A. MACROECONOMIC TRENDS
The financial year 2023-24 saw consolidation across most developed and emerging economies, after the post-Covid pent-up demand led to surge in growth and inflation in the previous year. The pickup in growth and inflation had led to steep rate hikes by most central banks in the previous year. FY 2023-24 saw the culmination of these rate hike cycles across economies. The US Fed led in terms of raising policy interest rates by a cumulative 525 bps, in a span of a little more than a year. Most other Central banks followed the suit, though to varying degrees. The Reserve Bank of India raised policy interest rates by a cumulative 250 bps in about the same time period. The rate hikes did have the intended effect of lowering inflation. Inflation in the US which had peaked above 9.0%, eased closer to 3.0% by the end of the year, though the path to achieving the target of 2.0% inflation is still uncertain. Similarly, domestic inflation too eased from the peak of 7.9% to the average level of 5.4% for the period FY 2023-24.
The sharp rate hikes, however, had a lower than estimated adverse impact on economic growth, with the US economy ending calendar year 2023 with a 3.4% growth, and a strong labour market that added an average of about 2,25,000 jobs every month in 2023. The robust economy led to a re-set of expectations of the timing and extent of rate cuts by the US Fed.
The change in expectations for US rate cuts has led to a change in expectations for rate cuts from the RBI as well. Domestic inflation is expected to ease to 4.5% for FY 2024-25, from the 5.4% in the previous year, though the RBI remains cautious with regards to food inflation. Similar to the US, domestic growth has held up well despite the rate hikes over the past two years, with GDP growth estimated at 7.6% for FY 2023-24 and forecasted to be 7.0% for FY 2024-25. The strength of the domestic economy is led by strong gains in domestic capital expenditure by the public sector and the Government, as also increasing focus on domestic manufacturing.
The favourable economic set up of benign inflation and robust growth were reflected in the asset markets. Equity markets saw sharp gains during the year, with the themes of domestic manufacturing, capex, infrastructure, amongst others. Public sector financials, too, saw impressive gains as the benefits of improved asset quality was factored into their valuations. Significant portion of the companies benefiting from these themes were spread across the mid-cap and small-cap space, leading to sharp differences in returns across the market capitalization range. Over the financial year FY 2023-24, the large-cap Nifty-50 index gained almost 29%, while the Midcap-100 index gained about 60% in the same period.
The debt markets, however, had a largely range- bound year, as expectations of rate cuts from the RBI were subdued. The markets pricing of rate cuts from the RBI showed expectations of a shallow rate cut cycle, commencing around the second half of FY 2024-25. The 10-year benchmark Government bond yield moved about 23 bps through the year, as it ended FY 2023-24 at 7.05%, down from 7.28% at the end of the previous year.
The global economy is expected to witness a synchronous rebound in 2025 as major election uncertainties will be out of the way and central banks in the West will likely announce a couple of rate cuts later in 2024. Additionally, India is likely to benefit from increased foreign investment, fueling private sector growth and a resurgence in exports.
Outlook on the Life Insurance Industry in India
Life insurance is positioned for significant growth in India, driven by the increasing need for financial security amongst the expanding middle class and younger demographic. Increasing presence of banks, agents, brokers, aggregators, direct and online channels has significantly improved access to life insurance. Insurance remains a multi-decade opportunity in the Indian context and the sector is backed by a dynamic regulator, whose vision is to have insurance for every Indian by 2047, within 100 years of our independence.
Some of the important growth drivers are elaborated below.
Integrated Annual Report 2023-24 155
Key Opportunities
I. Growing workforce and burgeoning middle-class
Number of Household (In mn)
Source: United Nations World Populations Prospects Report, CRISIL “The big shift in financialisation" report 2022
India is the most populous country in the world and amongst the youngest, with a median age of about 28 years. As per UN population projections, ~97 crore people or 68% of Indias population currently belong to the working age group of 15-64 years. This cohort will increase by 10 crore over the next two decades, which implies that more than 25% of the incremental global workforce will come from India. Middle income households (household with annual income between 200,000 - 10,00,000 as per CRISIL research) in India have been rising in the past decade, growing from ~16% in FY 2011-12 to ~32% of all households in FY 2021-22. It is expected to reach 47% by FY 2029-30, which translates to roughly 18 crore households. Growth of the Indian middle class, especially in rural and semi-urban areas, present an attractive opportunity. The deposits from outside the top 200 districts have increased from 25% in March 2015 to 30% in March 2021, indicating increasing customer affluence across newer customer segments and
II. Low insurance penetration Life Insurance penetration1 (FY 2022)
. Further, the population of consumers between the ages 15-55 in tier-2 and tier-3 cities has reached 139 million, which is almost at par with the tier-1 cities. A range of factors are helping push up demand in tier-2 and tier-3 cities, which include growth in monthly household income and an increasing number of graduates and postgraduates.
The life insurance industry plays a vital role in mobilising long-term savings, providing protection and long-term income and annuity solutions to cater to the varied needs of potential customer cohorts. It is anticipated that by 2035, nearly 1 billion individuals will be in the insurable age bracket (20 to 64 years), underscoring the need for longterm savings and protection plans. With burgeoning middle- class households, expanding workforce and improved financial literacy coupled with better access to information and awareness, market penetration can be expected to increase for insurance.
1. Penetration as measured by premiums as % of GDP, Swiss Re (Based on respective financial year of the countries); Indias estimated Life insruance penetration for the year 2023 is at 2.9%
2.Jefferies "Composite insurance License in India: Taking a Leaf from Global Experience" report 2022
3.Kotakinstitutional equities
As compared to other developed economies, India remains vastly under-insured, both in terms of penetration and density. The protection gap in India is amongst the highest in the world at 91%, as growth in savings and life insurance coverage specially in terms of number of policies has lagged economic and wage growth. The life insurance penetration in India is at 3.2% which is one of the lowest amongst developing countries. The sum assured as a % of GDP in India is also amongst the lowest compared to other developing geographies further highlighting the lack of adequate protection.
Protection in India has evolved differently from other geographies, shaped by, consumer preferences and habits, regulatory framework and the changing economic landscape. Moreover, India is a diverse economy, with different pockets of the nation having varied level of affluence and a varied approach to adopting protection.
The life insurance sector can capitalize on these diverse opportunities by providing tailor-made solutions based on customer preferences, through multiple channels and hybrid platforms.
India has the highest 5-year average GDP growth rate, among large economies. Indias per capita income crossed the $2,000 threshold in 2021, which is often considered as an inflection point for movement from subsistence expenditure to spending and investments. Favourable macroeconomic environment, increased awareness about the need for life insurance, increasing financial savings coupled with increasing urbanization and digitalization trends, will continue bolstering demand for life insurance. Uptick in credit also presents an opportunity for credit life.
III. Increasing life expectancy and lack of proper retirement planning
Indias pension market is under-penetrated at 3%1 of GDP
Japan Hong Kong Canada USA Australia
Indias retirement savings gap2 to grow annually by 10% to reach ~$96Tn in 2050
Improvement in life expectancy will lead to an average post retirement period of 20 years Life expectancy at age 60
Elderly population is expected to increase 2.5x by 2050
Ageing population
Source: Swiss Re: A Retirement lifeline (2023), OECD (2021), Milliman Asia Retirement Report 2017, NSSO, MoSPI, UN World Populations Prospects Report (2022)
1. Comprising pension assets/funds
2. Retirement savings gap = Desired retirement income (i.e. 70% of pre-retirement annual income) - Actual income (i.e. social security benefits + employer benefits + personal savings)
Changing demographics, rising life expectancy and limited social security has made financial security post retirement a concern in India. Proportion of elderly population is likely to increase to 17% by 2060 from current 7% and large part of this population is not covered by any formal social security plans. In comparison to global benchmarks, Indias pension market is woefully under-penetrated at 3% of GDP As per Swiss Re, Indias retirement savings gap will increase from $7 trillion in 2022 to $95.7 trillion in 2050.
III. Financialisaton of savings
Household savings composition
J Gross financial savings I Physical savings
This provides insurers an opportunity to offer long-term income and annuity products that generate income streams post retirement, in line with customers longterm objectives and risk appetite. There has also been a push by the government towards NPS solutions which further increases the potential for annuity products. We are optimistic about this segment and expect the growth momentum to continue in the near future.
Financial savings mix
Household savings as % of GDP
Sources: Motilal Oswal Financial Savings Update Sep 23, RBI Annual Report, Invest India
Over the long term, higher personal disposable incomes, resulting in higher household savings, are likely to be channelled into different financial savings instruments including life insurance. Share of life insurance as a % of GDP has largely remained stable over the past decade.
The government has also taken initiatives to promote financial inclusion and helped increase insurance awareness, including setting up small finance banks, payments banks and offering low-cost insurance schemes. The increase in credit penetration should also translate to an increase in the amount of protection sold to protect households against financial vulnerability.
158 HDFC Life Insurance Company Limited
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Corporate Overview+
Strategic Report+
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Financial Statements+
EV Results and Glossary of TermsIV. Digitisation
Changing technology is disrupting businesses rapidly. Both, customers and distributors, want seamless end to end digital solutions. Technology and data will be key, for not only improving customer buying experience, but also to underwrite effectively, as life insurers penetrate new segments and markets. Digital assets will be key for driving new business, enhancing customer service and claim pay-outs experience as well as in implementing robust risk management. Online is no longer a channel, but a way of life that permeates through the business as a whole. The pandemic and demonetization have further accelerated the adoption of technology across all lines of business.
Given higher digital adoption by customers and distributors, it has become imperative for insurers to develop strong technological capabilities and highly efficient platforms, which are powered by analytics, automation and artificial intelligence. Seamless integration of these platforms and processes with
B. LIFE INSURANCE INDUSTRY OVERVIEW
I. Overview
the partners systems is necessary. The customers expectation of a personalised and improved service experience can be addressed by the use of artificial intelligence, cloud computing, machine learning algorithms and bots.
Risks and Concerns
The life insurance industry faces risks due to rapidly evolving customer behaviour, increasing competition and dynamic macroeconomic and regulatory conditions. The financial performance and future prospects of companies may be affected by factors such as market fluctuations, changes in tax rates or interest rates. Shifts in relationships with key distribution partners could disrupt our channels and market reach.
Our enterprise risk management framework details the governance and management of all aspects of risks we face. A comprehensive description of our Enterprise Risk Management Framework can be found in the chapter on Risk Management.
The life insurance industry has evolved considerably over the last decade with private players steadily gaining market share in terms of individual WRP There have been significant changes in distribution strategy as well as product portfolio, with technology becoming a key enabler.
FY 2015 |
FY 2017 |
FY 2019 |
FY 2021 |
1 1 FY 2023 |
1 1 FY 2024 |
49% |
54% |
58% |
60% |
66% |
68% |
Source: IRDAI and Life Insurance Council
During FY 2023-24, the life insurance industry clocked 2% growth and collected new business premiums of 3,780 bn as against 3,705 bn in FY 2022-23.
Private insurers grew by 8% based on individual weighted received premium (WRP), while group business saw a growth of 20%. The market share of private insurers in individual business was 68%, up by 200 bps in comparison to FY 2022-23. Development of multiple channels of distribution and product innovation have been the key drivers for
growth in market share of private insurers in individual business, which has increased from 38% in FY 2013-14 to 68% in FY 2023-24.
Within theprivate sector, thetop 10 insurers accounted for 90% of the market (in terms of individual WRP) in FY 2023-24. Distribution arrangements with large banks and development of proprietary channels have been key drivers of growth for most of the large insurers.
Integrated Annual Report 2023-24 159
In recent years, private insurers have increased their focus on the non unit linked or traditional segment, within the individual business. Insurers are placing more emphasis on both, retirement and protection segments. The protection business has witnessed healthy growth aided by increase in credit protect business, embedded protection products, return of premium proposition, savings plans with higher sum assured cover amongst others.
Distribution mix 2
1. Based on Overall WRP (Individual and Group)
2. Based on Individual New Business premia for all private players
There has been a steady shift in distribution mix over time. The business sourced by bancassurance channel has gradually increased with expansion in number of branches and widening reach across the Indian cities. There is further scope to increase penetration in terms of number of policies especially in Tier 2 and 3 locations as banks and agency channels expand into these areas.
C. HOW ARE WE TRACKING BUSINESS PERFORMANCERs.
What we track
Comments
Performance Trend
1
a) Embedded value (EV):
Sum of adjusted net asset value and the present value of future profits of a firm
Consistent growth in EV (doubled in last 4 years), with steady Operating return on EV.
(Rs. in crore)
H Embedded value EVOP%
FY2022 EVOP excludes EMR or excess mortality reserve created due to COVID. Including EMR, EVOP% is at 16.6%
Note: Operating return on EV is calculated as EVOP (Embedded Value Operating Profit) to Opening EV
b) Value of New Business (VNB):
Determines the expected profitability of the new business written during the year
c) New Business Margins (NBM):
Determines profitability margin of the new business written during the year
We will continue to move ahead with aspiration of doubling key metrics while prioritizing VNB growth to build profitable business in the long run
? VNB NBM (Post over-run)
Persistency:
Strength and quality of existing book
Healthy persistency across cohorts, led by focus on quality of business, offering products suited to customer needs and leveraging technological capabilities to provide a superior customer experience
Note: Persistency ratios for limited pay/regular premium policies
Assets under Management (AUM): Growth and net accretion to deliver healthy growth with balanced mix
AUM has almost doubled in the last 4 years. Debt:Equity mix stood at 67:33. ~99% of debt investments in Government bonds and AAA rated securities as on March 31, 2024
Distribution mix:
Develop and nurture each channel, while ensuring business diversification
Diversified distribution comprises a wide spectrum of over 300 distribution partnerships. This is bolstered by more than 500 offices pan-India and 2 lakh + agent workforce.
Bancassurance Direct Agency Broker and others
Note: Based on individual annualised premium equivalent (APE)
Product mix:
Balanced product mix with options for different risk reward profiles
Need-based selling and profitable growth continue to be key focus areas
Product mix
Drive to increase protection:
Higher focus on protection business across individual and group segments
There has been an increase in protection share in total NBP from 29% in FY 2022-23 to 32% in FY 2023-24. Individual protection APE grew by 27% in FY 2023-24.
Robust protection growth
Individual APE
ULIP
Group Retirals
( in crore)
Overall NBP
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EV Results and Glossary of TermsPerformance Trend
Market share and ranking:
Maintained market leadership with sustained growth across segments
Outpaced the private industry over multiple timeframes including, in the past 3,
5 and 7 years, thereby consistently demonstrating growth leadership.
Steady individual WRP growth despite headwinds
Private market share :16.1% 16.5% 15.4%
Overall market share :10.1% 10.8% 10.4%
No. of lives: Number of lives insured across individual and group business, an indicator of scale of business
Insured 6.6 crore lives in FY 2023-24
D. STANDALONE PERFORMANCE OVERVIEW
Despite the fiscal budget changes impacting high- ticket business, HDFC Life delivered a healthy growth of 11% in individual WRP during FY 2024 (after adjusting for the one-off business of 1,000 crore in March 2023). Individual WRP grew by 1% on an unadjusted basis, leading to a private market share of 15.4% on individual WRP basis for FY 2024. Individual WRP maintained a healthy 2-year CAGR of 13% throughout the year, demonstrating resilience amidst headwinds. The Company continues to maintain its position among the top 3 life insurers in both individual and group segments. In line with our customer expansion strategy, the number of policies issued increased by 11%. Individual Renewal premium grew by 18% on the back of increased persistency across cohorts and long term business written in the past years. The Company reported Profit after Tax (PAT) of 1,569 crore in FY 2024, a healthy growth of 15% from FY 2023. Value of new business was 3,501 crores, reflecting a 2-year CAGR of 14%. Embedded value stood at 47,468 crores with an
operating return of 17.5%, maintaining a healthy performance across key metrics. We remain committed to our long-term strategy of driving business and creating stakeholder value by adapting to evolving customer preferences, maintaining a profitable product mix, diversifying distribution channels, and continuously innovating through technology.
I. Our Business Segments:
Lines of Business:
We offer long-term savings, protection and retirement or pension products to Individual and Group customers. These products are grouped under three segments Participating (Par), Non-Participating (Non-Par) and Unit-Linked (ULIP). A brief description of each product segment is set below:
1. Non-Linked segments:
Non-linked segment comprises the traditional products that offer reasonable insulation from market related risks. The non-linked segment is split into par and nonpar segments.
a) Non-Linked Participating segment:
This segment covers insurance contracts that participate in the surplus generated from the segment, during the term of the contract. The policyholder is entitled to 8/9th of the surplus generated from this segment, which is added to the policy as bonuses. The shareholders share of surplus is one-tenth of the bonus declared for the policyholders. The balance surplus, if any, in the segment is accumulated under the head Funds for future appropriation in the balance sheet for future distribution to policyholders and shareholders.
b) Non-Linked Non Par segment:
This segment covers insurance contracts, which do not participate in the surplus generated from the segment. The surplus arising from this segment is transferred to Shareholders Profit & Loss Account on recommendation by the Appointed Actuary of the Company.
2.
A)
Unit Linked segment:
This segment covers insurance contracts that are investment cum protection plans that provide returns directly linked to the market performance of the underlying fund. The investment risk is borne by the policyholder. The surplus arising from this segment is transferred to Shareholders Profit & Loss Account on recommendation by the Appointed Actuary of the Company.
Performance of Standalone Financial Statements:
The standalone results presented below includes detailed analysis across key financial parameters tracked by the Company.
Income statement analysis:
Thereported gross premiumincome witnessedgrowth in both individual and group premium. In comparison, expenses of management grew on the back of total business growth across segments and channels with calibrated investment in distribution and technology. The Profit after Tax (PAT) for the Company stood at
Income statement |
(in crore) | ||
| Revenue and Profit and Loss Account | FY 2023-24 | FY 2022-23 | Growth |
| Gross Premium Income | 63,076 | 57,533 | 10% |
| Reinsurance (net) | (1,117) | (769) | 45% |
Total Premium Income (Net) |
61,959 | 56,764 | 9% |
Income from Investments |
|||
| Policyholders | 38,354 | 12,598 | 204% |
| Shareholders | 1,002 | 720 | 39% |
Income from Investments |
39,356 | 13,318 | 196% |
Other Income |
|||
| Policyholders | 336 | 464 | -28% |
| Shareholders | 13 | 63 | -79% |
Total Income (A) |
1,01,664 | 70,609 | 44% |
| Less: | |||
| Commission | 5,256 | 2,887 | 82% |
| Operating Expenses | 6,953 | 8,500 | -18% |
| Interest on Non-convertible debentures | 69 | 62 | 11% |
| GST on linked charges | 411 | 376 | 9% |
| Benefits Paid | 39,696 | 38,872 | 2% |
| Other Provisions | (88) | 5 | -1860% |
| Change in Valuation Reserves (net) | 48,419 | 18,586 | 161% |
| Change in funds for future appropriations | (24) | (110) | -78% |
Total Expenses (B) |
1,00,692 | 69,178 | 46% |
Provision for tax: |
|||
| Policyholders | (592) | 159 | -472% |
| Shareholders | (5) | (88) | -94% |
Provision for tax (C) |
(597) | 71 | -941% |
Profit after tax (A-B-C) |
1,569 | 1,360 | 15% |
The following table sets forth summary of premium income at segment level for the periods indicated:
( in crore)
| Particulars | FY 2023-24 | FY 2023-24 | FY 2022-23 | ||||||
| Par | Non-par | Linked | Total | Par | Non-par | Linked | Total | Growth | |
New Business Premium (NBP) |
2,648 | 20,768 | 6,215 | 29,631 | 3,041 | 22,451 | 3,592 | 29,084 | 2% |
| Individual | 2,648 | 7,672 | 4,363 | 14,683 | 3,041 | 9,449 | 2,352 | 14,842 | -1% |
| Group | - | 13,096 | 1,852 | 14,948 | - | 13,002 | 1,240 | 14,242 | 5% |
| NBP growth (%) as compared to FY 2022-23 | -13% | -7% | 73% | 2% | 25% | 23% | 3% | 20% | |
Renewal Premium |
10,824 | 14,102 | 8,519 | 33,445 | 9,665 | 9,976 | 8,808 | 28,449 | 18% |
| Individual | 10,824 | 13,810 | 8,519 | 33,153 | 9,665 | 9,719 | 8,808 | 28,192 | 18% |
| Group | - | 292 | - | 292 | - | 257 | - | 257 | 14% |
Gross Written Premium |
13,472 | 34,870 | 14,734 | 63,076 | 12,706 | 32,427 | 12,400 | 57,533 | 10% |
| Less: Reinsurance ceded | (35) | (1,056) | (26) | (1,117) | (9) | (746) | (14) | (769) | 45% |
Net Premium |
13,437 | 33,814 | 14,708 | 61,959 | 12,697 | 31,681 | 12,386 | 56,764 | 9% |
Summary of Premium Income at Segment level:
Gross written premium increased by 10% from 57,533 crore in FY 2022-23 to 63,076 crore in FY 2023-24. Growth in premium was primarily driven by the focus on meeting customer needs through diverse and innovative products and a multi-channel approach. The product portfolio consists of 65 retail and 18 group products, along with 13 riders covering savings, investment, protection and retirement needs of our customers.
11.66 lakh new policies were added during the year.
a) Individual New Business Premium:
Individual new business premium dropped marginally by 1% from 14,842 crore in FY 2022-23
to 14,683 crore in FY 2023-24 without adjusting for the impact of 1,000 crore due to fiscal budget changes on high ticket size business during March23. The normalized growth, with adjustment, for individual new business premium would be 6% for the year ended March 31, 2024. There was steady growth in lower ticket size business during the year.
b) Group New Business Premium:
Group new business premium grew by 5% from 14,242 crore in FY 2022-23 to 14,948 crore in FY 2023-24. The growth was largely led by growth in group credit protect business, which is in line with the credit disbursement.
c) Renewal Premium:
Renewal premium grew strongly by 18% from 28,449 crore in FY 2022-23 to 33,445 crore, as a result of improvement in persistency.
Distribution channel mix
Our multi-channel distribution network effectively served customers and adapted to market shifts. Bancassurance witnessed a strong 17% YoY growth, led by increase in counter share at HDFC Bank. We consistently innovate on our product offerings, enhance our service quality and invest in our technological capabilities to meet the needs of our partners diverse customer segments. While agency channel growth was slower due to a high base, it maintained a robust 2-year CAGR of 14%. We actively built capacity
for future growth by adding 80,000 agents and opening 75 new branches in FY 2024. Our aim is to exceed 600 touchpoints next year through strategic branch expansion, attracting high-performing distributors, and investing in technology and capabilities. The Direct channel focuses on upselling and cross-selling to existing customers through a user-friendly online platform that guides users from onboarding to policy issuance.
ii. Reinsurance ceded
The Company collaborates with the reinsurers to share underwritten risk. The reinsurance premium ceded increased from 769 crore in FY 2022-23 to 1,117 crore in FY 2023-24. The increase is largely due to business being ceded in the micro-financial institutions (MFI) segment during the year.
iii. Income from Investments
The following table sets forth, for the periods indicated, summary of income from investments:
( in crore)
| Particulars | FY 2023-24 | FY 2023-24 | FY 2022-23 | |||||||
| Policyholders | Policyholders | Policyholders | ||||||||
| Par | Non Par |
Linked | Shareholders | Total | Par | Non Par |
Linked | Shareholders | Total | |
| Interest Income | 3,526 | 9,707 | 1,624 | 802 | 15,659 | 3,153 | 7,087 | 1,676 | 652 | 12,568 |
| Dividend Income | 212 | 8 | 735 | 28 | 983 | 162 | 9 | 759 | 20 | 950 |
| Profit on sale / redemption of investments | 836 | 177 | 9,656 | 190 | 10,859 | 661 | 106 | 4,645 | 90 | 5,502 |
| (Loss on sale / redemption of investments) | (59) | (243) | (353) | (18) | (673) | (72) | (227) | (745) | (42) | (1,086) |
| Transfer / gain on revaluation / change in fair value | (12) | (77) | 12,617 | _ | 12,528 | (3) | (66) | (4,547) | _ | (4,616) |
Total income from Investments |
4,503 | 9,572 | 24,279 | 1,002 | 39,356 | 3,901 | 6,909 | 1,788 | 720 | 13,318 |
a) Policyholders:
Non-Linked Segments (Par and Non-Par):
Participating and non-participating segments witnessed an increase in interest income from 10,240 crore in FY 2022-23 to 13,233 crore in FY 2023-24, on the back of higher assets under management (AUM), supported by higher inflows through renewal premium. Dividend income increased from 171 crore in FY 2022-23 to 220 crore in FY 2023-24 due to higher dividend payout by investee companies. Net profit on sale of investment/ redemption of investments increased from 468 crore in FY 2022-23 to 711 crore in FY 2023-24, on account of higher realization on sale of investment asset on the back of relatively strong performance of equity markets during FY 2023-24.
Unit-linked segment:
Investment income in unit linked segment increases from 1,788 crore in FY 2022-23 to 24,279 crore in FY 2023-24, largely due to increase in fair value of investment assets. The increase in change in fair value was primarily on the back of relatively strong performance of equity markets during FY 2023-24, as BSE Sensex increased by 24.9% compared to marginal increase of 0.7% in FY 2022-23 and BSE 100 increased by 32.3% compared to decrease of 0.7% in FY 2022-23. 10 year government security (G-Sec) bond yields fell by 26 bps against increase of 47 bps in FY 2022-23.
In the unit linked segment, the above was offset with a corresponding release in actuarial reserves and hence no impact on profit/loss during the year.
b) Shareholders:
Interest income in the shareholders account increased from 652 crore in FY 2022-23 to 802 crore in FY 2023-24 due to increase in size of the fixed income portfolio. Net profit on sale/ redemption
of investments increased from 48 crore in FY 2022-23 to 172 crore in FY 2023-24 on account of higher realization on sale of investment assets, on the back of relatively strong performance of equity markets during FY 2023-24.
Time Weighted Rate of Return (TWRR) for policyholders and shareholders accounts are given in detail below:
( in crore)
| Particulars | FY 2023-24 | FY 2022-23 |
| Investments: | ||
| Policyholders Investments | 2,77,338 | 2,25,650 |
| Shareholders Investments | 14,882 | 13,132 |
A. Without Unrealised Gains/Losses |
||
| Shareholders Funds | 7.02% | 6.30% |
| Policyholders Funds - Non-Linked | ||
| a) Participating | 8.09% | 7.90% |
| b) Non Participating | 9.86% | 9.13% |
| - Linked -Non Participating | 17.24% | 8.26% |
B. With Unrealised Gains/Losses |
||
| Shareholders Funds | 11.19% | 3.73% |
| Policyholders Funds - Non-Linked | ||
| a) Participating | 14.39% | 4.31% |
| b) Non Participating | 12.05% | 5.41% |
| - Linked -Non Participating | 30.29% | 0.54% |
During FY 2023-24, TWRR without unrealised gains /losses for policyholders and shareholders account increased on account of proportionately higher profit realization on sale of investment assets. Higher TWRR with unrealised gains / losses for policyholders and shareholders accounts primarily on the account of relatively strong performance of equity markets during FY 2023-24, as BSE Sensex increased by 24.9% compared to marginal increase of 0.7% in FY 2022-23 and BSE 100 increased by 32.3% compared to decrease of 0.7% in FY 2022-23. 10 year government security (G-Sec) bond yields fell by 26 bps against increase of 47 bps in FY 2022-23.
iv. Other income:
Other income mainly comprises interest on Income Tax refund, revival fees, interest on policy loans, and income on unclaimed amount of policyholders amongst others. During FY 2023-24, interest income on income tax refund accounted for 49 crore ( 36 crore towards Policyholders account and 13 crore towards Shareholders account) in FY 2023-24 against 247 crore ( 184 crore towards Policyholders Revenue account and 63 crore towards Shareholders P&L account) in FY 2022-23. The interest income on policy loan increased from 130 crore in FY 2022-23 to 166 crore in FY 2023-24, on the back of increasing loan book. Other increase is on account of higher revival fees and policy reinstatement fees.
v. Commission:
The summary of commission expense is as follows:
(in crore)
| Particulars | FY 2023-24 | FY 2022-23 | ||||||
| First year | Single | Renewal | Total | First year | Single | Renewal | Total | |
| Premium | 11,110 | 18,521 | 33,445 | 63,076 | 11,324 | 17,761 | 28,448 | 57,533 |
| Commission | 3,151 | 1,583 | 522 | 5,256 | 2,088 | 277 | 522 | 2,887 |
Commission % of premium |
28.4% | 8.5% | 1.6% | 8.3% | 18.4% | 1.6% | 1.8% | 5.0% |
Post the new IRDAI (Expenses of Management, including Commission of Insurers), Regulations 2024, the Company has revised its commission structure and implemented a Board approved Commission and Remuneration policy.
vi. Operating expenses:
The following table sets forth, for the periods indicated, summary of operating expenses:
(in crore)
| Particulars | FY 2023-24 | FY 2022-23 | Growth % |
| Employees remuneration & welfare benefits | 3,242 | 3,049 | 6% |
| Advertisement and publicity | 1,769 | 2,469 | -28% |
| Business development expenses | 483 | 1,583 | -69% |
| Information technology expenses | 263 | 230 | 14% |
| Others | |||
| - Volume Based | 214 | 201 | 6% |
| - Other expenses | 930 | 906 | 3% |
Operating Expenses Policyholders (A) |
6,901 | 8,438 | -18% |
Operating Expenses Shareholders (B) |
52 | 62 | -17% |
Oeprating Expenses (A+B) |
6,953 | 8,500 | -18% |
Interest on Non-convertible debentures |
69 | 62 | 11% |
The total operating expenses to total premium ratio over past 3 years is as below.
a) Operating expenses under Policyholders Revenue account:
The total operating expenses decreased from 8,500 crore in FY 2022-23 to 6,953 crore in FY 2023-24, thereby leading to a decrease in the ratio of operating expenses to total premium from 14.8% in FY 2022-23 to 11.0% in FY 2023-24. During the year the Company
has continued to invest in newer partnerships, employees and technology.
• Employee Remuneration:
Employee cost increased as compared to last year due to higher headcount (more than 2,000 compared to Mar23) as part of investment in diverse distribution channels and increments in line with the remuneration plan.
• Advertisement and Publicity Costs:
The Company continues to build brand visibility and create insurance awareness through various touch points either directly or through its partners.
• Business Development Expenses:
Business development expenses mainly comprise of name usage fees, events and meets expenses, contest payouts amongst others. We calibrate our spending plan based on demand and business needs
• Information Technology Expenses:
This included, higher spent on product system testing, development of various business applications, cloud projects etc. Deployment of digital assets for the above led to an increase in information technology cost.
• Others Expenses:
Other expenses like travel, training, printing, communication and general office expenses were increased from last year in line with inflation and activity levels.
Expenses of Management (EOM) consists of Commission and Operating expenses of policyholders. Below is the comparison of EOM for current year vs previous year:
(in crore)
| Particulars | FY 2023-24 | FY 2022-23 | Growth % |
Premium |
63,076 | 57,533 | 10% |
| Commission (A) | 5,256 | 2,887 | 82% |
| Operating Expense (B) | 6,953 | 8,500 | -18% |
| Total Expenses of Management (A+B) | 12,209 | 11,387 | 7% |
| Ratio of EOM to premium | 19.4% | 19.8% |
Overall, the EOM ratio as a percentage of Premium is 19.8% in FY 2022-23 and 19.4% in FY 2023-24.
b) Operating Expenses in Shareholders account:
Expenses in Shareholders account decreased by 17% from 62 crore in FY 2022-23 to 52 crore in FY 2023-24, erstwhile Exide business got integrated completely during FY 2023-24. We also implemented the managerial remuneration Guidelines issued by IRDAI.
Increase in NCD interest is due to Non Convertible debentures issued in June 22.
vii. Benefits paid:
The following table provides the summary of benefits paid:
| (in crore) | ||||||||
| Particulars | FY 2023-24 | FY 2022-23 | ||||||
| Par | Non Par | Linked | Total | Par | Non Par | Linked | Total | |
| Surrenders & Withdrawals | 1,146 | 5,476 | 13,096 | 19,718 | 974 | 12,149 | 8,581 | 21,704 |
| Maturity & Survival Benefits (including Annuity) | 3,821 | 2,376 | 4,466 | 10,663 | 3,653 | 1,284 | 4,191 | 9,128 |
| Protection Claims (Death, Health & Rider) | 322 | 4,473 | 365 | 5,160 | 305 | 3,753 | 372 | 4,430 |
| Discontinuance termination | - | - | 2,235 | 2,235 | - | - | 2,445 | 2,445 |
| Bonus | 2,859 | - | - | 2,859 | 2,039 | - | - | 2,039 |
| Total Benefits paid | 8,148 | 12,325 | 20,162 | 40,635 | 6,971 | 17,186 | 15,589 | 39,746 |
| Less: Reinsurance on claims | (17) | (893) | (29) | (939) | (12) | (845) | (17) | (874) |
| Net benefits paid | 8,131 | 11,432 | 20,133 | 39,696 | 6,959 | 16,341 | 15,572 | 38,872 |
Benefits paid increased marginally during the year from 38,872 crore in FY 2022-23 to 39,696 crore in FY 2023-24. Protection and maturity benefits increased during the year while payouts on surrenders, withdrawals and discontinuance decreased.
The movement in benefits paid is explained in detail below:
a) Surrenders & Withdrawals:
Surrenders and withdrawals decreased from 21,704 crore in FY 2022-23 to 19,718 crore in FY 2023-24. There is a significant decrease in surrenders and withdrawals by group clients from 12,251 crore in FY 2022-23 to 5,435 crore in FY 2023-24. The surrenders and withdrawals by individual clients
increased from 9,453 crore to 14,283 crore due to strong equity market performance.
b) Maturity & Survival Benefits (including Annuity):
Maturity and survival benefits increased from 9,128 crore in FY 2022-23 to 10,663 crore in FY 2023-24.
c) Protection Claims (Death, Health & Rider):
The protection death claims increased from 4,430 crore in FY 2022-23 to 5,160 crore in FY 2023-24 with corresponding increase in reinsurance claims recovery from 874 crore in FY 2022-23 to 939 crore in FY 2023-24. Overall claim settlement ratio was 99.7% and the individual claim settlement ratio was 99.5%.
d) Bonus:
The interim bonus increased from 1,227 crore in FY 2022-23 to 1,855 crore in FY 2023-24, in line with the growth in corresponding business with benefit of cash bonus. The terminal bonus increased from 812 crore in FY 2022-23 to 1,004 crore in FY 2023-24 largely due to increase in maturity claims during the year.
viii. Change in valuation of policy liabilities
The following table sets forth the summary of changes in valuation of policy liabilities:
( in crore)
| Particulars | FY 2023-24 | FY 2022-23 |
| Gross: policy liabilities (non-unit/ mathematical reserves) | 32,857 | 22,908 |
| Amount ceded in reinsurance | (778) | (590) |
| Amount accepted in Reinsurance | - | - |
| Fund reserve | 16,731 | (3,328) |
| Funds for discontinued policies | (391) | (404) |
Change in valuation of liability in respect of life policies |
48,419 | 18,586 |
Change in valuation reserves reflects change in the actuarial liability in respect of policies in force and for policies in respect of which premium has been discontinued but a liability still exists. The change in fund reserves includes the change in unit fund value of policyholders fund, under the unit linked segment.
During FY 2023-24, the movement in fund reserve reflects the unrealized gains due to mark to market movement in the unit linked portfolio along with any net change in liabilities due to premium receipt and any release due to benefits paid. The increase in change in reserves for the non-participating segment other than fund reserve reflects the net increase due to higher new business and renewal premium collection. The increase in liability under these policies was offset by release of reserves on account of benefits paid.
ix. Provision for tax
FY 2023-24 saw a reversal of tax provision of prior periods amounting to 770 crore, based on favourable orders received during the year.
x. Change in funds for future appropriation (FFA)
The reduction in FFA by 25 crore is primarily due to the strain on new business that corresponds with the business written in the participating segment in FY 2023-24.
B) Financial Position/Balance Sheet analysis:
The following table sets forth, for the periods indicated, the financial position of the Company:
| (in crore) | ||
| Particulars | As on March 31, 2024 | As on March 31, 2023 |
| Sources of funds | ||
| Shareholders funds | 14,652 | 12,987 |
| Borrowings | 950 | 950 |
| Policyholders funds | 2,76,916 | 2,24,447 |
| Funds for future appropriations | 1,211 | 1,235 |
| Total | 2,93,729 | 2,39,619 |
| Application of funds | ||
| Investments | 2,92,220 | 2,38,782 |
| Loans | 1,897 | 1,585 |
| Fixed Assets | 416 | 380 |
| Current Assets (i) | 7,974 | 7,175 |
| Current liabilities and provision (ii) | 8,778 | 8,303 |
| Net Current Assets (i-ii) | (804) | (1,128) |
| Total | 2,93,729 | 2,39,619 |
| Contingent liabilities | 2,131 | 908 |
i. Shareholders Funds:
The breakup of capital and reserves is as follows:
( in crore)
| Particulars | As on March 31, 2024 | As on March 31, 2023 |
| Share Capital | 2,151 | 2,149 |
| Share application money received pending allotment of shares | - | 3 |
| Reserves and Surplus | 12,050 | 10,815 |
| Credit / (Debit) Fair Value Change Account | 451 | 20 |
Shareholders fund (net worth) |
14,652 | 12,987 |
Net-worth increased from 12,987 crore at March 31, 2023 to 14,652 crore as a result of higher profit transfer reduced by dividend payout during the year.
Fair value change account represents the balance of unrealised gains/ loss on valuation of equity portfolio in the shareholders fund. Increase in fair value change in shareholders account from 20 crore at March 31, 2023 to 451 crore is mainly attributed to relatively strong performance of equity market as BSE 100 increased by 32.3% during FY 2023-24 compared to decrease of 0.7% during FY 2022-23.
ii. Policyholders Funds:
The summary of Policyholders funds is as below:
(in crore)
Particulars |
As on March 31, 2024 | As on March 31, 2023 |
POLICYHOLDERS FUNDS: |
||
| Credit/(Debit) Fair Value Change Account | 6,026 | 1,976 |
| Policy Liabilities | 1,75,349 | 1,43,270 |
| Provision for Linked liabilities | 92,114 | 75,384 |
| Funds for discontinued policies | 3,427 | 3,817 |
| Funds for future appropriations | 1,211 | 1,235 |
Total Policyholders Funds |
2,78,127 | 2,25,682 |
The increase in non-linked policy liabilities is in line with actuarial computed liability for existing inforced policies as on March 31, 2024, which includes net cash inflows generated from new and persistent policies. The provision for linked liability represents aggregation of net asset value of various unit link funds, including unrealized gains due to mark to market portfolio. Further the movement in fair value change in non-linked fund represents the impact of relatively strong performance by capital markets.
Application of Funds
iii. Investments
The graph below provides a summary of Assets under Management (AUM) of the Company:
The break-up of investments as on balance sheet dates is as follows:
(in crore)
| Particulars | As on March 31, 2024 | As on March 31, 2023 | Growth % |
| Investments | |||
| - Shareholders | 14,881 | 13,132 | 13% |
| - Policyholders (Non Linked) | 1,81,797 | 1,46,449 | 24% |
| Assets held to cover Linked Liabilities | 95,542 | 79,201 | 21% |
Total |
2,92,220 | 2,38,782 | 22% |
a) Shareholders Investments:
Shareholders investments increased from 13,132 crore as on March 31, 2023 to 14,881 crore as on March 31, 2024, due to profit transfers, realised investment income, tax refund, unrealized capital gains on account of relatively strong performance of equity market during the year.
b) Policyholders Investments including linked liabilities:
The Policyholders Investment including linked Policyholders fund increased by 51,689 crore. The increase in investment assets is in line with business growth, with an increase in linked investments primarily on account of capital market movements.
iv. Loans against Policy:
Loans against policies (net of repayments) increased from 1,585 crore as at March 31, 2023 to 1,897 crore as at March 31, 2024, as higher number of policyholders availed liquidity against their existing policies while continuing with their financial coverage. These loans are secured and are charged prevailing rate of interest as per the terms of the policy loan contract. Such loans are disclosed net of the provision for standard assets, made in accordance with the applicable IRDAI Regulations.
v. Current Assets:
The following table sets forth, for the periods indicated, summary of current assets:
(in crore)
| Particulars | As on March 31, 2024 | As on March 31, 2023 |
Advances Prepayments |
172 | 124 |
| Advance tax paid | 145 | 926 |
| Capital advances | 15 | 6 |
| Security deposits | 101 | 121 |
| Investment application - pending allotment | _ | 5 |
| Other advances | 31 | 82 |
Other Assets Income accrued on investments |
2,856 | 2,370 |
| Outstanding Premiums | 1,172 | 743 |
| Due from other entities carrying on insurance business (including reinsurers) | 230 | 131 |
| Due from subsidiaries/ holding company | 2 | 7 |
| Investment sold awaiting settlement | 30 | 422 |
| Assets held for unclaimed amount of policyholders (including income) | 299 | 512 |
| Goods and Services Tax/ Service Tax Deposits | 296 | 265 |
| Derivative Assets | 973 | - |
| Margin Money on Derivatives | - | 223 |
| Others | 123 | 101 |
| Cash and Bank Balance | 1,529 | 1,137 |
Total current assets |
7,974 | 7,175 |
Key items of current assets and advances are:
a) Advance tax paid decreased from 926 crore to 145 crore on account of refund of advance tax and provision reversal thereof backed by favorable order from Income tax department for advance tax pertaining to previous years.
b) Outstanding premium increased on the back of higher base of policies within grace period of 30 days.
c) Income accrued from investments increased due to increase in the fixed income debt securities.
d) Dues from other entities carrying on insurance business represents the net amount due from reinsurers pertaining to claims on policies covered by reinsurance, net of reinsurance premium payable to them. There is increase in receivable from reinsurers during the year due to increase in corresponding claims.
e) Investment sold awaiting settlement represents sales proceeds pending to be received on sale of investments. The decrease during the year is due to the market being closed from 29th to March 31, 2024.
f) Assets held for unclaimed amount of policyholders represent equivalent invested assets held towards unclaimed liability. The reduction in the assets is due to reduction in liability towards unclaimed policyholders.
g) Derivative Assets in Policyholders Fund increased to 973 crore (Assets) from 197 crore (Liability). There is corresponding change in the derivative margin which increased to 759 crore (margin received) from 223 crore (margin paid). The change is primarily attributed to change in fair value of underlying government bonds and increase in fixed income derivative volume. The 10 year government security (GSec) bond yields decreased by 26 bps in FY 2023-24 against increase of 47 bps in FY 2022-23. The outstanding derivative notional increased to 40,602 crore from 30,641 crore.
vi. Current Liabilities and Provisions:
The summary of current liabilities is as follows: (in crore)
| Particulars | As on March 31, 2024 | As on March 31, 2023 |
Current liabilities Agents Balances |
941 | 616 |
| Balances due to other insurance companies (including Reinsurers) | 176 | 17 |
| Due to subsidiaries / holding company | 83 | - |
| Premiums received in advance | 60 | 66 |
| Unallocated Premium | 706 | 714 |
| Sundry creditors | 3,597 | 4,119 |
| Claims outstanding | 1,153 | 1,054 |
| Annuities due | 6 | 4 |
| Unclaimed amount of policyholders | 299 | 512 |
| Investments purchased - to be settled | 129 | 273 |
| Interest payable on debentures/bonds | 49 | 49 |
| Payable to unit linked schemes | 442 | 205 |
| Derivative liability | - | 197 |
| Margin Money on Derivative | 759 | - |
| Others | 266 | 350 |
Provisions Provision for employee benefits |
70 | 101 |
| Provision for taxation | 42 | 26 |
Total current liabilities and provisions |
8,778 | 8,303 |
The key items of current liabilities & provisions
are as below:
a) Agent balances represent amounts payable to insurance agents and intermediaries towards commission as at the balance sheet date. The increase is in line with business growth and accrual for commission payable against the premium earned.
b) The amount due to subsidiary/holding company largely represents the name usage fees payable to the holding company, HDFC Bank Limited.
c) Unallocated premium represents premium received on policies that are in the process of issuance or pending due to underwriting requirements. There is decrease in unallocated premium during the year and is attributable to premium received pending underwriting or receipt of additional documents.
d) Sundry creditors represent amounts payable/accruals for various services utilised by the Company for expenses like employee
related cost, marketing cost, operating expenses, and provisions for litigations. Decrease in sundry creditors is in line with the nature and scale of business transactions.
e) Claims outstanding include claims intimated during the year and outstanding as on the reporting date and claims payable to the policyholders but not settled during the year.
f) The IRDAI issued modification in the Master Circular on Unclaimed Fund dated February 16, 2024, where the ageing for movement of outstanding payout to policyholder to Unclaimed fund increased from 180 to 365 days. Pursuant to the above circular, the unclaimed liability has been recalibrated. Apart from the change due to IRDAI circular, the reduction in unclaimed liability is also on account of the Company making efforts to connect and disburse the funds due to the policyholders.
g) Others include tax deducted to be remitted, Goods and services tax liability, proposal deposits and unclaimed dividend.
vii. Contingent liabilities:
The contingent liabilities are summarized in the
table given below:
(in crore)
Particulars |
As on March 31, 2024 | As on March 31, 2023 |
| Partly paid-up investments | 455 | 726 |
| Statutory demands and liabilities in dispute, not provided for | 1,628 | 134 |
| Claims against policies not acknowledged as debts by the Company (net of reinsurance) | 47 | 47 |
| Others | 1 | 1 |
Total |
2,131 | 908 |
| • Contingent liability for | partly | paid up |
investments decreased primarily due to payment of call amounts on the respective call dates of underlying investments.
• There is an increase in "Statutory demands and liabilities in dispute, not provided for" which relates to the show cause cum demand notices/ assessment orders received by the Company from tax authorities. Refer to the explanatory note 1 of Schedule 16(B) i.e. notes forming part of the financial statements.
C) Cash Flow Statement:
The following table sets forth, for the periods indicated, a summary of the cash flows:
(in crore)
| Particulars | FY 2023-24 | FY 2022-23 |
| Net cash generated from operating activities | 10,725 | 6,882 |
| Net cash generated used in investing activities | (13,632) | (10,072) |
| Net cash generated from financing activities | (403) | 1,985 |
i. Cash flow from operating activities:
Increase in cash flow from operating activities by 3,843 crore is primarily driven by premium received from policyholders net of payments towards benefits, commission and operating expenses.
ii. Cash flow from investing activities:
Decrease in cash flow from investing activities by 3,560 crore mainly represents net increase in investment of funds in various securities such as government bonds, equity, corporate bonds/ paper, money market instruments and liquid mutual funds.
iii. Cash flow from financing activities:
There was a capital infusion of 2,000 crore during FY 2022-23 from (erstwhile) HDFC Ltd, along with sub-debt issuance of 350 crore. The Company paid dividend of 359 crore during FY 2022-23 and 408 crore in FY 2023-24. In the light of the above, there was a decrease in cash flow from financing activities by 2,388 crore.
III. Key Analytical Ratios: i. Profitability:
The following table sets forth, a break-up of underwriting profits into existing business surplus and new business strain and shareholders income over a period of three years:
(in crore)
| Particulars | FY 2021-22 | FY 2022-23 | FY 2023-24 |
Underwriting Profit: |
|||
| a) Existing business surplus | 3,485 | 4,422 | 5,221 |
| b) New business strain | (3,045) | (3,833) | (4,547) |
Total (I) |
440 | 589 | 674 |
| Shareholders surplus (II) | 768 | 771 | 895 |
Total (I+II) |
1,208 | 1,360 | 1,569 |
I. The overall underwriting profits increased from 589 crore in FY 2022-23 to 674 crore in FY 2023-24. Further, underwriting profits comprise of the below:
a) Existing business surplus represents profits emerging during the year from business over the years. The surplus increased by 18% in the current year.
b) New Business strain increased by 19% in the year- in line with change in business mix and expense increase observed in the year.
II. Shareholders income represents investment and other income arising on shareholders funds, net of expenses.
ii. Capital and Solvency Ratio:
j Networth Solvency
The movement in net-worth from 12,987 crore as on March 31, 2023 to 14,652 crore as on March 31, 2024 is largely due to profit transfer, dividend payouts and ESOP allotments. Further, there was additional capital infusion of 2,000 crore by (erstwhile) HDFC Limited in FY 2022-23.
As against a regulatory minimum requirement of 150%, we have a solvency ratio of 187% as on March 31, 2024 as compared to 203% as on March 31, 2023. The fall in solvency ratio in FY 2023-24 is on account of dividend payout of 408 crore in Q2 FY 2023-24, gradual shift towards longer duration contracts and market movements.
iii. Other ratios:
| Particulars | FY 2023-24 | FY 2022-23 |
| Interest coverage ratio | 28.43 | 26.08 |
| Debt equity ratio | 0.06 | 0.07 |
| Current ratio | 0.91 | 0.86 |
| Return on networth | 0.11 | 0.10 |
• Interest coverage ratio is calculated as Profit before interest and tax divided by interest expense due. Tax for the purpose of this ratio includes tax of the Company reduced by tax pertaining to the participating segment.
• Debt equity ratio is computed as Total borrowings divided by Equity. Equity is calculated as shareholders funds excluding redeemable preference shares, if any.
• Current ratio is computed as Current assets divided by Current Liabilities. Current Liabilities includes provisions.
Return on net worth is calculated as profit after tax divided by average net worth as on the reporting date. The ratio remained stable during the period.
E. Performance of Subsidiary Companies
I. HDFC Pension Management Company
HDFC Pension Management Company Limited ("HDFC Pension"), a wholly owned subsidiary of HDFC Life Insurance Company Limited, started its operations in August 2013. It is the fastest growing PFM (Pension Fund Manager) under the NPS architecture (YoY growth of 69.5% in AUM) with an AUM of 76,955 crore as on March 31, 2024. In FY 2019-20, HDFC Pension started its operation as a Point of Presence (POP) in both retail and corporate NPS segments. HDFC Pension opens National Pension Scheme (NPS) accounts through their Point of Presence (POP) channel. HDFC Pension closed FY 2023-24 with over 2,500 Corporates and over 3.2 lakh NPS customers.
II. HDFC International Life and Re Company
HDFC International Life & Re, a wholly-owned subsidiary in the Dubai International Financial Centre (DIFC), completed eight years of operations and has expanded its growth across GCC and broader MENA region. The business model continues to offer treaty and facultative led reinsurance solutions to cedents and client partners, across life and medical insurance lines. During the financial year 2023-24, HDFC International commenced it commercial operations of HDFC International Life and Re, IFSC Branch (HDFC Life International"), its first overseas branch located at Gujarat International Finance Tec (GIFT City) - IFSC, India. Since its launch, an array of innovative life and health insurance plans have been introduced to address the needs of global Indians including NRIs, PIOs and resident Indians.
For the financial year 2023-24, HDFC International Life and Res Gross Written Premiums (GWP) of USD 24.4 million registered a 42% y-o-y growth, which includes business from both reinsurance and direct insurance lines of business. For the period under review, HDFC International Life and Re reported a Net Profit of USD 0.33 million on a consolidated basis, including the GIFT city branch. Further, S&P Global Ratings assigned its "BBB" insurer financial strength rating to HDFC International Life and Re for the sixth consecutive year.
F. Internal control systems and their adequacy
The Company has institutionalised a robust and comprehensive internal audit framework and independent review mechanism across all the processes and systems to ensure reliability of financial reporting, timely feedback on achievement of operational and strategic goals and, compliance with applicable policies, procedures, laws, and regulations.
The Internal Audit function at HDFC Life works closely with other governance functions, considering relevant
material inputs from risk management framework, compliance reports and external auditor reports etc. The Internal audit function also facilitates selfassessment of adequacy of internal financial controls.
Internal audits are conducted by in-house Internal Audit (IA) team and by the co-sourced auditor (an external chartered accountant firm). The internal audit planning activity ensures coverage of Companys information systems, business processes and transactions across corporate and branch offices. All significant audit observations and follow-up actions thereon are periodically reported to the Audit Committee and closely monitored for effective implementation.
The Company has a well-established Enterprise Risk Management (ERM) framework to actively manage all material risks. The ERM framework aligns the Companys strategy and business decisions with its risk appetite. The ERM framework covers financial, insurance, operational, fraud, data privacy, information security, business continuity and emerging risks to drive a risk intelligent culture across the organisation. This framework is detailed under the ERM section (Audit & Risk Management chapter) of the Annual Report.
ERM is implemented through a well-defined risk management policy,whichestablishesthe governance framework to enable identification, measurement, mitigation and reporting of all material risks of the Company. Key risks are monitored and status reported to the Risk Management Council (comprising the Executive Committee and key stakeholders). The Risk Management Council reports to the Board Risk Management Committee (RMC). On a quarterly basis, status and mitigation plans (where applicable) pertaining to top corporate and emerging risks are reported to the RMC.
IIFL Customer Care Number
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1860-267-3000 / 7039-050-000
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+91 9892691696
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