Max Financial Services Ltd (NSE:MFSL) Q4 FY21 earnings concall dated Jun. 09, 2021.
Corporate Participants:
Jatin Khanna — Chief Financial Officer
Prashant Tripathy — Managing Director and Chief Executive Officer
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Analysts:
Andrey Purushottam — Cogito Advisors — Analyst
Nitin Agarwal — Motilal Oswal Securities — Analyst
Ajox Frederick — B&K Securities — Analyst
Rahul Bhangadia — Lucky Investment — Analyst
Shreya Shivani — CLSA — Analyst
Sanketh Godha — Spark Capital — Analyst
Abhishek Saraf — Jefferies — Analyst
Nidhesh Jain — Investec Capital — Analyst
Nischint Chawathe — Kotak Securities — Analyst
Rishi Jhunjhunwala — IIFL — Analyst
Manoj Bahety — Carnelian Capital — Analyst
Vinod Rajamani — HSBC — Analyst
Neeraj Toshniwal — UBS Securities — Analyst
Prateek Poddar — Nippon India Mutual Fund — Analyst
Abhishek Khanna — Jefferies — Analyst
Mayank Bukrediwala — Franklin Templeton — Analyst
Presentation:
Operator
Ladies and gentlemen good day and welcome to Max Financial Services Limited Q4 and FY ’21 Earnings Conference Call. [Operator Instructions].
I would now like to hand the conference over to Mr. Jatin Khanna, CFO, Max Financial Services Limited. Thank you, and over to you, sir.
Jatin Khanna — Chief Financial Officer
Thank you. Good morning, ladies and gentlemen. Thank you for being part of Max Financial Services earnings call. My name is Jatin Khanna, CFO for Max Financial Services.
Before proceeding with the performance highlights, I’d like to introduce my other colleagues on the call with me. I have with me Mr. Prashant Tripathy, who is the MD and CEO for Max Life. Mr. Amrit Singh, who is the CFO and Head of Strategy for Max Life; Mr. Ashish Taneja, who is a Senior Leader from our Actuarial Functions.
Delighted to be hosting this call after a pause a few quarters. As you know, we were in the middle of a seminal transaction, which will shape out the course of Max Life for the future, so we had to pause for a while. Glad to be back to our quarterly results. Also glad, that Axis has become the co-promoter of Max Life with 13% stake.
MFS has received about INR736 crore on stake sold to Axis Bank and Axis has the right to acquire an additional 7% stake. This deal closure marks a new phase of growth and stability for Max Life, we’ve now got on to the first step of the transaction and filed an application with IRDAI for acquiring residual stake of 5.17% from MSI in Max Life, which will entail an outflow of about INR843 crores, we have around INR894 crores in our balance sheet to take care of this requirement. So we are going forward.
We are hopeful of concluding this transaction in the coming quarter. We are also hopeful of concluding the 7% stake sale transaction to Axis in the next 12 to 18 months. I would imagine, you will have some further nuanced question on the transaction structure. However, since we have to still conclude many other steps of the transaction, my request will be to refrain from seeking any further details of the transaction structure at this stage. We will be happy to address those at an appropriate time. I will request you to restrict your questions on the call to the performance of MFS and Max Life.
Now quick highlights of our business performance for FY ’21. Our consolidated revenue, excluding investment income for FY ’21, was at INR18,815 crore. A strong growth of 18% in the most challenging business environment. Consolidated PAT at INR560 crores has grown at a strong 105%. Growth in profits is largely aided by one-off factors, such as reversal of provision for impairment on financial assets and lower tax expense. These one-off gains were partly offset higher new business strain, due to shift in product mix towards non-policies [Phonetic].
Now moving onto the key business highlights for Max Life, despite COVID led challenges, FY ’21 was the most successful year for Max Life. Our successful conclusion of Axis transaction and renewal of YES Bank partnership for five years, sets the stage for a sustainable and profitable growth trajectory of Max Life. Decade high new business market share of 10.8% improved by 107 basis points. Most importantly, Max Life achieved one of the industry leading value of new business growth of 39%. VNB almost doubled in last three years to INR1,249 crores in FY ’21. NBMs also expanded by 360 bps to an all-time high of 25.2%, primarily driven by increase in non-par and protection business and cost saving initiatives. Max Life’s MCEV growth by 19% year-on-year to about INR11,834 crores. NCEV on operating basis has grown at 18.5% annualized, impacted by COVID provision however, including non-operating variances RoEV is at 22.4%. Max Life individual APE has grown by 19% to INR4,718 crores in FY ’21. Q4 sales grew by 36%, driven by both proprietary and partnership channels.
Max Life has outperformed the industry growth on new sales individual, by growing 19% in FY ’21 versus a private insurance growth of 8%. Highest ever individual sum assured sales at INR3.3 lakh crores, individual new business sum assured grew by 22% versus 6% for private sector.
The market share on sum assured touched about 15.6% and very pleased to share that we enjoy a third rank in the industry when it comes to the sum assured. So really our protection focus comes out of this vector. Our overall protection sales grew 28% year-on-year, higher than the overall company growth. Individual protection change has grown by 40% year-on-year, and contribution to overall sales has improved from 8% in previous year to 9% in the current year.
Group protection sales grew by 10% year-on-year, ranked number one on e-commerce direct online and web [Indecipherable] for protection, based on our market intelligence. So, very happy to share that. Our gross premium grew by 19% to INR19,018 crores in FY ’21 with Q4 growth of 21%. Renewal premiums also grew by 15% to INR12,192 crores. There has been an improvement in 13-month persistency by 80 bps to 84.1% and 61st month persistency by 190 bps to 54%.
Strong roots and investments in digital efforts, enabled transactions to a fully digital phase, recruitment, training and governance in weeks during the lockdown. Agility in technology enabled faster new product launches, so we launched 40 new products or modified some products, and we launched some riders as well over the last 12 months. This enabled sales momentum and margin improvement.
During FY ’21, company exceeding INR131 crore of net claims on account of COVID 19, which will utilize our provisions held at the start of the year. We made further provisions in excess of INR500 crore, to neutralize any adverse impact of COVID going forward. Claim rate ratio improved by further 13 bps to 99.35%, despite all the difficulties we now faced during this current environment and the propensity of claims also went higher, because of the COVID situation.
Very happy to share that we were ranked number one in customer loyalty as per the annual syndicated survey of policyholders by Kantar. We were ranked number two in customer grievances incident as per the quarterly disclosure, with decade low mis-selling count and incident rates. We’ve been extremely efficient in our capital management with our ROEs consistently hovering around 20%, which is again best in class. Our solvency surplus is at INR1,341 crore with solvency ratio of about 196%.
AUM as at March ’21 end stood at INR90,000 crore, growing at 32% year-on-year and our par AUM has grown by about 26% year-on-year. We are now the fourth largest asset manager of life insurance AUM. We also improved our ranking by 10 places to get to 24th amongst the Great Places to Work for, and was among the Best Workplaces in BFSI space.
So to really sum up, Max Life will continue its trajectory of driving strong shareholder outcomes with Axis as a new JV partner. With partnership with Axis having being strengthened and YES Bank bancassurance renewed for another five years. Significant investments in proprietary and digital channels. Razor sharp focus towards costs and improvement and protection mix. We are progressing well despite the current challenges.
Good progress made on [Indecipherable] of Max Life strategy with predictable and sustainable growth, product innovation to drive margin, customer centricity across the value chain, digitization and analytics as a foundation, and augmentation of human capital as I had detailed about.
So on that note, we will hand over to the moderator to open the floor for Q&A.
Questions and Answers:
Operator
Thank you very much. Ladies and gentlemen we will now begin the question-and-answer session. [Operator Instructions]. The first question is from the line of Nitin Agarwal from Motilal Oswal Securities. Please go ahead.
Nitin Agarwal — Motilal Oswal Securities — Analyst
Yeah, hi. Thanks for the opportunity and congratulations on good results. So my first question is like how sufficient do you think will this provision be towards the COVID claims that we have [Indecipherable]. Or put in other words, like what sort of increase in mortality claims are you prepared for, while making this provision? And how much of these provisions have actually flown through the P&L, because a lot of it has flown to the EV, so any number that has flown to the P&L also?
Prashant Tripathy — Managing Director and Chief Executive Officer
Thank you, Nitin. A very warm morning to you. We feel confident about the provisions that we are carrying. Like I mentioned to you, throughout the year, last year, we had about INR121 crores, as Jatin mentioned of late. So you know as a reference point, we are carrying about four times lower, four times more to our P&L, as well as to our embedded value. So I feel quite confident. However sitting today with the numbers coming down now, there is reasonable confidence that we’ll be able to manage, but as you know, there is a bit of unpredictability. So this is our best judgment at this point of time. I’m reasonably sure we will be able to manage within this number. But one, of course needs to be watchful about it also.
Nitin Agarwal — Motilal Oswal Securities — Analyst
Okay. And how much of these closures has flown through our P&L?
Prashant Tripathy — Managing Director and Chief Executive Officer
So this is this a provision. Actually we — we have been a prudent organization and we always carried, you know pandemic results, etc. So we just reclassed that and we will consume that. So we had not taken it through the P&L because it was already available. That’s a part of prudent balance sheet planning for a life insurance company and I’m very happy that we were always prepared for any pandemic.
Nitin Agarwal — Motilal Oswal Securities — Analyst
Okay. And secondly, are we now likely to see an increase in pricing of term products, especially the group term? And any steps that we are taking to mitigate risk?
Prashant Tripathy — Managing Director and Chief Executive Officer
Yes. I mean, one is mindful about COVID claim experiences. And honestly, a large part of that is reinsured also, and we might see price increases, but one — because we play in marketplace and we are one of the largest players on aggregators counters, we will attempt to be competitive and balance it out. So to answer your question, is there a price increase? On individual business there might be some. On the Group side, I think the prices are being increased on the GTL size which is employer-employee kind of areas, that’s where we are seeing higher incentive [Indecipherable]. So those are two areas where we are reviewing the prices and as you know, the group side is yearly renewable contracts. So it keeps changing depending on instances of claims. So that’s a very normal thing the way its planned. But to summarize, we will be dynamic. We do see protection as a long-term bet for Max Life Insurance. There is lot of penetration still to happen. So we will take those calls, to optimize for customers, to optimize for growth and also to optimize for our margin.
Nitin Agarwal — Motilal Oswal Securities — Analyst
Okay. Sure. And lastly, like a question on the persistency. Now I see that we have made good progress on claims payout, customer loyalty scores, reasons sheet [Phonetic], all of these indicators are improving. But on a comparative basis, we are still a little lower on the persistency number. So why is this so versus the peers, and where do you see this persistency in the medium term?
Prashant Tripathy — Managing Director and Chief Executive Officer
Yes in the medium term, you will see an upside. You know, as for our models, we do expect the numbers to go up, closer to about 86% odd, so it should be about 1 basis point. We are on a journey to increase our persistency. There is lot of underlying work which is taking place. At the end of the day, it is a combination of historical product mix approach to how the channels have performed. So there is lot of planning, which goes behind it, and I’m hoping that over a medium term basis where you will see growth, we had a rather difficult first half where you would have seen through our reports last year that we had bit of a persistency decline year-on-year. We worked on it, and that’s been covered. Now both 13th month as well 16th first month persistency are about 100 to 200 basis point higher than how they were the year before. And I think we will be on an upward trajectory from here on.
Nitin Agarwal — Motilal Oswal Securities — Analyst
And like, just to clarify here, is it possible to share like how much indicatively December will be, including the grace period, because now month — is over. We have already passed that 30 days over the quarter end. So because last you have reported 87% on FY ’20.
Prashant Tripathy — Managing Director and Chief Executive Officer
Yeah, I mean — if we want — if we were to compare apple to apple, because grace period means nothing actually, I mean you compute persistency. But if you were to kind of eliminate the impact of grace period. This year, we will be significantly better than last year.
Nitin Agarwal — Motilal Oswal Securities — Analyst
So higher than 87%, is what we can read into it?
Prashant Tripathy — Managing Director and Chief Executive Officer
Let’s say 87% was taking into account the impact of grace period. Assuming that there was no grace period, it wouldn’t have been 87%, it would have been a lower number. So wherever today we are, versus eliminating the impact of grace period, we are significantly higher than last year.
Nitin Agarwal — Motilal Oswal Securities — Analyst
Okay. Sure. Thanks so much and we wish you all the best.
Prashant Tripathy — Managing Director and Chief Executive Officer
Thank you, Nitin. Thank you for your interest.
Operator
Thank you. The next question is from the line of Sangeeta Purushottam from Cogito Advisors. Please go ahead.
Andrey Purushottam — Cogito Advisors — Analyst
Yeah, this is Andrey, Sangeeta’s partner. Congratulations on a great set of numbers. I had two sets of questions. The first of the question is really related to marketing. And what I wanted to understand in some detail is that, what has really led to your increase in market share. What is the effect? Is this the benefit linked to your IMRB results from consumer loyalty? If you can give some detail as to what were the measures of loyalty on which you have emerged higher than the others? And correlate this to the question of having increased market share? And/or any other reasons that you have for [Indecipherable] insight on why do you think you have gained market share?
Prashant Tripathy — Managing Director and Chief Executive Officer
So, you know, a direct mathematical correlation typically is very hard. But let me kind of break down, first the Kantar survey and then our overall growth. Kantar’s survey is a survey which is done on the customers of respective companies. Which means the company, the research company will go to customers of different life insurance companies and they will seek or run a questionnaire with respect to how they feel about owning the policy of that particular company, how happy they are, how engaged do they believe etc is the composite score that they come up with. They ask the questions, the questionnaire based thing. On that basis, Max Life Insurance is the top the company — top private company based on customer loyalty, which indicates that our customers are most loyal compared to how the customers of other company feels. That’s point number one.
When you look at it in terms of growth, I think growth is a combination of two things, acquiring new customers, as well as upselling to your existing customers. Now by having more loyal customers, the ability to upsell is pretty high and we have seen increase in our upsell ratios. But a very large part of growth is also contributed by acquisition of new customers, and acquisition of new customers happened because of many things, because of expansion to distribution network. It happens because of new product categories, which you end up launching, and the normal marketing efforts that is put in, in terms of promoting the brand and reaching out to the customers.
So in a way they are linked, but not in a direct way. You know the ability to or the propensity for the customers to buy because they are more loyal, does contribute to growth, but there are many other factors, which also contribute to growth, including acquisition of new consumers.
Andrey Purushottam — Cogito Advisors — Analyst
Okay. So let me just rephrase my questions there. If I were to just ask a Hindustan Lever employee, as to why has he gained share versus Procter & Gamble indexes hopes presence or something something. You know, we may see that we have got — we have the product or we have better distribution or something else. I was trying to get an insight as to what is making you a dealer in market share? The fact that you’ve gained market share, what is there for us to see? I was trying to understand what you think is [Indecipherable]
Prashant Tripathy — Managing Director and Chief Executive Officer
Okay, three or four reasons. Actually one, most important reason is stranglehold in distribution predominantly being caused by our promoter Axis Bank, it was the key reason Axis Bank demonstrated very high rate of acquisition of our own — of customers. Through our progress in expanding our product, through protection and non-PAR savings that also caused the market share to go up those are two categories where we saw disproportionate growth come through. Number three is the strength of the brand that our consideration scores have jumped quite significantly. And that has led to more customer traction. And last but not the least, I think overall focus on a distributed or diversified channel mix, so while on one side as we did very well towards the second half of the year, we also found our own channels, as well as YES Bank channel to grow quite considerably versus the market average. Those are reasons why we believe we gained market share.
Andrey Purushottam — Cogito Advisors — Analyst
If I could ask the second question. In terms of the [Technical Issues] we have made forward, obviously this is changing — what are the [Technical Issues]
Prashant Tripathy — Managing Director and Chief Executive Officer
Hello?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Sir, you are breaking in between.
Prashant Tripathy — Managing Director and Chief Executive Officer
Yes, you’re breaking in between. Can you repeat?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Would you like to join back the queue?
Andrey Purushottam — Cogito Advisors — Analyst
Okay. Alright, okay, okay.
Prashant Tripathy — Managing Director and Chief Executive Officer
Can’t hear you.
Jatin Khanna — Chief Financial Officer
Yes, you can [Technical Issues]
Operator
Thank you. The next question is from the line of Ajox Frederick from B&K Securities. Please go ahead.
Ajox Frederick — B&K Securities — Analyst
Thank you for the opportunity. And congrats on a good set of numbers, sir. Sir, I have a question, it’s a very basic question on taking the provisioning on VNB, but here the margin impact we saw. So — for COVID basically, so does this mean that this is factoring in the unexpected COVID claims of FY ’21 and pricing was not done for COVID when we started selling this product. Is my understanding, right?
Prashant Tripathy — Managing Director and Chief Executive Officer
Amrit, you want to take this?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Yes. So, hi, Ajox. Thank you for that question. Ajox this is, you know, you can say tightening of mortality rate assumption that you see on COVID and largely it is — this tightening has been done in duration one and duration two. So whatever we sold in FY ’21, obviously the claims coming in the same year are always will be lower, but the claims that could come in FY ’22 or probably let’s say FY ’23 given, you know, how and then the way it’s going to settle. Is — this is that additional tightening of the mortality assumption that we have done. I hope that’s clear.
Ajox Frederick — B&K Securities — Analyst
Yes, yes. That’s very clear, sir. And sir my second question is on the channel, some of it sits — we do — indicates again a focus towards traditional business — far business basically. Is it a strategy to diversify its mix and basically normalize this PAR. I mean, non-PAR not going beyond the point. So is it — if it a strategic to diversify the mix [Speech Overlap]
Prashant Tripathy — Managing Director and Chief Executive Officer
Yes, to both about the questions. It’s a constant effort to remain diversified, you will notice that our mix on non-PAR actually went up this year, but you would also notice that it will — it was in the range of 30% to 35%, we didn’t allow it to go beyond of that. And you will also find that there is a — distinct bias towards writing more and more traditional plans within that savings — PAR savings and protection through our own channels. And you will see that we write a little bit more non-PAR and [Indecipherable] though our partner channels. So that’s part of strategy to remain diversified, align the product mix to the channel for reaching out to the customers and meeting the demands, as well as optimizing the overall margins for the company.
Ajox Frederick — B&K Securities — Analyst
Got it, sir. Just one additional question again on some of the cheque were indicating that focus was slightly on the lower end for smart secure plus usually when a new product is launched there’s very strong focus in that product. And like we saw for smart work plan, but this market capitalizes [Phonetic] on a very innovative product out there, but push is not very aggressive. And now that we are expecting one more round of price hike on protection side. What is the broad senses, like if you can answer in group, like categories one is on protection demand out there and two is, why are we slightly more cautious on this product?
Prashant Tripathy — Managing Director and Chief Executive Officer
So, you know, it’s a — let me answer the second question first. I have — we have always maintained that Max Life believes in a diversified product mix. We don’t like to put all eggs in one basket and ever since the evolution of the industry you would have found that Max Life has maintained a market of product mix, which is a bit away from how the normal market will be. Even during the peak period, when the entire industry was selling more and more you live, we were selling more traditional plan. So we always like to remain balanced and it is for the purposes of ensuring that we are reaching the different customer segments, because these products are important for different segments and we make sure that we meet a variety of needs for the customers. So that’s the second question.
On the first part…
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
I think, Prashant sorry to interrupt. I think Ajox’s question is on our new protection plan, is that correct, Ajox?
Ajox Frederick — B&K Securities — Analyst
Yes, Amrit, you are right.
Prashant Tripathy — Managing Director and Chief Executive Officer
So on the new protection plan there has — I mean we have launched it and there is a price increase, which is planned for. We are fairly aggressive about running it just to give you a sense, the sales are similar or better than last year. There is the demand has picked up in the month of April and May. There are of course some underwriting level controls that in consultation with reinsurance companies that we have introduced life. So it’s not as if we are not promoting the product, it’s just that we are a bit more cautious in view of what is happening because of pandemic.
Ajox Frederick — B&K Securities — Analyst
Okay, okay, sir. So probably once everything settles down we’ll…
Prashant Tripathy — Managing Director and Chief Executive Officer
Yes, absolutely. Like I mentioned to you, the protection is a long-term bet Max Life Insurance. We have done a very good job, our growth in last five years has been closer to 50%. And once things around COVID settled down, we continue to maintain that momentum.
Ajox Frederick — B&K Securities — Analyst
Got it, sir. So that’s it from me and all the best. That was very helpful. Thank you.
Prashant Tripathy — Managing Director and Chief Executive Officer
Thank you.
Operator
Thank you. The next question is from the line of Rahul Bhangadia from Lucky Investment. Please go ahead.
Rahul Bhangadia — Lucky Investment — Analyst
Thank you for taking my questions, sir. Just [Indecipherable] dip on the INR88 crores that you have taken in the VNB margin. Is it totally a part of the C4 [Phonetic] numbers itself? Or how do you look at it? And correspondingly, what is the impact on — what is your sense of what the margins are and going ahead?
Prashant Tripathy — Managing Director and Chief Executive Officer
You want to take this, Amrit?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Yes, so this INR88 crores were actually provided for in the quarter four. So the hit with respect to the INR88 crores on — going to come on to this particular quarter four. But the view has been taken for the full year. And I will, kind of, reiterate this is a prudent measure of ensuring that we are actually tightening the underlying implications of COVID into the VNB that we sold for this particular year. VNB also is a factor of multiple things, how you price it and how the reinsurance prices this kind of, pan out. And if COVID is behind us, obviously this is a one-off hit that has been taken. But over a longer horizon once COVID is behind us you will see this kind of gain occurring, if other conditions around pricing and reinsurance going to stays in play.
Rahul Bhangadia — Lucky Investment — Analyst
So just to clarify, but for this hit your INR88 crores would have been — the VNB have been higher by a INR88 crores, right?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
That’s correct, yes.
Prashant Tripathy — Managing Director and Chief Executive Officer
That’s correct.
Rahul Bhangadia — Lucky Investment — Analyst
And your sense of margins going ahead, sir FY ’22, ’23?
Prashant Tripathy — Managing Director and Chief Executive Officer
That’s a good question. Actually, the outlook is perhaps similar to over short period and it’s a bit of ball gauging, especially in view of COVID, I mean, bonus you must understand that what this country and Meta Gold [Phonetic] is going through is hugely unusual and view of that forecasting something over a short period of time is a bit difficult. But assuming that things to recover well. I think, over a short period of time similar to what we have delivered this year. Over a long period of time — long period, meaning next two, three years, I think we should see a funded 200 basis upside somewhere reset.
Rahul Bhangadia — Lucky Investment — Analyst
Okay, okay. And sir, you have already mentioned because of the situation it’s a little bit tricky here. But any sense on what kind of growth you are panning out, sir, over the two, three years?
Prashant Tripathy — Managing Director and Chief Executive Officer
So, I mean, group — Max Life is quite bullish with respect to growth and just to give you a sense of numbers, we just went past April and May, months very, very — very two difficult months for this first two months the cumulative growth rates are — year-on-year growth rates of Max Life Insurance is 57% and which is also on two year CAGAR basis we are, you know, strong double-digit growth number. So we continue to grow. But you know maybe a very strong double-digit, kind of, a growth rate is what we will target maybe closer to about 20% — between 15% to 20% that will be my number at this point of time. That’s what we’re targeting.
Rahul Bhangadia — Lucky Investment — Analyst
Sure, sir. Thank you for answering my questions. Thank you very much.
Operator
Thank you. The next question is from the line of Shreya Shivani from CLSA. Please go ahead.
Shreya Shivani — CLSA — Analyst
[Technical Issues] Question is, if I just look about the VNB performance for this year, excluding the INR88 crore impact margins have accrued by north of 500 basis points financial year ’22 to ’27 this year. And obviously there has been a pickup in non-PAR mix about a 10%, 12% increase and then there is some pickup in our protection share. Even, if I adjust for the margin gap of this product vis-a-vis some of the lower savings product, you know, the 500 bps VNB margin expansion is still [Indecipherable]. So now we could have got more margin benefit either from opex or within a category certain margins of certain products are better this year than where we would have been last year to lead to this kind of VNB impact. So if you can just try and walk through from under ’22 to ’27, how does it stack up?
Prashant Tripathy — Managing Director and Chief Executive Officer
So Shreya’s I will give you a very high level answer maybe separately you could talk to Amrit and we could give you that walk, because that walk I may find it very hard to actually explain. But I think the mix increases of protection, as well as non-PAR savings, they will be the strongest contributors to our margin expansion. We also — there was a tight control on expense, which would have added to the overall margin profile. So you’re right, I think we’ve just have been very tight on expenses and we have altered the product mix more in favor of protection, as well as non-PAR savings that would have caused all of margin enhancement. Amrit will reach out to you separately and they will be able to share the walk through.
Amrit, do you want to respond anything further?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Yes. I’ll just add actually, if that’s rather [Indecipherable] others — even the product that we launched the new non-PAR, which was launched in FY ’21 that product fundamentally were of a better margin profile than what we saw — what used to exist in our previous product. So that’s also an initial catch up, but it’s not just that 10% delta from 20% to 32% movement in the non-PAR component even the 20% itself also came over the meta margin profile, yes.
Shreya Shivani — CLSA — Analyst
Yeah, that probably explains. So you’re saying the non-PAR margin of profile in ’21 was better than ’20.
Prashant Tripathy — Managing Director and Chief Executive Officer
Yes, it’s a new product that we launched others, if we launched it in the month of July actually, it’s a new product that we launch. It was not the same profile of non-PAR that we used to have in 1920 or before that.
Shreya Shivani — CLSA — Analyst
Okay, this is useful. And second question little more longer-term question and probably was the continuation of the one of the earlier question was, you know, from a brand perspective, right? We did them well in terms of market share gain, but just as a financial brand, your top three peers have a larger umbrella financial services brand and now obviously we have Axis as a partner. How do you see that play out, because we still accreted market share with not having an big umbrella brand like an ICICI or HDFC, but now we have Axis which can get co-branded a little bit. So how do you see that journey? Does it help or we’ve been extracting whatever we could with [Indecipherable]?
Prashant Tripathy — Managing Director and Chief Executive Officer
So considering the current structure and ownership etc and the cellular [Phonetic] arrangement in the first step is to add Axis Bank’s name, so in our tag line we able to say a joint venture between Max Financial and Axis Bank, we’re able to promote all our holdings are going to get changed, we are incurring branding expenses actually to promote that. That will definitely have an upside. The other upside I definitely see is for Axis Bank customers and Axis Bank does anywhere between 55% to 60% the sales. I think that’s going to be very strong foundational affiliation, because the Axis Bank will be able to promote Max Life products being a joint venture company of Axis Bank that will also a bigger robust that we’ll get.
So for a very large part, I think the brand will start to play — kick-in and start to play a big role. And as things evolves, etc at a later date we’ll consider if there is a bigger robust impact possibility exists or not. But over a short period of time this is how we are going to approach it.
Shreya Shivani — CLSA — Analyst
Perfect. Thanks, Prashant. Thanks, Amrit.
Prashant Tripathy — Managing Director and Chief Executive Officer
We have just to conclude, we also saw a distinctly a big shift in brand consideration others from about late ’40s to we — our consideration actually jumped up to late ’60s, which was one of the sharpest contribution increases that we have seen in the evolution of Max Life Insurance predominantly, because of A) COVID where insurance itself start to find, but for a variety of pieces of work that we’ve done around protection sales, around being this more prominent by through mass media or published material, I think the brand has already strengthened quite considerably, especially last 12 months. We feel good about that.
Shreya Shivani — CLSA — Analyst
That’s useful, Prashant. Thanks.
Operator
Thank you. The next question is from the line of Sanket Godha from Spark Capital. Please go ahead.
Sanketh Godha — Spark Capital — Analyst
Yes. Thank you. Thank you for the opportunity. My first question is on EV walk, just with the operating variance number of INR80 crores, what we see other than the non-COVID other than the COVID provisions, is largely related to the tax refund what we got in the first quarter, right? So we did not have any significant positive operating variances coming either from persistency or opex in the current year, because this INR80 crore seems to be exactly timing of — with the tax refund what we got in first quarter. Is my understanding right?
Prashant Tripathy — Managing Director and Chief Executive Officer
Hi, Sanket. You’re right, as we had disclosed even in the first quarter, we had a tax refund of INR63 crores. So INR80 crores has a tax refund of INR63 crores. And then the rest is actually some positive variances.
Sanketh Godha — Spark Capital — Analyst
Okay, perfect. And the second question, which I had was that right now what is VNB margins which we report around INR25.2 is based on effective tax rate, probably we paid significant amount of dividend in the current — we paid the dividend amount given in the current year. So we got a huge ATM benefit, so the margins were little on the higher side. So as Axis Bank relationship has now become permanent, our dividend payout will substantially come down going ahead and risening so. So then will it had a [Indecipherable] on the VNB margins, because of effective tax rate going up, because Section ATM benefit will be relatively lower going ahead?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Yes, so effective tax rate actually has a methodology, you know, we don’t necessarily take a short-term view. But it is a defined methodology of taking a longish — a longer horizon view on how that the tax subsequent dividend flows will be. Maybe on the short period the dividends will be of a low or there to support growth. But over a longer horizon, obviously there will be dividends, which will be coming through in the business. So effective tax rate actually, we haven’t altered the effective tax rate in this particular year as compared to last year.
Sanketh Godha — Spark Capital — Analyst
Okay, so you mean to say that this is to fluctuate what we’re banking in our VNB margin calculation is based on long-term dividend strategy rather than this current effective tax rate what you have?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Correct. Correct.
Sanketh Godha — Spark Capital — Analyst
Okay.
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
I mean, you can’t take one year views on how you’re changing effective tax rate, it is a set methodology, which [Indecipherable] users and which actually takes a longer view around how do you complete the effective tax rate.
Sanketh Godha — Spark Capital — Analyst
And sir basically INR25.2 is more on the normalized basis rather than one-time benefits what we have in [Speech Overlap]
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Correct, yes.
Sanketh Godha — Spark Capital — Analyst
Okay, perfect, perfect. And finally just walk on one question, the unwind rates in the current year seems to be little lower around 8.6 percentage, compared to 9% plus what you usually have. So is it because we did a lot of non-par business and ticked revenues up significantly, and therefore, we distinctively hold profit pool and therefore the unwind rate was lower. So should we look at it that way? And also, if you can tell me how the unwind rate during the year would be?
Prashant Tripathy — Managing Director and Chief Executive Officer
So unwind, actually unwind rate that you see in the EV walk is the management expectation of how the interest rate will be at the start of the year. So, and you will recall, at that point and I think that continues to be the case, that the view at that point of point was of low interest rate. And that is what you see actually kind of come through, when you see that our unwind from FY ’20 which was at 9.1% came down to 8.6% in FY ’21. So it’s a view. In actual reality, what happens is, you will have the performance of the funds kind of come through, where you will get actual return of income on the fund, which actually has been significantly higher than our expectation, and part of that goes in sits in the non-operating variance, and that’s how it is done.
With respect to the view for the future. I think it will remain range bound, maybe a few basis point lower than their — how it was at the start of the previous year. Given the interest environment that we see at this point in time.
Sanketh Godha — Spark Capital — Analyst
Okay. And finally on protection business, somewhere in the newspaper it was mentioned, that we have made vaccination compulsory for 45 plus guys. They are the most — for taking the protection business. So just wanted to know the likely impact on the growth of protection business in the near term, because it increased by 40 odd percentage and even if I look at four quarters growth around 17%, it looks is very healthy compared to the industry average. So just wanted to know the impact of it on the numbers? And this vaccination requirement of making compulsory, more of a reinsurance requirement or we optionally took the choice of making vaccination compulsory to do term insurance incremental?
Prashant Tripathy — Managing Director and Chief Executive Officer
Sanketh, just to clarify, we have not made it. So to that extent, the representation in that article isn’t correct. We haven’t made vaccination compulsory that’s the clarification. However at the front end, there are several underwriting controls that the company has deployed, in consultation with the insurance organization, so that we are selecting lives where we are almost sure about the quality of life, etc, those are things that most of the reinsurance have recommended, life insurance companies to adopt and almost all players have done that. So we have done that too. However, we have seen an upside in in the demand for protection and despite those controls, I think our overall mix for the first two months is higher than the mix that we are seeing in quarter three, quarter four, and the overall mix is closer to about 15%.
Sanketh Godha — Spark Capital — Analyst
Okay, got it. Maybe finally, if one more I can pitch in, just on ULIP business, just wanted to understand that our ticket size seems to be little on the higher side compared to industry average, around INR1.5 lakh ticket size. Do you — are you seeing any impact or do you foresee any impact on the new tax loans, with respect to even deepen our ticket sizes on the little higher side compared to maybe other players?
Prashant Tripathy — Managing Director and Chief Executive Officer
To be honest, not so far actually Sanketh.
Sanketh Godha — Spark Capital — Analyst
Okay. Okay. Yeah, that’s it from my side.
Prashant Tripathy — Managing Director and Chief Executive Officer
Thank you.
Operator
Thank you. The next question is from the line of Abhishek Saraf from Jefferies. Please go ahead.
Abhishek Saraf — Jefferies — Analyst
Yeah, hi. Am I audible?
Prashant Tripathy — Managing Director and Chief Executive Officer
Yes Abhishek.
Abhishek Saraf — Jefferies — Analyst
Yeah. Thanks for the opportunity. So most of my questions have been answered. Just wanted to understand, on the reserving part. So we mentioned that we are carrying around INR500 crores plus of extra reserving. But in the EV walk if I see that, it’s around INR340 crore on the EV operating assumptions, and then INR88 crores on the VNB side. So what am I missing? It doesn’t add up. So just wanted to understand that part. And secondly, was that related to the claim size within the — it seems that our reserving is much higher than what other peers who reported earlier have done so. So what is making us provide more on the COVID reserve part?
Prashant Tripathy — Managing Director and Chief Executive Officer
I will answer the second question first and then I’ll let Amrit give you the recon. [Technical Issues]. Abhishek, you’re there?
Abhishek Saraf — Jefferies — Analyst
Yes, I am there.
Prashant Tripathy — Managing Director and Chief Executive Officer
So the answer to your second question is, when we saw the size of wave two versus wave one. We just thought it would be prudent to be more conservative. So the claims in the first wave and the death rates and the infection rates are much lower actually. Wave two appears to be higher. So we have gone to be little more conservative, just to see how it unwinds. In times like these, it is good to be conservative. That is why you would have seen us build conservatism in our balance sheet, in our EV, in our VNB also, to that extent, just to make sure that we are protected and we don’t come up with surprises, as we hit FY ’22, that’s the reason. If we perform better, of course it will unwind and come back to our financials. Amrit, if you could just talk about, how the balance sheet reconciles to the EV?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Yeah. So Abhishek, absolutely right INR340 crores in the EV plus INR88 crore, and then you also gross up for tax as well. And the data still is actually — is that old [Indecipherable] pandemic results. So in our last interactions, whenever it could have happened, we had indicated that we have been carrying a very reasonable sized pandemic reserve, even though in FY — at end of FY ’20 we created a INR10 crores small reserve. But beyond this INR10 crores, we are carrying in excess of INR200 crores plus kind of a number with respect to our pandemic reserve.
So a part of it, we did use up in FY ’21 to neutralize the INR121 crore net COVID claims that we kind of saw for ourselves. And the rest is what the differential is between the INR500 crore and the maths that you’re doing on INR88 crore and INR340 crore.
Abhishek Saraf — Jefferies — Analyst
Okay. Okay, got it. One last one, if you can just on the YES Bank side. So if you — is it possible to share, what kind of share yes Bank will now be accounted for in our business? And what kind of products are being sold on that counter? Can you just give some kind of understanding there?
Prashant Tripathy — Managing Director and Chief Executive Officer
It’s a very important relationship and we are absolutely immensely proud of the relationships that we share with YES Bank. They have been a part of our growth, both the organizations have evolved together. And just — we just concluded 16 years of our journey with YES Bank, it’s a very-very potent relationship. If we look at last two, three years the contribution from YES Bank has been anywhere between 7% to 10% and we expect, that it will continue to grow at the same pace — at least in the same pace as we grow as an organization. So we expect to grow at this point of time. YES Bank is growing. It is contributing positively and while YES Bank is going down the path of open architecture, as you all know. We really hope sincerely, and wish that we continue to maintain the counter share — our significant counter share on YES Bank count.
Abhishek Saraf — Jefferies — Analyst
Sure, thanks for that. Possible to share, which could be the — means the product mix with YES Bank?
Prashant Tripathy — Managing Director and Chief Executive Officer
Yes sorry, I missed it. The product mix will be pretty similar to the product mix that we will sell at broader bank level. But the margin up or down, we will be able to share that with you. But predominantly ULIP, as well as non-par, those two will make the large part of product mix that we sell at YES Bank.
Abhishek Saraf — Jefferies — Analyst
Sure. Sure. Thanks a lot.
Operator
Thank you. The next question is from the line of Nidhesh Jain from Investec Capital. Please go ahead.
Nidhesh Jain — Investec Capital — Analyst
Thanks for the opportunity sir. So firstly on the dividend payout and capital position solvency has now been below 200%. What is the comfortable solvency margin that we would like to maintain, and how will the dividend payout policy will be based going forward?
Prashant Tripathy — Managing Director and Chief Executive Officer
So we are — Nidhesh, thank you very much. Always a pleasure to connect with you. On the dividend side, of course, as you know last few years, we had to declare dividend for facilitation of buyback from Axis Bank, etc, at all that is now behind us. So there is no need to declare heavy dividends. There’ll be marginal declared dividends that we may be declaring in the organization. Hence retaining most of the capital in the business to grow. In addition, we anticipate to maintain a solvency ratio anywhere between 180% to 200% that will be our target over the next few years, and hence we will, at an appropriate time during this financial year, we will look at the need to raise any capital. It’s not firmed up yet. It will go through several approval processes. But there is a desire to actually buffer up the capital position by raising debt.
Nidhesh Jain — Investec Capital — Analyst
Sure, sir. [Indecipherable] with respect to Axis Bank, do you see further synergies, it’s already a very one [Indecipherable] relationships we have been there for last almost 10-years plus. So do you think after this tie up, but it’s definitely a certainty that we are getting in terms of [Speech Overlap]. But in addition to that, do you see any other synergies it’s coming to Max Life?
Prashant Tripathy — Managing Director and Chief Executive Officer
Yes, I’m very optimistic, I’m very optimistic being a part of their group company or their joint venture. I think they are definitely significant synergies synergies like I mentioned in governance already we see [Indecipherable] of their business leaders coming and sitting in our Board that adds to the heft, that adds to the knowledge and I meant, you know, a few of them are very, very experienced in life insurance space as well. So overall strategically their contribution to Max Life Insurance is going to go high. Brand robust, we were just talking about little while earlier that’s a big contribution. We are also discussing how Max Life Insurance would participate in the new channels, or new verticals that they’re adding. The teams are discussing how we could work together to inject more analytics in overall sales process and improve penetration refinement in what we sell product mix, especially in the area of selling more annuity or selling more protection is going to get more weight.
And needless to say, being such a large financial services organization, we do anticipate that we will be able to leverage some synergies with respect to procurement or people practices etc, etc. So really we are looking at leveraging this relationship in a 360 manner and I’m very optimistic Nidesh that it will be a plus, plus from where we have been so far.
Nidhesh Jain — Investec Capital — Analyst
Sure, sir. Actually on the credit lines, you had not been a very [Indecipherable] not consciously focusing on that segment, but has any thought process changed over that segment. And also Axis Bank would also be having significant retail lending operations. And so, are we — I mean, is there a possibility to scale up credit like business from that channel?
Prashant Tripathy — Managing Director and Chief Executive Officer
Yes, Amrit do you want to take this?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
So the credit life, you know, we have always indicated from — as a strategic, twice at individual business that we have been working towards. And that’s the granularity of business comes sustainability of margin profile comes. And actually we have participated in credit life, and even within the Bank, we do participate in credit life, actually for the full-year ’21 mid end up growing at a pace of 45% growth we saw in the credit life business overall you see the group business at 30, because the term life business was largely held flat. And this credit life growth has come out of better penetration and activation across many counters that we run, including Axis Bank.
As you would be aware, within the Credit Life space Axis Bank actually runs an open architecture model and there has been the case for couple of years now. We will evaluate tactically as and when, when the opportunity have come through. But the margin profile of this particular category, especially in the background of mortality again the [Indecipherable] important for us to kind of keep a view on.
Nidhesh Jain — Investec Capital — Analyst
Sure, sir. Thanks, Amrit and thanks, Prashant, sir. Thanks for that.
Operator
Thank you. The next question is from the line of Nischint Chawathe from Kotak Securities. Please go ahead.
Nischint Chawathe — Kotak Securities — Analyst
Yes. Hi, this is Nischint here. Two questions, one was really on your channel mix and I know you have invested a lot in your proprietary channel. You have guided sometime back that probably the channel, which will kind of get a little bit more balanced. With the ratio of Axis Bank coming down over time, but if I just think essentially the share of Axis Bank going up this year? So what do you think should be the channel mix maybe in ’22 or ’23?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
So that’s correct. Actually we made investment then you would have noticed that the contribution of own channel has been growing. Last year was a blip here, I must say that with you, because of the model. I mean, industry-wide, if you see the growth of Banca channel is higher than agency or proprietary channels that has happened, because agency has a channel where agents go and meet with the customer and the profile of agents where many times homemakers or retired people are also, even advisors they were reluctant to walk out. As against the Banca channel model, where it is more dependent on Bank customers or foot falls. So propriety channels did peak ahead and you would have noticed that even in our growth, you know, significant part of the growth is also contributed by banks. Our own channels actually grew 10%.
So hopefully as COVID settle, we will be able to balance that we are yet to see it, because as this year has begun again we have been covered. As long as COVID last the impact on proprietary channels will be a bit more than how it is on bank channel. But assuming that COVID will be out of our ways through this year. I anticipate that our own channels will start to grow at least as far as the bank channels and that will be the objectives. So we will maintain or expand the proportion of own channels going forward.
Nischint Chawathe — Kotak Securities — Analyst
At any particular ratio or guidance you could give in terms of, you know, where that Axis Bank [Indecipherable]?
Prashant Tripathy — Managing Director and Chief Executive Officer
Yes, I mean, we have been historically for the last few years we have been close to 30%. So at least that level is one would definitely try.
Nischint Chawathe — Kotak Securities — Analyst
Sure. And I think you also mentioned that you’re looking at around a 100 to 200 basis of guidance on margin, I think…
Prashant Tripathy — Managing Director and Chief Executive Officer
Over a longer period. Over a longer period, Nischint.
Nischint Chawathe — Kotak Securities — Analyst
Okay. And what are the initial triggers for — I mean, if I have to look at the margin profile for Mitsui or so what are the initiative there for probably using that — that probably VNB growth matures, is it given nearly by the VNB and by margin expansion?
Prashant Tripathy — Managing Director and Chief Executive Officer
So it will be a combination of sales growth and a bit on margin expansion, really if you were to look at our product mix, we have optimized our broad mix there are some thoughts on how we could enhance the margins better, but I think what we’ll also start to kick in, is basis our side some bit of scale benefit. We saw that from last year and we will continue to see in next two to three years, and that will be one of the biggest sources of margin expansion.
Nischint Chawathe — Kotak Securities — Analyst
Sure, sir. Thank you very much and all the best.
Prashant Tripathy — Managing Director and Chief Executive Officer
Thank you, Nischint.
Operator
Thank you. The next question is from the line of Rishi Jhunjhunwala from IIFL. Please go ahead.
Rishi Jhunjhunwala — IIFL — Analyst
Yes, thanks for the opportunity. I have a couple of questions. Firstly on sir, non-PAR portfolio right around the guaranteed return products. I just wanted to understand, you know, how has our taking exposure changed over the last couple of years? And as a result the consequent impact on the margins that we are driving from these products?
Prashant Tripathy — Managing Director and Chief Executive Officer
So actually, we changed our view, a little bit with respect to non-PAR savings predominantly after FRA were allowed, somewhere into 2019. Before that we had a different view, you would have seen our overall exposure to non-PAR was a bit limited, but with FRA coming on board, which is a much more efficient, our design to hedge one was more comfortable to go ahead and increase the proportion. So we increase the proportion from 20%-odd to about 30%. And I think we do intend to keep this ratio in the range of — or similar ranges. So, you will not see us go 40%, 50, but yes, one would take the exposure of 25% to 30%, 35%, that kind of range. And that’s our view on non-PAR and non-PAR savings, because we can hedge it better.
Rishi Jhunjhunwala — IIFL — Analyst
And the trend on profitability as a result, I mean, margin.
Prashant Tripathy — Managing Director and Chief Executive Officer
Of course, it has had a positive bearing on margin and definitely one of the biggest contributors of margin enhancement of about — close to about 360 basis point has been increasing on [Indecipherable].
Rishi Jhunjhunwala — IIFL — Analyst
Great. The second question is on — on the protection side to some of your larger peers have — are suggesting that the market is not looking that great. And as a result they are kind of pulling back in terms of selling retail term protection. Just wanted to understand your thought process. Do you see it as a tactical opportunity to gain higher market share? Or do you really think that some of those concerns are probably unjustified?
Prashant Tripathy — Managing Director and Chief Executive Officer
So in times like these, of course, they have several forces that you need to be cognizant of, one big force is of course your relationship with the reinsurance company as things stand reinsurance companies have had to take losses on the account of COVID. And hence, you know, some of the norms around underwriting will be a bit more stringent. But our view is that we will be cautious over a short period of time, but protection is a long-term growth area for us and we will continue to operate with competitive broad design, improvement in our processes, making sure our pricing is competitive in the market etc, etc,. to win over a long period of time. We do intent to remain a potentially strong player in the protection space.
Rishi Jhunjhunwala — IIFL — Analyst
Understood. And just one last quick one, can you give us some sense of our share of business in Axis Bank channel, given that, you know, it’s an open architecture and how it has seen [Speech Overlap]
Prashant Tripathy — Managing Director and Chief Executive Officer
About 85% is our share on the counter. It may go up or down depending on how it moves, but about 85% over — of last few year is at some stage we have 100%, then we were about 95%. So there is a rebalancing which is taking place. But we hope to remain in the — to have the lion’s share on the counter.
Rishi Jhunjhunwala — IIFL — Analyst
Great, thank you so much. All the best.
Operator
Thank you. The next question is from the line of Manoj Bahety from Carnelian Capital. Please go ahead.
Manoj Bahety — Carnelian Capital — Analyst
Hi, good afternoon, Jatin. Good afternoon, Prashant. First of all let me congratulate your view for consistently reporting good set of numbers. I have couple of questions, first one is like if I see like over last three, four years, the margin improvement of Max and along with that, if I look at the product mix change, it appears was a sizable proportion of this margin improvement. This contributed by rising share of protection business. And also on the protection business like, one thing which I was seeing, like when I was seeing the financial reporting of one of your peers that a lion share of the profitability is contributed by the protection business. I assume the same will be in your [Indecipherable]. So how do you see the sustainability of margins of protection business. I understand, but it will be a high growth vertical for the industry, as well as for you. But along with that higher growth, whether these kind of margin on protection are going to sustain? And how it compares, this is how — let’s say international insurance companies protection margins. Yes, these are like couple of questions from my side.
Prashant Tripathy — Managing Director and Chief Executive Officer
Amrit, do you mind taking this?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Sure. So, Manoj, your observation is correct. The margin improvement, there are two levers there is obviously the product mix given, which is non-PAR protection, non-PAR savings along with inefficiencies, which kind of, keep coming through as a business rises in scale. Specifically coming to protection margins and predictions for files, actually protection margins have been falling sharply in the last few years, and consequently you have also been seeing the protection prices actually increases. Now if you really go back in time and see the history of our protection, popularity and protection prices move, it used to be quite expensive product design, then the popularity started rising there was competitiveness with respect to pricing, everyone started taking actions around pricing.
There was emergence of experiences, which started coming through both for the life insurers and for the reinsurers, because this category is largely reinsured and the reinsurance support is extremely important. And we are at a point in time where there is now, you know, a reset — re-sling of the pricing expectations around protection. And hence the consequent last 1, 1.5, 2 years you have seen a price rise, which actually is happening, which is happening both from ensuring that you know, you are on this particular category trying to predict your margins as well. So even for us also I think beyond, if you look beyond COVID there will be a right place and right play of where the margins will have to move towards, where you will have to optimize for market penetration, market shares, along with margin and thematics [Phonetic]. This is a product category, which is important for us to drive margin, it comes with the associated risk, and hence 2020 the reward assessment by the insurer also has to be equally strong. And we will keep a view of these things and we are taking our product forms.
Manoj Bahety — Carnelian Capital — Analyst
How do you see protection margins in India vis-a-vis like international players, I think India is abnormally high and if it starts like as the category side will start growing. And if these margins starts normalizing, then how do you see the sustainable margin going forward.
Prashant Tripathy — Managing Director and Chief Executive Officer
There may not be correct actually, the Indian margins may not be higher than international margins. Actually India across the board operates on the lower side of margin, including section. It’s a competitive — more competitive space, where even the pricing is quite competitive. So I think a large part of normalization basis experience etc has happened now, I don’t anticipate that the margins will continue to fall if there is any experience — new experience, which is coming up, it will get reflected in the pricing. So my expectation is that companies will try to protect their margins by increasing prices.
Manoj Bahety — Carnelian Capital — Analyst
Is it possible to share the protection prior margins separately?
Prashant Tripathy — Managing Director and Chief Executive Officer
Actually, we don’t — it’s not a part of our disclosure.
Manoj Bahety — Carnelian Capital — Analyst
Okay, okay, thanks. Thanks for taking my question and wish you good luck.
Operator
Thank you. The next question is from the line of Vinod Rajamani from HSBC. Please go ahead.
Vinod Rajamani — HSBC — Analyst
Yes. Thanks so much for taking my question. Just on this — the additional reserving that you’ve done for COVID. Just a hypothetical question, but just wanted to know at what level of additional reserve end, will the solvency get impacted that is — that’s question number one.
And then can you give some color on how much of the reserving buffer that you’ve created, how much of it you would have utilized, say up to date. I mean, if that is possible. These are the two question I have. Thank you.
Prashant Tripathy — Managing Director and Chief Executive Officer
So basically one — first one, really, really far away. You know, we have close about 200% solvency or 96% or 97% solvency. The breach on solvency happens at 150% and every percent for us is close to about INR30 crores. So you’re talking about 50% in INR30 crores, which is INR1,500 crores, so really, really far away.
Vinod Rajamani — HSBC — Analyst
Right.
Prashant Tripathy — Managing Director and Chief Executive Officer
On the second question on the reserves, we — last year, as you can see we saw only INR121 crores, so versus that this provision is significantly larger, and we hope that we’ll be able to manage in this year as well.
Vinod Rajamani — HSBC — Analyst
Right. How much would you have used, Prashant, so a year in this period from the year-end reporting to-date. I mean, some color on that. Is it possible?
Prashant Tripathy — Managing Director and Chief Executive Officer
Abstraction of that actually, and why I’m not giving you a number is the claims have started to come, so I don’t want to prematurely share the number, but it looks at this point of time sitting, you know, considering that the numbers come down and India gets vaccinated etc, I’m reasonably confident that we’ll be able to manage in a lower number than what we have provided for.
Vinod Rajamani — HSBC — Analyst
Yes. Thanks so much, Prashant, thanks.
Prashant Tripathy — Managing Director and Chief Executive Officer
Yes.
Operator
Thank you. The next question is from the line of Neeraj Toshniwal from UBS Securities. Please go ahead.
Neeraj Toshniwal — UBS Securities — Analyst
Hi, Prashant, congrats on a good set of numbers. So two questions, so one is the leverage strategy that might [Indecipherable] happening around. And second, on the potential price hike, of the total sum — how much was that and how much is in pipeline if at all?
Prashant Tripathy — Managing Director and Chief Executive Officer
Thanks, Neeraj, I’ll request somebody to take this question, Amrit.
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Sorry Neeraj, I think couldn’t hear your first question so well, if you could just [Indecipherable]
Neeraj Toshniwal — UBS Securities — Analyst
First was on the deleverage basically on the pledge anything happening around?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Okay. I think I’m going to ask Jatin for that first question, Jatin?
Jatin Khanna — Chief Financial Officer
Yes, on the deleveraging actually there is the thing is that [Indecipherable] are always been committed to, you know, sort of deleverage at different constant time. As you could see that even they have monetized significant part of their ownership in both Max Financial, as well as the rest of their entire shareholding in Max Healthcare to that effect and then they will monetization some other assets as well outside of the — some of the listed company shares, so that is one thing.
The second is that the, you mean, the pledge level as it is, you know, have been very comfortable — is now in a very comfortable zone, you know, that we do are not on the private side or the family side. But what I know is that there are few things, which are happening or has happened, which will, you know, the current share prices will reduce, the pledge level to maybe around 60%, you know. So to that extent, I think the pledge level is quite comfortable. Having said that, you know, there — their intent to monetize at a right time, some of their other assets as well continues and they — so you will see that, you know, continuing with the deleveraging initiatives. So as it is the pledge level will be quite comfortable, I think shortly, if it’s already — not at those levels.
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
On your second question, which was around price hike, when we launched the new product in April, there was an inbuilt price hike in the product. As you are aware, the product has multiple forms and multiple edges. So I would say anywhere between 5% to 10% was a that actually happened amidst [Phonetic] the product launch. With respect to future product price hike, I think we will take a consider on leaving all the aspects around the pricing environment and also the reinsurance application, before we decide on the price hikes.
Neeraj Toshniwal — UBS Securities — Analyst
Got it. And recently, you had some digital initiatives in terms of tie up with some startups. Anything happening around and anything interesting coming out of that?
Jatin Khanna — Chief Financial Officer
So Prashant?
Prashant Tripathy — Managing Director and Chief Executive Officer
So I I’ll take that Neeraj.
Neeraj Toshniwal — UBS Securities — Analyst
Yes please.
Prashant Tripathy — Managing Director and Chief Executive Officer
We — actually every year annually. We do run an accelerator program, wherein we go out and outreach to various startups and in FY ’21, we had a second cohort of this particular startups that are coming through. The — again, ran that program, gave us six, seven used cases, which was specifically given out in the market. We saw upwards of 150 startups kind of applying. We have shortlisted a total of four or five startups with whom proof-of-concepts are actually being done. And these are across value chain dimensions of a more healthy engaging platform, underwriting capabilities, capabilities to reprocess documents actually more effectively and more better. So those POCs are actually in various stages with some of these providers. Some of them actually come and become mainstream. But it’s our structured effort of actually outreaching in the market, to ensure we are kind of scouting for new technology changes that are happening in the environment.
Jatin Khanna — Chief Financial Officer
And just to conclude this Neeraj. We take this very-very seriously. So on that day, when the team shortlists many people, everybody in the leadership, being me, Rishi, who is our DMD, our head of — our COO, Amrit, at least five or six of us spend about the full day, going through the presentation. On one side, it gives an opportunity for the companies who we select, to come and work with us. But on the other side, it just creates a sense of awareness for us to know what is happening in the marketplace and constantly evolve ourselves.
Neeraj Toshniwal — UBS Securities — Analyst
Got it. Thank you.
Operator
Thank you. The next question is from the line of Prateek Poddar from Nippon India Mutual Fund. Please go ahead.
Prateek Poddar — Nippon India Mutual Fund — Analyst
Yeah, hi, Sir just one question, the INR88 crores of provision on the VNB walk, is this one-time?
Prashant Tripathy — Managing Director and Chief Executive Officer
Yeah Prateek. As I said, this is actually — we have kind of tightened some bit of mortality, which might come out of the sale that we have done in FY ’21 due to COVID, which could come out probably in duration one, duration two of those policies. So you can call it one time. Yes.
Prateek Poddar — Nippon India Mutual Fund — Analyst
So fundamentally, we have not altered the mortality assumptions right?
Prashant Tripathy — Managing Director and Chief Executive Officer
No, we haven’t.
Jatin Khanna — Chief Financial Officer
No, not for long-term.
Prateek Poddar — Nippon India Mutual Fund — Analyst
Yeah, for long term, you haven’t, right?
Jatin Khanna — Chief Financial Officer
No.
Prateek Poddar — Nippon India Mutual Fund — Analyst
Okay. Okay. Thanks.
Operator
Thank you. The next question is from the line of Abhishek Khanna from Jefferies. Please go ahead.
Abhishek Khanna — Jefferies — Analyst
Hi, I had one small question. What was our total debt claims in FY ’21, the raw [Indecipherable] if you could provide that please?
Prashant Tripathy — Managing Director and Chief Executive Officer
So gross for FY ’21 was INR1,349 crores and net was INR1,009 crores.
Abhishek Khanna — Jefferies — Analyst
And the INR121 crores number that we provided for COVID is I am assuming, net of insurance, right?
Prashant Tripathy — Managing Director and Chief Executive Officer
No, no, I mean within INR1,009 crores, INR121 crores is also sitting.
Abhishek Khanna — Jefferies — Analyst
And INR121 crores is net of insurance?
Prashant Tripathy — Managing Director and Chief Executive Officer
Correct.
Abhishek Khanna — Jefferies — Analyst
Got it. Got it. Thank you so much. That’s it from my side.
Operator
Thank you. The next question is from the line of Abhishek Saraf from Jefferies. Please go ahead.
Abhishek Saraf — Jefferies — Analyst
Yeah, my question has been answered. Thanks a lot.
Operator
Thank you. The next question from the line of Mayank Bukrediwala from Franklin Templeton. Please go ahead.
Mayank Bukrediwala — Franklin Templeton — Analyst
Hi team. Thanks for taking my question. I’m going to harp on that same INR88 crores on the VNB and INR300 crores on the EV. So what you’re essentially saying is that, this INR88 crores is something that you expect to pay out in the next one year? And would it be fair to assume, that even close to INR300 crores that you have traded on the EV, that is something that you expect to pay out in the next one year? Or are these numbers a part of your value in firms? As in are these — are you arriving at the INR388 crores post discounting over a period of years?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
So Mayank, this is a COVID related provision, keeping a view of what kind of an implication can come through during this pandemic. And now pandemic timelines, very difficult to kind of predict. It’s a daily evolving timeframe. So this is a pandemic reserve that we have created for ourselves. Use it, we may not use it also. It all depends upon how much of the debt will kind of come through. As Prashant kind of indicated, it was kind of giving a sense that, INR121 crores was the number [Technical Issues].
Jatin Khanna — Chief Financial Officer
You there, Amrit?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Yeah, hello?
Jatin Khanna — Chief Financial Officer
Yes, you dropped off a little while.
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Oh sorry. I wasn’t. Okay. Let me just reiterate again Mayank. What I was saying is, INR500 crores is a provision that we have created for a pandemic and at this point in time we are undergoing a pandemic situation. Now is there a definitive view that we will end up using that in this year? The answer is no. It’s a pandemic reserve, as in how long the pandemic lasts, what is the implication of that pandemic. It might get used or might not get used as well. And it’s extremely difficult at this point in time to kind of give a very definitive sense of how and what it would be. It’s a constantly evolving situation, very closely we’re monitoring it. But we feel comfortable that, I think we have adequately and very prudently reserved that.
Jatin Khanna — Chief Financial Officer
Have we lost him again?
Prashant Tripathy — Managing Director and Chief Executive Officer
See what Amrit is saying is that, you know, this is quite prudent. It can do over one year, this can be over many years. But what we have thought through, is that this is what the reserve should be, and therefore we provision for everything sufficient.
Mayank Bukrediwala — Franklin Templeton — Analyst
Okay. So the INR88 crores is not essentially a discounted number, it’s a one-off. And so my question is that you know if I adjust for this one-off, your margins for the full year look closer to 27%, and so when you are giving a guidance of an increase of about 100 to 150 bps over a period of years, are you giving this guidance over the 25% or over the 27%?
Prashant Tripathy — Managing Director and Chief Executive Officer
Over the 25% actually. And any number is not a static number, there are many moving pieces. The number of 27 could become 25 depending on change in product mix, our view on protection etc. So more conservative number or a base number from our perspective is what we have reported. We definitely see an upside from here on, of about 200 basis point over medium term basis.
Mayank Bukrediwala — Franklin Templeton — Analyst
Understood. And just one last question. One is, if you could just give me the opex number for the quarter, the non-commission opex and the other question is more on the outlook of opex. Now I see that we’ve got about — after two, three years of increasing the employee clients, we are at about 15,000 employees. So for whatever growth you’re forecasting for the next two, three years what sort of opex investments will we have to do, and will we have to increase our employee count from the 15,000 level further from here, over the next two, three years?
Prashant Tripathy — Managing Director and Chief Executive Officer
There will be increase, but it will not be a step increase. There will continue to be increase, because as we continue to grow as a business, we will have to deploy more resources. So in the same way, like it has grown for the last few years, we will see employee count going up. As far as expense is concerned, I think it will be a part of disclosure. Amrit, I don’t have that number in front of me, if you could share what was the expense or maybe if you could write to us, we’ll be able to give you that number.
As far as expense increase is concerned, I think expense increase will be will be circa 10% year-on-year is what we have planned for. We just need to review that. As things stand, we are looking at our business very differently and throughout this year, we are going to look at a new strategy for Max Life Insurance, which we will roll forward from next year. And once we do that, we will be able to give you a clearer view on how the expense increase will look like. Sitting today, the plan is about 10% expense increase year-on-year.
Mayank Bukrediwala — Franklin Templeton — Analyst
Got it. Which ideally means is, if it’s a 10% opex increase, one should assume a small amount of operating leverage playing out every year. So that…
Prashant Tripathy — Managing Director and Chief Executive Officer
It will. Yes.
Mayank Bukrediwala — Franklin Templeton — Analyst
Okay. Perfect. I will take the number later from office.
Prashant Tripathy — Managing Director and Chief Executive Officer
Yes. Thank you.
Operator
Thank you. The next question is from the line of Sangita Purushottam from Cogito Advisors. Please go ahead.
Andrey Purushottam — Cogito Advisors — Analyst
Hi. Andrey again. Sangeeta’s partner. Is my understanding correct that, pure protection product is higher in terms of margins…
Operator
This is the operator. I’m sorry to interrupt, but your audio is not clear, sir. It’s breaking up. Requesting you to please try using the handset mode while speaking?
Andrey Purushottam — Cogito Advisors — Analyst
Okay. Hello, can you hear me now?
Prashant Tripathy — Managing Director and Chief Executive Officer
Yes.
Operator
Yes. Please go ahead.
Andrey Purushottam — Cogito Advisors — Analyst
Is my understanding correct that the pure protection product is better in terms of margins, but lower in terms of ROE? If this — whether or not this is correct or not, could you tell us in terms of your financial metrics, how do you balance your ROE aspirations and your margin aspirations, and how does that influence your product mix going forward?
Prashant Tripathy — Managing Director and Chief Executive Officer
That’s a very good question you asked. Typically we will target ROEs, healthy ROEs in the range about 20% odd and protection is no different. Protection is good in terms of margin, but it is also reasonably good in terms of ROE, is the straight answer. When we make the decision on product, there are three or four vectors which are kept in mind. Number one is customer value proposition, and that’s the starting point, whether this particular product has customer demand or not. What are customers looking at? And we determine that on basis of research, basis of talking to distributors, basis of talking to salespeople. To find out if this product will do well or not. Once that is done, then you start to look at the financial outcomes, including the features and the financial outcomes will be seen in terms of margin. Also in terms of strain, as well as ROE, those are factors which are kept in mind. And we kind of optimize it. Depending on, you know try to hit a sweet spot, actually, to put it simply. Try to hit a sweet spot, and once those are all triangulated, we go ahead and launch the products.
Andrey Purushottam — Cogito Advisors — Analyst
Sorry, so you said your pure protection products are not lower in terms of ROE?
Prashant Tripathy — Managing Director and Chief Executive Officer
Not really. They’re not.
Andrey Purushottam — Cogito Advisors — Analyst
Okay.
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
Yeah, this is. Amrit, I am [Indecipherable] for Prashant and everyone. Just to reiterate, I think we have a hurdle rate that we look, even from an ROE perspective, keeping this train in play and what Prashant is indicating is that, there is a bare minimum ROE that we’ll try to do. And generally protection products are again healthy from an ROE perspective also. They are not any different actually — or not treated any differently.
Andrey Purushottam — Cogito Advisors — Analyst
Thank you. Thank you very much.
Operator
Thank you. The next question is from the line of Ajox Frederick from B&K Securities. Please go ahead.
Ajox Frederick — B&K Securities — Analyst
Thank you for taking my question again. Just one data keeping question sir. Although this INR121 crores, if you can split it across individual, credit life and GTI, that is helpful?
Prashant Tripathy — Managing Director and Chief Executive Officer
Amrit, do we have that number?
Amrit Singh — Chief Financial Officer and Executive Vice President, Max Life Insurance Company Ltd.
I don’t have it handy. But Ajox, I will provide that.
Ajox Frederick — B&K Securities — Analyst
Yeah, yeah, definitely. I will take it offline. Thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for closing comments.
Jatin Khanna — Chief Financial Officer
Thank you, ladies and gentlemen for being on the Max Financial earnings call. We wish you good health and fitness in these unusual times. We look forward to more such interaction in the future. Thank you once again and goodbye and have a good day.
Operator
[Operator Closing Remarks].