Cholamandalam Financial Holdings Limited (CHOLAHLDNG) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '22 Earnings Conference Call of Cholamandalam Financial Holdings Limited hosted by Spark Capital Advisors India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sanketh Godha from Spark Capital Advisors, India Private Limited. Thank you, and over to you, sir.

Thank you, Stephen. Good morning, everybody, and welcome to Cholamandalam Financial Holdings Limited Q2 FY '22 Result Call. To discuss the same, we have on the call Mr. Sridharan Rangarajan, Director, Cholamandalam Financial Holdings Limited; Mr. Suryanarayanan, Managing Director, Cholamandalam MS General Insurance Company Limited; Mr. S. Venugopalan, Chief Financial Officer, Cholamandalam MS General Insurance Company Limited; and Mr. Ganesh N., Chief Financial Officer, Cholamandalam Financial Holding Limited. May I request Sridharan sir to give his initial remarks post which we can open the floor for a question-and-answer session. Over to you, sir.

Thank you. Good morning to all of you, and I hope you had all a good Diwali celebration, and you are doing health-wise fine. I will just give a quick overview, and then we'll open up for questions. As a customary one, I think we consolidate Cholamandalam Finance, Chola Insurance and Chola MS Risk, and purely, the control is looked at it from IndAS point of view, and that's how the consolidation works. I'll cover the stand-alone financial performance of Cholamandalam Financial Holdings. For the quarter ended September '21, the company received a final dividend of INR 26.1 crores from Chola Finance. And after considering the finance costs and other expense the PBT is INR 25.19 crores. The consolidated results of the company consist of, as I said, Cholamandalam Finance, Cholamandalam MS General Insurance and Chola MS Risk. At consolidated level, for the quarter ended September '21, the revenue increased by 2.4% to INR 3,583 crores as compared to the corresponding quarter of the previous year, while the profit after tax increased by 29% to INR 652 crores, primarily due to the reduction in impairment charge in the financial instruments. Chola Finance was able to capitalize on the favorable trends in the external environment. The waning of second wave, increased pace of vaccine and good monsoon led to the expectation of circular economy. This was supported by uptrend in economic indicators like tax collection, power consumption, vehicle registration, highway toll collection and e-way bills, et cetera. The economical revival has led to a sharp recovery in Chola's disbursement and collections during Q2 FY '22. Disbursements were up by 35% compared to Q2 FY '21. PAT for the quarter ended September 30, '21 is INR 607 crores compared to INR 432 crores in the corresponding quarter of the previous year, registering a 40% growth. Assets under management remained flat at about INR 75,063 crores as at September 30, '21 as compared to INR 74,471 crores as at September 30, 2020. CIFCL asset quality, as at the end of September '21, represented by Stage 3 assets, stood at 6.16% with the provision coverage of 36.45% as against 6.79% as at June '21 with a provision coverage of 35.51%. The restructuring book stood at INR 4,749 crores as at September '21. The capital adequacy ratio as at the end of Q2 was 19.63% against the regulatory requirement of 15%. Chola MS General Insurance registered a GWP of INR 1,304 crores in Q2 FY '22, an increase of 11% over corresponding quarter of the previous year, driven by increased contribution from these channels and growth in commercial SME segment. The company maintained leadership positions in motor LOB in Tamil Nadu and Chhattisgarh while regaining in AP and Telangana. In spite of the increase in GWP in Q2 FY '22, COVID claims to the extent of INR 66 crores, an accelerated amortization of deferred acquisition costs to the extent of INR 139 crores, of which normally we would have absorbed INR 18 crores, resulting in the net impact of INR 121 crores, which resulted in the drop in profit before tax by 46% to INR 52 crores. During the quarter, the company received the resolution plan-based settlement of dues from DHFL to the extent of INR 75 crores, resulting in a surplus over the provision of INR 38 crores, and the company has made additional provision to the tune of INR 22 crores in IL&FS and Reliance Capital. The net carrying value of the stressed investment Stage 2 is only INR 12 crores as at 30th September 2021. Solvency as at 30 September '21 is 1.77x, after considering the disallowance of INR 160 crores of taxes paid towards contingent liabilities as per IRDA circular. Chola MS Risk Services is a small but niche company, reported a profit of INR 1.12 crores as against 0.26 crores in the corresponding quarter of prior year. Overall, we feel that the Chola MS General insurance, most of the things are already completely addressed and is accelerated depreciation will result into some more pain in H2. We will cover that -- Suri would cover that. But I think with that, I think we'll be behind with all the issues. In fact, the years to come will start giving much more benefit because we are taking all this accelerated depreciation in 1 year. I would leave it to Suri to cover that in much more detail as we go through in the Q&A. Thank you, and we'll open up for Q&A.

[Operator Instructions] The first question is from the line of Devansh Nigotia from SIMPL.

Just had a couple of questions. Sir, one is in order to reclarify on the COVID claims in last quarter, we mentioned it was INR 146 crores in Q1. But in this quarter, if I just do -- just reconcile the numbers, it comes around INR 200 crores in Q1. So if you can help us understand why is...

Is it clear, the question to you, Venu relating number we claimed?

Yes. Total H1, INR 262 crores of the COVID claims, including the COVID-specific product plus the general COVID-19 claims, that is H1 INR 226 crores. To that extent, we confirm the impact in the -- it consists of both COVID product -- specific product losses as well as the general products in terms of the COVID losses.

Seems like we lost the connection, sir, for the current participant.

He talked about INR 260 crores, that is H2.

In Q2, what...

In Q2, the COVID product losses specific is INR 54 crores and non-COVID -- general product-based COVID losses is around INR 12 crores. Total INR 66 crores is the COVID impact in Q2. Does it answer your question.

So I think that person dropped, so...

Mr. Nigotia, are you able to hear us?

Yes. Yes.

Yes, sir. If you have any further questions, you may please proceed.

Hello?

Yes, pleas. Please go ahead.

Yes. Yes. Yes. Sir, so one is -- okay, I was actually -- I dropped on the call. So INR 146 crores was in Q1 and then we mentioned that it was INR 200 crores. So how does this difference come? And if you can just throw some light on that?

There is no INR 1.6 crores element we have mentioned in any of our presentation. As I mentioned just now, in Q2, overall INR 66 crores of impact arising out of the COVID losses. Broken into 2 parts, COVID-specific product loss and COVID general product losses of INR 54 crores and INR 12 crores, respectively. This is for the quarter Q2. In H1, INR 262 crores out of that INR 195 crores comes from the COVID-specific product and INR 67 crores comes from these products. Totaling to INR 262 crores. This is the thing. There is no INR 1.6 crores. I'm not able to...

INR 146 crores.

140...

INR 146 crores in Q1. That's what you mentioned in last call.

Yes. Yes. INR 141.5 crores of Q1 under COVID-specific product.

Okay. Okay. Okay.

So that has come down to INR 54 crores in Q2.

Okay. And sir, basically, if I adjusted for our profit as per INR 16 crores and if I do a net tax adjustment for COVID claims of -- COVID claims and the deferred acquisition, then the PAT comes in the range of, I think, around INR 210 crores. So I mean, if you can just help us understand? And one more thing. So we mentioned that there was a write-back of INR 38 crores for DHFL. And then again, there were further provisioning for IL&FS. So if you can help us understand that as well?

Okay. On the DHFL side, we received INR 75 crores as mentioned by Mr. Sridharan in the opening remarks. Out of the INR 157 crores of exposure, towards the entirety of the resolution plan-based settlement INR 75 crores in the form of both Piramal housing bonds and the cash component together. Other that the net plus back to P&L in that DHFL is INR 38 crores. So we have provided INR 22 crores additional provision towards Reliance Capital and IL&FS. Reliance Capital, 100% we have provided now. And IL&FS only INR 12 crores we are keeping as a balancing book account on that. So net effect of it, INR 38 crores minus INR 22 crores has flown back to the P&L.

Okay. And what would be -- so if you look at the normalized PAT, I mean it is significantly higher than what it has been historically. So what are the key 2, 3 things that we see because now even the activity is back to normal? So if you can just throw some light on how this profitability has changed structurally adjusting for these one-offs?

Yes, you have already mentioned the one-off as COVID losses and the impact arising out of the prepaid expenses, that part you already mentioned. That is one-off really. Yes, being the COVID year, there are benefits arising out of the lockdown benefit also. That together, it will shape up the entire thing in the next year as a positive note only, net-net of it. So you're right from the point of view of netting of these 2 items. But there may be some other benefits coming in the current year in the form of the lockdown benefit that also being on-off. But net-net of it, it will be a benefit for the next year.

No, just to intervene here. On the lockdown-related benefits, company has stayed conservative and the benefit is recognized over the year. So some level of benefit will flow through right through H2 as well.

Okay. And in case of motor TP, if you look at the claim ratio, this quarter was 62%. And historically, that run rate, if you go back to pre-COVID level is 90%, 95%. So considering that the level of activity in September was back to normal what we see everywhere around and there were also no price increases that had happened. So if you can help us understand how this claim ratio is actually moving -- has actually moved in this quarter? And how should we look at it going forward?

Yes, you are right that activity levels have picked up and you would have noticed that even in terms of the motor OD loss ratios, the loss ratios have gone up reflecting the higher movement of vehicles and the consequential accident levels. So very clearly, that has happened. However, with respect to motor third-party, our normal reserving continues at the same level, considering the lack of any price increase for the loss of -- for the last 1 or 2 years. But there is a frequency benefit that we have been seeing in our historical reserving, which is being now considered, which has a benefit. So that element will probably continue right through the year. But the incremental provisioning that we are making with respect to the current underwriting year factors in adequately the element of non-receipt of any price increase.

Okay. So there has been a few reversals in the claims, which is making it as low as 60% to 63% as against the normalized run rate if that's the understanding, and that will continue for this year as well?

Another element is that you should have noticed that the portfolio mix is changing continuously. It is going more in favor of 2-wheelers and cars and less from commercial vehicles, which is also having its effect in shaping the motor third-party loss ratios.

Okay. Okay. And if you look at our health insurance book, if we exclude the specific COVID policies that was sold, how would you give a direction on the growth that has been in FY '21 and in Q1 and Q2 of [ FY '20? ]

Look, even if you had to look at the health claims, intimations, we have seen a steady reduction even through Q2. July continued to be high also arising from the lag effect. But as we go along in August and September, we have seen a continuous reduction in the intimation levels, which is really pointing out to the fact that the frequency in health claims is reverted back to earlier pre-COVID levels. Also, the average claim size in health has also reduced from last year's levels and Q1 levels, primarily because of the COVID level -- the level of treatment and those things not happening and revert back to a normal treatment, which is largely the nature of treatments that used to exist the pre-COVID situation is what we are looking at now. Of course, there is a trend of deferred elective procedures that we are seeing by way of, say, cataract-related or any operation and things like that. Those elective procedures are being opted by customers now which was not so much the case, say, perhaps in the last 2 to 3 quarters. But still, we are seeing the overall average price going down.

Sir, actually my question was more on the business growth and premium growth in health products than the claims on health products. So what has been the business growth, if I exclude it for COVID-specific health policies in FY '21 and in Q1 and Q2 of FY '22? And also, if you can elaborate on how have we revamped the whole strategy on health? Or are we operating in the similar way kind of product launches that is happening and some soft points on how the business is actually shaping up?

Adjusting for the COVID-related product sale that was there in Q2, our health business has grown by about 15% in Q2. So that is the value market still, which is perhaps still lower than what the industry is seeing. There a few corrective measures have also been put in place. To begin with, on the new product, we have -- early this month, we have launched a new product, Sarva Shakti, which is oriented towards women. You will start seeing more of this product in the days to come. That is one from a product side. Other products approvals have also been obtained in the areas of top-up and super top-ups. So those product approvals have also come in. We have expanded our POST network during this quarter as well. Then there is also some sort of a team change that has happened during this quarter.

And what are the changes, who is heading this business right now, a background of the health insurance side, if you can just throw some light there?

Who is heading that?

Yes. So now actually, we have got -- all of you would know that we operate our Chola Insurance Express outlets. The person who was heading that Chola Insurance Express outlets is now being brought in from September as the head for the health business, for bringing in greater synergy with all the 470 offices plus that we have operating on the CAE format. So we believe that this should help in penetrating the market on the health front as well. We have done it in motor. We would like to extend this to the health business as well.

[Operator Instructions] The next question is from the line of Sanketh Godha from Spark Capital.

I have a small clarification, sir. If you're looking to Slide #50 in the presentation, we see the loss ratio mentioned is 74.9% for 1H FY '22. But if you look at Page #52, the loss ratio overall mentioned is 80.6%. Sir, there is a discrepancy in the number. So just wondering why is it so?

Loss ratio 80.6% as against...

As against the 74.9% mentioned in Page #50.

74.9% versus 80.6%.

Breakup, we know you have given as 74.9%. Whereas here, it is 80 point...

74.9% is right, Sanketh.

Okay. Okay. No issue, sir. Yes. Okay, sir. And just on the deferred acquisition cost, again, clarification. Sir, that INR 138 crores, which is mentioned in the press release is based on in that. If I do IGAAP accounting, then what you have provided in the current quarter is closer to INR 81 crores, INR 82 crores, right, sir?

Yes, INR 82 crores of opening balance. There are 2 elements to that. One is the opening balance amortization. Second is the new long-term business that is there. INR 82 crores, what you are saying is opening balance.

And the rest amount is for what, sir?

New long-term balance is written during the Q2.

Okay. Okay. So basically, INR 138 crores, if I break it down, INR 82 crores is for the opening volumes and rest is towards the new business that you have returned during the quarter, right, sir?

Yes, Sanketh.

The next question is from the line of Prateek Poddar from Nippon India Mutual Fund.

Sir, just 1 question. Maybe if you could just talk a bit about how much of the opening balance is left on the deferred acquisition cost line? And when do we see this basically going down to 0 and the impact on future profitability once this becomes 0? That's question number one.

Yes. Finish that, and then we'll take the next question.

See, the opening balance of the prepaid expense towards long-term policy is INR 326 crores as of March '21. As per IRDA letter, we have to fully amortize this in 1-year period. So by the end of the year, the entire opening balance of INR 326 crores will be taken to the P&L. So we have taken in the half year INR 163 crores, a proportionate amount. Remaining INR 163 crores will be taken to the P&L in the H2. So by the end of the year, it will be nil. Also, the new long-term policies written during the year will also be fully absorbed and there has not been any prepaid concept. So that cost will also get into the P&L. So we will not have any prepaid expenses in the books of account as of March '22.

Got it. Got it. And sir...

What is the benefit, roughly about INR 80 crores plus, right?

Yes. So the impact of the opening balance in the next year will not be there. That's around -- this will have an impact of depending on the policies duration. So in the next 2 to 3 years, definitely, the benefit will be there almost 70% on the point of this thing, remaining in the next 10 years, some of the policies are running beyond 10 years also. So it will taper off. So the benefit will flow in the next few years as far as the opening balance is concerned. On the new long-term policies, next year, any new long-term policies written that will fully get absorbed into P&L.

So to an extent what we have to bear in mind is that the pace of growth will while the benefit will be is definite and it will flow, as we step on the growth level, the absorption level will have to be immediate. So to that extent, yes, the impact would stay. But from the onetime absorption that we are doing, the benefit will easily flow over the next 2 to 3 years because most of the costs are on long-term products relating to health, personal accident and those products. Venu, if we can give an idea of the amount.

See, first 3, 4 years, 70% of that will get the benefit out of that -- out of the INR 326 crores. So we can clearly see around INR 60 crores to INR 70 crores benefit comes in the form of every year-on-year benefit.

Roughly about INR 75 crores to INR 80 crores per year will be the benefit for the next 3 years.

Arising out of the opening balance. As Mr. Suri said that the new long-term policies, depending on the growth, the cost will get absorbed.

Understood. Understood. And sir, just to clarify, these long-term policies are only health and PA or it includes even motor?

Yes, it includes motor in terms of the long-term, 5-year in the case of the 2-wheeler and cost. Cost is the lesser extent.

And there will also be businesses like which today capped at 10 years. So the cost relating to that would also -- which also factored in.

Understood. Understood. And last, secondly, I think you've touched upon this, but just to clarify, when you talk about the 3 measures in terms of introduction of new products, increasing your POSP network size and team changes, can we expect that the health business, which has underperformed in H1 versus the industry in terms of growth coming back and outperforming?

Definitely, yes, we do expect to have a much stronger growth on the health business in H2, both from see bundled business as well as the retail business, both are definitely looking up. We are seeing the uptick. So we should see much better volumes in the subsequent 2 quarters.

And sir, from a channel mix perspective, we have seen that our own captive channel has been quite subdued. Just from the growth disbursements normalizing as we have seen, can we expect that, that channel will come back again and in H2, we can see faster growth from that channel?

Prateek, are you referring to the captive channel or the...

Yes, sir. Yes, sir. Captive channels. Chola Financial...

The captive channels, they have been growing in the first half, largely in the backdrop of cars and 2-wheelers. Commercial vehicle sluggishness continues and areas of traditional strength like school buses and others still haven't picked up. But then I don't see a big improvement in these areas in Q3. Q4, when again, schools open in full rather than being optional, which is the situation presently, I do see the opportunity going up there. And to a larger extent, yes, the commercial vehicles, which has been the main driver of the CAE, should, when it comes back, the volumes can grow. But even otherwise, the CAEs have grown during H1 and not particularly in Q2.

Q2, correct. And on your long-lasting channel, is the investment bank channel, it seems that it has degrown in H1 versus last year H1. Any specific reason, sir?

Largely is due to the commercial vehicle sluggishness. And due to their own other inherent tightness with reference to NPA management and all of that, growth in the commercial vehicle portfolio hasn't been much, which is what, in fact, their management has also talked about in their calls. So this situation more corroborates with the lower growth of their commercial vehicle portfolio.

And when do you expect the DHFL/Piramal channel to start coming back because that was a substantial channel before DHFL got into trouble for us. So when do you expect that, is that FY '23, where you expect them to come back and contribute meaningfully to book?

Chola MS, in fact, I had DHFL as a corporate agent prior to their problems. That corporate agency agreement still subsists and in fact, has been extended by the new management for a year. So we should be in discussions with the new management for relaunch of the products.

Okay. So any growth from that channel will come only next year, right, sir? Or we could see something in Q4 as well?

I think, first, we have to agree on the products, the structure and all of that. But I do suppose that it can begin as and when we complete the decisions and they also start lending. It can. It doesn't really have to wait until April. So we would like to certainly recommence that part of the business, at least from January.

Okay. And sir, many congratulations on diversifying your motor mix from what we were traditionally. Just other -- one of the other strategic pillars are also to overall diversify the line of business mixes -- line of business mix, right? So when do we see that health and other lines of businesses, which is commercial and et cetera, slightly having a higher share within our overall mix and dependence on motor overall reducing?

Yes. So yes, in motors, it is more pronounced with the shift -- a strong shift towards cars and 2-wheelers. And we are growing reduction in dependence to commercial vehicles. If you look at the other lines of business, even the fire line of business, we have been growing at a rate faster than the industry. For instance, in the fire line of business, our growth is at about 12.2% as against the industry growth of 7.6%. Of course, it's on a smaller base. But then that trust continues. And this is where actually we are seeing this business both on the Indian commercial corporate front as well as the bancassurance-led volumes contributing fairly strongly. So we do -- and even in the other commercial lines, the non-fire lines, we have been growing fairly well. Our growth in Q2 was at about 18%. So those lines have also been growing. Health is the piece where, hopefully, in H2, we should be able to take it up on par with the industry growth, which will mean that on an overall, we would have successfully diversified. And more importantly, first, we are now getting Chola MS back on the growth path. In Q2, our growth at 12% was higher than the industry growth of 10.7%. And this has to be seen in the context that Chola MS does not participate in 1/3 of the industry, which is largely crop, the government-related health as well as the employer-employee group. We don't participate in 1/3 of the industry. So in 2/3 of the industry is where we operate, and yet, we have a growth rate higher than the industry growth. So clearly, we are on the growth path. And even, I should say, October has been a better month where we have had a growth of 15% plus. Of course, industry numbers are awaited. They have not come in fully. But we do hope that we will be continuing to grow higher than industry.

And within this growth, the diversification will continue, right, in the sense, growth will be faster than health and other lines of businesses versus motor?

Yes.

Okay. Okay. And just sir, from a medium-term perspective, how should we think about -- as you embark on this growth plan, how should we think about the loss ratios and combined ratio?

See, on the loss ratios, very clearly, motor is going, especially in the motor wound damage side, can be an area of pain as we go along because of the competition that is there. But then what we will have going in our favor is rather the blend of business. So naturally, the loss ratios in commercial vehicles are higher and which is where our change in mix is helping. So that is on the motor OD side. Motor third party, as I mentioned earlier, the industry very badly needs a price revision. And hopefully, we should be able to get it from -- at least from April of next year. So that should help bring the motor loss ratios under control. Health, of course, after the founding that the industry has taken with respect to COVID claims of over INR 30,000 crores that cumulatively has been paid, we certainly look for some respite from the regulator either in terms of a onetime price correction permission across products or some other leeway. In fact, the industry has been talking of some subsidy from the government relating to health, which is what is there even in the papers today. Otherwise, I think we do believe that the property and other lines are in control. So we should be able to -- the mix of business, the changing mix and as the bundled business, which are traditionally better in terms of loss ratios start getting activated, we see that the loss ratios should stay under control on an overall basis.

The next question is from the line of Ameya Karambelkar from Kotak Investment Advisors.

I had a few questions. Firstly, on motor OD. So if I look at our loss ratio in that segment in FY '20, essentially prior to the COVID outbreak, that was at the 60%, 61% mark. And now in the second quarter, we are at the 69-odd percent mark. And as you said, there seems to be some pain in that particular industry. So sir, directionally, I just wanted to get a sense, is it ever likely that we'll go back to those 60%, 61% levels? Or will the loss ratio here continue to remain elevated? That's question number one. Secondly, on motor third-party, again, prior to the COVID outbreak, we were from a loss ratio perspective at the 90-odd-percent mark. And I understand that we will continue to see some releases and provisions for this year. But from a more medium 2- to 3-year perspective, at what range can those loss ratios settle? I mean will it be like in the early 80s range or 90% plus range. If you could give some color on that, that would be tremendously helpful? And thirdly, from an overall combined ratio and ROE perspective, do we have any medium-term aspirations that you can sort of call out because prior to the various issues that plagued us in the past couple of years, we were operating at the 100%, 101% combined ratio mark. So can we look to get there in the next couple of years? That would be very helpful if you can comment on that.

So the first question was on motor OD. So you compared it to the FY '20 levels. FY '20 was a pre-COVID situation where even the proportion of new vehicles was fairly good and strong, but -- at least in cars, 2-wheelers, all of that. So naturally, when a new vehicle proportion is there, high proportion is there, the premium realization is so much better, which helps bring down the loss ratios. But over 2 years of COVID-related impact, the proportion of new vehicles has been low, very clearly compared to that. So which itself is a reason and the cause for the loss ratios to go up because the premium realization on every single vehicle on an average is coming down. And this is in a situation when claim severity have more or less remained the same or only gone up due to inflation-related labor and spare part price increases. So these are the drivers, which have caused the loss ratios. Plus today, the discount level or in the motor wound damage business is fairly high. So we have some players operating even at about 80%, 85% discount. And therefore, the average discounts that are available on the premium pricing has gone up, which is what has led this overall motor OD loss ratios to go up from where they were to about 69%. But then as I mentioned earlier in the call, the changing mix is what is expected to bring this under control. Obviously, the dynamics of commercial vehicle and the car and 2-wheeler are very different from a wound damage claims perspective. And as the mix is changing, so we do hope to bring this under control. Second question was on the motor third-party levels. At a stable level, we do -- barring the frequency benefit, which may not be there in any subsequent year, we do expect the loss ratios to be around -- back at around 75% -- 75%, 76% is what we would expect, considering the mix that would be there, we always will factor in the changing business profile. So that is the kind of rate that we would have expected. And third, from an overall see what perspective, yes, our intent is to get back to our earlier levels of at least around 101% to 102% of combined ratio. So we should be able to get back there. Even in the current year, if one were to knock out the COVID-related claims, we are there. So that is the COR position even as at the half year level.

That's very helpful. Just 2 quick follow-ups. So if you can qualitatively call out earlier, what was the proportion of new vehicles for us and versus now that you said that it's gone down just with the range in which it has moved, that would be helpful. And two, any longer-term ROE aspirations that we have?

The proportion normally of our new vehicles to overall -- and of course, this varies between the product classes very, very differently. Historically, it used to be at around 40% to 45%. And that today has come down, notwithstanding our surge in two-wheelers. Actually, to the premium size, the larger chunk comes from commercial vehicles. And when that volume is not good, so the proportion at an absolute level of new premium is lower.

The next question is from the line of Preethi RS from UTI.

Also, my question is on the health portfolio. So if I see the mix between health and PA, including within health service, it seems we have a significantly higher market share in personal accidents compared to our overall market share. So what has worked well for us? And going forward is that a segment which we will continue to focus on?

Yes, you are right that in personal accident, our market share is higher at about 3.6%, which is largely from the bundled volumes that we get from our channels. And as we step up and we see the revival of financial channels, these volumes will go up back to their earlier level. We are seeing that trend happening. We have seen that jump. Even from Q1 to Q2, we have seen it, and we are seeing the trend even in October. So to that extent, the volume step-up in PA will be there.

Sir, and the channels you're captive channels or even the Banca channel?

Formally PA bundled business comes from the Banca channel.

Banca channel. And what is the product usually this bundled business [indiscernible].

I didn't get the question clearly, sorry.

So what are the usual products, financial products that this product is bundled with?

Yes. See, it is a credit-linked PA that goes with any vehicle financing. It goes with the dwelling financing. So it goes in with all of that.

Understood, sir. Okay. And the second question is what is the current mix between our indemnity products and benefit products within the healthcare service?

Now actually -- and that again actually varies between the agency and the Banca channel. Typically, agency channel, it would be in the ratio of 70-30. I'm talking of indemnity to benefit would be about 70-30. And, say, in banks, it would even be like 90-10. So overall, you can say that it's supposed to be at around, say, 75-25.

25 benefits, right?

75 of indemnity and 25 of in health.

Right. Sir, I would have thought the benefits would be actually higher in Banca channel. So this is actually slightly different to what one would have thought. So indemnity sold higher in the Banca channel?

Yes, because in our -- we sell quite a bit of indemnity through our public sector bank businesses and also with the through IndusInd Bank. And I'm talking in terms of the premium size. So where an indemnity premium is naturally far larger. We also sell products that with the Banca channels, it could be a hospital cash or it would be a critical illness. But then those ticket sizes are smaller. So from a value perspective, premium perspective, this is our mix.

Understood, sir. Sir my last question is on what is your strategy on our collaboration with advocators like PolicyBazaar, et cetera, especially in health product?

Yes. So we do operate with the web aggregators. So we do operate with PolicyBazaar on across lines, whether it is motor or health or even some of the SME lines. So we do cooperate with them, and we do get our volumes from them.

Okay. So is that a strategic channel for us in the longer run? Or how do you see that particular channel?

See, the way we see it is that we are growing our own direct business at this point in time. The investments are happening. And this also helps us to get an idea about the customer profiles, the geographic profiles and the experience out of these businesses. So this is something that we would operate.

[Operator Instructions] The next question is from the line of Ashish Sood from InCred.

I have 2 questions. First, I want to ask whether we're thinking of listing our general insurance business separately in next 1 to 2 years because we are seeing our peers are getting a much higher valuation? And seeing the potential of our company, we are not getting the justified valuations. So this is the first question. And second question is that since our solvency ratio is roughly 1.77, and do you have any plans of raising capital in the near term?

Yes. So I think -- thanks for asking these 2 questions. So we feel that both the partners are fully involved in business, and we will be able to provide adequate capital as and when it is required for the growth. So currently, we feel that we have a good franchise. I think a successful franchise with good profitability. There last couple of years, we had challenges. We've kind of overcome those challenges. And we'll put some trajectory of growth going forward. And then we'll take a relook at it in terms of the need for listing, et cetera. Obviously, the regulatory need, we will definitely consider that at that point in time. As far as the combined ratio, I think a lot of that is today impacted by extraordinary things. At the moment, these are going away. We're pretty confident that we'll get back to 2 plus and which we did last year also, and this again came back because of the deferred acquisition cost impact, et cetera. Also, we have been impacted because of this tax issue that we are facing peculiarly in south because of some disallowances, and I think we are fighting through these cases through the normal course. We are pretty confident because these are very normal industry practice and we will win. So all those releases will also happen in times to come. So -- but as and when it is required for the growth, I think the funds will -- are ready and we will be able to fund the growth. Both the partners are willing to fund the growth.

Yes. And sir, are you looking to raise funds for the existing partner or we can see some new players coming in and infuse capital in the company?

Well, I think as I said that both the partners are fully involved in business, and we -- both of them have a good pedigree and capability to invest. So we'll first look at the in-house.

So holding company discount is pretty high. So in the future, you might look for listing then shareholders and get more value.

Ladies and gentlemen, due to time constraint, we take that as the last question. I now hand the conference over to the management for their closing comments. Over to you, sir.

So thanks for your participation. I think I just want to leave 1 or 2 thoughts that I think Chola MS General Insurance had quite a few challenges, particularly with regard to investment-related challenges. I think we have kind of behind that. Completely, we are out of it. The DAC related is quite unexpected, but I think we will also be behind at the end of this year. We expect that because of this advance taking of this cost, obviously, there would be a benefit of at least INR 75 crores to INR 80 crores going forward in the next 3 years, every year. So -- plus these extraordinaries that we are looking at, which are investment related and the DAC related will go away from the next year. Growth paths have been well worked out. And I think both in terms of investment in digitization and also people are at full swing. We expect these will come back once the market starts also reviving, and we see quite a lot of good signs of revival as the COVID impact slows down and probably we will have better medicines to tackle. I think this will become normal and will become part of our life, then I think the growth will come back. Once the growth comes back, I think we feel that we'll have a very good set of numbers to discuss with you going forward. We'll continue to improve our disclosures. I think this time, we have done some more information to share with you at this point in time. Hope you find it very useful. Thank you, and all the very best. Thanks for all for participating.

Thank you. Ladies and gentlemen, on behalf of Spark Capital Advisors, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.