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Persevere. Pioneer. Prosper. Courage of Conviction

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Persevere. Pioneer. Prosper. Courage of Conviction Kotak Mahindra Life Insurance Company Limited Annual Report 2019-20 Persevere. Pioneer. Prosper. Courage of Conviction. Consolidated Financial Bank Reports and Persevere. Pioneer. Prosper. Financial Highlights Constancy of Change. Statements Statements TWENTIETH ANNUAL REPORT 2019-20 CONTENTS PAGE NO. Board of Directors 2 Directors’ Report 3 Management Report 42 Auditors’ Report 50 Revenue Account 59 Profit & Loss Account 60 Balance Sheet 61 Schedules forming part of the Financial Statements 63 1 BOARD OF DIRECTORS AS ON MARCH 31, 2020 Uday Kotak Non-Executive Director – Chairman Prakash Apte Independent Director Paresh Parasnis Independent Director Anita Ramachandran Independent Director – Woman Director Shivaji Dam Non-Executive Director Dipak Gupta Non-Executive Director Gaurang Shah Non-Executive Director G. Murlidhar Managing Director COMPANY SECRETARY Muralikrishna Cheruvu CIN U66030MH2000PLC128503 REGISTERED OFFICE 2nd Floor, Plot # C- 12, G- Block, BKC, Bandra (E), Mumbai - 400 051 AUDITORS M/s S. R. Batliboi & Associates, LLP M/s Haribhakti & Co., LLP BANKERS Kotak Mahindra Bank Ltd. Standard Chartered Bank ICICI Bank Ltd. HDFC Bank Ltd. REGISTRAR AND TRANSFER AGENT M/S. LINK INTIME INDIA PVT. LTD. C-101, 247 PARK, L.B.S. MARG, VIKHROLI (WEST), MUMBAI – 400 083 WEBSITE https://insurance.kotak.com/ 2 Annual Report 2019-20 Consolidated Financial Bank Reports and Persevere. Pioneer. Prosper. Financial Highlights Statements Statements Directors' Report Directors’ Report TO THE MEMBERS OF KOTAK MAHINDRA LIFE INSURANCE COMPANY LIMITED The Directors present their Twentieth Annual Report together with the audited accounts of your Company for the year ended March 31, 2020. FINANCIAL HIGHLIGHTS Your Company continues to demonstrate consistent performance in a competitive environment. This year your Company continues to be profitable, which it has achieved through a product mix and efficient management of cost. The summarized results of operations of your Company for the Financial Year (“FY”) 2019-20 are as follows: (` in Crores) Particulars Year ended Year ended March 31, 2020 March 31, 2019 New Business Premium 5,106 3,977 Renewal Premium 5,234 4,191 Total Premium 10,340 8,168 Profit/(Loss) before tax 813 664 Profit/ (Loss) after tax 582 580 Bonus to Policyholders 418 291 Net worth 3,353 2,745 New Business Sum Assured 162,529 1,64,602 Assets Under Management 34,915 30,310 POLICYHOLDER BONUSES The cost of regular / cash / reversionary bonuses declared by the Board of Directors for FY19-20 is approximately Rs. 391.5 crores, an increase of Rs120.5 crores from the cost of regular / cash / reversionary bonuses declared in FY18-19. Additionally, interim and terminal bonuses of Rs26.9 crores were paid during FY19-20 to policy exits. DIVIDEND & RESERVES Your Directors do not recommend any dividend for the current year. Your Company does not propose to carry any amount to the reserves of the Company. CAPITAL Your Company continues to be amongst the most efficient capital users in the life insurance space and has a good Assets under Management to Capital ratio. During the year under review, the Authorized Share Capital of your Company was Rs. 625 crores, while the paid up share capital of your Company was Rs. 510 crores. There has been no capital infusion during the FY 2019-20. LICENSE The Certificate of Registration under Section 3 of the Insurance Act, 1938 was granted by IRDAI on January 10, 2001. Pursuant to Section 3 read with Section 3A as amended by Insurance Laws (Amendment) Act, 2015, the process of annual renewal of the Certificate of Registration issued to insurers was deleted. Consequently, the Certificate of Registration granted by the IRDAI to insurers continues to be in force provided the insurers pay the annual fees within prescribed time and in prescribed manner. The Company has paid the annual fees to IRDAI for the FY 2020-21. Accordingly, the Certificate of Registration is valid as on March 31, 2020 and the same continues to be in force. INDUSTRY SCENARIO In FY 2020, KLI registered a growth of 23.5% on Total New Business Premium- APE terms whereas private insurance industry as a whole registered a growth of 9.1% on Total New Business Premium – Adjusted Premium Equivalent (APE) terms (Single 1/10). On the same basis, KLI market share stood at 6.6% of private industry with a growth of 13.2% over FY 2019. Kotak Life is the sixth largest private sector life insurer in terms of individual first year premiums and overall first year premiums for FY2020. 3 BUSINESS AND DISTRIBUTION CHANNELS Individual Business The year witnessed increased focus towards traditional products and an increasing trend towards long-term selling, which augurs well for the Company. Your Company has driven Protection and Long Term Savings Products (PALTS) across its distribution verticals. The share of traditional premium in overall premium has increased from 76.7% in FY19 to 81.6% to FY20. Your Company continues to focus on distribution efficiency. Investment in training Life Advisors and sales hierarchy has been stepped up to ensure productivity is improved and the distribution team is equipped to meet customers’ expectations. Besides Kotak Mahindra Bank Limited, your Company has agency tie-ups with cooperative banks, commercial banks, corporate agents and brokers which also contribute to the premium income. Group Business Group portfolio comprises of traditional and unit linked products catering to gratuity, leave encashment and superannuation needs of employer- employee groups. In addition, your Company also offers Term and Credit Insurance products. Your Company generated a premium income of Rs. 2990 Crores [includes New Business Rs. 2707 Crores & Renewal Rs. 283 Crores] FY 2019-20 vs Rs. 2085 Crores [includes New Business Rs. 1846 Crores & Renewal Rs. 240 Crores] from group insurance business registering a growth of 43.4% over FY 2018- 19. PRODUCTS During the Financial Year 2019-20, the Authority issued multiple Regulations pertaining to the design and sales of products. This required a change in not just the product design but also the way we sell our products. Your Company successfully and smoothly did this transition and the entire product portfolio (i.e. Individual & Group Products as well as riders) were revamped and launched. Along with this, the new regulation pertaining to Suitability analysis of the customers and revision in the Benefit Illustration format were also implemented. In continuation with the vision to provide Smart Solutions to customers, in the month of July 2019, Company launched– “Save2Secure”, a series of solutions that offer a combination of Protection & Savings to the customer. Another solution, “Prosperous Life”, was launched to provide long term savings solution to the customers. MARKETING Your Company’s marketing efforts during the year were focused on activities that were designed to improve customer experience, drive the brand promise, and expand adoption of marketing technologies. To this end, your Company has: • Implemented the Net Promoter System® to drive positive customer experience. Existing processes and touch points were revamped after understanding feedback received from customers • Continued building the Kotak Life brand externally through three major digital campaigns: Poora Plan, Har Sapna Hai Khas for Father’s Day and Barabari ka Saath for Women’s Day. Poora Plan also was also screened for multiple weeks in cinemas across the country. • Built on Kotak Life brand internally through enhanced employee training initiatives, huddles, employee activation and recognizing good customer stories by publishing them across the company. • Driven adoption of Smart Sell marketing and engagement tool, which was launched last year. It is currently used by our agents across multiple channels as an integral part of their pitch. • Leveraged the use of customer engagement martech to improve effectiveness of communication by reaching out to customers with personalized communication. HUMAN RESOURCES Your Company earnestly strives to distinguish itself from the peers and aspires to be counted amongst the best places to work across various sectors. During the year under review, the Company has undertaken various initiatives to support business through organisational efficiency, and various employee engagement programmes to enable achievement of higher productivity levels. The Company continued to focus on developing leadership capability as well as technical and functional capabilities of employees in order to meet future talent requirement. Your Company continued its development focus on the people capital. 4 Annual Report 2019-20 Consolidated Financial Bank Reports and Persevere. Pioneer. Prosper. Financial Highlights Statements Statements Directors' Report Our focus on human capital continued to manifest as Building Scale, Building Capability and Becoming Employer of Choice. The following initiatives were taken: • Keeping retention as one of our key focus areas, several measures were taken leading to improvement in retention by 8%. • Around 450 freshers hired from various management institutes in our endeavour to build talent pipeline within KLI. • U matter (The employee engagement survey) launched for the second time at KLI. The engagement score improved to 73% from 68%, positioning KLI above LI top quartile (72%). • Segmented approach for leadership development was adopted through programs like LEAP, Emergence, MP-DC, and GOLD. GOLD Phase 1 successfully completed with all our leaders at L8 and L9. For the first
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