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Max Life continues to prove it is the growth champion, reiterate as top life insurer pick

Our view – Healthy growth over high base particularly creditable

VNB margin - Margin expanded on sequential basis due to seasonality as well traction for certain margin-enhancing products: Calculated VNB margin for 4QFY24 rose 134bps QoQ but fell -175bps YoY to 28.6%. One of the reasons for margin expanding sequentially is seasonality as the margin for Max Life is computed on actual cost due to which scale impact is highest in 4Q. Furthermore, Max Life has driven protection, health, annuity and riders, which have optimized margin despite a higher share of ULIP. In terms of margin guidance, management stated that VNB growth will be at the same level as sales growth or slightly lower, implying broadly stable margin.

APE growth - The 13.2% YoY growth on the high base of 4Q last year is particularly creditable for the life insurer and underlines its multi-pronged growth engine: New business APE grew by 60.0%/13.2% QoQ/YoY, driven higher YoY by growth in Par, Individual Protection, Annuity and ULIP segments. Total APE was at Rs 74.33 bn for FY24, up 19% YoY, while the company is looking at a sales growth in the high teens in FY25. For the year, proprietary channel APE was Rs 29.57 bn, up 28% YoY, while banca channel APE was Rs 43.4bn, up 12% YoY. Management stated that it has been publicly communicated by Axis Bank that they would like to maintain Max Life counter share between 65-70%. For the Non-Axis Bank partners, the counter shares have been increasing on month-on-month basis. Non-Axis Bank partners will be a potent source of revenue and the company will also continue to look for new partners. We maintain ‘BUY’ rating on MAXF with a revised price target of Rs 1310: We value Max Life (MLI) at 2.4x FY26 P/EV for an FY25E/26E RoEV profile of 20.8/19.8%% and then apply a 20% holding company discount. We had deliberately resisted covering MAXF for an extended period of time and then initiated coverage on it in our report dated 4 th December 2022 after we felt the negatives were more than priced in

Other Highlights (See “Our View” above for elaboration and insight)

* VNB growth: VNB growth was at 67.9%/6.6% QoQ/YoY driven sequentially by sharp rise in APE

* Expense control: Expense ratio de-grew -149bps/-14bps QoQ/YoY to 21.3%, QoQ driven lower by fall of -169bps in Opex ratio

* Persistency: 37th month ratio rose 200bps YoY to 63% whereas 61st month ratio was up 700bps YoY at 58%

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