MANAGEMENT DISCUSSION AND ANALYSIS

Mr. Rahul Khosla

President, Max Group & Executive President, MFSL

Mr. Mohit Talwar

Managing Director

Ms. Archana Pandey

Sr. Director - Corporate Affairs

Mr. Sandeep Pathak

Company Secretary

Ms. Sujatha Ratnam

Chief Financial Officer

Ms. Vandana Trehan

EA to Group President

Max Financial Services Limited (‘MFSL’ or ‘the Company’), a part of the US$ 3 billion Max Group, dynamically manages a majority stake in Max Life Insurance Company Limited (“Max Life”), India’s largest non-bank owned, private life insurance company. Max Life is a joint venture with Mitsui Sumitomo Insurance (MSI), a Japan headquartered global leader in life insurance. After the demerger of the erstwhile Max India Limited in January 2016, MFSL became the first listed company in India focussing exclusively on life insurance, thus providing an opportunity for Indian investors to get access to a unique pure life insurance business. The Company currently holds 70.75% stake in Max Life as on date of this report.

In FY 2018, Max Financial Services Limited reported consolidated revenues of ₹ 14,967 crore, with an encouraging growth of 15% over the previous year. The Company reported consolidated Net Profit of ₹ 296 crore, 25% lower compared to the previous year.

MFSL’s sole operating subsidiary Max Life Insurance demonstrated broad-based growth across channels with Individual Adjusted Sales of ₹ 3,215 crore in FY 2018, growing 22% over the previous year. This was primarily driven by improvement in productivity and increased demand for unit-linked products across channels. Max Life’s Renewal Premium stood at ₹ 8,152 crore, increasing 15% over the previous year, led by efficiency improvement and various initiatives aimed at lapse recovery. Gross Written Premium in FY 2018 was ₹ 12,501 crore, rising to 16% over the previous year.

Max Life achieved an important milestone this year with its Assets under Management (AUM) crossing the ₹ 50,000 crore mark for the first time. The AUM as at 31st March 2018 stood at ₹ 52,237-crore, growing 18% over the previous year.

Max Life also reported Market-Consistent Embedded Value (MCEV), of ₹ 7,509 crore, with an Operating Return on EV (RoEV) of 20.6%. For a detailed review of MCEV, please refer to page no. 45 of the Annual Report. The Value of New Business (VNB) written during FY 2018 was ₹ 656 crore, growing 31% over the previous year, and the New Business Margin stood at 20.2%, 140 bps higher compared to the previous year. Max Life achieved an important milestone this year with its Assets under Management (AUM) crossing the ₹ 50,000-crore mark for the first time. The AUM as at 31st March 2018 stood at ₹ 52,237 crore, growing 18% over the previous year. Max Life is now the 5th largest fund manager among private life insurers in India. The Company’s AUM has grown steadily over the years, reflecting consistent performance, new strategies and a stable approach to product portfolio mix.

CORPORATE DEVELOPMENTS

At its meeting held on 23rd July 2018, the Board of Max Financial Services Limited appointed Mr. Analjit Singh, Founder and Chairman Emeritus of the Max Group as Director and non-executive Chairman of the Company. Mr. Analjit Singh is the sponsor and principal shareholder of Max Financial Services Limited, Max India Limited and Max Ventures and Industries Limited (“MaxVIL”). Mrs. Naina Lal Kidwai who had been serving as Chairman of Max Financial Services Limited since 15th January, 2016, continues to serve on the Board as an Independent Director for her full term.

Another key appointment on the Board of the Company was of Mr. Sahil Vachani, Managing Director and CEO of MaxVIL, on 25th May 2018. He was also appointed to the Board of Directors of Max Life, effective 18th May 2018. Mr. Vachani joined the Boards of these companies as a representative of the Owner Sponsor Group led by Mr. Analjit Singh.

HUMAN RESOURCES

The number of employees on the permanent rolls in Max Financial Services Limited as on 31st March 2018 is 13.

Sevabhav, Credibility and Excellence continue to be the key HR pillars, skilfully intertwined across all the talent and performance measures. The organisation has continued to emphasise right through the year its strong focus on building effective corporate governance, fostering an inclusive work culture, enhancing talent capabilities to drive performance and development. This was achieved by leveraging progressive ways of employee learning and development.

The Company is committed to build and sustain its talent pipeline by attracting and retaining the right talent and investing in adequate capability enhancement of employees. Concerted efforts have been directed towards multiple talent management interventions, in-house training programmes as well as sponsoring employees to attend external training and career development programmes for improving their functional and managerial effectiveness. Additionally, the power of Digital HR is being harnessed to ensure that the workforce is capable of multi-skilling, thus enriching the overall employee experience.

The Company has established an organisational structure which is agile and fluid, focussed on delivering results and efficient performance in a dynamic business environment. The organisation strongly believes in focussing on all-round employee wellness. It strives to create effective communication channels for employees such that they are all aligned to the common business goals / strategy.

OUTLOOK

Max Life has demonstrated strong and consistent organic growth over the past few years. At the same time, with a healthy solvency ratio of 275% and fundraising capabilities, the Company has the passion as well as the ability to aggressively pursue inorganic growth. With the acquisition of an exceptional quality bank-owned life insurance asset, this move would certainly empower Max Life to offer its product portfolio to a much wider and growing customer base. Simultaneously, the business will continue to build on its existing strengths of need-based selling of long-term savings and protection products through a well-balanced distribution architecture comprising bancassurance, agency and the rapidly growing digital channel.