Max Financial Services Ltd Q3 FY2024 Concall Summary

Key Takeaways

• Volume-led growth, not just price: Individual adjusted first year premium rose 18% YoY, double the private sector's 9%, driven by an 18% increase in policy count. Proprietary channels surged 47%.
• Margin rebuild is on track: Q3 margin of 27.2% (9-month: 25.3%) improved sequentially from Q1 to Q3, aided by a non-PAR mix shift to 30% via the SWAG product relaunch. Management calls last year's 39% Q3 margin unsustainable.
• Axis Bank deal is closing: IRDAI approved Axis Bank's INR1,612 crore capital infusion, with CCI approval expected and the transaction set to conclude within 90 days. Structure simplification remains a long-term intent with no timeline.
• Protection and health are breakout lines: The segment grew 82% YoY in Q3, with the new SEWA health product already contributing nearly a fifth of total protection sales.
• What to watch next quarter: Whether the promised Banca channel pickup materializes, the trajectory of the margin walk as the non-PAR base effect fades, and any concrete steps on structure simplification once the Axis equity infusion closes.

Top-Line Growth & Channel Dynamics

• Proprietary channels are the engine: Agency, Direct Sales, and E-commerce all grew upwards of 40%, with agency recruitment up 73%, making it the fastest-growing agency force in the industry during Q3.
• Online channel is scaling beyond protection: The channel grew 43% and now ranks #2 in the industry on a 9-month basis across both protection and savings designs.
• Bancassurance is the laggard: Growth was 10%, with Axis Bank slower in Q3. Management noted that large banks with a balanced product mix, rather than a unit-linked bias, have generally seen growth taper to single digits.
• Group credit life surged: The line grew almost 120% for the quarter, adding a lumpy but material boost to top-line momentum.
• New partnerships are being stockpiled: Eight new partners were onboarded in Q3, bringing the 9-month total to 26; these are expected to become meaningful in the next financial year.

Prashant Tripathy: "Last year in this quarter, we had launched a big non-par design. And you noticed that last year, this quarter, our margin was 39%. And I always maintain that this margin is unsustainable."

Margin Profile & Product Mix

• The margin walk is a product-mix story: The dominant reason for the 9-month margin decline is a shift in business mix: non-PAR share has fallen while ULIP share has risen to 36% of individual APE, up 12 percentage points YoY, reflecting customer preference in a rising equity market.
• Like-for-like compression is real: On identical product variants, such as 5 Pay 10 versus 5 Pay 10, non-PAR margins have faced pressure largely from competitive actions. The counter-strategy involves introducing new designs and tweaking premium payment terms and policy tenures.
• SWAG relaunch is doing the repair work: Revitalizing the SWAG product with an immediate-income design increased the non-PAR share from 24% in Q2 to 30% in Q3, reinforcing the sequential margin improvement.
• ULIP growth has two distinct drivers: Unit-linked designs are performing well in the online savings space and in the affluent segment of bank partners.
• New business strain is a volume effect: The predominant reason for higher strain is the higher absolute volume of new business, not a deterioration in unit economics.

Amrit Singh: "If you can ask me a 5 Pay 10 versus 5 Pay 10, yes, definitely, there has been margin pressures on these variants, largely because of competitive actions."

Protection, Health & Annuity

• Protection and health are scaling fast: The combined segment grew 82% in Q3, with the newly launched SEWA health product already representing almost a fifth of total protection sales in the quarter.
• Annuity is growing over the medium term: The segment grew 52% over 9 months, despite an 18% transitory decline in Q3 attributed to lower Banca contribution.
• A new affluent term offering was launched: The product features differentiated underwriting and targets the affluent category, adding a premium-tier variant to the protection shelf.

Axis Bank Transaction & Structure Simplification

• The capital infusion is nearly done: IRDAI has approved Axis Bank's INR1,612 crore infusion into Max Life, with only CCI approval pending. The transaction is expected to conclude over the next 90 days. PFRDA has already approved the proposed change in shareholding pattern.
• The deal does not reset compensation: Management stated explicitly that the Axis transaction does not mean any more compensation is needed, either in the past or in the future.
• Structure simplification is a stated intent with no timeline: Management wants to collapse the Max Financial and Max Life structures and has discussed a few approaches internally, but it is very hard to commit to any timeline. The bias is to do it earlier than later, and a review will begin once the Axis equity step is concluded.

Prashant Tripathy: "Very hard for me to commit any timeline at this point in time. But again, I will say management bias is do it earlier than later."

Customer & Digital Metrics

• Customer experience scores improved: Net Promoter Score rose 4 points from 52 to 56, with transaction NPS upwards of 70%.
• Persistency is stable: 13th-month persistency stood at 85% and 61st-month persistency at 58%.
• Generative AI is in early deployment: Marketing campaigns using generative AI were implemented in Q3, spanning channel marketing, personalized customer interactions, and location-based social media campaigns.
• Service digitization expanded: New capabilities include a dedicated help section with WhatsApp, webchat, and call; vernacular WhatsApp bot with native payment journeys; customer servicing in six languages; and onboarding of two new account aggregators and financial information providers.

Guidance & Commitments

Key Metrics