The Members of
The SBI Life Insurance Company Limited
Your Directors are pleased to present their 17th Annual Report along withaudited financial statements of SBI Life Insurance Company Limited ("SBI Life"or "the Company") for the year ended March 31 2017.
1. FINANCIAL RESULTS HIGHLIGHTS
This was another year of successful operations for the Company. The Company has earneda Gross Written Premium of ' 210151.35 million driven by a strong growth inIndividual business. The Company continued meeting its stakeholders' expectationsachieving profitable growth year on year.
The summary of the financial performance of the Company for FY 2016-17 is presentedbelow:
|Particulars ||FY 2017 ||FY 2016 |
|Financial Parameters || || |
|Premium income ||210151.35 ||158253.65 |
| New Business Premium ||101438.62 ||71065.76 |
| Renewal Premium ||108712.72 ||87187.89 |
|Profit / (Loss) before taxation ||11544.03 ||10270.62 |
|Provision for taxation ||1997.50 ||1660.28 |
|Profit / (Loss) after taxation ||9546.53 ||8610.34 |
|Profit at the beginning of the year ||36906.65 ||29740.60 |
|Total profit available for appropriation ||46453.18 ||38350.94 |
|Appropriations : || || |
|Interim dividend (Including dividend distribution tax) ||1805.36 ||1444.29 |
|Profit carried to the balance sheet ||44647.82 ||36906.65 |
|Earnings per equity share: || || |
|Basic & Diluted ||9.55 ||8.61 |
|Book value per share ||55.52 ||47.33 |
|Individual Rated Premium ||59361.23 ||42759.93 |
|New Business Annualized Premium Equivalent ||67273.18 ||50455.49 |
|Assets under management (AUM) ||977366.03 ||798275.78 |
|Net worth ||55520.79 ||47331.01 |
|Key performance indicator: || || |
|Operating Expense ratio ||7.83% ||9.21% |
|Commission ratio ||3.73% ||4.51% |
|Solvency ratio ||2.04 ||2.12 |
|Persistency ratio (13th month on premium basis) ||81.07% ||80.69% |
|Number of new policies (in 000's) ||1275.50 ||1273.52 |
2. HIGHLIGHTS OF RESULTS AND STATE OF COMPANY'S AFFAIRS
The Company witnessed a growth and consistent performance in FY 2016-17. The keyfinancial parameters of the Company are as follows:
The Company has achieved New Business Premium (NBP) of ' 101438.62 million anda market share of 20.04% amongst private players which is 270 basis points higher thanprevious year
Registered a growth of 42.74% in NBP with Individual Regular business growing by 40.00%to ' 58770.06 million against ' 41979.53 million in previous year
Overall market share in new business increased to 5.80% in FY 2016-17 from previousyear's 5.13%
Individual Rated Premium stands at ' 59361.23 million growing at 38.87% overprevious year
New Business Annualized Premium Equivalent (APE) stands at ' 67273.18 milliongrowing at 33.33% over previous year Renewal premiums of ' 108712.72 million was24.69% higher than that of ' 87187.89 million in FY 2015-16 Total Gross WrittenPremium (GWP) collected was ' 210151.35 million registering a growth of 32.79%over previous year's GWP of ' 158253.65 million
The Company's profit after tax grew by 10.87% and stands at ' 9546.53 millionin FY 2016-17 against ' 8610.34 million in FY 2015-16
The operating expense ratio (Operating Expense to GWP) stands at 7.83% which is 138basis points less than that of previous year
The Company's Assets Under Management (AUM) registered a growth of 22.43% to '977366.03 million from ' 798275.78 million in FY 2015-16.
Solvency ratio of the Company stands at 2.04 as against the regulatory requirement of1.5 indicating the strong & stable financial health of the Company.
The 13th month persistency ratio (based on premium) improved to 81.07% in FY 201617from 80.69% in FY 2015-16.
The Company declared an interim dividend of ' 1.50 per share at 15.00% of paidup equity capital in FY 2016-17 amounting to ' 1805.36 million (including dividenddistribution tax).
Embedded Value as on March 31 2017
The Company also declared its Indian Embedded Value and New Business Margins as onMarch 31 2017 based on Embedded Value report issued by the Independent Actuary
Indian Embedded Value of the company stands at ' 165379 million as on March31 2017
The Value of New Business stands at ' 10368 million
The Value of New Business Margin as a percentage of Annualized Premium Equivalent was15.4% and as a percentage of Present Value of New Business Premium was 3.8%
Embedded Value Operating Profit was ' 28875 million and our Operating Return onEmbedded Value was 23%
Company's multi-channel distribution network includes bancassurance individual agentsdirect sales and sales through corporate agents brokers insurance marketing firms andother intermediaries.
Bancassurance represents Company's largest distribution network and in FY 2015-16 andFY 2016-17 contributed 54.43% and 53.03% respectively of our total New Business Premiumin such periods. The Company also reported a year-on-year growth rate of 38.42% inIndividual New Business Premium generated through bancassurance channel.
Individual agent has contributed 27.47% and 22.31% respectively of our total NewBusiness Premium in FY 2015-16 and FY 2016-17. As of March 31 2017 we had 95355individual agents. In FY 2016-17 individual agent network generated New Business Premiumof ' 234501 from individual products per agent reflecting the highestproductivity among all private life insurers in India.
The Company's direct sales primarily comprising sale of group products as well asstandardized individual products sold through online offerings. In FY 2015-16 and FY2016-17 other distribution channels including direct sales sales by non-bancassurancecorporate agents brokers microagents common service centres and insurance marketingfirms contributed 18.10% and 24.66% respectively of our total New Business Premium insuch periods.
We have supported our various distribution channels by operating through 801 offices asof March 31 2017 and increasing the number of sales and customer support employees tosupport our sales channels. The full time employee base has grown by 10.94% from 10863 asof March 31 2016 to 12051 as of March 31 2017 reflecting the overall growth in scaleof our operations.
The Company continues to emphasize on the expansion of its distribution reach byopening new offices quality recruitments and registering new individual agents and CIFs.
The Company intend continue to explore opportunities to expand our operations in SouthAsia including in Nepal and Bangladesh and have obtained necessary regulatory approvalsfor starting operations in Bahrain.
3. INDUSTRY AND COMPANY OUTLOOK
The life insurance industry in India is growing consistently after the phase ofregulatory reforms in early part of the decade. Industry growth rates are also improvingwith industry's new business growth seen at 26% in FY 2016-17. Private life insurers haveopportunities to grow in this phase with private industry recording a growth rate of 21%between FY2014-15 to FY 2016-17.
India's life insurance industry is still highly under penetrated. With such a hugepopulation and favourable demographic situation the industry has a lot of potential togrow. The growth of the industry rests on life insurer's ability to innovate in productdevelopment to provide relevant personalised solutions adopting digital tools to reducecost to serve and responsiveness towards customers customer education and awarenessefforts and regulatory support to encourage transparency and accountability in thebusiness practices to build trust amongst customers. Given the right products andprocesses there is no dearth of capital or customers in this business.
Life insurance industry is also supported by government policy actions and reformmeasures which are aimed at financial inclusion clean up and consolidation of bankingsector more foreign investment friendly measures better tax compliance and digitalconnectivity. These efforts are driving the investments in the country and keep growthprospects strong. Industry is witnessing more investors coming and consolidation exerciseswhich might help major insurers to consolidate their business.
Additionally the regulator has initiated several changes for the life insurance sectorsuch as expenses of management corporate governance convergence to the Indian AccountingStandards etc.
With several changes in regulatory framework which are expected to further change inthe way the industry conducts its business and engages with its customers. Demographicfactors such as growing middle class young insurable population and growing awareness ofthe need for protection and retirement planning will support the growth of Indian lifeinsurance sector.
I n current year the Company has continued to show robust growth in terms of newbusiness premium as well as renewal premium collections.
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.
The Company intends to further strengthen its Bancassurance model. This will beachieved by leveraging State Bank of India's widespread branch network and equippingselect branches with requisite resources including manpower support which would result inhigher cross sell penetration.
4. DIVIDEND AND RESERVES
The board at its meeting held on March 22 2017 has declared an interim dividend of '1.50 per equity share (previous year ' 1.20 per equity share) which amounts to atotal pay-out of ' 1805.36 million including dividend distribution tax (previousyear ' 1444.29 million). No final dividend is recommended for the year endingMarch 31 2017 and interim dividend declared is to be confirmed as final dividend.
The Company has carried forward ' 44647.82 million to its reserves.
The shareholding pattern during the year under review is in compliance with thestatutory requirement. There was no fresh capital infusion by the promoters in the Companyduring the financial year 2016-17. The authorized and paid up share capital of the Companystands at ' 20000 million and ' 10000 million. respectively. Theshareholding pattern of SBI Life as on March 31 2017 is available under Schedule - 5Awhich forms part of the Financial Statements.
During the year under review the Board of Directors of the Company approved the stepsto initiate process for an Initial Public Offering (IPO) of the Company by way of an"offer for sale" by the promoter companies. This is subject to relevantregulatory and other approvals as applicable. The Company has filed a Draft Red HerringProspectus (DRHP) with Security Exchange Board of India (SEBI) dated July 17 2017 and acopy of the DRHP is available on the website of SEBI and the Book Running Lead Managers(BRLMs)
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 of Deposits)Rules 2014.
7. AWARDS & RECOGNITIONS
Won the Golden Peacock National Quality Award-2016
Won "Life Insurance Company of the Year" at the Indian Insurance Awards 2016organised by Fintelekt.
Won "Bancassuracne Leader Life Insurance (Large Category)" at the IndianInsurance Awards 2016 organised by Fintelekt.
Won 'LIMRA and LOMA Social Media Silver Bowl Awards 2016' for best use of social mediaby a Company outside of the United States at the Social Business Conference for FinancialServices in Boston Massachusetts.
Adjudged one of the "Most Trusted Brand 2016" for the sixth consecutive yearby The Economic Times Brand Equity - Nielsen survey.
We believe that each of the awards demonstrates Company's commitment to achieveexcellence across all spheres of its activities and operations. We owe these awards tothe constant support and trust reposed by our Policyholders and Stakeholders and the hardwork and dedication of our work force.
SBI Life has a wide range of products catering to various customer needs in the lifehealth pension & micro-insurance segments. The products are customer centric simpleto understand and have competitive features.
To maintain its competitive edge in the market the Company had launched two newindividual products and nine existing individual products with modifications in thefinancial year 2016-17.
The details of the new products launched in 2016-17 are as follows:
1) SBI Life - Smart Privilege (UIN: 111L107V01): This is an individual linkednon- participating product.
2) SBI Life - Smart Bachat (UIN: 111N108V01): This is an individual non- linkedwith-profits endowment assurance product.
9. CUSTOMER AND PARTNER SERVICE ENABLEMENT
The Company continues to focus on improving customer's experience of SBI Life at everytouch point. Last year the Company introduced many initiatives in the areas of customerservice delivery process automation business process and quality improvements. This yearalso the Company has introduced some new initiatives and process improvements to furtherreduce the turnaround time (TAT) and simplify customer service with specific focus oncustomer self-service. Some of these initiatives are described below:
A. Policy Serving
Premium collection through digital medium: In our endeavour to push digitaltransactions the Company has started premium collection through various e-Wallets andUnified Payment Interface (UPI). Now policy holders can pay renewal premiums through SBIBuddy Jio Money Airtel Money m-Pesa UPI etc.
Workflow automation: The Company has launched workflow solution for payouts likeFree-look Cancellation Partial Withdrawal and Policy Deposit refund which has automatedand streamlined the payout processes. The workflow module ensures speedy closure ofcustomer service request and has improved overall operational efficiency.
Revival Mela: Two special revival campaigns were launched during the FY 2016-17with the motive of revival of lapsed policies and rebuilding the relationship with ourpolicyholders.
"Ankur" A Go Green initiative: To bring about an impact on environmentand to engage with customer effectively the Company has been driving registrations fore-communications for last 2 years. During this year the Company has
launched a campaign "Ankur" whereby a tree is planted in the name of thepolicy holder if he/she registers for Go Green. The Company had planted 50000 trees videthis campaign and sent e-certificates confirming the plantation of a tree. Overall with GoGreen initiative the Company has sent 61.14 lakh communications through emails.
Surrender Prevention: Following the Surrender Management and Retention Toolintroduced last year a SMART Campaign was launched in FY 2016-17 to reward and recognizebranches for focussing on surrender prevention and retaining the customer from prematureclosure of the policy.
Predictive Analytics of renewal database: In order to make the Renewal collectionprocess more proactive and cost effective the Company used Data Analytics this year toidentify key factors that influence customers' intentions of paying premiums andclassified customers into different categories for renewal follow-up. This has helped inoverall achievement of annual renewal budget and also increased collection efficiencies.
B. Customer Engagement
The second year of the Customer Engagement Department has been an exciting journeywhich saw the advent of multiple strategic initiatives to connect with our customers in amuch professional yet personal manner. Apart from the customer awareness campaigns thatthe Company executed through email and SMS to spread awareness on Life Insurance policiesand engaging with the customers on their Birthday and Policy Anniversary otherinitiatives like personalizing the issuance email to customers introducing missed callservice for policyholders' SMS based feedback after a service is availed by the customermapping our processes to industry practices through mystery shopping focused andstructured C-Sat surveys and its learning being deployed in existing processes for coursecorrections are some key highlights during the FY 201617. The HNI Cell continues to ensurefaster processing of HNI proposals and priority processing of servicing requests.
Project Anubhav has started taking shape and this will lend the organization therequired impetus to create the Brand Value to give the edge to SBI Life for generatingappropriate mileage from the FY 2017-18 onwards.
Creation of Regional Underwriting Units: Regional Underwriting
Units (RUU) has been created as per Risk Management Committee recommendations. Traininghas been imparted to RUU underwriters regularly throughout the year both through classroom training at RUU locations and through VCs. In-house diary module built with the helpof IT for effective distribution and assignment of cases. Vendor has been appointed forUnderwriting Medical case sheet preparation which saves time of the underwriters both atRUU and CPC level. RUU is now successfully functioning at all regional level locations.
Enhancement in Auto-UW rules to increase auto-underwriting percentage. Autounderwriting success rate increased from 11% in April 2016 to close to 50% by March 2017.Vendor has been appointed for image and data verification of auto-underwriting proposalsto check correctness of output.
Modification in Smart Advisor application - Inquiryon the move: Under thisinitiative complete information suite has been made available inside "SmartAdvisor". Following features have been added in the application which has helped thesales personnel in tracking and quick processing of their proposals.
Proposal Tracker: The user can check status of proposals introduced by him. Therewill be no need to visit SBI or SBI Life branch. Apart from status of the proposal(In-force / Postpone / Decline / Cancelled) they are also able to see the openrequirements both medical as well as non-medical.
Document Upload facility: For non-medical requirements user will have an option toupload the images of requirement documents. There is an option to click and save theimages and then the same can be uploaded by using "Document Upload" option.Physical document can be submitted subsequently for record purpose.
PIWC Status: This option allows the user to know the Pre Issuance Welcome Call(PIWC) status i.e. whether PIWC is cleared or not cleared. Soon the option will be madeavailable giving list of proposals pending at various stages of PIWC.
Facility to broadcast information:
One pager abridged guidelines is issued on financial underwriting and made available onSmart Advisor for the ready reference of the sales team.
The Company has formed a tie-up with Multi-speciality hospitals in 8 cities foroffering differentiated services for HNI customers. Services are currently available in 78hospitals in all these cities.
D. Group Operations
Group Corporate Portal
Enabled Group Corporate Portal (Dew Drops) in SBI Life website for master policyholders of Kalyan ULIP wherein the master policy holder can view details of contributionclaims paid and fund balance Enabled Group Corporate Portal for master policy holders ofSampoorn Suraksha (Group term Insurance) policies wherein the master policy holder canview member wise policy details and claims settlement.
Group Customer Portal
Facility for online generation of PMJJBY Certificate of Insurance and renewal premiumreceipts to the customers.
Facility for the nominee/claimant to check the PMJJBY claims status.
The portal was revamped and additional information and additional facilities likegeneration of Certificate of Insurance etc. was made available to the Group Customer.
E. New Business
Additional Pages in Policy Documents:
The Policy Document was revised and additional documents along with the copy ofproposal form are sent to the customer from the FY 2016-17. The documents submitted tocomply with Know Your Customer (KYC) norms and Benefit Illustration signed by the customeris inserted and sent along with the revised Policy Document. This will help the customerto know the document submitted to the Company at the time of buying the policy and bringin transparency in the process.
Image Flow: The scanning software used by the vendor at branch offices was upgradedwith Image Flow. Image Flow is a software developed in-house and has additional featurescompared to the one used by the vendor. The software is user friendly and has the featureof auto indexing and image quality sliders to improve the effectiveness of scanning.
ePolicy Bond: The Policy Documents is now available to our policy holders inelectronic form and it can be downloaded from the SBI Life website. The softcopy of thepolicy document can be downloaded by inputting the policy number and date of birth of theproposer. A One Time Password (OTP) will be sent to the customer's registered mobilenumber which should be used to view and download the soft copy of policy document.
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 to keepthe 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 certified for ISO 10002standards.
The Company's Grievance Redressal Management System is fully integrated with'Integrated Grievance Redressal Management System' (IGMS) of IRDAI. IGMS provides onlineview of customer complaints and the related turnaround time. The IGMS also facilitatesescalation of complaints where necessary.
The policyholder can approach the Company through any medium like letters emailsphone calls text messages toll free numbers or directly approach any of the SBI Lifebranches for redressal of grievance. Grievance officers have been nominated for all theBranch Offices Regional Offices and the Company. If the customer is not satisfied withthe resolution provided by the branch policyholder can contact the customer care desk atSBI Life Regional Office. The policyholder can also seek redressal with Head - ClientRelationship at SBI Life Central Processing Centre. The contact details are provided inthe policy document and on the SBI Life website. The details of grievance disposal are asunder:
|Particulars ||FY 2016-17 ||FY 2015-16 |
|Opening balance at the beginning of the year ||7 ||13 |
|Add: Additions during the year ||7806 ||9510 |
|Less: Complaints resolved during the year ||(7810) ||(9516) |
|Complaints pending at the end of the year ||3 ||7 |
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. In FY 2016-17 the overall Claim settlement ratio has improved to 97.98% ascompared to 95.77% in FY 2015-16.
Initiatives taken by Claims Department during the FY 2016-17
Claims Predictive Analytics model: This model enables us to detect potential fraudcases. Risk score and rating factor i.e. High Risk Medium Risk and Low Risk provided bypredictive analytics model and can be used as reference tool in assessment of Claims.
Shat Pratishat - 100% initiation of Living Benefits Claims Competition: With a viewto encouraging regions to increase their settlement ratio of living benefit claims acompetition launched for the regions exclusively for the months of February & March2017. The scope of the competition includes cases (Maturity and Survival Benefits) duefrom the period of April 01 2016 to March 31 2017 (including the outstanding dues ofprevious financial years) and the basis for qualification would be percentage initiatedout of this base during the financial year.
Business Process Management (BPM) platform for Annuity pay-outs: Workflow moduledesigned for processing of Annuity claims under individual policies. This module willfacilitate better control and monitoring of the entire Annuity claims process forindividual products
All India Investigators' Meet conducted twice i.e. on September 23 2016 &February 20 2017. The purpose of the meet was to sensitize the Investigators about ourexpectation regarding the quality of investigation and to share our concerns.
Scanflow for Living Benefit Claims: This enhancement enables paperless processingof living benefit claims. Now branches and PC's can scan and upload documents receivedfor living benefit claims through Scanflow module.
C & R module in E-Sampark for Claims:
Cancellation and Reissuance (C&R) module enhanced for reprocessing of payment(Stale cheques/ EFT rejections). This feature enables end to end reprocessing of paymentand helps us to track of all C&R cases for future reference.
Enhancement of Credit Account Statement on Banca Online: Banca team is now able toaccess Credit Account Statement directly from Banca portal which can be filled at the timeof claim intimation itself. This will help us to reduce the TAT of further requirement.
Claims Training: This is arranged for all employees of claims department to ensureno lack of process or product knowledge. A yearly training calendar is prepared toregularize training process.
Automation of Fund Transfer request:
Earlier the Clams department used to send requisition for cheque for Fund Transfercases. The cheque used to be then dispatched to branches or handed over to PolicyServicing department for cashiering against the new proposal. Now the Claims departmenthave changed the practice of issuing cheques for fund transfer cases and started sendingrequisition for direct credit to SBI Life's account. Accounts team processes the same andprovides Claims team with the UTR numbers for the transactions which is shared withPolicy Servicing department for initiating cashiering against the new proposal. Thisprocess helps in eliminating the cost involved in printing and despatch of cheque. Alsothere is substantial decrease in TAT of overall process of Fund transfers.
Claim presence on Digital Platform:
Smart Advisor Mobile App - Enhancement of Living Benefit (LB) Dues Alertsincorporated in Smart Advisor Mobile App. This will enable Advisor's / CIF's to tracktheir respective customer's dues in advance and will help us to get the requirements ontime leading to increase in LB Settlement Ratio.
Claims Corner link (Containing the process of claim forms to be used etc. from ourweb page) has been enabled on Easy Access and Smart Advisor Mobile App
12. INFORMATION TECHNOLOGY
Technology innovations at SBI Life is aligned to the pace with change in technologyglobally and focused to deliver convenience for customer service with omni channelexperience. Some of such major enhancements / initiatives taken up and in progress aregiven below:
As a part of IT modernization replacement of Core PMS (Policy Management System)Project initiated with Ingenium for which we have partnered with an established technologyprovider. Phase 1 got successfully implemented during the year 2016-17 and Phase 2 of theimplementation is in progress.
With a focus on customer centricity Digital Initiatives were taken up / initiated. Thekey areas focussed on include:
New CRM System implementation process is in progress which will provide the 360 degreeview of the customers at SBI Life Branch Offices. This will help the branches to servicethe customers better. This project is targeted for go live during first quarter of nextfinancial year.
As a part of digitization of new business process Work Flow implementation was taken upand is targeted for second quarter of next financial year. This will improve scalabilityof operations through automation and manage growth with reduced processing time. Thisentails use of Intelligent Technology to ensure that a substantial volume of new businesswould be processed through technology without much human intervention.
Website refresh project will enable web experience management of online customers. Itwill enable our marketing teams and business users to easily create and managecontextually relevant social and interactive online experiences across multiple channelson a global scale to drive sales and loyalty. This website refresh is targeted for thesecond quarter of next financial year.
Market witnessed testing times both domestic and internationally but gave good returnsat the end. Both debt and equity had headwinds of US interest rate starting to riseBrexit results haunting and the outcome of US presidential results to look at. On thedomestic side it was hardening of commodity prices and demonetization led growth impact.Country witnessed good economic growth stabilized its external account and strengthenedrupee towards the end and gave stellar returns in equity and debt markets. GDP grew 7.1%CAD ended at 1.1% of the GDP INR strengthened by 2% at 64.85 Sensex gave a return of 17%and 10-year bond yield softened by 77 basis points.
Yield on 10-year Government of India Bond eased by 77 basis points to 6.69% (31.3.2017)as Reserve Bank of India reduced the policy interest rates by 50 basis points on accountof lower trajectory of inflation. 10 year reached a level of 6.11% in Q1 of 2017. Globalevents like the Brexit triggered the slide in sovereign yields and Indian bonds were noexception.
Creation of the Monetary Policy Committee (MPC) in line with global best practices hasincreased the credibility of the central bank. MPC and RBI have taken up the mantle withimmense commitment and made inflation targeting their solitary and unswerving goal. The NKSingh committee revamped the Fiscal Responsibility and Budget Management (FRBM) act andmade noteworthy recommendations on the trajectory of debt-GDP ratio and fiscal deficit-GDPratio over the next 6 years.
The Assets under Management (AUM) increased by 22.43% to ' 977366.03 million ason March 31 2017 from ' 798275.78 million as at March 31 2016. The AUM was madeup of ' 531635.70 million of traditional funds (including shareholders' funds) and' 445730.38 million of Unit Linked Funds. The Unit linked portfolio majorlycomprises of equity funds and NAV guaranteed funds. The performance of both traditionaland unit linked funds was satisfactory with majority of funds equity and bond fundscomfortably beating the benchmark and their respective peers.
14. PARTICULARS OF EMPLOYEES
SBI Life has completed 16 years of being in business. The year 2016-17 has witnessed achange management strategy which has aimed to align People Process and Technologyinitiatives being in sync to our business strategy and vision. This transformation hasbeen the outcome of the persistent focus and effort that the management team along withthe Company's entire workforce has put in pursuing its strategy. Along with a shift instrategy comes a fundamental shift in roles and responsibilities. Marching towards a flatorganization structure we are focussing on employee involvement through a decentralizeddecision-making process and promoting selfmanaging teams. Our workforce is a balanced mixof experience and techno-functional. SBI Life family has grown from 10863 employees as onMarch 31 2016 to 12051 employees as on March 31 2017 which depicts a growth of 10.94%.
While the average age of employees is 34.8 years the average tenure comes up to 4years
1 month. There was a huge focus on alignment of goals across the organizationcommunication and leadership development initiatives that have led to strong improvementin business. To take the Company's talent management initiatives to the next levelvarious projects to increase effectiveness of HR subsystems like talent acquisitionLearning and Development succession planning employee communication etc. are beingundertaken.
Placing higher emphasis on employee engagement activities the Company promotes an openand progressive environment. Senior management interacted with the employees at the grassroot level through Town Halls conducted at various locations. Communication within regionsgrew stronger through the Regional E-Magazine initiative which was launched to provideregions with a platform to share macro and micro level information including employees'and teams' accomplishments with all the employees on a monthly basis. Other initiativeslike Sangam (Annual Day celebrations) cross functional offsite and corporate dinners werealso organized for the employees to encourage team bonding and camaraderie within the SBILife family. We are working on sustaining our outperformance in the industry by redefiningour strategy to improve employee satisfaction and customer connect.
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
SBI Life is in the business of covering life risks on payment of a premium. RiskManagement therefore becomes an integral part of its business activities. The Companyrecognise and manages its risks in a proactive ongoing and positive manner. Riskphilosophy of the Company is outlined in the Risk Management Policy. The Risk Managementpolicy specifies the process for identification measurement and analysis of the Company'srisk exposures; develop risk management strategies and its monitoring. The Risk ManagementPolicy is supported by various other policies pertaining to insurance market complianceoutsourcing fraud information security and business continuity management. All the abovepolicies are reviewed by the Risk Management Committee of the Board on an annual basis.
The Company has formulated risk appetite statements at the corporate as well as thefunctional level which are reviewed and monitored by the Board level Risk ManagementCommittee and Internal Risk Management Committee respectively. The Company also carriesout an ICAAP (Internal Capital Adequacy Assessment Process) activity which details theassessment of material risks estimation of capital requirement and adequacy formaintaining solvency requirements.
The British Standard Institute has stated that the Company's enterprise risk managementsystem which covers all departments and functions at its corporate offices centralprocessing centre as well as regional and branch offices meet the recommendations of ISO31000:2009 standards. The Company's Business Continuity Management System (BCMS) is ISO22301 certified and its Information Security Management System (ISMS) is ISO 27001certified.
More information on the risk practices adopted by the Company is available in 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 the riskbased audit approach and it commensurate with the nature of the business and the size ofits operations. The internal audit plan covers the process audit as well as transactionbased audits at the Head office Regional Office and across various branches of theCompany.
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 auditobservation 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 internal financial control system with the requirements ofthe Companies Act 2013 on lines of globally accepted risk based framework as issued byCommittee of Sponsoring Organizations (COSO). The internal control framework is intendedto increase transparency and accountability in an organization's process of designing andimplementing a system of internal control. The framework requires the Company to identifyand analyse risks and manage appropriate responses. The Company has successfully laid downthe framework and ensured its effectiveness.
The Company's internal financial control framework is based on 'three lines of defencemodel'. The Company has laid down standard operation procedures and policies to guide thebusiness operations. The Company has a well- defined delegation of power with authoritylimits for approving revenue and capital expenditure. Statutory Concurrent and InternalAuditors undertake rigorous testing of the control environment of the Company.
The Company has a Chief Internal Auditor with a dedicated internal audit team which iscommensurate with the size nature and complexity of operations of the Company.
The Company also undergoes an independent internal/concurrent audit by specialisedthird party professional consultants to review function specific regulatory compliances aswell as internal controls.
The audit committee reviews reports submitted by the Management and audit reportssubmitted by the internal auditors and statutory auditors. Suggestions for improvementsare considered and the Audit Committee follows up on corrective actions. The AuditCommittee also meets the Company's statutory auditors to ascertain their views on theadequacy of internal control systems and keeps the board of directors informed of itsmajor observations 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 related party transaction policy to regulate the transactions with itsrelated parties. As per the policy all related party transactions require approval of theAudit Committee of the Board. As per Rule 6A of the Companies (Meeting of Boards and itsPowers) Rules 2014 the Audit Committee may grant omnibus approval for related partytransaction proposed to be entered into by the Company subject to 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. Nalawaya & 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) Government of India has notified the Companies(Indian Accounting Standards) Rules 2015 on February 16 2015. Subsequently IRDAI (the"Authority") has issued a circular on "Implementation of Indian AccountingStandards (Ind AS) in insurance sector" on March 01 2016 requiring insurancecompanies to prepare and execute the implementation of Ind AS.
The circular requires all insurers to comply with the Ind AS based financial statementsfor FY 2018-19 with comparatives of FY 2017-18. The Insurers also needs to submit proformaInd AS financial statements to the Authority from the quarter ended December 31 2016onwards.
In compliance with the above circular the Company has formed a cross functionalSteering
Committee for Ind AS implementation prepared the roadmap for implementation of Ind ASand got it approved from the Board appointed the consultant for Ind AS implementation andhas completed the gap analysis of current accounting policies and practices and therequirements of Ind AS.
The Implementation Group of Ind AS in insurance sector has submitted its report to theAuthority on December 29 2016 addressing the implementation issues and facilitatesformulation of operational guidelines to converge with Ind AS. The Authority has alsoissued an Exposure draft of Insurance Regulatory and Development Authority of India(Preparation of Financial Statements of insurers) Regulations 2017 on March 15 2017inviting the comments on the same; the Company has submitted its comments to theAuthority. The Authority has issued a circular dated June 28 2017 deferring theimplementation of Ind AS in insurance sector in India for a period of two years to beeffective from FY 2020-21. The said circular however requires the submission of proformaInd AS financial statements on quarterly basis.
The Company has submitted to the Authority proforma Ind AS financial statements forthe period ended December 31 2016 and year ended March 31 2017 as per the report ofImplementation Group on Ind AS in insurance sector.
20. BOARD OF THE DIRECTORS AND KEY MANAGEMENT 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 2017 of which four are Independent Directors and six Non-Independent Directorswhich includes one Executive Director.
During the year under review Mr. V. G. Kannan ceased to be a Director w.e.f. July 302016 due to his superannuation from SBI. The Board placed on record its sincereappreciation for the valuable services and guidance provided by Mr. V. G. Kannan duringhis tenure as an Independent Director.
Mr. Dinesh Khara was appointed on the Board of SBI Life as Nominee Director of SBIw.e.f. October 19 2016.
In terms of Section 152 of the provisions of the Companies Act 2013 Mr. Pierre dePortier de Villeneuve would retire by rotation at the ensuing Annual General Meeting andbeing eligible has offered himself for re-appointment.
Mr. Deepak Amin and Mr. Somasekhar Sundaresan have been appointed as AdditionalIndependent Directors on the Board of the Company with effect from July 13 2017.
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 inthe Report on Corporate Governance which is forming a part of this report. Theintervening gap between the said Board Meetings was within the period prescribed under theCompanies 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 2016-17.
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 Nomination & RemunerationCommittee. The details 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 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 program 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 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 financial year have been disclosed in Annexure II to thisreport as mandated under the said Rules.
23. PARTICULARS OF LOANS GUARANTEES OR INVESTMENT
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. SUBSIDIARY 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 2016-17 SBI Life witnessed a Renewal Premium collection of ' 108712.72million which contributed to 51.73% of Gross Written Premium. SBI Life has continued tofocus on renewals and has undertaken initiatives to improve persistency of its existingpolicies. The independent Renewal Vertical is focusing on collection of renewal premiumsand servicing 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 financial year 2016-17. As against the minimum requirement of 20% theCompany has issued 24% policies in the rural sector which affirms the Company's approachtowards life insurance inclusion. Further 589932 lives covered (6.4% of total new livescovered in preceding year) by the Company are from the underprivileged social sector asagainst the regulatory requirement at least 5% of total lives covered in preceding year.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 Auditor's Report of InsuranceCompanies) Regulations 2000 the Management Report is placed separately and forms part ofthis Annual Report.
In views of the applicability of Section 139 of the Companies Act 2013 to the Companyit comes under the purview of the Comptroller & Auditor General of India (C&AG).M/s L.S. Nalwaya & Co. Chartered Accountants and M/s P. Parikh & AssociatesChartered Accountants appointed by C&AG will retire at the conclusion of seventeenthAGM. M/s L.S. Nalwaya & Co. Chartered Accountants and M/s P. Parikh & AssociatesChartered Accountants are re-appointed as Statutory Auditors of the Company for thefinancial year 2017-18 as advised by the Comptroller & Auditor General of India(C&AG) in accordance with Section 139 of the Companies Act 2013.
29. AUDITOR'S REPORT
The Auditor's Report (including annexure thereof) to the Members does not contain anyqualification reservation adverse remark or disclaimer hence do not call for anyfurther comments u/s 134 (3) (f) of the Companies Act 2013.
30. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA (C&AG) ON THE ACCOUNTSOF 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 2017. The C&AG vide their report no. GA/R1/ SBI Life/Audit/2016-17/24 datedJune 22 2017 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 REPORT
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 Secretaries Mumbai as the SecretarialAuditor of the Company. The Auditor has not made any qualification reservation or adverseremark or disclaimer in his report for FY 2016-17. The detailed report on SecretarialAudit of the Company for FY 2016-17 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 2017 formspart of this report as Annexure IV.
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 the financial statements relateand the date of this report.
34. SIGNIFICANT AND MATERIAL ORDERS PASSED BY REGULATORS OR COURTS OR TRIBUNALSIMPACTING THE GOING CONCERN STATUS AND OPERATIONS OF THE COMPNAY
During the financial year 2016-17 no significant or material orders were passed by theRegulators or Courts or Tribunals which impact the going concern status and Company'soperation in future.
35. DIRECTOR'S 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 2017 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 2017 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 2017on 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 CONVERSATION 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 || eSignature and eKYC were successfully implemented for the New Business proposals which are sourced digitally. |
|2. Benefits derived as a result of the above R&D || The wet signature and 'styler' signature through tablet are avoided. |
| || Customers need not provide separate KYC documents. |
| || eSign confirms customer explicit consent and presence for documents submitted. |
|3. Future plan of action || Implementation of Robotics in few of the operational processes is being targeted to start with. |
|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 the following areas were focused this year: |
| || Mobile based solution for field force an application called as 'Saathi'. |
| || For eSign process internally a Web Service was built for use by multiple delivery channels like Online Sales and tab based assisted Sales. |
|2. Benefits derived as a result of the above efforts e.g. product improvement cost reduction product development import substitution etc. || Easy on boarding process of CIFs (Certified Insurance Facilitators) |
| || Ease of uploading the requirement documents |
| || Customer convenience and consent using eSign |
| || Better monitoring of performance reports |
| || Field force activity tracking |
|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: ||Nil |
|(a) Technology imported || |
|(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:
|Particulars ||Current Year ||Previous Year |
|Foreign Exchange Earnings ||- ||- |
|Foreign Exchange Outgo ||181.55 ||855.65 |
37. IRDAI LICENSE
The Insurance Regulatory and Development Authority of India (IRDAI) have renewed theannual license of the Company to continue the Life Insurance Business for the financialyear 2017-18.
38. OTHER INFORMATION
A. Economic Capital:
The annual assessment of economic capital of SBI Life was carried out as on December31 2016. As 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. A large part of theSBI Life portfolio is now monitored using a stochastic ALM model. The aggregate economiccapital requirement for the risks of the Company including the guarantees is well withinthe statutory capital requirement. The current Solvency 2 ratio (Value / SCR) is 304%. Therisk margin induced by this high ratio is well within comfortable levels.
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 IRDAI (Assets Liabilities and Solvency Margin of Life InsuranceBusiness) Regulations 2016. The Company has a strong solvency ratio of 2.04 as on March31 2017 (Previous year ended March 31 2016: 2.12) as against the Regulatory requirementof 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 amounting to ' 843.17million vide order no. IRDA/Life/ORD/Misc/228/10/2012 dated October 5 2012. The Companyhad filed an appeal against the said order with the Ministry of Finance Government ofIndia who remanded the case back to IRDAI on November 4 2015. IRDAI issued furtherdirections dated January 11 2017 reiterating the directions issued on October 5 2012.The Company has filed an appeal against the said directions/ orders with the SecuritiesAppellate Tribunal. The said amount is disclosed as contingent liability as at March 312017 in Schedule 16C (1) of the notes to accounts.
IRDAI has issued directions under section 34 (1) of the Insurance Act 1938 to refundthe excess commission paid to corporate agents to the members or the beneficiariesamounting to ' 2752.95 million vide order no. IRDA/Life/ORD/ Misc/083/03/2014 dated March11 2014. The Company has filed an appeal against the order with the Securities AppellateTribunal. The said amount is disclosed as contingent liability as at March 31 2017 inSchedule 16C (1) of the notes to accounts.
D. Appointed Actuary's Certificate
The certificate of the Appointed Actuary on valuation and actuarial assumptions isenclosed in 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 the IRDAICorporate Governance Guidelines is enclosed and forms part of the Corporate GovernanceReport.
The Directors are grateful to the Insurance Regulatory and 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 trust and patronage.
The Directors also express their gratitude for the advice guidance and supportreceived from time to time from the auditors and statutory authorities. The Directorsexpresses their deep sense of appreciation to all the employees insurance advisorscorporate agents and brokers distributors re-insurers bankers and the Registrars whocontinue to display outstanding professionalism and commitment enabling the organizationto retain market leadership in its business operations. The Directors also wish to expresstheir gratitude to the State Bank of India BNP Paribas Cardif S.A. Temasek and KKR fortheir continued support and trust.
For and on behalf of the Board of Directors
|Place: Mumbai ||Arundhati Bhattacharya |
|Date: September 07 2017 ||Chairman |