Max Financial Services Limited · NSE:MFSL
Max Financial Services — H1 FY2021 Earnings Presentation
39 slides from Max Financial Services's earnings presentation, Oct 30, 2020
Slide 1: Max Financial Performance Update, Investor Release H1 FY21
MAX 6MAX FINANCIAL SERVICES (.4 LIFE INSURANCE Max Financial Performance Update Investor Release H1 FY21 • September 30, 2020 Best Companies lasVial eKa Phatos litrAtiet To Work Far Great Place To THE ECONOMIC TIMES Work. Claims 46A Max Financial Services and • MS Joint Venture
Slide 2: Section I: Max Financial Services H1FY21 Key Highlights
SECTION I Max Financial Services : H1FY21 Key Highlights
Slide 3: Max Financial Services: H1 FY'21 Key Highlights
)MAX LIFE Max Financial Services : H1 FY’21 Key Highlights INSURANCE Axis transaction update: • RBI has advised Axis Bank to be guided by Para 5(b) of Master Direction – RBI (Financial Services provided by Banks) 1 Directions, 2016, accordingly Axis Bank proposes to acquire upto 9% stake directly, u
Slide 4: Section II: Max Life Insurance – Business Overview
SECTION II Max Life Insurance – Business Overview
Slide 5: Industry Landscape (H1 FY'21)
)MAX MAX II Industry Landscape (H1 FY’21): Despite COVID-19 challenges, Max Life continues to perform better than industry and recorded the highest H1 market share of 11% in last 10 years LIFE YoY Growth basis Individual Adjusted FYP FY’19 FY’20 H1 FY’20 H1 FY’21 • Max Life Private Industry YoY grow
Slide 6: Financial Performance Summary H1FY'21
)MAX II Financial Performance Summary H1FY’21 LIFE INSURANCE Pvt Market Share Individual APE Gross Written Premium AUM 162 bps 5% 11% Rs 1804 Cr Rs 7,283 Cr 13% Rs 77,764 Cr 19% [9%] * [Rs 1717 Cr] * [Rs 6,432 Cr] * [Rs 65,425 Cr] * Profit after tax Net Worth Policyholder Cost to Policyholder Expens
Slide 7: Strong performance on new business; market share up 162 bps
II Max Life has delivered strong performance on new business ; Maintained 4th rank in the private industry and increased market share by 162 bps. Q2 sales grew by 10%; Sum assured grew by 40% -'6 LIFE 1111111L INSURANCE New Business Premiums (on APE basis)- Q2 sales grew by 10% Renewal Income Amount
Slide 8: Individual protection penetration increased; NBM expanded
)MAX II Individual protection penetration increased significantly; NBM expanded by more than 3 percent Product Mix – Increase in NPAR savings owing to launch of new non par Margins LIFE INSURANCE product -10 bps 320 bps 38% 35% 31% 42% 24.2% 9% 20% 18% 31% 6% 4% 10% 5% 13% 7% } 14% 21.7% 21.6% 21.0%
Slide 9: Efficient capital management with consistent RoE of 20%+
6 MAX II Efficient capital management with consistent RoE of 20%+… best in class among financial services -Now) NSIURANCE Opex to GWP*- Cost management actions improved Opex to GWP by ~120 Solvency Ratio (pre dividend) - maintained well above the regulatory bps requirement 120bps -122 bps 242% 224%
Slide 10: Operating RoEV for H1FY21 at 17.5%
)MAX II Operating RoEV for H1FY21 at 17.5% LIFEINSURANCE Embedded Value (EV) - EV has grown at 12% driven by growth in value of Operating Return on Embedded Value – RoEV at 17.5%, lower compared to new business and quality of inforce business last year primarily due to management expectations of low
Slide 11: Max Life has consistently grown its Asset Under Management
6 MAX II Max Life has consistently grown its Asset Under Management Assets Under Management - MLI is the 4th largest manager of ,,LIFE INSURANCE ULIP: Healthy mix of Debt and Equity private LI AUMs, Par fund size ~42K Debt Equity Amount in INR ‘000 Cr 9% 51% 43% 19% 51% 48% 78 68 65 63 57% 49% 49% 5
Slide 12: Max Life recognised by Indian and foreign business bodies
mAx II Max Life has been recognised by a number of Indian and foreign business bodies for its excellence in business, customer service and focus on people LIFE NelIPI,)NSURANCE I I Ow' was$ Business Excellence Leaders in Quality Focus on People ▪ Winner of CII Industry Innovation Award ▪ Outlook Mon
Slide 13: Section III: Max Life Insurance – Strategy
SECTION III Max Life Insurance – Strategy
Slide 14: Significant progress made across key strategic priorities
)MAX II Significant progress made across key strategic priorities LIFE A d B R41 C D i Predictable & Sustainable Digitalto Product innovation Customer centricity across the value Digitization for efficiency and growth drive margins chain intelligence ▪ Deepen Bancassurance ▪ Increase protection pene
Slide 15: Growth in both Proprietary and Bancassurance channels
)MAX IL A Max Life has focused on ensuring growth in both its Proprietary and Bancassurance channels MAX LIFE INSURANCE Proprietary Channels New Business (APE) - Amount in INR Cr Channel Mix - Max Life has focused on maintaining a balanced distribution 1282 mix 1162 10% 1% 1% 1% 1% 0% 577 583 70% 68
Slide 16: Product mix in proprietary and Bancassurance channels
IL A Product mix in proprietary and Bancassurance channels aligned to customer needs; Protection driven across all channels ), MAX `.0 LIFE INSURANCE Proprietary Channels Product mix - biased towards traditional products and Bancassurance Product Mix - has been biased towards ULIPs to cater to prote
Slide 17: Complete suite of products, focus on longer term and protection
)MAX IL B Max Life has a complete suite of products and focus is on selling longer term products along with improving penetration of pure protection offerings Average Policyholder Age Average Policy Term Average PPT LIFE Max Life has products across all categories Product Type (Years) (Years) (Years
Slide 18: Focus on Protection: ~78% growth in retail protection
)MAX IL B Focus on Protection: ~78% growth in retail protection and 52% increase in policies LIFE INSURANCE Total APE (Individual + Group) No of Protection Policies (Individual) Figures in Rs. Cr. Figures in ‘000. 571 CP 232 403 388 6P 175 183 II° 176 Oa 153 259 122 127 10+ 339 80 227 235 132 FY19 F
Slide 19: Strong focus on customer measures
)MAX IL C Strong focus towards customer measures has helped deliver superior performance across health parameters and will continue to remain an important priority MAX LIFE Claims Paid Ratio- One of the best claims paid ratio in the industry Surrender to GWP 179 bps 141 4% due to UL 99.22% discontin
Slide 20: Digital assets & embedding intelligence across value chain (1/2)
D Significant progress in driving adoption of digital assets & embedding intelligence across )MAX LIFE insurance value chain aiding in effectiveness and efficiency (1/2) INSURANCE Recruitment Prospecting 6 Fulfilment a End-to-end agent uote In! Digital Assets Products CSG/one Cross sell Form filling
Slide 21: Digital assets & embedding intelligence across value chain (2/2)
D Significant progress in driving adoption of digital assets & embedding intelligence across )MAX LIFE insurance value chain aiding in effectiveness and efficiency (2/2) INSURANCE Underwriting L 1040 Renewal Servicing (te CRM system for One view of Multiple digital Customer IEP,0WER Milli – Digital
Slide 22: Section IV: Max Life Insurance – ESG
SECTION IV Max Life Insurance – ESG
Slide 23: ESG Framework: Setting benchmarks for inclusivity and sustainability
)MAX II ESG Framework: Setting benchmarks for inclusivity and sustainability LIFE INSURANCE Environmental Social III I Governance Replace Community Service Supervisory Board ▪ End to end digital solutions ▪ Plantation Drive: >35,000 trees planted in ▪ Diverse Board composition ▪ Live plants to impro
Slide 24: Section V: MCEV Disclosures H1 FY'21
SECTION V Max Life Insurance – MCEV Disclosures: H1 FY’21
Slide 25: Key Results
)MAX II Key Results LIFE INSURANCE The Embedded Value1 (EV) as at 30th September 2020 is Rs 11,047 Cr. The Operating Return on EV (RoEV) over H1 FY21 is 17.5%. Including non-operating variances, the total RoEV is 22.6% 2. The New Business Margin (NBM) at actual cost for H1 FY21 is 24.2%, with Value
Slide 26: Overview of the components of the EV as at 30th September 2020
)MAX II Overview of the components of the EV as at 30th September 2020 LIFE VIF Net worth and EV Market value of Shareholders’ owned assets over liabilities Present Value of Future Profits (PVFP) Rs 9,318 Cr Time value of financial options and guarantees fr TVFOG Rs 68 Cr I Cost of residual non- hed
Slide 27: Value of New Business and New Business Margins
6 MAX II Value of New Business and New Business Margins as at 30th September 2020 ,,LIFE INSURANCE Description H1 FY20 H1 FY21 Y-o-Y growth APE 1 1,730 1,815 5% New Business Margin (NBM) 21.0% 24.2% +320 bps (actual costs) Value of New Business (VNB) 364 438 20% (actual costs) ▪ The New Business Mar
Slide 28: EV movement analysis: March 2020 to September 2020
6 MAX IIEV movement analysis: March 2020 to September 2020 ,,LIFE INSURANCE Figures in Rs Cr. EV EV 405 241 11,047 438 15 9,977 VIF VIF 8,277 7,432 Operating RoEV: 17.5% NAV NAV 2,545 2,770 Opening EV Value of Unwind Operating Non-Operating Closing EV New Business variance Variance ▪ Operating retur
Slide 29: Sensitivity analysis as at 30th September 2020
)MAX LIFE Sensitivity analysis as at 30th September 2020 Figures in Rs Cr. EV New business Sensitivity Value (Rs Cr) % change VNB (Rs Cr) | NBM % change Base Case 11,047 - 438 | 24.2% - Lapse/Surrender - 10% increase 10,926 (1%) 434 | 23.9% (1%) Lapse/Surrender - 10% decrease 11,170 1% 441 | 24.3% 1
Slide 30: Annexures
> ANNEXURES a
Slide 31: Consistent growth in top line and renewals with cost efficiencies
)MAX II Delivering consistent growth in top line and renewals coupled with driving cost efficiencies LIFE INSURANCE Financial Performance FY19 FY20 H1 FY’20 H1 FY’21 , Individual APE 3,917 5% 4,116 1717 5% 1804 13% , Renewal Premium 9,415 10,600 4141 16% 4789 , Gross Premium 14,575 11% 16,184 6432 1
Slide 32: Healthy and consistent profitability while maintaining solvency
)MAX MAX II Healthy and consistent profitability creating value to all the stakeholders while maintaining solvency above required levels LIFE Financial Performance FY19 FY20 H1 FY’20 H1 FY’21 3% , Profit(after Tax) 556 4- 539 154 * 28% 197 , AUM 62,798 9% 68,471 65,425 * 19% 77,764 10 bps 320 bps 21
Slide 33: Performance update H1'FY21
6 MAX II Performance update- H1’FY21 ,,LIFE INSURANCE Quarter Ended Period Ended Q-o-Q Y-o-Y Key Business Drivers Unit a) Individual APE Rs. Crore Sep’19 1,038 AM Sep’20 1,144 Growth 10% Sep’19 1,717 Sep’20 1,804 Growth 5% b) Gross written premium income Rs. Crore 3,781 4,532 20% 6,432 7,283 13% Fir
Slide 34: Protection – Expansion in both case size and number of policies sold
6 MAX II Protection – Expansion in both case size and number of policies sold -......L IFE INSURANCE Case Size (INR’000) NoPs (INR’000) • Non PAR- Saving • PAR • Ind Protection • ULIP • Non PAR- Saving • PAR • Ind Protection • ULIP 69 645 64 61 42 65 - 2% 597 123 106 156 134 147 139 175 183 19 19 28
Slide 35: Definitions of the EV and VNB
6 MAX II Definitions of the EV and VNB ,,LIFE INSURANCE Market consistent methodology ▪ The EV and VNB have been determined using a market consistent methodology which differs from the traditional EV approach in respect of the way in which allowance for the risks in the business is made. ▪ For the m
Slide 36: Components of VIF (1/2)
6 MAX II Components of VIF (1/2) ,,LIFE INSURANCE Present Value of Future Profits (PVFP) ▪ Best estimate cash flows are projected and discounted at risk free investment returns. ▪ PVFP for all lines of business except participating business is derived as the present value of post-tax shareholder pro
Slide 37: Components of VIF (2/2)
6 MAX II Components of VIF (2/2) ,,LIFE INSURANCE Time Value Of Options and Guarantees (TVFOG) ▪ The TVFOG for participating business is calculated using stochastic simulations which are based on 5,000 stochastic scenarios. ▪ Given that the shareholder payout is likely to be symmetrical for guarante
Slide 38: Key Assumptions for the EV and VNB (1/2)
6 MAX II Key Assumptions for the EV and VNB (1/2) ,,LIFE INSURANCE Economic Assumptions ▪ The EV is calculated using risk free (government bond) spot rate yield curve taken from FBIL1 as at 30th September 2020. The VNB is calculated using the beginning of respective quarter’s risk free yield curve (
Slide 39: Key Assumptions for the EV and VNB (2/2)
6 MAX II Key Assumptions for the EV and VNB (2/2) ,,LIFEINSURANCE Expense and Inflation ▪ Maintenance expenses are based on the recent expense studies performed internally by the Company. The VIF is reduced for the value of any maintenance expense overrun in the future. The overrun represents the ex
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