Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cholamandalam Financial Holdings Ltd reported a gross direct premium growth of 9.2% in Q2, outperforming the industry growth of 1.7%.
- The company achieved a half-year top-line growth rate of 11.5%, compared to the industry growth of 6.7%.
- The claims ratio improved by 1.2% to 72.6% from 73.8% in the previous year.
- Investment income for the quarter was robust at ₹342 crores, contributing positively to the financial results.
- The company is progressing on digital initiatives, including migrating its private car portfolio to a cloud architecture, enhancing operational efficiency.
Negative Points
- The company's expenses of management increased to ₹32.18 in Q2 from ₹29.7 in the corresponding quarter, indicating rising operational costs.
- The operating expense ratio increased from 36.3% last year to 37.4%, impacting the combined ratio negatively.
- The motor own damage (OD) loss ratios are higher than historical levels, particularly in the commercial vehicle segment.
- The company faced challenges due to NatCat events, such as floods in Andhra, Telangana, and Surat, impacting financial performance.
- There is uncertainty regarding the regulatory changes affecting long-term policy accounting, which could impact future financial reporting and expense management.
Q & A Highlights
Q: What is the board's plan for value realization for shareholders of Cholamandalam Financial Holdings Ltd?
A: Mr. Sridharan Rangarajan, Non-Executive Director, stated that the board has not yet considered this aspect but will take an appropriate call at the right time. Currently, no such discussions have taken place.
Q: The OpEx ratio has increased from 36.3% to 37.4%, impacting the combined ratio. How do you see this playing out in the future?
A: Mr. Sridharan Rangarajan explained that the increase is due to tech spending, which will continue into the next year. The company is conservative in recognizing reinsurance commissions, which could improve the combined ratio if no further NatCat events occur.
Q: The motor OD loss ratio seems higher than historical levels. Is this the new normal?
A: The higher motor OD loss ratio is attributed to a higher component of commercial vehicles in the mix. The company expects the loss ratios to stabilize and improve in the second half of the year.
Q: With a 20% annualized ROE in the first half, is this sustainable?
A: Despite a one-time income tax reversal, the trend over the quarters shows improvement, and there is no reason why this cannot be sustained.
Q: How will the company handle the transition to recognizing long-term policies on a one-by-one basis?
A: The industry is pursuing discussions with the regulator. The change affects accounting recognition but not cash flow. The company will continue to engage with partners to adapt to this change.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
