life insurance corporation of india share price Management discussions


Unless indicated otherwise or the context otherwise requires, the financial information included herein is based on or derived from our Restated Consolidated Financial Statements as at and for the years ended March 31, 2019, March 31, 2020, March 31, 2021, and the six months ended September 30, 2021 included in "Financial Statements" beginning on page 300. You should read the following discussion and analysis of our financial condition and results of operations together with the Restated Consolidated Financial Statements. Our fiscal year commences on April 1 and ends on March 31 of the subsequent year.

Accordingly, all references to a particular Fiscal Year, or "Fiscal", are to the 12 months ended March 31 of that year.

The following discussion and analysis contain forward-looking statements that involve risks and uncertainties. Our actual results may differ from those anticipated in these forward-looking statements as a result of any number of factors, including those set forth in " Factors Affecting Our Results of Operations and Financial Condition", "Forward-Looking Statements" and "Risk Factors" on pages 444, 22 and 23, respectively.

We have included various operational and financial performance indicators in this Draft Red Herring Prospectus, including certain non-GAAP financial measures, some of which may not be derived from our Restated Consolidated Financial Statements or otherwise subjected to an audit or review by the Statutory Auditor to the Offer. VNB, VNB margin, Indian Embedded Value, Indian Embedded Value operating earnings and operating return on Indian Embedded Value are non-GAAP financial measures and should be read in conjunction with the context and assumptions set out in the Embedded Value Reports on page 582. See "Risk Factors Internal Risk Factors Risks Related to our Business There is significant technical complexity involved in embedded value calculations and the estimates used in the Embedded Value Reports could vary materially if key assumptions are changed or if our experience differs from our assumptions used to calculate our Indian Embedded Value. In addition, regardless of the appropriateness of the assumptions, there may be a risk that the model used to calculate Indian Embedded Value itself may not be appropriate despite taking due care to ensure that models are appropriate. Our VNB may vary as future experience may be different from the assumptions used in calculating our VNB. The inclusion of these values should not be regarded as a representation of our future profitability by us, the Independent Actuary, the BRLMs or any other person" on page 32.

Our financial statements and the presentation of our performance metrics differ significantly from those of non-insurance and may differ from other insurance companies. See "Risk Factors Internal Risk Factors Risks Relating to Our Business Our financial statements differ significantly from financial statements prepared by non-insurance companies" and "Risk Factors Internal Risk Factors Risks Relating to Our Business We have included certain non-GAAP financial measures and certain other selected statistical information related to our business, financial condition, results of operations and cash flows in this Draft Red Herring Prospectus. These non-GAAP financial measures and statistical information may vary from any standard methodology that is applicable across the life insurance segment, and therefore may not be comparable with financial or statistical information of similar nomenclature computed and presented by other life insurance players" on pages 57 and 58, respectively.

Certain industry and market data used in this section have been derived from the CRISIL Report, which has been exclusively prepared for the purpose of the Offer. Our Corporation commissioned and paid for the CRISIL Report pursuant to an engagement letter dated September 24, 2021, CRISIL Research is not related in any manner to our Corporation or any of our Directors or our Promoter. The CRISIL Report was prepared using publicly available financial information. As we have not publicly disclosed consolidated financial statements prior to the filing of this Draft Red Herring Prospectus, the CRISIL Report was prepared using our Corporations standalone financial statements and filings made with the IRDAI. For more details, see

"Certain Conventions, Presentation of Financial, Industry and Market Data and Currency of Presentation Industry and Market Data" on page 21.

Overview

Our Corporation has been providing life insurance in India for more than 65 years and is the largest life insurer in India, with a 64.1% market share in terms of premiums (or GWP), a 66.2% market share in terms of New Business Premium (or NBP), a 74.6% market share in terms of number of individual policies issued, a 81.1% market share in terms of number of group policies issued for Fiscal 2021, as well as by the number of individual agents, which comprised 55% of all individual agents in India as at March 31, 2021. (Source: the CRISIL Report). Our Corporation had the highest gap in market share by life insurance GWP relative to the second-largest life insurer in India as compared to the market leaders in the top seven markets globally (in 2020 for the other players and in Fiscal 2021 for our Corporation). (Source: the CRISIL Report). According to CRISIL, this is owing to our enormous agent network, strong track record, immense trust in the brand ‘LIC and our Corporations 65 years of lineage. (Source: the CRISIL Report). Our Corporation is ranked fifth globally by life insurance GWP (comparing our Corporations life insurance premium for Fiscal 2021 to our global peers life insurance premium for 2020) and 10th globally in terms of total assets (comparing our Corporations assets as at March 31, 2021 with other life insurers assets as at December 31, 2020). (Source: the CRISIL Report).

Our Corporation is the largest asset manager in India as at September 30, 2021, with AUM (comprising policyholders investment, shareholders investment and assets held to cover linked liabilities) of 39,558,929.24 million on a standalone basis, which was

(i) more than 3.3 times the total AUM of all private life insurers in India,

(ii) approximately 16.2 times more than the AUM of the second-largest player in the Indian life insurance industry in terms of AUM,

(iii) more than 1.1 times the entire Indian mutual fund industrys AUM and (iv) 18.5% of Indias annualised GDP for Fiscal 2022. (Source: the CRISIL Report). As per the CRISIL Report, as at September 30, 2021, our Corporations investments in listed equity represented around 4% of the total market capitalisation of NSE as at that date. (Source: the CRISIL Report).

Our Corporation was formed by merging and nationalizing 245 private life insurance companies in India on September 1, 1956, with an initial capital of 50.00 million. From our Corporations incorporation until 2000, we were the only life insurer in India. Our Corporation was identified by IRDAI as a Domestic Systemically Important Insurer ("D-SII") on the basis of size, market importance and domestic and global inter-connectedness in September 2020.

Our Corporations brand, LIC, was recognised as the third strongest and 10th most valuable global insurance brand as per the

"Insurance 100 2021 report" released by Brand Finance. The strength of a brand means the efficacy of a brands performance on intangible measures relative to its competitors and is determined by looking at the brands marketing investment, stakeholder equity and impact of those on business performance. The value of a brand is the present value of earnings specifically related to brand reputation. The brand ‘LIC was also recognised by WPP Kantar as the second most valuable brand in India in the report "BrandZ Top 75 Most Valuable Indian Brands" for 2018, 2019 and 2020. Our Corporation has a broad, diversified product portfolio covering various segments across individual products and group products. Our individual products comprise

(i) participating insurance products and

(ii) non-participating products, which include

(a) savings insurance products;

(b) term insurance products;

(c) health insurance products;

(d) annuity and pension products; and

(e) unit linked insurance products. Our individual products include specially designed products for specific segments, such as special products for women and children and Micro Insurance products. In addition, we offer riders that provide additional benefits along with the base product to cover for additional risks, such as accidental disability, death, critical illness and premium waiver on the death of the proposer. As at

September 30, 2021, our Corporations individual product portfolio in India comprised 32 individual products (17 participating products and 15 non-participating products) and seven individual riders. Our group products comprise

(i) group term insurance products,

(ii) group savings insurance products;

(iii) group savings pension products; and

(iv) group annuity products. As at

September 30, 2021, our Corporations group product portfolio in India comprised 10 group products.

Our Corporations omni-channel distribution platform for individual products currently comprises

(i) individual agents,

(ii) bancassurance partners,

(iii) alternate channels (corporate agents, brokers and insurance marketing firms), (iv) digital sales

(through a portal on our Corporations website),

(v) Micro Insurance agents and

(vi) Point of Sales Persons-Life Insurance scheme. Our Corporations individual policies are primarily distributed by our individual agents. In Fiscal 2019, Fiscal 2020, Fiscal 2021 and the six months ended September 30, 2021, our individual agents were responsible for sourcing 96.69%, 95.73%, 94.78% and 96.42% of our Corporations NBP for our individual products in India, respectively. Our Corporation has the largest individual agent network among life insurance entities in India, comprising approximately 1.35 million individual agents as at March 31, 2021, which was 7.2 times the number of individual agents of the second largest life insurer. (Source: the CRISIL Report). Customers can also approach our branch offices and satellite offices and purchase products through our intermediaries. As at September 30, 2021, our Corporation had 2,048 branch offices and 1,554 satellite offices in India, covering 91% of all districts in India. Our Corporations multichannel distribution platform for group products comprises

(i) our employees in the sales team for group products,

(ii) individual agents,

(iii) bancassurance partners and

(iv) alternate channel partners (other corporate agents and brokers).

In addition to our Corporations life insurance operations in India, our Corporation has one branch in each of Fiji, Mauritius and the United Kingdom and subsidiaries in Bahrain (with operations in Qatar, Kuwait, Oman and the United Arab Emirates), Bangladesh, Nepal, Singapore and Sri Lanka in the life insurance industry. For Fiscal 2019, Fiscal 2020, Fiscal 2021 and the six months ended September 30, 2021, on a consolidated basis, our premium from outside India represented 0.93%, 0.99%, 0.73% and 0.77%, respectively, of our total premium.

In addition, our Corporations other subsidiaries include LIC Pension Fund Limited, which is one of the three companies appointed as a pension fund sponsor under the Indian Governments New Pension System, and LIC Cards Services Limited, which operates a credit card business.

Our profit after tax (Shareholders Account) on a consolidated basis for Fiscal 2019, Fiscal 2020, Fiscal 2021 and the six months ended September 30, 2021 was 26,273.78 million, 27,104.78 million, 29,741.39 million and 15,040.13 million, respectively.

Factors Affecting Our Results of Operations and Financial Condition

Our results of operations and financial condition on a consolidated basis primarily reflect our Corporations results of operations and financial condition on a standalone basis. These results are significantly affected by a number of factors, including the macroeconomic and regulatory environment in India, competition, variance between actual experience and actuarial assumptions, our Corporations product mix, fluctuations in interest rates and equity markets in India, as well as our Corporations ability to grow its business while controlling costs and improving productivity.

Macroeconomic Environment in India

Our business, financial condition, results of operations and cash flows are significantly affected by macroeconomic conditions in India, where we conduct the vast majority of our business and generate substantially all of our income. While our business tends to benefit from increased consumer confidence in the overall economy, and the life insurance sector in particular, adverse macroeconomic conditions in India may reduce the demand for our products, increase the number of policy surrenders and withdrawals, reduce the returns from our investment activities and otherwise adversely affect our results of operations.

Key macroeconomic factors affecting the performance of the growing but underpenetrated life insurance industry in India include Indias population growth trajectory and favourable demographics, urbanisation, overall economic growth rates, household income growth rate and consumer attitudes towards financial savings. These factors affect the proportion of household savings invested in insurance products relative to other competing products ranging from physical assets, such as real estate and gold, to financial savings instruments, such as bank deposits, provident and mutual funds. Macroeconomic conditions also affect the mix of our investments across various asset classes. For more details, see "Risk Factors External Risk Factors Risks Related to Our Business Any downturn in the macroeconomic environment in India could adversely affect our business, financial condition, results of operations and cash flows" on page 59.

Fiscal 2020 was volatile for the global economy. The first three quarters were ensnared in trade protectionist policies and disputes among major trading partners, volatile commodity and energy prices, and economic uncertainties arising from Brexit. Hopes of broad-based recovery in the fourth quarter were dashed by the COVID-19 pandemic, which has infected more than 307 million people in 224 countries (as at January 10, 2022), leading to considerable human suffering and economic disruption. (Source: the CRISIL Report). The COVID-19 pandemic sharply slowed the Indian economy in the first quarter of Fiscal 2021, but the huge economic costs that it extracted forced the economy to open up and get back on its feet in the second quarter of Fiscal 2021. (Source: the CRISIL Report). What also helped was a sharp cutback in operating costs for companies due to job and salary cuts, employees exercising work from home, low input costs due to benign interest rates, crude and commodity prices. (Source: the CRISIL Report).

The second wave of the COVID-19 pandemic took the healthcare ecosystem to the brink and beyond in the first quarter of Fiscal 2022, but it did not hit economic activity as hard as the first wave. (Source: the CRISIL Report). The main reason for this was decentralised and less stringent lockdowns, which reflect the ‘learning to live with the virus attitude that authorities have adopted. Many states also permitted construction and manufacturing activities to continue during the lockdown. (Source: the CRISIL Report). The number of active COVID-19 cases in India increased from 75,456 as at December 27, 2021 to 723,619 as at January 9, 2022. Further, as at January 9, 2022, India reported 4,033 Omicron cases. The mortality rate during December 27, 2021 to January 9, 2022, however, has been much lower than that witnessed in the second wave. Furthermore, the number of patients being admitted to intensive care units of hospitals and needing ventilators or oxygen support is lower than in the second wave. Going forward, in a scenario of significant rise in COVID-19 cases for a sustained period of time due to the Omicron variant and a rise in mortality rates, the performance of the life insurance industry may be impacted over the short run, as witnessed by the industry during the second wave of COVID-19 in the first quarter of Fiscal 2022. (Source: the CRISIL Report).

Having said that, CRISIL Research foresees growth rebounding in Fiscal 2022, on the back of a very weak base, a counter-cyclical Union Budget for Fiscal 2022 pushing investments and some benefit from a rising-global-tide-lifting-all-boats effect. Rapid urbanisation, rising consumer aspiration and increasing digitisation coupled with government support in the form of reforms and policies are expected to support growth. For example, the government has recently announced production-linked incentives across identified sectors with an aim to propel the growth of India as a manufacturing destination. (Source: the CRISIL Report). At a macro level, digitalization has led to various benefits such as linkage to Aadhaar identity cards, direct benefit transfer and various other government benefits. The NSO, in its advance GDP estimates released in January 2022, has forecasted Indias GDP to grow by 9.2% in Fiscal 2022. CRISIL Research forecasts Indias GDP for Fiscal 2022 to grow by around 7.8% to 9.2% for Fiscal 2023, assuming the ongoing surge in COVID-19 cases due to the Omicron variant does not have a material impact as the number of people vaccinated against COVID-19 continues to grow at a robust pace in India. (Source: the CRISIL Report).

Effects of COVID-19

The COVID-19 pandemic has had, and we expect it to continue to have, a material adverse effect on our business, financial condition, results of operations and cash flows.

Our first-year premiums decreased by 41.24% from 584,464.99 million for Fiscal 2020 to 343,409.95 million for Fiscal 2021 on a consolidated basis. Our first-year premiums were 133,997.11 million for the six months ended September 30, 2021 on a consolidated basis.

Our distribution partners ability to distribute our products was adversely affected due to lockdowns and social distancing measures limiting in-person interactions. In addition, the pandemic caused a deferral of exams by the IRDAI for individual agents and corporate agents, which prevented us from adding as many new agents as we would have liked to. Our individual policies are primarily distributed by our individual agents. Our individual agents procured 96.69%, 95.73%, 94.78% and 96.42% of our NBP in India for Fiscal 2019, Fiscal 2020, Fiscal 2021 and the six months ended September 30, 2021, respectively. In addition, the average productivity of our individual agents in India fell from 18.11 policies sold per year in Fiscal 2020 to 15.49 policies sold per year during Fiscal 2021 due to the impact of COVID-19.

In addition, our net claims by death increased by 35.41% from 173,418.17 million for Fiscal 2020 to 234,833.35 million for Fiscal 2021 on a consolidated basis. Our net claims by death was 213,248.38 million for the six months ended September 30, 2021 on a consolidated basis.

Persistency ratio is the proportion of business that is retained from the business underwritten and is measured in terms of the number of policies and premiums underwritten (the "Persistency Ratio"). Our Persistency Ratios decreased as at March 31, 2020. For example, our Persistency Ratio by regular premium and limited premium for our individual business in India in the 13th month was 72% as at March 31, 2020 compared to 77% as at March 31, 2019. For more details on our Persistency Ratios in India, see "Our Business-Our Corporations Business-Operations-Customer Service and Retention" on page 214.

The extent to which the pandemic will continue to affect our business, financial condition, results of operations and cash flows in the future will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic. For more information on the effects of COVID-19 and the lockdown and restrictions on our business, see "Risk Factors The ongoing COVID-19 pandemic could adversely affect all aspects of our business, including: (i) restricting the ability of our agents to sell our products; (ii) significantly increasing our expenses due to changes in laws and regulations and investing in new methodologies to overcome the restrictions brought in to address the spread of COVID-19 and the adverse changes in population mortality/morbidity or utilization behaviours; (iii) adversely affecting our investment portfolio; (iv) adversely affecting our operational effectiveness; and (v) heightening the risks we face in our business, including those discussed in this

Draft Red Herring Prospectus" on page 23.

Regulatory Environment in India

Our business is highly regulated in India. Insurance regulations and the Life Insurance Corporation Act cover a variety of aspects that affect our business, including product design, new product approvals, capital requirements, investment guidelines, distribution of surplus, expense management and arrangements with distributors. Certain insurance laws, rules and regulations restrict our investment activities, which may limit our ability to diversify investment risks and improve returns on our investment portfolio, thereby affecting our results of operations. The regulatory and policy environment in which we operate is subject to changes from time to time.

 

IRDAI Regulations

The key new regulations promulgated by the IRDAI between April 1, 2018 and September 30, 2021 are summarised below:

Increase in surrender value to policyholders, which may come at the cost of reduction in variable benefits to the policyholders continuing until maturity. This change was effective from February 1, 2020.

Increase in revival period for non-linked policies from two years to five years and that for linked policies from two years to three years. This change was effective from November 4, 2019 and was made applicable to all existing policies sold after implementation of Product Regulations 2013. These changes encourage the revivals of lapsed insurance policies. Nonetheless, all policies sold prior to the introduction of Product Regulations in 2013 were already subject to a five year revival period.

The IRDAI (Non-Linked Insurance Products) Regulations, 2019 ("IRDAI Product Regulations 2019") has enabled insurers to declare the interest on funded schemes, in advance or in arrears, with a frequency of quarterly, half yearly or yearly intervals. Interest rate credited to each fund and expenses charged to such funds shall be in accordance with the Board approved policy of the insurer. However, the IRDAI (Non-Linked

Insurance Products) Regulations, 2013 ("IRDAI Product Regulations 2013") were more prescriptive in that Group Fund based products could only be filed under Variable Insurance Platform ("VIP") wherein the interest has to be declared in advance and declaration was supposed to be in form of three rates:

Guaranteed non-negative interest rate, referred as minimum floor rate.

Non-negative additional interest rate, to be declared over and above the minimum floor rate.

Non-negative residual additions, in order to meet the maximum reduction in yield provisions in the regulation at the end of each year starting from policy year five.

Provision of non-negative residual additions required insurers to maintain shadow policy accounts at policy level along with the Policyholders Account. This led to difficulty in administration of schemes. As per the IRDAI Product Regulations 2019, the product structure has been made simpler by removing various restrictions related to VIP introduced under the IRDAI Product Regulations 2013. This change was effective as at March 20, 2020.

 

General Fiscal and Corporate Tax Laws

Any adverse development in fiscal laws applicable to insurance companies in India, discontinuance of tax exemptions in relation to pension income, dividend income, tax free bonds, change in applicability of minimum alternate tax rates and any discontinuance of tax benefits to customers on the purchase of insurance products in India, may materially and adversely affect our results of operations and financial condition.

With effect from April 2021, income earned on contributions beyond 0.25 million per annum in ULIPs are taxable. In case of ULIPs having an annual premium of more than 0.25 million, the income/return on maturity shall be treated as a capital gain and charged accordingly under Section 112A of the Income Tax Act. The cap of 0.25 million on the annual premium of ULIP is applicable only for the policies taken on or after February 1, 2021. This change did not have a material adverse effect on our results of operations for the six months ended September 30, 2021 as ULIPs are a small percentage of our product portfolio and there was still demand for ULIPs. For Fiscal 2019, Fiscal 2020, Fiscal 2021 and the six months ended September 30, 2021, our

NBP from ULIPs in India was 342.53 million, 911.38 million, 7,558.50 million and 8,418.59 million, respectively, which represented 0.07%, 0.18%, 1.34% and 3.84% of our NBP in India, respectively. One of our strategies is to increase our NBP from non-participating products, including ULIPs. However, the successful execution of such strategies will be subject to regulations such as the aforementioned tax laws. See "Our Business-Our Strategies-Further diversify our product mix by increasing the contribution of the non-participating portfolio" and "Key Regulations and Policies" on pages 186 and 246, respectively.

 

LIC-Specific Regulatory and Compliance Measures

Up until March 31, 2021, our Corporation had one fund and the valuation surplus from both the participating and non-participating businesses was distributed between policyholders and the Shareholders in the proportion of 95:5. The Finance Act, 2021 amended the Life Insurance Corporation Act and enabled our Corporation to have a participating fund and non-participating fund. The bifurcation was effective as at September 30, 2021. In accordance with our Corporations approved surplus distribution policy, the surplus in respect of the participating fund will be allocated between policyholders and Shareholders in the ratio of 95:5 for Fiscal 2022, 92.5:7.5 for each of Fiscal 2023 and Fiscal 2024 and then 90:10 from Fiscal 2025 onwards. Life insurance companies regulated under the Insurance Act are permitted to maintain a surplus allocation of 90:10. The Shareholders have a 100% allocation in the non-participating fund. Our Corporations Indian Embedded Value

("IEV") increased in the six months ended September 30, 2021, due to economic variants and shareholders interest increasing to 100% in the non-par fund following the bifurcation of the policyholder fund as at September 30, 2021, following changes in the surplus distribution policy in line with the amended Section 28 of the Life Insurance Corporation Act.

For further details, see "Risk Factors Internal Risk Factors Risks Related to Our Business Our Corporation is subject to complex regulatory requirements and if we fail to comply with these regulatory requirements, our operations could be disrupted or we may become subject to significant penalties. In addition, any changes in regulatory requirements could have a material adverse effect on our business, financial condition, results of operations and cash flows" and "Key Regulations and Policies" on pages 49 and 246, respectively.

Competition

As at March 31, 2021, our Corporations competitors in India were the 23 private insurance companies in India. (Source: the CRISIL Report). On April 1, 2021, the Insurance Laws (Amendment) Act, 2021 came into force, raising the limit of foreign investment in an Indian insurance company from 49% to 74%, subject to certain safeguards. We expect this to lead to new entrants in the industry, better capitalisation of existing competitors and generally increase the level of competition. While increased competition may lead to overall growth in customer participation for the underpenetrated insurance industry in India, prompt additional reforms for the sector and improved industry practices, it may also adversely impact our market share, margins, growth in new business premiums and customer acquisition. See, "Risk Factors Internal Risk Factors Risks Relating to Our Business We face significant competition and our business, financial condition, results of operations and cash flows could be materially harmed if we are not able to compete effectively" on page 36.

The table below shows our Corporations market share in India in terms of premium, NBP, number of individual policies issued and number of group policies issued for the period and Fiscal Years indicated.

Particulars 2019 Year Ended March 31, 2020 2021 Six Months Ended September 30, 2021
Our Corporations Market Share in India (%)
Premium 66.4 66.2 64.1 66.2
NBP 66.2 68.7 66.2 64.5
Number of individual policies issued 74.7 75.9 74.6 70.9
Number of group policies issued 80.2 78.4 81.1 84.3

(Source: the CRISIL Report).

Our Corporations other competitors include non-life insurance companies (to the extent such companies offer health insurance products), standalone health insurance companies, pension funds, mutual funds companies, and other financial services providers offering a variety of financial investment products. For more details on competition, see "Our Business Competition" on page 232.

Introduction of New Products

We have increased our premium by, among other things, introducing new products. The table below sets forth the new insurance products we have introduced in India in Fiscal 2019, Fiscal 2020, Fiscal 2021 and the six months ended September 30, 2021 and premium for such products in India for the period and Fiscal Years presented.

Particulars

Six months ended September 30, 2021

2021

Year Ended March 31, 2020

2019
Premium ( in millions) % of total premium Premium ( in millions) % of total premium Premium ( in millions) % of total premium Premium ( in millions) % of total premium
New products introduced in the six months ended September 30, 2021:
LICs Saral Jeevan Bima 3.53 0.00 N.A. N.A. N.A. N.A. N.A. N.A.
LICs Saral Pension 437.00 0.02 N.A. N.A. N.A. N.A. N.A. N.A.
LICs Arogya Rakshak 75.58 0.00 N.A. N.A. N.A. N.A. N.A. N.A.
New products introduced in Fiscal 2021:
LICs Jeevan Akshay -VII 30,493.63 1.64 26,575.75 0.66 N.A. N.A. N.A. N.A.
LICs New Jeevan Shanti(1) 22,102.04 1.19 23,394.06 0.58 N.A. N.A. N.A. N.A.
LlCs Bima Jyoti 517.12 0.03 463.21 0.01 N.A. N.A. N.A. N.A.
LICs Bachat Plus 5,073.58 0.27 563.48 0.01 N.A. N.A. N.A. N.A.
New products introduced in Fiscal 2020:
LICs Jeevan Amar 1,263.34 0.07 2,274.30 0.06 949.92 0.03 N.A. N.A.
LICs Tech-Term 229.73 0.01 415.77 0.01 137.22 0.00 N.A. N.A.
LICs Nivesh Plus 7,203.63 0.39 6,772.63 0.17 378.68 0.01 N.A. N.A.
LICs SIIP 973.30 0.05 975.17 0.02 52.56 0.00 N.A. N.A.
LICs One Year Renewable
Group Micro Term Assurance
Plan 108.67 0.01 1,145.26 0.03 345.51 0.01 N.A. N.A.
New products introduced in Fiscal 2019:
LICs Jeevan Shanti(1) 0.00 0.00 147,939.39 3.67 135,766.53 3.58 104,887.12 3.11
LICs Micro Bachat 47.33 0.00 136.49 0.00 1,413.43 0.04 8.14 0.00
LICs Navjeevan(2) 608.71 0.03 1,075.17 0.03 1,788.03 0.05 738.36 0.02
Total of new products 69,137.19 3.72 211,730.68 5.26 140,831.88 3.72 105,633.62 3.13
Total of all products 1,860,972.93 100.00 4,028,881.36 100.00 3,790,135.63 100.00 3,371,300 .19 100.00

 

Notes:

(1) LICs Jeevan Shanti was a single premium annuity policy which was withdrawn during Fiscal 2021 and another similar deferred annuity plan "LICs New Jeevan Shanti" was introduced.

(2) LICs Navjeevan was withdrawn with effect from August 15, 2019.

See "Our Business Product Strategy and Development" and "Risk Factors Internal Risk Factors Risks Related to Our Business We may be unable to implement our growth strategies, which could have a material adverse effect on our business, financial condition, results of operations and cash flows" on pages 198 and 42, respectively.

Variance Between Actual Experience and Actuarial Assumptions

Our results of operations and financial condition are affected by, among others, our claims, persistency, surrender experience, interest and expense experience etc., which may vary from the assumptions made when we priced our products and calculated our insurance contract liabilities.

Our claims experience varies over time, differs across product types and may be impacted by specific events that affect mortality and morbidity. Our life and health insurance business is exposed to the risk of catastrophic mortality and illness, such as an epidemic or pandemic, such as the COVID-19 pandemic, or other events that may cause a large number of mortality and/or morbidity claims. Net claims by death increased by 35.41% from 173,418.17 million in Fiscal 2020 to 234,833.35 million in

Fiscal 2021, which increase was primarily due to deaths caused by COVID-19. However, claims for health and treatment benefits decreased by 13.44% from 482.31 million in Fiscal 2020 to 417.48 million Fiscal 2021.

The best-estimate mortality assumptions for assured lives are set based on our own experience during the two-year period to December 31, 2020. Our Corporations experience analysis does not capture the impact of the ongoing COVID-19 pandemic. However, it is assumed that any additional deaths arising due to the pandemic will have a one-off impact and may not impact the long-term best-estimate mortality rates of our Corporation. We have established a separate reserve as at March 31, 2021 for the cost of excess deaths related to COVID-19, and our results of operations assume no value arising from this reserve. For more information regarding our assumptions, see "Embedded Value Reports" on page 582.

Set forth below is a table showing claims by death, the amount ceded in reinsurance for claims by death, net claims by death, and health and treatment benefits for the period/Fiscal Years presented.

Particulars Six months ended September 30, Year Ended March 31,
2021 2021 2020 2019
( in millions)
Claims by death 217,341.50 239,268.94 175,279.87 171,288.42
Claims by death (amount ceded in reinsurance) (4,093.12) (4,435.59) (1,861.70) (1,650.72)
Net claims by death 213,248.38 234,833.35 173,418.17 169,637.70
Claims for health and treatment benefits (1) 261.20 417.48 482.31 429.12

(1) Includes hospitalisation benefits, major surgical benefits, domiciliary treatment benefits and day care benefits.

Our results of operations are also affected by our persistency and surrender experience, which may differ from the assumptions that we make both when we design and price our products and when we calculate our insurance contract liabilities. Maintaining a high level of persistency is important to our results of operations, as a large block of in-force policies provides us with regular revenue in the form of renewal premiums. In addition, our ability to convert first year premiums into renewal premiums thereby increasing the number of in-force policies is an important factor affecting our financial condition and results of operations, as well as the long- term growth of our revenue and profitability. Persistency and surrender experience varies over time and from one type of product to another and may be affected by events such as changes in macroeconomic conditions, changes in consumer sentiment or policyholder behaviour, relative competitiveness of our products, claims experience, investment performance of our funds and other factors.

Our Corporation performs a high-level analysis of policyholder persistency when making our assumptions. The best-estimate lapse/surrender/reduced paid-up and revival/reinstatement rates specific to different products and durations in-force, are set based on a combination of our own experience (where statistically credible) and our understanding of the experience of/assumptions set by other insurers in the market where relevant (otherwise).

Accordingly, when evaluating our results of operations, we use certain assumed policy discontinuance rates for a total of 10 products, covering the top five products (by contribution to present value of future profits as at March 31, 2021 in respect of in-force business) and top five products (by contribution to present value of future profits in respect of new business sold during Fiscal 2021). In addition to the assumed rates of discontinuance, our results of operations are also assessed assuming that 15% of policies in reduced paid-up status, and 4% of policies in lapsed status as at the applicable valuation date, will revive.

For details on our persistency in India, see "Our Business Operations Customer Service and Retention" on page 214.

Also see "Risk Factors Internal Risk Factors Risks Related to Our Business If actual claims experienced and other parameters are different from the assumptions used in pricing our products and setting reserves for our products, it could have a material adverse effect on our business, financial condition and results of operations" on page 28.

Fluctuations in Market Interest Rates

The profitability of certain of our products and our investment returns can be sensitive to interest rate fluctuations. Interest rates are highly sensitive to many factors, including monetary and tax policies, domestic and international economic and political considerations, inflationary factors, fiscal deficits, trade surpluses or deficits and regulatory requirements.

Our interest rate sensitivity varies across the different product lines, based on the nature of the returns due to our policyholders. In general, the investment risk in respect of investments made for unit-linked contracts is borne by policyholders of such products, whereas the investment risk associated with investments backing participating products is shared between our policyholders and Shareholders, and the investment risk associated with non-participating products post bifurcation of the fund and Shareholders funds is completely borne by the Shareholders. A significant portion of our investment portfolio is held in debt securities, particularly fixed income government securities. Our Corporations investments in debt instruments include investments in

(i) Government securities and Government guaranteed bonds including treasury bills;

(ii) debentures/bonds & pass-through certificates;

(iii) money market instruments; and

(iv) other fixed income securities, which was 24,550,178.69 million, 3,188,940.46 million, 88,967.99 million and 147,992.93 million as at September 30, 2021 and represented 62.07%, 8.06%, 0.22% and 0.37% of our standalone AUM as at September 30, 2021, respectively.

Some of our insurance and investment contracts have guaranteed features. These contracts carry the risk that interest income from the financial assets backing such liabilities may be insufficient to fund the guaranteed benefits payable as interest rates fall. During periods of declining interest rates, we may not be able to fully meet the guaranteed liabilities of our non-participating contracts. Declining interest rates generally have the effect of increasing the proportion of policyholders who elect to continue with products that have guaranteed benefits. While this may improve our persistency, it also increases the overall cost of providing such guarantees and therefore affects our financial results. Our Corporation does not have hedging arrangements in place to mitigate this risk. For participating contracts, a decline in interest rates may result in lower bonus rates for policyholders, which may lead to policyholders dissatisfaction and therefore increased surrenders and decreased new business sales.

In addition, our insurance contracts liabilities tend to have a longer duration than our investment assets, which may result in the re-investment returns of our maturing investments being lower than the average guaranteed pricing rate for our insurance policies in a declining interest rate environment.

Rising interest rates could lead to higher levels of surrenders and withdrawals of existing policies as policyholders seek to buy products with perceived higher returns, which may require us to sell our invested assets and make cash payments to policyholders at a time when the prices of those assets are declining, which may result in realised losses.

See "Risk Factors Internal Risk Factors Risks Related to Our Business Interest rate fluctuations may materially and adversely affect our profitability" and "Embedded Value Reports" on pages 30 and 582, respectively.

Fluctuations in Equity Markets

Fluctuations in equity markets may affect our investment returns and sales of our unit-linked and participating products.

Sales of unit-linked insurance products typically decrease in periods of protracted or steep declines in equity markets and increase in periods of rising equity markets. Policy loans, surrenders and withdrawals may increase at times of declining equity markets as customers shift to other products, although some customers may continue to hold on to the investments for future gains. In addition, lower investment returns for our unit-linked insurance products would also reduce the asset management and other fees we earn. Policy surrenders and withdrawals may also increase with rising equity markets because customers may exit their policies to realise their gains and invest directly in the equity markets.

A decline in the equity markets reduces our investment income and also reduces the fair value of investments held towards non-linked policyholder funds and Shareholders funds, which could adversely affect our results of operations. Lower equity returns could also lead to higher levels of surrenders of existing non-linked policies as policyholders seek to buy products with perceived higher returns. These surrenders and withdrawals may result in cash payments to policyholders requiring the sale of our equity investments at a time when the prices of those assets are adversely affected by market movements, potentially resulting in realised investment losses. These would impact our financial condition and our results of operations.

For additional details regarding sensitivity to equity markets, see "Embedded Value Reports" on page 582.

Ability to Grow our Business While Controlling Costs and Improving Productivity

Our profitability is affected by our growth in new business and our ability to control costs. The table below sets forth our commission, operating expenses related to insurance business, NBP and premium and the foregoing as percentage of premium for the period and Fiscal Years indicated.

Particulars

Six months ended September 30, 2021

2021

Year Ended March 31, 2020

2019
( in millions) % of total premium ( in millions) % of total premium ( in millions) % of total premium ( in millions) % of total premium
Commission 98,152.19 5.23 223,581.61 5.51 215,482.58 5.63 204,826.09 6.02
Operating expenses related to insurance business 189,063.60 10.08 351,622.15 8.66 344,258.84 8.99 283,316.03 8.33
Of which: 153,762.45 8.20 267,962.72 6.60 251,278.96 6.56 199,045.39 5.85
Employees remuneration & welfare benefits
NBP 857,293.82 45.71 1,855,232.15 45.71 1,802,742.06 47.09 1,440,379.58 42.33
Premium 1,875,353.42 100.00 4,058,508.02 100.00 3,828,114.50 100.00 3,402,946.15 100.00

The commissions paid to agents are based on the percentage of premium (first year and renewal). The rates vary between single/regular premium/group policies and also vary depending on the term of the policies and the segment. The capping is limited to the percentages as specified by the IRDAI and varies from 2% to 40%.

We strive to effectively control operating expenses related to insurance business by improving our operational efficiencies, investing in information technology (including our digital sales channel) and undertaking various initiatives with our distribution partners and employees to increase productivity levels. Employees remuneration & welfare benefits is the largest expense in our operating expenses related to insurance business. As at March 31, 2019, March 31, 2020, March 31, 2021 and September 30, 2021, we had 108,684, 114,498, 108,987 and 105,738 full-time employees in India, respectively. Financial liability for additional contribution of 111,246.6 million arising due to a fresh pension option to the employees vide Govt. notification No. G.S.R. 324I dated April 23, 2019 is being amortized over a period of five years up to March 31, 2024 in accordance with letter reference 101/2/F&A-Life/LIC/2018-19/208 dated July 6, 2020. Instalments of 22,249.3 million were recognized in each of Fiscal 2020 and Fiscal 2021 and an instalment of 111,246.6 million was recognized in the six months ended September 30, 2021 and the balance 55,623.3 million is to be recognized over the periods up to March 31, 2024.

See "Risk Factors Internal Risk Factors Higher than expected operating expenses related to our insurance business could have a material adverse effect on our results of operations" on page 43.

IDBI Bank Becoming a Subsidiary in January 2019 and Then Becoming an Associate in December 2020

IDBI Bank became a subsidiary with effect from January 21, 2019 following our Corporations acquisition of an additional

827,590,885 of the outstanding equity shares in IDBI Bank, which resulted in our Corporation owning 51% of the outstanding shares in IDBI Bank. IDBI Trusteeship Services Limited is a subsidiary of IDBI Bank, with IDBI Bank holding 54.70% of the outstanding shares, so IDBI Trusteeship Services Limited also became our Corporations subsidiary with effect from January 21, 2019. On December 19, 2020, IDBI Bank was reclassified as an associate company due to the reduction of our Corporations shareholding to 49.24% following the issuance of additional equity shares by IDBI Bank in a qualified institutions placement. Consequently, IDBI Trusteeship Services Limited was also reclassified from a subsidiary to an associate on that date. Our

Corporation used policyholders funds to acquire all of its equity shares in both IDBI Trusteeship Services Limited and IDBI

Bank.

IDBI Bank and IDBI Trusteeship Services Limiteds results of operations were consolidated as subsidiaries for the following periods in the respective Fiscal Years: (i) for Fiscal 2019, the three months from January 1, 2019 to March 31, 2019; (ii) for Fiscal 2020, the entirety of the Fiscal Year; and (iii) for Fiscal 2021, the nine months from April 1, 2020 to December 31, 2020. IDBI Bank and IDBI Trusteeship Services Limiteds results of operations were subsequently recognised on an associate company basis for the three months from January 1, 2021 to March 31, 2021 and the six months ended September 30, 2021.

Seasonality

We are subject to seasonal fluctuations in results of operations and cash flow. Insurance volumes for individual products typically increase significantly in the last quarter of each Fiscal Year, which coincides with the end of the tax year in India, due to customers capitalising on income tax advantages that life insurance products offer. For the same reason, we typically experience lower business volumes in the first three quarters of each Fiscal Year.

Key Performance Indicators

In evaluating our business, we consider and use certain non-GAAP financial measures and key performance indicators that are presented below, as supplemental measures to review and assess our operating performance. The presentation of these non-GAAP financial measures and key performance indicators is not intended to be considered in isolation or as a substitute for the Restated Consolidated Financial Statements included in this Draft Red Herring Prospectus. We present these non-GAAP financial measures and key performance indicators because they are used by our management to evaluate our operating performance and formulate business plans.

These non-GAAP financial measures are not defined under Indian GAAP and are not presented in accordance with Indian GAAP. The non-GAAP financial measures and key performance indicators have limitations as analytical tools. Further, these non-GAAP financial measures and key performance indicators may differ from the similar information used by other companies, including peer companies, and hence their comparability may be limited. Therefore, these metrics should not be considered in isolation or construed as an alternative to profit before tax, surplus before tax, premiums earned net or any other measure of performance or as an indicator of our operating performance, liquidity, profitability or results of operations.

The following table sets forth certain key performance indicators for our life insurance segment/business on a consolidated basis (unless indicated).

Particulars As at and for the Six Months Ended September 30,

As at and for the Year Ended March 31,

2021 2021 2020 2019

( in million, except ratios and percentages)

APE of individual business in India 121,281.13 322,705.91 352,974.11 314,476.64
APE of group business in India 63,206.75 133,173.28 126,749.25 91,179.11
Individual new business sum assured 2,248,966.76 5,860,838.86 6,453,988.09 5,751,317.13
Operating expenses related to insurance business to premium income ratio (as a % of premium) 10.08% 8.66% 8.99% 8.33%
13th month Persistency Ratio in India for individual products (%)(1)
(i) regular premium and limited premium 79% 79% 72% 77%
(ii) single premium and fully paid-up premium 100% 100% 100% 100%
(iii) total premium 88% 87% 85% 88%
49th month Persistency Ratio in India for individual products (%)(1)
(i) regular premium and limited premium 65% 63% 58% 60%
(ii) single premium and fully paid-up premium 97% 97% 96% 95%
(iii) total premium 80% 79% 72% 73%
61st month Persistency Ratio in India for individual products (%)(1)
(i) regular premium and limited premium 61% 59% 54% 63%
(ii) single premium and fully paid-up premium 96% 95% 94% 92%
(iii) total premium 75% 72% 70% 72%
VNB(2) 15,830 41,670 N.C. N.C.
VNB margin(3) 9.3% 9.9% N.C. N.C.
Indian Embedded Value (consolidated)(4) 5,396,860 956,050 464,970 N.C.
Indian Embedded Value operating earnings (consolidated)
("IEVOE")(5) N.C. 171,510 N.C. N.C.
Operating return on Indian Embedded Value (consolidated)
("ORIEV")(6) N.C. 36.89% N.C. N.C.
Net premium 1,872,895.40 4,053,984.98 3,824,755.18 3,399,716.34
AUM (consolidated) 39,742,077.12 36,929,672.66 33,381,079.43 32,710,327.25
Solvency Ratio (within India Business) 1.83 1.76 1.55 1.60

 

Notes:

(1) The Persistency Ratios are based on regular premium/limited premium/single premium/fully paid up combined under individual business. For more details, see " Key Performance Indicators Persistency Ratios" on page 454.

(2) VNB is the present value of expected future earnings from new policies written during any given period. VNB is derived from the Embedded Value Reports. VNB set forth in the Embedded Value Reports were not based on all policies. For more details, see "Embedded Value Reports" on page 582. VNB was not calculated ("N.C.") as at March 31, 2019 and March 31, 2020 as there is no requirement for it be calculated.

(3) VNB margin is the ratio of VNB to APE (as set forth in the Embedded Value Reports) for the relevant period and is a measure of the expected profitability of new business in percentage terms.

(4) Indian Embedded Value is derived from the Embedded Value Reports. Indian Embedded Value consists of our Adjusted Net Worth ("ANW") (consisting of our free surplus and required capital) and the value of in-force business ("VIF"). The free surplus is the market value of assets allocated to, but not required to support, the in-force covered business as at the applicable valuation date. The required capital is determined as the amount of assets attributed to the covered business over and above that required to back liabilities for covered business, the distribution of which to shareholders is restricted. The VIF is a measure of the value of the Shareholders interest in our "covered business". The VIF represents the present value of the Shareholders interest in the earnings distributable from the assets allocated to the covered business, after making sufficient allowance for the aggregate risks in the covered business. The allowance for risk is calibrated to match the market price for risk, where reliably observable. The "covered business" is all life insurance and pensions business, accident and health insurance business across both individual and group segments:

(a) that has been written by our Corporation in India; and

(b) that has been written by our Corporations entities outside of India, either through its branches, subsidiaries or joint ventures. For more details, see "Embedded Value Reports" on page 582. Indian Embedded Value was not calculated as at March 31, 2019 as there is no requirement for it be calculated.

(5) IEVOE is the summation of our

(i) VNB added during the year;

(ii) expected return on existing business; and

(iii) variances in operating experience.

(6) ORIEV is the ratio of IEVOE for any given period to the IEV at the beginning of that period.

Annualised Premium Equivalent

Annualised Premium Equivalent ("APE") is the sum of annualized first year individual and group premiums on regular premium policies, and 10% of single premiums of individual and group business written by us. Regular premium policies are policies issued in yearly/half yearly/quarterly/monthly basis as opposed to single premium policies. The regular premium policies are annualized by taking the premium amount and multiplying it by the frequency of payments in the billing cycle.

For the purposes of calculating APE, we considered all new premiums received in our individual and group business and any top-up premiums as single premiums. The premiums received in our individual and group business have been classified into new and renewal business for the purpose of calculating APE, based on IRDAI guidelines. Our APE does not include renewal premiums paid after the initial policy term.

APE#

For the Six Months Ended September 30, 2021

For the Year Ended March 31,

2021 2020 2019
In India (Individual) In India (Group)(3) Total In India (Individual) In India (Group)(3) ( in millions) Total In India (Individual) In India (Group)(3) Total In India (Individ ual) In India (Group)(3) Total
Annualized first year premium (A)(1) 111,275.67 111,275.67 298,273.88 298,273.88 330,990.79 330,990.79 290,083.23 290,083.23
10% single premium (B)(2) 10,005.46 63,206.75 73,212.21 24,432.03 133,173.28 157,605.31 21,983.32 126,749.25 148,732.57 24,393.41 91,179.11 115,572.52
APE (C) = (A+B) 121,281.13 63,206.75 184,487.88 322,705.91 133,173.28 455,879.19 352,974.11 126,749.25 479,723.36 314,476.64 91,179.11 405,655.75

 

# Premium also includes the net premium refunded during the cooling period and premium cheques dishonoured. (1) Does not include renewal premiums paid after the initial policy term. (2) Includes all new premiums in group business and top-up premiums.

(3) For group business all new business premiums are considered as single premiums and therefore first year premiums are appearing as zero.

Our total APE in India increased by 18.26% from 405,655.75 million in Fiscal 2019 to 479,723.36 million in Fiscal 2020 primarily due to the increase in our APE for individual businesses in India by 12.24% from 314,476.64 million in Fiscal 2019 to 352,974.11 million in Fiscal 2020 which was on account of the increase in volume of single premium annuity sales, increased persistency leading to increased volume of regular premium and increased new business sales leading to growth in non-single. Our total APE in India decreased by 4.97% from 479,723.36 million in Fiscal 2020 to 455,879.19 million in Fiscal 2021 primarily due to the decrease in our APE for individual businesses in India by 8.58% from 352,974.11 million in Fiscal 2020 to 322,705.91 million in Fiscal 2021, which was on account of the decrease in sales of our participating business. Our total APE in India was 184,487.88 million for the six months ended September 30, 2021.

Individual New Business Sum Assured

Individual new business sum assured represents the total sum insured by us for mortality and morbidity risks on the individual new business written in a given period. This is a useful indicator of the level of insurance protection provided by us on the individual new business written.

Our individual new business sum assured increased from 5,751,317.13 million in Fiscal 2019 to 6,453,988.09 million in Fiscal 2020, and subsequently decreased to 5,860,838.86 million in Fiscal 2021, primarily due to an increase in sales of high-ticket size policies mainly under the LICs Jeevan Shiromani and LICs Bima Shree products and increased volumes of sales covering the high net worth segment, and the subsequent impact of COVID-19 during Fiscal 2021. Bridging the protection gap among our existing customer base also paved the way for an increased sum assured.

Our individual new business sum assured was 2,248,966.76 million for the six months ended September 30, 2021.

Total Operating Cost Ratio for the Life Insurance Segment

Total operating cost ratio is the ratio of total operating expenses for the life insurance segment (excluding commissions) to the total gross premium reported for a period.

Our total operating cost ratio increased from 8.33% in Fiscal 2019 to 8.66% in Fiscal 2021, primarily due to the increase in our employee remuneration and welfare benefits.

Our total operating cost ratio was 10.08% for the six months ended September 30, 2021. Our total operating cost ratio for the six months ended September 30, 2021 is not directly comparable to the corresponding values for full Fiscal Years due to our lower business volumes during the first half of each Fiscal Year as a result of the seasonal nature of premium received, while costs are partially of a fixed nature and partially variable. See " Seasonality" on page 451.

Persistency Ratio

Persistency Ratio measures the percentage of the issued business that remains in force and premium paying after a certain period of time. The Persistency Ratios provided by us pertain to individual business within India and includes both regular premium and single premium business. Our Corporations Persistency Ratios have been calculated as per the guidelines issued by the IRDAI from time to time. The IRDAIs circular dated September 30, 2021 on public disclosures requires Persistency Ratios in public disclosures to be shown separately on a premium basis and number of policies basis, further subdivided for individual products based on (i) regular premium and limited premium and (ii) single premium and fully paid-up premium with effect from the six months ended September 30, 2021. The Persistency Ratios in this Draft Red Herring Prospectus may differ from similar information presented in public disclosures, as the Persistency Ratios provided in this Draft Red Herring Prospectus include segregation of Persistency Ratios on the basis of

(i) regular premium and limited premium and

(ii) single premium and fully paid-up premium, while the Persistency Ratios provided in public disclosures until June 30, 2021 were for regular premium and limited premium under individual business only. For further information, see "Our Business Operations

Customer Service and Retention" on page 214.

Maintaining a high level of persistency is important for our results of operations, as a large block of in-force policies provides us with regular revenue in the form of renewal premiums. We believe that the 13th month Persistency Ratio is an important metric to assess the quality of our sales because it is the first opportunity for us to assess the likelihood of premiums being paid beyond the first year, thereby reaffirming the policyholders decision to buy the insurance policy and thus reflecting the quality of business written. A high level of 49th month and 61st month Persistency Ratios reflects the success of products with a long-term horizon. A focus on this metric helps in averting high surrenders and retaining customers by reaffirming the insurance decision made at the time of sale of policy.

The following table sets forth our Persistency Ratios in terms of amount of premium by (i) regular premium and limited premium ("RP & LP"), (ii) single premium and fully paid-up premium ("SP & FP") and (iii) total premium ("TP") in India for our individual products as at the dates indicated.

Individual Products

As at March 31,

As at September 30, 2021

2019 2020 2021
RP & LP (%) SP & FP (%) TP (%) RP & LP (%) SP & FP (%) TP (%) RP & LP (%) SP & FP (%) TP (%) RP & LP (%) SP & FP (%) TP (%)

Amount of premium

13th month 77 100 88 72 100 85 79 100 87 79 100 88
25th month 71 99 84 67 99 83 70 99 83 71 99 84
37th month 65 97 76 63 98 80 67 98 82 68 98 81
49th month 60 95 73 58 96 72 63 97 79 65 97 80
61st month 63 92 72 54 94 70 59 95 72 61 96 75

Although there was a marginal decrease in our 13th month Persistency Ratio for individual business in terms of total amount of premium from 88% in Fiscal 2019 to 87% in Fiscal 2021, which was primarily due to the fallout of the COVID-19 pandemic, it has increased to 88% for the six months ended September 30, 2021.

Our 49th month Persistency Ratio for individual business in terms of amount of total premium increased from 73% in Fiscal 2019 to 79% in Fiscal 2021, primarily due to follow-up with policyholders and insurance awareness through reminders and repeated communication and increased further to 80% for the six months ended September 30, 2021.

Our 61st month Persistency Ratio for individual business in terms of amount of total premium was 72% in Fiscal 2019, which remained the same level at Fiscal 2021 and improved to 75% for the six months ended September 30, 2021.

Our continued efforts to improve the quality of our new business, focus on need-based selling, and the inclusion of Persistency Ratio as one of the important metrics for our sales channels have resulted in increasing persistency trends. Additionally, we have introduced a number of initiatives to further improve persistency in our existing policies, including (i) use of data analytics to improve renewal collection, (ii) revival campaigns from time to time and (iii) encouraging the use of eNACH for payment of premiums.

VNB and VNB Margin

VNB is an important metric of profitability as it reflects the additional value generated through the activity of writing new policies during any given period. VNB set forth in the Embedded Value Reports were not based on all policies. For more details, see "Embedded Value Reports" on page 582. VNB margin is the ratio of VNB to APE (as set forth in the Embedded Value

Reports) for the relevant period and is a measure of the expected profitability of new business in percentage terms. Our VNB and VNB margin were 41,670 million and 9.9% for Fiscal 2021, respectively. Our VNB and VNB margin were 15,830 million and 9.3% for the six months ended September 30, 2021, respectively.

IEV, IEVOE and ORIEV

The increase in IEV by 105.62% from 464,970 million as at March 31, 2020 to 956,050 million as at March 31, 2021 was due to an increase in (i) VIF by 95.07% from 457,510 million as at March 31, 2020 to 892,450 million as at March 31, 2021; and (ii) ANW by 752.68% from 7,460 million as at March 31, 2020 to 63,610 million as at March 31, 2021.

Our IEV increased from 956,050 million as at March 31, 2021 to 5,396,860 million as at September 30, 2021 mainly due to:

an increase in VIF from 892,450 million as at March 31, 2021 to 5,314,830 million as at September 30, 2021 due to the increase in present value of future profits (which is the present value of projected distributable profits to shareholders arising from the in-force covered business) from 1,047,720 million as at March 31, 2021 to 5,469,920 million as at September 30, 2021, which was mainly on account of the segregation of the Life Fund into the participating policyholders fund and the non-participating policyholders fund effective September 30, 2021, resulting in the shareholders share of the surplus in the non-participating fund and the projected value of surplus from the non-participating global reserves increasing from the assumed allocation of 10% previously to 100% from September 30, 2021 onwards; and

an increase in ANW from 63,610 million as at March 31, 2021 to 82,030 million as at September 30, 2021 due to an increase in free surplus (which represents the market value of assets allocated to, but not required to support, the in-force covered business).

Our IEVOE of 171,510 million for Fiscal 2021, which was 36.96% of our IEV total earnings, was mainly due to:

Our expected return on existing business of 94,740 million for Fiscal 2021 which consists of (i) an expected return of 38,010 million based on the opening reference rates as at March 31, 2020; and (ii) the impact of expected excess of ‘real-world best-estimate investment return during the year over the opening reference rates amounting to 56,730 million in Fiscal 2021;

our VNB amounting to 41,670 million in Fiscal 2021; and

a positive operating variance of 35,110 million, reflecting a better experience vis-?-vis assumptions on most key parameters including persistency, mortality and morbidity in Fiscal 2021.

Our ORIEV, which represents the ratio of IEVOE for any given period to the IEV at the beginning of that period, stood at 36.89% in Fiscal 2021. This is primarily attributed to:

our IEVOE of 171,510 million for Fiscal 2021; and

IEV of 464,970 million at the beginning of Fiscal 2021.

Net Premium

Net premium during any period represents the gross premiums earned by us less reinsurance. We believe that net premium is an important metric as it reflects the net funds retained by us.

Net premium increased by 12.50% from 3,399,716.34 million in Fiscal 2019 to 3,824,755.18 million in Fiscal 2020 and increased by 5.99% from 3,824,755.18 million in Fiscal 2020 to 4,053,984.98 million in Fiscal 2021.

Net premium was 1,872,895.40 million for the six months ended September 30, 2021.

Consolidated AUM

Our consolidated AUM increased by 2.05% from 32,710,327.25 million as at March 31, 2019 to 33,381,079.43 million as at

March 31, 2020 and further increased by 10.63% to 36,929,672.66 million as at March 31, 2021. The increase in our AUM in Fiscal 2020 was relatively lower as compared to Fiscal 2021 given the reduction in the mark to market of the equity component of our AUM in Fiscal 2020, which was largely due to adverse market conditions causing the AUM of 2020 to shrink significantly. Our AUM increased more rapidly in Fiscal 2021 due to conducive market conditions, coupled with the increase in net premium from policyholders, investment income from fixed income securities and realised gains.

Our consolidated AUM was 39,742,077.12 million as at September 30, 2021.

 

Solvency Ratio (within India Business)

Solvency Ratio is a regulatory measure of capital adequacy for Indian insurance companies and is calculated by dividing an insurers available solvency margin by its required solvency margin, each as calculated in accordance with IRDAI guidelines. The available solvency margin represents the capital available to meet regulatory solvency capital and is the excess of admissible assets over liabilities. The required solvency margin is computed by using factors specified by IRDAI for different lines of business, the factors being applicable on the reserves and the sum at risk. The minimum Solvency Ratio required to be maintained is the control limit of 1.50, as set by the IRDAI.

Our Solvency Ratio (within India business) decreased from 1.60 as at March 31, 2019 to 1.55 as at March 31, 2020, primarily due to a debit balance in the fair value change account of 43,165.63 million as at March 31, 2020. Our Solvency Ratio (within India business) increased from 1.55 as at March 31, 2020 to 1.76 as at March 31, 2021, primarily due to increased capital gains and retention of shareholder dividends of 55,939.22 million.

Our Solvency Ratio (within India business) was 1.83 as at September 30, 2021, which is higher than the control limit of 1.50 set by IRDAI as at such date. As at September 30, 2021, we had available solvency margin of 2,023,475.32 million. We believe that our solvency ratio positions us to withstand situations such as significant variance between actual experience and actuarial assumptions, and provides for increased capital requirements associated with high growth and an efficient use of capital.

Recent Developments in Accounting Standards

We currently prepare our statutory financial statements in accordance with Indian GAAP, the Companies Act and IRDAI regulations. The IRDAI issued a circular dated March 1, 2016 regarding the implementation of Ind AS in the insurance sector, requiring all insurance companies to comply with Ind AS for the preparation and presentation of financial statements for accounting period beginning on or after April 1, 2018, with comparative for year ending March 31, 2018. The IRDAI subsequently issued a further circular dated June 28, 2017, deferring the implementation of Ind AS in insurance sector in India for a period of two years to be effective from Fiscal 2021, and requiring all insurance companies to continue the submission of proforma Ind AS financial statements on quarterly basis until such future date. However, on January 21, 2020, the IRDAI issued a circular on Implementation of Ind AS in the Insurance Sector whereby it withdrew its circular dated June 28, 2017, deferred the implementation for Ind AS and dispensed with the requirement to submit the proforma financial statements. It has been decided to implement Ind AS 109 and Ind AS equivalent of IFRS 17 simultaneously, along with all other applicable Ind AS, and the effective date of implementation shall be decided after the finalization of IFRS 17 by the International Accounting Standards Board and subsequent notification of the standard equivalent to IFRS 17 in India.

This is an indicative analysis of significant developments in accounting standards and is provided for convenience only. It is not intended to be an exhaustive list. Investors should seek specific advice from their advisors in relation to the impact on our financial statements due to any amendment to the accounting standards rules. Also see "Risk Factors Internal Risk Factors

Risks Relating to our Business Changes in the accounting standards used in the reporting of our Restated Consolidated Financial Statements due to new pronouncements such as Ind AS, interpretations, migration to new standards or even due to our own decision to change accounting policies may significantly affect our financial statements for the future years, and may materially and adversely affect our financial condition" on page 57.

List of Subsidiaries and Associates Considered for Preparation of the Restated Consolidated Financial Statements

 

Subsidiary Companies

Name of Subsidiary Country of Incorporation

Our Corporations Direct Shareholding %

As at September 30, 2021 As at March 31, 2021 As at March 31, 2020 As at March 31, 2019
LIC Pension Fund Limited India 100.00% 100.00% 100.00% 100.00%
LIC Cards Services Limited India 100.00% 100.00% 100.00% 100.00%
Life Insurance Corporation (Singapore) Pte. Ltd. Singapore 100.00% 100.00% 100.00% 100.00%
Life Insurance Corporation (LIC) of Bangladesh Limited Bangladesh 83.33% 83.33% 83.33% 83.33%
Life Insurance Corporation (Nepal) Ltd. Nepal 55.00% 55.00% 55.00% 55.00%
Name of Subsidiary Country of Incorporation

Our Corporations Direct Shareholding %

As at September 30, 2021 As at March 31, 2021 As at March 31, 2020 As at March 31, 2019
Life Insurance Corporation (International) B.S.C.(c) Bahrain 99.66% 98.90% 98.90% 98.90%
Life Insurance Corporation (Lanka) Limited Sri Lanka 80.00% 80.00% 80.00% 80.00%
IDBI Trusteeship Services Ltd. India N.A.(1) N.A.(1) 29.84%(1) 29.84%(1)
IDBI Bank India N.A.(1) N.A.(1) 51.00%(1) 51.00%(1)

 

Notes:

(1) IDBI Bank became a subsidiary with effect from January 21, 2019 following our Corporations acquisition of an additional 827,590,885 of the outstanding shares in IDBI Bank, which resulted in our Corporation owning 51% of the outstanding shares in IDBI Bank. IDBI Trusteeship Services Limited is a subsidiary of IDBI Bank, with IDBI Bank holding 54.70% of the outstanding shares, so IDBI Trusteeship Services Limited also became our

Corporations subsidiary with effect from January 21, 2019. On December 19, 2020, IDBI Bank was reclassified as an associate company due to the reduction of our Corporations shareholding to 49.24% following the issuance of additional equity shares by IDBI Bank in a qualified institutions placement. Consequently, IDBI Trusteeship Services Limited was also reclassified from a subsidiary to an associate on that date. Our Corporation used policyholders funds to acquire all of its shares in both IDBI Trusteeship Services Limited and IDBI Bank. IDBI Bank and IDBI Trusteeship Services

Limiteds results of operations were consolidated as subsidiaries for the following periods in the respective Fiscal Years: (i) for Fiscal 2019, the three months from January 1, 2019 to March 31, 2019; (ii) for Fiscal 2020, the entirety of the Fiscal Year; and (iii) for Fiscal 2021, the nine months from April 1, 2020 to December 31, 2020.

Associate Companies

Name of Associate(1) Country of

Our Corporations Direct Shareholding %

Incorporation As at September 30, 2021 As at March 31, 2021 As at March 31, 2020 As at March 31, 2019
LIC Housing Finance Limited India 45.24% 40.31% 40.31% 40.31%
LICHFL Asset Management Company Limited India 5.38%(2) 5.38%(2) 5.38%(2) 5.38%(2)
LIC Mutual Fund Asset Management Limited India 45.00% 45.00% 45.00% 45.00%
LIC Mutual Fund Trustee Company Private Limited India 49.00% 49.00% 49.00% 49.00%
IDBI Trusteeship Services Limited India 29.84%(3) 29.84%(3) N.A.(3) N.A.(3)
IDBI Bank India 49.24%(3) 49.24%(3) N.A.(3) N.A.(3)

 

Notes:

(1) All of our Corporations shares in the associate companies were purchased using policyholders funds.

(2) LIC Housing Finance Limited holds 94.62% of the outstanding shares in LICHFL Asset Management Company Limited.

(3) IDBI Bank became a subsidiary with effect from January 21, 2019 following our Corporations acquisition of an additional 827,590,885 of the outstanding shares in IDBI Bank, which resulted in our Corporation owning 51% of the outstanding shares in IDBI Bank. IDBI Trusteeship Services Limited is a subsidiary of IDBI Bank, with IDBI Bank holding 54.70% of the outstanding shares, so IDBI Trusteeship Services Ltd. also became our Corporations subsidiary with effect from January 21, 2019. On December 19, 2020, IDBI Bank was reclassified as an associate company due to the reduction of our Corporations shareholding to 49.24% following the issuance of additional equity shares by IDBI Bank in a qualified institutions placement. Consequently, IDBI Trusteeship Services Limited was also reclassified from a subsidiary to an associate on that date. IDBI Bank and IDBI

Trusteeship Services Limiteds results of operations were recognised on an associate company basis for the three months from January 1, 2021 to March 31, 2021 and the six months ended September 30, 2021.

Basis of Preparation

The Restated Consolidated Financial Statements of the Group comprises; the Restated Consolidated Statement of Assets and Liabilities as at September 30, 2021, March 31, 2021, March 31, 2020, March 31, 2019 and the Restated Consolidated Statement of Revenue Account (also called the Policyholders Account or Technical Account), Restated Consolidated Statement of Profit

& Loss Account (also called the Shareholders Account/ Non-Technical Account) and the Restated Consolidated Statement of Receipts and Payments Account (also called the Cash Flow Statement) for the six months ended on September 30, 2021 and for each of the financial years ended March 31, 2021, March 31, 2020 and March 31, 2019 and Significant Accounting Policies and notes to the Restated Consolidated Financial Statements and other explanatory notes (collectively, the "Restated Consolidated Financial Statements").

The Restated Consolidated Financial Statements have been prepared by the Management of the Corporation for the purpose of inclusion in the Draft Red Herring Prospectus in connection with the proposed initial public offer of equity shares of the Corporation, in accordance with the requirements of:

i. Section 5 of Chapter II of the Act;

ii. Para 1 & 2 of Schedule I Part (c) of Insurance Regulatory and Development Authority of India (Issuance of Capital by

Indian Insurance Companies transacting Life Insurance Business) Regulations, 2015 (referred to as the "IRDAI Regulations") issued by the IRDAI;

iii. The SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 issued by the Securities and Exchange

Board of India ("SEBI"), as amended (together referred to as the "SEBI Regulations"); iv. Guidance note on reports in Company Prospectuses (Revised 2019) as issued by the Institute of Chartered Accounts of India ("ICAI"), as amended ("Guidance Note").

a) These Restated Consolidated Financial Statements have been compiled by the Management from:

i. the audited special purpose consolidated interim financial statements of the Group as at and for the six months ended

September 30, 2021, prepared in accordance with the recognition and measurement principles of accounting standard

(referred to as "AS") 25 "Interim Financial Reporting" prescribed under Section 133 of the Companies Act, 2013 to the extent applicable and the other accounting principles generally accepted in India, which have been approved by the Board of Directors at their meeting held on January 20, 2022; and;

ii. the audited consolidated financial statements of the Group as at and for each of the financial years ended March 31,

2021, March 31, 2020 and March 31, 2019, prepared in accordance with the AS as prescribed under Section 133 of the Companies Act, 2013, to the extent applicable and other accounting principles generally accepted in India, which have been approved by the Board of Directors at their meeting held on January 20, 2022.

The above referred audited special purpose consolidated interim financial statements and audited consolidated financial statements of the Group are prepared under the historical cost convention, with fundamental accounting assumptions of going concern, consistency and accrual, unless otherwise stated. The accounting and reporting policies of the Group conform to accounting principles generally accepted in India ("Indian GAAP"), comprising regulatory norms and guidelines prescribed by the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditors Report of Insurance Companies) Regulations, 2002 ("the Financial Statements Regulations"), the Master Circular on Preparation of

Financial Statements and Filing of Returns of Life Insurance Business Ref No. IRDA/F&A/Cir/232/12/2013 dated December 11, 2013 ("the Master Circular") and other circulars issued by the IRDAI from time to time, provisions of the Insurance Act, 1938, as amended, norms and guidelines prescribed by the Reserve Bank of India ("the RBI"), the Banking Regulations Act,

1949, Pension Fund Regulatory and Development Authority, National Housing Bank Act, 1987, Housing Finance Companies (NHB) Directions, 2010 as amended, and in compliance with the Accounting Standards notified under Section 133 of the Companies Act, 2013, and amendments and rules made thereto, to the extent applicable.

The accounting policies have been consistently applied by the Corporation in preparation of the Restated Consolidated Financial Statements and are consistent with those adopted in the preparation of financial statements for the six months ended September 30, 2021.

Subsidiaries /Associates of the Corporation are governed by different operation and accounting regulations and lack homogeneity of business; hence only material adjustments have been made to the financial statements of the subsidiaries/associates to bring consistency in accounting policies at the time of consolidation to the extent it is practicable to do so. Where it is not practicable to make adjustments and, as a result, the accounting policies differ, such difference between accounting policies of the Corporation and its subsidiaries have been disclosed.

The Restated Consolidated Financial Statements have been prepared:

after incorporating adjustments for the changes in accounting policies, material errors and regrouping/reclassifications retrospectively in the financial years ended March 31, 2021, 2020 and 2019 to reflect the same accounting treatment as per the accounting policy and grouping / classifications followed as at and for the six-month period ended September 30, 2021; after incorporating adjustments for reclassification of the corresponding items of income, expenses, assets and liabilities, in order to bring them in line with the groupings as per the audited consolidated financial statements of the Corporation as at and for the six months ended September 30, 2021; in accordance with the Act, ICDR Regulations and the Guidance Note; and do not require adjustment for any modification, as there is no modification of opinion in the underlying audit reports.

The Restated Consolidated Financial Statements are presented in Indian Rupees "INR" or "Rs." and all values are stated as INR or Rs. millions, except for share data and where otherwise indicated.

The notes forming part of the Restated Consolidated Financial Statements are intended to serve as a means of informative disclosure and a guide towards a better understanding of the consolidated position and results of operations of the Group. The Corporation has disclosed such notes from the standalone financial statements of the Corporation and its subsidiaries that are necessary for presenting a true and fair view of the Restated Consolidated Financial Statements. Only the notes involving items that are material are disclosed. Materiality for this purpose is assessed in relation to the information contained in the Restated Consolidated Financial Statements. Additional statutory information disclosed in separate financial statements of the subsidiaries and/or the Corporation having no bearing on the true and fair view of the Restated Consolidated Financial

Statements are not disclosed in the notes to the Restated Consolidated Financial Statements.

The accounting policies, notes and disclosures made by the Corporation on a standalone basis are best viewed in its standalone financial statements.

The Corporation has made certain investments in equity shares and various other classes of securities in other companies which have been accounted for as per Accounting Standard 13 Accounting for Investments. This includes certain investments in companies, not considered for Consolidation, as per category wise reasons given hereunder:

Where the Corporation is categorised as Promoter:

The Corporation has nominee directors on the board of directors of some of these companies. However, the Corporation does not have any control or significant influence on these companies. The board seat of the Corporation in these investees is 1 out of total strength of the respective board of directors of the investee companies ranging from six to 15. The promoter status is by way of investment at the time of formation of these companies.

Shareholding of Corporation is more than 20%:

Legacy investments by the Corporation without any representation on the board of directors and/or any involvement in the management/administration of the investee companies. As such, the Corporation does not have any management control or significant influence in these entities.

Corporation has Board position through agreement or nominee directors:

In such cases the shareholding of the Corporation is below 20% and the Corporation has nominee directors on the board of directors of these investee companies. The investments in these companies are at par with other companies and shares are bought and sold depending upon market conditions. The board seat is 1 out of total strength of the respective board of directors of the investee companies ranging from six to 15. As such, the Corporation does not have control or significant influence on these companies.

Basis of Consolidation

a) The financial information of the Corporation and its subsidiaries have been combined on a line-by-line basis by adding together similar items of assets, liabilities, income and expenses after eliminating intra-group balances, transactions and resulting unrealized profits or losses (unless cost cannot be recovered). The Policyholders account specifically dealing with direct insurance business governed by IRDAI Regulations has retained its distinct independent form in these Restated Consolidated Financial Statements.

b) The excess of costs to the Corporation of its investment in the subsidiaries over its share of equity of the subsidiaries at the dates on which the investments in subsidiaries are made, is recognised as ‘Goodwill being an asset in the Restated Consolidated Financial Statements. Alternatively, where the share of equity in the subsidiaries as on the date of investment is in excess of cost of investment of the Corporation, it is recognised as ‘Capital Reserve and shown under the head ‘Reserves and Surplus, in the Restated Consolidated Financial Statements. The ‘Goodwill / ‘Capital Reserve is determined separately for each subsidiary.

c) The Restated Consolidated Financial Statements include the share of profit / loss of the associate companies which have been accounted for using ‘Equity Method in accordance with Accounting Standard (AS) 23 - "Accounting for Investments in Associates in consolidated financial statements" and accordingly, the share of profit/ loss of each of the associate companies (the loss being restricted to the cost of investment) has been added to/deducted from the cost of investments. The carrying value is reduced for the distributions received from the associates.

d) The Corporation accounts for its share in the change in the net assets of the associate, post-acquisition, after eliminating unrealised profits and losses resulting from transactions between the Corporation and its associate to the extent of its share, through its statement of Profit and Loss Account (Shareholders Account or Non-Technical Account) / Revenue Account - Policyholders Account or (Technical Account) based on the source of investment made through respective fund to the extent such change is attributable to the associates statement of profit and loss.

e) Minority interest in the net assets of subsidiaries consists of the amount of equity attributable to the minority shareholders at the dates on which investments are made by the Corporation in the subsidiaries and further movements in their share in the equity, subsequent to the dates of investments as stated above.

f) The financial statements of the foreign subsidiaries used in the consolidation are drawn up to the same reporting date as that of the Corporation, i.e., 31st March or up to 31st December, in case where the subsidiaries or associates close their financial year on that date. The foreign subsidiaries have prepared their accounts in accordance with International Financial Reporting Standards ("IFRS") / Generally Accepted Accounting Principles ("GAAP") as per the required local laws of the respective country, resulting in some variations as compared to Indian GAAP followed by the Corporation. For the purpose of preparing the consolidated financial statements of the Group, accounting adjustments have not been made to align the accounts of these entities to confirm with the accounting polices followed by the Corporation. The impact of difference in accounting policy will not be material.

g) Financial statements of foreign subsidiaries, being non-integral operations, have been converted into Indian Rupees at following exchange rates: Revenue and Expenses: at the average of the year/period; Assets and Liabilities: closing rate at the end of the financial year/period. The resultant translation exchange difference is transferred to "Exchange Fluctuation Reserve".

Use of Estimates

The preparation of Restated Consolidated Financial Statements is in conformity with Indian GAAP, which requires that the

Groups management makes estimates and assumptions that affect the reported amounts of income and expenses for the year/period, reported balances of assets and liabilities and disclosures relating to contingent liabilities as on the date of the Restated Consolidated Financial Statements. The estimates and assumptions used in the accompanying Restated Consolidated

Financial Statements are based upon managements evaluation of the relevant facts and circumstances up to and as on the date of the Restated Consolidated Financial Statements. Actual results could differ from the estimates. Any revision to the accounting estimates is accounted for prospectively.

Significant Accounting Policies

1. Revenue Recognition

A. For Life Insurance Business:

a. Premium Income

i. Premiums are recognized as income when due, for which grace period has not expired and the previous instalments have been paid. In case of linked business, the due date for payment is taken as the date when the associated units are created.

ii. Income from linked funds, which includes fund management charges, policy administration charges, mortality charges, etc., are recovered from linked funds in accordance with terms and conditions and recognized when due.

iii. Premium ceded on re-insurance is accounted in accordance with the terms of the reinsurance treaty or in-principle arrangement with the re-insurer.

b. Investment Income

i. Interest income in respect of all government securities, debt securities including loans, debentures and bonds, pass through certificate ("PTC"), mortgage loans is taken credit to the Revenue Account as per the guidelines issued by the IRDAI.

ii. In respect of purchase or sale of government and other approved securities from secondary market, interest for the broken period is paid / received on cash basis.

iii. Interest, dividend, rent, etc. are accounted at gross value (before deduction of Income Tax).

iv. In respect of loans, debentures and bonds, accrued interest as at the date of the balance sheet is calculated as per method of calculation of simple interest mentioned in the loan document/information memorandum or such other document. In respect of government and other approved securities and mortgage loans, accrued interest as at the date of balance sheet is calculated based on 360 days a year.

v. Profit or loss on sale of securities/equities/ mutual fund is taken to revenue only in the year/period of sale.

vi. Dividend on quoted equity where right to receive the same has fallen due on or before

March 31 (i.e., dividend declared by the company) is taken as income though received subsequently. Dividend on unquoted equity is taken as income only on receipt. vii. Interest on policy loans is accounted for on accrual basis.

viii. Rental income is recognized as income when due and rent/license fees which is in arrear for more than six months is not recognized as income. Upfront premium is accounted on cash basis.

ix. Outstanding interest on NPAs as at balance sheet date is provided as interest suspense. x. Dividend on preference shares/mutual fund is taken as income only on receipt. xi. Interest on application money on purchase of debentures/bonds is accounted on cash basis. xii. Income on venture capital investment is accounted on cash basis. xiii. Income from zero coupon bonds is accounted on accrual basis. xiv. Premium on redemption/maturity is recognized as income on redemption/maturity. xv. Processing fee is accounted on receipt basis.

B. For Banking Business:

i. Interest income is recognized on accrual basis except in the case of non-performing assets where it is recognized upon realization as per the prudential norms of the Reserve Bank of India ("RBI").

ii. Commissions on Letter of Credit (LC)/ Bank Guarantee (BG) are accrued over the period of LC/ BG.

iii. Fee based income is accrued on certainty of receipt and is based on milestones achieved as per terms of agreement with the client.

iv. Income on discounted instruments is recognized over the tenure of the instrument on a constant yield basis.

v. For listed companies, dividend is booked on accrual basis when the right to receive is established.

For unlisted companies, dividend is booked as and when received.

vi. In case of non-performing advances, recovery is appropriated as per the policy of the Bank.

2. Investments

A. For Life Insurance Business:

a. Non-Linked Business:

i. Debt securities including government securities and redeemable preference shares are considered as ‘held to maturity and the value is disclosed at historical cost subject to amortization as follows:

(a) Debt securities including government securities, where the book value is more than the face value, the premium will be amortized on straight line basis over the balance period of holding/maturity. Where face value is greater than book value, discount is accounted on maturity.

(b) Listed redeemable preference shares, where the book value is more than the face value, the premium is amortized on a straight-line basis over the balance period of holding/maturity and are valued at amortised cost if last quoted price (not later than 30 days prior to valuation date), is higher than amortised cost. Provision for diminution is made if market value is lower than amortised cost.

Unlisted redeemable preference shares where the book value is more than the face value, the premium is amortized on a straight-line basis over the balance period of holding/maturity and are valued at amortised cost less provision for diminution.

Listed irredeemable preference shares are valued at book value if last quoted price

(not later than 30 days prior to valuation date), is higher than book value. In case last quoted price is lower, it is valued at book value less provision for diminution.

Unlisted irredeemable preference shares are valued at book value less provision for diminution.

ii. Listed equity securities that are traded in active markets are measured at fair value on balance sheet date and the change in the carrying amount of equity securities is taken to fair value change account.

iii. Unlisted equity securities and thinly traded equity securities are measured at historical cost less provision for diminution in the value of such investments. Such diminution is assessed and accounted for in accordance with the impairment policy of the corporation. A security shall be considered as being thinly traded as per guidelines governing mutual funds laid down from time to time by SEBI.

iv. All investments are accounted on cash basis except for purchase or sale of equity shares and government securities from the secondary market.

v. The value of investment properties is disclosed at the revalued amounts and the change in the carrying amount of the investment property is taken to Revaluation Reserves. Investment property is revalued at least once in every three years. The basis adopted for revaluation of property is as under:

(a) The valuation of investment property is carried out by rent capitalization method considering the market rent.

(b) Investment properties having land alone without any building/structure is revalued as per current market value.

vi. Mutual fund and exchange traded fund ("ETF") investments are valued on fair value basis as at the balance sheet date and change in the carrying amount of mutual fund/ETF is taken to fair value change account.

vii. Investments in venture fund/ alternative investment fund ("AIF") is valued at cost wherever

NAV is greater than the book value. Wherever, NAV is lower than book value the difference is accounted as diminution.

viii. Money market instruments are measured at book value.

b. Linked Business:

Valuation of Securities is in accordance with IRDAI directives issued from time to time. B. For Banking Business: a. Classification:

In terms of extant guidelines of the RBI on investment classification and valuation, the entire investment portfolio is categorized into held to maturity, available for sale and held for trading. Investments under each category are further classified as:

i. Government securities ii. Other approved securities iii. Shares iv. Debentures and bonds v. Subsidiaries/ joint ventures vi. Others (Commercial paper, mutual fund units, security receipts, PTC).

b. Basis of Classification:

i. Investments that the Bank intends to hold till maturity are classified as ‘held to maturity.

ii. Investments that are held principally for sale within 90 days from the date of purchase are classified as ‘held for trading.

iii. Investments, which are not classified in the above two categories, are classified as ‘available for sale.

iv. An investment is classified as ‘held to maturity, ‘available for sale or ‘held for trading at the time of its purchase and subsequent shifting amongst categories and its valuation is done in conformity with RBI guidelines.

v. Investment in subsidiaries and joint venture are normally classified as ‘held to maturity except in case, on need-based reviews, which are shifted to ‘available for sale category as per RBI guidelines. The classification of investment in associates is done at the time of its acquisition.

c. Investment Valuation:

i. In determining the acquisition cost of an investment:

(a) Brokerage, commission, stamp duty, and other taxes paid are included in cost of acquisition in respect of acquisition of equity instruments from the secondary market whereas in respect of other investments, including treasury investments, such expenses are charged to profit and loss account.

(b) Broken period interest paid/ received is excluded from the cost of acquisition/ sale and treated as interest expense/ income.

(c) Cost is determined on the weighted average cost method.

ii. Investments ‘held to maturity are carried at acquisition cost unless it is more than the face value, in which case the premium is amortized on straight line basis over the remaining period of maturity. Diminution, other than temporary, in the value of investments, including those in Subsidiaries, joint ventures and Associates, under this category is provided for each investment individually.

iii. Investments ‘held for trading and ‘available for sale are marked to market scrip-wise and the resultant net depreciation, if any, in each category is recognised in the profit and loss account, while the net appreciation, if any, is ignored.

iv. Treasury bills, commercial papers and certificates of deposit being discounted instruments are valued at carrying cost.

v. In respect of traded/ quoted investments, the market price is taken from the trades/ quotes available on the stock exchanges.

vi. The quoted government securities are valued at market prices and unquoted/non-traded government securities are valued at prices declared by Financial Benchmark India Private

Limited ("FBIL").

vii. The unquoted shares are valued at break-up value or at NAV if the latest balance sheet is available, else, at Rs 1/- per company and units of mutual fund are valued at repurchase price as per relevant RBI guidelines.

viii. The unquoted fixed income securities (other than government securities) are valued on yield to maturity ("YTM") basis with appropriate mark-up over the YTM rates for central government securities of equivalent maturity. Such mark-up and YTM rates applied are as per the relevant rates published by Fixed Income Money Market and Derivative Association of India ("FIMMDA")/FBIL.

ix. Security receipts issued by the asset reconstruction companies are valued in accordance with the guidelines applicable to such instruments, prescribed by RBI from time to time. Accordingly, in cases where the cash flows from security receipts issued by the asset reconstruction companies are limited to the actual realisation of the financial assets assigned to the instruments in the concerned scheme, the Bank reckons the NAV obtained from the asset reconstruction company from time to time, for valuation of such investments at the end of each reporting period.

x. Quoted preference shares are valued at market rates and unquoted/non-traded preference shares are valued at appropriate yield to maturity basis, not exceeding redemption value as per RBI guidelines.

xi. Investment in stressed assets stabilisation fund ("SASF") is categorized as held to maturity and valued at cost. Provision is made for estimated shortfall in eventual recovery by September 2024.

xii. VCF investments held in HTM category are valued at carrying cost and those held in AFS category are valued on NAVs received from fund houses.

xiii. PTC investments are presently held only under AFS category and are valued on YTM basis with appropriate mark-up over the YTM rates for central government securities of equivalent maturity and the spreads applicable are that of NBFC bonds. Such mark-up and YTM rates applied are as per the relevant rates published by FIMMDA/FBIL. Mark to market ("MTM") provision is done on monthly basis.

xiv. Profit or loss on sale of investments is credited/ debited to profit and loss Account.

However, profits on sale of investments in ‘held to maturity category is first credited to profit and loss account and thereafter appropriated, net of applicable taxes to the capital reserve account at the year/period end. Loss on sale is recognized in the profit and loss account.

xv. Investments are stated net of provisions.

xvi. Repo and reverse repo transactions: In accordance with the RBI guidelines repo and reverse repo transactions in government securities and corporate debt securities (including transactions conducted under Liquidity Adjustment Facility ("LAF") and Marginal Standby Facility ("MSF") with RBI) are reflected as borrowing and lending transactions respectively. Borrowing cost on repo transactions is accounted as interest expense and revenue on reverse repo transactions is accounted as interest income.

3. Acquisition Costs

Acquisition costs are expensed in the period in which they are incurred. Acquisition costs are those costs that vary with and are primarily related to the acquisition of new and renewal insurance contracts.

4. Claims i. Claims costs consist of the policy benefit amount and claims settlement costs, wherever applicable.

ii. The date of recognition of claim shall be the date of receipt of intimation of death or surrender by the policy holder. The date of recognition of claims in case of maturity, survival benefits, annuity etc. shall be as per the terms and condition of the policies.

iii. Repudiated claims disputed before judicial authorities are treated as contingent liability based on management prudence.

iv. The provision is made for disputed legal cases pertaining to repudiated claims where decision is given against the Corporation by Lower Forum/Court to the extent of entire amount awarded by the Forum/Court against LIC, pending the appeal/writ/revision filed by LIC.

5. Loans and Provisions

A. For Life Insurance Business:

Loans are measured at historical cost subject to impairment provisions. Asset Classification and Provisioning for NPAs are as follows:

i. As per the guidelines issued to insurance companies by the IRDAI. Assets representing loans, debentures and bonds and mortgage loans against house property are classified based on record of recovery as:

(a) standard; (b) sub-standard; (c) doubtful; and (d) loss assets.

ii. Provisioning for non-performing loans, debentures and bonds and mortgage loans against house property is made as per the guidelines issued by the IRDAI.

B. For Banking Business:

i. Advances are classified into standard, sub-standard, doubtful and loss assets and provisions are made in accordance with the prudential norms prescribed by RBI. Advances are stated net of provisions towards non-performing advances.

ii. Advances are classified as ‘secured by tangible assets when security of at least 10% of the advance has been stipulated/ created against tangible security including book debts. Security in the nature of escrow, guarantee, comfort letter, charge on brand, license, patent, copyright, etc. are not considered as ‘tangible assets.

iii. Amounts recovered against debts written-off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized as income in the profit and loss account.

iv. The Bank does not make any floating provision for bad and doubtful advances and investments.

v. Provision on loans and advances restructured/rescheduled is made in accordance with the applicable

RBI guidelines on restructuring of loans and advances by Banks.

vi. The Bank had made countercyclical provisioning buffer as required by RBI guidelines, in earlier years, with the approval of the Board, which can be utilized within the limits and in the circumstances permitted by RBI.

6. Fixed Assets

A. For Life Insurance Business:

Values of the fixed assets are stated at cost (inclusive of taxes) less depreciation. Property under construction and amounts paid for the properties taken in possession, pending documentation, are accounted under ‘house property and land.

B. Depreciation / Amortisation:

1. For Life Insurance Business:

Depreciation / amortisation on fixed assets is provided using the straight-line method, based on useful lives of assets as estimated by the management. Depreciation is charged on monthly pro-rata basis for assets purchased/sold during the year. Assets individually costing up to Rs. 5,000, being low value assets are fully charged to revenue in the year of purchase. Based on useful life evaluation carried out by the management the rates of depreciation are as follows:

Asset Rate of Depreciation
Furniture and fittings:
Furniture and fittings 10%
Refrigerators and water coolers, etc. 13.91%
Electric fittings and ceiling fans in rented premises 10%
Asset Rate of Depreciation
Fans(table/pedestal) in rented/ owned premises 10%
Information Technology Equipment:
Electronic Computers/ microprocessors Printers 30%
Software for microprocessors 30%
Cartridge tapes, cartridge discs 30%
Vehicles:
Cycles 15%
Mobile Publicity Vans 20%
Staff Cars 20%
Jeeps 20%
Office Cars-Scheme VI 20%
Office Equipment:
Canteen Equipment 10%
Accounting machines 30%
Addressograph, Adrema and Bradma Machines, etc. 10%
Typewriters 10%
Duplicators 20%
Cheque Writers 10%
Franking machines 10%
Weighing Machines 10%
Comptometers, adding and calculating Machines 20%
Others:
Telephones 10%
Fax/Epabx 10%
Mobile phones and other communication equipment 30%
Library Books 20%
Miscellaneous Capital Equipment 10%
Audio Visual and other Allied equipment 30%
Neon signs, Glow signs, Hoardings and other publicity materials 20%
Engineering Departments equipment costing over Rs. 5000/- 12.50%
Voltage stabilizers and UPS 30%
Generators, DG sets in rented premises 30%
Land and Building:
House Property and Land (Freehold) 2%
House Property and Land (Leasehold) Pro rata based on lease period
Ownership Flats purchased in Co-op Societies 2%
Electrical Installations, fans, lifts and generators in House 10%
Property (Freehold and Leasehold)

2. For Banking Business:

i. Fixed assets other than premises are stated at cost less accumulated depreciation. Premises are revalued in accordance with the banks policy and RBI guidelines and the same are stated at revalued amount less accumulated depreciation.

ii. Cost of asset includes purchase cost and all expenditure incurred on the asset before put to use. Subsequent expenditure incurred on assets which have been put to use is capitalized only when it increases the future benefits from such assets or their functioning capability.

iii. The appreciation on revaluation, if any, is credited to the Revaluation Reserves.

iv. Depreciation in respect of fixed assets is calculated on straight line method with reference to cost or revalued amounts, in case of assets revalued.

v. In respect of revalued assets, the additional depreciation consequent to revaluation is transferred from the Revaluation Reserves to general reserve in the balance sheet.

vi. Fixed assets individually costing less than Rs. 5,000 are fully depreciated in the year of addition.

vii. Depreciation on tangible assets is allocated over useful life of the asset as prescribed under

Part C of Schedule II of the Companies Act, 2013. The useful lives and residual values are reviewed periodically. If the management estimate of the useful life of an asset at the time of acquisition of the asset or of remaining useful life on subsequent review is shorter, depreciation is provided at a higher rate based on the managements estimate of useful life / remaining useful life.

viii. Depreciation on additions/ sale of fixed assets during the year is provided for the period for which assets are actually held.

ix. Leasehold land is amortized over the period of lease.

x. Computer software individually costing more than Rs. 0.25 million is capitalized and depreciated over its useful life, not exceeding six years.

xi. The useful lives of fixed assets are as follows:

Asset Useful Life (in Years)
Owned Premises 60
Furniture and Fixtures 10
Electrical Installation and Machinery 10
Motor Vehicles 8
Computers (Including Integral Software) 3
Automated Teller Machine 8
VSAT Equipment 6
Consumer Durable with Employees Furniture and Fixtures 10
Consumer Durable with Employees Personal Computers 3

7. Impairment of assets

i. The carrying values of assets at each balance sheet date are reviewed for impairment. If any indication of such impairment exists, the recoverable amounts of those assets are estimated and impairment is recognised, wherever necessary.

ii. Assets are reviewed for impairment whenever events or changes in circumstances warrant that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated current realizable value and value in use. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds estimated current realizable value of the asset or value in use.

iii. The impairment for unlisted/thinly traded equity shares, preference shares and equity under affiliated investments as assessed and accounted for in accordance with the impairment policy of the Corporation.

8. Liability for Life Policies

The liabilities towards policyholders are determined by the Corporations Appointed Actuary pursuant to his annual investigation of the Corporations life insurance business.

9. Effect of Changes in the Foreign Exchange Rate

A. For Life Insurance Business:

a. Foreign Currency Transactions:

Transactions in foreign currencies are recorded at the exchange rates prevailing at the date of the transaction. Monetary items in foreign currency, if any, are translated at the year-end closing rates. The resultant exchange gain or loss arising on settlement/translation is recognized in the revenue or profit and loss account as applicable.

b. Non-Integral Foreign Operations:

i. Life fund relating to foreign business/foreign subsidiary has been invested according to the statutory regulations of the respective countries.

ii. Financial statements of branches in foreign countries are prepared in accordance with local laws and are translated at appropriate rates of exchange except for Suva (Fiji) branch, for which the conversion is done at appropriate rates, from the financial statement as at December 31, each year, since the accounts of the branch are prepared on calendar year basis.

iii. Exchange gains or losses arising on such conversions are recognised in the period in which they arise in the revenue account.

iv. Operations carried out in Fiji, Mauritius and U.K. are of non-integral nature. The revenue account items are translated at the average exchange rate and balance sheet item at closing rate. Revaluation exchange difference is accumulated in exchange fluctuation reserve under shareholders or policyholders account based on the source of investment from the respective fund.

v. Investments made outside India by remittances sent from India are accounted for at original rupee cost or at the earliest recorded rupee cost, where original cost is not available.

B. For Banking Business:

i. Foreign currency transactions, on initial recognition are recorded at the exchange rate prevailing on the date of transaction. Monetary foreign currency assets and liabilities are translated at the closing rates prescribed by Foreign Exchange Dealers Association of India ("FEDAI") and the resultant gain or loss is recognized in the profit and loss account. Exchange differences arising on the settlement of monetary items are recognized as income or expense in the period in which they arise.

ii. Premium or discount arising at the inception of forward exchange contracts which are not intended for trading is amortized as expense or income over the life of the contract. Premium or discount on other forward exchange contracts is not recognized.

iii. Outstanding forward exchange contracts which are not intended for trading are revalued at closing

FEDAI rates. Other outstanding forward exchange contracts are valued at rates of exchange notified by FEDAI for specified maturities or at interpolated rates for in-between maturities. The resultant profits/ losses are recognized in the profit and loss account.

iv. Profits/ losses arising on premature termination of forward exchange contracts, together with unamortized premium or discount, if any, are recognized on the date of termination.

v. Contingent liabilities in respect of outstanding forward exchange contracts are calculated at the contracted rates of exchange and those in respect of guarantees, acceptances, endorsements and other obligations are calculated at the closing FEDAI rates.

vi. Operations of foreign branch are classified as ‘Integral Foreign Operations. Assets and liabilities are translated at the closing rates prescribed by FEDAI and income and expenditure items are translated at quarterly average rates. The resultant gain or loss is recognized in the profit and loss account.

10. Employee Benefits

A. For Life Insurance Business:

i. Gratuity to employees is provided for (on the basis of actuarial valuation) through a Group Gratuity

Insurance Policy issued by the Corporation and as such, the liability in respect thereof, forms part of the Life Fund.

ii. In respect of employees who have opted for Provident Fund Scheme, matching contribution is made to the Provident Fund Trust formed under the Life Insurance Corporation Act 1956.

iii. In case of Defined Contribution Pension Scheme, the contributions are made when due and charged to Revenue account during the period when related services are rendered.

iv. In case of Defined Benefit Plan for employees who have opted for Pension Scheme, in lieu of

Provident Fund Scheme, the Corporations contribution is made to the Pension Fund Trust, in accordance with the Pension Rules notified by the Government of India and the said contribution including past service contribution is made on the basis of actuarial calculation.

v. Leave encashment benefits on retirement are provided for (on the basis of actuarial valuation) through a Group Leave Encashment Insurance Policy issued by the Corporation and as such, the liability in respect thereof, forms part of the Life Fund.

B. For Banking Business:

i. Payments to defined contribution schemes are charged to profit and loss account of the year when contribution are due.

ii. For defined benefit schemes, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains or losses are recognized in the profit and loss account for the period in which they occur.

iii. The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognized during the period when the employee renders the service.

11. Provisions, Contingent Liabilities and Contingent Assets

i. A provision is made based on a reliable estimate when it is probable that an outflow of resources embodying economic benefits will be required to settle an obligation. Contingent liabilities (other than policies), if material, are disclosed by way of notes.

ii. Contingent assets are not recognized or disclosed in the financial statements.

12. Receipts and Payments Account

Receipts and Payments Account is prepared and reported using the Direct Method in accordance with Para 2.2 of the Master C on Preparation of Financial Statements and Filing of Returns of Life Insurance Business Ref No. IRDA/FandA/Cir/232/12/2013 dated December 11, 2013.

13. Taxation

A. For Life Insurance Business:

i. Direct Taxation: Provision for income tax is made in accordance with the provisions of Section 44 of the Income Tax Act, 1961 read with Rules contained in the First Schedule and other relevant provisions of the Income Tax Act, 1961 as applicable for life insurance business.

ii. Indirect Taxation: The Corporation claims credit of goods and services tax on input services, which are set off against goods and services tax on output services. As a matter of prudence, unutilized credits towards goods and services tax on input services are carried forward under ‘Schedule 12 Advances and Other Assets in the balance sheet, wherever there is reasonable certainty of utilization.

iii. In the Restated Consolidated Financial Statements, income tax expenses are the aggregate of the amounts of tax expense appearing in the separate financial statements of the Corporation and its Subsidiaries, as per their applicable laws.

B. For Banking Business:

i. Current tax is the amount of income tax determined to be payable (recoverable) in respect of taxable income (tax loss) for a period calculated in accordance with the provisions of the Income Tax Act,

1961 and the Income Computation and Disclosure Standards ("ICDS").

ii. Deferred tax for timing differences between the book and tax profits for the year is accounted for, using the tax rates and laws that have been substantively enacted as of the balance sheet date. Deferred tax assets arising from timing differences are recognized to the extent there is reasonable certainty that these would be realized in future.

iii. Deferred tax assets in case of unabsorbed depreciation/ losses are recognized only if there is virtual certainty that such deferred tax asset can be realized against future taxable profits. iv. Disputed taxes not provided for including departmental appeals are included under contingent liabilities.

v. In respect of certain subsidiaries, tax credit is recognized in respect of Minimum Alternate Tax

(" MAT") as per the provisions of Section 115JAA of the Income

Tax Act, 1961 based on convincing evidence that it will pay normal income tax within the statutory time frame and is reviewed at each balance sheet date.

vi. IDBI Bank has opted for the lower tax rate as per Section 115BAA of the Income Tax Act, 1961 through Taxation Laws (Amendments) Act, 2019 which provides, inter alia, that MAT would not be applicable for the domestic companies opting for the lower tax.

vii. In the Restated Consolidated Financial Statements, deferred tax assets and liabilities are computed at an individual entity level and aggregated for consolidated reporting.

14. Leases

i. Operating Lease: Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the lease term are classified as operating leases. Operating lease rentals are recognised as an expense over the lease period on a straight-line basis. Where our Corporation is the lessor, assets subject to operating leases are included in fixed assets. Lease income is recognised in the profit and loss account on a straight-line basis over the lease term. Costs, including depreciation are recognised as expense in the profit and loss account.

ii. Finance Lease: Leases under which our Corporation assumes substantially all the risk and rewards of ownership of the asset are classified as finance leases. Such leased asset acquired are capitalised at fair value of the asset or present value of the minimum lease rental payments at the inception of the lease, whichever is lower.

15. Borrowing Costs

Borrowing costs include interest, commission/brokerage on deposits and exchange differences arising from foreign currency borrowings to the extent they are regarded as adjustment to interest cost.

16. Earnings per Share

Basic earnings per share is computed by dividing the net profit or loss after tax attributable to equity shareholders by weighted average number of equities shares outstanding during the period. Diluted earnings per share is computed by dividing the net profit or loss after tax by the weighted average number of equity shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares.

17. Securitisation Transactions

a. For Banking Business:

Securitisation of various loans results in sale of these assets to Special Purpose Vehicles ("SPVs"), which, in turn issue securities to investors. Financial assets are partially or wholly derecognised when the control over the contractual rights in the securitised assets is lost. The Bank accounts for any loss arising on sale immediately at the time of sale and the profit/ premium arising on account of sale is amortised over the life of the securities issued/ to be issued by the SPV to which the assets are sold.

18. Sale of Financial Assets to Securitisation Companies/Reconstruction Companies

i. Sale of financial assets to Securitisation Companies ("SCs")/ Reconstruction Companies ("RCs") is reckoned at the lower of the redemption value of Security Receipts ("SRs")/ PTCs received and the net book value of the financial asset.

ii. In case of sale of assets which are fully provided and technically written off, the SRs are reckoned at Rupee one in the investment book of the Bank.

iii. In case the sale value is at a price below the Net Book Value ("NBV") (i.e., book value less provision held), the shortfall is be debited to the profit and loss account of that year. The Bank also uses, with permission of RBI, countercyclical/floating provisions for meeting any shortfall on sale of NPAs i.e., when the sale is at a price below the NBV.

iv. In case, sale value is higher than the NBV, the excess provision is reversed to the profit and loss account in the year in which cash amounts are received. However, such reversal of excess provision is limited to the extent to which cash received exceeds the NBV of the asset.

19. Derivative Transactions a. In transactions designated as ‘Hedge: i. Net interest payable/ receivable on derivative transactions is accounted on accrual basis.

ii. On premature termination of hedge swaps, any profit/ losses are recognised over the remaining contractual life of the swap or the residual life of the asset/ liability whichever is lesser.

iii. Re-designation of hedge swaps by change of underlying liability is accounted as the termination of one hedge and acquisition of another.

iv. Hedge contracts are not marked to market unless the underlying is also marked to market. In respect of hedge contracts that are marked to market, changes in the market value are recognised in the profit and loss account.

b. In transactions designated as ‘Trading:

i. Outstanding derivative transactions designated as ‘Trading, which includes interest rate swaps, cross currency swaps, cross currency options and credit default swaps, are measured at their fair value. The resulting profits/ losses are included in the profit and loss account. Premium on options is recorded as a balance sheet item and transferred to profit and loss account on maturity/ cancellation.

ii. Derivative Transactions in Exchange Traded Currency Futures ("ETCFs") segments designated as trading includes currency futures, currency options and interest rate futures which are measured at their fair value and are cash settled on T+1 basis. The resulting profits / losses on these transactions are transferred to profit and loss account on the month end settlement date stipulated by respective exchanges.

c. Transactions in Futures and Options:

i. Initial margin payable at the time of entering into futures contract / sale of options is adjusted against the deposits with the exchanges in the form of fixed deposits, cash deposits and securities.

ii. Transactions in future contracts are accounted as purchase and sales at the notional trade value of the contract. The open interest in futures as at the balance sheet date is netted by its notional value.

iii. The difference in the settlement price or exchange closing price of the previous day and exchange closing price of the subsequent day, paid to or received from the exchange is treated as MTM Margin. The balance in the MTM Margin Account represents the net amount paid or received on the basis of movement in the prices of open interest in futures contracts till the balance sheet date. Net debit balance in the MTM Margin Account is charged off to revenue whereas net credit balance is shown under current liabilities.

iv. Premium paid or received on purchase and sale of options and the difference paid or received on exercise of options is accounted as purchases or sales. In case of open interest in options sold as on the balance sheet date, provision is made for the amount by which premium prevailing on the balance sheet date exceeds the premium received for those options. The excess of premium received over the premium prevailing on the balance sheet date is not recognized. Similarly, in case of options bought, provision is made for the amount by which the premium paid for the option exceeds the premium prevailing on the balance sheet date and the excess of premium prevailing on the balance sheet date over the premium paid is ignored. In case of multiple open positions, provision is made or excess premiums are ignored after netting off the balances in buy as well as sell positions.

20. Segmental Reporting:

Based on the primary segments identified under the Financial Statements Regulations read with AS 17 on "Segment Reporting" notified under Section 133 of the Companies Act, 2013 and rules thereunder, our Corporation has classified and disclosed segmental information separately for shareholders and policyholders. Within policyholders, the businesses are further segmented into participating and non-participating policies and linked and non-linked business. Further, for non-linked business, separate statements are prepared for ordinary life, general annuity, pension, variable and health insurance.

The Corporation operates in various geographical segments. However, since the revenues and assets from the overseas segments are less than 10% of the total revenue and assets, no separate geographical segments have been disclosed.

21. Funds for future appropriations:

For Non-linked participating business, the balance in the funds for future appropriations account represents funds, the allocation of which, either to participating ‘Policy Holders or to ‘Shareholders, has not been determined at the balance sheet date. Transfers to and from the fund reflect the excess or deficit of income over expenses and appropriations in each accounting period arising in the Corporations ‘Policy holders fund. In respect of participating policies any allocation to the policyholder would also give rise to a shareholder transfer in the required proportion.

The fund for future appropriations held in the unit-linked funds, represents surplus that has arisen from lapsed policies unlikely to be revived. This surplus is required to be held within the ‘policyholders fund until the point at which a policyholder can no longer revive their policy.

Principal Components of our Revenue Account Policyholders Account (Technical Account)

 

Net Earned Premiums

Premium income includes premiums received by us on all individual and group business and is classified into first year, renewal and single premium. First year premium refers to premiums received during the first year of the policy. Renewal premium refers to premiums received during the years after the first year of the policy, until premium payment term is over or the policy lapses, whichever is earlier. Single premium refers to premiums received on single premium policies and also includes top-up premiums, which are additional amounts of premiums that can be paid over and above basic premiums for unit-linked policies. Premium is always accounted exclusive of GST.

Reinsurance Ceded

Reinsurance ceded refers to the amount of reinsurance premium paid/payable to reinsurers in respect of the risk underwritten by them. Reinsurance ceded is shown as a deduction from premium.

Income from Investments

Income from investments refers to the investment income earned by policyholders funds on investments made in the policyholders account in accordance with IRDAI regulations and includes interest and dividend income, profit/loss on sale of investments, amortisation of premium on investments and income on unclaimed amounts of policyholders. Any changes in the fair value of unit-linked investments during the relevant Fiscal Year/period are reflected in our income from investments.

Income on unclaimed amount of policyholders is credited to unclaimed funds and is accounted for on an accrual basis. Amount payable for unclaimed amount of policyholders is accounted for on an accrual basis and is disclosed net of fund management charges. Unclaimed amount of policyholders liability is determined on the basis of value of assets outstanding as at the valuation date.

Investment income from unit-linked policyholder investments is linked to market changes and can be quite volatile. The investment income from unit-linked policyholder investments is directly attributable to policyholders and is reflected as a corresponding change in the unit reserves. Investment income from non-participating and participating policyholder investments is relatively stable as it is mainly based on income of debt securities, which are not market-linked. Realisation of gains/losses in equity investments from participating policyholder investments can affect investment income. For both non-participating and participating policyholder investments, investment income is reflected in an increase in policy liabilities.

Other Income

Other income mainly comprises interest and charges collected on revival of policies for the period during which the policy has lapsed, and other miscellaneous charges. It also includes other income of our non-insurance Subsidiary companies, mainly IDBI Bank (during the periods it was a subsidiary).

Commission

This includes commission paid to intermediaries and our distributions partners for the purposes of sourcing new business. As with premiums, commissions are classified into first year, renewal and single premium commissions.

Operating Expenses Related to Insurance Business

Operating expenses related to insurance business include all expenses that are incurred for the purposes of sourcing new business and expenses incurred for policy servicing (which are known as maintenance costs). Our operating expenses include employee-related costs, computer, marketing, professional and infrastructure costs, as well as variable costs based on our volume of new business, including sales staff incentives, stamp duty, policy printing and medical fees.

Other Expenses

Other expenses relate mainly to expenses incurred by our non-insurance subsidiary companies, i.e., LIC Pension Fund Ltd., LIC Card Services Ltd., IDBI Bank (during the periods it was a subsidiary) and IDBI Trusteeship Services Limited (during the periods it was a subsidiary) and comprise costs incurred in relation to

(i) exchange fees,

(ii) interest expended,

(iii) payments to and provisions for employees,

(iv) outsourcing expenses,

(v) rent, taxes and lighting,

(vi) depreciation and

(vii) others.

GST on Fund Management Charges and Other Charges

GST on fund management charges and other charges includes GST recovered on all charges from our unit-linked business. These charges relate to policy administration fees, mortality charges, reinstatement fees, fund management charges, lapse charges, surrender charges and other miscellaneous charges. GST on these charges is recovered either by way of deallocation of units or reduction of the NAV of the relevant unit-linked fund based on the amount of GST payable.

Provisions

Provisions include provisions for

(i) doubtful debts,

(ii) taxation and

(iii) provisions (other than taxation).

Provision for taxation comprises provision for tax on our Corporations life insurance business and provision for tax of each of the Corporations subsidiaries. Provision for tax on our Corporations life insurance business is computed on the actuarial valuation surplus as provided in Section 44 of the Income Tax Act, 1961 read with the rules contained in the First Schedule and other relevant provisions of the Income Tax Act, 1961 as applicable to a life insurance business. For Fiscal 2019, Fiscal 2020, Fiscal 2021 and the six months ended September 30, 2021, the income tax rate for a life insurance business in India as prescribed under section 115B(1)(i) of the Income Tax Act, 1961 was 12.5% plus a surcharge of 12% and a cess of 4% (a total of 14.56%).

Provisions (other than taxation) comprises

(a) provisions for diminution in the value of investments (net) and

(b) provisions for others. Provisions for diminution in the value of investments (net) represents the difference between the remeasured fair value of non-linked policyholders equity investments and its weighted average acquisition cost. Such assessment for impairment is carried out at each balance sheet date, using data from internal and external sources based on our impairment policy, to assess whether there is any indication of impairment to investments. Provisions for others primarily comprises provisions made to cover amounts outstanding in respect of all standard and non-standard assets in accordance with the "Guidelines on prudential norms for income recognition, asset classification, provisioning and other matters in respect of debt portfolio" notified by the IRDAI.

Benefits Paid (Net)

Benefits paid include the pay-outs made by us against death claims, policy maturity, surrenders and withdrawals, discontinuance termination, as well as interest on unclaimed amounts by policyholders. Benefits paid are disclosed net of amounts recoverable from reinsurers.

Change in Valuation of Liability in Respect of Life Policies

Change in valuation of liability in respect of life policies represents the increase/decrease in policyholders liabilities during the relevant period. Policyholders liabilities are calculated based on reports provided by the Appointed Actuary, using actuarial principles for all policies where a liability exists on valuation date or where a liability could arise in the future.

Policy liabilities are assessed differently for the interim periods. This is because the provisions of the amended Life Insurance Corporation Act do not require valuation exercise to be done for interim periods. However, to be in line with the market practices in India, the Corporation will be assessing the liabilities within the applicable provisions of Life Insurance Corporation Act, Insurance Act, guidelines and norms issued by the IRDAI. The results of the year end exercise is expected to be different from that of the quarterly exercise due to various factors such as experience changing over a period of time and the passage of time itself that has an impact on discounting.

Transfer to/(from) Provision for Linked Liabilities

Transfer to/(from) provision for linked liabilities is the excess of income over expenses in respect of the unit fund of our linked business.

Transfer to Funds for Future Appropriation

For non-linked participating business, the balance in the funds for future appropriations account represents funds, the allocation of which, either to participating "policyholders" or to "shareholders", has not been determined at the balance sheet date. The fund for future appropriations held in the unit-linked funds, represents surplus that has arisen from lapsed policies unlikely to be revived. This surplus is required to be held within the policyholders fund till the point at which the policyholders can no longer revive their policy.

Share of Profits in Associates

Share of profits in associates represents the parent share of profit / loss in the associate company for the Fiscal Year.

Minority Interest

Minority interest consist of the minority share in revenue, profit/loss of the respective Subsidiary company consolidated for the Fiscal Year.

Transfer to Shareholders Account

For Fiscal 2019, Fiscal 2020 and Fiscal 2021, transfer to Shareholders Account represents transfers from the participating policyholders fund and non-participating policyholders fund (including unit-linked non-participating segments), as per the Board approved policies governing surplus and dividend distribution and reserves/appropriations of the subsidiary companies in which investment have been made from Shareholders Fund.

For the six months ended September 30, 2021, transfer to Shareholders Account represents transfers from the non-participating policyholders fund (including unit-linked non-participating segments), as per the Board approved policies governing surplus and dividend distribution and reserves / appropriations of the subsidiary companies in which investment have been made from Shareholders Fund.

Transfer to Other Reserve

Transfer to other reserve represents transfers made by respective Subsidiary companies.

Principal Components of our Profit and Loss Account Shareholders Account (Non-Technical Account)

Income includes (i) amount transferred from the Revenue Account Policyholders Account (Technical Account) and (ii) income generated from investments of Shareholders funds.

Expenses primarily comprise contribution to the Policyholders Account towards others, which is to meet the deficit in any segment of the Policyholders account.

Provision for taxation is made on the profit before taxation excluding the amount transferred from the Policyholders Account (the Shareholders do not pay any tax on the amount transferred from the Policyholders Account since the valuation surplus has already been subject to tax in the Policyholders Account). This amount is not considered as income from life insurance business and hence is subject to income tax rate at the normal rate as provided under section 115(B)(1)(ii) of the Income Tax Act, 1961. For Fiscal 2019, Fiscal 2020, Fiscal 2021 and the six months ended September 30, 2021, the income tax rate was 30% plus a surcharge of 12% and a cess of 4% (a total of 34.944%).

Our Results of Operations

The following table shows a breakdown of our results of operations from our Restated Consolidated Statement of Revenue

Account (Policyholders Account) and our Restated Consolidated Statement of Profit and Loss Account (Shareholders

Account) for the period and Fiscal Years indicated.

Revenue Account Six Months Ended September 30, Year Ended March 31,
(Policyholders Account) 2021 2021 2020 2019
( in millions)
Income:
Premiums earned - net:
Premium 1,875,353.42 4,058,508.02 3,828,114.50 3,402,946.15
Reinsurance ceded (2,458.02) (4,523.04) (3,359.32) (3,229.81)
Reinsurance accepted
Net earned premiums 1,872,895.40 4,053,984.98 3,824,755.18 3,399,716.34
Income from investments:
Interest, dividends and rent - gross 1,244,733.48 2,395,650.18 2,220,501.02 2,000,210.33
Profit on sale/redemption of investments 291,029.08 461,867.51 313,616.70 302,412.19
(Loss on sale/redemption of investments) (58,563.78) (63,771.20) (119,741.88) (63,440.11)
Transfer/gain on revaluation/change in fair value(1) 17,067.82 61,457.69 13,987.30 11,252.99
Income from investments 1,494,266.60 2,855,204.18 2,428,363.14 2,250,435.40
Other income:
Amounts written back 2.86 2,854.87 8,189.73 2,682.96
Interest earned 102,000.36 150,660.97 38,477.51
Commission, exchange and brokerage 12,950.96 20,105.65 6,129.35
Sundry receipts 2,564.30 10,051.50 23,918.90 10,632.04
Contribution from Shareholders account towards others 47.60 61.15 22.10
Other income 2,567.16 127,905.29 202,936.40 57,943.96
Total income (A) 3,369,729.15 7,037,094.45 6,456,054.72 5,708,095.70
Expenses:
Commission 98,152.19 223,581.61 215,482.58 204,826.09
Operating expenses related to insurance business 189,063.60 351,622.15 344,258.84 283,316.03
Other expenses:
Of which:
Exchange loss/(gain) 4.96 (49.74) (24.31) 13.49
Interest expended 88,674.42 132,874.87 34,314.94
Payments to and provisions for employees 24,549.18 33,637.13 6,501.28
Outsourcing expenses 4,001.18 6,183.52 1,522.02
Rent, taxes and lighting 3,569.76 4,559.18 1,085.17
Depreciation 3,020.73 3,991.56 921.79
Others 10,796.11 16,095.51 3,965.08
Total of other expenses 4.96 134,561.64 197,317.46 48,323.77
GST on fund management charges and other charges 341.03 932.22 982.75 1,097.81
Provision/(write back of provision) for doubtful debts (2,867.54) 101,819.10 108,881.65 114,520.09
Provision for taxation 48,107.64 91,705.25 108,255.58 55,567.74
Provisions/(write back of provision) (other than taxation):
For diminution in the value of investments (net) (15,602.31) 56,620.36 23,905.16 10,092.62
Provision for required solvency margin 0.00 - - -
Others (66,027.83) (85,316.54) 111,715.98 31,398.61
Sub-Total (B) 251,171.76 875,525.79 1,110,800.00 749,142.76
Revenue Account Six Months Ended September 30, Year Ended March 31,
(Policyholders Account) 2021 2021 2020 2019
( in millions)
Benefits paid (net) 1,502,499.06 2,884,890.51 2,554,794.89 2,523,808.34
Interim bonuses paid 14,153.14 22,290.73 16,733.70 16,513.70
Change in valuation of liability in respect of life policies:
Gross(2) 1,636,746.01 3,211,340.48 2,966,283.81 2,535,854.60
Amount ceded in reinsurance
Amount accepted in reinsurance
Transfer to/(from) provision for linked liabilities (93,863.33) 4,343.10 (91,103.40) (93,122.82)
Transfer to funds for future appropriation 44,030.93 31.26 0.41 0.95
Transfer to funds for discontinued policies 134.31 54.41 34.63 59.13
Sub-Total (C) 3,103,700.13 6,122,950.49 5,446,744.04 4,983,113.90
Surplus/(deficit) (D) = (A)-(B)-(C) 14,857.27 38,618.17 (101,489.32) (24,160.96)
Add: Share of profit in associates 15,985.98 11,633.54 5,744.42 6,683.97
(Less)/Add: Minority interest (20.57) (4,465.25) 63,726.72 25,162.06
Adjusted surplus/(deficit) 30,822.68 45,786.46 (32,018.18) 7,685.07
Appropriations:
Transfer to Shareholders Account 14,752.25 29,625.82 26,955.13 25,994.77
Transfer to other reserve 16,070.43 16,160.64 (59,109.78) (18,323.36)
Proposed dividend paid 136.47 13.66
Total appropriations (D) 30,822.68 45,786.46 (32,018.18) 7,685.07
Total surplus during the period/year:
Interim bonus 14,153.14 22,290.73 16,733.70 16,513.70
Allocation of bonus to policyholders(3) 548,911.92 512,571.16 505,513.14
Surplus shown in revenue account 30,822.68 45,786.46 (32,018.18) 7,685.07
Total surplus 44,975.83 616,989.11 497,286.68 529,711.91

 

(1) Represents the deemed realised gain as per norms specified by the Authority. (2) Represents mathematical reserves after allocation of bonus.

(3) The details of allocation to bonus to policyholders pertain only to our Corporation and do not include the details of the foreign subsidiary insurance companies as they are not required to provide such details as per their local laws or regulations. Allocation of bonus to policyholders is conducted at year end.

Profit and Loss Account (Shareholders Six Months Ended September 30,

Year Ended March 31,

Account) 2021 2021 2020 2019
( in millions)
Amount transferred from/to Policyholders account
(technical account) 14,752.25 29,625.82 26,955.13 25,994.77
Income from investments:
Interest, dividends and rent gross 429.64 177.77 352.01 373.75
Profit on sale/redemption of investments 17.96 61.22 21.21 126.00
(Loss on sale/redemption of investments) (2.61) (9.10) (18.79) (44.56)
Other income
Income from investments 444.99 229.89 354.43 455.19
Total revenue (A) 15,197.24 29,855.71 27,309.56 26,449.96
Expenses other than those directly related to the insurance business 2.48 4.64 4.50 4.21
Contribution to Policyholders account towards others 47.60 61.15 22.10
Provisions (other than taxation):
For diminution in the value of investments (net) 58.75
Provision for doubtful debts
Others
Total expenses (B) 2.48 52.24 124.40 26.31
Profit/(loss) before tax (C) = (A)-(B) 15,194.76 29,803.47 27,185.16 26,423.65
Provision for taxation 154.63 62.08 80.38 149.87
Profit/(loss) after tax 15,040.13 29,741.39 27,104.78 26,273.78
Appropriations:
Balance at the beginning of the period/year 1,128.54 632.57 685.89 2,073.57
Interim dividends paid during the period/year
(5% valuation surplus paid to Central Government)
Proposed final dividend 151.44 26,997.35 27,254.37
Dividend distribution on tax 6.61 32.70
Transfer to general reserve 29,005.67 149.65 279.01
Transfer to other reserve 290.04 81.69 11.10 95.38
Profit carried forward to the balance sheet 15,878.63 1,128.55 632.57 685.89

Six Months Ended September 30, 2021

Additional Significant Factors Affecting our Results of Operations

Seasonality of Income Generated From our Premiums

A major part of our total income is generated during the second half of the Fiscal Year where we usually experience a greater inflow of premiums and net premiums earned. As such, the financials for the six months ended September 30, 2021 may not be indicative of our performance in Fiscal 2022 as a greater surplus is expected to be generated in the second half of Fiscal 2022.

 

Increased Transfer of Surplus to Shareholders Account Due to Bifurcation of Funds

Up until March 31, 2021, our Corporation had one fund and the valuation surplus from both the participating and non-participating businesses was distributed between policyholders and the Shareholders in the proportion of 95:5. The Finance Act, 2021 amended the Life Insurance Corporation Act and enabled our Corporation to have a participating fund and non-participating fund. In accordance with our Corporations approved surplus distribution policy, the surplus in respect of the participating fund will be allocated between policyholders and Shareholders in the ratio of 95:5 for Fiscal 2022, 92.5:7.5 for each of Fiscal 2023 and Fiscal 2024 and then 90:10 from Fiscal 2025 onwards. Life insurance companies regulated under the Insurance Act are permitted to maintain a surplus allocation of 90:10. The Shareholders have a 100% allocation in the non-participating fund.

Due to the bifurcation of funds, 100% of the surplus from non-participating policies (as opposed to 5% prior to the amendment) amounting to 14,752.25 million was transferred from the Policyholders Account to the Shareholders Account for the six months ended September 30, 2021, while the remaining surplus from participating policies was transferred to our funds for future appropriation.

 

Calculation of Surplus/(Deficit)

Our surplus for the six months ended September 30, 2021 does not include the surplus from the participating funds for the various business segments as the amounts have not been allocated to the policyholders and shareholders in their respective proportions. The figures would be made available in the financials for Fiscal 2022 but they have not been derived as at the date at which this Draft Red Herring Prospectus is being drafted. Hence, the surplus amounts for the six months ended September 30, 2021 would not be comparable to the corresponding figures for total surplus shown for the Fiscal Years.

In addition, the total surplus shown in our Policyholders Account for the six months ended September 30, 2021 does not include bonuses paid to our policyholders, which is usually handed out at the end of the Fiscal Year. Hence, amounts presented for total surplus for the six months ended September 30, 2021 would not be comparable to the corresponding figures for total surplus shown for the Fiscal Years.

 

Premiums Earned Net (Revenue Account)

For the six months ended September 30, 2021, our premium was 1,875,353.42 million, our reinsurance ceded was (2,458.02) million and our premiums earned - net was 1,872,895.40 million.

 

Premium

For the six months ended September 30, 2021, our total premium was 1,875,353.42 million and our premium in India and outside India was 1,860,972.93 million and 14,380.49 million, respectively. The following table sets forth the breakdown of our premium in India and premium outside India for the six months ended September 30, 2021.

Particulars

Six Months Ended September 30, 2021

First year premiums Renewal premiums Single premiums & CAG(1) Total

( in millions)

Non-Linked Business
Of which:
-Life Par 115,195.66 965,923.81 39,148.68 1,120,268.15
-Life Non-Par 1,311.54 5,868.26 146.75 7,326.55
-Annuity Par 0.00 12.06 0.00 12.06
-Annuity Non-Par 0.00 10.45 54,449.40 54,459.85
-Pension Par 0.44 1,885.91 0.00 1,886.35
-Health Non-Par 387.32 1,065.98 0.00 1,453.30
-Variable Non-Par 0.00 44.32 0.00 44.32
-Group Non-Par 14,654.16 32,103.92 617,413.38 664,171.46
Linked
-Life Non-Par 1,157.62 2,104.95 7,260.97 10,523.54
-Pension Non-Par 0.00 481.93 0.00 481.93
-Health Non-Par 0.00 336.12 0.00 336.12
-Group Non-Par 0.00 9.30 0.00 9.30
Total in India 132,706.74 1,009,847.01 718,419.18 1,860,972.93
Outside India including 1,290.37 8,212.59 4,877.53 14,380.49
Subsidiaries
Gross Premium 133,997.11 1,018,059.60 723,296.71 1,875,353.42

 

Note(s):

(1) CAG is the abbreviation for consideration for annuity granted.

For more details on our premium in India, see "Our Business Our Product Breakdown in Numbers" on page 193.

 

Reinsurance Ceded (Revenue Account)

Our reinsurance ceded was (2,458.02) million for the six months ended September 30, 2021.

 

Income from Investments (Revenue Account)

The following table sets forth our income from investments for the period indicated.

Particulars Six Months Ended September 30, 2021
( in millions)
Income from Investments:
Interest, dividends & rent gross 1,244,733.48
Profit on sale/redemption of investments 291,029.08
(Loss on sale/redemption of investments) (58,563.78)
Transfer/gain on revaluation/change in fair value 17,067.82
Total income from investments 1,494,266.60

Our income from investments was 1,494,266.60 million for the six months ended September 30, 2021 and primarily comprised income from interest and dividends gross of 1,244,733.48 million, profit on sale/redemption of investments of 291,029.08 million, and fair value gain of 17,067.82 million, mainly as a result of favourable equity capital market conditions.

Our income from investments is partially offset by a loss on sale/redemption of investment of (58,563.78) million for the six months ended September 30, 2021.

 

Other Income (Revenue Account)

Our other income was 2,567.16 million for the six months ended September 30, 2021.

Total Expenses (Revenue Account)

Commissions (Revenue Account)

Our commissions paid to our distributors was 98,152.19 million for the six months ended September 30, 2021.

The following table sets forth the split of commissions paid across first year premiums, renewal premiums, single premiums, other commissions as well as our total commission paid for the six months ended September 30, 2021.

Particulars Six Months Ended September 30, 2021
( in millions)
Commission paid:
Direct First year premiums 38,171.05
Renewal premiums 52,076.36
Single premiums 2,001.37
Other commission 2.66
Sub-total 92,251.44
Commission on Re-insurance Accepted
Commission on Re-insurance Ceded 4.22
Net Commission 92,247.22
Rewards and Remuneration to Intermediaries 5,904.97
Total 98,152.19

Our total commission was 98,152.19 million for the six months ended September 30, 2021.

Our commission paid for first year premiums was 38,171.05 million for the six months ended September 30, 2021. Our commission paid for renewal premiums was 52,076.36 million for the six months ended September 30, 2021. Our commission paid for single premiums was 2,001.37 million for the six months ended September 30, 2021.

 

Operating Expenses Related to Insurance Business (Revenue Account)

Operating expenses related to insurance business were 189,063.60 million for the six months ended September 30, 2021, which represented 10.08% of our premiums. These mainly comprised (i) employees remuneration and welfare benefits of 153,762.45 million; (ii) GST on premium, etc. of 12,038.37 million; (iii) allowances and commission (other than commission to insurance agents) of 6,250.71 million; and (iv) rents, rates & taxes of 3,135.14 million.

Other Expenses (Revenue Account)

Other expenses were 4.96 million for the six months ended September 30, 2021, which was due to an exchange loss of 4.96 million.

 

Provisions for Doubtful Debts (Revenue Account)

We wrote back 2,867.54 million of provisions for doubtful debts for the six months ended September 30, 2021, which was primarily due to repayments received on loans extended.

 

Provision for Taxation (Revenue Account)

Our provision for taxation was 48,107.64 million for the six months ended September 30, 2021. It comprised provision for taxation for our Corporation on a standalone basis amounting to 47,511.63 million and provision for taxation for our Subsidiaries amounting to 596.01 million.

 

Provisions (Other than Taxation) (Revenue Account)

We wrote back 81,630.14 million of provisions (other than taxation) for the six months ended September 30, 2021. This comprised (i) 15,602.31 million of provisions written back for diminution in the value of investments (net), which was primarily due to the write back of provision on our equity holdings in IDBI Bank; and (ii) a write back of 66,027.83 million for other provisions, which was primarily due to the settlement of some debt cases under the National Company Law Tribunal other channels.

 

Benefits Paid (Net) (Revenue Account)

The following table sets forth the benefits paid (net) for the six months ended September 30, 2021.

Particulars Six Months Ended September 30, 2021
( in millions)
Insurance claims:
Claims by death 217,341.50
Claims by maturity 791,370.85
Annuities/pensions payment 77,927.87
Other benefits:
Surrenders(1) 416,081.34
Bonuses in cash
Hospitalisation benefits 84.74
Major surgical benefits 92.15
Domiciliary treatment benefits 74.70
Day care benefits 9.61
Lump sum benefit/income benefit (by installment) 87.92
Other claims cost:
Interest on unclaimed costs 3,603.30
Others 46.68
(Amount ceded in reinsurance):
Claims by death (4,093.12)
Claims by maturity
Annuities/Pensions payment
Other benefits (128.47)
Amount accepted in reinsurance:
Claims by death
Claims by maturity
Annuities/Pensions payment
Other benefits
Total 1,502,499.06

 

Note(s):

(1) Includes partial surrender and switches.

Our benefits paid to policyholders was 1,502,499.06 million for the six months ended September 30, 2021.

 

Interim Bonuses Paid (Revenue Account)

Interim bonuses paid were 14,153.14 million for the six months ended September 30, 2021.

 

Change in Valuation of Liability in Respect of Life Policies (Revenue Account)

The gross change in valuation of liability in respect of life policies was 1,636,746.01 million for the six months ended September 30, 2021. Policyholders liability depends upon the business profile and assumptions made about future mortality/morbidity, interest, expenses etc., at each point of time. The change in business profile happens due to policies exiting and policies entering mainly due to new business and existing policies getting closer to maturity.

Transfer to/(from) Provision for Linked Liabilities (Revenue Account)

There was a transfer from provision for linked liabilities of 93,863.33 million for the six months ended September 30, 2021. This was primarily due to the greater amount of claims payments arising from the maturity of the Endowment Plus plan and Samrudhi plan, compared to the premium received during the six months ended September 30, 2021.

 

Transfer to Funds for Future Appropriation (Revenue Account)

There was a transfer to funds for future appropriation of 44,030.93 million for the six months ended September 30, 2021. The balance in the funds for future appropriations account represents funds, the allocation of which, either to participating "policyholders" or to "shareholders", has not been determined at the balance sheet date.

 

Surplus/Deficit (Revenue Account)

Primarily as a result of the factors discussed above, our total surplus was 14,857.27 million for the six months ended September 30, 2021.

 

Share of Profit in Associates (Revenue Account)

Our share of profits in associates was 15,985.98 million for the six months ended September 30, 2021.

 

Minority Interest (Revenue Account)

Minority interest was (20.57) million for the six months ended September 30, 2021.

 

Amount Transferred from Policyholders Account (Profit and Loss Account Shareholders Account)

Amount transferred from Policyholders Account was 14,752.25 million for the six months ended September 30, 2021, arising mainly from surplus generated in our unit-linked life, unit-linked pension, unit-linked health, unit-linked group and non-participating segments.

 

Income from Investments (Profit and Loss Account Shareholders Account)

Income from investments were 444.99 million for the six months ended September 30, 2021, arising mainly from interest, dividends & rent gross of 429.64 million and a profit on sale/redemption of investments of 17.96 million.

 

Total Expenses (Profit and Loss Account Shareholders Account)

Our total expenses were 2.48 million for the six months ended September 30, 2021.

 

Profit Before/After Tax (Profit and Loss Account Shareholders Account)

As a result of the above, profits before tax were 15,194.76 million for the six months ended September 30, 2021. Provisions for taxation, which is made on profit before taxation excluding the amount transferred from the Policyholders Account, were 154.63 million for the six months ended September 30, 2021.

As a result of all the factors mentioned above, profit after tax was 15,040.13 million for the six months ended September 30, 2021.

Fiscal 2021 Compared to Fiscal 2020

Additional Significant Factor Affecting our Results of Operations

Life Insurance Corporation of India (Employees) Pension (Amendment) Rules, 2019 was notified by the Government on April 23, 2019 giving one-time pension option to employees who had not opted it before, in accordance the terms and conditions as specified in the said notification. Financial liability of 111,246.6 million arising due to the fresh pension given to the employees is being amortized over a period of five years with effect from Fiscal 2020. The IRDAI approved the amortization of this expense over a five-year period vide its letter no. 101/2/F&A-Life/LIC/2018-2019/208 dated July 6, 2020. Accordingly, an instalment of

22,249.3 million was recognized in Fiscal 2020 valuation and the second instalment of 22,249.3 million has been funded in Fiscal 2021 and the balance amount of 66,748 million is to be amortised over the period up to March 31, 2024. If the approval from the IRDAI had not been granted, our Corporation would have recorded much higher expenses and a lower surplus in our

Policyholders Account in Fiscal 2020.

 

Premium Earned - Net (Revenue Account)

Premium

Particulars

Year Ended March 31,

2021 2020
First year premiums Renewal premiums Single premiums & CAG(1) Total First year premiums Renewal premiums Single premiums & CAG Total

( in millions)

Non-Linked Business
Of which:
-Life Par 272,562.10 2,086,960.52 78,625.83 2,438,148.45 290,806.50 1,913,971.93 66,818.58 2,271,597.00
-Life Non-Par 2,144.03 10,899.77 402.56 13,446.36 1,577.12 10,432.42 174.60 12,184.13
-Annuity Par 35.06 35.06 44.91 44.91
-Annuity Non
Par 59.23 202,913.18 202,972.41 61.36 152,368.80 152,430.16
-Pension Par 39.64 5,766.37 5,806.02 237.06 6,185.15 84.82 6,507.03
-Health Non-
Par 1,021.00 2,361.37 3,382.38 1,047.37 2,101.42 3,148.80
-Variable Non
Par 208.67 208.67 376.54 376.54
-Group Non- 61,999.87 73,192.19 1,215,694.50 1,350,886.56 285,015.67 68,797.18 982,476.88 1,336,289.73
Par
Linked
-Life Non-Par 1,223.33 3,980.02 6,335.17 11,538.52 524.98 3,685.83 386.40 4,597.22
-Pension Non-
Par 1,360.61 1,360.61 1,797.64 1,797.64
-Health Non-
Par 1,068.85 1,068.85 1,089.45 1,089.45
-Group Non-
Par 27.47 27.47 73.02 73.02
Total in India 338,989.97 2,185,920.13 1,503,971.24 4,028,881.36 579,208.70 2,008,616.85 1,202,310.08 3,790,135.63
Outside India including
Subsidiaries 4,419.98 17,355.74 7,850.96 29,626.66 5,256.29 16,755.59 15,966.99 37,978.87
Gross
Premium 343,409.95 2,203,275.87 1,511,822.20 4,058,508.02 584,464.99 2,025,372.44 1,218,277.07 3,828,114.50

 

Note(s):

(1) CAG is the abbreviation for consideration for annuity granted.

Our total premium increased by 230,393.52 million, or 6.02%, from 3,828,114.50 million in Fiscal 2020 to 4,058,508.02 million in Fiscal 2021. This increase was primarily due to an increase in our premiums from India, which increased by

238,745.73 million, or 6.30%, from 3,790,135.63 million for Fiscal 2020 to 4,028,881.36 million for Fiscal 2021. The following table sets forth our premium by type, product type and customer type in India and outside India for Fiscal 2020 and Fiscal 2021.

Our first-year premiums decreased by 41.24% from 584,464.99 million in Fiscal 2020 to 343,409.95 million in Fiscal 2021, primarily due to the decrease in first year premiums earned in India by 41.47% from 579,208.70 million in Fiscal 2020 to

338,989.97 million in Fiscal 2021. The decrease in first year premium in India was on account of the decrease in our first year premiums earned from the group non-participating business by 78.25% from 285,015.67 million in Fiscal 2020 to 61,999.87 million in Fiscal 2021, which decrease was because of higher base of Fiscal 2020 in which a superannuation scheme with one of the state governments was completed in May 2019 and a premium of 231,600 million was classified as first year premium.

Our renewal premiums increased by 8.78% from 2,025,372.44 million in Fiscal 2020 to 2,203,275.87 million in Fiscal 2021, primarily due to the increase in renewal premiums earned in India by 8.83% from 2,008,616.85 million in Fiscal 2020 to

2,185,920.13 million in Fiscal 2021 on account of the increase in premiums earned from the life participating business by 9.04% from 1,913,971.93 million in Fiscal 2020 to 2,086,960.52 million in Fiscal 2021, reflecting an increase in insurance awareness due to the COVID-19 pandemic, resulting in an increase in our Persistency Ratio for total premiums in India across all periods, with the 13th month Persistency Ratio increasing from 85% for Fiscal 2020 to 87% in Fiscal 2021 and the 61st month Persistency Ratio increasing from 70% in Fiscal 2020 to 72% in Fiscal 2021.

Our single premiums & CAG increased by 24.10% from 1,218,277.07 million in Fiscal 2020 to 1,511,822.20 million in Fiscal 2021, primarily due to the increase in single premiums & CAG earned in India by 25.09% from 1,202,310.08 million in Fiscal 2020 to 1,503,971.24 million in Fiscal 2021 on account of the increase in our (i) group non-participating business by 23.74% from 982,476.88 million in Fiscal 2020 to 1,215,694.50 million in Fiscal 2021 primarily due to the increase in our premiums earned under funded schemes; and (ii) annuity non-participating business by 33.17% from 152,368.80 million in Fiscal 2020 to 202,913.18 million in Fiscal 2021 primarily due to an increase in volume of single premium annuity sales because of the closure of LICs Jeevan Shanti and introduction of LICs New Jeevan Shanti with revised annuity rates.

For more details on our premium in India, see "Our Business Our Product Breakdown in Numbers" on page 193.

Reinsurance Ceded (Revenue Account)

Our reinsurance ceded increased by 34.64% from 3,359.32 million in Fiscal 2020 to 4,523.04 million in Fiscal 2021, mainly due to the increased sum assured in LIC Employees Group Insurance Scheme during Fiscal 2021.

 

Income from Investments (Revenue Account)

The following table sets forth our income from investments for the Fiscal Years indicated.

Particulars Year Ended March 31,
2021 2020
( in millions)
Income from Investments:
Interest, dividends & rent gross 2,395,650.18 2,220,501.02
Profit on sale/redemption of investments 461,867.51 313,616.70
(Loss on sale/redemption of investments) (63,771.20) (119,741.88)
Transfer/gain on revaluation/change in fair value(1) 61,457.69 13,987.30
Total income from investments 2,855,204.18 2,428,363.14

 

Notes:

(1) Represents the deemed realised gain as per norms specified by the Authority.

Our total income from investments increased by 17.58% from 2,428,363.14 million in Fiscal 2020 to 2,855,204.18 million in Fiscal 2021, primarily due to increases in: (i) interest, dividends, rent gross by 7.89% from 2,220,501.02 million in Fiscal 2020 to 2,395,650.18 million in Fiscal 2021 which was on account of increase in investment in interest bearing securities as well as increase in dividend received against equity investments; and (ii) profit on sale/redemption of investments by 47.27% from 313,616.70 million in Fiscal 2020 to 461,867.51 million in Fiscal 2021 which was on account of realised profits on sale of equity.

 

Other Income (Revenue Account)

Our other income decreased by 36.97% from 202,936.40 million in Fiscal 2020 to 127,905.29 million in Fiscal 2021, which decrease was primarily due to IDBI Bank being our subsidiary for 12 months in Fiscal 2020 and nine months in Fiscal 2021 which led to a decrease in (i) interest earned by 32.30% from 150,660.97 million in Fiscal 2020 to 102,000.36 million in Fiscal 2021; (ii) sundry receipts by 57.98% from 23,918.90 million in Fiscal 2020 to 10,051.50 million in Fiscal 2021; and (iii) commission, exchange and brokerage by 35.59% from 20,105.65 million in Fiscal 2020 to 12,950.96 million in Fiscal 2021.

Total Expenses (Revenue Account)

Commissions (Revenue Account)

The following table sets forth the split of commissions paid across first year premiums, renewal premiums, single premiums, other commissions as well as our total commission paid for the Fiscal Years indicated.

Particulars Year Ended March 31,
2021 2020
( in millions)
Commission paid:
Direct First year premiums 90,614.73 98,113.81
Renewal premiums 115,143.90 104,127.94
Single premiums 5,830.39 4,796.69
Other commission 5.62 3.98
Sub-total 211,594.64 207,042.42
Commission on Re-insurance Accepted
Commission on Re-insurance Ceded (27.73) (441.29)
Net Commission 211,566.91 206,601.13
Rewards and Remuneration to Intermediaries 12,014.70 8,881.45
Total 223,581.61 215,482.58

Our total commission increased by 3.76% from 215,482.58 million in Fiscal 2020 to 223,581.61 million in Fiscal 2021, generally in line with the increase in premium of 6.02% over the same period. As a percentage of premium, our total commission decreased by 0.12% from 5.63% in Fiscal 2020 to 5.51% in Fiscal 2021.

Our commission paid for first year premiums decreased by 7.64% from 98,113.81 million in Fiscal 2020 to 90,614.73 million in Fiscal 2021, generally in line with the decrease in first year premiums of 41.24% over the same period. As a percentage of first year premiums, our commission paid for first year premiums increased by 9.60% from 16.79% in Fiscal 2020 to 26.39% in Fiscal 2021.

Our commission paid for renewal premiums increased by 10.58% from 104,127.94 million in Fiscal 2020 to 115,143.90 million in Fiscal 2021, generally in line with the increase in renewal premiums of 8.78% over the same period. As a percentage of renewal premiums, our commission paid for renewal premiums increased by 0.09% from 5.14% in Fiscal 2020 to 5.23% in Fiscal 2021.

Our commission paid for single premiums increased by 21.55% from 4,796.69 million in Fiscal 2020 to 5,830.39 million in

Fiscal 2021, generally in line with the increase in single premiums of 24.10% over the same period. As a percentage of single premiums, our commission paid for single premiums was 0.39% in Fiscal 2020 and remained at 0.39% in Fiscal 2021.

 

Operating Expenses Related to Insurance Business (Revenue Account)

Our operating expenses related to insurance business increased by 2.14% from 344,258.84 million in Fiscal 2020 to 351,622.15 million in Fiscal 2021. This increase was primarily due to a 6.64% increase in employees remuneration & welfare benefits from 251,278.96 million in Fiscal 2020 to 267,962.72 million in Fiscal 2021, mainly due to the provision towards additional contribution to the pension fund in Fiscal 2021 as compared to Fiscal 2020.

This increase was partially offset by, among other things, a decrease in:

(i) allowances and commission (other than commission to insurance agents) by 13.77% from 22,365.32 million in Fiscal 2020 to 19,285.80 million in Fiscal 2021, which was primarily due to a decrease in volume of new business; and

(ii) GST on premium etc. by 11.53% from 33,051.69 million in Fiscal 2020 to 29,242.09 million in Fiscal 2021, which was primarily due to a reduction in the portion of GST borne by us on plans issued prior to 2012 in India and rectification entry of ineligible input tax credit.

(iii) Our employees in India from 114,498 as at March 31, 2020 to 108,987 as at March 31, 2021.

 

Other Expenses (Revenue Account)

Other expenses decreased by 31.80% from 197,317.46 million in Fiscal 2020 to 134,561.64 million in Fiscal 2021. The primary reasons for this decrease in other expenses were the decreases in:

(i) interest expended by 33.26% from 132,874.87 million in Fiscal 2020 to 88,674.42 million in Fiscal 2021, which decrease was mainly due to a decrease in IDBI Banks interest expended as well as the fact that IDBI Banks interest expended was only consolidated for the nine months ended December 31, 2020 in Fiscal 2021 compared to all of Fiscal 2020; and

(ii) payments to and provisions for employees by 27.02% from 33,637.13 million in Fiscal 2020 to 24,549.18 million in Fiscal 2021, which decrease was mainly due to IDBI Banks payments to and provisions for employees only being consolidated for the nine months ended December 31, 2020 in Fiscal 2021 compared to all of Fiscal 2020.

 

Provisions for Doubtful Debts (Revenue Account)

Provisions for doubtful debts decreased by 6.49% from 108,881.65 million in Fiscal 2020 to 101,819.10 million in Fiscal 2021, primarily due to IDBI Banks financial results being consolidated as a subsidiary for the nine months ended December 31, 2020 for Fiscal 2021 compared to its financial results being consolidated as a subsidiary for all of Fiscal 2020.

 

Provision for Taxation (Revenue Account)

Provision for taxation decreased by 15.29% from 108,255.58 million in Fiscal 2020 to 91,705.25 million in Fiscal 2021, primarily due to a decrease in provision for taxation for our Subsidiaries, mostly relating to IDBI Bank in which provision for taxation declined from 39,509.05 million in Fiscal 2020 to 11,168.87 million in Fiscal 2021. However, the provision for taxation increased from 68,239.33 million in Fiscal 2020 to 79,877.60 million in Fiscal 2021 for our Corporation on a standalone basis due to the increase in valuation surplus by 7.09% from 539,548.59 million in Fiscal 2020 to 577,802.02 million in Fiscal 2021.

 

Provisions (Other than Taxation) (Revenue Account)

Provisions (other than taxation) decreased by 164,317.32 million from 135,621.14 million in Fiscal 2020 to (28,696.18) million in Fiscal 2021, which decrease was primarily due to the decrease in provision for others from 111,715.98 million in Fiscal 2020 to (85,316.54) million in Fiscal 2021, which was primarily due to recoveries and reduction in provision under non-performing assets. This decrease was partially offset by the increase in provisions for diminution in the value of investments

(net) by 136.85% from 23,905.16 million in Fiscal 2020 to 56,620.36 million in Fiscal 2021.

 

Benefits Paid (Net) (Revenue Account)

The following table sets forth the benefits paid (net) for the Fiscal Years indicated.

Particulars Year Ended March 31,
2021 2020
( in millions)
Insurance claims:
Claims by death 239,268.94 175,279.87
Claims by maturity 1,691,763.97 1,539,186.03
Annuities/pensions payment 145,804.00 130,212.52
Other benefits:
Surrenders(1) 803,475.51 702,642.72
Bonuses in cash 0.01
Hospitalisation benefits 124.68 154.10
Major surgical benefits 154.98 162.18
Domiciliary treatment benefits 116.16 134.99
Day care benefits 21.66 31.04
Lump sum benefit/income benefit (by installment) 137.99 79.75
Other claims cost:
Interest on unclaimed costs 8,505.79 8,767.39
Others 217.46 284.34
(Amount ceded in reinsurance):
Claims by death (4,435.59) (1,861.70)
Claims by maturity
Annuities/Pensions payment
Other benefits (265.04) (273.69)
Amount accepted in reinsurance:
Claims by death
Claims by maturity
Annuities/Pensions payment
Other benefits (4.66)
Total 2,884,890.51 2,554,794.89

 

Note(s):

(1) Includes partial surrender and switches.

Our benefits paid to policyholders increased by 12.92% from 2,554,794.89 million for Fiscal 2020 to 2,884,890.51 million in Fiscal 2021, primary due to increases in (i) claims by maturity by 9.91% from 1,539,186.03 million for Fiscal 2020 to 1,691,763.97 million in Fiscal 2021; (ii) surrenders by 14.35% from 702,642.72 million for Fiscal 2020 to 803,475.51 million in Fiscal 2021; and (iii) claims by death by 36.51% from 175,279.87 million for Fiscal 2020 to 239,268.94 million in Fiscal 2021, which increase was primarily due to deaths caused by COVID-19.

The above increases were partially offset by an increase in amount ceded in reinsurance claims by death, which increased by

138.25% from 1,861.70 million for Fiscal 2020 to 4,435.59 million in Fiscal 2021.

 

Interim Bonuses Paid (Revenue Account)

Interim bonuses paid increased by 33.21% from 16,733.70 million for Fiscal 2020 to 22,290.73 million in Fiscal 2021.

Change in Valuation of Liability in Respect of Life Policies (Revenue Account)

The gross change in valuation of liability in respect of life policies increased by 8.26% from 2,966,283.81 million in Fiscal 2020 to 3,211,340.48 million in Fiscal 2021. Policyholders liability depends upon the business profile and assumptions made about future mortality/morbidity, interest, expenses etc., at each point of time. The change in business profile happens due to policies exiting and policies entering mainly due to new business and existing policies getting closer to maturity.

Transfer to/(from) Provision for Linked Liabilities (Revenue Account)

There was a transfer to provision for linked liabilities of 4,343.10 million in Fiscal 2021 compared to a transfer from provision for linked liabilities of 91,103.40 million in Fiscal 2020. This change was primarily due to the loss on sale of redemption of investments of unit fund of linked business in Fiscal 2020 as compared to Fiscal 2021.

 

Surplus/Deficit (Revenue Account)

Primarily due to the loss incurred by IDBI Bank amounting to 128,474.02 million in Fiscal 2020, we experienced a deficit of

101,489.32 million in Fiscal 2020 compared to a surplus of 38,618.17 million in Fiscal 2021.

 

Share of Profit in Associates (Revenue Account)

Our share of profits in associates increased by 102.52% from 5,744.42 million in Fiscal 2020 to 11,633.54 million in Fiscal 2021, which increase was primarily due to IDBI Banks financial results being consolidated as an associate for the three months ended March 31, 2021 in Fiscal 2021 compared to its financial results being consolidated as a subsidiary for all of Fiscal 2020.

 

Minority Interest (Revenue Account)

The minority share of loss during Fiscal 2020 was 63,726.72 million compared to the minority share of profit of 4,465.25 million in Fiscal 2021. The primary reason for the change was due to IDBI Banks deficit in Fiscal 2020 compared to the surplus of IDBI Bank in Fiscal 2021.

 

Amount Transferred from Policyholders Account (Profit and Loss Account Shareholders Account)

Amount transferred from Policyholders Account increased by 9.91% from 26,955.13 million in Fiscal 2020 to 29,625.82 million in Fiscal 2021, arising mainly from an increase in the surplus payable to the Shareholders and an increase in the earnings retained by our Subsidiaries.

 

Income from Investments (Profit and Loss Account Shareholders Account)

Income from investments decreased by 35.14% from 354.43 million in Fiscal 2020 to 229.89 million in Fiscal 2021, mainly due to a decrease in dividends by 49.50% from 352.01 million in Fiscal 2020 to 177.77 million in Fiscal 2021 resulting from the reduction in dividend received from some subsidiaries.

 

Total Expenses (Profit and Loss Account Shareholders Account)

Our total expenses decreased by 58.01% from 124.40 million in Fiscal 2020 to 52.24 million in Fiscal 2021, primarily due to the decreases in

(i) provisions (other than taxation) from 58.75 million in Fiscal 2020 to nil in Fiscal 2021 on account of the provision for diminution in the value of equity investment in Saudi Indian Company for Cooperative Insurance; and

(ii) contribution to Policyholders Account towards others by 22.16% from 61.15 million in Fiscal 2020 to 47.60 million in Fiscal 2021. This was because during Fiscal 2019 the shareholders subsidy contribution was under-provisioned and it was detected while doing the actuarial valuation for Fiscal 2020. It was corrected then and the balance amount belonging to the previous year was taken in Fiscal 2020, which means that the total amount in Fiscal 2020 included the subsidy for Fiscal 2019 and also a portion belonging to the previous year, i.e., Fiscal 2018.

 

Profit Before/After Tax (Profit and Loss Account)

As a result of the above, profit before tax increased by 9.63% from 27,185.16 million in Fiscal 2020 to 29,803.47 million in Fiscal 2021.

Provision for taxation, which is made on profit before taxation excluding the amount transferred from the Policyholders Account, decreased by 22.77% from 80.38 million in Fiscal 2020 to 62.08 million in Fiscal 2021. The decrease was primarily due to the decrease in income from investments in our profit and loss account by 35.14% from 354.43 million in Fiscal 2020 to 229.89 million in Fiscal 2021.

Primarily as a result of the factors mentioned above, profit after tax increased by 9.73% from 27,104.78 million in Fiscal 2020 to 29,741.39 million in Fiscal 2021.

Fiscal 2020 Compared to Fiscal 2019

Additional Significant Factors Affecting our Results of Operations

Life Insurance Corporation of India (Employees) Pension (Amendment) Rules, 2019 was notified by the Government on April 23, 2019 giving one-time pension option to employees who had not opted it before, in accordance the terms and conditions as specified in the said notification. Financial liability of 111,246.6 million arising due to the fresh pension given to the employees is being amortized over a period of five years with effect from Fiscal 2020. The IRDAI approved the amortization of this expense over a five-year period vide its letter no. 101/2/F&A-Life/LIC/2018-2019/208 dated July 6, 2020. Accordingly, an instalment of

22,249.3 million was recognized in Fiscal 2020 valuation and the second instalment of 22,249.3 million has been funded in Fiscal 2021 and the balance amount of 66,748 million is to be amortised over the period up to March 31, 2024. If the approval from the IRDAI had not been granted, our Corporation would have recorded much higher expenses and a lower surplus in our

Policyholders Account in Fiscal 2020.

 

Premium Earned - Net (Revenue Account)

Premium

The following table sets forth our premium by type, product type and customer type in India and outside India for Fiscal 2019 and Fiscal 2020.

Particulars

Year Ended March 31,

2020 2019
First year premiums Renewal premiums Single premiums & CAG(1) Total First year premiums Renewal premiums Single premiums & CAG Total

( in millions)

Non-Linked Business:
-Life 290,806.50 1,913,971.93 66,818.58 2,271,597.00 262,872.09 1,852,297.47 78,958.09 2,194,127.65
Participating
-Life Non- 1,577.12 10,432.42 174.60 12,184.13 1,764.79 9,916.22 36.81 11,717.82
Participating
-Annuity 44.91 44.91 48.74 48.74
Participating
-Annuity Non- 61.36 152,368.80 152,430.16 70.69 164,850.02 164,920.71
Participating
-Pension 237.06 6,185.15 84.82 6,507.03 221.52 6,768.24 89.22 7,078.98
Participating
-Health Non- 1,047.37 2,101.42 3,148.80 1,126.04 1,852.33 2,978.37
Participating
-Variable Non- 376.54 376.54 472.15 472.15
Participating
-Group Non- 285,015.67 68,797.18 982,476.88 1,336,289.73 46,521.02 70,101.92 865,270.10 981,893.04
Participating
Linked Business:
-Life Non- 524.98 3,685.83 386.40 4,597.22 342.53 4,081.15 4,423.68
Participating
-Pension Non- 1,797.64 1,797.64 2,269.21 2,269.21
Participating
-Health Non- 1,089.45 1,089.45 1,273.82 1,273.82
Participating
-Group Non- 73.02 73.02 96.02 96.02
Participating
Total in India 579,208.70 2,008,616.85 1,202,310.08 3,790,135.63 312,847.99 1,949,247.96 1,109,204.24 3,371,300.20
Outside India including 5,256.29 16,755.59 15,966.99 37,978.87 3,917.62 13,318.61 14,409.73 31,645.95
Subsidiaries
Total Premium 584,464.99 2,025,372.44 1,218,277.07 3,828,114.50 316,765.61 1,962,566.57 1,123,613.97 3,402,946.15

 

Note(s):

(1) CAG is the abbreviation for consideration for annuity granted.

Our total premium increased by 12.49% from 3,402,946.15 million in Fiscal 2019 to 3,828,114.50 million in Fiscal 2020, primarily due to the increase in premium in India by 418,835.44 million, or 12.42%, from 3,371,300.19 million in Fiscal

2019 to 3,790,135.63 million in Fiscal 2020 on account of the strong growth in new business written under our individual and group business in participating, non-participating and unit-linked life segments and stable renewal premiums.

Our first-year premiums increased by 84.51% from 316,765.61 million in Fiscal 2019 to 584,464.99 million in Fiscal 2020, primarily due to the increase in our (i) premiums earned from the group non-participating business by 512.66% from 46,521.02 million in Fiscal 2019 to 285,015.67 million in Fiscal 2020 primarily due to the contributions by the Government of Tamil Nadu towards the defined contribution schemes for its employees; and (ii) premiums earned from the individual life participating business by 10.63% from 262,872.09 million in Fiscal 2019 to 290,806.50 million in Fiscal 2020, which was primarily due to the introduction of our modified plans.

Our renewal premiums increased by 3.20% from 1,962,566.57 million in Fiscal 2019 to 2,025,372.44 million in Fiscal 2020, primarily due to the increase in renewal premiums earned in India by 3.05% from 1,949,247.96 million in Fiscal 2019 to

2,008,616.85 million in Fiscal 2020, on account of the increase in premiums earned from the individual life participating business by 3.33% from 1,852,297.47 million in Fiscal 2019 to 1,913,971.93 million in Fiscal 2020, reflecting the continued impact of the sales of our regular premium products during previous years, as well as the customer initiatives we have undertaken in improving renewal premium collection.

Our single premiums & CAG increased by 8.42% from 1,123,613.97 million in Fiscal 2019 to 1,218,277.07 million in Fiscal 2020, primarily due to the increase in single premiums & CAG earned in India by 8.39% from 1,109,204.24 million in Fiscal

2019 to 1,202,310.08 million in Fiscal 2020 on account of the increase in premiums earned from our group non-participating business by 13.55% from 865,270.10 million in Fiscal 2019 to 982,476.88 million in Fiscal 2020, which was primarily due to the increase in our premiums earned under gratuity schemes.

For more details on our premium in India, see "Our Business Our Product Breakdown in Numbers" on page 193.

 

Income from Investments (Revenue Account)

The following table sets forth our income from investments for the Fiscal Years indicated.

Particulars Year Ended March 31,
2020 2019
( in millions)
Income from Investments:
Interest, dividends & rent gross 2,220,501.02 2,000,210.33
Profit on sale/redemption of investments 313,616.70 302,412.19
(Loss on sale/redemption of investments) (119,741.88) (63,440.11)
Transfer/gain on revaluation/change in fair value(1) 13,987.30 11,252.99
Total income from investments 2,428,363.14 2,250,435.40

 

Notes:

(1) Represents the deemed realised gain as per norms specified by the Authority.

Our total income from investments increased by 7.91% from 2,250,435.40 million in Fiscal 2019 to 2,428,363.14 million in Fiscal 2020, primarily due to increases in: (i) interest, dividends, rent gross by 11.01% from 2,000,210.33 million in Fiscal 2019 to 2,220,501.02 million in Fiscal 2020 which was on account of the increase in investment in interest bearing securities; and (ii) profit on sale/redemption of investments by 3.71% from 302,412.19 million in Fiscal 2019 to 313,616.70 million in

Fiscal 2020 which was on account of the realised profit on sale of equity under our non-linked portfolio. The aforementioned increases were partially offset by an increase in loss on sale/redemption of investments by 56,301.77 million from 63,440.11 million in Fiscal 2019 to 119,741.88 million in Fiscal 2020 which was on account of losses under our linked portfolio resulting from turbulent market conditions.

 

Other Income (Revenue Account)

Our other income increased by 250.23% from 57,943.96 million in Fiscal 2019 to 202,936.40 million in Fiscal 2020, which was primarily due to IDBI Bank which was our subsidiary for 12 months in Fiscal 2020 and 3 months in Fiscal 2019 which led to an increase (i) interest earned by 291.56% from 38,477.51 million in Fiscal 2019 to 150,660.97 million in Fiscal 2020; (ii) sundry receipts by 124.97% from 10,632.04 million in Fiscal 2019 to 23,918.90 million in Fiscal 2020; and (iii) commission, exchange and brokerage by 228.02% from 6,129.35 million in Fiscal 2019 to 20,105.65 million in Fiscal 2020.

Total Expenses (Revenue Account)

Commissions (Revenue Account)

The following table sets forth the split of commissions paid across first year premiums, renewal premiums and single premiums and the corresponding ratios of commissions paid to premiums received excluding GST for the Fiscal Years indicated.

Particulars Year Ended March 31,
2020 2019
( in millions)
Commission paid:
Direct First year premiums 98,113.81 88,882.68
Renewal premiums 104,127.94 101,117.27
Single premiums 4,796.69 5,224.95
Other commission 3.98 2.99
Sub-total 207,042.42 195,227.89
Commission on Re-insurance Accepted
Commission on Re-insurance Ceded (441.29) (350.66)
Net Commission 206,601.13 194,877.23
Rewards and Remuneration to Intermediaries 8,881.45 9,948.86
Total Commission 215,482.58 204,826.09

Our total commission increased by 5.20% from 204,826.09 million in Fiscal 2019 to 215,482.58 million in Fiscal 2020, which was primarily due to the increased volumes of new business and renewal premiums, and was generally in line with the increase in premium of 12.49% over the same period. As a percentage of premium, our total commission decreased by 0.39% from 6.02% in Fiscal 2019 to 5.63% in Fiscal 2020.

Our commission paid for first year premiums increased by 10.39% from 88,882.68 million in Fiscal 2019 to 98,113.81 million in Fiscal 2020, generally in line with the increase in first year premiums of 84.51% over the same period. As a percentage of first year premiums, our commission paid for first year premiums decreased by 11.27% from 28.06% in Fiscal 2019 to 16.79% in Fiscal 2020.

Our commission paid for renewal premiums increased by 2.98% from 101,117.27 million in Fiscal 2019 to 104,127.94 million in Fiscal 2020, generally in line with the increase in renewal premiums of 3.20% over the same period. As a percentage of renewal premiums, our commission paid for renewal premiums decreased by 0.01% from 5.15% in Fiscal 2019 to 5.14% in Fiscal 2020.

Our commission paid for single premiums decreased by 8.20% from 5,224.95 million in Fiscal 2019 to 4,796.69 million in Fiscal 2020, generally in line with the increase in single premiums of 8.42% over the same period. As a percentage of single premiums, our commission paid for single premiums decreased by 0.08% from 0.47% in Fiscal 2019 to 0.39% in Fiscal 2020.

 

Operating Expenses Related to Insurance Business (Revenue Account)

Our operating expenses related to insurance business increased by 21.51% from 283,316.03 million in Fiscal 2019 to

344,258.84 million in Fiscal 2020, driven by increases in:

(i) employees remuneration & welfare benefits by 26.24% from 199,045.39 million in Fiscal 2019 to 251,278.96 million in Fiscal 2020, which increase was primarily due to (i) an increase in salaries; and (ii) an expense of 22,249.3 million arising from our employees electing to participate in our Corporations fresh pension scheme for the first time in Fiscal 2020. Our Corporation was permitted to amortise 111,246.6 million of expenses incurred in relation to the pension scheme over a period of five years, pursuant to the approval granted by IRDAI vide its letter no. 101/2/F&A-Life/LIC/2018-2019/208 dated July 6, 2020; and

(ii) allowances and commission (other than commission to insurance agents) by 13.17% from 19,762.87 million in Fiscal 2019 to 22,365.32 million in Fiscal 2020, on account of the increase in incentive bonus to development officers on their annual performance appraisals, transaction fee and re-imbursements to SBAs, agents travelling expenses and pre-recruitment expenses.

 

Other Expenses (Revenue Account)

Other expenses increased by 308.32% from 48,323.77 million in Fiscal 2019 to 197,317.46 million in Fiscal 2020. The primary reasons for this increase were increases in:

(i) interest expended by 287.22% from 34,314.94 million in Fiscal 2019 to 132,874.87 million in Fiscal 2020, which increase was mainly due to the financial results of IDBI Bank being consolidated as a subsidiary for 12 months in Fiscal 2020 and three months in Fiscal 2019.

(ii) payments to and provisions for employees by 417.39% from 6,501.28 million in Fiscal 2019 to 33,637.13 million in Fiscal 2020, which increase was mainly due to the financial results of IDBI Bank being consolidated as a subsidiary for 12 months in Fiscal 2020 and three months in Fiscal 2019.

 

Benefits Paid (Net) (Revenue Account)

The following table sets forth the benefits paid (net) and interim/terminal bonuses paid for the Fiscal Years indicated.

Particulars Year Ended March 31,
2020 2019
( in millions)
Insurance claims:
Claims by death 175,279.87 171,288.42
Claims by maturity 1,539,186.03 1,543,676.83
Annuities/pensions payment 130,212.52 109,181.14
Other benefits:
Surrenders(1) 702,642.72 693,431.51
Bonuses in cash 0.01
Hospitalisation benefits 154.10 100.73
Major surgical benefits 162.18 180.34
Domiciliary treatment benefits 134.99 119.53
Day care benefits 31.04 28.52
Lump sum benefit/income benefit (by installment) 79.75 10.85
Other claims cost:
Particulars Year Ended March 31,
2020 2019
( in millions)
Interest on unclaimed costs 8,767.39 7,460.09
Others 284.34 132.53
(Amount ceded in reinsurance):
Claims by death (1,861.70) (1,650.72)
Claims by maturity
Annuities/Pensions payment
Other benefits (273.69) (151.43)
Amount accepted in reinsurance:
Claims by death
Claims by maturity
Annuities/Pensions payment
Other benefits (4.66)
Total 2,554,794.89 2,523,808.34

 

Note(s):

(1) Includes partial surrender and switches.

Our benefits paid to policyholders increased by 1.23% from 2,523,808.34 million for Fiscal 2019 to 2,554,794.89 million in Fiscal 2020, primary due to an increase in annuities/pension payments by 19.26% from 109,181.14 million for Fiscal 2019 to 130,212.52 million in Fiscal 2020.

 

Change in Valuation of Liability in Respect of Life Policies (Revenue Account)

The gross change in valuation of liability in respect of life policies increased by 16.97% from 2,535,854.60 million in Fiscal 2019 to 2,966,283.81 million in Fiscal 2020. Policyholders liability depends upon the business profile and assumptions made about future mortality/morbidity, interest, expenses etc., at each point of time. The change in business profile happens due to policies exiting and policies entering mainly due to new business and existing policies getting closer to maturity.

 

Transfer to/(from) Provision for Linked Liabilities (Revenue Account)

The transfer from provision for linked liabilities decreased by 2.17% from 93,122.82 million in Fiscal 2019 to 91,103.40 million in Fiscal 2020.

 

Surplus/Deficit (Revenue Account)

Primarily due to the loss incurred by IDBI Bank, which was consolidated for three months in Fiscal 2019 and for 12 months in

Fiscal 2020, our total deficit increased by 77,328.37 million, or 320.06%, from 24,160.96 million in Fiscal 2019 to 101,489.32 million in Fiscal 2020.

 

Share of Profit in Associates (Revenue Account)

Our share of profits in associates decreased by 14.06% from 6,683.97 million in Fiscal 2019 to 5,744.42 million in Fiscal

2020, which decrease was primarily due to the reduction in share of profit contributed by LIC Housing Finance Limited during Fiscal 2020.

 

Minority Interest (Revenue Account)

Minority share of loss increased by 153.27% from 25,162.06 million in Fiscal 2019 to 63,726.72 million in Fiscal 2020 due to the deficit of IDBI Bank, which was consolidated for three months is Fiscal 2019 and 12 months in Fiscal 2020

 

Amount Transferred from Policyholders Account (Profit and Loss Account Shareholders Account)

Amount transferred from Policyholders Account increased by 3.69% from 25,994.77 million in Fiscal 2019 to 26,955.13 million in Fiscal 2020, mainly due to an increase in the surplus payable to the Shareholders and an increase in the earnings retained by our Subsidiaries.

 

Income from Investments (Profit and Loss Account Shareholders Account)

Income from investments decreased by 22.14% from 455.19 million in Fiscal 2019 to 354.43 million in Fiscal 2020, mainly due to a decrease in: (i) profit on sale/redemption of investments by 83.17% from 126.00 million in Fiscal 2019 to 21.21 million in Fiscal 2020 resulting from one time amount received on renunciation of rights from an affiliate in Fiscal 2019 and (ii) gross interest, dividends and rent by 5.82% from 373.75 million in Fiscal 2019 to 352.01 million in Fiscal 2020 primarily due to the reduction in dividend received from some Subsidiaries. The decreases were partially offset by a decrease in loss on sale/redemption of investments by 57.83% from (44.56) million in Fiscal 2019 to (18.79) million in Fiscal 2020 on account of the amount written off in relation to the reduction in capital of an affiliate in Fiscal 2019.

 

Total Expenses (Profit and Loss Account Shareholders Account)

Our total expenses increased by 372.82% from 26.31 million in Fiscal 2019 to 124.40 million in Fiscal 2020, primarily due to the increases in

(a) contribution to the Policyholders Account towards others by 176.70% from 22.10 million in Fiscal 2019 to 61.15 million in Fiscal 2020. This was because during Fiscal 2019, the shareholders subsidy contribution was under provisioned and it was detected while doing the actuarial valuation for Fiscal 2020. Therefore, the total expenses recorded in Fiscal 2020 includes the subsidy for Fiscal 2019 an also a portion belonging to Fiscal 2018; and

(b) provisions (other than taxation) from nil in Fiscal 2019 to 58.75 million in Fiscal 2020 on account of the provisions for diminution in value of equity investment in Saudi Indian Company for Cooperative Insurance.

 

Profit Before/After Tax (Profit and Loss Account Shareholders Account)

As a result of the above, profit before tax increased by 2.88% from 26,423.65 million in Fiscal 2019 to 27,185.16 million in

Fiscal 2020.

Provision for tax, which is made on profit before taxation excluding the amount transferred from the Policyholders Account, decreased by 69.49 million, or 46.37%, from 149.87 million in Fiscal 2019 to 80.38 million in Fiscal 2020. The decrease was primarily due to the decrease in income from investments in our profit and loss account by 22.14% from 455.19 million in Fiscal 2019 to 354.43 million in Fiscal 2020.

Primarily due to the factors mentioned above, our profit after tax increased by 3.16% from 26,273.78 million in Fiscal 2019 to 27,104.78 million in Fiscal 2020.

Our Financial Condition

 

Significant Factors Affecting our Financial Condition

IDBI Bank became a subsidiary with effect from January 21, 2019 following our Corporations acquisition of an additional

827,590,885 of the outstanding equity shares in IDBI Bank, which resulted in our Corporation owning 51% of the outstanding shares in IDBI Bank. On December 19, 2020, IDBI Bank was reclassified as an associate company due to the reduction of our

Corporations shareholding to 49.24% following the issuance of additional equity shares by IDBI Bank in a qualified institutions placement. Accordingly, the investments, assets and liabilities reflected in our restated consolidated balance sheets as at March 31, 2019 and March 31, 2020 include those of IDBI Bank but those as at March 31, 2021 and September 30, 2021 do not. The following table shows a breakdown of our financial condition from our restated consolidated balance sheet as at the dates indicated.

Balance sheet As at September 30, As at March 31,
2021 2021 2020 2019
( in millions)
Sources of funds:
Shareholders funds:
Share capital 63,249.98 1,000.00 1,000.00 1,000.00
Reserves and surplus 22,848.06 67,054.71 8,916.58 7,984.35
Credit/(debit) fair value change account 1,432.77 784.97 101.69 (887.61)
Minority interest (Shareholders) 1,010.94 992.76 962.84 877.61
Sub-total 88,541.75 69,832.44 10,981.11 8,974.35
Borrowings 37.16 36.65 2,534,135.99 2,694,005.95
Policyholders funds:
Credit/(debit) fair value change account 4,078,637.99 2,729,449.88 (43,165.63) 2,166,952.55
Policy liabilities 35,843,884.08 34,207,270.03 31,028,155.02 28,056,931.13
Minority interest (Policyholders) 45.01 209.48 171,331.95 188,363.61
Funds for discontinued policies:
Discontinued on account of non- payment of premium 439.37 336.60 333.42 327.10
Others 169.24 169.97 185.17 190.69
Insurance Reserves 143,065.85 127,114.55 114,148.90 130,959.43
Provision for linked liabilities 235,711.93 329,591.68 325,352.99 416,508.65
Sub-total 40,301,990.63 37,394,178.84 34,130,477.81 33,654,239.11
Funds for future appropriations 44,064.32 33.40 286.82 132.71
Balance sheet As at September 30, As at March 31,
2021 2021 2020 2019
( in millions)
Total sources of funds 40,434,596.70 37,464,044.68 34,141,745.74 33,663,346.17
Application of Funds:
Investments:
Shareholders 51,494.53 4,264.03 4,008.40 3,693.83
Policyholders 37,849,032.11 34,984,407.37 29,579,077.57 28,776,866.93
Assets held to cover linked liabilities 235,994.38 329,749.57 321,698.86 335,668.71
Loans 1,099,862.67 1,087,636.65 2,374,346.96 2,498,803.33
Fixed Assets 34,533.15 34,740.26 145,717.78 145,675.77
Current Assets:
Cash and bank balances 260,500.81 360,783.18 631,526.28 678,995.28
Advances and other assets 1,566,764.28 1,493,661.00 1,941,964.94 1,832,788.44
Total current assets (A) 1,827,265.09 1,854,444.18 2,573,491.22 2,511,783.72
Current Liabilities:
Current liabilities 514,109.11 681,714.55 650,317.13 402,823.05
Provisions 149,476.12 149,482.83 206,277.92 206,323.07
Total current liabilities (B) 663,585.23 831,197.38 856,595.05 609,146.12
Net current assets (C) = (A) (B) 1,163,679.86 1,023,246.80 1,716,896.17 1,902,637.60
Total application of funds 40,434,596.70 37,464,044.68 34,141,745.74 33,663,346.17

Our share capital increased from 1,000.00 million as at March 31, 2021 to 63,249.98 million as at September 30, 2021 primarily due the allotment of 6,324,997,701 Equity Shares, which was effected on September 8, 2021.

Our reserves and surplus (Shareholders funds) increased from 8,916.58 million as at March 31, 2020 to 67,054.71 million as at March 31, 2021 and decreased to 22,848.06 million as at September 30, 2021. The increase as at March 31, 2021 was primarily due to the retention of the surplus of Fiscal 2020 and Fiscal 2021 payable to the Shareholders, while the decrease as at September 30, 2021 was on account of the allotment of 6,324,997,701 Equity Shares from our reserves and surplus, which was effected on September 8, 2021.

Our borrowings decreased from 2,534,135.99 million as at March 31, 2020 to 36.65 million as at March 31, 2021 primarily due to IDBI Banks borrowings no longer being consolidated as a subsidiary.

Our credit/(debit) fair value change account (policyholders funds) was 2,166,952.55 million as at March 31, 2019, (43,165.63) million as at March 31, 2020, 2,729,449.88 million as at March 31, 2021 and 4,078,637.99 million as at

September 30, 2021. The sharp decline in fair value was primarily due to the fall in share prices, on account of the COVID-19 pandemic in Fiscal 2020.

Policy liabilities (policyholders funds) increased from 28,056,931.13 million as at March 31, 2019 to 31,028,155.02 million as at March 31, 2020 and 34,207,270.03 million as at March 31, 2021. Policyholders liability depends upon the business profile and assumptions made about future mortality/morbidity, interest, expenses etc., at each point of time. The change in business profile happens due to policies exiting and policies entering mainly due to new business and existing policies getting closer to maturity.

The funds for future appropriations increased from 33.40 million as at March 31, 2021 to 44,064.32 million as at September

30, 2021 since the allocation of surplus to either the participating policyholder or shareholder, with respect to the surplus generated as at September 30, 2021, will only be conducted at the end of the Fiscal Year as per the provisions in the Insurance

Act and IRDAIs regulations.

Minority interest (policyholders funds) in the net assets of consolidated subsidiaries consists of the amount of equity attributable to the minority shareholders at the dates on which investments are made by the Corporation in the subsidiaries and further movements in their share in the equity, subsequent to the dates of investments. The amount of equity attributable to the minority shareholders decreased from 171,331.95 million as at March 31, 2020 to 209.48 million as at March 31, 2021, since IDBI Banks results were no longer consolidated as a subsidiary as at March 31, 2021.

Our provision for linked liabilities (policyholders funds) decreased from 416,508.65 million as at March 31, 2019 to 325,352.99 million as at March 31, 2020, increased to 329,591.68 million as at March 31, 2021 and decreased to 235,711.93 million as at September 30, 2021. The decrease in our provision for linked liabilities as at March 31, 2020 was primarily due to the reduction in fair value of investments of unit fund of linked business in Fiscal 2020. The decrease in our provision for linked liabilities as at September 30, 2021 was due a greater claims pay-out following the maturity of the Endowment Plus plan and the Samrudhi plan.

Our shareholders investments increased from 4,264.03 million as at March 31, 2021 to 51,494.53 million as at September

30, 2021 on account of allocation of investments commensurate with the increase in capital.

Our policyholders investments increased from 28,776,866.93 million as at March 31, 2019 to 29,579,077.57 million as at March 31, 2020 and further increased to 34,984,407.37 million as at March 31, 2021. These increases were primarily due to the corresponding increases in premium income, interest income, realised gain on investments and the upward trend in fair value of equity.

Our loans decreased from 2,374,346.96 million as March 31, 2020 to 1,087,636.65 million as at March 31, 2021 primarily due to the repayment of loans.

Our fixed assets decreased from 1,45,717.78 million as March 31, 2020 to 34,740.26 million as at March 31, 2021, primarily due to IDBI Banks financial results no longer being consolidated as a subsidiary.

Our goodwill decreased from 33,284.48 million as March 31, 2020 to nil as at March 31, 2021 due to IDBI Banks financial results no longer being consolidated as a subsidiary.

Our cash and bank balances decreased from 631,526.28 million as March 31, 2020 to 360,783.18 million as at March 31, 2021 primarily due to IDBI Banks financial results no longer being consolidated as a subsidiary.

Our advances and other assets decreased from 1,941,964.94 million as March 31, 2020 to 1,493,661.00 million as at March 31, 2021 primarily due to IDBI Banks financial results no longer being consolidated as a subsidiary.

Our current liabilities (excluding provisions) increased from 402,823.05 million as at March 31, 2019 to 650,317.13 million as at March 31, 2020 primarily due to the increase in provision made for outstanding claims, outstanding unclaimed amounts and outstanding expenses in Fiscal 2020. Our current liabilities (excluding provisions) decreased from 681,714.55 million as at March 31, 2021 to 514,109.11 million as at September 30, 2021 primarily due to the decrease in provision made for outstanding claims, outstanding expenses and amounts due to trustees of staff provident & pension fund.

Our provisions decreased from 206,277.92 million as at March 31, 2020 to 149,482.83 million as at March 31, 2021 primarily due to IDBI Banks financial results no longer being consolidated as a subsidiary.

Segment Information

We have business in force in six different segments namely

(i) life business;

(ii) pension business;

(iii) annuity business;

(iv) variable business;

(v) health business and

(vi) unit-linked business. Due to the immaterially of our variable business and health business segment, we have not included a discussion on the segment income and surplus of those segments.

Segment Results for the Six Months Ended September 30, 2021

The following table shows a breakdown of our segment income and surplus from our restated consolidated statement on segmental disclosure during the six months ended September 30, 2021.

Particulars

Non-linked Total (Current Year)

Linked Business

Total (Current Year)

Subsidiaries/ Inter- Total
Participating Non- participating Non- participating Participating Non- participating company adjustments
( in millions)
Segment Income 2,210,243.22 1,084,776.28 55,623.84 2,210,243.22 1,140,400.12 19,085.81 3,369,729.15
Segment Expenses 2,210,243.22 1,080,987.60 45,333.84 2,210,243.22 1,126,321.44 18,307.22 3,354,871.88
Surplus/ (Deficit) 3,788.68 10,290.00 14,078.68 778.59 14,857.27
Add: Share of profits in Associates 15,985.98 15,985.98
(Less)/Add:
Minority Interest (20.57) (20.57)
Total
Surplus/(Deficit) 3,788.68 10,290.00 14,078.68 16,744.00 30,822.68

Segment Results for Fiscal 2021

The following table shows a breakdown of our segment income and surplus from our restated consolidated statement on segmental disclosure during Fiscal 2021.

Particulars

Non-linked Total (Current Year)

Linked Business

Total (Current Year)

Subsidiaries/ Inter- company adjustments Total
Participating Non- participating Non- participating Participating Non- participating
( in millions)
Segment Income 4,445,350.35 2,244,075.79 132,623.80 4,445,350.35 2,376,699.59 215,044.51 7,037,094.45
Segment Expenses 4,416,460.25 2,244,075.79 132,623.80 4,416,460.25 2,376,699.59 205,316.45 6,998,476.28
Surplus/ (Deficit) 28,890.10 28,890.10 9,728.06 38,618.17
Add: Share of profits in
Associates 11,633.54 11,633.54
(Less)/Add:
Minority Interest (4,465.25) (4,465.25)
Total
Surplus/(Deficit) 28,890.10 28,890.10 16,896.35 45,786.46

Segment Results for Fiscal 2020

The following table shows a breakdown of our segment income and surplus from our restated consolidated statement on segmental disclosure during Fiscal 2020.

Particulars

Non-linked Total (Current Year)

Linked Business

Total (Current Year)

Subsidiaries/ Inter- company adjustments Total
Participating Non- participating Non- participating Participating Non- participating
( in millions)
Segment Income 4,078,907.30 2,088,854.15 (8,932.08) 4,078,907.30 2,079,922.07 297,225.35 6,456,054.72
Segment Expenses 4,051,929.87 2,088,854.15 (8,932.08) 4,051,929.87 2,079,922.07 425,692.10 6,557,544.04
Surplus/ (Deficit) 26,977.43 26,977.43 (128,466.75) (101,489.32)
Add: Share of profits in
Associates 5,744.42 5,744.42
(Less)/Add:
Minority Interest 63,726.72 63,726.72
Total
Surplus/(Deficit) 26,977.43 26,977.43 (58,995.61) (32,018.18)

Segment Results for Fiscal 2019

The following table shows a breakdown of our segment income and surplus from our restated consolidated statement on segmental disclosure during Fiscal 2019.

Particulars

Non-linked Total (Current Year)

Linked Business

Total (Current Year)

Subsidiaries/ Inter- company adjustments Total
Participating Non- participating Non- participating Participating Non- participating
( in millions)
Segment Income 3,939,488.05 1,604,616.92 63,738.97 3,939,488.05 1,668,355.89 100,251.76 5,708,095.70
Segment Expenses 3,912,882.10 1,604,616.92 63,738.97 3,912,882.10 1,668,355.89 151,018.66 5,732,256.65
Surplus/ (Deficit) 26,605.95 26,605.95 (50,766.90) (24,160.95)
Add: Share of profits in
Associates 6,683.97 6,683.97
(Less)/Add:
Minority Interest 25,162.06 25,162.06
Total
Surplus/(Deficit) 26,605.95 26,605.95 (18,920.87) 7,685.08

Life Business (Revenue Account)

The following table sets forth the breakdown of our segment income and surplus for the life business operating segment for Fiscal 2019, Fiscal 2020, Fiscal 2021 and the six months ended September 30, 2021 on a standalone basis.

Life business segment

Six Months Ended September 30, 2021

March 31, 2021

Year Ended March 31, 2020

March 31, 2019

Participating Non- participating Participating Non- participating Participating Non- participating Participating Non- participating

( in millions)

Segment income:
Net premium 1,121,738.53 178,880.87 2,440,942.67 404,543.18 2,274,131.32 329,914.71 2,196,591.97 433,337.99
Income from investments 1,076,271.26 109,952.64 1,974,742.48 210,947.54 1,765,733.86 199,285.84 1,626,453.83 193,927.75
Other income (1,331.81) 2,273.23 (158.13) 4,931.85 9,587.74 4,384.95 3,650.66 4,180.71
Total segment 2,196,677.98 291,106.74 4,415,527.02 620,422.58 4,049,452.92 533,585.50 3,826,696.46 631,446.45
Income
Segment expenses:
Commission 95,270.58 687.10 214,939.60 1,180.92 207,921.17 1,059.95 194,560.65 1,080.97
Operating expenses related to insurance business 177,753.19 5,166.53 329,996.90 8,965.10 322,464.60 9,408.81 266,847.07 8,671.80
Other expenses: exchange loss/(gain) 0.67 0.00 (1.50) (0.70) 2.99
Provisions for doubtful debts (2,868.66) (0.21) 89,039.69 (0.35) (4,476.20) 6.74 34,391.40 4.94
Provision for taxation 21,453.03 1,244.28 79,875.31 68,237.75 77,217.43
Provisions (other than taxation) (54,048.67) (10,945.39) (45,332.99) 5,744.25 66,684.87 19,250.02 17,063.37 17,176.05
Benefits paid (net) 841,730.51 231,318.70 1,695,451.51 390,141.52 1,477,443.41 411,096.86 1,495,365.28 339,937.00
Interim bonuses paid 14,147.11 0.00 22,284.72 16,727.87 16,511.30
Change in valuation of liability in respect of life policies (gross) 1,044,727.36 104,792.39 2,000,383.68 214,391.14 1,867,472.73 92,763.13 1,698,131.01 264,575.88
Transfer to funds for future appropriations 58,512.86
Total segment expenses 2,196,677.98 332,263.40 4,386,636.92 620,422.58 4,022,475.50 533,585.50 3,800,090.50 631,446.64
Surplus during the year/period:
Interim bonus 14,147.11 22,284.72 16,727.87 16,511.30
Allocation of bonus to policyholders 547,088.15 510,813.73 503,651.45
Surplus shown in revenue account (41,156.66) 28,890.10 26,977.43 26,605.95
Total surplus during the year/period 14,147.11 (41,156.66) 598,262.97 554,519.03 546,768.70

Six Months Ended September 30, 2021

Our total life business segment (non-participating) surplus was (41,156.66) million for the six months ended September 30, 2021. This was primarily due to expenses incurred in relation to

(i) our benefits paid (net) of 231,318.70 million; and (ii) change in valuation of liability in respect of life policies (gross) of 104,792.39 million for the six months ended September 30, 2021. The expenses were partially offset by the income generated from our net premiums of 178,880.87 million for the six months ended September 30, 2021.

Fiscal 2021 Compared to Fiscal 2020

Our total life business segment (participating) surplus increased by 7.89% from 554,519.03 million in Fiscal 2020 to

598,262.97 million in Fiscal 2021. This increase was primarily due to the favourable experience of our Corporation in various parameters such as interest and mortality.

Our life business segment (participating) surplus shown in the revenue account increased by 7.09% from 26,977.43 million in Fiscal 2020 to 28,890.10 million in Fiscal 2021. This increase was primary due to the increase in total segment income by 9.04% from 4,049,452.92 million in Fiscal 2020 to 4,415,527.02 million in Fiscal 2021 on account of the increase in (i) income from investments by 11.84% from 1,765,733.86 million in Fiscal 2020 to 1,974,742.48 million in Fiscal 2021 and

(ii) net premium by 7.34% from 2,274,131.32 million in Fiscal 2020 to 2,440,942.67 million in Fiscal 2021. The increases were partially offset by an increase in gross change in valuation of liability in respect of life policies by 7.12% from

1,867,472.73 million in Fiscal 2020 to 2,000,383.68 million in Fiscal 2021.

Fiscal 2020 Compared to Fiscal 2019

Our total life business segment (participating) surplus increased by 1.42% from 546,768.70 million in Fiscal 2019 to

554,519.03 million in Fiscal 2020. This increase was primarily due to the favourable experience of our Corporation in various parameters such as interest and mortality.

Our life business segment (participating) surplus shown in the revenue account increased by 1.40% from 26,605.95 million in Fiscal 2019 to 26,977.43 million in Fiscal 2020. This increase was primary due to the increase in total segment income by

5.82% from 3,826,696.46 million in Fiscal 2019 to 4,049,452.92 million in Fiscal 2020 on account of an increase in income from investments by 8.56% from 1,626,453.83 million in Fiscal 2019 to 1,765,733.86 million in Fiscal 2020, which increase was partially offset by an increase in: (i) provisions (other than taxation) others by 1,457.45% from 3,946.33 million in

Fiscal 2019 to 61,461.95 million in Fiscal 2020 on account of the increase in provisions on our non-performing assets and (ii) operating expenses related to insurance business by 20.84% from 266,847.07 million in Fiscal 2019 to 322,464.60 million in

Fiscal 2020 mainly due to the provision towards additional contribution to the pension fund in Fiscal 2020 as compared to Fiscal 2019.

Pension Business (Revenue Account)

The following table sets forth the breakdown of our segments results for the pension business segment for Fiscal 2019, Fiscal 2020, Fiscal 2021 and the six months ended September 30, 2021 on a standalone basis.

Pension business segment

Six Months Ended September 30, 2021

March 31, 2021

Year Ended March 31, 2020

March 31, 2019

Participating Non- participating Participating Non- participating Participating Non- participating Participating Non- participating

( in millions)

Segment income:
Net premium 1,885.81 490,949.59 5,804.63 957,235.73 6,505.45 1,017,114.44 7,111.99 435,714.26
Income from investments 11,206.93 215,059.13 22,507.31 395,054.78 21,776.62 328,655.88 21,780.97 233,928.35
Other income (0.01) 958.76 (0.32) 1,240.38 (2.54) 802.71 (0.26) 622.41
Total segment income 13,092.73 706,967.48 28,311.62 1,353,530.88 28,279.53 1,346,573.03 28,892.70 670,265.01
Segment expenses:
Commission 46.51 0.32 88.76 1.71 167.73 0.92 170.72 0.23
Operating expenses related to insurance business 333.57 1,686.65 647.69 2,453.13 675.23 2,986.39 641.43 528.77
Provisions for doubtful debts (0.10) (0.14) (0.14) 2.07 (0.30)
Provisions for taxation 17,704.84
Provisions (other than taxation) 3.46 (7,134.13) (68.37) 654.21 35.47 10,063.42 (72.30) 952.77
Benefits paid (net) 10,687.87 315,777.99 22,027.12 582,629.33 19,703.29 516,854.64 18,165.17 404,126.37
Interim bonuses paid 6.03 6.01 5.83 2.40
Pension business segment

Six Months Ended September 30, 2021

March 31, 2021

Year Ended March 31, 2020

March 31, 2019

Participating Non- participating Participating Non- participating Participating Non- participating Participating Non- participating

( in millions)

Change in valuation of liability in respect of life policies (gross) 15,191.79 330,604.20 5,610.41 767,792.64 7,691.98 816,667.81 9,983.21 264,657.18
Transfer to funds for future appropriations (13,176.50)
Total segment expenses 13,092.73 658,639.77 28,311.62 1,353,530.88 28,279.53 1,346,573.03 28,892.70 670,265.01
Surplus during the year/period:
Interim bonus 6.03 6.01 5.83 2.40
Allocation of bonus to policyholders 1,812.07 1,744.62 1,846.78
Surplus shown in revenue account 48,327.71
Total surplus during the year/period 6.03 48,327.71 1,818.08 1,750.45 1,849.18

Six Months Ended September 30, 2021

Our total pension business segment (non-participating) surplus was 48,327.71 million for the six months ended September 30, 2021. This was primarily due to the income generated from our (i) net premiums of 490,949.59 million; and (ii) income from investments of 215,059.13 million for the six months ended September 30, 2021, which were partially offset by the expenses incurred in relation to the (i) change in valuation of liability in respect of life policies (gross) of 330,604.20 million; and (ii) benefits paid (net) of 315,777.99 million for the six months ended September 30, 2021.

Fiscal 2021 Compared to Fiscal 2020

Our total pension business segment (participating) surplus increased by 3.86% from 1,750.45 million in Fiscal 2020 to

1,818.08 million in Fiscal 2021. This increase was primarily due to the favourable experience of our Corporation in various parameters such as interest and mortality.

Fiscal 2020 Compared to Fiscal 2019

Our total pension business segment (participating) surplus decreased by 5.34% from 1,849.18 million in Fiscal 2019 to

1,750.45 million in Fiscal 2020. The liability depends upon the business profile and assumptions at each point of time. The liability and hence surplus depends on the combined effect of both the factors.

Annuity Business (Revenue Account)

The following table sets forth the breakdown of our segments results for the annuity business segment for Fiscal 2019, Fiscal 2020, Fiscal 2021 and the six months ended September 30, 2021 on a standalone basis.

Annuity business segment

Six Months Ended September 30, 2021

March 31, 2021

Year Ended March 31, 2020

March 31, 2019

Participating Non- participating Participating Non- participating Participating Non- participating Participating Non- participating

( in millions)

Segment income:
Net premium 12.06 54,457.13 35.06 202,953.20 44.91 152,407.93 51,290.07 236,892.97
Income from investments 460.42 30,652.01 1,476.06 63,179.71 1,130.35 52,493.92 32,608.89 62,361.77
Other income 0.03 0.02 0.59 (0.41) (1.26) (0.07) (0.51)
Total segment income 472.51 85,109.16 1,511.72 266,132.91 1,174.85 204,900.59 83,898.89 299,254.23
Segment expenses:
Commission 0.31 1,032.25 0.87 4,559.35 1.01 3,477.06 2.76 3,365.98
Operating expenses related to insurance business 29.37 1,117.57 57.01 4,283.29 58.17 3,355.72 554.20 4,403.16
Provision for doubtful debts (7.50) (0.34) (0.13)
Provision for taxation 3,310.16
Provisions (other than taxation) (9,445.54) (112.73) 103.33 (7.67) 9,651.05 (9.59) 59.05
Benefits paid (net) 1,842.33 33,579.63 3,772.88 57,016.10 3,499.35 48,689.86 31,061.91 77,382.45
Change in valuation of liability in respect of life policies (gross) (94.07) 46,479.12 (2,198.81) 200,170.85 (2,376.02) 139,726.91 52,289.94 214,043.73
Transfer to funds for future appropriations (1,305.43) 0.00
Total segment expenses 472.51 76,073.19 1,511.72 266,132.91 1,174.85 204,900.59 83,898.89 299,254.23
Surplus during the year/period:
Interim bonus
Allocation of bonus to policyholders 11.70 12.81 14.91
Surplus shown in revenue account 9,035.97
Total surplus during the year/period 9,035.97 11.70 12.81 14.91

Six Months Ended September 30, 2021

Our annuity business segment (non-participating) surplus was 9,035.97 million for the six months ended September 30, 2021.

This was primarily due to the income generated from our (i) net premiums of 54,457.13 million; and (ii) income from investments of 30,652.01 million for the six months ended September 30, 2021, which were partially offset by the expenses incurred in relation to the (i) change in valuation of liability in respect of life policies (gross) of 46,479.12 million; and (ii) benefits paid (net) of 33,579.63 million for the six months ended September 30, 2021.

Fiscal 2021 Compared to Fiscal 2020

Our annuity business segment (participating) surplus decreased by 8.67% from 12.81 million in Fiscal 2020 to 11.70 million in Fiscal 2021. The liability depends upon business profile and assumptions at each point of time. The liability and hence surplus depends on the combined effect of both factors. The decrease in Fiscal 2021 was because no new business was written under this segment.

Fiscal 2020 Compared to Fiscal 2019

Our annuity business segment (participating) surplus decreased by 14.08% from 14.91 million in Fiscal 2019 to 12.81 million in Fiscal 2020. The liability depends upon business profile and assumptions at each point of time. The liability and hence surplus depends on the combined effect of both factors. The decrease in Fiscal 2020 was because no new business was written under this segment.

Linked Business (Revenue Account)

The following table sets forth the breakdown of our segments results for the linked business segment for Fiscal 2019, Fiscal 2020, Fiscal 2021 and the six months ended September 30, 2021 on a standalone basis.

Linked business segment Six Months Ended Year Ended
September 30, 2021 March 31, 2021 March 31, 2020 March 31, 2019
Non-Participating Non-Participating Non-Participating Non-Participating

( in millions)

Net premium 11,336.80 13,938.37 7,490.98 8,007.91
Income from investments 44,292.37 118,696.99 (16,412.35) 55,738.13
Other income (5.33) (11.56) (10.71) (7.06)
Total segment Income 55,623.84 132,623.80 (8,932.08) 63,738.97
Segment expenses:
Commission 251.50 406.67 249.59 284.25
Operating expenses related to insurance business 1,232.96 1,780.77 2,057.14 2,084.55
Other expenses: exchange loss/(gain) 6.13 (49.33) (22.14) 7.91
GST on fund management charges & other charges 341.03 932.22 982.75 1,097.81
Provision for doubtful debts 1.43 553.61 131.32 317.30
Provision for taxation 3,770.83 2.29 1.58 0.95
Provisions (other than taxation) 29.92 (559.94) 1,242.73 328.81
Benefits paid (net) 54,972.11 92,938.52 47,360.25 124,340.46
Change in valuation of liability in respect of life policies (gross) 78,456.95 32,190.21 30,133.04 28,339.67
Transfer to provision for linked liabilities (93,863.33) 4,343.10 (91,103.40) (93,122.82)
Transfer to funds for future appropriations 31.26 0.41 0.95
Transfer to funds for discontinued fund 134.31 54.41 34.63 59.13
Total segment expenses 45,333.84 132,623.80 (8,932.08) 63,738.97
Total surplus during the year/period 10,290.00

Six Months Ended September 30, 2021

Our linked business segment (non-participating) surplus was 10,290.00 million for the six months ended September 30, 2021.

This was primarily due to the income generated from our

(i) income from investments of 44,292.37 million; and

(ii) net premiums of 11,336.80 million for the six months ended September 30, 2021, which were partially offset by the expenses incurred in relation to the

(i) change in valuation of liability in respect of life policies (gross) of 78,456.95 million; and

(ii) benefits paid (net) of 54,972.11 million for the six months ended September 30, 2021.

Fiscal 2021 Compared to Fiscal 2020

Our linked business segment (non-participating) income increased by 141,555.88 million from (8,932.08) million in Fiscal 2020 to 132,623.80 million in Fiscal 2021. This increase was primarily due to an increase in income from investments by 135,109.34 million from (16,412.35) million in Fiscal 2020 to 118,696.99 million in Fiscal 2021 on account of mark to market gains in our unit linked segment in Fiscal 2021 compared to losses in Fiscal 2020.

Fiscal 2020 Compared to Fiscal 2019

Our linked business segment (non-participating) income decreased by 72,671.05 million from 63,738.97 million in Fiscal 2019 to (8,932.08) million in Fiscal 2020. This decrease was primarily due to a decrease in income from investments by 72,150.48 million from 55,738.13 million in Fiscal 2019 to (16,412.35) million in Fiscal 2020 on account of higher mark to market and realised losses resulting from turbulent market conditions.

Liquidity and Capital Resources

The liquidity needs of our life insurance operations are generally affected by outflows for claims (including through during surrender, deaths, maturities and bonus payments), commission and administrative expenses, which are offset by inflows from premiums and income from investments.

Liquidity requirements of our insurance operations are fully met on the basis of net cash flow generated by our insurance business in the ordinary course of business.

The following table sets forth a summary of our cash flow for the years/period indicated.

Receipts and payments account Six Months Ended September 30, 2021 Year Ended March 31,
2021 2020 2019
( in millions)
Net cash flow generated from/(used in) operating activities (111,143.74) 806,020.38 543,669.21 132,738.14
Net cash flow generated from/(used in) investing activities 8,878.26 1,487,923.11 (418,090.92) 87,645.00
Net cash flow generated from/(used in) financing activities (2,561,254.67) (186,637.44) (136,995.79)

 

Net Cash Flow from Operating Activities

Our net cash flow used in operating activities was 111,143.74 million for the six months ended September 30, 2021, primarily attributed to the payment of claims/benefits of 1,506,744.06 million and payment for other operating expenses of 294,953.41 million during the six months ended September 30, 2021. The cash flows used for the aforementioned expenses were partially offset by 1,866,322.07 million of cash flow generated in relation to premium received from policyholders, including advance receipts during the six months ended September 30, 2021.

Our net cash flow generated from operating activities increased by 48.26% from 543,669.21 million in Fiscal 2020 to 806,020.38 million in Fiscal 2021, which increase was primarily due to an increase in premium received from policyholders, including advance receipts by 7.07% from 3,799,289.45 million in Fiscal 2020 to 4,067,745.98 million in Fiscal 2021. This increase was partially offset by an increase in payments of claims/benefits by 16.27% from 2,509,916.73 million in Fiscal

2020 to 2,918,212.14 million in Fiscal 2021.

Our net cash flow generated from operating activities increased by 309.58% from 132,738.14 million in Fiscal 2019 to 543,669.21 million in Fiscal 2020, which increase was primarily due to an increase in premium received from policyholders, including advance receipts by 11.22% from 3,416,145.27 million in Fiscal 2019 to 3,799,289.45 million in Fiscal 2020. This increase was partially offset by an increase in payments of other operating expenses by 29.33% from 325,344.09 million in Fiscal 2019 to 420,753.70 million in Fiscal 2020.

 

Net Cash Flow from/(used in) Investing Activities

Our net cash flow from investing activities was 8,878.26 million for the six months ended September 30, 2021, primarily attributed to rents/interests/dividends received of 1,180,740.08 million and sales of investments of 1,125,629.66 million and partially offset by purchase of investments of 2,288,125.42 million.

Our net cash flow from investing activities was 1,487,923.11 million in Fiscal 2021 compared to our net cash flow used in investing activities of 418,090.92 million in Fiscal 2020. The difference was primarily due to an increase in: (i) sales of investments by 80.18% from 1,525,158.09 million in Fiscal 2020 to 2,748,073.22 million in Fiscal 2021; and (ii) loans disbursed (net of repayments) by 7,507.79% from 15,574.71 million in Fiscal 2020 to 1,184,891.24 million in Fiscal 2021.

These increases were partially offset by an increase in purchase of investments by 17.21% from 4,261,926.25 million in Fiscal 2020 to 4,995,554.48 million in Fiscal 2021.

Our net cash flow used in investing activities was 418,090.92 million in Fiscal 2020 compared to our net cash flow generated from investing activities of 87,645.00 million in Fiscal 2019. The difference was primarily due to a 34.60% increase in purchase of investments from 3,166,292.62 million in Fiscal 2019 to 4,261,926.25 million in Fiscal 2020. This increase was partially offset by a 16.11% increase in rents/interests/dividends received from 1,991,443.44 million in Fiscal 2019 to 2,312,305.88 million in Fiscal 2020.

 

Net Cash Flow Used in Financing Activities

Our net cash flow used in financing activities was nil for the six months ended September 30, 2021, as we had not made any repayments in borrowings or paid any interests/dividends for the six months ended September 30, 2021.

Our net cash flow used in financing activities increased by 1,272.32% from 186,637.44 million in Fiscal 2020 to 2,561,254.67 million in Fiscal 2021, which increase was primarily due to the increase in repayments of borrowing by 1,485.10% from

159,869.96 million in Fiscal 2020 to 2,534,099.33 million in Fiscal 2021, which was primarily due to the borrowings of IDBI Bank, whose financial results were no longer consolidated as a subsidiary in Fiscal 2021.

Our net cash flow used in financing activities increased by 36.24% from 136,995.79 million in Fiscal 2019 to 186,637.44 million in Fiscal 2020, which increase was primarily due to interest/dividends paid of 26,767.48 million in Fiscal 2020 compared to interest/dividends received of 5,632.97 million in Fiscal 2019.

Indebtedness

As at September 30, 2021, our outstanding borrowings amounted to 37.16 million, all of which pertained to LIC Lankas (one of our Subsidiaries) issuance of 10,000,000 non-voting non-cumulative redeemable Class C preference shares to Lanka Island Resort Limited, in which the holders of the Class C preference shares were entitled to require LIC Lanka to redeem all or a part of the outstanding Class C preference shares at the subscription price. For more information, see "Financial Information Financial Indebtedness" on page 442.

Off-Balance Sheet Transactions

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that we believe are material to investors.

Capital Expenditure

From time to time, we make capital expenditures to expand our operations, primarily through making leasehold improvements, acquiring property, plant and equipment, and intangible assets, primarily consisting of computer software. Our capital expenditure for the six months ended September 30, 2021, Fiscal 2021, Fiscal 2020 and Fiscal 2019 largely related to investment in IT systems and digital infrastructure to deliver improved digitalization of core processes covering customer experience and back-office services. We have historically funded our capital expenditures through using cash generated by our operating activities. The following table sets forth additions to property, plant and equipment by category of expenditure, for each of the period and years indicated below.

Particulars Six-months ended September 30, 2021 Fiscal 2021 Fiscal 2020 Fiscal 2019
( in millions)
Intangibles 0.00 8.45 938.10 25.59
Land Freehold 596.66 135.93 115.01 4,519.49
Land Leasehold 2.36 15.86 - 2,497.97
Buildings 307.15 5,954.67 1,840.69 14,266.74
Furniture and fittings 58.02 271.18 417.55 301.65
Information technology 370.40 2,200.96 2,686.26 1,228.79
Vehicles 479.35 1,173.58 1,154.52 1,386.95
Office equipment 11.79 33.24 210.70 53.00
Others 38.07 145.27 3,351.38 288.29
Work in progress 482.83 821.48 488.37 889.58
Total 2,346.63 10,760.62 11,202.58 25,458.05

Our capital expenditure on information technology equipment increased by 118.61% from 1,228.79 million in Fiscal 2019 to

2,686.26 million in Fiscal 2020 primarily due to the increase in purchases decided for the year, which are decided based on our need for hardware/software. At times, request for proposals decided in a particular year do not get finalized in the same year and the expenses are made to spill over to the following year. This was the basis for the increase in our capital expenditure on information technology equipment in Fiscal 2020. Our capital expenditure on land-freehold decreased by 97.46% from

4,519.49 million in Fiscal 2019 to 115.01 million in Fiscal 2020, primarily due to capital expenditure incurred by IDBI Bank in Fiscal 2019. Our capital expenditure on buildings decreased by 87.10% from 14,266.74 million in Fiscal 2019 to 1,840.69 million in Fiscal 2020, primarily due to capital expenditure incurred by IDBI Bank in Fiscal 2019. Our capital expenditure on others increased by 1,062.50% from 288.29 million in Fiscal 2019 to 3,351.38 million in Fiscal 2020 primarily on account of IDBI Bank being our subsidiary for three months in Fiscal 2019 and 12 months in Fiscal 2020.

Contingent Liabilities

The table below sets forth our contingent liabilities as at September 30, 2021 on a standalone basis.

Particulars As at September 30, 2021
( in millions)
Partly paid-up investments 15,580.39
Claims, other than against policies, not acknowledged as debts by the Corporation 133.59
Guarantees given by or on behalf of the Corporation and others 0.81
Particulars As at September 30, 2021
( in millions)
Statutory demands and liabilities in dispute, not provided for 247,280.27*
Others
Policy related claims under litigation 4,093.95
Claims under litigation other than policy holders 1,303.38
Total contingent liabilities 268,392.39
Notes:

 

an assessing officer.

Partly paid-up investments include partly paid equity. We pay the call money for the partly paid-up shares as per the rates stipulated in the call money payment schedule. As at September 30, 2021, the partly paid-up shares amounted to 15,580.39 million.

Statutory demands and liabilities in dispute, but not provided for, relate to the show cause cum demand notices/assessment orders received by us from the respective tax authorities for various assessment years. We have filed appeals against the demand notices/assessment orders with the appellate authorities, including the Office of the Commissioner of Income Tax (Appeals), Income Tax Appellate Tribunal and the Bombay High Court. Tax authorities have also filed appeals with the Income Tax Appellate Tribunal, the Bombay High Court and the Supreme Court of India for various assessment years. As at September 30, 2021, the aggregate amount of income tax and interest, contested in these matters was 678,632.1 million.

Qualitative Disclosures About Market Risk

Market risk arises due to fluctuations in market prices and rates. We are exposed to a variety of market risks, including, but not limited to, interest rate risk, equity market price risk, foreign exchange rate risk and liquidity risk.

Interest Rate Risk

Our exposure to interest rate risk predominantly arises from any difference between the duration of our assets and liabilities, or any difference between the return on investments and the return required to meet our commitments, primarily in our traditional insurance liabilities. This exposure is heightened in products with inherent interest rate options or guarantees. We seek to manage our interest rate risk by ensuring appropriate product design and underlying assumptions as part of our product approval process and by matching, to the extent possible and appropriate, the duration of our investment assets with the duration of our insurance contracts. Given the long duration of policy liabilities and the uncertainty of future cash flows arising from these contracts, it is not possible to acquire assets that will perfectly match the policy liabilities. The duration of interest-bearing financial assets is regularly reviewed and monitored by referencing the estimated duration of insurance contract liabilities. For more details, see "Our Business Risk Management Interest Rate Risk" on page 228.

Equity Market Price Risk

Our equity market price risk exposure relates to financial assets and liabilities whose values fluctuate as a result of changes in equity market prices and principally investment securities not held for the account of unit-linked policyholders. We manage these risks by setting and monitoring investment limits in each country and sector.

 

Foreign Exchange Rate Risk

We are exposed to foreign exchange rate risks as a result of having business operations (branch offices and subsidiaries) in various jurisdictions and from financial assets and liabilities that are denominated in foreign currencies. Our financial assets are predominantly denominated in the same currencies as our insurance liabilities, which serves to mitigate the foreign exchange rate risk. The level of currency risk is managed and monitored by the respective entities, through regular monitoring of the currency positions of financial assets and insurance contracts.

Liquidity Risk

We are exposed to liquidity risk in respect of insurance contracts that permit surrender, withdrawal or other forms of early termination for a cash surrender value specified in the contractual terms and conditions. To manage liquidity risk, we have implemented a variety of measures, with an emphasis on flexible insurance product design, so that we can retain the greatest flexibility to adjust contract pricing, crediting rates or other non-guaranteed policyholder dividends. We also seek to match, to the extent possible and appropriate, the duration of our investment assets with the duration of our insurance contracts. We perform regular monitoring of our liquidity position through cash flow projections. See "Our Business Risk Management Liquidity Risk" on page 228.

Significant Developments after September 30, 2021

Except as disclosed below, to our knowledge, there is no subsequent development after September 30, 2021 that materially and adversely affects, or is likely to materially and adversely affect, our operations or profitability, or the value of our assets, or our ability to pay our material liabilities within the next 12 months.