Ladies and gentlemen, good day and welcome to the Max Financial Services Limited Q2 and H1 FY 2025 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Amrit Singh, Chief Financial Officer, Max Financial Services Limited and Max Life Insurance Company Limited. Thank you, and over to you, sir.
Thank you, Leo. Good morning, everyone, and once again, welcome you to the Max Financial Services earnings call for the quarter ended September of twenty twenty-four. We made our results available on our website as well as stock exchanges last evening. And as always, I'm today joined by Prashant Tripathi, Managing Director and CEO of Max Life Insurance. I'll request him to share key developments and insights from this quarter.
Good morning, everyone, and warm welcome to Max Financial Services earnings call. I'm very excited, just to begin with, to share with you that we have now solid plans to refresh our corporate name and brand identity. With Axis Bank on board as a co-promoter, Max Life management proposed the inclusion of Axis as a part of its corporate name and brand identity, and I'm so thankful to the Axis Bank management board as well as Max that we now have the permission to use Axis name from their perspective on our brand identity. With Axis Bank coming as co-promoter way back in two thousand twenty-one, igniting a powerful synergy, the time was right for us to consider having Axis name in our brand also.
Our goal is to create an even more powerful and influential brand that continues to inspire Bharosa for our customers, employees, investors and other stakeholders. This strategic decision was backed by an in-depth research with all our stakeholders by an external consultant. The key findings of study show a strong association with Axis Bank beyond urban and tier one, and Max plus Axis joint branding being a preferred thing. Combining the two brands would result into stronger brand association, increased likability, ease of remembering and preferred buying consideration, and it will also very solidly and overtly exhibit to all the stakeholders the association as well as ownership of Max Life Insurance by Axis Bank.
The brand refresh has been approved by all the boards, Max Life, Max Financial, and Axis Bank, and the new corporate name and brand and identity will be announced in due course, subject to corporate and regulatory approvals. I am very optimistic that we will do that over next quarter. Now, moving on to key development in quarter two across all the strategic areas, and I'll pick them up one by one. Firstly, about predictable and sustainable growth. In the second quarter of FY twenty-five, our individual adjusted first-year premium exhibited a very strong growth of 34%, outperforming both the private sector and overall industry growth rates of 24% and 21%, respectively. It is noteworthy that this growth, even on a two-year CAGR term, is also a healthy 25% compared to overall industry growth of only 14%.
Total APE in quarter two expanded by 31%, led to a significant 20%, over 20% increase in number of policies we issued. Therefore, so far in the first half of the year, our sales, which is APE and adjusted FYP, have grown by an impressive 31%, backed by secular growth from both proprietary and partnership channels. Our continued investment in prop channels led to a sustained momentum in their growth, achieving year-on-year 45% growth in quarter two FY 2025, and 51% in H1 FY 2025. It is noteworthy that our strong focus and execution capabilities have resulted in prop channel growing at two-year CAGR of around 46% in H1 FY 2025. Offline prop channels saw a remarkable 39% growth, driven by enhanced front, frontline sales productivity and the expansion of our top-performing agent pool.
Our online channels continue to lead the market, holding the top position across digital platforms in both protection and savings segments. These channels grew by over 59% in quarter two FY twenty-five, fueled by robust demand of our new fund offer in that online savings segment. Further, in our ongoing efforts to broaden distribution, we have successfully onboarded twenty new partners during quarter two FY twenty-five, including two banks. India Post Payments Bank is one of them, ten GCL partners, five online and offline brokers, and three corporate agents. While these partners become sizable in medium term, our existing partnership channels delivered a strong performance in quarter two as well, posting a 22% growth and 17% in H1 FY twenty-five.
Additionally, despite a competitive and slow disbursement market, our group credit life business expanded by 34% in H1 FY twenty-five, showcasing our ability to scale up in highly competitive markets despite being late entrants. In short, we are committed to maintaining a similar momentum of growth throughout the year, surpassing industry growth by a significant margin. Talking about products, which has been a big discussion item also in view of the regulatory changes which became effective from first of October, our dedication to product innovation remains steadfast. Max Life continues to lead the market in launching attractive products that align with customer needs while delivering healthy returns to our shareholders. With the same objective in quarter two, we introduced a Nifty 500 Momentum Fund, predominantly for e-commerce customers, a move to leverage opportunities in the current equity market.
This led to 74% growth in the ULIP segment at company level, with the ULIP share in our products mix increasing from 35% total APE last year to 47% in quarter two FY 2025. Protection, a long-term focus area for us, saw 49% growth in retail protection in quarter two, driven by the success of our unique SEWA Health proposition and strategic emphasis on riders. We achieved the highest ever rider attachment ratio of 45% in H1 FY 2025, was 31% in H1 FY 2024, with rider APE growing by over 280%. With this protection and health penetration in our individual APE, we reached 11% in quarter two FY 2025 versus 10% previous year.
Further, in retirement, we recently launched our latest edition of IRIS study, which revealed that most urban Indians recognize the importance of early retirement planning. The retirement preparedness index for urban India increased from 47 points in IRIS 3.0, to 49 points in IRIS 4.0, supported by greater awareness and proactive financial planning. Therefore, the retirement segment remains a strategic priority for us, and we are well positioned to capitalize on this opportunity through our annuity proposition. While in quarter two, annuity sales saw a moderate growth of 5% due to competitive pricing actions, we expect them to ease in the coming quarters, paving the way for renewed growth from this segment.
All our efforts in distribution expansion, along with product innovation, resulted in a significant increase of 23% in our VNB for quarter two, with an NBM of 23.6. And with that, our first half VNB growth is now 16%. This is an increase on quarter-on-quarter 6.1%, which comes from the benefit of our operating leverage and strong growth in rider attachment. You will find the outcomes to be consistent with the commentary that we had shared with you at the end of quarter one, where there were a lot of questions around our NBMs. Surrender regulations update is something that you must be waiting for. As you are aware, new surrender regulations became effective from first October, and it wanted all our products to be fully compliant.
I'm happy to share that we have successfully relaunched 98% of these products to date. Further, we are in the process of mitigating the impact on margins by adjusting distribution compensation, customer benefits, as well as taking, you know, actions on specific discretionary area of expenses. As guided earlier, we anticipate a net margin impact on a run rate basis, full year run rate basis of between 100 and 200 basis points, majority of which, I believe, will be mitigated in the medium term. Medium term defined as over the next few quarters. Talking about customer obsession across the value chain, at Max Life, customer obsession is integrated to everything we do. The dedication to delivering unparalleled value and trust has been recognized, with Max Life being named as one of the Best Organizations for Customer Experience 2024 by ET Now.
We also achieved a 5-point increase in our company-wide Net Promoter Score, rising from 56 in March 2024 to 61 in September 2024, with both touchpoint and relationship NPS showing similar gains. We maintain our leadership in 13th-month persistency for number of policies, with our regular and limited premium persistency reaching its highest ever level at 87%, up 309 basis points, while our 61st-month persistency stood at 58 for the period ending September 2024. The fourth strategic lever, this is digitization for efficiency and intelligence. Our ongoing digitization initiatives continue to enhance operational efficiency across the business, delivering both cost savings and improved customer satisfaction. Max Life's efforts were recognized with the Digital Transformation Award at the 19th SKOCH Summit for our OCI cloud journey, as well as the Best Desktop Ops Team Award by Quantic.
Our quarter two technology interventions include the launch of the mPitch Pro app, designed to help agent advisors simplify the pitch to prospects, and the THIRL tool, which streamlines onboarding of customers and distributors. Our new claim system called Pega, now operational for almost all products, offers real-time claim validation, further building customer trust. We also launched a generative AI-based Copilot for over 4,000 frontline sales personnel and supervisors in quarter two to assist with real-time sales query and objection handling. In summary, our quarter two results underscore our ability to scale proprietary channels, grow partnerships, and achieve profitable outcomes. As we move forward, leveraging the strength of both Max and Axis brands, we remain committed to delivering sustainable long-term value for our customers, shareholders, partners, and employees.
I'm going to hand it over to Amrit now, who will provide an update on our financial performance. Back to you, Amrit.
Thank you, Prashant. Some update on key financial metrics, incrementally. MFSL consolidated revenue, excluding investment income, now stands at INR 12,820 crores, a growth of 14% in the first half. The consolidated profit after tax for MFSL stands at INR 295 crores. Max Life retail premium grew by 12% to INR 8,046 crores, and hence consequently, the gross premium has grown by 14% to INR 14,137 crores. Value of new business over the first half is at INR 766 crores versus INR 663 crores the previous year, a growth of 16%. The NBM for first half now has improved to 21.26%. Embedded value end of September 2024 is INR 23,338 crores.
This includes the capital infusion, which was done by Axis in the first quarter of INR 1,612 crore. The annualized total return on EV first half FY 2025, excluding the capital infusion of INR 1,612 crore, is 24.2%, and the annualized operating ROE stands at 16.8%. In the annualized operating ROE, there has been a positive operating variance of INR 9 crore. On overall embedded value, there is a non-operating variance of INR 660 crore. Policyholder OpEx to GWP stands at 16.5, and total cost to GWP is at 25.6. Policyholder OpEx has grown by 22% in line with business growth. Max Life first half FY 2025 profit stands at INR 267 crore, a growth of 3%. Solvency position is at 198% end of September 2024.
The overall assets under management, end of September 2024, is 1.7 lakh crore, a growth of 27%. We will now be happy to take any questions that you may have, and I will hand over to moderator to open the floor for questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from Shreya Shivani from CLSA. Please go ahead.
Yeah. Thank you, and congratulations on a good set of numbers. So just wanted to check on two things. First is on the surrender value regulation. We've heard your peers speak about that they're using a multi different form combination of clawback or progressive commissions, and that's how the structures are currently under discussion with distributors. Where are you guys on this conversation? Are they being seen? Most of your peers have said that the industry will take another quarter for this entire dynamic to settle down. Some commentary around that would be useful. And second, sir, on this Axis use of Axis Bank in the name, Axis in the name, what sort of regulatory approvals are required here?
You are saying it can come through in the next quarter. Will RBI be included in approving this? Some color around that would be useful. Thank you so much.
Yeah, thanks, Shreya. I'll take both the questions. On surrender income, my commentary is consistent with what the industry peers are saying. We have had detailed conversations with large set of partners already, and their proposals, which are a combination of all the things that you mentioned. I'm very optimistic that, you know, from our perspective, we'll be able to close it, you know, in less than one quarter. With smaller distribution partners, we are engaging in that discussion right now, and we are really optimistic that all that will get settled over the next few weeks. As far as the approval of branding is concerned, as you know, we need to go to ROC, followed by an approval from IRDAI for the name change. Those are two approvals which are required.
We don't require any approval from RBI, so, hopefully the turnaround time to do that will be close to 45 days. And, you know, I'm very optimistic that hence to the next quarter, we'll be able to launch our brand.
Okay, very useful, sir. Congratulations, and all the best.
Thank you, Shreya.
Thank you. The next question is from Avinash Singh from Emkay Global. Avinash's line seems to be on hold. We'll move to the next question. Next question is from Swaraj Mukherjee from B&K Securities. Please go ahead.
Hi, sir. Thank you for taking my questions and congrats on a good set of numbers. Yeah, so first I wanted to understand regarding the margin front. So if I were to look at Q2 vis-à-vis Q1, this around 600 basis points improvement that has come through-
... just wanted some quantification from your side that how much of this would have come from operating leverage and how much should have come from the product mix? Because at least at you know macro level, it looks like that product mix have you know impact might be relatively smaller, but if you could give more color on that. And also whether you know you like you know a couple of your peers have commented that the yield curve impact were absorbed in in terms of the non-par products. So have you done the same as well? And whether if that is part of this number, how much you know in basis points terms maybe had impacted the margin? That would give us some color on what we are going to be going ahead.
And also, if your guidance changes because of that, you know, because this margin came out strong this quarter, whether there would be any change in the guidance. Secondly, sir, in terms I wanted some color on, you know, the breakup that you can maybe provide on the sub-segments in your proprietary channel. How, you know, what has been the mix of, say, the direct channel, the e-commerce, and the agency in your proprietary channel this quarter and the prior year same quarter. So that will be helpful. And how the commission structures are panning out in the e-commerce channel, because I think for one each, you have mentioned that there has been more than 100% growth in this channel. So just wanted to understand that. And lastly, in-
I will lose track of all the questions that you're asking.
Sure, sir. Just one last one on the structures simplification process, if you can highlight.
Let me make an attempt to answer some of the questions, and I'll lean on Amrit to share with you the numbers. I think, you know, with respect to the advantage or margin increase, you may recall that we mention every time that when we come up with our margin numbers, we take expenses on actuals, and hence, if you were to look at last many years, our quarter one margins are smallest, and every passing quarter, the margin builds up, and this quarter was no different. If you remember, we had a 17.5% margin in quarter one. If you look at our VNB in the first quarter, our VNB was close to INR 250 crore. Now it is more than doubled.
So we do significant more sales in quarter two compared to quarter one, and hence, there will be a big advantage of leverage first part. And I don't know if Amrit has those numbers handy. I'll give it to him in a second. And the other one is a commentary that I mentioned to you. We attached significant more riders this quarter to drive our margins up. So hence, if you look at our product mix, our product mix is more or less similar. We have written similar amounts of unit also. But because of higher leverage as well as attachment of riders, we were able to drive more profit. So in riders, we generally call as a part of our protection and health proposition.
And you will notice that protection and health proposition has significantly increased in first half. So that is the big reason why it has happened. But I'm going to hand it over to Amrit to, you know, give more color, as well as talk about responses to other questions.
Yeah, thanks, Sumit. So, from quarter one to quarter two, the 600 basis point improvement that you see, 500 basis point of that comes out of operating leverage and also strong volume growth that we have continued experiencing in the quarter. And around 100 basis point is a mix of, the riders, which we have been successfully able to actually attach across our product lines. On the second question that you actually asked was on, the yield curve impact. Look, the yield curve impact is a regular course of business. There is a yield curve movement which will happen, and we will respond to those yield curve movements. We have done some bit of it during this first half.
The non-par pricing has been adjusted at various points in time, though the movement in the last month has been a bit sharper, but keeping an overall view of competitive intensity and competitive actions, we will also, you know, continue to take those calls with respect to adjusting the non-par rates for the customers as well. I think you asked a question on the contribution coming out of our different channels. The agency has, at an overall level, contributed around 21-22% last year. It has at similar levels this year as well. The CAB channel also contributed around 9% last year. It is at similar levels this year as well, and the e-commerce contribution is actually up from 9%, it has moved to 15%.
So there is the e-commerce growth, which you can see of over 105% in the first half is causing to an improvement of share of the e-commerce business. What else?
Yeah. Yeah, yeah, a couple of things. One was, you know, whether you are, you know, whether there is any change in the margin guidance that you had given because of, because of the, you know, better margin profile that came through this time, and maybe the rider attachments are growing. So they would like to change that. And, second is on the structure simplification process, if there is any progress, if you want to share.
So I think on guidance, we'll stick to whatever we had been saying at the start of the year. You will appreciate that-
... it's not a normal period that we are entering into from a regulatory disruption that has come into play, and it will require this quarter three some sort of stabilization to happen. But keeping the overall guidance in view that we do aspire for a double-digit VNB growth and a strong APE growth, and VNB margins will be an outcome of some of those things. So we'll kind of continue holding to those particular guidances. On the structure simplification, we don't have any updates beyond whatever we have shared so far. We are working and we are observing.
Sure, sir. And do you have any timelines in mind for that?
I think the moment we have visibility to timelines, we'll come back to you. It's, I mean, it is going to be a time-consuming process, and, you know, I think we'll make an attempt to do that over the next few quarters, is the way I'll put it.
Sure, sir. Sure. Very helpful. Thank you so much, and all the best.
Thanks.
Thank you. The next question is from Supratim Datta from Ambit. Please go ahead.
Hi. Thanks for the opportunity. So my first question is on the growth side, you know, ULIP has been growing very strongly, and this has not been the case only for you, but across the sector, and ULIP has been growing very strongly. Just wanted to understand, what is your experience, you know, suggest that, you know, when the market slows down or when, you know, things start to, you know, stabilize, how easy is it to switch from ULIP to other products? And, you know, what could be some of the levers that you could use to, you know, shift growth from one product to the other? If you could give some color on that and what your past experience is there.
Particularly given, you know, we could enter a period where we could see rate cut as well, if you could give some color on, you know, how life insurance products during rate cut periods move on, that would be very helpful, and the next question is on the EV WoC, so there seems to be a positive operating variance that you have been holding for this half. Just wanted to understand that, you know, what has resulted in this positive operating variance. You could give some color on that, that would be helpful for us.
Yes. Okay, so I'll take that. I think growth from ULIP definitely is a phenomenon, and this is not happening for the first time. In past also, there's a strong correlation on ULIP growth with respect to market uptake, and over the last few quarters we have seen, you know, the share market perform well and then ULIP picks up. In past, we have witnessed that life insurance industry has been able to maneuver the change quite well, and so have we. There have been many quarters where our growth or our ULIP mix will go up to between 40%-45%, it will fall between 35%-40%, but we have more or less maintained that trajectory. I don't expect a big impact on account of ULIP transition.
If at all, it will be very marginal. In terms of EVWOC and operating variance, positive variance, operating variance, which is a minor number, is because of some of the upsides that we have seen from our mortality experience.
Got it. And just one clarification: so on the name change or, you know, rebranding, would it be a joint name that you're proposing, like Axis Max or Max Axis, or, you know, how would that be? If you could give some color.
Yeah, I think your expectation is correct. I can't tell you whether it will be Axis Max, Max Axis, but yeah, it is going to be a combination of both the names.
Got it. Thank you.
Thank you.
Thank you. The next question is from Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah, hi. So firstly, just extending the point on the rebranding, which channels do you, in your, you know, the survey or the feedback that you would have received from the third party, which channels would you expect to benefit the most out of this? And, you know, we've already kind of been delivering a very strong growth on AP front. So, you know, on this base, also from a two to three-year perspective, what will be your growth aspiration considering the rebranding?
Yes. Thank you very much. That's a very good, good question you ask, and it is something very, very strategic. From our point of view, of course, Max Life Insurance is a prominent brand within life insurance space. We are seen as experts in life insurance, and we have had an incredible journey so far. However, you know, Axis is a larger financial services conglomerate, and it has presence in many, many more cities, tier two, tier three, smaller in part of India, where perhaps Max Life brand is not as strong. And hence, we kickstarted and this is not really something which was a guidance from shareholders.
Actually, management team picked up this exercise to look at any opportunities that may arise by having the strength of Axis Bank associated with Max Life Insurance, and we actually talked to almost everybody. We, as you know, we are expanding in smaller cities. We opened hundred branches over last one year. We talked to agents, advisors, we talked to current customers, we talked to prospective customers, we talked to employees of Axis Bank, sellers of Axis Bank, sellers for other banks, and I think across all cohorts, we found that the strength of both brands coming together was more prominent than Max Life on its own.
So, hence, the management team made a request to our Axis set of shareholders, along with Max shareholders, to allow us to use the brand, which kind of carries both the strength of both the brands together, and I'm very happy and lucky that it's been allowed, so we'll take that on board. It also, in a way, answers some of the questions that investors and analysts have over and over again come and asked us about the seriousness, the ownership of the agenda of Max Life Insurance growth by Axis Bank.
I would like to unequivocally communicate that, you know, it is reflective, the ownership of the agenda, the growth of Max Life's agenda by Axis Bank is quite vested in the decision that Axis Bank has chosen to lend its name brand to Max Life Insurance. It goes to that extent. So, you know, it serves, you know, to the purpose of really reflecting and demonstrating to the entire world that both the companies are going to work together and, you know, we have very deep interest in building life insurance business in India. We have, you know, I think the advantage, distinct advantage that we're going to get is also with sellers of Axis Bank, where we have an open architecture situation.
I think having a common brand or having Axis brand attached to Max Life Insurance will definitely give some bit of distinctive advantage to Max Life Insurance in the minds of the sellers. We already are in the market share range of 65%-70%, and we have maintained that over and over again. There have been questions around it. We have maintained it. So, honestly, from all counts, I think this was a very positive, you know, decision that I was personally passionate about, and I'm happy that we're moving in that direction. Our growth has been strong. Your observation is right. We are doing very well, and I think with these changes or with the strategic decisions that we are doing, one will make an attempt to grow even faster.
We have deep aspirations to be among the top three players, and I think we will continue to pursue that journey, with strength and with determination.
Great. Thanks for that elaborate answer. And, secondly, from a, you know, viewing the margin perspective in the second half, how do you see this panning out, you know, given that, you know, charges, will kind of, come in and probably will have a rebranding cost that could, come into your numbers? And, also the commission structures are still, you know, being, discussed and not yet finalized. So, you know, do we see the margins kind of, coming off in Q3 and then, kind of possibly a more normalized number in Q4? How do we see the margins kind of panning out?
From a, you know, two to three-year perspective, do we see that the VNB CAGR would be similar to the APE CAGR, or how should we kind of look at from a two to three-year perspective?
Yes. I think margin is something which is quite dear to us, and you know, on all the discussions that we do internally, margin finds a very important place. However, over last two or three years, you would have seen that we are trying to balance market share growth with margin. One would be very happy if we are near about 24%-25% margin, yet being able to maintain the growth trajectory on APE the way we are doing. Last year, margin was 26.5%. The year began without any surrender impact. We had given a guidance of being between 25 to 26, that kind of number, close to about 25%. The surrender guidelines have come, and you know, we have spoken about 100-200 basis point impact.
So really, I think our margin should be in the range of 23-24% for the full year basis. I'm being bold in giving some kind of guidance. This is in a very fluid environment. So, you know, with the one quarter here or there, I think there on a run rate basis, we should try and make, or try and come close, between 23-24% for the year. That will be our attempt. And over a medium-term basis, when I say medium term, over three to four quarters, we should try to cover up this data which has come, and as demonstrated in this quarter, we have several initiatives which are running to optimize for margin. So we will continue to do that.
I think, the cost of rebranding, I would count it out, because that's honestly going to be a one-off cost, and hence, you know, one should look at margins independent of that. But you're right, the next two quarters will be, in that sense, especially this quarter, is going to be dynamic because of how surrender income, you know, regulations are settling. But, one would definitely make an impact in, very genuine effort to hold the margin at the levels where we are or improve further.
Great. Just last question, how is doing the first twenty-three day, twenty-two days of October, and then under the new regulations with respect to growth or, with respect to product mix, any different from what you would have seen in the first half?
Honestly, I mean, that's something which I'll be running afoul talking about the growth rate. Let the IDI numbers come at the end of the month. I think it requires your patience.
... Okay, great. Thank you so much.
I don't have any reasons to worry.
Okay, that helps. Thanks.
Thank you. Before we take the next question, a request to participants to please limit your questions to two per participant. Should you have follow-up questions, we request you to rejoin the queue. We take the next question from Sukant Garg from Equirus Securities. Please go ahead.
Hi, thanks for giving me the chance. Just a little bit old school question here. What was the bind rate currently in the policy, Max Life Insurance?
Amrit, do you want to take this? I think even your... Can you repeat your question?
Yeah. What was the bind rate? The policy conversion rate against the quotes that's been generated. Mm-hmm.
Okay. Do you have the conversion rate, Amrit?
It's generally 10% conversion rate is what we observe across-
It varies by channels also.
Yeah. And it does vary, depending upon channel. Bank conversion rates are slightly higher, e-commerce conversion rates are more tougher, and agency conversion rates are, and direct link conversion rates are between eight to 10%.
10% is the overall, the quote, for the quote generated against the policy conversion, that would be correct?
Right. That's right. Meeting, customer meetings done to policy converted.
That is 10%?
Yeah.
Okay. And what would be the revenue per policyholder and average cost per claim, around, approximately?
Sorry, revenue and what claims per policy you ask?
Revenue per policyholder and average cost per claim. Thank you.
The ticket sizes, you mean? You mean the ticket size of every policy?
Yeah. Yeah.
Yeah, it's closer to one lakh, Amrit, if I'm correct, right?
That's right.
Yeah, one lakh per ticket size on the regular policies. I... Sorry, I don't have the answer to the second. But if you could email me and Amrit, we'll come back to you with specific answers, if that works?
Sure. Sure, no problem.
I mean, if you're looking for case sizes in the investor release on page 46, we do provide average ticket size per policy. On an average, as Prashant mentioned, it is INR 1 lakh for all products put together. But it does vary depending upon the product that is being sold. So it can be as low as INR 40,000 in a protection design, going up to as high as INR 1.5 lakh in an annuity kind of a design.
Thank you. The next question is from Madhukar Ladha from Nuvama Wealth Management. Please go ahead.
Hi, good morning. Congratulations on a great set of numbers. Just, you know, I'm not sure whether any of the previous participants have touched upon it, on this. But can you talk a little bit about, you know, what is driving growth within the proprietary channels, so, the online channel and the agency channel? If you could give what is the growth for each online, direct, and the agency? And...
We seem to have lost the line from Mr. Madhukar. We'll move to the next question. The next question is from Avinash Singh from Emkay Global Financial Services. Please go ahead.
Hi, good morning. Congratulations on great set of number. So growth has been especially pressed in first half, I mean, and the growth is coming across channel and to be fair, even product-wide growth is quite good. Now, when we move to H2, there are kind of a couple of external factors that we get, including your surrender regulation changes, probably, I mean, maybe limited, but some disruption on the product side and also some negotiation on the payouts. Additionally, the month of October is anyway a very festive kind of a month, where you have the Diwali disruption.
I mean, so how are you seeing the growth trend so far, and what sort of expectation you will have that, I mean, in this backdrop, what kind of a growth, I mean, that you can deliver on in terms of the APE in H2 or rather for the FY 2025?
You ask a very relevant question. The good part is it just doesn't apply to Max Life Insurance, it is true of industry. You know, hence, I will peg my response to the industry growth rate. Whatever is the industry growth rate, we will try to grow substantially more than like, for example, the industry growth rate was 24%, we grew 34%. So one would like to have a plus 5% to plus 7% delta with respect to private industry growth rate. Let me put it that way. I'm very optimistic that the changes in regulation is not going to have a material impact on growth rates, and we are at least from our side, internally, not cutting down on our growth expectations.
So, you know, one would make an attempt to maintain the trajectory of growth the way we have done in first half. We are quite committed actually on, on a double-digit teens kind of VNB growth rate, and we will target that. Earlier, Avinash, I did mention that, one would make an attempt to hold the margin like we have done in quarter two, despite having the surrender impact. But yeah, you're right, there's some moving pieces. But, I can only, you know, pivot back to every such regulatory changes, you can go back in history. Each time it has happened, Max Life Insurance has come out stronger. So that gives me a lot of optimism. And...
You know, basis all the discussions that we have done, made changes, et cetera, I think, we are reasonably confident of what we're talking about.
Okay.
Yeah.
Clear. Thank you.
Thank you. Next question is from Sanket Godha, from Avendus Spark. Please go ahead.
Yeah, thank you for the opportunity. Prashant, you said that your rider attachment is around 45%, which helping the margin expansion. So just wanted to understand, what is the internal target you have, and to what extent it can mitigate the impact of, say, standard rules or product exchange, to support the margins? I mean, 45% is already a very good number, whether you see this number going fully further up compared to what it is today. That's on rider first question. The second question is on annuity. It seems to have slowed down a bit, if I look at the numbers. Is it because last year you had growth and now you have not got it, that led to that moderation?
If you can differentiate between that number, annuity business into group annuity and individual annuity, and how individual annuity have behaved, that will be useful. And the last question is on cost. The growth has been 31%, but the costs are, overall costs have increased by three to four basis points, on year-on-year basis. Just wanted to understand, is it cost because of capacity addition, like many more people in Axis Bank or your investments in prop channel is still happening?
If that is the case, then future investment leverage, or sorry, this operating leverage for these investments made in the channels, how you seem to play out going ahead? Yeah, these are my three questions.
Thank you very much. I'll take the first one, and then I'll request Amit to focus on the next two. In terms of rider attachments, in our organization, we have chosen protection and health as a very critical area of growth. We are very deeply working on improving the penetration, and we count that as protection, meaning pure protection, either you know, return on premium kind of protection or normal protection. These health products and we have an offering called SEWA, which is very very good in terms of margin contribution as well as sales. The third one is riders, which we are trying very hard to attach to.
A large part of rider attachment that they did was, we did in last quarter was with ULIP designs, which we sold through banks. We are, at this point of time, trying to rebalance the overall, mix, and the efforts are on to, to reduce the proportion of ULIP, you know, and we are seeing reasonable success in doing so. So, we will, we'll continue to work on optimizing the margin. If the ULIP proportion goes up, we'll try to attach riders so that we're able to preserve margin or reduce or optimize the product mix in a manner that ULIP proportion goes down and, the proportion of non-par goes up. So those will be attempts.
As you would appreciate, these are moving pieces and, continuous efforts are made actually to optimize our product mix so that the margin outcomes are optimal. For question two and three, I'm going to hand over to Amrit to respond.
So Prashant, a small follow-up. Is it fair to assume these riders margins are meaningfully superior compared to even the protection and overall company average?
It will be aligned to protection and a tad higher than protection.
Okay.
Significantly higher than company average.
Yeah. Got it. Mm.
Yeah, Amit.
Yeah. I think on the two questions that you asked, one was on annuity and the second one operating leverage in the subsequent quarters. Annuity, as we did mention in the opening remark and also in the presentation, the retail annuity has grown at 18% for first half. But the group annuity, because we actually experienced a very large deal last year, a single one-off deal last year, there is a large decline in group annuity at the moment, around 60% decline. But if you adjust for that large deal, then there's a 60% growth. We are quite optimistic that this group annuity business also will pick up in the subsequent quarters as it kind of, you know, takes away the effect of that one specific large deal.
Amrit, can you split out your annuity into group and retail, percentage mix?
Around 173 is retail and 12 odd crores is group annuity, superannuation annuities.
Okay. Okay.
On AP basis. This is AP, right? So...
Yeah, yeah. INR 173 crore is retail and INR 12 crore is this. That, that's the way I understand.
Yes. Yeah. On operating leverage, you're right. Actually, historically, you would have seen that as quarters progress, where sales volume increases and our fixed operating leverage kicks in, there is an improvement in margins which happens. We do experience anywhere between two hundred to three hundred basis point expansion in margins, from what you have seen in quarter to going forward as well, because of that.
No, Amrit, my question was half to half comparison, that is first half last year to first half this year. You had a growth of 31%, but ideally the cost ratio should have come down, but it has increased. So wanted to understand if cost increase is largely because of man addition in Axis or investment in prop, and how it will play out if you deliver this investment something in the trend, and how you see it playing out going ahead?
Right. So, the total expense that has increased, which is around 28% increase. And obviously, the individual business has grown by 31%. The AP has grown by 31%. The 28% increase, the OpEx, pure OpEx, is actually around 21-22% increase. And there is a large commission increase that is evident, which some bit of it is re-basing of commission between lines which is actually happening and panning out. And also the fact that we are aggressively pursuing some of the new accounts in group credit-life businesses, where generally the commission ratios are higher. Now, with respect to OpEx, pure OpEx, there is obviously an increase which has been done towards the distribution workforce across our channels.
And that distribution workforce does start showing up productivity gains as time progresses, whether it is in agency, whether it is in direct selling teams or whether it is in relationships with banks that we have added. So that's largely, you know, the overall confluence of how OpEx is panning out.
Thank you. Next question is from Madhukar Ladha, from Nuvama Wealth Management. Please go ahead.
Hi, morning. Sorry, I got disconnected for some reason, so just wanted to get a sense of what is driving growth within the online channel, the online agency, and direct, you know, such sort of channel growth out there. Second, if you look at the new business strain, that's also gone up substantially, and it's good to see that surplus has grown, but new business strain has actually gone up quite sharply in this quarter and in the first half, so any particular reason on that? Is it more reserving business or is it more sort of higher commission payouts, or something of that sort of, you know, actually payouts going up out there? Some color on that will be helpful.
Can you break down the economic variance between fixed income and equity?
Yeah. I will request Sunny, if you take this, the question. Yeah. So, you asked three questions. The first one is actually where, what is driving the growth across our proprietary channels? In agency, clearly, you know, our top agents, engagement programs and, overall, top agent momentum is very strong, and that is actually helping us. In addition to the fact that the expansion of capacity, which is helping with processes, you know, productivity being flowing through the years, is also a leading force in what has been driving the growth, momentum within agency channels. In direct selling, teams, actually it's, it's to do with more and newer pools of, customer segments to whom we have started doing cross-sell and up-sell, which is actually aiding that growth.
Those new pools have come as some of the customers which are untapped in our bancassurance franchise, whom we have had now e-commerce relationships. Those kind of additional pools have helped. And obviously, we have invested in people to go and kind of tap into these pools across our cities, and that is enabling the growth momentum in the direct channels. And largely, in the e-commerce channel, I think it's we did mention around two years back that savings is a business that we are now entering into, and there has been strong savings momentum in that particular channel, and which we have from not being present two years back, has kind of come to a pole position with the significant market share that we own in that particular market. That has helped.
And the underlying protection growth, we continue to remain leaders in that business as on the whole. So that's the first one. I think the second question you asked was on the strain. You saw a rise in strain. The reason for the strain increase, one, obviously, is higher sales and protection with group life and ULIPs, which actually intrinsically has higher initial strain. And that's largely the reason why the strain has grown. It's a factor of business mix and business growth coming out of these specific segments. And all these segments, unit links, credit life, and protection have higher strains initially, unlike in a participating savings policy. Last question you asked was on the economic variance, what proportion?
Two-thirds of that is attributable to equity gains and one-third to the tax gains.
Got it. Thank you, and all the best.
Thank you.
Thank you. The next question is from Nidhesh, from Investec. Please go ahead.
Thanks for the opportunity. The question is on e-commerce channel. So what is driving such sharp growth in this channel, almost 100% YOY? Definitely you must be gaining significant market share. So what we are doing to drive that? And second is, if you can break down the e-commerce channel, what percentage of business is coming from your own website, from the e-commerce, in the, in the e-commerce channel?
Thank you, Nidhesh, and greetings to you. I think we historically on the e-commerce channel, Nidhesh, you'll remember we were always very good on protection. We have been number one in protection for many years, and that was our area of focus. However, our presence on savings space was quite limited, and we were like a fourth player, if we were to add the retail protection together. About a year, a year and a half ago, we decided that we need to be comprehensive. This is an area of growth, and you would... If you look at our analyst presentation, you will find number one initiative as being leader in the e-commerce space.
... We took tangible steps to consolidate our presence in the savings space, and that's been the key reason of our growth. Generally, we sell you know a combination of ULIPs with non-par on you know e-commerce platforms. And over last few quarters, I think index-linked designs have been very famous or very popular, and that's driven our growth at e-commerce. On the direct website, that's something that we always try to rebalance, and my sense is we will have close to about 30-35% of the sale actually comes from directly our website.
Sure, sure. That would also be pretty large number, 30% of your e-commerce.
It's growing. Both are growing quite rapidly. Both, the aggregator space, as well as our own website, both of them have grown remarkably.
Yeah. So the direct growth is up 90% and aggregators are also around 9-10%, so both have grown quite substantially.
From product level margin perspective, if you sell through aggregator or if you sell through other channels, how differently is the product level margins from each-
I think it comes similar, Nidhesh. Honestly, it comes similar, not very different. Even coming to our website also requires investment in terms of generating traffic and, search, et cetera.
Sure. Thank you, sir. That's it from my side.
Thank you, Nidhesh. Thank you. You have a nice day.
Thank you. We'll take that as the last question. I would now like to hand the conference back to the management team for closing comments.
Thank you. Thank you, and thank you everyone for attending our earnings call. We continue to look forward to more such interactions, and have a good day. Bye.
Thank you very much.
Thank you very much. On behalf of Max Financial Services, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect the lines.