Max Financial Services Ltd Q4 FY2025 Concall Summary

Key Takeaways

• FY25 growth outpaced the industry: Individual adjusted first year premium grew 20% vs 15% for private peers, with a 2-year CAGR of 18% that was the fastest among the top 10 private insurers.
• Margin held the guided range despite mix pressure: Full-year NBM landed at 24%, the outer end of the 23-24% guidance, even as ULIP share rose to 44% from 36%. Rider APE growth of 300% and Protection/Health actions cushioned the surrender regulation impact to less than 50 bps in Q4.
• The Axis Bank channel slowed in H2, and that is the base case going forward: Axis Bank Q4 growth of ~7% mirrored the broader industry deceleration, and management expects growth closer to 13-14%, not 20%, with no discontinuous assumption on the 5-year CAGR.
• The reverse merger is waiting on a legislative window: Management is hopeful for clarity during the monsoon session (August-September), and will begin the exercise immediately if the act changes; an alternative NCLAT path exists but is deferred to keep all stakeholders aligned.
• What to watch next quarter: Whether the ULIP mix begins to decline as guided, the pace of Protection growth toward the 25% CAGR aspiration, and any formal regulatory communication on bancassurance.

Growth Drivers & Channel Dynamics

• Proprietary channels led the two-year story: Prop Channels grew 27% over 2 years, while Bancassurance grew 12% despite open architecture headwinds.
• April momentum was broad-based but the month is small: April grew ~24% vs private industry ~2%, with agency clocking a ~20% delta vs competition, though management cautioned against reading too much into the smallest month of the year.
• Axis Bank growth is normalizing to trend: The bank's Q4 growth of ~7% reflected the industry-wide H2 deceleration (private industry grew 21% in H1 but only ~8-9% in H2). Management expects growth closer to 13-14%, consistent with the last 5-year CAGR.
• Other bancassurance partnerships are gaining share: New bank partnerships (TMB, SIB, DCB) have been successful, with Max Life ranking among the top 2-3 players in counter share, supported by a strong distribution capability center.
• E-commerce is a differentiated growth pocket: Driven by innovative presence in Savings (ULIP and index-linked products, where Max Life was a first mover), a data-driven approach, and segment focus on self-employed, HNIs and Gen Z. Base effects will kick in and 60% growth is not the guide going forward.
• Protection is a 25% CAGR aspiration over 5 years: Max Life has seen 35% growth in Protection in FY25 and is the #3 player on sum assured basis. The belief rests on under-penetration (real penetration 17-18% in top 25 cities) and the past growth trajectory.

Tripathy: "April is generally the smallest month of the year and hence we shouldn't read too much into the performance. Of course, the desire of Axis Max Life Insurance is to continue the momentum that we have seen in last 2 years and continue to work hard."

Margin & Product Mix

• Full-year NBM landed at 24%, the outer range of guidance: Q4 margin was 28.1% vs 28.6% last year. The 250 bps YoY decline was primarily due to lower non-PAR and higher ULIP mix (44% vs 36%).
• Riders and Protection cushioned the surrender regulation hit: Rider APE grew 300%, and actions on Protection and Health helped negate the impact of lower-margin product categories. The net surrender value impact was less than 50 bps in Q4.
• ULIP proportion is expected to come down in FY26: April was directionally moving on that trajectory. A new non-PAR Savings proposition (Smart Buy) has been launched to rebalance the mix.
• Banca margins are expected to improve: The driver is a product mix shift as traditional products become more favorable and ULIP volatility plays out.
• FY26 margin guidance is 24-25%, with growth taking priority: Management is not aspiring to phenomenally higher margins at the cost of growth, and will maneuver to grow faster than the industry while keeping NBM in that range.

Tripathy: "We are not aspiring to have phenomenally higher margins at the cost of growth. So the way we are going to maneuver this year is to try NP in the range of 24%-25% and try to grow faster than the industry."

Persistency & Operating Metrics

• Persistency improved sharply across cohorts: 13th month persistency rose ~100 bps to 87.6%, and 25th month persistency rose 380 bps to 74%. Axis Max Life ranked in the top 2 across all cohorts in 25th month persistency per the 9-month disclosure.
• The persistency formula change restated both years: The regulator changed the persistency disclosure guidance in FY24, an event that has occurred only 3 times in the last 10 years. Both current and previous year numbers have been restated for comparability.
• Risk analytics tools mitigated significant claim risk: Tools (Shield, MediCheck, GoVern) identified and mitigated approximately ₹1,500 crore in claim risk in FY25.
• Brand and customer metrics strengthened post-rebrand: The company retained rank 2 in the NPS study by Hansa Research for the third consecutive year, brand consideration scores rose 7%, and the rebranding to Axis Max Life drove awareness and consideration beyond expectations.

Reverse Merger & Capital

• The reverse merger timeline hinges on a legislative change: Management is hopeful that clarity will come during the monsoon session (August-September timeframe). If the act changes, the exercise will begin immediately.
• An alternative NCLAT path exists but is deferred: Another company won a case against IRDAI in NCLAT, but Max Life is a listed organization with multiple regulators and wants to keep all stakeholders aligned, so the decision is to wait for the act to change. If there are significant delays, that alternative path will be considered.
• No dividends until listing: Capital is needed for growth, and this strategy remains firm until Axis Max Life gets listed.
• Subordinate debt of ₹500 crore was raised with an AA+ credit rating.

Tripathy: "I am quite hopeful that it will come in the month of August-September timeframe. We will immediately begin the exercise."

Regulatory & Competitive Positioning

• No formal communication on bancassurance changes: Management has not officially received any sense from any sources about whether anything is coming. Some sound bites suggest the expected regulatory posture should be consistent and not changing a lot.
• No pricing action taken to reflect brand strength: Management will give about a year's time to see the full provision and benefit of brand strength before considering any pricing changes.
• The surrender value impact has been neutralized: Actions taken in Q4 (changing variants, thematics around riders, pricing actions, design constructs) have almost neutralized the entire effect, and no further impact is expected in FY26.

Tripathy: "I have not officially got any sense from any sources about where is it coming from or is there anything coming or not? On the contrary, some of the sound bites that I have heard actually confirm that the expected regulatory posture should be consistent should not be changing a lot."

Digital & Operational Initiatives

• mSpace super app launched for frontline staff: Adoption reached 90% in agency supervisor roles and 100% in the direct sales force. The app will be launched across all channels by the end of this year.
• AI-based underwriting and digital tools are scaling: Initiatives include scheduled callback on WhatsApp (improved NPS by 100 bps), same-day claim settlements, mPulse Medical Vital Face Scan for NRI underwriting, and AI-based in-journey financial underwriting using CIBIL, PAYU and bank statements.
• The ELY People Engagement platform 14.04 was launched, powered by Gen AI. The company ranked 28 on Great Place to Work and has been in the top 100 for 10 years.
• Embedded value was reviewed by Willis Towers Watson and a certificate was published with the results.

Guidance & Commitments

Key Metrics