Chief Financial Officer

See, basically the URR is a function of growth in business. So it’s dynamic, it’s not a constant number. If the growth in constant, it will be constant number, but depending upon the growth being higher or lower compared to last year, it will keep on fluctuating.

Supratim Datta — Ambit Capital — Analyst

So, is it fair to assume that you had faster growth maybe in the elongated weeks of March, that’s why, essentially?

Nilesh Kambli — Chief Financial Officer

Yes, yes.

Supratim Datta — Ambit Capital — Analyst

Got it. Okay. Got it. And on the same [Indecipherable] you talk about 1% lower in loss ratio. Just wanted to understand what are the initiatives do you have going on, on that part. Is there any new initiative and — or what kind of a improvement — further improvement do you expect from those?

Prakash Subbarayan — Managing Director

So, you’re talking about the fraud initiatives which has resulted in an incremental 1.3% of this improvement, right, in quarter four?

Supratim Datta — Ambit Capital — Analyst

Yes. Yes.

Prakash Subbarayan — Managing Director

Yeah. So, it’s an ongoing initiative that we improve on the fraud control and management, the ANH network that we continue to improve. We continue to negotiate rates with the hospitals. That’s an ongoing initiative and it will continue to give benefits to us.

Supratim Datta — Ambit Capital — Analyst

Okay, got it. And what proportion of your ANH hospitals would be having packages versus ones which will not be having packages?

Prakash Subbarayan — Managing Director

Yeah. So basically the ANH network is the hospitals that we have packages. That 67% ratio that we have commented on.

Supratim Datta — Ambit Capital — Analyst

Okay. So [Indecipherable]. Thank you. Thank you.

Prakash Subbarayan — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Devansh Nigotia from SIMPL. Please go ahead.

Devansh Nigotia — SIMPL — Analyst

Yeah, sir, thanks for the opportunity. Sir, in case of Family Health Optima after the price increase is taken, we have seen that our pricing is actually at 15% to 25% premium to our peers. So what do we think with such high pricing? Do we see a risk of dropouts being more than 5% that we are expecting for FY ’24 and also what you’re saying is that the Company itself is actually pushing Star Comprehensive instead of Family Health Optima for the family floater policies, which is actually at a 12% to 13% discount to Family Health Optima. So I mean, if you could just share some perspective over here or how you see the family health policy mix evolving for FY ’24?

Anand Roy — Managing Director

So, see, our family floater portfolio continues to grow well, and overall at a company level, we are tracking that, how does the family floater portfolio perform and there are four products that constitute this portfolio. So Family Health Optima price revision initial response, we have not seen any negative outcomes. We are including the four products that I mentioned about. As long as the portfolio is growing, we are okay with that.

Devansh Nigotia — SIMPL — Analyst

Okay. In case of — so from [Indecipherable] and the experience that we have seen for the new sales, how has the mix evolved within family floater? Is it — I mean, has there been a tilt towards the Star Comprehensive instead of Family Health Optima or the portfolio share? Because their pricing is actually at 12%, 13% discount. So, it’s been actually two, three months since the price increase has happened. So any data point if you can share?

Anand Roy — Managing Director

We are seeing a balance between these products, Star Comprehensive, Star Assure, Family Health Optima. As you know, we have region-based pricing. So some regions, Family Health Optima is more attractive for the customers. Some regions, the features of Assured is more attractive to the customers. So it’s being sold on those basis. But as I told you, at the portfolio level, the Company continues to grow on the family floater portfolio and I think that’s what we are more interestingly.

Devansh Nigotia — SIMPL — Analyst

And Family Health Optima price increase has happened from 1st April or from which state that has happened for the renewal portfolio?

Anand Roy — Managing Director

Well, it’s bound to happen from 2nd of May onwards.

Devansh Nigotia — SIMPL — Analyst

2nd of May. Okay. Okay. So — but we are yet to see the experience in the — in case of renewals, how it will shape up?

Anand Roy — Managing Director

Yes.

Devansh Nigotia — SIMPL — Analyst

And in case of our bancassurance, since now that the wallet share is with now eight insurance can be onboarded instead of three. So are we looking to target some large banks, which can actually create a meaningful difference in our benefit-based book, which currently is negligible? So, any thought process if you can share and what can be the constraint here to empanel ourselves with the large banks?

Anand Roy — Managing Director

So, there are no constraints. All banks who are interested in growing their health insurance portfolio are talking to us. And now, as you’ll understand that with the new UN regulations, which has been brought in by the regulator, we are also engaging in discussions with them. As I’ve already mentioned in my speech that we have signed up three banks in the last quarter, which India Post Payments Bank, Standard Chartered bank and ESAF Small Finance Bank. We will continue to add more and more banks as we go forward.

Devansh Nigotia — SIMPL — Analyst

Thank you. So, are we trying for large banks, I mean, because all the banks that we mentioned for banca tie-up are actually relatively small. So that is why that question was targeted towards large-sized banks?

Anand Roy — Managing Director

We are interested in partnerships where Star Health is also gaining. We are not interested in any partnerships which is not viable for us. So, we will continue to talk to them and we’ll see how it goes. So we’re also now making some large NBFCs. I think some of them will be announced very soon.

Devansh Nigotia — SIMPL — Analyst

And the investment index you shared for the quarter was 7.34. So does that include some M2M gains that we have booked in our bond book? And what is the yield we are working with for FY ’24 and FY ’25?

Prakash Subbarayan — Managing Director

So, obviously, this does not include any mark-to-market or any book profits. There are no book profits, that’s it. Guidance is slightly difficult to give. But yeah, but what we understand is that, perhaps, yield curve would remain somewhere here only, given the fact that RBI is on a long pause. So I think we would keep getting interesting opportunities for deployment.

Devansh Nigotia — SIMPL — Analyst

So 7.34 is sustainable for the year if considering the interest rates are constant?

Operator

Sorry to interrupt, sir. May we request you to please rejoin the queue for follow-up questions?

Devansh Nigotia — SIMPL — Analyst

Yeah, sure. Thank you.

Operator

[Operator Instructions] The next question is from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead.

Pallavi Deshpande — Sameeksha — Analyst

Yeah. So just wanted to know on the number of agents you mentioned. How many of those 96,000 would be exclusive agents that you added this year compare that to the same number last year?

Anand Roy — Managing Director

So the exclusive agents that we have added this year is close to 18,000 and it would have been the similar number last financial year also. So IC-38 agents is a focused area. We are also looking at growing this channel very, very fast, so we will continue to focus on this.

Pallavi Deshpande — Sameeksha — Analyst

Sorry, I didn’t catch the last part.

Anand Roy — Managing Director

So, we added 18,000.

Pallavi Deshpande — Sameeksha — Analyst

Right, okay. And the target for this year would be how many?

Anand Roy — Managing Director

So we aspire to do at least double this. But I think we should do better.

Pallavi Deshpande — Sameeksha — Analyst

Right. And sir, secondly, you mentioned about overall this — on the fraud reduction. So that was a half year period that you’ve got this benefit. And so just on that side, if you want to estimate that for the next year, we just — we can assume some just double that up or I mean, how do we look at it?

Prakash Subbarayan — Managing Director

So, whatever work we have done, we’ll continue to get the benefit for the full year next year. This year, it was only available for six months period, but full year, and we’ll continue to improve on that numbers.

Pallavi Deshpande — Sameeksha — Analyst

Right. I’ll come back in the queue. Thank you so much.

Operator

Thank you. I now like to hand the conference over to Mr. Nilesh Kambli, for closing comments. Over to you, sir.

Nilesh Kambli — Chief Financial Officer

So, thank you everyone for joining the call and we are really very happy to announce profitable result with improved operating profitability for the full year post listing. Thanks for the trust and confidence and we assure you, we’ll continue to do well. Thank you all.

Operator

[Operator Closing Remarks]