21 March 2016
Initiating Coverage | Sector: Insurance
Max Financial Services
High quality franchise at attractive valuations
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
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
21 March 2016
2
Max| Financial
Services
Initiating Coverage
Sector: Insurance
Max Financial Services
BSE Sensex
25,285
S&P CNX
7,704
CMP: INR329
TP: INR400 (+21%)
Buy
High quality franchise at attractive valuations
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)
Regulatory uncertainty behind; Bancassurance partnerships remain key
MAXF IN
267.0
466/303
-11/-20/3
87.8
1.3
186
59.6
Financial Snapshot (INR b)
Y/E MARCH
FY16E FY17E
APE
21.0 24.0
NBAP
3.5
3.9
Closing EV
56.2 60.3
Statutory PAT
5.1
5.7
APE gr. YoY (%)
6.9
14.0
NBAP margin (%) 16.8 16.4
Oper. RoEV (%)
16.2 16.2
EV per sh. (INR)
211
226
P/EV (x)
2.3
2.1

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

We like Max Life for four key reasons: (1) strong distribution network, (2)
in participating (par) business, based on AUM.
improving operational performance, thereby reducing cost overruns, (3) healthy
new business margins (NBM) and return on embedded value (RoEV), and (4)
FY18E
27.4
4.6
64.7
6.3
14.5
16.9
16.7
243
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
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.
[email protected]
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21 March 2016
3
Max Financial Services
Healthy NBM and RoEV; large part of regulatory overhang behind
Stock Performance (1-year)
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
93.7
1.5
154.0
68% stake
106.2
104.7
Target price
Cash at
holdco
MFS (68%
stake)
Appraisal
value
Value of
future new
business
Embedded
Value (FY17E)
60.3
INR 400 / share
implying 2.4x
FY18E P/EV
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
21 March 2016
4
Max Financial Services
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 (%)
Max Life
SBI Life
ICICI Pru
Kotak OM
30
37
3
20
4
24
4
17
21
18
21
4
FY11
17
1
FY10
22
Max Life
ICICI Pru Life
3.4
HDFC Life
Others
2.8
4
14
24
4
18
19
4
18
26
20
21
22
26
13
12
0.2
FY14
FY15
FY10
29
36
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
13
8
17
9
FY12
FY13
HDFC Life
SBI Life
2.6
2.5
3.2
2.5
1.0
0.6
1.5
1.8
1.8
1.3
1.2
1.2
0.2
0.3
FY13
FY14
0.5
0.3
FY11
FY12
2.4
1.8
1.3
0.3
FY15
Note: We do not have 9MFY16 data. Source: Company Data, MOSL
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 (%)
Exhibit 5: Incremental portfolio mix shifting away from ‘par’
(%)
79
81
77
12
9
74
44
FY10
FY09
FY08
FY15
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
21 March 2016
69
59
58
56
54
21
27
27
27
28
16.2
16.2
16.7
17.3
17.7
FY17E
FY18E
FY19E
FY20E
22.3
15.6
FY14
10.8
FY13
12.2
FY12
14.5
FY11
FY09
FY20E
FY19E
FY15
FY14
FY13
FY11
FY10
FY09
-5.0 -6.9
16.8 16.4 16.9 17.5 17.5
4.4
FY12
-1.2
18.5 17.5 17.5 17.5 17.5
9.0
13.1 13.2
18
Operating RoEV (%)
12.0
14.1 13.6 21.5
11.2
FY18E
13.6
FY17E
16.9
FY16E
19.6
17
Exhibit 7: Overall operating RoEV is expected to remain
stable at 16-18% for the next few years
Post-cost over-runs
23.4
15
Source: Company Data, MOSL
FY10
Pre-cost over-runs
14
FY16E
13th
25th
37th
49th
61st
Month Month Month Month Month
80
10
52
FY14
20.0
14
FY15
30.0
8
FY18E
FY13
4
FY17E
40.0
4
21
FY16E
FY12
3
16
FY15
50.0
1
19
Non-participating
FY14
FY11
60.0
Participating
FY13
70.0
Linked
FY12
FY10
FY11
80.0
Note: Data pre FY15 is based on TEV methodology and post FY15
based on MCEV methodology.
Source: Company Data, MOSL
5
Max Financial Services
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.




Japan
9.0
UK
Korea
Italy
France
7.2
Exhibit 9: Supporting this thesis is the expected expansion in
working age population in India (m)
739
691
5.4
Thailand
Malaysia
Spain
India
Brazil
1.8
China
Mexico
Indonesia
3.6
Germany
U.S
Canada
Australia
639
585
0.0
0
1000
2000
3000
4000
2015
Premiums Per-capita (USD)
2020
2025
Source: UN, MOSL
Source: Swiss Re Sigma, MOSL
Exhibit 11: Over the last few years, while India’s household
savings (as % of GDP) have been trending lower…
7.2
7.6
13.2
11.0
10.5
FY14
FY15
13.2
FY10
FY13
10.1
13.5
FY09
7.3
11.6
10.8
FY08
15.5
11.3
11.9
FY07
FY12
11.9
11.6
FY06
9.9
10.1
13.5
FY05
13.2
11.0
12.2
FY04
96
FY11
10.0
12.3
Germany
Malaysia
Korea
Singapore
Japan
US
FY03
149
106
60
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
21 March 2016
10.5
166
12.7
226
India
260
Thailand
270
Financial Savings (% of GDP)
FY02
Physical Savings (% of GDP)
12.0
Exhibit 10: India’s sum assured / GDP (%) remains
significantly below developed and some emerging markets
2030
7.0
Life Insurance Penetration
(%)
Exhibit 8: Traditional measures of insurance sector
development highlight significant long-term opportunity
Source: CSO, CMIE, MOSL
6
Max Financial Services
Exhibit 12: …the share of life insurance within financial savings has largely stabilized post
linked business guideline changes in 2010
51
47
46
42
46
46
40
46
37
39
39
42
41
39
46
FY00
FY01
FY02
FY03
FY04
FY05
FY06
46
58
49
46
33
15
28
22
27
21
19
57
51
60
19
20
16
18
29
23
27
25
42
51
57
56
57
FY14
14
FY13
15
FY12
13
FY11
16
FY10
14
FY09
14
Life insurance
FY08
12
FY95
47
FY90
44
8
9
FY85
7
FY81
8
Others
FY07
Deposits
26
32
Source: CSO, CMIE, MOSL
Exhibit 13: Overall APE growth (%) has recovered since 2014, partially driven by strong
equity market performance
Impacted by guideline
change in ULIPs which
had 80%+ share in
private insurers NBP
2
-5
-9
17
7
-2
-3
13
4
-10
-24
FY11
FY10
-20
FY09
FY08
-10
FY14
1
FY13
31
Product re-filiing and
dicontinuation of
guranteed NAV
products
16
-3
9MFY16
Industry
FY15
Private
FY12
86
Industry APE growth back
on track
Source: IRDA, Life Insurance Council, MOSL
Exhibit 14: Individual APE growth has been trending in line with equity market
performance
Trend between private
sector individual APE
growth and equity market
performance remains high
Private APE Growth YoY (%)
40
RHS, Nifty Performance YoY (%)
50
20
25
0
0
-20
Dec-15
Sep-15
Jun-15
Mar-15
Dec-14
Sep-14
Jun-14
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
-25
Note: The above data is on three month rolling basis.
Source: Bloomberg, IRDA, Life Insurance Council, MOSL
21 March 2016
7
Max Financial Services
Exhibit 15: Share of linked business for private insurers back to 40%+ of NBP (%)
Linked
14
17
86
31
83
FY09
Traditional
59
65
71
41
35
29
FY12
FY13
FY14
62
56
38
44
FY15
1HFY16
69
FY10
FY11
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…
Growth YoY (%)
14.0
14.5
15.0
392
15.0
FY20E
FY14
13.5
341
FY19E
-3.4
16.0
FY18E
1.9
296
FY17E
-20.0 -23.9
200
172
259
FY16E
178
7.1
227
FY15
175
FY13
230
FY12
FY08
1.1
288
FY11
143
269
FY10
266
FY07
We expect 14-15%
individual APE growth for
private sector
Private - Individual APE (INR b)
85.6
FY09
99.7
Source: IRDA, Life Insurance Council, MOSL
Exhibit 17: …and share of private insurers to sustain above 50% (individual APE basis, %)
57
52
46
37
38
38
FY12
FY13
FY14
48
46
44
42
40
49
52
54
56
58
60
FY20E
50
51
FY19E
62
FY18E
62
FY17E
63
FY16E
54
FY15
48
FY11
36
43
FY10
34
50
FY09
64
LIC
FY08
66
FY07
Private
FY06
Expect private insurers to
sustain 50%+ market share
on individual APE basis
Source: IRDA, Life Insurance Council, MOSL
21 March 2016
8
Max Financial Services
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, %)
Agency
Bancassurance
Exhibit 19: More importantly, banks have been the key
driver of individual NBP for private insurers, contributing
~70% of incremental growth in FY15 (%)
Others
18
21
24
24
20
17
17
16
17
19
21
25
33
39
43
44
Individual Agents YoY (%)
17
Bancassuarance YoY (%)
120%
80%
47
40%
36
FY15
40
FY14
40
FY13
44
FY12
47
FY11
51
FY10
55
FY09
60
FY08
FY07
66
Source: IRDA, MOSL
21 March 2016
0%
-40%
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
Source: IRDA, MOSL
9
Max Financial Services
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
Status
Promoter
Promoter
Promoter
Promoter
Promoter
Banca tie-up
Promoter
Banca tie-up
Banca tie-up
Banca tie-up
Banks
SBIN
PNB
CBK
BOB
BOI
CBOI
UNBK
SNDB
IOB
ALBK
Insurer
SBI Life
PNB MetLife
Canara HSBC OBC
India First
Star Union Dai-ichi
LIC
Star Union Dai-ichi
LIC
LIC
LIC
Top 10 Private Banks
Status
Promoter
Banca tie-up #
Banca tie-up
Promoter
Promoter
Promoter
Banca tie-up
Banca tie-up
Banca tie-up
Banca tie-up
Banks
ICICIBC
HDFCB
AXSB
KMB
FB
JKBK
SIB
IIB
KTK
YES
Insurer
ICICI Pru Life
HDFC Life
Max Life
Kotak OM
IDBI Federal
PNB MetLife
LIC
Tata AIA
PNB MetLife
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
Max Life
ICICI Pru
30
37
3
20
4
24
18
17
1
FY10
HDFC Life
SBI Life
Kotak OM
4
14
24
4
18
19
4
18
26
20
21
22
26
13
12
FY14
FY15
29
36
4
17
Others
21
22
21
4
FY11
13
8
17
9
FY12
FY13
Source: IRDA, Company, 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
Exhibit 22: Max Life is relatively more reliant on
bancassurance channel v/s private sector average
Banks
3
21
Individual Agents
20
2
54
70
4
FY10
22
FY11
13
7
37
Direct
Corporate Agents
10
7
9
8
6
10
35
31
28
51
56
Others
4
12
Individual Agents
19
32
29
40
48
Banks
26
1
9
-7
52
3
4
FY15
9MFY16
-39
FY12
FY13
FY14
FY15
9MFY16
Note: The above data is based on individual NBP.
Source: Company Data, MOSL
21 March 2016
62
FY12
FY13
FY14
Note: The above data is based on individual NBP.
Source: Company Data, MOSL
10
Max Financial Services
Equity offerings to bancassurance partner in some sense an ESOP
Banks’ bargaining power to
remain high unless growth
from agency channel
recovers on a sustainable
basis
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, %)
Significant opportunity in
existing bancassurance
network
Max Life
3.4
2.8
3.2
2.5
1.0
0.6
ICICI Pru Life
SBI Life
2.5
2.6
1.5
1.8
1.8
1.3
1.2
1.2
0.2
0.3
FY13
FY14
0.5
0.3
FY11
FY12
0.2
FY10
HDFC Life
2.4
1.8
1.3
0.3
FY15
Note: We have added Yes Bank’s SA deposits in the denominator from FY13.
Source: MOSL, Company
21 March 2016
11
Max Financial Services
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
Number of agents
90,000
Exhibit 26: This has also been reflected in moderate agency
new business premium growth
Growth YoY (%)
Individual Agency NBP (INR b)
129%
9%
72,000
54,000
36,000
-14%
18,000
-40%
-19%
0%
20%
0%
-15%
-7%
1HFY16
FY15
FY14
FY13
FY12
FY11
FY10
0
FY09
Growth YoY (%)
Source: Company Data, MOSL
3%
-7%
6.4
12.3
10.4
-39%
5.9
6.5
6.7
FY10
FY11
FY12
FY13
FY14
FY15
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.
21 March 2016
12
Max Financial Services
9.3 9.3 9.3
Source: Swiss Re Sigma, MOSL
FY18E
FY17E
FY16E
FY15
FY14
4.1
5.5
FY13
FY04
FY20E
FY19E
FY18E
FY17E
FY16E
FY15
FY14
FY13
FY12
FY11
4.9
FY12
4.5
36.3
27.4 31.6
24.0
21.0
15.8 17.2 15.1 15.1 17.7 19.7
5.9
5.4 5.4
FY11
-13
FY10
8.8
7.5
FY10
-1
7
9.8
8.6 8.5
15
FY09
0
15
FY08
11
14
FY07
9
14
FY06
17
10.3
Growth YoY (%)
FY05
Max Life (INR b)
Exhibit 28: However, we expect Max Life’s market share to
remain largely stable (%, private players)
9MFY16
Exhibit 27: Overall we expect 14-15% APE growth (%) over
FY16-20E
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.
‘Par’ business growth
continues to struggle
Exhibit 29: Significant focus on long-term savings products post 2010 (individual APE mix,
%)
Linked
1
19
3
16
4
21
Participating
4
8
14
80
77
12
9
FY12
FY13
Non-participating
10
14
15
17
18
69
59
58
56
54
21
27
27
27
28
FY14
FY15
FY16E
FY17E
FY18E
52
79
81
74
44
FY08
FY09
FY10
FY11
Source: MOSL, Company
Exhibit 30: However, since 2012, APE growth (%) in
participating products has remained muted…
% of Individual APE (%)
166
Exhibit 31: …partly driven by subdued growth in agency
channel
APE Growth YoY (%)
Individual Agency NBP Growth YoY (%)
Individual PAR Growth YoY (%)
150
34
30
1
Driven by Axis Bank
100
-3
6
-5
50
0
16
21
52
80
77
69
59
FY09
FY10
FY11
FY12
FY13
FY14
FY15
Source: Company, MOSL
21 March 2016
-50
FY11
FY12
FY13
FY14
FY15
Source: Company, MOSL
13
Max Financial Services
Exhibit 32: Overall bancassurance commissions for ‘par’ business increased significantly
post 2010
Participating
Incremental growth from
non-par and ULIP segments
Non-participating
Linked
11
5
4
9
3
13
8
9
9
13
84
88
84
83
77
FY11
FY12
FY13
FY14
FY15
61
6
33
FY10
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.
21 March 2016
14
Max Financial Services
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.
th
Exhibit 33: Max Life has one of the best 13 month persistency (%)
76 77
76 77
72 74
69
73
68
Bajaj Allianz
HDFC Life
SBI Life
LIC
Max Life
ICICI Pru
Kotak OM
62
Note The above data is standardized based on revised IRDA guidelines.
60 62
57
62
60 58
Reliance Life
79
72
PNB Metlife
82 81
FY15
Birla Sunlife
FY14
Source: MOSL, Company
Exhibit 34: More importantly, Max Life has seen consistent improvement in its persistency
experience (%)…
900-1800bp improvement
in 3-5 year persistency
80.0
77.0
FY10
70.0
60.0
60.0
68.0
FY11
49.0
50.0
40.0
32.0
42.0
30.0
13th Month
25th Month
37th Month
FY13
FY14
32.0
20.0
FY12
49th Month
23.0
61st Month
FY15
Source: MOSL, Company
21 March 2016
15
Max Financial Services
Exhibit 35: …In our view, this is largely driven by stable conservation ratio in the
participating portfolio (%)
In last six years, par
conservation ratio has
remained largely stable –
moving in 400bp range
Par
90
80
86
86
83
80
Non-par
Linked
87
82
84
74
72
79
86
84
83
73
74
FY14
FY15
60
50
39
FY09
45
FY10
FY11
FY12
FY13
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 FY1618E led by increasing focus on technology and better productivity
Total operating expenses (INR m)
Growth YoY (%)
2.3
-3.5
-5.4
-3.9
4.1
2.5
4.0
4.0
-18.4
16.1
16.5
13.5
12.7
12.2
12.7
13.1
13.6
14.1
FY10
FY11
FY12
FY13
FY14
FY15
FY16E
FY17E
FY18E
Source: MOSL, Company
Exhibit 37: Other operating expense remain key driver of cost control
Employee expenses YoY (%)
Other opex YoY (%)
7
9
6
-1
0
0
-1
-8
-16
-10
-11
FY13
FY14
-19
FY10
FY11
FY12
FY15
Source: MOSL, Company
21 March 2016
16
Max Financial Services
Exhibit 38: After SBI Life, Max Life has the best agent
productivity amongst the large private insurers
Exhibit 39: Also, branch productivity is one of the highest
amongst large private insurers
Average Branch Productivity (INR mn)
Average Agent Productivity (INR '000)
26
205
23
22
Source: Company Data, MOSL
11
9
Birla Sunlife
Reliance Life
Birla Sunlife
HDFC Life
Reliance Life
ICICI Pru
56
SBI Life
73
Max Life
84
HDFC Life
13
92
ICICI Pru
Max Life
SBI Life
130
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
Direct Channel (% of individual NBP)
12
10
3
7
7
8
FY12
FY13
FY14
2
FY10
FY11
FY15
9MFY16
Source: MOSL, Company
Exhibit 41: Overall we expect no acquisition cost overruns post FY18
Acquisition cost over-run (INR m)
5,000
RHS, as % of APE (%)
25
FY20E
FY19E
0
FY18E
0
FY17E
5
FY16E
1,000
FY15
10
FY14
2,000
FY13
15
FY12
3,000
FY11
20
FY10
4,000
FY09
Improving persistency
curves likely to lead to
lower cost overruns
Source: MOSL, Company
21 March 2016
17
Max Financial Services
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




21 March 2016
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.
18
Max Financial Services
SWOT analysis
Strength
•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)
Weakness
Opportunity
Threats
•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)
Source: MOSL
21 March 2016
19
Max Financial Services
Margins and RoEV to remain in high teens
High margin non-par portfolio remains the key driver
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
16.7
17.3
FY18E
FY19E
17.7
16.2
FY17E
16.2
22.3
FY20E
FY16E
FY15
12.2
FY12
14.5
FY11
FY09
FY20E
FY19E
FY15
FY14
FY13
FY11
FY10
FY09
-5.0 -6.9
16.8 16.4 16.9 17.5 17.5
4.4
FY12
-1.2
18.5 17.5 17.5 17.5 17.5
9.0
13.1 13.2
Operating RoEV (%)
12.0
14.1 13.6 21.5
11.2
FY18E
13.6
FY17E
16.9
FY16E
19.6
Post-cost over-runs
23.4
FY10
Pre-cost over-runs
Exhibit 43: … with operating RoEV stabilizing around 16-18%
15.6

FY14

10.8

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 1820% 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.
FY13

Note: Data pre FY15 is based on TEV methodology and post FY15
based on MCEV methodology.
Source: Company Data, MOSL
FY17E
7.7
8.5
9.1
FY20E
7.0
FY19E
6.8
FY16E
9.6
2.1
FY15
FY12
FY11
-4.8
FY10
FY09
-6.1
FY14
-0.7
5.4
6.2
FY13
Post overruns NBAP contribution (%)
FY18E
Exhibit 44: Contribution of NBAP in RoEV is expected to increase to 8% by FY18E
Source: MOSL, Company
21 March 2016
20
Max Financial Services
Excess capital to drive inorganic growth pursuits
We expect management to strengthen bancassurance partnerships
Exhibit 45: Regulatory capital position remains comfortable
for meeting double digit growth projections over next 4-5
years
Exhibit 46: While we do not have break-down of ANAV; we
expect large portion to be free surplus
Regulatory solvency ratio (%)
17.1
402
FY10
9MFY16
FY15
FY14
FY13
8.8
FY12
FY11
365
435
19.3
21.2
20.9
11.4
Source: MOSL, Company
1HFY16
485
19.0
FY15
520
FY14
534
ANAV (INR b)
FY13

FY12

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.
FY11

Source: MOSL, Company
Exhibit 47: Cash conversion of VIF into ANAV is probably very fast
In our view, cash conversion
of VIF into ANAV is fast – a
positive indicator
INR m
Indicator I
Closing ANAV
Add: Dividends
Less: Opening ANAV
Difference (A)
Unwind (B)
Indicative cash
conversion (%) – (A/B)
Indicator II
Opening VIF
Add: New business margin
Less: Closing VIF
Difference
FY11
FY12
FY13
FY14
FY15
1HFY16
11,410
0
8,800
2,610
3,360
17,110
0
11,410
5,700
4,190
18,980
3,020
17,110
4,890
3,920
19,310
3,090
18,980
3,420
3,790
21,150
4,060
19,450
5,760
4,000
20,930
2,200
21,150
1,980
2,520
78
136
125
90
144
79
18,430
-200
20,750
-2,520
20,750
660
19,730
1,680
19,730
1,980
18,580
3,130
18,580
2,340
20,220
700
24,560
4,230
31,170
-2,380
31,170
1,380
32,690
-140
Source: MOSL, Company
21 March 2016
21
Max Financial Services
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
93.7
1.5
154.0
68% stake
106.2
104.7
Target price
Cash at
holdco
MFS (68%
stake)
Appraisal
value
Value of
future new
business
Embedded
Value (FY17E)
60.3
INR 400 / share
implying 2.4x
FY18E P/EV
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
21 March 2016
22
Max Financial Services
Exhibit 49: Max Life embedded value projections
Traditional Embedded Value
(INR m)
MCEV
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16E
FY17E
FY18E
FY19E
FY20E
Opening Embedded Value
Net Asset Value
Value of in-force business
13,160
3,620
9,540
22,840
7,670
15,170
27,230
8,800
18,430
32,160
11,410
20,750
36,840
17,110
19,730
37,560
18,980
18,580
44,010
19,450
24,560
52,320
21,150
31,170
56,155
60,261
64,700
69,678
Unwind
% of opening EV
Value of new business
(pre cost over-runs)
Acquisition cost over-run
Value of new business
(post cost over-runs)
Growth YoY (%)
Operating variance
1,900
14.4
2,610
11.4
3,360
12.3
4,190
13.0
3,920
10.6
3,790
10.1
4,000
9.1
4,944
9.5
5,166
9.2
5,393
9.0
5,661
8.8
5,992
8.6
3,120
2,670
2,350
1,680
2,130
2,400
4,600
3,891
4,189
4,796
5,517
6,343
-3,920
-3,770
-2,550
-1,020
-150
-60
-370
-350
-250
-150
0
0
-800
-1,100
-200
660
1,980
2,340
4,230
3,541
3,939
4,646
5,517
6,343
-3,830
37.5
-2,550
-81.8
-1,760
-430.0
-1,950
200.0
-2,080
18.2
-340
80.8
1,230
-16.3
-350
11.3
-250
17.9
-150
18.8
0
15.0
0
1,190
2,730
129.4
3,950
44.7
3,920
-0.8
3,970
1.3
5,850
47.4
9,830
68.0
8,485
24.3
9,106
7.3
10,039
10.2
11,178
11.3
12,336
10.4
Non-operating variance
990
-250
980
760
-230
-790
2,540
-250
0
0
0
0
Net capital movement
Capital Infusion
Dividend
7,500
7,500
0
1,910
1,910
0
0
0
0
0
0
0
-3,020
0
-3,020
-3,090
0
-3,090
-4,060
0
-4,060
-4,400
0
-4400
-5,000
0
-5000
-5,600
0
-5600
-6,200
0
-6200
-6,800
0
-6800
Closing Embedded Value
Net Asset Value
Value of in-force business
Embedded Value
pre-capital movement
Growth YoY (%)
22,840
7,670
15,170
27,230
8,800
18,430
32,160
11,410
20,750
36,840
17,110
19,730
37,560
18,980
18,580
39,530
19,310
20,220
52,320
21,150
31,170
56,155
60,261
64,700
69,678
75,213
15,340
25,320
32,160
36,840
40,580
42,620
56,380
62,755
65,261
70,300
75,878
82,013
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
Growth YoY (%)
15,950
15,840
-0.7
17,240
8.8
15,060
-12.6
15,130
0.5
17,690
16.9
19,670
11.2
21,031
6.9
23,967
14.0
27,435
14.5
31,561
15.0
36,289
15.0
New business margins (%)
Pre-cost over-runs
Post-cost over-runs
Cost over-runs
19.6
-5.0
24.6
16.9
-6.9
23.8
13.6
-1.2
14.8
11.2
4.4
6.8
14.1
13.1
1.0
13.6
13.2
0.3
23.4
21.5
1.9
18.5
16.8
1.7
17.5
16.4
1.0
17.5
16.9
0.5
17.5
17.5
0.0
17.5
17.5
0.0
Operating RoEV (%)
Non-Operating RoEV (%)
RoEV (%)
9.0
7.5
16.6
12.0
-1.1
10.9
14.5
3.6
18.1
12.2
2.4
14.6
10.8
-0.6
10.2
15.6
-2.1
13.5
22.3
5.8
28.1
16.2
-0.5
15.7
16.2
0.0
16.2
16.7
0.0
16.7
17.3
0.0
17.3
17.7
0.0
17.7
Operating Profit
Growth YoY (%)
Source: MOSL, Company
21 March 2016
23
Max Financial Services
Financial and Valuations – Max Life Insurance
INR m
Policyholder Account
Premiums earned (Net)
Income from Investments
Contribution from SH
Other income
Total (A)
FY11
FY12
FY13
FY14
FY15
FY16E
FY17E
FY18E
57,362
9,908
118
24
67,413
63,208
3,034
94
18
66,354
65,703
12,994
12
102
78,811
72,118
21,622
131
177
94,048
81,051
41,057
441
146
122,695
90,001
25,002
6
147
115,156
100,759
36,848
0
154
137,761
113,357
43,852
0
163
157,371
Commission
Operating expenses
Benefits paid (net)
Change in valuation of policy liabilities
Other expenses
Total expenses and provisions (B)
5,399
14,404
13,049
31,020
32
63,905
5,804
12,542
17,815
23,949
19
60,130
6,140
12,288
26,069
27,999
38
72,536
6,828
12,038
29,837
39,090
630
88,423
7,486
12,419
35,323
61,139
629
116,996
8,052
12,246
37,107
50,581
716
108,702
8,881
12,847
41,271
66,131
738
129,868
9,887
13,478
47,296
76,660
820
148,141
Surplus / (deficit) (C)=(A)-(B)
Provision for taxation
Surplus / (deficit) after tax
3,508
0
3,508
6,224
0
6,224
6,275
0
6,275
5,625
0
5,625
5,699
0
5,699
6,454
0
6,454
7,893
0
7,893
9,231
0
9,231
Shareholder Account
Transfer to Shareholders’ account
Income From Investments
Other income
Total income
Operating expenses
Contribution to the Revenue Account
Provisions (other than taxation)
Profit / (Loss) before tax
Provision for Taxation
Profit / (Loss) after tax
Total Dividend
3,299
856
0
4,154
2,095
118
0
1,941
0
1,941
0
4,112
1,500
144
5,756
1,064
94
0
4,598
0
4,598
0
3,023
2,193
0
5,216
450
12
0
4,754
0
4,754
3,020
2,944
2,415
0
5,359
198
131
0
5,031
519
4,511
3,090
2,835
2,706
0
5,541
325
441
0
4,776
672
4,104
4,060
3,887
2,387
0
6,274
395
6
0
5,872
634
5,239
4,400
4,582
2,482
0
7,064
482
0
0
6,583
779
5,804
5,000
5,348
2,509
0
7,857
571
0
0
7,286
873
6,413
5,600
21 March 2016
24
Max Financial Services
Financial and Valuations – Max Life Insurance
Balance Sheet
Liabilities
Share Capital
Reserves and Surplus
Networth
Policyholders Funds
Other liabilities
Total Liabilities
FY11
FY12
FY13
FY14
FY15
FY16E
FY17E
FY18E
18,410
2,151
20,561
122,733
1,568
144,862
19,447
2,581
22,028
146,898
4,264
173,190
19,447
2,034
21,481
174,684
6,814
202,980
19,447
1,823
21,270
217,135
10,197
248,601
19,188
952
20,141
279,846
13,691
313,678
19,188
766
19,954
333,114
16,249
369,317
19,188
995
20,183
399,663
19,961
439,807
19,188
1,248
20,436
476,882
24,333
521,651
Assets
Investments
Shareholders’ Investments
Policyholders’ Investments
Assets held to cover linked liabilities
Loans
Fixed assets
Net current assets
Misc. Expenses
Debit balance in P&L
Total Assets
13,199
36,470
88,696
116
1,402
-4,072
756
8,296
144,862
21,882
51,612
98,657
159
1,199
-4,720
703
3,698
173,190
27,111
72,921
104,547
296
1,257
-5,845
0
2,693
202,980
27,751
106,102
113,304
417
1,180
-1,369
0
1,217
248,601
26,227
151,980
133,996
592
1,188
-304
0
0
313,678
27,272
194,376
145,378
740
1,247
304
0
0
369,317
27,575
250,628
159,049
925
1,310
322
0
0
439,807
28,379
315,108
175,291
1,156
1,375
341
0
0
521,651
Note: We have currently not published accounts for Max Financial Services since it is just a holding company.
21 March 2016
25
REPORT GALLERY
RECENT INITIATING COVERAGE REPORTS
Max Financial Services
NOTES
21 March 2016
27
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MAX FINANCIAL SERVICES
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