ICICI_Prudential_Annual_Report_FY_2014

ZINDAGI 2013-14ANNUAL REPORTEK DINBADLEGIINSURANCE AAJ BADALRAHA HAI

INSURANCEAAJ BADALRAHA HAIICICI Prudential Life has distinct phases since opening up of the sector.taken up the mantle In the initial few years till 2008, the focus was toto convey the positive expand distribution and geographical presence,changes in the industry increase penetration and capture market share,to the citizens of the in this phase the industry registered a growth ofcountry through our 28%, life insurance penetration increased fromcampaign of “Insurance 2.2% in 2002 to 4.4% in 2008. From 2009-2014,Aaj Badal Raha Hai - We in the backdrop of a tough macro-economic andare changing too”. an evolving regulatory environment, the industry growth moderated and penetration dippedThe life insurance landscape in India has been superior experience. The customer servicing to 2.8% as of FY2014. Today life insurers areconstantly evolving since opening up in 2000 and approach has transformed from the traditional focused on efficiency and offering significantlyis at an exciting juncture today. This journey has agent-branch based model to 24x7 multi-mode improved product propositions. This hasseen the sector transform significantly in almost model using various mediums such as call provided the industry an edge to compete withall aspects be it the customer proposition, centres, email, SMS etc. The distributor is also other financial services instruments.distribution approach, regulatory framework, now more effective as access to information iscompetitive intensity or scale of the industry. on a real-time basis using technology. Against this backdrop, ICICI Prudential Life has taken up the mantle to convey the positiveThe customer proposition comprising the Distribution approach for the industry has changes in the life insurance industry to theproduct offering, the buying experience and evolved to incorporate more avenues of reaching citizens of the country through its campaignafter the sales service has seen significant out to customers, viz. bancassurance, internet of “Insurance Aaj Badal Raha Hai - We aretransformation. Life insurance products have and direct channels. This is relevant considering changing too”. We continue to offer a superiorevolved from being tax saving tools to serving customer preferences have themselves evolved. value proposition to customer’s through ourlife cycle financial needs of customers. Unit On the regulatory front, the focus of the regulator comprehensive product suite, transparentlinked products, introduced in the last decade, has been on ensuring protection of customer approach, superior investment returns andbecame popular owing to the advantages of interests and enhancing accountability of the life convenient service delivery. We aim to leveragetransparency, flexibility and enhanced control insurer and distributor. technology as a change agent to adapt to theto customers compared to the conventional emerging environment, become more efficientproducts category. The buying experience for the The competitive intensity has increased as the and ensure delivery of a superior proposition tocustomer too has migrated towards a simpler, number of players increased to 24 by the end of our customers.hassle-free process that involves customers FY2014. Insurance products today compete within the needs analysis process followed by a other financial saving instruments such as fixed In summary, the changes in the industry havefinancial plan and product advisory based on deposit and asset classes like real estate, gold ensured that customers’ interests remain thelong-term goals. Use of technology has enabled etc. The scale of operations and consequently focal point which therefore augurs well for thefaster issuances, lesser documentation and a growth for the industry has witnessed two future. Ultimately, what is good for the customer is good for the industry and for us.

CORPORATE OVERVIEWCONTENTSCORPORATE OVERVIEW02-13 Message from the Chairperson 02 Message from the Chief Executive, Prudential Corporation Asia 03 Message from the Managing Director & CEO 04 Board of Directors and Board Committees 06 ICICI Prudential Life at a Glance 08 Offering a Superior Value Proposition 10 Enhancing the Customer Experience 12STATUTORY REPORTS & MANAGEMENT REVIEW14-42 Directors’ Report 14 Corporate Governance 24 Management Discussion and Analysis 26 Enterprise Risk Management 38 Fostering a Winning Workplace 41 Making a Difference to our Communities 42FINANCIAL STATEMENTS43-338 Management Report 44 Standalone 50 Independent Auditors’ Report and Certificates 54 Financial Statements 302 Consolidated 303 Independent Auditors’ Report Financial Statements OTHER INFORMATION339-343 New Business Profit Reporting 339 Glossary of Terms 340 Additional Information 343 10 Offering a Superior Value Proposition 12 Enhancing the Customer Experience

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014MESSAGE With extensive use of technologyFROM and a committed team ofTHE CHAIRPERSON employees, we strive to be the preferred choice of customers for their protection and savings needs.Chanda Kochhar DEAR SHAREHOLDERS, The Indian life insurance sector has evolvedChairperson rapidly over the last decade. A competitive The Indian economy has experienced challenges market and regulatory initiatives focused on in recent years due to both global and domestic high quality products that meet the needs of headwinds. However, the intrinsic strengths of the customer have laid the foundation for future the economy as well as policy measures taken growth. In this scenario, the ICICI Prudential Life to stabilise the fiscal and current account deficits Insurance franchise continues to make excellent have helped to sustain optimism and confidence progress. We have built a business model based regarding our long-term growth potential. The on a competitive product proposition, quality decisive mandate in the recent general elections customer service and a strong distribution has created the space for proactive policy and network. With extensive use of technology and administrative action to harness our growth a committed team of employees, we strive to drivers. In the coming years, India’s dynamism be the preferred choice of customers for their and the existing under-penetration of financial protection and savings needs. We accord the services will provide the basis for sustained highest importance to honouring the trust that growth in the financial sector. our customers have reposed in us, not only for themselves but also for their families. We are therefore committed to ensuring that we are responsive to customer needs. The Company achieved robust performance in fiscal 2014 due to its consistent customer- centric strategy, strong leadership and dedication & hard work of its employees. Going forward, I am confident that ICICI Prudential Life Insurance will lead the way in building a globally benchmarked business in life insurance in India.2 02 Message from the Chairperson 03 Message from the Chief Executive, Prudential Corporation Asia 04 Message from the Managing Director & CEO

INSURANCE AAJ BADAL RAHA HAI CORPORATE OVERVIEWMESSAGE FROM THECHIEF EXECUTIVE, PRUDENTIALCORPORATION ASIA Our strengths in growing and managing high quality, multi- channel distribution, together with our expertise in providing innovative solutions to our customers’ savings and protection needs and delivering service excellence.Barry Stowe What differentiates us is our passion for thisChief Executive, Prudential Corporation Asia business that is driven by our understanding of the unique role we have in our communities. We give families the ability to protect themselves against the financial impacts of a personal tragedy; in their darkest hours we can take at least one worry away from them. We also take their savings and put these to work much more effectively through giving them unrivalled access to the bond and equity markets leveraging the breadth and depth of our investment management expertise. These long-term investments we make on behalf of our policyholders underpin the growth and development of the local economy which in turn benefits the communities in very positive ways. It is a very virtuous circle that we term ‘doing well by doing good’. DEAR SHAREHOLDERS, Prudential plc has a number of market leading positions in Asia and I am very pleased that our joint venture, ICICI Prudential Life, continues to be one of these. I am often asked about the drivers of this success in the region. Our strengths in growing and managing high quality, multi-channel distribution, together with our expertise in providing innovative solutions to our customers’ savings and protection needs and delivering service excellence are all vitally important but do not tell the full story.06 Board of Directors and Board Committees 08 ICICI Prudential Life at a Glance 10 Offering a Superior Value Proposition 12 Enhancing the Customer Experience 3

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014MESSAGE FROM ICICI Prudential Life’s focusTHE MANAGING DIRECTOR remains on supporting delivery of& CEO elements of value to customers. The company’s array of products continue to fulfil customer specific financial goals, now in a much more cost effective manner.Sandeep Bakhshi DEAR SHAREHOLDERS,Managing Director and CEO There are several reasons to be optimistic about the path of the Indian life insurance industry. The industry has experienced changes in regulations which we believe will provide the necessary tailwinds. The industry is more stable today and certain enablers like demographics, better product construct & customer service and consistent fund performance bodes well for the industry. Life insurance today encompasses targeted product coverage for every consumer profile and need. We at ICICI Prudential Life are delighted to have been an integral part of the transformation that has enabled us to offer a better proposition to customers. Our focus on integrating technology in all aspects of our functioning has made it fairly easy for us to adapt to the changed business environment with a sustained focus on service delivery. In fact, the new regulations have provided an opportunity to position life insurance as a tool offering financial protection and facilitating building a savings pool for the future. Maintaining A Customer Focus ICICI Prudential Life’s focus remains on supporting delivery of elements of value to customers. The company’s array of products continue to fulfil customer specific financial goals, now in a much more cost effective manner. The Company has strengthened its customer relationships by embedding technology into all aspects of business and providing customers with a superior value proposition in terms of products, service and a consistently high claims settlement ratio. The Company has established4 02 Message from the Chairperson 03 Message from the Chief Executive, Prudential Corporation Asia 04 Message from the Managing Director & CEO

INSURANCE AAJ BADAL RAHA HAI CORPORATE OVERVIEW We have had a fair degree of success in simplifying the life insurance buying experience for customers, our endeavour is to make it as simple as opening a fixed deposit. As awareness about the new customer- friendly product structures widens, we believe that life insurance will attract a significant proportion of financial savings of the customer. analytics and digital capabilities for a better long-term value to customers with increased customer experience besides data analysis and accountability and responsibility. Through the segmentation capability. use of appropriate solutions we will endeavour to enrich the customer experience and provide The Company recognizes the emerging digital satisfaction at every step. landscape as an opportunity to retain and grow customer value. It has constantly empowered We have had a fair degree of success in customers to take informed decisions and simplifying the life insurance buying experience enhanced their participation in the buying for customers, our endeavour is to make it as process. It also offers a superior customer on- simple as opening a fixed deposit. As awareness boarding experience by ironing out the legacy about the new customer-friendly product challenges. The sales process is completed in a structures widens, we believe that life insurance matter of minutes and can be tracked. The digital will attract a significant proportion of financial initiatives have converted every distributor with savings of the customer. Life insurance is a a tablet into a virtual branch thereby providing long-term product and we strive to offer holistic convenience to customers. and meaningful service to our customers and other stakeholders across the entire life-cycle. Highlights of FY 2013-14 We truly believe that life insurance has changed ICICI Prudential Life has delivered good results and this will enable us to bring a larger section of despite a changing business environment. This the country’s population under the ambit of life has been the result of ensuring that all initiatives insurance. We thank you for your contributions in implemented pivoted around customers and our journey to deliver value to all stakeholders. their requirements in an efficient manner. More importantly, the digital initiatives facilitated increased productivity across the organization. The Road Ahead The Indian life insurance industry has just begun using technology, the benefits of which are visible. We at ICICI Prudential Life will continue to integrate sales and service channels so as to be able to provide customers with a brand- affirming experience at every touch-point. The sell-online platform has added to the existing capabilities of our distribution network to deliver06 Board of Directors and Board Committees 08 ICICI Prudential Life at a Glance 10 Offering a Superior Value Proposition 12 Enhancing the Customer Experience 5

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014BOARDOF DIRECTORSMs. Chanda Kochhar Mr. N. S. Kannan Mr. K. RamkumarChairperson Director Director Mr. Adrian O’ConnorMr. Rajiv Sabharwal Mr. Barry Stowe DirectorDirector DirectorMr. Keki Dadiseth Prof. Marti G. Subrahmanyam Ms. Rama BijapurkarIndependent Director Independent Director Independent DirectorMr. Vinod Kumar Dhall Mr. V. Sridar Mr. Sandeep BakhshiIndependent Director Independent Director Managing Director and CEOMr. Puneet Nanda Mr. Sandeep BatraExecutive Director Executive Director6 02 Message from the Chairperson 03 Message from the Chief Executive, Prudential Corporation Asia 04 Message from the Managing Director & CEO

INSURANCE AAJ BADAL RAHA HAI CORPORATE OVERVIEWBOARDCOMMITTEES BOARD AUDIT COMMITTEE BOARD NOMINATION & REMUNERATION COMMITTEE* Mr. Keki Dadiseth, Chairman Mr. K. Ramkumar Ms. Rama Bijapurkar, Chairperson Mr. Adrian O’Connor Prof. Marti G. Subrahmanyam Mr. V. Sridar Mr. Vinod Kumar Dhall Mr. K. Ramkumar BOARD CORPORATE SOCIAL Mr. Adrian O’Connor RESPONSIBILITY COMMITTEE** WITH PROFITS COMMITTEE Mr. Vinod Kumar Dhall, Chairman Mr. K. Ramkumar Mr. V. Sridar, Chairman Mr. Adrian O’Connor Mr. N. S. Kannan Mr. Adrian O’ Connor BOARD CUSTOMER SERVICE & Mr. N. M. Govardhan POLICYHOLDERS’ PROTECTION Mr. Sandeep Bakhshi COMMITTEE Mr. Satyan Jambunathan Mr. Vinod Kumar Dhall, Chairman BOARD RISK MANAGEMENT Mr. K. Ramkumar COMMITTEE Mr. Adrian O’Connor Prof. Marti G. Subrahmanyam, Chairman BOARD INVESTMENT Ms. Rama Bijapurkar COMMITTEE Mr. N. S. Kannan Mr. Adrian O’Connor Prof. Marti G. Subrahmanyam, Chairman Mr. N. S. Kannan SHARE TRANSFER COMMITTEE Mr. Adrian O’Connor Mr. Sandeep Bakhshi Mr. Vinod Kumar Dhall, Chairman Mr. Sandeep Batra Mr. Keki Dadiseth Mr. Satyan Jambunathan Mr. Sandeep Bakhshi Mr. Manish Kumar Mr. Binay Agarwala * Board Compensation & Nominations Committee renamed as Board Nomination & Remuneration Committee with effect from April 22, 2014. ** Board Corporate Social Responsibility Committee constituted on April 22, 201406 Board of Directors and Board Committees 08 ICICI Prudential Life at a Glance 10 Offering a Superior Value Proposition 12 Enhancing the Customer Experience 7

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014ICICI PRUDENTIALLIFE AT A GLANCEICICI Prudential Life Insurance Company Limited (ICICI Prudential Life) Our strategic objectives, detailed below, areis a joint venture between ICICI Bank, India’s second largest bank directed towards reinforcing our customer valueand Prudential plc, a leading international financial services group proposition while keeping the interest of ourheadquartered in the United Kingdom. ICICI Prudential Life was among stakeholders in mind:the first private sector life insurance companies to enter the life insuranceindustry in December 2000. ICICI Bank and Prudential plc hold 74% and Enhance market leadership26% stakes, respectively, in ICICI Prudential Life.Our commitment revolves around the customer, helping them meet their Provide superior value proposition tolong-term financial goals. For over a decade, this commitment has only customer’sgrown from strength to strength. Strengthen multichannel architecture Continued focus on efficiency of operations Superior risk adjusted fund performance Customer retentionNew business (` billion) Market share* (%)premium 18.9 18.528.18 31.18 33.10 35.32 32.53 34.44 16.1 5.9 7.0 7.2FY 2012 FY 2013 FY 2014 FY 2012 FY 2013 FY 2014 Retail Weighted New Annualised Premium Private industry Total industryBusiness Premium (RWRP) Equivalent (APE) *Retail weighted received premium basisDistribution mix* (%) Product mix* (%)10.2 7.5 13.1 7.2 9.6 8.0 38.4 45.5 33.5 38.3 45.2 54.2 61.6 66.5 54.5 44.0 34.5 28.2FY 2012 FY 2013 FY 2014 FY 2012 FY 2013 FY 2014 Agency Bancassurance ULIP Traditional Corporate agents & Brokers OthersRetail weighted received premium basis Retail weighted received premium basis8 02 Message from the Chairperson 03 Message from the Chief Executive, Prudential Corporation Asia 04 Message from the Managing Director & CEO

INSURANCE AAJ BADAL RAHA HAI CORPORATE OVERVIEW Expenses* (` billion) Expense ratios (%) 69.3 17.83 17.31 16.28 84.8 75.4 6.05 7.65 6.27 17.9 19.2 18.8 FY 2012 FY 2013 FY 2014 FY 2012 FY 2013 FY 2014 Commission Operating expenses* Cost to RWRP Total expense ratio * excluding unit expensesAssets under (` billion) Profit after tax (` billion) Dividendmanagement 805.96 15.67 382.26707.71 741.64 13.84 14.96 10.93*398.90 377.54 7.65 4.14 4.84 2.90 3.39308.81 364.10 423.70 FY 2012 FY 2013 FY 2014 FY 2012 FY 2013 FY 2014 FY 2012 FY 2013 FY 2014 Profit after taxDebt Equity Dividend per share (`) Dividend (` billion) * Includes special dividend of ` 4.86 billion Persistency* (%) Solvency ratio* (%) 71.7 372.3 77.0 71.4 371.3 395.7 FY 2012 FY 2013 FY 2014 FY 2012 FY 2013 FY 2014 *13th Month Persistency Solvency ratio *Available solvency / required solvency06 Board of Directors and Board Committees 08 ICICI Prudential Life at a Glance 10 Offering a Superior Value Proposition 12 Enhancing the Customer Experience 9

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014OFFERING ASUPERIORVALUEPROPOSITIONWith the core philosophyof what is good for thecustomer is good for theCompany, we at ICICIPrudential Life aim atproviding a superior customervalue proposition. Our viewof customer value propositionencompasses comprehensiveproduct suite, higher returnsthrough product design andinvestment management,an enhanced customerexperience, best in classpost sales customer service,and convenient customerinteraction platforms.10 02 Message from the Chairperson 03 Message from the Chief Executive, Prudential Corporation Asia 04 Message from the Managing Director & CEO

INSURANCE AAJ BADAL RAHA HAI CORPORATE OVERVIEWComprehensive product suiteOur product strategy aims at catering to life stage needs of customer’s. Customer needs and therefore positioning of life insurance products have evolvedfrom being a tax saving tool to being a comprehensive life stage financial solution. We provide solutions to customers for various life stage requirements -protection, retirement, savings or child education.Young & single Married Married with young Married with grown Retired 25-30 years 30-35 years children up children 55+ years 40-55 years 35-40 yearsSavings for wealth Home purchase Mortage Childern’s Post-retirement livingcreation Pure protection Insurance higher studies expenses- Annuities ( health + life ) Childern’s education Mortgage Insurance Medical expenses Wealth creation Saving for Health care for long term child’s marriage Retirement planing Retirement provison Helath insuranceTransparency and flexibility in our part of our on-boarding process a welcome email can avail a loan of up to 80% of the surrenderproducts is sent to every customer containing an internet valueTransparency link to view a video detailing the features of theICICI Prudential Life is of the belief that customers product they have purchased. Higher value through product offeringsshould make a well informed decision before With our new bouquet of products it is ourbuying any product. This is critical as customers Flexibility endeavor to try and give the customer morerepose their trust in us and depend on us to meet We offer a lot of flexibility to suit the customer value for every rupee invested. The Reduction intheir financial goals. needs. These include: Yield (RIY), which is a measure of the charges 1. Choice of mode of purchase from any of our deducted from the premium, is lesser on ourIt is our endeavour to ensure that the customer new bouquet. The returns in our products,understands the product and its features. We distribution channels viz individual agents, measured by RIY, are superior as compared toensure that our distribution network is provided Bank branches, online sales and sales through the regulatory requirements and our peer set. Inwith the requisite training and have developed our proprietary sales force fact the lowest RIY among current products is 1.0%a skill set that facilitates them to understand 2. Option to choose the amount of life cover andthe needs of the customer. Our buying process to increase it later Superior risk adjusted returnsinvolves a ‘Need Analysis’ which takes into 3. Flexibility to choose asset allocation based We manage an AUM of over ` 800 billion withaccount various parameters viz. age, income, on risk appetite and to manage the asset a philosophy of ensuring long term Safety,monthly expenses, occupation, needs etc. to allocation through the term of the policy by Stability and Returns of our customer funds. Ourenable customers to choose only from that suite using switches or dynamic asset allocation investment management team has a cumulativeof products which match the specific need. rules experience of more than 50 years in various 4. Option to change the premium paying aspects of the capital markets like research,A benefit illustration showcasing the build-up frequency trading, risk management etc. For its unit-linkedof savings pool over the term of the policy and 5. Option to partially withdraw funds for any funds, the Company delivered superior funda key feature document listing out the product emergencies after 5 years. In unit linked performance and 97% of funds contributing tofeatures in a precise and concise manner are policies customers can withdraw up to 20% of the linked AUM outperformed their respectiveintegral part of on-boarding documentation. As the fund value and in non-linked policies they benchmarks since inception. 11

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014ENHANCINGTHECUSTOMEREXPERIENCEApart from our existingchannels of communication, weintroduced the online claimssettlement facility that providesconvenience to the claimant.All relevant documents can beuploaded for a quick processingand disbursal of the claim.12 02 Message from the Chairperson 03 Message from the Chief Executive, Prudential Corporation Asia 04 Message from the Managing Director & CEO

INSURANCE AAJ BADAL RAHA HAI CORPORATE OVERVIEWThe selling process comprises of conducting years, two-thirds of servicing transactions are For FY2014the need analysis, pitching a product and being conducted through self-service modes andconcluding a slae. This process has undergone one-fifth of our renewal premium is collected 80.2% of the new business applicationsa transformation. Traditionally, the distributor through online modes. initiated using the digital platformrequired to make several visits to the customerto pitch a product, collect various documents Ease of claim settlement 41.6% of renewal premium payment throughand the process involved risks associated electronic modeswith human errors. To overcome these legacy For ICICI Prudential Life claims is the ultimatechallenges we introduced tablets loaded with moment of truth, it is the delivery of the 70.0% of all service transactions processedan interactive application to aid our distribution promise made to the customer. The sole focus through website and IVRSnetwork. This has improved the performance of our claims management process is to providelevels of our distribution network on parameters support and convenience at a time of emotional 90.5% of payouts through electronic modeof customer service and efficiency. distress for the claimant. Each claim is handled with utmost care and sensitivity. Grievance ratio stood at 2531The tablets aid the distributor in conductingan on-the-spot need analysis of the customer Our philosophy remains ‘first time right’ to 1 Per 10,000 new business policies issuedand recommend only those products which ensure that genuine claims are settled in amatch their requirements. Use of tablets has smooth manner and in the least possible timestandardised the selling process and ensures frame. Due diligence is carried out at the time ofprotection of customer’s interests. It facilitates sourcing of policy, thus reducing turnaround timethe active participation of the customer in the for the claim settlement. The average time takenentire process enabling an error free and smooth to settle a non-investigation claim was 6 dayson-boarding process. At times it provides and claims settlement ratio 94% for FY 2014,insights to customers on their requirements and one of the best amongst private life insurancepossible solutions. companies.The acceptance or any other decision regarding Apart from our existing channels ofthe issuance of the policy is communicated communication, we introduced the online claimsinstantly to the customer. Our distributors can settlement facility that provides convenience toinstantly validate KYC by using the customers the claimants. All relevant documents can beAadhar card number (UIDAI), Permanent uploaded for a quick processing and disbursal ofAccount Number (PAN) or by just simply entering the claim.the ICICI Bank account number of the customer.The active participation of the customer ensures As the popularity of holding dematerializedsatisfaction right from the word go and has led policies grows, the online claims facility will beto a drop in the number of grievances registered. extremely useful in quick settlement of claims. However, the traditional modes of raising andThe dematerialisation of life insurance policies settling a claim continue to exist, we haveis a game changer of sorts for the industry as witnessed a trend which depicts the preferenceit eliminates a few challenges associated with of claimants to have the claims settledstorage and maintenance of physical documents. electronically. Over 90% of our claim paymentsCurrently, there are five insurance repositories have been settled electronically.that have been authorised to dematerialisepolicies. To provide customers with the option tochoose their preferred insurance repository wehave tied up all of them.Our digitisation initiative has enabled distributorsto download the proprietary application ontheir laptops, desktops or smart phones. Thedistributor equipped with this applicationcan accept service requests and respond tocustomer queries more effectively.Recognising the evolving customer preferencesof being connected 24x7, we extended ourservicing options to contact centres as well asemail and web. We have enabled transactionson our website to provide convenience to thetechnology savvy customers. For the last few 13

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014DIRECTORS’ REPORTTO THE MEMBERSICICI Prudential Life Insurance Company LimitedYour Directors have pleasure in presenting the fourteenth Annual Report of ICICI Prudential Life Insurance Company Limited (the Company) with the auditedstatement of accounts for the year ended March 31, 2014.PERFORMANCE ` 15.67 billion in FY2014. The solvency ratio for and on-boarding continues to gain momentum. the Company remained healthy at 372.3% for Capability to issue policies in less than threeIndustry in FY2014 FY2014. The assets under management (AUM) hours is first of its kind in the industry. For increased from ` 741.64 billion as at March 31, FY2014, 80% of new business applications wereThe life insurance industry registered a decline of 2013 to ` 805.97 billion as at March 31, 2014. initiated using the online platform. In addition,3.4% in retail weighted new business premium For its unit-linked funds, the Company delivered 41% of the retail renewal premium was collected(RWRP) terms for FY2014. The private sector superior fund performance and 97% of the funds through electronic mode.declined by 3.4%. Some of the key trends in the have outperformed their respective internalindustry are as follows: benchmarks since inception. The Company has been strengthening mechanisms to improve persistency including The new product regulations for linked The Company continued its focus on efficiency ensuring higher attachment of ECS or standing and non-linked products came into effect of operations. Cost to RWRP, declined from instructions at the time of sale and changes in from January 1, 2014. This has meant a 75.4% in FY2013 to 69.3% in FY2014. Total non- performance management and compensation significant transition for the industry with unit expenses registered a decline of ` 2.41 design to better align distributor and sales players having to re-build their product billion from ` 24.96 billion in FY2013 to ` 22.55 management to focus on persistency. These have suite. billion in FY2014. The digitization initiatives of led to increase in retail renewal premium after the Company to facilitate customer acquisition two years and improvement in Year 1 persistency. The decline in the number of individual agents for the industry was arrested in A summary of the key metrics are as mentioned in the table below: FY2014 with number of agents increasing marginally from 2.17 million as at December Particulars FY2013 (` billion) 31, 2012 to 2.20 million as at December 31, RWRP 33.10 FY2014 2013. For Private industry also the number Total retail premium 116.94 of individual agents increased from 0.96 Non unit expenses 24.96 32.53 million in December 2012 to 1.00 million 116.85 in December 2013. The percentage of 22.55 business from agency for private players as of December 2013 was similar to December Profit after tax 14.96 15.67 2012. Sum assured in force: 2,412.99 2,688.01Company in FY2014 Basic policy 2,757.71 3,020.68 Total (Basic + Riders)The Company registered a decline of 1.7% inRWRP FY2014. The Company’s market share Assets held 741.64 805.97based on RWRP is expected to be around7.2% in FY2014. Among private players, the Cost to RWRP 75.4% 69.3%Company maintained its leadership position with Expense ratio* 19.2% 18.8%market share of 18.9% in FY2014. However, theCompany increased its gap vis-à-vis its nearest * Expense ratio = Expenses (including commission and front line sales cost excluding unit expenses)/(Total premium income - 90%private competition from 1.06 to 1.16 times. of single premium)Total premium collected by the Company Outlook for the industry and the Enhance market leadership: The Companydeclined by 8.2% from ` 135.38 billion in FY2013 Company would continue to focus on growth opportunitiesto ` 124.29 billion in FY2014 primarily on account in the market with a customised regionalof decline in group premium. Retail premium We believe that given strong structural strategy to strengthen relative position in everywas flat with new business declining marginally advantages like India’s favourable demographics, geography.from ` 36.39 billion in FY2013 to ` 35.85 billion high rate of financial savings and improvingin FY2014 and renewal premium increasing insurance product propositions, the life Providing superior value proposition tomarginally from ` 80.55 billion in FY2013 to insurance industry would continue to be one customers: The Company would continue` 81.00 billion in FY2014. This increase in retail of the preferred instruments for longer term to focus on providing superior customerrenewal premium arrests the two year trend of savings and protection. value proposition through product designdeclining renewal premiums. and service architecture. The Company would continue to focus on itsThe Company registered 4.7% growth in profit strategic priorities, specifically:after tax from ` 14.96 billion in FY2013 to14 14 Directors’ Report 24 Corporate Governance 26 Management Discussion and Analysis 38 Enterprise Risk Management

INSURANCE AAJ BADAL RAHA HAI STATUTORY REPORTS & MANAGEMENT REVIEW Strengthen multi-channel architecture: profit after tax of ` 14.96 billion for the previous assets under management. As per the terms The Company would strengthen its mutli- year. The Board at its Meetings held on July 16, and conditions of the bidding process, the channel distribution by non-linear scale 2013, October 18, 2013 and January 16, 2014 entities who agree to match the lowest bid will up of agency and proprietary sales force, had approved payment of interim dividend of be selected as Pension Fund Manager by the leveraging the bancassurance franchise and ` 1.00 per share, ` 1.05 per share and ` 1.15 PFRDA. Further communication in this regard is focussing on quality third party distribution. per share respectively. Further, the Board at its awaited from PFRDA. PFRDA has extended the Meetings held on October 18, 2013 and January validity of existing license till June 30, 2014. Continued focus on efficiency of 16, 2014 had approved payment of special operations: The Company would focus on dividend of ` 1.10 per share, ` 1.25 per share BOARD OF DIRECTORS cost efficiency and in particular would leverage respectively. The Board at its Meeting held on the digital platform to improve customer April 22, 2014 recommended a final dividend of Section 149 of the Companies Act, 2013 (the Act) experience and efficiency of operations. ` 1.05 per share and a special dividend of ` 1.05 which defines the composition of the Board has per share. Total dividend for the year is ` 7.65 per been notified effective April 1, 2014 and provides C ustomer retention: The Company would share aggregating to ` 10.93 billion for FY2014. that an independent director shall not hold office strengthen mechanisms to improve An amount of ` 1.57 billion was transferred to for more than two consecutive terms of five years the AUM growth by increasing renewal the reserves of the Company at March 31, 2014. each provided that the director is re-appointed by premium and curtailing surrenders. passing a special resolution on completion of first CLAIMS term of five consecutive years. Superior risk adjusted fund performance: The Company has in place a robust risk The Company believes that claim settlement As per the explanation provided under Section and investment management framework is the ultimate promise which needs to be 149 of the Act, any tenure of an independent to deliver superior risk adjusted returns to delivered to policyholders/beneficiaries. Towards Director on the date of commencement of this customers. this objective, we have designed and developed Section i.e. April 1, 2014 shall not be counted robust claims processes and systems which as a term. The tenure of every independentOUR REACH ensure settlement of genuine claims at the director to compute the period of first five earliest, thereby protecting the interest of consecutive years would be reckoned afreshThe Company reaches its customers through policyholders. from April 1, 2014. The independent directors viz559 offices in 489 locations at March 31, 2014. Mr. Keki Dadiseth, Prof. Marti G. Subrahmanyam,At March 31, 2014, the Company had over The Company has demonstrated its commitment Ms. Rama Bijapurkar, Mr. Vinod Kumar Dhall,10,700 employees and over 171,000 advisors by settling over 15,000 individual and group Mr. V. Sridar will hold office for a maximumand is thus well equipped to cater to the needs mortality claims in FY2014. For non-investigated consecutive period of five years post whichof customers. The Company distributes its individual claims, the claim settlement was they will be subject to re-appointment subjectproducts and renders services through its offices completed within an average turn around time to compliance with applicable provisions of theas well as individual agents, corporate agents, of six days from receipt of last requirement as Companies Act, 2013.banks, brokers, proprietary sales force (PSF) and compared to the regulatory norm of 30 days.online channels. The digitization initiative has Section 152 of the Act, also notified effectivehelped the Company expand its reach by making SUBSIDIARY April 1, 2014 provides that independentus agnostic to presence of physical offices. To directors would need to be excluded from thefurther this initiative, the Company has deployed The Company’s wholly owned unlisted subsidiary, total number of directors for the purpose ofmore than 6,000 handheld devices. ICICI Prudential Pension Funds Management computing the number of directors whose Company Limited (PFM) acts as a fund manager period of office will be liable to determination byPRODUCTS under the National Pension System (NPS). retirement of directors by rotation.During the year, the Company revamped its During the year ended March 31, 2014, the In terms of the aforesaid provisions, Mr. N. S.entire portfolio of products to ensure adherence subscribers’ funds managed by PFM have Kannan and Mr. Rajiv Sabharwal would retireto the new product regulations issued by IRDA. increased by 144.8% to ` 1,768.2 million by rotation at the forthcoming AGM and isThese regulations covered product design of all (previous year: ` 722.3 million). PFM has eligible for re-appointment. Mr. N. S. Kannan andretail and group products including unit linked registered a loss of ` 10.7 million (previous year: Mr. Rajiv Sabharwal has offered himself forand traditional products. The Company currently loss of ` 1.0 million). re-appointment.offers a range of products across unit linked andtraditional platforms to meet specific customer The PFRDA has proposed to select and appoint AUDITORSneeds. The Company has introduced unit linked afresh eight Pension Funds to manage thelife and pension products that offer equity pension assets of the Private Sector NPS S. B. Billimoria & Co. and S. R. Batliboi & Co.participation while providing a capital guarantee. through competitive bidding. This appointment LLP, Chartered Accountants, were appointedIn FY2014, the Company had a balanced product will be valid for five years. as joint statutory auditors of the Companymix with traditional products contributing to for FY2014 at the Thirteenth Annual General33.9% of the retail new business premium. The Company had submitted its bid for ICICI Meeting to hold office upto the conclusion of Prudential Pension Funds Management Company the ensuing Annual General Meeting. PursuantDIVIDEND & TRANSFER TO Limited (PFM) as per PFRDA requirement and to circular dated July 25, 2005 regarding theRESERVES successfully emerged as one of the lowest appointment of statutory auditors by insurance eight bidders. The lowest bid for Investment companies, IRDA requires that the joint statutoryThe financial operations have resulted in a profit Management Fees was 0.01% per annum on auditors should retire after completion of fiveafter tax of ` 15.67 billion as compared to a41 Fostering a Winning Workplace 42 Making a Difference to our Communities 15

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014years and are eligible for reappointment after philosophy encompasses not only regulatory and certification from respective functional heads,a cooling off period of two years. Accordingly, legal requirements but also several voluntary is placed at the Board Audit Committee on aBSR & Co. LLP, retired as joint statutory auditors practices aimed at a high level of business quarterly basis.of the Company in FY2012 on completion of ethics, effective supervision and enhancement ofthe maximum term of five years prescribed value for all stakeholders, legally, ethically and on Whistle Blower Policyby IRDA. BSR & Co. LLP have completed the a sustainable basis, while ensuring fairness. Thecooling off period of two years and are eligible Insurance Regulatory & Development Authority The Company has formulated a Whistle blowerfor reappointment as joint statutory auditors. The (IRDA) had issued corporate governance Policy to encourage employees to report mattersBoard proposes to appoint B S R & Co. LLP in guidelines applicable to all insurance companies. without the risk of subsequent victimisation,place S. B. Billimoria & Co., retiring Auditor and The Guidelines have come into force effective discrimination or disadvantage. As per the Policy,re-appoint M/s. S. R. Batliboi & Associates LLP, April 1, 2010. The Company had taken necessary employees can raise concerns related to breachChartered Accountants, as the Joint Statutory steps and put in appropriate processes to ensure of any law, statute or regulation, Issues relatedAuditor (being eligible for appointment and compliance with the same. to accounting policies and procedures, Actsre-appointment) on the recommendation of the resulting in financial loss or loss of reputation,Audit Committee of the Company. Internal audit and compliance misuse of office, suspected/actual fraud and framework criminal offences, non-compliance to Anti-DETAILS AS PER SECTION 217(2A) bribery & anti-corruption policy by the Company Internal Audit: The Company has in place or its employees to the Board Audit CommitteeAs required by the provisions of Section 217 an internal audit framework with a risk based through specified channels. This mechanism(2A) of the Companies Act, 1956, read with the audit approach. The basic philosophy of risk has been communicated and posted on theCompanies (Particulars of Employees) Rules, based internal audit is to provide reasonable Company’s intranet.1975, as amended, the names and relevant assurance to the Board Audit Committee andparticulars of the employees are set out in the top management about the adequacy and Code of Conduct for PersonalAnnexure to the Directors’ Report. effectiveness of the risk management and Investments control framework in the Company.RURAL AND SOCIAL BUSINESS The Company has a code of conduct for personal Review of controls is undertaken by internal investments. The objective of the Code is to212,650 policies were issued in rural areas, audit through execution of internal audits as per prohibit insider trading in any manner by theconstituting 27% of total policy issuances. The risk based audit plan. The internal audit covers Access Persons and to maintain confidentialityCompany also covered more than 171,700 lives auditing of processes, transactions and systems. of unpublished price sensitive information andfalling within the norm of ‘social sector’ business. Key audit observations and recommendations access to information on a “need to know” made are reported to the Board Audit basis. The Code is applicable to all “AccessINCREASE IN SHARE CAPITAL Committee every quarter. Implementation of the Persons” and their “Family Members” as defined recommendations is actively monitored. in this Code.The paid-up capital of the Company increased by` 3.16 million (face value) pursuant to exercise The internal audit function is capable of reviewing Code of business conduct and ethicsof stock options granted under the Employee and assessing the adequacy and effectivenessStock Option Scheme taking the paid-up capital of, and the Company’s adherence to its internal The Board of Directors has approved a Code ofto ` 14.29 billion (face value) at March 31, 2014. controls as well as reporting on its policies and Business Conduct and Ethics for Directors and procedures. employees of the Company. The Code aimsPUBLIC DEPOSITS at ensuring consistent standards of conduct Compliance: The Board Audit Committee and ethical business practices across theDuring the year under review, the Company has oversees the compliance framework of the constituents of the Company.not accepted any deposits under Section 58A of Company. The Company has formulated variousthe Companies Act, 1956. internal policies/procedures and an employee The Code lays down the broad framework of code of conduct, which govern day-to-day general guiding principles.CORPORATE GOVERNANCE activities to ensure compliance. The Compliance function disseminates relevant laws, regulations Sexual Harassment PolicyThe corporate governance framework of the and circulars related to insurance, anti-moneyCompany is based on an effective independent laundering and other regulatory requirements, to The Sexual Harassment of Women at WorkplaceBoard, the separation of Board’s supervisory various functions. It also serves as a reference (Prevention, Prohibition and Redressal) Act,role from the executive management and the point for the staff of various functions for seeking 2013 provides protection against sexualconstitution of Board Committees, generally clarifications on applicable laws, regulations and harassment of women at workplace and for thecomprising a majority of independent/non- circulars issued by the regulatory authorities. The prevention and redressal of complaints of sexualexecutive Directors and chaired by independent Compliance team also monitors the adequacy of harassment. The Company has laid down policyDirectors, to oversee critical areas. the compliance framework across the Company. on sexual harassment at work place and has Key issues observed as part of this monitoring appraised all its employees about the same. ThePhilosophy of Corporate Governance are reported to the Board Audit Committee, and Company believes in providing a safe working implementation of recommendations is actively environment at the workplace. On an ongoingThe Company is committed to adopting the monitored. A compliance certificate signed by basis, the Company is taking steps measureshighest business, governance, ethical and legal the Managing Director & CEO, based on the to create awareness amongst its employee bystandards. The Company’s corporate governance conducting/ sending its employees for various seminars/discussion forums.16 14 Directors’ Report 24 Corporate Governance 26 Management Discussion and Analysis 38 Enterprise Risk Management

INSURANCE AAJ BADAL RAHA HAI STATUTORY REPORTS & MANAGEMENT REVIEWBoard of Directors Name of the Director Board Meetings Number of other directorships Number of other attended/held Of Indian public Of other committee3The Company has a broad-based Board of Nominee Directors during the year limited companies1 companies2 membershipsDirectors, constituted in compliance with the Ms. Chanda Kochhar,Companies Act, 1956 and in accordance with Chairperson 5/5 43 -IRDA Corporate governance guideline, 2009. Mr. N. S. KannanThe Board comprises of fourteen Directors; four Mr. K. Ramkumar 5/5 41 2nominated by ICICI Bank Limited, two nominated Mr. Rajiv Sabharwal 4/5 2- -by Prudential Plc, five independent Directors, the Mr. Barry Stowe 5/5 2- -Managing Director & CEO and two Executive Mr. Adrian O’Connor 2/5 -- -Directors. Except the Managing Director & CEO Independent Directors 4/5 -- -and two Executive Directors, all other Directors Mr. Keki Dadisethincluding the Chairperson of the Board are non- Prof. Marti G. Subrahmanyam 4/5 81 5executive Directors. There is a clear segregation Ms. Rama Bijapurkar 3/5 34 -of responsibility and authority between the Mr. Vinod Kumar Dhall 3/5 12 1non-executive Directors and the executive Mr. Sridar Iyengar (upto April 5/5 5- 7management. The Board is responsible for overall 18, 2013) 1/1 51 -corporate strategy and other responsibilities Mr. V. Sridar (appointed w.e.fas laid down by IRDA under the Corporate April 18, 2013) 3/4 8- 8Governance guidelines. The Managing Director Executive Directors& CEO and the Executive Directors oversee Mr. Sandeep Bakhshi, 5/5 2- 1implementation of strategy, achievement of Managing Director & CEOthe business plan and day-to-day operations. Mr. Puneet Nanda 5/5 1- 1There is an appropriate mix of executive, non- Mr. Sandeep Batra, (appointed 1/1 21 1executive and independent Directors to maintain w.e.f January 1, 2014)the professionalism and independence of theBoard. The independent Directors are eminent 1. Comprises public limited companies incorporated in India.personalities with significant expertise in thefields of finance, insurance, law, strategy and 2 C omprises private limited companies incorporated in India and foreign companies but excludes Sectionmarketing. None of the Directors are related to 25 companies and not for profit foreign companies.any other Director or employee of the Company. 3. Comprises only Audit Committee and Share Transfer & Shareholders’/Investors’ Grievance Committee of Indian public companies.The Board functions either as a full Boardor through various Committees constituted Board Committees have post-audit discussions to addressto oversee specific operational areas. TheBoard has constituted eight Committees, The details of Board Committees are as follows: areas of concern.namely, Board Audit Committee, Board RiskManagement Committee, Board Investment a) Board Audit Committee Approval of payment to statutoryCommittee, Board Customer Service & auditors and internal auditors or any ofPolicyholders’ Protection Committee, Board Terms of reference:Nomination and Remuneration Committee, its associated persons or companies, forWith Profits Committee, Board Corporate SocialResponsibility Committee and Share Transfer I. Accounts & Audit any other services rendered by them.Committee. These Committees were constitutedwith independent/non-executive Directors and Oversee the financial statements, Reviewing, with the management, theall the Committees are chaired by independent annual financial statements beforeDirectors. financial reporting, statement of cash submission to the Board for approval,At March 31, 2014, the Board of Directors flow and disclosure processes both onconsisted of 14 members. There were five with particular reference to:Meetings of the Board during FY2014 - on April 18, an annual and quarterly basis.2013, July 16, 2013, October 18, 2013, October30, 2013 and January 16, 2014. The names of the Recommend the appointment, re- Changes, if any, in accounting policiesDirectors and their attendance at Board Meetings and practices and reasons for the same.during the year are set out in the following table: appointment and, if required, the replacement or removal; remuneration, Significant adjustments made in the performance and oversight of the work financial statements arising out of audit of the auditors (internal/statutory/ findings. concurrent). Compliance with listing and other Oversight of the procedures and legal requirements relating to financial processes established to attend to statements to the extent applicable. issues relating to maintenance of books Disclosure of any related party of account, administration procedures, transactions. transactions and other matters having a bearing on the financial position of To the extent applicable review with the the Company, whether raised by the management, the statement of uses/ auditors or by any other person. application of funds raised through Discuss with the statutory auditors an issue (public issue, rights issue, before the audit commences, about the preferential issue, etc.), the statement nature and scope of audit, as well as, of funds utilised for purposes other than those stated in the offer document/41 Fostering a Winning Workplace 42 Making a Difference to our Communities 17

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014 prospectus/notice and the report S upervise and monitor matters reported b) Board Risk Management Committee submitted by the monitoring agency using the Company’s whistle blowing Terms of reference: monitoring the utilisation of proceeds or other confidential mechanisms for I. Risk Management: of a public or rights issue, and making employees and others to report ethical A ssist the Board in effective operation appropriate recommendations to the and compliance concerns or potential Board to take up steps in this matter. breaches or violations. of the risk management system by performing specialised analyses and II. Internal Audit Advise the Board on the effect of the quality reviews. above on the Company’s conduct Review the adequacy of internal audit of business and helping the Board M aintain a group wide and aggregated function, if any, including the structure set the correct “tone at the top” view on the risk profile of the Company of the internal audit department, by communicating, or supporting in addition to the solo and individual risk staffing and seniority of the official the communication, throughout the profile. heading the department, reporting Company of the importance of ethics structure, coverage and frequency of and compliance. Report to the Board details on the risk internal audit. exposures and the actions taken to Approve compliance programmes, manage the exposures. Oversee the efficient functioning of reviewing their effectiveness on a the internal audit department and regular basis and signing off on any A dvise the Board with regard to risk review its reports. The Committee material compliance issues or matters. management decisions in relation to will additionally monitor the progress strategic and operational matters such made in rectification of irregularities Review key transactions involving as corporate strategy and acquisitions and changes in processes wherever conflict of interest. and related matters. deficiencies have come to notice. Review the Anti Money Laundering II. Asset Liability Management (ALM): Set-up procedures and processes (AML)/Counter – Financing of Terrorism Formulate and implement optimal ALM to address all concerns relating to (CFT) policy annually and review the adequacy of checks and control implementation of the Companies AML/ strategies, both at product level and mechanisms. CFT programme. enterprise level and meeting risk/reward objectives. Review the findings of any internal Review compliance of Insurance Lay down the risk tolerance limits. investigations by the internal auditors Regulatory & Development Authority Monitor risk exposures at periodic into matters where there is suspected (IRDA) Corporate Governance guidelines. intervals and revise ALM strategies fraud or irregularity or a failure of internal where required. control systems of a material nature and Monitor the directives issued/penalties Place the ALM information before the reporting the matter to the Board. imposed/penal action taken against the Board at periodic intervals. Company under various laws and statutes Review with the management, and action taken for corrective measures. Composition performance of internal auditors, and the The Board Risk Management Committee comprises adequacy of the internal control systems. Composition of two independent Directors and at March 31, 2014 was chaired by Prof. Marti G. Subrahmanyam, Look into the reasons for substantial The Board Audit Committee comprises of an independent Director. There were four Meetings defaults in the payment, if any, to two independent Directors and at March 31, of the Committee during the year. the depositors, debenture holders, 2014 was chaired by Mr. Keki Dadiseth, an shareholders (in case of non payment independent Director. There were six Meetings The details of the composition of the Committee of declared dividends) and creditors. of the Committee during the year. and attendance at its Meetings are set out in the following table: R eview the functioning of the Whistle The details of the composition of the Committee Blower mechanism. and attendance at its Meetings are set out in the following table: III. Compliance & Ethics Name of the member Number of Name of the member Number of Monitor the compliance function and meetings meetings the Company’s risk profile in respect Mr. Keki Dadiseth – Chairman attended/held Prof. Marti G. Subrahmanyam attended/held of compliance with external laws and Mr. K. Ramkumar – Chairman regulations and internal policies, including Mr. Adrian O’Connor 6/6 Ms. Rama Bijapurkar 3/4 the Company’s code of ethics or conduct. Mr. V. Sridar* Mr. N. S. Kannan 6/6 Mr. Adrian O’Connor 3/4 Review reports on the above and on 3/4 proactive compliance activities aimed 2/6 2/4 at increasing the Company’s ability to meet its legal and ethical obligations, 1/2 on identified weaknesses, lapses, breaches or violations and the controls * Appointed w.e.f July 16, 2013 and other measures in place to help detect and address the same. The Board of Directors at its Meeting held on c) Board Investment Committee July 16, 2013 re-constituted the Board Audit Committee effective July 16, 2013 pursuant to Terms of reference: which Mr. V. Sridar was appointed as a Member Responsible for laying down an overall of the Committee. Investment Policy and operational framework for the investment operations of the Company. The Policy18 14 Directors’ Report 24 Corporate Governance 26 Management Discussion and Analysis 38 Enterprise Risk Management

INSURANCE AAJ BADAL RAHA HAI STATUTORY REPORTS & MANAGEMENT REVIEW should focus on prudential Asset The Board of Directors at its Meeting held on Name of the member Number of Liability Management (ALM) supported October 30, 2013 re-constituted the Board meetings by robust internal control systems. Investment Committee effective October 18, Mr. Vinod Kumar Dhall attended/held The Investment Policy and operational 2013 pursuant to which Mr. Sandeep Batra was – Chairman framework should, inter alia, encompass appointed as a Member of the Committee in Mr. K. Ramkumar 4/4 aspects concerning liquidity for smooth place of Mr. Puneet Nanda. Mr. Adrian O’Connor operations, compliance with prudential 4/4 regulatory norms on investments, risk d) Board Customer Service & 2/4 management/mitigation strategies Policyholders’ Protection Committee to ensure commensurate yield on e) Board Nomination and Remuneration investments and above all protection of Terms of reference: Committee policyholders’ funds. Putting in place proper procedures Responsible for a periodic review of Terms of reference: the Investment Policy based on the and effective mechanism to address To identify persons who are qualified performance of investments and the complaints and grievances of evaluation of dynamic market condition. policyholders including misselling by to become directors and who may Put in place an effective reporting intermediaries be appointed in senior management system to ensure compliance with the Ensure compliance with the statutory in accordance with the criteria laid Policy set out by it apart from Internal/ requirements as laid down in the down, recommend to the Board their Concurrent Audit mechanisms for a regulatory framework pertaining to appointment and removal and shall sustained and on-going monitoring of policyholders’ protection carry out evaluation of every director’s Investment Operations. Review of the mechanism at periodic performance. Set the Company’s risk/reward objectives intervals To formulate the criteria for determining and assess policy holders’ expectations. Ensure adequacy of disclosure of “material qualifications, positive attributes Quantify the level of risk exposure and information” to the policyholders. These and independence of a director and assess the expected rewards and costs disclosures shall, for the present, comply recommend to the Board a policy, associated with the risk exposure. with the requirements laid down by the relating to the remuneration for the To furnish a report to the Board on the Authority both at the point of sale and at directors, key managerial personnel and performance of Investments atleast on periodic intervals other employees. a quarterly basis and provide analysis Review the status of complaints of the To ensure that the level and composition of its Investment portfolio and on the policyholders at periodic intervals of remuneration is reasonable and future outlook. Provide the details of grievances at sufficient to attract, retain and motivate periodic intervals in such formats as directors of the quality required to runComposition may be prescribed by the Authority the company successfully. Provide details of insurance ombudsmen To ensure that relationship ofThe Board Investment Committee comprise of to the policyholders remuneration to performance is clearone independent Director and at March 31, 2014 Shape the customer service philosophy and meets appropriate performancewas chaired by Prof. Marti G. Subrahmanyam, an and policies of the organisation based benchmarks.independent Director. There were four Meetings on the overall environment in the To approve the Compensation Programmeof the Committee during the year. financial services industry and to ensure that remuneration to Oversee the functions of the customer directors, key managerial personnel andThe details of the composition of the Committee service council senior management involves a balanceand attendance at its Meetings are set out in the Review measures for enhancing the between fixed and incentive pay reflectingfollowing table: quality of customer service short and long term performance Provide guidance to improve in the objectives appropriate to the working of Name of the member Number of overall satisfaction level of customers the company and its goals. meetings Prof. Marti G. Subrahmanyam attended/held Composition Composition Chairman The Board Compensation & Nominations Mr. N. S. Kannan 3/4 The Board Customer Service & Policyholders’ Committee comprises of three independent Mr. Adrian O’Connor ProtectionCommitteecompriseofoneindependent Directors and at March 31, 2014 was chaired by Mr. Sandeep Bakhshi 3/4 Director and at March 31, 2014 was chaired by Ms. Rama Bijapurkar, an independent Director. Mr. Puneet Nanda* 2/4 Mr. Vinod Kumar Dhall, an independent Director. There were five Meetings of the Committee Mr. Sandeep Batra** 4/4 There were four Meetings of the Committee during the year. Dr. Avijit Chatterjee*** 3/3 during the year. Mr. Manish Kumar 1/1 The details of the composition of the Committee Mr. Satyan Jambunathan**** 1/1 The details of the composition of the Committee and attendance at its Meetings are set out in the Mr. Binay Agarwala**** 4/4 and attendance at its Meetings are set out in the following table: 3/3 following table:* upto December 31, 2013 3/3** appointed from January 1, 2014*** upto April 18, 2013**** appointed April 18, 201341 Fostering a Winning Workplace 42 Making a Difference to our Communities 19

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014Name of the member Number of of expenses representing this business h) Board Corporate Social Responsibility meetings shall be allocated and interest rate (CSR) Committee**Ms. Rama Bijapurkar – attended/held credits to these asset shares representChairperson the underlying assets of these funds. Terms of reference:Prof. Marti G. Subrahmanyam 5/5 Determining the asset share for eachMr. Vinod Kumar Dhall product in accordance with the guidance To formulate and recommend to the Board, aMr. K. Ramkumar 3/5 or practice standards, etc. issued by the Corporate Social Responsibility Policy whichMr. Adrian O’Connor 5/5 Institute of Actuaries of India. shall indicate the activities to be undertaken 4/5 Providing approval for the detailed by the Company. 4/5 working of the asset share, the expense allowed for, the investment income To recommend the amount of expendituref) Share Transfer Committee earned on the fund, etc. which were to be incurred on the Corporate Social Terms of reference: represented in the asset share. Responsibility activities. Approval and rejection of transfer and Composition To monitor the Corporate Social Responsibility transmission of shares in physical form The With Profits Committee comprises two Policy of the Company from time to time. Approval and rejection of requests independent Director and at March 31, 2014 was chaired by Mr. V. Sridar, an independent Composition for split and consolidation of share Director. There were one Meeting of the The Corporate Social Responsibility (CSR) certificates Committee during the year. Committee comprise of one independent Director Approval and rejection of issue of who is also the Chairman of the Committee. duplicate share certificates The details of the composition of the Committee Any other activities which are incidental and attendance at its Meetings are set out in the Mr. Vinod Kumar Dhall, non-executive or ancillary thereto following table: Director Members: Name of the member Number of Mr. Adrian O’ Connor, non-executive Director Mr. Vinod Kumar Dhall (Chairman) meetings Mr. K. Ramkumar, non-executive Director Mr. Keki Dadiseth attended/held Mr. Sandeep Bakhshi, Managing Director & ** The Committee was constituted on April 22, 2014 Mr. V. Sridar, Chairman 1/1 CEO Remuneration policy Mr. Adrian O’ Connor 0/1 The Board Compensation and Nominations During the year, no Meetings of the Committee determines and recommends to the Committee were held as there were no Mr. N. S. Kannan 0/1 Board the amount of remuneration, including request for the activities listed above. performance bonus and perquisites, payable to Mr. N. M. Govardhan 1/1 the wholetime Directors on certain parameters.g) With Profits Committee* Terms of reference: Mr. Sandeep Bakhshi 1/1 The following table sets out the details of Maintaining the asset shares, at policy remuneration (including perquisites and retiral Mr. Satyan Jambunathan 1/1 benefits) paid to whole time Directors for level, and ensuring that only the portion FY2014. * The Committee was constituted on October 18, 2013 Name of the Director Basic Bonus Retirals Allowances LTRS1 (` ‘000) 12,626 5,585 2,878 Perquisites 15,000 Total Sandeep Bakhshi, 7,349 4,079 12,500 Managing Director & CEO 1,556 - 7,643 - 43,732 145 1,700 7,500 32,868 Puneet Nanda, 21,676 1,617 7,323 35,000 4,044 Executive Director 11,364 10,299 187 2,301 90,943 Sandeep Batra, Executive Director2 647 307 Madhivanan Balakrishnan, 5,329 17,574 Executive Director3 Total1 Long Term Reward Scheme paid during the year2 Inducted effective January 1, 20143 Held office until June 30, 201220 14 Directors’ Report 24 Corporate Governance 26 Management Discussion and Analysis 38 Enterprise Risk Management

INSURANCE AAJ BADAL RAHA HAI STATUTORY REPORTS & MANAGEMENT REVIEWAs provided under Article 135 of the Articles of d) Submit report on its performance to the Customer Service & Policyholder Protection CommitteeAssociation of the Company, the fees payable to (CS & PPC) on a quarterly basis.the Non-Executive Directors (other than nomineeDirectors of ICICI Bank Limited and Prudential plc The key discussions of the GRC Meeting are put up at the Board Customer Service & Policyholders’i.e. the promoter group) for attending a Meeting Protection Committee for information.of the Board or Committee thereof are decidedby the Board of Directors from time to time General Body Meetingswithin the limits prescribed by the Companies The details of the last three Annual General Meetings (AGM) are given below:Act, 1956 or the Central Government. TheBoard of Directors has approved the payment of Financial Year ended Day, Date Start time Venue` 20,000 as sitting fees for each Meeting of Eleventh AGM 3.00 p.m.Board or Committee attended. This amount Tuesday, July 19, ICICI PruLife Towers, 1089is within the limits prescribed by the Ministry 2011 11.00 a.m. Appasaheb Marathe Marg,of Corporate Affairs vide its Notification dated Prabhadevi, Mumbai 400025July 24, 2003. Other than the sitting fee no Twelfth AGM Monday, June 18, 11.00 a.m.other remuneration is paid to the Non-Executive 2012 ICICI PruLife Towers, 1089Directors. Appasaheb Marathe Marg, Thirteenth AGM Thursday, June 20, Prabhadevi, Mumbai 400025Sitting fees paid to independent Directors during 2013the financial year ended March 31, 2014: ICICI PruLife Towers, 1089 Appasaheb Marathe Marg, Prabhadevi, Mumbai 400025Name of the Director Amount (in `) The following special resolutions were passed Extra Ordinary General MeetingMr. Keki Dadiseth 2,00,000 by the members during the last three Annual The details of the last Extra Ordinary GeneralProf. Marti G. Subrahmanyam 2,40,000 General Meeting: Meeting (EGM) is given below:Ms. Rama Bijapurkar 2,20,000Mr. Vinod Kumar Dhall 2,80,000 Annual General Meeting held on July 19, 2011 Day, Date Start time VenueMr. V. Sridar 1,20,000 Revision in remuneration payable to Tuesday, 4.30 p.m. ICICI PruLife Towers,Mr. Sridar Iyengar 20,000 December 3, 1089 Appasaheb Mr. Sandeep Bakhshi, Managing Director & CEO. 2013 Marathe Marg, Revision in remuneration payable to Prabhadevi, Mumbai 400025 Mr. Puneet Nanda, Executive Director. Revision in remuneration payable to The following special resolutions was passed by the members during the last Extra Ordinary Mr. Madhivanan Balakrishnan, Executive Director. General Meeting:Grievance Redressal Committee (GRC) Annual General Meeting held on June 18, 2012 Appointment & approval of remuneration Revision in remuneration payable to payable to Mr. Sandeep Batra, ExecutiveGrievance Redressal Committee is formed to Director.provide effective grievance redressal to the Mr. Sandeep Bakhshi, Managing Director & CEO.policyholders. The Committee consists of two Revision in remuneration payable to Share Transfer Systemexternal members and three members from The Company’s investor services are handled bysenior management team of the Company. Mr. Puneet Nanda, Executive Director. 3i Infotech Limited (3i Infotech). 3i Infotech is aMr. R. Narayanan, an external member, chairs Revision in remuneration payable to SEBI registered Category I - Registrar to an Issuethe Committee. As part of the grievance & Share Transfer (R&T) Agent.redressal mechanism, the GRC constituted as Mr. Madhivanan Balakrishnan, Executive Director.the final authority to address the policyholders’ Registrar and Transfer Agentgrievances before approaching the Ombudsman Annual General Meeting held on June 20, 2013 The address of the Registrar and Transfer Agentoffice. Additionally, the GRC focuses on building Revision in remuneration payable to of the Company is as follows.and strengthening customer service orientation 3i Infotech Limitedin the Company by initiating various measures Mr. Sandeep Bakhshi, Managing Director & CEO. International Infotech Parkincluding simplifying processes for improvement Revision in remuneration payable to Tower 5, 3rd Floorin customer service levels. The Committee Vashi Railway Station Complexmeets on a quarterly basis with the following Mr. Puneet Nanda, Executive Director. Vashi, Navi Mumbai 400 703terms of reference: Maharashtra, India General Shareholder Information Tel No. : +91-22-6792 8000a) Evaluate feedback on quality of customer Fax No. : +91-22-6792 8099 service and claims experience. General Body Day, Date & Venue Meeting Time ICICI Prulifeb) Review and approve representations Towers, 1089, received on claims repudiations. Fourteenth Monday, Appasaheb AGM June 23, 2014, Marathe Marg,c) Ensure that the Company follows all 4.30 p.m. Prabhadevi, prescribed regulatory requirements on Mumbai – policyholder service. 40002541 Fostering a Winning Workplace 42 Making a Difference to our Communities 21

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014ADDITIONAL INFORMATION that in the preparation of the annual accounts, The Directors would also like to take thisConservation of Energy and Technology the applicable accounting standards have opportunity to express sincere thanks to itsabsorption been followed, alongwith proper explanation valued customers for their continued patronage. relating to material departures; The Directors express their gratitude for theIn view of the nature of business activity of valuable advice, guidance and support receivedthe Company, the information relating to the that they have selected such accounting policies from time to time, from the auditors and theconservation of energy and technology absorption, and applied them consistently and made statutory authorities. The Directors express theiras required under Companies (Disclosure of judgments and estimates that are reasonable deep sense of appreciation to all employees andParticulars in the Report of Board of Directors) and prudent so as to give a true and fair view of distributors, who continue to display outstandingRules, 1988, is not required to be given. the state of affairs of the Company at the end of professionalism and commitment, enabling the the financial year and of the profit or loss of the organisation to retain market leadership in itsForeign exchange earnings and outgo Company for that period; business operations. The Directors also wish toDetails of foreign exchange earnings and outgo express their gratitude to ICICI Bank Limited andrequired under above Rules are as under: they have taken proper and sufficient care Prudential Corporation Holdings Limited for their for the maintenance of adequate accounting continued trust and support. (` ‘000) records in accordance with the provisions of the Companies Act, 1956 for safeguarding For and on behalf of the BoardParticulars FY2013 FY2014 the assets of the Company and forForeign exchange preventing and detecting fraud and otherearnings and outgo 52,781 52,925 irregularities; and- Earnings 432,118 695,007- Outgo the financial statements prepared represent accurately and fairly the financial conditionEvents after Balance Sheet date of the Company; Date: April 22, 2014 Chanda KochharThere have been no material changes and Place: Mumbai Chairpersoncommitments, affecting the financial position of the that the Company is running the businesscompany, which have occurred between the end soundly and the business will be viable overof the financial year of the company to which the the long-term; andBalance Sheet relates and the date of this report. that they have prepared the annual accountsDIRECTORS’ RESPONSIBILITY on a going concern basis.STATEMENT ACKNOWLEDGEMENTSIn accordance with the requirements of Section217(2AA) of the Companies Act, 1956 and the The Directors are grateful to the InsuranceCorporate Governance Guidelines, the Board of Regulatory & Development Authority, ReserveDirectors confirm: Bank of India and Government of India for their continued co-operation, support and advice.22 14 Directors’ Report 24 Corporate Governance 26 Management Discussion and Analysis 38 Enterprise Risk Management

INSURANCE AAJ BADAL RAHA HAI STATUTORY REPORTS & MANAGEMENT REVIEWCOMPLIANCE WITH THE CODE OF BUSINESS CONDUCT AND ETHICSI confirm that all Directors and members of the senior management have affirmed compliance with Code of Business Conduct and Ethics for the yearended March 31, 2014.Sandeep BakhshiManaging Director & CEODate: April 22, 2014Place: MumbaiCERTIFICATION FOR COMPLIANCE OF THE CORPORATE GOVERNANCE GUIDELINESI, M. Sanaulla Khan, hereby certify that the Company has complied with the Corporate Governance guidelines for Insurance Companies as amended fromtime to time and nothing has been concealed or suppressed.M. Sanaulla KhanCompany SecretaryDate: April 22, 2014Place: Mumbai41 Fostering a Winning Workplace 42 Making a Difference to our Communities 23

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014CORPORATE GOVERNANCEDISCLOSURE REQUIREMENTS AS PRESCRIBED BY THE IRDA GUIDELINES ON CORPORATE GOVERNANCE FORINSURANCE SECTOR1. Disclosures regarding the Board 2. Basis, methods and assumptions 4. Actual solvency margin details Governance Structure on which the financial information vis-à-vis the required margin is prepared and impact of changes, These include: if any  The details of the solvency ratio are as below: a. Number of Board and Board committee The basis, methods and assumptions using meetings held in the financial year. which the financial statements have been Particulars FY2013 FY2014 prepared have been detailed in schedule Actual solvency ratio 395.7% 372.3% b. Details of composition of the Board and 16 of financial statements i.e. significant Required solvency ratio 150.0% 150.0% the Committees mandated including accounting policies and notes forming part the names of the directors, their fields of the financial statements. 5. Financial performance including of specialisation, status of directorship growth rate and current financial held, etc. 3. Quantitative and qualitative position of the insurer information on the Company‘s c. Number of meetings held by the financial and operating ratios A detailed analysis if the financial directors and the members of the namely, incurred claim, commission performance of the Company including Committee. and expenses ratios growth rate and current financial position has been furnished in Management d. Details of remuneration paid, if any to  Information, both quantitative and Discussion and Analysis section of the the independent directors. qualitative, on the insurer’s financial and Annual Report. operating ratios have been submitted in The above data has been furnished as a part the Management Discussion and Analysis 6. Description of the risk management of the Directors Report forming a part of the section of the Annual Report. architecture Annual Report. The risk management architecture of the Company has been detailed under the Enterprise Risk Management section of the Annual Report.7. Details of number of claims intimated, disposed of and pending with details of duration The claims settlement experience for the Company for FY2014 has been as follows:Sr. Claims experience Death Maturity Survival Annuities/ Surrender Health OtherNo. claims claims benefits Pensions claims claims benefits1. Claims outstanding (beginning of the period) 1,4532. Claims reported during the period 20 162 - 4,264 917,568 426 13. Claims settled during the period 16,162 28,073 53,172 71,352 898,580 24,568 1944. Terms and condition rejections 15,311 19,327 53,172 71,313 - 20,434 1905. Claims repudiated during the period - 3,8476. Claims reopened - - - - - -7. Claims written back 726 - - - - 304 28. Claims outstanding (End of the period) - - - 20,441 - - - - - - - - - 8,908 - 4,303 3 145 409Ageing of claims outstanding as at March 31, 2014 was as follows:Claims experience Death Maturity Annuities/ Surrender Health Other claims claims Pensions claims claims benefitsClaims outstanding at end of the period 20,441Less than 3 months 145 8,908 4,303 20,405 409 33 months to 6 months 101 4,726 947 5 379 26 months to 1 year 40 102 19 30 -1 year and above 570 326 12 - 2 825 - 1 2 2,787 2,928 -Claims long outstanding are on account of:1. Non-submission of necessary documents by the claimants.2. Non exercise of the annuity option in case of annuity claims by the annuitant.24 14 Directors’ Report 24 Corporate Governance 26 Management Discussion and Analysis 38 Enterprise Risk Management

INSURANCE AAJ BADAL RAHA HAI STATUTORY REPORTS & MANAGEMENT REVIEW8. All pecuniary relationships or 9. Elements of remuneration package 12. Policy lapse ratio transactions of non-executive of individual directors summarised directors under major groups such as salary, Policy lapsation is measured through the benefits, bonuses, etc persistency ratio which is furnished as a The Company’s non-executive and part of the financial statements - Refer independent directors do not have any Remuneration package of individual accounting ratios section of schedule 16: pecuniary relationships or transactions directors is detailed in the Directors Report Significant accounting policies and notes with the Company, its Directors or its forming part of the Annual Report. forming part of the financial statements. senior management except to the extent of insurance policies taken by them in the 10. All related party transactions 13. Any other matters which have ordinary course of business and the sitting material impact on the financial fees paid to them for attending Board and Details of related party transactions entered position Committee meetings. into by the Company are included in the ‘Details of related parties and transactions There are no matters which have material The premium income received by the with related parties’ section of the notes to impact on the financial position except Company from insurance policies issued to the accounts forming part of the financial those disclosed in the financial statements. non-executive directors of the Company is statements. as follows: 11. Disclosure requirements of the (`’000) Participating and Unit linked policyholders’Name of non-executive FY2013 FY2014director Disclosure requirements of the Participating and Unit linked policyholders’ has beenRajiv Sabharwal 1,191 1,191 furnished as a part of the financial statements – Refer schedule 16: SignificantRama Bijapurkar 30 30 accounting policies and notes forming part of the financial statements.N.S. Kannan 15 15Total 1,236 1,236Further, payments made to parties in whichdirectors are interested are disclosed in theManagement Report forming part of the AnnualReport.41 Fostering a Winning Workplace 42 Making a Difference to our Communities 25

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014MANAGEMENT DISCUSSION AND ANALYSISWith extensive use of technologyand a committed employeeforce, we are confident that wewill be the preferred choice ofcustomers for their protection andsavings needs.I. INDUSTRY AND BUSINESS Particulars FY2010 FY2011 (` billion)REPORT Nominal GDP (` trillion) 65 78 FY2012 FY20131. Economic and industry overview Household savings as % of GDP 25.2% 23.1% Financial savings as % of GDP 12.0% 9.9% 90 1011.1 Indian economy and impact on life New business premium* (` billion) 22.8% 21.9%insurance industry Total premium (` billion) 550 504 7.0% 7.1% Insurance share of financial assets 2,654 2,916Indian Gross Domestic Product (GDP)1 grew Penetration (total premium as % of GDP) 26.2% 19.5% 479 470by 4.6% in FY2014 (advance estimates) as 4.6% 3.7% 2,871 2,872compared to 4.7% in FY2013. The growth in 19.8% 16.4%the last two years is significantly lower than 3.2% 2.8%that witnessed in the preceding 5 years. Thecompounded annual growth rate of GDP for Source: RBI, CSO and IRDAthe five year period from FY2007 to FY2012 *Based on RWRPwas 7.8%. Structurally the Indian economy remains strong owing to solid fundamentals in the form of favorableSlowdown in growth, persistent high inflation demographics and a high savings and investment rate. In the medium to long term, there shouldand interest rates, and volatile equity markets be some upward movement in GDP growth rates from the current level and a shift back to financialhave adversely impacted the environment for savings. A stable government would accelerate the movement towards higher GDP growth rates andthe life insurance industry. There has been a financial saving rates. This increase in income levels and financial savings will provide an impetus forreduction in household savings as a percentage the growth of the life insurance market in the future.of GDP from 25.2% in FY2010 to 21.9% inFY2013. There is also a fall in financial savings 1.2 Insurance industry overviewfrom 12.0% in FY2010 to 7.1% of GDP in FY2013.Within financial savings there has been a 1.2.1 Competitive landscapeshift toward term deposits and fall in share ofinsurance. Total new business premium (based The Indian Life Insurance industry has 24 players including Life Insurance Corporation of India (LIC). LICon retail weighted received premium (RWRP)) continues to be a strong player with a market share of more than 60%. Top 7 private players contributehas declined from ` 550 billion in FY2010 to ` to around 75% of the private market.4542 billion in FY2014. This has led to a reductionin insurance penetration3 from 4.6% in FY2010 to Market share* (%)2.8% in FY2013. 12.8 12.1 10.0 9.1 9.0 39.5 33.6 26.6 28.9 29.01GDP at market prices at 2004-05 prices; Estimates of CSO 47.7 54.3 63.4 62.0 62.02Source: IRDA FY2013 FY20143Penetration: Total premium as percent of GDP at current FY2010 FY2011 FY2012prices, Source IRDA Annual Report LIC Top 7 private Others *Based on RWRP, Source IRDA In FY2014, the industry declined by 3.4%. Both LIC and private players declined by 3.4% hence, the market share of private players has remained flat in FY2014.26 14 Directors’ Report 24 Corporate Governance 26 Management Discussion and Analysis 38 Enterprise Risk Management

INSURANCE AAJ BADAL RAHA HAI STATUTORY REPORTS & MANAGEMENT REVIEW1.2.2 Shift in product mix 1.2.4 Regulatory changesOverall, the trend of shift from ULIPs to traditional products continued. For private players, traditional The regulatory changes introduced in FY2014mix moved from 59% in FY2012 to 65% in FY2013 and to 72% as at December 31, 2013 of total new seem to be focused on providing a better valuebusiness received premium. Bigger private players have a more balanced mix between linked and proposition to the customer, encouraging longtraditional products. term behavior, and increasing distribution reach and financial inclusion. This can be seen from theProduct mix for private players* (%) list of regulatory changes enlisted below: 17.0 31.3 58.6 65.3 71.7 Product regulations 83.0 68.7 41.4 34.7 28.3 Insurance Regulatory and Development Authority (IRDA) issued regulations regardingFY2010 FY2011 FY2012 FY2013 9m-2014 linked and non linked products to originally ULIP Traditional come into effect from October 1, 2013. The main changes introduced were linking*Based on total new business premium of commission to premium paying term, discontinuance of non participating productsSource: Life insurance council statistics linked to an external index and highest NAV guarantee products, and increase1.2.3 Distribution trends in guaranteed surrender value for non linked products. IRDA extended the dateAgency channel continues to be the predominant channel for LIC, however the share of agency for of applicability of these regulations fromprivate insurers has reduced from 51% in FY2010 to 40% in FY2013 (refer chart below). This stems October 1, 2013 to January 1, 2014. However,from the transition triggered by the ULIP regulations of FY2011 and the economic slowdown in last products with highest NAV guarantee andfew years, which impacted the individual agents more because of the lead time required by them benefits linked to an external index wereto get used to the new product suite. Linking of commission to the premium paying term in FY2014 discontinued from October 1, 2013.has also impacted the earning pattern of agents putting further downward pressure on the agencychannel. The number of agents engaged by the industry has fallen to 2.20 million as at December 31, Distribution2013 from 2.89 million as at March 31, 2010. For FY2014, the share of agency has remained flat forthe industry as well as for private players after three years of continuous decline. IRDA allowed banks to continue as corporate agents or become insuranceDistribution trends (%) brokers with prior approval from RBI. In case a bank becomes a broker, there would be a 24.4 19.9 16.9 17.2 16.7 cap of 25% on business from insurer within the same promoter group. 24.9 33.2 39.0 43.1 42.3 Renewal of agency licenses will now not 50.7 46.9 44.1 39.7 41.0 be subject to meeting the persistency rates FY2013 9m-2014 of 50% and insurers may have their ownFY2010 FY2011 FY2012 persistency criterion for renewal of agency licenses from July 1, 2014.Agency Banca Others IRDA allowed insurers to open foreignDistribution mix for private insurers based on new business received premium branches/subsidiaries subject to certainSource: Public disclosures guidelines.Bancassurance as a distribution channel has seen rapid growth in the last few years. The share of this Financial inclusionchannel4 among private players has increased from 25% in FY2010 to 42% in 9m-2014. Direct salesthrough proprietary sales force or through internet is also becoming increasingly important. IRDA added new organisations and types of individuals to the list of entities who can be appointed as Micro Insurance Agents (MIA) in accordance with the extant applicable provisions of IRDA (Micro Insurance) Regulations, 2005. IRDA allowed marketing and servicing of policies through M/s CSC e-governance Services India Limited (CSC-SPV) and its Common Service Centers (CSCs). Insurers can develop special products to be marketed through these entities.4Based on retail new business premium 27 41 Fostering a Winning Workplace 42 Making a Difference to our Communities

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014Investment Revival in household savings and financial medium income countries. 59% of this spend is savings out of pocket for which people need to dip into IRDA allowed insurers to participate in savings9. The total premium collected for health Collateralized Lending and Borrowing The Indian economy has been traditionally insurance by both life and non-life companies Obligations (CBLO) transactions under characterised by a high savings rate. After a in FY2013 was ` 158.18 billion10, of which the IRDA’s guidelines for reverse repo continuous fall in savings rate for the last three share of life insurance companies was less than transactions which has a cap of 10% of each years, we expect a rebound on the back of a fall 5%. Moreover with rising affluence, private fund for such transactions. in inflation rate. To arrest the current account health care spends are increasing. Relatively deficit, the government took several measures lower health care spends with a high proportionProcess in FY2014 to curb gold demand including raising of out of pocket expenses signifies tremendous of import duty by 200 basis points. As a result opportunities for life insurance companies. As Insurance repositories were launched. the gold demand has dropped by 16.5 % in bulk of the working population in India is self- CY2013 compared to that in CY20125. Moreover, employed, life insurers with their large retail Both IRDA and PFRDA (Pensions Fund interest rates could potentially come down distribution are well placed to harness this Regulatory and Development Authority) on the back of an upward trend in growth and opportunity. permitted e-KYC (know your customer) capital market performance, thereby reducing service of UIDAI (Unique Identification the attractiveness of deposits. All these factors Pension needs Authority of India) to be used as acceptable could result into an increase in the pie size of proof for KYC verification subject to specific household savings and increase in the share of The demographic profile of India offers a huge and express consent of the customer to insurance fund in total household savings. opportunity for the pension market as well. In access his/her data through the UIDAI the absence of an organised social security net, system. Demographic dividend individuals would need to accumulate monies to fund their post retirement period. Even though Policy servicing forms are to be made The working population in India is increasing and the population would continue to be dominated available in all languages recognised under about 50% of the population is below 25 years of by a young work force, the absolute number of the Constitution of India. age. About 13 million people enter the working people needing annuities would grow at a high age group each year in urban India. This trend is pace. However, for the sector to gain impetus,1.3 Industry outlook favorable for the insurance industry in two ways: it would require favourable taxation regime or would require pension contributions to be madeThe value proposition of life insurance products 1. Rising workforce will fuel economic activity mandatory.has improved over the last few years, making and will lead to more income and saving.it more competitive vis-à-vis other financial 1.3.2 Challengesproducts. The long term growth prospects of the 2. The target customer segment for theindustry remain positive on the back of structural insurance industry is the working and retired Competition from other asset classes andadvantages of the Indian economy. However, the population. With increasing workforce, this financial instrumentsindustry would need to concentrate on a few size of this segment is expected to increase,near term challenges to be able to fully leverage translating into more customers for the Insurance products compete with physicalits growth potential. insurance industry. assets like gold and property as well as other financial instruments like fixed deposits and1.3.1 Opportunities Specifically, for population of age greater than mutual funds for a share of household savings. 25 years which is the target segment for the In the last few years the proportion of householdGDP growth and rising income levels insurance industry, this number is expected to savings flowing into financial instruments go up from 613 million in the year 2010 to 755 (financial savings rate) has fallen from 12.0% inIndia is likely to remain one of the fastest growing million in 2020 and to 888 million by 20306. FY2010 to 7.1% in FY2013.economies in the world on a long term basis. Asa result of its growth, India is seeing a rise in Insurance penetration and density Within financial savings the proportion ofthe number of affluent households. This trend is insurance has decreased from 26.2% in FY2010promising for the financial services industry as Life insurance penetration in India was 3.2% to 16.4% in FY2013. The focus of the industrythe surplus incomes are likely to be channelled in FY2013 (down from 4.6% in FY2010) and to increase awareness, improve customerinto savings avenues like life insurance. the insurance density7 was ` 2,235 per capita. propositions and bring in greater transparency The penetration is lower compared to other should help in ensuring that insurance becomes Number of FY2015F FY2025F developed and developing economies and one of the most attractive avenues of deploying households in millions 166.6 221.1 hence there is significant potential for it to grow longer term retail savings. further in the coming years. One more indicator Mass affluent (` 3.3 9.5 of potential for the insurance industry in India is Persistency and surrender prevention 90,000 to ` 1 million the fact that India has a very low Sum Assured per annum) to GDP ratio. India, with a ratio of 39%8 in 2013, Customer retention is one of the most important significantly lags behind many economies, for drivers of profitability for an insurance company. High net-worth instance the US at 263% or Japan at 256%. The industry needs to focus on inculcating households (over ` 1 longer term behavior in the customer and the million per annum) Rising health care spends distributor. This is also one of the key regulatory priorities. The industry needs to focus onSource: NCAER, McKinsey India spends 3.9% of GDP on health care compared to an average of 5.7% in other low and5World Gold Council Report February 2014  6Source: UN Population division’s release “World Population Prospects – The 2012 Revision”  7Density : Total premium per capital8McKinsey analysis  9World Bank database for the period CY2011  10IRDA Journal, June 201328 14 Directors’ Report 24 Corporate Governance 26 Management Discussion and Analysis 38 Enterprise Risk Management

INSURANCE AAJ BADAL RAHA HAI STATUTORY REPORTS & MANAGEMENT REVIEWenhancing the tenure of policies going forward 2. Company strategy 2.3 Strengthen multichannel architectureto ensure sustainable and profitable growth. The The Company has a well-diversified channelregulatory change linking first year commission 2.1 Enhance market leadership mix and would continue to strengthen itsto premium payment term will play a big role in multi-channel distribution. In agency, the focusthis regard. The Company would continue to focus on growth would be on scaling distribution in a non-linear opportunities in the market with a customised manner. Towards this end the Company is inCost efficiency regional strategy to strengthen relative position the process of revamping the agency model in key micro markets in the country. using a segmented approach and designingGiven the high fixed cost structure of the specific initiatives for retention and growthindustry, this is a key lever to ensure long term In its endeavour to create strategies for different of agents. In the corporate agent and brokerfinancial sustainability. Many players have seen a micro markets, the Company evaluates the need channel, we will continue to work with ourfall in expense ratio because of various efficiency to open branch offices to optimize presence and partners to ensure that our processes areinitiatives carried out by them. However, the gain market share. In line with this strategy, integrated seamlessly and gain higher customerindustry needs to reach to an even greater level the Company has opened branch offices in 20 penetration. The company also seeks to tie upof efficiency to deliver higher customer value and locations in FY2014. The Company is present with new distribution partners and has recentlyto make the products even more competitive across 489 locations in India through 559 strengthened its Bancassurance franchise bywith other financial products. branches (at March 31, 2014) and have over tying up with Standard Chartered Bank (effective 5,000 partner points of presence. July 1, 2014). In the proprietary channel, we will1.3.3 Contribution to the Indian economy continue to leverage our existing customer base 2.2 Provide superior value proposition to for upsell opportunities.The Indian insurance industry plays a pivotal customerrole in channelizing retail investor savings in The product strategy of the Company is based 2.4 Continued focus on efficiency ofthe financial markets thereby aiding capital on providing superior value to customers and operationsformation. Long term investment in equity offering a comprehensive suite of products. Efficiency of operations has been a focus areafunds have contributed to the stability of equity Having a wide range of product offerings helps for the Company for the last few years. Themarkets by reducing the sensitivity of equity us meet different needs of customers and for all Company implemented an integrated regionalmarkets to FII (Foreign Institutional Investor) segments of customers. structure in FY2012 to leverage the potential offund movements. The infrastructure sector has regional markets. To align individual goals withalso benefited out of infusion of long term funds Value to customer can be measured in terms of the Company’s goal of driving profitable growthfrom the insurance sector. Apart from banking, Reduction in Yield (RIY) in case of linked products with quality, a balanced KPI (Key Performanceit is the only other financial sector that has such and Internal Rate of Return (IRR) in case of Indicator) mix was introduced for the businessan extensively developed distribution network traditional products. Lower the RIY, and higher teams comprising growth and market share,throughout the country. But more importantly the IRR, the better the proposition is for the cost to RWRP and quality measures.perhaps, it has provided full time or part time customer. We have products which have amongemployment to more than two million people the lowest RIY and highest IRRs, thus delivering We leverage technology in all sales and servicein India and also ensured financial inclusion best-in-class value to the customer. In fact, the processes to expand our reach, improve costthrough coverage of rural areas. Some of the key lowest RIY among current products is 1%. efficiency and provide convenience to thestatistics in this regard are as under: customer. The digital platform helps us to enable a structured sales process, faster turnaround, At year ended lesser paperwork and better efficiency. It has helped us to develop a more profitableEquity holdings (` billion) March 31, March 31, March 31, March 31, March 31, March 31, franchise and provide better value proposition to 2008 2009 2010 2011 2012 2013 customers.Insurance industryAs % of Sensex* market cap 2,383 1,997 4,469 5,074 4,739 4,648 2.5 Superior risk adjusted fund performance The Company has in place a robust risk and 10.7% 13.2% 17.1% 17.2% 16.3% 15.0% investment management framework to deliver superior risk adjusted returns to customers.Source: Life Insurance Council, www.bseindia.com The Company’s investment focus is to ensure* Total market cap of companies comprising BSE Sensex long term safety, stability and profitability of customer’s funds.Nos. in ‘000s FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 2,904 2,889 2,609 2,359 2,126 2.6 Customer retentionNo. of agents (individual) 2,499 285 269 243 259 245 The Company has been strengthening 3,189 3,158 2,852 2,618 2,371 mechanisms to improve the assets underNo. of direct employees 254 management (AUM) growth by increasing renewal premium and curtailing surrenders.Total 2,753 Some of the key initiatives have been increasing the attachment of ECS (Electronic ClearingSource: Life insurance council statistics System) or standing instructions at the time of sale for renewal premium collection and incorporation of persistency targets for sales across levels.41 Fostering a Winning Workplace 42 Making a Difference to our Communities 29

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY20143. Performance overview and key RWRP for participating segment registered an increase from ` 1.75 billion in FY2013 toinitiatives: FY2014 ` 6.00 billion in FY2014 with introduction of new participating products and withdrawal of non- participating savings product from October 1, 2013. Non-participating segment registered a decline3.1 Market share from ` 13.31 billion in FY2013 to ` 4.91 billion in FY2014. Linked RWRP registered a growth of 19.8%.In FY2014, the Company maintained itsleadership position and increased its market (` billion)share11 amongst private players from 18.5%in FY2013 to 18.9% in FY2014. The Company Retail (RWRP) FY2013 FY2014increased its lead over the next private player Par Non-par Linked Par Non-par Linkedand was 1.16 times on Retail Weighted Premiumbasis in FY2014 as against 1.06 times in FY2013 New business premium 1.75 13.31 18.04 6.00 4.91 21.62as compared to the next private player. Withrespect to total market, the share has improved The Company had re-entered the pension segment in last quarter of FY2013 and has enhanced itsfrom 7.0% in FY2013 to 7.2% in FY2014. product suite in FY2014. Pension segment contributed to 1.7% of the RWRP in FY2014.3.2 Balanced channel mix 3.4 Customer retentionThe Company continued its focus onstrengthening its multi-channel distribution. The Company has focused on improving quality of business and reduced mis-selling. All KPIs,For FY2014, 54.2% of RWRP was from recognition forums and performance measures have persistency and surrenders as key criteria.bancassurance channel followed by 28.2% Certain initiatives that have been described in section 2 under “Customer retention”.of RWRP from Agency, 9.6% from third partydistribution comprising Corporate agents and As a result of these initiatives the Company registered a year on year growth in retail renewal premiumbrokers and 8.0% from other distribution channels for FY2014. Retail renewal premium has been registering a decline for the last 8 quarters. This trendincluding direct channels. Bancassurance has was arrested in Q3-2014. Retail renewal premium grew by 3.9% in Q3-2014 and 13.9% in Q4-2014been an important growth driver. In the Corporate resulting in a full year growth of 0.6% for FY2014. Year 1 persistency has improved marginally fromagent and Broker channel, the Company has 71.4% to 71.7%. The retail surrenders as a percentage of average AUM, a metric used to measure thereviewed its portfolio in line with its strategy to withdrawals, reduced from 1.3% per month in FY2013 to 1.1% per month in FY2014.work with partners having long term outlook andquality focus. (` billion)Channel mix on Retail FY2013 FY2014RWRP basis Par Non-par Linked Par Non-par Linked FY2012 FY2013 FY2014Agency 44.0% 34.5% 28.2% Renewal premium 5.56 9.12 65.87 6.39 18.62 55.99Bancassurance 38.3% 45.2% 54.2% 10.2% 13.1% 9.6% Renewal premium followed new business with a lag with non-participating renewal premiumCorporate agent registering strong growth on back of new business premium growth registered in FY2013.and Broker 7.5% 7.2% 8.0% 3.5 Cost efficiencyOthers The Company embarked on its journey of ‘Growth with Efficiencies’ a few years back and has since3.3 Product mix witnessed a continuous reduction in expenses year on year. As a result of the various efficiencyDuring the year, the Company revamped its initiatives, the Company managed to reduce operating expenses every year for the last three years asentire portfolio of products to ensure adherence shown in the graph and table below:to the new product regulations issued by IRDA.These regulations covered product design of Cost efficiency Absolute expense (` billion)all retail and group products. The transition tothe new product regulations was managed 25.50 23.88 24.96 22.55smoothly and the Company got approvals for 5.61 6.05 7.65 6.2719 new products across all lines of business inFY2014.The Company currently offers a range 19.89 17.83 17.31 16.28of products across unit linked and traditional FY2013 FY2014platforms to meet specific customer needs. FY2011 FY2012The Company has introduced life and pensionproducts that offer equity participation withcapital guarantee. In FY2014, the Company hada balanced product mix with traditional productscontributing to 33.5% of the RWRP.Retail product Operating expenses Commissionmix on RWRPbasis FY2012 FY2013 FY2014Linked 61.6% 54.5% 66.5%Non linked 38.4% 45.5% 33.5%11 On retail weighted premium basis30 14 Directors’ Report 24 Corporate Governance 26 Management Discussion and Analysis 38 Enterprise Risk Management

INSURANCE AAJ BADAL RAHA HAI STATUTORY REPORTS & MANAGEMENT REVIEWRatios FY2011 FY2012 FY2013 FY2014 3.7 Strong capital positionCost1 to RWRP 69.2% 84.8% 75.4% 69.3% The Company has a strong capital position whichCommission ratio2 3.5% 4.6% 5.9% 5.2% provides resilience to our Balance Sheet toTotal expense ratio3 16.0% 17.9% 19.2% 18.8% comfortably manage business cycles. The total capital infused by the promoters at `47.96 billion1 All insurance expenses including commission as at March 31, 2014 is the highest in the industry2 Commission ratio: Commissions/(Total premium – 90% of single premium) and our solvency margin is 372.3% as against the3 Total expense ratio: All insurance expenses (including commission)/(Total premium – 90% of single premium) mandated 150% (as at March 31, 2014).This has led to improvement in cost ratios. The Company tracks Cost to RWRP as the key indicator for The Company became the first private lifecost efficiency. On this metric the Company has improved from 84.8% in FY2012 to 69.3% in FY2014. insurance company in India to start paying dividends in FY2012. The aggregate dividend3.6 Profitability paid in FY2012 was ` 4.14 billion, which increased to ` 4.84 billion in FY2013, and thenThe Company had a profit after tax of ` 15.67 billion in the year ended March 31, 2014 (as against to ` 10.93 billion (including a special dividend of` 14.96 billion in FY2013), which works out to a return of 32.7% on the capital invested in the Company. ` 4.86 billion) in FY2014.The financial results for broad business segments (excluding Shareholders) are tabulated below: ICRA has reaffirmed the “iAAA” rating for claimsParticulars FY2013 (` billion) paying ability of ICICI Prudential for the fifth year Par Non-par Linked FY2014 in a row. The rating indicates fundamentally Par Non-par Linked strong position and that the prospects of meeting policyholder’s obligations is the best.Surplus/deficit (pre-tax and net of 1.09 (6.26) 14.49 1.95 0.34 9.80 The claims paying ability rating takes intocontribution from the Shareholders’ account strong parent support from ICICI bankaccount) and Prudential plc., healthy market share among private players, well diversified distributionSurplus from the linked business reduced on APE. The NBP margin for FY2014 was 12.4% as channel and profitability.account of change in composition of the in-force compared to 15.0% in FY2013. The change isbook from higher charge structure to lower attributed to the shift in product mix in terms of 3.8 Investment performancecharge structure products after introduction of increased share of linked products and the shift The assets under management (AUM) increasedSeptember 2010 guidelines. Another important from higher margin non-participating products from ` 741.64 billion as at March 31, 2013 tofactor is reduction in foreclosure income from ` to participating products within the traditional ` 805.97 billion as at March 31, 2014. For its4.05 billion in FY2013 to ` 2.13 billion in FY2014. portfolio. unit-linked funds, the Company delivered superiorThe surplus in the non-par segment improved on fund performance and funds contributing to 97%account of lower new business strain. (` billion) of the linked AUM outperformed their internalThe Company also measures the New Business benchmarks since inception and 77% for lastProfit (NBP) which is the net present value of Channel mix (RWRP) FY2013 FY2014 three years.future profits for the Shareholders from the newbusiness written during the year. NBP margin New business profit 5.29 4.27is expressed as percentage of new business New business APE 35.32 34.44 New business margin* 15.0% 12.4% *Computed using Traditional Embedded Value method on a post-tax basisInvestment performance (%) 3.9 Customer service6.83 8.08 6.12 7.12 10.21 11.78 16.34 19.01 Customer service is an integral element of Preserver Protector our value proposition to the customer. Service Balancer Maximiser delivery, claims management and grievance redressal are the building blocks of our customerBenchmark Fund service proposition. To be responsive to various servicing requirements of the customer throughAs on March 31, 2014 the term of the policy, we are proactive, easily accessible for premiums payments or forBenchmarks : servicing requirements and aim to provide firstPreserver Fund – CRISIL Liquid Fund Index time right resolution. Apart from the traditionalProtector Fund – CRISIL Composite Bond Index servicing channels such as branch, call centre,Balancer Fund – 65% CRISIL Composite Bond Index + 35% BSE 100 email, customers have the option to availMaximiser Fund – BSE 100 information/transact with Company through the website, SMS or IVRS (Interactive Voice Response System). Over the last few years, two-thirds of our servicing transactions are made through self-service mode. In the area of premium payments, 42% of the payments have41 Fostering a Winning Workplace 42 Making a Difference to our Communities 31

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014been through website and electronic mode. 3.11 Green initiative Increase in investment income in linked and nonIn the area of claims, we handle claimants linked funds was primarily due to increase insensitively and settle claims efficiently without Apart from the significant push towards average assets under management and revivaltoo much to and fro. In FY2014, we have also digitization, in FY2014 we have implemented of the equity market.provided the facility to register claims through efficient print management in our offices towebsite along with submission of documents. control the usage of paper. We have also installed Commissions decreased primarily on accountFor FY2014, we had a claim settlement ratio of sensors to control lighting in major offices. These of change in product mix from conventional94.1% and the average time taken to settle non- initiatives have helped us to reduce energy and products to linked products as linked productsinvestigation claims was 6 days. To make the paper usage, waste generation and recycling of have lower commission rates and due to thepayment faster and safer, we insist on payment waste. linkage of commissions with premium payingmandates. Over 90% of the claims have been terms as mandated by IRDA in the new productsettled electronically. 3.12 Contribution to exchequer guidelines. The Company continued with its cost control agenda initiated some years back and has3.10 Brand performance The company has contributed ` 9.01 billion to witnessed improvement in operating expenses. the exchequer in FY2014 and ` 9.42 billion in Benefits paid have primarily decreased onICICI Prudential Life has been a leading brand FY2013 on account of service tax, stamp duty, account of lower surrenders.in the private life insurance market, with tax deducted at source, works contract tax, VAThighest consumer awareness scores and high and other duties. The profit after tax for the Company increased byconsideration scores in the syndicated Nielsen 4.7% to ` 15.67 billion for FY2014 primarily due toBrand Track. During FY2014, it maintained its II. STANDALONE FINANCIAL the continued income stream from business soldleadership amongst private players by having a STATEMENTS in prior years, increase in investment income andbrand awareness of 79%. As per the syndicated lower commission and operating expenses. TheNielsen Brand Track, when it comes to intention Retail new business premium has marginally Company continued to declare dividend duringto purchase, our brand has the highest decreased in FY2014 as compared to FY2013. FY2014 given the healthy solvency position andconsideration amongst private players. . However, retail renewal premium was marginally sustained profitability. higher in FY2014 as compared to FY2013. ThisOver the years, the brand has kept the consumers led to total retail premium remaining flat in Our net-worth grew by 10.8% to ` 43.93 billion atengaged through meaningful & attractive FY2014 as compared to FY2013. The Group March 31, 2014 and our investment assets grewcampaigns like Jeetey Raho, Chintamani, business has however shown a decline as by 8.7% from ` 737.28 billion as at March 31,Achche Bande and Insurance is changing. compared to FY2013. As a result total premium 2013 to ` 801.20 billion as at March 31, 2014. was lower in FY2014.During recent times, the brand has usedtechnology and social media to maintain a. Results from operations: Analysis of Profit and Loss and Revenue Accountcustomer centricity. We proactively listen andrespond to customer feedback in different forms The statement below summarises the Company’s Revenue and Profit and Loss accounts:of social media. Taking the engagement with (` billion)consumers to a new high, the ICICI PrudentialLife YouTube channel is the most viewed in Particulars FY2013 FY2014the insurance industry with more than 2.9million views. There are close to 100 videos Premium income (net) 134.17 122.83on the channel. These include product videos Income from investments 65.96 95.69presented in a simple manner to aid consumer Other income(including fees and charges) 0.25 0.27understanding. Continuing the efforts in this Commission (7.65) (6.27)direction, the brand launched its Facebook page Operating expenses (17.31) (16.28last year. As per data from Unmetric.com, a Unit fund expense* (3.13) (3.10)social media benchmarking tool, the Facebook Benefits paid (132.93) (120.83)page registers high levels of engagement. Change in valuation of liability in respect of life policies (23.42) (56.58) Taxes (0.98) (0.06)The brand icon Chintamani recently struck a Profit after tax 14.96 15.67partnership with ‘Chhota Bheem’, the muchrevered animated child hero. This unique tie-up *Service tax on linked charges and other unit fund expensecreated brand affinity and engagement with bothparents & children. The Company’s results from operations have been analysed below: i. Premium incomeThe brand continues to help customers in theright purchase and right usage of insurance Particulars FY2013 FY2014 (` billion)products and undertakes many initiatives in this Retaildirection. During the last year, key information First year premiums 32.98 32.31 Growthhelp in the form of calculators, videos, leaflets Single premiums 3.41 3.54and presentations were integrated with the pre- Renewal premiums 80.55 81.00 (2.0%)purchase process so as to help the customer Total retail premium 116.94 116.85 3.8%make a more informed decision. Group premium 18.44 7.44 0.6% Gross total premium 135.38 124.29 Reinsurance premium (1.21) (1.46) (0.1%) Net total premium 134.17 122.83 (59.7%) (8.2%) 20.7% (8.5%)32 14 Directors’ Report 24 Corporate Governance 26 Management Discussion and Analysis 38 Enterprise Risk Management

INSURANCE AAJ BADAL RAHA HAI STATUTORY REPORTS & MANAGEMENT REVIEWThe retail new business premium including single premium decreased by ` 0.54 billion (1.5% decrease) Particulars (` billion)from ` 36.39 billion in FY2013 to ` 35.85 billion in FY2014. After a decline for three consecutive years, FY2013 FY2014the retail renewal premium increased by ` 0.45 billion (0.6% increase) from ` 80.55 billion in FY2013 Average interest earning 302.90 357.68to ` 81.00 billion in FY2014. Group premiums however declined by 59.7% from ` 18.44 billion in assetsFY2013 to ` 7.44 billion in FY2014 leading to a decline in the total premium income from ` 134.17 9.2% 9.0%billion in FY2013 to ` 122.83 billion in FY2014, a decline of 8.5%. Average yieldii. Investment income (` billion) Profit and Loss on sale on investmentsDetails of income from investments are given in the table below: Profits and losses are realised as the portfolio is realigned based on market conditions and FY2013 FY2014 expected relative attractiveness of securities and sectors going forward. NonParticulars Unit linked Total Unit Non Total Unrealised gain/loss (unit linked portfolio) linked linked linked Unrealised gains or losses result from pureInterest, dividend and rent 11.21 34.42 marked-to-market valuation of assets held inProfit /(loss) on sale of investments* (net) 23.21 1.73 19.56 25.06 13.59 38.65 the unit linked portfolio. The unrealised gain onUnrealised gain/(loss) 17.83 11.98 27.77 investments held under the unit linked businessTotal income/(loss) on investments 11.98 - 65.96 29.13 0.15 27.92 increased from ` 11.98 billion in FY2013 to 53.02 12.94 81.96 ` 29.13 billion in FY2014 primarily due to - 29.13 the rise in the equity markets experienced in 13.74 95.69 FY2014. Equity markets rose in FY2014 with the BSE Sensex rising by 20.2% from 18,836*Profit/(loss) on sale of investments includes loss due to impairment. as on March 31, 2013 to 22,386 as on March 30, 2014.IRDA regulations on preparation of financial statements prescribe that the Revenue account mustinclude income from investments earned from assets held under both unit linked and non-linked iii. Other income (including fees andbusinesses. Income on investments under unit linked business though included as income in the charges)revenue account is offset by a corresponding effect on the unit linked liabilities and does not impactthe profit or loss for the period. Other income includes fee collected on policy reinstatement, income from stale cheques (otherThe total income on investments (including the unit linked business) is analysed as follows: than customer dues and statutory payouts), interest earned on loans given to policyholdersInterest, dividend, and rent and interest on income tax refund.During FY2014 interest income, dividend and rent increased by 12.3% from ` 34.42 billion in FY2013 to` 38.65 billion in FY2014 due to higher interest income on account of increase in average debt assetsunder management offset party by lower yields. The table ahead indicates average debt investmentsand average yield earned.iv. Expenses (including commission) FY2013 FY2014 (` billion) There is a decrease in the total commission 7.65 6.27 by 18.0% from ` 7.65 billion in FY2013 toParticulars 17.31 16.28 Growth ` 6.27 billion in FY2014 as against the decreaseCommission expenses 22.55 (18.0%) in premium by 8.2% from ` 135.38 billion inOperating expenses 24.96 (6.0%) FY2013 to ` 124.29 billion in FY2014. InitialTotal expenses (9.7%) retail commission rate has decreased from 19.1% in FY2013 to 14.5% in FY2014. The lowerThe total expenses are further analysed below. (` billion) commission is primarily on account of changeCommission expenses in product mix from conventional products to linked products, as linked products have lowerParticulars Retail Total commission rates (conventional mix havingInitial reduced from 45.5% in FY2013 to 33.5% in- Premium FY2013 FY2014 FY2013 FY2014 FY2014 on RWRP basis), and due to the linkage- Commission of commissions with premium paying terms asCommission (%) 32.98 32.31 41.84 32.85 mandated by IRDA in the new product guidelines.Single 6.30 4.70 6.30 4.70 However, the commission ratio on renewal book- Premium 19.1% 14.5% 15.1% 14.3% has increased from 1.7% in FY2013 to 1.9% in- Commission FY2014 on account of increased mix of traditionalCommission (%) 3.41 3.54 6.24 4.74 products in retail renewal premium.Renewal 0.01 0.01 0.01 0.02- Premium 0.3% 0.4% 0.2% 0.3% Operating expenses- CommissionCommission (%) 80.55 81.00 87.30 86.69 Operating expenses decreased by overTotal premium 1.34 1.56 1.34 1.56 ` 1.00 billion in FY2014 as compared to FY2013.Total commission 1.7% 1.9% 1.5% 1.8% The total operating expenses of the Company areTotal commission (%)* 114.75 115.32 135.38 124.29 analysed as follows: 7.65 6.27 7.65 6.27 6.7% 5.5% 5.9% 5.2%* Total commission ratio: Commissions/(Total premium – 90% of single premium)41 Fostering a Winning Workplace 42 Making a Difference to our Communities 33

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014 (` billion) The increase in mortality, maturity and survival viii. Taxes paid claims is in line with the expected payouts as perParticulars FY2013 FY2014 Growth the portfolio of the company. Particulars (` billion) 7.73 7.19 (7.0%) Deferred tax charge FY2013 FY2014Employee’s vii. Change in valuation of liability is Totalremuneration and 1.00 2.27 127.2% respect of life policies 0.98 0.06welfare benefits 1.31 1.06 (18.9%) 0.98 0.06Administration 0.96 0.84 (12.5%)support expenses 0.67 0.61 (9.3%) (` billion) Deferred tax asset is recognised on theAdvertisement 1.65 0.59 (64.1%) Company’s eligible tax losses to the extent thatand publicity Particulars FY2013 FY2014 there is virtual certainty supported by convincingRents, rates and 0.39 0.56 44.7% evidence that sufficient future taxable incometaxes Change in non linked will be available against which such deferred taxCommunication 0.41 0.47 14.2% reserves asset can be realised and also includes timingexpenses 0.32 0.36 14.0% differences between the financial and tax booksAgents training, 0.32 0.33 1.8% - Participating 4.22 5.62 arising from linked fund for future appropriation.recruitment and 0.31 0.28 (8.2%)incentives 2.24 1.72 (23.3%) - Non participating 22.79 23.46Legal and 17.31 16.28 (6.0%)professional Change in linked reserveschargesDepreciation - Non unit reserves (0.62) (0.41)Information - Unit reserve (2.97) 27.91 The deferred tax asset on carried forwardtechnology cost unabsorbed losses was recognised basedOffice running Total 23.42 56.58 on estimated taxable profit expected to beexpenses contractually earned in the future from theRepairs This represents the change in actuarial liability current in-force life insurance contracts. During set up in respect of policies in force and for FY2014, the Company has reported accountingOthers* policies in respect of which premium has been profits and consequently the deferred tax asset discontinued but a liability still exists. Change in created on the eligible tax losses of earlier yearsTotal expenses reserves charged to the Revenue account is the has been utilised.(excluding unit difference between policy liabilities as on twoexpense) Balance Sheet dates. Reserves on both participating and non- b. Financial condition participating policies are calculated using the gross*Others include provision for doubtful debts and bad debts. premium method, using assumptions for interest, The following table sets forth, on the dates mortality, expense, inflation and, in the case of indicated, the summarised Balance Sheet. participating policies, future bonuses together withv. Unit fund expenses (including service tax allowance for taxation and allocation of profits to Particulars (` billion)on linked charges) shareholders. These assumptions are derived from Sources of funds March March analysis of actual experience, with allowance for 31, 2013 31, 2014Unit fund expenses majorly comprise of service prudent margins for adverse deviation.tax on linked charges amounting to ` 3.07 Equity capital and reserves 48.41 49.82billion in FY2014 as compared to ` 3.18 billion Reserves for participating line of business is (Shareholders’ funds) 687.34 746.24in FY2013. Service tax on linked charges is increased on account of higher business in Policyholders’ fundsrecovered from the policyholders and thus is just FY2014 as compared to FY2013.the pass through and profit and loss neutral. Funds for future 5.08 5.04 appropriations 20.18 19.71vi. Benefits paid Change in valuation of liability (unit reserve) in Current liabilities and 761.01 820.81 respect of linked business has been taken as provisionsA summary of benefits paid is provided below: the value of the units standing to the credit of Total policyholders, using the Net Asset Value (NAV) (` billion) prevailing at the valuation date. The adequacy Application of funds of charges under unit linked policies to meetParticulars FY2013 FY2014 future expenses and claims in excess of the unit Investments reserves has been tested and provision made asSurrenders 126.93 113.07 appropriate. Provision has also been made for - Shareholders’ 49.20 53.53 the cost of guarantee under unit linked productsMortality (Death)claims 3.20 3.66 that carry a guarantee. The units held in respect - Policyholders’ 112.87 144.57 of lapsed policies are divided into a revivalMaturity and annuity claims 2.24 2.99 reserve, which contributes to liabilities, and a Asset held to cover linked 575.21 603.10 fund for future appropriation, which contributes liabilitiesSurvival benefits 1.36 1.95 to regulatory capital. The significant increase in unit reserves is attributed to increase in income Fixed assets 1.72 2.02Amount recovered from (0.80) (0.83) from investments arising due to the rise in thereinsurer equity markets experienced in FY2014. Deferred tax asset 0.08 0.02Total claims 132.93 120.83 Current assets, loans and 13.17 11.68 advancesBenefits paid represent amounts paid topolicyholders or their legal heirs, on occurrence Debit balance in Profit and 8.76 5.89of an insured event as per the contractual terms Loss accountof insurance contract. Total 761.01 820.81 Contingent liabilities 1.79 1.99Surrenders primarily pertain to the linkedportfolio where the customers are free to encashtheir fund value post the lock-in period.34 14 Directors’ Report 24 Corporate Governance 26 Management Discussion and Analysis 38 Enterprise Risk Management

INSURANCE AAJ BADAL RAHA HAI STATUTORY REPORTS & MANAGEMENT REVIEWSources of funds With respect to general reserves, during the Statements and Auditor’s report of Insurance current year the Company paid interim dividend companies) Regulations, 2002 is required toi. Equity capital and reserves (Shareholders’ of `7.93 billion. The Board of Directors has be re-valued atleast once in three years. Thefunds) further recommended final dividend of ` 3.00 value of investment property is required to be billion. The Company has accordingly transferred disclosed at the revalued amount in the BalanceEquity capital 10% of current year’s profit amounting to ` 1.57 Sheet and the change in carrying amount isThe Company’s issued and subscribed share capital billion to general reserve as per the requirements classified under revaluation reserve. The value ofcomprises 1,429,255,687 equity shares of face of the Companies (Transfer of Profit to Reserves) the investment property in accordance with thevalue of ` 10 each (1,428,939,249 Equity shares Rules, 1975. The general reserve is however independent valuation is ` 0.85 billion as againstat March 31, 2013). Of the above, 73.84% equity adjusted against the Debit balance in Profit and ` 0.89 billion at March 31, 2013 (Historical cost:shares are held by ICICI Bank Limited (73.85% at Loss account as per Insurance Regulatory and ` 0.19 billion).March 31, 2013), 25.94% equity shares are held by Development Authority (Preparation of FinancialPrudential Corporation Holdings Limited (25.95% at Statements and Auditor’s Report of Insurance For movement in policy liabilities and provisionsMarch 31, 2013) and balance 0.22% equity shares Companies) Regulations, 2002. for linked liabilities refer point II a. vii above.are held by others (0.20% at March 31, 2013)which are issued under the Company’s Employee The reduction in the debit balance of Profit and Funds for discontinued polices represent fundsStock Option Scheme. Loss account is attributable to the profit after pertaining to lapsed or surrendered linked tax earned by the Company for the year and the policies which have not completed the minimumThere has been no capital infusion during the adjustment of general reserve in accordance lock in period (pending payment to customer) asyear except to the extent of shares allotted to with Insurance Regulatory and Development prescribed by IRDA.employees under the Employee Stock Option Authority (Preparation of Financial StatementsScheme. and Auditor’s Report of Insurance Companies) iii. Funds for future appropriations (FFA) Regulations, 2002. Summary of funds for future appropriations isThe Company is subject to the minimum solvency provided in the table below:requirements (i.e. excess of value of assets overvalue of insurance liabilities) prescribed by IRDA. ii. Policyholders’ funds Particulars March (` billion)The solvency margin was 372.3% at March 31, A summary of Policyholders’ funds is provided in 31, 2013 March2014 as against 395.7% at March 31, 2013, the table below: 31, 2014compared to minimum 150% solvency marginprescribed by IRDA for life insurers. (` billion) FFA - Linked 1.32 0.45 Particulars March March FFA - Non linked 3.76 4.59 31, 2013 31, 2014Reserves Total 5.08 5.04A summary of reserves and surplus is providedin the table below: Fair value change account 2.48 4.81 Revaluation reserve 0.70 0.66 FFA - Linked: FFA represent an amount that is estimated by (` billion) Policy liabilities 110.28 138.12 the Appointed Actuary in respect of lapsed unit linked policies and is set aside in the Balance March March Provision for linked 569.58 591.37 Sheet. This amount is not made available for 31, 2013 31, 2014 liabilities distribution to Shareholders until the expiry ofParticulars the maximum revival period. After expiry of the Funds for discontinued 4.30 11.28 revival period, the Company may appropriate FFAShare premium 33.65 33.66 polices amount as a surplus on the Appointed Actuary’s recommendation.Fair value change account 0.48 1.86 Total 687.34 746.24 FFA - Non linked:Total 34.13 35.52 Fair value change account represents unrealised The Insurance regulations require that the gain (net) on equity and mutual fund securities surplus under Policyholder funds can beDebit balance in Profit 8.76 5.89 pertaining to Policyholders’ non linked transferred to the Shareholder funds only onand Loss account (net of investments as on the Balance Sheet date. Such the recommendation of the Appointed Actuary.General reserves) mark to market treatment of equity and mutual Specifically under participating funds, such fund securities as on the reporting date is in line recommendation can only be made in relation toThe addition to the share premium is on with requirements of Insurance Regulatory and bonuses declared to policyholders. Any surplusaccount of shares issued under Employee Stock Development Authority (Preparation of Financial in the Policyholder funds (excluding the unit fund)Option Scheme. Statements and Auditor’s report of Insurance that has not been recommended for distribution companies) Regulations, 2002. Movement to the shareholders or policyholders is held asFair value change account represents unrealised in fair value change account is a function of Funds for future appropriation (FFA) - Non linked.gain (net) on equity and mutual fund securities performance of the equity markets and the mixpertaining to Shareholders’ investments as on of equity and mutual funds in the portfolio.the Balance Sheet date. Such mark to markettreatment of equity and mutual fund securities as The Company has an investment propertyon the reporting date is in line with requirements held under the non linked funds which as perof Insurance Regulatory and Development the requirements of Insurance Regulatory andAuthority (Preparation of Financial Statements Development Authority (Preparation of Financialand Auditor’s Report of Insurance Companies)Regulations, 2002. Movement in fair valuechange account is a function of performanceof the equity markets and the mix of equity andmutual funds in the portfolio.41 Fostering a Winning Workplace 42 Making a Difference to our Communities 35

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014iv. Current liabilities and Provisions Unallocated premium mainly includes premium 15 (Revised) on Employee Benefits and also received in advance which will be recognised as includes amounts provided at year end for leaveCurrent liabilities premium income on the due date of the policy which can be encashed by the employees.A summary of current liabilities is provided in the amounting to ` 1.28 billion (previous year: ` 1.09table below: billion) and monies received from policyholders’ Application of Funds but pending to be allocated on issuance of anParticulars (` billion) insurance policy. It also includes amounts which i. Investments March March need to be refunded back to the policyholders 31, 2013 31, 2014 on freelook or cancellation of policy and are Our primary fund management objective is outstanding in the normal process of refund. the safety of our investments and the stabilitySundry creditors 8.12 6.03 of returns. The Company ensures that the Policyholders’ claims payable represent amounts investment portfolio is adequately diversified andAmount pertaining to payable to the policyholders for all claims (death, adheres to high standards of quality.policyholders survival, etc.) that are intimated to the Company and are outstanding due to pending investigation- U nclaimed amount of 4.13 4.32 as a part of the normal claims process or A statement of total investments made by the Policyholders pending due to incomplete documentation from Company is given below: the policyholders. The significant increase is- U nallocated premium 1.44 1.56 on account of maturity claims of pension plans Particulars March (` billion) (including advance 0.07 0.38 where policyholder has not exercised the option 31, 2013 March premium) to commute or annuitise. 31, 2014- P olicyholders’ claims Agents’ balances represents amount payable to Investments payable advisors towards commission as on the Balance Sheet date. Amount outstanding is mainlyPayable to agents (Agents 1.03 0.87 attributable to business sourced during the last - Shareholders’ 49.20 53.53balances) month of the financial year. - Policyholders’ 112.87 144.57Taxes payable 0.25 0.20 Taxes payable represent tax deducted and 0.13 0.08 payable under Income tax regulations, such Asset held to cover linked 575.21 603.10Reinsurance premium taxes will be paid in due course within their due liabilities 737.28 801.20payable dates. TotalOther liabilities 3.26 2.62 Other liabilities primarily include ` 2.32 billion received towards unit linked contracts on theTotal 18.43 16.06 last day which are transferred to the unit fund As indicated above, total investments grew subsequently and hence held as a current liability by 8.7% from ` 737.28 billion as at March 31,Sundry creditors represent amounts payable to (March 31, 2013: ` 3.19 billion). 2013to ` 801.20 billion as at March 31, 2014.various service providers towards goods andservices availed by the Company along with Provisions The increase in Shareholders’ investmentsthe provision for the services availed/goods A summary of provisions is provided in the table is largely attributable to the profit generatedreceived but bills not received (March 31, 2014: below: during the year net of dividend paid to the` 5.02 billion; March 31, 2013: ` 5.96 billion) Shareholders’. The increase in Policyholders’ nonand amount payable to counter-parties for (` billion) linked funds is largely attributable to net inflowsinvestment trades where settlement is pending into the fund. In case of the linked assets, the(March 31, 2014: ` 1.01 billion; March 31, 2013: Particulars March March increase is largely attributable to the mark to` 2.16 billion). 31, 2013 31, 2014 market gains arising from the improvement in the equity market during FY2014.Unclaimed amount of the policyholders includes Proposed dividends 1.41 3.00the following: 75.3% of total investment assets were held ina. Claims settled but not paid due to Dividend distribution tax 0.24 0.51 unit linked funds at March 31, 2014 as against 78.0% at March 31, 2013. The shift can be reasons other than litigation: ` 0.01 billion Provision for leave 0.10 0.14 mainly attributed to a higher proportion of was outstanding at March 31, 2014 encashment and gratuity premium inflows in non-linked funds during (` 0.01 billion at March 31, 2013); FY2014. Further, of the total assets of ` 801.20 Total 1.75 3.65 billion as at March 31, 2014, 47.7% of the assetsb. Sums due to the insured/policyholders on were held as equity as against 51.2% at March maturity or otherwise:` 1.71 billion was The Board of Directors have proposed a final 31, 2013. outstanding at March 31 2014 (` 1.18 dividend of ` 3.00 billion (FY2013: ` 1.41 billion) billion at March 31,2013); which would be placed before the Annual General Our investment policy seeks to address the Meeting for approval. Dividend distribution tax is requirements of risk management relevant toc. Excess collection of premium which is provided for in line with the tax regulations. individual lines of business as well as to address refundable to the policyholders either as policyholders’ reasonable expectations. The terms of conditions of the policy or as per Company’s liability towards leave encashment Company ensures compliance with Insurance law or as may be directed by the Authority and gratuity is actuarially valued and is as per the Regulatory and Development Authority but not refunded so far: ` 0.07 billion requirements of revised Accounting Standard (Investments) Regulations, 2000, which focus was outstanding as at March 31, 2014 on the safety of the policyholders’ money by (` 0.09 billion as at March 31, 2013); having a well-diversified quality investment portfolio and transparency in terms of adequated. Cheques issued but not encashed by disclosures about the portfolio. the policyholder/insured: ` 2.54 billion was outstanding as at March 31, 2014 (` 2.85 billion as at March 31, 2013).36 14 Directors’ Report 24 Corporate Governance 26 Management Discussion and Analysis 38 Enterprise Risk Management

INSURANCE AAJ BADAL RAHA HAI STATUTORY REPORTS & MANAGEMENT REVIEWii. Fixed Assets Cash and bank balances represent amounts The PFRDA has proposed to select and appoint collected during last few days of the financial afresh eight Pension Funds to manage theA statement of movement of fixed assets is year and they also include cheques on hand and pension assets of the Private Sector NPSgiven below cheques deposited but not cleared. through competitive bidding. This appointment will be valid for five years. (` billion) Sundry debtors (investments) represents amount receivable from counter-parties for The Company had submitted its bid for ICICIParticulars March March trades done on the last few days of the year Prudential Pension Funds Management Company 31, 2013 31, 2014 where settlement is pending. Limited (PFM) as per PFRDA requirement and successfully emerged as one of the lowest eightGross block 3.85 4.40 Outstanding premium represents accrued bidders. In case the revised bid is lower than the premium income on traditional products which existing rate, there could be challenges in breakLess: Accumulated 2.20 2.43 are due within the grace period. The increase is even for the business.depreciation attributable to increase in traditional business. BusinessNet block 1.65 1.97 Other advances primarily include advances made in the ordinary course of business for services to PFM had a total subscriber base of 26,536 atAdd: Capital work in 0.07 0.05 be availed in the future. March 31, 2014 (at March 31, 2013: 15,183)progress and funds under management of ` 1.77 billion Deposits represent deposits placed for premises at March 31, 2014 (` 0.72 billion at March 31,Net fixed assets 1.72 2.02 taken on lease for setting up branches as well 2013). During the year the PFM added 11,353 as for leased accommodations for employees. It subscribers (previous year 5,754 subscribers).The increase in the net fixed asset is mainly also includes electricity deposits, telephone and The PFM held 16.3% share in assets underattributable to the increase in communication other utility deposits. management of the industry (excludingnetwork assets and purchase of information government sector and NPS Lite) at March 31,technology equipment by the Company. Contingent Liability 2014 (March 31, 2013: 12.4%).iii. Deferred tax asset The contingent liability at March 31, 2014 The net worth of PFM at March 31, 2014 is increased to ` 1.99 billion as against ` 0.26 billion (at March 31, 2013 ` 0.27 billion).The Company carried a deferred tax asset of ` 1.79 billion at March 31, 2013. The matter of For the year ended March 31, 2014 the PFM` 0.02 billion as at March 31, 2014 (as at contingency relates to applicability of service registered a loss of ` 0.01 billion (previous year:March 31, 2013 ` 0.08 billion). The Deferred tax tax on surrender/foreclosure charges where the loss of ` 0.001 billion). The increase in loss isasset as at March 31, 2014 represents timing service tax authority has contended that these attributable to the increase in scale of operationsdifferences between the financial and tax books charges are liable for levy of service tax. The which resulted in higher employee cost. Thearising from linked fund for future appropriation. Company’s stance is that these charges are penal increase in costs is partly offset by higher interestAs per Company’s assessment, the deferred tax in nature and no service as such is rendered in income on the increased share capital (` 160assets would be recovered from future taxable lieu of these charges to the policyholders. The million infused on September 28, 2012) and higherincome. matter is under litigation as at March 31, 2014. fund management fees. The fund management The increase of ` 0.20 billion is mainly attributable fee has increased from 0.0009% per annum toiv. Current assets, loans and advances to an additional demand raised by office of the 0.25% per annum with effect from March 11, Commissioner of Service tax. 2013 as per PFRDA guidelines.A summary of current assets, loans andadvances is provided in the table below: III. CONSOLIDATED FINANCIAL The current operations of the PFM are not RESULTS – SUBSIDIARY material in context of overall profit of the (` billion) PERFORMANCE Company.Particulars March March The Company has a wholly owned subsidiary, Consolidation basis 31, 2013 31, 2014 ICICI Prudential Pension Funds Management Company Limited (PFM). The PFM is licensed by The Company prepares and presents consolidatedIncome accrued on 4.27 4.90 the Pension Funds Regulatory and Development financial statements in addition to its individualinvestments Authority (PFRDA) as a Pension Fund Manager financial statements. The consolidated financial under the National Pension System (NPS) for statements are prepared in accordance withCash and bank balances 3.25 1.93 Indian citizens. Accounting Standard (AS) 21 on ‘Consolidated Financial Statements’, prescribed in theSundry debtors 1.86 0.53 Industry Companies Act, 1956 ((Accounting Standard)(Investments) Rules, 2006).The financials are consolidated on The total assets under management of the a line-by-line basis in accordance with AS 21.Advance taxes and tax 1.45 1.55 industry has grown from ` 298.37 billion atdeducted at source March 31, 2013 to ` 481.05 billion at March 31, 2014. The non-government sector category,Outstanding premium 1.22 1.62 where the Company has presence (excluding NPS Lite), grew from ` 5.82 billion at March 31,Other advances and 0.56 0.49 2013 to ` 10.82 billion at March 31, 2014.receivablesDeposits 0.35 0.37Prepayments 0.13 0.18Policyholders’ loans 0.09 0.12Total 13.18 11.69Income accrued on investments representsinterest income accrued, however not due forpayment as at March 31, 2014. It is mainlyon fixed deposits, Government securities anddebentures. The increase is attributable tothe increase in the debt investments of theCompany.41 Fostering a Winning Workplace 42 Making a Difference to our Communities 37

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014ENTERPRISE RISK MANAGEMENTENTERPRISE RISK MANAGEMENT Board Market Risk Policy Risk and Control Self-Assessment (RCSA) Board Credit Risk Policy to identify and assess operational risks inThe Company recognises that risk is an Board Liquidity Risk Policy terms of their likelihood and impact by eachintegral element of the business and managed Board Insurance Risk Policy business unit within the Company.acceptance of risk is essential for the Board Operational Risk Policygeneration of shareholder value. The Company’s Board Fraud Risk Policy 1 The Embedded Value of the Company is the presentacceptance of risk is dependent on the return value of shareholders’ interests in the earningson risk-adjusted capital and consistency with In addition to the above, the Board has approved distributable from assets allocated to the coveredits strategic objectives. Having accepted a the following policies that assist in managing business after sufficient allowance for the aggregaterisk, the Company may cede or hedge it where some of the above risks: risks in the covered business.this is cost-effective. In general therefore, the Board Reinsurance PolicyCompany’s control procedures and systems are Board Underwriting Policy 2. Risk measurementdesigned to manage risk, rather than eliminate Board Outsourcing Policy The Company uses the following approaches toit. However, at certain times, there may also measure its risk exposure:exist some risks for which the Company has no The Board Market Risk Policy, Board Credit Risk Risk to the EV: Value at Risk (VaR )of the EV istolerance and which are actively avoided. Policy, Board Liquidity Risk Policy and Board Insurance Risk Policy collectively constitute the an appropriate measure of risk exposure forThe Company has in place a risk management Asset Liability Management (ALM) Policy of the market, credit and insurance risks. The VaRframework with the following aims: Company. is measured by calculating the reduction in Determining the risk profile of the Company the EV under extreme economic and non- This framework in conjunction with the three economic scenarios. The stresses are i.e. the aggregate level of risks that the lines of defense helps the Company manage benchmarked to European Insurance and Company has undertaken in pursuit of risk. The key responsibilities of each line are laid Occupational Pensions Authority (EIOPA) profitable business. out below: standards as they develop, subject to Identification, measuring, monitoring and appropriate adjustments for local conditions control of risk for the purpose of protecting First line: Business functions that manage risk and the Company’s stage of development. the interests of key stakeholders. on a day-to-day basis. They are responsible for Risk to the growth of the EV: In addition to Enhancing the Company’s ability to identification and assessment risk at a transaction the risk to the current EV, the Company also identify and pursue opportunities that offer and process level and implementation of controls considers risks that impede future growth attractive risk-adjusted returns by providing to mitigate the same. of the EV like insufficient new business transparent, accurate and timely risk profit growth and over-run in acquisition information. Second Line: Risk functions that provide or renewal expenses, caused by adverse Embedding risk-based decision making in independent oversight of the first line of deviation of actual unit costs from planned key management processes and fostering a defense’s risk management activities. unit costs. culture of risk awareness. Risk to the statutory position: The Company Limiting the Company’s exposure to adverse Third Line: The third line consists of internal and considers the impact of market risk on its outcomes through risk limits. external auditors who regularly review the first statutory position and assess the quality Ensuring compliance with regulatory and second line’s activities and results to ensure of its ALM by performing a resilience test requirements. adequacy of risk controls and appropriate risk periodically on the quasi-regulatory balance Focusing on ensuring that it possesses the governance. sheet. The quasi-regulatory balance sheet is appropriate capabilities and experience in obtained by marking to market the assets on managing and transferring risks. 1. Risk identification the regulatory balance sheet. The liabilities Minimising reputational risk. The Company identifies its risk exposures are determined with reference to the market through a variety of techniques and processes, value of assets and by preserving theRISK GOVERNANCE FRAMEWORK including: margins for adverse deviation in accordance Stress testing of the current financial with applicable regulation and professionalThe risk governance structure of the Company guidance. The quasi-regulatory Balanceconsists of the Board, the Board Risk condition of the Company. Risk may be Sheet is subjected to economic shocks andManagement Committee (BRMC), the Executive identified by reference to the Embedded the solvency ratios and free assets underRisk Committee (ERC) and its sub-committees. Value1 (EV) or to the statutory position of the stress scenarios are monitored. the Company. Key Risk Indicators (KRIs) and loss data forThe risks faced by the Company are classified Product development process by way of operational risk.into market, credit, liquidity, insurance and analysis of the sensitivity of profit margins Liquidity Ratio of its highly liquid assets tooperational risks. The risk management model of and of profit signatures to market and its near term liabilities, after allowing for anythe Company comprises a four-stage continuous insurance risks. Any liquidity or operational constraint on the fungibility of its assets.cycle, namely the identification and assessment, risk arising out of the new product ormeasurement, monitoring and control of risks. modification of existing product is assessed 3. Risk monitoring prior to product launch. The ERC reviews all the risks and present a riskThe following Board approved risk policies (“Risk Business planning process by way of report to the BRMC on a quarterly basis.ThePolicies”) detail identification, measurement, analysis of the sensitivity of the projected BRMC may inform the Board of the key findingsmonitoring and control standards relating to the solvency and emergence of profit to market at its discretion.various individual risks: and insurance risks.38 14 Directors’ Report 24 Corporate Governance 26 Management Discussion and Analysis 38 Enterprise Risk Management

INSURANCE AAJ BADAL RAHA HAI STATUTORY REPORTS & MANAGEMENT REVIEWBased on the Board reports, representatives of monitoring of the equity backing ratio and The Investment Specifications as a part ofpromoter shareholders may consider the risks to debt duration against limits as applicable. the asset-liability management frameworktheir respective operations. The bonus declaration mechanism for provide guidelines to manage liquidity risk by participating products also helps in the specifying the minimum investment in highly4. Risk control smoothing of the volatility of the investment liquid assets, taking account of constraintsIdentified risk are managed by one or more of the returns. on the fungibility of assets among funds,andfollowing techniques: ii. Category 2: Other conventional business by specifying cashflow matching for certain Retention (acceptance); – Annuity, Non par investment, Non-unit funds. Avoidance; of unit linked business, Protection and Transfer or; Paid up fund of participating products The Company has a liquidity contingency Reduction (mitigation). plan, which addresses the following The liabilities for these lines of businessThe nature of the controls implemented and the are obligations to policyholders or to meet a. Identifying mitigants to liquidity stresslevel of control exercised are based upon the: expenses and have to be met either at a fixed arising out of contingencies; time or on the occurrence of a contingency. Potential severity of the risk; The Company manages the risk on such b. Communication and action protocol; Frequency of the risk occurring; products by investing only in fixed income and Cost of implementing controls relative to the instruments. ALM is done by managing the duration gap between assets and liabilities. c. Restoring normality in the event of any significance of the risk; and In addition, for certain products a cashflow contingency. Risk Appetite. matching strategy is used. New products are launched only after(a) Market risk: iii. Category 3: Linked products with return approval by the ERC. Launching new products can significantly and capital guarantee – Universal life funds and Return guarantee funds The ERC also evaluates the impact of market alter the risk profile of the Company’s liquidity on any hedging or asset allocation balance sheet. Market risks inherent in the The Company uses a mix of stochastic and strategy required by the product. new products or significant modifications deterministic approaches to calculate the to existing products are identified at the cost for providing the guarantee and holds (d) Morbidity and Mortality risk: The product design stage and a risk report a reserve on this account. The Company Company uses the following approaches to placed before the ERC. The products are manages the investment risk arising from manage its mortality and morbidity risk: launched only after approval by the ERC. these products by setting limits on the Asset Liability Management (ALM): Asset- equity backing ratio and debt duration. Product approval process: Launching new liability management involves minimizing the products can significantly alter the risk risk due mismatches in assets and liabilities. iv. Category 4: Linked products without profile of the Company’s balance sheet. Mismatches could arise either due to guarantees Insurance risks inherent in the new products asymmetric changes in the value of assets or significant modifications to existing and liabilities as a consequence of changes The linked portfolio without guarantees has products are identified at the product design in macroeconomic factors such as interest minimal investment risk to the solvency of stage and products are launched only after rates, or due to asynchronous cash inflows the Company. These funds are managed approval by the ERC. and outflows. The Company has developed with respect to an appropriate benchmark detailed investment specifications that index and do not require any active ALM. Reinsurance: The Company uses govern the investment strategy and limits appropriate reinsurances arrangements, for each fund depending on the profile of (b) Credit risk: The Company manages the including catastrophe reinsurance, to the liability backed by those assets. For credit risk of its investments through the manage insurance risk. The Company’s each category of products, the Investment following measures: reinsurance exposures are considered and Specifications specify limits to permissible approved by the ERC periodically. exposures to various asset classes along Exposure limits for companies, groups and with duration guidelines for fixed income industries in accordance with IRDA norms Repricing: The Company also reserves instruments. The Investment Specifications and limits as per its own Investment Policy. the right to review risk charges, in case of are designed appropriately to achieve the risk adverse experience, with IRDA approval. versus return objectives and policyholders’ Restricting investments primarily to reasonable expectations while maintaining securities rated AA and above. Underwriting and claims controls: the risk within the Company’s risk appetite Underwriting and claims policies and and with due consideration of regulatory Engagement with select and financially procedures are in place to assess and requirements. The mitigation strategies for sound reinsurers as per internal guidelines for manage the risks. The Company conducts different portfolios are as follows: reinsurance. The credit risk on reinsurance periodic reviews of both underwriting andi. Category 1: Participating and contracts are reviewed when the Company claims procedures. Non-participating endowment business plans to enter into a relationship with a new reinsurer, or in case of significant events Experience analysis: The Company For these funds the Company’s asset like credit rating downgrades of existing conducts its experience analysis regularly allocation strategy, which includes reinsurers. to ensure that corrective action can be investments in equities, is designed to initiated at the earliest opportunity and that achieve the twin objectives of managing Approved counter-parties are used to assumptions are in line with experience. risks arising from guarantees and optimizing minimize settlement risk. policyholder returns, subject to regulatory (e) Persistency risk: The Company uses the constraints. ALM is done through monthly (c) Liquidity risk: The Company faces following approaches to manage the risk: limited liquidity risk due to the nature of its liabilities. The Company has put the Experience analysis: The Company following mitigants in place: conducts its experience analysis regularly to ensure that corrective action can be initiated at the earliest opportunity and that assumptions used in product pricing and41 Fostering a Winning Workplace 42 Making a Difference to our Communities 39

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014 embedded value reporting are in line with The Company actively promotes a safety of human resources. The key BCM experience. risk awareness culture by improving objectives are: Product features: The Company uses understanding through communication a. Responding to a disruption of critical features like loyalty bonuses and additional and education amongst management, allocation of units to encourage policyholders employees, contractors and vendors. business processes & system and to continue with the policy. Appropriate training material is developed recovering them within acceptable Service initiatives: The Company uses and cascaded to improve knowledge and timeframe. a combination of proactive and reactive promote a strong operational risk practice. b. To minimize the potential impact any interventions to manage persistency. business disruption would have on the The interventions could include sending Use of insurance: The Company periodically company and its reputation. communication via different media like email evaluates the purchase of insurance to c. To ensure continuous operation of to customers and distributors and reminders mitigate operational risk. business critical systems/processes in and telephonic interviews with customers. the event of an interruption. Aligning key performance indicators: The Fraud Management: The following approach Information Security: The Company has an Company uses different key performance has been adopted to prevent fraud: information security framework that ensures indicators for different levels of hierarchy in all information assets are safeguarded by sales and operations to align interests and i. Proactive Fraud Management: establishing comprehensive management ensure adequate focus on persistency. 1. Triggers to identify suspected processes throughout the organization and business information is protected(f) Expense risk: The Company uses the frauds both from internal data and adequately through appropriate controls following approaches to manage the risk: external environment. and proactive measures. The Company 2. Random sample checks. aims to reduce risks of unauthorized access, Experience analysis: The Company actively ii. Build awareness and provide training modification, sharing or destruction of data, monitors its expense levels, which are to employees and encourage incident service disruption. Access rights are role- then fed back into new product pricing, reporting. based and a system-based authority matrix calculation of reserves and management iii. Incident management: Fraud incidents is used to govern the same. All new IT reporting. In case of any adverse deviations are investigated for identification applications are assessed for data security between actual unit costs and planned unit of process/system failures and/or vulnerabilities before their implementation. costs, mitigation measures are taken. identification of responsible internal/ Whistle-blower policy that facilitates reporting external parties. The investigations of observed breaches to the code of conduct, Aligning key performance indicators: The are followed by financial recovery and legal violations in relation to work related Company uses different key performance implementation of controls to prevent issues, non-adherence to accounting policies indicators to align interests and ensure repeat incidents. Disciplinary action in and procedures, or non-compliance with adequate focus on expense. accordance to Malpractice Matrix is the anti-bribery and anti-corruption policy. initiated against involved employees. Employee code of conduct that is laid out with(g) Operational risk: The Company uses the Business Continuity Management (BCM): a malpractice matrix prescribing disciplinary following approaches to manage the risk: The Comapny has a BCM framework action including caution, deterrent action to ensure resilience and continuity of and termination based on the nature and The Company develops mitigation plans for key products and services at minimum seriousness of non-compliant behaviour. high risk items. The Company monitors actions acceptable level to achieve business-as identified for mitigation of the risks towards usual presence in the market place and improvement of its operational risk profile.40 14 Directors’ Report 24 Corporate Governance 26 Management Discussion and Analysis 38 Enterprise Risk Management

INSURANCE AAJ BADAL RAHA HAI STATUTORY REPORTS & MANAGEMENT REVIEWFOSTERING A WINNING WORKPLACE We strive to be a preferred employer by delivering on our core employee value proposition of Learning & Growth, Meritocracy, Fairness and providing a Supportive environment.The ability of any organisation to stay ahead of Leave for recovery from miscarriage for provide safe and secure work environmentthe curve depends on its ability to change and 6 weeks; to all our colleagues is not just limited to ourreinvent itself. At ICICI Prudential Life, we have offices but extends to safe travel practices asembraced change and transformation with vigor Leave of 6 months for fertility treatment; well with policies and guidelines on personaland enhanced our customer proposition to create safety during travel, permissible travel hours,value for all our stakeholders. Our core values and Leave of 2 weeks for tubectomy; choice of travel partners and vehicles. Safetyculture of Passion, Humility, Integrity, Customer and security measures for women colleaguesFirst and Boundaryless behaviour creates the Option to avail of part time employment and have been reinforced with enhanced limitsenabling environment for our business success sabbatical. for outstation travel. The Company has alsoand binds us together as One Team. facilitated the ICICI Group initiative, Quick It is now well established that Health, Response Team (QRT) to provide assistance toAs a leading life insurance player, we strive to Safety and Wellness have direct bearing women colleagues in situations of distress. Asbe a preferred employer by delivering on our on performance and productivity. We have soon as a woman employee calls the dedicatedcore employee value proposition of Learning & reinforced our health and wellness proposition helpline, the control room notified for QRT isGrowth, Meritocracy, Fairness and providing to include programmes that help proactive and informed. QRT is dispatched to the location froma Supportive environment. We encourage preventive health management. We encourage where the call is received. Whilst on the wayour colleagues to be the architects of their annual health check-ups for colleagues over QRT activates medical help, police help etc. ascareers by offering challenging assignments, 35 years and offer free medical consultation may be relevant. Besides policies to support ourencouraging movement across diverse roles, to colleagues for their common health issues. women colleagues for their life stage needs, thenetworking opportunities and rewarding the truly All our colleagues are protected against the Company through its development framework,deserving through opportunities for accelerated exigencies of life through comprehensive Life offers them Womentoring program, which iscareer growth. Insurance, Accident Insurance and Medical a one on one voluntary mentoring program. Insurance plans. Colleagues having children with Senior colleagues of the company mentorWe believe that a working environment that special needs are extended financial support to women colleagues to help them achieve theirenables our colleagues to effectively balance cover expenses of therapies/treatment that aid professional goals.their professional and personal needs is critical in improving quality of life. Scholarship schemesfor their physical and psychological well-being have also been instituted for encouragingand consequently, their productivity at work. We excellence in academics and sports for thehave implemented a wide range of customised children of colleagues and is awarded basis apolicies that recognises the diverse life-stage certain level of merit.needs of our colleagues. These include: Employee safety is paramount at the Company. Enhanced maternity leave for 24 weeks; Our offices are compliant on health, safety, security and environmental standards. Paternity leave for 5 days; Employees are trained on emergency procedures and there is regular communication on safety Adoption leave for 12 weeks; practices and fire drills. Our commitment to41 Fostering a Winning Workplace 42 Making a Difference to our Communities 41

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014MAKING A DIFFERENCE TO OUR COMMUNITIES Children are the future of our country. Initiatives for their protection and development deeply resonate with us.The Company’s Corporate Social Responsibility development and facilitating adoptions has been free treatment for underprivileged patients. On(CSR) commitment aims to support worthy planned. an average 250-300 dialysis are conducted percauses such as supporting children and the month, whereas there was a requirement toelderly, protection of communities for health, In the first year, interventions as below were taken cater to double the existing capacity. To meet thiseducation, livelihoods, environment, etc. As an forward in six children homes: rising need, in FY2014, the existing capacity wasICICI Group Company, we support ICICI Foundation enhanced with 5 additional machines.in its mission of inclusive growth by contributing a Medical camps to assess health levels ofsignificant part of our CSR funds. children. Approximately 8340 dialysis have been successfully conducted since inception of theMore details can be found on ICICI Foundation Deworming was done for every child facility.website www.icicifoundation.org. Nutrition support has been provided to EMPLOYEE VOLUNTEERINGIn FY2014, the Company took forward initiatives in supplement regular intake of foodthe following areas of CSR: The Company also encourages the spirit of giving Treatment to children with medical amongst its employees. The Company participatedFINANCIAL INCLUSION conditions and dental issues in the “Joy of Giving week” from October 2 to 8, by running “Donate a Wish” campaign throughThe Company has taken forward the goal of Spectacles given to children with the online Wish Tree wherein employees donatedfinancial inclusion through distribution of its micro problem of eyesight gifts for about 1500 children. Funding for the Reliefinsurance product Sarva Jana Suraksha. The and Rehabilitation of the affected population ofproduct was distributed through a network of over Hygiene workshops conducted in all homes, Uttarakhand was contributed by the employees25 partners to more than 212,650 rural customers hygiene kits given to every child; through their payroll and the Company matchedspread across 10 states. this contribution. Additionally through the Payroll Tuition support extended to children with Giving Program, employees are encouraged toCHILDREN unsatisfactory education performance; donate to causes of their choice and the Company makes a matching contribution in areas aligned toChildren are the future of our country. Initiatives for Training for livelihood initiated for older the Company’s CSR focus areas. Additionally, thetheir protection and development deeply resonate children. Company supports the Teach for India Fellowshipwith us. In FY2014, the Company partnered with program where selected employees areCatalysts for Social Action (CSA) to implement Approximately 260 children benefited through this encouraged to take up teaching assignments for 2Government of India’s Integrated Child Protection program. years at the schools identified by Teach for India.Scheme in the state of Madhya Pradesh. As part During this period, the Teach for India Fellowsof this program, interventions for rehabilitation In Mumbai, the Company continued to support continue to be on the Company payroll.including registrations of homes under Juvenile education of 500 underprivileged children throughJustice Act, improving and enhancing living the Midday Meal Program.and hygiene conditions, providing support for HEALTH In 2011, the Company had funded setup of a dialysis facility comprising of 5 dialysis machines at Raja Rajeshwari Medical College and Hospital at Mysore Road, Kambipura to provide subsidised/42 14 Directors’ Report 24 Corporate Governance 26 Management Discussion and Analysis 38 Enterprise Risk Management

STANDALONE FINANCIAL STATEMENTS44-299 Management Report 44 Independent Auditors’ Report and Certificates 50 Revenue Account 54 Profit & Loss Account 56 Balance Sheet 57 Receipts & Payments Account 58 Schedules forming part of Financial Statements 59 Statement pursuant to Section 212 of 100 the Companies Act, 1956 Annexures 101

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014MANAGEMENT REPORTfor the year ended March 31, 2014In accordance with the Insurance Regulatory and Development Authority – “Loans”, “Investments”, “Agents Balances”, “Outstanding Premiums”,(‘IRDA’) (Preparation of Financial Statements and Auditors’ Report of “Interest, Dividend and Rents outstanding”, “Interest, Dividends and RentsInsurance Companies) Regulations, 2002, the following Management accruing but not due”, “Amounts due from other persons or Bodies carryingReport is submitted for the financial year ended March 31, 2014: on insurance business”, “Sundry Debtors”, “Cash” and items specified under “Other Accounts” except debt securities held in non-linked and1. CERTIFICATE OF REGISTRATION Shareholder funds.The Certificate of Registration under Section 3 of the Insurance Act, 1938 As required by IRDA (Preparation of Financial Statements and Auditor’swas granted by IRDA on November 24, 2000. We hereby confirm that the Report of Insurance Companies) Regulations 2002, all debt securitiesCompany has obtained renewal of registration certificate from IRDA for the and redeemable preference shares made from Policyholders’ non-linkedfinancial year ended March 31, 2015 and the registration certificate was funds and Shareholders’ funds are considered as ‘held to maturity’ andvalid as on March 31, 2014 and is in force as on the date of this report. accordingly measured at historical cost, subject to amortisation of premium or accretion of discount.2. STATUTORY LIABILITIES/DUES The Balance Sheet value and the market value of these investments is as follows:We hereby certify that all dues payable to the statutory authorities havebeen duly paid except those under dispute or disclosed under contingent (` ‘000)liabilities. March 31, 2014 March 31, 20133. SHAREHOLDING PATTERN Particulars Balance Market Balance Market Sheet value value Sheet value valueWe hereby confirm that the shareholding pattern of the Company and any Debttransfer of shares during the year are in accordance with the statutory investments in 166,432,925 160,597,928 141,682,196 142,289,088requirements. non-linked and ShareholderThere was no capital infusion by the promoters during the year under review. fundsThe Company has allotted 316,438 shares (FY2013: 90,125 shares) during 7. APPLICATION AND INVESTMENTS OF LIFEthe year under the Employees Stock Option Scheme. INSURANCE FUNDSThe shareholding pattern of the Company was as follows: We certify that no part of the life insurance fund has been directly or indirectly applied in contravention of the provisions of the Insurance Act,Particulars At March 31, 2014 At March 31, 2013 1938, relating to the application and investments of the life insurance funds.ICICI Bank Limited 73.84% 73.85% 25.94% 25.95%Prudential CorporationHoldings Limited 0.22% 0.20% 8. OVERALL RISK EXPOSURE AND STRATEGY ADOPTED TO MITIGATE THE SAMEOthers The Company recognises that risk is an integral element of the business and4. INVESTMENTS OUTSIDE INDIA managed acceptance of risk is essential for the generation of shareholder value. The risk governance structure of the Company consists of the Board,We hereby declare that no investments, directly or indirectly have been the Board Risk Management Committee (BRMC), the Executive Riskmade outside India from the funds of the holders of policies issued in India. Committee (ERC) and its sub-committees. Board approved risk policies detail identification, measurement, monitoring and control standards5. SOLVENCY MARGIN relating to the various individual risks, namely investment (market, credit and liquidity), insurance and operational risks.We hereby confirm that the Company has maintained adequate assets tocover both its liabilities and required solvency margin as prescribed under 8.1. Investment riskSection 64VA of the Insurance Act, 1938 and the IRDA (Assets, Liabilitiesand Solvency Margin of Insurers) Regulations, 2000. Investment risk is the risk arising out of variations in the level or volatility of market prices of assets and financial instruments, including the risk arisingThe details of the solvency ratio are as below: from any mismatch between assets and liabilities, due to external market and economic factors. The Company faces limited liquidity risk due to theParticulars At March 31, 2014 At March 31, 2013 nature of its liabilities. The key mitigation approaches for this risk are asActual solvency ratio 372.3% 395.7% follows:Required minimum solvency ratio 150.0% 150.0% (a) Product approval process: Launching new products can significantly6. VALUATION OF ASSETS IN THE BALANCE SHEET alter the risk profile of the Company’s Balance Sheet. Investment risks inherent in the new products or significant modifications to existingWe certify that the values of all assets have been reviewed on the date products are identified at the product design stage and products areof the Balance Sheet and to best of our knowledge and belief the assets launched only after approval by the ERC.set forth in the Balance Sheets are shown in the aggregate at amountsnot exceeding their realisable or market value under the several headings44 44 Management Report 50 Independent Auditors’ Report and Certificates 54 Revenue Account 56 Profit & Loss Account 57 Balance Sheet

INSURANCE AAJ BADAL RAHA HAI STANDALONE FINANCIAL STATEMENTS(b) Asset Liability Management (ALM): The Company has detailed (b) The Company actively promotes a risk awareness culture by improving Investment Specifications that govern the investment strategy and understanding through communication and education amongst limits for each fund depending on the profile of the liability backed management, employees, contractors and vendors. by those assets. For each category of products, the Investment Specifications specify limits to permissible exposures to various (c) Use of insurance: The Company periodically evaluates the purchase asset classes, duration guidelines for fixed income instruments and of insurance to mitigate operational risk. minimum investment in liquid assets. (d) Fraud management: The Company follows both a proactive and(c) Exposure limits have been defined for companies, groups and reactive approach to manage fraud. Proactive management is done industries in accordance with IRDA guidelines and the Company’s by using triggers to identify suspected frauds and through random internal Investment Policy. The Company restricts investments sample checks. Reactive management is done through incident primarily to securities rated AA and above. management. Investigation is done for identification of process/ system failures and/or identification of responsible internal/external8.2. Insurance risk parties. The Company ensures implementation of controls to prevent repeat incidents, financial recovery process and disciplinary actionInsurance risk is the risk arising because of mis-estimation of the best against involved employees in accordance to malpractice matrix.estimate or because of random fluctuations in the frequency, size andtiming of insurance liabilities. Insurance risk is composed of the following (e) Business Continuity Management (BCM): The Company has acomponents: mortality, morbidity, persistency and expense risk. These risks BCM framework to ensure resilience and continuity of key productsare mitigated through: and services at minimum acceptable level to achieve business-as usual presence in the market place and safety of human resources.(a) Product approval process: Insurance risks inherent in the new This includes systems and processes including use of disaster products or significant modifications to existing products are identified recovery sites and business continuity drills for critical processes. at the product design stage and products are launched only after approval by the ERC. The Company in its product design incorporates (f) Information security: The Company has an information security product features and uses appropriate policy wordings to mitigate framework that ensures all information assets are safeguarded by insurance risk. establishing comprehensive management processes throughout the organization.(b) Reinsurance: The Company uses appropriate reinsurances arrangements, including catastrophe reinsurance, to manage (g) Internal policies like employee code of conduct that prescribes a insurance risk. The arrangements are with select and financially sound malpractice matrix with appropriate disciplinary action based on the reinsurers. The Company’s reinsurance exposures are considered and nature and seriousness of non-compliant behavior and whistle-blower approved by the ERC periodically. policy that facilitates reporting of observed breaches to the code of conduct, legal violations in relation to work related issues, non-(c) Underwriting and claims controls: Underwriting and claims adherence to accounting policies and procedures, or non-compliance policies and procedures are in place to assess and manage mortality with the anti-bribery and anti-corruption policy. and morbidity risks. The Company seeks to minimise these risks by diversifying its business portfolio and adhering to appropriate and 9. OPERATIONS ABROAD segmented underwriting norms. The Company conducts periodic reviews of both underwriting and claims procedures. The Company has set up representative offices in the Kingdom of Bahrain and the United Arab Emirates. These representative offices do not contract(d) Experience analysis: The Company conducts its experience liability overseas and all the policies are underwritten and issued in India. analysis regularly to ensure that corrective action can be initiated at The Company has recently been granted an approval to set up a branch in the earliest opportunity and that assumptions used in product pricing, the Kingdom of Bahrain. reserving and embedded value reporting are in line with experience. The Company actively monitors its claims experience, persistency 10. CLAIMS levels and expense ratios. The average time taken by the Company from the date of submission of the(e) Aligning key performance indicators: The Company uses final requirement by the claimant to despatch of claim payment, in respect appropriate key performance indicators for different levels of hierarchy of mortality and morbidity claims, was as follows: in sales and operations to align interests and ensure adequate focus on insurance risk specially, persistency and expense. Period Average time taken for claim settlement (in days) FY 2014 68.3. Operational risk: FY 2013 4 FY 2012 5Operational risk is the risk of loss, resulting from inadequate or failed internal FY 2011 7processes, people and systems, or from external events. The Operational FY 2010 7risk framework includes management of fraud risk and outsourcing risk. FY 2009 7The Company uses the following approaches to manage the risk: The ageing of mortality and morbidity claims registered and not settled at March 31, 2014 has been detailed herein below:(a) The Company develops and monitors mitigation plans for high risk items identified through the Risk Control Self-Assessment (RCSA) done by each business function or loss events or audit findings.58 Receipts & Payments Account 59 Schedules 100 Statement Pursuant to Section 212 of the Companies Act, 1956 101 Annexures 45

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014Linked business: Fixed deposits with banks are valued at cost. At March 31, 2014 At March 31, 2013 11.2. Linked investments We certify that the investments in linked business are valued on mark-to-Period Number of Amount Number of Amount market basis. claims (` ‘000) claims (` ‘000)Upto 30 days 287 263 Central and State government securities are valued as per the valuationGreater than 30 100 31,737 91 24,911 price provided by CRISIL.days and upto 6 23,613 9,746months - Debt securities other than government securities with a residual maturityGreater than - -- over 182 days are valued on a yield to maturity basis, by using spreads over6 months and - the benchmark rate (based on the matrix released by the CRISIL Limitedupto 1 year - -- (‘CRISIL’) on daily basis) to arrive at the yield for pricing the security.Greater than 1 1year and upto 5 433 1 402 Debt securities with a residual maturity upto 182 days are valued at lastyears valuation price plus the difference between the redemption value and lastGreater than 5 valuation price, spread uniformly over the remaining maturity period of theyears instrument.Non linked business: Money market instruments are valued at historical cost, subject to accretion of discount over the period of maturity/holding on a straight-line basis. At March 31, 2014 At March 31, 2013 Listed equity shares are valued at market value, being the last quotedPeriod Number of Amount Number of Amount closing price on the NSE (in case of securities not listed on NSE, the last claims (` ‘000) claims (` ‘000) quoted closing price on the BSE is used).Upto 30 days 54Greater than 30 107 124,490 61 7,989 Mutual fund units are valued at the latest available net asset values of thedays and upto 6 159,533 27 13,667 respective fund.months 2Greater than 16,721 - - Venture fund units are valued at the latest available net asset value of the6 months and 1 respective fund.upto 1 year 808 1 747Greater than 1 - Unrealised gains and losses are recognised in the Revenue account asyear and upto 5 -- - prescribed by IRDA (Preparation of Financial Statements and Auditors’years Report of Insurance Companies) Regulations 2002.Greater than 5years Fixed deposits with banks are valued at cost.Claims remain unpaid for greater than 6 months for want of proof of title 12. REVIEW OF ASSET QUALITY AND PERFORMANCEor the cause of death or pending other necessary documentation, to OF INVESTMENTSdetermine the claim liability. All investments are made in accordance with the regulatory norms,11. VALUATION OF INVESTMENTS Investment Policy, fund objectives of unit linked funds, asset liability management guidelines and risk profile of the respective fund.11.1. Non linked investments 12.1. Asset compositionWe hereby certify that as prescribed under the IRDA (Preparation of Financial The portfolio mix of assets of the Company at March 31, 2014 is as follows:Statements and Auditor’s Report of Insurance Companies) Regulations2002, all debt securities and redeemable preference shares made from Asset class Total %Policyholders’ non-linked funds and Shareholders’ funds are considered as (` billion)‘held to maturity’ and accordingly measured at historical cost, subject to 46.8%amortisation of premium or accretion of discount in the Revenue account or Equity shares 377.58 17.4%the Profit and Loss account over the period of maturity/holding. 15.8% Government securities 140.62 9.5%Listed equity shares and mutual fund investments are carried at fair value 6.8%being the last quoted closing price on the National Stock Exchange of India Debentures and bonds* 127.15 1.5%Limited (‘NSE’) (in case the securities are not listed on NSE, the last quoted 0.1%closing price on the BSE Limited (‘BSE’) is used). Unlisted equity shares are Money market instruments 76.61 0.0%stated at historical cost. 2.0% Fixed deposits 54.45Mutual fund units are valued at the latest available net asset values of the 100.0%respective fund. Mutual funds 11.87Unrealised gains/losses arising due to changes in the fair value of listed Investment property 0.85equity shares and mutual fund units are taken to the “Fair Value ChangeAccount” in the B1alance Sheet. Loan against policies 0.12Investments in venture funds and loans are valued at historical cost. Net current assets and other 16.72 investmentsInvestment property is valued at historical cost, subject to revaluation, atleast once in every three years and provision for impairment, if any. Total 805.97 * includes non-convertible preference shares46 44 Management Report 50 Independent Auditors’ Report and Certificates 54 Revenue Account 56 Profit & Loss Account 57 Balance Sheet

INSURANCE AAJ BADAL RAHA HAI STANDALONE FINANCIAL STATEMENTSThe Company has a well-diversified portfolio spread across various asset classes, companies, groups and industries. Investments in equity and relatedinstruments are targeted at long term capital appreciation with a “value-oriented” investment style to target superior long-term returns. 85.1% of the equityinvestments are held in companies forming part of CNX Nifty 50 and 98.0% in companies forming part of CNX 500 index.The Company maintains a fixed income portfolio of superior asset quality at all point of time. 93.5% of the fixed income portfolio is held in highest credit ratedsecurities (Sovereign/AAA or equivalent). The Company’s investments in debt instruments are largely restricted to a minimum rating of AA and above whichaccounts for 99.4% of the Company’s fixed income portfolio. The Company does not hold any non-performing assets in its debt portfolio.12.2. Fund performanceLinked fundsAt March 31, 2014, funds representing 77% of the linked assets performed better than the respective benchmark over trailing three year and 97% sinceinception.The fund performance of major linked funds as against the benchmarks over three year and since inception period is as follows: Annualised returnsFund name SFIN Assets held* (` billion) 3 year return Since inception return 41.55 Fund Benchmark Fund Benchmark 21.11Equity funds 20.09 17.25Maximiser Fund ULIF 001 22/10/01 LMaximis1 105 17.23 6.75% 4.63% 19.01% 16.34%Dynamic P/E Fund ULIF 097 11/01/10 LDynmicPE 105 17.04 4.77% 5.76% 7.16% 6.61%Pension Flexi Growth Fund ULIF 029 20/03/07 PFlexiGro1 105 16.41 4.38% 4.13% 8.09% 7.89%Pension Flexi Growth Fund II ULIF 030 20/03/07 PFlexiGro2 105 15.65 5.47% 4.13% 9.07% 7.89%Flexi Growth Fund ULIF 026 20/03/07 LFlexiGro1 105 14.95 4.77% 4.13% 8.32% 7.89%Pension Maximiser Fund II ULIF 013 17/05/04 PMaximis2 105 14.20 8.24% 4.63% 18.10% 16.09%Multi Cap Growth Fund ULIF 085 24/11/09 LMCapGro 105 10.49 5.00% 4.13% 6.72% 5.27%Pension Dynamic P/E Fund ULIF 098 11/01/10 PDynmicPE 105 10.41 4.82% 5.76% 6.78% 6.61%Pension RICH Fund ULIF 052 17/03/08 PRICH1 105 10.34 3.82% 4.07% 7.53% 6.50%Pension Multi Cap Growth Fund ULIF 091 11/01/10 PMCapGro 105 9.62 5.13% 4.13% 6.36% 3.97%Maximiser Fund II ULIF 012 17/05/04 LMaximis2 105 9.62 7.98% 4.63% 17.65% 16.09%Flexi Growth Fund II ULIF 027 20/03/07 LFlexiGro2 105 8.30 5.25% 4.13% 8.98% 7.89%Pension RICH Fund II ULIF 053 17/03/08 PRICH2 105 7.94 4.77% 4.07% 8.43% 6.50%Flexi Growth Fund IV ULIF 038 27/08/07 LFlexiGro4 105 6.56 5.14% 4.13% 6.98% 5.92%Maximiser Fund V ULIF 114 15/03/11 LMaximis5 105 5.63 15.86% 12.14%RICH Fund II ULIF 049 17/03/08 LRICH2 105 5.01 NA NA 7.68% 6.45%Multiplier Fund ULIF 042 22/11/07 LMultip1 105 3.05% 4.07% 2.63% 2.50%RICH Fund ULIF 048 17/03/08 LRICH1 105 18.20 3.93% 4.74% 6.79% 6.45%Pension Opportunities Fund ULIF 092 11/01/10 POpport 105 16.01 2.20% 4.07% 5.89% 4.57%Pension Maximiser Fund ULIF 004 03/05/02 PMaximis1 105 14.39 5.34% 4.07% 20.12% 17.19%Debt funds 10.37 7.69% 4.63%Income Fund ULIF 089 24/11/09 LIncome 105 8.81 7.85% 6.36%Pension Protector Fund ULIF 006 03/05/02 PProtect1 105 7.49 8.52% 7.08% 7.28% 6.18%Group Debt Fund ULGF 002 03/04/03 GDebt 105 5.07 8.16% 7.08% 7.63% 5.65%Pension Income Fund ULIF 095 11/01/10 PIncome 105 8.71% 7.08% 7.84% 6.50%Protector Fund ULIF 003 22/10/01 LProtect1 105 32.50 8.72% 7.08% 7.12% 6.12%Pension Protector Fund II ULIF 017 17/05/04 PProtect2 105 17.30 7.96% 7.08% 7.41% 5.49%Invest Shield Cash Fund ULIF 020 03/01/05 LInvCash 105 11.41 9.14% 7.08% 7.52% 6.02%Balanced funds 10.89 8.15% 7.08%Highest NAV Fund B ULIF 116 15/03/11 LHighNavB 105 8.28 3.88% -Group Balanced Fund ULGF 001 03/04/03 GBalancer 105 7.30 2.46% - 10.27% 7.95%Balancer Fund ULIF 002 22/10/01 LBalancer1 105 5.78 8.41% 6.89% 11.78% 10.21%Pinnacle Fund ULIF 081 26/10/09 LPinnacle 105 5.51 7.02% 6.54% 5.73%Group Growth Fund ULGF 004 30/10/03 GGrowth 105 3.24% 15.00% -Pension Balancer Fund II ULIF 015 17/05/04 PBalancer2 105 11.79 9.22% - 10.92% 11.45%Pinnacle Fund II ULIF 105 26/10/10 LPinnacle2 105 10.73 6.15% 6.08% 1.63% 9.80%Pension Balancer Fund ULIF 005 03/05/02 PBalancer1 105 7.49 3.15% 6.54% 11.41%Liquid funds 7.39 4.76% -Pension Preserver Fund ULIF 011 17/05/04 PPreserv 105 6.96 - 7.95% 10.66%Money Market Fund ULIF 090 24/11/09 LMoneyMkt 105 9.25% 6.54% 8.19%Preserver Fund ULIF 010 17/05/04 LPreserv1 105 9.23% 8.08% 6.82%Group Short Term Debt Fund ULGF 003 03/04/03 GSTDebt 105 9.26% 8.71% 7.06% 7.70%Pension Money Market Fund ULIF 096 11/01/10 PMoneyMkt 105 8.66% 8.71% 8.36% 6.83% 9.25% 8.71% 6.36% 8.71% 7.86% 8.71%NA – indicates that the fund was non-existent during relevant year* Assets held at March 31, 201458 Receipts & Payments Account 59 Schedules 100 Statement Pursuant to Section 212 of the Companies Act, 1956 101 Annexures 47

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED ANNUAL REPORT FY2014Non linked and Shareholders' fundsThe fund performance of non-linked Policyholders’ and Shareholders’ funds over the 1 year period are as follows: FY2014 FY2013 Particulars Assets held* 1 year return Assets held* 1 year return (` billion) (` billion) Policyholders’ fund Market value Book value Market value Book value Participating Non-participating 67.84 5.69% 8.51% 59.45 12.17% 9.48% Shareholders’ fund 79.83 5.00% 8.08% 56.72 11.79% 8.98%* Assets held at March 31, 2014 55.19 8.36% 7.24% 50.26 11.47% 10.03%13. PAYMENTS MADE TO PARTIES IN WHICH DIRECTORS ARE INTERESTEDThe details of such payments for the year ended March 31, 2014 are given below: (` ‘000)Sr. No. Name of Entity in which Director is interested Interested as Amount paid1 Director ICICI Bank Limited Managing Director & CEO FY2014 FY2013 Chanda Kochhar ICICI Lombard General Insurance Company Limited Chairperson ICICI Securities Limited Chairperson ICICI Foundation for Inclusive Growth Member - Governing Council 13,648,488 7,560,360 The Willingdon Sports Club Member 189,481 167,304 Confederation of India Industry (CII) Member - National Council 408,198 406,536 Chairperson - National Committee 96,840 0 on Banking Member - National Committee for 38 20 Financial Inclusion 631 1,200 Member - IIM Society, Lucknow Indian Institute of Management, Lucknow Member - Managing Committee - 194 - 25 Associated Chambers of Commerce and Industry of India (ASSOCHAM)2 Keki Dadiseth The Indian Hotels Company Limited Director 11,940 2,198 18,535 23,635 PwC - Price Waterhouse Coopers Private Limited Member, India Advisory Board3 K. Ramkumar ICICI Bank Limited Executive Director 13,648,488 7,560,360 ICICI Foundation for Inclusive Growth Member - Governing Council 96,840 04 N. S. Kannan ICICI Bank Limited Executive Director & CFO 13,648,488 7,560,360 189,481 167,304 ICICI Lombard General Insurance Company Limited Director 38 20 96,840 0 The Willington Sports Club Corporate Member ICICI Foundation for Inclusive Growth Member - Governing Council5 Vinod Kumar Dhall Schneider Electric Infrastructure Limited Non-Executive Chairman 171 1676 Rajiv Sabharwal ICICI Bank Limited Director 13,648,488 7,560,360 ICICI Home Finance Company Limited Chairman 118 607 ICICI Foundation for Inclusive Growth Member - Governing Council 96,840 0 Khanna Hotels Private Limited (The Club) Corporate member The Willingdon Sports Club Member 590 728 38 207 V. Sridhar ICICI Bank Limited Director 13,648,488 7,560,36048 44 Management Report 50 Independent Auditors’ Report and Certificates 54 Revenue Account 56 Profit & Loss Account 57 Balance Sheet