Bajaj Allianz Life Insurance Annual Report 2014-2015

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Management overview

PERFORMANCE AT A GLANCE

Message From The Managing Director & CEO | Board of Directors | Performance at a Glance

66 Message From The Managing Director & CEO | Board of Directors | Performance at a Glance

Management overview

777

Your Directors have pleasure in presenting their Fourteenth Annual

Report & audited financial statements for the financial year ended

March 31, 2015.

1. The Life Insurance industry

During the year, on the back of the improved GDP growth, lower

inflation and improved equity market performance the private

industry witnessed a rebound after witnessing de-growth for four

consecutive years. The private industry grew by 18.0% for FY 2015 as

compared to de-growth of 4.1% in FY 2014. The private market share

was up from 24.6% in FY 2014 to 30.8% in FY 2015. After successfully

gaining market share over the past five years consecutively, LIC

experienced a decline in market share and ended with 69.2% market

share as against 75.4% of the share for FY 2015. The loss of market

share was on account of the 13.6% de-growth LIC witnessed on new

business premium in FY 2015 as compared to a growth of 18.9% in

FY 2014.

The industry as a whole had registered de-growth of 5.8% in FY 2015

as compared to a growth 12.3% in FY 2014.

During the current year, the government had introduced amendment

in the Insurance Act, 1938 by an ordinance issued on 26th

December 2014. Subsequently, the Parliament passed the Insurance

Amendment Bill thereby amending the Insurance Act, 1938. The Act

has also brought in many other changes which inter alia, included

major reforms in claims settlement, digitization of insurance policies,

agent licensing process and agent commission, opening the Indian

market for foreign reinsurers by setting up branch offices in India, etc.

Overall, the insurance industry is once again set to align its operations

for a better customer experience as well as achieve greater degree of

compliance to the legal and regulatory framework.

2. Summary of operations for the year

Business Performance

FY 2015 ended at a very positive note for your Company. Your

Company registered a 3.0% growth in gross written premium (GWP)

after de-growth for four consecutive years. This growth was backed

by a growth in both new business and renewal premium. New

business premium for your Company for FY 2015 was Rs. 2,702 crore

as compared to Rs. 2,592 crore in FY 2014, a growth of 4.2%. The

renewal premium for your Company ended with a growth of 2.0%

but this was after a decline in renewal premium experienced by the

Company over four consecutive years. Renewals for FY 2015 were

Rs. 3,315 crore as compared to Rs. 3,251 crore for FY 2014. GWP for

FY2015 was Rs. 6,017 crore as compared to Rs. 5,843 crore for FY

2014.

Your Company ended with a new business market share of 2.4%

for FY 2015 as compared 2.2% share in FY 2014. Within the private

sector, your Company maintained the fourth position and ended with

a new business market share of 7.8% for FY 2015 as compared 8.8%

share in FY 2014.

Your Companys expenses were lower by 10.7% at Rs. 1,346 crore for

FY 2015 down from Rs. 1,508 crore in FY 2014.

Your Company earned a profit after tax of Rs. 876 crore as compared

to the profit of Rs.1,025 crore in FY 2014. The accumulated profits

of your Company included under Reserves and Surplus stood at Rs.

5,533 crore at March 31, 2015.

Investments

The total funds under management as on March 31, 2015 were Rs.

43,554 crore which included shareholder investments of Rs. 7,187

crore, traditional policyholder investments of Rs. 14,722 crore and

unit-linked investments of Rs. 21,645 crore. The total investments

under management of your Company showed an increase of 12.3%

in the year.

The equity markets were buoyant through the year with the

benchmark indices crossing previous all-time highs. Your Company

has utilized the opportunity provided by these rising markets to

increase equity allocation in the traditional portfolio to maximize

returns. Your Companys diversified equity funds have delivered

healthy returns and have outperformed the S&P CNX Nifty 50 index

during the year.

Debt markets also delivered good returns with a secular decline

in interest rates in the year. Macro economic fundamentals have

continued to improve with India being well poised at a cusp of a

recovery and we remain optimistic on the prospects of the capital

market in the coming year.

Products

Further to new product regulations (Linked & Non-linked Regulation,

2013), your Companys product portfolio underwent significant

changes. As on March 31, 2015, your Company had 10 group plans

and 12 individual plans in its product basket apart from 8 riders.

Within individual business, unit linked premium contributed 53.1% of

the NB premium for FY2015, compared to 19.4% in the corresponding

period of previous year.

DIRECTORS REPORT for the financial year ended March 31st 2015

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Directors Report | Secretarial Audit Report | Management Discussion and Analysis

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Customer Service

During the year, your Company has continued to further strengthen in its relationship with its customers. Your Companys robust complaint management system which delves into the root-cause of complaints and actions taken has resulted in a reduction of operational complaints by over 60%. By improving the level of automation in processes of grievance handling and policy servicing, your Company has been able to improve turnaround times as compared to the last financial year.

Your Companys 13th month persistency has improved by 6% over last years performance indicating improvement in customer retention. Your Company has taken additional steps to introduce convenient options for renewal premium payments and registering servicing requests for its customers in tie-up with banks, Service-on-Wheels at select locations and payment through Interactive Voice Recorders. The Wave Application on mobile platforms for renewals and new business collection was launched towards the end of the year.

Your Company engages with customers in different ways during different stages of the life cycle of a policy through a customer contact programme covering advance renewal intimation, grace period notification, and lapsed policy revival facilities, among others. Renewal notices are sent in English, Hindi and 12 other languages as per customers preference. A special revival campaign was also conducted during the year to increase persistency.

Death claims intimated/booked (Individual and Group) during the current year and previous year are as below:

Particulars

FY2014 FY2015

No. of

Policies

Amount

(Rs. crs)

No. of

Policies

Amount

(Rs. crs)

Claims

intimated/

booked

22,626 724 20,107 814

Claims settled 21,671 651 18,996 737

Repudiated 1,506 78 1,068 68

Note: The above includes only Death claims and Accidental benefit riders and does not include surrender benefits and withdrawals. In case of Group claims number of schemes have been considered as number of policies.

Recognition & Awards

As one of the leading private life insurers, your Company has been recognized for its financial stability, excellence in claim settlement and best practices in overall operations. Your Company received the following accolades during FY2015:

Credit Rating

Your Company has been rated as AAA by CARE Ratings for its claims paying ability/Financial Strength.

Awards and recognitions

Your Company won several awards during the year, some of which are highlighted below:

Promising Brand of the Year 2015 by the Economic Times

Best Life Insurance Company in the Private Sector by ABP News BFSI awards

Contribution towards financial literacy in the Corporate Social Responsibility category in the BFSI Vision Editors Choice awards.

Best Life Insurance Company Private Sector in the Lokmat BFSI awards 2014

SKOCH Financial inclusion and deepening award 2014 in the Platinum category for excellence in life insurance.

Claims Service Company of the year 2014 in the India Insurance awards 2014.

3.1 Capital and Net Worth

The total funds infused by the shareholders in your Company

remains Rs. 1,211 crore. The net worth of your Company at March

31, 2015 was Rs. 6,749 crore as against Rs. 5,871 crore at March 31,

2014. Your Company had no accumulated losses as at March 31,

2015.

Your Company maintained very high levels of solvency throughout the year, which provides policyholders with a high degree of comfort when dealing with your Company. The solvency ratio as at March 31st 2015 stands at 761% which is well in excess of the required solvency margin of 150%.

3.2 IRDAI registration

Your Company has paid to the Insurance Regulatory and Development Authority of India (IRDAI) the annual fees for FY 2016 as specified by the IRDA (Registration of Indian Insurance Companies) Regulations, 2000. Section 3A of the Insurance Act, 1938 has been amended by the Insurance Laws (Amendment) Act, 2015 under which the requirement for annual renewal of registration has been done away with.

4. Extract of the Annual Return

The extract of Annual Return as provided under Section 92(3) of the Companies Act, 2013, in the prescribed Form MGT- 9 is annexed to this report.

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5. Number of meetings of the Board

The Board of Directors met 6 times during the year, detailed information about dates of meetings and attendance of Directors thereat is given in the Corporate Governance Report annexed to this report.

6. Directors responsibility statement

In accordance with the requirements of Section 134(3)(c) of the Companies Act, 2013 (the Act), the Board of Directors wishes to confirm that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2015 and of the profits of the Company for that period;

(c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the annual accounts have been prepared on a going concern basis;

(e) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

7. Directors remuneration policy

Policy on Directors appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under Section 178(3) of the Companies Act 2013 is given as annexure to this report.

8. Related party transactions

All related party transactions entered during financial year under review were on arms length basis and were in the ordinary course of business. There were no material contracts or arrangement or transactions at arms length basis that needs to be disclosed in Form AOC-2 as required under the Companies Act 2013 during the year under review.

9. Material changes and commitments

There have been no material changes or commitments affecting the financial position of the Company, which have occurred between the end of financial year of the Company and the date of this report.

10. Conservation of Energy and Technology absorption

The Company, being an Insurance Company, does not have any manufacturing activity. The Directors, therefore, have nothing to report on conservation of energy and technology absorption.

11. Foreign exchange earnings and expenditure

Earnings in foreign currency : Rs. NilExpenditure in foreign currency : Rs. 28 crore

12. Risk management policy

A statement indicating development and implementation of risk management policy for the Company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the Company has been given in the Corporate Governance Report annexed to this report.

13. Corporate social responsibility

Report on Corporate Social Responsibility Policy developed and implemented by the Company and CSR initiatives taken during the year pursuant to Section 134 and Section 135 of the Companies Act, 2013 is given in annexure to this report. 14. Performance evaluation of the Board, its Committees and Directors

In accordance with Section 134(3)(p) of the Companies Act 2013, formal annual performance evaluation of the Board, its Committees and the Directors individually has been carried out in the following manner:

(a) Rating sheets were filled by each of the Directors with regard to evaluation of performance of the Board, its Committees and individual Directors (except for the Director being evaluated) for the year under review.

(b) A consolidated summary of the ratings given by each of the Directors was then prepared, based on which a report of performance evaluation was prepared by the Chairman in respect of the performance of the Board, its Committees and Directors individually.

(c) The report of performance evaluation so arrived at was then discussed by the Nomination and Remuneration Committee and Board at their meetings held on May 15th 2015.

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15. Directors and key managerial personnel

Mr. Sanjay Asher, Mr. S H Khan, Mr. Suraj Mehta and Mr. Manu Tandon, existing Independent Directors were appointed as Independent Directors pursuant to Companies Act, 2013 at the extraordinary general meeting (EGM) of the Company for a term of 5 years effective 6th March 2015. At the said EGM, Mrs. Lila Poonawalla was also appointed as an Independent Women Director of the Company for a term of 5 years effective 6th March 2015.

The Independent Directors have submitted declarations stating that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013.

Pursuant to Section 203 of the Companies Act, 2013, Mr. Ramandeep Singh Sahni has been appointed as Chief Financial Officer of the Company in place of Mr. Rajesh Viswanathan effective 1st August 2014 who has since resigned.

In light of the provisions of the Companies Act, 2013, Mr. Manuel Bauer and Mr. Ranjit Gupta, Directors, retire by rotation at the ensuing Annual General Meeting and, being eligible, have offered themselves for reappointment.

16. Significant and material orders passed by the Regulators or Courts

There were no significant and material orders passed by the Regulators or Courts or Tribunals during the year under review impacting the going concern status of your Company and its operations in future.

17. Adequacy of Internal Financial Controls

Internal financial controls with reference to the financial statements were adequate and operating effectively.

18. Particulars of employees

As required by the provisions of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of the employees are set out in the annexure to this report. This report and accounts are being sent to shareholders excluding the said information. Any shareholder interested in obtaining such information may write to the Company Secretary at the registered office of the Company for a copy thereof.

19. Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

During the year under review, 3 cases were filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. All three cases were investigated out of which 2 have been withdrawn and 1 not substantiated.

20. Corporate governance

A report on compliance with the Corporate Governance Guidelines for insurance companies issued by IRDAI (Corporate Governance Report) is annexed to this report along with a certificate from the Company Secretary.

21. Composition of Committees

These details are provided in the Corporate Governance Report annexed to this report.

22. Establishment of vigil mechanism

The Company has established a vigil mechanism in the form of Whistle Blowing Committee for the employees to raise concerns internally about possible irregularities, governance weaknesses, financial reporting issues or other such matters of irregularities. The said vigil mechanism provides adequate measures to safeguard the persons who take recourse to such vigil mechanism and in appropriate cases, the concerned person may approach the Chairperson of the Audit Committee. The Audit Committee oversees the vigil mechanism of the Company.

23. Auditors

Statutory auditors

M/s. S R Batliboi & Co. LLP, Chartered Accountants and M/s. Kirtane & Pandit LLP, Chartered Accountants, the Joint Statutory Auditors of the Company, hold office up to the conclusion of the ensuing annual general meeting of the Company. The Board of Directors recommends re-appointment and fixing of remuneration of M/s. S R Batliboi & Co. LLP, Chartered Accountants and M/s. Kirtane & Pandit LLP, Chartered Accountants as the joint statutory auditors of the Company from conclusion of the ensuing Annual General Meeting till conclusion of the next Annual General Meeting.

Secretarial auditor

Pursuant to the provisions of Section 204 of the Companies Act 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Company has appointed Mr. Shyamprasad Limaye (Membership No. 1587), Company Secretary in Practice to undertake the Secretarial Audit of the Company. The Secretarial Audit report for the financial year ended on March 31st 2015 is annexed to the report.

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24. Appreciation & Acknowledgment

The Board is grateful to the IRDAI and other regulatory authorities for their continued support.

Your Companys performance during the year would not have been possible without the commitment and hard work of the employees.

Your Directors take this opportunity to thank the promoters, Bajaj Finserv Limited and Allianz SE for providing strategic direction to and guidance in the working of the Company.

On behalf of the Board of Directors, we thank your Companys policyholders, intermediaries and reinsurers for reposing their unstinted faith in your Company and we are confident of continuing to deliver value to all our stakeholders.

For and on behalf of the Board of Directors of

Bajaj Allianz Life Insurance Company Limited

Sanjiv Bajaj

Chairman

Date : May 15, 2015Place : Pune

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Annexure to the Directors Report for the year ended March 31, 2015 Extract of Annual Return (Form No. MGT. 9)As on the financial year ended on 31st March 2015[Pursuant to section 92(3) of the Companies Act, 2013 and Rule 12 (1) of the Companies (Management and Administration) Rules, 2014]

I. Registration and other details

i. Corporate Identification Number (CIN):- U66010PN2001PLC015959ii. Registration Date:- 12th March 2001iii. Name of the Company:- Bajaj Allianz Life Insurance Company Limitediv. Category /Sub-Category of the Company: Public Company Limited by shares having a share capitalv. Address of the Registered office and contact details:- GE Plaza, Airport Road, Yerawada, Pune 411 006, Tel : 020 - 66026777vi. Whether listed company:- Novii. Name, Address and contact details of Registrar and Transfer Agent, if any. Not Applicable

II. Principal business activities of the Company

All the business activities contributing 10% or more of the total turnover of the Company.

Sr. No. Name and Description of main products / service NIC Code of the Product / Service % to total turnover of the Company.

1 Life Insurance 65110 100%

III. Particulars of holding, subsidiary and associate Companies

Sr. No. Name and Address of the Company CIN / GLNHolding / Subsidiary /

Associate% of shares held Applicable Section

1 Bajaj Finserv Limited

Bajaj Auto Limited Complex, Mumbai-Pune Road,

Pune 411 035

CIN: L65923PN2007PLC130075 Holding Company 74% 2(46)

IV. Share holding pattern (equity share capital breakup as percentage of total equity)

i. Category-wise Share Holding

Categories of Shareholders

No. of Shares held at the beginning of the year No. of Shares held at the end of the year% change during

the yearDemat Physical Total% of Total

SharesDemat Physical Total

% of Total

Shares

A. Promoters

(1) Indian

a) Bodies Corporate

Nil 111,524,660 111,524,660 74% Nil 111,524,660 111,524,660 74% 0%

Sub-total (A) (1):- Nil 111,524,660 111,524,660 74% Nil 111,524,660 111,524,660 74% 0%

(2) Foreign

b) Bodies CorporateNil 39,184,340 39,184,340 26% Nil 39,184,340 39,184,340 26% 0%

Sub-total (A) (2):- Nil 39,184,340 39,184,340 26% Nil 39,184,340 39,184,340 26% 0%

Total shareholding of Promoter

(A) = (A)(1)+(A)(2)Nil 150,709,000 150,709,000 100% Nil 150,709,000 150,709,000 100% 0%

B. Public Shareholding Nil Nil Nil Nil Nil Nil Nil Nil Nil

1. Institutions Nil Nil Nil Nil Nil Nil Nil Nil Nil

Sub-total (B)(1):- Nil Nil Nil Nil Nil Nil Nil Nil Nil

2. Non-Institutions Nil Nil Nil Nil Nil Nil Nil Nil Nil

Sub-total (B)(2):- Nil Nil Nil Nil Nil Nil Nil Nil Nil

Total Public Shareholding

(B)=(B)(1)+ (B)(2) Nil Nil Nil Nil Nil Nil Nil Nil Nil

C. Shares held by Custodian for

GDRs & ADRsNil Nil Nil Nil Nil Nil Nil Nil Nil

Grand Total (A+B+C) Nil 15,07,09,000 15,07,09,000 100% Nil 15,07,09,000 15,07,09,000 100% 0%

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ii. Shareholding of Promoters

Sr

No

Shareholders

Name

Shareholding at the beginning of the year Shareholding at the end of the year

% change in

shareholding

during the yearNo. of Shares

% of total Shares

of the Company

%of Shares

Pledged /

encumbered to

total shares

No. of Shares% of total Shares

of the Company

%of Shares

Pledged /

encumbered to

total shares

1 Bajaj Finserv Limited 111,524,060 73.9996% 0% 111,524,060 73.9996% 0% 0%

2 Allianz SE 39,184,340 26% 0% 39,184,340 26% 0% 0%

3Bajaj Finserv Limited jointly

with Mr. Rahul Bajaj100 0.0001% 0% 100 0.0001% 0% 0%


with Mr. Niraj Bajaj100 0.0001% 0% 100 0.0001% 0% 0%


with Mr. Sanjiv Bajaj100 0.0001% 0% 100 0.0001% 0% 0%


with Mr. Ranjit Gupta100 0.0001% 0% 100 0.0001% 0% 0%


with Mr. Kevin DSa100 0.0001% 0% 100 0.0001% 0% 0%


with Mr. J Sridhar100 0.0001% 0% 100 0.0001% 0% 0%

Total 150,709,000 100% 0% 150,709,000 100% 0% 0%

iii. Change in Promoters Shareholding No Change

iv. Shareholding Pattern of top ten Shareholders (other than Directors, Promoters and Holders of GDRs and ADRs) - All shares are held by promoters as mentioned in (ii) Shareholding of Promoters above.

v. Shareholding of Directors and Key Managerial Personnel: Apart from the Joint shareholding of the Directors mentioned in point IV (ii) above, no other Director or Key Managerial Personnel holds any shares in the Company.

V. Indebtedness

Indebtedness of the Company including interest outstanding/accrued but not due for payment: Nil

VI. Remuneration of Directors and key managerial personnel

A. Remuneration to Managing Director, Whole-time Directors and/or Manager:

Sr

NoParticulars of Remuneration

Name of MD/WTD/Manager

Anuj Agarwal

Managing Director & CEOTotal Amount

1 Gross salary

(a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 196115,157 15,157

(b) Value of perquisites u/s 17(2) Income-tax Act, 1961 1,101 1,101

(c) Profits in lieu of salary under section 17(3) Income Tax Act, 1961 Nil Nil

2 Stock Option Nil Nil

3 Sweat Equity Nil Nil

4 Commission Nil Nil

5 Others, please specify Nil Nil

Total 16,258 16,258

( Rs. 000)

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B. Remuneration to other Directors:

Sr

NoParticulars of Remuneration

Name of DirectorsTotal Amount

S H khan Sanjay Asher Suraj Mehta Manu Tandon

Independent Directors

Fee for attending board / committee meetings690 350 220 290 1,550

Commission

Others, please specify

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Total (1) 690 350 220 290 1,550

4. Other Non-Executive Directors Nil Nil Nil Nil Nil

Total (2) Nil Nil Nil Nil Nil

Total (B)=(1+2) 690 350 220 290 1,550

Total Managerial Remuneration Nil Nil Nil Nil Nil

Overall Ceiling as per the Act NA NA NA NA NA

C. Remuneration to key managerial personnel other than MD/Manager/WTD

Sl. Particulars of Remuneration

Name of Key Managerial Personnel

Rajesh Viswanathan

Chief Financial Officer *

Ramandeep Singh

Sahni

Chief Financial Officer**

Sameer Bakshi

Company SecretaryTotal Amount

1 Gross salary

(a) Salary as per provisions

contained in section 17(1) of

the Income-tax Act, 1961

7,829 6,256 3,359 17,445

(b) Value of perquisites u/s

17(2) Income-tax Act, 196113 306 66 385

(c) Profits in lieu of salary

under section 17(3) Income-tax Act, 1961- - - -

2 Stock Option - - - -

3 Sweat Equity - - - -

4 Commission

- as % of profit

- others, specify

- - - -

5 Others, please specify - - - -

Total 7,842 6,563 3,425 17,830

* Resigned with effect from July 31, 2014** Appointed as CFO with effect from August 1, 2014

D. PENALTIES / PUNISHMENT/ COMPOUNDING OF OFFENCES (Under Companies Act 2013): Nil

( Rs. 000)

( Rs. 000)

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The Corporate Governance Guidelines dated 5th August 2009 (the Guidelines) for the insurance companies issued by Insurance Regula-tory and Development Authority of India (IRDAI) outlines the frame-work of corporate governance policies and practices followed at the Company.

Board of Directors

The Board of Directors consists of 12 Directors, which includes 5 In-dependent Directors. The CEO of the Company, as the Managing Di-rector, is executive member of the Board of Directors. The Chairman of the Company and all other Directors are Non-executive Directors and none of the Independent Directors are close relatives of any other Director or employee of the Company. The list of Directors as on 31st March 2015 and other major offices held by them is mentioned else-where in this Annual Report.

1. Mr. Sanjiv Bajaj, Chairman, is a Mechanical Engineer, has done M Sc from University of Warwick, UK and MBA from Harvard Business School, USA. He is currently the Managing Director of Bajaj Finserv Limited.

2. Mr. Rahul Bajaj, Director, is an Honors graduate in Economics and Law and MBA from Harvard Business School. He is considered as one of the most successful business leaders of India and heads the Bajaj Group of Companies.

3. Mr. Manuel Bauer, Director, has done Mechanical Engineering from Technical Engineering College in Vienna. He is a Board member of Man-agement of Allianz SE, Munich since 2011.

4. Mr. Sanjay Asher, Independent Director, is a Commerce and Law Graduate from Mumbai University and a fellow member of the Institute of Chartered Accountants of India. Mr. Sanjay Asher is a Partner of M/s. Crawford Bailey & Co. and was an invitee to the Department of Disin-vestments Committee for standardizing the transaction documents in relation to privatization of the public sector enterprises.

5. Mr. Niraj Bajaj, Director, has done his B. Com. from Sydenham Col-lege of Commerce & Economics, Mumbai and Masters in Business Administration from Harvard Business School, USA. He has been Co-Chairman of Mukand Ltd since July 14, 2007 and serves as its Managing Director. Mr. Niraj Bajaj is one of the Promoters of the Bajaj Group.

6. Mr. Kamesh Goyal, Director, is Head of Group Planning and Control-ling, Allianz SE. He is a science and law graduate and has also done MBA from Faculty of Management Studies, Delhi University. Earlier, he has been a CEO of Bajaj Allianz General Insurance Company Limited and Bajaj Allianz Life Insurance Company Limited.

7. Mr. Ranjit Gupta, Director, who is currently working as President Insurance, at Bajaj Finserv Limited, has Masters Degree in Mechanical & Electrical Engineering from the Indian Railway Institute of Mechani-cal & Electrical Engineers.

8. Mr. S H Khan, Independent Director, has a Masters Degree in Com-merce and is the former Chairman and Managing Director of IDBI and by virtue of his long association with IDBI, possesses deep knowledge of Indian Industry and Finance. During his tenure as Chairman of IDBI, he was responsible for promotion of capital market institutions such as the National Stock Exchange, National Securities Depository and the rating Company CARE. He is also on the Board of Bajaj Finserv Limited as an Independent Director.

9. Mr. Suraj Mehta, Independent Director, who has honors in Econom-ics, also serves as Non-Executive Independent Director of BPL Limited. Mr. Mehta has held key management positions in India and abroad with ANZ Grindlays Bank till the year 1994. He was the Chief Execu-tive Officer of Dresdner Bank AG in India and was the Geographic Head for the groups four businesses which included Investment, Banking; Securities Broking and Software Development. He has also worked as the Chief Executive Officer of NABIL Bank Limited, the private sector bank in Nepal.

10. Mrs. Lila Poonawalla, Independent Director, is the Chairperson of Lila Poonawalla Foundation and also former CMD of Alfa Laval-Tetra Pak India. She is the Chairperson of the Board of Governors of Indian Institute of Technology, Ropar. Mrs. Poonawalla has Bachelors Degree in Mechanical Engineering from COEP, Pune. She has been presented the Padmashree award in 1989, Royal order of the Polar star from the King of Sweden along with numerous other national and interna-tional awards. 11. Mr. Manu Tandon, Independent Director, is a Commerce gradu-ate and Chartered Accountant, England & Wales. He retired in 2008 as Managing Director Elantas Beck India Ltd Pune, subsidiary of Altana AG, Germany. He was Director, Finance & Corporate Affairs, BASF India Ltd, Mumbai from 1983 till 1996. He was the Chairman of Pune Zonal Council, Confederation of Indian Industry (CII) and also the Chairman of CII National Council for Chemicals Fertilizers & Petrochemicals.

12. Mr. Anuj Agarwal, Managing Director, has a Bachelors degree in Electronics & Communications. He has also done Masters of Manage-ment Studies in Finance from University of Bombay. He was associated with Bajaj Allianz Life Insurance Company Limited from Inception of the Company till the year 2004 and held the position of Vice President Finance in 2004. He has held senior positions as Chief Financial Of-ficer, SBI Life Insurance Company Limited from 2007 till 2009 and Chief Financial Officer/Chief Risk Officer with the Allianz Group in Egypt and Indonesia.

Meetings of the Board of Directors

Mr. Sanjay Asher, Mr. S H Khan, Mr. Suraj Mehta, Mrs. Lila Poonawalla and Mr. Manu Tandon have been appointed as an Independent Direc-tors under the Companies Act 2013 for a period of five consecutive years, w.e.f. 6th March 2015 to 5th March 2020.

During the year 2014-15, the Board of Directors met 6 (Six) times on 10th May 2014, 12th July 2014, 23rd September 2014, 11th October 2014, 12th January 2015 and 5th March, 2015. Following table sets out the details of attendance of Directors at the Board meetings.

Annexure to the Directors Report for the year ended March 31, 2015

Report on Corporate Governance

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Name of Director

Category Meetings attended

Sitting Fees(Amt in Rs.)

Mr. Sanjiv Bajaj Chairman 6/6 NIL

Mr. Manuel Bauer Director 3/6 NIL

Mr. Sanjay Asher Independent Director 3/6 1,50,000/-

Mr. Niraj Bajaj Director 2/6 NIL

Mr. Rahul Bajaj Director 5/6 NIL

Mr. Kamesh Goyal Director 5/6 NIL

Mr. Ranjit Gupta Director 6/6 NIL

Mr. S H Khan Independent Director 6/6 2,70,000/-

Mr. Suraj Mehta Independent Director 5/6 2,20,000/-

Mrs. Lila Poonawalla*

Independent Director 0/0 NIL

Mr. Manu Tandon Independent Director 5/6 2,20,000/-

Mr. Anuj Agarwal MD & CEO 6/6 NIL* Appointed as an Independent Director w.e.f. 6th March 2015

Committees of the Board of Directors

Constitution & Composition

Audit Committee, Investment Committee, Risk Management Committee, Policyholders Protection Committee and With Profit Committee, which are mandatorily required under the Guidelines, have been constituted in accordance with the requirements set out therein. Further, the Company has also formed Corporate Social Responsibility Committee and Nomination and Remuneration Committee of the Board of Directors as required pursuant to Section 135 and Section 178 of the Companies Act, 2013 respectively.

Audit Committee

The Audit Committee of the Board of Directors oversees the periodic financial reporting before submission to the Board and disclosure processes, functioning of the Internal Audit Department and reviews its plans and reports on a quarterly basis. The Audit Committee is directly responsible for the recommendation of the appointment, remuneration, performance and oversight of the work of the Internal, Statutory and Concurrent Auditors. The senior management personnel are invited to the meetings of the Audit Committee, along with the Head of Internal Audit, who presents his report to the Committee at every meeting thereof.

During the year under review, the Audit Committee was re-constituted as required by Section 177 of the Act. Mr. S H Khan, an Independent Director, is the Chairman of the Audit Committee, with Mr. Sanjay Asher, Mr. Suraj Mehta, and Mrs. Lila Poonawalla, Independent Directors, Mr. Sanjiv Bajaj and Mr. Manuel Bauer being other members thereof. All the members of the Audit Committee are Non-executive Directors, with majority of them being Independent Directors.

The Audit Committee met four times during the year on 10th May 2014, 12th July 2014, 11th October 2014 and 12th January 2015. Following table sets out the particulars of attendance of members of the Committee at various meetings:

Name of Member CategoryMeetings

Attended

Sitting Fees

(Amt in Rs)

Mr. S H KhanIndependent

Director4/4 1,70,000/-

Mr. Sanjay AsherIndependent

Director3/4 1,50,000/-

Mr. Suraj Mehta*Independent

Director0/0

Mrs. Lila

Poonawalla*

Independent

Director0/0

Mr. Sanjiv Bajaj Director 4/4 -

Mr. Ranjit Gupta** Director 4/4 -

Mr. Manuel Bauer Director 2/4 -

Mr. Kamesh Goyal** Director 3/4 -

* - Appointed as a member w.e.f. 6th March 2015

** - Ceased to be a member w.e.f. 5th March 2015

Investment Committee

The Investment Committee establishes the Investment Policy and

operational framework for the investment operations of the Company.

It periodically reviews the Investment policy based on the investment

performance and the evaluation of dynamic market conditions and

places it before the Board of Directors for approval.

Mr. Kamesh Goyal is the Chairman of the Investment Committee, with

Mr. Sanjiv Bajaj, Mr. Ranjit Gupta and Mr. Anuj Agarwal, MD & CEO

being the other Director members thereof. Mr. Ramandeep Singh

Sahni, Chief Financial Officer, Mr. Sampath Reddy, Chief Investments

Officer and Mr. Saisrinivas Dhulipala, Appointed Actuary, are also

members of the Investment Committee. The Chief Risk Officer is also

invited to the Investment Committee meetings.

The Investment Committee met four times during the year on 9th

May 2014, 11th July 2014, 10th October 2014 and 9th January 2015.

Following table sets out the particulars of attendance of members of

the Investment Committee at various meetings:

Name of Director Category Meetings Attended

Mr. Kamesh Goyal# Director 3/4

Mr. Manuel Bauer* Director 0/4

Mr. Sanjiv Bajaj Director 4/4

Mr. Ranjit Gupta Director 4/4

Mr. Anuj Agarwal MD & CEO 4/4

Mr. Ramandeep Singh

Sahni**CFO 2/2

Mr. Rajesh Viswanathan*** CFO 2/2

Mr. Sampath Reddy CIO 4/4

Mr. Saisrinivas Dhulipala AA 4/4

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Mr. Manu Tandon, Independent Director, is the Chairman of the With

Profit Committee, with Mr. Anuj Agarwal, MD & CEO, Mr. Saisrinivas

Dhulipala, Appointed Actuary and Mr. M G Diwan, Independent Actuary

being the other members thereof.

The With Profit Committee met on 11th March 2015 during the year.

Following table sets out the particulars of attendance of members of the

With Profit Committee at the meeting:

Name of Director Category Meetings

Attended

Sitting Fees

(Amt in Rs)

Mr. Manu TandonIndependent

Director1/1 70,000/-*

Mr. Anuj Agarwal MD & CEO 1/1 Nil

Mr. Saisrinivas

DhulipalaAA 1/1 Nil

Mr. M G DiwanIndependent

Actuary1/1 Nil

* Includes sitting fees of Rs, 20,000/- paid for a meeting held in last financial

year.

Nomination and Remuneration Committee

As required by the Section 178 of the Companies Act, 2013, the Company has

formed the Nomination and Remuneration Committee, with responsibility

to identify persons who are qualified to become Directors and who may be

appointed in senior management in accordance with the criteria laid down

and to formulate the criteria for determining qualifications, positive attributes

and independence of a Director.

Mr. S H Khan, Independent Director is the Chairman of the Nomination and

Remuneration Committee, with Mr. Sanjay Asher, Independent Director, Mr.

Sanjiv Bajaj , Director and Mr. Kamesh Goyal, Director of the Company, being

the other members thereof.

The Nomination and Remuneration Committee met twice during the year on

12th July 2014 and 5th March 2015. Following table sets out the particulars

of attendance of members of the Nomination and Remuneration Committee

at various meetings:

Name of Director CategoryMeetings

Attended

Sitting Fees (Amt

in Rs)


Director2/2 1,00,000/-

Mr. Sanjay AsherIndependent

Director1/2 50,000/-

Mr. Sanjiv Bajaj* Director 2/2 Nil

Mr. Kamesh Goyal Director 2/2 Nil

* - Mr. Ranjit Gupta appointed as alternate member to Mr. Sanjiv Bajaj w.e.f.

12th January 2015.

# - Mr. Kamesh Goyal participated meetings as an alternate member to

Mr. Manuel Bauer till 9th January 2015 and he has been appointed as

Chairman of the Committee w.e.f. 12th January 2015.

* - Mr. Manuel Bauer ceased to be a member w.e.f. 12th January 2015.

** - Mr. Ramandeep Singh Sahni has been appointed as a Chief Financial

Officer in place of Mr. Rajesh Viswanathan w.e.f. 1st August 2014.

*** - Mr. Rajesh Viswanathan ceased to be a Chief Financial Officer of

the Company w.e.f. 31st July 2014.

Policyholders Protection Committee

The Policyholders Protection Committee of the Board of Directors,

has the responsibility to put in place proper procedures and effective

mechanism to address complaints and grievances of policyholders

including mis-selling by intermediaries and to ensure compliance

with the statutory requirements. It reviews the Grievance Redressal

Mechanism and the status of complaints at periodic intervals.

Mr. Sanjiv Bajaj is the Chairman of the Policyholders Protection

Committee, with Mr. Kamesh Goyal, Mr. Ranjit Gupta, and Mr. Anuj

Agarwal, MD & CEO, being the other members thereof. The Chief

Financial Officer, is also invited to meetings of the Policyholders

Protection Committee.

The Policyholders Protection Committee met four times during the

year on 9th May 2014, 11th July 2014, 10th October 2014 and 9th

January 2015. Following table sets out the particulars of attendance

of members of the Policyholders Protection Committee at various

meetings:



Mr. Manuel Bauer* Director 0/4


Mr. Kamesh Goyal** Director 3/4


* Mr. Manuel Bauer ceased to be a member w.e.f. 12th January 2015.

** Mr. Kamesh Goyal participated as an alternate member to Mr. Manuel

Bauer till 9th January 2015 and he has been appointed as member of the

Committee w.e.f. 12th January 2015 in place of Mr. Manuel Bauer.

With Profit Committee

As required by the IRDA (Non-linked Insurance Products) Regulations,

2013, the Company has formed a With Profit Committee of the Board of

Directors, with responsibility to ensure that the asset share is maintained

at policy level and that only the portion of expenses representing the

relevant business should be allocated and interest credits to such asset

shares should represent the underlying assets of these funds.

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Corporate Social Responsibility Committee

As required by the Section 135 of the Companies Act, 2013, the Company has

formed a Corporate Social Responsibility Committee, with responsibility to

carry out, monitor and assess CSR activities undertaken by the Company.

Mr. Sanjiv Bajaj is the Chairman of the Corporate Social Responsibility

Committee, with Mr. S H Khan, Independent Director and Mr. Anuj Agarwal,

MD & CEO being the other members thereof.

The Corporate Social Responsibility Committee met thrice during the year on

10th September 2014, 11th October 2014 and 24th March 2015. Following

table sets out the particulars of attendance of members of the Corporate

Social Responsibility Committee at various meetings:


Attended

Sitting Fees

(Amt in Rs)

Mr. Sanjiv Bajaj* Director 3/3 Nil


Director3/3 1,50,000/-

Mr. Anuj Agarwal MD & CEO 3/3 Nil

* - Mr. Ranjit Gupta appointed as alternate member to Mr. Sanjiv Bajaj

w.e.f. 12th January 2015.

Enterprise Risk Management framework

Risk objectives

The Company perceives risk management as a means of value

optimization. The risk owners are responsible to review the key risks

on an ongoing basis and the same is then discussed during the Risk

Committee Meeting. The CRO is ultimately responsible for fostering

the enterprise-wide risk management function including provision of

the Top risk Assessment (TRA) to the Executive Risk Committee and

the Board Risk Management Committee. The Company also performs

self-assessment to identify and assess operational risks in terms of their

likelihood and impact by each business unit within the Company.

The risk management practices are aimed to address one or more of

these risk management goals as given below:

Determine the risk profile of the Company;

Integration of risk considerations into decision-making processes

including promotion of a strong risk management culture supported by

a robust risk governance structure;

Determine the relevant processes and strategies for Risk management

which include identification of risks, ongoing measurement and

monitoring of risk exposures and ensuring relevant control or risk

transfer;

To ensure adherence to all regulatory mandates as laid down by

different regulatory authorities and all critical internal policies/limits;

Minimizing reputational risk as identified and assessed as part of a

regular assessment and managed on a case-to-case basis.

Risk governance framework

The risk governance structure of the Company consists of the Board,

the Board Risk Management Committee (RMC) and the Executive Risk

Committee and then there are various lines of defenses which include

the Heads of each department, Internal Audit and the Risk team, the

Statutory and Concurrent Auditors and lastly the Control Committee.

The RMC oversees the functioning of the overall risk management

framework of the Company and implementation of the risk management

strategy. The RMC has also been vested with the responsibility to

formulate, implement, monitor and periodically revise the Asset

Liability Management strategy of the Company. Mr. Kamesh Goyal is the

Chairman of the Risk Management Committee, with Mr. Sanjiv Bajaj, Mr.

Ranjit Gupta and Mr. Anuj Agarwal MD & CEO being the other Director

members thereof. The Chief Risk Officer, the Chief Investment Officer,

the Chief Financial Officer and the Appointed Actuary are permanent

invitees to all meetings of the RMC.

The Risk Management Committee met four times during the year on

9th May 2014, 11th July 2014, 10th October 2014 and 9th January 2015.

Following table sets out the particulars and attendance of members of

the Risk Management Committee at various meetings:


Attended

Mr. Kamesh Goyal* Director 3/4

Mr. Manuel Bauer** Director 0/4




* Mr. Kamesh Goyal participated as an alternate member to Mr. Manuel

Bauer till 9th January 2015 and he has been appointed as Chairman of

the Committee w.e.f. 12th January 2015.

** Mr. Manuel Bauer ceased to be a member and Chairman w.e.f. 12th

January 2015

The supervisory level Executive Risk Committee, convened by the CRO,

comprises of various Heads of Departments, which have been identified

as the owners of key risks within the Company. They are responsible for

implementation of risk management activities including risk mitigation

plan within their respective vertical/departments. This executive level

committee ensures centralized risk monitoring and management.

The Risk, internal audit, concurrent audit and statutory audits support

the identification, measurement and control of risks, flagging off areas

where corrective action is needed.

The risk strategy of the Company is to identify actual and potential threats

to the company on a short and long term basis internally and externally.

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Key risks and their mitigation

1. Market risk and Asset Liability management risk is the risk to the

Companys profits and/or liabilities due to changes in market values of

its investments. The company manages this risk by controlling exposures

to risky assets, monitoring durations of assets vis--vis liabilities and

ensuring adequate reserves are maintained for meeting claim and

guarantee obligations

2. Credit Risk or the risk of default of counter parties is sought to be

mitigated by investing in securities with minimum acceptable credit

rating and reviewing changes in credit ratings

3. Liquidity risk is monitored on a regular basis to ensure sufficient

liquidity is maintained to meet short-term obligations

4. Operational risk is mitigated by a system of internal audit which

flags off areas where risks are identified. Mortality risk is sought to be

mitigated by regular actuarial review of mortality experience.

5. Your company has an off-site data center and a business continuity

plan to mitigate Business Continuity risk

Certification for compliance of the Corporate Governance Guidelines

I, Sameer Bakshi, Chief Risk Officer and Company Secretary hereby

certify that the Company has complied with the Corporate Governance

Guidelines for Insurance Companies as amended from time to time and

nothing has been concealed or suppressed.

Date: May 15, 2015 Sameer Bakshi

Place: Pune Chief Risk Officer and

Company Secretary

Reports and reviews


2020


Remuneration Policy

I) Remuneration Policy of Bajaj Allianz Life Insurance Company Limited

1) This Remuneration Policy is prepared pursuant to the requirements of Section 178 of the Companies Act, 2013.

2) The level and composition of remuneration should be reasonable and sufficient to attract, retain and motivate Directors and employees of

the quality required to run the Company successfully.

3) Relationship of remuneration to performance should be clear and meet appropriate performance benchmarks.

4) The Independent Directors may be paid sitting fees as per recommendation of the Nomination and Remuneration Committee and approved

by the Board of Directors from time to time within the overall limit as may be prescribed under the Companies Act, 2013.

5) Remuneration to the Managing Director, Key Managerial Personnel and Senior Management should involve an optimal balance between

fixed and incentive pay reflecting short and long term performance objectives appropriate to the working of the Company and its goals. Any

changes in the same should be referred to one Director representing each Co-promoter of the Company for approval.

6) While remuneration and changes in remuneration including payment of bonus to the Managing Director shall be recommended by

the Nomination and Remuneration Committee for approval of the Board of Directors, annual revision of remuneration of all the employees,

including the Key Managerial Personnel and Senior Management, may be finalized with approval from one Director representing each Co-

promoter of the Company.

II) Criteria for determining qualifications, positive attributes & independence of Director

1) Qualifications of Director:-

A Director shall possess appropriate skills, experience and knowledge in one or more fields of finance, economics, insurance, law,

management, sales, marketing, administration, research, corporate governance, operations or other disciplines related to the Companys

business.

2) Positive attributes of Directors:-

A Director shall be a person of integrity, who possesses relevant expertise and experience and who shall uphold ethical standards of

integrity and probity; act objectively and constructively; exercise his responsibilities in a bona-fide manner in the interest of the Company;

devote sufficient time and attention to his professional obligations for informed and balanced decision making; and assist the Company in

implementing the best corporate governance practices.

3) Independence of Independent Directors:-

An Independent Director should meet the requirements of the Companies Act, 2013 concerning independence of Directors.

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1. Brief outline of Companys CSR Policy, including overview of projects or programs proposed to be undertaken and a reference to

the web-link to the CSR Policy and projects or programs:

The Company has in place its Corporate Social Responsibility (CSR) Policy in line with the requirements of Companies Act, 2013. The Policy has been

approved by the Board of Directors at its meeting held on 23rd September 2014 and the same is placed on the Companys website (www.bajajallianz.

com).

The Company has inherited its CSR Philosophy from its promoters namely Bajaj Group and Allianz. The Bajaj Group believes that the true and full measure

of growth, success and progress lies beyond balance sheets or conventional economic indices. It is best reflected in the difference that business and

industry make to the lives of people. For society, Bajaj is more than a corporate identity. It is a catalyst for social empowerment.

Allianz is a global company that operates in more than 70 countries. As a globally responsible citizen, Allianz takes its responsibility to society very

seriously. By offering skills, time and money, Allianz strives to advance social wellbeing in local communities.

The Companys CSR Policy outlines the Companys responsibility as a corporate citizen and lays down the guidelines and mechanism for undertaking

activities for welfare and sustainable development of the community at large. The CSR Policy of the Company outlines the Scope of CSR activities,

Modalities of execution of Projects / Programmes, Implementation through CSR Cell / other vehicles of CSR implementation and Monitoring Assessment

of CSR Projects / Programmes.

The process for implementation of CSR programs involves identification of programs based on proposals received through various channels, assessment

of the project in terms of funding required, implementation area and overall scope, due diligence of implementation agency and recommendation to

the CSR Committee. The CSR Committee, if found appropriate, approves the proposal and amount of expenditure to be incurred on the same within the

overall limit approved by the Board.

2. Composition of the CSR Committee:

The CSR Committee of the Company comprises of the following Directors:

a) Mr. Sanjiv Bajaj, Chairman

b) Mr. S H Khan, Independent Director

c) Mr. Anuj Agarwal, Managing Director & Chief Executive Officer

3. Average net profit of the Company for last three financial years: Rs. 1,452 Crore.

4. Prescribed CSR Expenditure (2% of amount as in Item No. 3 above): Rs. 29.05 Crore.

5. Details of CSR spent during the financial year 2014-15:

a) Total amount to be spent for the financial year: Rs. 29.05 Crore

b) Amount unspent: Rs. 19.00 Crore

c) Manner in which the amount spent during the financial year is detailed below:


Annual Report on Corporate Social Responsibility Activities

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Sr NoCSR Project or

activities identified

Sector in

which the

project is

covered

Projects or

programs (1)

Local area or other

(2) Specify the

state and district

where projects

or programs was

undertaken

Amount

outlay

(budget)

project or

programs

wise

Amount spent

on the projects

or programs sub

heads: (1) Direct

Expenditure

on projects or

programs. (2)

Overheads

Cumulative

expenditure

up to the

reporting

period

Amount spent:

Direct or through

implementing

agency

1 Smile Train India:

To provide 170 safe,

quality and totally free

cleft surgeries for poor

children at selected

Smile Train Centres in

cities across India.

Promoting

health care

including

preventive

health care

The project was

undertaken on All

India basis.

Rs. 30 Lacs 1) Direct

expenditure:

Rs. 30 Lacs

2) Overheads: Nil

Rs. 30 Lacs Amount

spent through

implementing

agency, namely

Smile Train, India

2 Rainbow Foundation

India: Starting 1

Rainbow Home in Pune

Promotion

of education,

Employment

enhancing

vocational

skills,

Pune Rs. 32.85

Lacs

Nil Nil No amount

actually spent on

this project so far.

3 Contribution to the

Jammu & Kashmir

disaster relief and

rehabilitation

Disaster relief Jammu & Kashmir Rs. 25 Lacs 1) Direct

expenditure:

Rs. 25 Lacs

2) Overheads: Nil

Rs. 25 Lacs Jammu and

Kashmir Disaster

Relief and

Rehabilitation Fund

of Confederation of

Indian Industries

4 Swachh Bharat Kosh

(SBK) set up by the

Government of India

to enable the desiring

corporate to contribute

in the Swachh Bharat

Abhiyaan

Promoting

health care

including

preventive

health care

All India basis Rs. 5 Crore 1) Direct

expenditure:

Rs. 5 Crore

2) Overheads: Nil

Rs. 5 Crore Swachh Bharat

Kosh (SBK) set up

by the Government

of India

5 BSSK - Medical

expenses for orphan

children for 2 years

Eradicating

hunger,

poverty,

malnutrition

Pune, Aurangabad,

Chiplun, Sangli

(Maharashtra)

Rs. 1 Crore 1) Direct

expenditure:

Rs. 50 Lacs

2) Overheads: Nil

Rs. 50 Lacs Bharatiya Samaj

Seva Kendra

6 Bandhan - Support

for education of

4000 extremely poor

children for 4 years

Eradicating

hunger,

poverty,

malnutrition,

Promoting

Education

Eastern States of

India

Rs. 4 Crore 1) Direct

expenditure:

Rs. 4 Crore

2) Overheads: Nil

Rs. 4 Crore Bandhan Konnagar

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6. In case the Company fails to spend the 2% of the Average Net Profit of the last 3 financial years, the reasons for not spending the amount

shall be stated in the Board report:

The CSR policy of the Company allows undertaking CSR Projects directly (CSR Cell) or through a registered trust, society, etc. (CSR vehicle). The

CSR activities including the projects to be taken up are considered and monitored at group level along with other Bajaj Group companies, where

substantial commitments are made.

Financial Year 2014-15 was effectively the first year for the Company for its own CSR activities, as such in view of the nascent stage of the

implementation framework of CSR activities, the Company could not spend the entire 2% of the average net profit of the last Three financial

years.

CSR Committees Responsibility Statement

The CSR Committee hereby confirms that the implementation and monitoring of CSR activities is in compliance with CSR objectives and Policy of

the Company.

Sanjiv Bajaj Anuj Agarwal

Chairman of Managing Director &

Of CSR Committee Chief Executive Officer

Reports and reviews


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Reports and reviews


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Form No. MR-3

SECRETARIAL AUDIT REPORT FOR THE FINANCIAL YEAR ENDED March 31, 2015.

[Pursuant to section 204(1) of the Companies Act, 2013 and rule No.9 of the Companies Appointment and Remuneration of Mana-

gerial Personnel) Rules, 2014]

To,

The Members,

Bajaj Allianz Life Insurance Company Limited,

U66010PN2001PLC015959

GE Plaza Airport Road,

Yerawada, Pune- 411006.

I have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate

practices by Bajaj Allianz Life Insurance Company Limited, (hereinafter called as The Company). Secretarial Audit was conducted

in a manner that provided me a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing my

opinion thereon.

Based on my verification of the Company, books, papers, minute books, forms and returns filed and other records maintained by the

company and also the information provided by the Company, its officers, agents and authorized representatives during the conduct

of secretarial audit, I hereby report that in my opinion, the company has, during the audit period covering the financial year ended

on March 31, 2015, complied with the applicable statutory provisions listed hereunder and also that the Company has proper Board-

processes and compliance mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

I have examined the books, papers, minute books, forms and returns filed and other records maintained by the Company for the finan-

cial year ended on March 31, 2015, according to the provisions of:

(i) The Companies Act, 2013 (the Act) and the rules made thereunder;

(ii) Foreign Exchange Management Act, 1999 and the rules and regulations made there under regarding Foreign Direct

Investment.

(iii) The Insurance Act, 1938, the Insurance Regulatory and Development Authority Act, 1999 and rules and regulations made

thereunder,

(iv) Rules, regulations, guidelines, circulars and notifications issued by the Insurance Regulatory and Development Authority of

India (IRDAI) as are applicable to a life insurance company.

The Company is a Public Company which is a subsidiary of Listed Company.

During the period under review the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards,

etc. mentioned above.

I further report that the Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Execu-

tive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period

under review were carried out in compliance with the provisions of the Act.

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Adequate notice was given to all Directors to schedule the Board Meetings, including committees thereof, alongwith agenda and de-

tailed notes on agenda at least seven days in advance, and a system exists for seeking and obtaining further information and clarifica-

tions on the agenda items before the meeting and for meaningful participation at the meeting by the directors.

I further report that there are adequate systems and processes in the Company commensurate with the size and operations of the

company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.

I further report the Company has altered and substituted Article of Association thereby increased Number of Directors and adopted

new set of Articles of Association in line with the Act, by passing a Special Resolution at Extra-Ordinary General Meeting Conveyed on

5th March, 2015.

I further report that during the audit period there was no other event/action having major bearing on the Companys affairs.

Date: May 15, 2015 Shyamprasad D. Limaye

Place: Pune FCS No. 1587 C P No.: 572

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272727

A. Economic and industry overview

(a) Indian economy and the life insurance industry

Indian GDP1 has seen a decent growth in the FY2014 of around 5.0% (6.9% as per revised calculation methodology). The early estimates for the current financial year were around 5.6%1 (7.4% as per revised calculation methodology). GDP growth is likely to remain high relative to key emerging peers.

Current year average CPI1 inflation was around 6.5% down from 9.5% in FY2014. For the last couple of years the inflation rate was at around 10% which has reduced substantially in the current financial year. Whole sales price average inflation has also reduced from 6% to 2.3%.

Gross savings2 as a % of gross national disposable income declined to 30% in FY2014 as compared to 33% in FY2012. The decline was mainly on account of lower savings in physical assets by the household. Household physical savings declined to 10.4% in FY2014 vis--vis 14.8% in FY2012. On a positive note gross financial savings has improved to 11% in FY2014 vs 10.3% in FY2012. With a low GDP growth and high inflation backed by lower financials savings, the private players in the insurance industry witnessed de-growth for three consecutive years from FY2012 to FY2014.

Equity markets did very well in FY2015. Overall, optimism on the equity market continued to be good due to the change of government at the centre and expectations of economic recovery. Nifty index gave a return of 26.7% during the year and some of the midcap indices have done better. Fixed income funds have also generated good returns as the interest rate decline continued in FY2015 leading to healthy capital appreciation. Latter half of the year has also seen couple of rate cuts by RBI in order to foster growth in the economy. With GDP growth now reinstated at 7% plus levels, muted inflation and a strong equity market performance backed by the recent rate cuts by RBI, the private Life Insurance industry saw a growth of 18% in FY2015.

Indias insurable population is anticipated to touch 75 crores in 20203, with life expectancy reaching 74 years. Furthermore, life insurance is projected to comprise 35 per cent of total savings by the end of this decade, as against 26 per cent in FY20103. Demographic factors such as growing middle class, young insurable population and growing awareness of the need for protection and retirement planning will support the growth of Indian life insurance. With relatively low insurance penetration, favourable demographics and higher disposable incomes we believe that the Insurance sector is poised for a growth over the next few years. Source: 1 Citi research, 2 RBI, 3 IBEF India Brand Equity Foundation Feb 2015

(b) Insurance industry overview

i. New business trends and relative performance of insurers

NB

growth

rate

FY 2010 FY2011 FY 2012 FY 2013 FY 2014 FY 2015

Private 12% 3% -17% -6% -4% 18%

LIC 34% 22% -6% -6% 19% -14%

Total

industry25% 15% -9% -6% 12% -6%

Chart 1: New business growth rate

Based on total new business premium

Source: IRDAI and Life Insurance Council statistics

As seen above in chart 1, over the period of FY2010 to FY2015 new business premium registered a growth of a mere 0.7% (CAGR), for private insurers there was a de-growth of 1.9%. When compared with FY2014, industry de-grew by -6% in FY2015, however the growth was reinstated for most private players and private market registered a growth of 18% for FY2015.

NB market

shareFY 2010 FY2011 FY 2012 FY 2013 FY 2014 FY 2015

LIC 65% 69% 71% 71% 75% 69%

Major bank

promoted

companies

17% 17% 15% 15% 13% 17%

Others 18% 14% 14% 14% 12% 14%

MANAGEMENT DISCUSSION AND ANALYSIS

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Chart 2: New business market share

Based on total new business premium

Source IRDAI and Life Insurance Council statistics

On the basis of new business premium, LIC had gained significant market share over the past five years to achieve 75% market share in FY2014. LICs market share however declined in FY2015 to 69%. Private players with a critical Bancassurance mass and the major bank promoted companies (i.e. ICICI Prudential, HDFC Life, SBI Life and Max Life) gained market share up from 13% in FY 2014 to 17% in FY2015. The key reason for growth of these bank led insurance companies being the advantage of accessing parent distribution network. Other private players also gained market share up from 12% in FY2014 to 14% in FY2015.

ii. Shift in business mix

NB product

mix -

private

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

Linked 83% 69% 41% 35% 29% 38%

Non Linked 17% 31% 59% 65% 71% 62%

Chart 3: Product mix for private players

*Based on total new business premium - Private

Source: IRDAI Annual report and Life Insurance Council statistics

Over the past few years the private industry had seen a shift of product mix towards traditional products but with a buoyant capital market the share of ULIP business has seen an increase from 29% in FY2014 to 38% in FY2015.

iii. Distribution mix

Channel

mix -

Industry

FY2010 FY2011 FY2012 FY2013 FY20149m

FY2015

Individual

agents80% 79% 79% 78% 78% 73%

Corporate

agents-

Banks

11% 13% 15% 16% 16% 20%

Corporate

agents-

Others

4% 4% 3% 2% 1% 1%

Brokers 1% 2% 2% 2% 2% 2%

Direct

selling4% 2% 2% 3% 3% 4%

Total 100% 100% 100% 100% 100% 100%

Chart 4: Channel mix

Based on Individual new business premium for total Industry

Source: Public disclosures

As seen in the above table, traditionally agency channel has been the

primary channel in the Indian Insurance distribution network. But in last

couple of years, this channel has seen a drop in share especially for the

private players as agency commissions have shrunk which moved part

time agents away from the industry. The number of agents engaged by

the industry has fallen to 2.07 million as at March 31, 2015 from 2.98

million as at March 31, 2010. There is an increasing contribution from

the Bancassurance channel in recent years, especially for the private

players.

iv. Regulatory changes and implications thereof

(a) Insurance Laws (Amendment) Act, 2015

The Insurance Laws (Amendment) Act 2015 was notified in the Official


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292929

Gazette in March 2015 and is effective from December 26, 2014 (i.e.

when the Insurance Laws (Amendment) Ordinance was passed). Besides

the increase in foreign investment which was the most popular aspect of

the amendment, the Act contains many other provisions which have a

significant impact on the insurance industry in India. Below is a gist of

some of the important changes brought about by the Amendment:

Increase in FDI limit (Section 2(7)A)

Aggregate holding of foreign investor, including portfolio investor,

allowed upto 49% (increased from earlier 26%) of paid-up equity

capital of Indian insurance Company.

Corporate agents included under the definition of intermediary

or insurance intermediary (Section 2(f) of IRDAI Act, 1999)

Corporate agents to seek registration from the Authority, Concept of

multi tie-up with insurers introduced, Authority is now in process of

coming up with regulations in this regard.

Appointment of insurance agents (Section 2(10) and 42)

Requirement of IRDAI issuing license dispensed with, Training and

examination requirements prescribed as a pre-required qualification,

Prohibition on multi-level marketing, Penalty upto Rs. one crore to

insurer for appointing agent in contravention of provisions, Insurer

responsible for act of its agents; liable for penalty upto Rs. one crore.

Power of Authority to investigate and inspect (Section 33(3) and

33(4))

Production of documents by and examination on oath of a service

provider or contractor where the services are outsourced by the

insurer.

Assignment of insurance policies (Section 38)

New provisions for assignment introduced wholly or partial or

conditional. Insurer to decide whether to accept the assignment.

Nomination by policyholder (Section 39)

Where the holder of a policy of insurance on his own life nominates

his parents or his spouse or his children or any of them, the nominee

or nominees shall be beneficially entitled.

Policy not to be called in question on ground of mis-statement

after 3 years (Section 45)

No claim repudiation beyond three years even due to fraud, In case

of repudiation due to material mis-statement, premium to refunded.

Payment of commission, Limitation of expenses of Management

(Section 40, 40B)

Overall limits prescribed earlier omitted. Regulations to prescribe

limits.

Prohibition of rebates (Section 41)

Penalty increased to Rs. ten lakhs from earlier Rs. Five hundred.

Solvency (Section 64, 64VA)

Authority to prescribe regulations defining assets and liabilities.

Assets to be 150% over liabilities.

Opening of new places of business (Section 64VC)

Earlier provision regarding approval of Board omitted. Regulations to

be specified by IRDAI.

Securities Appellate Tribunal (Sections 110)

Any person aggrieved by the order of the authority can prefer an

appeal to the securities appellate tribunal having jurisdiction in the

matter.

Penalties for breaches of regulatory provisions (Sections 102,103,

104, 105, 105B)

Non-compliance of investment provisions and Rural and Social

Sector Obligations: Maximum upto Rs. twenty five crores, One lakh

rupees for each day during which such failure continues or one crore

rupees, whichever is less (earlier not exceeding Rs. five lakhs).

(b) Other regulatory updates

Product related

IRDAI has issued a circular on File and Use Procedure for Group and

Immediate Annuity Products in order to curb the practice of insurers

offering premium quotes to various groups different from the

premiums approved under the file and use procedure.

Distribution related

Guidelines on appointment of Insurance Agents - Insurers are

required to have a Board approved policy inter alia covering training,

recruitment, skill development and remuneration methodology.

Existing insurance agents continue to operate for the respective

insurers.

Circular on Registration of Insurance Marketing Firm (IMF) - An entity

registered by IRDAI as IMF can solicit or procure insurance products

of two Life, two General and two Health insurance companies at any

point of time, undertake insurance service activities as specified in

these regulations and distribute other financial products as specified

in these regulations.

Investments related

Guidelines on Interest Rate Derivatives to deal in rupee interest rate

derivatives, including forward rate agreements (FRAs), interest rate

swaps (IRS) and exchange traded interest rate futures (IRF).

IRDA has permitted Insurers to become a proprietary trading member

of a SEBI approved stock exchange for carrying out trades in the debt

segment subject to the conditions mentioned in the circular.

Investment in Onshore Rupee Bonds issued by Asian DevelopmentBank

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(ADB) and International Finance Corporation (IFC) will be treated as

approved investments.

Investments in Long term Bonds of Banks towards mandatory

Infrastructure and Housing sector exposure requirements have been

permitted subject to the conditions

We believe that with more powers being entrusted to IRDAI this will only

benefit the industry in the long term.

v. Industry outlook

The performance of the insurance industry in the current financial year

has been very positive, perhaps signaling the bottoming out of the private

sector. This positive development has been a derivative of some of the

actions being taken by the government and the regulator to expand the

horizon of the Insurance industry. Some of the initiatives undertaken

include allowing 49% of foreign holding in an Indian Insurance Company,

increasing the tax rebate limit and guidelines on unit linked products

which make ULIPs even more beneficial to the customer. The revival of

sales in the unit linked products which followed the buoyant market,

softening of the interest rates and easing of inflation are some of the

factors which form a very good base for the financial sector to grow

commendably.

vi. Opportunities

We expect the growth in the Insurance Industry to come back on account

of the following:

Economic revival: Indian Economy is looking-up with brighter prospects

amongst the worlds major economies today. The Economic Survey

FY2015 states that Indian economy appears to have now gone past the

economic slowdown, persistent inflation, elevated fiscal deficit, slackening

domestic demand, external account imbalances and oscillating value of

the rupee. The Economic Survey taking into consideration the change of

base year by the Central Statistics Office of the National Accounts series

from FY2005 to FY2012, states that growth at market prices for FY2016

is expected to be 8.1 to 8.5 per cent. The growth rate in GDP at constant

(FY2012) market prices in FY2013 was 5.1 per cent, which increased to

6.9 percent in FY2014 and it is expected to further increase to 7.4 per

cent in FY2015 (according to advanced estimates Citi Research).

Buoyant capital market and softening of interest rates: Till January

2015, RBI had kept the policy rates unchanged. As inflationary conditions

eased, RBI softened the monetary policy by cutting the Repo rates by 25

basis points in January 2015 (from 8% to 7.75%). Another rate cut by

RBI had been effected in March 2015, rate cut was by another 25 basis

points that took the repo rates to 7.5%. Equity markets continued to do

well in FY2015. The benchmark indices, BSE Sensex and Nifty showed a

general upward trend in FY2015 with growth rates of 24.9% and 26.7%,

respectively, year on year.

Demographic advantage and low insurance penetration: Economic

development and demographics of population has a very strong

influence on the level of development of life insurance market. Life

insurance penetration in India continued to be very low compared

with the most developed and Asian economies. 27.6% of the Indian

population falls under the age group of 25 44 years, which is largely the

insurable population, which shows that there is huge growth potential

for life insurance sector. Indias insurable population is anticipated

to touch 75 crores in 20203, with life expectancy reaching 74 years.

Other demographic factors such as growing middle class and growing

awareness of the need for protection and retirement planning will

support the growth of Indian life insurance.

vii. Risks and threats

Further expansion of sector with FDI limit increased to 49%

The increase in FDI limit is a very welcome move for the industry as

this would bring in host of opportunities. However, this also poses a

challenge for the existing players as this would increase the number

of new entrants creating further competition in an already competitive

environment.

Competition from other asset classes and financial instruments

Life insurance product continues to face stiff competition from other

financial instruments like fixed deposits, mutual funds and National

Pension Scheme.

High surrenders

As the equity markets continue to do well and as the contracts complete

their lock in period, customers may feel inclined to book gains. The

industry faces an uphill task of taming the outflow of funds through

surrenders. High surrenders in the unit linked portfolio could impose

severe strain on the insurers given that the surrender charges insurers

can levy under the new ULIP guidelines have been capped at amounts

which will not be able to recover the acquisition cost of such sale.

Low persistency

The full value of life insurance product is realised both by the customer as

well as the company, if the relationship exists over a long term. Hence it

is very important, both the customers and employees are educated from

time to time about the value of persistency. Through various regulations

and guidelines IRDAI has made considerable efforts to bring out the best

value proposition for the customer which can only be harness if the policy

is persistent. The customer will not get the full benefit of the policy if the

same is surrendered in midway; company loses the valuable customer

as well as the income streams from the product. Low persistency across

some customer segments would continue to stress insurers.

Cost efficiency

Last couple of years have been very challenging mainly for the private

industry because of the slowdown and consequential fall in business

volumes the industry has witnessed. Industry players have been forced

to revisit their business models given the lower business volumes and


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the lower affordability arising from the change in product structures

arising out of the Regulatory changes around products. Non-bank

backed insurers continue to adjust their costs to adjust to the current

environment.

B. Business overview

i. Company strategy

(a) Invest in new engines of growth

The Company lost its largest Bancassurance partner to a peer in a

regional deal. With this loss the Companys retail business has largely

been restricted to Agency. The Company has however identified certain

new channels, focusing on different forms of distribution, in order to

have alternate channels of individual business growth. These channels

largely evolve around the direct channels of sale. The Company also

plans to capitalize on its relation with Bajaj Finance Limited to enhance

individual business.

(b) Grow agency

Historically agency has been the flagship channel over majority of life of

the Company. In the last couple of years agency has shown significant

drop in new business. The focus now is to revive the contribution of

agency in coming years through the agency transformation project

presently being run by the Company. The key areas of focus for the

project include improving agency compensation structures, enhance

agent recruitment, quality, activation and retention, develop digital

Agency model, strengthening of Agency in metros and other cities with

lower market share.

(c) Enhance quality of business which includes improvement in

persistency and reduced surrenders, early claims and customer

grievances

This is being driven through the following initiatives:

Persistency, claims experience and grievances introduced in sales

performance criteria and sales competitions;

Alternate customer servicing options which includes tie ups with

various banks and retail outlets for acceptance of renewal premiums;

Service on Wheels - An exclusive mobile van equipped with

a customer service executive and other infrastructure to provide

convenient services for policy servicing and renewal premium

collection at locations nearest to customer;

CAMS offices - Engaging with CAMS - an Insurance Repository, for

policy servicing and renewal premium collection across 320 of their

offices;

Verification Call - Welcome calling to newly acquired customers

to verify their understanding and awareness on the policy benefits,

payment term, etc. and also the customers contact details for future

communication;

Interactive Voice Response System (IVRS) - A convenient option for

the customer to address their servicing needs on call with minimum

manual intervention;

Contactibility Exploiting the data base of Credit Rating Agencies to

enrich contact details of our non-contactable customer database;

Know your customer (KYC) through UIDAI we have tied up with

UIDAI to retrieve KYC information to authenticate the contact

information of customers and also pre

Bajaj Allianz Life Insurance Annual Report 2014-2015

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