in the form of having a large distributor as a shareholder. It provides a pedestal for long-term growth. But, having a large financial services group as your shareholder also means leverage will be much higher.
There will be synergies in terms of governance, ease of working together, creating common plans, product mix, to learn from Amitabh Chaudhry (MD & CEO of Axis Bank), who has been CEO of HDFC life.
What growth levers are you seeing with this deal?
So far, we work 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 in terms of 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 a greater push towards selling high-margin products, such as protection, which Indian customers need.
Where do you see APE (annualised premium equivalent) growth and margin over the medium term once the deal is cleared?
We have always targeted 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 was stable in the last couple of years because of higher investments in the proprietary channel.
We are hoping that in three years, 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 after the deal? Are you going to reduce dependency on other channels or tie up with other banks?
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 exposure to anything similar to Franklin Templeton
Fund. We don’t take exposure in mutual funds where underlying assets are corporate bonds. Our mutual fund exposure is mostly in overnight funds and backed by government securities.