Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Max Financial Services Ltd (BOM:500271, Financial) reported a robust 27% growth in individual adjusted first-year premium, outpacing private sector and overall industry growth rates.
- The company achieved a significant 31% growth in total APE for Q1, driven by a 27% increase in the number of policies.
- Max Life Insurance was honored with the Laureate distinction by Great Places to Work institute and ranked number 28 among 1750 organizations.
- The online channel expanded more than 200% in Q1 FY25, fueled by strong demand for new fund offers targeting the online savings segments.
- Max Life Insurance achieved a best-in-industry claims paid ratio of 99.65% for FY24, demonstrating its commitment to customer satisfaction.
Negative Points
- The company's margin for Q1 FY25 was lower at 17.5%, compared to the previous year, due to a tactical shift towards unit-linked products.
- The bank assurance channel grew at a slower rate of 9% in APE compared to proprietary channels.
- The implementation of new surrender regulations by IDI is expected to impact margins by 100 to 200 basis points.
- Increased headcount in the distribution function led to a 14% rise in policyholder operating expenses.
- The company's focus on unit-linked products in the digital space and bank channels resulted in a lower non-par contribution, affecting overall margins.
Q & A Highlights
Q: Given the way you account for costs in the quarter, your margin trajectory tends to increase over the quarters. How do you see the margin trajectory panning out this year, especially with the introduction of new products in H2?
A: Avinash, you raise a very good question. Historically, our margins range between 17% to 21% in Q1 due to lower sales. As the year progresses, leverage improves margins. Despite the new product introductions, I am confident that our product mix will rebalance, and we will maintain our margin delivery capability. β Prashant Tripathy, CEO
Q: Are you still confident of achieving the 26% margin guidance provided earlier, given the strong growth in Axis Bank and the product mix?
A: We expect to maintain our counter share in the range of 65% to 70% with Axis Bank. While the new surrender regulations may impact margins, we are working hard to mitigate this and remain confident in our guidance. β Prashant Tripathy, CEO
Q: What is the impact of the new surrender regulations on margins, and does it account for potential increases in surrenders?
A: The 100-200 basis points impact we estimate does account for potential increases in surrenders. We are optimistic that with various mitigating actions, we can balance this impact over time. β Prashant Tripathy, CEO
Q: Can you provide more details on the growth in Axis Bank and the impact on margins?
A: Axis Bank's growth for YTD July is 19%, with a significant surge in July. This growth is driven by new product interventions. The impact on margins is managed through strategic product mix and distribution efforts. β Prashant Tripathy, CEO
Q: How are you planning to launch new products in light of the new regulations?
A: We have a phased approach to replace products from August 15 to September 30. This ensures compliance with new regulations while maintaining our product offerings. β Prashant Tripathy, CEO
Q: What is the impact of the increased headcount in distribution on margins?
A: The 14% increase in OpEx is largely due to headcount growth in distribution. This investment is necessary to build momentum and productivity, which will improve margins over time. β Amrit Singh, CFO
Q: Can you explain the impact of the new surrender regulations on your product mix and margins?
A: The new regulations may lead to increased surrenders, but we have factored this into our margin impact estimate. We are confident that our strategic initiatives will mitigate this impact over time. β Prashant Tripathy, CEO
Q: How has the product mix in July compared to Q1, and what are the expected margins for Q2?
A: We have seen positive sales momentum across all channels in July. While it's hard to predict exact margins, we expect an improvement due to better leverage and strategic product mix. β Prashant Tripathy, CEO
Q: What is the impact of the new agency models on growth and margins?
A: The new agency models, including variable cost models and new training approaches, are contributing to growth. These investments will improve productivity and margins over time. β Amrit Singh, CFO
Q: Can you provide an update on the impact of the new surrender regulations on your embedded value?
A: The non-operating variance for Q1 is positive at INR276 crore, driven by equities and debt. We expect to manage the impact of the new regulations through strategic adjustments. β Amrit Singh, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
