Max Financial surges 7%, scales record high post strong Q3 results

Shares of Max Financial Services (MFSL) rose 7 per cent to hit a record high of Rs 793 on the BSE in Wednesday's intra-day trade, in an otherwise subdued market, after reporting a strong set of numbers for the quarter ended December 2020 (Q3FY21). The company’s subsidiary Max Life Insurance registered an impressive value of new business (VNB) and individual adjusted sales. The stock surpassed its previous high of Rs 751.85 touched on January 21, 2021.
 

The company’s consolidated net profit jumped 54 per cent year-on-year (YoY) to Rs 227 crore on the back of 68 per cent YoY rise in consolidated revenues at Rs 8,990 crore, due to higher investment income.

In Q3FY21, MFSL's sole subsidiary Max Life reported gross written premium of Rs 4,629 crore, up 19 per cent over the previous year. Profit after tax (PAT) jumped 43 per cent YoY to Rs 220 crore due to higher investment income and reserve release due to hedging of in-force protection business.

Max Life Insurance demonstrated a resilient performance amid a challenging macro environment with 21 per cent annual premium equivalent (APE) growth, led by robust growth in non-PAR savings and recovery in ULIP. Absolute VNB growth stood robust (65 per cent YoY), led by a VNB margin of 28.6 per cent. 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 the proprietary channel is also showing a recovery.

“Max Life reported strong trends in the non-PAR segment, while ULIP showed a recovery. VNB margin has improved sharply to ~25.9 per cent in 9MFY21 (490bp YoY improvement). Strong push via the bancassurance channel has supported premium growth, while the proprietary channel is also recovering,” according to Motilal Oswal Financial Services.

With increasing focus towards high margin products and productivity improvements, we estimate APE growth at 16 per cent CAGR over FY20-23E, while VNB margin will sustain 24 per cent in FY23E, the brokerage said, adding that this would enable 21 per cent VNB CAGR over FY20-23E, while operating RoEV will sustain around 20 per cent, with embedded value (EV) reflecting 18 per cent CAGR over FY20-23E. 

"The stock will continue to re-rate if the AXSB-MAX LIFE deal goes through and both entities forge a long term strategic partnership," it further said in the result update.