ET Now: Let us talk about the performance this past quarter, as it was overall a pretty good quarter, if you could share with us key highlights and what really has led to the strong APE growth and the VNB?
Prashant Tripathy: Yes, that is correct. I am very delighted with how the last quarter went. We grew about 36% on APE basis for the quarter, our VNB was pretty robust– 44%– and as a result of these two vectors for the entire year– our VNB has grown 39% and our APE has grown 19% –these are industry top numbers and what led to this kind of performance is a three-four fold reasons.
Reason number one was throughout the year, the digital legislative with which Max Life approached the lockdown and continued to outperform throughout the year. Our performance at
has also been very robust and that is another reason why we did well. We saw growth across all channels –our own channels as well as Yes Bank in quarter three and four and that growth came from very smart product mix change– moving more towards protection throughout the year and also rebalancing the product mix in favour of non-power saving design, guarantee designs. These are the reasons for outperformance especially during quarter four.
ET Now: Also talk to us about the impact of the second wave and now that it is easing, what is the likely scenario when it comes to the claim ratio?
Let me first talk about the industry and unlike last year when there was big impact on industry growth numbers, this year industry has been pretty strong for the first two months. I have noticed that for both months at least the private life insurance industry has recorded growth of about 35-36% which is pretty robust over last year. However, we must remember that was small base effect. We are seeing higher instances of claims and it will be premature because claims come with a lag of about four to six weeks but sufficient to say that we have seen higher instances of claims this year. Max Life Insurance especially to protect ourselves for future claims, has kept about 500 crore in balance sheet to take care of wave two or wave three. So, we feel very confident that with the kind of buffer that we carry in our balance sheet we will be able to manage wave two quite well.
ET Now: What is the growth that you are expecting for FY22?
Going forward the reasons why we saw robust growth is of course the VNB growth which is margin growth as well as sales growth–The journey of Max Life Insurance along with Axis Bank– the foundation that we have build together and now Axis Bank being, our promoter, will create new avenues for growth for Max Life Insurance. There is a big programme that we are running around growth of our own channels and our bet on moving towards more health, retirement protection will continue to give momentum to our margins. These factors put together will continue to keep our return embedded value a pretty robust with target close to about 20%.
ET Now: In the last six months the cost of insurance has gone higher and that is largely because the reinsurance players have hiked their prices, do you see a sharp increase post the second wave?
The reinsurance companies have– on one side been mindful that the claims are going up but as far as price increase is concerned they have not factored in the Covid claims because the general belief is that the Covid claims are one off and that it will go away. Now, as the trend emerges and we find that post vaccination the instances of Covid or instances of death because of Covid actually go down drastically, Covid will be just a wave which will pass away and the prices will hold on. But, if Covid causes a permanent shift in mortality experience to some extent because of deep rooted impact of Covid on a large number of customer base then there may be an increase, very hard to predict at this point of time but working very closely with reinsurers, I must tell you that they have taken a pragmatic view, they have not taken a blind view of Covid.
ET Now: Personally, when I look at the industry growth a year ago when Covid hit us my view was that okay the fear to buy insurance is only going to increase and the need for protection will only go higher and the industry will go through an explosive growth but the need of the hour which is to buy protection has not really translated into any great gains for the industry, I am not talking about Max but across the board. Now considering the circumstances we are in, are you surprised with that?
So, you would have noticed we actually run every year a survey called India Protection Questions– where we go and ask consumers at large in top 25 cities and ask their views about protection and despite how we in large cities perceive protection the level of penetration of protection as well as awareness continues to be very low, hence expecting that protection suddenly will jump up from whatever x% to 3x etc is not going to happen.
I think it will take longer time, but if you look at protection as a segment, it is going to be a high growth segment for many years to come because slowly the penetration will increase. There is a direct correlation between how pandemic behaves and how people get scared and then the demand, so for example, last year you may recall in the first two quarters the demand was pretty high but then the demand subsided as the Covid went down. Suddenly, I am again seeing in the month of April and May that demand to come back and it shows up not just in terms of number of policies that we sell but Google search queries etc also jump up. So hopefully, I am very optimistic that as awareness increases people will continue to buy protection and for us it has been the highest growth segment, we have grown over 50% year-on-year for the last five years and I expect that growth or momentum will sustain over the next few years.