Max Financial Services announces Embedded Value (EV) for Max Life at Rs. 6,946 Cr.; Return on EV (RoEV): 17 percent

Manish Arya / On 2017-11-13 15:03:51

Max Financial Services Limited (MFS) today announced the Embedded Value (EV) for its life insurance business, Max Life, at Rs. 6,946 Cr.* as at 30th September 2017, based on Market Consistent methodology. The annualised growth in EV in the first half of FY2018 (H1 FY2018) was an impressive 17%.

The Value of New Business (VNB) written during H1 FY2018 was Rs. 204 Cr., growing 16% over the corresponding period last year. The New Business Margin during this period was a strong 18%.

For the quarter ended 30th September 2017 (Q2 FY2018), Max Life reported Individual Adjusted Sales of Rs. 654 Cr. growing 18% over the previous year. During H1, they grew 19% to Rs. 1,112 Cr.

MFS reported consolidated revenues of Rs. 3,435 Cr. in Q2, growing 12% over the previous year and Rs. 6,002 Cr. in H1 FY2018, growing 13% over the same period last year.

Commenting on the priorities for Max Life, Mr. Rahul Khosla, President, Max Group and Chairman, Max Life said, “With the potential merger with HDFC Life behind us, our focus has firmly shifted to aggressively pursuing profitable growth through investments in our proprietary channels such as agency and digital, enhancing policyholder experience, leveraging our strong bancassurance partnerships and forging new distribution alliances. We have renewed our focus to strengthen our franchise by evaluating acquisition opportunities that have started to emerge in the insurance space.”

Mr. Mohit Talwar, Managing Director, MFS said, “The best-in-decade performance that we witnessed in FY2017, continues in the first half of FY2018. The quality of the business across various vectors remains top quartile. The robust growth in Embedded Value and Value of New Business reflects strong fundamentals in the existing business and a continued focus on profitable new business. All our channels are delivering a profitable growth powered by improved productivity. We have a balanced product mix with increasing contribution from protection products, which differentiates us from several of our competitors whose products are heavily skewed towards equity-linked products or are growing through cost-overruns.”

he 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.

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