HDFC Standard Life Insurance Company Limited · Product/Service Award – 2015 Click 2 Invest...

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HDFC Standard Life Insurance Company Limited

Quarter ending June 2015

HDFC Life’s Strategy and Performance Snapshot Financial Overview Awards and Accolades

Agenda

A

Agile multi-distribution

platform

Innovation in product selling and grow niches

Economies of Scale

Digital Leadership

Core strategic elements – ready for the next cycle

3

3

Long term orientation

1

Owning customer segments

2

Fortify and diversify distribution

3

Achieve cost leadership

4

Unique customer experience

5

Tech

no

log

y e

nab

lem

en

t

Skill development & retention

Ris

k m

itig

ati

on

& m

an

ag

em

en

t

Customer experience

Delivering Value

Way ahead

Key enablers

Strategy

31.1 23.6

29.3

68.9 80.2

93.4

11.4 14.8

21.8

1.8

2.0

3.8

FY13 FY14 FY15

120.6 113.2

148.3

11%

-13%

9%

20%

16%

7%

10%

17%

30%

-24%

23%

93%

16%

47%

24%

4.5 4.8

16.1 17.0

3.0

5.2 0.6

0.9

Q1 FY15 Q1 FY16

24.2

28.0

26%

152%

20%

23%

43%

15%

43%

6%

73%

7%

Revenue trends

4

Healthy trajectory across all premium categories vs last year

Group premium continues to grow robustly with enhanced focus on protection portfolio

First Year Regular Premium (Individual)

Total Premium Single Premium (Individual)

Renewal Premium (Individual)

Group Premium

` Bn Orientation 1 12M Performance Q1 Performance

14.3%

15.3%

Q1 FY15 Q1 FY16

New Business Received Premium

15.6%14.8%

Q1 FY15 Q1 FY16

Individual WRP

12.6%

15.6%

Q1 FY15 Q1 FY16

Group Received Premium

14.4%

13.7%

15.8%

FY13 FY14 FY15

New Business Received Premium

Consistently ranked amongst the top 3 private players

Market ranking

5 Source: Life Insurance Council

Rank

Rank

Rank

Orientation 1

2

3 3

1

2

2

10.9%

14.4%

17.8%

FY13 FY14 FY15

Group Received Premium

17.5%

13.8% 14.8%

FY13 FY14 FY15

Individual WRP

2 3

4 3 1

3 2

2

3

12M Performance Q1 Performance

79%

97%

83%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q1 FY14 Q1 FY15 Q1 FY16

79% 79%90%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY13 FY14 FY15

Conservation ratio

6

Industry leading conservation ratio2 through a raft of customer retention initiatives

Collection efforts complemented by effective technology usage

86% of service transactions through online mode

54% of renewal payments received through online and direct debit modes

Initiatives launched in FY14 for revival of lapsed and paid-up customers, led to a spike in FY15

conservation ratio - current sustainable levels reflect the strong renewal base

Notes: 1. Conservation ratio are for individual business 2. Based on FY15 numbers

Orientation 1 12M Performance Q1 Performance

1

70%

88%82%

89%

64%74%

89% 91% 94%

67%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

13th month 25th month 37th month 49th month 61st month

Jun-14 Jun-15

Persistency ratio

7

Improving persistency trends seen across cohorts

Quality measures introduced at customer on-boarding phase in FY15 starting to yield benefits in

13th month persistency

Note: Persistency ratios are calculated with a 1 month lag for the period of Jun-May for respective years based on individual business

Orientation 1

Basis Original premium

70% 74% 69% 65% 66% 65% 55% 66% 23% 37%

24.2

28.0

15.1 15.7

1.8 3.3

7.3 9.0

(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

-

5.0

10.0

15.0

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Q1 FY15 Q1 FY16

113.2 120.6

148.3

35.7 40.6

70.0

3.6 6.4 12.6

74.0 73.6 65.8

(100.0)

(80.0)

(60.0)

(40.0)

(20.0)

-

20.0

40.0

60.0

80.0

100.0

-

50.0

100.0

150.0

200.0

FY13 FY14 FY15

Total Premium Surrenders & Withdrawals

Claims by Death, Maturity & Others Net Cash flow

Premium less benefit payouts

8

Notes: 1. Gross of reinsurance 2. Based on FY15 results

Highest Premium less Benefit Payouts amongst the private players2

Claims saw a rising trend in line with the expectations, primarily due to increased number of

polices attaining maturity

17.7 19.3

24.2

5.2

9.3

15.1

0.6 1.1 1.8

11.9

8.9 7.3

(10.0)

(5.0)

-

5.0

10.0

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Q1 FY13 Q1 FY14 Q1 FY15

Total Premium Surrenders & Withdrawals Claims by Death, Maturity & Others Premium less policyholder payouts

` Bn Orientation 1

1


1

Product portfolio

9

Offering for every customer need… Recognised by experts

Children

Women

Protection

Health

Retirement &

pension

Savings &

investment

Segments 2

Golden Peacock Innovative Product/Service Award – 2015

Click 2 Invest

Indian Insurance Awards 2014- Best Product Innovation

Super Income Plan

Product of the Year 2013 under Life Insurance category

Smart Woman Plan

Winners of the Indian Insurance award for Best Product Innovation 2012

Sampoorn Samriddhi

Awarded at Indian Insurance Award 2012

Sampoorn Samriddhi

Winner at Indian Insurance Awards 2011

Crest

Consistently awarded ‘Best Product of the Year’ over last five years

Comprehensive product suite catering across life-cycle

Thank You

Employment

benefit solutions

48%

66%

30%

17%

22%17%

Q1 FY15 Q1 FY16

Unit Linked Participating

61%49%

62%

37%

36%21%

2%15% 17%

FY13 FY14 FY15

Unit Linked Participating Non Participating

Product mix

10

Continue to refine the product strategy to balance customer needs and channel profitability

‘Cancer Care’, a unique health product enabling customers to fight against cancer launched in

the quarter - witnessed great response with 29,668 policies sold since May 2015

Continue to market niche and innovative products such as ‘Click2’ series, including

Click2Protect Plus and Click2Invest

Note: The percentages are with reference to APE for individual business

61%49%

62%

37%

36%21%

2%15% 17%

FY13 FY14 FY15

Unit Linked Participating Non Participating

Segments 2


675

993

1300

280

190

212

0

200

400

600

800

1000

1200

1400

1600

1800

2000

FY13 FY14 FY15

Pure Protection Others

1,183

955

1,513

New business sum assured

New business sum assured continues to grow with increased focus on protection segment

Increased mix of pension products resulted in reduction of new business sum assured for

Others

` Bn

Segments 2

11


675

993

1300

280

190

212

0

200

400

600

800

1000

1200

1400

1600

1800

2000

FY13 FY14 FY15


1,183

955

1,513

274

364

32

39

0

100

200

300

400

500

600

Q1 FY15 Q1 FY16


306

404

Note: The above numbers are based on Individual and Group business

52

34

31

49

38

39

53

Non-par Pension

Non-par protection

Non-par savings

Par Pension

Par Savings

UL Life

UL Pension

11

32

16

14

14

13

12

Non-par Pension

Non-par protection

Non-par savings

Par Pension

Par Savings

UL Life

UL Pension

Segment wise average term and age

Average Policy Term (Yrs) Average Customer Age (Yrs)

Orientation towards long term insurance solutions reflected in higher policy term

Protection and Saving contracts have a younger customer profile and offer long term

opportunities to cross-sell and up-sell across customer life-cycle

Note: The segment wise average term and age of the individual new business policies sold in Q1 FY16

Segments 2

12

15.9 (Q1 FY15: 14.7) 38.1 (Q1 FY15: 37.7) Overall

16% 14%

6%4%

70%72%

8% 10%

Q1 FY15 Q1 FY16

Agency Broker Bancassurance Direct

16% 16% 14%

7% 7%5%

72% 70% 73%

5% 7% 8%

FY13 FY14 FY15


16% 16% 14%

7% 7%5%

72% 70% 73%

5% 7% 8%

FY13 FY14 FY15


Distribution mix

13

All India presence through 414 HDFC Life offices and 8,300+ partner branches

Continue to nurture relationships across various banks, NBFCs2 and MFIs2

Maintained leadership in Online segment, with 4% contribution to new business (Q1 FY15: 2%)

Distinctive program in association with Manipal Global Education, to train and create a

professional entry level specialised sales force

Notes: 1. The percentages are with reference to APE for individual business 2. NBFC - Non-Banking Financial Corporation, MFI - Micro-finance Institutions

Distribution 3


1

11.7 12.2 12.9

11.5% 10.8% 10.7%

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

FY12 FY13 FY14

Operating Expenses Operating Expense/Total premium Ratio

2.8 3.2

11.7% 11.6%

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Q1 FY15 Q1 FY16

12.2 12.9 15.1

10.8% 10.7% 10.2%

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

-

5.0

10.0

15.0

20.0

FY13 FY14 FY15

Cost trends

14 Note: Commission ratio is calculated as a factor of Total Commission paid and Total premium

Maintained healthy Opex / Total Premium Ratio, despite increased investments in distribution

channels, training, technology and product innovation

Commission ratio movement reflecting change in product mix (Higher UL products sold in Q1 FY16)

` Bn

Cost 4


Commission ratio

5.7% 4.3% 4.2% 4.2% 3.4%

Customer touch points

15

96% death claims settled within 10 working days (excluding investigative cases)

Tied up with Common Service Centres to utilise their network to expand reach to rural areas

Use of technology to improve service efficiency and enhance overall customer experience

1st private life insurer to have a responsive website, launched a comprehensive online app.

Large bouquet of products available online

Leading presence across social media and digital platforms

81% of new business applications initiated using Point of Sale (POS) platform

HDFC Life branch network

414 own branches and over 8,300 partner branches

New business Call Centre

Pre-conversion calling at new business stage

Mobility

SMS on the move with policy details, branch details, etc.

Customer portal (My account)

Online portal providing fund value, renewal premium receipt, etc.

Email interaction

Dedicated agents to handle email requests

Service call centre

Dedicated agents to handle customer calls

Customer touch points

Customer 5


Agenda

B

55% 54% 52%

45% 46% 48%

31st Mar 2013 31st Mar 2014 31st Mar 2015

Debt Equity

405

506

670

25% 25%33%

-120%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

150

250

350

450

550

650

750


AUM in Rs bn Growth in AUM vs LY

569 680

37%

20%

-120%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

150

250

350

450

550

650

750

30th Jun 2014 30th Jun 2015

AUM in Rs bn

55% 54% 52%

45% 46% 48%


Debt Equity

405

506

670

25% 25%33%

-120%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

150

250

350

450

550

650

750



55% 54% 52%

45% 46% 48%


Debt Equity

Assets under management

17

Continue to rank amongst top 3 private players

Note: Ranking based on Assets under Management as on March 31, 2015

405

506

670

25% 25%33%

-120%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

150

250

350

450

550

650

750




51% 54%

49% 46%

30th Jun 2014 30th Jun 2015

Debt Equity

11.6 14.8

5.8

7.4 4.9

8.6

192%

208%

50%

70%

90%

110%

130%

150%

170%

190%

210%

230%

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

June 30th 2014 June 30th 2015

RSM @100%

Incremental RSM @150%

Surplus Capital

22.2

30.7

8.2 10.8

14.3

4.1

5.4

7.1

5.5

4.7

6.6

217%

194% 196%

50%

70%

90%

110%

130%

150%

170%

190%

210%

230%

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0


RSM @100% Incremental RSM @150%

Surplus Capital Solvency margin

17.7

20.9

28.0

Capital position

18

Stable solvency ratio, despite consistent growth in underlying business

208% vs regulatory requirement of 150% as on 30th June 2015

No fresh capital infusion since FY12

Note: RSM represents Required solvency margin

` Bn 12M Performance Q1 Performance

11.6 14.8

5.8

7.4 4.9

8.6

192%

208%

50%

70%

90%

110%

130%

150%

170%

190%

210%

230%

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

June 30th 2014 June 30th 2015

RSM @100% Incremental RSM @150% Surplus Capital Solvency margin

22.2

30.7

Available Solvency Margin (ASM)

2.5 1.9

0.4

0.4

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Q1 FY15 Q1 FY16

Underwriting profits

2.8 2.3

3.9

5.5 6.2

0.6

1.8

1.6

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

FY13 FY14 FY15

Underwriting profits Shareholders' income

4.5

7.3 7.9

3.9

5.5 6.2

0.6

1.8

1.6

(0.5)

1.5

3.5

5.5

7.5

9.5

FY13 FY14 FY15

Underwriting profits Shareholders' income

4.5

7.3 7.9

Profitability trends

19

Continue to deliver long term stable ROE along with increasing RoIC

Accumulated profits of ` 6.1 Bn as on 30th June 2015

Notes: 1. Return on equity calculated as a factor of profit after tax and average net worth (Net worth comprises of Share capital, Share premium and Accumulated profits/(losses)) is annualised for the quarter 2. Return on invested capital calculated as a factor of profit after tax and share capital including share premium is annualised for the quarter 3. The shareholders’ income for FY14 includes surplus of ` 0.8 Bn due to one time tax adjustment

` Bn

RoE1 41.4% 44.7% 35.1% 59.2% 36.7%

RoIC2 20.9% 33.6% 36.4% 52.0% 42.2%


3

-1.5 -2.0

3.8 3.8

0.2 0.0

-5.6

-3.6

-1.6

0.4

2.4

4.4

6.4

8.4

Q1 FY15 Q1 FY16

New Business Strain

Existing Business Surplus

2.51.9

Underwriting profits breakup

Lower profits in Q1 FY16 due to increase in new business strain in line with growth and

shift in product mix

` Bn

-5.9 -5.8

-9.6

9.5 9.1

15.5

0.32.2

0.4

-10.0

-5.0

0.0

5.0

10.0

15.0

FY13 FY14 FY15

New Business Strain Existing Business Surplus UL FFA

5.53.9

6.2

20


-5.9 -5.8

-9.6

9.5 9.1

15.5

0.32.2

0.4

-10.0

-5.0

0.0

5.0

10.0

15.0

FY13 FY14 FY15

New Business Strain Existing Business Surplus UL FFA

5.53.9

6.2

32.8

25.4 29.5

17.8%

26.2%

22.5%

13.2%16.1%

17.5%

-25.0%

-15.0%

-5.0%

5.0%

15.0%

25.0%

-

10.0

20.0

30.0

40.0

50.0

FY13 FY14 FY15

New business APE NBM (pre overrun) NBM (post overrun)

Individual new business margins

21

Improvement in individual pre overrun margin aided by higher share of protection business

Entity level (Individual + Group) pre-overrun margins at 24.3% for Q1 FY16

Note: New business profits are computed on MCEV basis

32.8

25.4 29.5

17.8%

26.2%

22.5%

13.2%16.1%

17.5%

-25.0%

-15.0%

-5.0%

5.0%

15.0%

25.0%

-

10.0

20.0

30.0

40.0

50.0

FY13 FY14 FY15

New business APE NBM (pre overrun) NBM (post overrun)

` Bn

4.5 5.0

22.1% 22.9%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Q1 FY15 Q1 FY16

New business APE NBM (pre overrun)


Performance summary

22

Notes: 1. Based on Individual Weighted Received Premium amongst private sector 2. For individual business 3. On individual new business 4. Basis APE 5. Calculated as annualised profit after tax and share capital including share premium 6. As on 31st March 2014 and 31st March 2015

Orie

nta

tio

n Total premium (` Bn)

Market share / Rank 1

Conservation ratio2

Premium less Benefit Payouts (` Bn)

24.2

15.6% / 2

97%

7.3

28.0

14.8% / 2

83%

9.0

Q1 FY15 Q1 FY16

Seg

men

ts

Linked : Traditional mix4

Protection mix4

Avg. policy term (years)3

Avg. sum assured (Million)3

48:52

6%

14.7

1.4

66:34

8%

15.9

1.5

Q1 FY15 Q1 FY16

Dis

trib

uti

on

# of branches

# of agents (‘000)

# of employees

Online business (%)

428

79

13,982

2%

414

94

14,537

4%

Profit after tax (` Bn)

RoIC5

2.8

52.0%

2.3

42.2%

Individual NBM on loaded expenses

MCEV (` Bn)6

22.1%

69.9

22.9%

88.1

Cu

sto

mer

Renewal premium by Online / Direct debit

Other complaints (Per 10,000 NOP)3

Sales related complaints (Per 10,000 NOP)3

43%

187

668

54%

36

195

NB policies via POS 81% 81%

AUM (` Bn) 569 680 Individual NBAP on loaded expenses (` Bn)

1.0 1.1

Building blocks of future

Digital leadership

Innovation in product selling

and grow niches

Economies of Scale

Agile multi-distribution

platform

Build a self-sustainable e-commerce platform with holistic sales and service capabilities

Grow the digital insurance category and establish leadership

Sales process improvisation to drive need-based selling

Grow niches while ensuring a well diversified product portfolio

Achieve economies of scale

Increase operational efficiency

Profitability and cost leaderships

Grow, fortify and diversify distribution mix

Be a platform of choice for distribution partners across categories

23

Online segment grew by 177%2

Launch of consumer mobile app for various services including to locate nearest branches, track NAVs and claims login

Products Launched - Cancer Care, Uday and Sampoorn Nivesh

Cancer care sales enabled via Mobile POS

Continued thrust on lowering expense ratios & improving margins

New business workflow 'LifeLine' successfully implemented; driving straight through processing

Grew by 12% and 73% in individual and group segments respectively1

Tied up with over 15 partners in last 18 months – four new arrangements during the quarter

Performance Update

Notes: 1. Based on total new business premium in respective categories 2. Based on APE


Agenda

C

HDFC Life won the prestigious Golden Peacock Award 2015 for the

most Innovative Product for Click2Invest

HDFC Life won the CIO 100 Award 2015 for the sales

enabler software application MyMix

HDFC Life won the silver Indian Digital Media Awards (IDMA) 2015 award for the "Best PPC

campaign - Performance Marketing“.

HDFC Life won in 5 categories at the Indian Insurance

Awards 2015 - Life Insurance Company of the Year, Agency

Efficiency (LI), Marketing Initiative (LI), E-business

Leader (LI) and Innovative Social Media Campaign (LI)

38th in ‘Top 100 Best Places to Work for’ 2015. Ranked

No. 1 in the Insurance industry sector

Awards and accolades

Actuarial Update, Appendix & Glossary

4.09

5.86

0.65

1.16 -0.04

FY14 VNB Impact of Higher

EPI

Change in

Product Mix

Change in

Assumptions

FY15 VNB

Value of new business (VNB) walkthrough – FY15

VNB increased due to growth in new business and higher non-participating business

` Bn

NBM - 3.4% -0.1% 18.5% 15.2%

Note: The above numbers are based on Overall (individual + Group) business 27

Market consistent embedded value (MCEV) – FY15

TVFOG includes cost of guarantees for conventional non participating and participating

products

Notes:

1. The above is based on unaudited figures 2. PVFP pertains to Overall (Individual + Group) business 3. PVFP – Present Value of Future Profits; TVFOG - Time Value of Financial Options and Guarantees; FC – Frictional Cost; CNHR –

Cost of Non Hedgeable Risk; VIF – Value of InForce business 4. Detailed explanation of components provided in the Appendix to the corporate presentation

` Bn

-

10

20

30

40

50

60

70

80

90

PVFP TVFOG FC CNHR VIF Networth EV

VIF

65.160.2

88.1

-1.3 -0.4-3.2

27.9

28

49.8

3.5 7.4

-1.56.1

-0.3 4.6

-1.7

60.2

MCEV at 31st Mar 14

Methodology and assumption changes

New business profits (before expense over-run)*

Acquisition expense overrun

Expected return on inforce

Operating Variances

Investment variances and change in economic assumptions

MCEV at 31st Mar 15

Dividendpayout

20.127.9

88.1

69.9

Analysis of change in MCEV – FY15

29

15.2

Embedded value operating profit (EVOP)

22% of Opening MCEV (FY14: 19%)

18.2

EV profit

26% growth in MCEV over last year

Investment variance reflects buoyant performance of equity markets in FY15

Shareholder’s Adjusted Networth Value of in-force business

` Bn

Note: 1. New business profits pertain to Overall (Individual + Group) business 2. The above is based on unaudited figures

1

Sensitivity analysis – FY15

Scenario VNB % Change

in VNB % Change

in NBM EV

% Change in EV

Change in Base 5.92 18.5% 88.1

Interest rate Increase by 1% 6.4 8% 1.5% 87.5 (0.6%)

Decrease by 1%3 5.8 (0.8%) (0.2%) 88.8 0.9%

Equity values Increase by 10% 5.9 negligible negligible 89.6 1.7%

Decrease by 10% 5.9 negligible negligible 86.5 -1.7%

Persistency Increase by 10% 6.4 8% 1.5% 90.1 2.3%

Decrease by 10% 5.4 (8%) (1.4%) 86.1 (2.2%)

Maintenance expenses

Increase by 10% 5.6 (5%) (0.9%) 87.2 (1.0%)

Decrease by 10% 6.2 5% 0.9% 88.9 1.0%

Mortality Increase by 10% 5.6 (5%) (0.9%) 87.1 (1.1%)

Decrease by 10% 6.2 5% 0.9% 89.0 1.1%

` Bn

Additional Info VNB % Change

in VNB % Change

in NBM EV

% Change in EV

Impact of no TVFOG for non-participating savings products

6.7 14% 2.6% 89.1 1.2%

Impact of zero tax on Par fund 6.0 2% 0.3% 90.3 1.6%

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Note: 1. Based on unaudited figures 2. Post overrun total VNB for Individual and Group business 3. The NBM impact in interest rate fall scenario is low as the TVFOG charged is sufficient to absorb the impact of such decrease in interest rate

1

0.10.20.30.40.50.60.70.80.9#

Shareholders’ EV IRR – FY15

The shareholder IRR measured on EV generated is showing a steady growth on back of growth

in business

` Bn

Note: The IRR has been calculated based on MCEV and not on appraisal value

17.8

25.6

33.8

42.1

48.2

58.7

69.9

88.1

12.718.0 19.7 21.6 21.6 21.6 21.6 21.6

13.2% 13.0%

15.6%16.2% 15.9%

16.7%17.2%

18.3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-10

10

30

50

70

90

110

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

MCEV Share capital Shareholders'-IRR

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Appendix 1 : MCEV methodology and approach

MCEV methodology

The calculations of embedded value and new business profits have been performed using a market consistent embedded value (“MCEV”) approach. This approach differs from a traditional EV approach primarily in respect of the way in which allowance for risk is made.

Within the traditional EV approach allowance is made for risk through an increase in the risk discount rate used to value future shareholder cash flows, whilst within the MCEV calculation explicit separate allowances are made for risk.

Components of MCEV

There are two components to the MCEV:

1. Adjusted net worth –It represents the market value of assets attributable to shareholders. This amount is derived from the Indian GAAP balance sheet and adjusted to allow for assets on a market value basis.

2. Value of in-force –It is derived as

Present value of future profits (“PVFP”) less

Time Value of Financial Options and Guarantees ("TVFOG") less

Frictional Costs of Required Capital (“FCRC”) less

Cost of non hedgeable risk (“CNHR”)

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Appendix 2 : Components of value of in force (“VIF”)

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Present value of future profits (“PVFP”)

This component is the present value of the projected future after tax shareholder profits expected to arise on the business existing at the valuation date.

The projection is carried out on a deterministic basis using market-consistent economic assumptions and best estimate non-economic assumptions (such as persistency, mortality, morbidity, expenses, inflation). The economic assumptions (future investment returns and risk discount rate) are based on the risk free (government bond) yield curve at the valuation date.

Time Value of Financial Options and Guarantees ("TVFOG")

This component represents the cost that may arise due to embedded financial options and guarantees.

Different economic scenarios are derived on the basis of a stochastic simulation process using suitable statistical distributions for interest rates and equity returns calibrated to Indian market conditions.

The cost of the options and guarantees is calculated using these economic scenarios with methodology and non-economic assumptions consistent with the underlying PVFP.

Frictional Costs of Required Capital (“FCRC”)

This represents the frictional costs of holding required capital (“FCRC”). Required capital is set equal to the amount of shareholder attributable assets required to back local regulatory solvency requirements. The frictional costs represent the investment costs and taxes associated with holding the required capital.

Cost of non hedgeable risk (“CNHR”)

This represents the deduction to allow for non hedgeable risks. The CNHR has been derived using a cost of capital approach and is calculated as the discounted value of the annual charge applied to projected risk bearing capital.

The initial risk capital has been calculated based on stress events for non economic assumptions. These events are based on the Solvency II, QIS5 framework.

Appropriate risk drivers are used in projecting the risk capital at future time points.

The annual charge applied to the projected risk capital is 4% p.a.

Appendix 3 : Key assumptions underlying MCEV and NBP

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Economic assumptions

The closing MCEV is calculated by basing the projected earned and risk discount rates on the risk free (government bond) yield curve at the closing balance sheet date.

The new business profitability is calculated with similar assumptions, except that the yield curve at the start of the quarter in which the new business has been written is taken.

For detailed assumptions, refer Appendix 5

Non economic assumptions

Expenses

Maintenance expenses have been based on the latest expense analysis carried out in March 2015 with appropriate allowance for future inflation. These assumptions do not incorporate any allowance for future productivity improvements.

Based on an analysis carried out by the Company, the projected long-term acquisition expense assumptions have been revised and these are higher than those used earlier and have been incorporated into the calculation of pre-overrun margins for FY15.

Mortality and morbidity

Mortality and morbidity assumptions are set for different products based on past experience.

Persistency

Persistency assumptions are set for different product lines, payment mode and duration in-force, based on past experience and expectations of future experience. Separate decrements are modeled for lapses, surrenders, paid-ups and partial withdrawals.

Tax

Tax assumptions are based on our interpretation of existing tax legislation, where appropriate supported by legal opinion.

Profits attributable to shareholders are assumed to be taxed at 14.42% for Life business and 0% for Pensions business.

Allowance is made within the tax computation for dividend offsets permitted under Section 2A of the Income Tax Act.

Appendix 4 : Key components underlying MCEV movements

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Analysis of change in MCEV

Opening modeling, assumptions and methodology changes: The models, assumptions and methodology are continuously refined and improved and the impact of these refinements is reflected in the opening changes.

Expected return on inforce: It reflects expected investment income on shareholder assets during the period and unwind of the discount rate on the opening PVFP.

Operating Variances: The Operating Variances capture the impact of the difference between the actual expenses, mortality and persistency experience from those expected in the opening MCEV calculation.

Investment variances and change in economic assumptions: This reflects the impact due to the actual investment return being different from expected and the impact due to the change in economic assumptions (represented by change in yield curve during the period).

Appendix 5 : Economic assumptions

Years Forward rates Spot rates

FY14 FY15 FY14 FY15

1 8.74% 7.91% 8.38% 7.61%

2 8.73% 7.91% 8.38% 7.61%

3 9.05% 7.96% 8.47% 7.63%

4 9.31% 7.97% 8.58% 7.64%

5 9.45% 7.98% 8.67% 7.65%

10 9.58% 7.98% 8.90% 7.66%

15 9.59% 7.98% 8.99% 7.66%

20 9.59% 7.98% 9.03% 7.66%

25 9.59% 7.98% 9.05% 7.66%

30+ 9.59% 7.98% 9.07% 7.66%

The forward rates derived from the spot-rates of risk-free government bonds are used in

projecting future investment returns and discounting of future profits in VNB and MCEV

calculation

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Glossary

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APE (Annualized Premium Equivalent) – The sum of annualized first year regular premiums and 10% weighted single premiums and single premium top-ups. Conservation ratio – Ratio of current year renewal premiums to previous year’s renewal premium and first year premium. First year premiums – Regular premiums received during the year for all modes of payments chosen by the customer which are still in the first year. For example, for a monthly mode policy sold in March 2015, the first installment would fall into first year premiums for 2014-15 and the remaining 11 installments in the first year would be first year premiums in 2015-16. New business received premium – The sum of first year premium and single premium. Operating expense – All expenses of management excluding service tax. It does not include commission. Operating expense ratio – Ratio of operating expenses (excluding service tax) to total premiums. Renewal premiums – Regular recurring premiums received after the first year. Solvency ratio – Ratio of available solvency margin to required solvency margins. Total premiums – Total received premiums during the year including first year, single and renewal premiums for individual and group business. Weighted received premium (WRP) – The sum of first year premium and 10% weighted single premiums and single premium top-ups. 13th month persistency – Percentage of contracts, measured by premium, still in force 13 months after they have been issued.

Disclaimer

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This release is a compilation of published financial results, other information and is not a statutory release. This may also contain statements that are forward looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ from our expectations and assumptions. We do not undertake any responsibility to update any forward looking statements nor should this be constituted as a guidance of future performance. This release is a privilege copy intended for reference of selected group. These disclosures are subject to the prevailing regulatory and policy framework as on June 30, 2015 and do not reflect any subsequent changes.

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