Max Financial Services Limited · NSE:MFSL
Max Financial Services — Q1 FY2021 Earnings Presentation
40 slides from Max Financial Services's earnings presentation, Jul 30, 2020
Slide 1: Max Financial Performance Update
Max Financial Performance Update Investor Release Q1 FY21 July 30, 2020
Slide 2: Section I: Q1FY21 Key Highlights
SECTION I Max Financial Services : Q1FY21 Key Highlights
Slide 3: Max Financial Services: Q1 FY'21 Key Highlights
Max Financial Services : Q1 FY’21 Key Highlights Axis transaction update: • RBI and IRDAI application under progress; Shareholders approval received 1 • MSI transaction update: Shareholders, CCI & Stock exchanges approval received; DEA & IRDAI application under progress 2 Consolidated Revenue* at Rs
Slide 4: Section II: Max Life Insurance – Business Overview
SECTION II Max Life Insurance – Business Overview
Slide 5: Industry Landscape (Q1 FY'21)
Industry Landscape (Q1 FY’21): Total Industry de-grew by 18%, while Pvt. players de-grew by 23% and LIC by 11%, Max Life de-grew only by 4% YoY Growth basis Individual Adjusted FYP FY’19 FY’20 Q1 FY’20 Q1 FY’21 • Despite all COVID-19 Private Industry 5% 23% challenges, Max life YoY growth 24% 24% 23
Slide 6: Financial Performance Summary Q1FY21
Financial Performance Summary Q1FY21 Pvt Market Share Individual APE Gross Written Premium AUM 217 bps -3% 11% Rs 660 Cr Rs 2,751 Cr 4% Rs 73,239 Cr 15% [9%] [Rs 679 Cr] [Rs 2,651Cr] [Rs 63,877 Cr] Profit Before tax Net Worth Policyholder Cost to Policyholder Expense to GWP Ratio GWP Ratio Rs 138 Cr
Slide 7: Max Life strong performance on new business; maintained 4th rank
Max Life has delivered strong performance on new business ; Maintained 4th rank in the private industry and increased market share by 217 bps New Business Premiums (on APE basis) Renewal Income Amount in INR Cr Amount in INR Cr 5% 13% 3,950 4,149 10,600 9,415 -4% 6% 685 661 1,740 1,852 FY19 FY20 Q1
Slide 8: Individual protection penetration doubled; NBM declined due to interest rates
Individual protection penetration doubled; NBM declined due to interest rates Product Mix – Increasing protection contribution while maintaining balance Margins (post-overrun) -10 bps -250 bps 42% 38% 37% 35% 21.7% 21.6% 19.6% 17.1% 15% 18% 9% 18% 6% 10% 8% 4% 5% 15% 11% 13% 7% 25% 8% 14% 40% 33% 30
Slide 9: 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 ~243 Solvency Ratio (pre dividend) - maintained well above the regulatory bps requirement 120bps -243 bps 242% 225% 18.7% 212% 16.2% 207% 14.
Slide 10: Embedded value grew at 15%, operating RoEV at 15.9%
Embedded value grew at 15%, while operating RoEV for Q1FY21 at 15.9% Embedded Value (EV) - EV has grown at 15% driven by growth in value of Operating Return on Embedded Value - RoEV has increased to 15.9% in new business and quality of inforce business* Q1FY21* Amount in INR Cr 12% 15% 10670 21.9% 9
Slide 11: 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 ~40K Debt Equity Amount in INR ‘000 Cr 9% 51% 43% 15% 73 50% 50% 68 63 64 49% 57% 50% 50% 52 49 44 43 FY 19 FY 20
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 Innovation Award ▪ No. 1 in Customer Loyalty ▪ Ranked 24th – India’s Bes
Slide 13: Section III: Max Life Insurance – Strategy
SECTION III Max Life Insurance – Strategy
Slide 14: COVID Response Initiatives
COVID Response: Significant progress made in key programs initiated to navigate through current situation and emerge stronger 1 2 3 4 5 Furthering Digital Sales Products and Underwriting Cost rationalization Close to customer Human capital ▪ 100% digitized selling, ▪ Distribution enablement for ▪ Ta
Slide 15: Significant progress made 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 16: 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 1282 mix 1162 8% 1% 1% 1% 1% 228 248 68% 66% 62% 70% FY19 FY20 Q1'20 Q1'21
Slide 17: 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 18: Complete suite of products, longer term focus
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 19: Focus on Protection: half of policies were Pure Protection
Focus on Protection: Half the policies underwritten in Q1 were Pure Protection, led to B >100% growth in APE YoY Total APE (Individual + Group) No of Protection Policies (Individual) Figures in Rs. Cr. Figures in ‘000. 571 232 403 183 175 176 187 339 114 82 227 61 62 39 105 52 FY19 FY20 Q1 FY'20 Q1
Slide 20: Strong focus on customer measures across health parameters
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 6% due to UL 99.22% discontinuance 98.26% 98.7
Slide 21: Embedded intelligence (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 22: Embedded intelligence (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 23: Section IV: Max Life Insurance – ESG
SECTION IV Max Life Insurance – ESG
Slide 24: ESG Framework: 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 for our business ▪ Plantation Drive: >35,000 trees planted in ▪ Diverse Board composition activities FY20 across offices ▪ 3
Slide 25: Section V: MCEV Disclosures: Q1 FY'21
SECTION V Max Life Insurance – MCEV Disclosures: Q1 FY’21
Slide 26: Key Results
Key Results The Embedded Value1 (EV) as at 30th June 2020 is Rs 10,670 Cr. The annualized Operating Return on EV (RoEV) over Q1 FY21 is 15.9%. Including non-operating variances, the annualized RoEV is 30.8% . Due to the sales being skewed towards later part of the year, the impact of cost overrun is
Slide 27: Overview of the components of the EV as at 30th June 2020
Overview of the components of the EV as at 30th June 2020 VIF Net worth and EV Market value of Shareholders’ owned assets over liabilities Time value of Cost of residual financial options and non-hedgeable guarantees risks Net Worth Frictional cost Rs 2,776 Cr TVFOG Rs 66 Cr CRNHR FC Rs 767 Cr Rs 13
Slide 28: Value of New Business and New Business Margins
Value of New Business and New Business Margins as at 30th June 2020 Description 3M FY20 3M FY21 Y-o-Y growth APE 1 685 661 (4%) New Business Margin (NBM) 24.9% 24.5% -40 bps (before cost overrun) New Business Margin (NBM) 19.6% 17.1% -250 bps (post cost overrun) Value of New Business2 (VNB) 171 162
Slide 29: VNB and NBM Walk
Value of New Business (VNB) and New Business Margin (NBM) Walk Figures in Rs Cr. 113 NBM* → 19.6% - 3.2% -3.9% -1.8% 17.1% Note: *NPAR savings and protection products have been repriced to mitigate interest rate impact going forward. Acquisition overrun are higher in Q1’21 due to lower volume owing
Slide 30: Sensitivity analysis as at 31st March 2020
Sensitivity analysis as at 31st March 2020 Figures in Rs Cr. EV New business Sensitivity Value (Rs Cr) % change VNB (Rs Cr) | NBM % change Base Case 9,977 - 897 | 21.6% - Lapse/Surrender - 10% increase 9,854 (1%) 864 | 20.8% (4%) Lapse/Surrender - 10% decrease 10,103 1% 930 | 22.4% 4% Mortality - 10
Slide 31: Annexures
> a ANNEXURES a
Slide 32: 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 Q1 FY’20 Q1 FY’21 5% -3% Individual APE 3,917 4,116 679 660 13% 6% 9,415 10,600 1,740 1,852 Renewal Premium 11% 2,651 4% Gross Premium 14,575 16,184 2,751 126 bps Policyholder
Slide 33: Healthy profitability while maintaining solvency above required levels
Healthy and consistent profitability creating value to all the stakeholders while maintaining solvency above required levels Financial Performance FY19 FY20 Q1 FY’20 Q1 FY’21 4% 80% Profit(before Tax) 623 598 77 138 9% 15% 62,798 68,471 63,877 73,239 AUM 10 bps 250 bps 21.7% 21.6% 19.6% 17.1% New Bu
Slide 34: Performance update- Q1'FY21
Performance update- Q1’FY21 Year Ended Key Business Drivers Unit Y-o-Y Growth Q1 FY’20 Q1 FY’21 a) Individual APE Rs. Crore 679 660 -3% b) Gross written premium income Rs. Crore 2,651 2,751 4% First year premium 646 621 -4% Renewal premium 1,740 1,852 6% Single premium 265 278 5% c) Shareholder Prof
Slide 35: Protection – Expansion in case size and number of policies
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 69 645 597 60 54 61 123 106 156 125 139 144 175 183 19 17 13 13 59 59 53 57 307 224 114 123 19 21 88 96 97 84 39 61
Slide 36: 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 37: 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 38: 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 39: 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 Jun 2020. The VNB is calculated using the beginning of respective quarter’s risk free yield curve (i.e. 31st March 2020). ▪ No allo
Slide 40: 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
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