Max Financial Services Limited · NSE:MFSL
Max Financial Services — H1 FY23 Earnings Presentation
57 slides from Max Financial Services's earnings presentation, Oct 19, 2022
Slide 1: Max Financial Performance Update
Max Financial Performance Update Investor Release H1 FY23 October 19, 2022 ^As per the annual audited financials for FY21-22
Slide 2: Section I: 6MFY23 Key Highlights
SECTION I Max Financial Services : 6MFY23 Key Highlights
Slide 3: Max Financial Services: H1 FY23 Key Highlights
Max Financial Services: H1 FY23 Key Highlights Consolidated Revenue excluding investment income at Rs 9,720 Cr, grows 12% in H1FY23. Consolidated PAT at Rs 130 Cr, Up 1 56%, due to lower tax expenses than corresponding previous half year In H1 FY23, New Business Premium grew 9% to Rs 3,378Cr and APE
Slide 4: Section II: Max Life Insurance – Business Overview
SECTION II Max Life Insurance – Business Overview
Slide 5: 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 6: 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 7: Financial Performance Summary H1 FY23
Financial Performance Summary H1 FY23 Individual APE Gross Written Premium Renewal Premium AUM Rs 2,168 Cr 2% Rs 9,904 Cr 12% Rs 6,526 Cr 14% Rs 1,13,352 Cr 13% [Rs 2,127 Cr] [Rs 8,815 Cr] [Rs 5,706 Cr] [Rs 1,00,090 Cr] Profit Before tax Net Worth Policyholder Cost to Policyholder Expense to GWP Rat
Slide 8: Max Life APE grew by 2% led by proprietary channels
Max Life APE grew by 2% led by proprietary channels New Business Premiums (on APE basis) –Strong growth of 23% in proprietary Renewal Income – Delivering consistent growth channels in H1 Amount in INR Cr Amount in INR Cr 5,588 14,509 4,957 2,200 6,526 2,158 5,706 12,192 FY21 FY22 H1 FY22 H1 FY23 FY2
Slide 9: VNB increased by 7% aided by expansion in product NBMs
VNB increased by 7% over last year aided by and expansion in product NBMs Value of New Business- Consistently growing VNB through balanced product Product Mix – Balanced product mix mix, H1 3 year CAGR 17% Amount in INR Cr 37% 37% 33% 35% 586 1,528 546 1,249 31% 30% 29% 33% 5% 6% 9% 16% 14% 14% 8% 1
Slide 10: Efficient capital management with profitable growth
Efficient capital management with profitable growth Opex to GWP – Solvency Ratio (pre dividend) 211% 201% 196% 196% 15.5% 15.1% 14.2% 150% 13.5% Solvency Limit FY21 FY22 H1 FY22 H1 FY23 FY21 FY22 H1 FY22 H1 FY23 Operating Return on EV (RoEV) – Reduction primarily due to lower VNB Underwriting Profit
Slide 11: Max Life has consistently grown its Asset 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 ~56K ULIP: Healthy mix of Debt and Equity Amount in INR ‘000 Cr Debt Equity 113 108 52% 54% 59% 56% 100 90 48% 46% 41% 44% 79 FY 21 FY 22 H1 FY22 H1 F
Slide 12: 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 survey by IMRB Best Workplaces in Asia’ b
Slide 13: Section III: Max Life Insurance – Strategy
SECTION III Max Life Insurance – Strategy
Slide 14: 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 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 mix 15% 1,611 773 1,403 630 0% 0% 0% 1% 64% 71% 71% 70% FY21 FY22 H1 FY22 H1
Slide 16: Agency: Strategic focus on enabling top agents and 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 17: Agency transformation – new Way of Working
A Agency transformation – Launched new “Way of Working” (WoW) pilot started in 25 branches New Right Right Right Way of Working Enablement Inputs Output Advisors ▪ Segmented expectation across advisor segment ADMs regularly Increase in sales calls ▪ Joint sales calls for all advisors 94% attending t
Slide 18: 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 19: Expanding traditional and emerging distribution ecosystems
Max Life has been augmenting distribution capability by expanding both traditional and A emerging ecosystems Ecosystems Key partners signed by Max Life in Q2 Bancassurance Offline Brokers Yella Online Brokers Max Life Insurance 19
Slide 20: Continued leadership in online acquisition
A Continued leadership in online acquisition APE grew 6X in 5 years H1 FY23 Highlights New product launch – FD/RD like category Penetrated into new segments – contribute created; Best in class returns to ~10% in Term on run rate basis Led to 100% growth in savings Homemaker NRI Self-employed run-rat
Slide 21: Product mix in proprietary and Bancassurance channels
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 15% 22% 20% 26%
Slide 22: Product innovation with first-in-industry propositions
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 23: Accelerating product innovation and new customer segments
…Accelerating product innovation agenda through experiments and creating new customer B segments 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 Solution Ke
Slide 24: 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 25: Focus on retirement
B Focus on retirement 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 until death Needs ▪ Savings for future education, bu
Slide 26: 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 27: 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 28: 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# - Individual policies excluding single pay/fully paid up policies 84% 84% 67% 67% 60% 61% 56% 56% 50% 50% 13th Month 25th Month 37t
Slide 29: Significant progress on our Digital Journey
D We had made significant progress on our Digital Journey 50+ 72% Partners Automated Underwriting (Retail) Text 46% ~58 DIGITAL NATIVE FRICTIONLESS Infra on Cloud Claims paid everyday TALENT CUSTOMER ONBOARDING 56% <3 seconds >6L^ Insta COI (Axis) Page load time DIGITAL Text DIGITAL SALES Policies S
Slide 30: Max Life's Digital Strategy based on 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 31: Leveraging Digital Tech; Leader in E-Commerce Protection
D Max Life is Leveraging Digital Tech & is a Leader in E-Commerce Protection Sales… 1 Savings New Intercept ▪ New Age DIY Savings Chase - Conversational Interface ( Whatsapp-bot) journey with enhanced customer Experience ▪ Improved Quote page design across all Savings products. ▪ Lead to quote impro
Slide 32: 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 33: New partners onboarded in record time
…New Partners onboarded in record time, enabled Integration with Bank marketplaces, Partner D Integration marketplace & eco-system integration 3 New partner Onboarding Integration with Market Places & creating Max Life Partner Integration Eco-system Integration For KYC details and document waivers A
Slide 34: 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 35: Cutting edge AI applications at scale
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 36: Cloud and system modernization investments
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 37: Section IV: Max Life Insurance – ESG
SECTION IV Max Life Insurance – ESG
Slide 38: Four pillars of our sustainability framework
Four pillars of our sustainability framework Investors Communities Regulators ESG Distribution Partners Customers Employees Investor Release 38
Slide 39: 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 40: 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 41: Care for People and Community
Care for People and Community Diversity & Inclusion Health & Wellness Employee Development CSR Initiatives & Policies Gender diversity ratio at 25% at Counselling and mental Ranked 18th in Great Place to Joy of Giving: Teams Max Life wellbeing sessions conducted work survey in 2021 volunteered in ou
Slide 42: 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 43: 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 44: 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 45: Section V: MCEV Disclosures H1 FY23
SECTION V Max Life Insurance - MCEV Disclosures: H1 FY23
Slide 46: Key Results
Key Results The Embedded Value1 (EV) as at 30th September 2022 is Rs 14,704 Cr. The Operating Return on EV (RoEV) over H1 FY23 is 15.7%. Including non-operating variances, the total RoEV 2 is 7.6%. The New Business Margin (NBM) at actual cost for H1 FY23 is 26.7%, with Value of New Business (VNB) wr
Slide 47: Progression of Embedded Value
Progression of Embedded Value 14,704 14,174 12,988 11,063 11,582 10,069 2,919 3,111 3,122 H1 FY22 FY22 H1 FY23 Net Worth (NW) Value of Inforce (VIF) 1. EV as at H1 FY23 represents an increase of Rs 529 Cr from the EV of Rs 14,174 Cr as at FY22; implying a growth of 3.7% (annualized to 7.6%) over the
Slide 48: Value of New Business and New Business Margins as at 30th September 2022
Value of New Business and New Business Margins as at 30th September 2022 Description H1 FY22 H1 FY23 Y-o-Y growth APE 1 2,158 2,200 2% New Business Margin (NBM) 25.3% 26.7% 140 bps (post cost overrun) Value of New Business (VNB) 546 586 7% (post cost overrun) ▪ The New Business Margin (NBM) has incr
Slide 49: VNB and NBM Walk
Value of New Business (VNB) and New Business Margin (NBM) Walk NBM --> 25.3% - 1.4% 26.7% Note: Figures in Rs Cr. and may not add up due to rounding Investor Release 49
Slide 50: 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 51: Annexures
> a ANNEXURES a
Slide 52: Expansion in case size of policies sold in 6M FY23
Expansion in case size of policies sold in 6M FY23 Case Size (INR’000) NoPs (’000) Non PAR- Saving PAR Ind Protection ULIP Non PAR- Saving PAR Ind Protection ULIP 646 615 76 92 131 82 69 131 168 148 146 145 219 176 24 26 23 259 241 22 81 81 148 53 66 75 149 55 76 65 60 50 106 105 104 109 147 161 70
Slide 53: 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 54: 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 55: 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 56: 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 2022. The VNB is calculated using the beginning of respective quarter’s risk free yield curve (i.e. 31st March 2022 and 3
Slide 57: 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 — H1 FY23 Earnings Presentation on 6ix