Max Financial falls 5% on squeezed insurance margins, brokerages turn cautious

Shares of Max Financial surged by a paltry 5 percent so far this year

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

Shares of Max Financial Services - the holding company of Max Life Insurance - faced selling pressure on August 16 that sent shares lower by over 5 percent, owing to margin contraction in the June quarter.

As a result, brokerages Nomura and Motilal Oswal have adopted a 'Neutral' stance on the stock, noting that although management is confident of offsetting margin pressure with higher premium growth, the outlook appeared far-fetched.

Nomura said the Max's life insurance business would need to deliver much higher Value of New Business (VNB) growth to meet its margin guidance of 25-26 percent in FY25E, downgrading Max Financial to 'Neutral' from 'Buy'. It also slashed target price to Rs 1,130 per share from Rs 1,150 put out earlier.

VNB is an important indicator that measures the profit margin of new business written by a life insurance company.

Motilal Oswal too reiterated a 'Neutral' call on Max Financial and set the target at Rs 1,030 apiece due to weak Q1 performance. "We cut our VNB margin assumptions given adverse product mix trends and higher share of ULIPs," MOSL said.

ALSO READ: Cash Market | A pullback trade set-up is seen Max Financial Services

The new surrender value norms could have a 100-200 basis margin impact, the management has hinted. Jefferies believes this impact is likely to be limited and projects a mid-teen VNB growth over FY26-27. The brokerage shared a 'Buy' on Max Financial, with a Rs 1,270 target price.

Two months ago, the Insurance Regulatory and Development Authority of India (IRDAI) had introduced new regulations for the surrender value of life insurance policies. Under these updated rules, insurance companies are now required to pay a special surrender value after policyholders complete the full premium payment for the first year. This marks a shift from previous rule which provided no surrender value in the first year and began payment only after collecting two years of premium on a policy.

For the quarter ended June, Max Financial saw a sharp 470 bps YoY margin contraction, but the total Annualised Premium Equivalent (APE) jumped 31 percent YoY in Q1FY25, ahead of major competitors like SBI Life (20 percent) and HDFC Life (23 percent).

The number of new retail policies grew by 27 percent, and the renewal premium rose by 10 percent to Rs 3,323 crore, bringing the gross written premium to Rs 5,399 crore in Q1FY25.

So far this year, shares of Max Financial have risen by 5 percent, underperforming the 11 percent rise seen on benchmark Nifty 5o during the same period.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.