Max Financial Services Limited · NSE:MFSL
Max Financial Services — 9M FY20 Earnings Presentation
37 slides from Max Financial Services's earnings presentation, Feb 5, 2020
Slide 1: Max Financial Performance Update
Max Financial Performance Update Investor Release 9M FY20 5th February, 2020
Slide 2: Section I: 9M FY20 Key Highlights
SECTION I Max Financial Services : 9MFY20 Key Highlights
Slide 3: Max Financial Services: 9M FY'20 Key Highlights
Max Financial Services : 9M FY’20 Key Highlights Consolidated Revenue at Rs 14,000 Cr, grows 13%. Consolidated PAT at Rs 266 Cr, Up 23%, due to one-off gain from 1 successful transition in hedging strategy from Interest Rate Swap (IRS) to Forward Rate Agreement (FRA), aided by higher investment inco
Slide 4: Section II: Max Life Insurance – Business Overview
SECTION II Max Life Insurance – Business Overview
Slide 5: Industry Landscape (9M FY'20): Total Industry grew by 17%
Industry Landscape (9M FY’20): Total Industry grew by 17%, while Pvt. players grew by 16% and LIC by 17% YoY Growth basis Individual Adjusted FYP FY’18 FY’19 9M FY’19 9M FY’20 Private Industry YoY growth 24% 12% 11% 16% Industry 22.0% 21.0% Max Life 20% 20% 19.0% 17% 9.0% 8% Max Life’s private 9% 9%
Slide 6: Max Life has delivered strong performance on new and renewal business
Max Life has delivered strong performance on both new business and renewal business; Maintained 4th rank in the private industry New Business Premiums (on APE basis) Renewal Income Amount in INR Cr Amount in INR Cr 16% 11% 22% 9,415 20% 3,950 8,108 3,248 6,618 2,740 5,956 2,291 FY18 FY19 9M FY19 9M
Slide 7: 24% growth in VNB with 9M margins at 21%
24% growth in VNB with 9M margins at 21% driven by increased focus on Non Par Savings Margins (post-overrun)* # Product Mix – Shifting towards a balanced product mix, NPAR savings mix 150 bps increased by 14%. Individual Protection mix grew by 1.3%, while the Group Protection mix grew by 0.4% 21.7%
Slide 8: Efficient capital management with consistent RoE of more than 20%
Efficient capital management with consistent RoE of more than 20%… among the best in financial services Opex to GWP* - Increase due to investment in proprietary channels 16.3% 14.5% 12.9% 13.2% Solvency Ratio (pre dividend) - maintained well above the regulatory requirement 275% 242% 239% FY18 FY19
Slide 9: Embedded value crossed Rs 10,000 Cr with growth of 22%
Embedded value crossed Rs 10,000 Cr with a growth of 22%, operating RoEV for 9MFY20 at 18.4% Embedded Value (EV)* - EV has grown at 18% driven by growth in value of Operating Return on Embedded Value - RoEV at 18.4% in 9MFY20 new business and quality of inforce business Amount in INR Cr 22% 22% 21.9
Slide 10: Max Life has consistently grown its Asset Under Management
Max Life has consistently grown its Asset Under Management Debt-Equity Mix - Healthy mix of Debt and Equity on an overall level 22% 22% 21% 22% Assets Under Management - MLI is the 4th largest manager LI AUMs Amount in INR ‘000 Cr 78% 78% 79% 78% 18% 20% 69 FY18 FY19 9M FY'19 9M FY'20 63 58 52 Debt
Slide 11: Unwavering focus on 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 12: 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 ▪ No. 1 in Customer Loyalty ▪ Ranked 35th – India’s Best Innovation Awar
Slide 13: Section III: Max Life Insurance – Strategy FY19-22
SECTION III Max Life Insurance – Strategy FY19-22
Slide 14: Aspirations FY22
Max Life embarked on its journey of 25%+ VNB growth, 25% NBM and 25% ROEV aspirations by FY22. Key strategic elements to achieve the vision A B C D Predictable & Sustainable Digitalto Product innovation Customer centricity across the value Digitization for efficiency and growth drive margins chain i
Slide 15: 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 30% 1162 mix 891 H1 FY19 H1 FY20 Growth 488 577 18% 12% 13% 11% 12% 1% 1% 1%
Slide 16: Product mix across proprietary and Bancassurance channels
Product mix proprietary and Bancassurance channels aligned to customer needs; future focus A to be on driving balanced product mix Proprietary Channels Product mix - biased towards traditional products and Bancassurance Product Mix – focused on increasing NPAR Savings to drive protection for driving
Slide 17: Complete suite of products with 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 18: Focus on Protection: 45% increase in individual protection APE
Focus on Protection: 45% increase in individual protection APE, 31% of total individual B policies are pure protection No of Protection Policies (Individual)- Lower NoP growth in 9M FY 20 due to Total APE (Individual + Group) introduction of limited pay term Figures in Rs. Cr. Figures in ‘000. 403 1
Slide 19: Strong focus on customer measures delivers superior performance
Strong focus towards customer measures has helped deliver superior performance across C health parameters and will continue to remain an important priority Conservation Ratio Persistency^ 90% 90% 89% 84%85% 87% 80% 83% 72%71%72%72% 62%64%65%63% 57% 58% 57%60% 53%53%55%51% FY18 FY19 9M FY'19 9M FY'20
Slide 20: Significant elements of the value chain digitized
Significant elements of the value chain digitized, focus remains to leverage digitization & AI for D augmenting efficiencies Digital building blocks in end-to-end customer journey deployed at Max Life Agent Application Sourcing Underwriting Verification Issuance Account service Collection Onboarding
Slide 21: Section IV: Max Life Insurance – MCEV Disclosures 9M FY'20
SECTION IV Max Life Insurance – MCEV Disclosures: 9M FY’20
Slide 22: Key Results
Key Results The Embedded Value1 (EV) as at 31st December 2019 is Rs 10,0772 Cr. The annualized Operating Return on EV (RoEV)3 over 9M FY20 is circa 18.4%. Including non-operating variances, the RoEV is 18.7%. The New Business Margin (NBM) for 9M FY20 is 24.3% (before allowing for acquisition operati
Slide 23: Overview of the components of the EV as at 31st December 2019
Overview of the components of the EV as at 31st December 2019 VIF Net worth and EV Market value of Shareholders’ owned assets over liabilities Time value of financial options and guarantees Cost of residual non- hedgeable risks Frictional cost Net Worth Rs 2,687 Cr TVFOG Rs 47 Cr CRNHR EV Rs 785 Cr
Slide 24: Value of New Business and New Business Margins as at 31st December 2019
Value of New Business and New Business Margins as at 31st December 2019 Description 9M FY19 9M FY20 Y-o-Y growth APE 1 2,291 2,740 20% New Business Margin (NBM) 22.8% 24.3% +150 bps (before cost overrun) New Business Margin (NBM) 20.4% 21.0% +60 bps (post cost overrun) Value of New Business2 (VNB) 4
Slide 25: Sensitivity analysis as at 30th September 2019
Sensitivity analysis as at 30th September 2019 Figures in Rs Cr. EV New business Sensitivity Value (Rs Cr) % change VNB (Rs Cr) | NBM % change Base Case (before final SH dividends) 9,831 - 364 | 21.0% - Lapse/Surrender - 10% increase 9,691 (1%) 351 | 20.3% (4%) Lapse/Surrender - 10% decrease 9,979 2
Slide 26: Section V: Max Life Insurance – Financial Performance
SECTION V Max Life Insurance – Financial Performance
Slide 27: Financial Performance Summary 9M FY'20
Financial Performance Summary 9M FY’20 Pvt Market Share Individual APE Gross Written Premium AUM 30 bps 20% 9.0% Rs 2,718 Cr Rs 10,311 Cr 14% Rs 68,618 Cr 18% [8.7%] [Rs 2,269 Cr] [Rs 9,054 Cr] [Rs 58,397 Cr] Profit Before tax Net Worth Policyholder Expense to Policyholder Cost to GWP Ratio GWP Rati
Slide 28: Delivering consistent growth in top line and investing for future growth
Delivering consistent growth in top line and investing for future growth Financial Performance FY18 FY19 9M FY’19 9M FY’20 22% 20% Individual APE 3,217 3,917 2,718 2,269 15% 11% Renewal Premium 8,152 9,415 6,618 5,956 17% 14% Gross Premium 12,501 14,575 9,054 10,311 Policyholder expense to GWP 12.9%
Slide 29: Healthy and consistent long term profitability
Healthy and consistent long term profitability creating value to all the stakeholders while maintaining solvency above required levels Financial Performance FY18 FY19 9M FY’19 9M FY’20 1% 6% Profit(before Tax) 615 623 375 353 20% 18% 52,237 62,798 68,618 AUM 58,397 150 bps 60 bps 20.2% 21.7% 20.4% 2
Slide 30: Performance update - Q3'FY20 and 9M'FY20
Performance update- Q3’FY20 and 9M’FY20 Quarter Ended Q-o-Q Period Ended Y-o-Y Key Business Drivers Unit Dec’18 Dec’19 Growth Dec’18 Dec’19 Growth a) Individual APE Rs. Crore 864 1,000 16% 2,269 2,718 20% b) Gross written premium income Rs. Crore 3,435 3,879 13% 9,054 10,311 14% First year premium 8
Slide 31: Annexure
Annexure Investor Release 31
Slide 32: Definitions of the Embedded Value (EV)
Definitions of the Embedded Value (EV) 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
Slide 33: 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 34: 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 provided by Moody's Analytics. ▪ Given that the shareholder payout is likely to be symmetrical for guar
Slide 35: 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 2019. The VNB is calculated using the beginning of respective quarter’s risk free yield curve (i.e. 31st March 2019, 30th
Slide 36: 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 37: MAX
MAX FP surance
Max Financial Services — 9M FY20 Earnings Presentation on 6ix