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Thirteenth Annual Report 2012-13

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Directors Report

TO THE MEMBERS OF HDFC STANDARD LIFE INSURANCE COMPANY LTD.

The Directors have pleasure in presenting the 13th Annual Report of HDFCStandard Life Insurance Company Ltd. ('Company'), together with the auditedFinancial Statements of the Company, for the Financial Year ended March 31,2013 (FY 2013).

FINANCIAL PERFORMANCE & BUSINESS REVIEWFinancial Performance

(` Crore)Particulars FY 2013 FY 2012

(Audited) (Audited)

New business premium

Individual business

a. Regular premium 2,895 2,555

b. Single premium 173 194

Group business

a. Regular premium 1


Pensions

a. Regular premium 218 139


Renewal premium 6,887 6,344

Gross premium income 11,323 10,202

Profit / (Loss) after Tax 451 271

Board of Directors

Business Review and Outlook

The business environment continuedto be challenging for life insurancecompanies during FY 2013. This wason account of a combination offactors, including slowdown in GDPgrowth rate, inflation, high interestrates and uncertainty on other macro-economic and regulatory parametersthat impacted investor sentiments.During the year, the life insuranceindustry continued to adjust theirchannel and product mix and regulatetheir cost structures to align theirbusiness model to the regulatory and

macro-economic environment. Inshort, the industry remained in thezone of instability.The industry witnessed 1.9% declineon individual new business WeightedReceived Premium (WRP) during FY2013. On an overall basis (Individualand Group WRP), the industryregistered a 15.2% decline in FY2013.Your Company bucked the trend onboth the parameters. It registered agrowth of 11% over FY 2012 in thetotal written premium segment.Besides, it grew by 15% on Individual

Mr Deepak S ParekhChairman

DirectorsMr Gerald Grimstone(Appointed w.e.f. April 1, 2013)Mr Keki M MistryMr David NishMs Renu Sud KarnadMr Nathan Parnaby(Resigned w.e.f. March 31, 2013)Mr Norman Keith SkeochMr Gautam DivanMr Ravi NarainMr Ranjan PantMr AKT ChariDr SA DaveMr Michael Connarty(Alternate to Mr Norman Keith Skeoch)

Mr Amitabh ChaudhryManaging Director &Chief Executive Officer

Ms Vibha Padalkar(Appointed w.e.f. August 14, 2012)Executive Director &Chief Financial Officer

AuditorsM/s SB Billimoria & Co.Chartered AccountantsM/s Haribhakti & Co.Chartered Accountants

BankersHDFC BankYes BankAxis BankCitibankBank of BarodaFederal BankUnion Bank of IndiaState Bank of IndiaState Bank of TravancoreIndian BankIndian Overseas BankRatnakar BankSaraswat Co-op. Bank Ltd.Central Bank of India

Registered OfficeRamon House, H. T. Parekh Marg,169, Backbay Reclamation,Churchgate, Mumbai 400 020

Corporate Office12th and 13th Floor, Lodha Excelus,Apollo Mills Compound,NM Joshi Marg, Mumbai - 400 011Email : [email protected] : www.hdfclife.com

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HDFC Standard Life Insurance Company Limited

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new business premium (WRP), whileindividual renewal premiumincreased by 8.5%. The Companycontinued its trend of gaining marketshare in the private life insurancespace. Its market share increasedfrom 15.5% in FY 2012 to 17.5% inFY 2013. It continued with its strongperformance in the Group businessthat recorded a robust growth of 20%over FY 2012.Apart from a strong performance ingaining new business, the Companycontinued to outperform the industryon other financial and operationalparameters as well. The robustperformance on Individual businessrenewal premiums meant that theCompany registered a conservationratio of 78%. The sum assured in forcefor the overall business at the end ofFY 2013 stood at Rs.201,858 Crs,which represented a growth of 45.5%.During FY 2013, operating expensesratio, excluding service tax,decreased by 70 basis points over theprevious year. The Company recordedIndian GAAP profits of Rs. 451 Crs inFY 2013. The back book is generatingsufficient profits to offset the newbusiness strain incurred in writing ofnew policies. Backed by the growth inNew Business and Renewal Premium,the Companys Assets underManagement (AUM) registered agrowth of 24.4% for FY 2013.The Company continued its focus onthe five strategic themes it hadidentified in FY 2013 and rolled out anumber of initiatives to buildorganisational efficiency and agility.These initiatives have beeninstrumental in the Companys strongfinancial performance. These wereactively monitored by theManagement team to ensuresustained long-term impact on theCompanys performance.

The efforts put in by the Managementteam were widely recognised by theindustry. The Company receivedseveral awards and recognitionsduring the year for its strong peoplepractices, brand promise,organisational excellence, processmaturity and enabling technology.

Key Regulatory ChangesDuring the year under review, theInsurance Regulatory andDevelopment Authority (IRDA) issuedseveral regulatory guidelines acrossmultiple business areas. Theseinclude regulations on amalgamationand transfer of life insurers;standardising application formsacross insurers; amendments toBroker regulations enhancingregulatory reporting; and revisedguidelines on architecture oftraditional products.

Rural and Social Sector ObligationsThe Company has customisedproducts and service architecture tofocus on the rural and social sectormarket. The business from thissegment is embedded within theCompanys overall business plan.The IRDA has prescribed certainpercentage/quantum of rural andsocial sector businesses to beundertaken by life insurancecompanies as a proportion of theirtotal business. Accordingly, theCompany achieved 22% ruralbusiness (as percentage of totalpolicies written), against the 20%required. Further, against theregulatory target of 55,000 lives to beinsured under the social sectorcategory, the Company covered morethan 6 lacs lives.

ProductsThe Company offers products soldthrough various business channels

across individual and group segmentsfor both conventional and unit-linkedplatforms. These platforms aim toaddress customer needs acrossprotection, investment, pension andhealth insurance.The Companys current productportfolio comprises 42 products, asfollows:

Category No. ofProducts

Individual Traditional 14Annuity 2Unit Linked 11

Group Traditional 7DIP 1Unit Linked 2

Rural 2Health

Traditional3

Total 42Of which:Individual 32Group 10

Total 42

Your Company was the first to launchthe individual pension plan inDecember 2012, aligned to theIRDAs new pension guidelines. Thisyear, the Company also launched thefirst full indemnity health plan duringFY 2013. In response to the recentIRDA Product Guidelines, theCompany has already initiated itsproduct modification process.

Policyholder and Customer ServiceIn its pursuit of service excellence, theCompany has taken further steps toembed customer centricity in itsbusiness strategy. The Companylaunched Serveshresht, a uniqueservice transformation initiative todeliver great customer experience,consistent in quality across all touchpoints. Under this initiative, ten


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strategic projects covering the entirevalue chain, from pre-sales to claims,were initiated. The focus was toimprove the overall customersatisfaction in his various interactionsby achieving the following: Provide end-to-end Turn AroundTime (TAT) commitment to customers Provide guarantee on criticalservice requests Build strong customerrelationships by proactiveengagement Improve customer retention andrepurchase Migrate customers from offline toonline servicing media Increase pan-India presence forpremium collections through third-party tie-upsAdditionally, there was an internalfocus to drive service culture withinthe Company, which culminated in thelaunch of Service Credo.The Companys core processes, likeunderwriting, claim settlement andpersistency have been acknowledgedby independent agencies as best-in-class among Indias private insurers.Strong business performance andcontinued focus on peoplemanagement practices have led it tobeing recognised as an employer ofchoice in several HR surveys. TheCompany has embarked on atechnology transformationprogramme with an identified set ofsix initiatives, which are focused toimprove customer experience, reduceprocess complexities and future-proof the organisation in terms ofagility and responsiveness. Sometechnology initiatives, like the point-of-sale underwriting system and salesforce automation using tablets, wererolled out during the year and haveseen early signs of success.

InvestmentsThe investment funds are managedas per the stated objectives. TheCompany has in place an assetliability management (ALM) policy.This lays down the asset allocationand risk appetite guidelines for thedifferent funds, some of which havein-built guarantees. These are trackedon a regular basis and are backedwith suitable assets.The total assets under management(AUM) as on March 31, 2013, were` 40,108 Crs. This comprised assetsof ` 27,998 Crs held under the unit-linked funds and ` 12,110 Crs heldunder the conventional funds andshareholder funds. Thecorresponding numbers for theprevious year were 23,386 Crs and` 8,868 Crs, respectively.The total equity AUM being managedby the Company, as on March 31,2013, is 18,203 Crs. Under the unit-linked funds, the Company offers aseries of funds ranging from pureequity to money market funds, thusproviding policyholders the flexibilityto choose the asset allocation as pertheir requirements.

Human Resource and PeopleDevelopmentThe Company has a strong team ofmore than 15,000 employees at theend of the year under review. Thefocus of Human Resource (HR)initiatives during the past financialyear was to build a robust selectionprocess to improve the quality ofhires, improve retention, strengthenthe recognition and communicationframework and continue theCompanys efforts towards leadershipdevelopment and career planning.These have helped the Company builda culture where people are respected,performance is rewarded and everyemployee can realise his potential.

In accordance with the provisions ofSection 217(2A) of the CompaniesAct, 1956, and the rules framedthereunder, the names and otherparticulars of relevant employees areset out in the Annexure to theDirectors Report.

SwabhimaanSwabhimaan, the CompanysCorporate Social Responsibility (CSR)initiative, aims to play a positive roleby contributing towards the societysadvancement and environmentalconservation, while engaging with ourstakeholders.Swabhimaan aims to help improveand enhance the quality of life ofcommunities, in which the Companyoperates, thereby contributing tocreate an equitable society.Swabhimaan takes the overallresponsibility for implementing CSR-related strategies and activities, withand for all internal and externalstakeholders.

SolvencyIRDA requires the life insurers tomaintain a minimum Solvency Ratioof 150%. The Solvency Ratio iscalculated as prescribed underSection 64VA of the Insurance Act1938 and the IRDA (Assets,Liabilities, and Solvency Margin ofInsurers) Regulations, 2000. Ascompared to the minimumrequirement of 150%, the CompanysSolvency Ratio, as on March 31,2013, was 217%.

DividendMembers may recall that theCompany achieved profitability duringFY 2012. It has exhibited a furtherimprovement in profitability in thecurrent year. Considering that theprofits have started to accrue onlysince the previous financial year, the

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Directors are of the view thatconservation of profits is in the bestinterest of the Company. Accordingly,the Directors do not recommend anydividend.

CapitalThe Company did not issue any freshshares during the year under review.Thus, there has been no change inthe Companys paid up capital, whichstands at ` 1,995 Crs.Housing Development FinanceCorporation Ltd. and the StandardLife Group hold 72.4% and 26.0%,respectively, of the Companysequity capital.

Corporate GovernanceIRDA regulations require the Companyto provide a report on the CorporateGovernance framework within theCompany, with required certification.Accordingly, the required report isenclosed hereto as Annexure andforms part of this Report.

Internal Audit FrameworkThe Company has in place a robustinternal audit framework. Audits areconducted by both an in-house teamas well as independent firms of

Chartered Accountants, withresponsibilities for audit clearlydemarcated between the two. Theaudits are conducted on a risk-basedapproach, keeping in view the natureof the business and the size ofoperations. The Companys auditprocess factors in verifyingcompliance inter alia with process,systems, regulatory guidelines andcontrols.The internal auditors present theaudit report to the Board AuditCommittee, which discusses the auditobservations and recommendations.The internal auditors and the AuditCommittee track the status ofimplementation of variousrecommendations / actionables.

Particulars regarding Conservation ofEnergy, Technology Absorption andForeign Exchange Earnings andOutgoSection 217 of the Companies Act,1956, read with the Companies(Disclosure of Particulars in theReport of Board of Directors) Rules,1988, requires disclosure of certainspecified information pertaining toconservation of energy, technologyabsorption, foreign exchange

earnings and outgo in the DirectorsReport.The disclosure relating toconservation of energy does not applyto companies in the life insurancesector and hence, the Company isexempted therefrom. Disclosure inrespect of technology absorption, andforeign exchange earnings and outgois given below.

DirectorsAs on the date of this Report, theCompanys Board comprises 13Directors, with one Director alsohaving his Alternate Director on theBoard.In line with the provisions of theCompanies Act, 1956, Mr DeepakParekh, Mr David Nish, Mr Ravi Narainand Mr Amitabh Chaudhry retire byrotation at the ensuing AnnualGeneral Meeting of the Company. Theretiring Directors are eligible for re-appointment, and resolutions for thepurpose are being proposed in theNotice convening the ensuing AnnualGeneral Meeting.

Changes during the year

Mr Paresh Parasnis, who was theExecutive Director & Chief Operating

TTTTTechnology Aechnology Aechnology Aechnology Aechnology Absorbsorbsorbsorbsorptionptionptionptionption

1. Specific areas, in which R&D Not Applicableis carried out by the Company

2. Benefits derived as a result of Not Applicablethe above R&D

3. Future plan of action Evaluating solutions around Video Conferencing on cloud/Cloud Computing/Big Data/BYOD

4. Expenditure on R&D: Not Applicablea) Capitalb) Recurringc) Totald) Total R&D expenditure as a

percentage of total turnover


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TTTTTechnology absorechnology absorechnology absorechnology absorechnology absorption, adaption and innoption, adaption and innoption, adaption and innoption, adaption and innoption, adaption and innovvvvvationationationationation

1. Efforts in brief towards technology Major initiatives undertaken/completed are:absorption, adaption and innovation

Launched the point-of-sale system (Click2Buy) - a first of its kindinitiative in the life insurance industry

Introduced online policy selling (OPS) to enable customer/agentto buy insurance online

SAP ICM - Incentives was successfully implemented to manageincentives

SAP BW system was launched with enhanced capability of dataanalysis

SAP BPC Implementation focused on system enablement ofbudgeting and planning process in following key areas:-

a. Revenue Planning

b. Variable and Fixed Costs Planning

c. CAPEX Planning

d. Human Resources Planning

e. Actual and Budget Allocations

Virtual desktops (VDI) have been deployed in top 80 branches.This was the programmes first successful deployment in the lifeinsurance industry

Launch of Project Tablet to boost the productivity of distributionchannel and improve buying experience of customers

Successful completion of ISO 27001 surveillance audit andcertification for digital channels

2. Benefits derived as a result of the Benefits derived in terms of process / product improvement /above efforts (eg product improvement, cost reduction include:cost reduction, product development, With the launch of Click2Buy, the Company enabled the salesimport substitution and so on) team to underwrite and communicate the decision or

requirement(s) at the Point of Sale. The implementation of theproject has helped the Company reduce transaction cost byremoving non-value adding steps. The validation and up-frontavailability of information/documents also helped the Companyreduce errors

SAP ICM - Incentives has helped to increase the frequency ofcommission and incentive payouts with accurate processing

SAP BW has reduced considerable time in report generation anddistribution

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SAP BPC was commissioned for automating budgeting andplanning process and has helped in:

a. Automation of the planning process through a single tool withauthorization based access and work flows for intensivebudgeting and planning.

b. Significantly reducing the time consumed for running the driverbased complex allocation process and in achieving accurateprofitability.

Implementation of VDI has helped in achieving:

a. Enhanced data and information security

b. Reduced costs for support and maintenance over time

c. Ability to manage upgrades, patches and backups from a singlelocation, increasing the success rates

d. Reduced unplanned downtime and accelerated recovery incase of failure

Successful completion of ISO 27001 surveillance audits hasresulted in the following:

a. Unified approach for managing compliance and security

b. Timely identification of security risks

c. Alignment between visibility of threats and appropriate controlsto mitigate the risks

d. Significant improvement in the security and complianceregulations

Foreign Exchange Earnings & Outgo Earnings ` 31 Crs Outgo ` 65 Crs


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Officer, resigned as Director and fromthe services of the Company, effectiveJuly 31, 2012. Mr Parasnis had beena founder member of the Companyand, over the years, had madeimmense contribution to the successof the Organisation. The Board placeson record its deep appreciation for theservices rendered by him during hisassociation with the Company.Consequent to Mr Parasnissresignation, the Board decided toelevate Ms Vibha Padalkar, the thenChief Financial Officer (CFO), to theBoard level. Ms Vibha Padalkar hasbeen with the Organisation sinceAugust 2008 as the CFO, overseeingFinance, Accounting, Procurement,Legal, Risk, Audit and Compliancefunctions. Her responsibilities werefurther enhanced to includeOperations function as well.Considering her achievements inHDFC Life and span of her role andresponsibilities, she was appointed,effective August 14, 2012, as Wholetime Director of the Company anddesignated as Executive Director &CFO. As part of this appointment, shewas also appointed an AdditionalDirector on the Board of the Companyeffective the same date.In view of the provisions of theCompanies Act, 1956, read with theArticles of Association of theCompany, Ms Padalkar, as anAdditional Director, will hold officeonly up to the date of the Companysforthcoming Annual General Meeting,and is eligible for re-appointment.Resolutions seeking her re-appointment as a Director, as well asconfirming her appointment asExecutive Director and Chief FinancialOfficer, and terms and conditionsthereof including remuneration, arebeing proposed in the Noticeconvening the ensuing AnnualGeneral Meeting.

Mr Nathan Parnaby resigned as theCompanys Director, effective March31, 2013, consequent to hisresignation from Standard Life. TheBoard places on record itsappreciation for the servicesrendered by Mr Parnaby during histenure as a Director of the Company.Consequent to Mr Parnabysresignation, Standard Life nominatedMr Gerald Grimstone on to theCompanys Board as a Director. Hewas appointed an Additional Director,effective April 1, 2013, and thus, hewill hold office up to the date of theCompanys forthcoming AnnualGeneral Meeting and is eligible for re-appointment. Necessary resolution isbeing proposed in the Noticeconvening the ensuing AnnualGeneral Meeting.In order to facilitate the appointmentof Mr Grimstone as an AdditionalDirector, he resigned as AlternateDirector to Mr David Nish, effectiveMarch 31, 2013.Profiles of Directors seekingappointment / re-appointment at theforthcoming Annual General Meetingare included in the Notice of the 13thAnnual General Meeting.None of the Companys Directors aredisqualified from being appointed /re-appointed as Directors inaccordance with Section 274(1) (g) ofthe Companies Act, 1956.

Secretarial Audit ReportAs a par t of good governancepractice, the Company conductedSecretarial Audit by a PracticingCompany Secretary. For the purpose,the Company appointed Mr DevangDalal, Practicing Company Secretary,to conduct the audit. The Auditorhas not made any adverse remarksor comments in his Report forFY 2013.

Subsidiary CompanyThe Company had set up a whollyowned Subsidiary to undertakepension fund management businessunder the name of HDFC Life PensionFund Management Company Ltd.(Subsidiary Company), incorporatedin June 2011.During the year, Mr Paresh Parasnisresigned as the Director of theSubsidiary Company, effective July25, 2012, and Mr SrinivasanParthasarathy was appointed as anAdditional Director, effective the samedate.Steps were undertaken during theyear under review to seek regulatoryapproval from Pension FundRegulatory & Development Authority(PFRDA) for the proposed business ofthe Subsidiary Company. Towardsthis, the Company secured a Sponsorapproval from PFRDA, to sponsor thebusiness of the Subsidiary Company.The Subsidiary Companysubsequently has received aCertificate of registration as aPension Fund Manager from PFRDA.Consequently, the Pension businessis being launched.

As part of the licensing and startingup the business of the SubsidiaryCompany, the following activities wereundertaken:

1. Capital of Rs 53 lacs was infusedin the Subsidiary Company andfurther capital is proposed to beinfused shortly to achieve andmaintain a networth of Rs 25 Crs, inline with the PFRDA regulations.2. The Board of the SubsidiaryCompany, effective March 6, 2013,has been re-constituted by inductingDr SA Dave and Mr AKT Chari asIndependent Directors, andappointed as Additional Directors.Thus, the current composition of the

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Board is as follows: Dr SA Dave, Independent Director Mr AKT Chari, Independent

Director Mr Amitabh Chaudhry, Non-

Executive Director Ms Vibha Padalkar, Non-Executive

DirectorThe re-constitution of the Board is inline with the PFRDA regulationsrequiring at least 50% of the Directorsto be independent. As part ofthe aforesaid re-constitution,Mr Srinivasan Parthasarathyresigned, effective the same date.3. The Subsidiary Company hasappointed a CEO and required staffmembers.To leverage the corporate brand andrationalize the same, the name of theSubsidiary Company has beenchanged to HDFC PensionManagement Company Ltd. The newname, approved by the Registrar ofCompanies, describes the Companyspension management business.

AuditorsM/s. S B Billimoria & Company,Chartered Accountants, and M/sHaribhakti & Company, CharteredAccountants, Joint Statutory Auditorsof the Company, retire at theforthcoming Annual General Meeting,and are eligible for re-appointment.

The Joint Statutory Auditors haveconfirmed their eligibility for proposedre-appointment. Resolution seekingapproval to their re-appointment isincluded in the Notice of the ensuingAnnual General Meeting. YourDirectors recommend their re-appointment.

DepositsThe Company has not accepted anyfixed deposits during the year underreview.

Directors Responsibility StatementIn accordance with the requirementsof Section 217(2AA) of the CompaniesAct, 1956 (Act), the Board ofDirectors state that:(i) In the preparation of the annualaccounts, the applicable accountingstandards have been followed, alongwith proper explanation relating tomaterial departures (if any);(ii) Such accounting policies havebeen selected and appliedconsistently, and judgments andestimates made that are reasonableand prudent, so as to give a true andfair view of the Companys state ofaffairs, as on March 31, 2013, and ofthe Companys profit for the yearended on that date;(iii) Proper and sufficient care hasbeen taken for the maintenance ofadequate accounting records, in

accordance with the provisions of theAct for safeguarding the assets of theCompany and for preventing anddetecting fraud and otherirregularities; and(iv) The annual accounts have beenprepared on a going concern basis.

Appreciation and AcknowledgementThe Directors thank the policyholders,customers, distributors, and businessassociates for reposing their trust inthe Company. The Directors alsothank the Companys employees fortheir continued hard work, dedicationand commitment; and theManagement for continuing successof the business.The Directors further take thisopportunity to thank HousingDevelopment Finance CorporationLtd. and Standard Life Group for theirinvaluable and continued support andguidance. The Directors also thankthe Insurance Regulatory andDevelopment Authority, Reserve Bankof India, and other governmental andother bodies and authorities for theirsupport, advice and directionprovided from time to time.

On behalf of the Board of Directors

MUMBAI DEEPAK S PAREKHApril 30, 2013 Chairman


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More details on the Board of Directors are as under:(a) Composition of the Board (as on March 31, 2013)

Sr. Name of Director Status No. of other No. ofNo. Directorships^ Committees^

As AsMember Chairman/

Chair-person

1 Mr Deepak S Parekh,Chairman Non-Executive Director; non-Independent 8 4 2

2 Mr Gerald Grimstone# Non-Executive Director; non-Independent 3 Mr Keki M Mistry Non-Executive Director; non-Independent 13 6 44 Mr David Nish Non-Executive Director; non-Independent 5 Ms Renu Sud Karnad Non-Executive Director; non-Independent 11 2 46 Mr Norman Keith Skeoch Non-Executive Director; non-Independent 1 7 Mr Gautam Divan Non-Executive Director; Independent 2 18 Mr Ravi Narain Non-Executive Director; Independent 14 2 39 Mr Ranjan Pant Non-Executive Director; Independent 3 10 Mr AKT Chari Non-Executive Director; Independent 1 1 11 Dr SA Dave Non-Executive Director; Independent 10 5 3

ANNEXURE TO DIRECTORS REPORT FOR THE FINANCIAL YEAR ENDEDMARCH 31, 2013 (FY 2013)Report on Corporate GovernanceCorporate Governance at HDFCStandard LifeThe Board of Directors (Board) ofHDFC Standard Life InsuranceCompany Ltd. (HDFC Life /Company) has put in place aCorporate Governance Policy(Policy). The Policy was approved bythe Board in FY 2009 and the samehas been amended from time to time,including in line with the requirementsunder the Insurance Regulatory andDevelopment Authority (IRDA)Corporate Governance Guidelines(Guidelines) issued by the IRDA onAugust 5, 2009, and amended tilldate. The Policy is also reviewedperiodically and necessaryamendments are made.The Corporate Governanceframework in the Company isdescribed in Section A below, whichis also in line with the Policy as well

as the relevant IRDA regulations. TheCompany also strives to follow theprovisions of clause 49 of the listingagreement, providing CorporateGovernance framework for listedcompanies, to the extent feasiblewithin its context. Section B hereinoutlines the compliance status withrespect to various requirements of thesubject as per the Guidelines.

SECTION A:Corporate Governance FrameworkI. Board of DirectorsThe Companys Board comprisedthirteen Directors, as at the end of thefinancial year, with five beingIndependent Directors, six Non-Executive Directors, including theChairman, a Managing Director andan Executive Director. Further, oneDirector also has his AlternateDirector on the Board.

Changes in the Board during the yearhave been mentioned in theDirectors Report for the year endedMarch 31, 2013 (FY 2013). As wascommunicated in the last Report,HDFC Lifes Holding Company,Housing Development FinanceCorporation Ltd., in line with therequirements under Clause 49 of thelisting agreement to appoint aDirector on the Board of its materialsubsidiary, appointed Dr SA Dave onthe Board of the Company during theyear under review.The Directors on the Board of theCompany come from diverseexperiences and backgrounds, andhave a wide range of experience andskills. The current Board size andcomposition is considered optimal,considering our business andevolution context. None of theDirectors of the Company are relatedto each other.

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Sr. Name of Director Status No. of other No. ofNo. Directorships^ Committees^

As AsMember Chairman/

Chair-person

12 Mr Amitabh ChaudhryManaging Director & Managing Director 2 1 Chief Executive Officer

13 Ms Vibha Padalkar$Executive Director & Executive Director 2 Chief Financial Officer

14 Mr Michael Connarty* Non-Executive Director; non-Independent

# Alternate Director upto March 31, 2013, and appointed as a Director wef April 1, 2013$ Appointed as Director, & ED & CFO wef August 14, 2012* Alternate Director^ For the purpose of calculation of number of Directorships, the Directorships in private companies, Section 25

companies, foreign companies and Alternate Directorships have been excluded.For the purpose of considering the Committee Memberships and Chairmanships for a Director, the Audit Committee,and the Shareholders Grievance Committee of public limited Committees alone have been considered. As perdisclosure(s) received from the Directors, the Directors do not hold Memberships in more than ten Committeesand Chairmanships in more than five Committees.

Details of new Director(s) appointed during the FY 2013:

Sr. Name of Director Status Appointed (wef)No.

1 Dr SA Dave Independent Director April 26, 20122 Ms Vibha Padalkar Wholetime Director* August 14, 20123 Mr Gerald Grimstone Non-Executive Director April 1, 2013*Designated as Executive Director & CFO

Details of Director(s) resigned during the FY 2013:

Sr. Name of Director Status Resigned (wef)No.

1 Mr Paresh Parasnis Wholetime Director#

July 31, 20122 Mr Nathan Parnaby Non-Executive Director March 31, 2013

# Designated as Executive Director & COO

(b) Responsibilities of the BoardThe Board of Directors represents theinterests of the Companysshareholders and policyholders, andprovides the Management withguidance and strategic direction. The

Board oversees and directs theCompanys overall business andaffairs, as also its strategic direction,reviews corporate performance,authorises and monitors strategicinvestments, has an oversight on

regulatory compliance and corporategovernance matters, and overseeinterests of various stakeholders. Indischarging their duties, the Directorsshall also comply with the Code ofConduct as adopted by the Board.


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(e) Attendance of Directors at board meetings

Name of Director Designation Number of MeetingsHeld: 4

AttendedMr Deepak Parekh Chairman & Non-Executive Director 3Mr Keki M Mistry Non-Executive Director 4Mr David Nish (including throughhis Alternate Director) $$ Non-Executive Director 4Ms Renu Sud Karnad Non-Executive Director 4Mr Nathan Parnaby # Non-Executive Director 4Mr Norman Keith Skeoch (includingthrough his Alternate Director) $$ Non-Executive Director 4Mr Gautam Divan Independent Director 4Mr Ravi Narain Independent Director 4Mr Ranjan Pant Independent Director 3Mr AKT Chari Independent Director 4Dr SA Dave Independent Director 3Mr Amitabh Chaudhry Managing Director & Chief Executive Officer 4Ms Vibha Padalkar$ Executive Director & Chief Financial Officer 3Mr Paresh Parasnis* Executive Director & Chief Operating Officer 1

The Directors attend and activelyparticipate in Board Meetings, andmeetings of the Committees, in whichthey are members.

The Boards responsibilities alsoinclude various matters, as providedunder the IRDA Guidelines, including:

a. Overall direction of theCompanys business, includingprojections on capital requirements,revenue streams, expenses andprofitability;

b. Obligation to comply with variouslaws and regulations;

c. Addressing conflicts of interest;

d. Ensuring fair treatment ofpolicyholders and employees;

e. Ensuring information sharingwith and disclosures to variousstakeholders, including investors,policyholders, employees, regulators;

f. Developing a corporate culturethat recognises and rewardsadherence to ethical standards.

(c) Board MeetingsThe meetings of the Board ofDirectors are usually held at theCompanys registered office inMumbai. The Board meets at leastonce a quarter to inter alia review theCompanys quarterly performanceand financial results. The meetingsare scheduled with a gap notexceeding four months between twomeetings.The Board is provided, on a timelybasis, with requisite information anddetailed agenda papers, together withnecessary supporting papers, asrequired. The Board papers, agendaand other explanatory notes arecirculated to the Directors in advance.As part of the information and agendapapers, following minimuminformation are provided to theDirectors for each meeting:a. Minutes of the previous Boardand Committee meetingsb. Financial resultsc. Business reviews and plans

d. Annual business plans andbudgets, and updates on the samee. Regulatory updates andcompliancesf. Any material default, showcause, demand, penalty notices,materially importantg. Any material default in financialobligations to / by the Companyh. Sale of a material nature, suchas investments, subsidiaries, assets,which is not in normal course ofbusiness(d) Number of Board Meetings heldduring FY 2013The Board of Directors met four timesduring FY 2013, as follows: April 26, 2012 August 14, 2012 November 9, 2012 February 5, 2013Meetings were held once every threemonths and the time gap betweentwo successive Board meetings didnot exceed four months.

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$$Attendance of their Alternate Directors:

Mr Gerald Grimstone ** Alternate to Mr David Nish 2Mr Michael Connarty Alternate to Mr Norman Keith Skeoch 3

# Resigned wef March 31, 2013$ Attended all meetings from her appointment wef August 14, 2012* Attended all meetings till his resignation wef July 31, 2012** Resigned as Alternate Director to Mr David Nish wef March 31, 2013, and appointed as Director wef April 1, 2013

Name of Director Designation Number of MeetingsHeld: 4

Attended

Name of the Director Qualification Field of specialisationMr Deepak Parekh, Fellow of Institute of Chartered Managing Housing Finance Business as Chairman ofChairman Accountants (England & Wales) HDFC LtdMr Gerald Grimstone # Master of Arts, Master of Science Overseeing financial services business as Chairman,

in Chemistry, Merton College, Standard Life plcOxford University and NATO-CCMSFellowship Wolfson College,Oxford University

Mr Keki M Mistry FCA, Member of Michigan Managing Housing Finance Business as ViceAssociation of Certified Public Chairman & Chief Executive Officer of HDFC LtdAccountants

Mr David Nish Member of the Institute of Managing Life Insurance Business as Chief ExecutiveChartered Accountants of at Standard Life plcScotland

Ms Renu Sud Karnad Graduate in Law, and Masters Managing Housing Finance Business as Managingdegree in Economics from Director of HDFC LtdDelhi University

Mr Norman Keith Fellow of the Securities Institute, Managing Investment Process and CEO function asSkeoch Fellow of the Royal Society for the CEO of Standard Life Investments Ltd

Encouragement of the Arts,Manufacture and Commerce,BA, MA

Mr Gautam Divan FCA Practicing Chartered Accountant and Director invarious Companies

Mr Ravi Narain Cambridge University-trained Securities Markets & Stock Exchange operations asEconomist, MBA, Wharton School, Vice Chairman, NSEUniversity of Pennyslvania, USA

Mr Ranjan Pant BE (Honours), Birla Institute of Global Management Consultant; Director in variousTechnology and Sciences; MBA, CompaniesThe Wharton School

Mr AKT Chari Electrical Engineering, Madras Consultant/Experience in Project Finance forUniversity Infrastructure Projects

(f) Brief profile of Directors


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Dr SA Dave Doctorate of Economics and Securities Markets as ex-Chairman, SEBI; Director inMasters in Economics from various CompaniesUniversity of Rochester

Mr Amitabh Chaudhry, Engineering, Birla Institute of Business Management; occupying CEO positions inManaging Director & Technology and Science, Pilani; past and current rolesChief Executive Officer MBA-IIM, AhmedabadMs Vibha Padalkar, Chartered Accountant from The Overseeing the Finance, internal audit, riskExecutive Director & Institute of Chartered Accountants management, compliance, legal and secretarial,Chief Financial Officer in England and Wales investor relations and operations function

Member of the Institute ofChartered Accountants in India

Mr Michael Connarty, Graduate in Law and MBA International Investments, Marketing, Risk,Alternate Director Compliance, Legal, Company Secretarial and

Operations in Life Insurance business ofStandard Life

# Resigned as Alternate Director to Mr David Nish wef March 31, 2013, and appointed as Director wef April 1, 2013

Name of the Director Qualification Field of specialisation

II. Audit CommitteeThe Audit Committee of the Board,including its composition, functions inIine with the requirements under theIRDA Guidelines and Company lawprovisions.

Key Terms of ReferenceThe Terms of Reference andresponsibilities of the AuditCommittee inter alia includeoverseeing the Companys financialreporting process and disclosure offinancial information to ensure thatthe Financial Statements are correct,sufficient and credible; reviewing theadequacy of internal audit function,its structure, reporting process, auditcoverage and frequency of internalaudits; discussing scope of audit withstatutory auditors; reviewingCompanys financial policies;compliance of internal controlsystems; approving complianceprogrammes, and reviewing theireffectiveness; and reviewing thefindings of any internal investigationby the internal auditors in matters

relating to suspected fraud orirregularity or failure in internal controlsystems of material nature andreporting the same to the Board. TheCommittee also reviews, with theManagement, the quarterly/annualfinancial statements prior torecommending the same to the Boardfor approval. The Committee alsoreviews any additional work to beentrusted to the auditor.

The Committee is responsible forrecommending to the Board, theappointment / re-appointment, or ifrequired, the replacement or removalof the Statutory / Concurrent andInternal auditor(s). The Committeealso undertakes review of theirperformance, and decides onprofessional fees.

CompositionFollowing Directors are members ofthe Audit Committee: Mr Gautam Divan, IndependentDirector - Chairman of the Committee Mr Keki M Mistry, Non-ExecutiveDirector

Mr AKT Chari, IndependentDirector One Non-Executive Directorrepresenting Standard LifeAll the Members of the Committee arefinancially literate and haveaccounting or financial managementexpertise / background.Quorum for the Committee meetingis one-third members of theCommittee or two members,whichever is higher. Presence of anIndependent Director is necessary toform the Quorum. The CompanySecretary acts as the Secretary to theCommittee.

Number of MeetingsDuring FY 2013, the Audit Committeeof the Board of Directors met sixtimes, as follows: April 26, 2012 August 13, 2012 October 18, 2012 November 9, 2012 January 18, 2013 February 5, 2013

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Attendance of Members:Name of Committee Number ofMember Meetings

Held: 6Attended

Mr Gautam Divan,Chairman of theCommittee 6Mr Keki M Mistry,Non-Executive Director 6Mr AKT Chari,Independent Director 6Mr Nathan Parnaby /Mr Michael Connarty,Non-ExecutiveDirector(s)* 3+3

* The members representedStandard Life

III. Risk Management CommitteeThe Risk Management Committeehas been constituted in line with therequirements under IRDA Guidelines.The Committee is responsible forputting in place and oversight of theCompanys Risk ManagementStrategy.

Key Terms of ReferenceThe broad functions of the Committeeinclude review and approval of theRisk Management Policy andassociated framework, processes andpractices of the Company on aperiodical basis; ensuringappropriateness of risk measures toachieve prudent balance between riskand reward in both ongoing and newbusiness activities; evaluating theCompanys risk exposure andassessing the Managements actionto timely mitigate the exposure;quantifying the level of risk exposureand assessing the expected rewardsand costs associated therewith; layingdown the risk tolerance limits;

formulating and implementingoptimal ALM strategies and meetingrisk reward objectives; maintainingGroup-wide and aggregate view onthe Companys risk profile; advisingthe Board on risk managementdecisions; supervising and monitoringmatters reported under the WhistleBlower Policy; and consider anymatter arising out of Prevention ofSexual Harassment Policy.

CompositionUnder the Policy, the RiskManagement Committee is requiredto be chaired by a Non-ExecutiveDirector, and shall further have twoor more Non-Executive Directors. TheCompany Secretary shall act as theSecretary to the Committee.As on March 31, 2013, the RiskManagement Committee comprisedthe following members:

Ms Renu Sud Karnad,Chairperson of the Committee

Mr Gautam Divan, IndependentDirector

One Non-Executive directorrepresenting Standard Life

Mr Amitabh Chaudhry, MD &CEO*

Ms Vibha Padalkar, ED & CFO*##

* with no right to vote.## Mr Paresh Parasnis, ED & COO, wasa member of the Committee till July31, 2012, and Ms Vibha Padalkar wasinducted in his place wef August 14,2012Quorum for the Meeting is twomembers or one-third of the totalMembers of the Committee,whichever is higher.

Number of Meetings HeldDuring FY 2013, the RiskManagement Committee met four

times (including adjourned meeting)as follows:

June 5, 2012

September 20, 2012

December 6, 2012

April 1, 2013$

$ Meeting adjourned from March 26,2013

Attendance of Members

Name of Committee Number ofMember Meetings

Held: 4Attended

Ms Renu Sud Karnad,Chairperson of theCommittee 4

Mr Gautam Divan,Independent Director 4

Mr Nathan Parnaby,Non-ExecutiveDirector /Mr David Nish, Non-Executive Director * 3 + 1

Mr Amitabh Chaudhry,MD & CEO 4

Mr Paresh Parasnis,ED & COO $ 1

Ms Vibha Padalkar,ED & CFO # 3

*The members representedStandard Life $ Attended all meetings till hisresignation wef July 31, 2012 # Attended all meetings from herappointment wef August 14, 2012

IV. Investment CommitteeThe Investment Committee is set-upin compliance with the provisions ofthe IRDA (Investments) Regulations,2000.


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Key Terms of ReferenceThe primary function of theInvestment Committee includesformulation and oversight onInvestment Policy, including mattersrelating to investment, liquidity,prudential norms, exposure limits,stop loss limits in securities trading,management of all investment andmarket risks, management of assetsliabilities mismatch, investmentaudits and investment statistics,recommend changes in theCompanys investment and lendingpolicy to the Board; to review assetmix of conventional portfolios; reviewfund performance; review ratingexposures; etc. The Committeereviews various aspects of theinvestment activity to ensure thatinvestments of shareholder andpolicyholder funds are madeconsistent with the product features,investment guidelines and policies,regulatory and internal, and keeps inview protection, safety and liquidity ofsuch funds.

CompositionIn accordance with IRDA regulationsand Policy of the Company, theCommittee shall consist of aminimum of two Non-ExecutiveDirectors, Principal Officer and Chiefsof Finance, Investment and AppointedActuary. Company Secretaryshall act as the Secretary to theCommittee.

As on March 31, 2013, theInvestment Committee comprised$the following members:

Mr Deepak Parekh, Chairman ofthe Committee

Mr Keki M Mistry, Non-ExecutiveDirector

Mr AKT Chari, IndependentDirector

Mr Amitabh Chaudhry,MD & CEO

Ms Vibha Padalkar, ED & CFO

Mr Srinivasan Parthasarathy,Appointed Actuary

Mr Prasun Gajri, CIO$ Mr Paresh Parasnis, ED & COO, wasa member of the Committee till July31, 2012

Quorum for the meeting istwo members or one-third of themembers of the Committee,whichever is higher.

Number of Meetings

During FY 2013, the InvestmentCommittee met four times (includingadjourned meetings) as follows:

June 26, 2012

October 18, 2012@

February 5, 2013

April 17, 2013@

@ Meetings adjourned fromSeptember 25, 2012 and March 25,2013, respectively

Attendance of Members

Name of Committee Number ofMember Meetings

Held: 4Attended

Mr Deepak Parekh,Chairman of theCommittee 3Mr Keki M Mistry,Non-Executive Director 4Mr AKT Chari,Independent Director 3

Mr Amitabh Chaudhry,MD & CEO 4Mr Paresh Parasnis,ED & COO$ 1Ms Vibha Padalkar,ED & CFO 4Mr SrinivasanParthasarathy,Appointed Actuary 4Mr Prasun Gajri,Chief InvestmentOfficer 4

$ Attended all meetings till hisresignation wef July 31, 2012

V. Policyholder ProtectionCommittee

This Committee has been set up inline with the IRDA requirements forthe purpose.

Key Terms of Reference

The responsibilities of thePolicyholder Protection Committeeinclude formulating properprocedures and effectivemechanisms to address complaintsand grievances of policyholders,oversight on compliance with thestatutory requirements as laid downin the regulatory framework withregards to policyholder matters,reviewing the redressal mechanismsat periodic intervals, reviewing thestatus of complaints at periodicintervals to the policyholders,providing details of insuranceombudsman to policyholders, etc.

CompositionUnder the Policy, the Committee shallconsist of at least 2 Non-ExecutiveDirectors. The Company Secretaryshall act as Secretary to theCommittee.

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As on March 31, 2013, thePolicyholder Protection Committeecomprised the following members: Mr Ravi Narain, IndependentDirector - Chairman of the Committee Ms Renu Sud Karnad, Non-Executive Director One Non-Executive Directorrepresenting Standard Life Mr AKT Chari, IndependentDirector Mr Amitabh Chaudhry, MD &CEO* Ms Vibha Padalkar, ED & CFO*#* with no right to vote# Mr Paresh Parasnis, ED & COO, wasa member of the Committee till July31, 2012, and Ms Vibha Padalkar wasinducted in his place wef August 14,2012Quorum for the Committee Meetingis two members or one-third of thetotal Members of the Committee,whichever is higher.

Number of MeetingsDuring FY 2013, PolicyholderProtection Committee met four times,as follows: April 26, 2012 August 14, 2012 November 9, 2012 February 5, 2013Attendance of Members

Name of Committee Number ofMembers Meetings

Held: 4Attended

Mr. Ravi Narain,Chairman of theCommittee 4

Ms. Renu Sud Karnad,Non-Executive Director 3

Mr. Nathan Parnaby,Non-Executive Director/Mr. Michael Connarty,Non-Executive Director* 3+1

Mr. AKT Chari,Independent Director 4

Mr. Amitabh Chaudhry,MD & CEO 4

Ms. Vibha Padalkar,ED & CFO# 2

Mr. Paresh Parasnis,ED & COO$ 1

*The members representedStandard Life# Attended all meetings since herappointment wef August 14, 2012$ Attended all meetings till hisresignation wef July 31, 2012

VI. NON-MANDATORY / OTHERCOMMITTEES OF THE BOARD

As part of the Governance framework,the Board has set up certain otherCommittees, even though non-mandatory or some of them notrequired under the Guidelines. Detailsof such Committees are given below:

A. Nomination CommitteeThe Nomination Committee has beenformed in line with the IRDAGuidelines.

Key Terms of ReferenceKey Terms of Reference ofNomination Committee includereview of Board structure, size andcomposition; recommendation forDirectors who are retiring by rotationand who are to be nominated for re-election; to evaluate and review onperiodical basis fit & proper criteriafor Directors as prescribed by IRDA;to put in place procedures for

appointment of Appointed Actuary,and ensure compliance of regulatoryrequirements and others; scrutinizethe declarations of intendingapplicants before the appointment/re-appointment/election of Directors;and to recommend appointment ortermination of Managing/Whole timeDirectors/Non-Executive Director.

Composition

The Committee shall comprise two ormore Non-Executive Directors. TheCompany Secretary shall act as theSecretary to the Committee.As on March 31, 2013, theNomination Committee comprisedthe following members: Mr Keki M Mistry, Chairman ofthe Committee Mr Deepak Parekh, Director Mr Ranjan Pant, IndependentDirector Mr Ravi Narain, IndependentDirector One Non-Executive Directorrepresenting Standard Life

Quorum for the meeting shall be twomembers or one-third of the Membersof the Committee, whichever is higher.During FY 2013, the NominationCommittee meeting was held on April26, 2012, attended by all themembers (with Mr Nathan Parnabyrepresenting Standard Life).B. Remuneration CommitteeAs part of the governancearchitecture and in line with the Policy,the Board has formed aRemuneration Committee.

Key Terms of ReferenceThe Terms of Reference of theCommittee include reviewing ofCompanys Compensation Philosophyand Companys Compensation


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Discussion and Analysis; determiningCompanys policy on specificremuneration packages and anycompensation payment, for the CEOand Whole time Directors; formulatingpolicies for extending benefits,monetary or otherwise, for theCompanys employees; and alsoformulating employee stock optionschemes including the review andgrant of options to eligible employeesunder these schemes. TheCommittee also reviews and approvesthe corporate goals and objectiveswith respect to the compensation forthe Chief Executive Officer/Wholetime Directors; and overseedevelopment of Managementsuccession plans for CXOs, includingother business critical positions.

CompositionThe Committee shall comprise two ormore Non-Executive Directors. TheCompany Secretary shall act as theSecretary to the Committee.As on March 31, 2013, theRemuneration Committee comprisedthe following members: Mr Ranjan Pant, Chairman of theCommittee Ms Renu Sud Karnad, Non-Executive Director One Non-Executive Directorrepresenting Standard LifeQuorum for the meeting shall be twomembers or one-third of the membersof the Committee, whichever is higher.

Number of MeetingsDuring FY 2013, the RemunerationCommittee met twice on: April 26, 2012 August 14, 2012

Attendance of MembersName of Committee Number ofMembers Meetings

Held: 2Attended

Mr Ranjan Pant,Chairman of theCommittee 2

Ms Renu Sud Karnad,Non-Executive Director 2

Mr Nathan Parnaby,Non-ExecutiveDirector * 2

*The member represented StandardLife

C. Executive CommitteeKey Terms of ReferenceThe key terms of reference of theExecutive Committee include actingon behalf of the Board on urgentmatters arising between regularBoard Meetings; agreeing andrecommending the CompanysBusiness Plan to the Board; approvinglong-term objectives, including overallbusiness and commercial strategy,the Companys annual operatingbudgets and the review of these;matters representing a major changeof policy or involvement of a materialnature in a new area of business; inrelation to any capital or securitiesissuance, re-organisation, structuringand/or re-structuring proposal ortransaction, including through IPO,merger or amalgamation or in relationto an acquisition transaction, definingmilestones/major activities andreview progress thereof; appointmentof any intermediaries, reviewing termsof their appointment, or their removal;providing guidance and consultationincluding resolving any doubt orquestion, including on any back-upplans and others.

Composition

The Committee shall comprise twoor more Non-Executive Directors,and the Company Secretary shallact as the Secretary to theCommittee.As on March 31, 2013, the ExecutiveCommittee comprised the followingmembers: Mr Keki M Mistry, Chairman ofthe Committee Ms Renu Sud Karnad, Non-Executive Director Mr David Nish, Non-ExecutiveDirector## Mr David Nish has been appointedas a member wef March 31, 2013, inplace of Mr Nathan Parnaby.Quorum for the meetings is twomembers or one-third of the Membersof the Committee, whichever ishigher.

Number of MeetingsDuring FY 2013, the ExecutiveCommittee met three times, on: June 5, 2012 September 20, 2012 December 6, 2012Attendance of Members

Name of Committee Number ofMembers Meetings

Held: 3Attended

Mr Keki M Mistry,Chairman of theCommittee 3

Ms Renu Sud Karnad,Non-ExecutiveDirector 3

Mr Nathan Parnaby,Non-ExecutiveDirector 3

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D. Share Transfer and AllotmentCommittee

Key Terms of ReferenceThe terms of reference of the ShareTransfer and Allotment Committeeinclude approving / ratifying allotmentof shares; appointing / removingRegistrar and Transfer Agent/Depositories etc; approving therequests lodged with the Company fortransfer / transmission / de-materialisation / re-materialisation ofshares; and approving / ratifying theissuance of duplicate, replaced, split,consolidated share certificates, dulyverified, confirmed andrecommended by the CompanySecretary, from time to time.

CompositionThe Committee shall comprise two ormore Non-Executive Directors, andthe Company Secretary shall act asthe Secretary to the Committee.

As on March 31, 2013, the ShareTransfer and Allotment Committeecomprised the following members:

Mr Keki M Mistry, Chairman ofthe Committee

Mr Deepak Parekh, Non-Executive Director

Mr Ravi Narain, IndependentDirector

Mr Gautam Divan, IndependentDirectorQuorum for the meetings is twomembers, or one-third of themembers of the Committee,whichever is higher.

Number of Meetings: In view of nospecific business to be transacted,the Committee did not meet duringthe year under review.

VII. Other Key Governance elementsA. ComplianceIn accordance with the complianceprocedures of the Company, quarterlyconfirmation on compliances isobtained from the SeniorManagement members. TheCompliance Officer places before theAudit Committee of Directors, acertificate confirming the details ofcompliances, as well as instances ofnon-compliance, if any, along with thesteps taken to rectify the non-compliance and prevention of theoccurrence in future, as applicable ina given case.

B. Employee Dealing PolicyAs a best practice and keeping in viewits large investment operations, theCompany has put in place anEmployee Dealing Policy (EDP).Under the provisions of the Policy,certain senior and other employeeshave been designated as KeyPersons whose specified personalinvestment transactions are subjectto approval/disclosure requirements,with a view to avoid any conflict ofinterest vis--vis Companysinvestment activities. The Policy isreviewed/updated periodically, or asrequired.

C. Risk ManagementA separate report on Enterprise RiskManagement framework has beenincluded in this Annual Report,describing the enterprise riskarchitecture.

D. Code of Conduct & WhistleBlower PolicyThe Company has adopted a Code ofConduct, which is approved by theBoard of Directors. A copy of the sameis also available on the Companyswebsite.

The Company has also put in place aWhistle Blower Policy to provide theemployees with a channel forcommunicating any breaches of theCompanys Values, Code of Conduct,Anti-Money Laundering Policy andother regulatory and statutoryrequirements. Action is initiatedagainst any violation, if found, of theValues and Code or Policies, as perthe provisions in this regard.

E. Prevention of SexualHarassment Committee

As part of the governance framework,the Company has put in place aCommittee for the Prevention ofSexual Harassment, which is Chairedby a woman employee, and also hasmembers from senior management.The Committee looks into complaintsand resolution thereof in relation tothe subject.

F. Disclosures

Transactions with Non-ExecutiveDirectorsThe Companys Non-Executive andIndependent Directors do not haveany material pecuniary relationshipsor transactions with the Company orits Directors, its Senior Management,other than insurance policies, if any,taken by any of them in the ordinarycourse of business; shares held bycertain Non-Executive / IndependentDirectors, and sitting fees are paid tocertain Non-Executive Directors,including Independent Directors, forattending Board and CommitteeMeetings. Further, for FY 2013,commissions are proposed to be paidto Independent Directors as per theproposal approved by the Board andsubject to the approval of theshareholders of the Company.


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Details of Shareholding of Directorsin the CompanyName of Director Number of

Shares@

Mr Deepak Parekh 1,367,877

Mr Gerald Grimstone*

Mr Keki M Mistry 1,125,000

Mr David Nish

Ms Renu Sud Karnad 1,125,000

Mr Nathan Parnaby#

Mr NormanKeith Skeoch

Mr Gautam Divan 21,000

Mr Ravi Narain 21,000

Mr Ranjan Pant 21,000

Mr AKT Chari

Dr SA Dave 20,000

Mr Amitabh Chaudhry,MD & CEO

Ms Vibha Padalkar,ED & CFO 25,000

Mr Paresh Parasnis$ 143,400

Mr Michael Connarty(Alternate toMr Norman KeithSkeoch)

* Resigned as Alternate Director toMr David Nish wef March 31, 2013 andappointed as Director wef April 1, 2013# Resigned as Director wef March 31, 2013$ Resigned wef July 31, 2012@ As on March 31, 2013, or as on date ofcessation

Affirmation of Whole time Directors

We confirm that all Board membersand senior managerial personnelhave affirmed compliance withthe Code of Conduct for the currentyear.

sd/- sd/-

Amitabh Vibha Mumbai Chaudhry Padalkar April 30, 2013 MD & CEO ED & CFO

Related Party TransactionsThere were no materially significantrelated party transactions with theDirectors, the Management,subsidiaries or relatives of theDirectors that have a potential conflictwith the interests of the Company atlarge. Transactions with relatedparties entered into by the Companyin the normal course of business areplaced before the Audit Committee aspart of the review/approval offinancial statements. There were nomaterial individual transactions withrelated parties, which were not in thenormal course of business, nor werethere any material transactions withrelated parties or others, which werenot on an arms length basis. Detailsof related party transactions enteredinto by the Company are included inthe Notes to the Accounts in thefinancial statements.

G. Accounting StandardsThe Company has complied withthe applicable Accounting Standardsnotified by the Companies(Accounting Standards) Rules, 2006.

Details of remuneration paid to Non-Executive Directors:

Name of Director Amount(`) $

Mr Deepak Parekh 140,000

Mr Keki M Mistry 360,000

Ms Renu Sud Karnad 280,000

Mr Gautam Divan 240,000

Mr Ravi Narain 180,000

Mr Ranjan Pant 100,000

Mr AKT Chari 340,000

Dr SA Dave 60,000$ includes sitting fees for Committeemeetings, but excludes sitting fees foradjourned meetings taken placeduring FY 2014.The aforesaid remuneration is onaccount of sitting fees only. Further,it is proposed that IndependentDirectors shall be paid a commissionamount of Rs 5 Lakhs (for eachIndependent Director) with respect toFY 2013. The actual payment,however, will take place subsequentto the approval of the shareholdersat the ensuing Annual GeneralMeeting.

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SECTION B. Reporting under IRDA Guidelines

IRDA issued Guidelines vide its circular dated August 5, 2009, and further amended by circulars dated January 29,2010, May 2, 2011 and December 20, 2012. The Company has implemented the requirements under the complianceprogressively in line with regulatory requirements. A summary of implementation of various provisions of guidelinesare captured in the following table:

Para ref of Particulars of requirements Compliance / CommentsGuidelines

3 Role of Board Significant ownership, controllingshareholders and conflict of interest

3.1 Minimum lock-in period of 5 years from the date of certificate Adheredof business commencement for promoters of an insurancecompany

3.2 FDI norms for life insurance sector (currently capped at 26%) Adheredin line with regulatory norms

3.3 Prior approval of IRDA for registration/transfer of shares, as Adheredand when requiredAdherence to Insurance Act for issue of shares in anyform other than equity shares and transfer of shares

3.4 In the event of arising of conflict of interest, duty of Board to The Board has acted in the interestact in interest of its Policyholders (including prospective ones) of Policyholders.There should be adequate systems, policies and procedures Adequate systems are in placein place to address conflict of interest and compliance withAS 18 of Accounting Standards

3.5 Auditors, Actuaries, Directors and Senior Managers (leadership Adhered/Ensuredteam and those one level below them) shall not simultaneouslyhold two positions in the Company that could lead to conflictor potential conflict of interest

3.6 Ongoing compliance of statutory requirements on capital Adheredstructure/issuance

4 Governance Structure4.1 Insurers are advised to familiarise themselves with Corporate The Company has already taken

Governance structures and requirements appropriate to listed steps to observe theseentities. The companies are also well advised to initiate requirements, includingnecessary steps to address the extant gaps that are so progressive implementation ofidentified to facilitate smooth transition at the time of their Clause 49 of Listing Agreementeventual listing in course of time. (being Corporate Governance

Guidelines) and has alsoundertaken gap analysis for thepurpose. The Company would beready to make smooth transition tothe Corporate Governancerequirements under Clause 49 atthe time of its listing, as and whenit takes place.


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4.2 Broader elements of good Corporate Governance are present, We believe that our Board structureconsidering the Board and management structure. (that is, the Board headed by a

Non-Executive Chairman), withdistinct executive and oversightresponsibilities, facilitate goodCorporate Governance practices.

4.3 Governance structure of the Company should be aligned with Adhered. The Company has its ownthat of the Group, however, taking into account our specific governance structure consideringbusiness and risk profile. its unique requirements. However,

the governance structures arealigned with the Group through therepresentative Directors of theshareholders on the CompanysBoard and are also receivingrelevant inputs with respect to theGroup companies throughdiscussions at the Board andCommittee meetings.

5 Board of Directors

5.1 The Company should be a public limited company, with a Adheredproperly constituted Board.Competent and Qualified Directors should be on the Board to The Companys Board comprisesdrive the strategies and product interest of stakeholders. Directors who are competent and

qualified with credible track recordand experience. They proactivelycontribute to all Board leveldiscussions, thus contributing toarchitecting the business strategyand monitoring thereof, andupholding interest of stakeholders.

Size of the Board should be in line with legal requirements Adhered. More details on Boardand consistent with scale, nature and complexity of business composition and related details

are given elsewhere in this Report.The size of the Board is in syncwith the scale, nature andcomplexity of the business.

Shareholders should elect or nominate Directors from various Adhered. The Directors of theareas of financial and management expertise. Company are from diverse

experience and academicbackground, thus bringing diversity.Details on the background andexpertise of Directors and theirqualification and field of work/specialisation have been providedelsewhere in this Report.


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Board and Senior Managers should be conversant with Adhered. Discussions as part of theCompanys organisational structure and understanding of its Directors appointment processlines of business and products, and the Board further should and at the Board and Committeeunderstand material risks and issues that could affect levels, facilitate suchGroup entities. understanding. Various risk-related

issues are discussed and resolvedin accordance with the risk-relatedgovernance framework thatincludes internal Risk ManagementCouncil, and the Boards RiskManagement Committee.

Board of Directors to comprise Independent Directors - where Adhered. Details on BoardCompany has a Non-Executive Chairman, one-third of the composition and related details areBoard strength should be independent, with minimum of two given elsewhere in this Report.Independent Directors

In case of a Non-Executive Chairman, the CEO should be aWhole time Director.

Not more than one member of family or close relative (as per Adhered. The IndependentSection 6 of the Companies Act, 1956) or associate (Partner, Directors of the Company are notDirectors, etc) should be on the Board of the Company as directly or indirectly related to eachIndependent Director other.

5.2 Specific areas of responsibilities of the Board as detailed in Adhered. A synopsis of theAnnexure I of Guidelines responsibilities of the Board is also

narrated in Section A of this Report.

The Board in consultation with Management to set strategies Adhered. These objectives areand policies to address broad range of areas including overall achieved through regular/periodicaldirection of business and various financial aspects, regulatory discussions at the Board andcompliance, sharing of information with and disclosure to Committee meetings throughstakeholders, channels, facilitating employees, raising various agenda items, as alsoconcerns, reporting possible breach of law/ regulation etc through various Committees set up

for specific aspects of the business.Such Committees are:

Audit Committee Policyholder Protection

Committee Risk Management Committee Investment Committee Nomination Committee Remuneration Committee Share Transfer and Allotment

Committee Executive Committee



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5.3 Directors to meet fit and proper criteria including integrity in The Directors on the Board of thepersonal behaviour and business conduct and judgemental Company meet the required criteria.and financial soundness Further, the fit and proper

undertaking is also refreshed by allthe Directors annually.

Individuals who are Directors should not have been convicted Adhered. To the best of ouror come under adverse notice of any law involving moral knowledge and belief, there hasturpitude or of any professional body. been no such conviction or adverse

notice of law.

Due-diligence enquiry to be conducted at the time of Adheredappointment/re-appointment of Director.

Declaration as per format in Annexure 2 of Guidelines to be Adhered. Such declarations areobtained annually from Directors before appointment/ also obtained annually for updationre-appointment of information therein

Directors to execute a Deed of Covenant with the Company Adhered. The Deed of Covenantas per format in Annexure 3 of Guidelines, defining mutual has been/is executed with each ofrole of Company, Directors and Board the Directors

5.4 Company Secretary should be responsible for proper conduct Company Secretary is responsible,of Board Meetings with adequate time to deliberate on in consultation with the Chairman /pertinent matters, in detail Board, for convening/organising

the meeting, which is conductedby the Chairman with the supportof Company Secretary and theManagement. The Board devotesadequate time to deliberate onvarious items of business.

Minutes to be recorded as soon as possible and circulated. The Company has process in placefor timely recording of minutes.Draft minutes are circulated forinformation/comments of theDirectors/Committee members.

New Directors are apprised of Companys governance policies, Adhered. The Directors are alsoand duties and responsibilities of Directors apprised, on an ongoing basis, on

Briefings on changes in financial sectors in general andvarious changes in the business

Insurance sector in particular are provided.and regulatory environment andcompetition landscape, both at amicro and macro levels, throughagenda items of various meetings.The business review is a standingitem at each Board meeting thatparticularly facilitates discussionswith respect to the issuesmentioned above.


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Annual Disclosure

Number of meetings of Board and committee mandatedunder CG Guidelines in the financial year

Details of the Composition of the Board of Directors andCommittees mandated, setting out name, qualification,field of specialisation, status of Directorship held.

Number of the meetings attended by the Directors and themembers of the Committee

Detail of the remuneration paid, if any, to theIndependent Director

6 Control Functions

Board to lay down policy framework for:

Risk (identification, assessment, control, mitigationand monitoring)

Compliance with Company Policies and applicablelaws and regulations

Appropriate Internal Control

Internal Audit function to review and assess adherence tointernal controls including risk functions

Independence of control functions, including riskmanagement

6.1 Oversight of control Functions by Directors having appropriate Adhered. The oversight of controlexperience etc functions is undertaken by the

Audit Committee, as well as theBoard, through various agendaitems in periodical meetings.Further, the Risk ManagementCommittee has an oversight on risk


The provisions of the CompaniesAct, requires that a meeting of itsBoard of Directors shall be heldatleast once in every three monthsand at least four such meetingsshall be held every year.

Further, the IRDA Guidelines, asper the amending circular datedAugust 5, 2009, specifies that inrespect of mandatory committees(being Audit, Risk, Investment andPolicyholders), at least fourmeetings shall be held during theyear and not more than fourmonths shall elapse between twomeetings. The meetings have beenheld accordingly. The details inrespect of various matters hereinare disclosed elsewhere in thisReport

The Board has laid down requisitepolicies and mechanisms for thepurpose that includes Risk,Compliance, Code of Conduct andWhistle Blower policies. TheCompany has a Risk Management,Audit and Compliance function,which is independent of businessoperations. Head Audit, RiskManagement & Complianceperiodically also reports to theAudit Committee. Further, thesematters are discussed by therespective Board Committeesand/or by the Board of Directors.


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and risk control/mitigation of theinternal controls of the Company.The Directors/Members of thesecommittees have requisiteexperience.

6.2 Risk control systems should be in place at Group level and Adhered. Further the Board/Riskat company level. Management Committee has put inBoard should lay down requisite policy for risk control. place Risk control framework

through appropriate policies andprocesses, oversight of which isundertaken by the RiskManagement Committee, andreported to the Board by placingminutes of the Risk ManagementCommittee, and through agendaitems at meetings. Further, theRisk Management Committee at itsmeetings inter alia deliberates onthe organisational risk matters,risk metrics and mitigationmeasures.

7 Delegation of FunctionsWhere the Board has set up Committees, the role and Adhered. The decisions/functions of the Committee including constitution, objectives, resolutions constituting /responsibilities, frequency, quorum of meeting, appointment re-constituting Committees specifyand removal of members and reporting to the Board have key elements in relation thereto.been defined

Role and responsibilities of the Committees

7.1 Audit Committee Mandatory

Audit Committee shall have oversight on financial statements,reporting and disclosure process.

Chairman of Audit Committee should be an IndependentDirector, with association of CEO, limited to eliciting anyspecific information relating to audit findings.

Oversight on functioning of internal audit department,and review of its reports

Recommend appointment, remuneration, performance andoversight of work of auditors (internal / statutory / concurrent)

Independence of Statutory Auditors should be ensured (thoughappointment, remuneration and removal shall be done byshareholders at their general meetings)


Adhered. The Board has put inplace an Audit Committee chairedby an Independent Director, andthe composition of the Committee,meeting frequency and quorum arein line with the regulatoryrequirements. The Committeesterms of reference provides foroversight on financial statements,reporting and disclosures, andreview of these other matters /activities. These matters arediscussed in the periodical AuditCommittee meetings.

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Oversight on process and procedures on issues relating tointer alia maintenance of books of accounts and others

Pre-audit discussion with Statutory auditors over nature andscope of audit, and post-audit discussions to address areasof concern

Additional work other than statutory / internal audit handled KPMG undertakes a part of internalby the auditor or any of its associated person or companies audit activity for the Company.shall be specifically approved by the Board, keeping in view Before their appointment as such,the necessity to maintain independence and integrity of they were assigned IFRSaudit relationship. conversion project, which has

continued post their appointmentfor internal audit.

All additional audit works entrusted to the auditors or its Additional work, if any, to theassociates or companies have been specifically disclosed in statutory auditors is disclosed inthe Notes to Accounts forming part of Companys annual the notes to the accounts.accounts.

7.2 Investment Committee (IC) Mandatory

Composition of Investment Committee (IC): Two Non-ExecutiveDirectors, CEO, CFO, CIO, and Appointed Actuary

Constitution of Investment Committee and changes thereinbe approved by the Board and communicated to the Authority

Lay down investment policy and operational framework for


The Management, including MD &CEO, and ED & CFO are present atthe Audit Committee meetings toprovide necessary inputs andinformation, as also to respond onthe queries/clarifications from theCommittee.

Auditors (internal/statutory) attendthe meetings, including forpresenting their Auditors report onfinancial accounts/internal auditreports and as required/wheretheir presence is essentialincluding apprising the Board onaudit observations. AuditCommittee also keeps in viewconflict of interest situations whererelevant, to prevent/mitigate thesame.

The Board is informed of theproceedings of the Committeemeetings through placing ofminutes of the Committeemeetings before the Board, as alsoapprising on any key matter, if any.

Adhered. The Board has put inplace an Investment Committee,which is in line with regulatory andother requirements and whoseterms of reference and activitiesinclude these specified matters.


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investment operations, with periodical review, that coversspecified aspects relating to investment operations. The policyshall cover aspects, such as liquidity, compliance withprudential norms, risk management / mitigation strategies,protection of policyholders

Committee members shall be conversant with InvestmentRegulations, independently review investment decisionswith proper support of due diligence process undertakenby the Investment Team

Put in place an effective reporting system to ensurecompliance of policies with regards to investment operations

The Committee shall meet at least once in a quarter andfurnish report to the Board on investment performance andanalysis of investment portfolio, on a quarterly basis

7.3 Risk Management Committee (RMC) Mandatory

Risk Management (RM) function should be enabled to monitorall risks across various lines of business of the Company

RMC shall:

Assist Board in effective operation of risk managementsystem

Report to Board on risk exposures and actions to managethe same

Advise Board on risk management decisions


The Investment Committeescomposition includes anIndependent Director. Changes inthe composition of the Committee,if any, are informed to the IRDA.The Investment Committeemembers are familiar withregulatory and other requirements.The Committee inter aliaperiodically discusses investments,performance and portfolio,regulatory provisions and changes,and other aspects concerninginvestment operations.The Investment policy isperiodically approved/reviewed andamended as required.The Board is informed of theproceedings of the Committeemeetings through placing ofminutes of the Committeemeetings before the Board, as alsoapprising on any key matter, if any.The Committee has met at suchfrequencies as required.

Adhered. The Risk Managementfunction measures and monitorsrisks across various activities of theCompany.The Board has put in place a RiskManagement Committee, whoseconstitution includes anIndependent Director. TheCommittee meets periodically andits terms of reference include thesespecified matters as well as thematters, which, under theregulations, are prescribed for theEthics Committee. The Risk Headpresents an update on risk to theCommittee at its periodicalmeetings.The Board is informed of the

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7.4 Asset Liability Management Committee (ALMC) Mandatory

ALMC lays down framework to ensure the Company invests ina manner, which enables it to meet cash flow needs andcapital requirements, as required.

Responsibilities of ALMC inter alia include setting theinsurers risk / reward objectives, quantifying the level ofrisk exposure, and associated rewards and costs,implementing ALM strategies, specifying risk tolerancelimits, monitoring risk exposure and others, and placingALM information before the Board periodically

7.5 Policyholders Protection Committee (PPC) Mandatory

Insurers to set up PPC reporting directly to the Board andshall ensure that Policyholders have access to redressalmechanisms and establish policies and procedures for thepurpose

Responsibilities of PPC inter alia include periodical review ofinvestor grievance redressal mechanism, status of complaints,periodic review of status of complaints, provide details ofgrievances at periodic intervals in such format as prescribedby IRDA, provide details of insurance ombudsman to thepolicyholders etc.

7.6 Other Committees

7.6.1 Remuneration Committee (Non-Mandatory)

The envisaged role of the Committee includes determining onbehalf of the Board and shareholders insurers policy andremuneration / compensation packages for CEO/ ExecutiveDirectors; and such Committee shall have three Directors,all being Non-Executive and chaired by an IndependentDirector


proceedings of the Committeemeetings through placing ofminutes of the Committeemeetings before the Board, as alsoapprising on any key matter, if any.

Since the Company has a RiskManagement Committee, in linewith regulatory provisions, thefunctions and activities relating toALM has been included within thescope of the Risk ManagementCommittee, and the Committeesactivities include oversight on ALMissues. During the year, the ALMCharter of internal ALM Committeehas been formalised.

Adhered. The Board has put inplace a Policyholder ProtectionCommittee whose compositionincludes an Independent Director.The Committee meets periodicallyand its terms of reference includethese specified matters.The Board is informed of theproceedings of the Committeemeetings through minutes of theCommittee meetings and alsoapprising the Board on any matterthat requires attention or advice.

The Company has a RemunerationCommittee, whose terms ofreference include these matters.The composition of the Committeeis also in line with these specifiedparticulars.The Board is informed of theproceedings of the Committeemeetings through placing ofminutes of the Committeemeetings before the Board, as alsoapprising on any key matter, if any.


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7.6.2 Nomination Committee (Non-Mandatory)

The envisaged role of the Committee includes scrutinisingdeclarations received from intended Directors before theirappointment/re-appointment/election of Directors at theGeneral meeting. The Committee could also makeindependent/discreet references to verify intendedapplicants information

7.6.3 Ethics Committee (Non-Mandatory)

The envisaged role of the Committee includes monitoringcompliance function, and the insurers risk profile forcompliance with various laws and regulations and internalpolicies; receiving reports on these aspects and reviewthereof; supervising and monitoring matters reported throughwhistle blower mechanism; approving complianceprograms etc

7.7 All mandatory committees should meet at least four times in Adhered. Details of variousa year and not more than four months shall elapse between committee meetings held duringtwo successive meetings. The quorum shall be either two the year and presence of membersmembers, or one-third of the members of the Committee, thereof at such meetings are givenwhichever is greater, but in case an Independent Director is elsewhere in this Report.mandated to be in the Committee, he/she should benecessarily present to form the quorum.

8 Senior Management

8.1 CEO & Other Senior Functionaries

Prior approval of IRDA is required before appointment, Adheredre-appointment or termination of CEO and WTD

The Board should take proactive steps to decide on the Adheredcontinuance of CEO before the expiry of his tenure or toidentify new incumbent

The Company should forward proposal (with Board approval) Not applicable during the yearto IRDA at least a month before the completion of tenure under review.of the incumbent.

Board should have practices for succession planning for The succession planning process /key senior functionaries. concept has been initiated as part

of the Companys Potential Reviewprocess. The same has been

The Company has a NominationCommittee, whose compositionincludes Independent Directors,and the terms of reference of theCommittee include these specifiedmatters.The Board is informed of theproceedings of the Committeemeetings through placing ofminutes of the Committee meetingsbefore the Board, as also apprisingon any key matter, if any.

The role and responsibilitiesprescribed for Ethics Committee isincluded within the Terms ofReference of the Risk ManagementCommittee, as permitted by theregulations. Details in respect ofthe Risk Management Committeeare given elsewhere in this Report.

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discussed in detail by theRemuneration Committee as part ofevolving a succession plan for theCEO, his direct reports and officialsfor business critical position. Whilea broad plan has already been putin place, the same would continueto evolve and be fine tuned in linewith the situation, as it will changefrom time to time.

8.2 Role of Appointed ActuariesAppointed Actuarys appointment, qualifications, powers and Adheredduties are in line with IRDA (Appointed Actuary) Regulations,2000.Prior approval of Authority should be taken for appointment Adheredof the Appointed Actuary and should be in line with variousregulatory requirements.Appointed Actuary shall provide professional advice or Adhered. Appointed Actuarys rolecertification to the Board with respect to specified matters, and responsibilities includesincluding estimation of technical provisions, identification all these matters.and estimation of material risks and management thereof,financial condition testing, Solvency margin requirements,allocation of bonuses to with-profit insurance contracts andproduct design, risk mitigation (including reinsurance) andother related risk management roles.To facilitate Appointed Actuary in discharging his Appointed Actuary has such access.responsibilities, he shall have access at all times to He is also a member or invitee torequired information. attend all the meetings of the Board

or its Committees (excludingRemuneration Committee), as alsoall key internal Committees, andaccordingly, has access to variousinformation.

8.3 External Audit Appointment of Statutory Auditors8.3.1 Appointment

Statutory Auditors should be recommended by the Audit AdheredCommittee and appointed by shareholders at theirgeneral meeting.

8.3.2 Eligibility Conditions/QualificationsJoint audit of ins

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