Max Financial Services Ltd:Annual Report 2023-24 Analysis

Max Financial Services Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Max Financial Services Ltd. (MFSL) was incorporated in 2000. The company’s roots trace back to the Max India Group, a diversified Indian conglomerate founded by Analjit Singh. MFSL was created as part of a restructuring exercise to focus on the financial services businesses of the group.

Headquarters Location:

The headquarters of Max Financial Services Ltd. is located in New Delhi, India.

Company Vision and Mission:

• Vision: To be a leading financial services group, recognized for excellence in customer service, product innovation, and stakeholder value creation.
• Mission: To build a trusted and enduring financial services enterprise that empowers individuals and businesses to achieve their financial goals.

Key Milestones in Their Growth Journey:

• 2000: Incorporation of Max Financial Services Ltd.
• 2012: Strategic stake sale by Goldman Sachs in Max Life Insurance.
• 2016: Shareholder agreement for Joint Venture between Max Financial Services, Axis Bank, and Mitsui Sumitomo Insurance for Max Life Insurance.
• 2021: Axis Bank became a co-promoter of Max Life Insurance.

Stock Exchange Listing Details and Market Capitalization:

Max Financial Services Ltd. is listed on the National Stock Exchange of India (NSE) and the Bombay Stock Exchange (BSE). Ticker Symbol: MAXFIN.

Recent Financial Performance Highlights:

Refer to the company’s latest annual reports and investor presentations for detailed financial data. Key areas to review include:

• Revenue growth
• Profitability metrics (Net Profit, Earnings Per Share)
• Assets Under Management (AUM)
• Solvency Ratio of Max Life Insurance (its primary subsidiary)

Management Team and Leadership Structure:

• Chairman: Analjit Singh
• Managing Director & CEO: Mohit Talwar

Their Products #

Complete Product Portfolio:

Through its primary subsidiary, Max Life Insurance, MFSL offers a comprehensive range of life insurance products:

• Protection Plans: Term insurance policies
• Savings Plans: Traditional endowment and money-back policies
• Retirement Plans: Annuity plans
• ULIPs (Unit Linked Insurance Plans): Market-linked insurance policies
• Group Solutions: Life insurance and employee benefits for organizations

Flagship or Signature Product Lines:

• Term life insurance products focused on providing financial protection to families in case of an unfortunate event.
• ULIP products aimed at wealth creation and long-term investment.

Primary Customers #

Target Industries and Sectors:

• Individual customers seeking financial security and wealth creation
• Corporates for group insurance and employee benefits solutions

Geographic Markets:

Primarily focused on the domestic market (India).

Distribution Network and Sales Channels:

• Agency Channel: A network of individual insurance agents.
• Bancassurance: Partnerships with banks to sell insurance products through their branches. Key partner: Axis Bank.
• Direct Sales: Online and direct marketing channels.
• Partnerships and Alliances: Collaborations with other financial institutions and organizations.

Major Competitors #

Direct Competitors in India:

• HDFC Life Insurance
• ICICI Prudential Life Insurance
• SBI Life Insurance
• Bajaj Allianz Life Insurance
• Other private and public sector life insurance companies in India

Comparative Market Share Analysis:

Market share information is typically available from regulatory reports published by the IRDAI (Insurance Regulatory and Development Authority of India) and industry research reports.

Competitive Advantages:

• Strong Brand Reputation: Max Group has a well-established and trusted brand name.
• Strategic Partnership with Axis Bank: The bancassurance channel provides significant distribution reach.
• Focus on Customer Service: Emphasis on providing a positive customer experience.
• Product Innovation: Continuously developing new and innovative insurance solutions.

How They Differentiate from Competitors:

• Emphasis on product customization and tailored solutions.
• Strong distribution network via bancassurance partnership.

Industry Challenges and Opportunities:

• Challenges: Increasing competition, evolving regulatory landscape, economic uncertainties.
• Opportunities: Growing insurance penetration in India, rising awareness about financial planning, technological advancements in the insurance sector.

Future Outlook #

Expansion Plans or Growth Strategy:

• Focus on increasing market share through product innovation and distribution expansion.
• Leveraging technology to enhance customer experience and operational efficiency.
• Strengthening the partnership with Axis Bank.

Sustainability Initiatives or ESG Commitments:

Please refer to the company’s ESG reports to see if they participate in environmentally conscious practices or activities.

Industry Trends Affecting Their Business:

• Digitalization of insurance: Increased adoption of online channels and digital technologies.
• Focus on customer experience: Growing emphasis on personalized and seamless customer interactions.
• Increasing awareness of insurance: Rising demand for insurance products due to increased awareness and financial literacy.

Max Financial Services Limited: Performance Overview #

Key Financial Metrics and Trend Analysis (Max Life Insurance) #

Max Financial Services Limited (MFSL) primarily operates as a holding company for Max Life Insurance Company Limited (Max Life). MFSL’s consolidated revenues for FY24 stood at ₹46,618 crore, a 48% growth year-over-year (YoY), largely driven by higher investment income. Excluding investment income, consolidated revenues grew by 16%. Consolidated Profit After Tax (PAT) was ₹393 crore, a 13% decrease YoY, attributed to a shift in product mix.

Max Life Insurance - Key Performance Indicators & Trends #

Business Segment Performance #

MFSL’s primary business segment is Life Insurance, operated through its material subsidiary, Max Life Insurance Company Limited. Max Life is India’s largest non-bank private life insurer.

• Individual Business: Grew 16% in FY24 (Adjusted First Year Premium), outperforming the private industry growth of 8%. This performance positioned Max Life as the fastest-growing listed player and 2nd fastest among the top 10 private life insurers in this metric. Number of new retail policies grew by 20%.
• Group Business: Total new business premium (individual and group) grew by 23% to ₹11,023 crore.
• Proprietary Channels: Showed robust performance with a 28% increase in new business premium to ₹2,957 crore. Contribution to individual sales surged from 37% in FY23 to 50% in FY24. This includes strong growth in e-commerce (79%), agency (24% on a normalized basis), and direct selling teams (55%).
• Bancassurance Channel: This channel remains critical, significantly strengthened by the Axis Bank partnership. Axis Entities collectively hold 19.02% in Max Life (as of April 17, 2024).
• Product Mix: Focus on margin-boosting products including protection and health (APE up 50% YoY, retail protection & health up 63%), Group Term Life (up 25%), and Group Credit Life (GCL up 62%). Annuity sales grew 59% YoY on an APE basis, driven by new regular pay annuity variants.
• Max Life Pension Fund Management Ltd.: AUM grew by 300% to ₹576 crore as of March 31, 2024, with a 6.6x growth in subscribers over FY23 to 19,602.

Major Strategic Initiatives and Their Progress #

• Axis Bank Partnership & Capital Infusion:
  • MFSL shareholders approved Max Life’s proposal to raise ₹1,612 crore from Axis Bank via preferential equity issue on September 27, 2023.
  • Axis Bank subscribed to 14.26 crore equity shares of Max Life on April 17, 2024, post regulatory approvals.
  • Post-infusion, Axis Entities hold 19.02% in Max Life, and MFSL’s shareholding reduced to 80.98%.
  • Axis Entities have the right to purchase an additional 0.98% stake from MFSL.
  • This strategic alliance enhances distribution capabilities and market position. Mr. Rajiv Anand (Deputy MD, Axis Bank) became Chairman of Max Life in Dec 2023.
• Sustainable and Profitable Growth:
  • Focus on outperforming industry growth, particularly in proprietary channels.
  • Expanding bancassurance partnerships and broker relationships (40+ new partners onboarded in FY24).
• Margin-Boosting Product Innovation:
  • Leading in Protection and Health & Wellness, Retirement solutions, and non-par savings.
  • Implemented 37 product interventions in FY24, contributing 45% of new business.
  • Strategic increase in rider attachments (up 52% YoY).
  • Launched industry’s first small-cap NFO tied to NIFTY 250 Quality 50 Index.
• Customer-Centricity:
  • Achieved highest-ever Claims Paid Ratio of 99.65% in FY24.
  • Industry-leading 13th-month persistency at 87% (NOP basis).
  • Transactional NPS improved from 69 to 74; Relationship NPS improved from 52 to 56.
  • InstaClaim™ initiative aims for one-day death claim payment for eligible policies (48% settled in a day).
• Digital Transformation & AI Integration:
  • Issued over 7 lakh policies digitally.
  • 81% automated retail underwriting using AI-based models, Credit Bureau, and IIB database.
  • ISO 27001 (Information Security) and ISO 22301 (Business Continuity) certified.
• Human Capital Development:
  • 54% increase in workforce (over 11,000 new hires YTD).
  • Over 2,300 supervisors covered through Management Development Programs.
  • Introduced 40 hours of dedicated learning opportunities and LinkedIn Learning.
  • Employee Engagement Score at 90th percentile. Gender ratio improved by 110 bps.
  • Certified by Great Places to Work®.

Risk Landscape Changes #

• Global Economic Environment: FY23 and early FY24 were marked by pandemic after-effects, geopolitical tensions (Russia-Ukraine), energy/food crises, and inflationary pressures. Mid-2023 saw easing inflation. Global GDP growth estimated at 3.2% for 2023, expected to be similar in 2024-2025.
• Indian Economic Resilience: India demonstrated sustained momentum (7.8% growth in 2023), driven by private consumption and government capex. Retail inflation eased to 5.09% (Feb 2024), though RBI maintained “withdrawal of accommodation” stance. IMF projects 6.8% growth for India in FY25.
• Key Risks for India: Volatile global commodity prices (especially oil), food price shocks, weather-related disruptions, geopolitical tensions, trade frictions. Need for investment in education and healthcare to manage a young, growing population and AI competition.
• Industry-Specific Risks:
  • Regulatory Changes: IRDAI’s “Insurance for All by 2047” mission and reforms (e.g., Bima Sugam, Bima Vahak, Bima Vistaar) present both opportunities and compliance requirements.
  • Competition: Intense competition, especially from private insurers.
  • Product Mix Sensitivity: Profitability can be affected by shifts in product mix (e.g., impact on MFSL’s consolidated PAT in FY24).
• Company-Specific Risk Management (MFSL/Max Life):
  • MFSL has a Risk Management Committee. Risks are categorized into Strategic, Operational, Compliance, and Financial & Reporting.
  • Max Life has a robust risk management framework with three lines of defense, overseen by the Risk, Ethics and Asset Liability Management (REALM) Committee.
  • Key risks managed: market risk (equity, interest rate), operational risk (mis-selling, technology, fraud, BCM, info-security), liquidity risk, credit risk, insurance risk (persistency, mortality, morbidity, longevity, expense), reinsurance risk, and concentration risk.
  • Interest rate risk is managed through ALM, duration gap management, and use of derivatives (Forward Rate Agreements).
  • Credit risk in Controlled Fund is mitigated by high allocation

Detailed Analysis #

Financial Analysis: Max Financial Services Limited (MFSL) #

Balance Sheet Analysis #

Comparative Analysis of Assets, Liabilities, and Equity (Standalone & Consolidated) #

The analysis below focuses on the available two-year comparison (FY 2023-24 and FY 2022-23).

Max Financial Services Limited - Standalone #

(₹ in lakhs)

Note: FY22 data not directly available in the provided standalone balance sheet summary.

Max Financial Services Limited - Consolidated #

(₹ in lakhs)

Operating Performance Analysis #

Income Statement #

Revenue Analysis #

• Consolidated Revenue (MFSL): FY24 consolidated revenue stood at ₹46,618 crore, a 48% increase year-over-year, primarily driven by higher investment income. Excluding investment income, consolidated revenue grew by 16%.
• Max Life Insurance (MLI) - Gross Written Premium (GWP): GWP for MLI reached ₹29,529 crore in FY24, an increase of 17% over the previous financial year.
  • Renewal premium rose 13% to ₹18,506 crore.
  • Total new business premium (individual and group) grew by 23% to ₹11,023 crore.
• MLI - Individual Adjusted First Year Premium (APE): Grew by 16% to ₹6,961 crore, leading to a private market share gain of 61 bps to 9.4%. Number of new retail policies grew by 20%.
• Geographic/Segment Breakdown: The primary revenue driver is the life insurance business in India, operated through the material subsidiary, Max Life Insurance. MFSL standalone also generates income from management consultancy services.

Cost Structure Analysis #

• Max Life Operating Expenditure (Opex) Ratio (Opex/Gross Premium): The company reports a sustained improvement in the Opex ratio, attributed to structural cost optimization initiatives.
• Major Cost Components (Consolidated P&L FY24):
  • Policyholders’ Expenses of Life Insurance operations: ₹46,07,488.57 lakhs
  • Employee benefits expenses: ₹3,02,020.32 lakhs
  • Other expenses: ₹5,00,425.80 lakhs
• Investment in Distribution: Max Life’s agent recruitment efforts saw a significant 54% increase, which likely contributed to acquisition costs but is aimed at future growth.

Margin Analysis #

• Max Life - New Business Margin (NBM): Achieved an NBM of 26.5% (at actual costs) in FY24.
• Max Life - Value of New Business (VNB): Reached ₹1,973 crore (at actual costs) in FY24, reflecting a 1% annual growth and a 2-year CAGR of ~14%.
• Profitability (MFSL Consolidated):
  • Profit After Tax (PAT): ₹393 crore in FY24, a decrease of 13% compared to the previous year. This decline is attributed to a shift in product mix.
• Profitability (Max Life):
  • Post-tax shareholders’ profit: ₹360 crore in FY24, a 17% decrease from the previous financial year, also impacted by product mix shifts.
• Max Life - Operating Return on Embedded Value (RoEV): Stood at 20.2% in FY24.
• Max Life - Embedded Value (EV): Reported at ₹19,494 crore as of March 31, 2024.

Operating Leverage #

• Consolidated revenue (ex-investment income) grew by 16%, while consolidated PAT declined by 13%. This suggests negative operating leverage in FY24 at the PAT level.

Non-Recurring Items #

• The significant 48% growth in MFSL’s consolidated revenue was heavily influenced by “higher investment income.” Excluding this, the underlying operational revenue growth was 16%.

GAAP vs. Non-GAAP Reconciliation #

• The provided document primarily reports financials based on Indian Accounting Standards (Ind AS), which are converged with IFRS (GAAP).
• Industry-specific metrics like Embedded Value (EV), Value of New Business (VNB), New Business Margin (NBM), and Operating Return on EV (RoEV) are key performance indicators for life insurance companies.

EPS Analysis (FY24) #

• MFSL Standalone:
  • Basic EPS: (₹3.25) (Loss per share)
  • Diluted EPS: (₹3.25) (Loss per share)
• MFSL Consolidated:
  • Basic EPS: ₹9.89
  • Diluted EPS: ₹9.88

Multi-Year Trends #

• Gross Written Premium (GWP): Shows a consistent upward trend over multiple years.
• Value of New Business (VNB): Generally increasing trend, with a 1% growth in FY24.
• New Business Margin (NBM): Showed improvement from FY19 (21.7%) peaking in FY22/23, with a dip to 26.5% in FY24.
• Assets Under Management (AUM): Strong and consistent upward trajectory, crossing ₹1.5 lakh crore in FY24 for Max Life (23% YoY growth).
• Opex Ratio (MLI): Demonstrates a sustained downward trend, indicating improving operational efficiency.
• Individual Adjusted First Year Premium (MLI): Stable growth over the years.
• Claims Paid Ratio (MLI): Consistently high and improving, reaching 99.65% in FY24, indicating strong claims settlement capability.
• Operating RoEV (MLI): Maintained in a healthy range, generally above 20%, with a slight moderation to 20.2% in FY24.

Cash Management Analysis: Max Financial Services Limited (MFSL) - FY24 #

Cash Flow Analysis (Consolidated, Rs. in lakhs) #

Operating Cash Flow (OCF) #

• FY24: Rs. 6,10,830.93 lakhs
• FY23: Rs. 9,92,170.11 lakhs

Analysis: OCF before working capital changes was Rs. 6,50,955.73 lakhs in FY24 compared to Rs. 9,17,801.86 lakhs in FY23. The decrease in net OCF is primarily attributable to a smaller increase in policyholder reserves (Rs. 25,98,061.04 lakhs in FY24 vs. Rs. 15,02,370.75 lakhs in FY23) and changes in working capital components such as a larger decrease in other financial liabilities and a smaller increase in insurance contract liabilities compared to the prior year. Income tax paid was Rs. 1,07,658.00 lakhs in FY24 versus Rs. 9,34,743.83 lakhs in FY23, significantly impacting the final OCF.

Investing Cash Flow (ICF) #

• FY24: Rs. (5,00,868.85) lakhs
• FY23: Rs. (11,55,849.77) lakhs

Analysis: The net cash used in investing activities decreased.

• Capital expenditure on PPE & intangibles: Rs. (22,883.76) lakhs in FY24 vs. Rs. (17,781.70) lakhs in FY23.
• Net investments (purchases less proceeds): Rs. (12,43,313.83) lakhs outflow in FY24 (purchases Rs. 1,13,95,939.88; proceeds Rs. 1,01,52,626.05) vs. Rs. (16,91,755.29) lakhs outflow in FY23.
• Interest, Rent, and Dividend Received: Rs. 7,77,581.65 lakhs in FY24 vs. Rs. 6,51,884.41 lakhs in FY23.
• No significant investment in subsidiary shares was noted in FY24, unlike FY23 (Rs. (84,376.02) lakhs).

Financing Cash Flow (FCF) #

• FY24: Rs. (11,864.30) lakhs
• FY23: Rs. (23,144.98) lakhs

Analysis: Net cash used in financing activities decreased.

• Payment of principal portion of Lease Liabilities: Rs. (8,577.02) lakhs in FY24 vs. Rs. (7,563.04) lakhs in FY23.
• Payment for purchase of treasury shares: Rs. Nil in FY24 vs. Rs. (12,283.40) lakhs in FY23.
• Proceeds from sale of treasury shares was Rs. (3,287.28) lakhs in FY24 vs. Rs. (3,298.54) lakhs in FY23 (appears to be incorrectly signed as proceeds). Correction: This likely relates to ESOP trust transactions, not a general share buyback/sale by the company itself.
• The significant decrease in outflow is mainly due to the absence of treasury share purchases in FY24.

Working Capital Management Efficiency (Consolidated) #

• Current Financial Assets (expected recovery within 12 months, FY24): Rs. 16,44,835.18 lakhs (including CCE, bank balances, derivatives, trade receivables, current portion of investments, and other financial assets).
• Current Financial Liabilities (expected settlement within 12 months, FY24): Rs. 8,96,969.85 lakhs (including trade payables, derivatives, current lease liabilities, current portion of insurance contract liabilities, and other financial liabilities).
• Current Non-Financial Assets (FY24): Rs. 26,875.46 lakhs (primarily current tax assets and other non-financial assets).
• Current Non-Financial Liabilities (FY24): Rs. 80,929.61 lakhs (primarily provisions and other non-financial liabilities).

Analysis: The Group maintains a significant surplus of financial assets expected to be realized within 12 months over financial liabilities due for settlement in the same period, indicating a strong short-term liquidity position. Traditional working capital cycle metrics (DSO, DPO, DIO) are less applicable given the financial services and insurance nature of the business. The focus is on matching asset and liability maturities, particularly for the insurance operations.

Capex Analysis by Segment (Consolidated, Additions to PPE, Intangibles, ROU assets, Investment Property; Rs. in lakhs) #

Business Investments and Others #

• FY24: Rs. 5.24 lakhs
• FY23: Rs. 18.12 lakhs

Life Insurance #

• FY24: Rs. 27,426.78 lakhs (derived from Rs. 5,901.05 PPE + Rs. 14,059.51 Intangibles + Rs. 7,331.78 ROU + Rs. 134.44 Investment Property additions)
• Note: The segment report provides a total addition figure, detailed component additions are from other notes. For Life Insurance, additions to PPE (Note 13B) were Rs. 5,972.00 lakhs, Intangibles (Note 13C) Rs. 12,249.92 lakhs, ROU

Key Performance Indicators #

Max Financial Services Limited (MFSL) Financial Analysis - FY24 #

Overview #

Max Financial Services Limited (MFSL) operates as a holding company for Max Life Insurance Company Limited (Max Life), India’s largest non-bank private life insurer. MFSL holds an 80.98% stake in Max Life, with Axis Entities holding 19.02%.

Consolidated Financial Performance (MFSL - FY24) #

• Revenue: ₹46,618 crore, a 48% YoY growth. Excluding investment income, revenue grew by 16% YoY.
• Profit After Tax (PAT): ₹393 crore, a 13% YoY decrease.

Max Life Insurance Company Limited (FY24) Performance #

New Business and Premiums #

• Gross Written Premium (GWP): ₹29,529 crore, a 17% YoY increase.
• Total New Business Premium (NBP - Individual & Group): ₹11,023 crore, a 23% YoY growth.
• Individual Adjusted First Year Premium (APE): ₹6,961 crore, a 16% YoY increase.
• New Retail Policies: Grew by 20% YoY.
• Renewal Premium: ₹18,506 crore, a 13% YoY increase.
• Proprietary Channels: New business premium increased by 28% to ₹2,957 crore.
• Annuity Sales: Grew by 59% YoY on an APE basis.

Profitability and Value Metrics #

• Value of New Business (VNB): ₹1,973 crore, a 1% YoY growth.
• New Business Margin (NBM): 26.5% (at actual costs).
• Embedded Value (EV): ₹19,494 crore.
• Operating Return on EV (RoEV): 20.2%.
• Shareholders’ Profit After Tax (Max Life): ₹360 crore, a 17% YoY decrease.
• Net Worth (Max Life): ₹3,998 crore, a 13% YoY increase.

Assets Under Management (AUM) and Solvency #

• AUM: ₹1,50,836 crore, a 23% YoY increase.
  • Max Life Pension Fund Management Limited (PFM) AUM grew by 300% to ₹576 crore.
• Solvency Margin: 172% at the end of FY24, improved to 206% after capital infusion.

Operational Efficiency and Customer Metrics #

• Claims Paid Ratio: 99.65% in FY24.
• Persistency:
  • 13th-month persistency (Premium): 86.6%.
  • 61st-month persistency (Cumulative, Premium): 58.3%.
• Customer Satisfaction (NPS): Relationship NPS improved by 4 points to 56, and transactional NPS increased from 69 to 74.
• Digitalization: 81% of retail underwriting was

Risk Framework: Max Financial Services Limited FY24 #

Comprehensive Risk Assessment #

Entity: Max Financial Services Limited (MFSL) and Max Life Insurance Company Limited (Max Life) Period: Financial Year 2023-24 (FY24) Date of Report: October 26, 2023 Source Document: Excerpts from MFSL Annual Report FY 2023-24

Introduction #

This report analyzes key risks faced by Max Financial Services Limited and Max Life Insurance Company Limited, based on their Annual Report for FY 2023-24.

Risk Management Framework Overview #

MFSL and Max Life employ a proactive risk management approach with a Risk Management Committee at the Board level and a structured framework. MFSL categorizes risks into Strategic, Operational, Compliance, and Financial & Reporting. Max Life uses a “three lines of defence” model, a Board-level REALM Committee, a Management Risk Committee, and an independent Risk Management Function. A Risk Appetite Statement is in place, and risks are monitored against Key Risk Indicators (KRIs) and tolerance levels.

Key Risk Categories and Analysis #

Strategic Risks #

• Risk Description:
  • Market Dynamics & Competition: Competitive Indian life insurance sector. Failure to adapt to market changes, customer preferences (digitalization), and competitive pressures.
  • Economic Landscape: Global and Indian economic conditions (inflation, GDP growth, geopolitical tensions) affecting investment performance, consumer demand, and operational costs.
  • Product Mix & Profitability: Shifts in product mix impacting New Business Margins (NBM) and overall profitability.
  • Regulatory Changes: Evolving regulations from IRDAI (e.g., “Insurance for All by 2047,” commission guidelines, capital norms).
  • Partnership Dependence (Axis Bank): Reliance on Axis Bank for distribution and strategic growth.
  • Low Insurance Penetration: Failure to capitalize on low insurance penetration compared to peers.
• Severity/Likelihood/Trend: High severity, ongoing likelihood. Trend towards increasing complexity.
• Mitigation Strategies & Control Effectiveness:
  • Strategic alliance with Axis Bank.
  • Focus on margin-boosting product innovation.
  • Digital adoption and transformation.
  • Three-year strategic framework for Max Life.
  • Diversified multi-channel distribution.
• Potential Financial Impact: Affects revenue growth, market share, profitability (NBM, VNB, PAT), and return on equity (RoEV).

Operational Risks #

• Risk Description:
  • IT Systems & Controls Dependency: Reliance on IT systems. System failures, cyber-attacks, or control deficiencies.
  • Talent Management: Ability to attract, train, and retain skilled employees and agents.
  • Business Continuity & Disaster Management: External events disrupting operations.
  • Fraud Risk: Potential for fraudulent claims or internal fraud.
  • Claims Management: Inefficient claims processing.
  • Data Privacy & Security: Handling sensitive customer data.
• Severity/Likelihood/Trend: Medium to High severity, ongoing likelihood. Trend towards increased cyber threats and data privacy concerns.
• Mitigation Strategies & Control Effectiveness:
  • ISO 27001 and ISO 22301 certifications for Max Life.
  • Robust IT general controls and application controls.
  • Investment in agent recruitment and employee training.
  • Proactive fraud prevention measures.
  • Focus on customer-centricity.
  • AI-based models for underwriting.
• Potential Financial Impact: Impacts operational expenses, potential financial losses, customer retention, and regulatory compliance costs.

Financial Risks #

• Risk Description:
  • Investment & Market Risk: Fluctuations in investment income due to market volatility.
  • Interest Rate Risk: Changes in interest rates

Strategic Direction #

Strategic and Management Analysis #

Max Financial Services Limited (MFSL) - Financial Analysis (FY23-24) #

Overview and Corporate Structure #

Max Financial Services Limited (MFSL), part of the Max Group, is the holding company for Max Life Insurance Company Limited (Max Life). As of April 17, 2024, MFSL holds an 80.98% stake in Max Life. Max Life is a joint venture between MFSL and Axis Bank Limited, with Axis Entities (Axis Bank, Axis Capital, Axis Securities) holding 19.02% of Max Life’s equity. Axis Entities retain the right to purchase an additional 0.98% of Max Life’s equity. Max Life is India’s largest non-bank private life insurer. MFSL is listed on the BSE (Scrip Code: MFSL) and the NSE (Symbol: MFSL).

Financial Performance (FY 2023-24) #

MFSL Consolidated Performance #

• Revenue: ₹46,618 crore (48% YoY growth), driven by higher investment income. Excluding investment income, revenue grew by 16%.
• Profit After Tax (PAT): ₹393 crore (13% YoY decrease), attributed to a shift in product mix.
• Standalone Net Worth (MFSL): ₹6,752 crore as of March 31, 2024 (0.2% decrease from ₹6,763 crore as of March 31, 2023), due to losses during the year.

Max Life Insurance Company Limited Performance #

• Gross Written Premium (GWP): ₹29,529 crore (17% YoY increase).
• Total New Business Premium (Individual & Group): ₹11,023 crore (23% growth).
• Individual Adjusted First Year Premium: ₹6,961 crore (16% growth), leading to a private market share gain of 61 bps to 9.4%.
• Renewal Premium: ₹18,506 crore (13% increase).
• Value of New Business (VNB): ₹1,973 crore (1% YoY growth, 2-year CAGR of ~14%).
• New Business Margin (NBM): 26.5% (at actual costs).
• Embedded Value (EV): ₹19,494 crore as of March 31, 2024.
• Operating Return on EV (RoEV): 20.2%.
• Assets Under Management (AUM): ₹1,50,836 crore as of March 31, 2024 (23% YoY increase).
• Solvency Margin: 172% as of March 31, 2024. Post-capital infusion by Axis Bank in April 2024, the solvency margin stands at 206%.
• Shareholders’ Post-Tax Profit: ₹360 crore (17% lower than the previous financial year).
• Claims Settlement Ratio: 99.65% in FY24, settling over 19,000 death claims worth ₹1254.39 crore.
• Persistency: 13th-month persistency (Premium) was 86.6%.

Max Financial Services Limited (MFSL) - FY24 Financial Performance Overview #

Consolidated Financial Highlights (FY24) #

• Revenue: ₹46,618 crore (48% YoY growth), primarily driven by higher investment income.
• Revenue (Excluding Investment Income): 16% growth.
• Gross Written Premium (Max Life): ₹29,529 crore (17% YoY growth).
• Profit After Tax (PAT): ₹393 crore (13% YoY decline), attributed to a shift in product mix.

Max Life Insurance Company Limited - Subsidiary Performance (FY24) #

New Business Growth #

• Total New Business Premium (Individual and Group): Grew by 23% to ₹11,023 crore.
• Individual Adjusted First Year Premium: Increased by 16% to ₹6,961 crore, leading to a private market share gain of 61 basis points to 9.4%.
• Number of New Retail Policies: Grew by 20%.

Renewal Premium #

• Rose 13% to ₹18,506 crore.

Profitability and Value Metrics #

• New Business Margin (NBM): 26.5% (at actual costs).
• Value of New Business (VNB): ₹1,973 crore (at actual costs), growing 1% in FY24, with a 2-year CAGR of approximately 14%.
• Embedded Value (EV): ₹19,494 crore.
• Operating Return on Embedded Value (RoEV): 20.2%.
• Shareholders’ Post-Tax Profit (Max Life): ₹360 crore (17% YoY decrease), influenced by the product mix shift.

Assets Under Management (AUM) #

• Crossed ₹1.5 lakh crore, reaching ₹1,50,836 crore (23% YoY growth) as of March 31, 2024.

Solvency #

• Solvency Margin (as of March 31, 2024): 172%.
• Post-Capital Infusion Solvency Margin (April 2024): 206% following the capital infusion by Axis Bank.

Operational Efficiency & Customer Centricity #

• Claims Settlement Ratio: Highest-ever at 99.65% in FY24. Over 19,000 death claims worth ₹1254.39 crore were settled.
• Persistency: 13th-month persistency was 86.6% (Premium), and 61st-month persistency stood at 58.3% (Cumulative, Premium).
• Proprietary Channels: New business premium increased by 28% to ₹2,957 crore, contributing 50% to individual sales (up from 37% in FY23).
• Annuity Business: Grew by 59% in FY24 on an APE basis.

Standalone Financial Highlights (MFSL - FY24) #

• Revenue from Operations: ₹2,088.21 crore (FY23: ₹5,027.48 crore).
• Total Income: ₹2,422.24 crore (FY23: ₹5,236.44 crore).
• Profit/(Loss) After Tax: (₹1,123.26) crore (FY23: Profit of ₹1,381.88 crore).
• Net Worth: Marginally decreased by 0.2% to ₹6,752 crore as of March 31, 2024, from ₹6,763 crore as of March 31, 2023.

Strategic Financial Developments #

Axis Bank Capital Infusion into Max Life #

• MFSL shareholders approved Max Life’s proposal to raise ₹1,612 crore from Axis Bank via a preferential issue of equity shares in Max Life.
• On April 17, 2024 (post FY24 reporting date), Axis Bank subscribed to 14,25,79,161 equity shares (6.02%) of Max Life.
• Post-infusion, Axis Entities collectively hold 19.02% in Max Life, and MFSL’s shareholding in Max Life was reduced.

Audit & Compliance #

Audit and Regulatory Analysis #