Max Financial Services Limited (NSE: MFSL) Q4 FY22 Earnings Concall dated May. 10, 2022
Corporate Participants:
Amrit Singh — Chief Financial Officer
Prashant Tripathy — Managing Director & Chief Executive Officer
Subrat Mohanty — Group Executive — Banking Operations and Transformation
Analysts:
Avinash Singh — Emkay Global — Analyst
Madhukar Ladha — Elara Capita — Analyst
Preethi RS — UTI AMC Ltd — Analyst
Nidhesh Jain — Investec — Analyst
Sanketh Godha — Spark Capital — Analyst
Prateek Poddar — Nippon India Mutual Fund — Analyst
Neeraj Toshniwal — UBS — Analyst
Rahul Bhangadia — Lucky Investment Managers Pvt Ltd. — Analyst
Nitin Agarwal — Motilal Oswal Financial Services Ltd. — Analyst
Abhishek Saraf — Jefferies — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q4 FY’22 Earnings Conference Call of Max Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amrit Singh, CFO at Max Financial Services Limited and Max Life Insurance Company. Thank you, and over to you, sir.
Amrit Singh — Chief Financial Officer
Good evening, everyone. And welcome to the earnings Call of Max Financial Services for the financial year 2022. Firstly, apologize for having kept you on wait for a long period of time. We are facing certain glitches. But now, our results have been made available on the stock exchange, BSE specifically and even on our website. Today, I am joined by Prashant Tripathy, MD and CEO of Max Life Insurance and also Subrat Mohanty, Group Executive – Banking Operations and Transformation at Axis Bank and also a nominee Director on Max Life from Axis. I will request Prashant to provide opening remarks and share the progress in Max Life’s strategic journey. And then I will take you through the financial performance of Max Financial Services. Thank you. Over to you Prashant.
Prashant Tripathy — Managing Director & Chief Executive Officer
Good evening, and welcome everyone. At Max Life, we take pride in being a purpose-driven organization. All the areas of our business, namely employee, advisors, partners work in the purpose of inspiring people to increase the value live, which means somebody showed consistent player and this purpose and our values has helped us be one of the most consistent year-on-year. Our five-year performance has been a — has had a consistent track record in the five-year CAGR is about 16% compared to the industry growth rate of 10% which mean, we have a 6% growth performance with respect to industry over last five years and our market share has been improving year-on-year and we have maintained our rank of number four private life insurance company.
Our consistency in our distribution channels as we have grown equally in both proprietary and Banca channels at 16% which means both Banca as well as proprietary channels have delivered equal growth rate over the last five years. Our growth has come as excellent financial outcome for shareholders. We have grown our VNB at a CAGR of 25% and with this rate, we have more than tripled our value of new business over the last five years. In FY ’17, our VNB was INR499 and this year we are reporting a number of INR1528 crores. With market leading clear business margin. Summary showed is the vector, which is quite aligned to our purpose. I am very happy to share that we have grown our new business sum assured at 20% CAGR over the last five years and we ranked number three in the private industry basis new business from a shore[Phonetic] in FY ’22
Last two years were very different as well difficult because of COVID. As you are aware, there was a big, big impact, not just on people at large, but also on businesses and this period actually tested the resilience of the life insurance industry and acted as a litmus test of a company’s commitment towards its stakeholders. At Max Life, we were not untouched by the severity of pandemic. The pandemic had a profound impact on the lives of many of our employees, advisors and their family. Though, we did not leave any stone unturned in driving 100% vaccination to them, we still encountered the loss of a few of our colleagues. While our heart goes out for their families, I am proud to say that Max Life Insurance successfully weathered the storm by honoring the commitment of paying claims to our policyholders to ease the financial burden their families would have gone through.
We settled last year our industry best claims ratio of 99.35 in FY ’21. We have settled more than 85,973 claims in the last two years. Also, while fulfilling our commitment to our policyholders, we did not compromise on robustness of financial outcomes for our shareholders returns. On a two year basis which is last two years of COVID,. we have grown 16% whereas the industry could grow only 9%. Protection business, which is retail and group included through a CAGR of 18%, value of new business grew a massive 31% CAGR over the last two years and maintained a healthy ROE of 18.5 in FY ’21 and 19.2 million in FY ’20. This has been possible only because of the relentless effort of our employees, advisors and partners who are passionately driven by the purpose of our organization.
Looking ahead, we believe that overall economy is not a good fit, and there are still uncertain times given the geopolitical situation and consequent implications on inflation and consumer demand. Further, we continue to watch these watchful for potential COVID wave so we believe that the severity is going to be significantly limited. While we are watching the emerging situation very closely, Life insurance segments of retirement in health and protection space continue to offer great opportunities. Overall for Max Life, we remain optimistic and confident about our future and I would like to talk about the key initiatives of the business for quarter four as well as FY ’22.
In terms of our overall distribution build-up for the first half of the year, of course, there was a deep impact of wave two as you may recall. However, our continued focus on building proprietary channels have yielded strong results in H2 and for second half of the year, we grew 19% as against only 8% in the first half. Our online proprietary business did really well in last five years. E-commerce grew 6x and the number of policies sold through online increased from 8% to 21%. We continue to be the leaders in online protection sales and this year we entered savings market as well, and thus the channel grew by 58%. Our success in online segment is driven by our SEOs leadership position is best in class as well as our strong conversion ratio, innovative practices, seamless integration with our partners and our analytics engine.
We are passionately working towards becoming the ecosystem partner of choice. We signed up a partnership with 10[Phonetic] fintech companies during the year, such as Phonepe, Bigbox, insurance and newbuy, etc. And also have worked with some partners to co-create disruptive proposition. Our vision is to continue our dominance in protection and scale up savings in coming time through our product innovations, new funds and best-in-class mission. Our offline proprietary channel which is other than the online but whole channels, join force of aggregate direct sales, offline proprietary channels on building scale and profitability, and that’s our desire on the basis of a very balanced product mix which is a source of strong profitability for our offline proprietary channel.
Within agency our focus continues towards building top advisors and variabilizing agency for equipment volume. Our number of topics greater than INR10 lakh annual business grew by 16% and we increased our NPI accounts this year over last year by about 28%. We have also launched Life advisor value proposition with simplified and strengthened proposition, which should help us further attract more top regions. Being the pioneers in the industry, we have maintained our leadership position is more than 300 active IMS partners and we have doubled our sales through the sell-in FY ’22. At the same time, the focus on variable agency continues and our variable agency contribution has moved up from 36% to 39% year-on-year in FY ’22. Overall agent recruitment also grew by 26% in FY ’22. The real testament of these models and initiatives line, how these initiatives are leading to better financial outcomes, I am happy to report that in FY ’22, we have witnessed remarkable growth in VNB coming from these channels.
On our partnership, Axis Bank has grown over 18% over the last five years and grew 15% in FY ’22. In the last quarter, especially the growth was a bit lower predominantly because the high base of the previous year and of course, January was impacted because of the Omicron virus. However, on a two-year CAGR, Axis has grown with a handsome 23% cumulatively. We are deeply integrated with both our large Banca partners at platform, we have interconnected CRM market player, new insurance systems were joined narrative and we continue to work with the bank to drive and improve penetration through investment towards distribution in different modules and overall enhanced integration for policy issuance.
Product innovation was a big drive for last year, and our focus is definitely is towards defining cutting-edge product innovation to achieve our aspiration. We added many new offerings to our treat in FY ’22. The key highlights were as follows. Within part[Phonetic], we strengthen our part position with a product called like Max Life Smart self incompliance. It’s not only helped the segment to grow by 22% but also strengthened margin in FY ’22. On non-par was bolstered by offering production of new variants booking, mainly long term income and we think just about a week ago, we have launched a new ULIP design called, ULPI Advantage plan with industry best features of auto debit boosters, which we believe will help us in driving percent [Indecipherable] whole life variant and return of all charges. This product is expected to fortify our market link, cross offerings and it also comes with a new ESG compliance.
In addition to the regular product there is a lot of focus towards building segment. Talking about annuity and retirement, our focus on annuity is yielding exceptional results with about 65% growth in annuity business in FY ’22 with the objective of attaining leadership in retirement, we launched Smart Guaranteed Pension Plan and augmented our NPS ecosystem with offering across the spectrum of customer needs. We have received certification for registration of Max Life Pension Fund Management Company, a wholly owned subsidiary of Max Life. We are thankful to NPA, NPA party[Phonetic] for this speedy approvals and we are in the process putting it all together so that we are ready to start our operations beginning Q2 of FY ’23. Within protection well, let us say FY ’22 definitely was a challenging year, especially towards retail protection due to reasons that we have been updating you on predominantly because of supply side constraints only through COVID-19.
Now, those constraints are slowly going away and those related changes seem to be getting completed. We ended the year with an absolute retail protection about INR19 crores, which was a growth of 12% year-on-year. This was it was a more tactical item because of COVID. I would like to highlight that in the last quarter were, we did manage to grow our retail protection. So a large part of the growth was until the third quarter led by issues generated by the COVID but we remain committed to line of business. This was of course one of the big four initiatives that we are trying within our organization who are long term process and the intent is to make sure that we continue to grow our protection.
We also launched a differentiated term plan with industry first special features like especially exit value, premium holiday options and with many such first initiatives, we have grown our protection more than 4x in last five years. We have launched critical illness and disability writer, which is our play in the health space. We have the facility of health and wellness. We are very happy to see the growth that’s the take-up work rider attachment has gone up, and we have seen a massive 64% rider attachment in quarter four of FY ’22, significantly higher than the previous year.
On some of the customer measures, we remain focused on customer satisfaction customer are extremely important to our organization. In FY ’22, our thirteenth month persistency of regular premium products went up by about 120 basis points to 84.8 and in 61st it stood at 50.2, which is an year-on-year growth about [Indecipherable] Max Life Insurance also tracked performance on customer experience through our net promoter scores and during FY ’22, we witnessed a 5 point increase from 44 to 49 which is 11% growth on the NPS scores.
As we have shared and we actually held the special session about digitization our efforts towards efficiency intelligence, it’s been a key priority item for our organization and absolute necessity to stay competitive. Our play in the E-commerce space actually requires us to really build the capabilities in digital space very differently. Our vision is to be a company that focuses on world-class experience through friction less onboarding, seamless customer service and proactive management of risks in a digital setup that is contemporary secure and inspirational for millennials.
In FY ’22, we have implemented various initiatives to achieve this vision, namely 46% of our infrastructure is now moved onto cloud. We launched m smart, a self surveillance tool for agency that has been well received 87% adoption within agency workforce. On-boarding is made friction less with new ways of cloud basic and intelligent underwriting system and integration with Banca marketplaces. We have also revamped customer communication by providing only seven[phonetic] customer service experience. They are now addressing more than 1 lakh customer queries through bots every month.
We upgraded to large enterprise systems. The first one being an SRM or SRM system on success factors, which just got launched to support recruitment, onboarding, training, performance management, succession planning, leave, attendance, payroll etc. So it covers all the elements of employees. The other one is we upgraded our investment system onto SAP platform because our [Indecipherable] and we need a very robust platform so that also was done this year.
We are leveraging digital and AI to augment employee experience and hence top line optimize effort and proactively identify and manage risk. On new business front, we have built an award-winning solution called [Indecipherable] seasonality for customer insight, sentiment, call effectiveness, agent collaboration and identification of cross sell initiatives. On purchase and issuance, we have built risk analytic engines to identify fraud at policy application fee, which has led to 100% real time risk prediction. On things like analytics to deploy to predict consumers propensity to pay, optimizing efforts on foot to fall, which has led to a 3x conversion rate in high propensity.
People continue to be the most important important element of our business and we, as we shared last year we were ranked amongst the top 50 workplaces, consecutively for the fifth year. In 2021, we ranked 18th Best Places to Work amongst quick survey conducted by India’s Best places — Best Companies to Work For, and in the Asia region, we were 55th for the first time. This also resonates with the scores of our annual employee engagement survey in partnership with Willis Towers Watson with shares that have engagement scores 95% plus always for the last three years. We have decided to take great steps towards our commitment.
We have bold aspirations to drive organization towards sustainability goals around four pillars work ethically and sustainably, care for people and society, financial reform and green operations. We have a dedicated ESG management committee towards our ESG actions and initiatives. We have fully integrated ESG in our investment decision-making and have launched our first Julie ESG funds in this quarter. We have also improved our gender diversity ratio from 23% to 25% in FY ’22 and we have set a target of 30% by FY ’25. Max Life has also been awarded the Excellent in gender diversity at the fourth B&I submits and awards by transforming forum.
We have completed our sovereign assessment in all offices and we have identified initiatives to achieve the target of carbon neutrality by FY ’28. I am sure all of you are eagerly waiting for our financial outcome. I am going to hand over to Amrit to talk about our financials.
Amrit Singh — Chief Financial Officer
Thanks, Prashant. At MFSL level on a consolidated basis, our revenue excluding investment income stands at INR22,840 crores, a growth of 17% in FY ’22. The consolidated pre-tax profit for MFSL for FY ’22 is at INR389 crores, lower than last year primarily account of reserves created for pandemic and certain one-off that were recorded in the same period last year. Moving specifically to Max Life update. Max Life individual APE has grown 12% to INR5,514 crores in FY ’22. Renewal premiums grew by 19% to INR14,509 crores, 13-month persistency as Prashant mentioned improved by 140 basis points to 84.8 and 61-month persistency by 90 basis points to 50.2.
The gross premium on overall basis has grown 18% to reach INR22,414 crore. For financial year ’22 to remain largely stable and as per our desired mix with par at 20%, non-par saving 29%, ULIP at 37 and protection at 14%. The first nine months, we have experienced a slowdown in protection business due to the supply side constraints. However, as the experienced started improving, we released some of the supply side constraints and our total protection business grew at 34% in quarter four. Retail protection business was adjusted a de-growth and experienced — that was experienced in the first three quarters then it grew by 4% in quarter four. VNB is at INR1,528 crores, a strong growth of 22% year on year due to both EPS growth of 13% and improvement in new business margin from 25.2% to 27.4%.
This improvement in margin is led by a combination of several factors including introduction of more profitable products agents and re-pricing decisions along with skill training[Phonetic]. Max Life MTV is at INR14,174 crores as at end of March, ’22, a growth of 19.8%. Operating ROE 19.2%, which if we exclude one of COVID, it translates to 20.1 operating. The operating return, operating EV is driven largely by value of new business and unwind. We have experienced some negative operating variance of INR277 crores, which includes COVID impact of INR180 crore and rest is probably due to strengthening of mortality assumptions. There is a non-operating variance of INR64 crores, which is primarily because of positive economic variances experienced during the period.
In financial year ’22, gross in net claims were INR3,170 crores and INR1,964 crores respectively. We began the year with INR500 crores of reserved VMs to settle pandemic related thing. We took out impact of approximately INR100 crores in our P&L during the year to settle the excess that claim even though severity of COVID-19 has declined as a prudent risk management framework adopted by the company, we are bolstering our overall pandemic reserve for closing position of INR500 crores in the balance sheet for any future pandemic like event.
Policyholder opex to GWP improved to 13.5% from 14.2% year-on-year. Absolute increase in opex was 11.7%. FY ’22 profit before tax for MLIC, Max Life is INR417 crores, a decline of 18% primarily due to COVID related budget provisions. The profit after tax, stands at INR387 crores. Our solvency is comfortable at 201% and AUM has crossed INR1 lakh crore mark closing at INR1,07,510 crores as on March, ’22. Now, I will be happy to — we will be happy to take any questions, I will hand over the mic to the moderator to opening the floor for Q&A.
Questions and Answers:
Operator
Thank you very much sir. [Operator Instructions] The first question is from the line of Avinash Singh from Emkay Global. Please go ahead.
Avinash Singh — Emkay Global — Analyst
Yeah, hi, good evening. [Indecipherable]So couple of questions. Firstly, on that INR500 crores of pandemic reserve that you have decided to carry on book, just would like to understand, I mean as in how this reserve will be the lead if, I mean there’s no pandemic hopefully, so by what time you will take the call and how this reserve will impact your profitability, your EV as well as the solvency capital. That is my question number one and the second question has more to do with the delivery margin that we see that a bit post nine months has improved, so have you sort of a change in any kind of operating presumptions there in terms of the cost of, have you reviewed and that has led you to this sort of margins. So, these are my two questions. Thank you.
Prashant Tripathy — Managing Director & Chief Executive Officer
Thank you Avinash ji. Thanks for complementing the set of results. On the INR500 crore, I think as the, it’s a measure which is more conservative in nature, we believe that for a business, our size some considering uncertainty, especially driven by any pandemic right now or in future, it is important to carry some provisions in the balance sheet, so that we are able to smoothen outcomes just in case we require to use them. Now, it is a position that the company has taken longer than point actually to make sure that we are keeping some buffer for bad time. I mean, let us put it that. Is it going to impact our embedded value. The answer is no. It is not going to impact our embedded value. In terms of how we keep it or reduce it or going forward whether or not we build it that we are in the process of creating a policy basis which we will handle that. On your question of 27.4% margin, I think the assumptions are all consistent with our will become a bit there no big changes made in any of the assumptions there are quite consistent with how we can move with our margins of the business impact.
Avinash Singh — Emkay Global — Analyst
Thank you.
Operator
Thank you. The next question is from the line of Madhukar Ladha from Elara Capital. Please go ahead.
Madhukar Ladha — Elara Capita — Analyst
Hi, Good evening. First, on the bank channel, I think you mentioned a 16% year-over-year growth for the bank, is that for FY ’22 for the quarter?
Prashant Tripathy — Managing Director & Chief Executive Officer
We mentioned a 15% growth on bank channel from Axis Bank. Our overall bank growth rate, including all the banks put together will be in the range of 11% to 12%.
Madhukar Ladha — Elara Capita — Analyst
Right. And for the quarter and what has Axis done?
Prashant Tripathy — Managing Director & Chief Executive Officer
That’s a very good question, actually for this quarter, our growth was quite muted. However, it has to be seen in conjunction with a very high base of last year. As you may remember, quarter four of FY ’21 the growth was 47% and hence, the of course, the growth was a bit impacted also there was this third wave of COVID, which had a significantly detrimental on sales growth in the month of January where activity actually came down. So for the first nine months, Axis Bank for Max Life Insurance was growing at a very robust pace however, the growth actually came down to 15% at the end of quarter four. I will, request Subrat to add anything, Subrat, do you have anything to add?
Subrat Mohanty — Group Executive — Banking Operations and Transformation
No, I think Prashant, I think you have covered it. Q4 had a bit of an impact because of some amount of issues around mobility in the month of January and also because of COVID.
Madhukar Ladha — Elara Capita — Analyst
Right. It’s good to have the Axis representatives here as well. My question is within the Axis sort of channel, what is Max’s share now, and is that going down or and what is, what do you think Max will be going forward, so if you were to look at FY ’22 as a year, then what would be Max’s shared in the Axis channel and then what is our sense of where that number will be going forward?
Prashant Tripathy — Managing Director & Chief Executive Officer
Okay, thanks. Really good question. I think it’s a conscious decision by our stakeholders, especially at Bank. To go through a open architecture, because we all believe that an open architecture creates a fair play for the customer as well as provide impetus to growth of all the participants. Just to update you on some numbers for the full year, the overall percentage of counter of Max Life Insurance is 75% so we at the end of the year at 75% on a run rate basis, we are close to about 70% and we are hopeful that we will be able to maintain that kind of competition going forward.
Madhukar Ladha — Elara Capita — Analyst
And what is Axis’s sort of view on it. And you know because if your current run rate is 75%, what is resulting in this decline, is it Axis’s commitment to Bajaj or is it some sort of product differentiation, what would really make you maintain or increase or decrease your share in that channel? I think that is pretty important to understand right now.
Prashant Tripathy — Managing Director & Chief Executive Officer
Yeah. Thank you. Let me go first, and then if Subrat has any additional points, he will make. The hypothesis — I mean, one needs to zoom in to really to think about this. The hypothesis is through open architecture, the pie will get expanded and we — it’s not as if open architecture got started just now. The process of open architecture started a couple of years ago and we have seen consistent growth of Max Life Insurance. So, the objective is to grow the pie and we have seen the pie grow. If you look at the Axis Bank growth for last couple of years, not just for bank level, but overall Axis bank growth for last couple of years, it will be significantly more than the private bank growth rate. My estimate is a private bank growth rate on insurance will be 15% and the bank growth rates at Axis Bank will be somewhere around 35%, 37% which is about 20% absolute percent more which is a objective of the bank and quite well understood. Hence, I think the bank — Axis Bank has a dual objective or the primary objective is to continue to grow the pie and within that Max Life Insurance being a dominant player will have growth coming through the overall pie. So that’s the direction in which we are working. That’s the overall understanding as far as Max Life Insurance’s counter share and growth are — is concerned, there is a complete alignment with the operating team as well as at shareholder levels. So we work together to make sure that the growth objective of Max Life Insurance is in fact not withstanding some of the base effect. I mean, what we saw last quarter was definitely a last year high base impact. Ignoring that, I think we will be growing at a pace which is consistent with how we are grown in past.
Madhukar Ladha — Elara Capita — Analyst
Right. I will come back in the queue. The numbers on the presentation has come pretty late, so I haven’t really gotten a chance to see through a lot of it so.
Prashant Tripathy — Managing Director & Chief Executive Officer
Absolutely, you could reach out to us on a one-to-one basis for any question.
Operator
Thank you. The next question is from the line of Preethi RS from UTI. Please go ahead.
Preethi RS — UTI AMC Ltd — Analyst
Hi, good evening. My question IS — hello, am I audible?
Operator
Yes, ma’am. Please proceed.
Preethi RS — UTI AMC Ltd — Analyst
Yes. So, my question is on the operating leverage. So we have actually outgrown the industry in the last three to four years, but if you see on the cost ratios compare it to the top three peers in the private sector, we are not seeing benefits on the cost as the scale is grown. So could you help us understand what would be the drivers on this?
Prashant Tripathy — Managing Director & Chief Executive Officer
I think the opex to GWP has improved from 14.2% to 13.5%. So we have got ourselves that benefit. Now, because the underlying denominator is gross written premium in this metric, scale is extremely important. So some of the competitors that you are comparing us the scale has to be adjusted for and we are in an open as indicated environment, we have to invest over the building distribution and division strength, and despite these opex ratio etc., the margin for you see. And for two consecutive years, we have been improving our margins and quite for many years, we have been improving our margins and for our last few years, demonstrated strong improvement in margins. These margins are all adjusted for this call. Going forward, I think on opex, we will continue investing for distribution strength and distribution muscle and hence you will see the pace of opex investment continue remain strong. Given we are desirous of continue building distribution strengthening our book position.
Preethi RS — UTI AMC Ltd — Analyst
Would that meet our targets or that you anchor to beat in terms of any amount of GWP?
Prashant Tripathy — Managing Director & Chief Executive Officer
We don’t anchor ourselves on an office with GWP, kind of a target. I think the VNB on a current cost basis is what we report out and the margins are also reported out on a current cost base. That’s where we anchor ourselves and and improvement of some of those metrics are more important.
Preethi RS — UTI AMC Ltd — Analyst
Great. Thanks and congrats on the quarter. Thank you.
Prashant Tripathy — Managing Director & Chief Executive Officer
Thank you.
Operator
Thank you. The next question is from the line of Nidhesh Jain from Investec. Please go ahead. Nidhesh Jain, your line is in talk mode. Kindly go ahead with your question, please.
Preethi RS — UTI AMC Ltd — Analyst
Yeah. Sorry. Thanks for the opportunity. So, firstly, this INR500 crore number that we set aside for pandemic, there is no impact on EV out of this number only now how to statutory accounting solvency that has an impact. Is that right understanding?
Prashant Tripathy — Managing Director & Chief Executive Officer
That’s correct, Nidhesh.
Nidhesh Jain — Investec — Analyst
Sure sir. Second, can you give the breakup of operating brands. So I missed the number mortality and how much is mortality strengthening and how much is COVID?
Prashant Tripathy — Managing Director & Chief Executive Officer
So the total negative operating brands Nidhesh was INR277 crores, of which INR108 crores is COVID related and rest of it primarily is mortality assumptions. There is a small last related variant which exists largely been seen on ULIPs portfolios but bulk of it is assumption strengthening around protection business.
Nidhesh Jain — Investec — Analyst
Sure. So, one thing that we are grappling with is how to assess the underwriting on the protection side for the company’s but there is something, including Max Life given all — we are underwriting this 20-year product and as I would say that it becomes very difficult to assess how a individual company’s underwriting and whether they are pricing the mortality risk adequately. So given that we have gone through a COVID related impact, there has been lot of issues in the reinsurance industry as well. How do we assess our underwriting capabilities and how is experience or expect, what assumptions on the underwriting side, as of now and how should we think about that in future?
Prashant Tripathy — Managing Director & Chief Executive Officer
Yeah, Max Life is a Nidhesh, Max Life is a conservative organization. We continue to monitor claims experience, which is out of underwriting decisions, which have been thinking will. We are working on two counts. Count number one is, how do we improve the process of underwriting. So that errors which are more manual in nature, decision related there be eliminated. And that’s the part of the — very tactical items. On the most strategic business, I think once the process issues were resolved or we are on top of the process, we true up the mortality outcomes in our assumptions to make sure that they are reflective off most current experience. We believe that and of course the team does that, we believe that our assumptions are trued up to the current experience and we hope to improve without — the other makers cycle that happens in the process is our reinsurance partners every year of reinsurance renewal or reinsurance conversations come up where we have to go and share the outcomes of underwriting process basis which the rates are portrayed. So that’s another bigger ticket versus that is already in the process.
Nidhesh Jain — Investec — Analyst
Sure sir. And so our VNB margins have expanded quite well on the y-o-y basis, despite our product mix have remained quite stable, so what explains VNB margin expansion?
Prashant Tripathy — Managing Director & Chief Executive Officer
So Nidhesh, actually it’s — I did mention in my opening remarks, the product mix has remained stable. However, the underlying product and their margins, whether it is on the participating design, the new product that we have introduced, whether it is on an non-participating design, the new product that we will introduce which actually also saw the full year of those products kind of run through. They were fundamentally most superior hygiene[Phonetic] profile and even on protection business, actually, we have been able to despite the reinsurance changes and the repricing, hold on and further improve the margin profile protection business, and then as scale builds up, as you can see overall premiums are up, 16% is [Indecipherable] only up 11.8%, there is some scale advantages in the process.
Nidhesh Jain — Investec — Analyst
Sure sir. And lastly on the protection, we have seen good growth in the group protection. So is it driven by credit life or it is driven by a group term the growth that we have seen in this year y-o-y?
Prashant Tripathy — Managing Director & Chief Executive Officer
It’s driven by both actually the credit life — Credit life growth has been quite robust actually this year. We have seen close to about 54 — over 50% type of growth rate on.
Nidhesh Jain — Investec — Analyst
Sure sir because I think there we still have no market share versus our listed peers and since Axis Bank is our strategic partner over a period of time, we should see — should we expect strong growth in that segment over a period of time?
Prashant Tripathy — Managing Director & Chief Executive Officer
Yes, yes, you should expect continued growth from from Axis Bank and other bank partners. We are quite selective about the kind of business that we want to do. We are focused on margin and we are focused on ensuring that we take risk, which is as per our risk appetite. So like I always maintain, this is not going to be a big VNB drivers, it’s not going to become a very large part of our VNB, but you should expect continued robust growth in this portfolio. And just to for numbers, 55% was group credit life growth and Group Term Life has grown 51%. To the comment of growth from continuing is largely in the credit life side. On group term life, I would say some moderation will happen because this was a year of pricing for pandemic etc. and as we are now entering the endemic stages and the severity of pandemic has come down. The group term life business will start seeing some moderation actually.
Nidhesh Jain — Investec — Analyst
Sure sir. And sir, lastly, what is the status of the the transactions with Mitsui Sumitomo remaining remain stake buyout from Axis Bank?
Prashant Tripathy — Managing Director & Chief Executive Officer
Okay, that’s — you mean our application?
Nidhesh Jain — Investec — Analyst
Yes, sir. I think there are two steps pending. One is the stake Axis Bank buying out 7% additional stake and stake selling to Mitsui Sumitomo — stake buyout from Mitsui Sumitomo and then selling to Axis Bank. These two steps are still pending.
Prashant Tripathy — Managing Director & Chief Executive Officer
Correct. The first step, which is Mitsui Sumitomo buyback by is under the application, as you know we were waiting for some of the placements at the regulators office and then is on board and I am sure it is arrival, there will be a positive process. So we are constantly working with our regulator to have that done. Hopefully, over the next few weeks we expect that to. And once that is done then the second step of Axis increasing stake will be processed.
Nidhesh Jain — Investec — Analyst
Sure sir. That’s it from my side. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Sanketh Godha from Spark Capital. Please go ahead.
Sanketh Godha — Spark Capital — Analyst
Thanks for the opportunity. Again, my question is again on the margin, so if I do a back of the envelope calculation for the fourth quarter, it seems that the GTL business has almost grew 3x compared to what it was in previous quarter of 4Q. So we believe and we see this margin expansion is largely led because because we did a little, little more than — more GTL in the current quarter and there is a lumpiness to that business. So the margin what we have reported, can we expect it to sustain if this particular product slows down and that’s the point which I wanted to check, though you have said that the underlying design of the respective product, whether it is par or non-par has changed and that has contributed to the margin, but just wanted to understand that from nine months to FY ’22 the delta seems to be largely driven by GTL business, so trying to understand whether whether this sustainability is going to remain or not.
Prashant Tripathy — Managing Director & Chief Executive Officer
Sanketh, actually before quarter four, GTL has largely remained flat. The GTL business group, term life business has grown and as you are aware —
Sanketh Godha — Spark Capital — Analyst
Yeah. I mean to say GTL only, group term life business which seems to have —
Prashant Tripathy — Managing Director & Chief Executive Officer
Sanketh, GTL business is not a part of margin computation for Max Life Insurance. It is a very tactical play and it just flows through to the P&L, so we don’t count that. The big reasons of margin expansions are exactly what Amrit described it valuable.
Sanketh Godha — Spark Capital — Analyst
Okay. But the understanding was that the newer design products were also were part of nine months FY ’22 numbers because that full benefit was always almost available for nine-months FY ’22 but still there is a decent delta in the margin expansion from nine-months to FY ’22. So just wondering what exactly led to led to it because even if I see individual protection on quarter-on-quarter basis, it has declined rather than growing in that sense.
Prashant Tripathy — Managing Director & Chief Executive Officer
I will say two things. Firstly, anyways, because our competition of VNB is on actual office basis[Phonetic] and as you are aware quarter four typically — so there is a leverage advantage which anyways come. The second is the participating designs were actually introduced in the really flow through the entire nine-months. They kind of came somewhere around November, December and hence that benefit always accrued and lastly, I guess you are asking only a sequential quarter question. So the reason is, as these two are the reason. If you see as compared to last year quarter if you compare obviously you will recall that we had made an INR88 crore provision in the VNB then for a one time COVID time which actually doesn’t exist this time. So if we were to really count that INR88 crore last year also, Sanketh, our margin would be more closer to 29%. So our margin has expanded further from that number to a little bit more. And as a result of that, overall average for the year has improved to 27.2%
Sanketh Godha — Spark Capital — Analyst
Got it. And just this INR27 crores of operating, that you said that 108 is COVID loss and some mortality tightening and probably you maybe I am assuming there is no significant positive delta coming from the opex end. So then if some part of mortality assumption is getting reflected in the EV but when the VNB walk is mentioned, I don’t see any walk with respect to mortality as it was in the fourth quarter of a full year of FY ’21. I don’t see anything of that kind in the EV walk. So it’s only a one-time adjustment you did for the retrospective book on the EV not to the incremental business what you have written?
Prashant Tripathy — Managing Director & Chief Executive Officer
VNB, you will recall assumption tightening done at the start of the year in line with how the reinsurance rates were and then consequently the consumer pricing etc. were also done. Now for EV, this is the impact of only the back book at the or whatever in the book its written.
Sanketh Godha — Spark Capital — Analyst
Got it. And finally, the final question is, you said that Axis Bank grew by 15% on full-year basis. Right, if I am not wrong?
Prashant Tripathy — Managing Director & Chief Executive Officer
It grew. Our business from Axis Bank grew by 15%.
Sanketh Godha — Spark Capital — Analyst
For the full year FY ’22. Right?
Prashant Tripathy — Managing Director & Chief Executive Officer
That’s correct.
Sanketh Godha — Spark Capital — Analyst
And, which means that other banks probably would have declined by 12%, 13%. Right?
Prashant Tripathy — Managing Director & Chief Executive Officer
That’s correct.
Sanketh Godha — Spark Capital — Analyst
Okay. Perfect. That’s it from my side. Thank you.
Operator
Thank you. The next question is from the line of Prateek Poddar from Nippon India Mutual Fund. Please go ahead.
Prateek Poddar — Nippon India Mutual Fund — Analyst
Yeah. So can you just talk a bit about case side, the ticket size has gone up substantially. If you can. That’s question number one. Second is also how should I think about VNB margin going forward given that the product mix as I mean it looks like getting exhausted. And we have almost had a balance product mix. How should we think VNB margins. And lastly on AP growth, if you can comment on the next, or the medium-term. How should we think about that?
Prashant Tripathy — Managing Director & Chief Executive Officer
So we are going to go after growth very aggressively. Firstly, answering your question on VNB margin like I have always maintained our outlook. It has to be in the range of 25% while we able to see 27.4%. The outlook is more around 25%, 26%, that would be target internally. For medium-term growth, definitely targeting number closer to 20, that’s our target, that’s the plan that we are working towards the plan that we work as a part of our business and so those are numbers that we are working on. I am going to just request somebody to give answer on ticket size.
Amrit Singh — Chief Financial Officer
So ticket size, one reason for increase in ticket size on a blended basis is also the reduction of protection business on number of policies. This year as you — we mentioned that the protection business has de-grown 12% on value. And similarly, either has next a number of in protection business, low case sites so that they get average impact is one that you see.
Prateek Poddar — Nippon India Mutual Fund — Analyst
But, Amrit, when I — which had the breakup. You have given the breakup also. I can see unit doing substantially from 100 — 500, 45,000 to 168 even on the power side, 62 to 81, anything to read into this?
Amrit Singh — Chief Financial Officer
10%, 15% kind of increases case sizes keep happening depending on the segment that we are chasing. I mean I wouldn’t say that those are out of the ordinary. The other thing that also happens is there is a bit of some shocking or not by savings moving to ULIP sector. It takes us well some impact there.
Prateek Poddar — Nippon India Mutual Fund — Analyst
And when we say, we are targeting growth of upwards of 20 — closer to 20%, sorry, this is how should I think about ticket sizes and NOP?
Amrit Singh — Chief Financial Officer
In terms of our growth rate?
Prateek Poddar — Nippon India Mutual Fund — Analyst
Yeah, I mean in this one, you will be more ticket size led or it will be an equal balance or a higher number of policies?
Amrit Singh — Chief Financial Officer
You should think about fair mix of both may be more tilted towards number of policies as against the ticket size.
Prateek Poddar — Nippon India Mutual Fund — Analyst
Got it, sir. Thanks.
Operator
Thank you. The next question is from the line of Neeraj Toshniwal from UBS. Please go ahead.
Neeraj Toshniwal — UBS — Analyst
Hi, my question is more specifically towards Axis. The wallet shares has gone down. So wanted to understand what are the strategy behind and, will 20% kind of sustain now LIC probably also in the — one of the open architecture model Axis has, how do you — how we are reading into it and what is 18% Life five-year CAGR will now come down to 15% kind of CAGR or with the recent trend we have seen in FY ’22 or how should one think about it?
Prashant Tripathy — Managing Director & Chief Executive Officer
So, as you know and Subrat could comment further. Bank is on an overdrive on growth. The rate of customer acquisition, the rate of growth in the core business is unprecedented and we believe that the subsequent or consequential impact on insurance business is going to be very robust, that’s number one. The decision for open architecture and the rational etc. I just described in the earlier question, but we believe that Axis Bank will continue to register very, very strong growth. The bank has the — we have worked with the bank for 12, 15 years. The bank is very strong in terms of the ability to do 20% plus kind of growth rate year-on-year for a continued over a decade. So, notwithstanding this blip of what you call as open architecture, which I call more very strong base effect settlement. We remain quite optimistic and I would say, along with Subrat to quote some [Indecioherable] our Board and our shareholder that we are very optimistic to be able to the determine growth at Max Life Insurance on the time of course, there are plans to deploy, collectively work together with operating few more Axis Bank and Max Life Insurance. And we are hoping that as we putour execution plans in action, it will start to churn numbers as 18% or better.
Neeraj Toshniwal — UBS — Analyst
But, coming to that, well growth of Axis bank is more towards in the first nine-month as we saw and then gradually going down and significant de-growth in the Q4. So that nine-months have a higher wallet share of Axis, so the growth upwards of 20% for this year, that looks difficult to me, obviously in the medium term, we can probably only be getting aggressive on the proprietary channel for — with the other channel partners, we are looking to kind of grow, so I am just trying to figure out the adjusting kind of growth which the rational — how in this environment, you are kind of looking at with the Axis and moderating in the growth. So just, maybe in the medium term obviously, we can achieve, there is no doubt, but more from the FY ’23 perspective.
Prashant Tripathy — Managing Director & Chief Executive Officer
I mean, of course, you could say so we believe that the impact of open architecture will settle as we go long, somewhere during the year, half mid year or before that. And after that the overall growth is it going to be seen as Max Life insurance level quite robustly number one. Number two, we are internally working in on plans to make sure that our overall counter share remains robust or growth. So as a result of both, I am very optimistic that we will be able to the growth. Of course these are the plan and once work through the plans we are trying to be very aggressive about our growth and that’s why I said, some of the margin upside you will find will be used as an investment to make sure that we continue to grow. At the same time, we are making those investments in our proprietary channel. As there is a big project that we have undertaken within our agency area to act on several elements of variabilizing the agency, growing the top agent town etc. And we are very hopeful that part of the business start to see growth. As a result of this a, aggressive posture, b, commitment to the build up c, special focus on agency, and d, open architecture settling at wherever it is. We are quite hopeful that the trends will reverse.
Neeraj Toshniwal — UBS — Analyst
Got it and coming to protection. The earlier commentary you mentioned that we have seen some bit of underwriting, relaxation happening. So a more color will be helpful, how we can kind of get the growth trajectory back as industry and obviously for Max what are plans in terms of the growth, both retail and credit protect, are we now seriously looking into this category. And where the growth can happen in multiples or the current run rate we can maintain?
Prashant Tripathy — Managing Director & Chief Executive Officer
Yeah. If you look at our individual protection as a percentage of total — in terms of percentage, I think we would be one of the top players amongst life insurance companies. And, we have a significant share of counter digital platform that we have done with recently well. Going forward as I have been repeating, protection, health and well-being as a category is extremely important to us and it is a part of Max Life Insurance’s long-term growth trend. So needless to say, our focus is going to come back. Of course, our underwriting flexibilities are coming back in terms of total sum assured or the means through which we will do and as a result of this quarter four did see marginal growth. We are very hopeful that as we travel through the year, quarter-on-quarter, the growth on protection will come back. Our internal plans are significantly more than the current year percentage.
Neeraj Toshniwal — UBS — Analyst
Got. Thank you so much.
Operator
Thank you. The next question is from the line of Rahul Bhangadia from Lucky Investment Managers. Please go ahead.
Rahul Bhangadia — Lucky Investment Managers Pvt Ltd. — Analyst
Sorry, my questions have been answered, thank you very much.
Operator
Thank you. The next question is from the line of Nitin Agarwal from Motilal Oswal Securities, please go ahead.
Nitin Agarwal — Motilal Oswal Financial Services Ltd. — Analyst
Yeah, hi, good evening, and congratulations on the results. Few questions. Firstly, with interest rates moving up and now banks likely increasing deposit rate. How do you see the growth in the non-PAR business and margins going and with e-curve flattening out, how do you see the growth and the margin dynamics?
Prashant Tripathy — Managing Director & Chief Executive Officer
Hi, Nitin. Thanks for the question. With interest rates going up, obviously the, as you would have seen on the sensitivity, if we don’t do anything, it kind of eats the margin expansion, but obviously to make the product to stay competitive, we will have to keep changing the IRR with the product as well. So, we will respond to some of those interest rates hike, we will also improve the IRR of our non-par design. So as to continue for them to remain attractive as compared to some of the deposit rate, then there is advantage of tax that anyway the consumer gets on a non-par rate. So on tax adjusted rate continues to remain. So what that continuity means is that I don’t necessary capture the margin expansion, I will remain largely margin neutral to ensure that the product — the proposition of guarantee is a evergreen proposition Nitin, I mean in our portfolio from a strategy perspective, from a consumer segment perspective, there is always an appeal for a long-term guarantee which only our category they will provide and that advantage and that ability to find the customer with such needs. I think it’s fairly robust, it doesn’t really matter what the the environment around interest rates look like.
Nitin Agarwal — Motilal Oswal Financial Services Ltd. — Analyst
Okay, sure. And in context for Banco sales, with Axis this product is seeing like a market share loss. Is it any specific product within growth has moderated ULIP par or anything special that you can mention?
Prashant Tripathy — Managing Director & Chief Executive Officer
Can you repeat this question again?
Nitin Agarwal — Motilal Oswal Financial Services Ltd. — Analyst
So in the Banco sales while Axis I mean like to enrich —
Prashant Tripathy — Managing Director & Chief Executive Officer
It’s very secular. It’s not as if that you from a product perspective we compete across all product categories. Our product propositions are very superior. It’s a secular thing it’s having to do with a specific segment that we would have lost the market share relative to.
Nitin Agarwal — Motilal Oswal Financial Services Ltd. — Analyst
Okay. And lastly, as you can also share details on the reason behind the positive non-operating variance on a small number of INR64 crore that we have reported. Was the EV sensitivity to the rising rate is slightly negative. So what has driven this?
Prashant Tripathy — Managing Director & Chief Executive Officer
So there are two things obviously, EV sensitivity is negative because of the increase in interest calls, the EV’s moving in reverse direction. But we also have bought for Axis certain realized gains during the year and also the unwind capture because unwind captures the management expectation of interest rates, anything which is over that unwind actually comes into non-operating variances that has been positive with respect to the impression — that’s the reason, largely for this positive variance to continue.
Nitin Agarwal — Motilal Oswal Financial Services Ltd. — Analyst
Okay, sure. Thank you. Thanks so much.
Operator
Thank you. The next question is from the line of Abhishek Saraf from Jefferies. Please go ahead.
Abhishek Saraf — Jefferies — Analyst
Yeah, hi, thanks for the opportunity. So just two questions. One, basically on our credit life stance so, if I recollect right so we used to have more of a tactical approach towards credit life, but now going by the commentary to appears that we see it as a much more structural opportunity, and we guide for very high growth, so just if you can share some thoughts around that, and secondly, on the COVID reserve, few of our large private sector peers have actually seen COVID reserve releases and we have kind of raised it to around INR500 crores. I mean, similar to what it was last year. And if I take the COVID impact in EV work of INR108 crores. So total impact was around INR6 crores to $INR8 crore in a year where we had two waves, so while it is good to have a conservative stance so only to understand, are we a bit different from other players who have seen COVID reserve release. So these two questions will be very helpful.
Prashant Tripathy — Managing Director & Chief Executive Officer
Yeah, on the first one. Our stance on GTL remain static however with our partners, we do have business and will continue to work with them, so really like I mentioned to you, we are not going to build GTL to be a very significant part of our VNB, our VNB is going to remain mostly retail related. Question one. On your question around COVID, I don’t think you should call it COVID reserve, you should call it pandemic reserve or catastrophic reserve. Being a conservative organization, if we want to have some bits of reserve built for unforeseen circumstances and unforeseen events, etc. which we will continue to hold for as long because these are events that happen in decade.
Amrit Singh — Chief Financial Officer
Yeah. And I just will add on to this. The COVID severity and the mortality has been. I mean it declined quite sharply and we have not seen any variances with respect to COVID tests coming in for many months now. So this should not be seen as something that has been created for COVID. This is actually pandemic for the future. It just the size of the balance sheet certain results around catastrophic and pandemic should be maintained. And we wanted to ensure that we can return to that mean position as we entered the COVID two years back when we experienced the pandemic.
Abhishek Saraf — Jefferies — Analyst
So that’s quite if you can just help me with one number, what was the share of Axis in this quarter in the overall APE?
Prashant Tripathy — Managing Director & Chief Executive Officer
I don’t have that handy with me — I will have it send to you.
Abhishek Saraf — Jefferies — Analyst
No worries. Thanks a lot.
Operator
Thank you. The next question is from the line of Nidhesh Jain from Investec. Please go ahead.
Nidhesh Jain — Investec — Analyst
So just one data keeping question, what is the back book surplus adjusted for COVID impact for FY ’22?
Prashant Tripathy — Managing Director & Chief Executive Officer
Back book surplus, you are asking for after the adjustment?
Nidhesh Jain — Investec — Analyst
Yeah because back book surplus is flattish or decline in FY ’22 because of —
Prashant Tripathy — Managing Director & Chief Executive Officer
Adjust for these, one of the back book, has grown by 14%. I don’t have a specific number handy, but the back book has grown actually 14% adjusting for the [Indecipherable]
Nidhesh Jain — Investec — Analyst
Back book surplus. So, last year was 1242, that is up 14% this year.
Prashant Tripathy — Managing Director & Chief Executive Officer
Yeah.
Nidhesh Jain — Investec — Analyst
Okay, thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Abhishek Saraf from Jefferies. Please go ahead.
Abhishek Saraf — Jefferies — Analyst
Hi, thanks for taking my question again. So I just missed asking one more thing, so if I heard it right sir, you mentioned to a earlier question, the VNB margin guidance of around 25% to 26% is that right that I heard? And given that we have seen 27.4% this year.
Amrit Singh — Chief Financial Officer
Yeah. I mean really my guidance if you ask me, it will be more in 25%-26% because we do want to make the investment towards growth and that will come at the cost of some bit of margin sacrifice. Also market and competitive forces will continue to resist significant growth in margin. And as a result of that we just — while there will will be all attempts to maintain the margin but for your analysis, so this is early days, may be more between 25%, 26%
Abhishek Saraf — Jefferies — Analyst
Sure. Thanks a lot, thanks.
Operator
Thank you. [Operator Instructions] The next question is from the line of Avinash Singh from Emkay Global, please go ahead.
Avinash Singh — Emkay Global — Analyst
Yeah, hi. One question, I mean when it was just happens of buying a 5% stake, 5.2% from Mitsui and then giving Axis group, 38% stake broadly. So what would be the sort of accounting impact of that transaction because I guess you will be buying from Mitsui 85 plus, Max Life at half[Phonetic] price and in the previous turns, you have given to Axis around 32, 38 so what will be the accounting treatment of this the funding when it happens?
Prashant Tripathy — Managing Director & Chief Executive Officer
Let me, I mean I guess you are asking from MSE perspective on the year right?
Avinash Singh — Emkay Global — Analyst
Yes.
Prashant Tripathy — Managing Director & Chief Executive Officer
I will respond to you separately on that with respect to the accounting period there.
Avinash Singh — Emkay Global — Analyst
Okay, thanks.
Operator
Thank you, the next question is from the line of Madhukar Ladha from Elara Capital, please go ahead.
Madhukar Ladha — Elara Capita — Analyst
Hi, thank you for taking my question again, are there any additional approvals required for Axis entities to increase stake by 100%?
Prashant Tripathy — Managing Director & Chief Executive Officer
Yes, we will have to go to idea IMC because any equity stake more than 1% requires a pre-approval from idea, but we believe that is a part of our overall filing, it was a disclosed items idea so we feel that it should be okay, it may just happen very quickly.
Madhukar Ladha — Elara Capita — Analyst
Right and can you give us some color on our owned margins for protection and non-linked savings and lean savings as three separate categories or protection versus savings margin, some sort of color out there that would be helpful and how that has moved year-over-year?
Prashant Tripathy — Managing Director & Chief Executive Officer
We generally that level of retail is not a part of our disclosure, but I will say all our margins are quite robust.
Madhukar Ladha — Elara Capita — Analyst
All right. All the best.
Operator
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments. Over to you, sir.
Prashant Tripathy — Managing Director & Chief Executive Officer
Thank you, Stephen. And thank you ladies and gentlemen for being on Max Financial earnings call. We look forward to more such interaction in future. Thank you once again and goodbye from the management team side.
Operator
[Operator Closing Remarks]