Max Financial Services Limited — Q3 FY25 earnings call

Call held 5 Feb 2025

Management summary

Max Financial Services reported a robust Q3 FY25, with individual adjusted first-year premium growing 25% in 9M FY25, significantly outperforming the industry. The company successfully navigated the impact of new surrender guidelines, limiting the margin impact to 100 basis points, while improving its Net Promoter Score to 61. However, VNB margins were slightly lower at 23.2% in Q3 due to product mix shifts towards ULIPs and a 9% degrowth in 9-month profit before tax for Axis Max Life. The company remains focused on rebalancing its product mix and achieving sustainable growth.

Highlights

  • Individual adjusted first-year premium grew by 25% in 9M FY25, outperforming private sector (19%) and industry (14%).

  • Total APE expanded by 17% in Q3 FY25, driven by an 11% increase in policy issues.

  • Prop channels grew by 24% in Q3 and 41% in 9M FY25, strengthening leadership in online segment.

  • Rider attachment ratio reached 45% (up from 32% last year), with rider APE growing over 250%, enhancing profitability.

  • Net Promoter Score (NPS) improved to 61 in Dec 2024 from 56 in March 2024, reflecting customer-centric approach.

Concerns

  • Q3 margin stood at 23.2%, slightly lower than Q2, primarily due to product mix shift towards ULIPs and lower sales from non-PAR/PAR segments, with a 100 bps impact from surrender guidelines.

  • Axis Max Life's 9-month profit before tax saw a degrowth of 9% to ₹397 crore, attributed to higher strains of product forms and overall segment allocations.

  • Sequential slowdown in Banca channel growth in Q3, though management noted improvement in the new calendar year.

Key financials

3 periods

Headline

  • MFSL Consolidated Revenue (excl. investment income)
    ₹20,907 Cr
    YoY +14%
  • MFSL Consolidated PAT
    ₹365 Cr
  • Axis Max Life VNB
    ₹1,255 Cr
    YoY +9%
  • Axis Max Life NBM
    21.9%
  • Embedded Value
    ₹24,129 Cr
  • AUM
    ₹1.72L Cr
    YoY +20%

Q3

  • Margin
    23.2%

9M FY25

  • Individual Adjusted First-Year Premium Growth
    25%

What they filed

Q1 FY27: revenue up 16.8%, net profit up 37.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue13,372 8,923 12,376 12,822 9,792 −27%14,259 +60%10,802 −13%14,970 +17%
EBITDA173 89 20 119 21 −88%78 −12%-6 −130%167 +40%
Net profit139 70 38 86 6 −96%45 −36%-32 −184%118 +37%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

medium confidence
  • M&A Axis Max Life Insurance Joint venture · Pending regulatory

    Integration of two trusted names in financial services sector, extending reach beyond Metro cities.

    Axis ownership in Max Life is 19.02%, with a 0.98% option pending Axis' regulatory approvals. Section 35 amendment could shorten regulatory approval for merger.

    On your question on Section 35 clarification, yes, we are very optimistic. Actually, that's a very positive thing, especially for Axis Max Life Insurance, because as soon as that bill gets approved, we will go ahead and file it with the regulator. Hopefully, the regulatory approval process will be shortened because of the guidelines or the clarification coming from the Act. However, the overall process of going to NCLT seeking approval, etc., will take about one year. So, hopefully, a few months lower, but it is not going to be crunched to, you know, coming in one or two quarters. It will take its own time.
  • Liquidity Liquidity disclosed Solvency position stands at 196% as at end of December 24.
    Solvency position stands at 196% as at end of December 24.

Guidance & targets

Sales

  • FY25 Sales Growth Sales · FY25 · High confidence close to 20%
    As far as the year is concerned, we do want to finish very positively. As the year closes, we have started well for quarter 4. And I think by the time we finish year, we will like to be in the range of about close to 20% growth on sales basis and high single-digit growth for our VNB.

    — Prashant Tripathy

Profitability

  • FY25 VNB Growth Profitability · FY25 · Medium confidence high single-digit
    As far as the year is concerned, we do want to finish very positively. As the year closes, we have started well for quarter 4. And I think by the time we finish year, we will like to be in the range of about close to 20% growth on sales basis and high single-digit growth for our VNB.

    — Prashant Tripathy

Product Mix

  • ULIP Share in Product Mix Product Mix · medium term · High confidence 35% to 40%
    At our level, the product mix of, you know, upwards of 45%, close to 45% ULIP at a total level is on the higher side. We will typically like to be in the range of 35 to 40%. There are efforts that we are making to ensure that ULIP remains range bound in the range of about 35 to 40%.

    — Prashant Tripathy

Margin

  • VNB Margin Margin · long term · High confidence 25% or plus
    Hopefully, as we fix the product mix, we will come in the range that we typically like to be, which is around 25% or plus. As we have communicated in past, we would like to drive VNB growth and sales growth while being at around 25% margins. That will be the endeavor on which we will work as we go along.

    — Prashant Tripathy

  • VNB Margin Margin · short term · High confidence 23% to 24%
    Despite that trend, you know, the guidances on margin between 23 and 24, we will be able to meet.

    — Amrit Singh

Market Share

  • Growth vs Market Market Share · ongoing · High confidence 300 to 500 basis points faster
    From a total market growth rate, 300 to 500 basis points is always what we target.

    — Amrit Singh

What to watch in Q4 FY25

VNB Margin Trajectory

next quarter and beyond
Current 23.2% in Q3 FY25
Target 25% or plus (long-term), 23-24% (short-term)

Why it matters

Tracking VNB margin recovery is crucial for profitability and shareholder returns, especially after Q3 compression.

Hopefully, as we fix the product mix, we will come in the range that we typically like to be, which is around 25% or plus. As we have communicated in past, we would like to drive VNB growth and sales growth while being at around 25% margins.

Risks & concerns

  • Impact of Surrender Guidelines on Margins

    medium

    New surrender guidelines resulted in a 100 bps impact on Q3 margins, though management has taken actions to mitigate it.

    Management acknowledged

  • Product Mix Shift Affecting Margins

    medium

    A shift towards higher ULIP share and lower non-PAR/PAR sales contributed to a 300 bps impact on Q3 margins, which management is actively working to rebalance.

    Management acknowledged

  • Overall Market Slowdown

    medium

    Q3 saw an overall market slowdown, impacting sales numbers across the industry, requiring Max Financial to grow faster than the market.

    Management acknowledged

  • Higher Strains from Product Forms

    medium

    Axis Max Life's 9-month PBT saw a 9% degrowth partly due to 'higher strains of product forms that we have written and overall segment allocations'.

    Management acknowledged

Q&A highlights

5 direct
VNB Margins and Impact of Surrender Guidelines & Product Mix Direct
So if you remember, for Quarter 3, last year we did 27.2, and this year we have done 23.2. And the clarification I was giving to you was of the 400 basis point, about 100 basis point is the impact of surrender income, and 300 basis point impact, or net impact, net of all the corrective actions that we have taken is because of product mix.

Clarifies the specific drivers (surrender guidelines vs. product mix) behind the Q3 VNB margin compression, providing transparency on profitability challenges.

Asked by Shreya Shivani

Banca Channel Growth Slowdown Partial
However, I must highlight that that's tactical. For the quarter, the growth that we saw from Axis Bank was a bit lower than other bank channels that we got. But suffice us to say that as we go along and we have started the new calendar year, growth is significantly higher coming from Axis Bank.

Addresses analyst concern about sequential slowdown in Banca, attributing it to tactical factors and indicating recent improvement, suggesting a potential recovery.

Asked by Shreya Shivani

Timeline for Axis Max Life Listing and Section 35 Amendment Direct
Hopefully, the regulatory approval process will be shortened because of the guidelines or the clarification coming from the Act. However, the overall process of going to NCLT seeking approval, etc., will take about one year. So, hopefully, a few months lower, but it is not going to be crunched to, you know, coming in one or two quarters. It will take its own time.

Provides a realistic timeline for the merger and listing, tempering expectations despite optimism about the Section 35 amendment.

Asked by Shreya Shivani

ULIP Product Mix Strategy and Profitability Direct
No, just to clarify, we are trying to balance many things here. A, customer demand, customer centricity definitely drives the choice of products. B, our growth rate. And C, the overall profitability of the business. And generally, our product mix is a combination or triangulation of all these three. At our level, the product mix of, you know, upwards of 45%, close to 45% ULIP at a total level is on the higher side. We will typically like to be in the range of 35 to 40%.

Clarifies that the higher ULIP mix is not a strategic shift but a balance of factors, and management is actively working to bring it back to the desired range (35-40%) while enhancing profitability through riders.

Asked by Avinash

Impact of SEBI's Proposed MF + Term Insurance Product Partial
Very interesting thought on mutual fund plus term insurance. Very hard to predict, actually, on how it will evolve. In the past, I know that about a decade ago, you know, mutual fund industry did try to attach and actually attach term insurance a long time ago before it got stopped. But during that period, I didn't see much impact actually on the industry.

Management acknowledges the potential new product but downplays its historical impact on the life insurance industry, suggesting limited disruption while also seeing it as an opportunity.

Asked by Supratim Datta

Q4 Growth and Product Mix Strategy Direct
For the quarter, we are trying hard. But suffice us to say that as soon as the market goes down, there is definitely a sales story around, the market is low, so we should invest now. So, generally, my experience of the market going down and ULIP mix readjusting on its own without external efforts is a delta of a few months. So, of course, it is improving, but not drastically.

Provides insight into Q4 strategy, acknowledging market slowdown but emphasizing efforts to grow faster than the market and rebalance product mix, even if not drastically.

Asked by Supratim Datta

Impact of New Tax Regime on Insurance Sales Direct
And very frankly, this 80C as a reason to buy insurance actually is no longer a predominant reason. It's more on the 10(10D) benefits that is a more fundamental reason which creates a differentiation, which continues to remain intact and a strong basis for the product proposition to be overall attractive.

Management asserts that 80C is no longer the primary driver for insurance purchases, shifting focus to 10(10D) benefits, which is crucial for understanding demand drivers.

Asked by Gaurav Jain

Breakdown of Surrender Rules Impact Partial
But we have tweaked all of these things. And I think in our assessment, we have been indicating earlier as well that we will try to ensure that this charge burden that has come in the product design is passed on equally to all the legs associated, whether it's customer, shareholder, or distributor. So, we have tried to optimize on those principles per se.

Explains management's approach to mitigating the 100 bps surrender impact by optimizing across all stakeholders (customer, shareholder, distributor) and building conservatism into product designs.

Asked by Sanketh Godha

3 min read 7 chapters

Detailed narrative

Brand Refresh and Market Penetration

Max Life Insurance rebranded to Axis Max Life Insurance in December 2024, a strategic move to integrate two trusted names and extend reach beyond Tier-1 cities. A recent brand survey by Kantar in January 2025 indicates a positive impact, particularly in Tier-2 and Tier-3 cities, with increased brand awareness scores. Management is optimistic that continued investments in this area will yield further positive outcomes and strengthen market presence.

Sustainable Growth Outperformance

Max Financial Services demonstrated strong growth, with individual adjusted first-year premium growing by 25% in the first nine months of FY25, significantly outperforming the private sector (19%) and the overall industry (14%). In Q3 alone, individual adjusted sales grew by 16%, surpassing both private sector growth (13%) and overall industry growth (5%). Total APE expanded by 17%, driven by an 11% increase in policy issues, with proprietary channels expanding by 24% in Q3 and 41% over nine months.

Product Innovation and Margin Management

The company remains committed to product innovation, launching new protection products like Smart Term Plan Plus and achieving its highest rider attachment ratio of 45% (up from 32% last year), with rider APE growing over 250%. Despite a Q3 margin of 23.2%, slightly lower than Q2, management attributed 100 basis points of this impact to surrender guidelines and 300 basis points to product mix shifts towards ULIPs. Efforts are underway to rebalance the product mix and achieve VNB margins of 25% or more.

Customer-Centric Approach and Persistency

Max Financial's focus on customer outcomes is reflected in its improved Net Promoter Score (NPS), which rose from 56 in March 2024 to 61 in December 2024. The company continues to be a market leader in 13th-month persistency in NOP terms. Furthermore, regular limited pay persistency for the 13th month reached its highest-ever level, increasing by 240 basis points from 85% to 87%, indicating strong customer retention.

Digitalization for Operational Efficiency

Digital progress and AI capabilities are driving operational efficiency and business growth. A new product configurator reduced product launch time by almost 50%. Digital initiatives support new business through cross-sell campaigns and facilitate renewal collection via human-less channels. Risk analytics engines identified and avoided claim risks of nearly ₹700 crore in the first nine months of FY25, enhancing customer satisfaction and driving cost savings.

Strategic Outlook and Merger Timelines

Management expressed optimism about the company's growth trajectory for the next three years, with solid plans across channels and new ventures. Regarding the merger with Max Financial, the company is optimistic about the Section 35 amendment facilitating the process by potentially shortening regulatory approval timelines. However, the overall NCLT approval process is still anticipated to take approximately one year.

Product Mix and Market Dynamics

The ULIP segment continued its strong growth in Q3, expanding by 49% and increasing its share in the product mix from 35% last year to 44% this year. While this shift contributed to margin pressure, management is actively working to rebalance the product mix to keep ULIP share within the 35-40% range. Despite an overall market slowdown in Q3, Max Financial aims to grow 300-500 basis points faster than the market, targeting close to 20% sales growth and high single-digit VNB growth for FY25.

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