Notes to Accounts of Canara HSBC Life Insurance Company Ltd.

Mar 31, 2026

12. Provisions, Contingent Liabilities and
Contingent Assets

A provision is recognised when there is a present
obligation as a result of past event and it is probable
that an outflow of resources will be required to settle
the obligation, in respect of which a reliable estimate
can be made. Provisions are determined based on the
management’s estimate of the amount required to settle
the obligation, at the balance sheet date. These are
reviewed at each balance sheet date and adjusted to
reflect the current management estimates.

Contingent liabilities are disclosed in respect of possible
obligations that arise from past events, but their existence
or otherwise would be confirmed by the occurrence
or non occurrence of one or more uncertain future
events not wholly within the control of the Company
or present obligation that arises from past events but
is not recognized because it is not probable that an
outflow of resources embodying economic benefits will
be required to settle the obligation or a reliable estimate
of the amount of the obligation cannot be made.

Contingent assets are neither accounted nor disclosed.

13. Operating Leases

Leases where the lessor effectively retains substantially
all the risks and rewards of ownership over the leased
term are classified as operating leases. Operating
lease rentals are recognised as an expense over the
lease period.

14. Employee Benefits

a) Short Term Employee Benefits

All employee benefits payable within twelve months
of rendering the service are classified as short¬
term employee benefits. Benefits such as salaries,
performance bonus and incentives etc. are recognized
in the period in which the employee renders the related
service. All short term employee benefits are accounted
for on an undiscounted basis.

b) Post Employment Benefits
Defined Contribution Plan

Provident fund is a defined contribution scheme and the
contributions as required by the statute to Government
provident fund are charged off as an expense to Revenue
account and Profit or Loss account when due.

Further the Company for certain employees contributes
to National Pension Scheme which is managed and
administered by pension fund management companies
licensed by the Pension Funds Regulatory and
Development Authority (’PFRDA’). Contribution made to
National Pension Scheme is charged off as an expense
to Revenue account and Profit and Loss account
when due.

Defined Benefit Plan

Gratuity liability is a defined benefit scheme and is wholly
funded. The Company accounts for the liability for future
gratuity benefits based on an actuarial valuation using
projected unit credit method. The Company makes
contribution to a Gratuity Fund administered by trustees.

c) Other Employee Benefits

The Company accrues the liability for compensated
absences based on the actuarial valuation as at the
balance sheet date conducted by an independent
actuary using projected unit credit method.

Long term incentive plans, deferred bonuses and long
term association rewards are other long term employee
benefits and are accounted for based on actuarial
valuations at the year end conducted by an independent
actuary using projected unit credit method.

Gain or loss arising from change in actuarial assumptions/
experience adjustments is recognised in the Revenue
account and Profit and Loss account for the period, in
which they emerge, for all employee benefits.

d) Employee Cash Linked Stock Appreciation
Rights Plan

The Company has an Employee Cash Linked Stock
Appreciation Rights Plan (CSAR) (earlier called Employee
Phantom Option plan (EPOP)), which is a share linked
cash settled long term deferred incentive plan, for its Key
Managerial Persons.

In line with the accounting prescribed under Master
Circular on Corporate Governance for Insurers, 2024,

as amended from time to time, the liability with respect
to the CSAR pertaining to a performance year is created
in the same performance year.

The fair value of Option is being remeasured at each
reporting date and at the date of settlement, with any
changes in such value being recognized in the Revenue
Account or Profit and Loss Account, as the case may be.

Deferred remuneration pertaining to previous financial
years and paid in the reporting financial year is adjusted
against the liability outstanding in the books of accounts
at the beginning of the financial year.

In case of any forfeiture of deferred pay, the corresponding
liability outstanding is reduced accordingly.

In case of recovery of earlier paid remuneration, if any,
the same is credited to Revenue Account or Profit and
Loss Account, as the case may be.

e) Employee Stock Option Plan (ESOP)

The Company has formulated an ESOP Scheme namely
“Canara HSBC Life Insurance Company Limited -
Employee Stock Option Plan 2025” for grant of stock
options to eligible employees (including whole-time
directors). The ESOP Scheme is administrated through
the CHL ESOP Trust (“ESOP Trust”). Under the ESOP
Scheme, eligible employees are granted options to
subscribe to equity shares of the Company, which
vests in a graded manner. The vested options may be
exercised within a period, as specified in scheme.

The options are accounted for on an intrinsic value basis
in accordance with the Guidance Note on Accounting
for Share based Payments, issued by the Institute of
Chartered Accountants of India (ICAI). Intrinsic value
is measured as the excess, if any, of the fair value of
the underlying shares over the exercise price on the
grant date and is amortised over the vesting period. For
all grants issued in scheme ESOP 2025, the fair value
of the underlying shares has been determined by an
independent valuer as options were granted to eligible
employees prior to the listing of the Company.

15. Segmental Reporting

In accordance with the IRDAI (Actuarial, Finance and
Investment Functions of Insurers) Regulation, 2024 and
various circulars and notifications issued by the IRDAI
in this context as amended from time to time read with
Accounting Standard 17 on ’’Segmental Reporting”
notified under section 133 of the Companies Act 2013
and rules there under, the Company has classified
and disclosed segmental information separately
for Shareholders’ and Policyholders’. Within the
Policyholders’, following primary business segments
have been classified and disclosed:

• Linked Non-Participating - Life

• Linked Non-Participating - Pension

• Linked Non-Participating - Health

• Linked Non-Participating - Others

• Non-Linked Participating - Life

• Non-Linked Participating - Pension

• Non-Linked Participating - Health

• Non-Linked Participating - Others

• Non-Linked Non-Participating - Life

• Non-Linked Non-Participating - Pension

• Non-Linked Non-Participating - Health

• Non-Linked Non-Participating - Others

The Company operates primarily in India, therefore
the same is considered as one geographical segment.
The accounting policies used in segmental reporting
are same as those used in the preparation of the
financial statements.

The allocation of revenue, expenses, assets and
liabilities to the business segments, for shareholders
and policyholders’, is done on the following basis:

• Revenue and expenses, assets and liabilities,
which are directly attributable and identifiable
to the business segments, for shareholders and
policyholders’, are allocated on actual basis.

• Revenue, assets and liabilities, which are not
directly identifiable, are apportioned to the various
business segments based on relevant drivers like:

- Gross written premium

- Commission

- Benefits paid

- Actuarial reserves etc.

• Expenses, which are not directly identifiable, are
allocated to the various business segments, for
shareholders and policyholders, after considering
the following:

- Cost centres as identified by the management

- Distribution channel level used for the
business segment

- Weighted new business premium income

- Number of new policies / lives added

- Number of policies / lives in force

- Funds under management

- Commission etc.

16. Unclaimed amount of policyholders

Pursuant to IRDAI Master circular on Operations and
Allied Matters of Insurers (Ref: IRDAI/PPGR/CIR/
MISC/97/06/2024) dated 19^th June, 2024 (as amended
from time to time), the Company has created a single
segregated fund to manage all unclaimed monies.

Unclaimed amount of policyholders’ liability is
determined on the basis of NAV of the units outstanding
as at the valuation date.

Assets held for unclaimed amount of policyholders
and unclaimed amount of policyholders’ liability are
considered as Current Assets & Current Liabilities,
and disclosed as a separate line item in the specified
Schedules to the Balance sheet respectively.

Income on unclaimed amount of policyholders is
accreted to the unclaimed fund and is accounted for on
an accrual basis, net of fund management charges.

Amounts remaining unclaimed for a period of 10 years
together with all respective accretions are deposited
into the Senior Citizen Welfare Fund (SCWF) as per the
requirement of the regulations.

17. Provision for doubtful debts

The Company regularly evaluates the probability of
recovery and provides for doubtful deposits, advances
and other receivables.

18. Earnings per share

Basic earnings per share is calculated by dividing the
net profit or loss for the year attributable to equity
shareholders by the weighted average number of equity
share outstanding during the year. For the purpose of
calculating diluted earnings per share, the net profit
or loss for the year attributable to equity shareholders
is divided by the weighted average number of shares
outstanding during the year adjusted for the effects of
all dilutive potential equity shares.

19. Cash and Cash Equivalents

Cash and cash equivalents for the purpose of Receipts
and Payments Account comprises of cash and cheques
in hand, bank balances, deposits with banks and other
short-term highly liquid investments with original
maturities of three months or less.

Note-1: Statutory demands / liabilities in dispute
represent various Service Tax/ GST demands raised
and includes interest and penalty. The Company has
appealed against these and believes that these demands
should get dropped in due course. Hence, the Company
has disclosed the above as a contingent liability and has
not created any provisions against the same.

Note-2: Represents claims made against insurance
policies pending litigation.

2.

(a) Actuarial Assumptions

Assumptions used in the valuation of the actuarial
liabilities are determined as an estimate of the future
based on past experience and judgment about their
long term level at the date of valuation with margins for
adverse deviations. A brief of the assumptions used in
actuarial valuation is as below:

Interest Rate: The best estimate interest rate
assumptions are based on a weighted average return
of the actual locked in yields on the existing funds and
the expected yields on the future net cash flows. The
valuation rate of interest is subsequently derived by
reducing these for margins for adverse deviations from
10% to 25.5% (previous year 10% to 25.5%).

Mortality Rate: The mortality rates used for assurances
are based on the published “Indian Assured Lives
Mortality Table (2012-14) Ultimate” (IALM 2012-14)
(previous year IALM 2012-14). The best estimate rate
for unit linked business ranges from 40% to 96% of
IALM 2012-14 mortality tables (previous year 40% to
96% of IALM 2012-14). For conventional business, it
ranges from 22% to 473.4% of IALM 2012-14 (previous
year 22% to 473.4% of IALM 2012-14). The valuation
mortality assumptions for life assurance products are
based on increasing the best estimate rates by a margin
for adverse deviation of 10% to 20% depending on the
segment and product (previous year 10% to 20%). The
valuation mortality assumptions for health assurance
products are based on decreasing the best estimate
rates by a margin for adverse deviation of 20% (previous
year 20%).

The mortality rates used for annuities are based on
the published “Indian Individual Annuitant’s Mortality
table (2012-2015)” (previous year - Indian Individual
Annuitant’s Mortality table (2012-2015)). The best
estimate rates used for annuities are 84% of Indian
Individual Annuitant’s table (2012-2015) (previous year -
84% of Indian Individual Annuitant’s table (2012-2015)).
The valuation mortality assumptions for annuities are
based on decreasing the best estimate rates by a margin
for adverse deviation of 20% (previous year 20%) in
addition to applying some mortality improvement factors
to the rates.

Morbidity Rates: The morbidity rates used for health
assurance are based on the published “Critical Illness
Basic Table 1993” (CIBT93) (previous year - Critical
Illness Basic Table 1993). The best estimate rates
ranges from 1.6% to 347.4% (including Group Credit
policies) of CIBT93 depending on age and cover chosen
(previous year 1.6% to 347.4%). The valuation morbidity
assumptions for health assurance products are based
on increasing the best estimate rates by a margin for
adverse deviation from 20% to 30% (previous year 20%
to 30%).

Expenses: Best estimate maintenance expenses are
derived at the levels such that when used for projecting
expense recoveries based on the long term business
plan, result in reasonable expense break-even year and
minimize projected over-runs. The valuation expenses
have been derived by increasing the best estimate
assumptions by a margin for adverse deviation of 10%
(previous year 10%).

Further, for any additional maintenance expenses
expected to be incurred over and above the expenses

already being reserved for in the base actuarial reserves,
the Company has maintained Cost Gap Reserve as part
of the additional aggregate reserves. The Cost Gap
Reserve amounts to '' 731 lakhs as at 31^st March, 2026
(previous year Nil).

Inflation: The valuation expense inflation assumption
has been fixed at 4.5% p.a. till the policy term of less
than equal to 30 years and 3.2% p.a. post that (previous
year 5% p.a. till the policy term of less than equal to 30
years and 3.2% p.a. post that) for all the products (as
applicable).

Lapses/Paid-ups/Surrenders: The best estimate
assumption for lapse/paid-up/surrenders ranges
between 0% to 30% (previous year 0% to 30%) in first
year; and from 0% to 50% in subsequent years (previous
year 0% to 80%). The valuation lapse assumption has
been further adjusted by a margin for adverse deviation
which ranges between positive 30% to negative 30%
(previous year positive 30% to negative 30%) depending
on the product.

Revivals: The best estimate revival assumption
ranges from 0% to 100% (previous year 0% to 100%),
depending on the year in which the policy lapsed / paid-
up and the duration elapsed since the policy lapsed /

paid-up. The valuation revival assumption has been
further adjusted by a margin for adverse deviation of
positive 30% (previous year positive 30%).

(b) Freelook Reserves:

The Freelook cancellation reserves are determined by
multiplying the total new business premium net of in¬
force reserves held as at valuation date corresponding
to Unit Linked, Traditional as well as Group business
(excluding the fund based products) which is eligible
for free-look cancellation as at valuation date by an
appropriate free look percentage rate (based on a
prudent value of the recent past experience).

The Freelook percentage rate used is 1.92% (previous
year 1.97%) for individual business and 1.55% (previous
year 1.28%) for Group business.

The Freelook Reserve as at 31^st March 2026 is '' 269
lakhs (previous year '' 724 lakhs).

(c) Actuarial liability valuation:

The valuation of actuarial liabilities for policies in force
and policies in respect of which premium has been
discontinued but liability exists as on the reporting date
has been duly certified by the Appointed Actuary.

(d) Funds for Future Appropriation (FFA):

In case of Participating business, based on the
recommendation of Appointed Actuary, un-appropriated
profits are held in the Balance Sheet as Funds for Future
Appropriation (FFA). The balance of FFA on participating
business as at March 31, 2026 are '' 70,942 lakhs
(previous year '' 68,066 lakhs).

As per the para 1 (1) (ii) in Section-II on Valuation of Life
Insurance Business, chapter I (Actuarial function) of the
Master Circular on Actuarial, Finance, and Investment
Functions of Insurers issued by IRDAI in May 2024, the
discontinuance charges of lapsed unit-linked policies,
where revival is unlikely but policies are still in revival
period are required to be held as “Funds for Future
Appropriation” (FFA) in the Balance Sheet. Accordingly,
as at March 31, 2026, the Company has held '' 1,026
lakhs (previous year '' 743 lakhs) as “Funds for Future

Appropriation” (FFA) for discontinuance charges of
lapsed unit-linked policies, where revival is unlikely but
policies are still in revival period.

3. Solvency Ratio

As at March 31,2026, the Company has a solvency ratio
of 190% (previous year 206%) as against the required
ratio of 150%.

Solvency ratio as at March 31,2026 has been stated on
the basis of computation certified by Appointed Actuary
and it excludes inadmissible assets as required by the
IRDAI (Actuarial, Finance and Investment Functions of
Insurers) Regulations, 2024, IFSCA (Assets, Liabilities,
Solvency Margin and Abstract of Actuarial Report for
Life Insurance Business) Regulations, 2023 and Master
Circular on Actuarial, Finance and Investment Functions
of Insurers issued by IRDAI in May 2024 and directions
as received from IRDAI from time to time.

5. Commitments made and outstanding for
Loans, Investments and Fixed Assets

Estimated amount of capital commitments made and
outstanding at year end for fixed assets (net of capital
advances) to the extent not provided for amounts to '' 89
lakhs (previous year '' 37 lakhs).

Commitments made and outstanding for investments
(excluding the unpaid amount on partly paid investments
disclosed under Contingent Liabilities in note 16(C)(1))
are '' Nil lakhs (previous year '' Nil lakhs) and for loans
are '' Nil (previous year '' Nil).

6. Encumbrance of assets and assets deposited
under local laws

The assets of the Company are free from all
encumbrances except to the extent of assets or
monies which are required to be deposited as margin
contributions for investment trade obligations of the
Company or as mandated by the courts of law. Details
of such assets are given below:

b) Deposits made under local laws

The Company has deposited '' 1,388 lakhs (previous
year '' 1,022 lakhs) with various judicial forums / courts /
Authorities for filing of appeals / revisions etc in 80 cases
(previous year 52 cases). All the above cases are pending
adjudication before the respective judicial forum / courts.

There are no other assets required to be deposited under
any local laws or otherwise encumbered in or outside
India as at March 31,2026.

7. Restructured Assets

There are no assets including loans subject to re¬
structuring (previous year- Nil).

8. Operating Lease Commitments

In accordance with the Accounting Standard 19 on
Leases, the details of leasing arrangements entered into
by the Company are mentioned below.

The Company has entered into agreements in the nature
of lease or leave and license with different lessors or
licensors for office premises and motor vehicles. These
are in the nature of operating lease. Some of these
lease arrangements contain provisions for renewal and
escalation. There are no restrictions imposed by lease
arrangements nor are there any options given to the
Company to purchase the properties and the rent is not
determined based on any contingency.

The operating lease rentals charged to the Revenue
Account during the year and future minimum lease
payments under non - cancellable operating leases as
at the Balance Sheet date are as follows:

9. Claims outstanding

As at March 31, 2026, there were no such claims
(previous year '' Nil) which remained settled but were
unpaid for a period of more than six months.

10. Remuneration of Directors and Key Managerial
Persons

As required by the IRDAI (Corporate Governance for
Insurers) Regulation, 2024 and Master Circular on
Corporate Governance for Insurers, 2024 issued by
IRDAI in May 2024 (as amended from time to time),
disclosures on remuneration of Directors and Key
Managerial Persons are detailed as under:

Remuneration of Non-Executive/ Independent directors

No remuneration has been paid to any of the Non-
Executive/ Independent directors during the FY 2025¬
26 (previous year '' Nil) except for sitting fee amounting
to total of '' 190 lakhs (previous year '' 119 lakhs).

Remuneration of Key Managerial Persons

a) Qualitative Disclosures:

Composition and mandate of the Nomination and
Remuneration Committee

The Nomination and Remuneration Committee (NRC) of
the Company comprises of six directors (as on March
31,2026) and the number of independent directors shall

always be at least two-thirds of the total number of
members. All members of the Committee shall be non¬
executive directors. The Chairperson of the Committee
shall always be an independent director.

The NRC has been constituted to formulate and monitor
people related policies and guidelines and identifying the
right talent to be included in the management and at the
Board level. The Committee is also required to coordinate
and oversee evaluation of the performance of the Board
& Committees and individual directors. The Committee
provides oversight and makes recommendations to the
Board, within the scope of terms of reference approved
by the Board.

Design, structure, key features and objective of
remuneration policy:

The objective of Remuneration Policy is to define a
compensation strategy that is fair, equitable, transparent,
comprehensive and competitive with the market.

The Policy defines the key components of Fixed and
Variable Pay and details how it shall ensure that a proper
balance is maintained between these components to
ensure employees deliver good performance while keeping
overall risk management and good governance in sight.

The Policy ensures that the remuneration does not
encourage taking of inappropriate or excessive risk for
performance based variable pay.

The Policy defines the parameters that should be taken
into account for performance assessment for payment
of variable pay.

Description of the ways in which current and
future risks are taken into account in the
remuneration policy:

The Company ensures the effectual positioning of the
compensation in line with the overall risk framework
of the organisation. Different aspects of remuneration
have been designed to ensure their applicability over a
timeframe and cover the associated risks.

• The total compensation is aligned to the predefined
balanced scorecard covering the Financial, Customer,
Process and People indicators of performance.

• Portion of the remuneration is deferred and spread
across the time horizon of risk in the form of Short
Term and Long Term Incentive Plans.

• Deferred payouts are guided and controlled by
the framework and continuing performance as per
performance management framework/Policy.

Description of the ways in which the insurer seeks to
link performance during a performance measurement
period with levels of remuneration:

The Company follows a compensation philosophy
of pay for performance and meritocratic growth
in the organisation. There is linkage between pay
and performance. In line with Company’s pay for
performance philosophy the compensation is designed
to ensure that every employee will have at least a
part of the total Compensation which will be linked to
individual and/or Company performance. For senior
management, the variable payouts depend upon the
individual contribution and overall performance of the
organisation. The performance is assessed on pre¬
defined balanced scorecard and the payout rate varies
with the level of performance. The organization strives
for higher variable pay at senior levels thereby ensuring
more focus on performance driven remuneration.

b) Quantitative Disclosure:

The appointment and remuneration of managerial
persons is in accordance with the requirements of
Section 34A of the Insurance Act, 1938 (amended by
the Insurance Laws (Amendment) Act, 2015 and as
amended from time to time) and has been approved by
the IRDAI.

The details of the managerial remuneration of Managing
Director & Chief Executive Officer are as per Annexure 1.

11. Segment Reporting

As per the requirements of Accounting Standard 17
“Segmental Reporting” read in conjunction with the
IRDAI (Actuarial, Finance and Investment Functions of
Insurers) Regulations, 2024 (as amended from time to
time), the Company is required to prepare a segment
wise financial statement. The same is detailed as
Annexure 2.

12. Investments

All investments are made in accordance with the
provisions of the Insurance Act, 1938 (as amended by
the Insurance Laws (Amendment) Act, 2015), Insurance
Regulatory and Development Authority of India
(Actuarial, Finance and Investment Functions of Insurers)
Regulations, 2024, Master Circular on Actuarial, Finance
and Investment Functions of Insurers (as amended from
time to time), International Financial Services Centre’s
Authority (IFSCA) Investment Regulations 2022 and
International Financial Services Centre’s Authority Act,
2019 (as amended from time to time).

Note-1: In view of the downgrading of the credit rating of the said securities below investment grade and default in
payments of the dues, the Company has classified its entire exposure in IL&FS group as non-performing in line with its
accounting policy and regulatory guidelines and has created a full provision against the same as shown above.

Note-2: Redemption receivable and corresponding NPA provision is disclosed under Schedule-12 (Advances and Other
Assets).

Note-3: Investments, redemption receivable and corresponding NPA provisions are disclosed under Schedule 8-B.

Note-4: During the financial year ended March 31,2025, the Company is in receipt of '' 130 lakhs as interim distribution
from Infrastructure Leasing and Financial Services against an investment of '' 1,000 lakhs and '' 37 lakhs as interim
distribution from ILFS Financial Services Limited against an investment of '' 500 lakhs of Non-Convertible Debentures
(NCDs) and also '' 32 lakhs as interim distribution from ILFS Financial Services Limited against an investment of '' 500
lakhs of Commercial Paper (CPs) in Unit Linked Policyholders’ funds. Therefore, company has reduced Redemption
Receivable and corresponding provisions on NPA under Schedule 8B.

Note-5: During the financial year ended March 31,2025, the Company is in receipt of '' 62 lakhs as interim distribution
from ILFS Financial Services Limited against an investment of '' 500 lakhs of Non-Convertible Debentures (NCDs) and
receipt of '' 162 lakhs as interim distribution from ILFS Financial Services Limited against an investment of '' 2,500
lakhs of Commercial Paper (CPs) in Shareholders’ funds. Therefore, company has reduced Redemption Receivable and
corresponding provision on NPA under Schedule 12: “Advance and other assets”.

13. Value of unsettled contracts relating to Investments

Value of contracts in relation to investments, for:

(a) Purchases where deliveries are pending - '' 14,392 lakhs (previous year '' 15,910 lakhs).

(b) Sales where payments are overdue - Nil (previous year Nil).

14. Historical Cost of Investment

The historical costs of those investments whose reported value is based on fair value are:

16. Processing of Unit Linked Applications received
on Quarter Ends

The Company has complied with the guidelines under
Point 5 of ANNEXURE INV-I to Insurance Regulatory
and Development Authority of India (Actuarial, Finance
and Investment Functions of Insurers) Regulations,
2024 (as amended from time to time) governing the
applicability of the NAV for the processing of the Unit
Linked applications received on the last business day
of the Quarters.

17. Revaluation of Investment Property

The Company does not have any Investment in real
estate property and hence no revaluation is required.

18. Nature and terms of outstanding derivative
contracts

Certain Guaranteed products offered by the Company
assure the policyholders a fixed rate of return for
premiums to be received in the future and the Company
is exposed to interest rate risk on account of re¬
investment of interest & principal maturities at future date

and Guarantee risk on premiums from already written
policies. Interest rate derivative contracts as permitted
by IRDAI circular no. IRDA/F&I/INV/CIR/138/06/2014
dated June 11,2014 (‘the IRDAI circular on Interest Rate
Derivatives’) and IRDAI Master Circular on Actuarial,
Finance and Investment Functions of Insurers issued in
May 2024 (as amended from time to time) are used for
hedging of highly probable forecasted transactions on
insurance contracts and investment cash flows.

The Company 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.

The Company has during the year, as part of its hedging
strategy, entered into Forward Rate Agreement (FRA)/
Bond Forwards which is over the counter (OTC)
derivative contract to hedge interest rate risk arising
out of premiums from already written policies and re¬
investment risk of interest & principal maturities at
future date.

Qualitative Disclosures on risk exposure in
Fixed Income Derivatives:

Overview of business and processes:

i) 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,
bond forwards, interest rate swaps and interest
rate futures.

The Company during the financial year has entered
permitted fixed income derivative instruments to
minimize exposure to fluctuations in interest rates
on assets and liabilities. Hedge is carried out in
accordance with its established policies, strategies
and applicable regulations. The Company
does not engage in derivative transactions for
speculative purposes.

ii) Derivative policy/process and Hedge
effectiveness assessment:

The Company has well defined Board approved
Derivative Policies and Procedures for setting out
strategic objectives, regulatory and operational
frameworks 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 Company has clearly identified roles and
responsibilities to ensure independence and
accountability through investment decision, trade
execution, to settlement, accounting and periodic
reporting and audit of the Interest Rate Derivative
exposures. The overall policy and risk management
framework for Interest Rate Derivatives is monitored
by the relevant Committees.

iii) Scope and nature of risk identification, risk
measurement, and risk monitoring:

The Derivative and related Policies prescribe
appropriate risk limits, including sensitivity analysis
and value at risk (VaR) limits, for exposures in interest
rate derivatives. All financial risks associated with
the derivative portfolio are measured and monitored
on a periodic basis.

Quantitative disclosure on risk exposure in
Forward Rate Agreement and Bond Forwards

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/Bond forwards). Gains or losses arising from
hedge ineffectiveness, if any, are recognized in the
Revenue Account.

The tenure of the hedging instrument may be less
than or equal to the tenure of underlying hedged
asset/liability.

* Hongkong Shanghai Banking Corporation Limited is a related party (part of Promoter group company) and has outstanding
Derivative Notional as of March 31,2026''11,157 lakhs (previous year Nil).

19. Taxation

The taxable profits of a life insurance company are required to be computed in accordance with the provisions of Section
44 read with the rules contained in the First Schedule of the Income Tax Act, 1961. The provision for current tax amounting
to '' 1,424 lakhs (previous year '' 1,117 lakhs) has been computed accordingly. The tax expense for the year includes
reversal amount of '' 7 lakhs (previous year Nil) relating to the previous year, arising on account of the difference between
the provision made and the final tax liability determined upon filing of the incometax return for the previous year. The
Company does not have any timing difference (between accounting income and taxable income) and hence no deferred
tax has been recognized in the financial statements.

20. Percentage of business sector-wise

The Company has been meeting all its Rural and Social Obligations as required under IRDAI Regulations. The sector wise
(Rural and Social) break-up of business underwritten during the year ended March 31,2026 as per IRDAI (Rural, Social
Sector and Motor Third Party Obligations) Regulations, 2024 is as under:

Notes :-

Rural - During the FY 2024-25, the Company has achieved 261.39% against the target (“283,948” being total nos. of
lives covered under Rural / “108629” being 10% of Total no. of Gram Panchayat Population allotted to the Company).

Total Gram Panchayats allocated to Company are 188. Total Rural Lives covered are 283,948. The Company have achieved
the target of 10% in each Gram Panchayats allocated by IRDAI as of March 2025.

Social - Total Lives Insured by Company is 8,220,282 and the lives covered under Social are 986,110. The Company
achieved 12.00% against the requirement of 10%.

21. Allocation of investments and income thereon between Policyholders’ Account and Shareholders’
Account

The Company maintains separate funds for the shareholders and policyholders, therefore allocation of investments and
income is not required between Policyholders’ account and Shareholders’ account.

22. Disclosure on other work given to Auditors

Pursuant to clause IV (1) (c) of Annexure 6 of Master Circular on Corporate Governance for Insurers, 2024 issued by
IRDAI (as amended from time to time), the additional works (other than statutory/ internal audit) given to the Auditors are
detailed below:

The Statutory Auditors of the Company were engaged for Limited review of quarterly financials, providing certain
certifications, Examination of Restated financials & other activities related to IPO (refer Note 47 of Schedule 16C) and Tax
audit (under the Income Tax Act, 1961). The Board of Directors of the Company have approved such engagements as
required under ordinary course of business.

Notes :-

Rural - Total Gram Panchayats allocated to Company are 192. Total Rural Lives covered are 223,694. The Company
have achieved the target of 15% in each Gram Panchayats allocated by IRDAI as of March 2026.

Social - Total Lives Insured by Company is 12,024,755 (Number of Policies in Retail and Number of Lives in Group) and
the lives covered under Social are 2,168,498. The Company achieved 18.03% as of March 2026 against the requirement
of 10%.

23. Accounting Ratios

Key performance and accounting ratios are detailed as
Annexure 3.

24. Summary of Financial Statements

A summary of the financial statements is detailed in
Annexure 4.

25. Transfer from / (to) Revenue Account

During the current year, net surplus of '' 4,353 lakhs
(previous year surplus of '' 3,548 lakhs) is being contributed
by Policyholders’ account to shareholders’ account.

The segment wise details are tabulated below:

The shareholders’ contribution is irreversible in nature
and will not be recouped in the future. The approval for
the transfer of FY 2024-25 was taken in EGM on April 11,
2025 and approval for the transfer relating to FY 2025-26
will be taken in the upcoming EGM.

The Bonus to participating policyholders for current year,
as recommended by the Appointed Actuary based on
the Company’s Bonus philosophy, approved by the With-
Profits Committee and the Board, has been included in
the change in valuation for policies.

26. Related Party Disclosures

During the year, the Company had transactions with
related parties as defined in the Accounting Standard 18.
Lists of such transactions are disclosed as a part of the
“Related party disclosures” and detailed in Annexure 5.

27. Computation of Earnings Per Share

In accordance with Accounting Standard 20 - Earnings
per share, calculations for earning per share are as under:

29. Disclosure of Expenses relating to Outsourcing
Activities

As required by Master Circular on Actuarial, Finance and
Investment Functions of Insurers issued by IRDAI in May
2024 (as amended from time to time), in line with the
Outsourcing Return which is required to be submitted
as per the regulations, details of outsourcing expenses
are as follows:

28. Micro, Small and Medium Enterprises Development Act, 2006

According to information available with the management, on the basis of intimation received from suppliers regarding
their status under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) as amended from time
to time, the details of amounts due to Micro and Small Enterprises under the said Act are as follows:

30. Employee Benefits
A) Defined benefit plan
i) Gratuity:

The gratuity scheme provides for payments as per
scheme rules to an employee on his/her exit from
employment either by way of resignation, retirement
or death, after completion of minimum prescribed
continuous service with the Company and in case
of death of an employee during the course of an
active employment, the gratuity is paid even if the
employee has not completed the required minimum
continuous service.

The Company provides for gratuity benefits based
on an actuarial valuation using projected unit credit
method, in accordance with Accounting Standard
(AS) 15 (revised 2005), ‘Employee benefits’. The
Company contributes towards net liabilities to
Canara HSBC Life Insurance Company Limited
Group Gratuity Trust. The related expenses have
been recognized in Revenue and Profit & Loss
account under “Employees’ remuneration and
welfare benefits”.

Reconciliation of the opening and closing balance
of the present value of the defined benefit obligation
for gratuity benefits is detailed in Annexure 6.
This is based on an actuarial valuation done by
independent Actuary as on March 31,2026.

B) Defined contribution plan

i) Provident Fund:

The Company makes contribution towards
employees’ provident fund scheme as well as
employees’ pension scheme, a defined contribution
plan. The Company’s contribution for the year
amounts to '' 1,549 lakhs (previous year '' 1,340
lakhs) and '' 884 lakhs (previous year '' 876 lakhs)
respectively. The related expenses have been
recognized in Revenue and Profit & Loss account
under “Employees’ remuneration and welfare
benefits”.

ii) National Pension Scheme:

The Company makes contribution towards national
pension scheme for the employees who had
opted for the scheme. National pension scheme
is a defined contribution plan which is managed
and administered by pension fund management
companies licensed by the Pension Funds
Regulatory and Development Authority (’PFRDA’).
The Company’s contribution for the year amounts
to '' 243 lakhs (previous year '' 181 lakhs). The
related expenses have been recognized in Revenue
and Profit & Loss account under “Employees’
remuneration and welfare benefits”.

iii) Labour Welfare Fund:

The Company makes contribution towards Labour
welfare fund scheme, a defined contribution plan.
The Company’s contribution for the year amounts
to '' 12 lakhs (previous year '' 11 lakhs). The related
expenses have been recognized in Revenue
and Profit & Loss account under “Employees’
remuneration and welfare benefits”.

iv) Employee Deposit Linked Insurance:

The Company makes contribution towards
Employee Deposit Linked Insurance scheme,
a defined contribution plan. The Company’s
contribution for the year amounts to '' 58 lakhs
(previous year '' 55 lakhs). The related expenses
have been recognized in Revenue and Profit &
Loss account under “Employees’ remuneration and
welfare benefits”.

v) Employee State Insurance Corporation:

The Company makes contribution towards
Employee State Insurance Corporation scheme,
a defined contribution plan. The Company’s
contribution for the year amounts to '' 56 lakhs
(previous year '' 49 lakhs). The related expenses

have been recognized in Revenue and Profit &
Loss account under “Employees’ remuneration and
welfare benefits”.

C) Other employee benefits
i) Leave Encashment:

The Company accrues the liability for leave
encashment based on the actuarial valuation
as at the balance sheet date conducted by an
independent actuary. The related expenses have
been recognized in Revenue and Profit & Loss
account under “Employees’ remuneration and
welfare benefits”. The assumptions used for
valuation are:

ii) Long Term Incentive Plan / Deferred Bonus
and long term association rewards:

The Company accrues for the liability for the long
term incentive plan, deferred bonuses and long
term association rewards based on the actuarial
valuation as at the balance sheet date conducted
by an independent actuary. The related expenses
have been recognized in Revenue and Profit &
Loss account under “Employees’ remuneration
and welfare benefits”. The assumptions used for
valuation are:

D) Employee Stock Option Plan

Pursuant to our Board and Shareholders approval in
April 2025, an ESOP scheme namely “Canara HSBC Life
Insurance Company Limited - Employee Stock Option
Plan 2025” (the “ESOP Scheme”), for grant of employee
stock options to eligible employees was instituted. This
ESOP Scheme is being administered through the CHL
ESOP Trust (“Trust”) established pursuant to the trust
deed dated Aug 8, 2025.

Under the ESOP scheme, eligible employees are
granted stock options that vest over specified periods

subject to vesting conditions and are exercisable at a
predetermined exercise price within the prescribed
exercise period. The scheme is equity-settled in nature.
The ESOP Trust has been funded by the Company
through interest-free loan for the purpose of acquiring
equity shares of the Company from the secondary
market. The Trust has not subscribed to or been allotted
any fresh equity shares by the Company. Accordingly,
the issued and paid-up share capital, securities premium
and reserves of the Company is not impacted by the
ESOP Trust transactions during the year.

The Company accounts for the ESOP Scheme in
accordance with the Guidance Note on “Accounting
for Share-based Payments” issued by the Institute of
Chartered Accountants of India and has adopted the
intrinsic value method for measurement of stock options.

The exercise price of ESOP Scheme is determined
based on the fair market value as determined by the
Category I Merchant Banker registered with SEBI as
company’s equity was not listed on the day of grant.
As at the reporting date, no options have vested and
the intrinsic value of options granted is Nil as the
exercise price of the option is the same as fair value of
the underlying share on the grant date; accordingly, no
employee compensation expense has been recognized
in the Revenue Account or Profit and loss account for
the financial year 2025-26 (Previous Year Nil). Had the
Company followed the fair value method for valuing its
options, the charge to the Revenue Account/Profit &
Loss Account for the year would have been aggregated
to '' 717 Lakh (Previous year '' Nil Lakh) and the profit
after tax would have been lower by '' 613 Lakh (Previous
year '' Nil Lakh). Consequently, Company’s basic and
diluted earnings per share would have been '' 1.27
(Previous year: '' Nil per share).

The amount advanced by the Company to the ESOP
Trust, as an interest free loan, is disclosed in the balance
sheet as “Loan to ESOP Trust” and represents loan
recoverable from the Trust, primarily out of the exercise
price receivable from employees upon exercise of
vested options, and includes inter alia, the cost of equity
shares acquired from the secondary market (including
transaction costs), unutilized bank balances and other
incidental costs attributable to the administration of
the ESOP Scheme. Any difference between the cost of
shares acquired by the Trust from the secondary market
and the exercise price payable by employees, if arising
upon exercise of options, is treated in accordance with
the Guidance Note based on its underlying nature and
is not considered as employee compensation expense.

Such differences, if any, are recognised only upon exercise of options and determination of the resultant position based
on actual proceeds received from employees.

Appropriate disclosures in respect of salient features of the ESOP Scheme, the number of options granted, outstanding and
vesting terms along with the method of computation of fair value of options have been made hereinbelow in accordance
with the said Guidance Note.

E) Impact of New Labour Code

Pursuant to the notification issued by the Ministry of
Labour and Employment, the Code on Wages, 2019, the
Code on Social Security, 2020, the Industrial Relations
Code, 2020 and the Occupational Safety, Health and
Working Conditions Code, 2020 (collectively referred
to as the “New Labour Codes”) became effective from
November 21, 2025. Accordingly, the Company has
recognized incremental estimated obligation on account
of the employees past services and based on actuarial
valuation, in accordance with Accounting Standard 15
“Employee Benefits” (“AS 15”), the incremental estimates
amount to § 1,195 lakhs. This additional amount is
charged to the Policyholders’ Revenue Account and
Profit & Loss A/c for the year ended March 31,2026.

31. Foreign exchange gain/ loss

The net foreign exchange loss debited to Revenue
Account and Profit & Loss Account for the year ended
March 31,2026 is '' 10 lakhs (previous year '' 4 lakhs).

32. Foreign currency exposure

The year-end foreign currency exposures that have not
been hedged by a derivative instrument or otherwise are
Nil (previous year Nil).

33. Details of person in charge of management
of the business under Section 11(3) of the
Insurance Act, 1938 (amended by the Insurance
Laws (Amendment) Act, 2015)

34. Additional Disclosures as per requirements of
IRDAI

Unit linked disclosures as required by Master Circular on
Actuarial, Finance and Investment Functions of Insurers
issued by IRDAI in May 2024 (as amended from time to
time) is detailed as Annexure 7.

35. Disclosure on fines and penalties

As required by Master Circular on Actuarial, Finance and
Investment Functions of Insurers issued by IRDAI in May
2024 (as amended from time to time), a report on penal
actions has been detailed under Annexure 8<