Cholamandalam Financial Holdings Limited — Q4 FY26 earnings call

Call held 8 May 2026

Management summary

Cholamandalam Financial Holdings reported a mixed Q4 FY26, with strong GWP growth driven by reinsurance and non-crop business, despite a significant hit to GDPI from the loss of crop insurance. While the company maintained its motor market share and improved motor OD pricing, profitability metrics like claims ratio and combined ratio were impacted by higher motor claims and increased reserving. The solvency ratio also saw a decline. Management is focused on improving the combined ratio and achieving a 15%+ ROE in the medium term, with a strategic transition to Ind AS planned for FY28.

Highlights

  • Gross Written Premium (GWP) for FY26 reached INR 8,904 crores, demonstrating strong overall premium growth.

  • The motor segment maintained a market share of 5.25%, with the car portfolio growing robustly to 49% of total motor premium.

  • Cholamandalam MS is among the top 3 players in operating expense efficiency, having reduced its opex proportion significantly over the last 3 years.

  • Recent motor OD pricing corrections have led to a 7-8% improvement in price realization, expected to reduce OD loss ratios in the next 6 months.

  • Management reiterated a medium-to-long term target to maintain a 15%+ Return on Equity (ROE).

Concerns

  • Gross Direct Premium Income (GDPI) for FY26 was INR 7,762 crores, negatively impacted by INR 590 crores due to the loss of crop insurance business.

  • The claims ratio for FY26 was 81.3%, an increase of 2.71% YoY, primarily due to rising motor OD claims and increased motor third-party (TP) reserving.

  • The combined ratio for FY26 stood at 115.2% (112.2% without 1/n effect), reflecting the higher claims and reserving impacts.

  • The solvency ratio declined to 1.96x from a previous level of 2.18x, as higher claims growth necessitated pulling in more capital.

  • The absence of motor TP premium increases for 4-5 years, coupled with rising inflation (minimum wages, medical), continues to pressure motor TP loss levels.

Key financials

  1. GDPI ₹7,762 Cr
  2. GWP ₹8,904 Cr
  3. Claims Ratio 81.3% +2.7%YoY
  4. Combined Ratio 115.2%
  5. ROE 10.4%
  6. Solvency Ratio 1.96× -10.1%YoY

What they filed

Q1 FY27: revenue up 19.6%, net profit up 42.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue8,090 8,489 8,913 9,296 9,461 +17%9,949 +17%10,366 +16%11,114 +20%
EBITDA4,553 4,718 5,204 5,154 5,102 +12%5,462 +16%— —
Net profit1,125 1,093 1,362 1,260 1,214 +8%1,386 +27%1,626 +19%1,789 +42%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Liquidity Liquidity disclosed Investment corpus at year-end was INR 19,050 crores (without fair value change). Mark-to-market gains in equity were INR 137 crores, with a deficit of INR 112 crores in the debt portfolio at year-end. This position has since reverted to INR 302 crores in equity.
    The investment corpus as at end of the year was about INR19,050 crores without the fair value change. The company had a mark-to-market gains of INR137 crores in equity and a deficit of INR112 crores in the debt portfolio as at the end of the year. As you're aware, the mark-to-market gains position in equity was rendered lower due to the market meltdown from the geopolitical uncertainty. The position has reverted to a level of about INR302 crores as of yesterday.

Guidance & targets

Accounting Transition

  • Transition to Ind AS Accounting Transition · FY28 · High confidence April 1, 2027
    The Board of the company, after a careful evaluation, has decided that the company will seek forbearance for transitioning statutory accounting to Ind AS from April 1, 2027.

    — V. Suryanarayanan, Managing Director – Cholamandalam MS General Insurance

Profitability

  • Combined Ratio Profitability · FY28 and subsequent years · Medium confidence Significant drop in year of adoption, then level out
    It is fairly clear that there would be a significant drop in combined ratio in the year of adoption, but would level out over the years.

    — V. Suryanarayanan, Managing Director – Cholamandalam MS General Insurance

  • Return on Equity (ROE) Profitability · Medium-to-long term · High confidence Towards 15%
    help us in bringing the combined ratio back to a controllable level and to look at an ROE which is towards the 15%.

    — V. Suryanarayanan, Managing Director – Cholamandalam MS General Insurance

  • Return on Equity (ROE) Profitability · Medium-to-long term · High confidence 15% plus
    the intent would be from a medium- to long-term perspective, maintain the 15% plus ROE guidance.

    — Rajive Kumaraswami, Managing Director Designate – Cholamandalam MS General Insurance

Motor Underwriting

  • Motor OD Loss Ratio Motor Underwriting · Next 6 months · Medium confidence Reduction
    Over a period of last 2 to 3 months, we have seen about 7% to 8% improvement in the price realization for us, which gives us the confidence that over the next 6 months, we should start seeing the reduction in the motor OD loss ratio.

    — V. Suryanarayanan, Managing Director – Cholamandalam MS General Insurance

What to watch in Q1 FY27

Motor OD Loss Ratio Improvement

Next 6 months
Current OD claims ratio delta about 10% (higher than peers)
Target Reduction in motor OD loss ratio

Why it matters

Direct impact on combined ratio and overall profitability, key to achieving ROE target.

Over a period of last 2 to 3 months, we have seen about 7% to 8% improvement in the price realization for us, which gives us the confidence that over the next 6 months, we should start seeing the reduction in the motor OD loss ratio.

Risks & concerns

  • Loss of crop insurance business

    medium

    GDPI for FY26 was impacted by INR 590 crores due to the loss of crop insurance business consequent to re-tender.

    Management acknowledged

  • Higher claims ratio and combined ratio

    medium

    Claims ratio for FY26 was 81.3% (up 2.71% YoY), and combined ratio was 115.2%, primarily due to rising motor OD claims and increased TP reserving.

    Management acknowledged

  • Decline in solvency ratio

    medium

    Solvency ratio decreased to 1.96x from 2.18x due to higher claims growth pulling in more capital.

    Management acknowledged

  • Absence of motor third-party premium increase and inflation impact

    medium

    Motor TP pricing has not increased for 4-5 years, while minimum wages and medical inflation are rising, impacting motor TP loss levels.

    Management acknowledged

  • Uncertainty regarding regulatory changes to EOM and intermediation costs

    low

    Potential regulatory changes to intermediation costs could impact premiums and float, creating uncertainty.

    Management acknowledged

Q&A highlights

7 direct
Growth strategy post crop insurance loss and 2-wheeler slowdown Direct
what was lost will definitely we certainly hope to get it back in the crop side... conscious reduction in 2-wheeler... car side steadily, continuously... commercial vehicle book is now is fairly stable... plans to grow the commercial space.

Clarifies how the company plans to recover lost GDPI and grow, shifting focus from 2-wheelers to cars and commercial lines.

Asked by Sanketh Godha

ROE improvement given lower leverage and higher combined ratio Direct
OD is where -- while it has risen... that is an area of correction for us... price realization for us, which gives us the confidence that over the next 6 months, we should start seeing the reduction in the motor OD loss ratio... help us in bringing the combined ratio back to a controllable level and to look at an ROE which is towards the 15%.

Management outlines specific actions (OD claims correction, pricing improvement) to drive ROE towards 15% despite current challenges.

Asked by Sanketh Godha

Impact of IFRS transition on claims ratio and ROE Direct
Motor TP will have a discounting element as you move into IFRS. That will bring in a significant amount of benefit back into the P&L... transition to IFRS is from April '27.

Provides clarity on the financial benefits of IFRS adoption, particularly for motor TP provisioning, and corrects the timeline for its implementation.

Asked by Bunty Chawla

Future of expense ratio post EOM glide path Direct
30% would be the norm, and there is no further glide path... efficiency that has been brought in is for real and for the future as well... any reduction that the regulator mandates can only benefit us from hereon.

Confirms the end of the EOM glide path and management's confidence in maintaining cost efficiencies, while also highlighting potential benefits from regulatory changes in commissions.

Asked by Bunty Chawla

Decline in solvency ratio and plans for improvement Direct
claims growth is higher, some in terms of a claims ratio. Therefore, it has pulled in more capital... With the improvement in the claims ratio, it should again move back... money is getting flowed back into the business to support growth and solvency level.

Explains the reason for the solvency ratio decline and outlines how it is expected to recover through claims ratio improvement and internal capital generation.

Asked by Rachna Kukreja

Strategy for motor underwriting and reducing losses Direct
motor combined ratio levels inch up... absence of any TP price revision... motor OD pricing correction, whereby we are seeing somewhere about 7% to 8% improved pricing... TP, of course, it's a government decision.

Details the challenges in motor underwriting (TP pricing, inflation) and the company's proactive steps (OD pricing correction) while acknowledging external dependencies.

Asked by Rachna Kukreja

Overall ROE guidance and factors influencing it Direct
intent would be from a medium- to long-term perspective, maintain the 15% plus ROE guidance... whatever it takes, whether it is managing float income or combined ratio, we will work towards getting to that objective.

Reaffirms the long-term ROE target and highlights management's commitment to achieving it through various levers, including float income and combined ratio management.

Asked by Ritika Dua

3 min read 7 chapters

Detailed narrative

Q4 FY26 Performance Overview

Cholamandalam MS reported a Gross Direct Premium Income (GDPI) of INR 2,048 crores for Q4 FY26 and INR 7,762 crores for the full year. Gross Written Premium (GWP) stood at INR 2,349 crores for Q4 and INR 8,904 crores for the full year. The company's premium received in advance on long-term non-motor products was INR 410 crores, representing a market share of 3.3%.

Impact of Crop Insurance and 2-Wheeler Business

The GDPI was significantly impacted by the loss of crop insurance business, which reduced Q4 GDPI by INR 124 crores and full-year GDPI by INR 590 crores. Additionally, the company consciously reduced its 2-wheeler book, leading to a volume reduction of over INR 225 crores last year and a percentage drop from 19.6% to 10.6% of the motor composition. Management expects to regain the lost crop business in future tenders.

Motor Business Performance and Strategy

The motor segment maintained a market share of 5.25%. The composition of the motor book was 49% in cars, 40% in CVs, and 10.5% in 2-wheelers, with 24% of total motor premium derived from new vehicles. The company is steadily growing its car portfolio and maintaining stability in the commercial vehicle book. Efforts are underway to grow the commercial space and improve renewal rates through digital initiatives like the upcoming 'Chola Xceed' app.

Profitability and Combined Ratio Challenges

The claims ratio for Q4 and FY26 was 81.3%, an increase of 2.71% YoY, primarily due to rising motor OD claims and a prudent 10% higher reserving for motor TP losses compared to peers. This led to a combined ratio of 115.2% for the full year (112.2% without 1/n effect). Management noted a 7-8% improvement in motor OD price realization in the last 2-3 months, expecting a reduction in OD loss ratios in the next 6 months to bring the combined ratio to a controllable level and achieve a 15% ROE.

Solvency and Capital Management

The solvency ratio for FY26 stood at 1.96x, a decline from the previous level of 2.18x. This reduction was attributed to higher claims growth necessitating increased capital allocation. Despite this, the company remains profitable, and capital is being reinvested into the business to support growth and solvency, with expectations for the solvency ratio to improve as claims ratios normalize.

IFRS Transition and Future Outlook

The company plans to transition its statutory accounting to Ind AS from April 1, 2027 (FY28). Management anticipates a significant drop in the combined ratio in the year of adoption, followed by a leveling out in subsequent years. The IFRS transition, particularly the discounting element for motor TP provisioning, is expected to bring significant benefits to the P&L and net worth.

Digital Initiatives and Operational Efficiency

Cholamandalam MS continues to focus on operational efficiency, being among the top 3 players in terms of operating expenses. The company plans to launch 'Chola Xceed,' an operating app for sales personnel and channel partners, to enhance partner engagement, performance management, and ultimately improve renewal ratios. This digital push is expected to further boost efficiency and market competitiveness.

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