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Best in class profitability  

* Premium – Premium Income was at Rs 45bn and grew by 19% on YoY basis and 2% on sequential basis.  

* APE – APE at Rs12.25bn was higher than our estimates of Rs11.11bn. APE grew by 21% yoy and 6% qoq. The growth was led mainly on back more than doubling of Non‐Par segment.  

* APE Mix – Share of Non‐Par increased by 1448bps which was offset by decline in share of ULIPs and Par business. Share of Individual Protection remained flat.  

* VNB & VNB Margin – Q3FY21 VNB at Rs3.5bn was higher than our forecasts of R3.0bn, while VNB margin at 28.6% was above our estimates of 27.4%. On a yoy basis VNB margins expanded by 758bps.

* Persistency improvement – Sequentially, persistency improved by 100bps for 13th Month and 200bps for 61st Month. On a yoy basis 13th month persistency saw a decline.

* Opex and commission ratios – Commission ratios declined 13bps yoy whereas opex ratio declined by 22bps yoy  

* EV – EV improved by 6% to Rs117bn from Sept 2020. ROEV stands at 18%  

* Channel Mix – On YoY as well as QoQ basis, share of banca improved by 398bps and 171bps respectively.

* Axis transaction update:   (a) CCI approval received (b) IRDAI application under progress (c) MSI transaction update: Concluded swap of MSI 20.57% stake in Max Life, with 21.87% stake in MFSL

* Valuations ‐ The stock currently trades at FY23 P/EV of 2.0x.  

* Our view: Max Life Insurance has been outperforming its private peers in the past three quarters in terms of premium growth as well as profitability (VNB Margins). The company through an aggressive pricing strategy has been able to gain significant market share in the protection segment. Also, new product launches along with favorable environment for interest rate hedging mechanism has allowed them to strengthen their non‐par business. The trajectory is likely to sustain. However, key to future business trajectory lies in the approval for Max Financial deal with Axis Bank. The stock currently trades at a FY23E P/EV of 2x and is at discount to peers owing to uncertainty over the Axis Bank deal and high promoter pledge.

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