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High quality franchise at attractive valuations
Max Financial Services
21 March 2016Initiating Coverage | Sector: Insurance
Dhaval Gada ([email protected]) +91 22 3982 5505
Alpesh Mehta ([email protected]) +91 22 3982 5415 \ AS Venkata Krishnan ([email protected])
Investors are advised to refer through important disclosures made at the last page of the Research Report.Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Max Financial Services
21 March 2016 2
Contents Summary ............................................................................................................. 3
Long-term growth story of life insurance industry intact ........................................ 6
Strong distribution partnerships ........................................................................... 9
Revival of growth at agency channel remains critical ........................................... 12
Persistency curves show consistent improvement ............................................... 15
Key takeaways from ground reality check ........................................................... 18
SWOT analysis .................................................................................................... 19
Margins and RoEV to remain in high teens .......................................................... 20
Excess capital to drive inorganic growth pursuits ................................................. 21
Valuations and View ........................................................................................... 22
Financial and Valuations – Max Life Insurance ..................................................... 24
Max Financial Services
21 March 2016 3
High quality franchise at attractive valuations Regulatory uncertainty behind; Bancassurance partnerships remain key
We initiate coverage on Max Financial Services (MAX), the holding company of Max Life Insurance (68% stake), with a Buy rating and a target price of INR400 (P/EV of 2.4x FY18E).
Max Life is India’s fourth largest private life insurer and the largest private player in participating (par) business, based on AUM.
We like Max Life for four key reasons: (1) strong distribution network, (2) improving operational performance, thereby reducing cost overruns, (3) healthy new business margins (NBM) and return on embedded value (RoEV), and (4) significant excess capital.
Best bancassurance arrangement among non-bank/NBFC promoted insurers In an industry that has significant proportion of bank/NBFC-led insurers that depend on their promoters for new business premiums (NBP), Max Life stands out for its strong partnerships with Axis Bank, Yes Bank and Lakshmi Vilas Bank. Two of these banks feature among India’s five largest private sector banks and among the top-5 contributors of individual NBP via the bancassurance channel. Together, they contribute 50%+ of Max Life’s individual NBP. While concentration risk is high currently, it should decline due to (a) new open architecture framework (applicable from April 2016), where several banks have expressed their desire to have arrangements with multiple insurers, (b) increased focus on the direct channel (now accounts for ~12% of NBP v/s 2% in FY11), and (c) potential acquisition of a bank-led insurer. Persistency curves improving – a key driver of lower cost overruns Cost overruns for Max Life now stand at sub-2% v/s ~15% in FY11. Two key drivers for such massive reduction are (a) strong cost control, with absolute operating expense run-rate between INR12b-14b in FY12-16E v/s INR16.5b in FY11, and (b) consistent improvement in persistency curve (refer exhibit 34) over the last five years. While we do not have segmental persistency, we believe the improvement is largely driven by stability in the ‘par’ portfolio, reflected in the steady conservation ratio for the ‘par’ book and improving trends in the non-par portfolio (refer exhibit 35). We expect the current trends on persistency and operating expense growth to sustain. Max Life should break even on cost in FY19, leading to further improvement in margins and return ratios.
Initiating Coverage | Sector: Insurance
Max Financial Services CMP: INR329 TP: INR400 (+21%) Buy
BSE Sensex S&P CNX 25,285 7,704
Stock Info Bloomberg MAXF IN Equity Shares (m) 267.0 52-Week Range (INR) 466/303 1, 6, 12 Rel. Per (%) -11/-20/3 M.Cap. (INR b) 87.8 M.Cap. (USD b) 1.3 Avg Val, INRm 186 Free float (%) 59.6
Financial Snapshot (INR b) Y/E MARCH FY16E FY17E FY18E APE 21.0 24.0 27.4 NBAP 3.5 3.9 4.6 Closing EV 56.2 60.3 64.7 Statutory PAT 5.1 5.7 6.3 APE gr. YoY (%) 6.9 14.0 14.5 NBAP margin (%) 16.8 16.4 16.9 Oper. RoEV (%) 16.2 16.2 16.7 EV per sh. (INR) 211 226 243 P/EV (x) 2.3 2.1 2.0
Shareholding pattern (%) As On Dec-15 Sep-15 Dec-14 Promoter 40.4 40.4 40.5 DII 50.4 25.0 24.4 FII 0.0 25.7 25.0 Others 9.2 8.9 10.1 FII Includes depository receipts
Max Financial Services
High quality franchise at attractive valuations
+91 22 3982 5505
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Max Financial Services
21 March 2016 4
Healthy NBM and RoEV; large part of regulatory overhang behind While overall new business margins (NBM) remain low in India, Max Life boasts of relatively strong NBM. Its NBM post cost overrun is 17-18%, making it one of the top-3 among insurers that report individual NBM. With regulatory changes in the areas of product, distribution and cost behind, commissions and taxation remain the only area of ambiguity; negative outcome from these areas look less likely at this point based on interactions with the regulator and industry participants. We expect 16-17% operating RoEV for FY16-18, improving to ~18% by FY20. Improvement of operating RoEV beyond 18% will largely be a function of sustainable high teens annual premium equivalent (APE) growth or positive surprise on margins. Valuation and view We like Max Life for its management quality, higher proportion of long-term savings business, healthy operational efficiency, strong bancassurance tie-ups, robust return ratios, and excess capital position. The overhang of contract renewal with Axis Bank is now behind and management’s focus on building granularity in its distribution network is encouraging. We value Max Life on appraisal value methodology, leading to an enterprise value of ~INR154b (P/EV of 2.4x FY18E and P/NBAP of ~39x FY18E). Adjusting for MAX’s 68% stake in Max Life and adding the INR1.5b cash with MAX, we arrive at our target price of INR400/share. The stock currently trades at P/EV of 2x FY18E, implying 21% upside. Initiate with a Buy rating. Key risks to our estimate De-growth at agency and prolonged moderation in bancassurance channel;
however, initial trends in APE growth for 4QFY16 suggest return to normalcy Higher corporate tax rate or negative outcome from final guidelines on
commission expenses; based on our interactions with the regulator and industry participants, this looks less likely
Partnership of large insurers with Axis Bank or Yes Bank under open architecture; Max Life’s tie-up with other large banks could reduce the impact
Exhibit 1: Our target price implies 2.4x FY18E P/EV; +21% upside from current levels
Note: We discount value of future new business by 13.4% cost of equity (Rf 7.6%, beta 1.05, market risk premium 5.5%). Our long term growth assumption is 4.2%.
Source: MOSL, Company
60.3
154.0 106.2 93.7 104.7
1.5
Embe
dded
Valu
e (F
Y17E
)
Valu
e of
futu
re n
ewbu
sines
s
Appr
aisa
lva
lue
MFS
(68%
stak
e)
Cash
at
hold
co
Targ
et p
rice
68% stake INR 400 / share
implying 2.4x FY18E P/EV
Stock Performance (1-year)
Max Financial Services
21 March 2016 5
Max Life: Story in charts
Exhibit 2: Strong bancassurance partnerships – Axis Bank and Yes Bank account for ~12% of private sector individual ‘banca’ premiums, up from 9% in FY13 (%)
Note: We do not have 9MFY16 data. Source: Company Data, MOSL
Exhibit 3: Individual NBP via banks to SA ratio (%) for Max Life is 35% below HDFC Life and 90% below ICICI PruLife – an indicator of the significant opportunity in ‘banca’ channel
Note: We have adjusted for Yes Bank savings deposits from FY13.
Source: Company Data, MOSL
Exhibit 4: Improving operational efficiency – consistent improvement in Max Life’s persistency experience (%)
Source: Company Data, MOSL
Exhibit 5: Incremental portfolio mix shifting away from ‘par’ (%)
Source: Company Data, MOSL
Exhibit 6: We expect lower margins from ULIP business to be offset by higher margins on non-par portfolio, leading to largely stable margins beyond FY16 (%)
Note: Data pre FY15 is based on TEV methodology and post FY15 based on MCEV methodology. Decline in FY16E margins is largely on account of interest rate hedge brought against non-par portfolio.
Source: Company Data, MOSL
Exhibit 7: Overall operating RoEV is expected to remain stable at 16-18% for the next few years
Note: Data pre FY15 is based on TEV methodology and post FY15 based on MCEV methodology. Source: Company Data, MOSL
1 4 8 9 13 12 17 21 13 17 22 26 18 21 22
26 20 21 24 20 17
14 18 18 4
3 4 4 4 4 37 30 36 29 24 19
FY10 FY11 FY12 FY13 FY14 FY15
Max Life ICICI Pru HDFC LifeSBI Life Kotak OM Others
0.2
1.0 1.3 1.2 1.2
1.3
2.8 3.4
2.5 2.6
1.8 2.5
3.2
1.5 1.8 1.8 2.4
0.6
0.5 0.3 0.2 0.3 0.3
FY10 FY11 FY12 FY13 FY14 FY15
Max Life HDFC LifeICICI Pru Life SBI Life
20.0
30.0
40.0
50.0
60.0
70.0
80.0
13thMonth
25thMonth
37thMonth
49thMonth
61stMonth
FY10
FY11
FY12
FY13
FY14
FY15
79 81 74 44
12 9 21 27 27 27 28
19 16 21 52
80 77 69 59 58 56 54
1 3 4 4 8 14 10 14 15 17 18
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
E
FY17
E
FY18
E
Linked Participating Non-participating
19.6 16.9
13.6 11.2
14.1 13.6
23.4 18.5 17.5 17.5 17.5 17.5
-5.0 -6.9
-1.2 4.4
13.1 13.2
21.5 16.8 16.4 16.9 17.5 17.5
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
E
FY17
E
FY18
E
FY19
E
FY20
E
Pre-cost over-runs Post-cost over-runs
9.0 12
.0
14.5
12.2
10.8
15.6
22.3
16.2
16.2
16.7
17.3
17.7
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
E
FY17
E
FY18
E
FY19
E
FY20
E
Operating RoEV (%)
Max Financial Services
21 March 2016 6
Long-term growth story of life insurance industry intact Linked business back in flavor – key growth driver for private insurers
India’s long-term life insurance growth story remains intact. Insurance density and penetration remain very low. Also, on sum-assured-to-GDP, India (~60%) remains significantly behind developed markets (270% for the US).
In the last six years, the Indian life insurance industry has seen a slew of regulatory changes in the areas of mis-selling, products, distribution, commissions and expense of management. In absolute terms, individual new business premiums remain 30% below FY10/11 levels (flat YoY in FY16E).
However, in case of private insurers, post the revised linked business guideline (reduction in yields) in 2013 and improved economic / investor sentiment, new business growth has stabilized and remains healthy (+13% YoY). This is also reflected in higher share of linked business (44% of new business as of 1HFY16 v/s 29% in FY14).
Overall, we expect the share of non-participating (especially term insurance) and linked business to increase for private insurers.
Exhibit 8: Traditional measures of insurance sector development highlight significant long-term opportunity
Source: Swiss Re Sigma, MOSL
Exhibit 9: Supporting this thesis is the expected expansion in working age population in India (m)
Source: UN, MOSL
Exhibit 10: India’s sum assured / GDP (%) remains significantly below developed and some emerging markets
Note: The above data for India does not capture the impact of Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY).
Source: ICICI Prudential Life presentation, MOSL
Exhibit 11: Over the last few years, while India’s household savings (as % of GDP) have been trending lower…
Source: CSO, CMIE, MOSL
UK Japan
France
Australia
Italy Korea
U.S Canada
Germany Spain Malaysia
Brazil
Thailand
China Mexico
India
Indonesia 0.0
1.8
3.6
5.4
7.2
9.0
0 1000 2000 3000 4000
Life
Insu
ranc
e Pe
netr
atio
n (%
)
Premiums Per-capita (USD)
585
639
691
739
2015 2020 2025 2030
270 260 226
166 149 106 96
60
US
Japa
n
Sing
apor
e
Kore
a
Mal
aysia
Germ
any
Thai
land
Indi
a
12.7
12.3
12.2
13.5
11.6
11.9
10.8
13.5
13.2
13.2
15.5
13.2
11.0
10.5
10.5
10.0
11.0
10.1
11.9
11.3
11.6
10.1
12.0
9.9
7.3
7.0
7.2
7.6
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
Physical Savings (% of GDP) Financial Savings (% of GDP)
Max Financial Services
21 March 2016 7
Exhibit 12: …the share of life insurance within financial savings has largely stabilized post linked business guideline changes in 2010
Source: CSO, CMIE, MOSL
Exhibit 13: Overall APE growth (%) has recovered since 2014, partially driven by strong equity market performance
Source: IRDA, Life Insurance Council, MOSL
Exhibit 14: Individual APE growth has been trending in line with equity market performance
Note: The above data is on three month rolling basis.
Source: Bloomberg, IRDA, Life Insurance Council, MOSL
49 46 33
46 37 39 39 42 41 39 46 57 51 60 42 51 57 56 57
44 47 58
46 51 47 46 42 46 46 40 28
27 19 32
29 23 27 25
8 7 9 8 12 14 14 16 13 15 14 15 22 21 26 19 20 16 18
FY81
FY85
FY90
FY95
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
Deposits Others Life insurance
86
1 7
-20 -24
2
-3
16 13 31
-10
17
-9 -5
-2
-3
-10 4
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
9MFY
16
Private Industry
Impacted by guideline change in ULIPs which had 80%+ share in private insurers NBP
Product re-filiing and dicontinuation of guranteed NAV products
-25
0
25
50
-20
0
20
40
Dec-
11
Mar
-12
Jun-
12
Sep-
12
Dec-
12
Mar
-13
Jun-
13
Sep-
13
Dec-
13
Mar
-14
Jun-
14
Sep-
14
Dec-
14
Mar
-15
Jun-
15
Sep-
15
Dec-
15
Private APE Growth YoY (%) RHS, Nifty Performance YoY (%)
Industry APE growth back on track
Trend between private sector individual APE
growth and equity market performance remains high
Max Financial Services
21 March 2016 8
Exhibit 15: Share of linked business for private insurers back to 40%+ of NBP (%)
Note: This includes individual and group business.
Source: ICICI Prudential Life, IRDA, Life Insurance Council, MOSL
We expect the private sector to continue gaining market share v/s LIC (52:48 as of 9MFY16 v/s 49:51 in FY15). Given the overhang on participating (par) business, led by expense of management guideline and evolving agency model, we expect incremental growth to be driven by linked and non-par business. Exhibit 16: We expect private sector individual NBP to post 14.5% CAGR over FY16-20E…
Source: IRDA, Life Insurance Council, MOSL
Exhibit 17: …and share of private insurers to sustain above 50% (individual APE basis, %)
Source: IRDA, Life Insurance Council, MOSL
86 83 69
41 35 29 38 44
14 17 31
59 65 71 62 56
FY09 FY10 FY11 FY12 FY13 FY14 FY15 1HFY16
Linked Traditional
143
266 269 288 230
175 178 172 200 227 259
296 341
392
99.7 85.6
1.1 7.1
-20.0 -23.9 1.9 -3.4
16.0 13.5 14.0 14.5 15.0 15.0
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
E
FY17
E
FY18
E
FY19
E
FY20
E
Private - Individual APE (INR b) Growth YoY (%)
34 36 50 57 52 46 37 38 38 49 52 54 56 58 60
66 64 50 43 48 54 63 62 62 51 48 46 44 42 40
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
E
FY17
E
FY18
E
FY19
E
FY20
E
Private LIC
We expect 14-15% individual APE growth for
private sector
Expect private insurers to sustain 50%+ market share
on individual APE basis
Max Financial Services
21 March 2016 9
Strong distribution partnerships Best possible bancassurance tie-ups in place; however, at sizable cost
In line with other large private sector peers, Max Life relies significantly on the bancassurance channel (50%+ of individual NBP). Its tie-ups with Axis Bank and Yes Bank have been a key driver of individual premium growth (together, these two banks account for ~12% of private sector individual NBP via banks).
Over the past few quarters, growth from the bancassurance channel has moderated (1% YoY in 9MFY16 v/s 26% in FY15), led by slowdown at Axis Bank. However, a revival is now well on track (20%+ APE growth in Jan/Feb-16), led by increased focus on improving cross-sell ratios with the use of digitization and big data.
Moderate growth in agency channel remains a key area of concern (currently accounts for 30%+ of individual NBP); absolute NBP from the agency channel has remained flat for four years, largely in line with the growth in agent workforce.
While in the near term, healthy premium growth from bancassurance and direct channel is likely to support overall performance, stability and granularity within the portfolio remain key for sustainability of growth. In our view, subdued growth at the agency channel has also been a key driver of muted growth in long-term savings (participating) business. The ‘par’ business has been flat over the last three years and the share of ‘par’ business has declined from 80% in FY12 to 59% in FY15.
We expect Max Life to broadly sustain its current market share within private insurers (~8.9% in 9MFY16 v/s ~10% in FY15 on APE basis). For FY16, we expect 7% APE growth, improving to ~13.5% in FY17 and to ~15% thereafter (FY18-20E).
Overall industry’s dependence on bancassurance remains significant For LIC, 95%+ of individual new business growth comes from the agency channel. But private insurers have significant dependence on bancassurance partners (47% of NBP in FY15 v/s 25% in FY10). In FY15, bancassurance partners contributed 70% of the growth in private insurers’ individual NBP. In our view, the top-5 banks (SBIN, HDFCB, ICICIBC, AXSB and KMB) account for 80-85% of premiums.
Exhibit 18: Over the years, private insurers’ dependence on bancassurance partners has been increasing (individual premium break-up, %)
Source: IRDA, MOSL
Exhibit 19: More importantly, banks have been the key driver of individual NBP for private insurers, contributing ~70% of incremental growth in FY15 (%)
Source: IRDA, MOSL
66 60 55 51 47 44 40 40 36
17 19 21 25 33 39 43 44 47
18 21 24 24 20 17 17 16 17
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
Agency Bancassurance Others
-40%
0%
40%
80%
120%
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Individual Agents YoY (%) Bancassuarance YoY (%)
Max Financial Services
21 March 2016 10
Max Life gets 50%+ of new business premium via bancassurance In line with its peers, Max Life also has significant dependence on bancassurance partners (50%+ of individual premiums). However, unlike the top three private insurers, Max Life is not promoted by a bank/NBFC. Hence, the arrangement with Axis Bank remains critical. The recently announced 5% stake allotment to Axis Bank at face value is likely to ensure 4-5 years of stability in the partnership. Yes Bank’s contract comes for renewal in 2018 and should get renegotiated.
Exhibit 20: In our view, Max Life has one of the best possible bancassurance arrangements in the current landscape Top 10 PSU Banks Top 10 Private Banks
Banks Status Insurer Banks Status Insurer SBIN Promoter SBI Life ICICIBC Promoter ICICI Pru Life PNB Promoter PNB MetLife HDFCB Banca tie-up # HDFC Life CBK Promoter Canara HSBC OBC AXSB Banca tie-up Max Life BOB Promoter India First KMB Promoter Kotak OM BOI Promoter Star Union Dai-ichi FB Promoter IDBI Federal
CBOI Banca tie-up LIC JKBK Promoter PNB MetLife UNBK Promoter Star Union Dai-ichi SIB Banca tie-up LIC SNDB Banca tie-up LIC IIB Banca tie-up Tata AIA IOB Banca tie-up LIC KTK Banca tie-up PNB MetLife
ALBK Banca tie-up LIC YES Banca tie-up Max Life
Note: The above banks have been sorted based on branch network. # HDFC Ltd is the promoter of HDFC Bank and HDFC Life. Source: RBI, Company, MOSL
Exhibit 21: Five banks account for 70%+ of individual NBP via banks
Source: IRDA, Company, MOSL
Exhibit 22: Max Life is relatively more reliant on bancassurance channel v/s private sector average
Note: The above data is based on individual NBP.
Source: Company Data, MOSL
Exhibit 23: Over the last few quarters, Max Life has seen significant slowdown from Axis Bank’s network, which has impacted its overall performance
Note: The above data is based on individual NBP.
Source: Company Data, MOSL
1 4 8 9 13 12 17 21 13 17 22 26 18 21 22
26 20 21 24 20 17
14 18 18 4
3 4 4 4 4 37 30 36 29 24 19
FY10 FY11 FY12 FY13 FY14 FY15
Max Life ICICI Pru HDFC Life SBI Life Kotak OM Others
4 22
40 48 51 56 52 70
54 37 35 31 28 32
3 2 7 7 8 10 12 21 20 13 10 9 6 4
FY10 FY11 FY12 FY13 FY14 FY15 9MFY16
Banks Individual Agents Direct Corporate Agents Others
-39
-7 9 3 4
62
19 29 26
1
FY12 FY13 FY14 FY15 9MFY16
Individual Agents Banks
Max Financial Services
21 March 2016 11
Equity offerings to bancassurance partner in some sense an ESOP The recent equity offering to Axis Bank has raised some concerns over the bargaining power of Max Life and sustainability of the business model. We believe that given the industry dynamics for private insurers, bargaining power with banks’ is likely to remain high, unless growth from the agency channel recovers in a big way (sustained double-digit growth) – not part of our base case. Alternatively, strong growth in the direct channel and increased tie-ups with other banks, small finance banks and payment banks could provide some granularity to sourcing of new business over the medium term. Till then, we believe equity offerings to large bancassurance partners like Axis Bank would be necessary to provide a level of stability to the overall business model. While we do not know the financial targets (if any) built into the Axis Bank equity offering, given the long-standing relationship, we expect strong performance to continue over the next few years. In exhibit 24, we highlight that Axis Bank and Yes Bank together have individual NBP/SA ratio of 1.3% v/s 2.4% for ICICI Bank and 1.8% for HDFC Bank. Hence, the growth opportunity remains significantly higher within the existing base plus the strong SA deposit growth, which is likely to sustain. Exhibit 24: Axis Bank and Yes Bank have significant potential within the existing network (individual NBP / SA deposits, %)
Note: We have added Yes Bank’s SA deposits in the denominator from FY13.
Source: MOSL, Company
0.2
1.0 1.3 1.2 1.2
1.3
2.8 3.4
2.5 2.6
1.8 2.5
3.2
1.5 1.8 1.8 2.4
0.6
0.5 0.3 0.2 0.3 0.3
FY10 FY11 FY12 FY13 FY14 FY15
Max Life HDFC Life ICICI Pru Life SBI Life
Banks’ bargaining power to remain high unless growth
from agency channel recovers on a sustainable
basis
Significant opportunity in existing bancassurance
network
Max Financial Services
21 March 2016 12
Revival of growth at agency channel remains critical In absolute terms, individual NBP via agency is down 40% since FY10
One of the reasons we like Max Life is its market leadership in the ‘par’ business amongst private insurers; stability in the ‘par’ business is one of key reasons for consistent improvement in persistency and overall operational efficiency.
We believe muted growth from the agency channel has partly resulted in weak growth in the participating business, which has been Max Life’s key strength area post the ULIP guideline changes in 2010. Share of ‘par’ business has declined from 80% in FY12 to ~60% currently.
While we expect overall APE growth of 14-15% over FY17-20, this largely factors in mid to high single-digit growth in agency channel and similar growth in ‘par’ business. Any positive surprise in agency channel growth could lead to higher premium growth and better performance in ‘par’ business.
Agency channel remains key for sustained growth and improving granularity in sourcing Over the past five years, the life insurance industry has seen significant reduction in the number of agents. For Max Life, growth in the agency channel has remained muted over the last four years, in line with growth in the agent workforce. We believe double-digit growth in agency channel remains key for overall revival and medium-term business stability. The management has taken several initiatives – one being the introduction of new work system (NWS) project in 2013 – to boost growth via agency channel. Given the high cost structure involved in the agency model, we see limited catalysts in the near term for double digit growth. We expect single digit growth in the agency channel over FY16-18E.
Exhibit 25: Number of agents has largely remained unchanged for four years
Source: Company Data, MOSL
Exhibit 26: This has also been reflected in moderate agency new business premium growth
Source: Company Data, MOSL
Higher proportion of growth from agency channel will help propel growth in participating business (slightly more complex, and hence, is driven mainly by agency channel) and reduce reliance on bancassurance partnerships, thereby lowering dilution and concentration risks.
129%
-14% -40%
-19% 0%
20% 0% -7%
0
18,000
36,000
54,000
72,000
90,000
FY09
FY10
FY11
FY12
FY13
FY14
FY15
1HFY
16
Number of agents Growth YoY (%)
12.3 10.4
6.4
5.9 6.5 6.7
-15%
-39%
-7%
9% 3%
FY10 FY11 FY12 FY13 FY14 FY15
Individual Agency NBP (INR b) Growth YoY (%)
Max Financial Services
21 March 2016 13
Exhibit 27: Overall we expect 14-15% APE growth (%) over FY16-20E
Source: Swiss Re Sigma, MOSL
Exhibit 28: However, we expect Max Life’s market share to remain largely stable (%, private players)
Source: IRDA, Life Insurance Council, MOSL
Moderation in participating business likely to continue Post 2010, Max Life increased its focus on long-term savings products. Given the nature and complexity of participating products, individual agencies remain the key sales driver. However, unlike other large banks, sale of ‘par’ products remained high via the Axis Bank channel. Higher growth via the bancassurance channel was offset by growth moderation in the individual agency channel. Exhibit 29: Significant focus on long-term savings products post 2010 (individual APE mix, %)
Source: MOSL, Company
Exhibit 30: However, since 2012, APE growth (%) in participating products has remained muted…
Source: Company, MOSL
Exhibit 31: …partly driven by subdued growth in agency channel
Source: Company, MOSL
15.8 17.2 15.1 15.1 17.7 19.7 21.0 24.0 27.4 31.6 36.3
-1 9
-13
0
17 11
7 14 14 15 15
FY10
FY11
FY12
FY13
FY14
FY15
FY16
E
FY17
E
FY18
E
FY19
E
FY20
E
Max Life (INR b) Growth YoY (%)
4.5 4.1
5.4 5.4 4.9
5.9 5.5
7.5 8.6 8.5
10.3 9.8
8.8 9.3 9.3 9.3
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
9MFY
16
FY16
E
FY17
E
FY18
E
79 81 74 44
12 9 21 27 27 27 28
19 16 21 52
80 77 69 59 58 56 54
1 3 4 4 8 14 10 14 15 17 18
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
Linked Participating Non-participating
16 21 52 80 77 69 59
1 30
166
34 -3 6 -5
FY09 FY10 FY11 FY12 FY13 FY14 FY15
% of Individual APE (%) APE Growth YoY (%)
-50
0
50
100
150
FY11 FY12 FY13 FY14 FY15
Individual Agency NBP Growth YoY (%)Individual PAR Growth YoY (%)
Driven by Axis Bank
‘Par’ business growth continues to struggle
Max Financial Services
21 March 2016 14
Exhibit 32: Overall bancassurance commissions for ‘par’ business increased significantly post 2010
Note: While overall commissions may not be true reflection of NBP; directionally, it is a good indicator, in our view. Source: MOSL, Company
Incremental growth is largely driven by non-par and linked business – partly led by improved investor sentiment and market performance over the past 18-24 months. While margins on linked business remain relatively low (impacted by RIY guidelines); premium volumes remain high. In case of non-par products, while margins remain high (2-3x of ‘par’ business based on management interactions), interest rate risk remains significant.
33
84 88 84 83 77 6
5 9 13 9 13 61
11 4 3 8 9
FY10 FY11 FY12 FY13 FY14 FY15
Participating Non-participating LinkedIncremental growth from
non-par and ULIP segments
Max Financial Services
21 March 2016 15
Persistency curves show consistent improvement Expect Max Life to break even on cost post FY18
Since FY09, Max Life has seen consistent improvement in its persistency curve; this in our view is a key differentiator on underwriting practices and quality of the back book.
While we do not have segmental data on persistency, we consider conservation ratio as a proxy to analyze the drivers of improved persistency. Exhibit 35 highlights the stability of ‘par’ book conservation ratio over the past six years and at the same time significant improvement in conservation ratio of non-par portfolio.
Absolute operating expenses have remained largely stable at INR12-13b in FY12-16E v/s INR16.5b in FY11; we expect this cost control trend to continue led by increasing focus on technology and better productivity.
Direct channel now accounts for 12% of overall NBP v/s 2% in FY11. Strong focus on digitization along with increasing share of non-par and term insurance should help sustain 20%+ growth via direct channel.
Overall, strong cost control along with steady performance on persistency is likely to result in zero cost overruns post FY18.
Exhibit 33: Max Life has one of the best 13th month persistency (%)
Note The above data is standardized based on revised IRDA guidelines. Source: MOSL, Company
Exhibit 34: More importantly, Max Life has seen consistent improvement in its persistency experience (%)…
Source: MOSL, Company
82
72 76 76
72 69 62 60 57 60
81 79 77 77 74 73 68
62 62 58
Kota
k O
M
ICIC
I Pru
Max
Life LI
C
SBI L
ife
HDFC
Life
Baja
j Alli
anz
Birla
Sun
life
PNB
Met
life
Relia
nce
Life
FY14 FY15
68.0
42.0
32.0 23.0
32.0
49.0
60.0
77.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
13th Month 25th Month 37th Month 49th Month 61st Month
FY10
FY11
FY12
FY13
FY14
FY15
900-1800bp improvement in 3-5 year persistency
Max Financial Services
21 March 2016 16
Exhibit 35: …In our view, this is largely driven by stable conservation ratio in the participating portfolio (%)
Note: We do not have segmental persistency ratios. However, in our view, conservation ratio is a good proxy to understand the trend, as the book is recent and maturity / claims experience is low. Also, the proportion of new business to total premiums is significant (~30%). Source: MOSL, Company
Exhibit 36: Absolute operating expenses are likely to remain stable at INR13b-14b in FY16-18E led by increasing focus on technology and better productivity
Source: MOSL, Company
Exhibit 37: Other operating expense remain key driver of cost control
Source: MOSL, Company
90 86 86 87 83 84 86
39 50
45
60
72
84 82 80 83 80 79 74
73 74
FY09 FY10 FY11 FY12 FY13 FY14 FY15
Par Non-par Linked
16.1 16.5 13.5 12.7 12.2 12.7 13.1 13.6 14.1
-3.5 2.3
-18.4
-5.4 -3.9
4.1 2.5 4.0 4.0
FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
Total operating expenses (INR m) Growth YoY (%)
-8
7
-19
-1
6 9
0
-1
-16 -10 -11
0
FY10 FY11 FY12 FY13 FY14 FY15
Employee expenses YoY (%) Other opex YoY (%)
In last six years, par conservation ratio has
remained largely stable – moving in 400bp range
Max Financial Services
21 March 2016 17
Exhibit 38: After SBI Life, Max Life has the best agent productivity amongst the large private insurers
Source: Company Data, MOSL
Exhibit 39: Also, branch productivity is one of the highest amongst large private insurers
Source: Company Data, MOSL
Direct business gaining traction – 30%+ CAGR over FY10-15 Over the last few years, Max Life has seen significant increase in direct insurance channel (12% of individual NBP in 9MFY16 v/s 3% in 2010). With increased focus on technology and non-par term insurance business, we expect the strong traction to continue, leading to meaningful cost savings in coming years. Exhibit 40: Share of direct channel in overall individual NBP has increased to 12% in 9MFY16 v/s 2% in FY11 and 10% in FY15
Source: MOSL, Company
Exhibit 41: Overall we expect no acquisition cost overruns post FY18
Source: MOSL, Company
205
130 92 84 73 56
SBI L
ife
Max
Life
ICIC
I Pru
HDFC
Life
Relia
nce
Life
Birla
Sun
life
Average Agent Productivity (INR '000)
26 23 22
13 11 9
Max
Life
SBI L
ife
ICIC
I Pru
HDFC
Life
Birla
Sun
life
Relia
nce
Life
Average Branch Productivity (INR mn)
3 2
7 7 8
10
12
FY10 FY11 FY12 FY13 FY14 FY15 9MFY16
Direct Channel (% of individual NBP)
0
5
10
15
20
25
0
1,000
2,000
3,000
4,000
5,000
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
E
FY17
E
FY18
E
FY19
E
FY20
E
Acquisition cost over-run (INR m) RHS, as % of APE (%)Improving persistency curves likely to lead to
lower cost overruns
Max Financial Services
21 March 2016 18
Key takeaways from ground reality check Thrust on training and development of agents, R&R remains high
We undertook a ground reality check by meeting Max Life employees at branches, holding one-on-one meetings with agents, and through telephonic interactions with outstation agents. Key themes from our ground reality check Significant thrust on training and development of agents: One common theme
across our interactions was significant thrust on training. Max Life provides a seven-day training program before the person takes the IRDA examination for license. Further, the agency development manager also undergoes a six-month training process, where emphasis is on product understanding, sales and consumer psychology, and on agency recruitment and development.
Focus on “Sachchi Advice”; persistency a key indicator in reward and recognition (R&R) of agents: Several agents alluded to the “Sachchi Advice” (which means true advice) tag line while making their marketing pitch. Further, many agents also focused on maintaining high persistency to qualify and get invited to various functions and events by Max Life that recognizes top performing individuals.
Fresh KYC even for Axis Bank customers: While leads are generated by the bancassurance partner, customers do not have a KYC waiver and fresh KYC remains essential to complete the sales process. However, some of the other best practices from the industry did not feature in our survey. For instance, HDFC Life follows a process of multiple repeat calls to customers to ensure no mis-selling has been undertaken.
An impression that Max Life has one of the best after sales service: Most of the respondents highlighted that Max Life has a simple and quick claims settlement process. Some highlights were: (a) beneficiary has a choice to get the claims with the help of their agents or by directly going to a Max Life branch, (b) once all paper work is done, claims are given within 7 to 10 days. If the 10-day time frame is not met, the beneficiary is also paid a 3.5% penalty fee.
Max Financial Services
21 March 2016 19
SWOT analysis
Source: MOSL
•Largest private player in participating business •Strong bancassurance partnerships (contributes 50%+ of individual NBP) •Healthy capital position (solvency capital 400%+) •Robust margin profile (17-18% NBAP post cost)
•High concentration risk in distribution (~40% of individual NBP via Axis Bank)
•New bancassurance partnerships led by open architecture framework (average 1:1 mapping currently v/s 1:3 allowed by the regulator)
•Changes in cost structure of individual agency model •Digital selling; increasing share of direct channel (currently 12% of individual NBP v/s 9% for system
from direct and referrals)
•Heavy dependence on bancassurance; granularity in sourcing of business remains key (agency business ~30% of individual NBP)
•Declining reliance on participating products which has been a key driver of stability and success (~55% of individual NBP currently)
Strength
Weakness
Opportunity
Threats
Max Financial Services
21 March 2016 20
Margins and RoEV to remain in high teens High margin non-par portfolio remains the key driver
We believe the revised draft proposal of ‘expense of management’ guideline is likely to have negligible impact on the ‘par’ business.
Increased focus on non-par business (currently ~14% of NBP and expected to be 18-20% over the next few years) is likely to be the key margin booster. Margins in the non-par business are 2-3x the margins in the ‘par’ business. Declining interest rates remain a key risk in this line of business.
Overall, we expect NBAP margins pre cost overruns (including proposed interest rate hedge for non-par portfolio) to stabilize around 18% v/s ~20% in 1HFY16 and ~23% in FY15. Post cost overruns, margins are expected at 17-18% v/s ~21.5% in FY15.
We expect operating RoEV to remain 16-18% range (~9% contribution from ‘unwind’ and 7-9% post cost NBAP contribution). Improvement of RoEV beyond 18% will largely be a function of strong growth especially from agency channel or positive surprise on margins, which looks unlikely in the current environment.
Exhibit 42: Margins to stabilize around 17-18%...
Note: Decline in FY16E margins is largely on account of interest rate hedge brought against non-par portfolio.
Source: Company Data, MOSL
Exhibit 43: … with operating RoEV stabilizing around 16-18%
Note: Data pre FY15 is based on TEV methodology and post FY15 based on MCEV methodology.
Source: Company Data, MOSL
Exhibit 44: Contribution of NBAP in RoEV is expected to increase to 8% by FY18E
Source: MOSL, Company
19.6 16.9
13.6 11.2
14.1 13.6
23.4 18.5 17.5 17.5 17.5 17.5
-5.0 -6.9
-1.2 4.4
13.1 13.2
21.5 16.8 16.4 16.9 17.5 17.5
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
E
FY17
E
FY18
E
FY19
E
FY20
E
Pre-cost over-runs Post-cost over-runs
9.0 12
.0
14.5
12.2
10.8
15.6
22.3
16.2
16.2
16.7
17.3
17.7
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
E
FY17
E
FY18
E
FY19
E
FY20
E
Operating RoEV (%)
-6.1 -4.8
-0.7 2.1
5.4 6.2 9.6
6.8 7.0 7.7 8.5 9.1
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
E
FY17
E
FY18
E
FY19
E
FY20
E
Post overruns NBAP contribution (%)
Max Financial Services
21 March 2016 21
Excess capital to drive inorganic growth pursuits We expect management to strengthen bancassurance partnerships
Capital position on both regulatory and economic basis remains healthy; while we do not have break-down of adjusted net asset value (ANAV); Max has a good cash conversion of value in force (VIF) into ANAV based on our indicative analysis – reflection of portfolio duration and cash profitability.
On regulatory requirement, Max has INR14-15b of excess capital along with an option to raise sub-debts incase needed; hence, capital position remains very comfortable for meeting double digit growth projections over next 4-5 years.
Over the next couple of years, we expect several PSU banks to sell stake in non-core ventures (including insurance). Based on past management commentary, part of the excess capital will be used to acquire an insurer with strong bancassurance tie-up.
Exhibit 45: Regulatory capital position remains comfortable for meeting double digit growth projections over next 4-5 years
Source: MOSL, Company
Exhibit 46: While we do not have break-down of ANAV; we expect large portion to be free surplus
Source: MOSL, Company
Exhibit 47: Cash conversion of VIF into ANAV is probably very fast INR m FY11 FY12 FY13 FY14 FY15 1HFY16 Indicator I Closing ANAV 11,410 17,110 18,980 19,310 21,150 20,930 Add: Dividends 0 0 3,020 3,090 4,060 2,200 Less: Opening ANAV 8,800 11,410 17,110 18,980 19,450 21,150 Difference (A) 2,610 5,700 4,890 3,420 5,760 1,980 Unwind (B) 3,360 4,190 3,920 3,790 4,000 2,520 Indicative cash conversion (%) – (A/B) 78 136 125 90 144 79
Indicator II Opening VIF 18,430 20,750 19,730 18,580 24,560 31,170 Add: New business margin -200 660 1,980 2,340 4,230 1,380 Less: Closing VIF 20,750 19,730 18,580 20,220 31,170 32,690 Difference -2,520 1,680 3,130 700 -2,380 -140
Source: MOSL, Company
365
534 520 485 435 402
FY11
FY12
FY13
FY14
FY15
9MFY
16
Regulatory solvency ratio (%)
8.8 11.4
17.1 19.0 19.3
21.2 20.9
FY10
FY11
FY12
FY13
FY14
FY15
1HFY
16
ANAV (INR b)
In our view, cash conversion of VIF into ANAV is fast – a
positive indicator
Max Financial Services
21 March 2016 22
Valuations and View Strong capital position, healthy APE growth, stable margins and RoEV
Long term opportunity in India’s life insurance sector remain attractive; overall the past couple of years, new business growth has recovered with cost control and profitability remaining key focus area for most insurers. Outlook on regulatory environment remains positive with all major areas (product, distribution and expenses) already seeing guideline changes. Interestingly, the last couple of regulatory developments (i.e. proposed bank broker model and expense of management) have ended up being more accommodative for the industry v/s and severe negative impact seen previously. Hence, we remain positive on the sector.
We prefer MAX for its management quality, higher proportion of long-term savings business, healthy operational efficiency, strong bancassurance tie-ups, robust return ratios, and excess capital position. The overhang of contract renewal with Axis Bank is now behind and management’s focus on building granularity in its distribution network is encouraging.
We value Max Life on appraisal value basis. We assume cost of equity at 13.4% and terminal growth rate at 4%, resulting in overall appraisal value of ~INR154b (P/EV of 2.4x FY18E and P/NBAP of ~39x FY18E). Adjusting for MAX’s 68% stake in Max Life and adding the INR1.5b cash with MAX, we arrive at our target price of INR400/share. The stock currently trades at P/EV of 2x FY18E, implying 21% upside. In addition, dividend yield of 2.5-3% remains attractive.
We do not ascribe any holding company discount to MAX, as Max Life is the only major business owned and substantial portion of the dividend income received from Max Life is likely to flow through to MAX shareholders.
Key risks to our estimate De-growth at agency and prolonged moderation in bancassurance channel;
however, initial trends in APE growth for 4QFY16 suggest return to normalcy Higher corporate tax rate or negative outcome from final guidelines on
commission expenses; based on our interactions with the regulator and industry participants, this looks less likely
Partnership of large insurers with Axis Bank or Yes Bank under open architecture; Max Life’s tie-up with other large banks could reduce the impact
Exhibit 48: Our target price implies 2.4x FY18E P/EV; +21% upside from current levels
Note: We discount value of future new business by 13.4% cost of equity (Rf 7.6%, beta 1.05, market risk premium 5.5%). Our long term growth assumption is 4.2%.
Source: MOSL, Company
60.3
154.0 106.2 93.7 104.7
1.5
Embe
dded
Valu
e (F
Y17E
)
Valu
e of
futu
re n
ewbu
sines
s
Appr
aisa
lva
lue
MFS
(68%
stak
e)
Cash
at
hold
co
Targ
et p
rice
68% stake INR 400 / share
implying 2.4x FY18E P/EV
Max Financial Services
21 March 2016 23
Exhibit 49: Max Life embedded value projections Traditional Embedded Value MCEV
(INR m) FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E FY19E FY20E
Opening Embedded Value 13,160 22,840 27,230 32,160 36,840 37,560 44,010 52,320 56,155 60,261 64,700 69,678 Net Asset Value 3,620 7,670 8,800 11,410 17,110 18,980 19,450 21,150 Value of in-force business 9,540 15,170 18,430 20,750 19,730 18,580 24,560 31,170 Unwind 1,900 2,610 3,360 4,190 3,920 3,790 4,000 4,944 5,166 5,393 5,661 5,992 % of opening EV 14.4 11.4 12.3 13.0 10.6 10.1 9.1 9.5 9.2 9.0 8.8 8.6 Value of new business (pre cost over-runs) 3,120 2,670 2,350 1,680 2,130 2,400 4,600 3,891 4,189 4,796 5,517 6,343
Acquisition cost over-run -3,920 -3,770 -2,550 -1,020 -150 -60 -370 -350 -250 -150 0 0 Value of new business (post cost over-runs) -800 -1,100 -200 660 1,980 2,340 4,230 3,541 3,939 4,646 5,517 6,343
Growth YoY (%) 37.5 -81.8 -430.0 200.0 18.2 80.8 -16.3 11.3 17.9 18.8 15.0 Operating variance -3,830 -2,550 -1,760 -1,950 -2,080 -340 1,230 -350 -250 -150 0 0 Operating Profit 1,190 2,730 3,950 3,920 3,970 5,850 9,830 8,485 9,106 10,039 11,178 12,336 Growth YoY (%) 129.4 44.7 -0.8 1.3 47.4 68.0 24.3 7.3 10.2 11.3 10.4 Non-operating variance 990 -250 980 760 -230 -790 2,540 -250 0 0 0 0 Net capital movement 7,500 1,910 0 0 -3,020 -3,090 -4,060 -4,400 -5,000 -5,600 -6,200 -6,800 Capital Infusion 7,500 1,910 0 0 0 0 0 0 0 0 0 0 Dividend 0 0 0 0 -3,020 -3,090 -4,060 -4400 -5000 -5600 -6200 -6800 Closing Embedded Value 22,840 27,230 32,160 36,840 37,560 39,530 52,320 56,155 60,261 64,700 69,678 75,213 Net Asset Value 7,670 8,800 11,410 17,110 18,980 19,310 21,150 Value of in-force business 15,170 18,430 20,750 19,730 18,580 20,220 31,170 Embedded Value pre-capital movement 15,340 25,320 32,160 36,840 40,580 42,620 56,380 62,755 65,261 70,300 75,878 82,013
Growth YoY (%) 16.6 10.9 18.1 14.6 10.2 13.5 28.1 19.9 16.2 16.7 17.3 17.7 APE 15,950 15,840 17,240 15,060 15,130 17,690 19,670 21,031 23,967 27,435 31,561 36,289 Growth YoY (%) -0.7 8.8 -12.6 0.5 16.9 11.2 6.9 14.0 14.5 15.0 15.0 New business margins (%) Pre-cost over-runs 19.6 16.9 13.6 11.2 14.1 13.6 23.4 18.5 17.5 17.5 17.5 17.5 Post-cost over-runs -5.0 -6.9 -1.2 4.4 13.1 13.2 21.5 16.8 16.4 16.9 17.5 17.5 Cost over-runs 24.6 23.8 14.8 6.8 1.0 0.3 1.9 1.7 1.0 0.5 0.0 0.0 Operating RoEV (%) 9.0 12.0 14.5 12.2 10.8 15.6 22.3 16.2 16.2 16.7 17.3 17.7 Non-Operating RoEV (%) 7.5 -1.1 3.6 2.4 -0.6 -2.1 5.8 -0.5 0.0 0.0 0.0 0.0 RoEV (%) 16.6 10.9 18.1 14.6 10.2 13.5 28.1 15.7 16.2 16.7 17.3 17.7
Source: MOSL, Company
Max Financial Services
21 March 2016 24
Financial and Valuations – Max Life Insurance
INR m FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E Policyholder Account Premiums earned (Net) 57,362 63,208 65,703 72,118 81,051 90,001 100,759 113,357 Income from Investments 9,908 3,034 12,994 21,622 41,057 25,002 36,848 43,852 Contribution from SH 118 94 12 131 441 6 0 0 Other income 24 18 102 177 146 147 154 163 Total (A) 67,413 66,354 78,811 94,048 122,695 115,156 137,761 157,371 Commission 5,399 5,804 6,140 6,828 7,486 8,052 8,881 9,887 Operating expenses 14,404 12,542 12,288 12,038 12,419 12,246 12,847 13,478 Benefits paid (net) 13,049 17,815 26,069 29,837 35,323 37,107 41,271 47,296 Change in valuation of policy liabilities 31,020 23,949 27,999 39,090 61,139 50,581 66,131 76,660 Other expenses 32 19 38 630 629 716 738 820 Total expenses and provisions (B) 63,905 60,130 72,536 88,423 116,996 108,702 129,868 148,141 Surplus / (deficit) (C)=(A)-(B) 3,508 6,224 6,275 5,625 5,699 6,454 7,893 9,231 Provision for taxation 0 0 0 0 0 0 0 0 Surplus / (deficit) after tax 3,508 6,224 6,275 5,625 5,699 6,454 7,893 9,231 Shareholder Account Transfer to Shareholders’ account 3,299 4,112 3,023 2,944 2,835 3,887 4,582 5,348 Income From Investments 856 1,500 2,193 2,415 2,706 2,387 2,482 2,509 Other income 0 144 0 0 0 0 0 0 Total income 4,154 5,756 5,216 5,359 5,541 6,274 7,064 7,857 Operating expenses 2,095 1,064 450 198 325 395 482 571 Contribution to the Revenue Account 118 94 12 131 441 6 0 0 Provisions (other than taxation) 0 0 0 0 0 0 0 0 Profit / (Loss) before tax 1,941 4,598 4,754 5,031 4,776 5,872 6,583 7,286 Provision for Taxation 0 0 0 519 672 634 779 873 Profit / (Loss) after tax 1,941 4,598 4,754 4,511 4,104 5,239 5,804 6,413 Total Dividend 0 0 3,020 3,090 4,060 4,400 5,000 5,600
Max Financial Services
21 March 2016 25
Financial and Valuations – Max Life Insurance
Balance Sheet FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E Liabilities Share Capital 18,410 19,447 19,447 19,447 19,188 19,188 19,188 19,188 Reserves and Surplus 2,151 2,581 2,034 1,823 952 766 995 1,248 Networth 20,561 22,028 21,481 21,270 20,141 19,954 20,183 20,436 Policyholders Funds 122,733 146,898 174,684 217,135 279,846 333,114 399,663 476,882 Other liabilities 1,568 4,264 6,814 10,197 13,691 16,249 19,961 24,333 Total Liabilities 144,862 173,190 202,980 248,601 313,678 369,317 439,807 521,651 Assets Investments Shareholders’ Investments 13,199 21,882 27,111 27,751 26,227 27,272 27,575 28,379 Policyholders’ Investments 36,470 51,612 72,921 106,102 151,980 194,376 250,628 315,108 Assets held to cover linked liabilities 88,696 98,657 104,547 113,304 133,996 145,378 159,049 175,291 Loans 116 159 296 417 592 740 925 1,156 Fixed assets 1,402 1,199 1,257 1,180 1,188 1,247 1,310 1,375 Net current assets -4,072 -4,720 -5,845 -1,369 -304 304 322 341 Misc. Expenses 756 703 0 0 0 0 0 0 Debit balance in P&L 8,296 3,698 2,693 1,217 0 0 0 0 Total Assets 144,862 173,190 202,980 248,601 313,678 369,317 439,807 521,651
Note: We have currently not published accounts for Max Financial Services since it is just a holding company.
RECENT INITIATING COVERAGE REPORTS
REPORT GALLERY
Max Financial Services
21 March 2016 27
N O T E S
Max Financial Services
21 March 2016 28
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