Max Financial Services Ltd (NSE: MFSL) Q3 2025 Earnings Call dated Feb. 05, 2025
Corporate Participants:
Amrit Singh — Chief Financial Officer
Prashant Tripathy — Chief Executive Officer and Managing Director
Analysts:
Shreya Shivani — Analyst
Avinash Singh — Analyst
Supratim Dutta — Analyst
Manas Agrawal — Analyst
Prayesh Jain — Analyst
Sanketh Godha — Analyst
Gaurav Nigam — Analyst
Gaurav Jain — Analyst
Neeraj Toshniwal — Analyst
Madhukar Ladha — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Max Financial Services Limited’s Q3 FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star zero on a touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Amrit Singh, CFO from Max Financial Services Limited and Max Life Insurance Company Limited. Thank you, and over to you, sir.
Amrit Singh — Chief Financial Officer
Thank you. Good morning, everyone, and welcome to our earnings call for the quarter ended December 2024. The results were made available on our websites and on the exchanges last evening. And as always, I’m joined by Prashant, Managing Director and CEO of Axis Max Life Insurance.
I’ll hand it over to Prashant to share developments and insights for the quarter.
Prashant Tripathy — Chief Executive Officer and Managing Director
Thank you,, and good morning, everyone. Thank you very much for being on the call this morning. As many of you may be aware and already know that in-quarter three, actually in the month of December, we refreshed our brand, transitioning from Max Life Insurance to Access Max Life Insurance and changed our corporate name to Access Max Life Insurance Limited. The strategic move represents the integration of two trusted names in the financial services sector. It enables us to extend our reach beyond metro and Tier-1 cities where our consideration as well as awareness course were pretty strong already, but the hypothesis was to deepen our presence through our brands, especially in smaller cities, while carrying forward MaxLife’s legacy expertise in leveraging the trust and recognition associated with Access brand. A recent brand survey conducted by Kantar in January 2025 highlights the positive impact of our refreshed brand that we are seeing already, especially in Tier-2 and Tier-3 cities.
You may refer to Slide number nine of investor presentation where we have given some data points, but very happy to share with you that our refreshed brand is already making a positive impact. And obviously, this is a move targeted towards keeping our long-term strategy and reach in mind, and I’m very positive that the steps that we have taken in-building early fruits already. Our brand awareness scores have already increased in these areas. And I think with time, we believe that even consideration will increase and with further investments, we expect that brands will reach-out to the segments that we intend to cover more-and-more as we go-forward. We are confident that the combined strength of our brand will create long-term value for all our stakeholders.
Let me now go back as usual two key developments across our strategic areas during quarter three. Firstly, let’s focus on our growth. We actually target a sustainable and predictable growth, and I’m very happy to share that in the first-nine months of the fiscal year, our individual adjusted first year premium has grown by 25%, outperforming the private sector, which grew at 19% and overall industry, which grew at 14%. Even on a two-year compounded annual growth rate basis, we have grown at 22%, almost double as the industry CAGR at 11%. In-quarter three, individual adjusted sales grew by 16%, outperforming both private sector growth, which was at 13% and overall growth of industry, which was at 5%. Additionally, our total AP expanded by 17%, driven by an 11% increase in policies issues.
Our crop channels continued to see strong growth, expanding by 24% in-quarter three and 41% over the first-nine months. This growth is supported by both offline and online channels with the online segment strengthening our leadership position. Banca grew by 12% in-quarter three and 14% over nine months. Our group credit line business grew by 18% in the first-nine months of the year.
To expand our distribution, we onboarded eight new partners in-quarter three of FY ’25, including five group Credit life partners, two brokers and one corporate. These new partnerships are expected to contribute significantly in the medium-term and have already surpassed the INR100 crore mark. Overall, our focus on expanding prop channels and maintaining a healthy share in partner channels continue to support sustainable growth. The last quarter also saw us being compliant with the surrender guidelines. And my second topic hence is to talk about product innovations to drive margin.
I know there is a question that must be going on in your head as to what is the impact of those guidelines on the margins of our company and I will share that in a bit with you. Especially on product front, Max Life remains committed to leading product innovation. We continue to launch products that meet customer needs while delivering strong returns to our shareholders. Our retail protection business has grown by 37% in the first-nine months of the year.
To strengthen our protection proposition, we recently launched a new protection product called Smart Term Plan Plus with key features like auto rebalancing of life cover, maternity cover for female life insured and the Lifeline plus features, allowing a top-up in case of spouse to the death. This plan offers seven flexible variants to address unique customer needs. This protection product along with our flagship offering of health products 2.0 launched in November puts us in a unique and competitive position to further grow our Protection and health segment. Additionally, we also achieved the — our highest rider attachment ratio of 45%, up from 32% in the first-nine months of last year with rider APE growing at over 250%.
We also introduced a new PAR proposition with an income advancing option leading to 10% growth in this segment in-quarter three. Further, ULIP segment continues to grow in-quarter three at 49% despite a recent decline in liquidity markets. This trend is reinforced by the success of our new fund Sustainable Wealth 50 Index tailored for e-commerce customers. As a result, the unit share in our broad mix increased from 35% in last year, quarter three to 44% in-quarter three of this year. Subsequently, our product mix was — sequentially, our product mix was largely stable from quarter two to quarter three and the volumes were slightly lower. Typically, in-quarter three, our volumes will be higher than quarter two and we will see a volume leverage benefit. Unfortunately, this year, it was not so. So our quarter three was almost similar in terms of volume to quarter two.
As a result, our margin for quarter three stood at 23.2%, slightly lower than quarter two despite the impact of the surrender guidelines. Just to clarify, in all our discussions over last many quarters, we’ve been repeating that the net impact of the surrender guideline on us will be between 100 to 200 basis-points. Very happy to share with you that it remains at the lowest end-of-the guideline that we have been given it is close to about 100 basis-point impact. So if we were to simulate our product mix as we had last year-on this year sales, our margin would have been 100 basis-points lower than the last year quarter three margins, which means the delta that we see in this year’s margin versus last year, which is close to about 400 basis-points, about 300 basis-point of that is because of product mix or higher buyers towards unlip and lower sales from non-power and power segments.
We remain committed to rebalance the product mix and there are many actions that we’re taking right now. But suffice this to say that we have taken several steps internally like increasing the rider penetration, ensuring that the variants which are high-margin generating are being sold so that the effect of surrender income could be neutralized and hence, we ended-up at the lower-end of 100 basis, 200 basis-point guidance that we had given. Coming to the other areas, on products, just like to clarify that we have taken all actions with respect to pricing as well as the negotiations that we have to do with our distributors with respect to compensation. And I think we have achieved an equilibrium with respect to all the deals or all the discussions that we had to have.
Focusing on customer outcomes and especially around persistency, let me first share with you that I remain very satisfied with the progress that we’re making. Customer obsession is a central theme to everybody and everything that we do in this organization. We are pleased to report a five-point increase in our net promoter score rising from 56 in March of 2024 to 61 in December 2024. This improvement is seen across both touchpoint and relationship NPS. We continue to be the market-leader in 13th month persistency in NOP terms and across the five-year cohort of 13th, 25th, 37, 49th and 60. First month persistency on NOP basis, our rank will feature anywhere between number 1 to number three.
In value terms, however, we have achieved our highest-ever level of regular limited papersency for 13th month, increasing by about 240 basis-points, going up from 85% to 87%. And also a reasonable increase across other cohorts of persistency. We have made great strides over the last six months on the persistency vectors and I remain very optimistic that as we go-forward, we should see further improvement, especially in 26-month cohort.
Digitization is a four theme which we look at not just for driving operational efficiency, but also driving our business in-quarter three of this year to drive enterprise agility in-product launches, we launched new edge product configurator enabling a do-it-yourself product setup and automated journey configurations resulting in reduction of product launch time by almost 50%. So our ability actually to launch products quickly has significantly improved as far as the turnaround times are concerned. Further, our digital progress and AI capabilities have helped enable not only new business by driving cross-sell propensity campaigns, but also collection of newer via alternate collection channels.
Our risk analytics engines, namely SHIELD,, have been able to identify and avoid a claim risk of close to INR700 crores in the first-nine months of the year. Thus, our digital initiatives are improving operational efficiency, enhancing customer satisfaction and driving cost-savings as well. We just came out of a two-day strategy meeting with our Board and I feel very optimistic and positive about the discussions that we had about our business and opportunities for growth. I think we have very solid plans to drive our aspirations over next three years. We have detailed plans not just for our channels, but also areas that we like to venture into and experiment and grow as we go along. So as we finish the three months — 3/4 of the year, we remain hugely optimistic and positive about which way Axis Max Life Insurance is headed.
In summary, we have mostly been able to navigate the challenges posed by introduction of surrender regulations in-quarter three. We had guided towards the short-term impact and we are confident of mitigating this to deliver sustainable, profitable outcomes in medium-to-long term. As far as the year is concerned, we do want to finish very positively as the year closes, we are — we have started well for quarter-four. And I think by the time we finish the year, you know, we will like to be in the range of about close to 20% growth on-sales basis and high single-digit growth for our VNB. Those are numbers that we are targeting internally. Of course, there is a lot to be achieved and quarter-four is a large quarter, especially the month of March is very large and we are going to try our best.
With that, I’m going to hand it back to Amrit for him to share all the financial performances and outcomes.
Amrit Singh — Chief Financial Officer
Thanks, Prashant. Just a quick update on housekeeping financial metrics. MFSL consolidated revenue, excluding investment income stands at INR20,907 crores, a growth of 14% in nine months FY ’25. MFSL consolidated profit-after-tax is at INR365 crores. Access Max Life’s renewal premium has grown by 12% to INR13,269 crores and thereby a gross premium growth of 14% to INR21,360 crores. The value of new business written over this period stands at INR1,255 crores, a growth of 9% with an NBM of 21.9% for nine months FY ’25.
Embedded value as at end of 31st December is INR24,129 crores and annualized total ROEV for Nine-Month FY ’25 is 21.2% and annualized operating ROEV stands at 17.3%. This has nil operating variance and a positive non-operating variance of INR537 crores. Policyholder opex to GWP is 14.9% and total cost to GWP stands at 24.3% for nine months FY ’25. Policyholder opex has grown by 15% for nine months FY ’25 and for quarter three, it has grown only by 2%. Access MaxLife nine-month profit before-tax stands at INR397 crores. It’s a degrowth of 9% though largely due to higher strains of product forms that we have written and overall segment allocations. Solvency position stands at 196% as at end of December ’24 and AUM, we have ended at around INR1.72 lakh crores, a growth of 20% in our AUMs.
We will now be happy to take any questions that you may have and hence I’ll hand over to the moderator to open the floor for Q&A.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press R&1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press R&2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Shreya Shiwani from CLSA. Please go-ahead.
Shreya Shivani
Yeah. Thank you for the opportunity. Good morning, everyone. I have two questions. First is on the VNB margins. I wanted to — I wanted a little bit more detail to understand how the VNB has — how the VNB has moved from nine months-to nine months. So we were at 25.3 in nine months ’24. What I heard was 300 bps impact drag from mix change, 100 bps drag from surrender value. So the delta some 60 bps that we — that positive that we are coming to, is that from the higher rider because if I reduce 4 percentage points from 25.3% we come to closer to 21.3 so 21.9 in nine months if we — if you can help me understand on that bit.
My second question is on the banca channel. There is a bit of a — I mean a slight slowdown that may — that sequentially probably that has picked-up over there. If you can help us understand, is it just Axis Bank, all of the banks, are there any regulatory process changes going on at the bank. Any color on that would be helpful.
And my last question is, sir, — we are done with the rebranding exercise and congratulations on that. On the timelines on listing of Axis Max Life insurance, what I understand that the insurance amendment bill could probably facilitate it better because there is a clause for merger between insurance and non-insurance companies. So if that comes through, do you think our timelines on listing could be much shorter than earlier envisaged of 1, 1.5 years, two years. Those are my three questions. Thank you.
Prashant Tripathy
Thank you, Shreya. Let me take the questions one-by-one. The first question was the nine months margin. I was talking about quarter three margins. So if you remember for quarter three, last year we did 27.2 and this year we have done 23.2 and the clarification I was giving to you was of the 400 basis-point, 100 basis-point is the impact of surrender income and 300 basis-point impact or net impact, net of all the corrective actions that we’ve taken is because of product mix. Hopefully, as we fix the product mix, we will come in the range that we typically like to be, which is around 25% or plus. As we have communicated in past, we like to drive ENB growth and sales growth while being at around 25% margins. That will be the endeavor on which we will work as we go along.
With respect to your question on Banca, your observation is correct. However, I must highlight that that’s tactical. For the quarter, the growth that we saw from Axis Bank was a bit lower than other bank channels that we got, but suffice this to say that as we go along and we have started the new calendar year, growth is significantly higher coming from Axis Bank.
On your question on 35 — Section 35 clarification, yes, we are very optimistic. Actually that’s a very positive thing, especially for Max Life insurance because as soon as that bill gets approved, we will go-ahead and file it with the regulators. Hopefully, the regulatory approval process will be shortened because of the guidelines or the clarification coming from the Act. However, the overall process of going to MC, LT seeking approval, et-cetera, will take about one year. So hopefully a few months lower, but it is not going to be crunched to coming in one or two quarters. It will take it some time.
Hopefully, I answered all your questions. Over to the next question, please.
Shreya Shivani
Yes, thank you so much. That answers my question. Thanks a lot.
Operator
Thank you. The next question comes from the line of Avinash from Emkay. Please go-ahead.
Avinash Singh
Yeah, good morning. Thanks for the opportunity. Just a couple of questions. The first one is, you know, I mean, for very long, you had a kind of a range of ULIP in-product mix and now you seem to be consistently breaching that. So is it that, I mean, post this or Axis joining the rank of promoter, there is a strategic change as far as the thought process is concerned that now you are fine with kind of the selling the product that is demanded by the customer amid prevailing external environment.
So is it a kind of a strategic shift that, okay, now you are comfortable of with selling even higher units if there is a demand. And of course, when the demand moderate, of course, you will change that. So is there kind of some kind of thought process? And related to that on ULIP, in terms of you have been attaching this protection and riders, currently, if any kind of you can provide the numbers around that, okay, what the attachment rate with these ULIP products? So that is — yeah, so that is first question.
And second, again, a bit, I know it will be premature, but what are — I mean, because you have kind of — your Board has deliberated this issue and come up with this kind of a roadmap. So of course, once Section 35 is amended, things become much easier. But what is the view, I mean, if that amendment for whatever reason is delayed, can this — the roadmap you know provided by the Board for this merger of MaxF — and MaxLife, is it possible, I mean, to progress even if the S15 amendment gets delayed. Thank you.
Prashant Tripathy
Yes. Thank you, Vinaji. Always a pleasure to hear from you. Let me first answer your question on ULIP mix. No, just to clarify, we are trying to balance many things here. A, customer demand, customer-centricity definitely drives the choice of products; B, our growth rate and C, the overall profitability of the business. And generally, our product mix is a combination or triangulation of all these three.
At our level, product mix of, we — upwards of 45%, close to 45% at a total level is on the higher side. We will typically like to be in the range of 35% to 40%. There are efforts that we’re making to ensure that ULIP is — remains range-bound in the range of about 35% to 40%. However, as you know, ULIP has been over last few quarters, the most favorite designs considering stock market upsides, et-cetera, we have taken actions to attach more-and-more riders so that the profitability profile of the riders could be increased.
Like I mentioned to you in my initial commentary, we have about 45% total level. I — I don’t have the numbers for Ulyp, but we could talk to you separately. But because the attachment rates overall the attempt is to recover the overall profitability profile of the total book. So just to clarify, we are taking actions to keep it in the range of 35% to 40%. I’m very hopeful that as things stabilize and we move forward a couple of quarters, we’ll be back into the range that we’ve always been. There is no strategic shifts towards selling significantly higher units. We are comfortable selling a bit higher unit.
On — your question on Section 35, I’m at this point I am very positive that it should go through. It is definitely a problem with us to create a tangible structure that could facilitate the merger. So at this point in time, we are patient and we will wait for the Section 35 to get approved. Your question is about, do we have anything alternative to expedite? The answer is, we are not considering that right now. We remain very optimistic about this going through and then subsequently work with the regulator to expedite our overall approval process. But this definitely is a good step and we welcome that.
Thank you, Vinash.
Avinash Singh
Yeah. Thank you. Thank you.
Prashant Tripathy
Thank you. The next question comes from the line of Datta from Amrit. Please go-ahead.
Supratim Dutta
Hi, thanks for the opportunity. But my first question is on the growth side. So you have indicated that you’re expecting a 20% growth for the full-year, which basically means that 4th-quarter the growth will be around 11%. Is that correct? So should we see a higher mix of the non-par and par and slower-growth in the ULEP and is that something that you are building towards in the 4th-quarter? Okay.
And continuing that over FY ’26 and maybe into FY ’27, how do you see this product mix-shift now that we are seeing some bit of slowdown in the market and potentially there could be rate cut in the next six to 12 months. So how should we think about or how Max as a company is thinking about the product mix changing over the next 12 months and what are you doing towards that? So that’s my first question.
The second one was again on recently SEBI has been talking about launching a product which combines mutual funds and term insurance. If such a product comes into the market, then what would be the viability of as a product opportunity? If you could throw some color on that, that would also be helpful. Thank you.
Yeah. So and lastly, we have seen over the last your tie-up with access that has helped you gain traction in some of the markets you have those in data in the presentation, but wanted to understand what proportion of your policies currently come from Tier-2 and below cities? And how can this go up or change with this access rebranding that you have done? If you could throw some color there, that would also be very helpful. Thank you.
Prashant Tripathy
Thank you. Let me answer your questions one-by-one. Don’t know if your 11% number gets us to 20%, maybe you were back calculated or whatever that number is, but please know that quarter-four is the largest quarter and hence, you know, maintaining the same 25% growth may not exactly happen. I think 20% or above is the number that we are targeting. So 20% perhaps the lower-end of where we should end-up for the year. With respect to our margin profile and product mix, yes, we are making an attempt to rebalance the product mix and we will continue to do so.
Like I mentioned to you, there are three forces that actually impact the product mix, a, the customer demand; B, you know, our ability to gain market-share and maintain market-share and C, creating profitability. So there is a band in which we can operate, which will be 5% to 7% lower ULIP and maybe 5% more non-par and I think with that, I believe we will be able to hit our margin guidelines or margin endeavor of 25% plus percent. So I think that’s the direction. But suffice this to say that we’re not going to take draconian actions on product mix, which will have very significant impact on our growth. We typically try to grow faster than the markets so that we continue to gain our market-share. A very interesting thought on mutual fund plus term insurance, very hard to predict actually on how it will evolve.
In past, I know that about a decade ago, mutual fund industry did try to attach and actually attached term insurance a long-time ago before it got stopped, but there was a period when we saw mutual fund industry trying to attach term insurance or term to create a kind of surrogate or mimic of ULIP plants, but during that period, I didn’t see much impact actually on the industry. These are distribution — distribution-led businesses targeting different set of customers using different distribution channels. So not to defend life insurance industry, but at the same time, I think the customer segments and distribution methodologies are very different. So I’m not expecting huge impacts, but yeah, it is definitely a development that the life insurance industry should understand and prepare itself for.
At the same time, it also opens up opportunities to attach some insurance that we could provide to a very large set of buyers to mutual funds. So it is — it could be a unique opportunity as that. I don’t have the numbers of Tier-2 and Tier-3 cities, but my sense is that it will be quite significant and my sense is it will be close to almost a halfway mark-on the number of policies that we get from Tier-2, Tier-3 cities and large part of that actually comes from our partnerships, Bank, yes, Bank, other bank branches, you know, the corporate agents and the hypothesis was to create a brand which or a combined brand which helps our sellers to be able to sell, for example, in Axis Bank seller community having an Access Max life insurance product definitely is expected to find more favors and in the initial surveys that we’ve done that is actually get improved also.
So you know very happy with the step that we’ve taken, while it is just 50-odd days since we began, the early signs are better, but I’m quite optimistic that as we go along and make investment in this area to penetrate our brand, it will have outcomes. This is a step that we’ve taken for our future. So I think the early signs are positive.
Supratim Dutta
Got it. Thank you.
Operator
Thank you. The next question is from the line of Himang Sangai with Bernstein LG. Please go-ahead, Himank, your line has been unmuted. Please go-ahead with your question.
Manas Agrawal
Hi, sorry, can you hear me?
Operator
Yes, sir.
Manas Agrawal
This is Manas here from Bernstein. I wanted to understand, you mentioned that Q3 is generally heavier than Q2. We are also seeing an impact in the mix because of surrender value. Wanted to understand how much of Q2 was pull-forward demand and therefore a weaker Q3? Want to understand one part of that. And the other question I want to understand is a better brand awareness should eventually help you price better or cut the delta in pricing relative to larger private sector peers. So how are we approaching that, those two questions?
Prashant Tripathy
I will answer the second question first and then I’ll request Amrit to talk about the first question. One would definitely expect that you know a stronger brand or a combined brand will drive awareness as well as consideration and hence our ability to price ourselves better should increase or should become better. It is not a short-term thing, but over medium to long-term that definitely should be a possibility. You’re already seeing some very positive development around. And I don’t know if you know, but we are number-one sellers on e-commerce or digital space and that’s where strong brand starts to play a big role. So I’m hoping that as we go along, strong brand will definitely help us write better and will have a positive impact on our overall margins., you have the first one, please?
Amrit Singh
So your — the APE actually for quarter three this time is INR2,108 crores. And for quarter two, it was around INR170 crores. So approximately INR62 crores this quarter has come off as compared to the previous quarter. Now with respect to how much of it was impacted because of preponement of sale. I think it will be very difficult to kind of put a number there because that’s — the preponement of sale is only or at MAX is actually isolated only to an agency channel, if any. I could — my guess while guest would be anywhere between INR20 crores to INR30 crores of preponement I could have considered in-quarter two. But overall, if you would have noticed in the industry that there is a slowness from a premiums origination perspective in-quarter three, which has come through and which is the reason why the quarter three has come off slightly slower than quarter two. Thank you.
Manas Agrawal
Understood. Thank you.
Operator
Thank you. The next question comes from the line of Prahesh Jain from Motilal Oswal. Please go-ahead.
Prayesh Jain
Yeah. Hi. So just on this margins, again, VNB margins again. What would have been the hit had we not kind of come off — brought down the share of non-par in this quarter because that is — I think that also has a role to play in some form where the — so in a way, could you highlight as to how — what was the — what was the margin hit in the non-par side, particularly as to what kind of hit you would have seen on the non-par.
Prashant Tripathy
That’s a good question,, I’ll just maybe one sentence and then you can take it. We don’t really share the margin impact by-product categories. But like I mentioned to you, there is a dual impact which is taking place. Inherently speaking, the ULIP margins are lower and the non-par margins are higher. And if you look at our overall product mix for quarter three, you would see that ULIP is higher compared to last year and non-par is lower. So it’s a combined impact of this relative movement, which is causing the market to — the margin to go down, sorry maybe.
Amrit Singh
I think — so we — as mentioned, we don’t get into specific sub-segment margin sharing. Your observation is correct actually comparing quarter two of this year with quarter three of this year, where you are seeing that even the non-par actually has come off. So there would be an impact because of that, which is too, that’s an additional impact that we have faced in the quarter. But as we said, as mentioned that there are other mitigating actions also which have been taken, whether it is enhancing the product margin profiles of other segments, playing with variants, tweaking customer IRRs, etc., all have kind of gone into some of those competitions.
Prayesh Jain
So Amit, just clarifying this and helping on this a bit more. So if your margin — if your share of VNB, if your share of non-par would have been similar what was there in say Q2, your hit on margins would have been more or would have been less, that is produced.
Amrit Singh
If actually the share of non-par would have been similar to quarter two, then our margins would have improved actually.
Prayesh Jain
Okay. So the surrender charge itself is kind of not playing out that much.
And second on surrender charges, again, again, what is the kind of actions that you’ve taken with respect to commissions and alterations with the distributors have already been taken care of or how you know-how is that shaping up?
Amrit Singh
So as Prashant mentioned, I think from a distribution action perspective, all actions taken in the quarter and largely those are in-line with how the market has actually done depending upon the strategic importance of the distributor, its quality of writing business, etc, either there is an upfront reduction or there is a deferral as a construct which has been created.
Prayesh Jain
Okay. Okay. Got that. And last question would be on the ULIP trajectory, how has January panned so-far given the market corrections and how do you think this quarter could play-out with respect to the product mix?
Prashant Tripathy
Yeah. Well, for the quarter, we are trying hard, but suffice it to say that as soon as the market goes down, there is definitely a sales story around, oh, market is low, so we should invest now. So generally, in my experience of the market going down and unit mix readjusting on its own without external efforts is a delta of a few months. So of course, it is improving, but not drastically.
Prayesh Jain
Okay. Got that. Thank you so much.
Operator
Thank you. The next question comes from the line of Sanket Goda with Avendus Spark. Please go-ahead.
Sanketh Godha
Yeah. Thank you for the opportunity. So initially, our impact on the cylinder rules was somewhere between 100 to 200 basis-points, but we have arrested it to 100 basis. So just wanted to understand if I want to break-down this lower impact, how much is because of clawback or rationalization of commission structure? And how much is because of change in IRR or benefits to the end policyholder. Just wanted to understand that part. And second, in this 100 basis-point impact what you’re trying to highlight, have you already incorporated a assumption change with respect to behavior or you believe current behavior of paid-up will continue? So that’s my first question.
Amrit Singh
Yeah. So I think such a granularity of how much is customer IRR and how much is in distribution IRR, I think it will be incorrect on me to kind of share into such specific granularities actually. But we have tweaked all of these things. And I think in our assessment, we had been indicating earlier as well that we will try to ensure that this charge burden that has come in the product design is passed on equally to all the legs associated, whether it’s customer, shareholder or distributor. So we have tried to optimize on those principles per se. With respect to you know, paid-up behaviors and assumption changes, etc. In the new designs, there is some conservatism which has been built given the associated risk, which we have and that’s actually panning out in the margin profiles of the product as well.
Prashant Tripathy
Do you think it also — just to clarify that there were three things that we deployed. Firstly, looking at the customer returns, be distributant distribution compensation and C, cost actions at our end and being more effective and looking at our expenses. The first two actually are market forces. So you can’t unilaterally decide a very significantly higher adjustment to either customer IRRs or to distribution compensation because at the end, we are competing in open-market, large part of our distribution also is open architecture. So one has had to keep that in mind.
My belief is that all the changes that we’ve made are continuing to keep us very competitive in this space, either through return to the customers or return to the distributors. And definitely some other actions that be taken either in form of more protection or rider or lifting margin — margin profile by optimizing variants, et-cetera, our actions which have helped us to curb — curb this overall impact — net impact about 100 basis-points. So that’s the way we have operated. Fortunately, we don’t have breakdown on everything that I mentioned, but this is the net impact.
Sanketh Godha
Got it. Got it. Perfect, perfect. So my second question was basically, see, if I look at the just quarter, 3rd-quarter growth means — means heavy-lifting of the entire growth seems to be driven only by ULIPS because I see a sign of weakness in individual protection related to what we delivered in first-half and even credit life to that extent, which was anyhow a low-base product for us. So just wanted to understand that is equally true with non-par and annuity. So just wondering anything to read here, why there is a slowdown in other business predominantly in 3rd-quarter?
Prashant Tripathy
Yes. Basically you must also know that the overall market in-quarter three was lower than the first-half. Just to offer a few numbers. For the first-half of the year, the overall private market was growing at 24%. The overall industry was growing at 14%. If I were to look at those numbers for quarter three, the overall industry is 5% and overall private market is 13%. So there has been a slowdown and I think we always try to have a delta over industry and significant delta over industry. While we have succeeded in that, there has been an overall reduction in sales numbers. Your observation that large part actually came through is correct, but at the same time, with all the actions that we took around riders, etc., one has tried to optimize for the margins. Like I mentioned to you, it is our endeavor to rebalance the product mix and we are working in that direction.
Sanketh Godha
Got it. And then lastly, Prashant, on riders, which is 42% of the total business, is it largely fair to assume these riders are typically attached with to make the margin profile of that particular product to look better?
Prashant Tripathy
Not simply with the — with margin with ULIF, actually the rider attachment is a strategy that we started a couple of years ago and we have been trying to drive. Right now, my sense is that the overall volume in terms of sales volume will be between 2% to 3%. Our overall attachment will be about 45%, but we assess it with our term plans in a significant manner. We attach it with non non-par policies as well as we attach it ULIP. So those are three areas where we are trying to attach.
Sanketh Godha
Got it. And right as you don’t show it in protection, right? You show it as part of the savings where you have attached?
Amrit Singh
For protection. We — in the disclosures shown in the protection. You can see a footnote in the slide deck.
Prashant Tripathy
So the color actually is protection get.
Sanketh Godha
Okay, okay, perfect, perfect. That’s it from my side. Thank you.
Amrit Singh
Thank you.
Operator
Thank you. The next question comes from the line of Gaurav Nigam from Tunga Investments. Please go-ahead.
Gaurav Nigam
Yeah. Thank you, sir, for taking my question. Sir, this one is on surrender impact, which you have clarified as 100 bps. I just wanted to understand, sir, and, and this surrender regulations came in from 1st October and this is one of a kind, there is no historical precedent. How is the management estimating the impact to 100 bps and I just wanted to get a sense of what are the underlying — where-is the underlying data is getting derived from? That’s point number-one.
And second question, sir, is on overall clawback from banca and the proprietary channel, are we able to claw-back like have this discussion and claw-back the commission, have that structure in-place in both these sites?
Prashant Tripathy
So okay, I’ll take this question. The — so surrender is actually a mathematical number because there is now an increased surrender value that has to be given to the consumers after 12 months and also there is a new mechanisms of computing surrender values over the period of time. It is very mathematically identifiable that how much is the margin implication. And what we have shared is actually basis what we have seen in that product form with the increase, rates and the fact that we have adjusted for things around expense, commissions and returns, etc. The net number is what we have indicated actually. So I don’t know your specific question, but it’s not as if it’s not mathematical, it’s fairly mathematical number of how we have kind of come to a competition of the same.
Gaurav Nigam
Sir, just one clarification why I said this thing is how many people are going to surrender is not known, right? Or is that also mathematically possible?
Amrit Singh
But that anyways you — because this product form is not a new product form, this product form has always been in existence and you have an experience on how the surrender behaves in those product forms. And that actually — it becomes the basis of computing the profiles of margins. The reality is that in certain cases, let’s say, three years out, if you’re surrendering, the movement of the surrender values actually will — is not as-is it so stock or so material actually, it is marginally up. So that can’t become the reason why certainly the consumers will start selling because still the premiums that they would have paid-in the initial years, it doesn’t breakeven so quickly given the long-term nature of the contract. So we don’t expect that this is a completely new product form and there is no underlying assumptions that we have or we are aware of that we can’t price and can’t understand the product.
Gaurav Nigam
Understood.
Amrit Singh
Second question you asked was a clawbacks on proprietary channels, bank channels. Every channel actually has their own nuances, etc. And needless to say, we have had discussions with our partners and in-line with the market forces, as Prashant have mentioned, even our structures have either an upfront reduction or a clawback kind of a mechanism come into play. Understood. I mean within agency also, you will see variances, etc. But those are strategic choices of how we want to run businesses. Some places it will not be, some places, it will be, some places it will be a upfront, some places it will be a clawback, et-cetera.
Gaurav Nigam
Understood. Understood. Thank you, sir for answering my question.
Amrit Singh
Thanks.
Operator
Thank you. The next question comes from the line of Gaurav Jain from ICICI Prudential Mutual Fund. Please go-ahead.
Gaurav Jain
Hi, two questions from my side. One is, we understand currently Axis Group owns 19.2% in Max Life and that was to go to 19.99%. So what is the status on that transaction? And is it linked to merger or can that happen irrespective of this is first question.
Second is, we understand in this budget new tax regime has got a little attractive while the majority of people have already moved to new tax regime 70% odd. But what in your assessment is the number of people who would still be buying life insurance policy for ATC purposes? And how do you see this impacting our business? Thank you.
Amrit Singh
Thanks, Gaurav. So the access ownership in Axis MaxLife Insurance stands at 19.02% and there is a 0.98% option that exists. I think it’s pending a taxes end. They are seeking their regulatory approvals for that. So as and when that gets completed, the Board has already-approved it that will be facilitated. I think on the merger aspects, I think you know, there are many other things. This is listing roadmap approval which the Board has given as Prashant kind of mentioned that we will wait for applicable laws to get weaked. We are hopeful that this will be concluded in similar timeline so that it doesn’t become a challenge to it, but we will solve for it as and when the time comes.
On your second question around the new tax regime and old tax regime and you know, I think given the government data, over the last few years there has been a quite significant shift people preferring new tax regime and already upwards of 70.75% people are on that particular regime but that does not have — I mean, if ATC was the reason which was a reason for buying insurance, then you wouldn’t kind of see the structural strong growth that industry has been demonstrating for the last few years. And very frankly, this ATC as a reason to buy insurance actually is no longer a predominant reason. It’s more on the 1010D benefits and that is a more fundamental reason which creates a differentiation, which continues to remain intact and a strong basis for the product proposition to be overall attractive.
Gaurav Jain
Just a follow-up on the second question, Amit, any data concern that you would have done to understand the income segment or the ticket size or the, say, coming in Q4 or from the sales team, if you would have checked that is it really a top topic today? We understand the impact is meaningfully less, but there are camps who say that no, it is still significant. So any further insight from you on this will be helpful.
Amrit Singh
So we haven’t really — I mean, even those threshold levels of 5 lakh and 2.5 lakhs at, etc this particular year, we have seen growth happening all across by the way, so even those product forms where the tax impact shifting away from capital gain in case of ULIPS and the greater than 5 lakh in traditional, I think consumers see a benefit in the underlying product as well. So we haven’t really seen an impact that there is a reduction or sharp reduction happening in that particular area. And when it comes to less than a ticket size kind of threshold there also, I think the growth momentum has been there and you can see in NOP growth numbers. So we haven’t really experienced anything because of new tax regime shifting.
And we have been sharing this survey which actually was done few years back where it’s a syndicated survey where the reasons for buying insurance is asked and tax as a reason had kind of fallen down to beyond the top-10 reasons actually with the consumers were indicating. And even from a sales perspective, we haven’t. We don’t have — got you asking the question that do you know whether the customer is buying this product for the purpose of ATC. I really don’t have any data point actually for that particular prospective. We don’t capture any of that information.
Gaurav Jain
Got it, Amit. Thank you so much and all the best.
Amrit Singh
Thank you.
Operator
Thank you. The next question comes from the line of Neeraj Toshnewal with UBS Securities. Please go-ahead.
Neeraj Toshniwal
Yeah. Hi, Sir, my first question is on the kind of product mix we are targeting for Q4 given if we want to achieve single high-digit VNB on the aspect of 12% on AP looks to be on the higher side in terms of margin. So are we really looking to shift from to non-par in Q4?
Amrit Singh
Thanks,, for the questions. Obviously, there is all intention to optimize and improve upon the product mix. But what Prashant kind of gave as an indicative numbers around AP and B&B in his opening remarks, I think that does not assume a very significant shift, but all efforts will be done. So if the current run-rate maintains, is that what the answer that is Prashant indicated? And typically, why the margin improves in-quarter four is because of operating leverage. So the short answer is that we have assumed a similar trend going-forward. Despite that trend, the guidance is on margin between ’23, ’24, we will be able to meet. And if we are able to improve upon non-PAR significantly in the quarter, definitely the outcomes will look better.
Neeraj Toshniwal
So any change in strategy if the happens this week, then in terms of product mix, how the industry is looking at?
Amrit Singh
I’m sorry, I didn’t get your question. What happens in the industry?
Neeraj Toshniwal
So if the rate cut happens, let’s say, if we start with the easing of multi policy, do you think the non-par or traditional products will see a pickup from here.
Amrit Singh
Rate cuts you said?
Neeraj Toshniwal
Yeah, therefore it happens this week-in the loyalty policy.
Amrit Singh
Yeah, it’s always so it’s question it’s we always keep a close eye on how the yield curves are. And everyone in the industry does it and basis the movement in yield curves, the product gets repriced. But the reality is that all asset classes all across also move-in a similar nature and similar direction. But as things stand today, where the yield curve is, I think the products are priced in a particular manner. I don’t see a significant change happening on the — our product IRRs in the next few months for sure. But over longer horizons, obviously, we keep repricing basis, the movements in the yield curves. But it’s not as if you report it moves and we — tomorrow we reprice it. We take a more balanced view of how do we see the overall trend and the pressure on margins or positive elements on margins.
Neeraj Toshniwal
Got it. Okay. Thank you. Thank you so much.
Operator
Thank you. The next question comes from the line of Madhukar Lada with Nuvama Wealth Management. Please go-ahead.
Madhukar Ladha
Hi, thank you for taking my question. First, can you give us some sense of what medium-term growth for top-line and VNB you would be targeting over the next, you know, let’s say, three years? And where will the growth come from? So if this year, I look at your proprietary channel that’s grown at 40% plus level, but the banca has just grown at about 14%. So over the next three years, between these two channels, what will be the interplay, right? I mean, if you can get some sense on how this is going to move?
Second, despite ULIPS actually increasing in the mix on a year-over-year basis, your back-book strain has increased considerably. So if I look at — look this for Q3, the number is up 57%, if I’m not wrong, the new business train, but so what’s happening over there if some sort of sense of there?
And your economic variance from INR660 crores in first-half is down to INR537 crores, I think you mentioned — I think mentioned in the opening remarks. So I’m guessing this is largely the equity movement. So just these three questions.
Amrit Singh
Yeah. So let me go — thanks,. I’ll go last question backwards. You’re absolutely right. The movement or down from H1 to nine months on economic variance is largely due to equity. There is no other reasons to that. The strain, the strain actually is because of Unit-linked designs, because of new surrender regulations, also because of some allocation movements that actually happened. So those are effectively the reasons for strain and strain is coming — large part of the strain is coming because of Unit-linked designs and growing and increasing at a much faster pace. Where will the growth come from.
Madhukar Ladha
Just a follow-up. Wouldn’t non-par design cause a higher strain initially or does sort of ULIP cause a higher strain?
Amrit Singh
So in our case, they are fairly is how I say ULIF is slightly higher than the savings design of non-par. Protection obviously is higher strain, annuity is higher strain, but the ULIFs are slightly higher than the savings part of the design and that causes — has caused the additional strain that you’re seeing in the numbers that you’re attributing to.
Madhukar Ladha
Understood.
Amrit Singh
From a — and growth perspective, I think, Madhugar, I think the strategy, even though as we come conclude our planning, long-range planning process, we have just initiated that process. And when we come and meet you next time, we will provide you more specific details around some of those things. But I think needless to say, there is no shift in our overall thinking with respect to our priorities. So our priority will remain to continue keep accelerating our proprietary channel growth rates. And when I say proprietary, it will come from our online business, will come from our agency business and it will come for our direct selling businesses. Each of the businesses have their own nuanced strategy elements to how the growth will be built upon. Agency, the focus will be on expansion.
We still continue with respect to our size and scale, you know, fifth or a sixth player in the industry and there is more opportunity and room for us to keep adding on augmenting capacity in that — our agency channel as well. The direct selling team actually is doing quite well. It’s a team which is a cross-sell, upsell team and there is more-and-more avenues always available as the business book builds up. So it will continue to remain focus on that. In banks, core banks both at and yes, I think we will mirror the growth of how the bank will grow, hoping to keep counter share in intact and that’s what we have done over the last many years now. Additionally, there are new and new partners that we have added as you would have seen and all of those partners as where we scale and their annual run-rates start coming to business, that will help us from a growth perspective.
Without getting into some specific numbers, I think we will only reiterate that we will continue to grow faster than the market growth rate from a total market growth rate, 300 to 500 basis-point is always what we target and that’s where the focus will remain. On margin fronts, it’s a tactical period of where we were — were we kind of came across surrender regulations, etcetera. But over long horizon, we do see 25% margin profiles what we will try to target and try to be at.
Madhukar Ladha
Understood. This is very helpful hello.
Operator
Thank you, sir. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
Amrit Singh
Thank you, everyone, for joining our earnings call and we look-forward to more such interactions. Have a good day.
Prashant Tripathy
Thank you very much. Have a nice day.
Operator
Thank you. On behalf of Max Financial Services Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.