Rationale

 The rating factors in Cholamandalam MS General Insurance Company Limited’s (CMICL) parentage, with Cholamandalam Financial Holdings Limited (CFHL; part of Murugappa Group) and Mitsui Sumitomo Insurance Company Limited (MSI; rated A1/A3[hyb]/Stable by Moody’s) holding equity stakes of 60% and 40%, respectively, and the demonstrated operational, managerial and financial support to the company. The rating considers the joint venture partners’ representation on CMICL’s board of directors and the shared brand name, which further strengthens ICRA’s expectation of adequate and timely capital support to the company. The rating also considers the company’s established position in the motor segment with a market share of 5.4%1 in terms of gross direct premium written (GDPI) in 11M FY2024 and the improving investment leverage2 driven by increased growth, the high share of the long-tail business as well as multi-year policies. CMICL’s solvency stood at 1.79 times as on December 31, 2023, with an adequate cushion over and above the regulatory requirement, even though it has declined since FY2023 because of premium growth. The share of the motor segment in the overall GDPI declined in 11M FY2024 (~65%). However, this was due to the premium underwritten in the crop segment. Moreover, given the focus on reducing the expenses of management (EoM), the share of motor in the overall GDPI is expected to decline further. Despite this, the motor segment will continue to account for a major part of the GDPI in the medium term. CMICL’s profitability improved in 9M FY2024 with the better underwriting performance, further supported by investment income with the improving investment leverage. However, the sustainability of the same remains to be seen. Over the medium term, the company’s ability to diversify its product mix and maintain the improvement its profitability and operating efficiency would be critical for enhancing its earnings profile. The Stable outlook factors in ICRA’s expectation that operational, managerial and financial support from CFHL and MSI will be forthcoming. It also considers CMICL’s established position in the motor segment.