Conference Calls and Earnings Call Transcripts for NSE and BSE Stocks

Call with Max Life and Max Financial management on the 70/30 Joint Venture between MF and Axis Bank on Max Financial's subsidiary, Max Life Insurance. Click to listen to the full transcript.

Earnings Transcript of the Conference Call between HDFC Life Insurance Management and Analysts on Q4FY20 and full year performance. Listen in to the full transcript.

Call Participants: Ms. Vibha Padilkar - CEO & MD, Mr. Suresh Badami - Executive Director, Mr. Niraj Shah - Chief Financial Officer, Mr. Srinivasan Parthasarathy - Appointed Actuary, Mr. Kunal Jain - Vice President, Investor Relation

Introductory Remarks from Vibha Padilkar

Good evening everyone! Thank you for joining us for the discussion on our results ended March 31, 2020. I will run through the key highlights of our FY20 results and would be happy to take questions post that.

Key Highlights for Q4FY20

• Starting with an update on the current situation, as a result of this pandemic, human lives have been disrupted and organizations around the world are witnessing challenging times. As a responsible corporate citizen the safety and wellbeing of our employees, customers and partners and ensuring uninterrupted service to our customers are our foremost priorities. The impact of the outbreak has been seen across both new business and renewal collection. The customers want to conserve cash till clarity emerges. 
• While it might take some more time for things to settle down and a new normal to emerge, we believe that the structural stories for insurance remains intact and we expect business to emerge stronger at the end of this pandemic
• Our existing suite of digital assets has enabled us to continue to avoiding a seamless experience to the end customer from a new business and servicing perspective
• On the servicing front, adoption of our digital serving avenue has seen an overall increase of 67% during the lockdown period while usage of our box across WhatsApp, Twitter has increased by 70%
• We have settled around 3,000 maturity claims, Around 300 debt and health claims
• Made nearly 21,000 annuity payouts and processed close to 95,000 transactions in the first 15 days of lockdown
• With regards to new business, we have seen a jump in the adoption of assets such as chat based identification tool, pre-conversion verification chat which allows customers self authenticate their details
• Our virtual frontline sales model enabled our sales representative to connect with customers via video calling and complete the sales process
• Next on business performance, while there was disruption in the last 10 days of March, we have been able to exhibit steady performance and delivery across all key metrics in FY20
• Overall, new business premiums have grown at 15% in FY20, leading to a market share of 21.5% among private players
• We grew 19% based on individual WRP compared to private industry growth of 5% and overall industry growth of 6%. This led to a 170 basis point increase in market share from 12.5% in FY19 to 14.2% in FY20
• We have maintained our leadership position in the group segment with a market share of 29%
• Our new business margin for FY20 was 25.9%, an increase of 130 basis points over the same period, last year
• Value of new business grew by 25%, increasing from Rs 1,537 crores in FY19 to Rs 1,919 crores in FY20
• Operating return and embedded value reduced by 200 basis points to 18.1% compared to 20.1% last year
• In anticipation of the possibility of worsening mortality due to COVID-19, we have created a Covid reserve, the adequacy of which would be reviewed at regular intervals
• Our profit after tax for marginal increase over the previous year to Rs 1,295 crore. This is after providing Rs 106 crores for the YES Bank 81 bonds held by us
• New business trend was offset by our robust backbook surplus which grew by 17% 
• Our solvency position remains strong at 184% compared to 188% a year ago, the withdraw due to fall in equity market
• We have received board approval to raise thereto capital via subordinated debt. It is an enabling resolution and the extend in timing of the fund raise will be assessed in due course
• The stock debt would provide greater ability to increase our protection business and additional cushion against further market volatility
• Additionally, in line with the IIBI circular to conserve capital, we have not declared any dividend for FY20
• A share of proprietary channels have increased to 36% for FY20 from 22% in the previous year
• We remain focused on strengthening our relationship with all our bank insurance partners including HDFC Bank and maintain our market share with HDFC Bank
• Additionally, our broker channels crossed the milestone of Rs 500 crore APE, growing by more than 1.5x over FY19
• We continue to diversify our mix beyond the traditional modes of distribution and have deepen our relationship across 270 partners including more than 40 in the new ecosystem space
• Moving on to the product performance, our focus on maintaining a balance for this mix has helped us get multiple business cycle and we continue to actively pursue the same
• Our savings business grew by 18% while protection grew by 22% in FY20
• We continue to address longevity risk for customers through our annuity and long term income proposition
• Protection remains a key focus area for us and accounted for 27.6% of our business in terms of lieu business premium and 17.2% on weightage premium basis
• Individual term protection was at 7.6% of individual APE and grew by 33% over previous year
• We continue to monitor consistency in this difficult period for customers, specially for ULIP segment
• We have also strengthened our assumption in anticipation of any weakness in persistency 
• To conclude, we believe that while there are challenges in the short term, I have detailed in our IR presentation, there would also be opportunity in terms of increased demand for protection, inorganic growth and our reimagining insurance framework such as work from home and offering innovative digital solutions to customers
• We are preparing for multiple scenarios to pan out this year and we will dynamically review and react with agility as events unfold
• We endeavour to protect our downside risks while staying well to spot demand revival as the devastation caused by Covid-19 recedes.

General Updates:

• Against the degrowth in the month of March of 28%, the online channel grew by 13% and similarly, term APE is growing
• Slightly smaller ticket size is emerging 
• Getting a lot more enquiries on group term insurance from lots of  employers. Unfortunately this is not the time to only cover Covid, it needs to be a more holistic level of coverage that employers should be looking for all their employees
• We are looking for more reduction. For example in the annuity business. 
• At least some of the geographies are showing signs of lockdown ending
• Apart from the metros, we are willing to engage in a conversation with slightly lower ticket sizes
• Apart from Unit Link, we are able to give a loan against policy specially after premiums have been paid. The over the counter loan can be paid by the policyholder once the immediate cash stress scenario eases off
• We are telling our policyholders that rather than surrendering relaxing the policy, they should take a temporary loan which can be foreclosed anytime as there is no minimum tenure. Cannot say anything on Unit Link policyholders right now. Tenure loan is much cheaper than a personal loan
• Solvency has been impacted by 10% because of Covid-19
• Lockdown progressively starts disappearing but at the same time, equity market remains extremely volatile

Earnings Call Transcript of the Conference Call between Management and Analysts on Q4FY20 and Full Year results. Listen in to the transcript.

Conference call between Mahindra CIE Management and Analysts on Q4FY20 and Full Year Results. Listen in to the full transcript

Call Participants:

Mr. Ander Arenaza Alvarez - CEO

 Mr. K. Jayaprakash - CFO

Mr. Vikas Sinha - Sr. VP, Strategy,

Mr. Oroitz Lafuente - Business Controller

Introductory Remarks from Vikas Sinha

Good afternoon everyone! I welcome all of you on this call. Thank you for being with us in this trying time of the Covid crisis. I hope and wish that all your loved ones are taking care. Before we start with the results, let me take this opportunity to state the Covid is a global humanitarian crisis before anything else and CIE salutes the frontline health workers, policemen and other workers who are risking themselves everyday to keep our life moving when many of us are locked down at our home. 

Let us now start with the results of MCIE for the First Quarter CY20. I am referring to the presentation that we uploaded yesterday. 

Key Highlights of the last quarter

• Significant among the highlight is the fact that our parent CIE automotive has reinforced ownership by acquiring an additional 121,000 shares for MCI from the open market in the last week of Q1CY20

• Results for our India business for Q1CY20 are on Page 8. We have managed to keep the EBITDA at 13% which is an improvement despite the sales being lower. Sequentially the rate has come down but margin are up

• The last fortnight of March was affected badly by the Covid crisis

• The EBT is Rs 16 million in this quarter but this includes our Rs 413 million of negative extended fluctuations associated with BF Mexico USD loan of $26 million. This is a mark to market and is a exceptional item

• Our European results for Q1CY20 are shown on Page 9. The sales dropped substantially compared to Q1CY19 on account of the double impact and drop in demand due to Covid -19 and the slowdown in the market for our US, Italy business

• Labour adjustment measures have already been taken in this quarter and they will provide a cushion in the coming quarters

• Despite a difficult market situation worldwide, our EBITDA is at 11.7% for Q1CY20 in the consolidated result including India and Europe. In absolute terms, EBITDA is 37% lower compared to Q1CY19 which if you would recall was one of the best quarters MCIE has had

• I would like to mention again that EBT is at Rs 455 million and includes Rs 413 million in terms of the exceptional item of the negative exchange rate fluctuation associated to BF Mexico USD loan 

• We would like to emphasize that the real life situation is very fluid and evolving rapidly. Therefore any market predictions can be taken as a general guideline, but it could change rapidly depending how the pandemic follows. In general, all agencies are forecasting substantial drop in demand of all segments both in India and Europe

• Our German and Italian plants have currently restarted but May and June sales are still uncertain. We expect potential recovery in Q3CY20 in India and Q4CY20 in Europe

• MCIE has started with providing masks and sanitizers while working at the plants, with periodic sanitizing of workspaces

• Manufacturing Operations shutdown in last fortnight of March 2020, as per applicable local Government directives

• We are following all government directives regarding employees, incl. contract and temporary workers and suppliers, especially small & medium ones. MCIE will try its best to accommodate the needs of suppliers and employees 

• Due to the prolonged nature of the Covid crisis and the fact that the lockdown is the only available antidote, it is a huge economic crisis. This is an unprecedented situation where both the demand and supply sides are affected. The demand situation is especially challenging during this uncertain time

• Q1CY20 saw some demand slowdown. Despite the situation, we are confident that MCIE will come out of this to a better position. We have already put in place robust guidelines and systems for the structured restart of operations and subsequent stabilisation once the lockdown ends

• We have been completely focussed on managing this complex situation. There is a weekly review of the cashflow

• Teams are also working with customers, understanding demand and delivery scenario

• CAPEX is being reviewed and only the most urgent and important will be approved

• Inventory is being drawn down. Outsourced activities being reviewed for insourcing

• Overtime is being curtailed. All heads of cost including labor cost are being reviewed closely

• Here I may mention that the European governments are applying aid schemes to substantially reduce the labor cost burden for the next few months 

• Auto industry is an important constituent of European economy and European governments will continue to have an eye on its well being. It is worth pointing out that we have already embarked on a journey of operational improvement in import in India and Europe, pre-covid in the last few months

• We have been able to improve EBITDA margin in India in Q1CY20 compared sequentially to Q4CY19 ispite of drop in revenue as pointed out earlier

• Similarly, the trucks and off road markets in Europe has faced a massive drop in volume and they have been able to manage this drop 

• MCIE’s cash position is secure and it has unused working capital limits to be comfortable even if current lockdown is further extended over a much longer period

• MCIE has a solid debt position. MCIE’s parent CIE Automotive is a global MNC and has a robust system of managing cash repository worldwide

• CIE itself is secure from financial point of view and so we do not foresee any problem in that scope

• We believe that MCIE is at a secure position to not only manage this crisis and fallout  but we quietly optimistic that we will emerge stronger 

General Updated from the Call

• In this situation, we think that the market will consolidate. We hope to be in the winner list and to increase our market share in this situation. 

• We are open to acquiring companies. If the companies meets our requirements and align with our strategy, we will go for those companies

• First focus area is to get our plants back and running and improve our position with our customers. M&A will be the second option

• Movement from China to India, logistic change and supply change in our industry will be reviewed deeply next time. Some of the production can move to India but it's too early to say this. We need some more time to see the real effect from this pandemic

• Debt level is the same as on December 31, 2019. Essentially some committed capital expenditure had to go through so the debt level is same

• It is very difficult to answer the production level targeted for May because there is a big uncertainty yet and the customers are changing their plans every week. My expectation is that the market can be between 40-50% of the normal market

• We don’t foresee any problem in the supply chain till now. We have been managing that and till now there is no issue

• All our vendors are ready and we are also ready to start with the production. We are willing to start as soon as possible. We have already started gear plant operations. In India, we have got some clearances from the government for some plants and we have already started some production in Rajkot at a lower level. We have produced some medical equipment at our composite plants at Mangaon. Also, we have started Aurangabad plant production. 

• Passenger vehicles will not come back in 2021 and it will take one or two years to come back to the old situation. The tractor sector is expected to go up in 2020 even in this situation. The two wheeler saw a drop in this quarter but less drop than the passenger vehicle and the two wheeler will be one of the winners in the new era. Till 2022, the truck market will not be at the same level as was in 2019. It will take 1-2 years to come back to normal. 

• We think we will have some incremental costs may be coming from additional cleaning services and other services especially in the beginning. But in the mid-term we will train everybody. The cost impact coming from these will be marginal. In Europe, the impact will be close to zero. In India, it can be higher due to the amount of people and increase cleaning procedures in the plant

• We have continued our committed capex that we planned to launch in 2019 and beginning 2020 and so we continue with that plan. Once the market comes back, we will restart the program so more or less we expect the same capex in the previous year. Full Year Capex - Rs 900 million in the fourth quarter. Capex is subject to the market coming back. 

• In the months of March and May, we have kept both our contract and permanent employees and we have paid them 100% as suggested by the Government. We value our customers and keep them as we need them for the near future. This is our strategy from the company to protect our workers. 

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