Max Financial Services Limited · NSE:MFSL
Max Financial Services — Q1 FY22 Earnings Presentation
46 slides from Max Financial Services's earnings presentation, Aug 10, 2021
Slide 1: Max Financial Performance Update, Investor Release Q1 FY22
MAX Ndk FINANCIAL SERVICES LIFE INSURANCE Max Financial Performance Update Investor Release Q1 FY22 August 10, 2021 Great w LEAD THE 18th an ked Place To Work 4 Certified DIFFERENCE in India Maims A Max Financial and AAXIS BANKJV
Slide 2: Section I: Max Financial Services Q1FY22 Key Highlights
SECTION I Max Financial Services : Q1FY22 Key Highlights
Slide 3: Max Financial Services: Q1FY22 Key Highlights
Max Financial Services : Q1FY’22 Key Highlights 6 LIFE 1V1.1 X INSURANCE Application filed with IRDAI for acquiring residual ~5.17% stake from MSI in Max Life, at Rs 85/ share. Significant value 1 creation for shareholders on completion of transaction F 2 Consolidated Revenue excluding investment in
Slide 4: Section II: Max Life Insurance – Business Overview
SECTION II Max Life Insurance – Business Overview
Slide 5: Industry Landscape (Q1 FY22)
)MAX MAX II Industry Landscape (Q1 FY22): Total Industry grew by 16%, while Pvt. players grew by 26% and LIC by 4%. Max Life not only grew at 34% but also outperformed industry on 2-Yr CAGR basis as well LIFE YoY Growth basis Individual Adjusted FYP FY’20 FY’21 Q1 FY’21 Q1 FY’22 Q1 FY’22 (2 year CAG
Slide 6: Financial Performance Summary Q1FY22
II Financial Performance Summary Q1FY22 6LIFE1V1.1 X INSURANCE Pvt Market Share APE Gross Written Premium AUM 63 bps 32% 11% Rs 875 Cr Rs 3,484 Cr 27% Rs 93,697 Cr 28% [11%] [Rs 661 Cr] [Rs 2,751Cr] [Rs 73,239 Cr] Profit Before tax* Net Worth Policyholder Cost to Policyholder Expense to GWP Ratio GW
Slide 7: Strong performance on new business; market share up 63 bps
Max Life has delivered strong performance on new business ; Maintained 4th rank in the private 6LIFE industry and increased market share by 63 bps '411111.6)filSURANCE New Business Premiums (on APE basis) Renewal Income Amount in INR Cr Amount in INR Cr 21% 32% 15% 19% 12,192 2,244 875 4,957 1,852 4
Slide 8: VNB increased by 53% aided by margin increase of 260 bps
IIVNB increased by 53% over last year aided by increase in margins by 260 bps 6LIFE 1V1.1 X INSURANCE Product Mix – Increasing in NPAR savings while maintaining balance Margins (post-overrun)- Improved by 260 bps due to change in business mix 360 bps 260 bps 38% 37% 35% 37% 25.2% 21.6% 19.7% 18% 17.
Slide 9: Efficient capital management with consistent returns
6MAX Efficient capital management with consistent returns, best in class among financial services '4111111111'INSIURANCE Opex to GWP*- Higher opex in Q1 due to lower base effect, improvement of Solvency Ratio (pre dividend) - Raised 496 Cr in July, strengthening 130 bps over 2-year solvency margin b
Slide 10: Embedded value grew 16%; operating RoEV 13.5%
II Embedded value grew at 16%, while operating RoEV for Q1 FY22 at 13.5% 6LIFE 1V1.1 X INSURANCE Embedded Value (EV) - EV has grown at 16% driven by growth in value of Operating Return on Embedded Value* new business and quality of inforce business Amount in INR Cr 19% * 16% 12,290 11,834 20.3% 18.5
Slide 11: Max Life has consistently grown its Assets Under Management
6 MAX II Max Life has consistently grown its Asset Under Management Assets Under Management - MLI is the 4th largest manager of ,+,LIFE INSURANCE ULIP: Healthy mix of Debt and Equity private LI AUMs, Par fund size ~48K Debt Equity Amount in INR ‘000 Cr 32% 28% 43% 94 52% 50% 57% 90 73 68 57% 48% 50%
Slide 12: Business Excellence, Leaders in Quality
II 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 I, MAX ‘ 0 LIFE INSURANCE I S • die L Business Excellence Leaders in Quality Focus on People ▪ Awarded the Bronze for the YT connected ▪ No. 1 in Cus
Slide 13: Section III: Max Life Insurance – Strategy
SECTION III Max Life Insurance – Strategy
Slide 14: Significant progress made across key strategic priorities
)MAX II Significant progress made across key strategic priorities LIFE INSURANCE A d B M C D Predictable & Sustainable Digitalto Product innovation Customer centricity across the value Digitization for efficiency and growth drive margins chain intelligence ▪ Deepen Bancassurance ▪ Increase protectio
Slide 15: Growth in both Proprietary and Bancassurance channels
), MAX A `.0 LIFE Max Life has focused on ensuring growth in both its Proprietary and Bancassurance channels INSURANCE Proprietary Channels New Business (APE) Amount in INR Cr Channel Mix - Max Life has focused on maintaining a balanced distribution mix 3.0cY0 1,403 2-year CAGR CD 7% 1,282 5% 1% 0%
Slide 16: Product mix in proprietary and Bancassurance channels
Product mix in proprietary and Bancassurance channels aligned to customer needs; ), MAX A `.0 LIFE Protection driven across all channels INSURANCE Proprietary Channels Product mix - biased towards traditional products and Bancassurance Product Mix - has been biased towards ULIPs to cater to protecti
Slide 17: Complete suite of products, focus on longer term products
B Max Life has a complete suite of products and focus is on selling longer term products along )MAX LIFE with improving penetration of pure protection offerings INSURANCE Average Policyholder Age Average Policy Term Average PPT Max Life has products across all categories Product Type (Years) (Years)
Slide 18: Customer measures driving superior performance
C Strong focus towards customer measures has helped deliver superior performance across )MAX LIFE 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- Higher surrenders in ULIP 179 bps 109 99.22% 99
Slide 19: Significant increase in claim experience in Q1 owing to wave 2
)MAX L C Significant increase in claim experience in Q1 owing to wave 2 MAX LIFE No of claims- 1.3X from first peak in Q3 FY21 Gross claims- 2.1X from first peak in Q3 FY21 Net claims- 1.6X from first peak in Q3 FY21 Figures in Rs. Cr. Figures in Rs. Cr. 13,492 1,031 10,525 563 484 345 4,689 175 126
Slide 20: Leader in E-Commerce Protection Sales
MAX Max Life Leader in E-Commerce Protection Sales enabled by higher adoption of digital assets IL D and embedded intelligence in the entire operating model LIFEINSURANCE Sharper Prospecting Personalization Growth and Awards Chase VALUE not Traffic Never Ask Again 18% 16% % of customers through ecom
Slide 21: Seamless on-boarding of customers through mPRO
Seamless on-boarding of customers through Best-in-Class On-boarding Platform (mPRO); ),MAX D ' LIFE leveraging integration with Bank partners for customer data INSURANCE Step 1,4 Ramesh. asterrinycu TemRs B2C On-boarding Platform 14 Update o Frictionless Onboarding 1 mPRO , Coypu, ems pbe for metkal
Slide 22: Digital ecosystem for agent recruitment (mREC)
D Industry first Digital ecosystem to drive agent Recruitment agenda at scale (mREC); end-to-end mAx IFE agent recruitment platform facilitating faster agent prospecting and onboarding INSURANCE 11 MINIt 1111 111111 it ?11-3` 16iDEc REC REC Office View Bucket View < Ansi Saceimax fieretimentx1inn Mr
Slide 23: Omni-channel Customer Servicing Experience
), MAX D `.0 LIFE Omni-channel Customer Servicing Experience; services simplified through 24*7 digital offerings INSURANCE Chatbot- MILI Website- Self Servicing Website Help Center Servicing for Sellers WhatsApp MAX gPOWER cf° LI Help Centre 0 Er MAX Sign I AP Max Life Insurance = FF. Offering term
Slide 24: Applied cognitive AI technology
D AI smarts delivering intelligence to enhance customer experiences and risk selection 6MAX LIFE INSURANCE Business First Integrated AI AI integration across Max Life Machine Learning New Business Purchase & Issuance Servicing & Retention & Deep Learning Applied cognitive AI technology Customized cu
Slide 25: Section IV: Max Life Insurance – ESG
SECTION IV Max Life Insurance – ESG
Slide 26: Sustainability Strategy revolves around four pillars
)MAX II Our Sustainability Strategy revolves around four pillars LIFE INSURANCE Engaged with external and internal stakeholders to discuss on ESG parameters and developed Max Life’s Sustainability Framework Identified key focus areas and material issues pertaining to Max Life Four Pillars of Approac
Slide 27: Key Focus Areas: Work Sustainably & Ethically
), MAX II o Key Focus Areas: Work Sustainably & Ethically `4 LIFE INSURANCE ▪ Diverse Board composition with Independent Directors in Board (50%- MFSL; 30%- Max Life Insurance) ▪ Average board experience > 30 years ▪ Information security and cyber security compliant with ISO guidelines ▪ Platforms,
Slide 28: Key Focus Areas: Care for People & Society
MAX II Key Focus Areas: Care for People & Society ' - LIFE INSURANCE Diversity Inclusion ▪ Gender diversity at Max Life improved to 23.3% as on FY21 ▪ Initiatives and programs launched to develop women employees for future career development roles ▪ Awareness and sensitization programs launched on D
Slide 29: Key Focus Areas: Financial Responsibility
Key Focus Areas: Financial Responsibility 6MAX LIFE 1111116)NSURANCE Responsible Product Offerings ▪ Specially designed micro insurance products cater to socially and economically weaker sections. In FY21, we covered ~18 lakh lives (sum assured of 4,563 crores) ▪ Lower premiums offered to women poli
Slide 30: Key Focus Areas: Green Operations
)MAX II Key Focus Areas: Green Operations INSURANCE Energy Efficiency ▪ Home Office (HO) building is a LEED Platinum certified building with “5 star rating” in health and safety by British safety council ▪ Home Office building (Fulfilment center) initiated double glazing tinted glass material for bu
Slide 31: Section V: MCEV Disclosures Q1 FY22
SECTION V Max Life Insurance – MCEV Disclosures: Q1 FY’22
Slide 32: Key Results
II Key Results 6LIFE1V1.1 X INSURANCE I The Embedded Value1 (EV) as at 30th June 2021 is Rs 12,290 Cr. I The Operating Return on EV (RoEV) over 3M FY22 is 13.5%. Including non-operating variances, the total RoEV 2 is 16.3%. I The New Business Margin (NBM) at actual cost for 3M FY22 is 19.7%, with Va
Slide 33: Progression of Embedded Value
)MAX II Progression of Embedded Value LIFE INSURANCE 11,834 12,290 10,670 9,066 9,436 7,894 2,776 2,768 2,854 Q1 FY21 FY21 Q1 FY22 • Net Worth (NW) • Value of Inforce (VIF) 1. EV as at 3M FY22 represents an increase of Rs 456 Cr from the EV of Rs 11,834 Cr as at FY21; implying a growth of 3.9% (annu
Slide 34: Value of New Business and New Business Margins
6 MAX II Value of New Business and New Business Margins as at 30th June 2021 -.ow.LIFE INSURANCE Description Q1 FY21 Q1 FY22 Y-o-Y growth APE 1 661 875 32% New Business Margin (NBM) 17.1% 19.7% +260 bps (post cost overrun) Value of New Business (VNB) 113 172 53% (post cost overrun) ▪ The New Busines
Slide 35: VNB and NBM Walk
II Value of New Business (VNB) and New Business Margin (NBM) Walk )MAX LIFE INSURANCE 23 172 37 113 Q1 FY21 Impact of higher APE Change in business mix Q1 FY22 NBM --> 17.1% - +2.6% 19.7% Note: Figures in Rs Cr. and may not add up due to rounding Investor Release 35
Slide 36: Sensitivity analysis as at 31st March 2021
)MAX MAX II Sensitivity analysis as at 31st March 2021 LIFE EV New business Sensitivity Value (Rs Cr) % change VNB (Rs Cr) | NBM % change Base Case 12,010 - 1,249 | 25.2% - Lapse/Surrender - 10% increase 11,886 (1%) 1,232 | 24.9% (1%) Lapse/Surrender - 10% decrease 12,135 1% 1,263 | 25.5% 1% Mortali
Slide 37: Annexures
> a ANNEXURES a
Slide 38: Consistent growth in top line and renewals with cost efficiencies
II Delivering consistent growth in top line and renewals coupled with driving cost efficiencies 6MAX LIFEINSURANCE Financial Performance FY20 FY21 Q1 FY’21 Q1 FY’22 19% 31% , Individual APE 4,116 4,907 660 864 15% 21% ) Renewal Premium 10,600 12,192 1,852 * 2,244 , Gross Premium 16,184 18% 19,018 2,
Slide 39: Healthy profitability while maintaining solvency above required levels
Healthy and consistent profitability creating value to all the stakeholders while maintaining )MAX LIFE solvency above required levels INSURANCE Financial Performance FY20 FY21 Q1 FY’21 Q1 FY’22 -15% -44% Profit(before Tax) 598 510 138 77 32% 28% AUM 68,471 90,407 73,239 93,697 360 bps 260 bps 21.6%
Slide 40: Performance update Q1 FY22
6 MAX II Performance update- Q1’FY22 -.ow.LIFE INSURANCE Year Ended Key Business Drivers Unit Y-o-Y Growth Q1 FY’21 Q1 FY’22 a) Individual APE Rs. Crore 660 864 31% b) Gross written premium income Rs. Crore 2,751 3,484 27% First year premium 621 804 29% Renewal premium 1,852 2,244 21% Single premium
Slide 41: Protection – Expansion in case size and number of policies
6 MAX II Protection – Expansion in both case size and number of policies sold .......LIFE INSURANCE Case Size (INR’000) NoPs (INR’000) • Non PAR- Saving • PAR • Ind Protection • ULIP • Non PAR- Saving • PAR • Ind Protection • ULIP 646 76 78 597 42, 69 WY° 131 54 106 140 145 156 125 183 219 23 22 19
Slide 42: Definitions of the EV and VNB
6 MAX II Definitions of the EV and VNB -.ow.LIFE INSURANCE 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 th
Slide 43: Components of VIF (1/2)
6 MAX II Components of VIF (1/2) -.ow.LIFE INSURANCE 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
Slide 44: Components of VIF (2/2)
6 MAX II Components of VIF (2/2) -.ow.LIFE INSURANCE 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 guara
Slide 45: Key Assumptions for the EV and VNB (1/2)
6 MAX II Key Assumptions for the EV and VNB (1/2) -.ow.LIFE INSURANCE Economic Assumptions ▪ The EV is calculated using risk free (government bond) spot rate yield curve taken from FBIL1 as at 30th June 2021. The VNB is calculated using the beginning of respective quarter’s risk free yield curve (i.
Slide 46: Key Assumptions for the EV and VNB (2/2)
6 MAX II Key Assumptions for the EV and VNB (2/2) -.ow.LIFE INSURANCE 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 th
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