B. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES1. Basis of preparation
The accompanying financial statements have been
prepared and presented under the historical cost
convention unless otherwise stated, on the accrual
basis of accounting, in accordance with the IRDAI
(Actuarial, Finance and Investment Functions of
Insurers) Regulation, 2024, the provisions of Insurance
Act, 1938 and Insurance Regulatory and Development
Authority Act, 1999 as amended by the Insurance Laws
(Amendment) Act, 2015 and Insurance (Amendment)
Act, 2021, various circulars/guidelines issued by
IRDAI and accounting standards referred to under the
Companies Act, 2013 (section 133 read with Rule 7 of
the Companies (Accounts) Rules, 2014 and Companies
(Accounting Standards) Amendment Rules, 2021) to the
extent applicable, as amended from time to time and in
the manner so required as per the generally accepted
accounting principles in India (GAAP) and the practices
prevailing within the insurance industry in India.
The significant accounting policies followed are
consistent with those followed in the previous year,
unless otherwise stated.
2. Use of Estimates
The preparation of the financial statements in conformity
with generally accepted accounting principles (GAAP) in
India requires Company’s management (‘management’)
to make estimates and assumptions that affect the
reported amounts of revenues and expenses for the
year, reported balances of assets and liabilities and
disclosure relating to contingent liabilities as on the
balance sheet date. The estimates and assumptions
used in the accompanying financial statements are
based upon management’s evaluation of the relevant
facts and circumstances up to and as on the date of
the financial statements. Actual results could differ from
the estimates. Any revision to accounting estimates is
recognized prospectively.
3. Revenue recognitiona) Premium Income
Premium of non-linked business is recognised as
income (net of Goods and Services Tax (“GST”)) when
due from policyholders, where the grace period (as per
the product terms & conditions, as approved by IRDAI)
has not expired. For unit linked business, premium
is recognised as income when the associated units
are created/ allocated. In case of variable insurance
products and other fund based group products, premium
is recognised as income on the date of receipt of funds.
Premium on lapsed policies is recognised as income
when such policies are reinstated.
Products having regular premium paying plans with
limited premium payment term and/or pre-determined
policy term are treated as regular business with due
classification of premium into first year and renewal.
Premium income on products other than aforesaid is
classified as single premium.
Top-up premium paid by the unit linked policyholders’ is
considered as single premium and recognized as income
when the associated units are created / allocated.
b) Income from Linked Business
Fund management charges, administrative charges,
mortality charges and other charges as per the product
features are recovered from linked funds in accordance
with the terms and conditions of policies and are
recognised when due and recoverable. Allocation
charges are recovered when associated units are created
/ allocated in accordance with the terms and conditions
of policies.
Goods and Services Tax (“GST”) recovered on above
Unit Linked charges are shown under “Goods and
Services tax (“GST”) recovered on ULIP charges” in the
Revenue account as required by IRDAI guidelines.
c) Income from Investments
Interest income on investments is recognised on accrual
basis. Dividend income is recognised on ‘ex-dividend’
date in case of listed equity shares and when the right to
receive dividend is established in case of unlisted equity
shares, if any.
Accretion of discount and amortisation of premium to
the face value in respect of debt securities, for other than
linked assets, is recognised over the holding/maturity
period on a straight-line basis.
In case of discounted instruments, the difference
between the face value and book value is accreted over
the life of the instrument on a straight line basis
The realised gain or loss on sale of linked assets is the
difference between the sales consideration and weighted
average book cost.
The realised gain or loss on sale of debt securities in
case of non-linked assets is the difference between the
sales consideration and the weighted average accreted
/amortised cost.
The realised gain or loss on sale / redemption of equity
shares / mutual funds / Infrastructure Investment Trusts
(InvITs) / Real estate Investment Trust (REIT) / Additional
Tier I Bonds in case of non-linked assets is the difference
between sales consideration and weighted average
book cost. In respect of non-linked assets, the profit
or loss includes the accumulated changes in the fair
value previously recognised under “Fair Value Change
Account”.
Sales consideration for the purpose of realised gain or
loss is net of brokerage and taxes, if any.
The unrealised gains and losses on linked assets are
recognised in the respective funds’ revenue account.
Lending Fee, net of brokerage, on Equity shares
lent under Security Lending and Borrowing (SLB)
transactions is recognised on accrual basis under the
straight line method on the entire tenure of the contract
in the respective funds. In case if the securities are
re-called prior to the end of the contract term or if the
SLB position is closed out in the exchange due to a
corporate action, the unamortized lending fee, net of
the fees to be paid on recall, is transferred to the funds’
revenue account.
d) Others
Policy reinstatement fee is recognised on receipt basis,
in accordance with the terms and conditions of policies.
Interest on loans against policies is recognised on an
accrual basis.
4. Reinsurance Premium
Reinsurance premium ceded is accounted for on a
due basis in accordance with the treaty or in-principle
arrangement with the re-insurer.
5. Benefits paid (including claims)
Claims costs consist of the policy benefit amount
and claim settlement costs, where applicable. Death
claims and rider claims are accounted for on receipt of
intimation up to the balance sheet date.
Survival benefit claims, annuity claims and maturity
claims are accounted when these become due.
Surrenders and withdrawals (net of charges) under unit
linked policies are accounted for when associated units
are cancelled. Under non linked policies, these are
accounted for when the intimation for the surrender is
received and accepted up to the balance sheet date.
In case of Unit-Linked insurance products having the
feature of waiver of the balance future premiums on the
death of the life proposer, the entire future premiums
waived are recognised as liability under the benefits paid
on the occurrence of death of the life proposer. When
the subsequent modal premium becomes due, the said
premiums are funded by reducing the aforesaid liability
and the premium income is recognized for the same.
Repudiated claims disputed before judicial authorities
are provided for/ disclosed as contingent liability, based
on management prudence, considering the facts and
evidences available in respect of such claims.
Re-insurance recoveries on claims are accounted for, in
the same accounting period as the related claims.
6. Acquisition costs
Acquisition costs (such as commission, medical
examination fees etc.) are costs which vary with and
are primarily related to acquisition of insurance contracts
and are expensed off in the period in which they are
incurred. Recovery on account of clawback of the
commission paid, if any, in future is accounted in the
year in which its recovery is due.
7. a) Policy liability valuation
The value of liabilities, for policies in force and policies
in respect of which premium has been discontinued
but liability exists as on reporting date, is determined
in accordance with Insurance Regulatory and
Development Authority of India (Actuarial, Finance and
Investment Functions of Insurers) Regulations, 2024
, Insurance Act, 1938 as amended by the Insurance
Laws (Amendment) Act, 2015 and other relevant
circulars/regulations issued by IRDAI, as amended
from time to time, the Actuarial Practice Standards
(APS 2 and APS 7) issued by the Institute of Actuaries
of India and generally accepted actuarial principles in
India. Further, the value of liability for business written
under IFSC GIFT City is determined in accordance
with the relevant applicable regulations/circulars
issued by IFSCA.
A brief methodology for calculating the actuarial
liability is given below:
• The policy liabilities are valued on policy by policy
basis, i.e. each policy is valued separately.
• The linked portion on unit-linked policies is
determined by multiplying the number of units in
various unit-linked funds with the Net Asset Value
per unit as at the valuation date.
• The non-unit liability of unit-linked policies and
liability for non-linked policies (other than fund
based group products and one year renewable
group term assurance plans) is determined using the
prospective gross premium valuation methodology.
• For one year renewable group term assurance
plans, the liability is determined using the unearned
premium method or prospective gross premium
valuation methodology, whichever leads to a
higher reserve.
• In case of fund based group products, the liability is
determined on the basis of scheme account value
allowing appropriately for the interest declared
or guaranteed.
• In case of Variable group insurance products, the
liability is calculated by projecting the account
value of the relevant scheme till the end of the
current quarter using the guaranteed interest
rate declared at the beginning of the quarter and
then discounting this value to the valuation date
using the gross expected return after applying an
appropriate margin for adverse deviation.
The Company also holds additional aggregate risk
reserves (such as Incurred But Not Reported Reserves,
Closure to New Business Reserves, Free-Look Reserve
etc.) to allow for the risks that cannot be attributed
to specific policies or lines of businesses. Significant
assumptions relating to policyholders’ liability are
disclosed in Note 2 of Part C of this schedule.
Change in actuarial liability is charged to the
Revenue account.
b) Funds for future appropriationsFunds for future appropriations (Linked business)
In case of unit linked policies, the discontinuance
charges deducted from the lapsed policies which are
not expected to be revived are held as Funds for Future
Appropriations in Balance Sheet until the exit of the
policy from books due to expiry of revival period or due
to death of the life assured or expiry of the lock-in period
as applicable.
Funds for future appropriations (Non-Linked
business)
The Funds for Future Appropriations represents the
surplus which is yet to be appropriated to policyholders
/ shareholders, in the participating segment.
Transfers to and from the fund reflect the excess or
deficit of income over expenses and appropriations
in each accounting period arising in the participating
policyholders’ fund. In respect of participating policies,
any allocation to the policyholder would also give rise to
a shareholder transfer in the required proportion.
8. Investments
Investments are made and accounted for in accordance
with the Insurance Act, 1938, as amended by the
Insurance Laws (Amendment) Act, 2015, Insurance
Regulatory and Development Authority of India
(Actuarial, Finance and Investment Functions of Insurers)
Regulations, 2024, Investment Policy of the Company
and various circulars and notifications issued by the
IRDAI in this context, as amended from time to time.
Investments are recorded on trade date at cost, which
includes brokerage and related taxes, if any and excludes
pre-acquisition interest accrued, if any.
Broken period interest paid/received is debited/ credited
to interest receivable account.
Bonus entitlements are recognized as investments on
the ‘ex-bonus date’. Rights entitlements are recognized
as investments on the ‘ex-rights date’.
a) Classification
Investments maturing within twelve months from the
balance sheet date and investments made with the
specific intention to dispose of within twelve months
from the balance sheet date are classified as short-term
investments. All other Investments are classified as long¬
term investments.
Investments are specifically made for policyholders and
shareholders and held in separately maintained accounts.
The income relating to these investments is recognised
in the respective policyholder and shareholder account.
b) Valuation - Linked Funds
Listed equity shares
The Company has selected National Stock exchange
(NSE) as the primary exchange and Bombay Stock
exchange (BSE) as secondary exchange in line with the
IRDAI guidelines for Equity valuation.
Listed equity shares are valued at market value based on
the closing price of the primary stock exchange (National
Stock Exchange, NSE). In case the equity shares are
not listed/ traded on the National Stock Exchange, they
are valued on the closing price of the secondary stock
exchange (Bombay Stock Exchange, BSE). Unrealised
gains and losses are recognized in the respective funds’
revenue account.
Mutual funds
Mutual Fund units are valued at the previous day net
asset value. Unrealised gains and losses are recognized
in the respective funds’ revenue account.
Additional Tier 1 (Basel III compliant) Perpetual
Bonds (ATI bonds)
AT1 bonds are valued at prices arrived basis applicable
market yield rates published by a SEBI registered rating
agency (Credit Rating Information Services of India
Limited, CRISIL) using bond valuer at yield to call basis.
Exchange Traded Funds (ETFs)
Units of ETFs are valued in line with the equity shares
and are valued at the closing price of the particular
scheme on NSE. In case the scheme is not listed/
traded on the National Stock Exchange, it is valued
on the closing price of the secondary stock exchange
(Bombay Stock Exchange, BSE). In case the ETF is not
traded on any day, real time NAV as published by the
Asset Management Company (AMC) is considered for
valuation. Unrealised gains and losses are recognized in
the respective funds’ revenue account.
I nfrastructure Investment Trust (InvITs) / Real
estate Investment Trust (REIT)
InvITs/REITs are valued in line with equity shares and
valued at the closing price of primary stock exchange
(NSE) and if it is not available on Primary stock exchange,
then secondary stock exchange (BSE). In case the
InvITs/REIT is not traded either on the Primary or the
Secondary Stock Exchange on any given day, then latest
quoted price on exchange shall be considered however
the last quoted price should not be later than 30 days.
Where market quote is not available for last 30 days,
the units shall be valued at the latest NAV (not more
than 6 months old) as published by the Infrastructure
Investment Trust / Real Estate trust. Unrealised gains
and losses are recognized in the respective funds’
revenue account.
Debt securities
Central & State Government securities are market valued
as per CRISIL Gilt prices and other debt securities are
market valued at prices arrived from the CRISIL Bond
Valuer. Unrealised gains and losses are recognized in the
respective funds’ revenue account.
Discounted money market instruments (treasury bills,
certificate of deposits, commercial paper and Tri¬
Party Repo (TREPS)) are valued at accreted cost. The
difference between the face value and book value is
accreted over the life of the asset, on a straight line basis.
Fixed deposits and Reverse repo are valued at cost
till maturity.
c) Valuation - Non-Linked Policyholders’ Funds
and Shareholders’ Fund
Equity shares
The Company has selected National Stock exchange
(NSE) as the primary exchange and Bombay Stock
exchange (BSE) as secondary exchange in line with the
IRDAI guidelines for Equity valuation.
Listed equity shares are valued at market value based on
the closing price at the primary stock exchange (National
Stock Exchange, NSE). In case the equity shares are
not listed/ traded on the National Stock Exchange, they
are valued on the closing price at the secondary stock
exchange (Bombay Stock Exchange, BSE). Unlisted
Equity shares are stated at historical cost.
Mutual funds
Mutual Fund units are valued at previous day net
asset values.
Additional Tier 1 (Basel III compliant) Perpetual
Bonds (AT1 bonds)
ATI bonds are valued at prices arrived basis applicable
market yield rates published by a SEBI registered rating
agency (Credit Rating Information Services of India
Limited, CRISIL) using bond valuer at yield to call basis.
Exchange Traded Funds (ETFs)
Units of ETFs are valued in line with the equity shares and
are valued at the closing price of the particular scheme
on NSE. In case the scheme is not listed/ traded on the
National Stock Exchange, it is valued on the closing
price of the secondary stock exchange (Bombay Stock
Exchange, BSE). In case the ETF is not traded on any day,
real time NAV as published by the Asset Management
Company (AMC) is considered for valuation.
I nfrastructure Investment Trust (InvITs) / Real
estate Investment Trust (REIT)
InvITs/REITs are valued in line with equity shares and
valued at the closing price of primary stock exchange
(NSE) and if it is not available on Primary stock exchange,
then secondary stock exchange (BSE). In case the
InvITs/REIT is not traded either on the Primary or the
Secondary Stock Exchange on any given day, then latest
quoted price on exchange shall be considered however
the last quoted price should not be later than 30 days.
Where market quote is not available for last 30 days,
the units shall be valued at the latest NAV (not more
than 6 months old) as published by the Infrastructure
Investment Trust / Real Estate trust.
Unrealised gains and losses on equity shares, mutual
funds, ATI bonds, ETFs, InvITs and REITs are taken to
the “fair value change account” and carried forward in
the balance sheet.
Debt securities
All debt securities, including Government securities
are considered as ‘held to maturity’ and accordingly
stated at cost, subject to accretion/ amortisation of
the discount/ premium on a straight line basis over the
period of maturity / holding.
Discounted money market instruments (treasury bills,
certificate of deposits, commercial paper, Tri-Party Repo
(TREPS)) are valued at accreted cost. The difference
between the face value and book value is accreted over
the life of the asset, on a straight line basis.
Fixed deposits and Reverse repo are valued at cost
till maturity.
d) Derivative Instrument
Certain Guaranteed products offered by the company
assure the policy holders a fixed rate of return for
premiums to be received in the future and the Company is
exposed to interest rate risk on account of re-investment
of interest & principal maturities at future date and
also Guarantee risk on premiums from already written
policies. Interest rate derivative contracts are used for
hedging of highly probable forecasted transactions on
insurance contracts and investment cash flows.
A forward rate agreement (“FRA”) is a forward contract
to hedge the risk of movements in interest rates. The
Company is using FRA instruments to hedge interest
rate risk arising out of premiums from already written
policies and re-investment risk of interest & principal
maturities at future date.
The Company follows hedge accounting in accordance
with the ‘Guidance Note on Accounting for Derivative
Contracts’ issued by the Institute of Chartered
Accountants of India (ICAI) and IRDAI Investment Master
Circular, as amended from time to time.
The Company has well defined Board approved
Derivative Policy and Process document setting out the
strategic objectives, risk measures and functioning of
the derivative transactions as per the hedging strategy.
At the inception of the hedge, the Company designates
and documents the relationship between the hedging
instrument and the hedged item, the risk management
objective, strategy for undertaking the hedge and the
methods used to assess the hedge effectiveness.
For Cash Flow Hedges, hedge effectiveness is
ascertained at the time of inception of the hedge and
periodically thereafter.
• The portion of fair value gain / loss on the Interest
Rate Derivative that is determined to be an effective
hedge is recognised directly in appropriate equity
account i.e. ‘Hedge Fluctuation Reserve’.
• The ineffective portion of the change in fair value
of such instruments is recognised in the Revenue
Account in the period in which they arise.
• If the hedging relationship ceases to be effective or
it becomes probable that the expected forecasted
transaction will no longer occur, hedge accounting
is discontinued and the cumulative gains or
losses that were recognized earlier in Hedge
Fluctuation Reserve shall be reclassified to the
Revenue Account.
• The accumulated gains or losses that were
recognised in the Hedge Fluctuation Reserve are
reclassified into Revenue Account or profit and
loss account, in the same period during which
the income from investments acquired from
underlying forecasted cash flow is recognised in
the Revenue Account.
Recognition of Derivatives in Balance Sheet
• Initial Recognition: All derivatives are initially
recognised in the Balance sheet at their fair
value, which usually represents their cost. Any
fair value gain or loss on the date of inception of
the transaction is recognized in Revenue account
with a corresponding adjustment in the value of
derivative asset or liability.
Subsequent Recognition: All derivatives are
subsequently re-measured at their fair value, with
the method of recognising movements in this value
depending on whether they are designated as hedging
instruments and, if so, the nature of the item being
hedged. In case the Hedging Instrument is found
effective, then the movement in fair value gain or loss is
directly adjusted in to Hedge Fluctuation Reserve with
a corresponding adjustment in the value of derivative
asset or liability. In case the Hedging Instrument is found
ineffective, the ineffective portion of the change in fair
value of such instruments is recognised in the Revenue
Account in the period in which they arise. All derivatives
are carried as assets when the fair values are positive
and as liabilities when the fair values are negative.
e) Loans against policies
Loans against policies are valued at the aggregate of
book values (net of repayments) plus capitalised interest
and are subject to impairment, if any.
f) Impairment of investments
The Company assesses on each Balance Sheet date,
whether impairment other than temporary has occurred
in its investments based on its investment policy.
An impairment loss shall be recognized as an expense
in Revenue / Profit and Loss Account to the extent of
the difference between the re-measured fair value of
the investment and its acquisition cost as reduced by
any previous impairment loss recognised as expense in
Revenue / Profit and Loss Account.
However, at the Balance Sheet date if there is any
indication that a previously recognised impairment loss
no longer exists, then such loss is reversed in Revenue /
Profit and Loss Account and the investment is reinstated
to that extent.
g) Provision for Non Performing Assets (NPA)
All assets where the interest and/or installment of
principal repayment remains overdue for more than 90
days at the Balance Sheet date are classified as NPA
in the manner required by the IRDAI regulations on this
behalf and adequate provisions are made.
h) Transfer of investments
Transfer of debt securities from Shareholders’ to Non-
Linked policyholders’ fund is transacted at the lower
of net amortised cost or prevailing market value. Inter
fund transfer of securities within the unit linked funds
are carried at prevailing market value.
9. Fixed assets, Intangibles and Impairmenta) Fixed assets and depreciation
Fixed Assets are stated at cost less accumulated
depreciation and impairment loss, if any. Cost includes
the purchase price and any cost directly attributable to
bring the asset to its working condition for its intended
use. Subsequent expenditure incurred on existing fixed
assets is expensed out except where such expenditure
increases the future economic benefits from the existing
assets. Any additions to the original fixed assets
are depreciated over the remaining useful life of the
original asset.
Advances paid towards the acquisition of fixed assets
outstanding at each balance sheet and the cost of fixed
assets not ready for its intended use as on such date are
disclosed under capital work-in-progress.
Depreciation is provided on straight-line method (SLM)
basis, pro-rated from the date of being ready for its
intended use. The Company uses depreciation rates
equal to or higher than the rates prescribed under
Schedule II of the Companies Act, 2013, based on
management’s assessment of the estimated useful life
for each class of asset as mentioned hereunder:
Based on internal assessment carried out by the
management, the residual value at the end of life for
all the categories of assets is very negligible and hence
considered to be nil. Individual assets costing ' 5,000
or less are depreciated in full in the year of purchase.
b) Intangibles
Intangible assets are reported at acquisition cost
with deductions for accumulated amortization and
impairment losses, if any.
Cost relating to development of software are capitalised
and amortised on a straight line basis over a period of
four years or the period of the useful life, whichever is
lower, from the date of being ready for its intended use.
Significant improvements to software are capitalized and
amortised over the remaining useful life of the original
software if it is probable that such expenditure will enable
the asset to generate future economic benefits in excess
of its originally assessed standards of performance and
such expenditure can be measured and attributed to the
asset reliably.
Amortisation method, useful lives and residual values
of fixed assets and intangibles are reviewed at the end
of each financial year and if expectation differs from
previous estimates, the changes are accounted for as
a change in accounting estimate in accordance with
Accounting Standard 5.
c) Impairment of assets
The management assesses on an annual basis, whether
there is any indication that an asset may be impaired.
Impairment occurs where the carrying value exceeds the
present value of future cash flows expected to arise from
the continuing use of the asset and its eventual disposal.
The impairment loss to be expensed is determined as
the excess of the carrying amount over the higher of the
asset’s net sales price or present value as determined
above. If at the balance sheet date there is an indication
that a previously assessed impairment loss no longer
exists or may have decreased, the recoverable amount is
reassessed and the asset is reflected at the recoverable
amount, subject to a maximum of depreciable
historical cost.
10. Foreign currency transactions
Transactions in foreign currencies are recorded at the
exchange rates prevailing on the date of transaction.
Monetary assets and liabilities in foreign currencies are
translated at the closing rate of exchange prevailing on
the Balance Sheet date. Non-monetary items, which are
measured in terms of historical cost denominated in a
foreign currency, are reported using the exchange rate
prevailing at the date of the transaction. Non-monetary
items, which are carried at fair value or other similar
valuation, are reported using exchange rates prevailing
on the Balance Sheet date.
Exchange gains or losses arising on settlement of
transactions and on account of the Balance Sheet
date translations are recognized either in the Revenue
Account or Profit and loss account, as the case may be.
11. Taxationa) Direct Taxes (Current tax and Deferred tax)
Income tax expense comprises of current tax (i.e.
amount of tax for the year determined in accordance
with the Income Tax Act, 1961) and deferred tax charge
or credit (reflecting the tax effects of timing differences
between accounting income and taxable income for the
year).
Provision for current income tax is made based on the
estimated tax liability computed as per the method
prescribed under the Income Tax Act, 1961 for life
insurance companies and is based on the surplus or
deficit disclosed by the actuarial valuation made in
accordance with the Insurance Act, 1938.
The deferred tax charge or credit and the corresponding
deferred tax liabilities or assets are recognized using
the tax rates that have been enacted or substantively
enacted by the balance sheet date. The tax effect is
calculated on the accumulated timing differences at
the end of an accounting period based on prevailing
enacted regulations.
A deferred tax asset is recognised only to the extent
there is a reasonable certainty of realisation in future.
However, where there is carried forward business loss
under taxation laws, deferred tax assets are recognised
only if there is virtual certainty of realisation of such
assets. Deferred tax assets are reviewed at each balance
sheet date and written up / down to reflect the amount
that is reasonably/ virtually certain (as the case may be)
to be realised.
b) Indirect Taxes (Goods and Services Tax (“GST”))
The Company claims input tax credit of Goods and
Services Tax on the input goods and services, which
is set off against Goods and Services Tax liability on
the output services. Unutilised credit, if any, is carried
forward for utilization in the future periods to the extent
there is reasonable certainty that the assets can be
realised in future.
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