Max Financial Services Ltd (NSE: MFSL) Q2 2025 Earnings Call dated Oct. 23, 2024
Corporate Participants:
Amrit Pal Singh — Chief Financial Officer, Max Financial Services and Max Life Insurance
Prashant Tripathy — Managing Director & Chief Executive Officer, Max Life Insurance
Analysts:
Shreya Shivani — Analyst
Swarnabha Mukherjee — Analyst
Supratim Datta — Analyst
Prayesh Jain — Analyst
Sukant Garg — Analyst
Madhukar Ladha — Analyst
Avinash Singh — Analyst
Sanketh Godha — Analyst
Nidhesh Jain — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Max Financial Services Limited Q2 and H1 FY ’25 Earnings Conference Call. [Operator Instructions]
I now hand the conference over to Mr. Amrit Singh, Chief Financial Officer, Max Financial Services Limited and Max Life Insurance Company Limited. Thank you, and over to you, sir.
Amrit Pal Singh — Chief Financial Officer, Max Financial Services and Max Life Insurance
Thank you, Riyo [Phonetic]. Good morning to everyone. And once again, welcome you to the Max Financial Services earning call for the quarter ended September 2024. We made our results available on our website as well as stock exchanges last evening. And as always, I’m today joined by Prashant Tripathy, Managing Director and CEO of Max Life Insurance.
I’ll request him to share key developments and insights from this quarter.
Prashant Tripathy — Managing Director & Chief Executive Officer, Max Life Insurance
Good morning, everyone, and warm welcome to Max Financial Services earning call.
I’m very excited just to begin with to share with you that we have now solid plans to refresh our corporate name and brand identity. With Axis Bank on-board as a co-promoter. Max Life management proposed the inclusion of Axis as a part of its corporate name and brand identity. And I’m so thankful to the Axis Bank’s Management Board as well as Max, that we now have the permission to use Axis name from their perspective on our brand identity. With Axis Bank coming as co-promoter way back in 2021, igniting a powerful synergy, the time was right for us to consider having Axis name in our brand also. Our goal is to create an even more powerful and influential brand that continues to inspire Bharosa for our customers, employees, investors and other stakeholders.
This strategic decision was backed by an in-depth research by all our stakeholders — with all our stakeholders by an external consultant. The key findings of studies show a strong association with Axis Bank beyond urban and Tier 1, and Max plus Axis joint branding being a preferred space — preferred thing. Combining the two brands would result into stronger brand association, increased likability, ease of remembering and preferred buying consideration. And it will also very solidly and overtly exhibit to all the stakeholders the association as well as ownership of Max Life Insurance by Axis Bank. The brand refresh has been approved by all the Boards, Max Life, Max Financial and Axis Bank, and the new corporate name and brand identity will be announced in due course, subject to corporate and regulatory approvals. I am very optimistic that we will do that over next quarter.
Now, moving on to key development in quarter two across all the strategic areas, and I’ll pick them up one by one. Firstly, about predictable and sustainable growth. In the second quarter of FY ’25, our individual-adjusted first year premium exhibited a very strong growth of 34%, outperforming both the private sector and overall industry growth rates of 24% and 21%, respectively. It is noteworthy that this growth, even on a two-year CAGR term, is also a healthy 25% compared to overall industry growth of only 14%. Total APE in quarter two expanded by 31%, led to a significant 20% — over 20% increase in number of policies we issued. Therefore, so far in the first half of the year, our sales, which is APE and adjusted FYP, have grown by an impressive 31% backed by secular growth from both proprietary and partnership channels.
Our continued investment in prop channels led to a sustained momentum in their growth, achieving year-on-year 45% growth in quarter two FY ’25 and 51% in H1 FY ’25. It is noteworthy that our strong focus and execution capabilities have resulted in prop channel growing a two-year CAGR of around 46% in H1 FY ’25. Offline prop channels saw a remarkable 39% growth, driven by enhanced front-line sales productivity and the expansion of our top-performing agent pool. Our online channels continue to lead the market, holding the top position across digital platforms in both protection and savings segment. These channels grew by over 59% in quarter two FY ’25, fueled by robust demand of our new fund offer, aimed at online savings segment.
Further, in our ongoing efforts to broaden distribution, we have successfully onboarded 20 new partners during quarter two FY ’25, including two banks, Indian Post Payments Bank is one of them, 10 GCL partners, five online and offline brokers and three corporate agents. While these partners become sizable in medium term, our exciting partnership channels delivered a strong performance in quarter two as well, posting a 22% growth and 17% in H1 FY ’25.
Additionally, despite the competitive and slow disbursal market, our Group credit life business expanded by 34% in H1 FY ’25, showcasing our ability to scale up in highly competitive market, despite being late entrants. In short, we are committed to maintaining a similar momentum of growth throughout the year, surpassing industry growth by a significant margin.
Talking about products, which has been a big discussion item also in view of the regulatory changes which became effective from 1st of October. Our dedication to product innovation remains steadfast. Max Life continues to lead the market in launching attractive products that align with customer needs, while delivering healthy returns to our shareholders. With the same objective in quarter two, we introduced a Nifty 500 Momentum Fund predominantly for e-commerce customers, a move to leverage opportunities in the current equity market. This led to 74% growth in the ULIP segment at Company level, with the ULIP share in our product mix increasing from 35% total APE last year to 47% in quarter two FY ’25.
Protection, a long-term focus area for us, saw 49% growth in retail protection in quarter two, driven by the success of our unique SEWA health proposition and strategic emphasis on riders. We achieved the highest ever rider attachment ratio of 45% in H1 FY ’25 versus 31% in H1 FY ’24, with rider APE growing by over 280%. With this protection and health penetration in our individual APE, we reached 11% in quarter two FY ’25 versus 10% previous year.
Further, in retirement, we recently launched our latest version of IRI Study, which revealed that most urban Indians recognize the importance of early retirement plan. The retirement preparedness index for urban India increased from 47 points in IRIS 3.0 to 49 points in IRIS 4.0, supported by greater awareness and proactive financial planning. Therefore, the retirement segment remains a strategic priority for us, and we are well-positioned to capitalize on this opportunity through our annuity proposition. While quarter two annuity sales saw a moderate growth of 5% due to competitive pricing actions, we expect them to ease in the coming quarters, paving the way for renewed growth from this segment.
All our efforts in distribution expansion, along with product innovation, resulted in a significant increase of 23% in our VNB for quarter two, with an NBM of 23.6%. And with that, our first half VNB growth is now 16%. This is an increase on quarter-on-quarter 6.1%, which comes from the benefit of our operating leverage and strong growth in rider attachment. You will find the outcomes to be consistent with the commentary that we had shared with you at the end of quarter one, where there were a lot of questions around our NBMs.
Surrender regulations update is something that you must be waiting for. As you are aware, new surrender regulations became effective from 1st October, and it wanted all our products to be fully compliant. I’m happy to share that we have successfully relaunched 98% of these products for sale. Further, we are in the process of mitigating the impact on margins by existing distribution compensation, customer benefits as well as taking actions on specific discretionary area of expenses. As guided earlier, we anticipate a net margin impact on a run rate basis, full year run rate basis, of between 100 basis points and 200 basis points, majority of which, I believe, will be mitigated in the medium term, medium term defined as over next few quarters.
Talking about customer obsession across the value chain. At Max Life, customer obsession is integrated to everything we do. The dedication to delivering unparalleled value interest has been recognized, with Max Life being named as one of the Best Organizations for Customer Experience 2024 by ET Now. We also achieved a 5-point increase in our Company-wide Net Promoter Score, rising from 56 in March ’24 to 61 in September ’24, with both the touchpoint and relationship NPS showing similar gains. We maintained our leadership in 13-month persistency for a number of policies, with our regular and limited premium persistency reaching its highest ever level at 87%, up 309 basis points, while our 61-month persistency stood at 58% for the period ending September 2024.
The fourth strategic lever, which is digitization for efficiency and intelligence, our ongoing digitization initiatives continue to enhance operational efficiency across the business, delivering both cost savings and improved customer satisfaction. Max Life efforts were recognized with the Digital Transformation Award at the 19th [Phonetic] SKOCH Summit for our OCI Cloud Journey as well as the Best DevSecOps Team Award by Quantic.
Our quarter two technology interventions include the launch of the mPitch Pro app, designed to help agent advisors simplify the pitch to prospect and the SARAL tool, which streamlines onboarding of customers and distributors. Our new claims system, called TEJAS, now operational for almost all products, offers real-time claim validation, further building customer trust. We also launched a generative AI-based co-pilot for over 4,000 front-line sales personnel and supervisors in quarter two to assist with real-time sales query and objection handling.
In summary, our quarter two results underscore our ability to scale proprietary channels, grow partnerships and achieve profitable outcomes. As we move forward, leveraging the strength of both Max and Axis brands, we remain committed to delivering sustainable, long-term value for our customers, shareholders, partners and employees.
I’m going to hand it over to Amrit now, who will provide an update on our financial performance. Back to you, Amrit.
Amrit Pal Singh — Chief Financial Officer, Max Financial Services and Max Life Insurance
Thank you, Prashant. Some update on key financial metrics incrementally.
MFSL consolidated revenue, excluding investment income, now stands at INR12,820 crores, a growth of 14% in the first half. The consolidated profit after tax for MFSL stands at INR295 crores. Max Life renewal premium grew by 12% to INR8,046 crores. And hence, consequently, the gross premium has grown by 14% to INR13,137 crores. Value of new business over the first half is at INR766 crores versus INR663 crores the previous year, a growth of 16%. The NBM for first half now improved to 21.2%.
Embedded value end of September 2024 is INR23,338 crores. This includes the capital infusion, which was done by Axis in the first quarter of INR1,612 crores. The annualized total return on EV first half FY ’25, excluding the capital inclusion of INR1,612 crores, is 24.2%, and the annualized operating RoEV stands at 16.8%. In the annualized operating RoEV, there has been a positive operating variance of INR9 crores. And on overall embedded value, there is a non-operating variance of INR660 crores. Policyholder opex-to-GWP stands at 16.5% and total cost-to-GWP is at 25.6%. Policyholder opex has grown by 22%, in line with business growth.
Max Life first half FY ’25 profit stands at INR267 crores, a growth of 3%. Solvency position is at 198% end of September ’24. The overall assets under management end of September ’24 is INR1.7 lakh crores, a growth of 27%.
We will now be happy to take any questions that you may have, and I will hand over to the moderator to open the floor for questions.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]
The first question is from Shreya Shivani from CLSA. Please go ahead.
Shreya Shivani
Yeah. Thank you, and congratulations on a good set of numbers. Sir, I just wanted to check on two things. First is on the surrender value regulation. We’ve heard your peers speak about that they’re using a multiple — different combination of claw-back or progressive commissions and that’s how the structures are currently under discussion with distributors. Where are you guys on this conversation? Are the deals [Phonetic] see — most of your peers have said that the industry will take another quarter for this entire dynamic to settle down. So, some commentary around that would be useful.
And second, sir, on this Axis, use of Axis Bank in the name — Axis in the name, what sort of regulatory approvals are required? You were saying it can come through in the next quarter. Will RBI be included in approving this? Some color around that would be useful. Thank you so much.
Prashant Tripathy
Yeah. Thanks, Shreya. I’ll take both the questions. On surrender income, my commentary is consistent with what the industry peers are saying. We have had detailed conversations with large set of partners already, and there are proposals which are a combination of all the things that you mentioned. I’m very optimistic that from our perspective, we’ll be able to close it in less than one quarter. With smaller distribution partners, we are engaging in that discussion right now. And we are really optimistic that all that will get settled over the next few weeks.
As far as the approval of branding is concerned, as you know, we need to go to ROC, followed by an approval from IIDI [Phonetic] for the name change. Those are two approvals which are required. We don’t require any approval from RBI. So, hopefully, the turnaround time to do that will be close to 45 days, and I’m very optimistic that hence, within next quarter, we’ll be able to launch our brand.
Shreya Shivani
Okay. Very useful, sir. Congratulations and all the best.
Prashant Tripathy
Thank you, Shreya.
Operator
Thank you. The next question is from Avinash Singh from Emkay Global. [Technical Issues]
Avinash’s line seems to be on hold. We’ll move to the next question. Next question is from Swarnabha Mukherjee from B&K Securities. Please go ahead.
Swarnabha Mukherjee
Hi, sir. Thank you for taking my questions and congrats on a good set of numbers. So, first, sir, I wanted to understand regarding the margin front. So, if I were to look at Q2 vis-a-vis Q1, there’s around 600 basis points improvement that has come through. Just wanted some quantification from your side that how much of this would have come from operating leverage and how much would have come from the product mix? Because at least, at a macro level, it looks like that product mix have, in fact, might be relatively smaller, but if you could give more color on that.
And also, whether you, like a couple of your peers, had commented that the yield curve impacts were absorbed in terms of the non-PAR products. So, have you done the same as well? And whether if that is part of this number, how much in basis points terms maybe had impacted the margin, that would give us some color on what could be going in [Phonetic] India. And also, if your guidance changes because of that, because this margin came out strong in this quarter, whether there would be any change in the guidance.
Secondly, sir, in terms — I wanted some color on the break-up that you generally provide on the sub-segments in your proprietary channel. How — what has been the mix of, say, the direct channel, the e-commerce and the agency in your prop channel this quarter and the prior year same quarter? So, that would be helpful. And how the commission structures are panning out in the e-commerce channel? Because I think for 1H, you have mentioned that there is more than 100% growth in this channel. So, just wanted to understand that.
And lastly, in…
Prashant Tripathy
I will lose track of the — all the questions that you are asking.
Swarnabha Mukherjee
Sure, sir. Just one last one on the structure simplification process [Technical Issues], if you can highlight.
Prashant Tripathy
Let me make an attempt to answer some of the questions, and I’ll lean on Amrit to share with you the numbers. I think with respect to the advantage or margin increase, you may recall that we mentioned every time that when we come up with our margin numbers, we take expenses on actuals. And hence, if you were to look at last many years, our quarter one margins are smallest, and every passing quarter, the margin builds up. And this quarter was no different. If you remember, we had a 17.5% margin in quarter one. If you look at our VNB in the first quarter, our VNB was close to INR250 crores. Now, it is more than doubled. So, we do significant more sales in quarter two compared to quarter one. And hence, there will be a big advantage of leverage, first part. And I don’t know if Amrit has those numbers handily, I’ll give it to him in a second.
And the other one is a commentary that I mentioned to you. We attached significant more riders this quarter to drive our margins up. So, hence, if you look at our product mix, our product mix is more or less similar. We have written similar amounts of ULIP also. But because of higher leverage as well as attachment of riders, we were able to drive more profit. So, riders, we generally call as a part of our protection and health proposition. And you will notice that protection and health proposition has significantly increased in first half. So, that is the big reason why it has happened. But I’m going to hand it over to Amrit to give more color as well as talk about responses to other questions.
Amrit Pal Singh
Yeah. Thanks, Prashant. So, from quarter one to quarter two walk, the 600 basis point improvement that you see, 500 basis point of that comes out of operating leverage and also strong volume growth that we have continued experiencing in the quarter and around 100 basis point is a mix of the riders, which have — which we have been successfully enable to actually attach across our product points.
On the — the second question that you actually asked was on the yield curve impact. Look, the yield curve impact is a regular course of business. There is yield curve movements, which will happen, and we will respond to the yield curve movements. We have done some bit of it during this first half. The non-PAR pricing has been adjusted at various points in time, though the movement in the last month has been a bit sharper. But keeping an overall view of competitive intensity and competitive actions, we will also continue to take those calls with respect to adjusting our non-PAR rates for the customers as well.
I think you asked a question on the contribution coming out of our different channels. The agency has, at an overall level, contributed around 21%, 22% last year. It’s at similar level this year as well. The CAT channel also contributed around 9% last year. It is at similar level this year as well. And the e-commerce contribution is actually up from 9%; it has moved to 15%. So, there is the e-commerce growth, which you can see of over 105% in the first half. It’s causing to an improvement of share of the e-commerce of the business.
Swarnabha Mukherjee
Yeah. So, yeah, a couple of things. One was whether you are — whether there is any change in the margin guidance that you had given because of the better margin profile that came through this time and maybe the rider attachments are growing, so would you like to change that? And second is, on the structure simplification process, if there is any progress if you want to share.
Amrit Pal Singh
So, I think, on guidance, we’ll stick to whatever we had been saying at the start of the year. You will appreciate that it’s not a normal period that we are entering into from a regulatory disruption that has come in play, and it will require this quarter three some bit of stabilization to happen. But keeping the overall guidance in view that we do aspire for a double-digit VNB growth and a strong APE growth, and VNB margins will be an outcome of some of those things. So, we’ll kind of continue holding to this particular guidance.
Prashant Tripathy
On the structure simplification, we don’t have any update beyond whatever we have shared so far. We are working and we are observing.
Swarnabha Mukherjee
Sure, sir. And do you have any timelines in mind for that?
Prashant Tripathy
I think we — the moment, we have visibility to timelines, we’ll come back to you. It’s — I mean it is going to be a time-consuming process. And I think we’ll make an attempt to do that over the next few quarters is the way I’ll put it.
Swarnabha Mukherjee
Sure, sir. Sure. Very helpful. Thank you so much and all the best.
Prashant Tripathy
Thank you.
Operator
Thank you. The next question is from Supratim Datta from Ambit. Please go ahead.
Supratim Datta
Hi, thanks for the opportunity. Sir, my first question is on the growth side, ULIP has been growing fairly strongly. And this has not been the case only for you, but across the sector, ULIPs have been growing very strongly. Just wanted to understand what is your experience suggest that when the market slows down or when things start to stabilize, how easy is it to switch from ULIPs to other products? And what could be some of the levers that you could use to shift the growth from one product to the other? If you could give some color on that end what your past experience suggests, particularly given we could enter a period that you could see rate cuts as well. If you could give some color on how life insurance products during rate cut periods, that would be very helpful.
And the next question is on the EV walk. So, there seems to be a positive operating variance that you have reported for the half. Just wanted to understand that what has resulted in this positive operating variance. If you could give some color on that, that would be helpful. Thank you.
Prashant Tripathy
Yeah. Okay. So, I’ll take that. I think growth from ULIP definitely is a phenomenon, and this is not happening for the first time. In past also, there’s a strong correlation on ULIP growth with respect to market uptick. And over the last few quarters, we have seen the share market performed well, and hence, ULIP picks up. In past, we have witnessed that life insurance industry has been able to maneuver the change quite well, and so have we. There have been many quarters where our growth or our ULIP mix will go up to between 40% to 45%. It will fall between 35% to 40%. But we have more or less maintained that trajectory. I don’t expect a big impact on account of ULIP transition. If at all, it will be very marginal.
In terms of EV walk and operating variance, positive variance, operating variance, which is a minor number is because of some of the upsides that we have seen from our mortality experience.
Supratim Datta
Got it. And just one clarification. So, on the name change or rebranding, would it be a joint name that you’re proposing, like Axis Max or Max Axis? Or how would that be, [Phonetic] if you could give some color.
Prashant Tripathy
I think your expectation is correct. I can’t tell you whether it will be Axis Max, Max Axis. But yeah, it is going to be a combination of both the names.
Supratim Datta
Got it. Thank you.
Prashant Tripathy
Thank you.
Operator
Thank you. The next question is from Prayesh Jain from Motilal Oswal. Please go ahead.
Prayesh Jain
Yeah, hi. Sir, firstly, just extending the point on the rebranding. Which channels do you — in your survey or the feedback that you would have received from the third-party, which channels would you expect to benefit the most out of this? And we’ve already kind of been delivering a very strong growth on APE front. So, on this base also from a, say, two-year to three-year perspective, what would be your growth aspiration considering the rebranding?
Prashant Tripathy
Yeah. Thank you very much. That’s a very good question you asked, and it was — it is something very, very strategic. From our point of view, of course, Max Life Insurance is a prominent brand within life insurance space. We are seen as the experts in life insurance, and we have had an incredible journey so far. However, Axis is a larger financial services conglomerate and it has presence in many, many more cities, Tier 2, Tier 3, smaller part of India, where perhaps Max Life brand is not as strong.
And hence, we kickstarted — and this is not really something which was a guidance from shareholders. Actually, the management team picked up this exercise to look at any opportunities that may arise by having the strength of Axis Bank associated with Max Life Insurance. And we actually talked to almost everybody. We — as you know, we are expanding in smaller cities. We opened 100 branches over last one year. We talked to agents, advisors. We talked to current customers. We talked to prospective customers. We talked to employees of Axis Bank, sellers of Axis Bank, sellers of other banks. And I think across all cohorts, we found that the strength of both brands coming together was more prominent than Max Life on its own.
So, hence, the management team made a request to our Axis set of shareholders, along with Max shareholders, to allow us to use a brand which kind of carries both the — the strength of both the brands together, and I’m very happy and lucky that it’s been allowed. So, we’ll take that on-board.
It also, in a way, answers some of the questions that investors and analysts have over and over again, come and asked us about the seriousness, the ownership of the agenda of Max Life Insurance growth by Axis Bank. I would like to unequivocally communicate that it is reflected, the ownership of the agenda, the growth of Max Life agenda by Axis Bank is quite vested in the decision that Axis Bank has chosen to lend its named brand to Max Life Insurance. It goes to that extent. So, it serves to the purpose of really reflecting and demonstrating to entire world that both the companies are going to work together, and we have very deep interest in building life insurance business in India.
We — I think the advantage, distinct advantage that we’re going to get is also with sellers of Axis Bank, where we have an open architecture situation. And I think having a common brand or having Axis brands attach to Max Life Insurance will definitely give some bit of distinctive advantage to Max Life Insurance in the minds of the sellers. We already are in the counter share range the 65% to 70%, and we have maintained that. Over and over again, there have been questions around it. We have maintained it. So, honestly, from all counts, I think this was a very positive decision that I was personally passionate about, and I’m happy that we’re moving in that direction.
Our growth has been strong. Your observation is right. We are doing very well. And I think with these changes or with the strategic decisions that we are doing, one will make an attempt to grow even faster. We have deep aspirations to be among the top three players. And I think we will continue to pursue that journey with strength and with determination.
Prayesh Jain
Great. Thanks for that elaborate answer. And secondly, from a VNB margin perspective in the second half, how do you see this panning out given that surrender charges would kind of come in end probably you will have a rebranding cost that would come into your numbers? And also, the commission structures are still being discussed and not yet finalized. So, do we see the margins kind of coming up in Q3 and then kind of possibly a more normalized number in Q4? How do we see the margin kind of panning out?
And from a — say, again, from a two-year to three-year perspective, do we see that the VNB CAGR would be similar to the APE CAGR? Or how should we kind of look at from a two-year to three-year perspective?
Prashant Tripathy
Yes. I think margin is something which is quite dear to us. And on all the discussions that we do internally, margin finds a very important place. However, over last two or three years, you would have seen that we are trying to balance market share growth with margin. One would be very happy if we are near about 24%, 25% margin, yet being able to maintain the growth trajectory on APE the way we are doing.
Last year, margin was 26.5%. The year began without any surrender impact. We had given a guidance of being between 25% to 26%, that kind of a number, close to about 25%. The surrender guidelines have come, and we have spoken about 100 basis point, 200 basis point impact. So, really, I think our margin should be in the range of 23% to 24% for the full year basis. I’m being bold in giving some kind of guidance in a very fluid environment. So, with the one quarter here or there, I think on a run rate basis, we should try and make — or try and come close between 23% to 24% for the year. That will be our attempt.
And over a medium-term basis, when I say medium term, over three quarters to four quarters, we should try to cover up this delta which has come. And as demonstrated in this quarter, we have several initiatives which are running to optimize our margin. So, we will continue to do that.
I think the cost of rebranding, I would count it out, because that’s honestly going to be a one-off cost. And hence, one should look at margins independent of that. But you’re right, the next two quarters will be in that sense, especially this quarter is going to be dynamic because of how surrender income regulations are settling. But one would definitely make an impact — a very genuine effort to hold the margin at the levels where we are or improve further.
Prayesh Jain
Great. Just last question. How has been the first 23 days, 22 days of October under the new regulations with respect to growth or with respect to product mix, any different from what you would have seen in the first half?
Prashant Tripathy
Honestly, I mean that’s something which I’ll be running afoul talking about the growth rate, let the IIDI numbers come at the end of the month. I think we request your patience.
Prayesh Jain
Okay. Great. Thank you so much.
Prashant Tripathy
I don’t have any reasons to worry.
Prayesh Jain
Perfect. That helps. Thanks.
Operator
Thank you [Operator Instructions]
We take the next question from Sukant Garg from Equible Research. Please go ahead.
Sukant Garg
Hi. Thanks for giving me the chance. Just a little bit old school questions here. What would be the buying rate currently in the policy of Max Life Insurance?
Prashant Tripathy
Amrit, do you want to take this? I couldn’t even hear. Can you repeat your question?
Sukant Garg
Yeah. What would be the buying rate, the policy conversion rate against the quotes that’s been generated?
Prashant Tripathy
Do you have the conversion rates, Amrit?
Amrit Pal Singh
Generally, 10% conversion rate is what we observe across…
Prashant Tripathy
It varies [Phonetic] by channels also.
Amrit Pal Singh
Yeah. And it does vary depending upon channel. Bank conversion are slightly higher. E-commerce conversion rates are more tougher. And agency conversion rates — and direct-linked conversion rates are between 8% to 10%.
Sukant Garg
So, 10% is the overall the quote — for the quotes generated against the policy conversions, that would be fine [Phonetic]?
Prashant Tripathy
That’s right.
Amrit Pal Singh
That’s right. Meetings — customer meetings done to policy converted.
Sukant Garg
That is 10%?
Amrit Pal Singh
Yeah.
Sukant Garg
Okay. And what would be the revenue per policyholder and average cost per claim around — approximately?
Amrit Pal Singh
Sorry, revenue and what, claims per policy you’ve asked?
Sukant Garg
Revenue per policyholder and average cost per claim currently.
Prashant Tripathy
The ticket sizes, you mean? You mean the ticket size of every policy?
Sukant Garg
Yeah, average.
Prashant Tripathy
It’s closer to INR1 lakh, Amrit, if I’m correct, right?
Amrit Pal Singh
That’s right.
Prashant Tripathy
Yeah. INR1 lakh per ticket size on the regular policies. I — sorry, I don’t have the answer to the second question. If you could e-mail me and Amrit, we’ll come back to you with specific answers, if that works?
Sukant Garg
Sure.
Amrit Pal Singh
I mean if you’re looking for case sizes, in the investor release on Page 46, we do provide average ticket size per policy. On an average, as Prashant mentioned, it is INR1 lakh for all products put together. But it does vary depending upon the product that is being sold. So, it can be as low as INR40,000 in our protection design, going up to as high as INR1.50 lakh in annuity kind of a design.
Operator
Thank you. The next question is from Madhukar Ladha from Nuvama Wealth Management. Please go ahead.
Madhukar Ladha
Hi, good morning. Congratulations on a great set of numbers. Just I’m not sure whether or any of the previous participants have touched upon on this, but can you talk a little bit about what is driving growth within the proprietary channel, so the online channel and the agency channel? If you could give what is the growth for each, online, direct and agency. And…
Operator
We seem to have lost the line for Mr. Madhukar. We’ll move to the next question. The next question is from Avinash Singh from Emkay Global. Please go ahead.
Avinash Singh
Hi, good morning. Congratulations on a great set of numbers. So, growth has — especially growth has impressed in first half, I mean, and the growth is coming across channel, and even product-wise growth is quite good. Now when we move to H2, there are kind of a couple of external factors, the biggest including your surrender regulation changes probably, I mean, maybe limited, but some disruption on the product side and also some negotiation on the payouts. Additionally, the month of October is, any way, festive kind of a month where you have the Dussehra, Diwali-led disruption.
I mean, so how are you seeing the growth trend so far? And what sort of expectation you will have that, I mean, in this backdrop, what kind of a growth, I mean, that you can deliver in terms of the APE in H2 — or rather for the FY ’25?
Prashant Tripathy
You asked a very relevant question. The good part is it just doesn’t apply to Max Life Insurance, it is true of industry, and hence, I will peg my response to the industry growth rate. Whatever is the industry growth rate, we will try to grow substantially more than, like, for example, the industry growth rate was 24%, we grew 34%. So, one would like to have a plus 5% to plus 7% delta with respect to private industry growth rate, let me put it that way.
I’m very optimistic that the changes in regulation is not going to have a material impact on growth rates, and we are, at least from our side, internally, not cutting down on our growth expectations. So, one would make an attempt to maintain the trajectory of growth the way we have done in first half.
We are quite committed actually on double-digit teens kind of VNB growth rate, and we will target that. Earlier, Avinash ji, I did mention that one would make an attempt to hold the margin like we have done in quarter two, despite having the surrender impact. But yeah, you’re right, there are some moving pieces. But I can only pivot back to every such regulatory changes. You can go back in history. Each time it has happened, Max Life Insurance has come out stronger. So, that gives me a lot of optimism. And basis all the discussions that we have done, made changes, etc., I think, we are reasonably confident of what we’re talking about.
Avinash Singh
Okay. Clear. Thanks.
Operator
Thank you. Next question is from Sanketh Godha from Avendus Spark. Please go ahead.
Sanketh Godha
Yeah. Thank you for the opportunity. Prashant, you said that your rider attachment is around 45%, which helped in the margin expansion. So, just wanted to understand, what is the internal target you have? And to what extent it can negate the impact of, say, surrender rules or product mix change to support the margins? I mean, 45% is already a very big number, whether you see this number going, I mean, fully further up compared to what it is today. That’s on riders, first question.
The second question is on annuity. It seems to have slowed down a bit, if I look at the numbers. Is it because last year, you had group and now you have not got it, that led to that moderation? If you can give a split between that number, annuity business into group annuity and individual annuity and how individual annuity have behaved, that will be useful.
And the last question is on cost. See, the growth has been 31%, but the cost — overall cost has increased by 280 basis points on year-on-year basis. So, ideally this should be still an operating leverage given the kind of growth we had. So, I just wanted to understand, is this cost because of capacity addition, like many more people in Axis Bank or your investments in prop channel is still happening? If that is the case, then future investment leverage — or sorry, this operating leverage for these investments made in the channel, how you see to play out going ahead? Yeah, these are my three questions.
Prashant Tripathy
Thank you very much. I’ll take the first one, and then I’ll request Amrit to focus on the next two. In terms of rider attachment, Sanketh, in our organization, we have chosen protection and health as a very critical area of growth. And we are very deeply working on improving the penetration. And we count that as protection, meaning pure protection, either a return on premium kind protection or normal protection. B, health products, and we have an offering called SEWA, which was very, very good in terms of margin contribution as well as sales.
And then, the third one is riders, which we are trying very hard to attach to. A large part of rider attachment that did was — we did in last quarter was with ULIP designs, which we sold through banks. We are, at this point of time, trying to rebalance the overall mix, and efforts are on to reduce the proportion of ULIP. And we are seeing reasonable success in doing so. So, we will continue to work on optimizing the margin. If ULIP proportion goes up, we’ll try to attach riders, so that we’re able to preserve margin or reduce or optimize the product mix in a manner that ULIP proportion goes down and the proportion of non-PAR goes up. So, those will be attempts. As you would appreciate, these are moving pieces and continuous efforts are made to actually to optimize our product mix, so that the margin outcomes are optimal.
For question two and three, I’m going to hand over to Amrit to respond.
Sanketh Godha
Prashant, a small follow-up. Is it fair to assume these riders’ margins are meaningfully superior compared to even the protection and the overall Company average?
Prashant Tripathy
It will be aligned to protection and a tad higher than protection.
Sanketh Godha
Okay.
Prashant Tripathy
And significantly higher than Company average.
Sanketh Godha
Yeah, got it.
Prashant Tripathy
Yeah, Amrit?
Amrit Pal Singh
Yeah. I think on the two questions that you asked, one was on annuity and the second one on operating leverage in the subsequent quarters. Annuity, as we did mention in the opening remarks and also in the presentation, the retail annuity has grown at 18% for first half. But the group annuity, because we actually experienced a very large deal last year, a single one-off deal last year, there is a large decline in group annuity at the moment, around 60% decline. But if you adjust for that large deal, then there is a 60% growth. We are quite optimistic that this group annuity business also will pick up in the subsequent quarter as it kind of takes away the effect of that one specific large deal.
Sanketh Godha
Amrit, can you give split of your annuity into group and retail percentage mix?
Amrit Pal Singh
So, on an — around INR173 crores is retail and INR12 crores-odd is group annuities, superannuation annuities.
Sanketh Godha
Okay. Thanks.
Amrit Pal Singh
On APE basis. This is APE, right, so…
Sanketh Godha
Yeah. INR173 crores is retail and INR12 crores is group, that’s the way I need to understand, right?
Amrit Pal Singh
Right. Yeah. On operating leverage, you’re right. Actually, historically, you would have seen that as quarters progress where sales volume increases and opex, operating leverage kicks in, there’s an improvement in margins which happened. We do experience anywhere between 200 basis point to 300 basis point expansion in margins from what you have seen in quarter two going forward as well because of that.
Sanketh Godha
Amrit, my question was half-to-half comparison, that is first half last year to first half this year, you had a growth of 31%, but ideally, the cost ratio should have come down, but it has increased. So, I wanted to understand this cost increase is largely because of man addition in Axis or investment in prop? And how it will play out, if you believe these investments have been done upfront, then how do you see it playing out going ahead?
Amrit Pal Singh
Right. So, the total expense that has increased, which is around — is a 28% increase. And obviously, the individual business has grown by 31%. The APE has grown by 31%. The 28% increase, the opex, pure opex is actually around 21%, 22% increase. And there is a large commission increase that is evident, which some bit of it is re-baselining of commission between lines, which is actually happening and panning out. And also, the fact that we are aggressively pursuing some of the new accounts in Group credit life businesses, where, generally, the commission ratios are higher.
Now, with respect to opex, pure opex, there is obviously an increase, which has been done towards the distribution workforce across our channels. And that distribution workforce does start showing up productivity gains as time progresses, whether it is in agency, whether it is in direct selling teams or whether it is in new relationships or banks that we have added. So, that’s largely the overall confuse [Phonetic] of how opex is panning out.
Operator
Thank you. Next question is from Madhukar Ladha from Nuvama Wealth Management. Please go ahead.
Madhukar Ladha
Hi, good morning. Sorry, I got disconnected for some reason. So, just wanted to get a sense of what is driving growth within proprietary channel, the online agency and direct sub, sort of, channel groups out there.
And second, if you look at the new business strain, that’s also gone up substantially. I think it’s good to see that backlog surplus has grown, but new business has actually gone up quite sharply in this quarter and in the first half. So, any particular reason on that? Is it more reserving-driven? Or is it more sort of higher commission payouts or something of that sort of — actually payouts going up over there? Some color on that will be helpful. And can you break-down the economic variance between fixed income and equity?
Prashant Tripathy
Yeah. I will request, Amrit, if you take this, the questions?
Amrit Pal Singh
Yeah. So, you asked three questions. The first one is actually where — what is driving the growth across our proprietary channels. In agency, clearly, our top agent engagement programs and overall top agent momentum is very strong, and that is actually helping us. In addition to the fact that the expansion of capacity, which is helping with productivity gains coming through the year, is also an aiding force in what has been driving the growth momentum with the agency channels.
In direct selling teams, actually, it’s to do with more and newer pools of customer segments to whom we have started doing cross-sell and upsell, which is actually aiding that growth, and these new pool have come as some of the customers which are unmapped at Axis franchise customers, whom we have had now e-commerce relationships. Those kind of additional pools have helped. And obviously, we have invested in people to go and kind of tap into these pools across our cities, and that is enabling the growth momentum in the direct channel.
And largely, in the e-commerce channel, I think it’s — we did mention around two years back that savings is the business that we are now entering into, and there has been strong savings momentum in that particular channel, and which we have from not being present two years back, have kind of come to a pole position with respect to the counter share that we own in that particular market. That has helped. And the underlying protection growth, we’ll continue to remain leaders in that business on a whole. So, that’s the first one.
I think the second question you asked was on the strain. You saw a rise in strain. The reason for the strain increase, one, obviously, is higher sales in protection Group Credit Life and ULIPs, which actually intrinsically have higher NB strain, and that’s largely the reason why the strain has grown. It’s a factor of business mix and business growth coming out of these specific segments. And all these segments unit-linked, credit life and protection have highest strains initially, unlike saving design policy.
Last question you asked was on the economic variance, what proportion. Two-third of that is attributable the equity gains and one-third is fixed income [Phonetic].
Madhukar Ladha
Got it. Thank you and all the best.
Amrit Pal Singh
Thank you.
Operator
Thank you. The next question is from Nidhesh from Investec. Please go ahead.
Nidhesh Jain
Thanks for the opportunity, sir. The question is on e-commerce channel. So, what is driving such sharp growth in the channel, almost 100% Y-o-Y? Definitely, we must be gaining significant counter shares. So, what is — what we are doing to drive that?
And second is, if you can break-down the e-commerce channel, what percentage of business is coming from your own website from the e-commerce channel — in the e-commerce channel?
Prashant Tripathy
Thank you, Nidhesh, and greetings to you. I think we, historically, on the e-commerce channel, Nidhesh, you’ll remember, we were always very good on protection. We have been number one in protection for many years, and that was our area of focus. However, our presence on savings space was quite limited. And we were the fourth player if we were to add savings and protection together. About a year, 1.5 years ago, we decided that we need to be comprehensive. This is an area of growth. And you would — if you look at our analyst presentation, you will find number one initiative as being a leader in the e-commerce space. So, we took tangible steps to consolidate our presence in the savings space, and that’s been the key reason of our growth.
Generally, we sell a combination of ULIP with non-PAR on e-commerce platforms. And over the last few quarters, I think index-linked designs have been very famous, very popular, and that’s driven our growth at e-commerce.
On the direct website, that’s something that we always try to rebalance, and my sense is, we will have close to about 30% to 35% of the sale actually comes from directly our website.
Nidhesh Jain
Sure, sir. That would also be a pretty large number, 30% of your e-commerce.
Prashant Tripathy
Yeah, it’s growing. Both are growing quite rapidly, both the aggregator space as well as our own website, both of them have grown remarkably.
Amrit Pal Singh
Yeah. So, the direct growth is up 90% and aggregators are also around 110%. So, both have grown quite handsomely.
Nidhesh Jain
And from a product-level margin perspective, if you sell through aggregator or if you sell through other channels, how differentiated is the product-level margins from these two channels?
Prashant Tripathy
I think it comes similar, Nidhesh. Honestly, it comes similar, not very different. Even coming to our website also requires investment in terms of generating traffic and search, etc.
Nidhesh Jain
Sure. Thank you, sir. That’s it from my side.
Prashant Tripathy
Thank you, Nidhesh. Thank you. Have a nice day.
Operator
We’ll take that as the last question. I would now like to hand the conference back to the management team for closing comments.
Amrit Pal Singh
Thank you. Thank you, and thank you, everyone, for attending our earnings call. We continue to look forward to more such interactions and have a good day. Bye.
Prashant Tripathy
Thank you very much.
Operator
[Operator Closing Remarks]