The board also approved a preferential issuance, which will allow Mitsui Sumitomo Insurance (MSI) to swap 19.98 percent of its shareholding in Max Life with 21.45 percent stake in MFS.
Max Financial Services (MFS) posted a 65 percent year-on-year (YoY) jump in its June quarter net profit to Rs 54 crore.
MFS’ board also approved a preferential issuance, which will allow Mitsui Sumitomo Insurance (MSI) to swap 19.98 percent of its shareholding in Max Life Insurance (MLIC) for a 21.45 percent stake in MFS.
MSI is part of the world’s seventh-largest MS&AD Insurance Group Holding of Japan. MFS and MSI are 74-26 joint venture partners in Max Life Insurance.
The transaction will also provide MFS with an option to purchase from MSI, its balance shareholding of 5.24 percent of the equity share capital of Max Life for cash at a price of Rs 80.89 per share.
The transaction structure will involve MSI subscribing 73,551,029 shares of MFS having a par value of Rs 2 each at a price of Rs 421.67 per share aggregating to 21.45 percent of the paid-up equity share capital of the company on the date of allotment of the aforesaid fresh shares.
In consideration, MFS will receive 383,392,784 shares of Rs 10 each from MSI at a price of Rs. 80.89 per share translating into 19.98 percent stake of MLIC. Pursuant to this, the equity stake held by MFS in Max Life will increase from 71.79 percent to 91.77 percent.
MFS’ sole operating subsidiary Max Life continued its strong performance in Q1 FY2020, reporting revenues of Rs. 3,544 crores, growing 15 percent YoY. The business also reported its Embedded Value (EV) based on market consistent methodology (MCEV) at Rs 9,314 crore, with an Operating Return on EV (RoEV) of 14.8 percent.
The Value of New Business (VNB) written during the quarter was Rs 134 crore, growing 33 percent YoY while the New Business Margin(NBM) expanded 150 bps to 24.9 percent.
Max Life’s Assets under Management in Q1FY2020 were Rs 63,877 crore, an 18 percent YoY growth. The company’s Individual APE grew 23 percent over the last year to Rs 679 crore.
Max Life’s proprietary channel sales were recorded at Rs 228 crore, a growth of 16 percent over the previous year.
Max Life also initiated its Agency Excellence Program during the quarter, based on recommendations from former senior employees of New York Life, its erstwhile JV partner known for its gold standard in Agency channel.
Mohit Talwar, Vice Chairman, Max Group & Managing Director, Max Financial Services, said, “MSI has been valued partners since long, contributing through their participation in the Max Life Board. We are positive that they will continue to be equally engaged and helpful at the holding company level."
Speaking on the Q1 numbers, Talwar said the performance in the first quarter of the fiscal has set a firm pace for our goal of achieving 25 percent each in sales growth, new business margin, and return on embedded value, over the next three years.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.
