Max Financial Services Limited · NSE:MFSL
Max Financial Services — FY2020 Earnings Presentation
50 slides from Max Financial Services's earnings presentation, May 26, 2020
Slide 1: Max Financial Performance Update
Max Financial Performance Update Investor Release FY20 May 26, 2020
Slide 2: Section I: FY20 Key Highlights
SECTION I Max Financial Services : FY20 Key Highlights
Slide 3: Max Financial Services: FY'20 Key Highlights
Max Financial Services : FY’20 Key Highlights Axis transaction update: • Axis Bank to acquire 29% stake in Max Life; Post completion of series of transactions Max Life will be a 70:30 JV 1 • Postal ballot notice issued to Shareholders; RBI and IRDAI application filed; CCI filing shortly MSI transact
Slide 4: Section II: Max Life Insurance – Business Overview
SECTION II Max Life Insurance – Business Overview
Slide 5: Industry Landscape (FY'20)
Industry Landscape (FY’20): Total Industry grew by 6%, while Pvt. players grew by 5% and LIC by 8%) YoY Growth basis Individual Adjusted FYP FY’17 FY’18 FY19 FY’20 Private Industry YoY growth 14% 26% 24% 5% Industry 25% Max Life 22% 21% 21% 19% 9% 6% 5% Max Life’s private 10% 10% 9% 9% market share
Slide 6: Financial Performance Summary FY20
Financial Performance Summary FY20 Pvt Market Share Individual APE Gross Written Premium AUM 5% 10% 4 bps Rs 4,116 Cr Rs 16,184 Cr 11% Rs 68,471 Cr 9% [10%] [Rs 3,917 Cr] [Rs 14,575 Cr] [Rs 62,798 Cr] Profit Before tax Net Worth Policyholder Cost to Policyholder Expense to GWP Ratio GWP Ratio Rs 595
Slide 7: Strong performance on new business 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 5% 13% 4,149 10,600 3,950 9,415 3,248 8,108 7,081 2,657 FY17 FY18 FY19 FY20 FY17 FY18
Slide 8: Shift in product mix towards NPAR improved structural margin
Shift in product mix towards NPAR resulted in 180 bps improvement in structural margin; Current cost VNB growth in line with the sales growth owing to investments in growth and COVID impact Product Mix – Shifting towards a balanced product mix Margins (post-overrun)# 280 bps 30% 41% 42% 38% 21.7% 21
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*- Increase in FY20 ratio largely on account of investments in Solvency Ratio (pre dividend) - maintained well above the regulatory proprietary channels, growth initiatives and slowdown impact
Slide 10: Embedded value compounds at 15%; operating RoEV 20.3%
Embedded value compounds at 15% with operating RoEV for FY20 at 20.3% Embedded Value (EV) Operating Return on Embedded Value Amount in INR Cr 12% 21.9% 9977 19.9% 20.6% 20.3% 8938 7509 6590 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 Operating Variance - has been generally positive over the years Sensit
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 ULIP: Healthy mix of Debt and Equity private LI AUMs* Debt Equity Amount in INR ‘000 Cr 9% 54% 51% 51% 43% 68 63 52 49% 49% 57% 46% 44 49 43 FY 17 FY 18 FY 19 FY 20 35 29 Controlled
Slide 12: 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 13: 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 35th – India’s Bes
Slide 14: Section III: COVID Response
SECTION III Max Life Insurance – COVID Response
Slide 15: Max Life responded immediately to COVID situation
Max Life responded immediately to COVID situation across key dimensions; All key processes were functional within 4 days of lock down initiation Employees Customers Distributors ▪ Health and safety paramount Guiding ▪ Health and safety paramount ▪ Proactive customer communication ▪ Adequate support
Slide 16: Key programs initiated to navigate current situation
Key programs initiated to navigate through current situation and emerge stronger COVID19 1 2 3 4 5 Furthering Digital Sales Products and Underwriting Cost rationalization Close to customer Human capital ▪ Simplified and 100% ▪ Distribution enablement ▪ Tactical and structural ▪ Proactive communicati
Slide 17: Assessment of financial strength and asset portfolio
We also assessed how the current situation will effect our financial strength and asset portfolio; no immediate and medium term stress expected Key areas Results ▪ Strong solvency position at 207% as on March 31st, 2020. Stressed solvency in a 1-in-100 year event is also above internal thresholds. N
Slide 18: Section IV: Strategy
SECTION IV Max Life Insurance – Strategy
Slide 19: 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 ▪ #1 position
Slide 20: Growth in Proprietary and Bancassurance channels
A Max Life has focused on ensuring growth in both its Proprietary and Bancassurance channels Proprietary Channels New Business (APE) - Sales has grown at 19% CAGR since FY17, YTD Feb growth was ~20% Amount in INR Cr 10% Channel Mix - Max Life has focused on maintaining a balanced distribution 1282 m
Slide 21: Product mix in proprietary and Bancassurance channels
Product mix in proprietary and Bancassurance channels aligned to customer needs; Strategic A focus on NPAR share increase to further strengthen the balanced mix Proprietary Channels Product mix - biased towards traditional products and Bancassurance Product Mix - has been biased towards ULIPs to cat
Slide 22: Agency: increasing agent productivity and retention
A Agency: Strategic focus on increasing agent productivity and retention Active agent productivity increasing year on year; dip in Recruitment growth rate, FY20 impacted due to COVID FY19 due to new offices Branch and Active agent productivity in Number of agents recruited FY20 Progress INR Lacs per
Slide 23: Bancassurance partners continue to contribute strongly
A Bancassurance partners continue to contribute strongly Axis Bank: YTD Feb growth was ~16% Banca channels have grown at CAGR of 15% while increasing branch Amount in INR Cr 5% productivity, YTD Feb growth was ~16% 2,262 2,366 Amount in INR Cr 1,936 1,564 3% 2,760 2,838 2,335 FY17 FY18 FY19 FY20 Bra
Slide 24: E-commerce: driving protection online
A E-commerce: Max Life has focused it efforts in online towards driving protection Policies – Steady growth in NOP contribution, drop in FY20 Website Traffic - Annual traffic to Max Life’s website has is driven by limited pay protection launch seen a significant increase over the last 4 years Polici
Slide 25: Cross-selling Direct Channels
A Cross-selling Direct Channels: Max Life has set up a channel focused exclusively on cross-selling New Business Premium from direct channels Frontline Productivity Amount in INR Cr Productivity in INR Lacs per month FY20 Progress 1.6 1.6 1.6 ▪ Launched various digital assets and 100% adoption 1.4 o
Slide 26: Complete suite of products with focus on longer term
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 27: Focus on Protection: 49% increase in individual protection APE
Focus on Protection: 49% increase in individual protection APE and 31% of total individual B policies are pure protection No of Protection Policies (Individual)- limited growth in FY20 policies, Total APE (Individual + Group) protection growth led by introduction of limited pay Figures in Rs. Cr. Fi
Slide 28: Customer measures: claims paid ratio and persistency
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 Persistency* 290 70 320 420 -90 179 bps 141 80%80%83%83% 98.74% 99.22% 70%7
Slide 29: Digital assets and 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 Products illustration generation Form filling, document collection tool and post sales verification in a
Slide 30: Digital assets and 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 One view of customer Customer Servicing tool Multiple digital payment options Milli – chatbot
Slide 31: Technology transformation agenda in FY20
D Max Life continues to drive technology transformation agenda in FY20 FY22 Target Progress in FY 20 ▪ Migration to Open Source technology ▪ Moved to cloud native, modular architecture FLUID ▪ All applications to be on cloud customer onboarding solutions ARCHITECTURE ▪ Omni-channel enterprise ▪ Movi
Slide 32: Section V: ESG
SECTION V Max Life Insurance – ESG
Slide 33: ESG Framework: Setting 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 34: Section VI: MCEV Disclosures FY'20
SECTION VI Max Life Insurance – MCEV Disclosures: FY’20
Slide 35: Key Results
Key Results The Embedded Value1 (EV) as at 31st March 2020 (post allowing for the total shareholder dividend payout for FY20) is Rs 9,977 Cr. The Operating Return on EV (RoEV2) over FY20 is 20.3%. Including non-operating variances, the RoEV is 16.7%. The New Business Margin (NBM) for FY20 is 24.3% (
Slide 36: Overview of the components of the EV as at 31 March 2020
Overview of the components of the EV as at 31st March 2020 VIF Net worth and EV Market value of Shareholders’ owned assets over liabilities Time value of financial Cost of residual non- options and guarantees hedgeable risks Net Worth Frictional cost Rs 2,545 Cr TVFOG Rs 60 Cr CRNHR EV FC Present Va
Slide 37: Value of New Business and New Business Margins
Value of New Business and New Business Margins as at 31st March 2020 Description FY19 FY20 Y-o-Y growth APE 1 3,950 4,149 5% New Business Margin (NBM) 22.5% 24.3% +180 bps (before cost overrun) New Business Margin (NBM) 21.7% 21.6% -10 bps (post cost overrun) Value of New Business2 (VNB) 887 1,010 1
Slide 38: EV movement analysis: March 2019 to March 2020
EV movement analysis: March 2019 to March 2020 Figures in Rs Cr. 813 103 317 EV 456 EV 897 9,977 8,938 VIF Operating RoEV: 20.3% VIF 6,541 7,432 NAV NAV 2,397 2,545 Opening EV Value of Unwind Operating Non-Operating Dividend paid during the Closing EV New Business Variance Variance year ▪ Operating
Slide 39: VNB and NBM Walk
Value of New Business (VNB) and New Business Margin (NBM) Walk Figures in Rs Cr. NBM --> 21.7% - 2.0% -1.9% -0.1% 21.6% Investor Release 39
Slide 40: Sensitivity analysis as at 31 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 41: Annexures
> ANNEXURES a
Slide 42: 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 43: 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 44: 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 45: 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 March 2020. The VNB is calculated using the beginning of respective quarter’s risk free yield curve (i.e. 31st March 2019, 30th Jun
Slide 46: 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 47: 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 FY 17 FY18 FY19 FY20 21% 22% 5% Individual APE 2,657 3,217 3,917 4,116 15% 15% 13% Renewal Premium 7,114 8,152 9,415 10,600 16% 17% 11% Gross Premium 10,780 12,501 14,575 16,184 Policyh
Slide 48: Healthy and consistent profitability while maintaining solvency
Healthy and consistent profitability creating value to all the stakeholders while maintaining solvency above required levels Financial Performance FY 17 FY18 FY19 FY19 4% 20% 1% Profit(before Tax) 768 615 623 595 18% 20% 9% 44,370 52,237 62,798 68,471 AUM 140 bps 150 bps 10 bps 18.8% 20.2% 21.7% 21.
Slide 49: Performance update - Q4'FY20 and FY20
Performance update- Q4’FY20 and FY20 Quarter Ended Q-o-Q Year Ended Y-o-Y Key Business Drivers Unit Mar’19 Mar’20 Growth FY19 FY20 Growth a) Individual APE Rs. Crore 1,634 1,398 -15% 3,917 4,116 5% b) Gross written premium income Rs. Crore 5,521 5,873 6% 14,575 16,184 11% First year premium 1,631 1,
Slide 50: Case size continues to expand across the board
Case size continues to expand across the board; Almost 50% growth in Protection Plans Case Size (INR’000) NoPs (INR’000) Non PAR- Saving PAR Ind Protection ULIP Non PAR- Saving PAR Ind Protection ULIP 69 645 597 61 561 123 -14% 57 106 156 121 139 175 114 183 114 19 13 11 59 49 53 307 224 296 85 88 9
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