Max Financial Services Limited · NSE:MFSL
Max Financial Services — 9M FY21 Earnings Presentation
41 slides from Max Financial Services's earnings presentation, Feb 9, 2021
Slide 1: Max Financial Performance Update
Nalu• X7 FINANCIAL IfliA. SERVICES 6 MAX LIFE INSURANCE Max Financial Performance Update w Investor Release 9M FY21 • February 9, 2021 Best Companies TO Work For Great Place THE ECONOMIC TIMES To Work. Claims Paid L A Max Financial Services and 40MS Joint Venture NW.
Slide 2: Section I: Max Financial Services 9M FY21 Key Highlights
SECTION I Max Financial Services : 9MFY21 Key Highlights
Slide 3: Max Financial Services: 9M FY'21 Key Highlights
Max Financial Services : 9M FY’21 Key Highlights 6LIFE1V1.1 X INSURANCE Axis transaction update: 1 • CCI approval received • IRDAI application under progress • MSI transaction update: Concluded swap of MSI 20.57% stake in Max Life, with 21.87% stake in MFSL 2 Consolidated Revenue* at Rs 21,528 Cr, g
Slide 4: Section II: Max Life Insurance – Business Overview
SECTION II Max Life Insurance – Business Overview
Slide 5: Industry Landscape (9M FY'21)
)MAX Industry Landscape (9M FY’21): Despite COVID-19 challenges, Max Life continues to perform better than industry MAX II and recorded market share of 11% (gaining 158 bps) LIFE YoY Growth basis Individual Adjusted FYP FY’19 FY’20 9M FY’20 9M FY’21 • Max Life Private Industry YoY growth 24% 1 5% 16
Slide 6: Financial Performance Summary 9MFY'21
II Financial Performance Summary 9MFY’21 6LIFE1V1.1 X INSURANCE Pvt Market Share Individual APE Gross Written Premium AUM 158 bps 11% 11% Rs 3,014 Cr Rs 11,912 Cr 16% Rs 84,724 Cr 23% [9%] * [Rs 2,718 Cr] * [Rs 10,311 Cr] * [Rs 68,618 Cr] * Profit after tax Net Worth Policyholder Cost to Policyholde
Slide 7: Max Life has demonstrated robust performance in Q3'FY21
II Max Life has demonstrated robust performance in Q3’FY21 6LIFE1V1.1 X INSURANCE APE- Q3 sales grew by 21% driven both by proprietary and partnership Proprietary Channel APE- Growth momentum back in proprietary channels channels Amount in INR Cr Amount in INR Cr 1,226 337 21% 9% 1,009 309 Q3 FY20 Q
Slide 8: Strong performance on new business; market share up 158 bps
II Max Life has delivered strong performance on new business; Maintained 4th rank in the private industry and increased market share by 158 bps. Sum assured grew by 26% 6LIFE 1V1.1 X '411111.6)filSURANCE New Business Premiums (on APE basis) Renewal Income Amount in INR Cr 5% Amount in INR Cr 3,950 4
Slide 9: Individual protection penetration increased; NBM expanded by 490 bps
6 MAX II Individual protection penetration increased significantly; NBM expanded by 490 bps Product Mix – Increase in NPAR savings owing to launch of new non par Margins -.....LI FE INSURANCE product 33% -10 bps C----- 490 bps lir 42% 38% 37% 25.9% 21.7% 21.6% 21.0% 9% 18% 20% 33% 6% 4% 10% 5% 13% 6
Slide 10: Efficient capital management with consistent RoE of 20%+
6MAX Efficient capital management with consistent RoE of 20%+… best in class among financial services '4111111111'INSIURANCE Opex to GWP*- Cost management actions improved Opex to GWP by ~85 bps Solvency Ratio (pre dividend) - maintained well above the regulatory requirement 120bps -85 bps 242% 220%
Slide 11: Operating RoEV for 9MFY21 at 18%
6 MAX II Operating RoEV for 9MFY21 at 18% -.ow.LIFE INSURANCE Embedded Value (EV) - EV driven by growth in value of new business and Operating Return on Embedded Value – Continue to deliver robust RoEV at quality of inforce business 18% Amount in INR Cr 21.9% 11,723 20.3% 18.4% 18.0% 9,977 10,077 8,
Slide 12: Max Life has consistently grown its Assets 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 ~45K Debt Equity Amount in INR ‘000 Cr 23% 9% 51% 43% 85 52% 55% 68 69 63 57% 49% 48%
Slide 13: Max Life recognised for excellence in business, customer service and people
Max Life has been recognised by a number of Indian and foreign business bodies for its excellence 6LIFEMAX in business, customer service and focus on people INSURANCE I ■ 1.- 1• 41L 72, +NV iip- a ihu Business Excellence Leaders in Quality Focus on People MIA's ▪ Winner of CII Industry Innovation Aw
Slide 14: Section III: Max Life Insurance – Strategy
SECTION III Max Life Insurance – Strategy
Slide 15: Significant progress made across key strategic priorities
)MAX II Significant progress made across key strategic priorities LIFE INSURANCE A d B M C D Predictable & Sustainable Digitalto Product innovation Customer centricity across the value Digitization for efficiency and growth drive margins chain intelligence ▪ Deepen Bancassurance ▪ Increase protectio
Slide 16: Growth in both Proprietary and Bancassurance channels
), MAX A `.0 LIFE Max Life has focused on ensuring growth in both its Proprietary and Bancassurance channels INSURANCE Proprietary Channels New Business (APE) - Amount in INR Cr Channel Mix - Max Life has focused on maintaining a balanced distribution 1282 4% mix 1162 887 920 1% 1% 1% 0% 70% 68% 67%
Slide 17: Product mix in proprietary and Bancassurance channels
Product mix in proprietary and Bancassurance channels aligned to customer needs; ), MAX A `.0 LIFE Protection driven across all channels INSURANCE Proprietary Channels Product mix - biased towards traditional products and Bancassurance Product Mix - has been biased towards ULIPs to cater to protecti
Slide 18: Complete suite of products; focus on longer term products
)MAX L 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 19: Focus on Protection: ~54% growth in retail protection
)MAX L B Focus on Protection: ~54% growth in retail protection and 29% increase in policies LIFE INSURANCE Total APE (Individual + Group) No of Protection Policies (Individual) Figures in Rs. Cr. Figures in ‘000. 571 539 4:9 0 232 403 387 204 it9 •SP 176 169 183 175 164 227 0 339 218 334 127 FY19 FY
Slide 20: Strong focus on customer measures across health parameters
C Strong focus towards customer measures has helped deliver superior performance across )MAX LIFE 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 98.74% 99.22% 4% due to UL 97.81% 98
Slide 21: Death claim experience saw expected increase in Q3
)MAX L C Death claim experience saw an expected increase in Q3, now expected to decline. LIFE No of death claims reported COVID Deaths intimations seems to have peaked out 24,934 20,530 14,409 13,217 10,525 7,313 Count H1 Q3 YTD • FY20 FY21 ▪ Claim experience seems to have peaked out in October. ▪ E
Slide 22: Digital assets and embedded 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 • Fulfilment a End-to-end agent alum In! Digital Assets I POWER Products CSG/one Cross sell Form
Slide 23: Digital assets and embedded 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 fi Underwriting L 1040 4 Renewal Servicing cee CRM system for Multiple digital GROWER Customer Milli – One view of Digit
Slide 24: Section IV: Max Life Insurance – ESG
SECTION IV Max Life Insurance – ESG
Slide 25: ESG Framework: Setting benchmarks for inclusivity and sustainability
II ESG Framework: Setting benchmarks for inclusivity and sustainability 6MAX LIFEINSURANCE Environmental Social IIII Governance Replace Community Service Supervisory Board (Max Life Board) ▪ End to end digital solutions ▪ Plantation Drive: >35,000 trees planted in ▪ Diverse Board composition ▪ Live
Slide 26: Section V: Max Life Insurance – MCEV Disclosures 9M FY'21
SECTION V Max Life Insurance – MCEV Disclosures: 9M FY’21
Slide 27: Key Results
II Key Results 6LIFE1V1.1 X INSURANCE The Embedded Value1 (EV) as at 31st Dec 2020 is Rs 11,723 Cr. The Operating Return on EV (RoEV) over 9M FY21 is 18.0%. Including non-operating variances, the total RoEV is 24.0% 2. The New Business Margin (NBM) at actual cost for 9M FY21 is 25.9%, with Value of
Slide 28: Progression of Embedded Value
)MAX MAX II Progression of Embedded Value LIFE 11,723 10,077 9,977 8,667 7,391 7,432 2,687 2,545 3,056 9M FY20 FY20 9M FY21 Net Worth (NW) Value of Inforce (VIF) 1. EV as at 9M FY21 represents an increase of Rs 1,746 Cr from the EV of Rs 9,977 Cr as at FY20; implying a growth of 17.5 per cent over t
Slide 29: Value of New Business and New Business Margins as at 31st Dec 2020
6 MAX II Value of New Business and New Business Margins as at 31st Dec 2020 -.ow.LIFE INSURANCE Description 9M FY20 9M FY21 Y-o-Y growth APE 1 2,740 3,040 11% New Business Margin (NBM) 21.0% 25.9% +490 bps (post cost overrun) Value of New Business (VNB) 576 788 37% (post cost overrun) ▪ The New Busi
Slide 30: VNB and NBM Walk
6 MAX II Value of New Business (VNB) and New Business Margin (NBM) Walk -.ow.LIFE INSURANCE Figures in Rs Cr. 170 788 -20 63 576 FYTD Dec'19 Impact of Higher APE Change in Business Mix and Acquisition Cost Overrun FYTD Dec'20 Assumptions NBM --> 21.0% - 5.6% -0.7% 25.9% Investor Release 30
Slide 31: Sensitivity analysis as at 30th September 2020
)MAX MAX II Sensitivity analysis as at 30th September 2020 LIFE 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 |
Slide 32: Annexures
> a ANNEXURES a
Slide 33: Delivering 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 9M FY’20 9M FY’21 5% 11% Individual APE 3,014 , 3,917 4,116 2,718 13% 16% ) Renewal Premium 9,415 * 10,600 6,618 * 7,669 11% 16% 11,912 16,184 , Gross P
Slide 34: Healthy and consistent profitability while maintaining solvency
)MAX II Healthy and consistent profitability creating value to all the stakeholders while maintaining solvency above required levels LIFE INSURANCE Financial Performance FY19 FY20 9M FY’20 9M FY’21 3% 35% , Profit(after Tax) 556 4- 539 308 * 417 5% 37% ) VNB (Post Overrun) 856 * 897 576 4- 788 10 bp
Slide 35: Performance update 9M'FY21
6 MAX II Performance update- 9M’FY21 -.ow.LIFE INSURANCE Quarter Ended Period Ended Q-o-Q Y-o-Y Key Business Drivers Unit a) Individual APE Rs. Crore Dec’19 1,001 AM Dec’20 1,210 Growth 21% Dec’19 2,718 Dec’20 3,014 Growth 11% b) Gross written premium income Rs. Crore 3,879 4,629 19% 10,311 11,912 1
Slide 36: 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 -.....LI FE INSURANCE Case Size (INR’000) NoPs (INR’000) • Non PAR- Saving • PAR • Ind Protection • ULIP • Non PAR- Saving • PAR • Ind Protection • ULIP 69 645 70 IC. 61 42 66 597 123 106 139 156 432 150 412____6";D-- ‘ 13
Slide 37: Definitions of the EV and VNB
6 MAX II Definitions of the EV and VNB -.ow.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 th
Slide 38: Components of VIF (1/2)
6 MAX II Components of VIF (1/2) -.ow.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
Slide 39: Components of VIF (2/2)
6 MAX II Components of VIF (2/2) -.ow.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 guara
Slide 40: Key Assumptions for the EV and VNB (1/2)
II Key Assumptions for the EV and VNB (1/2) 6LIFE 1V1.1 X INSURANCE Economic Assumptions ▪ The EV is calculated using risk free (government bond) spot rate yield curve taken from FBIL1 as at 31st Dec 2020. The VNB is calculated using the beginning of respective quarter’s risk free yield curve (i.e.
Slide 41: Key Assumptions for the EV and VNB (2/2)
6 MAX II Key Assumptions for the EV and VNB (2/2) -.ow.LIFE INSURANCE 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 th
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