Investor Presentation November 2017 Max Group Vision To e the ost - - PowerPoint PPT Presentation
Max Financial Services Limited Investor Presentation November 2017 Max Group Vision To e the ost adired orporate for serie eellee Positive social impact Culture of Service Sevabhav Helpfulness
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Sevabhav Excellence Credibility
Max Group Vision To e the ost adired orporate for serie eellee
Health Insurance, JV with Bupa Plc
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Evolution of Max Group—Strong history of entrepreneurship and nurturing successful businesses
1985 1993 2000
Forays into Penicillin bulk pharma Enters Telecom in JV with Hutchison JV with Gist Brocades (Asia’s largest Drug manufacturer ) Shift from B2B to B2C businesses:
Hutchison
Fund raising ~ USD 360 Mn
2005 2011 2007 2009 2012 2013 2014 2015 2016
NYL exits and JV with MSI in 2012
general insurance group
USD 425 Mn
bn
LHC inducted as JV Partner in MHC
chain in South Africa
for USD 81 Mn in MHC
MHC invests USD 120 Mn
Enter Senior Living business, launch first community in Dehradun with 200 units Max India demerged into 3 listed hold cos Landmark Acquisitions by MHC
USD 40 Mn in 340 bedded Pushpanjali hospital expandable upto 540 beds
USD 100 Mn in 230 bedded Saket City hospital, expandable upto 1200 beds Note: USD rate considered at 64
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Max Group – Corporate Structure
Promoter holdings in Max Group holding companies
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Max Group Overview
USD 2.6 billion+ Revenues… 9 Mn Customers… 23,000 Employees… ~65,000 Agents Strong growth trajectory even in challenging times; a resilient & diversified business model Steady revenue growth and cost rationalization leads to strong financial performance Well established board governance….internationally acclaimed domain experts inducted Diversified ownership…..marquee investor base Superior brand recall with a proven track record of service excellence Strong history of entrepreneurship and nurturing successful business partnerships
1 2 3 4 5 6 7
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Max Group : Continues to grow from strength to strength
Group EBITDA (USD Mn)
69 82 97 112 160 FY'13 FY'14 FY'15 FY'16 FY'17
Group Revenue (USD Mn)
1.465 1.664 1.944 2.225 2.625 FY'13 FY'14 FY'15 FY'16 FY'17
Note: Adjusted for one-offs
7 Promoter 30,3% KKR 6,7% Mutual Funds 29,8% FII- Others 19,3% Public 13,8%
Shareholding Pattern as on 30th Sep 17
Shareholding concentrated with Marquee Investors
High pedigree of long term investor base
Number of outstanding shares : 26.84 Cr.
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Indian Life Insurance Industry has evolved rapidly; significant headroom still available for growth due to low penetration and favourable demographic profile
Strong parentage, marquee investors, eminent Board, strong management team and robust governance framework
Differentiated Life Insurer with key strengths of multi-channel distribution, balanced product mix, operational excellence and digital capabilities
One of the fastest growing players with equal emphasis on profitability – Among the top quartile across the comprehensive measures of success
With US 1.1 Bn+ of MCEV as at 30th September 2017, operating RoEV of 17% and new business margin at 18% are amongst the best in the industry
Key Summary Messages
Strength in business model recognised through several Awards and Accolades that Max Life Insurance wins every year
0% 2% 6% 15% 25% 34% 36% 50% 57% 52% 46% 37% 38% 38% 49% 52% 10 12 12 13 16 21 40 53 47 55 50 48 47 45 41 44 53 10
FY02 FY01 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY14 FY13
Phase 1
Joyful Entry (2001-2003)
Phase 2
Expansion (2004-2008)
Phase 3
Discovering New Normal (2009 onwards)
(In Rs 000 Cr)
FY15
Source: IRDAI and Life Council for FY 16-17
FY16
Private market share in terms of Ind. Adj. FYP
Private players count
Overview of Life insurance industry in India
11 12 12 13 14 15 17 21 22 22 23 23 23 23 23 4
92% 31%
17%
8% 100% 86% 1% 7%
2%
16% 14%
Growth: Private Growth: Industry
13% 17% 34%
>100% >100%
81% 2%
>100%
19%
>100%
FY17
21% 26%
23
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Industry Landscape (H1 FY: Industry grew by 25% driven by strong
performance of the private players (+37%) and LIC (+13%)
Source: Life Insurance Council | IRDAI
YoY growth Individual Adjusted FYP
8% 21% 18% 25% 8% 25% 18% 19%
Industry Max Life
Ma Lifes priate market share
FY FY H FY H FY 9% 9% 9% 8%
Private Industry YoY growth
26% 37% 14% 20%
Sigifiat proportio of the priate idustrs groth driven by higher ULIP contribution and low base effect. During this period Max life has continued to focus on balanced product mix
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% of Life Insurance in household savings- India
Significant potential to expand both in savings and protection segment
Life Insurance Penetration (Premium as % of GDP), 2016
2,3% 2,7% 7,4% 7,2% 16,2% 16,7% China India South Korea Japan Hong Kong Taiwan
Level of Protection (Sum Assured as % of GDP), 2015
226% 260% 149% 60% 96% Singapore Japan Malaysia India Thailand
Life Insurance Density (Premium per capita – USD), 2016
47 190 2.803 3.599 7.066 India China Japan Taiwan Hong Kong 21,0% 17,0% 16,0% 19,0% 19,0% FY'12 FY'13 FY'14 FY'15 FY'16
Source: "Swiss Re: World Insurance in 2016"
Highly experienced and versatile Board of Directors providing strong and secure foundation
Founder and Chairman Emeritus
Chairman
Director
Director
Kitagawa Independent Director
Independent Director
Murthy Independent Director
Director
Director
and MD
Fellow of the Institute and Faculty of Actuaries. Served as the AA for Max Life from 2005 till 2011 Founder and CEO of Arka Capital Advisors. Previously served as MD and India Head at Warburg Pincus Responsible for Mitsui Sumitomo overseas life insurance business with 30 years of experience A founder team member. Appointed as CEO and Managing Director in November 2008 Founder and Chairman of Max
civilian honor, the Padma Bhushan Seasoned business manager with wide domain expertise built over 27 years in financial services Fellow of the Society of Actuary (FSA). She is a Principal of Erlen Street Corporation, Switzerland Serving on the Board of ONGC, LIC Housing, STCI, Infiniti Retail, APSFC, Max Bupa and NABARD Former IAS officer of 1977 batch and has served the government of India in various capacities Seasoned professional with 29 years experience in financial industries Director
Seasoned professional with 24 years of experience in Corporate Finance and Investment Banking
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Executive Management team with rich experience of insurance and strong Governance Mechanism
Max Life Management Team
Executive Vice Chairman and MD Rajesh Sud (16 years)
Sr Director and Chief Operating Officer (16 years) V Viswanand Director and Chief People Officer (5 years) Shailesh Singh
26 years
Organizations: GE, SRF Finance, Eicher Tractors
Director Marketing & Chief Digital Officer (12 years) Manik Nangia Director & Chief Distribution Officer (4 years) Aalok Bhan
25 years
Organizations: Standard Chartered Bank, ABN AMRO, RBS
Director and Appointed Actuary (8 years) Jose John
17 years
Organizations: Prudential UK Metlife UK
Director and Head - Legal , Compliance and Regulatory Affairs (3 years) Amitabh Lal Das Sr Director and Chief Financial Officer (10 years) Prashant Tripathy
22 years
Organizations: Tata Steel, GE
Director and Chief Investment Officer (3 years) Mihir Vora
21 years
Organizations: HSBC Global Asset Management, ICICI Prudential, Birla Sun Life AMC
23 years
Organizations: ANZ Grindlays Bank
17 years
Organizations: ABN AMRO, ICICI Bank, ICICI Prudential
21 years
Organizations: Yahoo, Sapient
Bank of America, ABN AMRO , ANZ Grindlays
Tenure at Max Life
Quarterly Board Meeting Board Sub Committees
Executive Vice Chairman and MD Executive Mgmt. Committee
Weekly EMC Meeting Monthly Senior Leadership Meeting Monthly Business Reviews Weekly Team / Functional Meetings Council Meetings Cross Functional Connects
Governance Mechanism
Central PMO to drive Strategic Projects
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Shareholders Meeting twice a year at neutral locations
Shareholder
Monthly Shareholder Calls
Board
Shareholders Meeting interspersed with Board Meetings
To be the most admired life insurance company by securing the financial future
FY 2020-21
Caring Credibility Collaborative Excellence
is right
retirement solutions, delivered by our high quality Agency & Multi channel Distribution Partners
by supporting causes in health and wellbeing. Financial Strength Quality of Advice Service Excellence Superior Human Capital Value Driven Culture Corporate Governance
Vision Goals We Stand for Values Integrity Mission
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Log Ter strateg is drie our isio to e the Most Adired Life Isurae Copa
» Quality of advice » Human Capital and Leadership depth » Differentiated distribution capabilities » Podut suite foused o Log Te Savings and Protection » Quality of Business » Strong & Distinctive Brand
What are we known for
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Our Strategy: Strengthen multi-channel architecture and leverage technology to continue profitable growth
Continue to chase profitable growth
agency channel and strong Banca relationships
and variablizing costs by leveraging technology
processes and better customer experience
Strong digital footprints Comprehensive multi-channel distribution model
Supported by eminent Board, strong management team and robust governance framework
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Private Market Share 9% [9%] Individual Sales Rs 2,639 Cr [Rs 2,103 Cr] Gross Written Premium Rs 10,780 Cr [Rs 9,216 Cr] AUM Rs 44,370 Cr [Rs 35,824Cr] Profit Before tax Rs 592*Cr [Rs 511 Cr] Net Worth Rs 2,509 Cr [Rs 2,024 Cr] Embedded Value* 6,739 [5,617] Policyholder Expense Ratio 13.4%^ [13.6%] Sum Assured 3,77,572 Cr [2,71,633 Cr] Policies in force (Individual in Lakhs) 39.12 [37.60] Solvency Ratio 309% [343%] Case Size 51,056 [44,566]
9,446 [9,259]
54,283 [45,275] Claim Settlement Ratio 97.1% [96.9%] Protection Mix 4% [3%]
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25% 24% 4% 20 bps 2% 39%
15% 20%
Fiaial Perforae Suar: FY
16% 24% 17% 20 bps
60 bps
Figures in [brackets] are for previous year numbers (FY16) ; *Growth on Embedded value is operating RoEV;^ Excludes impact of One-off expense & Merger costs
20%
*FY17 numbers are adjusted for non-repeatable items and one-time non operating gains realization primarily from investment income
Market Share 8% [9%] Individual Sales Rs 1,112 Cr [Rs 936 Cr] Gross Written Premium Rs 4,808 Cr [Rs 4,218 Cr] AUM Rs 47,756 Cr [Rs 39,647 Cr] Profit Before tax* Rs 236 Cr [Rs 344 Cr] Net Worth Rs 2,562 Cr [Rs 2,309 Cr] Embedded Value^ 6,946 [6,590] Policyholder Expense Ratio 15.5% [17.3%] Sum Assured 4,35,524 Cr [3,52,756 Cr] Policies in force (Individual) 39,32,738 [37,44,586] Solvency Ratio# 295% [343%] Case Size 49,553 [48,666]
9,744 [9,081]
54,619 [50,055] Claim Settlement Ratio 95.12% [94.70%] Protection Mix 5% [4%]
Figues i [akets] ae fo peious ea ues HFY, eept Eedded Value hee it epesets MaFY *Pofit efoe ta fo HFY as highe due to one-time non operating gains realization primarily from investment income, # Post proposed interim dividend solvency ratio will be 282% (March 17: 298%), ^Growth on Embedded value is operating RoEV
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19% 20% 5% 184 bps 7% 23%
2% 9%
Financial Performance Summary H1 FY 18
31% 11% 14% 42 bps
118 bps 1% 17%
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Delivering consistent growth in top line and renewals coupled with driving cost efficiencies
Figures in Rs. Cr.
Ind Adj. FYP Renewal Premium Gross Premium FY 16 FY 17
2,103 2,639
Financial Performance
6,334 7,114
HFY HFY
936 1,112 2,857 3,236 9,216 10,780 4,218 4,808
25% 19% 12% 13% 17% 14%
Policyholder expense to GWP Ratio 17.3% 15.5% 13.6% 14.8%
120 bps 184 bps
Expense to average AUM (Policyholder) 4.0% 4.3%
23 bps
4.2% 3.9%
25 bps
FY 16 FY 17 Financial Performance
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Healthy and consistent profitability creating value to all the stakeholders while maintaining solvency above required levels
Figures in Rs. Cr.
AUM Profit(before Tax)* Solvency Ratio 343% 309%
511 768 344 236
295% 343%
35,824 44,370 39,647 47,756
50% 31% 24% 20% Abs 34% Abs 48%
HFY HFY
*Highe HFY pofit is due to oe-time non operating gains realization primarily from investment income ^MCEV is before dividend, post-dividend MCEV is Rs 6,946 Cr, Arrow represents growth in Operating RoEV
Operating RoEV 17.0% MCEV^
5,617 6,739
19.9% 17.0% 16.8%
6,035 7,142
New Business Margin 17.9% 18.8% 18.1% 18.5%
90 bps 40 bps 290 bps 20 bps 20% 17%
Rs in Cr 21
Assets under management- 20% increase Y-o-Y
Linked fund vs Controlled fund Debt vs Equity Debt portfolio exposure to AAA rated debt is well above the regulatory requirement of 75%
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58% 55% 53% 49%
3% 4% 4% 5%
11% 9% 10% 9% 28% 32% 33% 37% FY 16 FY 17 H1'FY17 H1'FY18 PAR Non PAR- Protection Non PAR- Savings ULIP
Product mix basis Ind. AFYP
Balanced product mix with enhanced focus on long term saving and protection contribution
As on 30th Sep 2017
*PPT: Premium Payment Term
23 24 14 64 17 31 19 15 30 21 57 34 37 36 28 35 43 39 37 35 63
Product Type Average Policyholder Age (Years) Average Policy Term (Years)
Average Average
Average PPT* (Years)
Average
Endowment ULIP Whole Life Money back Pure Term GMIP/GIP Health Cancer Insurance Pension Annuity
11 10 53 16 30 9 15 30 21 1
35 25 16
Balanced product mix with focus on long tenor life coverage
Continuous improvement in persistency Steady retention capabilities High quality business franchise
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21% 21% 28% 26% FY16 FY17 H1'FY17 H1'FY18
Surrender to GWP
86% 89% 87% 91% FY16 FY17 H1'FY17 H1'FY18
Conservation Ratio*
Superior customer outcomes and retention with continuous improvement across all quality parameters
79% 67% 58% 56% 43% 80% 70% 60% 55% 53% 81% 67% 60% 56% 51% 82% 73% 60% 57% 53%
13th Month 25th Month 37th Month 49th Month 61st Month FY16 FY17 H1'FY17 H1'FY18
*Conservation Ratio : Current year total renewal premium(excluding Group)/(total first year individual regular premium of previous year+ renewal premium (excluding group) of previous year-previous year premium from term completed policies, matured policies and policies which has ceased to exist due to death)
contribution from proprietary channels
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Distribution mix basis Ind. AFYP
32% 29% 34% 32% 58% 58% 55% 53% 9% 12% 10% 14% 1% 1% 1% 1% FY 16 FY 17 H1'FY17 H1'FY18 Proprietary Axis Bank Other Banks Others
Highly efficient and productive agency channel with focus on quality of advice Strong Banca relationship with consistent growth
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Atie Aget produtiit Rs p Branch productivity (Rs Lakhs pm) 22,5 24,4 21,4 22,0 FY16 FY17 H1'FY17 H1'FY18
Highly efficient and productive agency channel and strong banca relationships with consistent growth
1.387 1.814
FY16 FY17
591 728
H1'FY17 H1'FY18
46,9 69,3 64,5 79,4 FY16 FY17 H1'FY17 H1'FY18
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efficient sales processes and better customer experience
Transforming Digital Interface
i lass taffi to lead atio
assistae fo high lead to sale ratio
now being processed with 0 physical documents)
communication - Technology led and analytics based
and customers, planned in Q3- Cost
Re-imagining Fulfillment
insurability to provide frictionless journey
in issuance TAT. Digital Marketing and E Commerce
28% YoY growth in business; New product launch in Sep'17 showing early positive trends (Case size up by 16%)
through the digital door contributing 54% of total Sum Assured Seller Ecosystem
advisors on mobile based tool for effective sales conversations and predictable revenues
next generation of Smart analytics like lead propensity analysis for agency distribution
customer servicing tool (mPower) for agents, RAs and Banca sellers to increase productivity & persistency
Areas of leverage for digital technology
Percentage of customers through digital door
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New Customer Acquisition through the digital channel
without a single document
Transactions are undertaken through
(Online and ECS)
YoY growth in Online Renewal Premium
5% 11% 9% 19%
FY'16 FY'17 H1 FY'17 H1 FY'18
15% 113% 59% 123%
FY'16 FY'17 H1 FY'17H1 FY'18
16 33 12 26
FY'16 FY'17 H1 FY'17 H1 FY'18
YoY Growth in Sales NOPs
Fulfillment: Growth in direct to customer ecommerce sales
Business Impact
Lead scoring model to predict propensity
Filtering high fraud, high risk policies using predictive analytics Predictive modelling to identify risky policies for lapse and plan targeted intervention Targeted customer engagement strategy for cross sell Using a recruitment model to identify quality seller pool Sales Force Management Customer Acquisition UW Risk and Policy Issuance Lapse Risk & Retention Cross-Sell Superior Quality of Book Revenue Enhancement Revenue Enhancement
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Analytics center of excellence - Predictive models deployed across the value chain
Improvement in lead conversion from 3% (Pre-model) to 5% (Post-model) Highest conservation ratio Analytical campaigns account for more than 10%
sales Crude Death Rate reduction from 3.6 to 1.7 Improvement in quality hiring
NAV 2,398 NAV 2,610 NAV 2,547 NAV 2,414 VIF 4,192 VIF 4,532 VIF 4,532 204 306 20 21 196
Opening EV Value of New Business Unwind Operating variance Non-Operating Variance Closing EV (before interim dividend) Proposed Interim dividend Closing EV (after interim dividend) 6,590 6,946 7,142
30 Note: Figures in Rs Cr.
EV movement analysis: March 2017 to September 2017
Operating RoEV: 16.8%
payment of the interim dividend, the closing EV will be Rs 6,946 Cr.
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Awards and recognitions for Max Life
Best use of six sigma in banking and financial sector
Best Life Insurance company Best business leader – Sumit Rai
Idustr First tred setter
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Setting higher benchmark with every award
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Finance Industry at World Quality Congress - Global Awards
Prize in Service, IT and ITES category at the 11th edition of CII - National Competition on Six Sigma
ratios
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Awards and Accolades
* NACH: National Automated Clearing House ; POS TAT: Policy Operations servicing turnaround time
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Annexure
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Rank Company Individual new business premium (Rs Cr) H1FY18 H1FY17 Growth (%) Private Market Share (%) 1 ICICI Prudential 3,442 2,480 39% 24.6% 2 SBI Life 3,060 2,066 48% 21.8% 3 HDFC Life 1,781 1,287 38% 12.7% 4 Max Life 1,112 935 19% 7.9% 5 Bajaj Allianz 558 337 66% 4.0% 6 Kotak Life 498 378 32% 3.6% 7 Tata AIA 479 344 39% 3.4% 8 PNB MetLife 471 386 22% 3.4% 9 Birla Sunlife 361 290 24% 2.6% 10 Canara HSBC OBC 342 189 81% 2.4% Others 1,903 1,568 21% 13.6% Private Total 14,007 10,260 37% LIC 11,135 9,824 13% Grand Total 25,142 20,084 25% Market Share of private players 55.7% 51.1%
Max Life maintains 4th rank among private players
Key Business Drivers Unit Quarter Ended Q-o-Q Growth Half year Ended Y-o-Y Growth Sep'16 Sep'17 Sepr'16 Sep'17
a) Individual Adjusted Premium
552 654 18% 936 1,112 19% b) Gross written premium income
2,473 2,801 13% 4,218 4,808 14% First year premium 550 646 17% 932 1,099 18% Renewal premium 1,682 1,894 13% 2,857 3,236 13% Single premium 240 261 9% 429 473 10% c) Shareholder Profit (Pre Tax)
188 130
344 236
d) Policy Holder Expense to Gross Premium % 17.1% 13.0% >100 bps 17.3% 15.5% >100 bps e) Conservation ratio % 87.6% 90.9% >100 bps 87.1% 91.3% >100 bps f) Average case size(Agency) Rs. 45,632 52,535 15% 44,280 49,383 12% g) Case rate per agent per month No. 0.22 0.19 (14%) 0.21 0.18 (13%) h) Number of agents (Agency) No. 50,055 54,619 9% i) Share Capital
1,919 1,919
37.4 39.3 5% k) Sum insured in force
3,52,756 4,35,524 23% l) Grievance Ratio Per Ten thousand 294 138 NA
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Performance update- QFY ad HFY
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Overview of the components of the EV as at 30th September 2017
Note: Figures in Rs Cr. And may not add up due to rounding
Net worth and EV VIF
Present Value of Future Profits (PVFP) Rs 5,226 Cr Value of Inforce (VIF) Rs 4,532 Cr
Time value of financial options and guarantees Frictional cost
Net Worth Rs 2,610 Cr
Market value of Shaeholdes oed assets over liabilities
EV Rs 7,142 Cr
Cost of residual non-hedgeable risks
TVFOG Rs 17 Cr CRNHR Rs 585 Cr FC Rs 92 Cr
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Value of New Business and New Business Margins as at 30th September 2017
Note: Figures in Rs Cr.
by shift in product mix towards protection oriented products.
pronounced during H1 leading to lower new business margin on actual costs. The new business margin for H1 FY18 on aageets expectation of sales and costs for full year FY18 would be close to 20% compared to 18.8% for full year FY17.
1 Annual Premium Equivalent (APE) is calculated as 100% of regular premium + 10% of single premium. 2 The VNB is accumulated from the point of sale to the end of the reporting period (i.e. 30th Septee , usig the egiig of espetie uates isk fee ield
curve.
Description H1 FY17 H1 FY18 Y-o-Y growth APE 1 951 1,131 19% Value of New Business (VNB)2 (actual costs) 176 204 16% New Business Margin (actual costs) 18.5% 18.1%
39 Note: Figures in Rs Cr.
Sensitivity analysis as at 30th September 2017
Sensitivity EV VNB Value (Rs Cr) % change Value (Rs Cr) % change Base Case 7,142
7,015 (2%) 192 (6%) Lapse/Surrender - 10% decrease 7,278 2% 217 6% Mortality - 10% increase 7,053 (1%) 195 (5%) Mortality - 10% decrease 7,232 1% 214 5% Expenses - 10% increase 7,085 (1%) 193 (6%) Expenses - 10% decrease 7,200 1% 215 5% Risk free rates - 1% increase 6,965 (2%) 216 6% Risk free rates - 1% reduction 7,305 2% 189 (8%) Equity values - 10% immediate rise 7,194 1% 204 Negligible Equity values - 10% immediate fall 7,091 (1%) 204 Negligible
the risk free rate reduction sensitivity and increases under the risk free rate increase sensitivity.
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Key Assumptions for the EV and VNB (1/2)
Economic Assumptions
The VNB is alulated usig the egiig of espetie uates isk fee ield ue i.e. st March 2017 and 30th June 2017).
Indian market.
value of future cash flows of those bonds.
Demographic Assumptions
The lapse and mortality assumptions are approved by a Board committee and are set by product line and distribution channel
and proposed management actions on such assumptions.
1 Fixed Income Money Market and Derivatives Association of India
Year 1 2 3 4 5 10 15 20 25 30 + Sep 17 6.36% 6.45% 6.64% 6.70% 6.75% 6.97% 7.44% 7.64% 7.62% 7.59% Mar 17 6.36% 6.57% 6.68% 6.88% 6.78% 7.21% 7.38% 8.14% 7.93% 7.26% Change 0.01%
0.06%
0.33%
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Key Assumptions for the EV and VNB (2/2)
Expense and Inflation
for the value of any maintenance expense overrun in the future. The overrun represents the excess maintenance expenses expected to be incurred by the Company over the expense loadings assumed in the calculation of PVFP.
Tax
to be deducted before surplus is distributed to policyholders and shareholders.