Max Financial Services Limited · NSE:MFSL
Max Financial Services — 9M FY23 Earnings Presentation
60 slides from Max Financial Services's earnings presentation, Jan 31, 2023
Slide 1: Regulation 30 filing cover letter to BSE and NSE
January 31, 2023 BSE Limited National Stock Exchange of India Limited Phiroze Jeejeebhoy Towers Exchange Plaza, Bandra Kurla Complex, Dalal Street Bandra (East) Mumbai – 400 021 Mumbai – 400 051 Scrip Code: 500271 Scrip Code: MFSL Dear Sir/Madam, Sub: Corporate Announcement filed under Regulation 30
Slide 2: Max Financial Performance Update Investor Release 9M FY23
Max Financial Performance Update Investor Release 9M FY23 January 31, 2023 ^As per the annual audited financials for FY21-22
Slide 3: Section I: Max Financial Services 9M FY23 Key Highlights
SECTION I Max Financial Services : 9MFY23 Key Highlights
Slide 4: Max Financial Services: 9M FY23 Key Highlights
Max Financial Services: 9M FY23 Key Highlights Transaction Update – Completed acquisition of balance 5.17% of MLI stake from MSI. Post this transaction MFSL holding in MLI stands at 87%; 1 Agreements amended with Axis Bank for the right to acquire balance 7% stake sale of MLI at Fair Market Value ba
Slide 5: Transaction Update
Transaction Update Current Structure (As of 31st Dec‘22) Final structure (Post completion of series of transactions step wise details given below) Max Promoter Mitsui Sumitomo Public Max Promoter Mitsui Sumitomo Public 11.4% 21.9% 66.7% 11.4% 21.9% 66.7% Max Financial Axis Max Financial Axis (MFSL)
Slide 6: Section II: Max Life Insurance – Business Overview
SECTION II Max Life Insurance – Business Overview
Slide 7: Key Highlights for Max Life FY17-22 (1/2)
Key Highlights for Max Life FY17-22 (1/2) 4 Improved 5-Yr CAGR of 16% on Consistently maintained Individual new business market share rank#4 from Consistent growth vs since last 5 years 10% for life insurance industry 9.2% to 9.9% in 5 years 5-Yr CAGR of 5-Yr CAGR of Retail protection 16% in Prop ch
Slide 8: Key Highlights for Max Life FY17-22 (2/2)
Key Highlights for Max Life FY17-22 (2/2) Employee metrics Great Places to Experienced leadership Employee engagement1 Work rank #18 in FY21 with almost half score of >95% the leadership’s for last 3 years Rank #55 among Great Places tenure with Max Life to Work in Asia in FY21 more than a decade Cu
Slide 9: Financial Performance Summary 9M FY23
Financial Performance Summary 9M FY23 Individual APE Gross Written Premium Renewal Premium AUM Rs 3,664 Cr -1% Rs 16,188 Cr 12% Rs 10,548 Cr 16% Rs 1,18,400 Cr 16% [Rs 3,700 Cr] [Rs 14,415 Cr] [Rs 9,128 Cr] [Rs 1,02,471 Cr] Profit Before tax* Net Worth Policyholder Cost to Policyholder Expense to GW
Slide 10: Max Life delivering consistent premium growth
Max Life delivering consistent premium growth New Business Premiums (on APE basis) –Strong growth of 19% in proprietary Renewal Income – Delivering consistent growth channels in 9M Amount in INR Cr Amount in INR Cr 5,588 3,751 3,710 14,509 10,548 4,957 9,128 12,192 FY21 FY22 9M FY22 9M FY23 FY21 FY2
Slide 11: VNB increased by 25% aided by product NBMs and mix
VNB increased by 25% over last year aided by expansion in product NBMs and product mix Product Mix – Increased NPAR savings mix due to consumer bias towards Value of New Business- Consistent growth in VNB guaranteed products Amount in INR Cr 37% 37% 38% 30% 1,179 1,528 1,249 942 30% 29% 28% 42% 5% 6
Slide 12: Efficient capital management with profitable growth
Efficient capital management with profitable growth Opex to GWP – Solvency Ratio (pre dividend) 207% 201% 200% 196% 15.1% 14.2% 14.3% 150% 13.5% Solvency Limit FY21 FY22 9M FY22 9M FY23 FY21 FY22 9M FY22 9M FY23 Operating Return on EV (RoEV) – Increase primarily due to higher VNB Underwriting Profit
Slide 13: 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 private LI AUMs, Par fund size ~58K ULIP: Healthy mix of Debt and Equity Amount in INR ‘000 Cr Debt Equity 52% 54% 54% 118 59% 108 102 48% 46% 46% 41% 90 FY 21 FY 22 9M FY22 9M FY23
Slide 14: Max Life recognised by Indian and foreign business bodies
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 ▪ No. 1 in Customer Loyalty ▪ Ranked 55th amongst ‘2021 ▪ Selected as India’s most Trusted Brand
Slide 15: Section III: Max Life Insurance – Strategy
SECTION III Max Life Insurance – Strategy
Slide 16: Max Life's Strategic Thrust Areas and progress made
Max Life’s Strategic Thrust Areas and progress made A B C D Predictable & Sustainable Digitalto Product innovation Customer centricity across the value Digitization for efficiency and growth drive margins chain intelligence ▪ Fastest growing profitable ▪ Leader in Protection + Health & Wellness ▪ Im
Slide 17: Growth in both 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 mix 15% 1,611 1,262 1,403 0% 0% 0% 1% 1,062 65% 71% 71% 71% FY21 FY22 9M FY2
Slide 18: Agency: enabling top agents and variable recruiters
Agency: Strategic focus on enabling Top agents, variable recruiters; shaping the new business A models and overall digital enablement led to the growth in key agency parameters Recruitment growth over last year owing to a slew of initiatives across all Active agent and branch units productivity incr
Slide 19: Agency transformation – new Way of Working
A Agency transformation – Launched new “Way of Working” (WoW) New Right Right Right Way of Working Enablement Inputs Output Execution rigor ADMs regularly Increase in sales calls ▪ Expansion of the WoW to all Tied and 95% attending trainings 50% 73% Active advisors higher per ADM higher vs before Wo
Slide 20: Cross-selling Direct Channels
Cross-selling Direct Channels: Max Life has set up a channel focused exclusively on cross- A selling. Cross-sell engine is powered by strong analytics and robust on-ground execution New Business Premium from direct channels Cross-sell Policies - Strong growth in number of cross-sell policies Amount
Slide 21: Augmenting distribution capability through ecosystems
Max Life has been augmenting distribution capability by expanding both traditional and A emerging ecosystems Ecosystems Key partners signed by Max Life in 9M Bancassurance Offline Brokers Yella Online Brokers Investor Release 20
Slide 22: Continued leadership in online acquisition
A Continued leadership in online acquisition APE grew 6X in 5 years 9M FY23 Highlights New product launch – FD/RD like category Penetrated into new segments – contribute created; Best in class returns to ~20% in Term on run rate basis Led to 100% growth in savings Homemaker NRI Self-employed run-rat
Slide 23: Product mix aligned to customer needs
B Product mix in proprietary and Bancassurance channels aligned to customer needs; Proprietary Channels Product mix - biased towards traditional products and Bancassurance Product Mix - has been biased towards ULIPs to cater to protection for driving margins target customer segments 22% 20% 19% 22%
Slide 24: Forefront of product innovation with industry firsts
Max Life has been at the forefront of driving Products Innovation by creating first-in-industry B propositions 1. Break the endowments category clutter with 6. Enabled transparent customer participation in 10. Hedged Guarantees with Derivatives Industry First Whole Life plan Bonds with First Index-L
Slide 25: Accelerating product innovation agenda (1/2)
…Accelerating product innovation agenda through experiments and creating new customer B segments (1/2) Millennials preferring FD/RD like Solution for self employed ULIP product for self employed deposits /homemakers Smart Fixed-return Smart Flexi Protect Smart Secure Easy Digital Plan Solution Solut
Slide 26: Accelerating product innovation agenda (2/2)
…Accelerating product innovation agenda through experiments and creating new customer B segments (2/2) Limited and Regular Pay Deferred Annuity for near Guaranteed savings with enhanced flexibility, liquidity retiree segment and protection Guaranteed Lifetime Income Plan Smart Wealth Advantage Guara
Slide 27: Complete suite of products, focus on longer term products
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 28: Focus on retirement – annuity business more than tripled
B Focus on retirement – Annuity business more than tripled in 9M FY23 Life stage & Age: 25-45 yrs Age: 45-60 yrs Age: 60+ yrs Objective Accumulate funds Plan for retirement Cover the risk of living too long ▪ Tax Saving ▪ Tax Saving ▪ Lumpsum req. for big events (child’s ▪ Regular income stream unti
Slide 29: Focus on protection and its risk management
B Focus on protection and its risk management Customer Profiling and Selection Experience monitoring Profitability & Risk Management ▪ AI based risk models, Credit Bureaus, IIB ▪ Regular portfolio review/ Post issuance ▪ Regular repricing of products Database deployed in underwriting risk verificati
Slide 30: Managing Other Major Risks
B Managing Other Major Risks Information Security and Interest Rate Risks Investment Risks Operational Risks Business Continuity Risks Robust Asset Liability Front Office – Led by CIO: ▪ Cyber DARE framework for Preventive Programs: Management Framework: ▪ Differential strategy as per the managing s
Slide 31: Customer measures: persistency and claims paid ratio
Strong focus towards customer measures has helped deliver superior performance across C health parameters and will continue to remain an important priority Persistency# (Premium)- Individual policies excluding single pay/fully paid Persistency# (Policies)- Individual policies excluding single pay/fu
Slide 32: Significant progress on our Digital Journey
D We had made significant progress on our Digital Journey 50+ 72% Partners Automated Underwriting (Retail) Text 54% ~58 DIGITAL NATIVE FRICTIONLESS Infra on Cloud Claims paid everyday TALENT CUSTOMER ONBOARDING 44% <3 seconds >6L^ Insta COI (Axis) Page load time DIGITAL Text DIGITAL SALES Policies S
Slide 33: Digital Strategy based on 9 Key Pillars
D Max Life’s Digital Strategy is based on 9 Key Pillars Scale eCommerce Onboarding / Business 1 Digital Sales 2 Issuance 3 Customer Service 4 Enterprise 5 ▪ Digital Marketing Muscle ▪ Intelligent & Integrated ▪ Digital Native ▪ Omni Channel customer ▪ Mobile First Employee (Sharper prospecting) LEAD
Slide 34: Leader in E-Commerce Protection Sales
D Max Life is Leveraging Digital Tech & is a Leader in E-Commerce Protection Sales… 1 Combine Landing page for Online Products Home Page Store front launch ▪ Combined landing page for protection and savings ▪ Improved S2L for online channel ▪ Term S2L improvement – by 20% ▪ Savings S2L improved by 9
Slide 35: Digitizing the sales force capability and productivity
D We are digitizing the sales Force by driving capability and Productivity 2 mSMART – Activity and lead Management mREC Intelligent nudges on next best action Enables ADM/RA’s to track and create Smart Dashboards Lead Management Near by locations BA hiring for APC/Agency enabled in mREC activities,
Slide 36: New partners onboarded and marketplace integration
…New Partners on-boarded in record time, enabled end to end Integration with Axis Bank marketplace- D from lead generation to policy issuance, Partner Integration marketplace & eco-system integration 3 New partner Onboarding Integration with Market Places & creating Max Life Partner Integration Eco-
Slide 37: New age digital customer service platform
D We are Building a New Age Digital customer service platform… 4 Revamped Website Unified Payment Platform Launched QR Code Chase journey- WhatsApp Bot Improved Customer Customer PortalExperience Robust & scalable payment platform Soft launch across channels POC completed on Haptik platform NPS up b
Slide 38: AI applications at scale across customer touchpoints
Max Life has implemented cutting edge AI application at scale enabling superior business D 6 outcomes across the customer touchpoints Vision AI Conversational New Business Purchase & Issuance Servicing, Retention & Others Computer AI Speech Analytics suite Vision & OCR NLP & Bots for Customer insigh
Slide 39: Cloud and system modernization helping scale business
D Our investments in cloud and system modernization is helping us scale business in an agile way… 7 Cloud Data & Analytics Platform Cloud Foundation Legacy Modernization ▪ Data Lake Foundation & Customer 360 ▪ Agility in operations support ▪ Modernized Treasury, HR, Contact ▪ Data stores consolidati
Slide 40: Section IV: Max Life Insurance – ESG
SECTION IV Max Life Insurance – ESG
Slide 41: Four pillars of our sustainability framework
Four pillars of our sustainability framework Investors Communities Regulators ESG Distribution Partners Customers Employees Investor Release 40
Slide 42: Four pillars of our sustainability framework (contd…)
Four pillars of our sustainability framework (contd…) Work Ethically & Sustainably Care for People Financial Responsibility Green Operations Corporate Governance Diversity & Inclusion Sustainable Investing Waste Management Ethics & Compliance Employee Development Product responsibility Water Managem
Slide 43: Work Sustainably and Ethically
Work Sustainably and Ethically Governance Data Privacy & Security Risk Management Compliance & Policies Dedicated ESG Management MLI received the DSCI Excellence Max Life has a robust governance Platforms, mechanisms, Committee Award for Best Security Practices framework with Board risk channels in
Slide 44: Care for People and Community
Care for People and Community Diversity & Inclusion Well-being of Employee Development CSR Initiatives Employees & Policies Gender diversity ratio at 26% at Counselling and mental wellbeing Ranked 18th in Great Place to work Joy of Giving: Teams volunteered in Max Life sessions conducted for employe
Slide 45: Financial Responsibility
Financial Responsibility Committed to responsible investments 100% ESG integration will be ensured in all equity investment research and decision making by FY23 75% of equity portfolio to be ESG compliant from FY23 100% compliance for equity portions of shareholders fund to be adhered to from FY23 I
Slide 46: Green Operations
Green Operations Holistic approach Conducted a carbon footprint assessment of our pan-India offices. Striving to be carbon neutral by FY28 Energy Water Waste Management Conservation Management Home Office (HO) building is a LEED Water is recycled with the help of STP: 30 kilo MLI has pledged to comp
Slide 47: Accomplishments in key strategic shifts in ESG journey
Accomplishments in our key strategic shifts identified in our ESG journey Indicators Key Metric for ESG Indicators Key Targets Current Status Digital Digital enablement (Self Servicing) in 90% of all self- servicing operations 95% self-service enablement Operations Business transactions to be digita
Slide 48: Section IV: Max Life Insurance – MCEV Disclosures: 9M FY23
SECTION IV Max Life Insurance - MCEV Disclosures: 9M FY23
Slide 49: Key Results
Key Results The Embedded Value1 (EV) as at 31st December 2022 is Rs 15,547 Cr. The Operating Return on EV (RoEV) over 9M FY23 is 19.5%. Including non-operating variances, the total RoEV 2 is 13.1%. The New Business Margin (NBM) at actual cost for 9M FY23 is 31.8%, with Value of New Business (VNB) wr
Slide 50: Progression of Embedded Value
Progression of Embedded Value 15,547 14,174 13,412 12,173 10,409 11,063 3,003 3,111 3,374 9M FY22 FY22 9M FY23 Net Worth (NW) Value of Inforce (VIF) 1. EV as at 9M FY23 represents an increase of Rs 1,373 Cr from the EV of Rs 14,174 Cr as at FY22; implying a growth of 9.7% (annualized to 13.1%) over
Slide 51: Value of New Business and New Business Margins
Value of New Business and New Business Margins as at 31st December 2022 Description 9M FY22 9M FY23 Y-o-Y growth APE 1 3,751 3,710 -1% New Business Margin (NBM) 25.1% 31.8% 670 bps (post cost overrun) Value of New Business (VNB) 942 1,179 25% (post cost overrun) ▪ The New Business Margin (NBM) has i
Slide 52: VNB and NBM Walk
Value of New Business (VNB) and New Business Margin (NBM) Walk NBM --> 25.1% - 6.7% 31.8% Note: Figures in Rs Cr. and may not add up due to rounding Investor Release 51
Slide 53: Sensitivity analysis as at 31st March 2022
Sensitivity analysis as at 31st March 2022 EV New business Sensitivity Value (Rs Cr) % change VNB (Rs Cr) | NBM % change Base Case 14,174 - 1,528 | 27.4% - Lapse/Surrender - 10% increase 14,045 (1%) 1,502 | 26.9% (2%) Lapse/Surrender - 10% decrease 14,300 1% 1,553 | 27.8% 2% Mortality - 10% increase
Slide 54: Annexures
> a ANNEXURES a
Slide 55: Expansion in case size of policies sold in 9M FY23
Expansion in case size of policies sold in 9M FY23 Case Size (INR’000) NoPs (’000) Non PAR- Saving PAR Ind Protection ULIP Non PAR- Saving PAR Ind Protection ULIP 646 615 90 90 96 131 76 131 154 168 169 411 145 219 383 176 89 26 77 24 24 22 116 98 82 81 79 148 66 149 73 100 106 105 106 120 161 147 1
Slide 56: 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 57: 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 58: 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 59: 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 31st December 2022. The VNB is calculated using the beginning of respective quarter’s risk free yield curve (i.e. 31st March 2022 ,30th
Slide 60: 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
Max Financial Services — 9M FY23 Earnings Presentation on 6ix