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Max India
Its life insurance business, ie Max New York Life (MNYL), accounts for 85% of the revenues and is growing at a
steady pace. MNYL’s annual premium equivalent (APE) has grown 7.8% year till date (YTD) compared to the
12.6% decline in the industry. Further, MNYL’s market share (among the private players) has expanded to 6.7%
in January 2011 from 4.0% in the corresponding month of the previous year. Given the substantial growth in
premiums and better operating metrics, we expect a strong growth in revenues going forward.
In order to contain cost overruns, the company has entered into a long-term tie-up with Axis Bank for
distribution of its products. As a result, the company has rationalised its agency force and branch network,
leading to a sharp reduction in its operating costs. We expect MYNL’s distribution network to expand in line
with Axis Bank’s branch expansion plans. This will bring down the operating expenses-to-sales ratio (currently
30%) and contribute significantly to the bottom line.
MNYL is now focusing on traditional policies having a longer tenure (ten years and more). While the other
companies are focusing on mass products, MNYL is targeting affluent customers, mainly in the top 100-120
cities in India that contribute 80-85% of the revenues. We believe this will lead to a further improvement in the
persistency ratio (currently 81%) and increase the operating efficiency.
Max India is aggressively expanding its healthcare business and plans to add 1,000 beds in FY11. The healthcare
business has turned positive at the EBITDA level. We expect it to turn profitable post-expansion. Max Specialty
Films (packaging films) continues to grow at a robust pace as it reported EBITDA and PBT of Rs39 crore and
Rs26 crore respectively in M9FY11. However, an increase in crude prices will lead to a decline in the margins
though not substantially as the price gets negotiated at the beginning of every year.
Max India is among the best-managed companies in the life insurance space which is evident from its balanced
product mix, high persistency ratio, higher average case per agent etc. We remain convinced about the longterm
growth prospects of the life insurance industry in spite of the regulatory concerns plaguing insurance
sales in the near term. The company is already done with capital infusion in the life insurance business while
the treasury corpus of Rs580 crore and inflows from the life insurance business will take care of the funding
requirements of the health insurance and healthcare segments. We maintain Buy with our SOTP based price
target of Rs234.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Max India
Its life insurance business, ie Max New York Life (MNYL), accounts for 85% of the revenues and is growing at a
steady pace. MNYL’s annual premium equivalent (APE) has grown 7.8% year till date (YTD) compared to the
12.6% decline in the industry. Further, MNYL’s market share (among the private players) has expanded to 6.7%
in January 2011 from 4.0% in the corresponding month of the previous year. Given the substantial growth in
premiums and better operating metrics, we expect a strong growth in revenues going forward.
In order to contain cost overruns, the company has entered into a long-term tie-up with Axis Bank for
distribution of its products. As a result, the company has rationalised its agency force and branch network,
leading to a sharp reduction in its operating costs. We expect MYNL’s distribution network to expand in line
with Axis Bank’s branch expansion plans. This will bring down the operating expenses-to-sales ratio (currently
30%) and contribute significantly to the bottom line.
MNYL is now focusing on traditional policies having a longer tenure (ten years and more). While the other
companies are focusing on mass products, MNYL is targeting affluent customers, mainly in the top 100-120
cities in India that contribute 80-85% of the revenues. We believe this will lead to a further improvement in the
persistency ratio (currently 81%) and increase the operating efficiency.
Max India is aggressively expanding its healthcare business and plans to add 1,000 beds in FY11. The healthcare
business has turned positive at the EBITDA level. We expect it to turn profitable post-expansion. Max Specialty
Films (packaging films) continues to grow at a robust pace as it reported EBITDA and PBT of Rs39 crore and
Rs26 crore respectively in M9FY11. However, an increase in crude prices will lead to a decline in the margins
though not substantially as the price gets negotiated at the beginning of every year.
Max India is among the best-managed companies in the life insurance space which is evident from its balanced
product mix, high persistency ratio, higher average case per agent etc. We remain convinced about the longterm
growth prospects of the life insurance industry in spite of the regulatory concerns plaguing insurance
sales in the near term. The company is already done with capital infusion in the life insurance business while
the treasury corpus of Rs580 crore and inflows from the life insurance business will take care of the funding
requirements of the health insurance and healthcare segments. We maintain Buy with our SOTP based price
target of Rs234.
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