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Guides better-than-industry APE growth

-      MAX Financial Services (MAXLIFE) reported a decent performance in 4QFY24. Total APE grew 13% YoY to INR28.7b (14% beat), while absolute VNB rose 7% YoY to INR8.2b (18% beat). VNB margin contracted 170bp YoY to 28.6% (vs. our estimate of 27.6%). 

-      For FY24, VNB stood at INR19.7b (flat YoY), whereas VNB margin came in at 26.5% (-470bp YoY).

-      We prune our VNB margin estimates for FY25/FY26, in line with the management’s guidance. Reiterate Neutral with a TP of INR1,040, premised on 2.0x Mar’26E EV and a holding company discount of 20%.

Margins contract due to the higher share of par products

-      Gross written premium grew ~17.3% YoY (in line) in 4QFY24. The renewal premium grew 15% YoY (5% miss).

-      In 4QFY24, total APE grew 13% YoY to INR28.7b (14% beat). The par products reported an exponential growth of 66% YoY. Retail protection jumped 60% YoY, whereas Group protection declined 42% YoY. Total protection increased 52% YoY, while ULIP business surged 87% YoY. Non-par savings declined 29% YoY, but grew 65% QoQ during the quarter.

-      On a YoY basis, the business mix moved in favor of the par and ULIP products, with their share increasing to 15% (vs. 10% in 4QFY23) and 41% (vs. 25% in 4QFY23), respectively. The share of non-par savings declined to 36% in 4QFY24 from 57% in 4QFY23.

-      Absolute VNB rose 7% YoY to INR8.2b (18% beat), with VNB margin contracting 170bp YoY to 28.6% (our est. of 27.6%). AUM grew ~23% YoY to INR1.5t.

-      On the distribution side, Banca APE/proprietary channels grew 11%/9% YoY. Other channels surged 306% YoY in 4QFY24.

-      On the cost front, the opex-to-GWP ratio was up 150bp YoY to 22% in FY24.

-      The solvency ratio stood at 172% in 4QFY24. With the infusion of INR16.1b capital by Axis Bank into MAXLIFE, the solvency margin came in at 206%.

Highlights from the management commentary

-      Product-level margins have been under some pressure for segments such as protection and annuity.

-      Management guided a high-teen growth in premiums and lower/in-line growth in VNB.

-      The online channel grew ~79% YoY in FY24. The growth was mainly fueled by web aggregators, wherein savings business accelerated markedly (market share improved to 22% from 10-12% YoY).

-      The Banca channel’s APE segment grew ~12% YoY, with wallet share being maintained with two main partners – Axis Bank at ~70% and Yes Bank at ~58%. While Axis Bank has partnered with Aditya Birla Life and Tata AIA (via Citibank acquisition), MAXLIFE still expects to retain 65-70% wallet share.

Valuation and view

MAXLIFE reported a better-than-expected performance in 4QFY24. Going forward, if surrender charges are altered by the regulator, margins would be under pressure. In terms of growth, agencies and online channels are expected to maintain their strong growth momentum. Axis Bank channel growth will be critical given the new partner tie-ups as well as the challenge to grow the deposit base. We prune our VNB margin estimates for FY25/FY26, in line with the management’s guidance. Reiterate Neutral with a TP of INR1,040, premised on 2.0x Mar’26E EV and a holding company discount of 20%. 

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