Ladies and gentlemen, good day and welcome to the Q1 FY 2026 earnings conference call of Cholamandalam Financial Holdings , hosted by DAM Capital Advisors Ltd. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star and zero on your touch phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Parth Jariwala from DAM Capital Advisors Ltd. Thank you and over to you. Hello.
FY 2026 earnings call.
Yes.
Can you please start? We couldn't hear you.
Good evening, everyone, and welcome to the Q1 FY 2026 Cholamandalam Financial Holdings Limited Earnings Call. From the management, we have Mr. Sridharan Rangarajan, Non-Executive Director, Cholamandalam Financial Holdings Limited, Mr. N. Ganesh, Chief Financial Officer, Cholamandalam Financial Holdings Limited, Mr. V. Suryanarayanan, Managing Director, Cholamandalam MS General Insurance, and Mr. S. Venugopalan, Chief Financial Officer, Cholamandalam MS General Insurance. I'll now hand over the call to the management for their opening remarks, post which we can open the floor for Q&A. Over to you, sir.
Yeah. Good evening. This is Suryanarayanan. Thanks for joining the earnings conference call of Cholamandalam Financial Holdings Limited for the quarter ended June 2025. I'll now proceed with the overview of the performance for the quarter ended June. In Q1, in line with the one-by-one method of accounting and reporting of gross written premium in India, with respect to long-term non-motor business, Cholamandalam recorded a premium of around INR 1,812 crores. The premium received in advance on long-term non-motor products was INR 102 crores. Together with the reinsurance accepted business, the GWP for Q1 was INR 1,997 crores as against INR 1,945 crores in the corresponding quarter of the previous year. In motor, the principal line of business for the company, their market share stood at 5.2%. Within motor, the company now has a composition of 50% in cars, 38% in CVs, and 12% in two-wheelers.
The company secured about 25% of its total motor premium from new vehicles. The expense of management for Cholamandalam for the quarter stood at 32%, which measured without one-by-one works out to 30.4% and is lower than the glide path plan approved by the board and presented to the regulator way back in 2023. The expense of management ratio for the corresponding quarter of the previous year was 33.3%. The claims ratio for the quarter at 81% is higher than the corresponding quarter of the previous year. Recognizing the rising severity in court awards in third-party claims and the continued absence of increase in motor third-party premium for the last three to four years, Cholamandalam has stepped up its motor third-party reserving during the quarter, which had an impact on the overall claims ratio by about 3.53%.
The quarter's claim ratios in property lines were also impacted by a few large fire claims, which impacted the claims ratio by about 1.78%. This meant that the combined ratio for the quarter was 114.8% and without the one-by-one effect at 111.5%. The combined ratio includes the impact of the motor third-party reserving augmentation and the large fire claims, which together is about 5.11% for the quarter. The investment portfolio corpus at over INR 18,140 crore, which is excluding the fair value exchange. The company had mark-to-market gains in both the debt and equity portfolios amounting to over INR 390 crore. The profit report for the quarter was at INR 145 crore and the return on equity not annualized at 3.45%. Solvency ratio at 2.17x as of 30th June is comfortable. We'll now be happy to take any questions that you may have.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sanketh Godha from Avendus Spark. Please go ahead.
Thank you for the opportunity. I think, sir, the 81% loss ratio, honestly, is significantly very high compared to what you historically reported. Even in the COVID times, the number in the worst quarter was around 80%- 83%. I just wanted to understand, you highlighted that there are two things. That is one big claims, 1.78%, and maybe motor TP reserving you enhance. Even if I ignore those two numbers, you reporting maybe 77%- 78% kind of a loss ratio seems to be very high compared to what you reported around 70%- 73% in the past. I just wanted to understand whether things will be better in subsequent quarters or if any corrective actions you have taken to bring it back to 70%- 73% in the loss ratio. That's my first question.
Yeah, Sanketh, as I remarked in the opening statement, the thin elements of keeping up the motor third-party under fire losses, that impact is about 5.11%. What we are talking of is 81%- 5.11%, which is at about 76%. This is about 2%- 3% higher than our normal average of anywhere between 72.5%- 73%. The contributing element is, of course, the elevated loss ratios in the motor body segment. Many of you have been part of the investor calls of listed and other entities as well. The sector has been, even for the larger players, somewhere about 4%- 5% rise in the motor body claims ratios, which is prevalent in many of the companies that we have seen. We have also had this impact. Some corrective action has been taken, and generally, it is elevated in Q1 and then drops down through the other quarters.
We only believe that as we move on to the rest of the quarters, we should see some relief coming in in this space. Otherwise, I think it's fairly normal.
Just a motor TP reserve enhancement, what you did, 80.4% loss ratio. You absorbed everything in the current quarter, or you expect this 80.4% to remain as the new normal for the subsequent quarter, or will it go back to that 70%- 72% kind of number? Because whatever you wanted to provide, you provided in the current quarter itself.
It may not go back to that 72% level, but it can be lower than this number. What we have to recognize is that the industry has not had any increase over a fairly long period, and the stability inflation is there. Court awards are going up. If any company manages to hold on to its TP reserves continuously at that same level for a long period, it only means two things. Either there is a release from substantive release from the earlier years, which is coming in, or there is some quarterly fluctuation that we are reflecting in the reported numbers for the quarter. We would leave that to the respective companies. It is in the context of absence of a rise in premium, the right direction for the motor TP is actually to inch up from the earlier levels.
I guess we are doing the right thing in that perspective.
Got it, sir. Sir, suppose there is a lot of chatter that supply will come. Assume it comes, maybe I don't know what the number would be. Is it fair to assume that there could be a meaningful improvement in the loss ratio because there could be some bit of price adequacy?
One could expect that, yes. While there are press reports talking of the increase from a prospective date, we really have to wait and see as to whether that factifies. As and when the price increase happens, I'm sure this will get toned down.
Got it. Got it, sir. The second question which I want to ask is that, sir, last year when you did the reinsurance accepted business at overall company level, it was just 2% of the total GWP. In the current quarter, it is almost 9% of current GWP. I don't know whether it's a new normal for the full year. That's the first question what I have, whether this is a new normal for the full year, 9%- 10% of the total GWP. Point number one. Second is that in which segments you are seeing this business growing. Related to it, is it because of EOM pressure, maybe to some extent you are doing this business, or otherwise you are seeing a very big profit opportunity and that's why you're doing it?
Yes, Sanjay, we can expect this number to be around this level, about 8%- 10% is something that we can expect through the year. It is actually a combination. There are profitable opportunities that also come through, and incidentally, it may also bring in the UIM advantage and support there, which is what the board has taken a view on and accordingly, we have stepped up the presence in this segment. It is likely to be around that 8%- 10% range.
Which segments are driving in reinsurance acceptance? Basically, we will.
It can be across lines of business, not necessarily in a particular line. It will be across lines of business.
Okay, is this again asking more if it will be commercial, like property, fire, and crop predominantly, sir?
It will be across. If, for instance, the number that you talked last year, we had something in crop insurance. This year, it can be in other lines. It will be across lines.
Okay. Got it, sir. Currently, sir, these are my questions. I'll come back in the Q&A stick. Thank you.
Thank you. Ladies and gentlemen, a reminder to all, please press star and one if you have any questions. I repeat, anyone who wishes to ask a question may press star and one on their touch phone telephone. Ladies and gentlemen, we will wait for a moment while the question queue assembles. A reminder to all participants, anyone who wishes to ask a question may press star and one on their touch cell phone. I repeat, anyone who wishes to ask a question may press star and one on their touch phone telephone. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have a next follow-up question from Sanketh Godha from Avendus Spark. Please go ahead.
Okay. Thank you. Thank you again for the opportunity. Only two points I have incrementally to ask. One is on health side, sir. I think maybe I asked you this question last time also, that loss issues don't see a respite at all. We used to be 70%, now we are 80%. We told in the past that we have taken corrective price action. Is it largely because PA contribution has come down or any other reason why it's optically the ratios have gone up? That's one thing. The second thing, just wanted to understand on crop side, a bulk of our business, if I remember right, was Maharashtra, and Maharashtra probably has gone to Agriculture Insurance Company of India Limited this year.
Any outlook you want to view on the growth, either on full year basis or one by year basis, given crop won't be there in such a big way in the current year?
Thanks, Sanjay. I'll first take the crop question. We are fairly aware that based on the re-tenders in three states, Maharashtra, Bengal, and Orissa, and the revised pricing at which the business has got concluded, the industry is likely to face almost INR 9,000 crores drop in the total premium in crop insurance. As business has shifted more from the private sector players to Agriculture Insurance Company of India Limited to a larger extent, at least in Maharashtra, we are likely to see a drop in premium for multiline players generally, which is already manifested to an extent in the numbers reported by the industry for July. Cholamandalam also had last year about INR 100 crores of premium from crop last year, which will not be there for the current year. This drop is for an annualized is about INR 500 crores.
We will see it unfold and as at June, it was about INR 50 crores, and maybe as at July, it's about INR 145 crores. This drop will definitely be there for Cholamandalam . We are looking at alternate avenues to step up and make good the shortfall. This is on the crop side.
Related to that sense of your growth, growth outlook for the company for the full year, if you're okay to share that number, maybe because last year's GWP, what we did was around INR 8,300 crores. Given INR 500 crores, you're starting with -INR 500 crores or INR 7,800 crores kind of a number, whether we will be able to deliver INR 8,300 crore kind of figure again in the current year?
That's our intent. We'll have to see. Of course, the competitive intensity in the market is quite high with the kind of discounts and payouts. We'll have to see that because we are very clear that we won't be chasing top. The inherent economic viability of the business is what will drive our appetites. Yes, nobody likes to have a drop, which is what we will want to work on. This is on the crop side. Moving on to the health side, the question that you had, it is a fact that our volumes in PA have been toned down a bit given the UIM and other considerations, which is also a reason for the form we had related loss ratios.
We have returned some group health in the quarter one, though still we continue to be fairly low, probably fourth from the bottom in terms of the group health volume of business. I should say that perhaps we have also been making provisions conservatively there. Only maybe time will tell as to how this pans out. Generally, I think we have been prudent when it comes to claims and claims provisioning, which is also reflected in the higher LRs. We will see it as the next quarter unfolds and perhaps at the half-year stage, we will have a much clearer picture.
Got it. Got it. Basically, just again, simplifying the question that last year you were at 110% combined. Honestly, first quarter was a little on the higher side. Is it fair to tell that will you be able to end up a couple of percentage higher than what you reported last year, or you think you're competent to deliver a similar kind of combined for the full year? In the current year, I mean to say it's closer to 110% kind of a number.
You also have to see the change happening in the UIM number. If you go to slide or page 46, we have presented both the expense of management level on full premium and on one-by-one premium. You will see that from 33.3%, it has come down to about 30.4%. There is a reduction which has happened in the cost absorption. Our intent will also be to continue and maintain that trend. When that happens, it can possibly start reflecting even on the COR.
Got it, sir. Thank you very much. Those were my questions.
Thank you. A reminder to all participants, anyone who wishes to ask a question may press star and one on their touchstone telephone. I repeat, anyone who wishes to ask a question may press star and one on their touchstone telephone. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Thank you. Ladies and gentlemen, as there are no further questions, I now hand the conference over to the management for closing comments. Over to you, sir.
Yeah. Thanks to everyone for joining in the call. Stay safe. Stay healthy. Thank you.
Thank you. On behalf of DAM Capital Advisors Ltd, that concludes this conference. Thank you for joining us, and you may now disconnect your line.