6th August 2019, New Delhi
Max Financial Services Consolidated Revenue at Rs. 3,949 Cr., grows 11% y-o-y Mitsui Sumitomo Insurance to Acquire 21.45% Stake in MFS via Swapping its 19.98% stake in Max Life Insurance
MFS key subsidiary Max Life Insurance Q1FY2020 Financial Highlights:
- Revenue1: Rs. 3,544 Cr.; grows 15%
- Embedded Value grows to Rs. 9,314 Cr.; Operating Return on EV: 14.8%
- Value of New Business grows 33% to Rs. 134 Cr.; New Business Margin expands 150 bps to 24.9%
Max Financial Services Limited (MFS) today announced its financial results for the first quarter of financial year 2019-20 (Q1 FY2020). MFS, the holding company of Max Life Insurance (Max Life), India’s largest non bank-owned life insurer, reported consolidated revenues of Rs. 3,949 Cr., growing 11% over the previous year. MFS’ profit after tax was recorded at Rs. 54 Cr., showing a growth of 65%.
MFS’ Board also approved a preferential issuance, which will allow Mitsui Sumitomo Insurance (MSI) to swap 19.98% of its shareholding in Max Life with 21.45% stake in MFS.
MSI is part of the world’s 7th largest MS&AD Insurance Group Holding of Japan. Max Financial Services and MSI are 74:26 joint venture partners in India’s fourth largest private Life Insurer Max Life Insurance Company.
The transaction will also provide MFS an option to purchase from MSI, its balance shareholding of 5.24% of the equity share capital of Max Life for cash at a price of Rs 80.89 per share.
The transaction structure will involve MSI subscribing 7,35,51,029 shares of MFS having a par value of Rs. 2 each at a price of Rs. 421.67 per share aggregating to 21.45% of the paid-up equity share capital of the Company on the date of allotment of the aforesaid fresh shares. In consideration, MFS will receive 38,33,92,784 shares of Rs. 10/- each from MSI at a price of Rs. 80.89 per share translating into 19.98% stake of MLIC. Pursuant to this, the equity stake held by MFS in Max Life will increase from 71.79% to 91.77%.
MFS’ sole operating subsidiary Max Life continued its strong performance in Q1 FY2020, reporting revenues of Rs. 3,544 Cr., growing 15%. The business also reported its Embedded Value (EV) based on market consistent methodology (MCEV) at Rs. 9,314 Cr., with an Operating Return on EV (RoEV) of 14.8%. The Value of New Business2 (VNB) written during the quarter was Rs. 134 Cr., growing 33% over the previous year while the New Business Margin3 (NBM) expanded 150 bps to 24.9%.
Max Life’s Assets under Management in Q1FY2020 were Rs. 63,877 Cr., 18% higher than the previous year. The Company’s Individual APE grew 23% over the last year to Rs. 679 Cr.
Max Life’s proprietary channel sales were recorded at Rs. 228 Cr. – a growth of 16% over the previous year. The e-commerce sales were up 49%, owing to growth in organic leads while the CAT channel recorded 42% growth.
Max Life also initiated its Agency Excellence Program during the quarter, based on recommendations from former senior employees of New York Life, its erstwhile JV partner known for its gold standard in Agency channel.
Commenting on the proposed preferential allotment to MSI, Mr. Mohit Talwar, Vice Chairman, Max Group & Managing Director, Max Financial Services, said, “MSI has been valued partners since long, contributing through their participation in the Max Life Board. We are positive that they will continue to be equally engaged and helpful at the holding company level. We look forward to maintaining our fruitful relationship with them.”
Elucidating the quarterly financial results, he added, “Max Life has not only flourished on all financial metrics but with Individual Sales Growth of 23%, continues to perform in line with the robust private market growth. The performance in the first quarter of the fiscal has set a firm pace for our goal of achieving 25%-25%-25% in Sales Growth, New Business Margin, and Return on Embedded Value respectively, over the next three years.”
Note to the Editor
The EV of a life insurance company comprises two key elements — a) Net Asset Value or the Net Worth of the company, which represents the market value of the company’s assets attributable to the shareholders, and b) the Present Value of the company’s future expected profits from its existing business portfolio as at the date of valuation.
Max Life had transitioned its EV calculation to a Market Consistent methodology from the earlier traditional approach (Traditional Embedded Value – TEV) in FY2015. This follows market practice in developed markets, where life insurers have moved to adopt market consistent methodologies.
A market consistent methodology approach better reflects the embedded value of an insurance company by explicitly and specifically allowing for insurance and economic risks rather than using an implicit overall allowance for risks through a Risk Discount Rate (RDR) in the traditional approach. In addition, the market-consistent approach is more objective where asset and liability cash flows are valued using assumptions consistent with those applied to similar cash flows in the capital markets, thus more accurately reflecting the health of the business.
About Max Group
The Max Group is a leading Indian multi-business conglomerate with a commanding presence in the Life Insurance, Healthcare and Health Insurance industry. It has now ventured into high potential sectors – Senior Living and Real Estate. In FY2019, the Group recorded consolidated revenue of Rs. 22,150 Cr. It has a total customer base of 11 million, over 350 offices spread across India and employee strength of more than 27,500 as on 31st March 2019. The Group’s investor base includes marquee global financial institutions such as New York Life, KKR, IFC Washington, Vanguard, Ward Ferry, New York Life, Briarwood. Capital, Nomura, Aberdeen, First State Investments, First Voyager, Eastspring, Target Asset Management, Baron, Jupiter and Doric Capital.
The Max Group comprises three holding companies, namely Max Financial Services, Max India and Max Ventures & Industries.
About Max Financial Services Limited
Max Financial Services Limited (MFS), a part of the US$ 3 billion Max Group, is the parent company of Max Life, India’s largest non-bank, private life insurance company. MFS actively manages a majority stake in Max Life Insurance Company Limited, making it India’s first listed company focused exclusively on life insurance.
About Max Life Insurance
Max Life Insurance offers comprehensive long-term savings, protection and retirement solutions through its high-quality agency distribution and multi-channel distribution partners. A financially stable company with a strong track record over the last 17 years, Max Life Insurance offers superior investment expertise. Max Life Insurance has the vision ‘To be the most admired life insurance company by securing the financial future of our customers’. The company has a strong customer-centric approach focused on advice-based sales and quality service delivered through its superior human capital.
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- 1. Excludes Max Life Unit Investment Income
- 2. Value of New Business at post-overrun costs
- 3. New Business Margin at structural costs