Cholamandalam Financial Holdings Ltd (CHOLAHLDNG) Q3 FY23 Earnings Concall Transcript

Cholamandalam Financial Holdings Ltd (NSE:CHOLAHLDNG) Q3 FY23 Earnings Concall dated Feb. 10, 2023.

Corporate Participants:

Mr. Sanket Chheda — Investor Relations

Sridharan Rangarajan — Non Executive Director

M M Murugappan — Chairman and Non-Exe.Director

Venugopalan Srinivasan — Chief Financial Officer

N. Ganesh — Manager and Chief Financial Officer

Analysts:

Devansh Nigotia — SIMPL. — Analyst

Sanketh Godha — Spark Capital Advisors — Analyst

Yash Mehta — Steinberg Asset Management — Analyst

Parag Thakkar — Anvil Wealth — Analyst

Prateek Poddar — Nippon India Mutual Fund — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q3 FY ’23 Earnings Conference Call of Cholamandalam Financial Holdings hosted by DAM Capital Advisors limited. 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. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Sanket Chheda from DAM Capital Advisors. Thank you, and over to you.

Mr. Sanket Chheda — Investor Relations

Thank you. A very good morning to all of you. We have with us the entire management team of Cholamandalam Financial Holdings to discuss the Q3 results. So, we are accompanied by Sridharan Rangarajan who is Director, Mr. N. Ganesh, who is the CFO, Mr. Suryanarayanan, who is MD, Chola General Insurance and we have Venugopal, who is the CFO, Chola MS General Insurance.

So without further delay, I will hand over the call to the management for their opening remarks, followed by question and answer. So over to, sir.

Sridharan Rangarajan — Non Executive Director

Good morning to all of you. This is Sridhar. I have with me my colleagues, Suryanarayanan MD and Mr. Venugopalan, CFO of Chola General Insurance and Ganesh, our CFO of the company.

The Consolidated results are the company consists of Cholamandalam Investment [Indecipherable] Company Limited, Cholamandalam MS General Insurance Limited as subsidiaries and Cholamandalam MS Risk Services Limited as a JV. The total income for the quarter ended December 22 increased by 28% to INR4,777 crores, while profit after tax increased by 33% to INR720 crores.

Cholamandalam Investment and Finance Company you might have heard the call and enter details on representation and transcripts are well available. Chola has delivered the best set [indecipherable] collection and profitability in Q3 FY ’23. Chola has gained market share across products and meant in retail finance and other business units. As of December 31, 2022, stood at about 103,589 stores. This is a milestone. The company holds strong liquidity position, ROE is at 19.1% and the CAR as of December 31, 2022 was at 17.75%.

Cholamandalam MS General Insurance Company this sudden return premium of INR1,625 crores in Q3 FY ’23, an increase of 23% over the previous year, driven by growth across channels and partners. The company continues to have dominant presence in motor segments started really diversifying gross motor ecosystem. In Q3, the industry grew by 18.5% with sector players by 32.3%. YTD December 2022 industry grew by 16.2% and private sector players grew by 21.6%. For the same period Chola MS delivered a growth of 27.5%. In motor, Chola MS improved the market share from 4.9% to 5.3%. In PA growth, the market share to 4.9% in five business the growth is at about 37%. YTD December motor representing 69.3 percentages of portfolio grew by 24.5%. Commercial representing 14.3 percentages of the portfolio grew by 37%. Health Accident Travel and personal accidents representing 16.4 percentage of portfolio grew by 38%.

Within motor, two-wheeler and passenger car share 21% and 36% respectively. Commercial vehicles at 44%. The company’s long term policies road plus previous year reduction the company continues to uptrend absorb the full costs or long term policies. However the UPI, get end over the long term policy is created — creating an embedded value for the balance sheet. Solvency ratio as of December end is at 2.06 compared to the same period last year, which was at 0.186 [Phonetic]. Profit after-tax for Q3 FY ’23 was INR43 crores against INR18 crores of last year. YTD PAT was at INR115 crores as against INR16 crores in the same period last year

With these comments, I would love to now open up for question answer. Thank you, again.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have our first question from the line of the Devansh Nigotia from SIMPL. Please go ahead.

Devansh Nigotia — SIMPL. — Analyst

Yes, sir. Thanks for the opportunity. Just couple of questions. Sir, one is in case of — in case of our motor book, sales — would we have significantly build the two-wheeler NPV book. And that has come at a very high cost. So where do we see this mix settling in terms of our targeted, mix between TV, two wheeler and commercial vehicle. Any thoughts if you can share.

M M Murugappan — Chairman and Non-Exe.Director

Presently the two wheeler mix at about 21 22 or so and passenger cars is at about 35 or so over the medium term with the buoyancy in commercial vehicles emanating we would expect to see commercial vehicles at roughly at about 50% of the book and balance between two wheelers and cars. We’ve also seen the regulator coming up with a draft exposure on long term relating to tractors if that were also left to come through, then we could see a growth even in the tractor segment as well. But broadly 50% commercial vehicles and non commercial vehicles and 50 is the mix that we see going forward.

Devansh Nigotia — SIMPL. — Analyst

Okay, so the mix will remain broadly — so we’ve achieved the targeted mix that we were looking for a long period of time and we’ve achieved that now.

M M Murugappan — Chairman and Non-Exe.Director

I think given our channel preference, which is well diversified across and the financial tie-ups including the sister company relationship we would expect the mix to settle around this level.

Devansh Nigotia — SIMPL. — Analyst

Okay. And on how do you see the competitive intensity in motor insurance both in OD as well as two wheeler? And if vehicle wise you can share your commentary how is the intensity right now?

Sridharan Rangarajan — Non Executive Director

See the competitive intensity is at its peak across categories. It is not that it is in any way greater or lower in any particular product segment. Quite naturally, the peak competition would be in the cars and two wheelers, especially, in the new vehicle space in the OEM segments. To be a relatively lower in the commercial vehicle not space. And the key is having long standing relationships with financial partners. So thankfully Chola MS has these partnerships in place which would help us.

Devansh Nigotia — SIMPL. — Analyst

Okay, Okay, because — so we find the competitive intensity high in PV and two wheeler and that is about that we have built in last one, two years. So this led confused on — on the targeted you know combined ratio that we want to achieve. And also how are you thinking in terms of risk reward and phrasing in different vehicle segments. So can you just share your thought process?

Sridharan Rangarajan — Non Executive Director

The competitive intensity with respect to pricing discounts as mend that the Own Damage LRs have remained at an elevated level for almost all players. You could possibly have heard it in other investor calls as well. But then Chola MS has been by virtue of its mix and granular choice has being able to keep the motor OD loss ratios early. For instance in Q3 we are at about 68, Venu?

Venugopalan Srinivasan — Chief Financial Officer

Yes..

Sridharan Rangarajan — Non Executive Director

So, were we been able to reduce it from Q2 level and from Q1 as well. So, I think this is more or less the level maybe another 1% improvement can possibly come through. But then that is where we expect this to settle for the time being unless the discount situation improves. So that is what we would want to think as far as the OD LRs are concerned.

As I always maintained in the past, the motor third-party LRs would also depend on the kind of price increase that the government is considering for the ensuing year from April. It would largely depend on that. That is what would make the overall motor portfolio as such in totality. We — that is where the COR would rest. But then let us also understand that it is the motor portfolio, which brings in the investment book which companies use for building the corpus as well as generating the investment income.

Devansh Nigotia — SIMPL. — Analyst

Okay. And how do we see the competitive — competitive intensity in terms of remunerating the distribution channel? Because we’ve seen opex limit [phonetic] across all the players. So, is it easing? Or is it still at the core? Can you share some direction on where is it heading?

Sridharan Rangarajan — Non Executive Director

Today — see competitive intensity is there and it’s a function of choice as to where we want to grow and how much we want to grow. It is always there. We have always — we have already seen some larger players tone down growth in the motor segment. And in fact, even if we look at our growth, our growth is — in motor is more or less on the same level as that of the industry. So we are just about maintaining the market share, so to speak.

The private sector has grown at 20.8, we are at 24.5. So that is the level that we have seen our growth. And our reported growth, let’s also consider that, it takes in the long term premium, which has turned in into premium from previous years. So that element is also there, that addition is also coming in.

So, coming back to your question on market sourcing costs, the market aggression is there. But then we would have to manage our costs to stay with our choices as to line, line of business that we want to be in and also the geographies that we want to operate.

Devansh Nigotia — SIMPL. — Analyst

Okay. That’s it from my side. I’ll just come back in there.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Sanketh Godha from Avendus [Phonetic] Spark. Please, go ahead.

Sanketh Godha — Spark Capital Advisors — Analyst

Yes. Thank you for the opportunity. Sir, we mentioned that last quarter we took some corrective measures with respect to health and PA to improve a loss ratio. But if you look at the third quarter number, it still remains a little on the higher side, around 17 percentage, a marginal improvement compared to what we have done it in second quarter.

So just wondering whether it comes with a lag or is it because the green severity seems to be higher or pricing competition, let’s say, just, higher loss ratio. That’s my first question.

Sridharan Rangarajan — Non Executive Director

Yes. So on the health pillar, we have made some corrections with respect to pricing, both in our retail products as well as the products that we offer to our public sector bank tie-ups. So there is a price correction of about anywhere between 20% to 25% which has been done. And we do expect that the benefit of such price increase will start reflecting in loss as we go along.

Sanketh Godha — Spark Capital Advisors — Analyst

Okay. So it’s more to be get reflected in the next year, rather than getting reflected in the current year, because as this will run off, then only you’ll see the benefit, right? That’s the way I should understand, sir?

Sridharan Rangarajan — Non Executive Director

The larger effect would be seen, but we should start seeing the trend even for Q4 when we get there.

Sanketh Godha — Spark Capital Advisors — Analyst

Okay. Got it. And my second question is, the basic expense of management, because in the new regime of expense of management, which is proposed by the IRDA. It says that, you can’t breach 30 or the number for multiple increase is 30 and today we are at 40.

So any — what you call, chart — a part you want to guide us to, how you will ultimately achieve 30 whether we will increase our exposure to wholesale businesses? Currently, we are 84, 85% in retail in nature, which is OpEx intensive. So any thoughts on this you can share how gradually we’ll move in that direction without deteriorating or combined?

Sridharan Rangarajan — Non Executive Director

Yes. Two — there are two three dimensions to this question. First is that the present method of computation that 40, also includes the long-term premium that we are collecting, especially in motor, which is not reflected in the top line. So as an industry, we have represented to the regulator that while we’re evaluating and computing this limit, we should see this in total. So that is one element.

The second element is that the company may consider an entry into the crop insurance business, which can help in toning down and providing a balance for the ensuing year. So that is a thing that the board has discussed. And probably we should have greater clarity as the freeze our business plan signed later next month. That is second dimension.

The third dimension is that anyway, the regulator is also giving a glided path for reduction over a three year period. So it is not that the reduction is expected overnight. So that is also a choice. And as I’ve said before, as we attained scale, some economies of scale start kicking in, in terms of your own — our own operating expenses, which we are also seeing presently, even the present scale resulting from the 27% growth is giving us some sale.

If we look at it, our expense structure is lower than what it was in Q1. So from Q1 to Q2, we had a 3% drop and from Q2 to Q3, we have had a 1.9% drop. So this benefit should start also helping but to answer the question whether the all these will take us to 30 overnight next year, the answer is probably no. But we would well be on the right path towards converging to the stipulated number over three year time period.

Sanketh Godha — Spark Capital Advisors — Analyst

Okay, so basically, is it safe to assume that maybe somewhere around ’26 or ’27, FY ’26 or ’27 you will ultimately achieve closer to 30 kind of a figure in the Opex ratio?

Sridharan Rangarajan — Non Executive Director

Yeah, that is — that would also be a regulatory requirement. The window is about three years.

Sanketh Godha — Spark Capital Advisors — Analyst

Got it, sir.

Sridharan Rangarajan — Non Executive Director

So we need to have our plans drawn up to converge to that by that timeframe.

Sanketh Godha — Spark Capital Advisors — Analyst

And when you set crops are — just wanted to understand that in crop, you intend to have it very closer to your overall market share of the company, your exposure or you are okay to go a little overboard and then also want to understand that in crop given — given you’re relooking into it, it will be more into that 81, formula only where you will do or you’re okay to do in the normal way of doing crop also?

Sridharan Rangarajan — Non Executive Director

These are one proportion to our total time, we would like the crop insurance to be somewhere in the 10% to 12% range is what we would like to have, not to be excessively dependent on that line would be the broad guideline. That is A. And number two, we will also have to clearly look at the guidelines, the crop insurance guidelines that the government is expected to come up with…

Sanketh Godha — Spark Capital Advisors — Analyst

Right.

Sridharan Rangarajan — Non Executive Director

Relating to the various methods that are there today, we do have the loss corridor options that are available. Then there are pros and cons of doing the loss corridor method as well as the conventional PMFBY, which will have to be evaluated.

Sanketh Godha — Spark Capital Advisors — Analyst

Okay, fair sir. And the another question, which I had was, was basically, when I see your one of the slides where you mentioned that your market share in the new two wheeler is eight percentage, which I believe at the start of the year that is in 1Q FY ’23 was 10 percentage. So, it has come up a better.

So, anything to read there sir, is it easy conscious decision where you have lowered your market share, because of the intense competition or in general it has become a crowded chase. And that’s why you saw a reduction in the market share?

And if I want to connect it with the Chola Insurance expert officers, which have come down from last year of around 500 officers to 350 officers, has that also played a role? Just a broader picture if you can — or both are unrelated. Basically, if you can tell me on those lines will be helpful sir? The market share in two wheelers is a function of the competitive intensity and the economic viability given the pricing and the discounts. We have pruned the present, some geographies and in some product categories make models to taking a granular look at the loss experience and the related costs, sourcing costs. So that is what has come about there. And the — some of the — it’s a true moment when you look at even the — our location and presence, while we have stepped in and got into newer location, some locations, which probably haven’t really grown, or haven’t lived up to the potential. So we’ve also taken the call to reduce our presence in some of these locations. So that is a, I believe constant evaluation of market related opportunities that exist, which is what the teams have been doing.

Sridharan Rangarajan — Non Executive Director

Sir that is predominantly the reason why your motor already loss the show have come down to 68, the calculation, the recalibration of the…

Sanketh Godha — Spark Capital Advisors — Analyst

It is the function of that as well very clearly, because we have made our choices and those choices seem to be working in terms of managing the overall loss ratios. And these are not one quarter choices; these are continuous choices that we make, because any choice that we make leaves with us and cast its shadow for at least one year. And in case of long-term, it will have it shadow for three, four years. So these are continuous choices that the teams make. Got it sir. And maybe finally, if I can ask, a data keeping question, how much of our total premium is now from long-term in our GWP in the current nine months or third quarter of FY ’23? And finally, one more…?

Sridharan Rangarajan — Non Executive Director

I’ll ask Venu to answer that.

Venugopalan Srinivasan — Chief Financial Officer

So the position as of December ’22, we are carrying INR1,381 crores of the premium, which belongs to the…

Sanketh Godha — Spark Capital Advisors — Analyst

What is the percentage of the premium — it’s about eight point, roughly about 8.8%?

N. Ganesh — Manager and Chief Financial Officer

No, actually we embedded asset of nine months is at about 9.8%.

Sanketh Godha — Spark Capital Advisors — Analyst

9.8%, is right sir?

N. Ganesh — Manager and Chief Financial Officer

9.8%.

Sanketh Godha — Spark Capital Advisors — Analyst

Okay.

N. Ganesh — Manager and Chief Financial Officer

More or less, two, three plus at about 2.7, so it’s more or less settled at now at about 9.7%, 9.8%.

Sanketh Godha — Spark Capital Advisors — Analyst

Got it. Got it. Perfect, sir. Yes, that’s it from my side the question. Okay.

Operator

Thank you. [Operator Instructions] We have a next question from the line of Yash Mehta from Steinberg Asset Management. Please go ahead.

Yash Mehta — Steinberg Asset Management — Analyst

Hi. Thanks for the opportunity. One question on what was reported last year. If I look at it your March presentation in 2022, there were two one-off INR200 crores of COVID claims and INR263 crores of IRD order impact on write-off of deferred acquisition costs balance. That INR463 crores ideally shouldn’t have continued in the current year. So, one would have expected that about INR100-odd crores per quarter would be added to the bottom line of the company from last year to this year. But the actual translation has been closer to 20% of that in terms of improvement in what our absolute numbers are. How do you reconcile the one-offs and look at the steady state profitability because even today, our ROE is not reflecting the old ROE level pre-COVID ROE level?

N. Ganesh — Manager and Chief Financial Officer

Yes. To answer the question on the INR463 crores, which you’ve talked about as a part of health COVID claims and prepaid expenses, which were written off in the last year ’21, ’22.

See, there are things which are happening as a part of the model third-party change, okay. There are benefits that were flowing the last year in the form of the lockdown benefit another thing is also not there. There — and there costs associated one-time costs, there is a one-time benefit also float in the last year, it was not there. And you know very well that the model third-party, there is an inflation, the premium increase is not matching the other than the long-term part of it.

So, with that, the inflation element itself is costing us more at this one portion as a part of that is the reduction. Second part is also that the growth is around 28%. The long-term share, we have already said that around 9% to 10% on the mix is also there. Coupled with that, there is no prepared content that was been followed into the ’22, ’23, the entire absorption is taking into the central part.

So just I’m not putting the numbers here, there are positives and negatives made in the earlier part, there is an element of continued level of the growth is absorbing the cost also is part of the is intact. This will create an embedded value there as part which the earnings will come into the next year forecast.

Yash Mehta — Steinberg Asset Management — Analyst

Do you see, let’s say, improvement in our ROE from here on. Because the way it seems we are increasing the share of crop business. And that’s probably not as profitable as the overall business today. And on top of that, we are kind of adding, let’s say the long-term policies continue. So just want to understand if our ROE will see pickup and where do you see it stabilizing?

N. Ganesh — Manager and Chief Financial Officer

Definitely the ROE will pick up, because the growth in ’22, ’23 is, you know, around 28%. We are more than the industry from the point of view of that. That’s why their earnings will take time, it’s coupled with the long-term, it will take a long time for us to take the profitability. Our ROE will improve in the next year — next period onwards. But we have already improved in terms of the — you already set 20% of the thing only improvement is there, that is only because of the point on the growth and the long-term point of view. And also on the TP front, the inflation is there. So coming years, definitely you will see that the ROE to improve, because they already — every both ways acquisition cost is absorbed in the current year.

Yash Mehta — Steinberg Asset Management — Analyst

Understood. And what you’ve seen is your partners like IndusInd Bank and Chola the disbursements on vehicle finance have been absolutely stunning for the last quarter. But when we look at that translating into our growth from these channels, it’s not really coming through that well. So are there nuances which I’m missing here in terms of why our growth from these channels is not reflecting the growth that they’ve seen in their book, because they’ve started lending to acquire these vehicles. So ideally, one should see them insure — them selling insurance on this vehicle?

Sridharan Rangarajan — Non Executive Director

Yes. Your observation is partially right, to the extent that in the case of new vehicles, the control over the insurances with the dealers, whether it’s cars or two wheelers or OEMs, the financials control over that would be definitely lower. So the financials control always comes in only in the case of medium term — in used very certainly and in case of new vehicles in the later years. So to that extent, it will not reflect directly because that business is anyway it’s market related, which is controlled by the OEM on the dealerships. So it will not reflect the immediate increase in disbursements is not going to reflect directly in insurance stream.

Yash Mehta — Steinberg Asset Management — Analyst

Understood. And given, let’s say, the implications of the expense on management regulation that the regulator has now come up with. We consistently for the last two years have had money from shareholders account getting transferred to the revenue account. How do you see the implications of this on us? Because this is relevant to us, because we are above the 30% mark, which is — how do you see it? Is it positive? Is it negative? How do you approach this regulation? And will it benefit you gain cross subsidize better? I’m just trying to understand from a strategic perspective.

Sridharan Rangarajan — Non Executive Director

See from a pure strategic perspective, it only clear the compliance related aspects separately. From a market perspective, the sourcing cost is not really going to reduce. The intermediary asked, is not really going to reduce. So it’s more a question of how nimble players are in choosing the geographies profitable, and yet are able to manage both the loss ratios and the cost. So the game is all about managing your overall combined ratio, and not really to look at any element in isolation. So we cannot say that that you may have a higher cost. But if your loss ratios are okay, then it justifies. So the economic view is what players would start taking, which is what they have been taking as well. And that is how business would run. In that sense the UIM — the freeing up the UIM and the flexibility being given to insurers and insurer bonds is a welcome stop.

Yash Mehta — Steinberg Asset Management — Analyst

Understood. Fair enough. I’ll come back for other questions. Thank you.

Operator

Thank you. We have a next question from the line of Devansh Nigotia from SIMPL. Please go ahead.

Devansh Nigotia — SIMPL. — Analyst

Yeah. So, thanks for the call. Sir, in case of health insurance idea changing that everyone is going for 20%, 25% price increases. Sir, can you just help us feeling good perspective on how is everyone in all the players how they are taking pride in? Can you just throw some light on that and we have taken 20%, 25% price increase —

Sridharan Rangarajan — Non Executive Director

No clear, Devansh, could you please speak closer to the mic or?

Devansh Nigotia — SIMPL. — Analyst

Am I audible?

Sridharan Rangarajan — Non Executive Director

Yes.

Devansh Nigotia — SIMPL. — Analyst

Yes. So we just mentioned that you’ve taken the 20%, 25% price increase and in health insurance and similar commentary has been there from one of the listed peer as well. So, can you help us understand how is the regulator’s response to this price increase and how also other players in the industry are responding to this type of price increase, is everyone taking 20%, 25% price increase or is it only few players?

Sridharan Rangarajan — Non Executive Director

Yeah. Players have stepped up prices, the PSU players have done, the Sakis have done, even large private sector players have affected price increase, which is also inevitable given the medical inflation that is prevalent. The regulators own publication is suggestive offer 12% to 14% medical inflation. So — advanced to age, especially feet also happens when in renewals when people are renewing and they are in the 8th or 9th or 10th year into age linked the pricing also goes so it is inevitable that prices go up in the health sector. So it is there and customers are paying the price if not to Chola also to other companies.

Devansh Nigotia — SIMPL. — Analyst

Okay. But this 20%, 25% price increase is beyond the price increase that happened on changing cohorts age brackets, is that the right understanding?

Sridharan Rangarajan — Non Executive Director

So it is across for example, see health insurance caters to multiple needs. It needs accidental hospitalization, so which is not really age related. It is also me — children elements which again has nothing to do, but inflation is across whether it is the incidence of an element is probably the higher, the probability is higher in an advanced age, but then other hospitalization needs also suffer this medical inflation.

Devansh Nigotia — SIMPL. — Analyst

Okay. Got it. And how health claim experienced being when the Motor TP six months regulation that had come in place? How are we seeing the settlements happening on the ground with the coach.

Sridharan Rangarajan — Non Executive Director

It is more than coach actually we have Madras High Court, which is endorsed the law, which have come in from April 1. So we would need to see as to how other high courts also appreciate and endorse this particular amendment. For the moment, what we are seeing is some improvement in faster reporting of claims is something that we are seeing on ground. But we will have to still wait and see as to how the other leading courts in the country take a view on this. And that would be critical to the way the ultimate loss ratios shape up there. The law is here. Now, it is up to the courts as to how they implement the law.

Devansh Nigotia — SIMPL. — Analyst

So by that you mean that only Tamil Nadu is during the six month intermission, and it’s not being followed by all the states?

Sridharan Rangarajan — Non Executive Director

See, Tamil Nadu has come up with the judgment upholding the six-month time limitation, very clearly. So, similar upholding will have to come in other states. And then yes, there could always be appeals that could lie to the Supreme Court. So, ultimately, we believe that this matter will get settled by the Supreme Court sooner than later.

Devansh Nigotia — SIMPL. — Analyst

Okay. I’m still confused, because I’m just trying to understand how — so let’s say the settlements which are happening after six months across India, can you help us understand how is the claim experienced, not only in Tamil Nadu, but even in other states? Are their rejection of claims because they’ve exceeded the six month limit or–?

Sridharan Rangarajan — Non Executive Director

Let me check this. The time limit is only for intimation of the claim. Settlements, court proceedings can take longer. So, there is no time limit as to the settlement itself. The tribunal and court wants to hear that particular case only after two years, there is nothing that anyone can do. That is purely the way things progress in the court. The time limit for limitation only brings in a higher level of certainty as to the liability as to how many claims are actually reported, then it’s a function of the prevalent of severity for that nature of accident or whether it’s a death or an injury and the earning potential of the individual concerned who has suffered. So that will determine the ultimate part. So this only brings in a finality and uncertainty as to the number of claims that an insurer would have to pay for ultimately. The timing of payment, if a company is more negotiated settlement favoring position takes that position, it will happen faster and if an insurer waits for the court division, then it will take longer.

Devansh Nigotia — SIMPL. — Analyst

Okay. So, I mean, I’m just trying to understand that have there been any reduction of claims which has exceeded six months’ time limit because now we are in I think Feb, so it’s already — by October there should be five months where we have seen such cases, right? I’m not sure if you’re able to understand my question.

Sridharan Rangarajan — Non Executive Director

No, it is — in Tamil Nadu, Madras High Court has clearly given a verdict for both prior to 1/4/2022 as well as accident from 1/4/2022. So, these are all strictly followed by the MHC. And other thing is also — we are also saying it fluidly from the point of view of the messages in Tamil Nadu. We are also looking at the other states also to strictly implement motor vehicles — new motor vehicles rules. But having said that it is too early at this stage to come out with the clear level of how this happens or how the MSCTs are going to pick it up, and how the high courts are going to take them. But we are monitoring each of the MSCT cases very closely in terms of that. We will definitely appeal those cases wherever it is being admitted by MSCT Khatal. That’s the process internally we have. We will be implementing it very strictly.

Devansh Nigotia — SIMPL. — Analyst

Okay. Sir, it to be implemented ban engagement still take time, it is only the Madras Court that has come up with this ruling.

Sridharan Rangarajan — Non Executive Director

No, it is the Madras High Court state they have clarified. In the MSCTs, many of the other states are also following the six months limitation. Wherever the six months is not adhered to by MSCTs, we will appeal against that.

Devansh Nigotia — SIMPL. — Analyst

Got it. Okay. And if you can also elaborate on the strategy ex motor on fire insurance, personal accident and health insurance, what is our strategy going forward? What does the target focus? What are the kinds of policies you are looking to launch, and if you can share some soft points?

Sridharan Rangarajan — Non Executive Director

I think the fire insurance — so we are — we’ve been growing in that space as was mentioned earlier. So we’ve grown now well in the nine months to-date. Thanks to our bancassurance partnerships and the general credit growth that is happening in the banks. These are being large drivers. We also have some headwinds that have been announced are more likely to come up. We could potentially see some price contraction in the fire insurance space, so that is possibly there.

And also with the kind of losses that global reinsurers have taken — sorry reinsurance costs, it can go up. So that is what both even JITV as well as other reinsurers have sort of indicated. So this will have to be priced in by all insurers when they offer their products to the customers. But nevertheless, it’s a segment that will keep growing and we would want to grow there, also as a part of our strategy to increase our proportion of non-motor business. So that is on the fire segment.

The personal accident is something which goes well with our bundle products, along with our other motor and dwelling and other related insurances that we sell. We have maintained good pace and growth to this year. And we definitely hope to keep that going, and then operate at somewhere at a 5% market share which we have presently. So that will also grow as we see.

Devansh Nigotia — SIMPL. — Analyst

Great. And in case of health insurance?

Sridharan Rangarajan — Non Executive Director

Health — see our — we’ve been growing faster in the attachment and bundled space as also the volume that we get on indemnity from banking segments. The agency segment, in fact, during the last quarter we had our new product launch, which is called the Flexi Supreme, which is doing well in the market. And we do expect the growth to come in.

As I’ve said before, ideally we would want our indemnity benefit mix to be at about 50-50. Today, it is actually loaded more in favor of our benefiter. So that mix readjustment will come by a faster growth in the indemnity over the benefit products. That’s the intent, at least to balance it at 50-50.

Devansh Nigotia — SIMPL. — Analyst

And how would you comment on, competition in health insurance, as of now, in the competition is going up or the competitive intensity is high or any level come in the direction of competition?

Sridharan Rangarajan — Non Executive Director

See, in General Insurance, in every line there is competition. So it is not that any particular line has less competition and in Health, it is more. You have five more parties who are competing in that space.

And we’re probably focusing on that as the only line of business. So I would tend to think that, the intensity is no different in the Health line of business, as compared to Motor or as compared to fire.

So it’s again, a question now for the appetite for that business. And naturally as General Insurance players, we have what father revenues which have the relative advantages, Motor has a certain advantage, fire business has a certain agent and Chola is different. So the relative choices always come.

Devansh Nigotia — SIMPL. — Analyst

Okay. And sir just last question, we mentioned that the new investment that you’re building, building it at 7.2%, 7.4% and 7.6% interest rate. So, what is the expected investment yield that we are expecting in FY 2024 and FY 2025?

Sridharan Rangarajan — Non Executive Director

See the interest rates are going up, that’s the part which the incremental investments are being deployed at the higher yields. That’s why we are talking about this, 1.6% yield. It’s till the order books are carrying at a lower yield. That’s why we are expecting around 7% yield by end of March 2024.

March 2025 is again, we need to think about what would be the interest outlook and inflation and other aspects. So, we will be — it will be more than that, basically because the order investment will be invested in the high rates. So, exactly cannot be quantified it will be more than 7% in 2025.

Devansh Nigotia — SIMPL. — Analyst

Okay. So that’s it from me. Thank you all.

Operator

Thank you. We have a next question from the line of Parag Thakkar from Anvil Wealth. Please go ahead.

Parag Thakkar — Anvil Wealth — Analyst

Yeah, sir thanks a lot for taking my question. I think my question is not on insurance business. My question is on Chola Financial Holding valuation, when we are doing so much…

Operator

I’m sorry. Your voice is breaking Mr. Thakkar?

Parag Thakkar — Anvil Wealth — Analyst

Hello.

Operator

Yes. Can you repeat your question, please?

Parag Thakkar — Anvil Wealth — Analyst

Yeah. My question is, more on Chola Financial…

Operator

I’m sorry. Your sound is muffled.

Parag Thakkar — Anvil Wealth — Analyst

And now it is okay?

Operator

Yeah. Please go ahead.

Parag Thakkar — Anvil Wealth — Analyst

So question to entire Chola Financial Holding team is that, while you are building the business of insurance taking so much of pain. Now, evaluation of Chola Financial Holding does not even reflect a single percentage out of your Chola MS Insurance business value.

Because if you see 46 persons taking Chola Investment and Finance that itself is worth INR29,000 crores, while you’re current market cap is only INR11,650 crores. So, you’re already getting a huge discount, to your holding in Chola Investment and Finance share.

And I don’t know for 50 minutes, we are discussing only MS General Insurance business where you’re after taking so much of pain you have built-up that business, but actually for a shareholder this business is available for free. So, I am — my question is what we are thinking to unlock this value? Whether any buyback or promoter trying to increase stake? What can — what is this we trying to unlock this value because see Bajaj Holding, Maharashtra Scooters, various other holding company socks are there where the value has unlocked.

Because, for example, I can give you in Bajaj Holding the promoters themselves kept increasing their stake. And so, the value finally market realized some value. Hence — now it trades at 40% discount to its value in Bajaj Group shares. While you are trading as one-third of your investment only in Chola finance and the Chola MS General Insurance whatever INR200 crore PAT [Phonetic] or whatever you are going to make is absolutely available for free. And there you have 60% stake. So my question is what we are thinking as a company to unlock this value?

Sridharan Rangarajan — Non Executive Director

Thank you, Mr. Parag for asking this question. So our job is to explain to the investor community. And I think I just want to take this for us probably the rooting [Phonetic] question also is. See we’ve come a long way in building this fine insurance portfolio. There were some challenges. In the last couple of years, we have all overcome that. Business is done very well. The growth has come back. We used to grow at CAGR of 20% plus except the last couple of years back.

We are back into that growth trajectory. We feel that the investment books size that what we have built we can work on improving it, which I think we will do this becoming years, which will definitely augur well in terms of the profitability of this portfolio that we have building. Insurance assets industry has got a long-term potential and I think we feel that that will also augur well for this portfolio.

And I think the loss ratio is currently what we are seeing is coming down. I think the work that the team is doing in terms of portfolio change — growing in terms of the product, as well as in terms of the geography that they’re doing will also help to bring the loss ratios coming down.

So, in a place where the growth is there combined with the loss ratios coming down, and investment deals going up. And with the embedded value, what we have created in the balance sheet for the long term business that we have got. I think the profitability will go up. In the next couple of years you will start seeing this franchise building such a good return to the investors.

I would leave at this stage beyond which commenting on that would not be appropriate in this call.

Parag Thakkar — Anvil Wealth — Analyst

No. Yes. Correct.

Sridharan Rangarajan — Non Executive Director

I feel that this is a choice that the investor should make. The investor will — the investor like you would probably have observed it right. And I think it will start calculating down and more people will start buying the shares. And our job is to deliver the performance. And that’s say.

Parag Thakkar — Anvil Wealth — Analyst

No that — that I appreciate, sir. That I appreciate. But the only point is, the Chola Finance is doing so well. This quarter result was absolutely phenomenal. And — so Chola Finance, right now, for example, also — I don’t know how investors miss this that, if you are buying Chola Holding, you’re getting Chola Finance at 10p.

But Chola finance — and the underlying entity is doing so well. But — so — but the point is that — just to process my point that, in order to unlock value, there is something which management also has to think on that line. So, in — you all you very rightly, and I really appreciate that. But you — so you’ve submitted about the future growth prospects of Chola MS. But my point is that, Chola MS is not getting any value only, as of now.

Sridharan Rangarajan — Non Executive Director

So, Parag, I think, your points are well taken. As I said that, the investor should take a calculated position, both in terms of the performance of the Chola Finance, as well as Chola General Insurance. Since it is a holding company, obviously, they would look at both and our job is to present these portfolio choices that we have.

And as you rightly said that, the performance of NBFC has done superbly well. Insurance has also done well. And I think my positive feeling is that, investor community will start appreciating that going forward.

Operator

Thank you. Participants are requested to restrict their question to one at a time. We have our next question from the line of Prateek Poddar from Nippon India Mutual Fund. Please, go ahead.

Prateek Poddar — Nippon India Mutual Fund — Analyst

Yes. Hi. In parts and bits, this question has been answered. But just, from a holistic perspective, we have seen substantial pullback in the opex ratios, as well as improvement in the loss ratios, despite the growth which we have witnessed this quarter. Just wanted to ask you in terms of sustainability of these numbers going forward.

Sridharan Rangarajan — Non Executive Director

Yes. See, these are choices that we have made. And I see no — why there should be any change from — in the direction as well as what we have to prove in Q3.

Prateek Poddar — Nippon India Mutual Fund — Analyst

Got it. And sir, with this UM [Phonetic] new guideline, pricing as an important lever will no longer be a major way to grow. In your view, what will be the other aspects for, let’s say, Chola to outperform the industry growth.

Sridharan Rangarajan — Non Executive Director

Currently, there is a — potential for growth is very much there, given the process to penetration and general economic growth, which will be there. We will also see Chola MS strength is also over what it has been doing in the dietary end market. So, we will have to penetrate the market. Quite naturally, we also have the prospect of about another five, six, players entering the field. And from a competition intensity, we have discussed this a few times even in this call, it’s only going to be on the rise. And it will all start in the metros and urban markets. So, the key as I would see is also in building presence and strength in the Tier 3 and such market for sustainability.

Prateek Poddar — Nippon India Mutual Fund — Analyst

Got it, sir. This is really helpful. Thanks and all the best.

Operator

Thank you. I would now like to hand the conference over to management for closing comments over to you sir.

Sridharan Rangarajan — Non Executive Director

Thank you. I think I just like to summarize a few points is that one, has done a good performance, insurance has done a growth, which is back to about 25 plus percentage, so higher than the market growth, investments also reaching about close to 14,500 probably at the yearend. We will have a portfolio mix work done on the investment side as well. Product choices, region choices, very careful work is being done.

At this point in time the leadership at all levels is fully available and they have got fully revamped a team in place. Investment as far as the IT infrastructure as well as applications, a key project is undertaken and I think it will take about couple of years for us to change the course in a far better way than what we are currently having it. All this will augur well for this insurance business. And with that, I think thank you all for participating in the call all the very best. Thank you.

Operator

Thank you.

Sridharan Rangarajan — Non Executive Director

Thank you.

Operator

[Operator Closing Remarks]