Slide 1: Max Financial Performance Update
Max Financial Performance Update Investor Release FY19 May 28, 2019
Slide 2: Section I: FY19 Key Highlights
SECTION I Max Financial Services : FY19 Key Highlights
Slide 3: Max Financial Services: FY19 Key Highlights
Max Financial Services : FY19 Key Highlights Group Revenue* at Rs 17,538 Cr, grows 17%. Group PBT at Rs 391 Cr, down 30%, due to one off expenses related to 1 acquisition, reversible expense on Axis Bank Put Option, expense for distribution expansion & change in product mix 2 MCEV (Post dividend pay
Slide 4: Section II: Max Life Insurance – Business Overview
SECTION II Max Life Insurance – Business Overview
Slide 5: Industry Landscape (FY'19): Total Industry grew by 9%, while Pvt. players grew by 12%
Industry Landscape (FY’19): Total Industry grew by 9%, while Pvt. players grew by 12% and LIC by 5%)… Max Life has outperformed industry growth year after year YoY Growth basis Individual Adjusted FYP FY’16 FY’17 FY18 FY’19 Private Industry YoY growth 14% 26% 24% 12% Industry 25% Max Life 22% 21% 21
Slide 6: Strong performance on both 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 7,081 3,248 6,307 2,657 2,113 FY16 FY17 FY18 FY19 FY16 FY17
Slide 7: 30% growth in VNB with margins expanding to 21.7%
30% growth in VNB with margins expanding to 21.7% driven by increased focus on Protection Margins (post-overrun)# 380 bps Product Mix – Shifting towards a balanced product mix 21.7% 20.2% 17.9% 18.8% 27% 30% 41% 42% FY16 FY17 FY18 FY19 9% 9% 3% 3% 6% 7% 8% 4% 4% 9% 4% 4% 8% 4% 10% VNB (post over-run
Slide 8: 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* - Positive trend due to increase in operational efficiency; Increase in FY19 due to investment in proprietary channels 33 bps 14.8% 13.6% Solvency Ratio (pre dividend) - maintained well abov
Slide 9: Embedded value compounds at 18% with operating RoEV at 21.9%
Embedded value compounds at 18% with operating RoEV for FY19 at 21.9% Embedded Value (EV) - EV** has grown at CAGR of 18% driven by growth in Operating Return on Embedded Value - RoEV has increased to 21.9% value of new business and quality of inforce business Amount in INR Cr 19% 20.6% 21.9% 9257 1
Slide 10: Max Life has consistently grown its Asset Under Management by more than 20%
Max Life has consistently grown its Asset Under Management by more than 20% Debt-Equity Mix - Healthy mix of Debt and Equity on an overall level 29% 24% 22% 22% Assets Under Management - Grown consistently since FY16 and MLI is now the 4th largest manager LI AUMs, including retail AUM of MFs, ranked
Slide 11: 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, 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 ▪ No. 1 in Customer Loyalty ▪ Ranked 46th - India’s Best Innovation Awar
Slide 13: Section III: Max Life Insurance – 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 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) - Sales have grown at 21% CAGR since FY16 Amount in INR Cr Channel Mix - Max Life has focused on maintaining a balanced distribution 30% mix 1162 891 752 653 4% 1% 1%
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 increasing proportion of Non-PAR Proprietary Channels Product mix - biased towards traditional products and Bancassurance Product Mix - has been biased towards ULIPs to cater to protection for drivi
Slide 17: Agency: Focus on agent productivity and retention
Agency: Strategic focus on increasing agent productivity and retention; deployment of new A business models and geographic expansion to be key priorities till FY22 Active agent and branch productivity increasing year on Recruitment increased sharply in FY19 to facilitate growth year; dip in FY19 due
Slide 18: E-commerce: growing online business
E-commerce: Max Life has focused on growing its online business which has been a major A contribution to its protection business; focus in future to be on online savings products as well Policies - Contribution of policies from E-commerce channel Website Traffic - Annual traffic to Max Life’s websit
Slide 19: Direct Channels: cross-selling and upselling
A Direct Channels: Max Life has a channel focused on cross-selling and upselling New Business Premium from direct channels Frontline Productivity Amount in INR Cr Productivity in INR Lacs per month 47% Focus for FY20 and 1.6 1.6 beyond: 1.4 1.1 ▪ Scale up of tele-sales FY16 FY17 FY18 FY19 channel: C
Slide 20: Strong growth in Bancassurance partnerships since FY16
Strong growth in Bancassurance partnerships since FY16 driven through both productivity A improvement and footprint expansion Axis Bank: New business (APE) Banca channels have grown at CAGR of 26% while increasing branch Amount in INR Cr 17% productivity 2262 Amount in INR Cr 1936 1564 18% 1249 2760
Slide 21: Complete suite of products, focus on longer term 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 22: Focus on Protection: increase in individual protection APE
Focus on Protection: 66% increase in individual protection APE and 54% increase in B individual protection policies, 27% of total individual policies are pure protection Total APE (Individual + Group) No of Protection Policies (Individual) Figures in Rs. Cr. Figures in ‘000. 403 176 256 189 175 120
Slide 23: Customer measures: persistency, conservation, claims paid
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 240 40 390 300 20 260 bps 90% 80% 80%80%83% 89% 70%70%72%71% 89% 60%60%62% 64% 55% 55% 57%58% 53%53%53%53% 86% 13
Slide 24: 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 25: Digitization has positive impact across key processes
D Digitization has led to a positive impact across number of key processes FY16 FY19 ▪ Mobility, a key cornerstone; more Agent Onboarding TAT1 ~20 Days ~5 Days than 15 key tools fully mobile enabled Need Analysis Paper based Tool enabled ▪ Increase in number of digital tools Paper based with TAT of
Slide 26: Technology transformation agenda across 4 key dimensions
D Continue to invest in technology transformation agenda across 4 key dimensions Progress till FY19 FY22 Target ▪ All new customer & seller engagement applications built on cloud ▪ Migration to Open Source technology FLUID ▪ Transition to modular applications for agility & ▪ All applications to be o
Slide 27: FY19 Achievements
In Summary, Max Life made significant progress in FY19 towards its journey of 25%+ VNB growth , ~25% NBM and ~25% ROEV aspirations by FY22 A B C D Predictable & Sustainable Product innovation to Customer centricity across the value Digitization for efficiency and growth drive margins chain intellige
Slide 28: Section IV: MCEV Disclosures FY'19
SECTION IV Max Life Insurance – MCEV Disclosures: FY’19
Slide 29: Key Results
Key Results The Embedded Value1 (EV) as at 31st March 2019 (post allowing for proposed final shareholder dividend) is Rs 8,938 Cr. Before allowing for proposed final shareholder dividend, the EV is Rs 9,257 Cr. The Operating Return on EV2 (RoEV) over FY19 is 21.9%. Including non-operating variances,
Slide 30: Overview of the components of the EV as at 31st March 2019
Overview of the components of the EV as at 31st March 2019 VIF Net worth and EV Increase in EV with use of lower effective Market value of Shareholders’ tax rate owned assets over liabilities Time value of financial Rs 252 Cr options and guarantees Cost of residual non- hedgeable risks Frictional co
Slide 31: Value of New Business and New Business Margins
Value of New Business and New Business Margins as at 31st March 2019 Description FY18 FY19 Y-o-Y growth APE 1 3,248 3,950 22% New Business Margin (NBM) 20.2% 22.5% +230 bps (before cost overrun) New Business Margin (NBM) 20.2% 21.7% +150 bps (post cost overrun) Value of New Business2 (VNB) 656 856 3
Slide 32: EV movement analysis: March 2018 to March 2019
EV movement analysis: March 2018 to March 2019 Figures in Rs Cr. 697 384 9,257 319 126 282 8,938 823* 7,509 VIF VIF 6,540 VIF 6,540 Operating RoEV: 21.9% 5,028 NAV NAV NAV 2,481 2,718 2,398 Opening EV Value of Unwind Operating Non-Operating Dividend paid Closing EV Final proposed Closing EV New Busi
Slide 33: VNB and NBM Walk
Value of New Business (VNB) and New Business Margin (NBM) Walk Figures in Rs Cr. 33 -31 55 856 142 656 FYTD Mar'18 Impact of higher APE Business Mix and Effective Tax Rate Acquisition Cost Overrun FYTD Mar'19 Assumption Change NBM --> Investor Release 33
Slide 34: Sensitivity analysis as at 31st March 2019
Sensitivity analysis as at 31st March 2019 Figures in Rs Cr. EV New business Sensitivity Value (Rs Cr) % change VNB (Rs Cr) | NBM % change Base Case (before final SH dividends) 9,257 - 856 | 21.7% - Lapse/Surrender - 10% increase 9,103 (2%) 821 | 20.8% (4%) Lapse/Surrender - 10% decrease 9,420 2% 89
Slide 35: Max Insurance
MAX INSURANCE
Slide 36: Annexures
> a ANNEXURES a
Slide 37: 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.1 ▪ For the market consistent methodol
Slide 38: 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 39: 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 1,000 stochastic scenarios provided by Moody's Analytics. ▪ Given that the shareholder payout is likely to be symmetrical for guar
Slide 40: 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 2019. The VNB is calculated using the beginning of respective quarter’s risk free yield curve (i.e. 31st March 2018, 30th Jun
Slide 41: 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 42: Financial Performance Summary FY19
Financial Performance Summary FY19 Pvt Market Share Individual APE Gross Written Premium AUM 22% 10% 65 bps Rs 3,917 Cr Rs 14,575 Cr 17% Rs 62,798 Cr 20% [9%] [Rs 3,217 Cr] [Rs 12,501 Cr] [Rs 52,237 Cr] Profit Before tax Net Worth Policyholder Cost to Policyholder Expense to GWP Ratio GWP Ratio Rs 6
Slide 43: Delivering consistent growth in top line and renewals
Delivering consistent growth in top line and renewals coupled with driving cost efficiencies Financial Performance FY16 FY 17 FY18 FY19 26% 21% 22% Individual APE 2,103 2,657 3,217 3,917 12% 15% 15% Renewal Premium 6,334 7,114 8,152 9,415 17% 16% 17% Gross Premium 9,216 10,780 12,501 14,575 Policyho
Slide 44: 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 FY16 FY 17 FY18 FY19 50% 20% 1% Profit(before Tax) 511 768 615 623 24% 18% 20% 35,824 44,370 52,237 62,798 AUM 90 bps 140 bps 150 bps 17.9% 18.8% 20.2% 2
Slide 45: Performance update - Q4'FY19 and FY19
Performance update- Q4’FY19 and FY19 Quarter Ended Q-o-Q Year Ended Y-o-Y Key Business Drivers Unit Mar’18 Mar’19 Growth FY18 FY19 Growth a) Individual Adj FYP Rs. Crore 1,339 1,634 22% 3,215 3,880 21% b) Gross written premium income Rs. Crore 4,648 5,521 19% 12,501 14,575 17% First year premium 1,3