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TO THE MEMBERS,
The Directors have pleasure in presenting the Eleventh Annual Report with the audited accounts of the Company for the year ended March 31, 2011.
FY10–M saw significant regulatory changes that impacted the availability of products, the economics of distribution channels and the customer disposition towards the insurance sector. These structural changes that were focused on long term customer interests would improve the health of the industry in future. The speed of the implementation of these changes, however, did impact the new business premium collections for the industry. The industry (including LIC) witnessed a degrowth of almost 20% on individual new business (weighted received premium) in the second half (Oct 10 – Mar 11) of this financial year.
Despite the dynamic external environment, your Company saw strong growth in new business premium and renewal premium during the FY 10–11. The first year premium income grew by 21% (over FY 09–10) to Rs. 4,059 crore and renewal premium collected grew by 36% (over FY 09–10) to Rs. 4,945 crore. The strong performance in the renewal collections helped the company improve its conservation ratio of individual business to 81% from 72% in the previous year. Total premium (including Group business) registered a 29% growth to Rs. 9,004 crore during the current year. The sum assured in force for the overall business at the end of the current year stood at Rs. 98,917 crore as compared to Rs. 72,610 crore for the previous year.
The Company was ranked #1 amongst private life insurers on individual new business (weighted received premium) during the second half of the year. On a full year basis, the company increased its market share (weighted received premium of individual business) in private life insurance space to 13% from 9% in the previous year. This was the largest market share gain among the top 10 private insurers (on new business premium) over the previous year.
The Company continued its focus on improving operational efficiencies and cost containment. Operating expense ratio (total expenses excluding service tax to total premium) reduced from 20% in 2009–10 to 16% in 2010–11. The company launched a raft of efficiency enhancement initiatives that included tightening span of control, automation, vendor consolidation and stronger alignment of performance with incentives.
The annual losses as per Indian GAAP reduced from Rs. 275 crore in 2009–10 to Rs. 99 crore in 2010–11.
During the year the Company continued with its ongoing efforts on customer service and building awareness about insurance. There were industry leading initiatives that were carried out on providing multiple payment options to customers, offering a 30 day free look–in period instead of the mandated 15 day period, need based selling, coaching amongst the sales force and welcome calling to every new policy holder to ensure there are no expectations mismatch at the time of buying a policy. Our Underwriting and Claims Management practices were rated best–in–class in a benchmarking survey done by Swiss Re during the year.
The Company undertook a revamp of its visual identity based on market research to make it more appealing and relevant to the target demographics. The new visual identity that positioned the company as 'HDFC Life' was launched along with the 10th year anniversary celebration during the year. The new identity has been well received by all the key stakeholders.
The Company also received significant recognition and accolades during the year for its people practices, brand promise, quality and process maturity and enabling technology.
Your company was able to navigate through the change in business environment and emerged as the leader among private players in individual new business weighted received premium terms in H2' FY11. This was achieved through a well thought out product launch schedule, speed in embracing the new regime within operations, sales and training teams, focused efforts on strengthening new channels and delivering the right advice and service to the customers.
The Company issued over 8.3 lac policies (including policies sold in rural areas) amounting to Rs. 4,059.3 crore of new business regular premium during the financial year. The Group business received Rs. 591 crores of premiums during the year.
During the year, IRDA introduced new guidelines regarding ULIP products to be followed by all life insurers, effective September 1, 2010. These guidelines made the industry review and revamp existing products, distribution channels and cost models. The guidelines on Group ULIP led to almost 3 months of no group product being available for customers.
An entire range of new individual ULIP products had to be launched since September 1, 2010 that impacted the growth momentum of the life insurance industry. Pressures on channel cost, low commission payout to advisors and the absence of a viable regular premium pension product led to the private insurance industry showing a negative growth of 41% in weighted received premium (WRP) terms in the second half of FY11 and ended the year with a degrowth of 20% over the previous year.
The long term story for life insurance in India stays strong. The industry is on track to adjust to the 'new normal'. Your company plans to build on its solid performance in FY 10–11 and outperform the industry growth in the next year.
The company's efforts on persistency management helped it achieve a conservation ratio of 81% and a growth of 36% in renewal premium. This was achieved through a dedicated Persistency 'vertical' that analysed customer disposition, delivered timely communication to customer through different media and proactively supported the customers to move into self payment modes. The vertical plans to pioneer innovative practices in FY 11–12 on midterm benefit illustrations, advanced analytics to spot trends and last mile engagement of customers to maintain the high levels of conservation ratio.
During the year, the Company focused on containing the operating costs of all its offices. As a part of this exercise the Company carried out a Lean Branch initiative that reduced the total rented area and the overhead costs associated with the branches. This lean branch model will be used for all relocation and future expansion. The Company has also reworked its branch closing and opening process and the new process will ensure the policyholders, financial consultants and employees attached to the respective branch are kept informed and that there is no impact on the continuity in customer service. The Company has ensured that all of the above is done within guidelines set by the regulator.
The Company currently has 498 offices across the country and through the network of these offices the company's financial consultants, corporate agents and brokers are able to service customers in over approximately 700 cities and towns across the country.
The Company's distribution strategy continues to lay emphasis on the development of the tied agency channel. The Company is currently implementing a large scale transformation programme called Manthan to dramatically improve the productivity, customer focus and the effectiveness of the channe