June 25, 2024

Max Life Insurance Company Limited: Rating reaffirmed

Summary of rating action

Previous Rated Amount Current Rated Amount

Instrument* Rating Action
(Rs. crore) (Rs. crore)
Subordinated debt programme 496.00 496.00 [ICRA]AA+ (Stable); reaffirmed

Total 496.00 496.00

*Instrument details are provided in Annexure I

Rationale

The rating factors in Max Life Insurance Company Limited’s (Max Life) established presence in the individual life insurance
segment with a diversified distribution network. The company was among the top 3 private insurers with an overall market
share of 6.2% in FY2024 {5.6% in FY2023; in terms of individual new business premium (NBP)}. The rating also considers the
comfortable solvency with a solvency ratio of 2.06 times post capital infusion in April 2024, up from 1.72 times as of March 31,
2024, following the capital infusion of Rs. 1,612 crore1 in April 2024. The profitability is healthy with a return on embedded
value (RoEV) of 20.2% in FY2024 (22.1% in FY2023). Moreover, the embedded value (EV) increased at a compound annual
growth rate (CAGR) of 17% during FY2019-FY2024 to Rs. 19,494 crore as on March 31, 2024.
The rating factors in the company’s strong promoter profile, with Axis Bank (Axis) holding a 19.02% stake along with its
subsidiaries (Axis Capital Limited and Axis Securities Limited), as of April 30, 2024 (up from 12.99% as of March 31, 2024). The
rating also considers Max Life’s strategic importance to the bank and the expectation of support as and when required. Axis
has been associated with Max Life as a distributing partner with a share of more than 52% in its individual annualised premium
equivalent (APE) for FY2024. It has strong board representation at Max Life (five directors appointed by Axis including the
Chairman). While Axis has a presence across the financial services segment, Max Life’s foothold in the insurance business is of
strategic importance to the bank. The other promoter, Max Financial Services Limited (Max Financial), had an 80.98% stake in
Max Life as on April 30, 2024.
The company’s operating expenses remain high compared to large private life insurance players, given the significant share of
individual business in its overall business. The growth in the value of new business (VNB), VNB margin and profitability would
depend on Max Life’s ability to increase its APE and improve its operating efficiency. The profitability and solvency may remain
susceptible to changes in the actuarial assumptions, leading to long-term changes in the reserving requirements.
The Stable outlook reflects Max Life’s diversified distribution network and balanced product mix, enabling it to maintain its
market position. It also reflects the expectation of continued strategic and capital support from the Axis Group.

Key rating drivers and their description

Credit strengths

Strong promoter profile – As of April 30, 2024, Axis had a 19.02% stake in the company, along with its subsidiaries (Axis Capital
Limited and Axis Securities Limited), up from 12.99% as of March 31, 2024 with the capital infusion of Rs. 1,612 crore through
preferential equity in April 2024.

Axis is the third largest private bank in India. Although it has a diversified presence in the financial services segment spanning
asset management, securities broking, and investment banking through its subsidiaries, Max Life helps the bank improve its

1
By Axis Bank (Axis; rated [ICRA]AAA (Stable) for its Basel III Tier II bonds)

www.icra .in
Page | 1
 foothold in the life insurance business. Axis already had a well-established relationship with Max Life as a bancassurance
(banca) partner. It is now a promoter of Max Life (along with Max Financial) and has strong representation on the company’s
board (five directors nominated by Axis including the Chairman). Max Life’s existing branding is strengthened further as a joint
venture between Axis and Max Financial.

Axis’ wide distribution network is likely to provide impetus for additional growth. The share of banca was in the range of 59-
72% of the individual APE in the last five years, mainly including Axis’ contribution (>52%). As Axis is a promoter of Max Life,
ICRA expects strategic and capital support from the bank to be forthcoming.
Established player in individual segment with balanced product mix – Max Life is among the top 3 private life insurers with a
market share of 6.2%, in terms of individual NBP, even though its limited presence in the group business moderated its overall
market share to 2.9%, in terms of the overall NBP, in FY2024. The company has a balanced and diversified product mix with
unit linked insurance plans (ULIPs) accounting for 37% of the individual APE in FY2024, followed by non-participating (non-par)
at 35%, participating (par) at 19% and protection at 9%. The group portfolio, which accounted for 16% of the NBP in FY2024,
largely comprised group protection (90% of group NBP with focus on credit life) and group annuity. The product mix is likely to
remain diversified with Max Life looking at balanced growth across segments.

While the company’s distribution channel was concentrated towards banca, the increased focus on the growth of the
proprietary channel has led to diversification. Hence, the share of the banca channel declined to 58% of the individual APE in
FY2024 from 70% in FY2019.

Solvency supported by recent equity infusion – Max Life’s solvency remained comfortable at 2.06 times post capital infusion
in April 2024 (up from 1.72 times as on March 31, 2024) compared to the regulatory requirement of 1.50 times. It was
supported by the capital infusion of Rs. 1,612 crore by Axis in April 2024 to meet the company’s growth requirements. The
solvency ratio was previously supported by internal accruals and funds for future appropriation (FFA) related to par funds. FFA
accounted for 47% of the available solvency margin as on March 31, 2024. While dividend payouts had been high till FY2021,
the company did not announce any dividend payout between FY2022 and FY2024 to retain profits for business growth and to
maintain solvency. Max Life has headroom for raising additional sub-debt of ~Rs. 496 crore as of March 31, 2024, which could
help boost the solvency. Further, ICRA expects support from the parents to be forthcoming if required. Max Life’s solvency,
while expected to decline with the healthy growth, is likely to be maintained above 1.70 times.

Healthy profitability – Max Life’s absolute VNB was Rs. 1,973 crore in FY2024 (Rs. 856 crore in FY2019), supported by the
growth in the VNB margin as well as the APE. The EV increased to Rs. 19,494 crore as on March 31, 2024 (Rs. 8,938 crore as on
March 31, 2019), with operating RoEV of ~19-22% in the last five years. The VNB margin, though healthy, declined to 26.5% in
FY2024 from 31.2% in FY2023 due to the change in the product mix with the increase in the share of ULIP and the decline in
the share of the higher margin non-par segment in individual business. Going forward, the improvement in the absolute VNB
will largely depend on APE growth.

Max Life’s accounting profitability has moderated in recent years with an average return on equity (RoE) of ~9-12% in FY2023
and FY2024 (compared to 19-20% in the five years ending FY2021). Profitability was lower due to the higher initial reserving in
the non-par segment in the last two years and rising operating expenses. While the persistency2 ratio is satisfactory in the 13th
month and improved to 87% in FY2024, it is lower in the later cohorts, which also impacts profitability. The ability to maintain
prudent asset-liability management, to mitigate the interest rate risk arising from the deployment of future policy premiums
at remunerative rates, and achieve operating experience (such as persistency, mortality, operating costs, and interest rates),
in line with the assumptions at the time of policy underwriting, will remain the key driver of the long-term profitability and
capitalisation.

2 Regular premium/Limited premium payment under individual category

www.icra .in
Page | 2
 Credit challenges

Operating expenses relatively higher than peers – Max Life’s operating expenses (including commissions) remained higher
than other larger private life insurance peers and increased further to 22.2%3 of the gross written premium (GWP) in FY2024
from 20.8% in FY2023. The higher expense compared to larger private life insurance peers was due to the significant share of
retail premium in the overall business. The rising expense was on account of the scale-up in the proprietary channels and the
opening of new branches under agency. The operating expenses are expected to remain elevated in the medium term.

Ability to maintain NBP growth in individual segment – The growth in FY2024 was lower for the industry (individual NBP
growth of 3.7% in FY2024), largely on account of the headwinds faced by the industry due to the change in taxation, given the
Budget announcement regarding taxation on returns from life policies with a premium of more than Rs. 5 lakh per annum
applicable after March 2023. Max Life’s individual NBP, however, grew strongly by 14.5% YoY in FY2024, which was higher
than the private life insurers’ growth of 7.4% (though lower than private life insurers’ growth in the previous two years).

Given the environment of low NBP industry growth for the industry, competitive pressure could increase. With the VNB margin
growth expected to remain limited, APE growth is likely to be the driver of the absolute VNB growth. Further, the impact of
the recent regulatory changes, leading to an increase in the surrender values of life insurance policies, on the persistency ratios
and profitability will remain monitorable. ICRA, however, takes note of Max Life’s diversified product mix and improved
distribution network, which are likely to support its growth.

Liquidity position: Superior

The company’s net premium (excluding ULIP) stood at Rs. 21,812 crore in FY2024 in relation to the maximum net claims and
benefits (excluding ULIP) paid of Rs. 6,562 crore in the last few years. As a result, the operating cash flows have remained
positive, leading to growth in the investment book. Additionally, investments in Central and state government securities stood
at Rs. 66,842 crore, accounting for 63% of the total investments (excluding ULIP) as on March 31, 2024, which supports the
liquidity to meet the claims of policyholders. The shareholders’ investment of Rs. 5,848 crore also remains superior in relation
to the sub-debt outstanding of Rs. 496 crore as on March 31, 2024.

Rating sensitivities

Positive factors – A sustained increase in Max Life’s market position and profitability will be a positive factor.

Negative factors – A rating downgrade for Axis or a decline in the strategic importance of Max Life to the bank or in the
expectation of support from the promoter could impact the rating. Additionally, weakening in the overall market position and
profitability or a decline in the company’s solvency ratio to less than 1.70 times, on a sustained basis, would be negative factors.

Analytical approach

Analytical Approach Comments

Rating Methodology – Life Insurance
Applicable rating methodologies Rating Approach – Consolidation
Rating Approach – Implicit Parent or Group Support
Parent/Group Company: Axis Bank
The rating considers management support, given Axis’ board representation, and the
Parent/Group support
company’s ability to leverage the bank’s wide branch network for the distribution of its
insurance policies.
For arriving at the rating, ICRA has used the standalone financials of Max Life. However, in line
Consolidation/Standalone with its consolidation approach, ICRA has factored in the capital requirement of Max Life’s
subsidiary, which is listed in Annexure II.

3 Includes shareholder expenses

www.icra .in
Page | 3
 About the company

Max Life is a joint venture (JV) between Max Financial Services Limited and Axis Bank, holding a stake of 80.98% and 19.02%
(including Axis Group entities), respectively, as on April 30, 2024. Max Financial is a listed entity with Mitsui Sumitomo
Insurance Company and Max Ventures Investment Holdings Private Limited & individual promoters holding 21.86% and 6.52%,
respectively, as on March 31, 2024.

Launched in 2000, Max Life provides life insurance, savings, investment and annuity to individuals and groups. The products
are offered under the protection, par, non-par and unit-linked lines of business with a presence across the country through
304 branches (own branches) and distribution partners.

Key financial indicators (audited)

Max Life Insurance Company Limited FY2023 FY2024

Gross direct premium income 25,342 29,529
PAT 435 360
Net worth 3,547 3,998
Total investments^ 87,606 1,06,656
Value of new business margin 31.2% 26.5%
13th month persistency ratio 84.2% 86.7%
61st month persistency ratio 57.9% 58.3%
Regulatory solvency ratio (times) 1.90 1.72#
#
Source: Company, ICRA Research; All ratios as per ICRA’s calculations; Amount in Rs. crore; 2.06 post capital infusion in April 2024
^Excluding linked investments

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

Rating history for past three years

Current rating (FY2025) Chronology of rating history for the past 3 years
Amount Date & Date &
Amount outstanding Date & rating Date & rating in
Instrument rating in rating in
Type rated as of Jun 24, in FY2025 FY2024
FY2023 FY2022
(Rs. crore) 2024
(Rs. crore) Jun 25, 2024 Jul 7, 2023 July 11, 2022 Jul 15, 2021
Subordinated debt Long [ICRA]AA+ [ICRA]AA+ [ICRA]AA+ [ICRA]AA+
1 496.0 496.0
programme term (Stable) (Stable) (Stable) (Stable)

Complexity level of the rated instruments

Instrument Complexity Indicator

Subordinated debt programme Moderately Complex

The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated.
It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's
credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or
complexity related to the structural, transactional or legal aspects. Details on the complexity levels of the instruments are
available on ICRA’s website: Click Here

www.icra .in
Page | 4
 Annexure I: Instrument details

Instrument Coupon Amount Rated Current Rating and

ISIN Date of Issuance Maturity
Name Rate (Rs. crore) Outlook
Subordinated
INE511N08016 debt Aug-02-2021 7.50% Aug-02-2031* 496.00 [ICRA]AA+ (Stable)
programme
Source: Company
* The company has a call option exercisable five years from the date of allotment and at the end of every year thereafter before the redemption date

The rating also factors in the key features of the subordinated debt instrument:

• Servicing of interest is contingent on the company maintaining a solvency ratio above the levels stipulated by the
regulator4
• In case the interest payouts lead to a net loss or an increase in the net loss, prior approval of the regulator would be
required to service the debt

Annexure II: List of entities considered for consolidated analysis

Max Life Consolidation
Company Name
Ownership Approach
Max Life Pension Fund Management Limited 100.0% Full Consolidation
Source: Max Life annual report for FY2023

4As per Insurance Regulatory and Development Authority of India (IRDAI) regulations, insurers are required to maintain a minimum solvency
ratio of 150%

www.icra .in
Page | 5
 ANALYST CONTACTS
Karthik Srinivasan Anil Gupta
+91 22 6114 3444 +91 124 4545314
karthiks@icraindia.com anilg@icraindia.com

Neha Parikh Jui Jayant Kulkarni

+91 22 6114 3426 +91 22 6114 3427
neha.parikh@icraindia.com jui.kulkarni@icraindia.com

Abhilash Rathi
+91 22 6114 3421
abhilash.rathi@icraindia.com

RELATIONSHIP CONTACT
L. Shivakumar
+91 22 6114 3406
shivakumar@icraindia.com

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
communications@icraindia.com

Helpline for business queries

+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)

info@icraindia.com

About ICRA Limited:

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services
companies as an independent and professional investment Information and Credit Rating Agency.

Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company,
with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency
Moody’s Investors Service is ICRA’s largest shareholder.

For more information, visit www.icra.in

www.icra .in
Page | 6
ICRA Limited

Registered Office
B-710, Statesman House, 148, Barakhamba Road, New Delhi-110001
Tel: +91 11 23357940-45

Branches

© Copyright, 2024 ICRA Limited. All Rights Reserved.

Contents may be used freely with due acknowledgement to ICRA.
ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subject to a process of surveillance,
which may lead to revision in ratings. An ICRA rating is a symbolic indicator of ICRA’s current opinion on the relative capability of the issuer concerned to
timely service debts and obligations, with reference to the instrument rated. Please visit our website www.icra.in or contact any ICRA office for the latest
information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable,
including the rated issuer. ICRA however has not conducted any audit of the rated issuer or of the information provided by it. While reasonable care has been
taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, and ICRA in particular, makes no
representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. Also, ICRA or any of its group
companies may have provided services other than rating to the issuer rated. All information contained herein must be construed solely as statements of
opinion, and ICRA shall not be liable for any losses incurred by users from any use of this publication or its contents.