MFSL - Max Financial Services Limited Share Price

In the Q1 FY'26 earnings call, management provided an optimistic outlook for Max Financial Services, building on a robust performance in FY'25. Key highlights include a 23% growth in individual adjusted first-year premium, significantly outperforming the private sector growth of 8% and overall industry growth of 5%. Furthermore, the annualized premium equivalent (APE) grew by 15%, with proprietary channels showing a CAGR of 32% over three years. The bancassurance channels also performed well, achieving a 16% APE growth.

Management emphasized a commitment to maintaining a balanced product mix; ULIPs have reduced from 43% to 36%, while rider APE surged by over 300%, contributing to a 36% growth in the protection segment. The launch of the new product, Smart VIBE, is highlighted as a strategic initiative to enhance margin, which expanded from 17.5% in Q1 FY'25 to 20.1% in Q1 FY'26, supporting a 32% growth in the value of new business (VNB) to INR 335 crore.

Management anticipates maintaining margin guidance of 24% to 25% for FY'26 while continuing investment in distribution channels. Customer trust was evidenced by a claims paid ratio of 99.7% and strong persistency metrics, with 13th-month persistency at 86% and 25th-month persistency achieving an all-time high of 75%.

Looking forward, management indicated confidence in sustaining growth despite market volatility and plans to continue augmenting digital capabilities, which could drive operational efficiencies and customer engagement. The company's solvency ratio stands close to 199%, reinforcing its capital position, and emphasizes that shareholder capital may be required for future growth initiatives. Overall, management remains optimistic about navigating market dynamics while driving value creation across stakeholders.

Q&A Section Summary from Max Financial Services Earnings Transcript:

Question 1: Can you explain why the monthly numbers are distorted and how long this will continue?

Answer: The monthly numbers you see are accurate but represent annualized first-year premium (AFYP), whereas we report on annualized premium equivalents (APE). There's a gap mainly due to the prevalence of e-commerce channels favoring monthly payments. We expect this gap to narrow to around 2% to 3% going forward, as the online business solidifies its momentum.

Question 2: What is the expected timeframe for agent productivity to recover given the new agents?

Answer: Our total productivity has increased by 4% over Q1 last year, indicating agent productivity recovery is on track. Productivity is measured based on active agents, and the recent improvements are promising, suggesting we're on the right path.

Question 3: Any update on the insurance bill and potential implications for mergers?

Answer: The insurance bill is prepared for presentation to parliament, likely in the next session. Section 35 provisions should remain unaffected, allowing non-life and life insurance companies to merge with prior IRDAI approval. We don't foresee any issues with this since our partner company is not operational.

Question 4: Is there an impact from the surrender value regulation on margins?

Answer: Surrender regulations have led us to take necessary actions, but quantifying this impact is challenging. We've effectively mitigated most impacts, and our recent product mix and pricing strategies have contributed positively to margin expansion, guiding us to maintain our forecast of 24%-25%.

Question 5: What impact has the product mix had on margins, and do you foresee further expansion?

Answer: Certain products have improved margins while others have seen weaknesses due to design changes post-regulations. Overall, we expect to sustain a healthy margin range of 24%-25% this year and will invest any surplus back into growth.

Question 6: Has there been a move towards more non-par products, and what is the growth expectation?

Answer: Our product mix is intentional and market-driven, balancing between proprietary and non-proprietary products. We aim for a diversified mix, which currently includes more non-par savings products while continuing to explore growth in protection offerings, particularly through bancassurance channels.

Question 7: How much has Smart VIBE contributed to non-par savings APE this quarter?

Answer: I cannot disclose exact numbers, but new products like Smart VIBE typically become significant contributors upon launch "“ often exceeding 50% of the category's contribution. Our focus on balancing the product mix aligns with market intentions and customer needs.

Question 8: What's the outlook for the banca channel's contribution to growth?

Answer: We are optimistic about the banca channel, especially in new partnerships yielding significant counter share. Our growth in this area shows potential for continued acceleration, particularly with both traditional and newer product offerings.

Question 9: Has rider uptake contributed to better margins, and how is pricing structured?

Answer: Yes, we've seen improvements in margins due to rider attachments across various products. We continuously adjust pricing based on demand and competitive pressures. Our focus is on ensuring a balanced product offering that meets changes in market demand and consumer needs.

Question 10: Any observations regarding persistency and impact from ticket size changes?

Answer: Persistency issues are across channels, particularly in traditional policies. High-ticket policies, which typically offer better persistency, have declined. As we progress in the fiscal period, we're seeing trends indicating improvement in collection and persistency.

Question 11: What is the current wallet share in Axis Bank?

Answer: Our wallet share within Axis Bank remains stable, typically ranging between 65% and 70%, indicating strong collaboration and value from our partnership efforts.

These summaries reflect the key queries from investors and analysts, along with the strategic insights and performance metrics shared by the management during the earnings call.