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Max Financial Services Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of Max Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amrit Singh, CFO at Max Financial Services Limited and Max Life Insurance Company. Thank you, and over to you, sir.
Good evening, everyone, and welcome to the earnings call of Max Financial Services for the financial year 2022. First, we apologize for having kept you on wait for a long period of time. We are facing certain glitches. But now our results have been made available on the stock exchange, BSE specifically and even on our website.
Today, I'm joined by Prashant Tripathy, MD & CEO of Max Life Insurance; and also Subrat Mohanty, Group Executive, Banking Operations & Transformation at Axis Bank; and also a nominee Director and Max Life Board from Axis. I will request Prashant to provide opening remarks and share the progress on Max Life's recent journey, and then I will take you through the financial performance of Max Financial Services. Thank you. Over to you, Prashant.
Good evening, and welcome, everyone. At Max Life, we take pride in being a purpose-driven organization. All the areas of our business namely employees, retail advisers, partners, all with the purpose of inspiring people to increase the value of their life, which means a very sum assured, focused, consistent player. And this purpose and our values has helped us being one of the most consistent players year-on-year.
Our 5-year performance has been -- has had a consistent track record in the 5-year. CAGR is about 16% compared to the industry growth rate of 10%, which means we have a 6% growth performance with respect to the industry over the last 5 years. And our market share has been improving year-on-year, and we maintained our rank of being #4 private life insurance company. Our consistency is growing in our distribution channel, as we have grown equally in both proprietary and banker channels at 16%, which means both banks, as well as proprietary channels, have delivered equal growth rate over the last 5 years.
Our growth has come with excellent financial outcome for shareholders. We have grown our VNB at a CAGR of 25%. And with this rate, we have more than tripled our value of new business over the last 5 years. In FY '17, our VNB was INR 499 crore, and this year, we are reporting a number of INR 1,528 crores of VNB, with market-leading new business margin.
Sum assured is the vector, which is quite aligned to our purpose. I'm very happy to share that we have grown our new business sum assured at 20% CAGR over the last 5 years, and we are ranked #3 in the private industry basis new business sum assured in FY '22.
The last 2 years very, very, very different, as well as difficult due to COVID. As you are aware, the big impact, not just on people at large, but also on businesses. And this period actually this is the resilience of the Life Insurance industry and acted as a [ big insurance ] of the company's commitment towards its stakeholders.
At Max Life, we were not untouched by the severity of pandemic. The pandemic had profound impact on the life of many of our employees, legal advisers and their families. Though we did not leave any stones unturned, we are driving 100% vaccination for them. We still encountered the loss of a few of our colleagues. While our heart goes out to their families, I'm proud to say that Max Life Insurance successfully weathered the storm by honoring the commitment of paying claims to our policyholders to ease the financial burden their families would have gone through.
We closed last year an industry best claims paid ratio of 99.35% in FY '21. We settled more than 85,973 death claims in the last few years. Also, while fulfilling our commitment to our policyholders, we did not compromise on robustness of financial outcomes for our shareholders results.
On a 2-year basis, which is last 2 years of COVID, we have grown 15%, whereas the industry could grow only 9%. Protection business, which is retail and group included, grew a CAGR of 18%. Value of new business grew a massive 31% CAGR over the last 2 years and maintained a healthy ROE of 13.5% in FY '21 and 19.2% in FY '22. This has been possible only because of the relentless efforts of our employees, agent sizes and partners who are passionately driven by the purpose of our own measures.
Looking ahead, we believe that overall economy is loaned out of COVID events, and there are still uncertain times given the geopolitical situation and consequent implications on inflation and consumer demand. Further, we continue to watch -- be watchful for potential COVID events. So we believe that the severity is going to be significantly limited.
While we are watching the emerging situation very closely, life insurance segments both retirement, health and protection space continue to offer great opportunities. Overall for Max Life, we remain optimistic and confident about our future, and I would like to talk about the key initiatives of the business for quarter 4, as well as FY '22.
In terms of our overall distribution window, for the first half of the year, of course, there was a deep impact of wave 2, as you may recall. However, our continued focus on building proprietary channels have indeed strong results in H2. And for the second half of the year, we grew 19% as against only 8% in the first half. Our all-time proprietary business did really well in the last 5 years, e-commerce grew 6x and the number of policies sold through online increased from 8% to 21%.
We continue to be the leaders in online protection sales, and this year, we entered sales market as well, and thus, the channel grew by 58%. Our success in online segment is driven by our SEO leadership position. It is best in class, as well as our strong conversion ratio, innovative practices, seamless integration with our partners and our analytics engine. We're passionately working towards becoming the ecosystem partner of choice. We have signed up partnership with 10 new fintech companies during the year, such as PhonePe, Scripbox, InsuranceDekho, Ditto Insurance, RenewBuy, et cetera, and also have worked with some partners to co-create disruptive proposition.
Our vision is to continue our dominance in protection and scale up savings in coming times through our product innovations, new funds and investing cloud insurance.
Our offline proprietary channels, other than the online but owned channels, a joint force of agency and direct sales offline proprietary channels focused on building scale and profitability and that's our desire on the basis of a very balanced product mix, which is a source of strong profitability for our offline propriety channels.
Within agency, our focus continues towards building top advisers and variable agencies for recruitment volume. Our number of top agents with greater than 10 lakh annual business grew by 16%, and we increased our employee count this year over last year by about 28%.
We have also launched life advisor value proposition with simplified and strengthened proposition, which would help us further back more top agents. Being the pioneers in the industry, we have maintained our leadership position with more than 300 active IMS partners, and we have doubled our sales through this channel in FY '22. At the same time, the focus on variable agency continues, and our variable agency contribution has moved up from 36% to 39% year-on-year in FY '22. Overall, agent recruitment also grew by 26% in FY '22.
The real testament of these models and initiatives lines, how these initiatives are leading to better financial outcomes. I'm happy to report that FY '22, we have witnessed remarkable growth in VNB coming from these channels.
On our partnership, Axis Bank has grown over 18% over the last 5 years and grew 15% in FY '22. In the last quarter, especially the growth was a bit lower predominantly because of the high base of the previous year. And of course, January was impacted because of the Omicron virus. However, on a 2-year CAGR basis, Axis has grown with a handsome 23% cumulative rate. We are deeply integrated with both our large bank partners, tech platforms, interconnected CRM market player, new insurance systems or joint and we continue to work with the bank to drive and improve penetration through investment towards resolution, engagement models and overall enhanced integration for policy insurance.
Product innovation was a big drive for last year, and our focus definitely is towards redefining cutting-edge product innovation. To achieve our aspiration, we added many new offerings to annuity in FY '22. But the key highlights are as follows. Within PAR, we strengthened our proposition with a product called Max Life Smart wealth income plan, which not only help the segment to grow by 22%, but also strengthen margin in FY '22. Our non-PAR was bolstered by offering introduction of new variants, booking, mainly on long-term income. And I think we have just -- about a week ago, we have launched a new ULIP design called Flexi Wealth Advantage Plan, with industry best features of auto-debit boosters, which we believe will help us in driving potency, the whole life variant and return of all charges. And this product is expected to fortify our market-linked product offerings, and it also comes with a new ESG compliant fund.
In addition to the regular products within savings and ULIPs, there is a lot of focus towards building segment, that includes about annuity and retirement. Our focus on annuity is building exceptional results with about 65% growth in annuity business in FY '22, with the objective of gaining leadership in retirement, we launched Smart Guaranteed Pension plan and augmented our NPS ecosystem, with offering across the spectrum of customer needs. We have received certification for registration of Max Life Pension Fund Management company, a wholly-owned subsidiary of Max Life. We are thankful to PFRDA for the PD approval, and we are in the process of putting it all together so that we are ready to start our operations beginning Q2 of FY '23.
Within Protection & Wellness case, FY '22 definitely was a challenging year, especially towards retail protection due to reasons that we have been updating you on, predominantly because of supply side constraints due to COVID-19. Now those constraints are slowly going away, and those related changes seem to be getting completed. We ended the year with an absolute retail protection of about INR 419 crores, which was a degrowth of 12% year-on-year. This was towards a more tactical item because of COVID.
We would like to highlight that in the last quarter, we did manage to grow our retail protection. So a large quarterly growth was until the third quarter by issues generated by COVID. But we remain committed to this line of business. This is, of course, one of the big 4 initiatives that we signed within our organization for long-term success and ULIP. And the intent is to make sure that we continue to grow our protection element.
We also launched a differentiated term plan with industry first protection with details like special and great value, premium holiday option. And with many such initiatives, we have grown our retail protection more than 4x in the last 5 years. We've launched critical illness and disability rider, which is our play in the health space to tap the opportunity of health and wellness. We are very happy to see the growth that the take-up of rider attachments has gone up, and we have seen a massive 64% criteria attachment for the FY '22, significantly higher than the previous year.
On some of the customer measures, we remain focused. Customer satisfaction, customer operation are extremely important to our organization. In FY '22, a 13-month potency of regular premium products went up by about 120 basis points to 84.8%, and the 61 month persistency stood at 50.2%, which is a year-on-year growth of our business.
Max Life Insurance also track performance on customer experience through Net Promoter Scores. And during FY '22, we witnessed a 5-point increase from 44 to 49, which is an 11% growth on the NPS score. As we have shared, and we actually held a special session about digitalization, our reports towards efficiency and intelligence. It's been a key priority item for our innovation and absolute necessity to stay competitive. Our play in the e-commerce space actually requires us to reinvent these capabilities in digital place very differently.
Our vision is to be a company that focuses on world-class customer experience through frictionless onboarding, seamless customer service and proactive management of risk in a digital setup that is contemporary, secure and inspirational for millennial workforce. In FY '22, we have implemented various initiatives to keep this vision namely 46% of our infrastructure has now moved on to cloud.
We launched mSmart, a sales governance tools for agencies that have been well-received with 87% adoption within agency workforce. Onboarding is made frictionless with new age cloud intelligence, underwriting systems and integration with Banca marketplaces. We also revamped personal communication by providing only 7 customer service experience. We're now addressing more than 1 lakh customer trading to work every month. We upgraded 2 large enterprise systems, the first one being an HRMS recharge system on business factors, which just were launched to support recruitment, onboarding, training, performance and succession planning, leave attendance, payroll, et cetera to cover all the elements of employees. The other one has reupgraded our investment system onto SAP platform, because our AUM has grown INR 1 lakh crore and we need a very robust platform. So that also was done this year.
We are leveraging digital AI to augment employee experience, enhance top line, optimize report and proactively identify and management. On new business front, we have built an award-winning solution called OSSB analytics engine for customer insights, sentiment, call effectiveness, agents collaboration and identification of top selling initiatives.
On purchase and issuance, we have built risk analytics engines to identify fraud at policy application phase, which has led to 100% real time risk prediction. On progressing side, analytics is deployed to predict consumers' propensity to pay, optimizing efforts on who to call, which have led to a 3x conversion rate in high potential.
People continue to be the most important elements of our business, and we -- as we shared last year, we were ranked amongst the top 50 workplaces consecutively for the 5th year. In 2021, we ranked 18th. That led us to work amongst the survey conducted by India's best places -- best companies to work for. And in the Asia region, we were ranked the 55th for the first time. This also resonates with the course of our annual employee engagement survey in partnership with Willis Towers Watson, which shares that our engagement score is 95-plus percent always for the last 3 years.
We have tried to take great steps towards our commitment ESG. We have bold aspirations to drive organization towards sustainability, which revolves around 4 pillars: Work ethically and sustainably, care for people in society, financial responsibility and green operations. We have a dedicated ESG management committee to work our ESG actions and initiatives. We have fully integrated ESG in our investment decision making, and have launched our first ULIP ESG Fund in this quarter. We've also improved our gender diversity ratio from 23% to 25% in FY '22, and we have set a target of 30% by FY '25. Max Life has also been awarded the Excellence in Gender Diversity as the fourth D&I Summit & Awards by Transformance Forums.
We have completed our travel assessment in all offices, and we've identified initiatives to achieve the target of carbon neutrality by FY '28. I'm sure all of you are eagerly waiting for our financial outcome.
I'm going to hand over to Amrit to talk about our financials.
Thanks, Prashant. At MFSL level on a consolidated basis, our revenue, excluding investment income stands at INR 22,084 crores, a growth of 17% in FY '22. The consolidated pretax profit for MFSL for FY '22 is at INR 389 crores, lower than last year, primarily account of reserves created for pandemic and certain one-offs that were recorded in the same period last year.
Moving specifically to Max Life update. Max Life individual APE has gone 12% to INR 5,514 crores in FY '22. The renewal premium grew by 19% to INR 14,509 crores, 13-month persistency, as Prashant mentioned, improved by 120 basis points to 84.8% and 61-month persistency by 90 basis to 50.2%. Gross premium on overall basis has grown 18% to reach INR 22,414 crores. Product mix for financial year '22 remained largely stable. And as per our design mix, with PAR at 20%, non-PAR saving at 29%, ULIP at 37% and protection at 14%.
The first 9 months we experienced a slowdown in protection business due to supply chain constraints. However, as the experience started improving, we released some of those supply chain constraints, and our total protection business grew at 34% in quarter 4. Retail Protection business was enlisted -- enlisted its de-growth and experience -- that was experienced in the first 3 quarters, then it grew by 4% in quarter 4. VNB is at INR 1,528 crores, a strong growth of 22% year-on-year due to both APE growth of 13% and improvement in new business margin from 25.2% to 27.4%. This improvement in margin is led by a combination of debt factors, including introduction of more profitable product ratings and repricing decisions, along with scale benefits.
Max Life MCEV is at INR 14,174 crores as at end of March '22, a growth of 19.8%. Operating RoEV is at 19.2%, which if we exclude one-off COVID impact translates to 20.1% operating earnings. The operating return -- operating EV is driven largely by value of new business and unwind. We had experienced a negative operating variance of INR 277 crores, which includes COVID impact of [ INR 198 crores ], and rest is primarily due to sending of modality assumption. There is a nonoperating variance of INR 64 crores, which is primarily because of positive economic variance we experienced during the year.
In financial year '22, gross and net claims was INR 3,170 crores and INR 1,964 crores, respectively. We began the year with INR 500 crores of reserves, pandemic reserves. We took out impact of approximately INR 100 crores in our P&L during the year to settle the excess debt claim. Even though severity of COVID-19 has declined as a prudent risk management paying work adopted by the company, we are bolstering our overall pandemic reserve for closing position of INR 500 crores in the balance sheet for any future pandemic life events.
Policyholder OpEx for GWP improved to 13.5% from 14.2% year-on-year. Absolute increase in OpEx was 11.7%. FY '22 profit before tax for MLIC, Max Life is INR 417 crores, a decline of 18%, primally due to COVID-related provision. The profit after tax stands at INR 387 crores. Our solvency is comfortable at 201%, and the AUM has crossed INR 1 lakh crore per month, closing at INR 1,07,510 crores as of March 2022.
Now I will be happy to -- we will be happy to take any questions. I will hand over to mic to the moderator to open the floor for Q&A.
[Operator Instructions] The first question is from the line of Avinash Singh from Emkay Global.
A great set of numbers. So a couple of questions. Firstly, on that INR 500 crores of pandemic reserve that you have decided to carry on forward, I just would like to understand, I mean, as and when how this reserve will be released if, I mean, there is no pandemic, hopefully? So by what time will take the call? And how this rule will impact your accounting profitability to your TE as well as the solvency capital? So that's my question number one.
And my second question would be more to do with the VNB margin that exceed that the first 9 months partly. So have you sort of changed any kind of operating presumptions there in terms of the cost of persistency, have you reviewed that trajectory to this sort of a market perspective? These are my 2 questions.
Avinash, thanks for complementing the set of results. On the INR 500 crores, I think as the -- it's a measure which is both conservative in nature. We believe that for a business of our size, considering uncertainties, especially driven by any pandemic right now or in future, it is important to carry some provisions in the balance sheet so that we are able to smoothen outcomes just in case we require to use them. It is a position that the company has taken along with its point actually to make sure that we are keeping some buffer for bad times. I mean, let's put it that way.
Is it going to impact our impaired value? The answer is no. It is not going to impact our impaired value. In terms of how we keep it or release it or going forward, whether or not to build it, that we are in the process of creating a policy basis, which we will handle that.
On your question of 27.4% margin, I think the assumptions are all consistent with how we come up with. There are no big changes made in any of the assumptions that's quite different with how we came up with it -- with our margin position impact.
The next question is from the line of Madhukar Ladha from Elara Capital.
First, on the bank channel, I think you mentioned a 16% year-over-year growth for the bank. Was that FY '22 or for the quarter?
We mentioned the 15% growth on bank channels from Axis Bank. Our overall bank growth rate, including all the banks put together will be in the range of 11% to 12%.
Right. And for the quarter, what has Axis done?
Yes. That's a very good question. Actually, for this quarter, our growth was quite muted. However, it has to be seen in conjunction with a very high base of last year. As you may remember, quarter 4 of FY '21, the growth was 47%. And hence, of course, the growth was a bit impacted. Also, there was this third wave of COVID, which had a significantly detrimental impact on sales growth in the month of January, where activities actually came down.
So for the first 9 months, Axis Bank or Max Life Insurance was growing at a very robust pace. However, the growth actually came down to 15% at the end of quarter 4.
I will request Subrat to add anything. Subrat, do you have anything to add to this?
I think, Prashant you have covered it. So Q4 had a bit of an impact because of some amount of issues around mobility in the month of January. And also because of the [indiscernible]
Right. It's good to have the Axis representatives here as well. My question is within the Axis sort of channel, what is Max's share now? And is that going down? Or -- and what is -- what do you think Max will be going forward? So if you were to look at FY '22 as a year, then what would be Max's share if we have this channel? And then what is our sense of where that number will be going forward?
Yes. Okay. Thanks. A really good question. I think it's a conscious decision by our stakeholders, especially our bank to go through a process of open architecture because we all believe that an open architecture creates a fair play for the customer, as well as provide impetus to growth of all the participants. Just to update you on some numbers, for the full year, the overall percentage of counter of Max Life Insurance is 75%. So we, at the end of the year, 75%. On a run rate basis, we are close to about 70%, and we are hopeful that we will be able to maintain that kind of completion going forward.
And what is Axis' sort of view on it? And because if your current run rate is 70%, what is resulting in this decline? Is it Axis' commitment to Bajaj? Or is it some sort of product differentiation? What would really make you retain or increase or decrease your share in that channel? I think that is pretty important to understand right now.
Yes. Let me go first, and then Subrat has any additional points he will make. The hypothesis, I mean, one is to zoom out really to think about this. The hypothesis is through open architecture, the pie will get expanded. And we -- it's not as if no open market if you got started -- the broker -- open architecture started a couple of years ago, and we have seen consistent growth of Max Life Insurance. So the objective is to grow the pie, and we have seen the pie grow.
And so if you look at the Axis Bank growth over the last couple of years, not just for Max Life, but overall Axis Bank growth for the last couple of years, it will be significantly more than the private bank growth rate. My estimate is the private bank growth rates on insurance would be 15%, and the bank growth rates at Axis Bank will be somewhere around 35%, 37%, about 28 absolute percentage points more, which is the objective of the bank, and it is very well understood. Hence, I think the bank will -- Axis Bank has a real objective, and the primary objective is to continue to grow the pie. And within that, Max Life Insurance being a dominant player will have growth coming through the overall pie. So that's the direction in which we are working, that's the overall understanding.
As far as Max Life Insurance's counter share and growth is concerned, there is a complete alignment with the operating team, as well as the Max shareholder level. We are going to work together. So we show that the growth trajectory of Max Life Insurance is in fact not withstanding some of the base effects. I mean, what we saw last quarter was definitely a last year high base impact. Ignoring that, I think we will be growing at a pace which is consistent with how we have grown in part.
Right. Right. I'll come back in the queue. The numbers or the presentations come pretty late. So I haven't really gotten a chance to see through a lot of it.
Absolutely. You could reach out to us on a one-to-one basis for any questions.
The next question is from the line of Preethi RS from UTI.
So my question is on the operating leverage. So we have actually outgrown the industry in the last 3, 4 years. But if you see on the cost ratio comparing to the top 3 viewers in the private sector, we are not seeing benefits on cost as the scale has grown. So could you help us understand what would be the drivers on this?
I think the OpEx for durability has improved from 14.2% to 13.5%. So we have gotten that benefit. Now because the underlying denominator is gross written premium and the net rate, scale is extremely important. So some of the competitors that you're comparing us with, the scale has to be adjusted for. And we are in an open architecture environment. We have to invest towards building distribution and distribution strength. And despite these OpEx ratios, et cetera, the margins are for you to see. And for 2 consecutive years, we have been improving our margins. And quite -- for many years, we have been improving our margins. And for now last 2 years, we have demonstrated a strong improvement in margin price. These margins are all invested for this cost.
Going forward, I think on OpEx, we will continue investing for distribution strength and distribution losses. And hence, you will see another pace of OpEx investments continue to remain strong, given we are desirous of continue building distribution strength and our growth position.
Do we need targets or that you anchor to beat in terms of AUM or to GWP?
So we don't answer Axis on an OpEx to GWP kind of a target. I think the VNB on a current cost basis is what we report out. And the margins are also reported out on a current cost basis. That's where we anchor ourselves to and an improvement of some of those metrics are more important.
The next question is from the line of Nidhesh Jain from Investec.
So firstly, this INR 500 crore number that we set aside for pandemic, there is no impact on EV out of this number, only in our statutory accounts and solvency that has an impact. Is that right understanding?
That's correct, Nidhesh.
Sure, sir. Second, can you give the breakup of operating variance? I missed the number, mortality and how much is mortality strengthening and how much is COVID?
So the quarterly, negative operating variance, Nidhesh, was INR 277 crores, of which INR 108 crores is COVID-related. And the rest of it primarily is mortality assumptions. There is a small last related variance, which exist largely being seen on ULIP portfolios. But all of it is assumptions strengthening around protection business.
Sure. So one thing that we are rattling with this is how do asset underwriting on the protection side for companies -- big companies, including Max Life, given we are underwriting this 20-year product. And as an outside of that, it becomes very difficult to assess how are individual companies underwriting and whether they're pricing the modalities adequately. So given that we have gone through a COVID-related impact, there has been a lot of issues in the reinsurance industry as well. How do we accept our underwriting capabilities? And how is that experience with respect to our assumptions on the underwriting side as of now? And how should we think about that in the future?
Yes. Nidhesh, Max Life is a conservative organization. And we continue to monitor claims experience, which is the outcome of underwriting decisions, which have been taken. So we are working on 2 counts. Count #1 is how do we improve the process of underwriting, so that errors, which are more manual in nature, decision-related errors can be eliminated, and that's the part of BAU tactical item. On a more strategic basis, I think once the process issue is resolved or we are on top of the process, we true-up the mortality outcomes in our assumptions to make sure that they are reflective of our most current experiences. We believe that -- and of course, the security of that, we believe that our assumptions are trued up due to credit experience. And we hope to improve it.
Now the other maker status that happened in the process is our reinsurance partners. Every ER reinsurance renewals or reinsurance conversations come up where we have to go and share the outcomes of underwriting process, basis which the rate appropriate. So that's another maker-taker process that is already in the place.
Sure. And so -- our VNB margins have expanded quite well on a Y-o-Y basis despite our product mix has remained quite stable. So what explains VNB margin expansion?
So Nidhesh, actually, it's -- I did mention in my opening remarks, the product mix has remained stable. However, underlying products and their margins, whether it is on the participating design, the new products that we've introduced, whether it is on the non-participating design, the new products that we'll introduce, which actually also for the full year of those products kind of run through. They were fundamentally more superior margin profile. And even on Protection business, actually, we have been able to -- despite the reinsurance changes or the repricing changes, hold on and further improve the margin Protection business. And then as sales build up, as you can see, overall premiums are up 16% and the OpEx is only up 11.8%. There is some scale advantage that we get on the process.
Sure. Sure. Sure. And lastly, on the protection, we have seen good growth in the Group Protection. So is it driven by Credit Life or is driven by a group term, the growth that we have seen in this year?
Sure. It's driven by both actually. So Credit Life, yes, Credit Life growth has been quite robust at this year. We have seen close to about 54%, if I am not wrong, over 50% kind of growth rate on CL.
Sure. So because I think we still have more market share versus our listed peers, and since Axis Bank is our strategic partner over a period of time, we should see -- should we expect pretty strong growth in that segment over a period of time?
Yes. Yes, you should expect continued growth from Axis Bank and our bank partners. We are quite selective about the kind of business that we want to do. We are focused on margins and we are focused on ensuring that we take a risk, which is as per our risk appetite. So like I always maintained, this is not going to be a big VNB variance, it's not going to become a very large part of our VNB, but you should expect continued robust growth in this portfolio.
And just for numbers, 55% was the group Credit Life growth and Group Term Life has grown 51%. So the comment of growth continuing is largely on the Credit Life side. On Group Term Life, I would say some moderation will happen, because this was a year of pricing for pandemic, et cetera. And as we are now entering the health stages and the severity of pandemic has come down, the Group Term Life business will start seeing some moderation next year.
Sure, sir. And then lastly, what is the status of the transaction with Mitsui Sumitomo remaining stake buyout from Axis Bank?
Okay. That's -- you moved our applications.
Yes. So I think there are 2 steps spending. One is the stake Axis Bank buying out 7%, I just want to say. And stake -- selling to Mitsui -- buyout from Mitsui Sumitomo and then selling to Axis Bank. These 2 steps are still pending, right?
Correct. The first step, which is Mitsui Sumitomo buyback is under application. As you know, we are waiting for some of the placements at our regulator's office. And the Chairman is on board, and I'm sure with his arrival, there will be a faster process. We are constantly working with our regulators to have that one. And hopefully, over the next few weeks, we do expect that growth. But once that is done, then the second step of Axis increasing stake will be processed.
[Operator Instructions] The next question is from the line of Sanketh Godha from Spark Capital.
My question is again on the margin. So if I do the back of the envelope calculation for the fourth quarter, it seems that GTL the business has almost grew 3x compared to what it was in previous quarter or 4Q. So we believe, I mean, this margin expansion is largely led because we did a little more than -- more detail in the current quarter. And there is a lumpiness to the business. So that margin what we have reported, can we expect it to sustain if this particular product slows down? That's the point which I wanted to check. Although you have said that the underlying design of the respective product, whether it is PAR or non-PAR has changed and that has contributed to the margin. But I just wanted to understand that from 9 months to FY '22, the delta seems to be largely driven by GTL business. So I'm trying to understand whether this sustainability is going to remain or not.
So Sanketh, actually, for quarter 4, GTL has largely remained flat. The GTL business group term line business has grown. And as you are aware...
Yes, I mean to say, GTL only, Group Term Life business, it seems to have...
Sanketh, GTL business is not a part of margin competition for Max Life Insurance. It is a very tactical play, and it just flows through to the P&L. So we don't count that. The big reasons of margin expansions are exactly what Amrit described earlier.
Okay. But the understanding was that the newer design products also were part of 9 months FY '22 numbers because actual benefit was almost available from 9 months FY '22. But still there is a decent delta in the margin expansion for 9 months to FY '22. So just wondering what had led to it. Because even if I see individual protection, on quarter-on-quarter basis, it has declined rather than growing industries.
I'll say 2 things, firstly, anyway because our competition of VNB is on actual OpEx basis and as you are aware, quarter 4 typically is the largest, so there's a little advantage which anyway come. The second is participating designs were actually introduced -- really flow through the entire 9 months. They kind of came somewhere around November, December. And hence, that benefit also improved.
And lastly, yes, I guess you are asking only a sequential quarter question, so the reason is as -- these 2 are the reasons. If you see, as compared to last year's quarter, if you compare, obviously, you recall that we had made a INR 88 crore provision in the VNB then for a onetime impact, which actually doesn't exist this time.
So if we were to really count that INR 88 crores last year also, Sanketh, our margin would be more closer to 29%. So margin has expanded further from that number to a little bit more. And as a result of that, overall average for the year has improved to INR 277 crores.
Got it. Got it. And this INR 277 crores of operating variances, the recent INR 108 crores is COVID loss and some mortality tightening. And probably -- maybe I'm assuming there is no significant positive delta coming from the OpEx variance. So if some part of mortality assumption is getting reflected in the EV, but when the VNB walk is mentioned, I don't see any walk with respect to mortality as because in the fourth quarter of full year FY '21, I don't see anything of that kind, the EV workers. So it's only a onetime adjustment you did for the retrospective book on the EV, not to the incremental business what you have written?
So VNB, you will recall, assumption tightening were done at least start of the year itself in line with how the reinsurance rates were. And that's then, consequently, the consumer pricing, et cetera, were also done. Now for EV business is the impact of only the bank book or whatever the books available.
Got it. Got it. Got it. And finally, the final question is, you said that Axis Bank grew by 15% on a full year basis, right, if I'm not wrong?
It grew. Grew. Our business from Axis Bank grew by 15%.
For the full year, FY '22, right?
That's correct.
And which means that other banks probably would have declined by 12%, 13%, right?
Yes. That's correct.
The next question is from the line of Prateek Poddar from Nippon India Mutual Fund.
Yes. Sir, can you just talk a bit about case price? The ticket size has gone up substantially, if you can, and that's question #1. Secondly, also how should I think about VNB margins going forward given that the product mix lever -- I mean, most like, getting exhausted and they almost have a balanced product mix. How should we think about VNB margins? And lastly, on APE growth, if you can comment on the next or the medium term, how should we think about it?
So we are going to go after growth very aggressively. Firstly, answering your question on VNB margin, like I have always maintained, our outlook has to be in the range of 25%, 26%, while we have a 27.4%. The outlook is more around 25%, 26%. That's what we'll target internally. For medium-term growth, definitely targeting our number closer to 20%, that's our target. That's the plan that we're working towards. There are plans that we work as a part of our business plan. So those are numbers that we're working on.
I'm going to just request somebody to give the answer on ticket size.
So ticket size, 1 reason for increasing ticket price on a blended basis is also the reduction of protection business on number of policies. So this year, as you -- we mentioned that the protection business has degrown 12% on value. And similarly, the level has been experienced a number of protection businesses, low case side, so that weighted average impact is one that we are seeing.
But on this, you said the breakup, right? You've given the breakup also. I can see ULIP going substantially from INR 145,000 to INR 168,000. Even on the PAR side, we have seen INR 66,000 to INR 81,000. Anything to read into this, sir?
10%, 15% kind of increases on case sizes keep happening depending on the segment that we are chasing. So, I mean, I won't say that those are out of the ordinary. The other thing that also happened is the delivery of some shorting on non-PAR saving moving to ULIP et cetera. So some process there.
And when you say you're targeting growth of upwards 20% -- to 30% for each, this is -- how should I think about ticket sizes and NOP?
In terms of our growth rate?
Yes, I mean, in the sense, will it be more ticket size there? Or it will be an equal balance or a higher number of policy?
You should think about a fair mix of both, may be more tilted towards number of policies as against the ticket size.
The next question is from the line of Neeraj Toshniwal from UBS.
My question is more sort of lead towards access, the wallet share which has gone down. So I wanted to understand what was the strategy behind and will 20% kind of sustained, but now LIC probably also in the one of the open architecture model Axis has? How we are reading into it? And what this 18% life 5-year CAGR will now come down to 15% kind of CAGR more with the recent trends we have seen in FY '22? Or how should one think about it?
So as you know, and if we could -- supplement for the bank is on an overdrive on growth. The rate of customer acquisition, the rate of growth in the core business is unprecedented. And we believe that the subsequent or consequential impact on insurance business is going to be very robust. That's number one.
The decision for open architecture and the rational, et cetera, I just described in the earlier question. But we believe that Axis Bank will continue to register very, very strong growth. The bank has -- and we have worked with the bank for 12, 15 years since then, it's very strong in terms of the ability to do 20%-plus kind of growth rate year-on-year for a continued period over decades.
So notwithstanding this blip of what you call an open architecture, which I call more as very strong base effect settlement, we remain quite optimistic. And I'd say along with Subrat, who of course sit in our Board is our shareholder that we are very optimistic to be able to register a growth at Max Life Insurance on Axis bank counter. Of course, there are plans to be deployed collectively go together with the operating team of Axis Bank and Max Life Insurance. And we are hoping that as we put our execution plans in action, it will start to turn numbers as 18% OpEx.
But coming to that, will the growth rationalize more toward the first 9 months as we saw stepping and then gradually going down and significant degrowth in the Q4? So the 9 months have a higher wallet share of Axis. So the growth upwards of 20% on this year, it looks difficult to know. Obviously, in the medium term, we can probably -- or maybe getting aggressive on the proprietary channels or with the other channel partners or we are looking to kind of grow? So I was just trying to figure out the previous kind of growth, which [ the rattle ] how in this environment you are kind of looking at with the Axis and of moderating in degrowth. So just maybe the medium, obviously, we can achieve, there's no doubt, but more from the FY'23 perspective.
I mean, of course, you could say so. We believe that the impact of an architecture settle as we go long somewhere during the year. Perhaps midyear or before that. And after that, the overall growth is going to be seen at Max Life Insurance level, quite robustly, number one.
Number 2, we are internally working on plans to make sure that our overall counter share remains robust our growth. So as a result of both, I'm very optimistic that we'll be able to work. Of course, these are plans, and one works through the plans. We are trying to be very aggressive about our growth. And that's why I said some of the margin upside you will find to be used as an investment to make sure that we continue to grow.
At the same time, we are making those investments in our proprietary channels. As you know, there is a big project that we want to take in within our agency area to add on several elements of variablizing the agency, faster recruitment, growing the top agent count, et cetera, et cetera. And we are very hopeful that, that part of the business will also start to see growth.
So as a result of this, A, aggressive posture; B, commitment to distribution build up; C, statutory focus on agency; and D, open architecture now settling at wherever it is. We are quite hopeful that the trend will reverse and we'll start to see growth.
Got it. And coming to protection, in the earlier commentary you mentioned that we have seen some bit of underwriting or relaxation happening. So more color will be helpful how we can kind of get the growth trajectory back as an industry. And obviously, for Max, what are our plans in terms of degrowth, most retail and credit protection, are we now seriously looking into this category? And where the growth can happen in multiples or the current run rate we can maintain?
Yes. If you look at our individual protection as a percentage of total, in terms of percentage, I think we will be one of the top players amongst of life insurance companies. And we have a significant share of how the digital platforms are going [indiscernible] do that.
Going forward, as I have been repeating, protection, health and wellbeing as a category is extremely important to us, and it is a part of Max Life Insurance's long-term growth track. So needless to say, our focus is going to come back. Of course, some of the underwriting flexibilities are coming back. In terms of total sum assured or the means through which we will do. And as a result of this, quarter 4 did see marginal growth. We're very hopeful that as we reverse through the year quarter-on-quarter, the growth on protection will come back. Our internal plans are significantly more than the current year potential.
The next question is from the line of Rahul Bhangadia from Lucky Investment Managers.
Sorry, my questions have been answered.
The next question is from the line of Nitin Aggarwal from Motilal Oswal Securities.
Congratulations on the results. Few questions. Firstly, with interest rates moving up and now banks likely increasing deposit rate, how do you see the growth in the non-PAR business and margins going ahead? And with e-gov flattening out, how do you see the growth and the margin dynamics?
The interest rate is going up, obviously, as you would have seen from the sensitivity, if you don't do anything, it's kind of be in the margin expansion. But obviously, to make the products stay competitive, we will have to keep changing the IRRs of the product as well. So we will respond to some of those interest rate hikes. We will also improve the IRR of a non-PAR design so as to continue for them to kind of remain attractive as compared to some of the deposit rate. And in the advantage of tax rate, any way the consumer gets on a non-PAR rate. So on a tax-adjusted basis, the rate continues to remain upward.
So what that continuity means is that I don't necessarily capture the margin expansion. I will remain largely margin neutral to ensure that the product [Technical Difficulty]. The proposition of guarantee is an evergreen proposition. I mean, in a portfolio from a strategy perspective, from a consumer segment perspective, there is always an appeal for a long-term guarantee, which only our category is able to provide. And that advantage and that inability to find protection, what that means, it is fairly robust. It doesn't really matter what the environment around interest rates look.
Okay. Sure. And in context for Banca sales, one of this actual -- wanted to see like a market share loss. Is there any specific product within growth has moderated, ULIP, PAR or anything specific that you have mentioned?
Can you repeat the question?
So in the Banca sales where Axis...
No. It is very secular. It's very secular. It's not as if that you, from a product perspective, we complete across all product categories, our product propositions are very superior. It's a secular thing. It's nothing to do with a specific segment that we would have lost the market share relative to the comp.
Okay. And lastly, if you can also share details, some of reasons behind the positive nonoperating variance. A small number of INR 64 crores that we have reported, because the EV sensitivity to the rising rate is slightly negative. So what has driven this?
So there are 2 things. Obviously, it is EV sensitivity is negative because of the increase in interest cost. The EV moves in that reverse direction. But we also have what for as certain realized gains during the year. And also the unwind -- because unwind cap is the management expectation of interest rates, anything which is over that unwind actually comes into a nonoperating period, that has been positive with respect to the interest that has been written. That's the reason largely for this positive agency front.
The next question is from the line of Abhishek Saraf from Jefferies.
Sir, just 2 questions. One, basically on our Credit Life stance. So if I recollect right, so we used to have more of a tactical approach towards Credit Life. But now going by the commentary it appears that, we see it as a much more structural opportunity and usually guide for very high growth. So just if you can share some thoughts around that?
And secondly, on the COVID reserve, a few of our larger private sector peers have actually seen COVID reserve releases. And we have kind of raised it to around INR 500 crores, similar to what it was last year. And if I take the COVID impact in EV work of INR 108 crores, the total impact was around INR 608 crores in a year where we had 2 waves. So while it is good to have a conservative stance, I just wanted to understand a bit different from other players who have seen COVID reserve release. So these 2 questions will be very helpful.
Yes. On the first one, our stance on GTL remains tactical. However, with our partners, we do have business, and we'll continue to work with them. So really, like I mentioned to you, we are not going to build GTL to be a very significant part of our VNB. Our VNB is going to remain mostly retail-related, question one.
On your question around... On the COVID, I don't think you should call it COVID reserve. You should call it pandemic reserve or catastrophic reserve. Being a conservative organization, we do want to have some bits of reserve ready for composing circumstances and proofing events, et cetera, which we will continue to hold for as long because these are events that happen in the case.
Just add on to this, the COVID severity and the mortality has been -- I mean, it declined quite sharply, and we are not seeing any variances with respect to COVID that's coming in for many months now. So this -- it should not be seen as something that has been created for COVID. This is actually a pandemic for the future. It's just the side of the balance sheet certain reserves on catastrophic and pandemic should be maintained. And we want to be sure that we've returned to that mean position as we entered the COVID 2 years back in the experience of the bank.
Sure. That's quite helpful. If you can just help me with 1 number, what was the share of Axis in this quarter in the overall APE?
I don't have that quite handy with me.
I'll have it sent to you.
The next question is from the line of Nidhesh Jain from Investec.
Sir, just 1 [ bookkeeping ] question. What is the backbook surplus adjusted for COVID impact for FY '22?
The backbook surplus, are you asking for it after the adjustment?
Yes, because backbook surplus is flattish or declined because of...
I gave you -- just for the one-off, the backbook surplus has grown by 14%. I don't have a specific number handy, but the bank book has grown actually 14% adjusting for this time.
Yes. Backbook surplus, so last year was INR 1,242 crore, that is up 14% this year.
Yes.
[Operator Instructions] The next question is from the line of Abhishek Saraf from Jefferies.
So I just missed to ask 1 more thing. So if I heard it right, sir, you mentioned to an earlier question on the VNB margin guidance of around 25% or 26%. Is that right that I heard given that we have seen 27.4% this year?
Yes. I mean, really, my guidance, if you ask me, will be more in 25%, 26% because we do want to make the investment towards growth, and that will come at the cost of some bit of margin sacrifice. Also market and competitive forces will continue to resist significant growth in margins. And as a result of that, we just -- while there will be all attempt to maintain the margin, but for your analysis purposes, I would say, take you more between 25%, 26%.
[Operator Instructions] The next question is from the line of Avinash Singh from Emkay Global.
One question, I mean, whenever this happens, combining 5%, 5.2% stake from Mitsui and then giving Axis group [indiscernible] broadly. So what is the sort of accounting impact of that transaction? Because I guess you will be buying from Mitsui around INR 85 for sale of net price. And in the previous tranches, you have given to Axis around INR 32, INR 33. So what will be the accounting treatment of this transaction when it happens?
Let me -- I mean, I guess you're asking from MFS perspective on Ind AS, right?
Yes. Yes. Yes.
I will respond to you separately on that with respect to the accounting statement of the bank.
The next question is from the line of Madhukar Ladha from Elara Capital.
Are there any additional approvals required for Axis entities to increase stake by 7%?
Yes, we will have to go to IRDAI and seek approval because any equity stake more than 1% requires the pre-approval from IRDAI. But we believe that as a part of our overall filing because a disclosed item to IRDAI, so we feel that it should be okay and where -- this happens very quickly.
Right. And can you give us some color around margins for protection and non-linked tradings and linked savings as 3 separate tactical or protection versus savings margins. Some sort of color there, that would be helpful. And how that has moved year-over-year?
Generally, that level of retail is not a part of our disclosure. But I will say, all our margins are quite robust.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments. Over to you, sir.
Thank you, Kevin, and thank you, ladies and gentlemen, for being on Max Financial earnings call. We look forward to more such interaction in the future. Thank you once again, and goodbye from the management team here.
Thank you. Ladies and gentlemen, on behalf of Max Financial Services Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.