1. We have Jointly audited the accompanying Standalone Financial Statements of HDFC Life Insurance Company Limited (the "Company"), which comprise the Balance sheet as at March 31, 2024, and the related Revenue Account (also called the "Policyholders' Account" or the "Technical Account"), the Profit and Loss Account (also called the "Shareholders' Account" or "NonTechnical Account") and the Receipts and Payments Account for the year then ended, and notes to the Standalone Financial Statements, including a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Financial Statements are prepared in accordance with the requirements of the Insurance Act, 1938 as amended time to time (the "Insurance Act"), the Insurance Regulatory and Development Act, 1999 (the "IRDA Act"), the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations, 2002 (the "Regulations") including orders/directions/ circulars issued by the Insurance Regulatory and Development Authority of India ("IRDAI") and the Companies Act, 2013 ("the Act") to the extent applicable and in the manner so required, and give a true and fair view in conformity with the accounting principles generally accepted in India, as applicable to insurance companies:
(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2024;
(b) in the case of the Revenue Account, of the surplus for the year ended on that date;
(c) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and
(d) in the case of the Receipts and Payments Account, of the receipts and payments for the year ended on that date.
Basis for opinion
2. We conducted our joint audit in accordance with the Standards on Auditing (the "SAs") specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the Standalone Financial Statements under the Act, and the Companies (Audit and Auditors) Rules, 2014 ("Rules") thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
3. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Financial Statements of the current period. These matters were addressed in the context of our audit of the Standalone Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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Key Audit Matter
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How our audit addressed the key audit matter
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Appropriateness of the Timing of Revenue Recognition in the proper period
Refer Schedule 1 and Schedule 16A (2) of the Standalone Financial Statement.
During the year, the Company has recognised premium revenue of Rs. 29,631 crores towards new business (first year premium and single premium). Out of the total revenue recognised, Rs. 9,532 crores were recognised during the last quarter.
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Our procedures included the following:
• Understood and evaluated the design and tested the operating effectiveness of process and controls relating to recognition of revenue (including testing of key controls for verifying that the revenue has been accrued in the correct accounting period).
• Tested on a sample basis the policies at the year end to confirm if related procedural compliances with regard to acceptability of the terms of policy were completed before or after the year end to verify appropriate accounting of revenue.
• Verified on a sample basis to verify that policy sales of the next financial year are not accounted for in the current period.
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Key Audit Matter
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How our audit addressed the key audit matter
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This area was considered a key audit matter because of the significant concentration of revenue during the last quarter of financial year (including cut-off at the Balance sheet date). Due to the nature of the industry, revenue is skewed towards the balance sheet date. Hence, there is possibility that policy sales of the next financial year are accounted in the current period.
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• Tested on a sample basis, the unallocated premium to corroborate that there were no policies where risk commenced prior to balance sheet but revenue was not recognized.
• Tested the manual accounting journal entries relating to revenue on a sample basis so as to identify unusual or irregular items. We agreed the journal entries tested to supporting evidence.
• Tested on a sample basis cheques receipt with the time stamp in case of products like Unit Linked Insurance Plan to confirm the recognition of the revenue in correct accounting period.
Based on the work carried out, we did not come across any material exception which suggests that the revenue recognition is not accounted in the correct period.
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Appropriateness of the classification and valuation of Investments
Refer Schedule 8, 8A and 8B of the Standalone Financial Statement. For accounting policy, refer Schedule 16A (6) to the Standalone Financial Statements.
The Company holds investments against policy holders' liabilities, linked liabilities and shareholders' funds. A significant portion of the assets of the Company is in the form of investments (total investments as at March 31, 2024 is Rs. 292,220 crore). As prescribed by Insurance Regulatory and Development Authority of India (the "IRDAI") all investments including derivative instruments, should be made and managed in accordance with the Insurance Regulatory and Development Authority of India (Investment) Regulations, 2016 (the "Investment Regulations") and policies approved by Board of Directors of the Company. Further, investments including derivative instruments (which involves complex calculations to value such instruments) should be valued as prescribed in the Investment Regulations which state the valuation methodology to be used for each class of investment. This area was considered as a key audit matter as the valuation of unlisted or not frequently traded investment involves management judgement. Also, due to events affecting the investee company's rating, there could be a need to reclassify investment and assess its valuation / impairment per the requirements of the Investment Regulations and/ or Company's internal policies.
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Our procedures included the following:
• Understood Management's process and controls to ensure proper classification and valuation/ impairment of Investment
• Evaluated the design and tested operating effectiveness of the related controls implemented by the management
• Testing of key controls over investment classification and valuation/ impairment
• Tested on a sample basis, the correct recording of investments (including derivative instruments), classification and compliance with Investment Regulations and policies approved by the Board of Directors.
• Tested on a sample basis the valuation of securities which have been valued in accordance with the Investment Regulations and the Company's accounting policies. We verified the calculations made by management to assess the value of derivative instruments by involving auditor's independent experts.
• Tested on a sample basis impairment of securities (including reversal of impairment) which have been impaired / impairment recognised earlier has been (reversed) in accordance with the Investment Regulations and Company's impairment policies.
• For unlisted and not frequently traded investments, we evaluated management's valuation model and assumptions and corroborated these with regulatory requirements and the Company's internal policies including impairment.
• For an event specific reclassification and valuation, we corroborated management's assessment with the regulatory requirements and the Company's internal policies.
Based on the work carried out, we did not come across any
material exception which suggests that the investments
were not properly classified or valued.
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Key Audit Matter
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How our audit addressed the key audit matter
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Recognisation of provisions and disclosures of
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Our audit procedures included the following:
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Contingencies relating to certain matters pertaining
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Understood Management's process and control
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to Goods and service tax (GST) and Income tax
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for determining tax litigations and its appropriate
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Refer Schedule 16A (18) and note no. 16B(1) to the
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accounting and disclosure.
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Standalone Financial Statements.
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Evaluating the design and testing operating effectiveness of controls over the recognition,
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The Company has received various demands and
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measurement, presentation and disclosure made
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show cause notices (SCN) (mostly industry specific)
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in the Standalone Financial Statements in respect
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from the tax authorities in respect of matters relating
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of these matters
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to GST and income tax.
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Testing key controls implemented by Management
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In relation to GST the matters were mainly towards
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with respect to tax litigations.
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short reversal of Input Tax Credit (ITC), wrong
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Examining orders/SCN from tax authorities and
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availment and utilisation of ITC on expenses, excess
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management responses thereto.
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claim of ITC, reverse chargeability of GST on Agency
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Where applicable, examining external legal
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mentor, service tax on policy fees, switch fees, interest on revival charges, reimbursement of sales
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opinions obtained by the Management.
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promotion and marketing expenses etc The income tax the matter was mainly towards disallowance of
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Evaluating competence and capabilities of the Management's experts
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expenses.
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Inquired pending matters with the Company's Management.
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The Management with the help of its experts, external advisors and counsel (together management expert), where applicable, have made judgments relating to the likelihood of an obligation arising and whether
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Assessed Management's conclusions which included involvement of auditors' experts, as applicable, to gain an understanding of the current status of the tax cases and monitoring
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there is a need to recognize a provision or disclose a
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of changes in disputes to establish that the
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contingent liability.
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tax provisions/contingencies reflects the latest
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This area is considered as a key audit matter, as
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external developments and discussed with those
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evaluation of these matters requires Management
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charged with governance.
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judgement, estimation and assessment, interpretation
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Assessing the adequacy of disclosures related
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of laws and regulations and application of relevant
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to these matters in the Standalone Financial
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judicial precedents to determine the probability
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Statements.
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of outcome of ongoing proceedings and outflow of
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Based on the above procedures in respect of
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economic resources, if any, and the recognition of
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certain matters pertaining to GST and Income Tax
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provisions, disclosure of contingent liabilities and
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we determined that the extent of provisioning
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related disclosures to be made in the Standalone
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and disclosure of contingent liabilities and related
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Financial Statements.
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disclosures as at March 31, 2024 is reasonable
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Other Matter
4. The actuarial valuation of liabilities for life policies in-force and policies where premium is discontinued but liability exists as at March 31, 2024 and actuarial assumptions is the responsibility of the Company's Appointed Actuary (the "Appointed Actuary"), which has been certified by the Appointed Actuary in accordance with the regulations, as mentioned in paragraph 11 below. Accordingly, we have relied upon the Appointed Actuary's certificate for forming our opinion on the Standalone Financial Statements of the Company. Our opinion is not modified in respect of this matter.
Other Information
5. The Company's Board of Directors is responsible for the other information. The other information comprises the information included in Management
Discussion and Analysis, Directors' report including Annexures to Directors' report and management report but does not include the Standalone Financial Statements and our auditors' report thereon. The Management Discussion and Analysis, Directors' report including Annexures to Directors' report and management report is expected to be made available to us after the date of this auditors' report.
Our opinion on the Standalone Financial Statements does not cover the other information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the Standalone Financial Statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the Standalone Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
When we read the Management Discussion and Analysis, Directors' report including Annexures to Directors' report and management report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take appropriate action as applicable under the relevant laws and regulations.
Responsibilities of Management for the Standalone Financial Statements
6. The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance, and receipts and payments of the Company in accordance with the requirements of the Insurance Act read with the IRDA Act, the Regulations, order/ directions/circulars issued by the IRDAI in this regard, the Act to the extent applicable and in accordance with the accounting principles generally accepted in India including the Accounting Standards specified under section 133 of the Act to the extent applicable and in the manner so required. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Financial Statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.
I n preparing the Standalone Financial Statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditors' responsibilities for the audit of the Standalone Financial Statements
7. Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Financial Statements.
As part of an audit in accordance with the SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the Standalone Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the Standalone Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the Standalone Financial Statements, including the disclosures, and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
8. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
9. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
10. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Standalone Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
11. The actuarial valuation of liabilities for life policies in-force and for policies where premium has been discontinued but liability exists as at March 31,2024 has been duly certified by the Appointed Actuary. The Appointed Actuary has also certified that, in her opinion, the assumptions for such valuation are in accordance with the generally accepted actuarial principles and practices, requirements of the Insurance Act, regulations notified by the IRDAI and Actuarial Practice Standards issued by the Institute of Actuaries of India in concurrence with the IRDAI.
12. As required by the Regulations, we have issued a separate certificate dated April 18, 2024, certifying the matters specified in paragraphs 3 and 4 of Schedule C read with regulation 3 of the Regulations.
13. Further, to our comments in the Certificate referred to in paragraph 12 above, as required under the Regulations, read with section 143(3) of the Act, we report that:
a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.
b) In our opinion and to the best of our information and according to the explanations given to us, proper books of account as required by law have been kept by
the Company so far as it appears from our examination of those books except for the matters stated in paragraph 13(j)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended). ("the Rules").
c) As the Company's financial accounting system is centralized at Head Office, no returns for the purposes of our audit are prepared at the branches and other offices of the Company.
d) The Standalone Balance Sheet, the Standalone Revenue Account, the Standalone Profit and Loss Account, and the Standalone Receipts and Payments Account dealt with by this Report are in agreement with the books of accounts.
e) In our opinion and to the best of our information and according to the explanations given to us, investments have been valued in accordance with the provisions of the Insurance Act and the Regulations and orders/ directions/circulars issued by the IRDAI in this behalf.
f) In our opinion and to the best of our information and according to the explanations given to us, the Standalone Balance Sheet, the Standalone Revenue Account, the Standalone Profit and Loss Account and the Standalone Receipts and Payments Account dealt with by this report comply with the Accounting Standards referred to in section 133 of the Act, to the extent they are not inconsistent with the accounting principles prescribed in the Regulations and orders/ directions issued by IRDAI in this regard.
g) On the basis of the written representations received from the directors as on March 31, 2024, taken on record by the Board of Directors, none of the directors are disqualified as on March 31, 2024, from being appointed as a director in terms of Section 164 (2) of the Act.
h) With respect to the maintenance of accounts and other matters connected therewith, reference is made in paragraph 13(j)(vi) below on reporting under Rule 11(g) of the Rules.
i) With respect to the adequacy of the internal financial controls with reference to Standalone Financial Statements of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure A".
j) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financial position in
its Standalone Financial Statements - Refer Schedule 16B (1) and Schedule 16B (2) to the Standalone Financial Statements;
ii. The Company has made provision as at March 31, 2024 as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts Refer Schedule 16C (18) and Schedule 16B (15) to the Standalone Financial Statements.
iii. There are no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended March 31, 2024.
iv. a. The management has represented that, to
the best of its knowledge and belief, other than as disclosed in the Schedule 16C (20) to the Standalone Financial Statements, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
b. The management has represented that, to the best of its knowledge and belief, other than as disclosed in the Schedule 16C (20) to the Standalone Financial Statements, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company
shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
c. Based on such audit procedures that we considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (a) and (b) contain any material misstatement.
v. The dividend declared and paid during the year by the Company is in compliance with section 123 of the Act.
vi. Based on our examination, which included test checks, the Company has used accounting software for maintaining its books of accounts which has a feature of recording audit trail (edit log) facility and that has operated throughout the year for all relevant transactions recorded in the software, except that the audit trail is not maintained for softwares used for two transaction recording systems, of which one was decommissioned post April 30, 2023 and for direct database changes. Also, for one of the databases the audit trail feature did not operate during the period April 1, 2023 to December 21, 2023. Further, during the course of performing our procedures, we did not notice any instance of audit trail feature being tampered with.
4. The Company has paid/ provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 of the Act read with section 34A of the Insurance Act.
For Price Waterhouse Chartered Accountants LLP For G.M.Kapadia & Co.
Firm Registration No.012754N/N500016 Chartered Accountants
Firm Registration No.104767W
Russell I Parera Atul Shah
Partner Partner
Membership No. 042190 Membership No. 039569
UDIN: 24042190BKFFOH3593 UDIN: 24039569BKAUHP6584
Place: Mumbai Place: Mumbai
Date: April 18, 2024 Date: April 18, 2024
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