MFSLNSEq2fy24-06November 6, 2023

Max Financial Services Limited

7,711words

66turns

9analyst exchanges

0executives

Key numbers — 40 extracted

INR 1,612 crore

ad received approval from Max Life and Max Financial Services' Board regarding Axis Bank infusing INR 1,612 crore. Post that approval, MFSL has received shareholder consent and we have initiated the regulatory

32%

in the second quarter, our individual adjusted first year premium saw an impressive increase of 32% compared to 16% growth in the private sector. This growth was primarily driven by a remarkable 34

16%

quarter, our individual adjusted first year premium saw an impressive increase of 32% compared to 16% growth in the private sector. This growth was primarily driven by a remarkable 34% increase in th

34%

2% compared to 16% growth in the private sector. This growth was primarily driven by a remarkable 34% increase in the number of policies, indicating a robust market demand and our superior execution

the number of policies growth for private versus Max Life Insurance, our growth will be almost 3x. It is crucial to emphasize that this growth was not limited to a specific area, but permeated

50%

ary channels witnessed substantial expansion with the Annual Premium Equivalent (APE), surging by 50% in this quarter. This growth was particularly prominent in both online as well as offline proprie

62%

d renewed growth through new agent activations and adviser recruitments, experiencing a growth of 62% in recruitment. Additionally, our direct customer acquisition channel saw impro

30%

in sales in Axis Bank. In quarter 2, our bank channels, APE experienced an impressive growth of 30%. Furthermore, as a part of our strategic efforts to enhance our distribution network, we succes

21%

n the first half of the year. On Annual Premium Equivalent (APE) basis, the product mix comprises 21% participating, 26% non-participating products under Savings category, 30% Unit-Li

26%

al Premium Equivalent (APE) basis, the product mix comprises 21% participating, 26% non-participating products under Savings category, 30% Unit-Linked, 6% Annuity and 17% Protection

cipating, 26% non-participating products under Savings category, 30% Unit-Linked, 6% Annuity and 17% Protection. We continue to gain traction in the two identified focus areas for

17%

26% non-participating products under Savings category, 30% Unit-Linked, 6% Annuity and 17% Protection. We continue to gain traction in the two identified focus areas for Max Life, which

Guidance — 20 items

Prashant Tripathy

opening

“If one were to compare the number of policies growth for private versus Max Life Insurance, our growth will be almost 3x.”

Prashant Tripathy

opening

“This area is a very dynamic and with the progress that we've been making, I'm very hopeful that we will be able to strengthen our overall position in savings area.”

Prashant Tripathy

opening

“Our ongoing initiatives to scale up our offices is progressing well, and we anticipate sustaining this positive sales momentum as we go forward.”

Prashant Tripathy

opening

“And I remain optimistic to hit the 27% to 28% target.”

Prashant Tripathy

opening

“We are optimistic that the upcoming initiatives planned in Q3 and Q4 will enable us to achieve our full year guidance.”

Amrit Singh

opening

“We will be now happy to take any questions that you may have, and we will open the floor for Q&A.”

Prashant Tripathy

“I think these questions will be common across many people.”

Prashant Tripathy

“And we remain absolutely optimistic about the margin guidance.”

Prashant Tripathy

“As the year began, I had shared that the business will be making investment towards growth and market share.”

Prashant Tripathy

“And hence, the 31% margins was not sustainable for us, which we achieved last year, and we had given a guidance of 27% to 28%.”

Advertisement

Risks & concerns — 8 flagged

I think on the margin, overall annuity margin as you compare to last year does look a little weak and is not to do with a specific design actually, it is to do largely because of the mix between our business.

— Amrit Singh

We have seen, in line with pressure in the industry on single premium annuity, which has shifted towards regular premium annuity.

— Amrit Singh

Firstly, was there some pressure on product line VNB margins, as you highlighted with regards to ULIP, wherein you saw some pressure because of the mix changing and the launch of the new product.

— Prayesh Jain

There is a margin pressure at a ULIP line, for sure, because this particular product profile has a lower margin which actually has impacted the ULIP profile.

— Amrit Singh

Non-PAR, how many resets would have done in the quarter and because of where any resets, delay in resets, was there any pressure on margins?

— Prayesh Jain

So there is that pressure with respect to the contribution of greater than 5 lakh in our traditional book as compared to last year.

— Amrit Singh

— Sanketh Godha

And we don't expect the ULIP drag to be a structural permanent drag, which will remain and we expect it to settle down as the year kind of progresses.

— Amrit Singh

Q&A — 9 exchanges

Okay. You asked many questions. Let me try and attempt answering a few of them. So, thank you for your question. I think these questions will be common across many people. Overall, the product mix is an element of 2 factors, the customer demand as well as tactical interventions that we make through launches of new products. I personally believe that the par segment got strengthened, but it came at the cost of non-PAR going down a little bit. And it was driven predominantly because of the tactical move of PAR launch. Again, within ULIP, while the ULIP mix is similar to how it was last year, we

Amrit Singh

Yes. I think I'll just add, Prashant. I think just stepping back at the start of the year, we had indicated that this is a year of investing and driving for overall buildup of distribution and hence garnering our market share. And a large part of our investments were predominantly in two areas, either it was in augmentation of distribution muscle, or it was towards investment in technology. And I think we are on that trajectory, and we will continue on that trajectory. So, this elevation that you see of opex is something that will kind of remain in the period in this particular fiscal for sure

A couple of questions. If you can just help us understand sort of what is working for you in the annuity? Because typically, annuity has been something that you used to sell more in the second half, but this year, even in the first half, you are selling a good amount of annuity and particularly the trend in the industry on annuity has been a bit of a mix. So I mean, what is helping you there? Is it some sort of the return of, I mean for this particular with channels, those are helping? And if at all, I mean, on a Y-o-Y basis, your annuity margins, if your margin profile is similar in the case

Amrit Singh

Thanks, Avinash. I'll take this question. I think on annuity, what is working for us. I think I'll say 2 things. You'll recall, we had established our full retirement team as a construct over the last now 18 months, actually a full-fledged team has come in, which holistically looks at the entire retirement as an ecosystem, trying to tap into whether the NPS ecosystem, whether the corporate superannuation systems or whether driving the individual annuity through channels. So this investment in actually this team overall has helped actually support the annuity growth that we are experiencing for

Going back to the growth argument, looking at your performance for the last 2 quarters, doesn't it look like your guidance for sort of 10% APE growth for the year is a little conservative? I mean your ask rate for second half is not very high, even if I sort of exclude the one-offs that you did in the month of March.

Prashant Tripathy

Yes. I mean you good question that it's always good to remain conservative on giving guidances. Of course, we are trying very hard for a strong double-digit kind of a number. We will try to beat the guidance. So let's take it as that. We are trying very hard month-on-month to outpace whatever guidance is given, Nischint. Sure. And on the Banca side, what would be your growth in Axis Bank on a year- on-year basis? On year-on-year basis, if I look at the growth rate around Axis Bank on MFYP or paid premium basis, it is 12%. For first half. For first half. Of course, the business momentum picked

Firstly, was there some pressure on product line VNB margins, as you highlighted with regards to ULIP, wherein you saw some pressure because of the mix changing and the launch of the new product. Similarly, on non-PAR or Protection, any specific trends that would have impacted the product level margins?

Amrit Singh

Yes. I think on ULIP, as has been mentioned, the launch of is a very unique offering for the online channel, which actually was also taken up by our banks channel as well, especially in the affluent segment of selling and was successfully executed. There is a margin pressure at a ULIP line, for sure, because this particular product profile has a lower margin which actually has impacted the ULIP profile. Our participating non-PAR guaranteed savings design and the margins are stable. There is nothing to worth mention there. On Annuity, I did specifically mention in responding to Avinash's questi

I have one question on the agency channel. So if I look at the agent count, it was at about 70,000 flat in FY '22, '23. And you mentioned about BCG activity that you had carried out. In the first half, your agent count is up 7,000. It is at 77,000 right now. So while your agent productivity is amongst the better ones in the industry, are you looking at any specific agent base, like maybe, in the next 1 to 2 years, we want to achieve this much agent base or something like that? That's my question.

Prashant Tripathy

Yes. I mean, honestly, one way of looking at it is how many people do we have in the agency workforce. But there are other ways of looking at agency also. How many of them are active, which means doing one policy every month. We look at another measure of how many agents are delivering 10 lakhs and above of new sales. So there are several measures that we deploy. I don't have those numbers handy, maybe we could come up separately, but we are trying to drive the number of active agents and number of people contributing more than 10 lakhs. So those are 2 parameters that we internally track and t

Congrats. Just wanted to check on Axis as you close this transaction and you negotiate as a long-term partner. Just is there any difference in payouts that could have happened? Or is it product centric? How, the question I'm asking is because eventually, they have ended up paying you a little bit more money for the stake that they have bought. So does economics stand now from a VNB margin perspective, we could see some extra payouts?

Prashant Tripathy

So basically, the long-term arrangement and long term strategy of Axis Bank is to invest in Max Life insurance. And we're just following the regulatory guidance. I don't expect that to have any material impact on our VNB margin. Got it. And since our counter share is stabilized in the Axis network at now 65%, 70%. And given that there is one more channel, one more partner added from the Citi Channel. How is the progress happening on what access Tata is getting in Axis to Citi network? And how do you expect that to impact you in terms of counter share? So Axis Bank believes in open architecture

Two questions, firstly what all is included in protection and health? When we're saying protection has been grown at 70% Y-o-Y, what all products are included in that? And secondly, how is the growth in credit life business? What is the quantum of credit life business that we have done in H1?

Amrit Singh

Yes, Nidhesh. So protection and health category actually help now also includes the SEWA product that we have launched. Because with respect to the objective that it is solving for, it is very similar to the ethos of Protection and Protection & Health includes some bit of SEWA as well. And they are also similar margin profile. So it is actually a very strong grouping that has been done. But irrespective of that, even if I take out the SEWA contribution, which was around INR 18 crore, the growth is quite robust at 50% to 52% for Q2. Credit Life has been growing at a steady momentum of 30% to 31

I just wanted to understand the digital drive strategy because of you indirectly alluded to the point that it's a lower VNB, it's a drag on the VNB margin business, on the overall company's VNB margin because at the cost the products typically sold are the index-linked, ULIP plan. So I just wanted to understand that this is like a onetime phenomenon you chase that growth with the digital channel in the current quarter? Or given the margins are lower, you might tone down that growth? And I just wanted to understand how much is digital as opportunity of total APE. In that prop channel, how much

Amrit Singh

So ULIP, the question, I think whenever there is a particular product offering, which is offered, there is always some bit of initial 1 to 2 months of overindexing of that particular proposition. And we don't expect the ULIP drag to be a structural permanent drag, which will remain and we expect it to settle down as the year kind of progresses. So, I think that answers the question that you were trying to ask there. With respect to how much does our online e-commerce channel now is contributing, it's contributing around 8%-9%. And how much it was last year, if you remember? It would have been

Thank you, everyone, for having joined our earnings call, and we continue to look forward for such interactions. Have a good day, and goodbye to everyone.

Management

Advertisement

Speaking time

Amrit Singh

Prashant Tripathy

Moderator

Nischint Chawathe

Prayesh Jain

Sanketh Godha

Shreya Shivani

Adarsh

Avinash Singh

Nidhesh

Opening remarks

Amrit Singh

Good morning, everyone, and welcome to the earnings call of Max Financial Services for the half year ended September 2023. We made our results available on our website as well as on Stock Exchange last evening. I hope you got an opportunity to go through it. Today, I'm again joined by Prashant Tripathy, MD and CEO of Max Life Insurance. And I will hand to Prashant to actually share the developments of the first half.

Prashant Tripathy

Thank you, Amrit. Good morning, everyone, and thank you for being on the call. Let me first begin by giving you a quick update on the Axis transaction. As you may recall, in quarter 1, we had received approval from Max Life and Max Financial Services' Board regarding Axis Bank infusing INR 1,612 crore. Post that approval, MFSL has received shareholder consent and we have initiated the regulatory approval process with IRDAI and PFRDA. At this point of time, our proposal is moving forward. We had received the first set of query, we are in the process of responding. We are actively collaborating with the regulators for completion of these procedures. And I'm very hopeful that over the next few weeks, we'll make good progress. Transitioning to our business update, I'm pleased to report that Max Life has been able to accomplish significant growth outcomes, and we have picked up pace consistent with some of the updates I've been sharing with you over the last few quarters. I'm now going to o

Amrit Singh

Thank you, Prashant. Just on key financial metrics. For MFSL, the consolidated revenue, excluding investment income, now stands at INR11,221 crore, a growth of 16% compared to first half last year. The consolidated PAT for MFSL is at INR271 crore, up 109% year-on-year. Renewal premium for Max Life grew by 11% to INR7,215 crore, and gross premium stands at INR11,496 crore, a growth of 16%. Value of New Business during this period of first half stands at INR663 crore versus INR586 crore last year, representing a growth of 13%. And as Prashant highlighted, the NBM for first half stands at 24% and for quarter 2 at 25.2%. Embedded value as at 30th September '23 is INR17,911 crore. There is negligible operating variance in the first half. On the non-operating variance, there is a positive INR282 crore movement, which is mainly constituted by positive economic variance in equity market and interest rate moves. Operating ROEV for Max Life in first half FY '24 is 17.5%. The overall policyholder

Advertisement

← All transcripts MFSL stock page →

Max Financial Services Limited

Market Movers