Max Life eyes VNB growth of 26 per cent in FY21-22

After clocking a robust 39 per cent growth in ‘Value of new business’ (VNB) in 2020-21, Max Life Insurance, a private life insurer, is now eyeing a VNB growth of at least 26 per cent this fiscal, its Managing Director & CEO Prashant Tripathy has said.

Seen globally as the true measure of a life insurer’s profits, the VNB as a concept is the profit the company (insurer) hopes to make on policies written during the year after accounting for all the costs incurred and assuming future persistence and mortality.

For 2020-21, Max Life Insurance’s VNB came in at ₹ 1,249 crore, up 39 per cent over previous fiscal and almost doubled in last 3 years. The average VNB growth for the company over the last five years stood at 26 per cent.

“Maintaining VNB growth at 39 per cent will be difficult. However, our aspiration this fiscal is to achieve VNB growth of atleast 26 per cent, which has been our last five years average,” Tripathy told BusinessLine in an interaction post the announcement of financial results for 2020-21.

Asked as to how Max Life achieved strong growth in VNB in a pandemic year, Tripathy said that the company sold more protection policies and changed product mix and sold more non participating products. There was also some base effect that aided such growth, he noted.

Tripathy highlighted that VNB —and not statutory profits —is true reflection of an insurer’s profitability.

Statutory profits dip

As regards statutory profits, Max Life on Tuesday reported that it has recorded net profit of ₹523 crore in FY’20-21. This reflected a decline of 3 per cent over the net profit of ₹ 539 crore recorded in the previous fiscal.

In 2020–21, total new business premium (individual and group) of Max life increased 22 per cent to ₹ 6,826 crore. In terms of individual adjusted premium equivalents (APE), the company recorded 19 per cent growth to ₹ 4,907 crore. Further, the renewal premium income (including group) grew 15 per cent to ₹ 12,192 crore taking gross written premium to ₹19,018 crore, an increase of 18 per cent over the previous financial year.

For the fourth quarter ended March 31, 2021, Max life recorded a gross premium of ₹ 7,106 crore, an increase of 21 per cent from ₹ 5,873 crore in the same quarter last year. Individual APE grew 35 per cent in the quarter to ₹ 1,893 crore from ₹ 1,398 crore in the year ago period.

Second wave

Tripathy said that despite the second wave, situation in April-May 2021 is not that bad as last year when it came to industry. In 2020-21, the company received 1,762 Covid death claims and out of which 1,746 claims were settled with an amount close to ₹ 200 crore. For the current fiscal, the company has made ₹ 500 crore provisioning towards likely Covid claims.

“Despite Covid claims, our claims payment ratio has improved. We have kept ₹ 500 crore extra provision. We will not have P&L impact if extra claims is less than ₹ 500 crore in 2021-22. Of course, claims are going to go higher and our financials are protected. Covid has impacted balance sheet marginally, but we have enough resources to take care of that,” Tripathy said.

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