The Axis Bank-Max Life Insurance equity partnership has put to rest all uncertainties regarding their distribution tie-up, which is due for renewal in 2021. Prashant Tripathy, managing director and chief executive officer, Max Life, speaks to Shreepad S Aute about the growth levers the deal offers while revising the insurer's medium-term premium target upwards. Edited Excerpts:
The deal addresses investor concerns about the continuation of Max Life’s distribution tie-up with Axis. What additional synergies benefits do you see from this equity partnership?
Yes, the biggest benefit is the stability to Max Life in the form of having large distributor as a shareholder. It provides a pedestal for long-term growth. But there will also be much higher level of leverage to have a large financial services group become your shareholder. There will be synergies to work in terms of governance, ease of working together, creating common plans, product mix, to learn from Amitabh Chaudhry (MD & CEO of Axis Bank), who himself has been CEO of HDFC life.
What growth levers are you seeing with this deal?
So far, we have been working with Axis Bank as our distribution partner. With this deal, Axis Bank’s ownership becomes higher. So, they will be interested in increasing the value of Max Life by deploying all means with respect to the customers, digitisation and product mix in a much more significant manner. In fact, the conviction with which Axis Bank is selling Max Life’s products would now improve substantially. With this deal, there will be more push towards selling high-margin products such as protection, which Indian customers also need.
Where do you see APE (annualised premium equivalent) growth and margin over the medium term once the deal is cleared?
We have always been targeting 15-20 per cent APE growth, excluding the Covid-19 impact, and we are growing in that range. With this deal, we would increase our growth target to 18-20 per cent over the medium term. Our margin remained stable in the past few years due to higher investments in proprietary channel. We are hoping that in three years' time the margin will expand by 200-300 basis points once we fully leverage those investments, and with this deal we should see further margin improvement.
Will your distribution strategy change post the deal? Are you going you reduce dependency on other channels or tie up with other banks?
No, that is not correct. Relationships with other banks will continue. We have extended our relationship with YES Bank for five more years. Also, our strategy to grow and make investments in our own channels, namely agency and other proprietary channels will continue. In fact, the share of our own channel might go up. We believe in multi-channel distribution.
After the recent Franklin Templeton crisis, how comfortable are you with your debt investments, which are 78 per cent of assets under management?
We don’t have any exposure to anything similar to Franklin Templeton Fund. We don't take exposure in mutual funds where the underlying assets are corporate bonds. All our mutual funds are mostly in overnight funds and backed by government securities.