This is the sole and exclusive property of HDFC Life

HDFC Standard Life Insurance Company Limited

Financial Year ended March 2013

Economic overview

Overview of Indian life insurance industry

HDFC Life performance

2

Agenda

The demographic dividend would fuel middle class consumption with significant contribution from India

Source: WEF future of manufacturing report, 2012 3

By 2050 India is expected to be contributing about 30% to global middle class consumption

Savings and investment that drive economic growth are higher in India compared to other emerging

economies

Favourable demographics with improving human development would translate into higher life expectancy & greater demand

Increase in average life expectancy would fuel need for pension and health products.

Emergence of nuclear families has resulted in reduction in average household size and would increase need for protection products

Sufficient headroom exists to sell insurance as penetration remains lower than advanced economies

Improving life expectancy (Years)

4 Source : Census of India, Ministry of Health & Welfare, IRDA annual report 2012, # penetration for FY12

Lower penetration compared to developed nations

6.2

10.2

8.7

3.6 3.4

8.8

1.8

7.0

France South

Africa

United

Kingdom

United

States

India # Japan China South

Korea

60.3

61.7 62.7

63.4

67.0

68.5

70.0 71.1

1991-95 1995-98 1999-02 2002-06 2006-10 2011-15 2016-20 2021-25

Increase in the working age population would ensure demand for long term savings and protection plans offered by life insurance

1. Population between 20-59 years old

Source: BCG report 5

80+

70-79

60-69

50-59

40-49

30-39

20-29

10-19

0-9

Working-age population1

23

30 20 10 0

2001

1

2

5

6

10

14

17

22

30 20 10 0

2011

1

3

5

8

12

15

17

20

20

10

12

17

17

16

19

30 20 10 0

2020

1

3

6

47% 52% 56%

xx% Share of working-age population

in total population

1,029 1,184 1,364 +155 +180 Total pop. (Mn)

Economic overview

Overview of Indian life insurance industry

HDFC Life performance

6

Agenda

Number of private life insurance entrants

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Entry of Private Life Insurers

Start of Equity Bull Market

Post-Lehman World

Riding the wave (ULIPs1) 1st wave of private

insurers 2nd wave of entrants

Increase in Regulatory

change, 3rd wave

BSE S

EN

SEX

Source : BSE Sensex Performance Jan 1, 2000 – March 31, 2013, Google Finance, HDFC Life Analysis.

Graph not as per scale

Life Insurance in India has seen 3 distinct phases post the year 2000 – the market has 24 life

insurers present today

The development of life insurance industry in India

1 Unit Linked Insurance Plans are products where the investor bears the investment risk

13 7 3

7

97

196160 173

207

285

562600

532

715

864815

762

0 3 1024

56103

194

337 342384 394

327 308

1%

6%

12%

21%

26%

26%

36%

39%

35%

31%29% 29%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

100

200

300

400

500

600

700

800

900

1000

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

Pri

vate

Mar

ket

Shar

e %

Ne

w B

usi

ne

ss P

rem

ium

in R

s. B

n

LIC Private Players Private Market Share

Industry new business premium trends

Source: IRDA data, HDFC Life Analysis

New business includes individual and group

Insurance industry was opened to private sector in 2000 and was able to garner 39% market share in

new business premium by FY09

Between FY09 and FY13, private sector slowed down with de-growth of 3%, while LIC continued to

grow at 9% CAGR resulting in a slide in the private sector’s market share

Note: New Business Premium numbers are based on first year premium including single premium

ULIP

Regulations in

Sept 10

8

The industry had to reinvent to stay relevant to customers and distributors due to the pace & magnitude of change

Various guidelines issued by IRDA since 2010

ULIP - September 2010

Pension products - November 2011

Banca tie-ups (draft guidelines) - October 2012

Product guidelines - February 2013

In traditional products, these regulations relate to commission structures, surrender charges, minimum term of

policy and premium payment, death benefits.

In ULIP products, the regulations relate to reduction in yield from 5th policy year onwards, cap on guarantee

charge, ban on ‘highest NAV guaranteed’ product

Cap on surrender charges along with minimum surrender value forcing companies now to focus on

persistency, customer service and brand building

There is a clear shift in product mix for the industry with the contribution of ULIPs declining and that

of traditional (conventional) platform products growing, with participating plans leading the growth.

Bancassurance has very quickly emerged as an important distribution channel, contributing more

than 1/3rd to industry’s new business. However, with regard to insurance sales, large parts of the

banking system are still underpenetrated.

9

Economic overview

Overview of Indian life insurance industry

HDFC Life performance

10

Agenda

11

Reven

ue

• First Year premium higher by 16% (PY de-growth of 7%)

• Total premium growth* of 13% (PY 13%)

• Conservation ratio* at 78% (PY 80%)

• Ranked^ # 2 in private market share for FY13 (PY #2)

• Individual business market share at 17.5% (PY 15.5%) I

nd

ian

GA

AP

Fin

an

cia

ls

• Overall surplus of ` 5.1 bn (PY ` 3.8 bn)

• Expense ratio* at 10.8% (PY 11.7%) of total premium

• Solvency Ratio 217% as against a regulatory requirement of 150%

AU

M,

NB

M a

nd

MC

EV

• Assets under management increased 24.4% on YoY basis

• Pre-overrun NBM stood at 17.8%, post overrun NBM at 13.2%, for individual business

• Embedded value as on 31st March 2013 at ` 58.7 bn (YoY growth of 22%)

Performance Snapshot

* Since Q1-FY13, we stopped making an accrual for premium due but not received on unit-linked policies, based on directive from the regulator. Total premium growth, Conservation ratio and Expense ratio assume that this change has been done for previous years. Conservation ratio is for individual business. ^ Ranking is based on individual business WRP

29.0 26.9 31.1

5.9 9.5 11.4

49.2

63.4

68.9

5.9

2.1

1.8

FY11 FY12 FY13

90.0

102.0

113.2

29%

120%

36%

-5%

17%

13%

-65%

29%

61%

-7%

11%

-13%

9%

20%

16%

Premium Income

12

` Bn

Robust growth in new business continues for last six consecutive quarters

(Q3 FY12: 3%, Q4 FY12: 15%, Q1 FY13: 17%, Q2 FY13: 7%, Q3 FY13: 22%, Q4 FY13: 16%)

In tough regulatory environment, growth in first year regular (16%) & renewal (12%)

premium leading to overall growth of 13%

First Year Regular Premium (Individual)

Total Premium Single Premium (Individual) Renewal Premium (Individual)

Group Premium

{13%}

{12%}

Note:1) Since Q1-FY13, we stopped making an accrual for premium due but not received on unit-linked policies, based on directive from the regulator. Figures in flower bracket represent growth numbers had this change been done for previous years. 2) After adjusting for change in accounting policy for unit-linked business, total reported premium growth would be 13.0% (FY13), 13.1% (FY12) and 29.3% (FY 11).

28.6 27.9 32.8

12%-2%

17%

-200%

-150%

-100%

-50%

0%

50%

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

FY11 FY12 FY13

APE Growth

Annualised Premium Equivalent(APE)

Rebound in APE growth in an uncertain and challenging macro and regulatory environment

Fuelled new business growth through a mix of channel, operational and product led initiatives

H2 showed a better performance compared to H1 growing at 21% in FY13

` Bn YOY Performance Half Yearly Performance

13 Note: APE is for individual business

10.6

17.4

27.9

11.8

20.9

32.8

12%

21%17%

-70%

-50%

-30%

-10%

10%

30%

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

H1 H2 12 M

10.6

17.4

27.9

11.8

20.9

12%

21%17%

-70%

-50%

-30%

-10%

10%

30%

-

5.0

10.0

15.0

20.0

25.0

30.0

H1 H2 12 M

FY12 FY13 Growth

18%

-8%

15%

-20%

-24%

2%

-8%

-5%

-2%

FY11 FY12 FY13

Weighted Received Premia(WRP) Individual Growth

Delivered more than three times the growth rate in FY13 vs top 6 peer companies who

collectively grew by 4%

Consistently outpaced the private industry over the last 3 years by adapting well to the new

economic order

14 Source :IRDA

25%

-18%

15%

-9%

-34%

1%4%

-16%

8%

9M FY11 9M FY12 9M FY13

HDFC Life Growth Private Industry Growth Total Industry Growth

12.9%

15.5%

17.5%

5.9% 5.7%

6.7%

FY11 FY12 FY13

12.9%

15.5%

5.9% 5.7%

FY11 FY12

Private Industry Total Industry

Market Share (WRP Individual)

Only player to have doubled market share (private industry) since FY10

Ranked #2 in FY13 amongst private insurance companies (Individual business)

Shift in momentum towards private players in the second half of the current year

Source :IRDA 15

31%19% 16%

1%

4% 7%

65%73% 72%

3% 4% 5%

FY11 FY12 FY13

Agency Broker Bancassurance Direct

86%

56% 61%

13%

43% 36%

1% 1% 3%

FY11 FY12 FY13

Unit Linked Participating Non Participating

Distribution & Product Mix

16

While Direct and Broker channel continue to increase their share in total APE, Agency faces

challenges in difficult business conditions in line with industry. However it has been able to maintain

its share amongst peer group.

The company operates out of 450 offices across the country serving over 961 cities in India and a

liaison office in Dubai

Maintaining a balanced product mix, with Non-par segment picking up well and online term

products continuing to show potential

• The percentages are with reference to APE for individual business

Product Mix Distribution Mix

Commission Ratio

17

• After adjusting for change in accounting policy for unit-linked business, total Commission as a percentage to Premium Income for previous years would be 5.8% (FY12) and 5.4% (FY 11)

Maintained overall commission ratio as last year

Change in product mix with larger share of conventional products is reflected in the increase

in first year commission.

Commission (% of Premium Income) FY11 FY12 FY13

- First year premiums 12.7% 17.6% 17.7%

- Renewal premiums 2.0% 1.6% 1.3%

- Single premiums 1.0% 0.3% 0.3%

Total 5.3% 5.7% 5.7%

14.4

11.7 12.2

16.0%11.5% 10.8%

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

FY11 FY12 FY13

Operating Expenses Operating Expenses/Total premium Ratio

Operating Expenses

18

- After adjusting for change in accounting policy for unit-linked business, operating expenses/total reported premium ratio for previous years would be 11.7% (FY12) and 16.3% (FY 11)

- Operating expenses exclude service tax

Operating expense ratio was kept under control, despite significant investments being made

in new channels, technology, branch refurbishments and international business

Operating expenses increased by 4% but at a lower rate than inflation

Tangible decline in our expense ratio to 10.8%, one of the best in the private sector

` Bn

{16.3%}

{11.7%}

79%84%

78%

0%

10%

20%

30%

40%

50%

60%

70%

80%

FY11 FY12 FY13

80% 80% 78%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY11 FY12 FY13

Conservation Ratio

Focus on channels, products and customer oriented initiatives along with well defined premium

reminder process helping stem decline in persistency and conservation ratios

19 * Conservation ratio for previous years has been reworked after adjusting for change in accounting policy for unit-linked business

Conservation Ratio (Individual Business)* 13th Month Persistency Ratio

(1.7)

1.1 0.6 0.4

2.5 3.9

(1.4)

0.2

0.6

(4.0)

(2.0)

-

2.0

4.0

6.0

FY11 FY12 FY13

(2.7)

3.8

5.1

Indian GAAP Results

20

` Bn

Declared a net profit of ` 4.5 bn in the current year, yielding a total surplus of ` 5.1 bn

(Deficit in Revenue account as of 31st March 2012 of ` 0.6 bn has been completely off-set in the current year)

Back book generating sufficient profits to offset the new business strain incurred on writing of

new policies

(1.4)

0.2 0.6 0.4

2.5

4.6

(1.7)

1.1

(4.0)

(3.0)

(2.0)

(1.0)

-

1.0

2.0

3.0

4.0

5.0

FY11 FY12 FY13

Shareholder A/C surplus Policyholders' A/C surplus Deficit (created)/reversed in Rev A/c

21.6 21.6 21.6

1.92

0.0 0.0

-9.00

-7.00

-5.00

-3.00

-1.00

1.00

3.00

0.0

5.0

10.0

15.0

20.0

25.0

30.0

FY11 FY12 FY13

Total Share Capital

21

No additional capital introduced in the last 2 financial years

Solvency Ratio as at 31st Mar 2013 was 217% as against a regulatory requirement of 150%

` Bn

19.721.6 21.6

0.03 0.0 0.0

-9.00

-7.00

-5.00

-3.00

-1.00

1.00

3.00

0.0

5.0

10.0

15.0

20.0

25.0

30.0

H1 FY11 H1 FY12 H1 FY13

Closing Capital Capital Infused during the period

Capital Shareholding Pattern

72.4%

1.6%

26.0%

HDFC Limited Individuals / ESOP Trust Standard Life

72.4%

1.6%

26.0%

HDFC Limited Individuals / ESOP Trust Standard Life

Assets Under Management

22

AUM has grown at a CAGR of 23% (FY 2011–13) outpacing total industry growth

Percentage of debt portfolio increased due to shift in product mix and surrenders in the

equity oriented funds

46% 48%55%

54% 52%45%

31st Mar 2011 31st Mar 2012 31st Mar 2013

Debt Equity

265

323

401

19,445

17,404

18,836

15,000

17,000

19,000

21,000

23,000

25,000

27,000

29,000

31,000

33,000

35,000

150

200

250

300

350

400

450

500

31st Mar 2011 31st Mar 2012 31st Mar 2013

AUM in Rs bn Sensex

24.4%29.8%

21.7%

Growth in AUM vs LY

14.8%

11.9%

6.9%

2.5%

12.7%

8.7%

5.5%

-0.5%

Growth Balanced Secured Opportunities

HDFCSL Returns Benchmark Returns

Fund Performance (Since Inception)

The company has beaten benchmarks in all the major fund categories over a long term horizon

Inception Dates: Growth Fund: January 02,2004 Balanced Fund: January 02,2004 Secured Fund: January 02,2004 Opportunities Fund: January 04,2010. Fund performance represented in Compounded Annual Growth Rate (CAGR)

Benchmarks: BSE 100 45% BSE-100 & 55% Crisil Composite Bond Index

CRISIL Composite Bond Index

CNX MIDCAP Index

23

4.2%

7.8%

11.0%

-5.8%

6.8%

8.2%

9.3%

-4.0%

Growth Balanced Secured Opportunities

HDFCSL Returns Benchmark Returns

Fund Performance (Last 1 year)

Benchmarks: BSE 100 45% BSE-100 & 55% Crisil Composite Bond Index

CRISIL Composite Bond Index

CNX MIDCAP Index

24

Company’s long term oriented investment approach is designed to yield medium to long

term returns and benefit policyholders

Claim Repudiation Ratio

25

Shown a decline in claim repudiation ratio due to various customer initiatives driven by the

company

One of the lowest claim repudiation ratio amongst the private players in the industry

7.2%

8.4%

6.2%

4.0%3.6%

2.6%

FY11 FY12 FY13

% by Amount % by No. of Policies

MCEV as at 31st Mar 2013

Market Consistent Embedded Value (MCEV) results are unaudited 26

16.9

46.8

-0.7

-4.3

58.7

Shareholders Adjusted Networth

Present Value of Future profits

Frictional Cost of Required Capital

Cost of Non Hedgeable Risks

Shareholders Adjusted Net worth

16.9+ Value of Inforce

41.8

= MCEV 58.7

Cost of Non Hedgeable Risks

Present Value of Future Profits

Frictional Cost of Required Capital

` Bn

48.2

0.6 6.0 -1.5

3.9

0.6 0.9

58.7

MCEV at 31st Mar 12

Opening modeling, assumption and methodology changes

New business profits (before expense over-run)*

Acquisition expense overrun

Expected return on inforce

Operating Variances

Investment variances and change in economic assumptions

MCEV at 31st Mar 13

Analysis of Change MCEV

9.6

Notes to analysis of change: Opening modeling, assumptions and methodology changes: The models, assumptions and methodology are continuously refined and improved and the impact of these refinements is reflected in the opening changes. Expected return on inforce: This item reflects expected investment income on shareholder assets during the period, and reflects that future shareholder profits are now 1 year closer than at the start of the period. This positive item will occur in each MCEV period. Operating Variances: The Operating Variances capture the impact of the deviations of the actual claims, persistency and maintenance expense experience during the period from that assumed in the opening MCEV calculation. Investment variances and change in economic assumptions: This reflects the impact due to the actual investment return being different from the expected returns and the impact from the change in the yield curve at the end of the period compared to the yield curve at the start of the period.

Embedded value operating profit

10.5

EV profit ` Bn

27 * New business profits pertain to Overall (Individual + Group) business

28 * FY11 had first 5 months of margins under product portfolio that existed in the pre charge cap regime.

New Business Profits

FY11 FY12 FY13

New business profits1,2 5.4 4.8 5.8

New business APE2 28.6 27.9 32.8

New business margin1,2 18.8% 17.2% 17.8%

1Based on loaded acquisition expenses2Margins and APE are shown for individual business only

New business margin (after impact of

acquisition expenses overrun) 2 14.2% 13.2%10.5%

` Bn

Organization agenda continues to be driven through five strategic themes

Leader in providing long term insurance solutions

Fortify & Diversify distribution channel mix

Own select customer segments and product categories

Deliver unique customer experience

Cost leadership across the delivery chain

Set the industry standards by driving changes that encourage long term behaviour by all stakeholders & yield sustainable benefits

Retain and grow existing distribution partners and win new relationships to de-risk business in the face of increasing competitive intensity

Select attractive customer segments, develop products based on needs of the segments and drive efforts & investments to these segments

Improve customer experience & loyalty through offering best-in-class service standards across touch points

Run a profitable business through driving cost & productivity efficiencies across the value chain

29

Progress on Strategic Themes

Number of policies grew by 19%

Policy term enhanced to 13 years

Traditional products contributed 39%

Conservation ratio at 78%

APE growth in channels except agency

Direct sales & broker at 12%

Dedicated sales & support structure

Added new partners – banks, MFIs

~ 7 times increase in online term sales

Pension & annuity plans for wisdom investor

Integrated product & marketing teams

Product files in line with new regulations

‘Servesresht’ & TEBT programs

POS underwriting engine – ‘Click2Buy’

Increased margins, no capital infusion

1. Long Term Player 2. Fortification & Diversification

3. Owning Customer Segments 4. Unique Customer Experiences

5. Cost Leadership

30

Market

Customer

Channel

Product

Process & Technology

People

Polarization of market share in favour of large players with access to existing distribution continues

Higher alignment to brands that evoke trust

Ready with offerings with banks willing to offer in an open architecture / broker mode once regulations emerge

Filed revised products that would meet the new product guidelines to replace existing ones

Investing in a technology enabled business transformation program and has engaged TCS for the same

Ability to attract talent likely to be restricted to select few insurers who deliver profitable, sustainable growth

HDFC Life is well positioned to align and take advantage of the potential changes expected in the near future

31

Awards and Accolades

32

CIO 100 Award for Enterprise Excellence

Underwriting initiative of the year award by Asian

Leadership Awards

For more details about our Awards & Accolades, kindly refer our website at www.hdfclife.com

FAME – Fabulous Achievement in Marketing Excellence

BestPrax Benchmark Award for Leadership Governance

Brand Slam Leadership Award by CMO Asia

Best Private Life Insurer’ at CNBC TV18 Best Bank and Financial Institution Awards

2012

ASTD – Citation for improving sales productivity

33

Best Product Innovation Award 2012 for second consecutive year

Best Companies to Work for 3rd consecutive year

CISO –Best Information Security practices

World HRD Congress – Thought Leader Award 2012

Award for CEO with HR orientation & Talent Management

For more details about our Awards & Accolades, kindly refer our website at www.hdfclife.com

Quality Excellence Award 2012

Awards and Accolades

Award for Innovative Service (Click 2 Buy)

Celent Model Insurer Asia Award

Award for Innovation in Finance

Porter Prize for Strategy & Product Innovation

34 For more details about our Awards & Accolades, kindly refer our website at www.hdfclife.com

Outlook Money Award 2012 - Runners Up in the

'Best Life Insurer' Category

Product of the year 2013 for Smart Woman Plan

Awards and Accolades

Appendix & Glossary

35

Appendix 1 : MCEV methodology and approach

MCEV methodology

The calculations of embedded value and new business profits have been performed using a market consistent embedded value (“MCEV”) approach. This approach differs from a traditional EV approach primarily in respect of the way in which allowance for risk is made.

Within the traditional EV approach allowance is made for risk through an increase in the risk discount rate used to value future shareholder cash flows, whilst within the MCEV calculation explicit separate allowances are made for risk.

Components of MCEV

There are two components to the MCEV:

1. Shareholders’ adjusted net worth –this component represents the market value of assets attributable to shareholders. This amount is derived from the Indian GAAP balance sheet adjusted to allow for assets on a market value basis, elimination of intangible assets and to allow for shareholder attributable assets or liabilities residing within the unit-linked and non Par policyholder funds.

2. Value of in-force –this component represents the discounted value of after tax shareholder attributable cashflows expected on the business as at the valuation date. No allowance is made for future new business. This amount has been adjusted to deduct allowances for non hedgeable risk, frictional costs of required capital and the time value of financial options and guarantees.

36

Appendix 2 : Components of value of in force (“VIF”)

Present value of future profits (“PVFP”)

This component has been calculated by discounting the projected future after tax shareholder attributable cash-flows expected to arise on in-force business at the valuation date. The cash-flows have been projected on a deterministic basis using the company’s best estimate view of future persistency, mortality and expenses. Future investment returns and the risk discount rate have been set equal to the returns from the risk free (government bond) yield curve at the closing balance sheet date.

Time Value of Financial Options and Guarantees ("TVFOG")

During FY11, the company carried out an extensive analysis of the profile of guarantees in its Par funds to identify the level of guaranteed benefits occurring at future time periods. The investment strategy of the Par funds was re-set to enable, where possible, hedging of these guaranteed benefits through cashflow matching of the guarantees with fixed interest assets. As a result, the company is of the view that there is no residual TVFOG associated with the Par funds.

The cost associated with the investment guarantees in the unit linked funds has been allowed for in the PVFP calculation.

Frictional Costs of Required Capital (“FCRC”)

The VIF allows for a deduction in respect of the frictional costs of holding required capital (“FCRC”). Required capital has been set equal to the amount of shareholder attributable assets required to back local regulatory

solvency requirements. The FCRC has been calculated as the discounted value of investment costs and taxes on shareholder attributable assets backing the required capital over the lifetime of the in-force business.

Cost of non hedgeable risk (“CNHR”)

The VIF incorporates an explicit deduction to allow for non hedgeable and non economic risks. The CNHR has been derived using a cost of capital approach and is calculated as the discounted value of an annual charge applied to projected risk bearing capital.

The initial risk bearing capital has been calculated based on 99.5th percentile stress events for non economic assumptions over a 1-year time horizon. This initial risk bearing capital has been updated based on the portfolio of business as at 31st March 2013.

Projected risk bearing capital has been determined by running-off the initial risk bearing capital in line with the expected movement in the regulatory solvency margin requirement.

99.5th Percentile stress events have been taken from the EU Solvency II, QIS 5 framework (previously QIS 4 framework). In order to allow for the greater risks associated with emerging markets, the risk bearing capital has been uplifted by 50%.

The annual charge applied to the projected risk bearing capital is 4% p.a.

The stress events, uplifts to NHR, run-off pattern for projected risk bearing capital and annual charge, are reviewed and modified if necessary on an annual basis.

37

Expenses

Maintenance expenses have been based on the latest expense analysis done in FY13 and are inflated at 7.5% per annum. These assumptions do not incorporate any allowance for future productivity improvements.

Given the substantial changes in regulations, the Company has reviewed its cost structure, as a result of which the long-term acquisition expense levels have been calibrated at a level lower than that used earlier. These new long-term acquisition expense levels, as approved by the committee of Board in March 2012, have been incorporated into the pre-overrun margins disclosed for FY12 and FY13.

Economic assumptions

The closing MCEV is calculated assuming projected earned and risk discount rates are both set equal to the risk free (government bond) yield curve at the closing balance sheet date.

The new business profitability is calculated with similar assumptions, except that the yield curve at the opening balance sheet date is used.

No allowance for any illiquidity premia is made within the earned rates, except for group credit spread products.

Mortality and morbidity

Mortality and morbidity assumptions are set by product line and are based on past experience.

Persistency

Persistency assumptions are set by product line, payment mode and duration in-force, based on past experience and expectations of future experience. Separate decrements are modeled for lapses, surrenders, paid-ups and partial withdrawals.

Tax assumptions

Tax assumptions are based on interpretation of existing tax legislation, where appropriate supported by legal opinion.

Profits attributable to shareholders are assumed to be taxed at 14.16% for Life business and 0% for Pensions business.

Allowance is made within the tax computation for dividend offsets permitted under Section 2A of the Income Tax Act and for losses incurred within the Shareholder Fund.

No allowance is made for future changes to taxation such as the Direct Tax Code. These changes will be incorporated only once materially enacted. It is expected that implementation of DTC in its current form will result in a material negative impact to the MCEV and new business profitability.

Appendix 3 : Key assumptions underlying MCEV

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Glossary Commission ratio – Ratio of total commissions paid out on first year, single and renewal premiums to total premiums. Conservation ratio – Ratio of current year renewal premiums to previous year’s renewal premium and first year premium. APE (Annualized Premium Equivalent) – The sum of annualized first year regular premiums and 10% weighted single premiums and single premium top-ups. First year premiums – Regular premiums received during the year for all modes of payments chosen by the customer which are still in the first year. For example, for a monthly mode policy sold in March 2012, the first installment would fall into first year premiums for 2011-12 and the remaining 11 installments in the first year would be first year premiums in 2012-13. New business received premium – The sum of first year premium and single premium. Operating expense – All expenses of management excluding service tax. It does not include commission. Operating expense ratio – Ratio of operating expenses (excluding service tax) to total premiums. Renewal premiums – Regular recurring premiums received after the first year. Solvency ratio – Ratio of available solvency margin to required solvency margins. Total premiums – Total received premiums during the year including first year, single and renewal premiums for individual and group business. Weighted received premium (WRP) – The sum of first year premium and 10% weighted single premiums and single premium top-ups. 13th month persistency – Percentage of contracts, measured by premium, still in force 13 months after they have been issued.

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Disclaimer

This release is a compilation of published financial results, other information and is not a statutory release. This may also contain statements that are forward looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ from our expectations and assumptions. We do not undertake any responsibility to update any forward looking statements nor should this be constituted as a guidance of future performance. This release is a privilege copy intended for reference of selected group. These disclosures are subject to the prevailing regulatory and policy framework as on March 31, 2013 and do not reflect any subsequent changes.

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