FINANCIAL PARAMETER

INCOME

Premium is the primary income of a life insurance company and is received over a period.

HOW IT IS MEASURED

Gross Written Premium (GWP)

The total premium written by the Company before deductions for reinsurance ceded.

New Business Annualised Premium Equivalent (APE)

The sum of annualised first year premiums on regular premium policies and 10% of single premiums, written by the Company during the fiscal year from both retail and group customers.

Individual Rated Premium (IRP)

Premiums written by the Company under individual products and weighted at the rate of 10% for single premiums.

Renewal Premium

Life insurance premiums falling due in the years subsequent to the first year of the policy.

FINANCIAL PARAMETER

PROFITABILITY

Profitability of life insurance companies is measured via the value of new business. This metric reflects the earnings from new policies written during a given period.

HOW IT IS MEASURED

Value of New Business (VoNB)

VoNB is the present value of expected future earnings from new policies written during a specified period and reflects the additional value to shareholders expected to be generated through the activity of writing new policies during a specified period.

Value of New Business Margin (VoNB Margin)

VoNB Margin is the ratio of VoNB to New Business APE for a specified period and is a measure of the expected profitability of new business.

FINANCIAL PARAMETER

VALUE OF A LIFE INSURANCE COMPANY

The value of a life insurance company is measured using Embedded Value, which computes future profits from existing policies.

HOW IT IS MEASURED

Indian Embedded Value

The measure of the consolidated value of shareholders’ interest in the covered life insurance business, which is all life insurance business written by the Company since inception and in-force as on the valuation date (including lapsed business which have the potential of getting revived).

Embedded value is determined as per the requirements and principles set forth by the Institute of Actuaries of India, in accordance with Actuarial Practice Standard 10.

FINANCIAL PARAMETER

QUALITY OF BUSINESS

Quality of business of a life insurance company can be determined by understanding the ability to retain customers.

HOW IT IS MEASURED

Persistency ratio

It is the ratio of life insurance policies remaining in force to all policies issued in a fixed period. Persistency can be measured in terms of number of policies or in terms of premium.

FINANCIAL PARAMETER

CUSTOMER SERVICE

The quality of customer service offered by a life insurance company is measured in the efficiency with which it settles claims. It is also assessed by the sales practices and transparency adopted by a company.

HOW IT IS MEASURED

Death claims settlement ratio

The ratio of death claims settled to death claims reported to the Company and outstanding at the beginning of the year.

Unfair business practice ratio

The number of grievances with respect to unfair business practices reported to the Company divided by policies issued by the Company in the same period.

FINANCIAL PARAMETER

SOLVENCY

The solvency ratio measures how financially sound an insurer is and its ability to pay claims. In India, insurers are required to maintain a minimum ratio of 1.5.

HOW IT IS MEASURED

Solvency Ratio

Every insurer is required to maintain an excess of the value of admissible assets over the amount of liabilities of not less than an amount prescribed by the IRDAI, which is referred to as a Required Solvency Margin. The actual excess of admissible assets over liabilities maintained by the insurer is termed as the Available Solvency Margin. The ratio of the Available Solvency Margin to the Required Solvency Margin is the Solvency Ratio.