The Members of SBI Life Insurance Company Limited
Your Directors are pleased to present their 18th Annual Report along withaudited financial statements of SBI Life Insurance Company Limited ("SBI Life"or "the Company") for the year ended March 31 2018.
1. SUMMARY OF FINANCIAL RESULTS
This was another year of successful operations for the Company. The Company has earneda Gross Written Premium of Rs. 253.54 billion driven by a strong growth in Individualbusiness. The Company continued meeting its stakeholders' expectations achievingprofitable growth year on year.
The summary of the financial performance of the Company for FY 2018 is presented below:
| || ||Rs. |
|Particulars ||FY 2018 ||FY 2017 |
|Financial Parameters || || |
|Gross Written Premium (GWP) ||253.54 ||210.15 |
|New Business Premium ||109.66 ||101.44 |
|Renewal Premium ||143.88 ||108.71 |
|Profit / (Loss) before taxation ||14.22 ||11.54 |
|Provision for taxation ||2.72 ||2.00 |
|Profit / (Loss) after taxation ||11.50 ||9.55 |
|Profit at the beginning of the year ||44.65 ||36.91 |
|Total profit available for appropriation ||56.15 ||46.45 |
|Appropriations: || || |
|Interim dividend (Including dividend distribution tax) ||2.41 ||1.81 |
|Profit carried to the balance sheet ||53.74 ||44.65 |
|Earnings per equity share (Basic & Diluted) (in Rs.) ||11.50 ||9.55 |
|Individual Rated Premium ||77.88 ||59.36 |
|Assets under Management (AUM) ||1162.61 ||977.37 |
|Net worth ||65.28 ||55.52 |
|Key performance indicator: || || |
|Embedded Value ||190.70 ||165.38 |
|Annualized Premium Equivalent (APE) ||85.38 ||67.27 |
|Value of New Business (VoNB) ||13.85 ||10.37 |
|New Business Margin ||16.2% ||15.4% |
|Operating expense ratio ||6.8% ||7.8% |
|Commission ratio ||4.4% ||3.7% |
|Total cost ratio* ||11.2% ||11.6% |
|Solvency ratio ||2.06 ||2.04 |
|Persistency ratio (13th month on premium basis) ||83.0% ||81.1% |
|Number of new policies (in 000's) ||1428.46 ||1275.50 |
*Total Cost = Operating expenses + Commission + Provision for doubtful debts + Baddebts written off
2. HIGHLIGHTS OF RESULTS AND STATE OF COMPANY'S AFFAIRS
The Company witnessed a growth and consistent performance in FY 2018. The key financialparameters of the Company are as follows: Individual NBP has grown by 30.0% from Rs. 64.68billion in FY 2017 to Rs. 84.07 billion in FY 2018 due to increase in Individual Regularbusiness 31.4%.
Individual NBP private market share increased from 20.2% in FY 2017 to 20.8% in FY2018. While overall market share in individual NBP has increased from 8.3% in FY 2017 to9.1% in FY 2018.
APE has increased by 26.9% to Rs. 85.38 billion over previous year primarily due toincrease in individual NBP generated through bancassurance and agency channel.
Protection NBP has increased by 23.1% to Rs. 6.00 billion in FY 2018 from Rs. 4.87billion in FY 2017. GWP collected during the year was Rs. 253.54 billion registering agrowth of 20.6% primarily due to increase in renewal premium by 32.4% from Rs. 108.71billion to Rs. 143.88 billion.
The Company's profit after tax grew by 20.5% and stands at Rs. 11.50 billion in FY 2018against Rs. 9.55 billion in FY 2017.
The operating expense ratio (Operating Expense to GWP) stands at 6.8% as against 7.8%in FY 2017.
The Company has achieved a milestone by crossing its AuM Rs. 1 trillion during thefinancial year and registered a growth of 19.0% to Rs. 1162.61 billion from Rs.977.37 billion in FY 2017.
Solvency ratio of the Company stands at 2.06 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 83.0% in FY2018 from 81.1% in FY 2017.
Indian Embedded Value of the company stands at Rs. 190.70 billion as on March 31 2018as compared to Rs.165.38 billion as on March 31 2017. Value of New Business grew by 33.6%from Rs. 10.37 billion to Rs. 13.85 billion in FY 2018 leading to an increase in value ofnew business margin from 15.4% to 16.2% in FY 2018.
The Company continues to emphasise on the expansion of its distribution reach throughopening up of new offices and quality recruitments. As at March 31 2018 the Company has825 offices 108261 Insurance Advisors (IAs) and 49527 Certified Insurance Facilitators(CIFs) across the country as against corresponding figures of 801 offices 95355 IAs and39688 CIFs respectively as on March 31 2017.
During the year the Company collected New Business Premium of Rs. 109.66 billioncomprising of Rs. 68.42 billion from Bancassurance' which represents company'slargest distribution network Rs. 27.48 billion from Retail Agency and Rs. 13.76 billionfrom other distribution channel including direct sales sales by non-bancassurancecorporate agents brokers micro agents common service centres (CSC) insurance marketingfirms (IMFs) and Web aggregators.
The Company's direct sales primarily comprises sale of group products as well asstandardised individual products sold through online offerings.
The Company has obtained necessary regulatory approvals for opening branch offices inkingdom of Bahrain from IRDAI and Central Bank of Bahrain (CBB) for carrying out lifeinsurance business. The target market will be Non-Resident Indian (NRI) and Person ofIndian Origin (PIO) only. Further the Company continue to explore opportunities to expandour operations in other geographical regions.
3. INDUSTRY AND COMPANY OUTLOOK
In India life insurance industry is poised for a sustainable and profitable growth inlong run. Multiple factors stemming from macro-economic demographic and regulatorychanges are catalyzing the growth of the life insurance market.
Over the years the industry has undergone fundamental shifts such as rapid expansionrebalancing of distribution mix transitions of product mix digital transformationcapital inflows and approach towards customer-centricity. As a result Industry has showncreditable growth both in new business premium collection and new policies sold. InFY2018 Industry reported 11% growth in new business premium collection with the help ofboth Private Players and Life Insurance Corporation. Private life insurers enjoyed ahealthy growth of 18% during financial year.
Despite under penetration and low sum assured in life insurance segment industry has aconsiderable amount of potential to grow exponentially in upcoming year. Life Insurers'ability to innovate products matching risk profile of policyholders re-engineering thedistribution focus on adopting digital tools to reduce cost to serve making sales andmarketing more responsible and answerable and regulatory support to encouragetransparency and accountability offers more avenues in the wake of this fast growingeconomic environment.
Life insurance industry is supported by government policy actions and reform measureswhich are aimed at financial inclusion clean up and consolidation of banking sector moreforeign investment friendly measures better tax compliance and digital connectivity.
Additionally the regulator has issued various regulations/circular for the lifeinsurance sector such as IRDAI (Payment of commission or remuneration or reward toinsurance agents and insurance intermediaries) Regulations 2016 IRDAI (Outsourcing ofActivities by Indian Insurers) Regulations 2017 Prevention of Money-laundering(Maintenance of Records) Second Amendment Rules 2017 IRDAI (Protection of Policyholders'Interests) Regulations 2017 IRDAI Master Circular (Unclaimed Amounts of Policyholders)2017.
With several changes in regulatory framework which are expected to further changes 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.
Sustained efforts towards creating awareness and working to enhance the industry'sreach will lead to fruition of the objective of having a country of individuals who arefinancially protected.
The Company strategy focuses on the following:
1. Leveraging life insurance industry growth through deeper penetration increasingshare of protection business and increasing market share through a balanced portfolio ofprotection and savings products.
2. Increasing geographical reach by using our expansive distribution network andstrengthening our distribution mix by leveraging relationships with new corporate agentsbroker partners and web aggregators.
3. Maximising customer satisfaction by offering comprehensive suite of products oftransparent nature at competitive prices and improving customer experience from clienton-boarding to claims settlement.
4. Digitisation and automation of sales processes to improve distribution andoperational efficiencies.
4. DIVIDEND AND RESERVES
The board at its meeting held on March 23 2018 has declared an interim dividend of Rs.2.00 per equity share (previous year Rs. 1.50 per equity share) which amounts to a totalpay-out of Rs. 2.41 billion (including dividend distribution tax) (previous year Rs. 1.81billion). No final dividend is recommended for the year ending
March 31 2018 and interim dividend declared is to be confirmed as final dividend.
The Company has carried forwarded Rs. 9.10 billion to its reserves and surplus and hadaccumulated balance of Rs. 53.74 billion as on March 31 2018.
In terms of Regulation 43A of Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 ("ListingRegulations") the Dividend Distribution Policy of the Company is disclosed on thewebsite https://www. sbilife.co.in/dividend-distribution-policy
The Company has uploaded the details of unpaid and unclaimed dividend on the Company'swebsite: https://www.sbilife.co.in/sbi-life---unclaimed-dividend-list-fy-2017-18
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 FY 2018. The authorized share capital and paid up share capital of the Companystands at Rs. 20.00 billion and Rs. 10.00 billion respectively. The shareholding patternis provided as a part of Form No. MGT-9 which is annexed to this Report and under Schedule- 5A which forms part of the Financial Statement.
During the FY 2018 the Company had completed its Initial Public Offer("IPO") by way of an Offer for Sale (OFS) of 120000000 equity shares of facevalue of Rs. 10 each of the Company at Offer Price of Rs. 700 per equity share aggregatingto Rs. 83.89 billion (net of employee discount) by the Selling Shareholders State Bank ofIndia and BNP Paribas Cardif S.A. of 80000000 equity shares and 40000000 equityshares respectively.
The shares of the Company were listed on National Stock Exchange of India Limited (NSE)and Bombay Stock Exchange Limited (BSE) on October 3 2017.
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 ofDeposits) Rules 2014.
7. AWARDS & RECOGNITIONS
The Company has won several awards during the year some of which are highlightedbelow:
Won the Brand of the Year 2016-17 Award in the Insurance Category by World Consulting& Research Corporation (WCRC)
Won the Fintelekt Insurance Awards 2017 in the following 3 categories
a. Private Sector Life Insurance Company of the Year (Large Category)
b. Bancassurance Leader Life Insurance (Large Companies Category)
c. Data Analytics Initiative of the Year (overall award across Life General Health)
Awarded India's Leading insurance Company Life' (Private sector) at theDun & Bradstreet BFSI Summit 2018'.
Won Skoch Resilient India awards 2017 for two projects
a. Predictive Analytics and automation of renewal Management System
b. Integrated Death Claims Management System
Adjudged one of the "Most Trusted Brand 2017" for the seventh consecutiveyear by The Economic Times Brand Equity Nielsen survey.
We believe that each of the awards demonstrates the 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. These products are customer centricsimple to understand and have competitive features.
To maintain its competitive edge in the market the Company had launched two newindividual products and eight existing products (individual and group) with modificationsduring FY 2018.The details of the new products launched in FY 2018 are as follows:
1. SBI Life - Sampoorn Cancer Suraksha (UIN: 111N109V01): This is an individualnon-linked non-participating health insurance product.
2. SBI Life - Poorna Suraksha (UIN: 111N110V01): This is an individualnon-linked non-participating term insurance product with in-built critical illness cover.
9. CUSTOMER AND PARTNER SERVICE ENABLEMENT
Being a customer centric organization the operations group at SBI Life maintains aconsistent focus on enhancing and upgrading their work processes and systems with the aimof creating greater value in all its customer interactions across all customer touchpoints. With a view to meet and exceed customer expectations and remain competitive in themarket place the functional departments have undertakenseveralinitiativesinlinewiththeemergingtechnologies.
These initiatives will help the organization to build processes that are more robustconsistent and scalable. They will also result in the empowerment of the front line staffacross all customer touch points to service our customers more efficiently. Some of thekey initiatives undertaken by different departments of the Company are described below:
A. Client Relationship
The client relationship department is pivotal in ensuring that customer queries andgrievances are resolved to the full satisfaction of the customer within defined timelinesand therefore our initiatives this year have been to empower our employees to improve thequery and grievance handling mechanisms.
Upgradation of Customer Relationship Management (CRM) Module: - CRM Next is anautomated workflow that has been created for handling customer grievances obtaining salescomments & recommendation from the Regional Leadership group initiating investigationwherever necessary and seeking necessary approvals from the Competent Authority. It is adigital platform for conducting a root cause analysis of all the customer complaints andqueries. It also facilitates quality check of the grievance handling mechanism to ensurethat any gaps are identified and plugged immediately.
Under the Customer 360 degree view the details of all the policies held by customerand his service request history are maintained. Additionally real time information on theplan details service history records of the policy life cycle along with the policystatus is provided which helps in resolution of customer grievances.
With the launch of CRM Next we have moved towards a paperless complaints handlingprocess. This has brought in perfectly consistent & coherent workflow with betterrecord maintenance and process efficiency. It has also helped in reducing the overallresolution time of complaints.
Parivartan:- This is a module designed to empower SBI to log in SBI Lifecustomer queries/ complaints received at their end for better tracking and fasterresolution of queries/ complaints.
Root Cause Analysis:- The existing process of root cause analysis of complaintsand queries has been improvised and a well defined procedure has been laid down. Everymonth the complaints that arise due to service deficiencies are analyzed in depth and theobservations are taken up for improving the process or systems. This procedure has helpedin identifying and addressing process gaps thereby strengthening our processes by makingthem more efficient and customer centric. It has also led to reduction in instances ofsimilar complaints.
B. Customer Engagement
The customer engagement department has seen multiple strategic initiatives to connectwith our customers in a more professional yet personalized manner. Apart from thecustomer awareness campaigns that the Company executed through email and SMS to spreadawareness about Life Insurance and other initiatives to provide enhanced serviceexperience to HNI clientele the year 2017-18 also saw the introduction of two majorCustomer Centric initiatives:
Introduction of the Net Promoter Score (NPS) to gauge what the customers think aboutthe organization by reaching out to customers at Critical Moments of Truth in the Policylife Cycle. Feedback is now being sought at the policy issuance stage at Payment of 4thyear Renewal Premium and at Maturity of the policies. NPS implementation is currently atthe initial stage and is a rich source of feedback. Data will be integrated with CRM Next(our new CRM module) for a complete view of the customers and form the basis of improvingour processes to benefit customers. The knowledge of earlier customer feedback/ grievanceswill also enable the subsequent servicing agents to interact with the customers in abetter manner.
Introduction of the Chat-Bot named Real Intelligent Assistant (RIA) the automatedonline chat system that is available on our website. Currently it is empowered to provideresponses to most frequently asked questions and going forward it is being developed toprovide policy specific information to the existing/ potential prospects after dueauthentication.
C. New Business
a. PIWC in RiNn Raksha Housing Loan: Pre issuance Welcome Call (PIWC) has beeninitiated for the RiNn Raksha Housing Loan cases. This has been done to ensure that:
the customer is covered under the right policy as per his/ her choice & needs.
Information provided by the customer in the proposal is correct.
the customer has understood the product features.
b. Revamping of Pre-Issuance Welcome Call (PIWC) calling scripts and reference toFAQ: Based on an analysis of the various queries that are put forward by the customersduring the PIWC call a complete revamp of the call centre scripts was undertaken toensure greater clarification of customer queries during the PIWC. A set of FAQs were alsoshared with the call centre agents to help them with their query resolution process.
With an objective to further improve upon our underwriting practices as well as toreduce the risk of selection of any adverse lives some of the notable initiativesundertaken by the Company are shared below:
Implementation of risk score based underwriting that will alert the underwriters of aprobable high risk factor at the selection stage itself. This will prevent anyinconvenience at a later stage after the policy is issued.
Organized 360 degree training programme for all underwriters at Hubs (Regionalunderwriting Units) located at 16 regional centres with a view to create a better informedand well trained workforce.
New Business work flow implemented to make the issuance process faster and streamlined.
Financial underwriting based on credit information and score thereby reducing thefinancial requirements.
E. Policy Servicing
Revival Mela: - Revival campaign was conducted in FY 2017-18 with the motive ofreviving lapsed policies and rebuilding the relationship with our policyholders. A totalof 71887 polices were revived leading to a renewal collection of Rs. 2.39 billion.
Predictive Analytics for Revival of Lapse policies:
- For revival of lapsed policies predictive data analytics was used to identify thelikelihood of revival of policies. The lapsed policies were classified into fourcategories with the help of different variables so as to help the optimization of effortsto revive lapse policies during the campaign.
Proactive Surrender Prevention:- In order to prevent surrender in a proactivemanner surrender prevention analytics has been undertaken where in Surrender-ablepolicies of linked and non linked types are divided into three risk categories of RedAmber and Green based on multiple variables like policy vintage state past-lapsationlock-in period educational qualifications and surrender related queries. Various SMSemail campaigns are being triggered to these customers highlighting the benefits of theproduct on a regular basis and as part of an active engagement strategy.
Centralized Surrender Prevention Calling: - Centralized Surrender callingcommenced in FY 2017-18 through the outbound call centre. The calling is done by aspecially trained team having detailed knowledge about products and the correspondingadvantages which help them to convince customers to retain the policies till the end ofthe term. A total of 2619 policies amounting to Rs. 0.55 billion have been retained in FY2017-18 through Centralized Surrender Calling activity. This activity is over and abovethe "face-to-face" counselling activity in the branches.
Go Green: - Under the ongoing Go Green campaign policyholders are encouraged toregister for Electronic communications. A total of 718285 policies were registered forGo Green in FY 2017-18.
Customer Self Service Portal:- In view of changing dynamics and increasingdigitization of services across platforms all new customers are being registered on ourMy Policy Customer Self Service Portal to enable customers to have one view of alltheir policies and also do various transactions online. Unlike previous years where theywere communicated of this facility this year we are registering all new customers andcommunicating the user IDs to them to enable login and activity in the e- portal.
Premium collection through digital medium: - In our endeavour to push digitaltransactions the Company has tied up with "Paytm" services for renewal premiumcollection and customers can now pay renewal premium through "Paytm".
Auto-mailer Available Anytime Anywhere:- A series of auto mailers for renewalhas been rolled-out during the FY 2017-18 covering various critical monitoring parameterscustomized to different Groups (both from Operations and Sales) at different frequenciesdirectly benefiting regional team and making data & analysis availability handy evenwhen they are on field/tour.
F. Group Operations a. Go App Mobile application
Launched a Mobile based application for Key Accounts Managers (KAM) & BusinessDevelopment Managers (BDM) of Group Business to resolve basic queries related to Fund andGroup Term Business Products.
The information available under the application is stated below:
Fund Products - New business list mini fund statement requirement uploadmaster policy search claim view.
Sampoorn Suraksha - New Business list renewal list lapsation list masterpolicy search member view claim view requirement upload view of members forunderwriting.
b. Group Customer Portal
Enhancement of Group Customer Portal for Annuity customers. Group Members can now viewCOE (Certificate of Existence) Status and group members can generate and download Annuitycertificates.
Facility for the nominee/claimant to check the claim settlement status of the PMJJBYpolicies.
c. E-issuance of Group Term Master Policy documents
G. Outsourcing of activities
Outsourcing of Refund Initiation: The refund process has been partiallyoutsourced so as to improve customer service by reducing the servicing time.
Outsourcing of Living Benefit claims processing: This has led to reduction inclaims settlement TAT (Turnaround Time) better manpower management and cost efficiency.
Claims Management is a very important aspect of the insurance business. At SBI Lifecustomer focus at claims stage is ensured by providing efficient services striving toexceed the customer expectations by creating avenues for increasing self servicefacilities including setting up of programmes for effective resolution of customergrievances. In FY 2017-18 the claim settlement ratio for individual policies stood at96.8% and for Group policies at 99.4%.
Post Issuance Profile Verification (PIPV): Profile verification of high riskcases through external investigation commenced since April 2017. In lieu of the revisedSection 45 of the Insurance Act 1938 a policy cannot be called in question after threeyears from the commencement or revival even on the grounds of fraud. Hence the process toconduct Post Issuance Profile Verification (PIPV) was introduced for existingpolicyholders. This exercise helps us to identify fraudulent cases and initiateappropriate action to curb fraud.
Decentralization of Individual Fast Track (Non Early) claims: Claims processingfor cases where sum assured is up to 5 lakhs has been decentralized to branches all overIndia (only admissible cases other than lapse open title & indemnity bond (in case oflost original policy document) cases). The branches have been empowered through therelease of proper training and reference materials.
Maturity and Survival Benefit under Business Process Management (BPM) module:End to end workflow has been introduced for Maturity and Survival Benefits in BPM platformso as to reduce Turn around Time and help in effective monitoring. Also as a step towardsdigitalization the existing Scan Flow system has been integrated with the BPM module toenable branches to view the documents received from policyholders on one platform.
First Time Right learning series: First Time Right learning series for claimsprocesses was circulated to all employees periodically. The content reiterates andemphasizes on various documental requirements depending upon the claim type. This in turnwill helps us to obtain all the documents required correctly at first place itself leadingto faster processing of claim and customer satisfaction.
All India Investigators' Meet was conducted to sensitize the Investigators aboutconcerns and expectations regarding the quality of investigations to be done as part ofclaims settlement process.
11. INFORMATION TECHNOLOGY
At SBI Life as a practice we are committed to implement innovative solutions andadopting the newer technology to provide more and more convenient options to customers.Few of such innovative and customer centric solutions are listed below:
Upgrade of firewalls at Data Center (DC) and Disaster Recovery (DR) with NextGeneration Firewall having Advance Persistence Threat (APT) solution using Sandblasttechnology to protect against Ransomware malware zero attack unknown threat in DC &DR.
Augmentation of DR capacity to host more applications along with Infrastructure such asCore CISCO Nexus Switch and Infrastructure for Customer Relationship Manager (CRM) DataLoss Prevention (DLP) etc.
b. Process Area
Following are the major process improvements done:
During the financial year all the policies were issued and serviced from the NewPolicy Management System Ingenium. The old policies also will get migrated in theNew System in the coming years. This would increase the quality of the customer servicingfurther more.
New Customer Relationship Management (CRM) system Phase 1 is implemented in thisyear. The further enhancements are targeted for next financial year. This will help theend user servicing the customer to understand the complete details of the customerinteractions at the customer touch points.
The New Business Workflow system is implemented during this financial year. This willprovide mechanism for faster completion and issuance of the new policies.
Equity markets gave good returns for the year amidst increased volatility across bothdomestic and international markets. Sensex gave a return of
11.3% for the year. Domestic debt markets were extremely volatile with a mixed bag ofpositive and negative developments. Indian Economy witnessed good growth as we continuedto recovery from the post-demonetization' slowdown. Higher imports as a result ofstronger domestic demand combined with higher global crude oil prices weakened the currentaccount balance. INR weakened very marginally by 0.04% at Rs. 65.17 despite externalpressures owing to our strong Forex reserves which hit an all time high of USD 424billion.
Yield on 10-year Government of India Bond hardened by 64 basis points to end the yearat 7.33%. Markets reacted negatively to higher inflation wider fiscal deficits for FY2018 and FY 2019 and series of rate hikes in US. Crude Oil prices moved up by 30% to USD69 per barrel and added further pressure to India's macroeconomic fundamentals. Theintroduction of GST a landmark reform aimed at streamlining indirect taxes met withinitial challenges. The revenue collections continued to fall short of expectations.Moody's Investor Services upgraded India's sovereign ratings by one notch in November butthis failed to enthuse markets amidst pressures on the government's finances.
The Assets under Management (AUM) of the Company has increased by 19.0% to Rs. 1162.61billion as on March 31 2018 from Rs. 977.37 billion as at March 31 2017. The AUM wasmade up of Rs. 613.25 billion of traditional funds (including shareholders' funds) and Rs.549.36 billion of Unit Linked Funds. The Unit linked portfolio majorly comprises of Equityfunds Bond funds and NAV guaranteed funds. The performance of both traditional and unitlinked funds was satisfactory with majority of funds equity and bond funds comfortablybeating the benchmark and their respective peers.
13. PARTICULARS OF EMPLOYEES
SBI Life one of the most trusted private Life insurance brands is now more than 17years old. SBI Life family has grown from 12051 employees as on March 31 2017 to 13207employees as on March 31 2018 which depicts a growth of 9.60%. While the average age ofemployees is 35 years 3 months the average tenure is 4 years 5 month.
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. In terms of Section 136(1) of Companies Act 2013 the Report and theAccounts are sent to the Members excluding the aforesaid Annexure. Any member interestedin obtaining a copy of this Annexure may write to the Company Secretary at the RegisteredOffice of the Company.
14. 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 Company has aligned its risk management practices to ISO 31000:2009 and is inreceipt of Statement of Compliance' in respect of the same from British StandardInstitute (BSI). This implies that the Company has strong processes for riskidentification management and mitigation. The Company's Business Continuity ManagementSystem (BCMS) is ISO 22301 certified and its Information Security Management System (ISMS)is ISO 27001 certified.
More information on the risk practices adopted by the Company is available in theEnterprise Risk Management' Section appended to this report and ManagementReport' Section of the Annual report.
15. INTERNAL AUDIT AND COMPLIANCE FRAMEWORK
The Company has in place a robust internal audit framework. The Inspection and Audit (I& A) Department undertakes risk based audit approach and it commensurate with thenature of the business and the size of its operations. The internal audit plan coversInformation System Audit different process audit as well as transaction based audits atthe Head office Regional Offices and across various branches of the Company.
The audits are carried out by the internal audit team of the Company and also by theoutsourced chartered accountants firms. The approach of the audit is to verify compliancewith the regulatory operational and system related controls. Key audit observation andrecommendations are reported to the Board Audit Committee of the Company. Implementationof the recommendations is actively monitored.
The Board Audit Committee of the Company has laid down governing principles formanaging the compliance framework of the Company. The Company has also formulated variousinternal policies and procedures to define framework for the working of various functionsto ensure compliance. The Compliance function identifies and communicates regulatoryrequirements to relevant functions in a timely manner and monitors critical compliancerisks based on suitable monitoring mechanism. The Compliance function works in liaisonwith the regulators and provides clarifications to various functions on applicable lawsregulations and circulars issued by the regulatory authorities. A compliance certificatesigned by the Managing Director & CEO is placed at the Board Audit Committee on aquarterly basis.
16. 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 key components of the internalfinancial control framework include:
Entity level controls:
Entity Level Controls (ELCs) operates at an organisation level. The Company has defineda set of entity level policies and controls. The ELCs set up by the Company includesvarious policies and procedure in place such as Anti Money Laundering andCounter-Financing of Terrorism policy Business Continuity Management policy IT andInformation Security policy Risk Management Policy Whistleblower Policy etc.
Process level controls:
The Company has defined a set of process level controls across its business and supportfunctions such as premium reinsurance claims management agency management fixed assetsetc. The control type covers key operating controls financial reporting controls & ITcontrols have been done to ensure compliance with COSO.
The Company's internal financial control framework is based on three lines ofdefence model'. The Company has laid down standard operation procedures and policies toguide the business operations. The Company has a well-defined delegation of power withauthority limits for approving revenue and capital expenditure. Statutory Concurrent andInternal Auditors undertake rigorous testing of the control environment of the Company.
The Company has a Chief Audit Officer with a dedicated internal audit team which iscommensurate with the size nature & 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.
17. RELATED PARTY TRANSACTIONS
The Company has Policy on materiality of Related Party Transactions and on dealing withRelated Party Transactions to regulate the transactions with its related parties. As perthe policy all related party transactions require approval of the Board Audit Committee.As per Rule 6A of the Companies (Meeting of Boards and its Powers) Rules 2014 the AuditCommittee may grant omnibus approval for related party transaction proposed to be enteredinto by the Company subject to terms and conditions mentioned in the said Rule.
All the Related Party Transactions entered 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 for its approval. During the year there were nomaterial contracts or arrangements or transactions with related parties that need to bedisclosed as per Section 188(1) of the Companies Act 2013.
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 37 of Schedule 16(C) Notes to Accounts of the Financial Statementsof the Company.
The policy has been hosted on the website of the Company can be viewed athttps://www.sbilife.co.in/policy-on-materiality-and-on-dealing-with-related-party-transact
18. IND AS IMPLEMENTATION
The IRDAI ("Authority") has issued a circular dated June 28 2017 deferringthe implementation 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 onquarterly basis in FY 2017-18.
The Authority has constituted a working group new standard on Insurance Contracts(equivalent to IFRS 17 Insurance Contracts) primarily to review the standard and toidentify relevant areas/aspects which require suitable adoption in Indian context andchanges in regulations/guidelines. Further the Accounting Standards Board of ICAI issuedthe exposure draft of Ind AS 117 Insurance Contracts (equivalent standard to IFRS 17) onFebruary 12 2018.
19. BOARD OF DIRECTORS AND KEY MANAGEMENT PERSONNEL
Change in Directors and Key Managerial Personnel's (KMPs) during the year
|Name of the Director / KMP ||Nature of change ||With effect from |
|Ms. Arundhati Bhattacharya ||Resigned as Chairman ||October 06 2017 |
|Mr. Rajnish Kumar ||Appointment as Chairman ||October 07 2017 |
|Mr. P K Gupta ||Appointment as a Nominee Director ||March 23 2018 |
|Mr. Deepak Amin ||Appointment as an Independent Director ||July 13 2017 |
|Mr. Somasekhar Sundaresan ||Appointment as an Independent Director ||July 13 2017 |
|Mr. Arijit Basu ||Resigned as Managing Director and Chief Executive Officer ||March 10 2018 |
|Mr. Sanjeev Nautiyal ||Appointed as Managing Director and Chief Executive Officer ||March 10 2018 |
|Ms. Varsha Mondkar ||Ceased to be Chief of HR & Management Services ||July 25 2017 |
|Ms. Manjula Kalyanasundaram ||Appointed as Chief of HR & Management Services ||October 04 2017 |
Retirement by rotation
In accordance with the provision of Section 152 of the Companies Act 2013 Mr. GerardBinet (DIN: 00066024) would retire by rotation at the ensuing AGM being eligible haveoffered himself for reappointment.
Key Managerial Personnel
Mr. Sanjeev Nautiyal (Managing Director & CEO) Mr. Sangramjit Sarangi (ChiefFinancial Officer) and Mr. Aniket Karandikar (Company Secretary) are designated "KeyManagerial Personnel" of the Company under the provisions of the Act. During theyear Mr. Arijit Basu (Managing Director & CEO) has resigned and Mr. Sanjeev Nautiyalhas been appointed as Managing Director & CEO w.e.f. March 10 2018.
Declaration by directors
All independent Directors have submitted declarations that they meet the criteria ofindependence as laid down under Section 149 of the Companies Act 2013 and Regulation 16of the Listing Regulations.
The Company has also received declarations from all its Directors as per Section 164 ofthe Companies Act 2013 confirming they are not disqualified from being appointed asDirectors of the Company.
Fit and Proper' criteria
All the Directors have confirmed compliance with the fit and proper' criteriaprescribed under the Corporate Governance Guidelines issued by the IRDAI.
During the year nine Board Meetings were convened and held the details of which aregiven in the 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. A separate meeting of the independent Directors was held on March 232018.
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.
20. 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.
21. 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 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 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.
22. PARTICULARS OF LOANS GUARANTEES OR INVESTMENT
In line with the clarification given by the Ministry of Corporate Affairs under theRemoval of Difficulty Order dated 13 February 2015 the provisions of Section 186 of theCompanies Act 2013 relating to loans guarantees and investments do not apply to theCompany.
23. SUBSIDIARY JOINT VENTURES AND ASSOCIATE COMPANIES
The Company does not have any Subsidiary Joint Ventures or Associate Company.
Persistency is a critical indicator of business viability and brand success. During theFY 2017-18 SBI Life witnessed 32.4% growth in Renewal Premium collection at Rs. 143.88billion in FY 2018 which contributed to 56.8% of Gross Written Premium. SBI Life hascontinued to focus on renewals and has undertaken initiatives to improve persistency ofits existing policies. The independent Renewal Vertical is focusing on collection ofrenewal premiums and servicing policyholders. We shall continue to accord prime importanceto this area.
25. RURAL AND SOCIAL SECTOR OBLIGATIONS
As per the regulatory requirements SBI Life has met its Rural and Social Sectorobligations for FY 2018. As against the minimum requirement of 20% the Company has issued23.7% policies in the rural sector which affirms the Company's approach towards lifeinsurance inclusion. Further 649599 new lives covered (13.14% of total new lives coveredin preceding year) by the Company are from the underprivileged social sector as againstthe regulatory requirement of at least 5% of total lives covered in preceding year.Consequently the Company has substantially exceeded the minimum social and ruralregulatory norms.
26. 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 the Companycomes under the purview of the Comptroller & 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 eighteenthAGM. M/s GMJ & Co. Chartered Accountants and M/s PSD & Associates CharteredAccountants are appointed as Statutory Auditors of the Company for the FY 2018-19 asadvised by the C&AG in accordance with Section 139 of the Companies Act 2013.
28. 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.
29. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA ON THE ACCOUNTS OF THECOMPANY
The Comptroller & Auditor General of India (C&AG) have conducted asupplementary audit u/s 143 (6) (b) of the Companies Act 2013 of the accounts of theCompany for the year ended March 31 2018. The C&AG vide their report no. GA/ CA-I/Audit /SBI Life / 2017-18/ 75 dated July 13 2018 have stated that there is nothingsignificant which would give rise to any comment upon or supplement to Statutory Auditors'Report. The Report of C&AG is being placed with the report of Statutory Auditors ofthe Company.
30. SECRETARIAL 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 Secretary Mumbai as the Secretarial Auditorof the Company.
The Auditor has not made any qualification reservation or adverse remark or disclaimerin his report for FY 2018. The detailed report on Secretarial Audit of the Company for FY2018 is enclosed as Annexure III to the report.
31. ANNUAL RETURN
Pursuant to Section 134(3)(a) and Section 92(3) of the Companies Act 2013 (as amendedby the Companies (Amendment) Act 2017) read with Rule 12 of the Companies (Managementand Administration) Rules 2014 an extract of the Annual Return (in form MGT 9) has beenannexed as Annexure IV to this Report.
32. 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.
33. SIGNIFICANT AND MATERIAL ORDERS PASSED BY REGULATORS OR COURTS OR TRIBUNALSIMPACTING THE GOING CONCERN STATUS AND OPERATIONS OF THE COMPANY
During the financial year 2017-18 no significant or material orders were passed by theRegulators or Courts or Tribunals which impact the going concern status and Company'soperation in future.
34. DIRECTOR'S RESPONSIBILITY STATEMENT
In terms of Section 134(3) (c) read with 134(5) of the Companies Act 2013 and theCorporate Governance Guidelines your Directors confirm that;
a) in the preparation of the annual accounts for the year ended March 31 2018 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 2018 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 2018on a going concern basis;
e) they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively; and
f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
35. 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 ||Auto populating the data from the customers KYC proofs and the Bank instruments |
|2. Benefits derived as a result of the above R&D ||Better quality of data Minimizing human intervention |
|3. Future plan of action ||Implementation of this technology under Mobile and Web based solutions. |
|4. Expenditure on R & D: || |
|(a) Capital || |
|(b)Recurring ||In-house development. |
|(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 ||Automated Online Chat Solution' Voice Search on website |
|2. Benefits derived as a result of the above efforts e.g. product improvement cost reduction product development import substitution etc. ||Better Customer Service and Satisfaction Customer support 24*7 Instant reply to customer queries |
|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:
| || ||(Rs. billion) |
|Particulars ||FY 2018 ||FY 2017 |
|Foreign Exchange Earnings ||0.08 ||0.50 |
|Foreign Exchange Outgo ||0.68 ||0.68 |
36. BUSINESS RESPONSIBILITY REPORT
Business Responsibility Report as stipulated under Regulation 34 of the ListingRegulations form part of the Annual Report and is available on the website of the Companyhttps://www.sbilife.co.in/en/about-us/ investor-relations/annual-reports
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 2018-19.
38. OTHER INFORMATION
A. Economic Capital:
The annual assessment of economic capital of SBI Life was carried out as on March 312018. As part of this exercise we have quantified the risk capital requirements relatingto various risks such as Insurance Risks (Mortality risk Lapse Risk Expense Risk etc.)and Non-Insurance Risks (Market Risk Operational Risk etc). The cost of guarantee forthe products wherever applicable is also calculated. A large part of the SBI Lifeportfolio is now monitored using a stochastic ALM model. The aggregate economic capitalrequirement for the risks of the Company including the guarantees is well within thestatutory capital requirement. The current Solvency coverage ratio (Assets / [Liability +Other risk margins]) on an economic basis is 112%.
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 2.06 as on March31 2018 (Previous year ended March 31 2017: 2.04) 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 Rs. 0.84billion 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 312018 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 Rs. 2.75 billion 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 2018 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 (IRDAI) Reserve Bank of India (RBI) Comptroller and Auditor General of India(C&AG) Securities and Exchange Board of India (SEBI) and Government of India (GOI)for their continued co-operation support and advice. The Directors would also like totake this opportunity to express their sincere thanks to the valued customers andshareholders' 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 Temasek KKR and allstakeholders for their continued support and trust.
| ||For and on behalf of the Board of Directors |
| ||Rajnish Kumar |
| ||Chairman |
|Place: Mumbai || |
|Date: July 26 2018 || |