Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chola MS recorded a gross direct premium of INR1,921 crores with a growth rate of 14.2%, outperforming the industry growth of 12.4%.
- The company's expense of management for the quarter decreased to 33.35% from 33.87% in the corresponding quarter.
- The claims ratio for the quarter improved to 72% from 74.5% in the corresponding quarter.
- The combined ratio for the quarter improved to 108.8% from 112.9% in the corresponding previous quarter.
- The profit before tax for the quarter increased significantly to INR179 crores from INR88 crores in the corresponding quarter.
Negative Points
- Retail health growth was 9%, which is lower than the multi-line insurers' growth of 11.4%.
- Motor business growth was only 3.2%, which is below the industry average.
- The impact of Cyclone Remal resulted in a loss of INR6.3 crores.
- The company's return on equity for the quarter was 5.2%, which is not annualized and may indicate lower profitability.
- The company has not yet considered the SEBI circular regarding delisting, which could affect shareholder value.
Q & A Highlights
Cholamandalam Financial Holdings Ltd (BOM:504973, Financial) Q1 FY '25 Earnings Call Highlights
Q: Sir, my first question is on the holding company, that SEBI now given a provision that if the holding company derives more than 75% of the value from the listed entity of that holding company, they have a choice to delist themselves. Given we at the current market cap, we derive bulk of the value from one of the listed entities, so just wondering whether the Board of holding company has thoughts on the SEBI circular to create value to yourself and minority shareholders in that sense.
A: Yes. So thank you, Sanketh. They are aware of this circular, and the Board has no discussion on the circular at this point in time. (Sridharan Rangarajan, Non-Executive Director)
Q: How should we think your motor strategy going ahead because that was always our mainstay and we have grown meaningfully below the industry, at least in the current quarter at 3.2 percentage?
A: One can say that at least for the first months, it was a conscious tactical slowdown. In June, our growth rate in motor was 9.3% as against the industry growth rate of 5.9%. We are growing faster in fire and other commercial lines, but motor still remains our lifeline, and we will continue to grow. (Vasudha Sundararaman, Non-Executive Independent Director)
Q: Any guidance you want to give that -- as you rightly said, in the month of June and July, you did well. So we can expect a double-digit growth from a full year point of view with respect to motor business given the first quarter looks a little muted?
A: I would tend to think so because our long-term premium that rolls in is quite strong in the second half of the year. So double-digit growth in motor is very much possible. (Vasudha Sundararaman, Non-Executive Independent Director)
Q: Our retail growth is a little muted. As you highlighted in the initial remarks, it's 9 percentage, but group health has done very well. So if you can give a little bit of color on group health, which means where you're growing, whether it is again banca led or a group employee cover, and a long-term strategy on this piece and why it gives you comfort today to do that business if it is employee-employer compared to our previous strategy being very cautious on that particular space.
A: While our group health volumes have risen, we are still probably somewhere five from the bottom. We are focusing on the SME segments and leveraging synergies within the group. Our overall market share in group health would continue to be low. (Vasudha Sundararaman, Non-Executive Independent Director)
Q: Sir, just a clarification on the EOM. So what is the glide path and by when we hope to be at 30%?
A: The regulator had given us a three-year time frame ending with fiscal year '25, '26 to align to the 30% mark. We have been progressing in that direction, and we are confident that we will attain that level by that time. (Vasudha Sundararaman, Non-Executive Independent Director)
Q: Sir, just one question from my side. And if you could give some guidance in terms of how your financials could look like under IFRS?
A: There will be an element of deferred acquisition cost and discounting on the TP claims, which may have a positive impact. We are yet to evaluate the full impact in terms of the current business. (S. Venugopalan, Chief Financial Officer)
Q: Our solvency has improved to 192, still will it be okay to raise sub-debt or given the profitability looks better and growth seems to be in line with the ROEs or it's an option you have, but you will I mean just wanted to understand, it will get preserved in the current year or you see that solvency to be self-funded by your own profits?
A: The solvency currently at a comfortable level of 1.9 times. We have approval from the board for an amount of INR100 crores of the additional tier two as per regulation. However, we are yet to take the call. (S. Venugopalan, Chief Financial Officer)
Q: I was looking at data on channel-wise mix. And I was just curious what proportion of business that you kind of highlight from agency actually comes from POSPs?
A: Chola Insurance Express, our own captive agency, is part of the corporate agent captive, which is reflected there. The agents and POSP combination should be about 15.5%. The trend of POSPs operating under brokers is going up. (Vasudha Sundararaman, Non-Executive Independent Director)
Q: I just wanted to get a feel of the work that we're doing in the digital ecosystem. Will it be encompassing any more features like payments, et cetera? Or it will be confined to insurance only?
A: Under the regulations, we can do largely only the insurance business. Should the insurance amendment bill go through, then we could get into allied areas linked to insurance. We are working on a digital transformation within the company, including ERP transformation and enabling microservices and APIs for partners. (Vasudha Sundararaman, Non-Executive Independent Director)
Q: Any plans for listing this insurance arm separately, sir, is that under discussion? Are there any timeframe? Long-term timeframe that we're looking at?
A: The Board of the CFHL would take an appropriate call. There's no such discussion as of now. (Sridharan Rangarajan, Non-Executive Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
