THE MEMBERS OF
SBI LIFE INSURANCE COMPANY LIMITED
Your Directors are pleased to present their 16th Annual Report together with theaudited financial statements of SBI Life Insurance Company Limited (SBI Life' orthe Company') for the year ended March 31 2016.
1. Financial Results Highlights
The Company has completed another successful year of operations. The Company has earneda Gross Written Premium (GWP) of ` 15825 crores on the back of consistent growth inIndividual business during the financial year (FY) 2015-16. The Company continued meetingits stakeholders' expectations achieving profitable growth year on year.
The summary of Company's financial performance for FY 2015 - 16 is as under:
( ` crores)
|Particulars ||FY 2016 ||FY 2015 |
|Financial parameters || || |
|Premium income || || |
|- New business premium ||7107 ||5529 |
|- Renewal premium ||8719 ||7338 |
|Profit/(Loss) before taxation ||1027 ||944 |
|Provision for taxation ||166 ||124 |
|Profit/(Loss) after taxation ||861 ||820 |
|Profit at the beginning of the year ||2974 ||2306 |
|Total profit available for appropriation ||3835 ||3126 |
|Appropriations: || || |
|Interim dividend (including dividend distribution tax) ||144 ||144 |
|Corporate Social Responsibility expenses* ||- ||8 |
|Profit carried to the Balance Sheet ||3691 ||2974 |
|Earnings per equity share: || || |
|Basic & Diluted (`) ||8.61 ||8.20 |
|Book value per Share (`) ||47.33 ||40.39 |
|Sum assured (New Business) || || |
|- Basic policy ||259549 ||110296 |
|- Total (basic + rider) ||280043 ||135314 |
|Annualised premium equivalent (APE) ||4878 ||3551 |
|Assets under Management (AUM) ||79828 ||71339 |
|Net worth ||4733 ||4039 |
|Key Performance Indicator: || || |
|Expense ratio (excl. service tax on charges) ||9.21% ||9.14% |
|Commission ratio ||4.51% ||4.69% |
|Solvency ratio ||2.12 ||2.16 |
|Persistency ratio (for 13th month on premium basis) ||77.67% ||76.29% |
|Number of new policies (in 000s) ||1274 ||1126 |
|Sales Distribution & Geographical strength: || || |
|- Number of employees ||10863 ||9657 |
|- Number of agents and CIFs ||126536 ||110392 |
|- Number of offices ||774 ||750 |
* Pursuant to ICAI Guidance Note on "Accounting for Expenditure on CorporateSocial Responsibility Activities" expenditure on CSR has been charged to Profit andLoss Account.
2. RESULTS OF OPERATIONS AND THE STATE OF COMPANY'S AFFAIRS
The Company has registered a strong and consistent performance during FY 2015-16. Thekey financial parameters of the Company are as follows:
Maintained its No. 1 position amongst private life insurers on total New BusinessPremium (NBP) basis achieving highest NBP of ` 7107 crores with a market share of 17.3%amongst private players;
Registered an increase in new business total market share to 5.1% for FY 2016 from 4.9%in FY 2015;
Registered a strong growth of 39% in NBP (Regular business) standing at ` 4631 croresin FY 2016 as against ` 3331 crores of FY 2015;
Demonstrated a robust growth of 37% in its Individual new business APE portfolio;
Collected a Renewal Premium of ` 8719 crores during the FY 2016 from variousdistribution channels with growth of 19% as compared to previous year;
Total gross written premium collected registered a growth of 23% to ` 15825 crores inFY 2016 from
` 12867 crores in FY 2015.
Continued to show a steady growth both in business and earnings. The Net Profit of theCompany grew by 5% and stands at ` 861 crores during the year ended March 31 2016 asagainst ` 820 crores of the preceding year;
Continued to maintain one of the lowest Operating Expense (excluding service tax oncharges) to Gross Written Premium ratio (the OPEX Ratio) at 9.21% amongst privatesector life insurance companies;
Based on the Company's overwhelming performance during the FY 2016 your Company hasregistered a growth of 12% in its Assets under Management (AUM) to ` 79828 crores as onMarch 31 2016 as against
` 71339 crores as on March 31 2015.
The Solvency ratio of the Company stands at 2.12 as on March 31 2016 as against theRegulatory requirement of 1.50 indicating the strong & stable financial health of theCompany;
The 13th month persistency ratio (on premium basis) has also improved to 77.67% in FY2016 from 76.29% in FY 2015.
In view of Company's performance profitability cash flows and financial position aninterim dividend was declared during the FY 2015-16 at 12% of equity share capitalamounting to ` 144 crores (including dividend distribution tax);
Embedded Value as on 31st March 2016
The company also declared its Market Consistent Embedded Value and New Business Marginsfor the first time as on 31st March 2016
1. Market Consistent Embedded Value of the company stands at ` 12999 crores as on31st March 2016
2. The New Business Margin based on medium term acquisition expense assumption stoodat 16%
3. The New Business Margin based on current level of acquisition expense stands at14.2%
The Company continued to focus on its planned expansion through quality recruitment andopening up of new branch offices. As at March 31 2016 the Company has 774 offices92619 Insurance Advisors (IAs) and 33917 Certified Insurance Facilitators (CIFs) acrossthe country as against corresponding figures of 750 offices 83656 IAs and 26736 CIFsrespectively as on March 31 2015.
The total new business premium of ` 7107 crores comprises of:
1. ` 1952 crores from Retail Agency'
2. ` 3868 crores from Bancassurance' channel
3. ` 1249 crores from Direct Business'
4. ` 26 crores from Corporate Agent' channel and
5. ` 12 crores from Brokers'
Further the Company has taken yet another step towards creating a model brand thatwill be a leader not just in the country but also internationally. The Company hasreceived an "in principle" approval from the Regulator to open firstinternational branch office in the Kingdom of Bahrain.
3. INDUSTRY AND COMPANY OUTLOOK
After almost half a decade the life insurance industry has shown creditable growthboth in new business premium collection and new policies sold in FY 2015-16. The privatelife insurers delivered healthy premium growth during the year under review and gainedmarket share in the Individual segment. The life insurance industry registered 22.6%growth for new business premium in financial year 2015-16.
According to India Brand Equity Foundation (IBEF) India's life insurance sector is oneof the biggest in the world with about 360 million policies which are expected to increaseat a Compound Annual Growth Rate (CAGR) of 12-15 per cent over the next five years. Theinsurance industry plans to hike penetration levels to five per cent by 2020.
The Union Budget 2016-17 has proposed several reforms for the insurance and pensionssector including a proposal to allow foreign investment in insurance sector throughautomatic route up to 49%. This decision was taken to facilitate consolidation within themarket and support the infusion of capital which was much needed. With a view to raisecapital from the public markets the IRDAI has notified various regulations in 2015.Additionally the regulator has initiated several changes for the life insurance sectorsuch as expenses of management corporate governance convergence to the Indian AccountingStandards etc.
The future looks promising for the life insurance industry with several changes inregulatory framework which will lead to further change in the way the industry conductsits business and engages with its customers. Demographic factors such as growing middleclass young insurable population and growing awareness of the need for protection andretirement planning will support the growth of Indian life insurance sector.
In current year the Company has continued to show robust growth and has maintained acomfortable lead over its closest competitors in terms of New Business Premium collection.
While customer centricity remains the main focus various initiatives continue togather steam across the board ranging from customer education initiativescustomer-connect campaigns revival campaigns to ISO certifications product innovationsetc.
During FY 2016-17 one of the primary goals of the Company is to further strengthen thehighly successful Bancassurance model such that the channel attains a dominant positionin the new business portfolio. This will be achieved by leveraging State Bank of India'sand its Associate Banks' widespread branch network and equipping select branches withrequisite resources including manpower support which would result in higher cross sellpenetration.
4. DIVIDEND AND RESERVES
The Board at its meeting held on March 28 2016 has declared an interim dividend of `1.20 per equity share (previous year ` 1.2 per equity share) entailing a payout of
` 144 crores including dividend distribution tax (previous year ` 144 crores). No finaldividend has been recommended for the year ended March 31 2016 and interim dividenddeclared is to be confirmed as final dividend.
The Company has carried forward ` 3691 crores to its Reserves.
The shareholding pattern during the year under review was in accordance with statutoryrequirement. There was no capital infusion by the promoters during the financial year2015-16. The Authorized and Paid-up Share Capital of the Company stands at ` 2000 croresand ` 1000 crores respectively. The existing Shareholders have continued to remaincommitted to support the business operations of the Company.
With the increase in Foreign Direct Investment (FDI) limit the insurance sector will beable to tap into foreign funds making the sector more competitive and open for growth.The parent companies of SBI Life have expressed their interest in a stake sale andpurchase in line with the revised FDI limits. Both the shareholders will take anappropriate decision based on the suitability of the economic scenario.
During the year under review the Company has not accepted any deposits from the publicas per Section 73 of the Companies Act 2013 read with the Companies (Acceptance ofDeposit) Rules 2014.
7. AWARDS & RECOGNITIONS
Won the The Indian Insurance Awards 2015' for under-served Market PenetrationLife Insurance (Large Companies Category).
Adjudged the Best Life Insurance Company (Private Sector) at the Lokmat BFSI Awards2015 by World HRD Congress.
Won Marketing Campaign of the Year' award for Excellence in Branding andMarketing at 6th CMO Asia Awards.
Won TISS Leapvault CLO Award 2015 for Best Program for Sales Enablement.
Won Knowledge Management Leadership Award 2015 for "Use of Best Training Methodsfor Knowledge Management at the 14thAsia Pacific HRM Congress.
Adjudged as one of the Most Trusted Brand 2015' for the fifth consecutive yearby The Economic Times Brand Equity - Nielsen survey.
Won IndIAA Awards 2015 for Best Advertisement' under the insurancecategory'.
Won Brand Excellence Award in Life Insurance (Private Sector)' at the CMO AsiaAwards 2015.
Won the Golden Peacock Award for Risk Management' for the year 2015.
Won award in Best HR Technology' category at Inspiring Work PlacesConference 2015'.
Achieved Gold' level of recognition in the Aarogya Healthy Workplace Award 2015.
Adjudged the "The Economic Times Best Corporate Brands 2016".
Won Prime Time Award 2015 (Bronze) for the Great Dad advertising campaign under theBest Creative Advertising Single Ad or Campaign' category in the BFSI sector.
Won Stars Of The Industry Award for Excellence In Life Insurance'.
Awarded Golden Peacock National Quality Award' for the year 2015 at IOD India's26th World Congress on Leadership For Business Excellence & Innovation'.
Won HR Technology Excellence' Award at World HRD Congress 2016.
Bandhan' adjudged Best In House Magazine' at the Global MarketingExcellence Awards.
SAFA Best Presented Annual Report Awards 2014 - The Annual Report has been adjudged asthe recipient of Certificate of Merit' for the year 2014 in the categorylnsurance Sector'
Each of the awards demonstrates Company's commitment to achieve excellence across allspheres of its activities and operations. We owe these awards to the constant support andtrust reposed by our Policyholders and Stakeholders and the hard work and dedication ofour work force.
SBI Life has a wide range of products catering to various customer needs in the lifehealth pension on-line & micro-insurance segments. The products are customercentric simple to understand and have competitive features.
To maintain its competitive edge in the market the Company had launched six newindividual products and one new group product in the financial year 2015-16.
Details of the products launched are as follows:
1) SBI Life eWealth Insurance (UIN: 111L100V01): This is anindividual linked non- participating product for the online channel.
2) SBI Life CSC- Saral Sanchay (UIN: 111N099V01):
This is an individual non-linked non-participating variable insurance productmarketed through the Common Service Centers set up by the Department of Electronics andInformation Technology under the National e-Governance Plan.
3) SBI Life - Smart Money Planner (UIN: 111N101V01): This is an individualnon-linked with-profits endowment (money back type) assurance product.
4) SBI Life Smart Humsafar (UIN: 111N103V01): This is an individualnon-linked with-profits joint life endowment product.
5) SBI Life Smart Swadhan Plus (UIN: 111N104V01): This is anindividual non-linked non-participating term assurance with return of premium product.
6) SBI Life Smart Women Advantage (UIN: 111N106V01): This is anindividual non-linked with-profits insurance cum savings product exclusively for women.
7) SBI Life Pradhan Mantri Jeevan Jyoti Bima Yojana (UIN: 111G102V01):This is a group non-linked non-participating one year renewable term insurance productto meet the requirement of Government of India PMJJBY Scheme.
9. CUSTOMER AND PARTNER SERVICE ENABLEMENT
Financial Year 2015-16 was a year of renewed focus on customer service deliveryprocess automation & enhancements in business process and quality. We consistentlyimproved our performance in terms of customer service quality and delivery. Our dedicatedefforts shall increase customer loyalty and help us in sustained development in the comingyears. Listed below are the major initiatives taken by the Company during the FY 2015-16:
Missed call service: Launch of "Missed Call" service for knowing fundvalue of ULIP policies. 245161 missed calls received for querying fund value within 3months of launch. The service has been successfully used for the policy revival campaign.26994 missed calls were received showing interest in revival of policy.
Surrender prevention: Continuing the "Surrender Prevention"initiative SMART - Surrender Management and Retention Tool was launched for branches tohelp prevent surrenders. This tool has won the first edition of the INNOVITI award for2015-16.
Revamped customer self service (CSS) portal:
The CSS portal has been revamped with a new look & design. New functionalities likeonline submission of request for change of address and updation of bank account detailshave been included for our customers.
Special revival campaign - 2015-16: Total ` 127 crores was collected during thecontest which is four times the amount collected during last 2 campaigns.
Premium payment facilities
? The customer can now specify a preferred date for debit of premium from hisaccount. This gives customers added convenience and also reduces the instances of faileddebits.
? Single mandate for all Alternate Modes is introduced which will bringconvenience to customers and sales teams.
? SBI e-Pay is a new payment gateway launched by State Bank of India (SBI)similar to Billdesk run by Indiaideas.com. It has now gone live.
? Online Standing Instructions (paperless registration) at New Business &Renewal stage introduced for credit card users. While making online payment through creditcard for both New Business & Renewal customer can set up Standing instructions fordebit of future premiums. Total
1894 customers have registered online for this facility.
? Customers while paying Renewal payments online through credit card can opt forEMI facility.
? Renewal payment through wallets/cash cards has also been introduced. Renewalpayment through SBI Buddy Airtel Money Pay Cash Card I Cash Card ITZ Cash Cardsenabled.
? Real-time cashiering for EFT and Bullet payment modes like Payment Gateway APOnline MP Online and CSC has been enabled instead of the normal upload process whichrequires an additional day for execution.
Customer engagement: The "Customer Engagement" Department came intoexistence on 1st June 2015 with the sole purpose of driving service related customercentric activities and enhancing overall service experience. A HNI Cell has been createdto ensure faster processing of proposals and priority processing of servicingrequests. Customer Awareness campaigns through email and SMS are being carried outto spread awareness on Life Insurance policies. Engaging Customers on their Birthday andPolicy Anniversary by wishing them and taking feedback on our services has taken us a stepfurther. Driving projects like creating leads increasing email contactability and takingservice ratings through IVRS on inbound calls has added value in terms of revenuegeneration and knowing the customer better.
Go Green: Under Go Green' project which was launched last financial yearthe Company has started sending most of the communications via email. The majorcommunications are renewal premium notices renewal premium receipts Unit statements forULIP policies lapse intimations discontinuance notices annual account statements forpension & variable insurance products bonus statements premium paid certificates.
? Automated underwriting: The process of automated underwriting has beenintroduced for all products upto maximum Sum Assured of ` 5 lakhs except high risk plans.This has considerably reduced the turnaround time (TAT) of acceptance of proposals.
??Paperless underwriting: Using dual screen technology the underwriting processhas been made paperless at all underwriting units. This has resulted in significant savingof time and usage of paper for printing rating sheets etc. This will also enable optimizedstorage of information for future reference.
Group Insurance Business
? Group Corporate Portal - Dew Drops - in SBI Life website enabled in respect ofCapAssure Defined Benefit and Defined Contribution schemes wherein the masterpolicyholder can view the fund value interest accumulations and claims under itspolicies.
? Group Corporate portal also enabled for Master Policy Holders of Swarna Jeevanpolicy which enables the Master Policy Holders to view annuitant details as well as togenerate duplicate annuity certificate pertaining to the annuitants.
? Ladli Online Enrolment Module launched as per request of Delhi Government.This will also enable sending of SMS to members for renewal intimations under LADLIscheme.
? Pre-Issuance Welcome Calling: Inbound calling facility was introducedto improve clearance of Pre Issuance Welcome Calling. Toll free number is sent on SMS tothe customer after three calling attempts to reach the customer have failed. The customercan call the toll free number from the registered mobile number and clear the Pre IssuanceWelcome Call.
? NB Payout Module: New payout module in New Business department wasrolled out for the Regions. This module has built in workflow and gives regions theleverage to hold or allow payout after a specified period.
? Scan Flow: Scanners have been installed in all our Branches. Theproposals received at the branches are scrutinized and the scanned images are transferredto the vendor for data entry almost immediately helping in improving issuance TAT. Thusthe time taken to transfer proposals from branches to the scanning centres is saved.
10. CUSTOMER GRIEVANCE REDRESSAL
The Company has put in place a Grievance Redressal Policy which is reviewed annuallyand status update of compliance is placed before the Board/ Management. This policydocument lays down various provisions systems and procedures to ensure prompt redressalof customer grievances through a well defined structure.
In accordance with IRDAI's Corporate Governance Guidelines the Company has formed acommittee called the Policyholders' Protection Committee with a view to address variouscompliance issues relating to protection of the interests of policyholders and also tokeep the policyholders well informed and educated about insurance products andcomplaint-handling procedures. The Committee is responsible for putting in place properprocedures and effective mechanism to address complaints and grievances of policyholders.Our Customer Grievance Redressal process has been successfully re-certified for ISO10002:2004 standards. SBI Life is the second company in the Banking Financial servicesand Insurance (BFSI) sector to have its Customer Grievance Redressal process certifiedunder ISO10002:2004 standard.
The Company's Grievance Redressal Management System is fully integrated withIntegrated Grievance Redressal Management System' (IGMS) of IRDAI. IGMS providesonline view of customer complaints and the related turnaround time. The IGMS alsofacilitates escalation of complaints where necessary.
The policyholder can approach the Company through any medium like letter email phonecalls SMS toll free numbers or can directly approach any of the SBI Life branches forredressal of grievance. Grievance officers have been nominated for all the Branch OfficesRegional Offices and the Company. If the customer is not satisfied with the resolutionprovided by the branch policyholder can contact the customer care desk at SBI LifeRegional Office. The policyholder can also seek redressal with Head ClientRelationship at SBI Life Central Processing Center. The contact details are provided inthe policy document and on the SBI Life website. The details of grievance disposal are asunder:
|Particulars ||FY 2015-16 ||FY 2014-15 |
|Opening balance at the beginning of the year ||13 ||7 |
|Add: Additions during the year ||9510 ||12279 |
|Less: Complaints resolved during the year ||(9516) ||(12273) |
|Complaints pending at the end of the year ||7 ||13 |
11. INFORMATION TECHNOLOGY
Keeping in view the faster changing technologies across the globe and customer centricconveniences ease of usage SBI Life is concentrating on bringing in technologicalinnovations. Some of the major enhancements / initiatives are as follows:
As a part of IT modernization replacement of Core PMS Project (Policy ManagementSystem) was initiated last year. Accordingly the Core PMS System - Ingenium from HP hasbeen selected and the work is already in progress and Phase 1 is targeted to Go Live bythe Financial Year 2016-17.
b) Process Area
This year more focus was given to Customer Friendly Digital Initiatives. Thefollowing are the major areas covered this year:
Sourcing the Business through Tablet. Special thrust area was the proposals sourcedthrough State Bank of India and Associate Banks
Collecting the Payments through Mobile Devices.
Collecting the Payments through various Payment Gateways including the State Bank ofIndia Associate Banks and Regional Rural Banks.
Claims Management is a very important aspect of Insurance Business. At SBI LifeCustomer Relationship at claims stage is built by providing efficient services strivingto exceed the customer expectations and creating avenues for widening self servicefacilities including setting up of programmes for effective resolution of customergrievances. The prominent achievements in the claims area during FY 2015-16 are asfollows:
? Overall Claim settlement % has improved to 95.77% in FY 2015-16 as compared to92.40% in FY 2014-15.
? Non-Early death claim settlement TAT for FY 2015-16 is 5.43 days.
Economic activity for Financial Year 2016 continued to gather pace over the previousyear. The annual GDP data (new series) showed that India not only continued to dominateamong the fastest growing nations but also bettered its own performance of last year.India grew at 7.6% versus 7.2% in FY 2015. Commodity prices melt down and especially crudewhich was down 28% for the year continued to support a lower import bill for India. TheCurrent Account Deficit narrowed from an already narrow gap of 1.3% of GDP to 1.11% of GDPby the end of 2015. The currency however weakened in FY 2016 by as much as 6% owing to alot of strength show by US dollar considering US seeing its first rate hike since the GFCof 2008. Sensex ended the year at 25341 down 9.35%.
In the domestic bond markets Yield on 10 year Government of India Bond eased by around26 bps from 7.72% to 7.46% despite the Reserve Bank of India reducing the policy interestrates by 75 basis points on account of lower trajectory of inflation and confidence thatthe government will stick to its targeted path of fiscal consolidation. The average yieldon 10 year G-sec was 7.74%. It reached a high of 7.99% in May 2015 and a low of 7.46% inMarch 2016. The varied news and events during the year and the hot and cold monetarypolicy tone of the RBI have all played a part in this volatility.
Government has made considerable progress by passing of The Aadhaar Act The Mines andMinerals Amendment Act The Insolvency and Bankruptcy Code Bill in the Parliament and TheConstitution amendment Bill or the GST Bill. These will help reinstate confidence ofinvestors in terms of its commitment towards reforms.
The hawkish tone of RBI in between the intermittent rate cuts during the regime of Dr.Rajan was instrumental in achieving the disinflationary trend which saw CPI fall from 8.2%in March 2014 to 4.83% in March 2016. It touched a low of 3.69% in July 2015. Also RBImaintained its strategy to amass foreign exchange reserves by allowing the INR todepreciate has resulted in providing enough buffers against any external volatility andrisks. The Forex reserve has moved higher from $ 340 bn in April 2015 to $ 361 bn by theend of March 2016.
The Assets under Management (AuM) increased by 12% to ` 79828 crores as on March 312016 from ` 71339 crores as on March 31 2015. The AuM was made up of
` 43806 crores of traditional funds (including share holders funds) and ` 36022crores of Unit Linked Funds. The Unit linked portfolio majorly comprises of equity fundsand NAV guaranteed funds. The performance of both traditional and unit linked funds wassatisfactory in comparison to peers.
14. PARTICULARS OF EMPLOYEES
SBI Life has completed 15 years of being in business. The FY 2015-16 for SBI Life hasbeen a period of business out performance large scale transformation and strong effortson managing business. This performance has been the result of the relentless focus andeffort that the management team along with the company's entire workforce has put inpursuing its strategy.
SBI Life family has grown from 9657 employees as on March 31 2015 to 10863 employeesas on March 31 2016 which depicts a growth of 12.48%. While the average age of employeesis 34.1 years the average tenure comes to 3 years 6 months. There was a huge focus onalignment of goals across the organization communication and leadership developmentinitiatives that have led to strong improvement in business. Various talent acquisitionand development interventions like Town-Halls and Learning
& Development initiatives have been at the centre of HR initiatives during thefinancial year 2015-16. To take the Company's talent management initiatives to the nextlevel various projects to increase effectiveness of HR subsystems like talentacquisition Learning and Development succession planning employee communication etc.are being undertaken.
Placing higher emphasis on employee engagement activities the Company continued withthe Town Hall' initiative through which the Top Management of the Company interactswith the employees at the grass root levels and tries to understand the employees'aspirations and expectations from the company. Other initiatives like Sangam (Annual Daycelebrations) cross functional offsite and corporate dinners were also organized for theemployees to encourage team bonding and camaraderie within the SBI Life family.
In accordance with the provisions of Section 197 of the Companies Act 2013 read withRule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 the names and other particulars of employees are set out in the Annexure to theDirectors' Report.
15. RISK MANAGEMENT
The Company is in the business of covering life risks on payment of a premium. RiskManagement therefore becomes an integral part of its business activities. The Company iscommitted to recognizing and managing its risks in a proactive ongoing and positivemanner.
Risk philosophy of the Company is outlined in the Risk Management Policy. The Riskpolicy specifies the process for identification measurement and analysis of Company riskexposures; develop risk management strategies and its monitoring. The Risk ManagementPolicy is supported by various other policies pertaining to insurance market complianceoutsourcing fraud risks and business continuity management. All the above policies arereviewed by the Board on an annual basis.
The Company's Business Continuity Management System (BCMS) is ISO 22301 certified andits Information Security Management System (ISMS) is ISO 27001 certified. The Company hasformulated risk appetite statements at the corporate as well as the functional levelwhich are reviewed and monitored by the Board level Risk Management Committee and InternalRisk Management Committee respectively. The Company also carries out an ICAAP (InternalCapital Adequacy Assessment Process) activity which details the assessment of materialrisks estimation of capital requirement and adequacy for maintaining solvencyrequirements.
More information on the risk management practices adopted by the Company is availablein the Enterprise Risk Management' section appended to this report.
16. INTERNAL AUDIT FRAMEWORK
The Company has in place a robust internal audit framework developed with a risk basedaudit approach and is commensurate with the nature of the business and the size of itsoperations. The internal audit plan covers the process audits as well as transaction basedaudits at the Head Office Regional Office and across various branches of the Company.
The audits are carried out by the internal audit team of the company and also by theindependent Chartered Accountants firms. The approach of the audit is to verify compliancewith the regulatory operational and system related procedures and controls. Key auditobservations and recommendations made by the internal auditors are reported to the BoardAudit Committee of the Company. It is ensured that the recommendations made by theauditors are implemented by various departments.
17. INTERNAL FINANCIAL CONTROLS
The Company has aligned its current systems of internal financial control with therequirement of Companies Act 2013 on lines of globally accepted risk based framework asissued by the Committee of Sponsoring Organizations (COSO). The internal control frameworkis intended to increase transparency and accountability in an organisation's process ofdesigning and implementing a system of internal control. The framework requires a companyto identify and analyse risks and manage appropriate responses. The Company hassuccessfully laid down the framework and ensured its effectiveness.
The Company's internal financial controls framework is based on the three linesof defense model'. The Company has laid down standard operating procedures and policies toguide the business operations. The Company has a well-defined delegation of power withauthority limits for approving revenue and capital expenditure. The C&AG StatutoryConcurrent and Internal Auditors undertake rigorous testing of the control environment ofthe Company.
The Company has a Chief Internal Auditor with a dedicated internal audit team which iscommensurate with the size nature & complexity of operations of the Company. TheCompany also undergoes an independent internal/ concurrent audit by specialised thirdparty professional consultants to review function specific regulatory compliances as wellas internal controls.
The audit committee reviews reports submitted by the Management and audit reportssubmitted by internal auditors and statutory auditors. Suggestions for improvement areconsidered and the Audit Committee follows up on corrective action. The Audit Committeealso meets the Company's statutory auditors to ascertain their views on the adequacy ofinternal control systems and keeps the board of directors informed of its majorobservations if any periodically.
There is no qualification reservation adverse remark or disclaimer made by theauditors in their report on Internal Financial Controls.
18. RELATED PARTY TRANSACTIONS
The Company has a related party transactions policy to regulate the transactions withits related parties. As per policy all related party transactions require approval of theAudit Committee of the Board. As per Rule 6A of the Companies (Meeting of Board and itsPowers) Rules 2014 the Audit Committee may grant omnibus approval for related partytransactions proposed to be entered into by the Company subject the terms and conditionsmentioned in the said rule.
All the Related Party Transactions entered into during the financial year were on arm'slength basis and in ordinary course of business. All related party transactions are placedbefore the Audit Committee of the Board of Directors for its approval.
M/s L.S. Nalwaya & Co. Chartered Accountants reviewed the related partytransactions for each quarter and their report is placed at the meeting of the BoardAudit Committee along with details of such transactions.
All Related Party Transactions as required under Accounting Standards AS-18 arereported in Note 36 of Schedule 16 (C) - Notes to Accounts of the financial statements ofthe Company.
19. IND AS IMPLEMENTATION
The Ministry of Corporate Affairs (MCA) has notified the Companies (Indian AccountingStandards) Rules 2015 on February 16 2015 and issued a press release on January 18 2016outlining the road map for implementation of Ind AS in the financial services sectorincluding insurance companies.
Subsequently IRDAI issued a circular on "Implementation of Indian AccountingStandards (Ind AS)" on March 1 2016 requiring insurance companies to prepare andexecute the implementation of Ind AS. The circular requires all insurers to comply withthe Ind AS based financial statements for FY 2018-19 with comparatives of FY 2017-18.
The detailed roadmap for implementation of Ind AS was placed in the Board AuditCommittee meeting held on April 28 2016 and Board Meeting held on 29th April 2016. BoardAudit Committee shall oversee the progress of the Ind AS implementation process and reportto the Board at quarterly intervals. The Board Audit Committee has been entrusted with theresponsibility of overseeing the progress of the Ind AS implementation process and reportto the Board quarterly.
As mandated by the IRDAI the Company has set up Steering Committee for implementationof Ind AS comprising of Chief Financial Officer Appointed Actuary Chief InformationOfficer Chief Investment Officer and BNP Paribas Cardif representative. The Company hasalso nominated the nodal officer to IRDAI to facilitate smooth implementation of Ind AS.
As per the requirement of IRDAI circular the Company has to submit proforma Ind ASfinancial statements to the IRDAI from the quarter ended December 31 2016 onwards untilimplementation of Ind AS.
20. BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL
The composition of the Board of Directors of the Company is an optimum combination ofIndependent and Non- Independent Directors. The Board has strength of ten Directors as onMarch 31 2016. The Board has four Independent Directors and six Non-Independent Directorswhich includes one Executive Director.
Changes during the year
During the year under review Mr. K. M. Bhattacharya ceased to be an IndependentDirector w.e.f. September 22 2015 due to expiry of his tenure. The Board placed on recordits sincere appreciation for the valuable services and guidance provided by Mr. K. M.Bhattacharya during his tenure as an Independent Director.
Mr. B. Sriram resigned from the Board of SBI Life w.e.f. March 15 2016. Mr. RajnishKumar was nominated by SBI as Nominee Director w.e.f. March 28 2016. Smt. Joji SekhonGill was appointed as an Independent Director of SBI Life w.e.f. March 28 2016.
In terms of Section 152 of the provisions of the Companies Act 2013 Mr. Gerard Binetwould retire by rotation at the ensuing Annual General Meeting and being eligible hasoffered himself for re-appointment.
A calendar of Meetings is prepared and circulated in advance to the Directors. Duringthe year seven Board
Meetings were convened and held the details of which are given in the Report onCorporate Governance which is forming a part of this report. The intervening gap betweenthe said Board Meetings was within the period prescribed under the Companies Act 2013.
Key Managerial Personnel
Mr. Arijit Basu (Managing Director & CEO) Mr. Sangramjit Sarangi (Chief FinancialOfficer) and Mr. Aniket Karandikar (Company Secretary) are designated "Key ManagerialPersonnel" of the Company under the provisions of the Act. There were no changes inthe Key Managerial Personnel during the FY 2015-16.
The composition and the functions of the Audit Committee of the Board of Directors ofthe Company are disclosed in the Report on Corporate Governance which is forming a partof this report.
Pursuant to the provisions of Section 178 of the Companies Act 2013 the Board hasapproved the remuneration policy as recommended by the Board Compensation Committee. Thedetails of the said policy are annexed as Annexure I to this Report.
21. CORPORATE GOVERNANCE
The Corporate Governance philosophy of the Company is to comply with not only thestatutory requirements but also to voluntarily formulate and adhere to a strong set ofCorporate Governance practices which includes code of business conduct corporate ethicsvalues risk management etc. The Report on Corporate Governance is annexed and forms partof this Annual Report.
22. CORPORATE SOCIAL RESPONSIBILITY
The Company has constituted the Corporate Social Responsibility Committee (CSR) of theBoard of Directors in accordance with the provisions of Section 135 of the Companies Act2013 read with The Companies (Corporate Social Responsibility) Rules 2014 which drivesthe CSR programme of the Company.
The CSR Committee of the Board confirms that the implementation and monitoring of CSRPolicy is in compliance with CSR objectives and Policy of the company.
The brief outline of the CSR Policy including overview of the program proposed to beundertaken the composition of the CSR Committee average net profits of the Company forthe past three financial years prescribed CSR expenditure and details of amount spent onCSR activities during the year have been disclosed in Annexure II to this Reportas mandated under the said Rules.
23. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
In line with the clarification given by the Ministry of Corporate Affairs under theRemoval of Difficulty Order dated February 13 2015 the provisions of Section 186 of theCompanies Act 2013 relating to loans guarantees and investments do not apply to theCompany.
24. SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES
Your Company does not have any Subsidiary Joint Ventures or Associate Company.
Persistency is a critical indicator of business viability and brand success. During theFY 2015-16 SBI Life witnessed a Renewal Premium collection of ` 8719 crores whichcontributed to 55.09% of Gross Written Premium. SBI Life has continued to focus onrenewals and has undertaken initiatives to improve persistency of its existing policies.The independent Renewal Vertical is focusing on collection of renewal premiums andservicing policyholders. We shall continue to accord prime importance to this area.
26. RURAL & SOCIAL SECTOR OBLIGATIONS
As per the regulatory requirements SBI Life has met its Rural and Social sectorobligations for the year under review. As against the minimum requirement of 20% theCompany has issued 24% policies in the rural sector which testifies the Company's approachtowards life insurance inclusion. Further 285027 lives covered by the Company are fromthe underprivileged social sector as against the Regulatory requirement of 55000 lives.Consequently the Company has substantially exceeded the minimum social and ruralregulatory norms.
27. MANAGEMENT REPORT
Pursuant to the provisions of Regulation 3 of the Insurance Regulatory and DevelopmentAuthority (Preparation of Financial Statements and Auditors' Report of InsuranceCompanies) Regulations 2000 the Management Report is placed separately and forms part ofthis Annual Report.
In view of the applicability of Section 139 of the Companies Act 2013 to the Companyit comes under the purview of the Comptroller and Auditor General of India (C&AG). M/sL. S. Nalwaya & Co. Chartered Accountants and M/s P. Parikh & AssociatesChartered Accountants appointed by C&AG will retire at the conclusion of thesixteenth AGM. M/s L. S. Nalwaya & Co. Chartered Accountants and M/s P. Parikh &Associates Chartered Accountants are re-appointed as Statutory Auditors of the Companyfor the financial year 2016-17 as advised by the Comptroller and Auditor General of India(C&AG) in accordance with Section 139 of the Companies Act 2013.
29. AUDITORS' REPORT
The Auditors' Report (including annexure thereof) to the Members does not contain anyqualification or adverse remarks. The notes to accounts referred to in the Auditors'Report are self explanatory and therefore do not call for any further comments u/s 134 (3)(f) of the Companies Act 2013.
30. COMMENTS OF THE COMPTROLLER & AUDITOR GENERAL OF INDIA (C&AG) ON THEACCOUNTS OF THE COMPANY
The Comptroller & Auditor General of India have conducted a supplementary audit u/s143 (6) (b) of the Companies Act 2013 of the accounts of the Company for the year endedMarch 31 2016. The C&AG vide their report no. GA/CA-1/SBI Life/Audit/2015-16/83 datedAugust 12 2016 have stated that there is nothing significant which would give rise to anycomment upon or supplement to Statutory Auditors' Report.
The Report of C&AG is being placed with the report of Statutory Auditors of yourCompany elsewhere in this Annual Report.
31. SECRETARIAL AUDIT
Pursuant to Section 204 of the Companies Act 2013 read with Rule 9 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed V. V. Chakradeo & Co. Company Secretary Mumbai as the Secretarial Auditorof the Company. The Auditor has not made any qualification reservation or adverse remarkor disclaimer in his Report for FY 2015-16. The detailed report on Secretarial Audit ofthe Company for the FY 2015-16 is enclosed as Annexure III to the report.
32. EXTRACT OF ANNUAL RETURN
Pursuant to sub-section 3(a) of Section 134 and sub-section (3) of Section 92 of theCompanies Act 2013 read with Rule 12 of the Companies (Management and Administration)Rules 2014 the extracts of the Annual Return (in form MGT 9) as at March 31 2016 formspart of this report as
33. MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THE COMPANY
No material changes and commitments affecting the financial position of the Companyoccurred between the end of the financial year to which this financial statements relateand the date of this report.
34. SIGNIFICANT AND MATERIAL ORDER PASSED BY REGULATORS OR COURTS OR TRIBUNALSIMPACTING THE GOING CONCERN STATUS AND OPERATIONS OF THE COMPANY
During the financial year 2015-16 no significant or material orders were passed by theRegulators or Courts or Tribunals which impact the going concern status and Company'soperations in future.
35. DIRECTORS' RESPONSIBILITY STATEMENT
In terms of Section 134(5) of the Companies Act 2013 and the Corporate GovernanceGuidelines your Directors confirm that;
a) in the preparation of the annual accounts for the year ended March 31 2016 theapplicable accounting standards have been followed along with proper explanation relatingto material departures;
b) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as on March 31 2016 and of the profit of theCompany for the year ended on that date;
c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
d) they have prepared the accounts for the current financial year ended March 31 2016on a going concern basis; and
e) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
36. PARTICULARS OF CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGEEARNINGS AND OUTGO
A. Conservation of Energy
In view of the nature of business activity of the Company the information relating tothe conservation of energy as required under Section 134 (3) and Rule 8(3) of Companies(Accounts) Rules 2014 is not required to be given.
B. Technology Absorption
|Particulars ||Remarks |
|Research & Development (R&D) || |
|1. Specific areas in which R & D carried out by the company ||IRIS: A tool that scans the iris of the eye and maps it with the IRIS information stored in UIDAI database |
|2. Benefits derived as a result of the above R&D ||Quality information from UIDAI database Customers need not provide separate KYC documents |
|3. Future plan of action ||To study if the existing process of OTP (One Time Password) can be replaced with this technology and implement it. |
|4. Expenditure on R & D: ||In-house development. |
|(a) Capital || |
|(b) Recurring || |
|(c) Total || |
|(d) Total R & D expenditure as a percentage of total turnover || |
|Technology absorption adaption and innovation || |
|1. Efforts in brief made towards technology absorption adaptation and innovation ||As a part of Digital Initiatives we call it as Digilife' the following areas were more focused this year: |
| ||Connect Life: Sourcing the Business through Tablets |
| ||MOBCAST: A Learning Platform through Mobile |
| ||Application to all SBI Life Employees Distributors and Bank Staff |
| ||Qlik View: An Analytical Tool which enables the users to create dynamic reports and dashboards |
| ||Easy Access: An Android based Mobile Application which will enable the customers to pay premium and get information instantly. |
| ||Smart Advisor: An Android based Mobile Application for the distributors to know the product features and calculate the premium. |
|2. Benefits derived as a result of the above efforts e.g. product improvement cost reduction product development import substitution etc. ||Ease of usage Improved quality of customer data and document images No need for physical submission of documents like proposal form and various proofs Information dissemination to employees and distributors. Convenience for the customers and distributors |
|3. In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year) following information may be furnished: || |
|(a) Technology imported. ||NIL |
|(b) Year of import. || |
|(c) Has technology been fully absorbed? || |
|(d) If not fully absorbed areas where this has not taken place reasons there for and future plans of action. || |
C. Foreign Exchange Earnings and Outgo
Details of foreign exchange earnings and outgo required under above Rules are as under:
| || ||(` crores) |
|Particulars ||Current Year ||Previous Year |
|Foreign exchange earnings ||- ||- |
|Foreign exchange outgo ||85.57 ||59.34 |
37. IRDAI LICENSE
The Insurance Regulatory and Development Authority of India (IRDAI) have renewed theannual license of the Company to carry on Life Insurance Business for the financial year2016-17.
38. OTHER INFORMATION
A. Economic Capital
The annual assessment of economic capital of SBI Life was carried out as on March 312016. As a part of this exercise we have quantified the risk capital requirementsrelating to various risks such as Insurance Risks (Mortality risk Lapse Risk ExpenseRisk etc.) and Non Insurance Risks (Market Risk Operational Risk etc.). The cost ofguarantee for the products wherever applicable is also calculated. The aggregate economiccapital requirement for the risks of the Company including the guarantees is well withinthe statutory capital requirement.
B. Solvency Margin
The Directors are pleased to report that the assets of the Company are higher than theliabilities of the Company and the assets are more than sufficient to meet the minimumsolvency margin level of 1.50 times as specified in section 64 VA of the Insurance Act1938 read with the IRDA (Assets Liabilities and Solvency Margin of Insurers)Regulations 2000. The Company has a strong solvency ratio of 2.12 as on March 31 2016(Previous year ended March 31 2015: 2.16) as against the Regulatory requirement of 1.50.
C. IRDAI Directions
IRDAI has issued directions under Section 34(1) of the Insurance Act 1938 todistribute the administrative charges paid to master policyholders vide order no.IRDA/Life/ORD/Misc/228/10/2012 dated October 5 2012 amounting to ` 84.32 crores and torefund the excess commission paid to corporate agents vide order no.
IRDA/Life/ORD/ Misc/083/03/2014 dated March 11 2014 amounting to ` 275.29 croresrespectively to the members or the beneficiaries. The Company has filed appeals againstthe said directions/orders with the Appellate Authorities [i.e. Ministry of FinanceGovernment of India and Securities Appellate Tribunal (SAT)]. The said amount is disclosedas contingent liability as at March 31 2016 in Schedule 16C (1) of the notes to accounts.
D. Appointed Actuary's Certificate
The certificate of the Appointed Actuary on valuation and actuarial assumptions isenclosed to the financial statements.
E. Certificate from Compliance Officer (under the IRDAI Corporate GovernanceGuidelines)
A Compliance Certificate for complying with IRDAI Corporate Governance Guidelinesissued by the Company Secretary designated as the Compliance Officer under IRDAICorporate Governance Guidelines is enclosed and forms part of the Corporate GovernanceReport.
The Directors are grateful to the Insurance Regulatory & Development Authority ofIndia Reserve Bank of India Comptroller and Auditor General of India Securities andExchange Board of India and Government of India for their continued co-operation supportand advice. The Directors would also like to take this opportunity to express theirsincere thanks to the valued customers for their continued patronage.
The Directors also expresses their gratitude for the advice guidance and supportreceived from time to time from the auditors and the statutory authorities. The Directorexpresses their deep sense of appreciation to all employees insurance advisors corporateagents and brokers distributors reinsurers bankers and the Registrars who continue todisplay outstanding professionalism and commitment enabling the organization to retainmarket leadership in its business operations. The Directors also wish to express theirgratitude to State Bank of India and BNP Paribas Cardif for their continued support andtrust.
For and on behalf of the Board of Directors
Date: September 08 2016