Max Financial Services Ltd Q4 FY2024 Concall Summary

Key Takeaways

• Market share engine running hot: Individual adjusted FYP grew 16%, more than 3x the industry, adding 61 bps of market share for the year and reaching 10.4% in Q4.
• Margins held the guided range despite mix shift: New business margin landed at 26.5% for FY24, within the 26–27% band, even as ULIP share rose to 35% from 27%. Q4 exit margins hit 28.6% on seasonal operating leverage.
• Axis Bank deal consummated, restructuring clock starts: Axis infused INR1,612 crore in April 2024, its nominees joined the board, and the NCLT-led restructuring process is now expected to take 18–24 months.
• Distribution breadth is the quiet growth story: 40+ new partners onboarded in FY24, prop channels grew 28%, and agency recruitment surged 54%, building a wider funnel that management expects to become a significant part of total business.
• What to watch next quarter: Whether the high-teens sales growth target holds as the base effect from last year's large March normalizes, and any colour on surrender regulation outcomes as the consultative process concludes.

Sales Growth & Market Share

• APE growth of 19% was driven by a 20% increase in policy count, more than double the private sector average, with prop channels contributing 28% APE growth. Excluding one-off sales from the prior year, prop channels grew 44%.
• Agency channel saw a 54% surge in recruitment, establishing Max Life as the fastest-growing agency among the top 10 players. Offline prop channels grew 18% on a reported basis and 34% normalized.
• Online channel expanded 79%, with a significant portion flowing through the proprietary website driving higher-margin protection and health products. On the aggregator side, the company moved from roughly 10–12% to 22–23% market share in the savings segment, supported by constant product innovation and fund launches.
• Banca channel APE grew 12%, driven by all Banca partners. Management expects the push on driving fee income at Axis Bank to keep growth from that counter at the same level or better.
• Group Credit Life grew 62% for the full year, significantly outpacing the industry, with Q4 growth upward of 150%. Group term life is treated as a tactical play and was slowed in Q4 where competitive intensity made outcomes unattractive.
• Market share trajectory was consistent quarter-on-quarter, rising from 8.6% in Q1 to 10.4% in Q4, with the full-year gain at 61 bps. This growth came despite a very large March that the industry had in the prior year.

Tripathy: "We have increased the rates because the yield curves have altered. And it just shows our commitment to preserve our margins."

Margins & VNB Dynamics

• New business margin of 26.5% landed at the midpoint of the 26–27% guided range. Margins improved sequentially through the year from close to 22% in Q1 to 28.6% in Q4, as operational leverage kicked in with seasonal volume.
• Year-on-year margin compression came predominantly from two factors: a lower mix of Non-PAR business and a higher proportion of ULIP, which rose to 35% of APE from 27% last year. The focus on driving protection, health, annuities, and aggressive rider growth partially offset this mix drag.
• All large Non-PAR products have been repriced with higher rates to reflect altered yield curves, a move management frames as evidence of commitment to margin preservation.
• Channel mix pressure is acknowledged but not managed at the channel level: faster growth in online and other bancassurance channels, which typically carry higher payouts and lower margins, could directionally pressure margins. Management focuses instead on adding customers for lifetime value and cross-sell potential, while preserving overall margins through GCL growth, agency expansion, mix management, and higher rider attachments.
• Protection margins saw some shrinkage, though not very significant, relating to certain chosen segments such as the above-INR2 crore sum assured market.

Tripathy: "At this point of time, I will say we're not so fuss about channel level margins and rather we need to grow a channel or not."

Product & Innovation Engine

• 37 industry-leading product interventions contributed approximately 45% of new business sales in FY24. The emphasis on selected product segments (retail protection, health, annuity), which comprised 14% of total APE and grew 61%, lifted individual new business term assured to rank 3 in the private industry with 33% growth.
• Key launches included: SWAG variant on PAR design with enhanced liquidity, protection, and retirement features; STEP protection design with industry-first cover continence benefits; SWAG Elite with industry-first guaranteed endowment design; SWAG Pension targeting retirement with differential options; SUPR Rider offering return of premium upon maturity; and Small and Mid-cap momentum index funds for the e-commerce savings mix.
• Product SEWA, launched last year, has performed well and contributed to protection and health segment growth. The innovation pipeline includes further work in the Non-PAR area, supported by a dedicated team, customer panels, research, distributor engagement, and partner dialogue.
• Protection business growth has been supported by easing of underwriting as COVID-era restrictions ended, building confidence in lives onboarded, underwriting quality, and mortality experience. Management remains very positive about individual protection and intends to grow it faster than other categories.

Distribution Breadth & Channel Strategy

• 40+ new partners onboarded in FY24: one new bank, 20 new Group Credit Life partners, 14 online and offline brokers, and six corporate agents. Management anticipates these partnerships becoming a significant part of total business in the upcoming financial year.
• Proprietary channel growth over the last five years on an adjusted FY basis is 21%, and management hopes to maintain or better that rate. The bet on agency remains fairly high, with continued investment in driving growth.
• Banca channel will be worked aggressively with new partners signed up. On the Axis Bank counter, Max Life participates in the Citi acquisition; the Tata counter opened in December and the Aditya Birla counter is expected soon, though both new players are restricted to certain geographies rather than pan-India.
• A Dubai representative office has been established to extend presence in the Gulf region for non-resident Indian customers.

Axis Bank Transaction & Restructuring

• Axis Bank infused INR1,612 crore on April 17, 2024, by subscribing to 14.26 crore equity shares of Max Life Insurance. Axis Bank nominees have joined the Board, bringing diverse financial services experience.
• The restructuring process is expected to take 18 to 24 months because it involves the NCLT process. Management remains committed to pursuing that journey as time progresses.
• Commission structures with Axis Bank are expected to remain stable, with management anticipating a steady environment on that front.

Tripathy: "My sense is that it will take anywhere between 18 months to 24 months because this involves NCLT process, etcetera. We remain committed, and we will pursue that journey as time progressing."

Embedded Value & Variances

• Non-operating variance of INR54 crore negative is entirely economic variance. On the equity side, a positive variance of around INR485 crore came from market movements. On the debt side, falling interest curves forced liability repricing, creating a negative movement that offset the equity gain. Some variance also arose from the mix of ULIP equity proportion, shareholder equity proportion, and the proportion of group and single premium business. Management characterizes this as largely transitory since most of the portfolio is hold-to-maturity.
• Operating variance of INR57 crore negative came from proactive assumption tightening done as part of regular annual business, including mortality tightening on the group credit portfolio and certain lapse and persistency assumption changes across the portfolio. Experience variance was largely flattish.
• Back book surplus declined, linked to assumption tightening and a base effect from unusual growth in the prior year.
• VNB was not materially impacted by assumption changes because most products are recently priced with those corrections already built in. The variance is largely due to product mix and some margin shrinkage in annuities and protection categories.
• On why economic variance is negative while other insurers report positive economic variance, management said it can only hypothesize, citing multiple layering in EV, the percentage of shareholder net worth as a proportion of EV, and the nature of other players' EVs regarding single premium business. No specific answer was offered.

Singh: "I will not be able to give you a specific answer that why another player is higher and why we are low because I don't have insights into it."

Customer & Digital Metrics

• Customer NPS rose 4 points from 52 to 56. Touch point NPS reached 74, improving 6 percentage points. The company ranked number 2 among India's leading insurers for best-in-class customer experience in Hansa Research's CuES report.
• 13th month persistency reached its highest ever at 87%, an improvement of approximately 300 bps. 61st month persistency stood at 58%. The grievance incidents rate improved by 20 points, and the claims paid experience ratio was 99.51% in FY23.
• Digitization initiatives included migrating to a core policy admin system on the cloud, which improved system performance threefold, and leveraging generative AI to introduce Sales Genie, a virtual agent training companion. These enabled hyper-personalized communications and significantly reduced development time.

Guidance & Commitments

Key Metrics