ICICI Venture to invest Rs 120 cr in Star Health

Private equity firm ICICI Venture today said it plans to invest Rs 120 crore in Star Health and Allied Insurance Company, marking the first private equity deal in the Indian health insurance sector.

For ICICI Venture, a subsidiary of ICICI Bank, this would be the maiden investment from its new $500 million PE fund India Advantage Fund Series 3, a release issued here said.

Star Health is a Chennai-headquartered company headed by V Jagannathan, which has garnered a gross premium of around $200 million in 2009-10.

"We believe that the Indian health insurance market is poised for an exciting future given the low penetration levels witnessed historically despite a clear underlying consumer need. We believe that Star and its visionary management team led by Mr Jagannathan is currently best-positioned to tap this opportunity," ICICI Venture Managing Director & CEO, Vishakha Mulye said.

Star Health is promoted by shareholders of the ETA Ascon group (the Middle-East-based conglomerate) and Oman Insurance Company, a subsidiary of the UAE-based Mashreq Bank.

The Indian health insurance industry has grown at an annual rate of over 35 per cent since the opening of the sector in 2000 but the market continues to be significantly under-penetrated in comparison with other countries.

For instance, per capita private health insurance in India is estimated at $1.1 in comparison with $2,300 in the US, or $63 in Brazil.

Health insurance accounts for less than three per cent of healthcare spend in India in comparison with China's five per cent. Consequently, industry experts believe that the Indian market will grow rapidly as a result of greater awareness, government spending and increasing healthcare costs which create a greater incentive for health insurance coverage.

Over the next five years, the market is projected to grow at 25-30 per cent thereby, making it the fastest-growing segment in the general insurance market.

From a 10 per cent share in 2005, health insurance has grown to constitute 25 per cent of the total general insurance pie in 2009.

The corporate segment accounts for close to half the market with retail and government accounting for the balance. Star focuses on the retail and government segments which are the fastest growing sub-segments in the Indian health insurance industry, the release said.