The company faced solvency margin issues recently.
Star Health and Allied Insurance Company, a joint venture between Oman Insurance Company, the ETA Ascon group and a host of Indian shareholders, is looking for a new partner.
Star, India’s first standalone health insurance company, recently faced some problems in meeting the solvency margin requirement.
“We recently put in Rs 65 crore. The problem is solved,” said Chairman and Managing Director of Star Allied Health insurance, V Jaganathan, who owns 2.7 per cent in the company. Oman Insurance holds 10 per cent. Syed Mohamed Salahuddin, chairman emeritus and managing director of ETA ASCON, holds 8 per cent, while the ETA STAR group of Dubai and Essa Abdullah Al Ghurair hold another 8 per cent, taking the foreign shareholding to 26 per cent.
The Insurance Regulatory and Development Authority prescribes a solvency margin of 1.5 times the minimum stipulated by the law on non-life insurance companies, including health insurers.
A senior company executive said the partners would not sell their shares but bring in another partner. This will be through issue of fresh shares to the new partner and lead to an expansion of the company’s equity base. The source said the process would take a while.
Standard Chartered was working on the deal, sources privy to the discussions told Business Standard.
Star Health is one of the two standalone health insurance companies in India. The other is Apollo Munich.
The move by Star comes at a time when at least four new players, including Religare, Axis Bank and Analjit Singh-promoted Max India, are looking at enter the health insurance space. Max has tied up with Bupa for a 74:26 per cent joint venture while others are yet to finalise their plans. Religare and Swiss Re, which had plans to set up a health insurance venture, parted ways recently. A number of foreign companies, including Blue cross Blue shield Association, the United Health group, Discovery Health, Cigna Corporation and Aetna, are interested in entering India.
Standalone health insurance players have been facing tough competition since general and life insurance companies were allowed to offer the product. Over the years, general insurance companies, which used to sell fire and engineering covers, have offered group health covers at a steep discount to get the two lucrative businesses. Health now accounts for over 30 per cent of non-life insurers’ portfolios.
In the last financial year, Star Health reported a net profit of Rs 7 crore on a premium income of Rs 512 crore. The insurer saw over two-fold rise in premium income during 2008-09 from Rs 168 crore in 2007-08. Health insurance penetration, at 2 per cent of the gross domestic product, is better than the non-life industry’s 0.6 per cent level. Experts expect this industry to grow 35 per cent in the next five years.
