Axis Max Life aims to dial back ULIP exposure amid margin decline

Singh also outlined the company's vision for an ideal product mix, emphasising three primary operational licenses within their category: disciplined savings schemes, which include participating (par), non-participating (non-par), and Unit-Linked Insurance Products (ULIPs); mortality and morbidity themes focusing on protection business; and products designed for annuities addressing longevity.

Currently, individual protection accounts for 10 percent of their product mix, while annuities make up 5 percent. The CFO said he anticipates these segments to grow incrementally by half a percent to a percent each year.

In terms of an ideal mix within the savings category, the CFO said he hopes for a balanced portfolio with 20 percent par products, 30 percent non-par savings, and a reduction in ULIP exposure from the current 45 percent to an ideal range of 35-40 percent.

Addressing the Budget 2025 clarification on ULIP taxation, Singh remarked, "The announcement was merely a clarification. I would call it marginally positive for the category, but it is not really a game changer, as it already existed before.

On the topic of going public, Singh confirmed the company's plans following IRDAI's directive. "IRDAI had asked a set of companies to submit a listing roadmap. After deliberation and debate, the board decided to submit a roadmap which envisages the collapse of Max Financial Services Ltd (MFSL) into Axis Max Life Insurance, and through that collapse structure, the listing of our entity comes into play," he said.

However, the exact timeline remains uncertain as regulatory approval is pending, he added.

On entering the health insurance space and in the light of composite licensing that could potentially be announced, Singh said, "health annuity indemnity looks quite exciting for us. However, it will be possible only after composite licensing is announced and we have a clear view."

Singh also discussed the concept of open architecture in insurance distribution. "There is a large portion of agents who join fresh into the agency workforce and they require a lot of handholding. For them, their biggest association will be with the company who allows them to do all of this together, and they will not value open architecture in terms of multiple products being made available," he noted, indicating that open architecture might not significantly impact new agents but could be relevant for established ones.

Discussing the recent increase in FDI limits from 74 percent to 100 percent, he said, "Axis Max Life already has a significant amount of foreign direct investment. Our Japanese partner, Mitsui Sumitomo, currently holds a 21 percent stake."

Moreover, to achieve 'Insurance for All by 2047,' we must significantly expand our distribution capacity, he said.

"Additionally, the products I mentioned, like mortality, morbidity, annuity, and protection, are severely under-penetrated, leading to higher initial capital consumption. In the coming years, we can expect a strong influx of capital into the sector, including our company. Many international players are eager to join this market, viewing the policy change positively, which provides an opportunity for new entrants," he added.

Addressing dependency on Axis Bank's branch network for sales, where 45-46 percent of its premiums are sold, Singh said, "It is true that the number of premiums being sold through the branch network is around 45 percent but it is only premiums and not the number of policyholders. Generally, high ticket policies come through those routes."

He added, this distribution model aligns with industry standards, pointing out similar practices among peers like SBI Life, HDFC Life, and ICICI Life.