Max Financial Services Limited · NSE:MFSL
Max Financial Services — Q1 FY24 Earnings Presentation
53 slides from Max Financial Services's earnings presentation, Aug 9, 2023
Slide 1: Investor Release Q1 FY24 cover letter to exchanges
August 9, 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: Investor Release– Q1 FY 24 Pursuant to Regulation
Slide 2: Max Financial Performance Update
Max Financial Performance Update Investor Release 3M FY24 August 10, 2023 *GPTW ranking as of 2021, company has not participated post 2021
Slide 3: Section I: 3M FY'24 Key Highlights
SECTION I Max Financial Services and Max Life Insurance : 3M FY’24 Key Highlights
Slide 4: Transaction Update
Transaction Update Proposed Structure Final structure Current Structure (Post preferential issue of Max Life shares to Axis) (Post exercise of 0.98% right by Axis) Mitsui Mitsui Max Promoter Public Max Promoter Public Max Promoter Mitsui Sumitomo Public Sumitomo Sumitomo 10.1% 68.0% 10.1% 68.0% 10.1
Slide 5: Max Financial Services: 3M FY'24 Key Highlights
Max Financial Services: 3M FY’24 Key Highlights Consolidated Revenue excluding investment income at Rs 4,730 Cr, grows 19% in Q1 FY24. Consolidated PAT at Revenue Rs 101 Cr, Up 48% In 3M FY24, New Business Premium grew by 25% to Rs 1,857 Cr Max Life Insurance Profit before Tax grew by 14% to 103 cr
Slide 6: Section II: Max Life Insurance – Business Overview and Financials Update
SECTION II Max Life Insurance – Business Overview and Financials Update
Slide 7: Key Highlights for Max Life FY18-23 (1/2)
Key Highlights* for Max Life FY18-23 (1/2) 1 5-Yr CAGR1 of 13% on Asset Under Management at Individual new business Consistent leadership position in Rs 1.23 lac cr, CAGR of 19% over Consistent growth vs online protection last 5 years 10% for life insurance industry 5-Yr CAGR of 5-Yr CAGR of Retail
Slide 8: Key Highlights for Max Life FY18-23 (2/2)
Key Highlights for Max Life FY18-23 (2/2) Employee metrics Great Places to Experienced leadership1 Work rank #18 in FY21 with almost half Employee engagement2 the leadership’s score of >95% Rank #55 among Great Places tenure with Max Life of for last 4 years to Work in Asia in FY21 more than a decad
Slide 9: Financial Performance Summary Q1 FY24
Financial Performance Summary Q1 FY24 Total APE# Gross Written Premium Renewal Premium AUM Rs 1,113 Cr 10% Rs 4,871 Cr 19% Rs 3,014 Cr 15% Rs 1,29,127 Cr 21% [Rs 1,009 Cr] [Rs 4,103 Cr] [Rs 2,619 Cr] [Rs 1,07,140 Cr] Profit Before tax Net Worth Policyholder Cost to Policyholder Expense to GWP Ratio
Slide 10: Max Life has delivered strong performance on new business
Max Life has delivered strong performance on new business New Business Premiums (on APE basis) –Driven by strong growth in Renewal Income – Delivering consistent growth proprietary channels in Q1 Amount in INR Cr Amount in INR Cr 1,113 3,014 16,382 6,248 1,009 2,619 5,588 14,509 FY'22 FY'23 3M FY'23
Slide 11: Consistent VNB growth supported by strong product mix
Consistent VNB growth supported by strong product mix, profitable products and APE growth Product Mix: Increased annuity share in line with our focus on retirement Value of New Business- 2 year CAGR at 20% in Q1 Amount in INR Cr NBM% PAR Annuity NPAR Savings NPAR Protection Group Protection ULIP 31.
Slide 12: Value of New Business and New Business Margin Walk
Value of New Business (VNB) and New Business Margin (NBM) Walk NBM 21.1% - 1.1% 22.2% Note: Figures in Rs Cr. and may not add up due to rounding Investor Release 11
Slide 13: Efficient capital management with profitable growth
Efficient capital management with profitable growth Opex to GWP: Investing towards building distribution Solvency Ratio (pre dividend) 201% 17.4% 196% 16.9% 190% 188% 13.5% 14.2% 150% Solvency Limit FY'22 FY'23 3M FY'23 3M FY'24 FY'22 FY'23 3M FY'23 3M FY'24 Operating Return on EV (RoEV): Delivering
Slide 14: 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 ~61K Cr ULIP: Healthy mix of Debt and Equity Amount in INR ‘000 Cr Debt Equity ULIP Controlled Fund 129 123 54% 58% 54% 60% 108 107 46% 42% 46% 40% 9
Slide 15: 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. 2 in Customer Loyalty survey by Hansa Research ▪ Ranked 55th amongst ‘2021 ▪ Awarded at The
Slide 16: Section III: Max Life Insurance – Strategy
SECTION III Max Life Insurance – Strategy
Slide 17: 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 18: Growth in both Proprietary and Bancassurance channels
A Max Life has focused on ensuring growth in both its Proprietary and Bancassurance channels Channel Mix - Max Life has focused on maintaining a balanced distribution Proprietary Channels New Business (APE) mix Propietary Banca Others Amount in INR Cr 421 0% 1% 1% 2% 2,307 342 1,611 62% 59% 66% 71%
Slide 19: Augmenting distribution capability across ecosystems
Max Life has been augmenting distribution capability by expanding both traditional and A emerging ecosystems Ecosystems Key partners On-boarded Bancassurance Offline Brokers Yella Online Brokers Investor Release 18
Slide 20: Product mix in proprietary and Bancassurance channels
A 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 Savings & ULIP to protection for driving margins cater to target customer segments PAR Annu
Slide 21: Driving 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 22: Accelerating product innovation agenda
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 /homemakers deposits Smart Fixed-return Smart Flexi Protect Smart Secure Easy Digital Plan Solution Solution Inc
Slide 23: Complete suite of 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 24: Focus on retirement leading to growth in Annuity business
B Focus on retirement leading to ~4x growth in Annuity business in Q1FY’24 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
Slide 25: Focus on protection and its risk management
B Focus on protection and its risk management Customer Profiling and Selection Experience monitoring Profitability & Risk Management ▪ Regular portfolio review/ Post issuance ▪ AI based risk models, Credit Bureaus, IIB ▪ Regular repricing of products verification Database deployed in underwriting ri
Slide 26: 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 27: 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)- 61st month persistency improved by 110 BPS Persistency#(NOP)- Market leader on 13th month NOP persistency 84% 84% 2M FY2
Slide 28: Significant progress on our Digital Journey
D We had made significant progress on our Digital Journey 50+ 81.0% % servicing dig Partners Automated Underwriting (Retail) 83 Text ital 56% 60 mm DIGITAL NATIVE FRICTIONLESS Infra on Cloud Website NPS TALENT CUSTOMER ONBOARDING NOP via E-co 85% e- renewals 35% <3 seconds 6L Insta COI (Axis) Page l
Slide 29: Max Life's Digital Strategy 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 30: Leader in E-Commerce Sales
D Max Life is Leveraging Digital Tech & is a Leader in E-Commerce Sales… Ecommerce pre- purchase initiatives Ecommerce post purchase initiatives Native VMER • 98% video medicals completed New Mandate Page within TAT of 3 Days Features • New mode for auto-pay – UPI-SI e-KYC • Native input without hop
Slide 31: Digitizing the sales force
D We are digitizing the sales Force by driving capability and Productivity 2 mSMART – Activity & lead Management ; RMS - Renewal Lead Management System mREC Enables ADM/RA’s to track and Lead Management GeoAnalytics RA dispositions & Smart Dashboards Leader hiring for create activities, goals and PR
Slide 32: New partners on-boarded in record time
…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 33: Leveraging India Stack ecosystems
We are leveraging the ecosystems built on the India Stack to simplify the customer journey. We have integrated with the AA Ecosystem for sharing financial documents with customer consent 4 Eco-system Integration Sharing of Bank Statement using the Account Aggregator for Financial U/W FIU Integration
Slide 34: New Age Digital customer service platform
D We are Building a New Age Digital customer service platform… 5 Revamped - WhatsApp Bot Website Unified Payment Platform (Beta launch) New Help center approach with Live Agent Digital Living Certificate – Annuity customers Robust & scalable payment platform chat, native journeys and vernacular can
Slide 35: Increased penetration of Analytics & AI/ML
D Over the Last 2 years we have increased penetration of Analytics & AI/ML across processes with external recognition. 6 Vision 2022-2024 : Intelligent Enterprise at Scale - Scaled AI touching 90% critical identified business processes # Onboarding Retention & New Business Central Functions & Issuan
Slide 36: Investments in cloud and system modernization
Our investments in cloud and system modernization is helping us scale business D in an agile way… 7 Cloud Data & Analytics Platform Compliance & Security Cloud Foundation Legacy Modernization ▪ Data Lake Foundation build with data availability ▪ Industry best Tools & process to ▪ Agility in operatio
Slide 37: New Age Technology skills through dedicated CoEs
D We have built specific competence in New Age Technology skills through dedicated CoEs 9 Maxlife & Cognizant Data Engineering / Big Data Skills Enterprise Architecture AI works team – AI, NLP, ML Ingenium - Joint Development Centre Cloud Computing – Cloud architects, cloud ops Design Thinking Testi
Slide 38: Section IV: Max Life Insurance – ESG
SECTION IV Max Life Insurance – ESG
Slide 39: Four pillars of our sustainability framework
Four pillars of our sustainability framework Investors Communities ly Ca eopl ab SustWork P re e ain for Regulators resp ESG Distribution Partners io n s Finaonsib p e ee n ra t nci ilit Gr al y O Customers Employees Investor Release 38
Slide 40: 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 41: 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, channels in Committee Award for Best Security Practices in framework with Board ri
Slide 42: 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 Max Launched the Visit Health app as part of Concluded the Annual Employee Joy of Giving: 42,500+ beneficiaries Life the holistic employee well
Slide 43: Financial Responsibility
Financial Responsibility Committed to responsible investments 100% ESG integration will be ensured in all equity investment research and decision making 75% of equity portfolio to be ESG compliant at all times 100% compliance for equity portions of shareholders fund to be adhered to Integrating Resp
Slide 44: 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 MLI has pledged to completely ban single-use Home Office (HO) building is a LEED Platinum Water is recycled
Slide 45: Accomplishments in our 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 46: Annexures
> a ANNEXURES a
Slide 47: Expansion in case size and number of policies sold
Expansion in both case size and number of policies sold in 3M FY24 Case Size (INR’000) NoP’s (000’s) PAR Annuity NPAR Savings NPAR Protection ULIP PAR Annuity NPAR Savings NPAR Protection ULIP 103 615 90 597 118 114 90 153 88 131 116 20 153 31 168 27 140 28 176 147 36 24 134 25 115 30 105 105 155 21
Slide 48: Sensitivity analysis as at 31st March 2023
Sensitivity analysis as at 31st March 2023 EV New business Sensitivity Value (Rs Cr) % change VNB (Rs Cr) | NBM % change Base Case 16,263 - 1,949 | 31.2% - Lapse/Surrender - 10% increase 16,276 0.1% 1,951 | 31.2% 0.1% Lapse/Surrender - 10% decrease 16,234 (0.2%) 1,941 | 31.1% (0.4%) Mortality - 10%
Slide 49: 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 50: 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 51: 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 52: 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 June 2023. The VNB is calculated using the beginning of respective quarter’s risk free yield curve (i.e. 31st March 2023). ▪ No all
Slide 53: 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. ▪ Future CSR related expenses have been taken to be 2% of post tax (risk adjusted) profits emerging each year. ▪ The commission rates are
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