Max Financial Services Limited · NSE:MFSL
Max Financial Services — Investor Presentation (November 2020)
63 slides from Max Financial Services's investor presentation, November 2020
Slide 1: Max Financial Services Limited Investor Presentation
Max Financial Services Limited Investor Presentation November 2020
Slide 2: Section I: Max Financial Services
SECTION I Max Financial Services
Slide 3: Max Group Vision
Max Group Vision “To be the most admired corporate for service excellence” • Positive social impact • Culture of Service Sevabhav • Helpfulness • Mindfulness • Expertise • Entrepreneurship Excellence • Dependability • Business performance • Transparency • Respect Credibility • Integrity • Governance
Slide 4: Max Group – Overview
Max Group – Overview Max Group - Sponsors 22.3% 40.9% 49.7% Companies Holding Senior Living and Real Estate, Manufacturing Life Insurance Business Skilling businesses & Other businesses 51% 72.52%^ 100% Companies Operating 100% • Independent living - Residencies • Assisted Care services - Care Homes
Slide 5: Evolution of Max Group
Evolution of Max Group First wave: Early years, Second wave: Group reinvented Third wave: Corporate restructuring to Started with Manufacturing from a B2B conglomerate to a B2C unlock value & Portfolio Rebalancing Businesses (1982 – 2000) company (2000 – 2014) (2015-20) Started its journey with Rein
Slide 6: Journey of Successful Partnerships
Journey of Successful Partnerships Current JV Partners Investors Past JV Partners 6
Slide 7: MFSL – Board of Directors
MFSL – Board of Directors Former Chairman of HSBC India. Serving on the Chairman and Founder Founder and Chairman of Max Group. Awarded Independent Director Board of L&T, Cipla, Nayara Energy, Lafarage Mr. Analjit Singh with highest civilian honor, the Padma Bhushan Mrs. Naina Lal Kidwai Holicim Man
Slide 8: Max Group – Senior Management
Max Group – Senior Management Mohit Talwar • Vice-Chairman, Max Group (upto Jan 15, 2021) • Managing Director, Max Financial Services • Managing Director, Max India (upto Jan 15, 2021) • Vice-Chairman, Max Ventures (upto Q1CY21) • Non executive Director, Antara Senior Living (upto Q1CY21) Prashant T
Slide 9: Max Group Overview
Max Group Overview 1 USD 2.5 billion Revenues… 4.5 Mn Customers… 16,000 Employees… ~52,000 Agents 2 Strong growth trajectory even in challenging times; a resilient & diversified business model 3 Steady revenue growth and cost rationalization leads to strong financial performance 4 Well established b
Slide 10: High pedigree of long-term investor base
High pedigree of long-term investor base Shareholding concentrated with Marquee Investors ▪ KKR Shareholding Pattern ▪ Ward ferry as on 30th Sep 20 ▪ Baron Emerging Market Fund ▪ New York Life Public ▪ Vanguard 14.9% Promoter 22.3% ▪ Norway Government Pension Fund ▪ Jupiter ▪ Blackrock KKR FII- Othe
Slide 11: Section II: Recent Developments in Max Financial & Max Life
SECTION II Recent Developments in Max Financial & Max Life
Slide 12: Max Life to be a joint-venture between Max Financial and Axis Bank
Max Life to be a joint-venture between Max Financial and Axis Bank Strategic partnership to strengthen Max Life, bring certainty to the relationship and complement Max Life’s Brand and Financial strength, thereby benefitting Policyholders and other stakeholders 4th Largest 10+ year old relationship
Slide 13: MSI & Axis Transaction Summary
MSI & Axis Transaction Summary MSI Transaction ▪ Preferential allotment to MSI in MFS against swap of shares held by MSI in Max Life ▪ MFS to acquire balance 5.17% stake from MSI at Rs 85 per share for cash consideration of Rs 843 Cr ▪ Transaction expected to be completed by Dec’20, Shareholders, CC
Slide 14: Transaction Structure
Transaction Structure Final structure (Post completion of series of transactions Current Structure step wise detail given below ) Mitsui Public Max Promoter Public Max Promoter Sumitomo 22.33% 77.67% 17.45% 21.87% 60.68% Mitsui Max Financial Axis Bank Max Financial Axis Sumitomo (MFSL) (MFSL) Entiti
Slide 15: Section III: Max Life Insurance – Insurance Opportunity
SECTION III Max Life Insurance – Insurance Opportunity
Slide 16: Life Insurance among preferred asset class in India
Weak macroeconomic environment led to de-growth in financial assets flow; Life Insurance is among preferred asset class in India Retail wealth in India - Increasing preference for avenues other than cash High Savings Culture though savings rate slowing due to consumption and bank deposits Amount in
Slide 17: Significant opportunity for Life Insurance to grow in India
Significant opportunity for Life Insurance to grow in India on the plank of ensuring disciplined savings over a long term – Only asset class which is effective in addressing the gap Gap between other countries and India is significant for Life Insurance India lags behind other developed countries on
Slide 18: Urbanization, affluence and nuclear families driving Life Insurance
Urbanization, improving affluence, emergence of nuclear families will continue providing impetus to the Life Insurance industry India has witnessed rapid urbanization, aids Middle class is likely to increase rapidly, especially in Top 150 cities; Top 19 cities continue to hold bulk of affluence and
Slide 19: Life insurance industry cycles since 2001
Life insurance industry has seen multiple cycles since 2001. Recent structural changes in the economy have resulted in positive flow towards financial assets aiding the insurance industry Phase 1 – Joyful Entry Phase 2 –Expansion Phase 3 – Discovering New Normal Phase 4 – Reinvigoration (2001-2003)
Slide 20: Industry Landscape (H1 FY'21)
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 YoY Growth basis Individual Adjusted FYP FY’19 FY’20 H1 FY’20 H1 FY’21 Private Industry 5% 11% • Max Life 24% 16% YoY growth
Slide 21: Section IV: Max Life Insurance – Business Overview
SECTION IV Max Life Insurance – Business Overview
Slide 22: Max Life's extensive presence across India
Max Life has an extensive presence across India through its own offices and distribution partners and is the 4th largest private Life Insurance player in the country Max Life has more ~6500 Point of Sales across the country 354 Own Branch Units 4th Largest 7000+ Partner Private Life Insurer^ Branche
Slide 23: Max Life's road map to becoming India's most admired life insurer
Max Life Insurance’s road map to becoming India’s most admired life insurance company Vision To be the most admired life insurance company by securing the financial future of our customers Inspire People to increase the Value of their Life Purpose “I am the Difference” Quality of Advice Value Driven
Slide 24: Highly experienced and versatile Board of Directors
Highly experienced and versatile Board of Directors providing strong and secure foundation Chairman and Founder Founder and Chairman of Max India. Awarded Director An experienced Cost Accountant and Chartered Mr. Analjit Singh with highest civilian honor, the Padma Bhushan Mr. K. Narasimha Accountan
Slide 25: Executive Management Team
Executive Management Team has rich insurance experience and spent ~100 years at Max Life combined Max Life Management Team ▪ Stint in Max : 13+ years Prashant Tripathy ▪ Total Experience: 25+ years Managing Director & CEO ▪ Previous Organizations: Tata Steel, GE V Viswanand Manu Lavanya Aalok Bhan J
Slide 26: Financial Performance Summary FY20
Financial Performance Summary FY20 Pvt Market Share Individual APE Gross Written Premium AUM 5% 10% 4 bps Rs 4,116 Cr Rs 16,184 Cr 11% Rs 68,471 Cr 9% [10%] [Rs 3,917 Cr] [Rs 14,575 Cr] [Rs 62,798 Cr] Profit Before tax Net Worth Policyholder Cost to Policyholder Expense to GWP Ratio GWP Ratio Rs 598
Slide 27: Financial Performance Summary H1FY'21
Financial Performance Summary H1FY’21 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 Expense to GWP Ratio GWP Ratio Rs 197
Slide 28: Strong performance on new business; 4th rank in private industry
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% New Business Premiums (on APE basis)- Q2 sales grew by 10% Renewal Income Amount in INR Cr Amount in INR Cr 5%
Slide 29: Individual protection penetration increased; NBM expanded
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 product -10 bps 320 bps 38% 35% 31% 42% 24.2% 9% 20% 18% 31% 6% 21.7% 21.6% 4% 10% 5% 7% 21.0% 13% 14% 8% 7% 8% 20% 40% 12% 30%
Slide 30: Efficient capital management with consistent RoE of 20%+
Efficient capital management with consistent RoE of 20%+… best in class among financial services 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% 16.7% 207% 207% 14.5% 15.
Slide 31: Operating RoEV for H1FY21 at 17.5%
Operating RoEV for H1FY21 at 17.5% 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 lower unwind driven by fa
Slide 32: Max Life has consistently grown its Assets Under Management
Max Life has consistently grown its Asset Under Management Assets Under Management - MLI is the 4th largest manager of 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% 52% 55 49 FY 19 FY 20 H1 FY
Slide 33: Leadership strength and vintage employee pool
Unwavering focus on leadership strength and has a vintage employee pool, both of which are critical for success in long term businesses such as Life Insurance Great Place to Work Survey - Only Life insurance Company amongst Top 100 Employee Engagement^ - Consistently amongst top decile India’s best
Slide 34: Business Excellence, Leaders in Quality, Focus on People
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 Business Excellence Leaders in Quality Focus on People ▪ Winner of CII Industry Innovation Award ▪ Outlook Money Award- Best Life Insurer ▪ No. 1 in Cus
Slide 35: Section VI: Max Life Insurance – Strategy
SECTION VI Max Life Insurance – Strategy
Slide 36: Significant progress across key strategic priorities
Significant progress made across key strategic priorities A B C D Predictable & Sustainable Digitalto Product innovation Customer centricity across the value Digitization for efficiency and growth drive margins chain intelligence ▪ Deepen Bancassurance ▪ Increase protection penetration ▪ Improve pos
Slide 37: Growth in Proprietary and Bancassurance channels
A Max Life has focused on ensuring growth in both its Proprietary and Bancassurance channels Proprietary Channels New Business (APE) - Amount in INR Cr Channel Mix - Max Life has focused on maintaining a balanced distribution 1282 mix 1162 1% 1% 1% 1% 0% 577 583 70% 68% 66% 67% FY19 FY20 H1'20 H1'21
Slide 38: Product mix in proprietary and Bancassurance channels
Product mix in proprietary and Bancassurance channels aligned to customer needs; A Protection driven across all channels Proprietary Channels Product mix - biased towards traditional products and Bancassurance Product Mix - has been biased towards ULIPs to cater to protection for driving margins tar
Slide 39: Complete suite of products with focus on longer term
Max Life has a complete suite of products and focus is on selling longer term products along B with improving penetration of pure protection offerings Average Policyholder Age Average Policy Term Average PPT Max Life has products across all categories Product Type (Years) (Years) (Years) Endowment 3
Slide 40: Focus on Protection: ~78% growth in retail protection
B Focus on Protection: ~78% growth in retail protection and 52% increase in policies Total APE (Individual + Group) No of Protection Policies (Individual) Figures in Rs. Cr. Figures in ‘000. 571 232 403 388 183 175 176 153 259 122 127 339 80 227 235 132 FY19 FY20 H1 FY'20 H1 FY'21 FY 19 FY 20 H1 FY'
Slide 41: Customer measures: claims paid ratio, persistency, surrender
Strong focus towards customer measures has helped deliver superior performance across C health parameters and will continue to remain an important priority 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% discontinuance 98.26% 98.7
Slide 42: Embedded intelligence across insurance value chain (1/2)
Significant progress in driving adoption of digital assets & embedding intelligence across D insurance value chain aiding in effectiveness and efficiency (1/2) Recruitment Prospecting Fulfilment End-to-end agent Digital Assets Products CSG/one Cross sell Form filling, recruitment platform illustrati
Slide 43: Embedded intelligence across insurance value chain (2/2)
Significant progress in driving adoption of digital assets & embedding intelligence across D insurance value chain aiding in effectiveness and efficiency (2/2) Underwriting Renewal Servicing CRM system for Multiple digital Customer Milli – One view of Digital Assets payment options chatbot for custo
Slide 44: Section VII: Max Life Insurance – ESG
SECTION VII Max Life Insurance – ESG
Slide 45: ESG Framework: Setting benchmarks for inclusivity and sustainability
ESG Framework: Setting benchmarks for inclusivity and sustainability Environmental Social Governance Replace Community Service Supervisory Board ▪ End to end digital solutions ▪ Plantation Drive: >35,000 trees planted in ▪ Diverse Board composition ▪ Live plants to improve air quality; 2,600 live FY
Slide 46: Section V: Max Life Insurance – MCEV Disclosures: H1 FY'21
SECTION V Max Life Insurance – MCEV Disclosures: H1 FY’21
Slide 47: Key Results
Key Results 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 of New Business (VNB) w
Slide 48: Overview of the components of the EV as at 30th September 2020
Overview of the components of the EV as at 30th September 2020 VIF Net worth and EV Market value of Shareholders’ owned assets over liabilities Time value of financial Cost of residual non- options and guarantees hedgeable risks Net Worth Frictional cost Rs 2,770 Cr TVFOG Rs 68 Cr CRNHR EV FC Presen
Slide 49: Value of New Business and New Business Margins
Value of New Business and New Business Margins as at 30th September 2020 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 Margin (NBM) has increased by
Slide 50: EV movement analysis: March 2020 to September 2020
EV movement analysis: March 2020 to September 2020 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 return on EV of 17.5% is mainl
Slide 51: Sensitivity analysis as at 30th September 2020
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% Mortalit
Slide 52: Max Life Insurance
MAX FP insunance
Slide 53: Annexures
> ANNEXURES a
Slide 54: Definitions of the EV and VNB
Definitions of the EV and VNB 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 market consistent methodolo
Slide 55: Components of VIF (1/2)
Components of VIF (1/2) 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 profits from the in-force cov
Slide 56: Components of VIF (2/2)
Components of VIF (2/2) 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 guaranteed non-participating produ
Slide 57: Key Assumptions for the EV and VNB (1/2)
Key Assumptions for the EV and VNB (1/2) 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 (i.e. 31st March 2020, 30th
Slide 58: Key Assumptions for the EV and VNB (2/2)
Key Assumptions for the EV and VNB (2/2) 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 excess maintenance expenses
Slide 59: Consistent growth in top line and renewals with cost efficiencies
Delivering consistent growth in top line and renewals coupled with driving cost efficiencies Financial Performance FY19 FY20 H1 FY’20 H1 FY’21 5% 5% Individual APE 3,917 4,116 1717 1804 13% 16% 9,415 10,600 4141 4789 Renewal Premium 11% 6432 13% Gross Premium 14,575 16,184 7283 126 bps Policyholder
Slide 60: Healthy and consistent profitability while maintaining solvency
Healthy and consistent profitability creating value to all the stakeholders while maintaining solvency above required levels Financial Performance FY19 FY20 H1 FY’20 H1 FY’21 3% 28% Profit(after Tax) 556 539 154 197 9% 19% 62,798 68,471 65,425 77,764 AUM 10 bps 320 bps 21.7% 21.6% 21.0% 24.2% New Bu
Slide 61: Performance update- H1'FY21
Performance update- H1’FY21 Quarter Ended Period Ended Q-o-Q Y-o-Y Key Business Drivers Unit Growth Growth Sep’19 Sep’20 Sep’19 Sep’20 a) Individual APE Rs. Crore 1,038 1,144 10% 1,717 1,804 5% b) Gross written premium income Rs. Crore 3,781 4,532 20% 6,432 7,283 13% First year premium Rs. Crore 1,0
Slide 62: Protection – Expansion in case size and number of policies sold
Protection – Expansion in both case size and number of policies sold Case Size (INR’000) NoPs (INR’000) Non PAR- Saving PAR Ind Protection ULIP Non PAR- Saving PAR Ind Protection ULIP 69 645 64 597 65 - 2% 61 123 106 156 134 147 139 175 183 19 19 284 16 264 13 59 46 59 56 44 53 307 224 80 121 104 10
Slide 63: Max Life Insurance
MAX FP insunance
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