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Cholamandalam MS General Insurance reported a challenging Q1 FY26 with a combined ratio of 114.8% (111.5% ex-1-by-N), driven by a claims ratio of 81% impacted by motor third-party reserve strengthening (3.53%) and large fire claims (1.78%). Gross written premium (GWP) was ₹2,997 crore, up from ₹2,945 crore YoY, but crop insurance premium is expected to drop by ~₹500 crore annually due to state tender losses. Expense of management improved to 30.4% (ex-1-by-N) from 33.3% YoY, ahead of the glide path. Management expects motor claims ratios to ease in subsequent quarters but warns that TP reserving may remain elevated without premium hikes. The company aims to maintain GWP near last year's level despite crop headwinds, but competitive intensity and underwriting discipline pose risks. Key risk: rising severity in motor TP claims and lack of premium hikes could pressure margins further.
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Guidance to track
- Management aims to maintain GWP around ₹8,300 crore for FY26, offsetting an expected ~₹500 crore drop in crop premium through growth in other lines.
- Expense of management (ex-1-by-N) is expected to stay around 30.4% or lower, continuing the improving trend.
- Management expects motor claims ratios to decline from Q1 levels as seasonal effects fade, though TP reserving may remain elevated.
- Reinsurance accepted business is expected to contribute 8-10% of total GWP for the full year, up from ~2% last year.
Risks flagged
- Rising severity in court awards and lack of motor TP premium increases for 3-4 years may require further reserve strengthening, pressuring claims ratios.
- Loss of crop insurance business in Maharashtra, Bengal, and Odisha to AIC will reduce annual premium by ~₹500 crore, impacting top-line growth.
- Health loss ratios continue to be high (~80%) despite corrective pricing actions, partly due to reduced PA volumes and conservative provisioning.
- High discounts and payouts in the motor segment may pressure underwriting margins if the company chases top-line growth.
Key quotes
- The right direction for the motor TP is actually to inch up from the earlier levels and I guess we are doing the right thing in that perspective.
- We are very clear that we won't be chasing top line. So, the inherent economic viability of the business is what will drive our appetite.
- The industry has not had any increase over a fairly long period and the severity inflation is real. Court awards are going up.
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