Max Financial Services Ltd Management Discussions.

Prioritizing financial planning was a silver lining amidst the pandemic!

69% of urban Indians became proactive towards financial security as per IPQ 3.0,

In its constant endeavor to continue with its digitization agenda, build artificial intelligence (AI) in all digital assets and reduce back-office costs, Max Life launched various digital assets across the entire value chain and embedded intelligence to drive efficiency.

Max Financial Services limited (MFSL or the Company), a part of the $4-Bn Max Group, is the holding company for Max life Insurance Company limited (Max life). It owns and actively manages an 81.83% majority stake in Max Life - Indias largest non-bank owned, private life insurance company.

Corporate Developments

On April 6, 2021, Axis Bank Limited, Indias third-largest private sector bank, together with its subsidiaries Axis Capital Limited and Axis Securities Limited (collectively referred to as "Axis Entities") became the co-promoters of Max Life. This was after completion of the acquisition of a 12.99% stake collectively by the Axis Entities in Max Life - Indias fourth-largest private life insurance firm.

The transaction was completed after the Insurance Regulatory and

Development Authority of India (IRDAI) gave its formal approval in February this year MFSL, Max Lifes holding company, and Axis Bank had first announced their intent to bring in the latter as a strategic partner into Max Life in February 2020.

Under the deal, the Axis Entities have a right to acquire an additional stake of up to 7% in Max Life, in one or more tranches, subject to regulatory approvals.

This development will result in a mutually beneficial and enduring relationship between Axis Bank and Max Life. It further solidifies Max Lifes decade-long relationship with Axis Bank, providing long-term saving and protection products to over 19 lakh customers. This relationship will permanently address uncertainty around Max Lifes distribution and improve its position amongst its peers. The total premium generated through

In FY21, MFSL reported consolidated revenues of Rs. 31,288 crore, 72% higher compared to the previous year, due to mark-to-market gain on debt and equity portfolio. Excluding investment gains, consolidated revenues have grown by 18%. The Gross Premiums at Rs. 19,018 crore, grew at 18% compared to the previous year.

this relationship has aggregated to over Rs. 40,000 crore.

During the financial year, the company transferred 39,47,75,831 equity shares constituting 20.57% of the paid-up equity share capital of Max Life held by MSI to MFSL in exchange for issuance of 7,54,58,088 Equity shares of MFSL, constituting 21.87% of issued and paid- up share capital of MFSL.

on october 28, 2020, Mr. Mohit Talwar, approaching his retirement age, stepped down from his role as ViceChairman, Max Group and Managing Director, Max India - the Groups holding company for its senior care business - effective January 15, 2021. He stepped off the Boards of Max Ventures & Industries and Antara during the first quarter of calendar year 2021.

Mr. Talwar continues as the Managing Director of MFSL for another year to provide continuity to the key initiatives that are currently underway.

Business Performance

Despite lockdowns and the COVID-19 pandemic negatively impacting the operations of Max Life, MFSLs sole operating subsidiary bucked the trend to raise its market share among private players to 10.8% from 9.7% in the previous year. It maintained its fourth position while recording a gain of 107 bps.

Max Life registered a post-tax shareholders profit of INR 523 crore in FY21 as compared to Rs. 539 crore in the previous financial year, a marginal decline of ~6%. It paid an interim dividend of Rs. 200 crore to the shareholders, which takes the total dividend distribution to 10.40% of the face value of each share.

In FY21, MFSL reported consolidated revenues of Rs. 31,288 crore, 72% higher compared to the previous year, due to mark-to-market gain on debt and equity portfolio. Excluding investment gains, consolidated revenues have grown by 18%. The Gross Premiums at Rs. 19,018 crore, grew at 18% compared to the previous year. The Company reported consolidated Profit after Tax of Rs. 560 crore, a jump of 105% compared to the previous year. The steep surge in the Consolidated Profit after Tax was aided by reversal of provision for impairment on financial assets, lower tax expense and a partial offset by new business strain due to shift in product mix towards Non-Par business.

During the financial year, total new business premium (individual and group) of Max Life increased 22% to INR 6,826 crore. In terms of individual adjusted premium equivalent, it recorded a 19% growth to INR 4,907 crore. Further, the renewal premium income (including group) grew 15% to INR 12,192 crore, taking gross written premium to INR 19,018 crore, an increase of 18% over the previous financial year.

The operating expenses (policyholders) to net premium ratio marginally improved from 14.5% in FY20 to 14.2% in FY21 due to effective cost management efforts and higher business growth.

Max Life reported an Embedded Value of Rs. 11,834 crore, after allowing for the interim shareholder dividend payment of Rs. 200 crore and the final proposed shareholder dividend payment of Rs. 176 crore, to be accounted post March 31, 2021 The Operating Return on EV (RoEV) over FY2021 stood at 18.5%; including nonoperating variances and adding the dividends, the RoEV came to 22.4%.

The New Business Margin (NBM) for FY2021 was 25.2% (at actual costs), an increase in 360 bps and the Value of New Business (VNB) was Rs. 1,249 crore (at actual costs), an annual growth of 39%. The higher growth in VNB was primarily on account of the relatively higher sales compared to last year, in addition to the higher margins driven by an increase in the non-par sales.

Max Lifes assets under management (AUM) was INR 90,407 crore as on March 31, 2021 - a rise of 32% over the previous year.

COVID-19 Pandemic Coping Strategy

In its constant endeavor to continue with its digitization agenda, build artificial intelligence (AI) in all digital assets and reduce back-office costs, Max Life launched various digital assets across the entire value chain and embedded intelligence to drive efficiency. This led to increasing digital adoption, including Chatbot integration, digitized selling mechanisms, enabling faster product launches, industry best page load time for buying journey (4 seconds) and fully digital sales journey during CoVID-19 time.

Max Life continued to be amongst the leaders in online term plans, recording a strong growth on an ever-increasing base. Through its search engine optimization expertise, it achieved leadership in top 50 keywords in searches across life. It also achieved leadership position in term plans purchased through life insurers websites, leading web aggregators and digital brokers in India.

The claims paid ratio of Max Life was at a respectable 99.35% in FY21. The company is putting continuous efforts to increase the ratio even further.

During the pandemic, brand Max Life achieved the highest ever Brand Consideration Score of 63 in March 2021, an increase of 16 points over March 2020 score of 47.

Human Resources

Owing to the nationwide lockdown by the Indian government, MFSL shifted the complete working ecosystem to the digital mode, including onboarding, engagement, celebrations, performance management, and exit management.

The cycle of goal setting, mid-year reviews, year-end feedback, and performance appraisal happened digitally - a critical process to drive the performance-based culture in the organization. MFSL and Max Life recognized team members who went above & beyond to deliver value to the organization during the pandemic.

To continue with the firms culture of celebration and joy, MFSL celebrated Founders Day on January 15, 2021, digitally. Further, a COVID-19 crack team was created to support our team members during the pandemic. The team touched the lives of people & their families by being present in their most difficult times.

Owing to such policy initiatives, Max Life moved up 6 notches in the Great Places to Work rankings to 18 rank in 2021 from 24 in 2020 and among top 25 best workplaces for second year in a row. For the first time, recognized amongst Top 100 Great Places to Work in Asia and ranked #55 -only Insurance company from India. It also maintained its high employee engagement survey score of 96% (top 2 box score rating), being among the best in its class.

Outlook

Max Financials sole subsidiary Max Life has a three-year strategy which periodically reviews. During FY21, the management team undertook an in-depth exercise to identify its strategic priorities for the period FY22-24. These were identified keeping in view the socio-economic changes in India, competition analysis, insights from key stakeholders (including the customers and distributors), regulatory agenda, digitization transformation and the strengths of Max Life.

As a part of a three-year business plan for FY22-24, Max Life has continued with the five strategic pillars, which were identified and created in the previous financial year to achieve consistent and profitable growth.

In such emotionally distressing times, MFSL and Max Life are committed to ensure financial protection of the larger community by leading with agility and transitioning the business processes onto digital channels to promptly provide life insurance solutions and service to the customers.

Consumer receptiveness is driving digital adoption in the industry by demonstrating their comfort in engaging through online channels.

The supply-side transformation in the industry will continue to be driven by the digitalization of services along with expected investments from an increased Foreign Direct Investment (FDI) limit to 74% and potential demand owing to low insurance penetration. The Indian Life Insurance industry will thus need to accelerate its structural transformation further to be in tune with this evolving megatrend.

Indian Economy Review

The Indian economy is expected to contract by about 7-8% in FY2021 as a recession hit the economy in the aftermath of the pandemic-induced lockdown.1 A sharp revival in the high-frequency indicators such as power consumption, GST collections, the generation of e-way bills, and manufacturing pMI since Q3 FY2021 have instilled recovery optimism in the economy. the Indian Government increased its consumption spending to propel the overall demand even as the RBI adopted an accommodative Monetary policy and asset buyback to provide liquidity, control yields, and decrease the cost of borrowing. Good monsoons, a bumper harvest, and the timely procurement of crops cushioned the rural economy. While the Mahatma Gandhi National Rural Employment Guarantee Act (MGnReGA)-based employment increased year on year, the overall unemployment rate peaked at 23.52% in April 2020 and moderated to 6.52% in March 20212. the economy is yet to recover from the hangover of decline in the average household income by 28% in April 2020,3 even as the net new EpF subscriber base has been rising since H2 FY20214 the economic uncertainty continues to dampen the renewed optimism from vaccine availability due to the second wave of infections and associated health infrastructure crisis. the Indian life insurance industry will need to accelerate its structural transformation further to support the dwindling household balance sheet impacted by the loss of lives and livelihoods.

Life Insurance Industry Overview

In a year marked by sporadic lockdowns and social distancing, the industry witnessed enormous demand contraction in Q1 FY2021, when the pandemic was at its peak. the traditional in-person based sales gave way to digital means of selling products and services. the Indian Life insurance industry recorded a growth of 7.5% in new Business premium (NBp) from Rs. 2.58 trillion in FY2020 to Rs. 2.78 trillion in FY2021.5 The monthly first- year premium picked up momentum since Q2 FY2021 with such growth being driven by the private sector, single premium policies and a rise in demand for protection plans. The private insurers collectively outpaced the Life Insurance Corporation of India in NBp additions in March 2021 as the former recorded 83% growth over the year against the latters 65%. the NBp of life insurers clocked Rs. 43,416 crore in March 2021, with a 70% growth rate due to a low base effect from the previous year.5 the industry witnessed paradigm shifts in consumer preferences as people adapted to the new normal. the uninsured group realized the indispensable need to cover their risks. During the year, there has been a gradual shift in demand in the life insurance industry from market-linked products towards traditional products. product innovation and customisation focusing on features, enhanced benefits, flexibility in payments and the digital capacity of the insurer have taken over the traditional off-the- shelf and one-size-fits-all products in the industry. the standardisation of life insurance products such as Saral Jeevan Bima that aims to offer a no-frill basic cover term insurance plan is likely to receive more uptake. Consumers have been driving digital adoption in the industry by shifting from contact- based agents to online channels. the supply-side transformation in the industry will continue to be driven by the digitalisation of services along with expected investments from an increased FDI6 limit to 74% and potential demand, owing to low insurance penetration. The macroeconomic factors such as expected disinvestment of UC, job creation through planned infrastructure investments, and increased spending on public health infrastructure, as announced in the budget, augur well for the industry.

Max Life Insurance - Resilient and Agile

Max life creates a three-year strategy and reviews it periodically. During FY2021, the management undertook an in-depth exercise to identify its strategic priorities for the period FY2022-24. these have been identified keeping in view the socio-economic changes in India, competition analysis, insights from key stakeholders (including our customers and distributors), regulatory agenda, digitalisation transformation and the strengths of Max life. As a part of the three-year business plan for FY2022-24, Max life has continued with the five strategic pillars, which were identified and created in the previous financial year to achieve consistent and profitable growth. During FY2021, Max Life made major progresses in its strategic pursuits and will continue to work on them during FY2022:

Product innovation to drive margins

Max Life is already offering a wide range of products and plans to augment its product portfolio to remain competitive as well as to optimise margins. the Company will continue to pursue the protection agenda and leverage NpAR-Savings products for growth. Max Life also aims to augment choices among its uLIp portfolio, enhance health insurance protection through riders & retirement solutions through annuities, and offer group micro product to micro-finance

institutions (MFIs) and to nontraditional ecosystems.

Customer centricity across the value chain

Max life has always been amongst the leading players on customer centricity and plans to enhance customer focus and gain leadership on key customer parameters over years to come. the net promoter Score improved from 40 in FY2020 to 45 in FY2021, while the claims-paid ratio was 99.35% in FY2021. In an endeavour to serve the customers better, the Company is putting in a continuous effort to increase its claims-paid ratio. Max life has also improved its 13M and 61M persistency metrics to 84.1% (+80 bps) and 54% (+190 bps) respectively over previous year.

Max lifes focus on building pertinent customer trust has been acclaimed in a syndicated, industry wide customer loyalty study - Insurance India, conducted by Kantar. the Insurance India 2020 study was undertaken to understand customers behaviour and loyalty trends. the study recognizes Max Life as the (joint) top ranked private insurer in the Indian life insurance industry for Customer Loyalty with 72% truly Loyal customers.

Digitisation for efficiency and intelligence

In an extraordinary year, Max life has put dedicated focus on digitization, online selling of insurance plans, and empathetic customer communication. With its key digitization initiatives and the Bharose ka Number campaign,

Max Life has emerged as the industry leader on perception around Use of technology and Reliability in claims

processing which helped Max Life brand to distinguish itself on highest customer loyalty in the sector, as per the Kantar Insurance India 2020 study.

Max Life aims to continue with its digitisation agenda, build artificial intelligence (AI) in all digital assets and reduce back-office costs. The Company has launched various digital assets over time and during the year across the entire value chain and has embedded intelligence to drive efficiency. This has led to increasing digital adoption, including Chatbot integration, digitised selling mechanisms and more, enabling faster product launches, industry best page load time for buying journey (4 secs) and fully digital sales journey during Covid-19 times.

Employee

Employees will always be a strategic pillar for Max Life, which is reflected in the continual gains by Max Life in the Great Places to Work rankings, whereby the Company moved up from the 24th rank in 2020 to 18th rank in 2021. Further, it maintained its high employee engagement survey score of 96% (top 2 box score ratings), being amongst the best in class.

FY2021 saw unprecedented times, where the ensuing lockdown restricted human interaction. By proactively digitising its operations over the last couple of years, Max Life has been able to deliver a seamless customer journey and has effectively dealt with the Covid-19 disruption. In these times, the Company remains committed to ensure financial protection of the larger community by leading with agility and transitioning the business processes on to digital channels to promptly provide life insurance solutions and service to the customers. In its aim to secure the financial future of the customer, Max Life has adapted itself to cutting-edge digitisation avenues, enabling seamless business continuity, even when more than 95% of its workforce has been working from home. Overall, Max Life is happy to report a strong performance across various operational areas.

Financial Performance - Delivering Results Amidst Challenges

In FY2021, Max Life secured a 10.8% market share amongst the private players in terms of individual adjusted first year premium, maintaining its fourth rank by recording a gain of 107 bps. In FY2021, Max Life secured a 6.4% market share overall in terms of total new sales recording a gain of 89 bps.

During the year, total new business premium (individual + group) of Max Life increased by 22% to Rs. 6,826 crore. In terms of individual adjusted first year premium, the Company recorded a 19% growth to INR 4,870 crore. Further, the renewal premium income (including group) grew by 15% to Rs. 12,192 crore, taking gross written premium to Rs. 19,018 crore, an increase of 18% over the previous year.

The operating expenses (policyholders) to gross premium ratio decreased from 14.5% in FY2020 to 14.2% in FY2021 due to effective cost management efforts and higher business growth. The cost (commission plus policyholders operating expenses) to gross premium ratio also decreased from 20.8% in FY2020 to 20.7% in FY2021.

Max Life has generated a post-tax shareholders profit of Rs. 523 crore in FY2021 compared to Rs. 539 crore in the previous financial year, recording a marginal decline of ~6%. The Company paid an interim dividend of Rs. 200 crore during FY2021 to the shareholders, which takes the total dividend distribution to 10.40% of the face value of each share.

Business Verticals Review - Pillars Of Growth

At Max Life, proprietary distribution channels have been the core of consistent growth. This congregation of Agency Distribution, Customer Advisory Team and E-Commerce have combined to enable a stronger growth momentum for the Company and have ensured exemplary performance in terms of the quality of business. The proprietary channels recorded a growth of 9% during the year and closed the year with 28% share in adjusted individual first year premium in FY2021. A summary of the distribution channels and noteworthy developments are given below:

Agency Distribution: Agency Distribution has been one of the primary channels of Max Lifes growth over the years, enabling the Company to build a high growth proprietary distribution by improving the efficiency and productivity of agency distribution, and to increase the share of proprietary channels. To enhance the scope of business, going forward, the focus will

be on activation and retention of agent advisors by building a strong learning and development culture with a growth & entrepreneurial mind set.

Within the agency distribution, the Company carved out the Agency partners Channel which is driven by a variable agency model and leverages agent recruitment through a higher variable construct. This model has shown promise with strong growth in its second full year of functioning. As Army and paramilitary personnel of the country remain at the forefront to provide protection to the country, to bring additional focus on this segment, Max Life has created a new, specialist team within agency distribution to provide relevant life insurance solutions to them and is rapidly increasing market share year on year. these new initiatives have provided impetus to the agency distribution the Company will be further focusing on building the variable agency distribution model in the coming years.

Customer Advisory Team - At Max

Life, no customer is unaided as we have created a Customer Advisory Team (CAT) to meet the needs of customers whose agent advisors are no longer part of the Max Life system. The service-to-sales model for this direct- to-customers channel worked well during FY2021, including an expansion of its team to record high growth.

This channel doubled its sales in just two years and leads the 13th month persistency across the Companys multiple channels, in line with the global best.

E-Commerce - For more and more consumers, online is becoming the go-to channel for almost all their needs. Max Life has continued to be amongst the leaders in online term plans recording strong growth on an ever-increasing base. Through its search engine optimisation expertise,

the Company achieved leadership in top 50 keywords in searches across life. Max Life has also achieved leadership position in term plans purchased through life insurers websites, leading web aggregators and digital brokers in India.

Third Party Distribution - Unlocking Opportunities

• Axis Bank - The vision of the Max Life and Axis Bank distribution relationship is to be the most admired bancassurance partnership in India. This partnership has successfully completed 10 years

of association in FY2021, and has got strengthened by Axis Entities becoming co-promoters of Max Life recently. The partnership is one of the fastest growing bancassurance relationships in the Indian life insurance industry with both partners committed to provide superior value to its customers.

Max Life continued to dominate the life insurance counter in the bank in both the individual and group businesses despite an open architecture setup.

• YES Bank - Yes Bank and Max Life bancassurance has completed 15 years of successful partnership in FY2021, and the channel is back on a resurgence path, post recovery from the RBI moratorium. With the new leadership team at Yes Bank, the Company plans to take this relationship to the next level.

• Other bancassurance partnerships

- The Lakshmi Vilas Bank relationship agreement expired immediately after the banks merger with DBS; renewal efforts are under way. Our Urban Cooperative Banks partnerships business was impacted due to the pandemic with geographic concentration of these brank branch networks in Maharashtra state.

• Group Business - The Group business focuses largely on credit life business. The channel registered strong growth in last three quarters of the year after a slow start in first quarter (pandemic impact), resulting in 30% growth for the full year. The channel also enhanced the renewal ratios for group term life verticals.

Portfolio MIX - Balanced and Sustainable

Max Life has a balanced product portfolio with an optimal mix of traditional savings cum protection plans, unit-linked plans and pure protection. During FY2021, it added new products in the individual space. For the individual business, the Company launched the Guaranteed Lifetime Income Plan (Deferred Annuity), Assured Wealth plan, Smart Term plan, amongst others. protection continued to be a key focus area and, in FY2021, one in three individual policies underwritten by Max Life was a protection policy. Of the new business premium, including individual and group business, protection share increased from 13.6% in FY2020 to 14.6% in FY2021. This also resulted in 19% increase in the sum assured of inforce policies to INR 10,87,987 crore

Cost Management - Robust Operating Module

The operating expenses (policyholders) to gross premium ratio marginally reduced from 14.5% in FY2020 to 14.2% in FY2021 due to effective cost management efforts and higher business growth. The cost (Commission plus total operating expenses) to gross premium decreased to 20.7% in FY2021. Max Life didnt allow the ratios to go up significantly despite investment in opening new offices and expansion initiatives.

Investment Performance

Max Lifes assets under management (AUM) was Rs. 90,407 crore as on March 31, 2021 - a growth of 32% over the previous year.

The Company ensures the management of its investment assets in accordance with its asset-liability management policy for traditional plans and a market-oriented approach for its unit-linked plans. the performance of both traditional and unit-linked funds is commensurate with the risks assumed in the respective funds.

With an endeavour to delivering optimal returns to policyholders,

Max lifes investment team follows a disciplined approach. on the traditional funds, funds are invested keeping in mind the safety of capital and stability of returns over the long term. the debt portfolio of the Company continues to be of high quality with 96% of the portfolio carrying top ratings of AAA/ A1+. Most of the equity portfolios for traditional funds and unit-linked Insurance plan (uLIp) funds are large- cap oriented.

the Indian equities rallied sharply in FY2021, after a sharp fall in March 2020 in the face of increasing Covid-19 infections worldwide. the concerted effort by global central banks to infuse liquidity and subsequent fiscal stimuli by most developed economies led to a rise in all asset classes viz. equities, fixed income, commodities, real estate and even cryptocurrencies like Bitcoin. Markets were volatile throughout the year as concerns of spikes in Covid-19 infections and lockdowns were followed with more stimulus, drug discoveries and progress in vaccine development. In the financial year ended March 2021, we continue to be in an unprecedented environment. Huge blows to the economy were counteracted by bigger measures by central banks and the Government, leading to excess of savings and liquidity. this has led to extremely high market valuations and new-age businesses are being valued on novel metrics since traditional valuation measures are unable to explain the current valuations.

the Nifty 50 Index was up 71% in FY2021, while the mid-cap and small- cap indices outperformed large- caps, ending up by 102% and 125% respectively. long-term performance of our uLIp funds remained strong with above-benchmark returns overall. our traditional funds generated income in line with our long-term objectives.

Fixed income markets were driven by both conventional and nonconventional measures taken by the RBI. Due to the slowdown, the RBI followed an ultra-accommodative policy. the Monetary Policy Committee (MPC) actions focused on supporting growth and to ensure a stable interest rates environment. the MPC cut policy rates during the year by 65bps and injected massive amounts of liquidity into the banking system.

With a slowing economy and lower tax revenues, the Government invoked the escape clause of the Fiscal Responsibility and Budget Management Act (FRBM) to expand the fiscal deficit. In a sharp departure from the earlier policy of fiscal consolidation, the Government raised its fiscal deficit target to 6.8% for FY2022 and revised the glide path to reach 4.5% in five years, against a long-term target of 3%. In addition, the Government also announced a series of reforms such as the Production-linked Incentive (PU) scheme for the private sector to boost domestic manufacturing, attract large investments and to create employment.

For our traditional funds, we increased our investments in very high-quality commercial real estate with long-term lease commitments. these investments are in line with the objective to deliver attractive yields and generate superior returns on a low risk-adjusted basis. the investments team has taken several new initiatives during the year to enhance risk-adjusted returns for policyholders. We increased exposure to new asset classes like Alternative Investment Funds (AIFs), Real Estate and Infrastructure Investment Trusts (REITs and InvITs). Innovative hedging techniques continued to be applied on the fixed income portfolio.

Max Life has reviewed the Stewardship Code as prescribed by the IRDAI and stepped-up voting actions across investee companies in the best interests of the policy holders.

The Max Life Brand: Driving Differentiation

Max life envisions to be the most admired life insurance company in India by securing the financial future of our customers. With an emphasis on building greater awareness about the need to avail life insurance policies, the Company designs and develops unique brand campaigns that are aimed at driving a difference because of its belief in the adage, A stronger, fitter, better- prepared You is the best life insurance your loved ones can get, because for them #YouAreTheDifference!

During the pandemic, Brand Max Life fulfilled its promise of keeping Indians protected with its value accretive insurance policies and achieved the highest ever Brand Consideration Score of 63 in March 21, an increase of 16 points vs. the March 20 score of 47 (Source: Nielsen Consideration score is the likelihood of consumers to consider a Life Insurance brand).

This was enabled by the success of several campaigns introduced by the company during the year.

• India ke Bharose ka Number: 99.35% claim paid ratio

• Indias Protection Quotient Express Covid-19 edition

• Indias Protection Quotient 3.0

• Indias first Covid-19 rider by a Life Insurance Brand

• India ka Best Term Plan - Playing Protection Front Foot Pe

• India ka pehla customer engagement with SDPL

• India ka pehla health app by a Life Insurance brand - Max Fit Program & CID Rider The Company drove the #YouAreTheDifference campaign throughout the year with the following initiatives:

1. India ke Bharose Ka Number -

The campaign highlighted the Companys excellent claims paid ratio of 99.35% in FY21, reiterating its promise of securing the financial future of families insured by Max Life Insurance policies. Starring Abhay Deol, the advertisement reinstated the companys commitment to secure customer trust and deliver solutions in the most challenging times.

2. India Ka Pehla Customer Engagement Model - A campaign designed to assure customers about its exceptional service,

Speed Dial Partner for Life (SDPL), is a promise to serve customers better with a huge network of relationship managers who act as one-stop solutions for all customer queries.

3. India Protection Quotient: The

Company conducts an annual nationwide survey in partnership with Kantar, to shed light on factors that influence insurance purchase in Indians. In FY2021, the survey focused on current financial position of an individual, changing savings and investment patterns, key anxieties and triggers that influence the purchase amidst a huge crisis like the Covid-19 pandemic and in times to come.

An impactful national and regional campaign was produced, in partnership with NDTV. Print and social media campaigns were also organised to lay emphasis on protecting the financial future of families. Renowned celebrities like Neha Dhupia, Angad Bedi, Mandira Bedi, Lara Dutt and Mahesh Bhupathi supported the campaign.

4. India ka most Customer-

Obsessed Brand: (Closer to our customers) We transformed our monthly customer connect, under E- Super Customer Week, and organised interactive sessions with various influencers to focus on fitness and wellness.

5. India ka Best Term Plan offering

- protection Front Foot pe:

We partnered with Team Royal Challengers, Bangalore, to deliver a meaningful message about being proactive about health and fitness. the campaign also focused on the need for securing the financial future of families with the best term life insurance policies.

6. India ka pehla health app by a Life Insurance brand - Max Fit

programme: With growing health consciousness, Max Life Insurance launched an Industry First initiative

- Max Fit programme -a wellness programme offering discounts on renewal premium to individuals who are keen to maintain a healthy lifestyle. Measured through an app, exclusively designed for Max Life Critical Illness and Disability Rider Customers - the programme aims to increase awareness among customers with the core message of - Be Fit, Be Healthy, Be Protected, because for your loved ones, You are the Difference.

Report on Consistent Embedded Value

Keeping in view the requirements of long-term investors, the Company has been reporting the Embedded Value (EV) for the past several years. The EV is a measure of the shareholder value, arising from in-force policies and the net worth of the Company at the valuation date. The Company uses a market-consistent methodology approach, as it better reflects the value of an insurance company by explicitly allowing for insurance and economic risks, rather than using implicit overall allowance for risks through a risk discount rate, in the traditional approach.

The EV of the Company, as on March 31, 2021, stood at Rs. 12,010 Cr, after allowing for the interim shareholder dividend payment of Rs. 200 Cr during FY2021. post allowing for final proposed shareholder dividend payment of Rs. 176 Cr, which will be accounted, post March 31, 2021, the closing EV will be Rs. 11,834 Cr.

The EV of Rs. 12,010 Cr represents an increase of Rs. 2,033 Cr from the EV as at March 31, 2020 of Rs. 9,977 Cr; implying a growth of 20.4%. The Operating Return on EV (RoEV) over FY2021 is 18.5%; including nonoperating variances and adding back the interim dividend payment of Rs. 200 Cr during the year, the RoEV stands at 22.4%.

Value of New Business and New Business Margins

The Value of New Business (VNB) signifies the value added to the EV due to the new business written by the Company during the year. Please find below the VNB and NBM for FY2021 compared to FY2020 at actual costs:

Key Measures FY21 FY20 Y-o-Y growth
VNB Rs. 1,249 Cr Rs. 897 Cr 39.2%
NBM 25.2% 21.6% +360 bps

The New Business Margin (NBM) for FY2021 is 25.2% (at actual costs). The Value of new Business (VNB) written over the period is Rs. 1,249 Cr (at actual costs), representing an annual growth of 39.2%. the higher growth in VNB for the year is primarily on account of the relatively higher sales compared to last year, in addition to the higher margins driven by an increase in the proportion of non-par sales.

Policy Holder Bonus

As per the design of our participating products, the Company annually reviews the performance of its in-force business to determine the non- guaranteed bonuses payable to its existing participating policies.

the recommendations for the participating policyholder bonuses applicable during the period, from July 1, 2021 to June 30, 2022 are being made using the asset-share framework, taking into account the experience of the fund during the year as well the expected performance of the fund in the future. The methodology and assumptions used to calculate such bonuses are consistent with the established principles and practices documented in the Principles and Practices of Financial Management (ppFM).

On the advice and recommendation of Max Lifes appointed actuary, the board of directors approved to:

• Reduce the 2020 regular bonus rates by 7.5% for all the products launched after 2015;

• Reduce the 2020 regular bonus rates by 5% for products launched between 2013 and 2015;

• Maintain the 2020 regular bonuses for all other products;

• Pay terminal bonus of 5.0% on surrender and death post completion of 20 policy years

for the first time for Whole Life Participating and Amsure Bonus Builder plan; and

• Pay terminal bonuses to maturities and eligible deaths such that the final pay-outs are aligned to the asset share and meet policyholder reasonable expectations based upon issued benefit illustrations.

The total cost of regular bonus payable for the next 12 months starting April 2021 is estimated to be Rs. 1,297 crore, an increase of Rs. 20 crore from the bonus distributed last year amounting to Rs. 1,277 Cr. In addition, the payment of terminal bonus on maturities has been approved for the 12 months starting July 2021, the cost of which is estimated to be Rs. 39 crore.

Regulatory Update

The last fiscal has been all about sustenance and business continuity during the unprecedented times arising out of the Covid-19 pandemic. The year witnessed many regulatory initiatives by the Insurance Regulatory Development Authority of India (IRDAI) to address the concerns of insurers in these challenging times. While the IRDAI has been supportive of the insurance industry in these difficult times and has announced various measures to facilitate policyholder servicing, sales, and business margins, it has also been proactive in terms of assessing the industry situation. In this endeavour it has engaged with the insurers on addressing the concerns of the business continuity plan (BCP), overseeing annual business plans, product strategy and ensuring long-term growth and persistency.

Some of the important notifications issued by the IRDAI providing dispensations to support the insurance industry in Covid-19 times include:

• Relaxations in regulatory submission timelines

• Circular on dispensation with physical signatures and issuance of electronic policies

• Extension of the grace period and free-look period for policyholders

• Guidance on BCP and the Annual Business Plan.

As part of its engagement with the insurers during the course of the year, the IRDAI held WebEx meetings with the CEOs of life insurance companies to discuss matters related to Covid-19 impact, business continuity and Annual Business Plans. Some key takeaways included:

• Identifying risk identification and mitigation steps

• Charting an annual business plan in Covid-19 times

• Reviewing status of BCP related to policyholder services and launch of Covid-19 specific products

• Augmenting Agency force

• Facilitating need-based product development

• Focusing on issues in total digitalisation of processes

• Facilitating process of claim settlement and grievance redressal

• Monitoring impact of the pandemic on Solvency, Liquidity, Profitability and Asset-Liability Management

• Reviewing Covid-19 claims and maturity claims settlement, expenses of management review, etc.

The IRDAI also created a Committee on Alternatives to Physical Signatures on Proposal Papers and Benefit Illustrations to address the limitations of physical solicitation and to facilitate

remote face-to-face selling during pandemic times. The Committee recommended an SOP for remote face-to-face selling, which included digital suitability assessment, benefit disclosure, agent confidentiality report, and KYC, etc.

Following are the significant regulatory notifications issued by the IRDAI -

i) Notifications on Standardised products like Saral Jeevan Bima, Saral Pension, and Corona Kawach

ii) The IRDAI (Minimum Information required for Inspection)

Regulations, 2020

iii) The IRDAI Master Circular on Unclaimed Amounts

iv) Guidance on Information and Cyber Security

v) Disclosure of Underwriting Philosophy by insurers on their websites, and

vi) The IRDAI Guidelines on Wellness and Preventive Features. The year also witnessed the rolLout of Consumer Protection (e-Commerce) Rules, 2020, by the Department of Consumer Affairs (Ministry of Consumer Affairs, Food and Public Distribution).

Risk Management - Prepared for Tomorrow

Max Life has a Risk Management Framework (RMF) that enables it to appropriately develop and implement strategies, policies, procedures and controls to manage different types of material risks. The RMF is Max Lifes totality of systems, structures, policies, processes and people that identify, measure, monitor, report and control or mitigate all internal and external sources of material risk. This framework provides reasonable assurance to the management that each material risk is being prudently and soundly managed, with regard to the size, business mix and complexity of Max Lifes operations.

The RMF is maintained by the independent risk management function, headed by the Chief Risk Officer who reports directly to the Chief Executive Officer (CEO) of Max Life. He also has direct access to the Board and the Risk Committee of the Company to share his independent view of key risks affecting the Company. Under the RMF, the risk function is responsible for the supervision of all risk management activities in the Company, including:

1. Developing the Risk Appetite Statement (RAS), which states the material risk and the degree of risk that Max Life is prepared to accept.

2. Overlooking the appropriateness and adequacy of the Risk Management Strategy (RMS) that states Max Lifes strategy to address the material risks and the policies and procedures supporting the management of the material risks in Max Life.

3. Monitoring the internal capital adequacy assessment process.

4. Ensuring through various management submissions that the Board is adequately informed on top risks and key emerging risk- related issues and, if necessary, provides supplementary advice to the Board through the Risk Committee.

The entire implementation is monitored both at the management level as well as the Board Committee levels, and the overall risk management framework and its effectiveness are subject to both internal and external assurance reviews.

Corporate Social Responsibility - Community Outreach with Responsibility

Max Life and its directors firmly believe that the ultimate objective of Max Life is to contribute to the well-being of the society it operates in. While the Company is focused on education, healthcare, environment protection, financial literacy & insurance awareness, greater efforts were also made towards employees volunteering in various CSR activities across the country.

During FY2021, Max Life supported 17 leading NGOs working in the field of Education. Through these NGOs, Max Life supported education of 27,284 children and also provided support

for 2210 teachers and 40 fellows. In partnership with the SATH-E programme of the Madhya pradesh government, the Company reached approximately 81 lakh students of local government schools (1 to 12 grade) through the initiative Hamara Ghar, Hamara Vidyalaya (a remote learning programme leveraging media like WA, Tv, Radio, Community Classes and textbooks / Workbooks, etc.) Additionally, Max Life helped set up 30 libraries in schools under the South Delhi Municipal Corporation.

During these difficult pandemic times, through various initiatives under pehal, Max life and its employees helped fight the pandemic by supporting the frontline workers and the affected communities impacting approximately 1 lakh beneficiaries across the country. the organisation contributed 20,000 personal protective equipment (ppE) kits to doctors and healthcare workers, 36,300 safety kits to police officials, 6000 safety kits to security guards of 120 RWAs of Delhi/ NCR, 5000 kits for recovering patients of Government hospitals and 5500 antigen testing kits to the Haryana Government.

Additionally, food and ration were provided to over 4350 affected underprivileged sections and a contribution of Rs. 13,27,000 was also made to the prime Minister Cares Fund for fighting the pandemic. over 1000 employees and agent advisors from across office locations came together to distribute these necessary safety kits to

73.0 0 0 frontline staff and police officials while following all social distancing norms. A virtual event for employees was also organised with the Deputy Commissioner and Chief Medical officer of Gurugram to commemorate these contributions and create awareness.

the organisation has adopted nearly 4.25 km of high traffic road stretch for tree plantation, maintenance and sustainable solutions to preserve the environment. the stretch has been developed with plantation of more than 56,000 saplings, creation of a green park with 12 solar operated outdoor lamps, nine iron benches and outdoor gym equipment, and installation of 6 tata ezynest modular toilets for public sanitation. under the Water Conservation drive, 70.000 numbers of the low-cost water nozzles were distributed to residents of condominiums and Government offices in FY2021. these nozzles maintain the flow of water, thereby resulting in reduction of water wastage.

To facilitate financial literacy and insurance knowledge for young entrepreneurs and leaders, Max life partnered with world-renowned leader and innovator, Sonam Wangchuk and his organisation, the Himalayan Institute of Alternative learning (HIAU. As a part of the project,

115 young students from the mountainous regions of the county were supported to become successful entrepreneurs with optimum knowledge of risk management, insurance literacy, banking habits, Government support to business, and financial decision-making tools. the Company contributed 10,100 Happiness Kits to Government school children and anganwadi beneficiaries (young mothers) in these aspirational districts. Max life agent advisors from the local offices actively volunteered for the distribution drives

In line with the requirements under Section 135 of the Companies Act, 2013, Max life has contributed Rs. 12.24 crore towards these CSR activities during FY2021 through its execution partner,

Max India Foundation and through the Company directly. out of the aforementioned total contribution by Max life, Rs. 108.96 lakh remained unapplied due to the on-ground Covid-19 situation affecting some NGos in Q4 FY2021 by Max India Foundation, which shall be applied in H1 FY2022. the detailed Annual Report on the CSR activities undertaken by the Company is placed at Annexure II.

Future Outlook

the global pandemic had disruptive effects on the global as well as the Indian economies. While the world has been reeling under the detrimental health and economic effects of Covid-19, the Indian life insurance industry has also not been immune to it. Max life pivoted a Digital operating Model for distribution focusing on simplified and 100% digitised sales process enabled by digital tools.

the Company continues to closely monitor the pandemics impact on its financial strength and asset portfolio and will keep a focus on strengthening proprietary channels for predictable and sustainable growth. Max Life will maintain its focus on long term savings and protection products.