15. Provisions, Contingent Liabilities and Contingent Assets:
A Provision is made based on a reliable estimate when it is probable that an outflow of resources embodying economic
benefits will be required to settle an obligation. Contingent Liabilities (other than policies), if material, are disclosed by way
of notes. Contingent Assets are not recognized or disclosed in the financial statements.
16. Receipts and Payments Account:
Receipts and Payments Account is prepared and reported using the Direct Method in accordance with Chapter-2 Section-I
(2.a.i) of the Master Circular on Actuarial, Finance and Investment Functions of Insurers IRDAI/ACTL/CIR/MISC/80/05/2024
dated 17th May, 2024.
17. Taxation:
a) Direct Tax: Provision for income tax is made in accordance with the provisions of Section 44 of the Income Tax Act,
1961 read with Rules contained in the First Schedule and other relevant provisions of the Income Tax Act, 1961 as
applicable for life insurance business.
b) Indirect Tax: The Corporation claims credit of goods and services tax on input services, which are set off against
goods and services tax on output services.
Unutilized credits towards goods and services tax on input services are carried forward under ‘Schedule 12 -Advances
and Other Assets’ in the Balance Sheet, wherever there is reasonable certainty of utilization.
18. Borrowing Costs:
Borrowing cost includes interest, commission/brokerage on deposits and exchange differences arising from foreign
currency borrowings to the extent they are regarded as adjustment to interest cost.
19. Earnings per share:
Basic earnings per share is computed by dividing the net profit or loss after tax attributable to equity shareholders by
weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by
dividing the net profit or loss after tax attributable to the equity shareholders by the weighted average number of equity
shares outstanding during the period adjusted for the effect of all dilutive potential equity shares.
20. Segmental Reporting:
a) Identification of Segments:
Based on the primary segments identified under Insurance Regulatory and Development Authority of India (Actuarial,
Finance and Investment Functions of Insurers) Regulations, 2024 (‘the regulations’) read with Accounting Standard 17
on “segmental reporting” notified under section 133 of the Companies Act 2013 and rules there under, the Corporation
has classified and disclosed segmental information separately for shareholders and policyholders. Accordingly the
Corporation has prepared the Revenue Account and the Balance Sheet for the primary business segments namely
Participating Life Individual, Participating Pension Individual, Participating Annuity Individual, Non Participating Life
(Individual & Group), Non Participating Pension (Individual & Group), Non Participating Annuity Individual, Non
Participating Variable Individual, Non Participating Health Individual, Non Participating Unit Linked (Life, Pension
and Health) and Capital Redemption and Annuity Certain Business (CRAC). The Corporation operates in various
geographical segments.
b) Basis of allocation of expenditure to various segments of business:
Operating Expenses relating to life insurance business after adjusting for expenses attributable to Shareholders
Account is allocated to various lines of business such as Non-Linked Participating, Non-Linked Non-Participating,
General Annuities, Pensions, Health, Group Business and Unit Linked Business on the basis of:
a. Expenses which are directly identifiable to the respective lines of business have been recognized in the respective
lines of business on actual basis, and
b. Expenses which are not directly identifiable to the specific lines of business are allocated out of the common pool
on the following basis or a combination of these:
i. Number of policies
ii. Total premium income
iii. Sum assured
Allocation of expenses among various lines of business is based on the approved expense policy of the
Corporation.
21. Leases:
a) Operating Lease: Leases where the lessor effectively retains substantially all the risks and benefits of ownership
over the lease term are classified as operating lease. Operating lease rentals are recognized as an expense over the
lease period on a straight-line basis.
Where the Corporation is the lessor, Assets subject to operating leases are included in fixed assets.Lease income
is recognized in the Revenue/Profit and Loss Account on a straight-line basis over the lease term. Cost, including
depreciation are recognised as expense in the Revenue/ Profit and Loss Account.
b) Finance Lease: Leases under which the Corporation assumes substantially all the risks and the rewards of ownership
of the asset are classified as finance lease. Such leased asset acquired is capitalised at fair value of the asset or
present value of the minimum lease rental payment at the inception of the lease, whichever is lower.
22. Funds for future appropriations:
For Non- linked Participating business, the balance in the funds for future appropriations account represents funds, the
allocation of which, either to participating ‘Policy Holders’ or to ‘Shareholders’, has not been determined at the Balance
Sheet date. Transfers to and from the fund reflect the excess or deficit of income over expenses and appropriations in each
accounting period arising in the Corporation’s ‘Policy holders’ fund. In respect of participating policies any allocation to the
policyholder would also give rise to a shareholder transfer in the required proportion.
The fund for future appropriations held in the Unit-Linked funds, represents surplus that has arisen from lapsed policies
unlikely to be revived. This surplus is required to be held within the ‘policyholders’ fund till the point at which the policyholders’
can no longer revive their policy.
23. Unclaimed amount of policyholders:
Assets held for unclaimed amount of policyholders are created and maintained in accordance with the requirement of
Master circular on Unclaimed amount of Policyholders IRDA/F&A/CIR/Misc/282/ 11/2020 dated November 17, 2020 and
Insurance Regulatory and Development Authority of India (Actuarial, Finance and Investment Functions of Insurers)
Regulations, 2024 as amended from time to time:
a) Assets of unclaimed amounts of policyholders are disclosed in Schedule 12 “Advances and Other Assets”, forming
part of Balance Sheet. Corresponding income on unclaimed assets is shown under “Interest, Dividend & Rent- Gross”
in Revenue Account.
b) Income earned on unclaimed amount of policyholders is accreted to respective unclaimed fund and is accounted for
on an accrual basis.
c) Amounts remaining unclaimed for a period of 10 years along with all respective accretions to the fund are deposited
into the Senior Citizen Welfare Fund (SCWF) as per requirement of IRDAI regulations.
24. Income arising from Available Solvency Margin (ASM) fund:
Income arising from Available Solvency Margin (ASM) fund, which is part of Non-Participating fund, is treated as Income
of the respective accounting period under Non- Participating business. Consequently amount (net of Tax) pertaining to
the accretion on the ASM has been transferred from Non- Participating to Shareholders Fund along with equal amount of
Assets.
3. Actuarial Assumptions for valuation of Policy liabilities:
The Corporation’s Life Insurance Business consists of linked and non-linked business under Individual and Group contracts.
The non-linked business consists of Participating Assurance /Annuity / Pension policies and Non-participating Assurance
/ Annuity /Pension / Individual Health policies and Group policies written under non-participating assurances. The linked
business consists of Non-participating Assurance / Pension / Individual Health policies with a very small proportion of
linked assurance business written under Group contracts. Some of these policies have riders attached to them such as
Critical Illness, Premium Waiver Benefit, Term Assurance and Accident Benefit including Accidental Death & Disability
Benefit.
The Valuation liability for Individual and Group policies in our books as at 31st March, 2025, has been calculated actuarially
for each policy by using Prospective Gross Premium Method of valuation or unexpired premium reserve as applicable. It is
ensured that the reserve for each policy is at least equal to the Guaranteed Surrender Value or Special Surrender Value,
whichever is higher. It is also ensured that negative reserve is set to zero while arriving at the reserve under a policy.
The unit liability in respect of Linked business is taken as the total Net Asset Value of the units as on the date of valuation.
The non-unit liability under the linked business is calculated using the discounted cash flow method.
The liabilities are calculated based on the valuation assumptions for interest, mortality, morbidity, withdrawal, expenses,
inflation and bonuses wherever applicable. The best estimate assumptions are calculated based on the past experience
analysis and expected future experience. The valuation assumptions are arrived at after factoring in margins on the best
estimate assumptions as per the Regulations and Actuarial Practice Standards.
The liability for Group Cash Accumulation schemes has been taken as the fund value of all such schemes as on the date
of valuation. The liability in respect of One Year Renewable Group Term Assurance schemes has been arrived at as
unearned risk premium based on period up to next Annual Renewal Date.
The valuation rates of interest used vary according to the type of plan and ranges from 5.65% p.a. to 7.38% p.a. depending
on the nature and term of the underlying assets and liabilities. Bonus rate assumptions have been aligned to be consistent
with the valuation rates of interest.
The mortality rates used are based on the published Indian Assured Lives Mortality (2012-14) Ultimate Table and Indian
Individual Annuitants Mortality (2012-15) Ultimate Table and Morbidity rates are based on the Critical Illness Base Table
(CIBT 93, UK) /Reinsurer’s incidence rates.
The expense assumption for valuation was arrived at either as a percentage of premiums or as per policy or a combination
of these. The renewal per policy expenses used for valuing individual business varies according to the type of Plan and
status of the policy and with an appropriate assumption for expense inflation. Renewal Premium related expenses in
respect of individual business include GST on premium, wherever applicable, depending on the type of Plan. While valuing
Participating policies, the allowance for applicable taxation and allocation of surplus to shareholders has been made by
appropriately rating up future Reversionary Bonuses reserved for the remaining duration of the contract.
Additionally, reserves have been provided for liability in respect of Premium Waiver Benefit, Double Accident Benefit
including Permanent Disability Benefit, revival of paid up policies, reinstatement of policies which have not acquired
paid up value, immediate increase in expenses in case the office is closed for new business, AIDS/HIV, Incurred But Not
Reported deaths (IBNR), Catastrophe etc. Further, in case of Linked Plans, where there is a guarantee at maturity, cost
of such guarantee has been arrived at using stochastic methods. For Bima Account II, the cost of interest guarantee has
been provided for. For Plans where there are options which can be exercised by the policyholders, the most onerous option
has been taken for valuing these options. Fund for Future Appropriations (FFA) for both Non-Linked and Linked lines of
business has been provided for in the respective lines of Business.
The Board of the Corporation had approved in Financial Year 2021-22, bifurcation of the Single fund into separate Par
and Non-Par funds as mandated under Section 24 of LIC Act, 1956, and the Surplus Distribution Policy required under
the amended Section 28 of LIC Act, 1956. The Surplus Distribution Policy mandates the surplus distribution pattern for
Par policies as 95:5 for the financial year 2021-22, 92.5:7.5 for the financial years 2022-23 and 2023-24, and 90:10 from
financial year 2024-25 onwards and 0:100 for Non-Par policies from financial year 2021-22 onwards.
4. Basis of allocation of investments and income thereon between Policyholders’ Account and Shareholders’
Account:
Income accruing on investments held in Policyholders’ and Shareholders’ funds have been taken to the respective funds.
The investible surplus, arising out of operations and income on Policyholders’ investments, was invested in Policyholders’
account. The accretions to Shareholders’ fund during the year is invested in Shareholders’ fund.
C) Employees Pension Scheme 1995-Liability:
Projected Unit Credit Method where the benefits payable are valued considering the service up to the valuation date
and increases in salaries up to the date of exit. The value of such benefits as on the valuation date has been arrived
at by discounting the amount of such projected benefits.
The principal assumptions are the (1) Discount Rate & (2) Salary Increase.
13. Derivative Contracts:
The Corporation offers guaranteed products wherein the policyholders are assured of a fixed rate of return for premiums
to be received in future. These premiums are likely to be received over a longer tenure and the guaranteed rate of return
is fixed at the beginning of the policy term. Any fall in interest rates would mean that each incremental investment of the
Corporation would earn a lower rate of return. Accordingly the Corporation manages the Interest Rate Risk in accordance
with the IRDAI circular no. IRDA/F&I/INV/CIR/138/06/2014 dated 11 June, 2014 (the IRDAI Circular on Interest Rate
Derivatives) and IRDAI Investment Master Circular issued in May 2024 which allows insurers to deal in rupee interest rate
derivatives such as Forward Rate Agreements ("FRAs"), Interest Rate Swaps ("IRS") and Exchange Traded Interest Rate
Futures ("IRF").
The Corporation has in place a derivative policy approved by Board which covers various aspects that apply to the
functioning of the derivative transactions undertaken to substantiate the hedge strategy to mitigate the interest rate risk,
thereby managing the volatility of returns from future fixed income investment, due to variations in market interest rates.
During the year the Corporation has entered into Forward Rate Agreements (FRA) transactions, as part of Corporation's
Board approved Hedging strategy, to hedge the interest rate sensitivity for highly probable forecasted transactions as
permitted by the IRDAI circular on Interest Rate Derivatives.
Forward Rate Agreement derivative contracts are over-the counter (OTC) transactions wherein, the Corporation lock-in the
yield on the government bond at a specified future date at a price decided at the time of the FRA contract with an objective
to lock in the price of an interest bearing security at a future date.
Derivatives (FRA) are undertaken by Corporation solely for the purpose of hedging interest rate risks on account of following
forecasted transactions: a) Reinvestment of maturity proceeds of existing fixed income investments. b) Investment of
interest income receivable; and c) Expected policy premium income receivable on insurance contracts which are already
underwritten in Life, Pension & Annuity business.
The amount that was removed from Hedge Fluctuation Reserve account during the year ended March 31,2025
in respect of forecasted transaction for which hedge accounting had previously been used, but is no longer
expected to occur is Nil (Previous year Nil). The cash flows from the hedges are expected to occur over the
outstanding tenure of underlying policy liabilities and will accordingly flow to the Revenue Account.
I. Qualitative Disclosures on risk exposure in Fixed Income Derivatives:
Overview of business and processes:
a) Fixed Income Derivative Hedging instruments
Derivatives are financial instruments whose characteristics are derived from the underlying assets, or from
interest and exchange rates or indices. These include forward rate agreements, interest rate swaps and interest
rate futures.
The Corporation has during the year, as part of its Hedging strategy, entered into Forward Rate Agreements
(FRA) transactions to hedge the interest rate sensitivity for highly probable forecasted transactions as permitted
by the IRDAI circular on Interest Rate Derivatives. The Corporation does not engage in derivative transactions
for speculative purpose.
b) Derivative policy/process and Hedge effectiveness assessment:
The Corporation has well defined Board approved Derivative Policy and Process document setting out the
strategic objectives, regulatory and operational framework and risks associated with interest rate derivatives
along with having measurement, monitoring processes and controls thereof. The accounting policy has been
clearly laid out for ensuring a process of periodic effectiveness assessment and accounting.
The Corporation has clearly identified roles and responsibilities to ensure independence and accountability
through the investment decision, trade execution, to settlement accounting and periodic reporting and audit of
the Interest Rate Derivative exposures. The risk management framework for the Interest Rate Derivatives are
monitored by the Risk management Committee.
c) Scope and nature of risk identification, risk measurement, and risk monitoring:
The Derivative and related Policies as approved by the Board sets appropriate market limits such as sensitivity
limits and value-at-risk limits for exposures in Interest rate derivatives. All financial risks of the derivative portfolio
are measured and monitored on periodic basis.
d) Quantitative disclosure on risk exposure in Forward Rate Agreement
A hedge is deemed effective, if it has a high statistical correlation between the change in value of the hedged item
and the hedging instrument (FRA). Gains or losses arising from hedge ineffectiveness, if any, are recognised in
the Revenue Account.
The tenure of the hedging instrument may be less than or equal to the tenure of underlying hedged asset/liability.
Interest Rate Derivative - Counterparty exposure
10) Expenses of Management:
The Expenses of Management are in accordance with the Insurance Regulatory and Development Authority of India
(Expenses of Management, including Commission, of Insurers) Regulation 2024.
11) Disclosure on presentation of segmental Reporting:
Based on the primary segments identified under Insurance Regulatory and Development Authority of India (Actuarial,
Finance and Investment Functions of Insurers) Regulations, 2024 (‘the regulations’) read with Accounting Standard 17 on
“segmental reporting” notified under section 133 of the Companies Act, 2013 and rules there under, the Corporation has
classified and disclosed segmental information separately for shareholders and policyholders. Accordingly the Corporation
has prepared the Revenue Account and the Balance Sheet for the primary business segments namely Participating Life
Individual, Participating Pension Individual, Participating Annuity Individual, Non Participating Life (Individual & Group),
Non Participating Pension (Individual & Group), Non Participating Annuity Individual, Non Participating Variable Individual,
Non Participating Health individual, Non Participating Unit Linked (Life , Pension and Health) and Capital Redemption
and Annuity Certain Business (CRAC). The Corporation operates in various geographical segments. (Annexure - I on
segmental reporting).
12) Foreign Exchange Reserve:
Operations carried out in Fiji, Mauritius, United Kingdom and Gift City (Gandhinagar) are of non integral nature. The
Revenue Account items are translated at the average exchange rate and Balance Sheet items at closing rate. Revaluation
Exchange difference which was charged to Revenue Account till the year i.e. 2010-11 is now accumulated in Foreign
Exchange Reserve under Schedule 6A: Insurance Reserves (Policyholders) and Schedule 6: Reserve and Surplus
(shareholders).
16) Provision for tree-look period:
Provision for free-look period of ' 29.58 crores and ' 28.02 crores as at year end March 31, 2025 and March 31, 2024
respectively has been made on the basis of actual premium refunded during the month of April 2025 and April 2024
respectively. The provision is made with an assumption that all refund of premium during the month of April 2025 and April
2024 pertained to the policies completed on or before March 31,2025 and March 31,2024 respectively.
17) Progress of implementation of Ind AS:
The Gap Analysis on implementation of Indian Accounting Standards (Ind AS) was completed and submitted to the
Regulator. The Corporation is progressing on the preparation of Ind AS compliant Proforma Financial Statements as
required by the Regulator.
The Audit Committee and Board of Directors have been updated regularly in this matter.
18) Security under debt extended to two companies amounting to ' 628.60 Crore is executed partially and is under due
process (Previous Year under two companies, amounting to ' 628.60 Crore).
20) Pursuant to Regulatory approval received by the Corporation, an amount of ' 9,280.37 crore pertaining to additional
contribution due to increase in family pension is being amortised over 20 quarters commencing from Q3 of the
FY 2023-24 amounting to ' 464.02 crore per quarter. Accordingly, an amount of ' 464.02 crore has been charged to
Revenue Account for the quarter ended March 31,2025. The balance amount of ' 6,496.25 crore shall be amortised over
the subsequent quarters upto Q2 of the FY 2028-29.
21) Pursuant to Regulatory approval received by the Corporation, an amount of ' 7,230.09 crore in Par segment pertaining
to excess Expenses of Management for the FY 2022-23 is being replenished from Shareholders’ account in equal annual
installments not exceeding three, commencing from Q1 of the FY 2024-2025. Accordingly, an amount of ' 602.51 crore
has been replenished from the Shareholders’ account for the quarter ended March 31, 2025. The balance amount of
' 4,820.05 crore shall be replenished from Shareholders’ account over the subsequent quarters up to Q4 of the
FY 2026-27.
22) Pursuant to Regulatory approval received by the Corporation, an amount of ' 5,477.10 crore towards additional pension
liability pertaining to Par segment is being charged to the Shareholders account over a period not exceeding three years
commencing from the FY 2024-2025. Accordingly, an amount of ' 456.42 crore has been charged to Shareholders’ account
during the quarter ended March 31, 2025. The balance amount of ' 3,651.42 crore shall be charged to Shareholders’
account over the subsequent quarters up to Q4 of the FY 2026-27.
23) Impairment of Investments:
The impairment in value of investments other than temporary diminution has been assessed for the period and accordingly
impairment provisions have been provided.
Provision/(reversal) for impairment loss recognized in the Revenue Account under the head Provision for diminution in the
value of investments (net).
30) The Board of Directors has recommended a final dividend of ' 12 /- per equity share of ' 10 /- each for the Financial Year
2024-25, subject to approval of shareholders in the ensuing Annual General Meeting of the Corporation.
31) Transfer of unclaimed dividend and corresponding shares to Investor Education and Protection Fund (IEPF):
Transfer of Unclaimed dividend and corresponding shares to Investor Education and Protection Fund: Section 28C (5) of
the Life Insurance Corporation Act, 1956 provides that the amount remaining unclaimed and unpaid for a period of seven
years from the date it became due for payment in the Unpaid Dividend Account shall be transferred to the IEPF established
under sub-section (1) of section 125 of the Companies Act, 2013.
In terms of Section 28 C (6) of Life Insurance Corporation Act, 1956, all shares in respect of which dividend has not been
paid or claimed for seven consecutive years or more shall be transferred by the Corporation to the Investor Education and
Protection Fund.
32) Figures of the previous period/year have been regrouped wherever necessary to conform to the current periods’
presentation.
33) Disclosure requirements as per Corporate Governance Guidelines:
i) A description of the risk management architecture:
LIC has robust Enterprise Risk Management (ERM) framework to conduct business in an orderly fashion taking into
account the risks faced by the Corporation and controlling its business effectively with defined responsibilities and
adequate risk management procedures.
Board of Directors provide the overall guidance on Risk Management function which includes providing necessary
oversight on key risks and measures, approving the Enterprise Risk Management Policy, Cyber security policy, Risk
Appetite statement, Asset Liability Management (ALM) Policy and Business Continuity Plan (BCP) of the Corporation
on an annual basis.
In line with the IRDAI Guidelines, Corporation has constituted the Risk Management Committee of the Board (RMCB).
The RMCB looks after the risk management governance structure, reviews the risk management framework, risk
appetite and the risk mitigation plans for significant risks, identifies strategic risks emanating from changes in business
environment and regulations, oversees the compliance to regulatory requirements, all matters related to Asset Liability
Management, IT Security policy on annual basis, reviews regular updates on business continuity in line with the
Corporation’s Business Continuity Plan, solvency position of the Corporation, fraud monitoring, etc. on regular basis.
Further, all important matters which, in the view of the RMCB, require further strategic intervention from the Board are
brought to its knowledge in its meeting on a periodic basis.
An internal independent Committee, named as Committee of Executives on Risk Management (CERM) and Asset
Liability Management Committee (ALCO) has been constituted with Heads of key functional departments. Chief Risk
Officer (CRO) acts as the custodian of Enterprise Risk Management framework and guides the implementation of
the Enterprise Risk Management. Recommendations of the Committee of Executives on Risk Management & Asset
Liability Management are reported to RMCB by the CRO. CERM & ALCO supports the RMCB by supervising major
functions like establishing Enterprise Risk Management Policy, ALM Policy, Risk Appetite Statement, MIS for risk
reporting/risk control, key risks arising from strategic initiatives and changes in business environment or regulations,
risk assessment highlighting significant risks and risk mitigation plans thereof, review of operating risk environment
including Business Continuity Plan, review of solvency position of the Corporation on a regular basis, review of risk
related to IT security and Fraud Monitoring. A consolidated report on various issues discussed by the CERM & ALCO
and action taken thereon are reported to RMCB on quarterly basis.
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