9 February 2021
3QFY21 Results Update | Sector: Financials
MAX Financial Services
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Financials & Valuations (INR b)
Y/E MARCH
Net Premiums
Surplus / Deficit
Sh.PAT
NBP gr - unwtd (%)
NBP gr - APE (%)
Premium gr (%)
VNB margin (%)
Op. RoEV (%)
Total AUMs (INRb)
VNB(INRb)
EV per Share
Valuations
P/EV (x)
P/EVOP (x)
FY20 FY21E FY22E
161.8 181.2 204.5
12.9
10.3
8.3
5.4
6.3
7.1
8.2
14.0
16.0
5.9
12.3
15.7
11.0
11.9
12.9
21.6
25.1
24.5
20.3
21.0
20.3
684.7 865.0 916.9
9.0
11.9
13.5
209.7 273.2 322.1
4.4
21.9
3.4
19.0
2.9
16.7
MAXF IN
345
254.6 / 3.5
752 / 280
-4/3/29
1181
CMP: INR738
TP: INR860 (+17%)
VNB margin buoyant; Non-PAR growth remains robust
Buy
Growth momentum reviving in the proprietary channel
MAX Life Insurance (MAXLIFE) has demonstrated a resilient performance
amid a challenging macro environment, with 21% APE growth, led by robust
growth in Non-PAR savings and a recovery in ULIP. After witnessing robust
Protection growth over 1HFY21, the same has moderated during 3Q.
Shareholders’ PAT grew at 43% YoY during 3QFY21.
Absolute VNB growth stood robust (65% YoY), led by a VNB margin of
28.6%. This has been supported by robust trends in Non-PAR savings and
cost improvement. Strong push via the bancassurance channel has aided
premium growth, while proprietary channel is also showing a recovery.
We expect 16% CAGR in APE growth over FY20-23E, while VNB margin
remains ~24%. This would enable 21% VNB CAGR over FY20-23E, while
operating RoEV sustains ~20%.
Maintain Buy.
VNB margin buoyant; APE grows 21% YoY
Shareholding pattern (%)
As On
Dec-20 Sep-20
Promoter
17.3
22.3
DII
50.9
30.4
FII
19.7
32.4
Others
12.2
14.9
FII Includes depository receipts
Dec-19
28.3
31.5
27.7
12.5
Gross premium income grew ~19% YoY, led by a 20%/36% growth in the
first year/single premium. Renewal premium grew ~16% YoY. Shareholders’
PAT in 3QFY21 grew by 43% YoY to ~INR2.2b.
In 3QFY21, Individual APE grew at 21% YoY and thus, total APE growth also
stood at 21% YoY, aided by strong trends in the Non-PAR savings (118% YoY)
with the launch of new products, while ULIP saw a recovery (8% YoY).
Protection growth moderated to 17% YoY during 3Q after witnessing robust
growth in 1HFY21 (50% YoY). The share of Non-PAR savings increased to 36%
v/s 20% in 3QFY20 (33% in 9MFY21 v/s 20% in 9MFY20). The share of
Protection stood at 12% in 3QFY21 v/s 17% in 2Q (16% in 9M v/s 20% in 1H).
Absolute VNB growth stood at 65% YoY, led by buoyant (28.6%) margin.
This was supported by strong trends in the Non-PAR segment. In 9MFY21,
VNB grew at 37% YoY, aided by business mix change towards high margin
products. VNB margin improved sharply (490bp YoY) to 25.9%.
During 3QFY21, death claims have seen a sharp rise on account of COVID
intimations, with the highest seen in Oct’20. Total death claims increased to
10,525 (v/s 7,313 in 3QFY20). We have seen a similar rise in death claims in
HDFCLIFE as well. Both managements guided at declining trends in claims
intimations from Nov’20 onwards.
On a sequential basis, persistency trends stood stable with 13th month
persistency at 83%, while 61st month persistency improved 100bp to 54%.
On a YoY basis, persistency is still lower with 13th/25th month declining
200bp/300bp to 83%/69%.
On the distribution side, banca APE reported robust trends and grew at 29%
YoY, while proprietary channel APE witnessed a gradual recovery at 9%
during 3QFY21 (v/s a 4% decline in 2Q). Thus, the share of banca improved
to 69% in 9MFY21 (v/s 67% in 9MFY20) while the share of proprietary stood
at 30% in 9MFY21.
On the cost front, opex-to-GWP ratio declined to 21.7% over 9MFY21 (v/s
22.7% in 9MFY20).
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com) |
Himanshu Taluja
(Himanshu.Taluja@motilaloswal.com)
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com);
Yash Agarwal
(Yash.Agarwal@motilaloswal.com)
Y
Investors
are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.