Axis Bank, Max Financial Services Limited (MFS) and its subsidiary Max Life Insurance Company Limited (Max Life) today signed a confidentiality and exclusivity arrangement to explore the possibility of Axis Bank entering into a long-term strategic partnership with Max Life.
Max Life is currently the largest non-bank owned private life insurer in India. Max Financial Services presently holds a 72.5 per cent stake in Max Life while Mitsui Sumitomo Insurance and Axis Bank hold 25.5 per cent and 2.0 per cent stake respectively.
Axis Bank and Max Life have had a successful bancassurance (banca) arrangement for nearly a decade. The new premium generated through this banca arrangement has aggregated to over Rs 12,000 crores over this period, while maintaining high persistency. Both companies have invested extensively in product and need-based sales training, thereby leading to a consistent increase in productivity.
"At the Bank, we constantly keep assessing various strategic opportunities and we see a potential for greater participation in the under-penetrated life insurance space. We have had a long-standing bancassurance relationship with Max Life and the on-going discussions are a step further to deepen and strengthen this strategic partnership. The successful completion of the proposed transaction is expected to create significant value for all stakeholders," said Amitabh Chaudhry, MD and CEO, Axis Bank, while welcoming the ongoing discussions.
"The Max Life-Axis Bank partnership is natural. The partnership has already set multiple benchmarks in the life insurance industry for policy sales, customer retention, rigorous training to ensure need-based policy writing, technology integration etc," said Analjit Singh, Founder and Chairman, Max Group, while speaking about the development.
"The strategic interest of Axis Bank in Max Life will lead to the much-awaited permanence and allow both companies to work towards an enduring future for policyholders and other stakeholders. We also believe that the potential transaction will provide a fillip to the life insurance sector overall," added Singh.
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"Axis Bank and Max Life have worked together for nearly a decade, bringing immense value for all customers. The teams have been collaborating closely and are continuously building on each other's strengths. The time is right to leverage this unique camaraderie and bring in a more strategic intent to benefit both entities, our customers as well as the larger ecosystem," added Pralay Mondal, Executive Director - Retail Banking, Axis Bank.
"The proposed long term partnership between Axis Bank and Max Life is a natural evolution of what has been a highly productive and mutually beneficial affiliation. It will infuse fresh impetus into the teams in both companies and will motivate them to serve customers effectively and efficiently," said Mohit Talwar, Vice Chairman, Max Group and Managing Director, Max Financial Services, while explaining the rationale for the potential transaction,
"I believe that this will be one of the most value-accretive partnerships in the Indian life insurance industry," added Talwar.
The transaction will be subject to applicable regulatory approvals, satisfactory completion of due diligence, execution of definitive documentation and satisfaction of other conditions, including the necessary corporate approvals.
Max Life's Recent Performance
For Max Life, in the first nine months of FY2020 (9MFY2020), the proprietary and bancassurance (banca) channels demonstrated strong growth of 22 per cent and 20 per cent, respectively.
The Value of New Business (VNB) written during the first nine months of FY20 was Rs 576 cr, growing 24 per cent over the previous year, arising from the shift in product mix towards Non-PAR products. Total First Year Premium increased 19 per cent year-on-year to Rs 3,693 cr Renewal Premium for 9MFY2020 was recorded at Rs 6,618 cr, an increase of 11 per cent from the previous year.
In the same period, the New Business Margin was 21.0 per cent, increasing 60 bps over last year. The profit before tax fell marginally by 6 per cent to Rs 353 cr due to an increase in Non-Par business and strategic investments in proprietary channels which are positive for long term business health.
In a first, Max Life's Embedded Value (EV) based on market consistent methodology (MCEV) crossed the Rs 10,000 cr mark at Rs 10,077 cr, with an Operating Return on EV (annualised) at 18.4 per cent.
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