Max Financial Services Limited · NSE:MFSL
Max Financial Services — H1 FY2020 Earnings Presentation
38 slides from Max Financial Services's earnings presentation, Nov 6, 2019
Slide 1: Max Financial Performance Update – Investor Release H1 FY20
Max Financial Performance Update Investor Release H1 FY20 6th November, 2019
Slide 2: Section I: H1FY20 Key Highlights
SECTION I Max Financial Services : H1FY20 Key Highlights
Slide 3: H1FY20 Key Performance Highlights
Max Financial Services : H1FY20 Key Performance Highlights Consolidated Revenue* at Rs 8,635 Cr, grows 10%. Consolidated PAT at Rs 119 Cr, down 25%, due to shift in product mix 1 towards NPAR savings (increase from 5% in H1FY19 to 20% in H1FY20) and investments in proprietary channels MCEV as at 30t
Slide 4: Section II: Max Life Insurance – Business Overview
SECTION II Max Life Insurance – Business Overview
Slide 5: Industry Landscape (H1 FY'20)
Industry Landscape (H1 FY’20): Total Industry grew by 11%, while Pvt. players grew by 16% and LIC by 5%) YoY Growth basis Individual Adjusted FYP FY’18 FY’19 H1 FY’19 H1 FY’20 Private Industry YoY growth 24% 12% 11% 16% Industry Max Life 24% 22.0% 23% 21.0% 19.0% 11% 10% 9.0% Max Life’s private 9% 9
Slide 6: 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 16% 22% 9,415 3,950 8,108 12% 3,248 22% 1,730 3,711 4,141 1,420 FY18 FY19 H1 FY19 H1
Slide 7: 25% growth in VNB with H1 margins at ~21%
25% growth in VNB with H1 margins at ~21% driven by increased focus on Non Par Savings Margins (post-overrun)* # Product Mix – Shift towards NPAR savings mix increased by 1500 bps to drive 150 bps margin expansion. Individual Protection mix grew by 44 bps, while the Group Protection mix grew by 14 b
Slide 8: Efficient capital management with consistent RoE of ~20%
Efficient capital management with consistent RoE of ~20%… among the best in financial services Opex to GWP* - Increase due to investment in proprietary channels 16.7% 14.7% 12.9% 13.2% Solvency Ratio (pre dividend) - maintained well above the regulatory requirement 275% 242% 246% FY18 FY19 H1 FY'19
Slide 9: Operating RoEV for H1FY20 at 18.3%
Operating RoEV for H1FY20 at 18.3%(annualised) in line with H1FY19 Embedded Value (EV)* - EV has grown at 18% driven by growth in value of Operating Return on Embedded Value - RoEV at ~18.3% in H1FY20 new business and quality of inforce business Amount in INR Cr 22% 18% 21.9% 20.6% 9257 9831 7706 80
Slide 10: Max Life has consistently grown its Assets Under Management
Max Life has consistently grown its Asset Under Management Debt-Equity Mix - Healthy mix of Debt and Equity on an overall level 22% 22% 21% 21% Assets Under Management - MLI is the 4th largest manager of LI AUMs Amount in INR ‘000 Cr 78% 78% 79% 79% 17% 20% 65 63 FY18 FY19 H1 FY'19 H1 FY'20 56 52 De
Slide 11: 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 12: Business Excellence, Quality and People awards
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 ▪ No. 1 in Customer Loyalty ▪ Ranked 35th – India’s Best survey by IMRB
Slide 13: Section III: Strategy FY19-22
SECTION III Max Life Insurance – Strategy FY19-22
Slide 14: Aspirations FY22
Max Life embarked on its journey of 25%+ VNB growth, 25% NBM and 25% ROEV aspirations by FY22. Key strategic elements to achieve the vision A B C D Predictable & Sustainable Digitalto Product innovation Customer centricity across the value Digitization for efficiency and growth drive margins chain i
Slide 15: 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) – Higher sales growth in proprietary in Q2 as a result of agency restructuring. Amount in INR Cr Channel Mix - Max Life has focused on maintaining a balanced distribut
Slide 16: Product mix across proprietary and Bancassurance channels
Product mix proprietary and Bancassurance channels aligned to customer needs; future focus A to be on driving balanced product mix Proprietary Channels Product mix - biased towards traditional products and Bancassurance Product Mix – focused on increasing NPAR Savings to drive protection for driving
Slide 17: 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 18: Focus on Protection
Focus on Protection: 32% increase in individual protection APE, 30% of total individual B policies are pure protection No of Protection Policies (Individual)- Lower NoP growth in H1 FY 20 due to Total APE (Individual + Group) introduction of limited pay term Figures in Rs. Cr. Figures in ‘000. 403 1
Slide 19: Customer measures and health parameters
Strong focus towards customer measures has helped deliver superior performance across C health parameters and will continue to remain an important priority Conservation Ratio Persistency^ 91% 90% 89% 88% 85% 80% 83%84% 72% 71%73%72% 62% 64%64%65% 57% 58% 57%60% 53% 53%54%53% FY18 FY19 H1 FY'19 H1 FY
Slide 20: Value chain digitized, leveraging digitization and AI
Significant elements of the value chain digitized, focus remains to leverage digitization & AI for D augmenting efficiencies Digital building blocks in end-to-end customer journey deployed at Max Life Agent Application Sourcing Underwriting Verification Issuance Account service Collection Onboarding
Slide 21: Section IV: MCEV Disclosures H1 FY'20
SECTION IV Max Life Insurance – MCEV Disclosures: H1 FY’20
Slide 22: Key Results
Key Results The Embedded Value1 (EV) as at 30th September 2019 (post allowing for proposed interim shareholder dividend) is Rs 9,745 Cr. Before allowing for proposed interim shareholder dividend, the EV is Rs 9,831 Cr. The annualized Operating Return on EV2 (RoEV) over H1 FY20 is 18.3%. Including no
Slide 23: Components of the EV as at 30th September 19
Overview of the components of the EV as at 30th September 2019 VIF Net worth and EV Market value of Shareholders’ owned assets over liabilities Time value of financial options and Cost of residual non- guarantees hedgeable risks Frictional cost Net Worth Rs 2,563 Cr TVFOG Rs 46 Cr CRNHR Rs 736 Cr FC
Slide 24: Value of New Business and New Business Margins
Value of New Business and New Business Margins as at 30th September 2019 Description H1 FY19 H1 FY20 Y-o-Y growth APE 1 1,420 1,730 22% New Business Margin (NBM) 22.9% 24.6% +170 bps (before cost overrun) New Business Margin (NBM) 20.4% 21.0% +60 bps (post cost overrun) Value of New Business2 (VNB)
Slide 25: EV movement analysis: March 2019 to Sep 2019
EV movement analysis: March 2019 to Sep 2019 389 26 114 9,831 86 9,745 8,938 364 VIF VIF VIF 7,269 Operating RoEV: 18.3% 7,269 6,540 NAV NAV NAV NAV NAV NAV NAV NAV 2,398 2,563 2,477 Opening EV Value of Unwind Operating Non-Operating Closing EV Proposed Closing EV New Business variance Variance (bef
Slide 26: Sensitivity analysis as at 30th September 2019
Sensitivity analysis as at 30th September 2019 Figures in Rs Cr. EV New business Sensitivity Value (Rs Cr) % change VNB (Rs Cr) | NBM % change Base Case (before final SH dividends) 9,831 - 364 | 21.0% - Lapse/Surrender - 10% increase 9,691 (1%) 351 | 20.3% (4%) Lapse/Surrender - 10% decrease 9,979 2
Slide 27: Section V: Financial Performance
SECTION V Max Life Insurance – Financial Performance
Slide 28: Financial Performance Summary H1 FY'20
Financial Performance Summary H1 FY’20 Pvt Market Share Individual APE Gross Written Premium AUM 51 bps 22% 9.3% Rs 1,730 Cr Rs 6,432 Cr 14% Rs 65,425 Cr 17% [8.8%] [Rs 1,420 Cr] [Rs 5,619 Cr] [Rs 56,070 Cr] Profit Before tax Net Worth Policyholder Expense to Policyholder Cost to GWP Ratio GWP Ratio
Slide 29: Consistent growth in top line and investing for future growth
Delivering consistent growth in top line and investing for future growth Financial Performance FY18 FY19 H1 FY’19 H1 FY’20 22% 22% Individual APE 3,217 3,917 1,717 1,405 15% 12% Renewal Premium 8,152 9,415 4,141 3,711 17% 14% Gross Premium 12,501 14,575 5,619 6,432 Policyholder expense to GWP 12.9%
Slide 30: Healthy long term profitability while maintaining solvency
Healthy and consistent long term profitability creating value to all the stakeholders while maintaining solvency above required levels Financial Performance FY18 FY19 H1 FY’19 H1 FY’20 1% -39% Profit(before Tax) 615 623 276 170 20% 17% 52,237 62,798 65,425 AUM 56,070 150 bps 60 bps 20.2% 21.7% 20.4%
Slide 31: Performance update Q2'FY20 and H1'FY20
Performance update- Q2’FY20 and H1’FY20 Quarter Ended Q-o-Q Period Ended Y-o-Y Key Business Drivers Unit Sep’18 Sep’19 Growth Sep’18 Sep’19 Growth a) Individual APE Rs. Crore 853 1,038 22% 1,405 1,717 22% b) Gross written premium income Rs. Crore 3,299 3,781 15% 5,619 6,432 14% First year premium 84
Slide 32: Annexure
Annexure Investor Release 32
Slide 33: Definitions of the Embedded Value (EV)
Definitions of the Embedded Value (EV) 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.1 ▪ For the market consistent
Slide 34: 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 35: 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 provided by Moody's Analytics. ▪ Given that the shareholder payout is likely to be symmetrical for guar
Slide 36: 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 2019. The VNB is calculated using the beginning of respective quarter’s risk free yield curve (i.e. 31st March 2019, 30th
Slide 37: 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 38: MAX
MAX FP surance
Max Financial Services — H1 FY2020 Earnings Presentation on 6ix