HDFC Life Insurance Company Ltd Management Discussions

A. MACROECONOMIC TRENDS

Financial year 2025-26, was a year where Indias domestic growth drivers came to the fore and helped sustain the growth in economic activity, despite the elevated level of volatility and uncertainty in the global economic and trade flows.

Global trade dynamics during the year were marked by significant tariff-related uncertainty, leading to disruptions in export flows and heightened volatility across markets. The extended period of negotiations with the USA led to export contraction from the affected sectors and caused concerns for Indias growth outlook. The major portion of the brunt was borne by smaller companies in the textile, jewellery and sea-food sectors, which also are labour intensive industries.

Despite the extended period of punitive tariffs on India, and the associated hit to exports, economic growth sustained its improvement over the previous year. The Government had reduced direct tax rates for a large segment of tax assesses in the Budget for FY 2025-26. This was followed up with a rationalisation and easing of GST rates, in the middle of the year. The RBI, also contributed to shoring up growth through a series of rate cuts, with a cumulative 125 bps of rate cuts over the course of calendar year 2025.

Apart from the fiscal and monetary measures, the Government also concluded discussions for trade agreements with a number countries, with the key ones being the UK and the EU. The benefits of these agreements are expected to accrue in the coming years.

While the direct and the indirect tax cuts helped boost private consumption, the Government sustained the high growth in public capital expenditure through the current year as well. Based on the strength in these two drivers of the economy, growth for the year FY 2025-26 landed at 7.7%, a meaningful pick-up over the 7.1% recorded in the previous year.

The other key feature of the economy during the year was the benign inflation trends. While headline inflation fell to multi-year low of 0.25% in October, primarily led by deflation in food prices, core inflation, which excludes food and energy components, also stayed benign, in the 3.0% to 4.0% range through the year. The average inflation of the full year of 2025-26 is estimated at 2.1%.

Notwithstanding the pickup in the economy, along with benign inflation, Foreign Portfolio Investors were net sellers of Indian equities for the full year. Total net sales by FPIs topped Rs. 2 trillion for the full year. However, Domestic Institutional Investors were large buyers of equities, which not only absorbed the large FPI selling, but also were able to absorb the large supply in the primary market without any meaningful price impact. Total DII purchases during the year exceeded

~8.6 trillion.

Not long after the US tariff induced volatility had died down, the global economy was severely jolted by the break-out of war between the US and Israel against Iran.The conflict halted shipping through the Strait of Hormuz, a key route for global oil, gas, metals, and fertilisers. Energy prices spiked immediately, raising concerns over petroleum supply. For India, which imports 80–90% of its energy, the surge poses a threat to the current account deficit, currency stability, growth prospects, and inflation.

Outlook on the Life Insurance Industry in India

The global environment has become more uncertain in recent months, driven by heightened geopolitical tensions, particularly in West Asia, along with disruptions in energy markets and global supply chains. While Indias underlying fundamentals remain resilient and stronger relative to past periods, the shorter-term outlook is likely to be shaped by these developments, with near-term growth facing real headwinds, even as domestic consumption and investment continue to provide support.

In such an environment, while some moderation in savings and financial decision-making is not unusual, we believe the life insurance sector remains relatively well-positioned. The nature of our products, combining protection, long-term savings and guaranteed outcomes, tends to find stronger relevance during periods of uncertainty. As a result, while demand in the near term may be impacted, we expect the sector to demonstrate resilience, underpinned by its long-term orientation and the fundamental nature of the needs it addresses.

Key Opportunities

I. Growing workforce and burgeoning upper-middle income category

India being the worlds most populous country, is also one of its youngest, with a median age of 28 years. As per United Nations population projections, the eligible working-age cohort (15-64 years) in India comprises approximately ~100 crore individuals, accounting for 68% of the nations population. Further, approximately 25% of the incremental global workforce over the next decade will come from India. Consequently, India holds considerable potential to benefit from its demographic dividend.

The rise of upper middle-income households (per capita income between USD 4,000- USD 12,000 as per World Bank) will be a defining trend. The next seven fiscal years (2025-2031) will see the Indian economy crossing the Rs. 5 trillion mark, inching closer to Rs. 7 trillion. A projected average expansion of 6.7% in this period will make India the third-largest economy in the world and lift per capita income to ~USD 4,500 i.e., to the upper middle-income category by 2031. This will translate to increase in consumption and financialisaton of savings.

Financial inclusion and economic expansion beyond metro areas are evident in deposit trends. Bank deposits in semi-urban areas emerged as key driver of deposit growth in FY 2025-26. Bank deposits in these regions recorded 68% year-on-year rising from Rs. 1 lakh crore in H1 FY2024-25 to Rs. 1.7 lakh crore in H1 FY2025-26. Rural areas recorded a similarly strong performance. Deposits increased 40% from

Rs. 70,000 crore in H1 FY2024-25 to Rs. 98,000 crore in H1 FY 2025-26. The pick-up reflects steady income flows, improved financial inclusion and rising economic activity outside large cities.

The life insurance sector plays a crucial role in channelling long-term savings while offering protection, income security, and annuity solutions. By 2030, over 100 crore individuals will fall within the insurable age bracket of 20 to 64 years, reinforcing the demand for savings and protection products. With a growing upper middle class, an expanding workforce and enhanced financial inclusion and literacy, insurance penetration is set to rise, driven by greater awareness and improved access to financial services.

India continues to remain materially underinsured in life insurance compared to global peers, both on penetration and density metrics. Despite being one of the fastest-growing major economies, insurance penetration in India stood at only 2.7% in 2025, while the countrys protection gap remains among the highest globally at 91%. In addition, sum assured as a proportion of GDP is significantly lower than that of most emerging and developed markets, highlighting the large unmet need for financial protection and long-term savings solutions.

The protection landscape in India has evolved steadily over the years, shaped by rising income levels, changing consumer awareness, regulatory interventions, and shifts in product preferences. At the same time, Indias heterogeneous demographic and socio-economic profile has resulted in varying levels of insurance adoption across regions, customer segments, and income cohorts. This creates a sizeable long-term opportunity for the life insurance industry. Insurers can deepen market penetration by designing need-based and customer-centric solutions across categories - pure term plan, protection embedded savings plan, return of premium term plan, riders and credit protect. Growth can further be accelerated through expansion of multi-channel distribution networks, greater use of digital and hybrid engagement models, and improved accessibility across underpenetrated geographies. Increasing financial awareness, formalisation of the economy, and favourable demographic trends is also expected to support sustained growth in insurance demand over the medium to long term.

Further, Indias economic growth further reinforces the potential for insurance expansion. India recorded the highest five-year average GDP growth rate amongst large economies, with per capita income crossing the USD 2,000 threshold in 2021 – an inflection point that typically marks a shift from subsistence spending to discretionary investments. Despite global uncertainties, Indias economy has remained resilient, and is estimated to deliver GDP growth of 6.5% in FY 2025-26, outperforming other major economies. According to Swiss Re, life insurance premiums in India are expected to grow at 6.8% annually (in real currency terms) from 2026-2030.

A favourable macroeconomic environment, rising awareness of life insurance, increasing financial savings, urbanisation, and accelerating digital adoption are all expected to drive sustained demand for life insurance. Additionally, growing credit penetration presents an opportunity for expanding credit life insurance solutions.

III. Increasing life expectancy and lack of proper retirement planning Indias pension market is under-penetrated at 3%¹ of GDP

Source: Swiss Re: A Retirement lifeline (2023), OECD (2021), Milliman Asia Retirement Report 2017, Survey by NSSO, MoSPI, United Nations 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)

Indias workforce is increasingly responsible for its own retirement security, especially in the private sector. As per Mercer–CFA Institute Global Pension Index 2025 Indias pension architecture covers less than 25% of its workforce, among the lowest globally. Traditional pension guarantees have largely disappeared outside government employment. Further, the increase in life expectancy and inflation rates has made retirement planning more important than ever before.

The proportion of the elderly population (>65 years) is expected to rise to nearly 15% by 2050, with a significant portion lacking coverage under formal social security schemes. Compared to global benchmarks, Indias overall pension market remains significantly underpenetrated at just 3% of GDP.

This presents a significant opportunity for insurers to offer long-term income and annuity products that align with customers financial goals and risk appetites. Additionally, the governments push for National Pension System (NPS) solutions further enhances the growth potential for annuity products. We remain optimistic about this segment and expect strong growth momentum in the coming years.

IV. Financialisaton of savings

Indias total household wealth, by the end of FY 2024-25 stood at Rs. 1,300-1,400 trillion. Of this, investable financial assets stand at ~35% of the total, growing at nearly 17% over last 5 years, according to a recent Bain–Groww report, titled How India Invests.

In the long run, rising personal disposable incomes are expected to drive higher household savings, which will be allocated across various financial instruments, including life insurance. While the share of life insurance as a percentage of GDP has remained largely stable over the past decade, its role in financial planning continues to grow.

Government initiatives aimed at promoting financial inclusion — such as the establishment of small finance banks, payments banks, and the introduction of low-cost insurance schemes — have contributed to greater insurance awareness. Flagship programs like the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), which has provided affordable cover to millions of low-income individuals, exemplify this progress. In parallel, rising credit penetration is expected to drive greater demand for protection-oriented products, enabling households to better manage financial risks and vulnerabilities.

V. Digitisation

Rapid technological advancements are redefining how businesses operate, with both customers and distributors seeking seamless, end-to-end digital experiences. Technology and data have become indispensable — not only for elevating the customer journey but also for enabling sharper underwriting as life insurers tap into new segments and geographies.

Digital capabilities now play a pivotal role in acquiring new business, enhancing service delivery, streamlining claims processing, and reinforcing risk management. Today, ‘online is no longer just a distribution channel — it is embedded at the core of business operations. The pace of digital adoption has further accelerated in response to structural shifts such as the COVID-19 pandemic and demonetisation.

As customers and partners become increasingly digital-first, insurers must invest in robust technological infrastructure and agile platforms powered by data analytics, automation, and artificial intelligence. Seamless integration with partner ecosystems — ranging from bancassurance to fintech and health-tech — is critical to enabling scale and efficiency.

Moreover, the growing demand for personalised and intuitive service experiences is driving adoption of cloud computing, AI & machine learning, and conversational bots, all of which support a more proactive, data-driven approach to customer engagement.

Risks and Concerns

The industry is exposed to risks stemming from changes in macro-economic and regulatory landscape and intense competition. Market fluctuations, changes in tax policies or interest rates, and disruptions in relationships with key distribution partners can impact financial performance and future growth prospects.

To address these challenges, we have a robust Enterprise Risk Management (ERM) framework that governs and manages all aspects of probable risks faced by the industry. A detailed overview of our ERM framework is available in the chapter on Enterprise Risk Management.

B. LIFE INSURANCE INDUSTRY OVERVIEW

I. Overview

The life insurance industry has witnessed substantial transformation over the past decade, marked by a steady increase in market share for private insurers in individual weighted received premium (WRP). This evolution has been driven by shifts in distribution and product offerings, with technology playing a pivotal enabling role.

During FY 2025-26, the industry recorded 16% growth in new business premiums, reaching Rs. 4,597 billion compared to Rs. 3,973 billion in FY 2024-25. The industry registered 10% growth based on individual weighted received premium (WRP) and 19% growth in group business. Private insurers achieved 17% growth in total new business premium, 12% growth in individual WRP, while group business grew by 24% year-on-year.

The market share of private players in the individual segment rose to 72%, an increase of nearly 600 bps in last 3 years. The growth can be attributed to the expansion of distribution channels and ongoing product innovation.

Based on data for FY 2025-26 from the Life Insurance Council, the top 10 insurers accounted for 89% of the market (in terms of individual WRP). Distribution arrangements with large banks and development of proprietary channels have been key drivers of growth for most of the large insurers.

II. Product Mix across Private Insurers

Product mix¹

In recent years, private insurers have increasingly focussed on the unit-linked segment within the individual business, driven by strong performance in equity markets. There is also a growing emphasis on both the retirement and protection segments, with the protection business experiencing strong growth aided by GST change in September 2025. Several propositions are driving this growth, including embedded protection in savings plan, return of premium propositions, higher rider attachment and expansion of credit protect offerings.

Source: 1. Based on Individual New business premia for all private players

The industry has undergone a gradual shift in its distribution strategy, with bancassurance becoming the primary channel, supported by a larger bank branch network and the increasing geographic reach of life insurance branches across Indian cities. This strategic evolution underscores the pivotal role of banks in life insurance proliferation. By leveraging their extensive network and large customer base, life insurers have increasingly extended financial security to a wider range of customers while also investing in their own proprietary channel to diversify growth opportunities.

As the business continues to expand, there remains substantial potential for increased policy penetration, particularly in Tier 2 and 3 locations where bank and agency channels are progressively extending their market presence. In recent years, the broker channel has grown significantly, supported by increased customer adoption of digital platforms including web aggregators and modern fintech distribution platforms. Direct distribution by insurers is outpacing other channels, supported by a strategic emphasis on cross-sell/up-sell initiatives and scaling proprietary platforms to boost profitability.

C. HOW ARE WE TRACKING BUSINESS PERFORMANCE?

During FY 2025-26, we continued to maintain our position amongst the top three private insurers by individual WRP. Our private sector market share stood at 15.1% for FY 2025-26. We outperformed the broader industry in 2 key focus areas: The first one being retail protection which grew 43%, and the second one being agency channel which also grew ahead of industry.

Retail protection mix expanded by nearly 200 basis points year-on-year to 7.2% in FY 2025-26, and including riders, protection now contributes nearly 10% of our retail business. We also saw an improvement in ticket sizes post GST, with customers opting for higher levels of sum assured.

Further, the ongoing build-up of the agency channel was a strong story of the year. Agency grew faster than the Company growth, by 500 bps, maintaining a strong protection mix. We have added more than 250 branches over the last 30 months with business from these new branches, contributing to approximately 13% of the agency channels topline. Our focus is now firmly shifting from expansion to productivity, activation, and branch-level profitability. This should support a more sustainable and higher-quality contribution from the channel going forward.

As we enter FY 2026-27, the GST transition is largely complete, the yield curve is supportive for non-par, our agency channel is stronger today than it was a year ago in terms of reach, productivity and quality of business, protection portfolio is structurally larger and more meaningful than at any prior point in our journey.

D. STANDALONE PERFORMANCE OVERVIEW

During FY 2025-26, we continued to maintain our position amongst the top three insurers by individual WRP. Our private sector market share stood at 15.1% for FY 2025-26. We outperformed the industry in 2 key focus areas: The first one being retail protection which grew 43% YoY, and the second one being agency channel which also grew ahead of the sector. Further, retail sum assured growth for FY 2025-26 was higher than the industry, reinforcing the quality of our business mix. We began FY 2025-26 as expected, with H1 growth being ahead of the industry and Q3 broadly in line with our expectations. But witnessed some slowdown in Q4, reflecting a more challenging operating environment. However, proprietary channels buckled the trend delivering a healthy growth of 15-16% in Q4 as well as in FY 2025-26, and we thus delivered a full year Individual APE growth of 7% YoY. Our customer acquisition metrics remained healthy with over 70% of new customers onboarded during the year being first-time buyers with HDFC Life, and we insured over 4.6 crore lives during FY 2025-26. Embedded Value stood at Rs. 62,139 crore. Operating RoEV for the period was 15.0%. Profit after tax for the period stood at Rs. 1,910 crore. PAT excluding GST and labour code impact would have shown a growth of 16%. Renewal collections saw steady growth of 15% during the year, reflecting the continued stability of the in-force book. On persistency, the 13-month ratio moderated by 200 basis points to 85% during the year, broadly in line with the evolving business mix. The 61-month persistency remained robust at 64%, improving by 100 basis points year-on-year, reflecting the continued strength of the long-duration savings book.

Overall, while near-term growth has been influenced by the factors discussed, we believe our focus on continued investments in distribution, product competitiveness, partner engagement and pricing discipline positions as well to deliver more sustainable and profitable growth as the environment normalises. Our aspiration to outpace industry new business and VNB growth remains unchanged.

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 non-par 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 8/9^th of the surplus generated from this segment, which is added to the policy as bonuses. The shareholders share of surplus is 1/9^th 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-Participating 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. 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.

II. Performance of Standalone Financial

Statements:

The standalone results presented below includes detailed analysis across key financial parameters tracked by the Company.

A) Income statement analysis:

Gross premium income registered a steady growth of 12%, supported by consistent performance across both individual and group segments. Correspondingly, expenses of management increased in line with overall premium growth, driven by measured investments in expanding distribution and on enhancing technology capabilities. The Profit after Tax (PAT) for the Company stood at Rs. 1,910 crore.

Income statement

Revenue and Profit and Loss Account	FY	2025-26	FY 2024-25	Growth
Gross Premium Income		79,387	71,045	12%
Reinsurance (net)		(2,072)	(1,429)	45%
Total Premium Income (Net)		77,315	69,616	11%
Income from Investments
Policyholders		20,175	25,945	-22%
Shareholders		1,478	1,125	31%
Income from Investments		21,653	27,070	-20%
Other Income
Policyholders		347	283	23%
Shareholders		-	-	-
Total Income (A)		99,315	96,969	2%
Less:
1. Expense of Management:
a. Commission		9,127	7,835	16%
b. Operating Expenses		7,712	6,235	24%
2. GST on linked charges		263	489	-46%
3. Interest on Non-convertible debentures		220	117	88%
4. Expenses towards CSR activities		12	11	9%
5. Penalties		0	2	-100%
6. Other Provisions		27	95	-71%
7. Benefits and Change in Valuation:
a. Benefits Paid		38,323	39,346	-3%
b. Change in Valuation Reserves (net)		42,433	41,516	2%
c. Change in funds for future appropriations		(851)	46	-1950%
Total Expenses (B)		97,266	95,692	2%
Provision for tax:
Policyholders		94	(588)	-116%
Shareholders		45	64	-30%
Provision for tax (C)		139	(524)	-127%
Profit after tax (A-B-C)		1,910	1,802	6%

i. Premium earned:

The following table sets forth summary of premium income at segment-level for the periods indicated:

Particulars	FY 2025-26				FY 2024-25
	Par	Non-Par	Linked	Total	Par	Non-Par	Linked	Total	Growth
New Business Premium	3,523	20,828	11,745	36,096	2,568	21,076	9,721	33,365	8%
Individual	3,523	7,442	7,286	18,251	2,568	8,334	5,984	16,886	8%
Group	-	13,386	4,459	17,845	-	12,742	3,737	16,479	8%
NBP growth (%) as compared	37%	-1%	21%	8%	-3%	1%	56%	13%	-
to PY
Renewal Premium	11,845	18,982	12,464	43,291	11,449	16,210	10,021	37,680	15%
Individual	11,845	18,606	12,464	42,915	11,449	15,904	10,021	37,374	15%
Group	-	376	-	376	-	306	-	306	23%
Gross Written Premium	15,368	39,810	24,209	79,387	14,017	37,286	19,742	71,045	12%
Less: Reinsurance ceded	(21)	(1,948)	(103)	(2,072)	(17)	(1,360)	(52)	(1,429)	45%
Net Premium	15,347	37,862	24,106	77,315	14,000	35,926	19,690	69,616	11%

Summary of premium income at segment level:

Gross written premium increased by 12% from

Rs. 71,045 crore in FY 2024-25 to Rs. 79,387 crore in FY 2025-26. This growth was primarily driven by our continued focus on addressing customer needs through a diverse, innovative product suite and a robust multi-channel distribution strategy. Our portfolio now includes 49 retail and 17 group products, complemented by 15 riders, catering to savings, investment, protection, and retirement goals. During the year, we added 12.88 lakh new retail individual policies.

a) Individual New Business Premium:

Individual new business premium grew by 8% from Rs. 16,886 crore in FY 2024-25 to Rs. 18,251 crore in FY 2025-26. The Unit Linked segment registered a robust 21% year-on-year growth, despite weak equity market performance, reflecting a notable shift in customer preference and sustained demand for market-linked products. b) Group New Business Premium:

Group new business premium grew by 8% from

Rs. 16,479 crore in FY 2024-25 to Rs. 17,845 crore in

FY 2025-26. The growth was largely led by growth in group credit protect business, in line with higher credit disbursements during the year.

c) Renewal Premium:

Renewal premium recorded a healthy growth of 15%, increasing from Rs. 37,680 crore in FY 2024-25 to Rs. 43,291 crore in FY 2025-26. This was supported by an expanding back book of business over past years.

Distribution channel mix

The ongoing build-up of the agency channel was a strong story of the year. Agency grew faster than the Company by 500 bps, maintaining a strong protection mix. We have added more than 250 branches over the last 30 months with business from these contributing to approximately 13% of the agency channels top line. Our focus is now firmly shifting from expansion to productivity, activation, and branch-level profitability. This should support a more sustainable and higher-quality contribution from the channel going forward.

On the other hand, partnership channels experienced elevated volatility during the year, driven by a combination of factors including heightened competitive intensity and a moderation in operating environment in select banca partners. In response, we exercised discipline by stepping away from select business within these channels where competition became particularly intense, posing risk to margins.

ii. Reinsurance ceded

The Company collaborates with the reinsurers to share underwritten risk. The reinsurance premium ceded increased from Rs. 1,429 crore in FY 2024-25 to Rs. 2,072 crore in FY 2025-26. The increase is largely due to new reinsurance treaties entered by the Company to cover additional businesses of Group credit protect and micro-financial institution (MFI) segment during the year.

iii. Income from Investments

The following table sets forth, for the periods indicated, summary of income from investments:

Particulars	FY 2025-26					FY 2024-25
	Policyholders					Policyholders
	Par	Non-Par	Linked	Shareholders	Total	Par	Non-Par	Linked	Shareholders	Total
Interest Income	3,155	7,591	1,442	1,140	13,328	2,915	6,273	1,353	981	11,522
Dividend Income	341	37	837	44	1,259	292	32	801	35	1,160
Profit on sale / redemption of investments	1,448	126	8,307	293	10,174	1,192	232	11,112	160	12,696
(Loss on sale / redemption of investments)	-133	-82	-1,172	-6	-1,393	-109	-250	-559	-14	-932
Transfer / gain on revaluation / change in fair value	-79	-251	-9,188	0	-9,518	17	169	-4,332	0	-4,146
Amortisation of premium/ discount on investments	895	6,532	367	7	7,801	843	5,631	333	-37	6,771
Total income from Investments	5,627	13,953	593	1,478	21,651	5,150	12,087	8,708	1,125	27,070

a) Policyholders:

Non-Linked Segments (Par and Non-Par):

Interest and amortisation income from the participating and non-participating segments increased from Rs. 15,662 crore in FY 2024-25 to

Rs. 18,173 crore in FY 2025-26, driven by higher assets under management (AUM), supported by strong renewal premium inflows.

Dividend income increased from Rs. 324 crore in the previous year to Rs. 378 crore, primarily on account increased equity AUM and improved dividend pay-outs from investee companies. Net profit on sale of investment/redemption of investments increased from Rs. 1,065 crore in FY 2024-25 to Rs. 1,359 crore in FY 2025-26, on account of higher realisations on sale of investment assets.

Unit linked segment:

Investment income in the Unit Linked segment declined from Rs. 8,708 crore in FY 2024-25 to

Rs. 593 crore in FY 2025-26, primarily due to a sharp reduction in mark-to-market gains. This was largely driven by weaker equity market performance during the year, with the BSE Sensex declining by 7% as against a 5% increase in the previous year, while the BSE 100 recorded a lower growth of 5%, compared to a 5.5% increase in FY 2024-25.

The decline in equity returns resulted in lower fair value change as well as lower realisations from the sale of investments. Gains from the debt portfolio were also lower, reflecting adverse movements in the bond market with the 10-year G-Sec yield increasing by 38 basis points during the year compared to a 47 basis point decline in the previous year.

It is pertinent to note that investment income in the Unit Linked segment is offset by a corresponding increase in actuarial reserves, and accordingly does not have any impact on the profit or loss for the year. b) Shareholders:

Interest and amortisation income in the shareholders account rose from Rs. 944 crore in FY 2024-25 to Rs. 1,147 crore in FY 2025-26, driven by the expansion of the fixed income portfolio in line with growth in shareholders AUM.

Net profit from the sale and redemption of investments increased from Rs. 146 crore to Rs. 287 crore, reflecting higher realisation of profit in the equity portfolio.

Time Weighted Rate of Return (TWRR) for policyholders and shareholders accounts are given in detail below:

Particulars	FY 2025-26	FY 2024-25
Investments:
Policyholders Investments	3,55,143	3,17,895
Shareholders Investments	20,055	18,386
A. Without Unrealised Gains/Losses
Shareholders Funds	8.04%	7.22%
Policyholders Funds
- Non-Linked
a) Participating	8.21%	8.23%
b) Non-Participating	9.45%	9.69%
- Linked - Non-Participating	10.56%	17.73%
B. With Unrealised Gains/Losses
Shareholders Funds	4.99%	8.94%
Policyholders Funds
- Non-Linked
a) Participating	0.97%	8.91%
b) Non-Participating	(3.86%)	10.80%
- Linked - Non-Participating	(0.93%)	7.86%

In FY 2025-26, Time-Weighted Rate of Return (TWRR) excluding unrealised gains/losses increased for the shareholders account were driven by proportionately higher profit realisation on sale of investment assets.

Conversely, TWRR excluding unrealised gains/ losses for the Non-Linked Non-Participating,

Non-Linked Non-Participating policyholders and Linked Non-Participating policyholders saw a decline due to relatively lower profit realisation.

TWRR including unrealised gains/losses declined across both policyholder and shareholders accounts, primarily due to weak equity market performance, with the BSE Sensex declining by

7% during the year compared to 5% rise in the previous year, and the BSE 100 falling 5% compared to a 5.5% rise in FY 2024-25. Additionally, the debt portfolio witnessed negative fair value changes owing to an increase of 38 basis points in the

10-year G-Sec yield, in contrast to a 47-basis point decline in FY 2024-25.

iv. Other income:

Other income mainly comprises interest on policy loans, revival fees, and income on unclaimed amount of policyholders amongst others. The interest income on policy loan increased from Rs. 204 crore in FY 2024-25 to Rs. 244 crore in FY 2025-26, on the back of increasing loan book. Other increase is on account of higher revival fees during the year.

v. Commission:

The summary of commission expense is as follows:

Particulars	FY 2025-26				FY 2024-25
	First year	Single	Renewal	Total	First year	Single	Renewal	Total
Premium	13,879	22,217	43,291	79,387	12,976	20,389	37,680	71,045
Commission	5,370	3,083	674	9,127	5,860	1,385	RIGHT>590	7,835
Commission % of premium	38.7%	13.9%	1.6%	11.5%	45.2%	6.8%	1.6%	11.0%

Commission expenses are primarily influenced by the product type, distribution channel, premium payment term, and performance-linked incentives for individual agents and intermediaries. Accordingly, any shift in the mix of these variables can impact overall commission pay-outs.

The total commission increased from Rs. 7,835 crore in FY 2024-25 to Rs. 9,127 crore in FY 2025-26 which was in line with the Board-approved Commission and Remuneration Policy and in accordance with the IRDAI (Expenses of Management, including Commission of Insurers) Regulations, 2024.

vi. Operating Expenses

The following table sets forth, for the periods indicated, summary of operating expenses:

Particulars	FY 2025-26	FY 2024-25	Growth %
Employees remuneration & welfare benefits	3,926	3,198	23%
Advertisement and publicity	498	1,042	-52%
Business development expenses	502	258	95%
Information technology expenses	364	335	9%
Others
Volume-based	286	217	32%
Other expenses	2,115	1,171	81%
Operating Expenses Policyholders (A)	7,691	6,222	24%
Operating Expenses Shareholders (B)	32	26	23%
Operating Expenses (A+B)	7,723	6,248	24%
Interest on Non-Convertible Debentures	220	117	88%

a) Operating expenses under Policyholders Revenue account:

The total operating expenses increased from

Rs. 6,248 crore in FY 2024-25 to Rs. 7,723 crore in FY 2025-26, leading to an increase in ratio of operating expenses to total premium from 8.8% in FY 2024-25 to 9.7% in FY 2025-26. During the year, the Company has continued to invest in newer partnerships, employees and technology.

• Employee Remuneration:

Employee cost increased Y-o-Y primarily due to increase in sales resources towards deepening distribution network, increase in replacement cost, annual salary increments for the year and one-time retrospective impact of change in labour laws in FY 2025-26

• Advertisement and Publicity Spends:

Lower spends on marketing and branding activities during the year was in line with the annual spending plan, reflecting a calibrated approach towards cost optimisation and expense rationalisation.

• Business Development Expenses:

Business development expenses mainly comprise of events, contest and engagement initiatives. The increase in spend corresponds with growth in new business volumes

• Information Technology Expenses:

Higher technology expenses were driven by investments in product testing, application development, cloud-based projects, and deployment of digital assets, supporting ongoing digital transformation

Expenses of Management (EOM) consists of Commission and Operating expenses of policyholders. Below is the comparison of EOM for current year vs previous year:

Particulars	FY 2025-26	FY 2024-25
Premium	79,387	71,045
Commission (A)	9,127	7,835
Operating Expenses (B)	7,723	6,248
Total Expenses	16,850	14,083
of Management
Ratio of EOM to Premium	21.2%	19.8%

Overall, the EOM ratio as a percentage of Premium has increased from 19.8% in FY 2024-25 to 21.2% in FY 2025-26.

b) Operating expenses in Shareholders account:

• Expenses other than those directly related to insurance business increased by 23% from Rs. 26 crore in FY 2024-25 to Rs. 32 crore in FY 2025-26 mainly due to interest compensation paid to policyholders

• Interest expense on non-convertible debentures increased from Rs. 117 crore in FY 2024-25 to Rs. 220 crore in FY 2025-26 due to issuance of additional debt amounting to Rs. 749 crore during the year

vii. Benefits paid:

The following table provides the summary of benefits paid:

Particulars	FY 2025-26				FY 2024-25
	Par	Non-Par	Linked	Total	Par	Non-Par	Linked	Total
Surrenders & Withdrawals	1,229	4,109	10,403	15,741	1,111	4,874	11,827	17,812
Maturity & Survival Benefits	2,789	4,696	4,653	12,138	2,653	3,632	5,189	11,474
(incl. Annuity)
Protection Claims (Death,	355	5,313	436	6,104	377	5,388	439	6,204
Health & Rider)
Discontinuance Termination	-	-	2,255	2,255	-	-	1,929	1,929
Bonus	3,632	-	-	3,632	3,099	-	-	3,099
Total Benefits paid	8,005	14,118	17,747	39,870	7,240	13,894	19,384	40,518
Less: Reinsurance on claims	(14)	(1,476)	(57)	(1,547)	(21)	(1,109)	(43)	(1,174)
Net benefits paid	7,991	12,642	17,690	38,323	7,219	12,785	19,341	39,344

Benefits paid declined marginally from Rs. 39,344 crore in FY 2024-25 to Rs. 38,323 crore in FY 2025-26. While maturity benefits and discontinuance pay-outs increased during the year, the overall movement was offset by lower surrender and withdrawal pay-outs. The detailed movement in benefits paid is outlined below.

a) Surrenders and Withdrawals:

Surrenders and withdrawals decreased from

17,812 crore in FY 2024-25 to Rs. 15,741 crore in FY 2025-26. The surrenders and withdrawals by individual policyholders decreased from Rs. 12,685 crore to Rs. 11,895 crore largely on account of weaker performance of equity markets during the year. Surrenders and withdrawals from group policyholders also saw a decline, from Rs. 5,127 crore to Rs. 3,846 crore. b) Maturity and Survival Benefits (including

Annuity):

Maturity and survival benefits increased from

Rs. 11,474 crore in FY 2024-25 to Rs. 12,138 crore in FY 2025-26 in line with business written in the past.

c) Protection Claims (Death, Health & Rider):

The protection death claims has marginally decreased from Rs. 6,204 crore in FY 2024-25 to

Rs. 6,104 crore in FY 2025-26, representing strong underwriting principles followed by the Company with corresponding increase in reinsurance claims recovery from Rs. 1,174 crore in FY 2024-25 to Rs. 1,547 crore in FY 2025-26. Overall claim settlement ratio was 99.8% and the individual claim settlement ratio was 99.7% . d) Bonus:

Interim bonus increased from Rs. 2,435 crore in FY 2024-25 to Rs. 2,965 crore in FY 2025-26, in line with growth in the underlying participating business, including cash bonus. Terminal bonus also increased marginally from Rs. 664 crore to

Rs. 667 crore, primarily driven by higher 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:

Particulars	FY 2025-26	FY 2024-25
Gross: policy liabilities (non-unit/ mathematical reserves)	39,187	37,236
Amount ceded	(317)	(1,807)
in reinsurance
Amount accepted	-	-
in Reinsurance
Fund reserve	2,606	5,629
Funds for discontinued policies	957	458
Change in valuation of liability in respect of life policies	42,433	41,516

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 2025-26, the movement in fund reserve reflects the unrealised losses 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-unit linked segment other than fund reserve reflects the increase due to new business and renewal premium collection after considering release of reserves on account of benefits paid.

ix. Provision for tax

FY 2025-26 saw an increase primarily due to reversal of tax provision of earlier periods in FY 2024-25. The previous year included a reversal of tax provisions amounting to Rs. 631 crore, recognised following favourable tax orders received.

x. Change in funds for future appropriation (FFA)

FFA represents funds available for appropriation in case of deficit in the Par segment. During FY 2025-26, we witnessed higher mix of participating business leading to higher new business strain and thereby deficit in the Par segment. This deficit was funded from the FFA, which has led to the reduction in the FFA. c) Financial Position/Balance Sheet analysis:

The following table sets forth, for the periods indicated, the financial position of the Company:

Particulars	As on March 31, 2026	As on March 31, 2025
SOURCES OF FUNDS
Shareholders funds	17,696	16,126
Borrowings	3,099	2,950
Policyholders funds	3,57,801	3,19,200
Funds for future appropriations	406	1,258
Total	3,79,002	3,39,534
APPLICATION OF FUNDS
Investments	3,75,198	3,36,282
Loans	2,827	2,378
Fixed assets	737	601
Current assets (i)	11,257	9,872
Current liabilities and provision (ii)	11,017	9,599
Net Current Assets (i-ii)	240	273
Total	3,79,002	3,39,534
Contingent liabilities	1,870	2,386

Sources of Funds i. Shareholders funds:

The breakup of capital and reserves is as follows:

Particulars	As on March 31, 2026	As on March 31, 2025
Share Capital	2,158	2,153
Share application	1	1
money received pending allotment of shares
Reserves and Surplus	15,248	13,526
Credit / (Debit) Fair Value	289	446
Change Account
Shareholders fund (net worth)	17,696	16,126

Net worth increased from Rs. 16,126 crore as of March 31, 2025 to Rs. 17,696 crore as of March 31, 2026, driven by higher profit transfers, partially offset by dividend pay-outs during the year.

Fair value change account represents the balance of unrealised gains/ loss on valuation of equity portfolio in the shareholders fund. Marginal decrease in fair value change in shareholders account from Rs. 446 crore at March 31, 2025 to Rs. 289 crore mainly attributed to weaker performance of equity market during FY 2025-26.

ii. Borrowings:

During the year ended March 31, 2026, the company has exercised call option and redeemed in full, 6,000 unsecured, rated, listed, redeemable, fully paid-up, subordinated, non-convertible debentures (NCDs) aggregating up to Rs. 600 crore on July 29, 2025. Also, the Company has issued unsecured, subordinated, fully-paid, rated, listed, redeemable non-convertible debentures (NCDs) in the nature of ‘Subordinated Debt as per the IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations, 2024 amounting to Rs. 749 crore at a coupon rate of 7.63% per annum. The said NCDs were allotted on December 15, 2025 and redeemable at the end of 10 years from the date of allotment with a call option to the Company to redeem the NCDs post the completion of 5 years from the date of allotment and annually thereafter.

iii. Policyholders Funds:

Policyholders funds comprise two components: non-linked liabilities, which represent actuarially determined obligations to policyholders with in-force policies as of March 31, 2026, and linked liabilities, which reflect the aggregated Net Asset Value (NAV) of various unit-linked funds.

The summary of Policyholders funds is as below:

Particulars	As on March 31, 2026	As on March 31, 2025
POLICYHOLDERS FUNDS:
Credit / (Debit) Fair	2,961	6,795
Value Change Account
Policy Liabilities	2,49,648	2,10,778
Provision for	1,00,350	97,743
Linked Liabilities
Funds for discontinued policies	4,842	3,885
Funds for future appropriations	406	1,258
Total	3,58,207	3,20,459
Policyholders Funds

The increase in non-linked policy liabilities is in line with actuarial computed liability for existing in force policies as on March 31, 2026, 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 unrealised gains/losses due to mark to market portfolio. Further the movement in fair value change in non-linked fund represents the impact of movement in capital markets.

Application of Funds iv. 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:

Particulars	As on March 31, 2026	As on March 31, 2025	Growth %
Investments
- Shareholders	20,055	18,386	9%
- Policyholders	2,49,951	2,16,267	16%
(Non-Linked)
Assets held to cover	1,05,192	1,01,628	4%
Linked Liabilities
Total	3,75,198	3,36,282	12%

a) Shareholders Investments:

Shareholders investments increased from

Rs. 18,386 crore as on March 31, 2025 to Rs. 20,055 crore as on March 31, 2026, due to profit transfers net of dividend payout, realised investment income, and issuance of sub debt during the year.

b) Policyholders Investments including linked liabilities:

The Policyholders Investment including linked Policyholders fund increased by Rs. 37,248 crore. The increase in investment assets is in line with business growth, with an increase in non-linked investments primarily on account of premium income growth and investment income accruals.

v. Loans against Policy:

Loans against policies (net of repayments) rose from Rs. 2,378 crore as of March 31, 2025 to Rs. 2,827 crore as of March 31, 2026, reflecting increased uptake by policyholders seeking liquidity while continuing to retain their insurance cover. 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.

vi. Current Assets:

The following table sets forth, for the periods indicated, summary of current assets:

Particulars	As on March 31, 2026	As on March 31, 2025
Advances
Prepayments	159	175
Advance tax paid	941	889
Goods and Services	154	83
Tax Credits
Capital advances	11	18
Security deposits	174	145
Other advances	30	29
Other Assets Income accrued on investments	3,808	3,236
Outstanding Premiums	1,641	1,388
Due from other entities carrying on insurance business (including reinsurers)	47	82
Due from subsidiaries/ holding company	3	3
Investment sold awaiting settlement	169	44
Assets held for unclaimed amount of policyholders (including income)	27	27
Goods and Services	466	350
Tax/Service
Tax Deposits
Derivative Assets	-	1,537
Margin Money on Derivative	1,604	-
Others	100	96
Cash and Bank Balance	1,923	1,770
Total current assets	11,257	9,872

Key items of current assets and advances are:

a) Advance Tax Paid:

Advance tax payments rose to Rs. 941 crore in FY 2025-26 from Rs. 889 crore in FY 2024-25. The increase is on account of incremental advance tax and TDS pertaining to FY2025-26.

b) Outstanding Premium:

Outstanding premiums increased due to a higher base of policies that remained within the 30-day grace period.

c) Accrued Investment Income:

Accrued income from investments rose, driven by an increase in fixed income debt securities.

d) Investments Sold Awaiting Settlement:

This represents investment sales executed on the last business day of the year, pending settlement in accordance with the standard market cycle.

e) Assets Held for Unclaimed Amounts:

These assets reflect investments held against liabilities for unclaimed policyholder amounts.

f) Derivative Assets in Policyholders Fund:

Derivative assets decreased from Rs. 1,537 crore in FY 2024-25, with net derivative positions shifting towards a liability of Rs. 1,792 crore in FY 2025-26, accompanied by a rise in derivative margin, with margin balances shifting from Rs. 1,325 crore (Liabilities) to Rs. 1,604 crore (Asset). These changes were driven by adverse movements in the fair value of the underlying government bonds and fixed income derivative transactions.

The 10-year G-Sec yield increased by 38 basis points in FY 2025-26, in contrast to a decline of 47 basis points in the previous year, reflecting weaker debt market performance. The outstanding notional value of derivative contracts reduced from Rs. 46,009 crore to

Rs. 42,844 crore during the year.

vii. Current Liabilities and Provisions:

The summary of current liabilities is as follows:

Particulars	As on March 31, 2026	As on March 31, 2025
Current liabilities
Agents Balances	758	702
Balances due to other insurance companies (including Reinsurers)	442	130
Due to subsidiaries/ holding company	491	755
Premiums received in advance	67	50
Unallocated Premium	792	639
Sundry creditors	4,137	3,559
Claims Outstanding	922	1,141
Annuities Due	12	16
Unclaimed amount of policyholders	27	27
Investments purchased - to be settled	191	115
Interest payable on debentures/bonds	88	98
Payable to unit linked schemes	846	700
Derivative Liability	1,792	-
Margin Money on Derivative	-	1,325
Goods and Services	32	23
Tax Liability
Others	209	204
Provisions
Provision for employee benefits	208	112
Provision for taxation	3	3
Total current liabilities and provisions	11,018	9,599

Key components of current liabilities and provisions include the following:

a) Agent Balances:

Represent commissions payable to agents and intermediaries as of the balance sheet date. The increase aligns with overall business growth and corresponding commission accruals.

b) Amount Due to Subsidiary/Holding Company:

Primarily comprises name usage fees payable to the holding company, HDFC Bank Limited.

c) Unallocated Premium:

Refers to premiums received for policies pending issuance due to underwriting formalities or incomplete documentation.

d) Sundry Creditors:

Include accruals and payables for various services such as employee costs, marketing expenses, operating overheads, and litigation provisions.

e) Claims Outstanding:

Comprise claims that were intimated but not yet settled as on the reporting date.

f) Unclaimed Amounts:

The reduction reflects efforts made by the Company to trace and disburse funds to rightful policyholders, in line with revised IRDAI guidelines.

g) Others:

Include statutory dues such as tax deducted at source, proposal deposits, and unclaimed dividends.

h) Investments Purchased Awaiting Settlement:

Represent trades executed on the last business day of the financial year and pending settlement in line with market cycles.

i) Payable to Unit Linked Schemes:

Reflect business booked on the final day of the year under the Unit Linked segment. The increase is driven by higher transaction volumes on that day.

viii. Contingent liabilities:

The contingent liabilities are summarised in the table given below:

Particulars	As on March 31, 2026	As on March 31, 2025
Partly paid-up investments	5	583
Statutory demands and liabilities in dispute, not provided for	1,813	1,750
Claims against policies not acknowledged as debts by the Company (Net of reinsurance)	51	52
Others	1	1
Total	1,870	2,386

• Contingent liability relating to partly paid-up investments declined, primarily on account of settlement of call amounts as per scheduled 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

d) Cash Flow Statement:

The following table sets forth, for the periods indicated, a summary of the cash flows:

Particulars	FY 2025-26	FY 2024-25
Net cash generated from operating activities	22,502	15,598
Net cash generated used	(23,753)	(13,622)
in investing activities
Net cash generated from financing activities	(275)	1,607

i. Cash flow from operating activities:

Increase in cash flow from operating activities by Rs. 6,904 crore is primarily driven by premium received from policyholders net of payments towards benefits, commission and operating expenses. ii. Cash flow from investing activities:

Cash flow from investing activities represents investment/redemption 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:

The Company has issued sub-debt of Rs. 749 crore during the year and redeemed sub-debt of Rs. 600 crore. The Company paid dividend of Rs. 430 crore in FY 2024-25 and Rs. 454 crore in FY 2025-26.

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:

Particulars	FY 2023-24	FY 2024-25	FY 2025-26
Underwriting
Profit:
a) Existing business surplus	5,221	6,142	6,989
b) New business strain	(4,547)	(5,236)	(6,231)
Total (I)	674	906	758
Shareholders surplus (II)	895	896	1,152
Total (I+II)	1,569	1,802	1,910

1. The overall underwriting profits decreased from

Rs. 906 crore in FY 2024-25 to Rs. 758 crore in FY 2025-26. 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 14% in the current year.

b) New business strain increased in the year in line with the business growth along with the change in product mix observed through the year.

2. Shareholders income represents investment and other income arising on shareholders funds, net of expenses.

ii. Capital and Solvency Ratio:

The movement in net-worth from Rs. 16,126 crore as on March 31, 2025 to Rs. 17,696 crore as on March 31, 2026 is largely due to profit transfer, dividend pay-outs and ESOP allotments.

The Companys solvency ratio as at March 31, 2026 was 177% which was well above the minimum regulatory requirement of 150%. To further strengthen its capital position, the Board, at its meeting held on April 16, 2026, approved raising up to Rs. 1,000 crore through a preferential equity issue to the parent company, HDFC Bank.

iii. Other ratios:

Particulars	FY 2025-26	FY 2024-25
Interest coverage ratio	25.88	18.65
Debt equity ratio	0.18	0.18
Current ratio	1.02	1.03
Return on net worth	0.11	0.12

• 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. The reduction is on account of additional interest on debt raised during the year

• 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 Fund Management Limited

HDFC Pension Fund Management Limited (formerly "HDFC Pension Management Company Limited"), a wholly-owned subsidiary of HDFC Life, began operations in August 2013. It has emerged as one of the fastest-growing Pension Fund Managers (PFMs) within the National Pension System (NPS) ecosystem, recording a strong 35% year-on-year growth in Assets Under Management (AUM) during FY 2025-26.

Key financial parameters have been highlighted below:

Particulars	As on March 31, 2026	As on March 31, 2025	Growth %
Revenue	107.3	75.9	41%
Profit after Tax (PAT)	16.7	5.4	208%
Assets under	1,56,007	1,15,627	35%
Management
(AUM)
Market share	43.1%	43.2%	-

As of March 31, 2026, HDFC Pension manages assets under management (AUM) to the tune of Rs. 1.56 lakh crore — a testament to its strong performance and growing market trust.

Expanding its footprint further, HDFC Pension began operating as a Point of Presence (PoP) in FY

2018-19, offering seamless NPS account openings across both retail and corporate segments.

In just seven years, HDFC Pension has established itself as the largest PoP in terms of corporate relationships and corporate subscribers (excluding PoP employees). As of FY 2025-26, it proudly serves over 4,800 corporate clients and more than 7.3 lakh NPS customers — reflecting its growing leadership and unwavering commitment to helping India secure its retirement future.

II. HDFC International Life and Re Company

HDFC International, a wholly-owned subsidiary of the Company, was incorporated in 2016 in the Dubai International Financial Centre (DIFC). As a Life & Health (L&H) reinsurer incorporated in the DIFC and regulated by the Dubai Financial Services Authority (DFSA), HDFC International has established a growing presence across several international markets.

HDFC International provides reinsurance solutions across Life and Health through treaty and facultative arrangements. These services support a broad range of insurance product lines, including individual life insurance, group life insurance, group credit life insurance, health insurance, and travel insurance. The Company remains focussed on delivering solution-centric and value-added offerings to its ceding partners, enabling insurers to enhance and expand their business across target markets.

In addition to its DIFC headquarters, HDFC International has established an overseas branch at GIFT City - International Financial Services Centre (IFSC), operating under the brand name "HDFC Life International". The branch has completed 32 months of commercial operations as of March 31, 2026 and continues to demonstrate encouraging momentum in its business activities. From its base in GIFT City, IFSC, the branch offers US dollar-denominated Life & Health insurance products and solutions to non-resident Indians across the globe, further strengthening the Companys international presence and its ability to serve customers in global markets.

The Company has demonstrated steady growth under IFRS 4 AS, since its inception, with its gross written premiums (GWP) reaching USD 55 Mn in FY 2025-26, registering a 63% y-o-y growth, and maintaining a consolidated profit position. Insurance contract revenues have grown to 28% year-on-year from USD 31 Mn in FY 2024-25 to USD 40 Mn in FY 2025-26.

Further, S&P Global Ratings assigned an Insurer Financial Strength Rating of "BBB" to HDFC International for the eighth consecutive year. Apart from S&P Global Ratings, AM Best Ratings assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of "BBB" (Good) to HDFC International for the second consecutive year. The outlook assigned to both these Credit Ratings (ratings) are stable.

Furthermore, HDFC International received its certification on ISO/ IEC27001:2022 for Information Security Management Systems (ISMS) underscoring its commitment to excellence in technology and services.

F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

HDFC Life has established a robust and comprehensive internal audit framework, incorporating an independent review mechanism across all processes and systems. This framework ensures the reliability of financial reporting, provides timely feedback on operational and strategic goal achievement, and ensures compliance with applicable policies, procedures, laws, and regulations.

The Internal Audit function collaborates closely with other governance teams, integrating key insights from the risk management framework, compliance reports, and external auditor assessments. It also facilitates self-assessments to evaluate the adequacy and operational effectiveness of internal financial controls in line with the Sarbanes-Oxley (SOX) Act and the Companies Act.

Internal audits are conducted by an in-house Internal Audit (IA) team alongside a co-sourced external Chartered Accountant firm, operating under the oversight of the Audit Committee. Audit planning ensures comprehensive coverage of the companys information systems, business processes, and transactions across corporate and branch offices. Significant audit findings and follow-up actions are periodically reported to the Audit Committee and closely monitored to ensure effective resolution and implementation.

The Company has implemented a robust and integrated Risk Management framework that proactively identifies and addresses material risks. By aligning business strategy and decision- making with the Companys risk appetite, the framework provides coverage across financial performance, strategic initiatives, operational processes, fraud prevention, data privacy, information security, business continuity, and emerging risk areas. It also promotes a risk-aware culture throughout the organisation.

Key risks are continuously monitored, with statuses reported to the Risk Management Council, which includes the Executive Committee and key stakeholders. The Risk Management Council, in turn, reports to the Board Risk Management Committee (RMC). Quarterly, updates and mitigation plans (as necessary) for top corporate and emerging risks are presented to the RMC. The framework is detailed in the Risk Management section of the Annual Report.