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Beat on VNB margin; industry-leading growth trajectory intact

* Axis Max Life Insurance (MAXLIFE) continued to report better-than-industry performance in 1QFY26, with new business APE growth of 15% YoY to INR16.7b (in line).

* A shift in product mix toward non-par resulted in 32% YoY growth in VNB to INR3.4b (9% beat). This resulted in a VNB margin of 20.1% vs. 17.5% in 1QFY25 (est. 18.5%).

* The company reported EV of INR264.7b at the end of 1QFY26, reflecting RoEV of 20% and operating RoEV of 14.3% (14.2% in 1QFY25).

* The gap between adjusted first-year premium growth and APE growth is expected to reduce to 2-4%. The management reiterated confidence in achieving 24–25% VNB margin guidance for FY26. Any upside is likely to be reinvested into business growth.

* We retain our estimates and expect a 25.0%/25.5% VNB margin in FY26/ FY27. Reiterate Neutral with a TP of INR1,750, premised on 2.4x FY27E EV and a holding company discount of 10%. The success of the reverse merger is key to further re-rating of the stock.

Higher contribution of protection and savings drives margin expansion

* Gross premium income grew 19% YoY to INR64b (in line). Renewal premium rose 17% YoY to INR38.7b (in line).

* The strong growth drove market share expansion to 10% during 1QFY26 from 8.8% in 1QFY25.

* VNB margin expansion of 260bp YoY was driven by a product mix shift reflected in: 1) non-par savings contribution increasing to 33% (27% in 1QFY25) with APE growth of 41% YoY, 2) protection contribution rising to 23% (20% in 1QFY25) with rider APE growing 380% YoY, and 3) ULIP contribution declining to 33% (39% in 1QFY25) with APE dipping 4% YoY.

* MAXLIFE launched the Smart Value income and Benefit Enhancer plans during the quarter, offering instant income in the first policy year, which witnessed strong traction and contributed to non-par growth.

* On the distribution front, proprietary /bancassurance channels grew 11%/ 16% YoY during 1QFY26. Within the proprietary channel, offline APE grew 18% YoY while online APE was largely flattish YoY due to the high base impact of strong ULIP sales in 1QFY25. Within the bancassurance channel, Axis Bank witnessed growth of 11% YoY, while other bank partners witnessed APE growth of 54% YoY, driven by increasing tie-ups as well as a focus on achieving an optimal product mix in the bancassurance channel.

* The policyholders’ opex-to-GWP ratio was largely stable YoY at 17.8% in 1Q.

* Persistency on the premium basis improved across long-term cohorts, especially in the 25th-month (+500bp YoY to 75%) and 61st-month (+200bp YoY to 54%). However, the 13th-month persistency dipped 100bp YoY to 86%.

* AUM grew 14% YoY to INR1.83t, while solvency was 199%.

Highlights from the management commentary

* The company launched its in-house developed Axis Max Life app to integrate life insurance with wellness offerings. The app is expected to enhance customer engagement, NPS, and persistency, while also supporting cost efficiencies. It focuses on enabling real-time service and cross-selling opportunities.

* A newly launched non-par savings product, repricing actions, and maintained momentum in rider attachment aided margin expansion. However, some product segments saw pressure due to design changes.

* EV movement saw a positive non-operating variance, largely driven by favorable interest rate movements. Operating variance was also positive, though of a smaller magnitude. Unwind rate moderated from 8.4% to 8.3%.

Valuation and view

* MAXLIFE continues to witness strong growth and reported a better-thanexpected VNB margin in 1QFY26, backed by product mix shift towards savings and protection segments. Both proprietary and bancassurance channels maintained growth momentum backed by continued traction in offline sales and increasing tie-ups with banks.

* We retain our estimates and expect a 25.0%/25.5% VNB margin in FY26/ FY27. Reiterate Neutral with a TP of INR1,750, premised on 2.4x FY27E EV and a holding company discount of 10%. The success of the reverse merger is key to further re-rating of the stock.

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