Why Did Star Health's Q2 Net Profit Plummet by 54% Despite Revenue Growth?
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Synopsis
Star Health faces a significant challenge with a drastic drop in net profit, despite witnessing a revenue upsurge. As the company strives to enhance customer experience through technology, the implications of rising operational costs and claim ratios remain critical. Dive into the details of this financial report and understand its impact on the health insurance landscape.
Key Takeaways
- Net profit fell by 54% to Rs 54.9 crore in Q2 FY26.
- Revenue grew by 10.27% year-on-year to Rs 4,080 crore.
- Increased operational costs contributed to profit decline.
- Claims NPS improved, indicating better customer experience.
- Technology enhancements include an AI-enabled claims platform.
Mumbai, Oct 28 (NationPress) Star Health and Allied Insurance Company announced a notable decline of over 50 percent in its net profit, which fell to Rs 54.9 crore for the second quarter of the financial year (Q2 FY26), down from Rs 110 crore during the same period last year.
Despite this drop in profitability, the health insurer saw a robust revenue increase (net premium earned), rising by 10.27 percent year-on-year to reach Rs 4,080 crore, compared to Rs 3,700 crore in the same quarter of the previous fiscal year.
The decline in profits highlights potential pressure on margins, likely stemming from increased claim ratios and heightened operating costs.
Total expenses for the quarter were reported at Rs 4,284.9 crore, marking an increase of over 9 percent year-on-year from Rs 3,898.5 crore, and over 10 percent quarter-on-quarter from Rs 3,866.54 crore.
In its exchange filing, the company noted that net profit fell by over 79 percent quarter-on-quarter from Rs 262.5 crore in the April-June quarter (Q1 FY26).
MD and CEO Anand Roy commented, "Customer experience remains a key focus of Star Health’s strategy. Our claims NPS improved from 52 to 61, and the overall company NPS has risen from 59 to 61. These results reflect our consistent execution and the strength of our retail-focused model."
Roy added, "We are observing strong momentum following the GST exemption on retail health insurance. Initial trends show a clear demand uptick—evidenced by enhanced lead generation, new policy issuances, and GWP growth in October—highlighting increasing affordability."
In Q2FY26, the company’s expense ratio improved to 29.3 percent, down from 31.1 percent in Q2FY25.
Furthermore, the loss ratio improved to 71.8 percent in Q2FY26 from 73.7 percent in Q2FY25, and the combined ratio (on an IFRS basis) improved to 101 percent from 104.8 percent in the same period last year.
The company is also enhancing its technology-driven customer service by implementing an AI-enabled claims platform for quicker and smoother settlements. The Star Health app has surpassed 12 million downloads, as stated in its filing.
Point of View
It is crucial to recognize the complexities involved in Star Health's financial performance. The notable profit decline juxtaposed with revenue growth indicates underlying challenges within the health insurance sector. Star Health’s commitment to enhancing customer experience and leveraging technology shows promise amid these challenges, highlighting the need for continuous adaptation in a competitive market.
NationPress
03/11/2025
Frequently Asked Questions
What led to the decline in Star Health's net profit?
The decline in net profit for Star Health can be attributed to increased claim ratios and rising operational expenses, despite a healthy revenue growth.
How much did Star Health's revenue increase?
Star Health's revenue increased by 10.27 percent year-on-year, reaching Rs 4,080 crore in Q2 FY26.
What improvements has Star Health made in customer experience?
Star Health has improved its claims NPS from 52 to 61 and overall company NPS from 59 to 61, reflecting their focus on customer experience.
What is the significance of the GST exemption for health insurance?
The GST exemption on retail health insurance is expected to boost demand, as evidenced by stronger lead generation and new policy issuances.
How is Star Health leveraging technology?
Star Health is implementing an AI-enabled claims platform to facilitate faster and seamless settlements, enhancing overall customer experience.
