TO THE MEMBERS OF KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LIMITED

Your Directors take great pleasure in presenting their Thirteenth Report on the business and operations of your Company together with the Audited Financial Statements for the year ended March 31, 2013.

FINANCIAL RESULTS

Your Company continues to demonstrate a consistent performance in a challenging and competitive environment. This year your Company continues to be profitable, which it has achieved through a better product mix, management of capital and cost management. The summarised results of operation of your Company for the Financial Year 2012-13 are as follows:

Your Directors have declared the following rates of bonus on participating policies for the year ended 31st March 2013:

(a) 7% (2012 7%) on accumulation non retirement: products to participating life policyholders which comprises 4% cash bonus in addition to the guaranteed rate of 3%. Additionally, terminal bonus of 10% for the policies matured and on death claim benefits paid during the year.

(b) 8% (2012 8%) to Annuity participating policyholders which comprises 5% cash bonus in addition to the guaranteed rate of 3%. Additionally, terminal bonus of 10% for the policies matured and on death claim benefits paid during the year.

(c) A reversionary bonus of 2% (2012 -2%) for all plans (2.25% simple reversionary Life Plan).bonus for policies completing 5th policy year in Surakshit Jeevan Plan, Eternal Your Directors do not recommend any dividend for the current year.

DIVIDEND

Your Company is one of the efficient capital users in the life insurance space having

CAPITAL

Your Company is one of the efficient capital users in the life insurance having good Assets under Management to Capital ratio. During the year under review, the Authorised Share Capital of your Company was Rs. 625 Crores, while the Paid-up Share Capital of your Company was Rs. 510 Crores. There has been no capital infusion in 2012-13.

LICENCE

The Insurance Regulatory and Development Authority has renewed your Company’s licence to carry on the business of life insurance and annuity for the year 2013-14.

a) Individual Business

The year witnessed increased focus towards traditional products and an increasing trend towards long-term selling, which augurs well for the Industry. Your Company has driven protection and long term savings (PALTS) across its distribution verticals.

Your Company's Life Advisors and the distribution team worked hard to successfully adapt to changes in their operating environment. Life Advisors exiting the profession is a challenge for the Industry as a whole. Your Company is working on the challenge and remains confident of adjusting to changes in the Industry and environment and improve its distribution strength.

Your Company continues to focus on distribution efficiency and will ensure that it remains a key deliverable in next fiscal as well. Investment in training Life Advisors and sales hierarchy have been stepped up to ensure that the distribution is equipped to meet customers" expectations.

Kotak Mahindra Bank has a 34% share (on APE basis) of individual new business premiums for the Financial Year 2012-13. Besides Kotak Mahindra Bank, we have agency tie-ups with cooperative banks, commercial banks, corporate agents and brokers which also contribute to the premium income.

b) Group Business

Your Company provides a range of products from Term Insurance, Group Gratuity and Group Mortgage Insurance Schemes to cater to its group clientele. Your Company generated a premium income of Rs. 500 Crores (FY 2011-12 Rs. 354 Crores) from the group insurance business representing a growth of 41.2% over FY 2011-12.

PRODUCTS

Your Company launched Kotak Assured Protection Plan, a unique and first of its kind traditional product which offered the customer 'Complete Protection" or protection against every conceivable outcome during the term, such as natural death, accidental death, accidental disability, critical illness or on survival at end of the term. This is an innovative product in the Industry to provide for all these benefits in a single product. Your Company also launched Kotak Single Invest Plus, a single premium unit linked joint life plan. Your Company also launched two Group Products in the Traditional Non Par Segment Kotak Secure Return Gratuity Plan and Kotak Secure Return Leave Encashment. A Leave Encashment product has been introduced for the first time in your Company's product portfolio.

MARKETING

Your Company's marketing efforts during the year were focused on establishing your Company's core purpose of 'adding value to people's lives through Protection & Long Term Savings' (PALTS) and reinforcing the culture of customer-centricity in every outreach. Your Company's website was redesigned to reflect this commitment and it has fared well on usability tests and user surveys, on criteria of ease of use, navigation, design and content.

Your Company also reworked on its recruitment and s ales tools to make them more effective. Comprehensive kits were created in keeping with the essence of various channels, to drive volumes in Life Advisor recruitment and to attract good talent. Sales enablers were also designed in keeping with PALTS and transformed sales strategies.

Your Company's Facebook application won a Bronze at the Campaign India Digital Media Awards. Your Company's innovative use of in-car advertising in Meru cabs won it a Bronze in the new media category. Your Company's Facebook page has crossed 1 Lakh fans.

RURAL AND SOCIAL SECTORS

During the year, your Company wrote 36091 policies (Previous year 46053) in the rural sector representing 21.3 % (Previous year 22.2 %) of the total policies. This is and Social Sectors) Regulations, 2002 of 20% (Previous year 20%) of the total policies written in the financial year from the rural sector. Outperforming the Regulatory requirement of covering 55,000 lives in the social sector, your Company covered 509279 lives (Previous year - 178470 lives). Your Company takes the rural and social sector target seriously with a sense of duty towards the community.

INDUSTRY SCENARIO

The private industry has witnessed a fall of 6% in new business premiums over the previous year. In this new environment of sluggish growth, focus of insurers will shift from large-scale expansion to sustained value creation and efficient use of capital coupled with productivity of distribution channels. A fresh set of Regulations which have bearing on all categories of products, across the Industry, were released in the beginning of March and your Company's product design efforts would be directed to ensure that the present products are revamped and are ready and available to customers on time.

HUMAN RESOURCES

Your Company's HR department has been, for a fourth year in a row, re-certified with the ISO certification for the year for its HR operations. Last year, your Company has successfully embarked on a restructuring exercise and this has resulted in rationalization of managerial spans and building role clarity at all levels. The full cost benefits of the exercise shall become visible from the coming year. Your Company has also focused on building managerial skills in the areas of team and people leadership and execution management. The focus in the current year is to further build on the managerial skills to execute with greater effectiveness and integrate new managers into the Kotak Way.

INFORMATION TECHNOLOGY

Your Company is continuing its journey of creating a risk-free, innovative, secure and scalable technology infrastructure to enable your Company to achieve the growth that it desires. Several initiatives have been taken to empower distribution channels to achieve growth, improve persistency, to enhance customer service and improve process efficiency with a constant focus on compliance and risk management.

Your Company implemented "KRUX" an IT system for Persistency management. This will help us in taking pro-active measures at all levels to ensure that customers remain invested through the entire term in turn helping us achieve our core purpose of PALTS.

The Insurance One system which was implemented for Policy Servicing last year has now been extended to Underwriting and Claims. This has enabled us to automate several manual processes, extend them to the branches thereby reducing the resolution time. Since this offers better controls, risks would be significantly reduced in these core areas.

OPERATIONS AND CUSTOMER SERVICE

Your Company is committed to best in class customer service and recognizes it to be a key long term strategic differentiator. Towards this end, during the course of the year, your Company invested in several initiatives to make the customers' experience seamless and pleasant.

a. Your Company introduced multiple new modes through which customers can pay premiums apart from expanding and strengthening existing ones. Your Company's customers can now pay premiums through debit and credit card online, or through credit card at branches or over the Company's Interactive Voice Response (IVR) system, or pay using a mobile device through the Interbank Mobile Payment Service (IMPS), a first in the insurance sector. Your Company has extended the Regional Electronic Clearing Service (RECS) facility to 16 states and the direct debit facility to 14 Banks, besides enabling customers to pay via standing instructions on their Kotak Bank Credit Card.

b. actively encourages customers to shift from paper based communication to In line with your Company's avowed commitment to sustainability, your Company paperless communication via the electronic mode.

c. Your Company has enhanced its online policyholder self-service platform, 'Online Policy Manager', with several features to improve its usability such as auto registration facility and premium calendar.

COMPLIANCE AND INTERNAL CONTROL

The Compliance function is not only the custodian of Regulatory framework but also counsels other functions within the Company on the changing Regulations and their implications within the Industry. During the Financial year all Regulatory changes were implemented in a seamless and time bound manner.

Your Company has a Compliance Policy and Risk Manag ement framework in place, in order to mitigate risks across various functions of the Company and suitable measures are taken to proactively manage risks at all levels. Compliance processes of your Company are also complemented by independent audit conducted across various functions. As a part of good Corporate Governance, the Audit Committee reviews the findings of the Internal Auditors who report directly to the Audit Committee.

INVESTMENTS

Your Company manages its investments within the overall framework laid down by the Investment Policy and provisions of IRDA Investment Regulations, 2000 and Insurance Act, 1938. The Investment function works under the overall supervision of Investment Committee of the Board. Your Company has implemented systems to help in analysis of investment portfolio, which acts as an enabler to the front-end Investment team in asset allocation and stock selection. Further, your Company has well-staffed Investment team which has been structured for effective function and independent checks to constantly monitor investment performance and analysis.

The total Assets under Management for the Traditional and Unit Linked Funds was Rs.10,964 crores as at March 31, 2013 as against Rs. 9,724 crores as at March 31, 2012 registering a growth of 13% over the previous year. Financial Year 2012- 2013 was volatile for Markets. During the year 10 year benchmark Government Security yield has gone down from 8.57% as at March 31, 2012 to 7.95% as at March 31, 2013 and has 5,296 as at March 31, 2012 to 5,683 as at March 31, 2013 with a high of 6,082 and low of 4,836 during the year.

CORPORATE GOVERNANCE

Your Company has consciously endeavoured to follow the policy of transparency and accountability and holds the interest of its stakeholders paramount. Your Company has implemented the requirement of Corporate Governance circular issued by IRDA. (Note: A separate section pertaining to Corporate Governance compliance is appended to this document)

BOARD OF DIRECTORS AND COMMITTEES

Your Company has nine Directors on its Board. Eight of the Directors are Non-Executive Directors of which three are Independent Directors. Chairman of the Board holds a Non-Executive position and Chairman of Audit Committee is an Independent Director.

Mr. Shivaji Dam and Mr. Gaurang Shah, Directors of your Company, are liable to retire by rotation at the ensuing Annual General Meeting of your Company. Mr. Shivaji Dam and Mr. Gaurang Shah, being eligible, offer themselves for reappointment.

The detailed composition of the Board and various Committees along with the list of meetings held, are disclosed as part of the annexed report on Corporate Governance.

Mr. S.S. Thakur and Mr. Ralph Mupita resigned from the Board and ceased to be Directors of your Company. Your Company wishes to place on record the valuable contribution of Mr. S.S. Thakur and Mr. Ralph Mupita during their association with the Company. Your Company also wishes to place on record the contribution of Mr. S.S.Thakur as Chairman of the Audit Committee.

AUDITORS

M/s S. R. Batliboi & Co. LLP, Chartered Accountants and M/s Walker, Chandiok & Co. Chartered Accountants, the Joint Auditors of your Company, hold office until the conclusion of the ensuing Annual General Meeting of your Company. As per the requirements of the Regulations, M/s S.R. Batliboi & Co. LLP, one of the retiring Auditors tenure. It is proposed to appoint M/s Contractor, Nayak & Kishnadwala as one of the joint auditor in place of M/s S.R. Batliboi & Co. LLP, M/s Walker, Chandiok & Co. being eligible, have offered themselves for reappointment. The shareholders are requested to consider appointment of M/s Contractor, Nayak & Kishnadwala and M/s Walker, Chandiok & Co. as Joint Statutory Auditors of the Company in the ensuing Annual General Meeting.

MANAGEMENT REPORT

Pursuant to the provisions of Regulation 3 of the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations, 2002, the Management Report forms a part of the financial statements.

PUBLIC DEPOSIT

During the period under review, your Company has not accepted any deposits from the S: public.

PARTICULARS OF EMPLOYEES:

The information required under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 is enclosed herewith.

1 Conservation of Energy and Technology Absorption

The particulars in the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 pertaining to conservation of energy do not apply to life insurance industry and hence are not applicable.

Information Technology

Your Company leverages information technology as a strategic tools to gain competitive advantage and to improve productivity and efficiency of the organisation. Our platforms are designed to service scale and are capable of handling high customer and transaction volumes. We have used technology to deliver process improvements, innovations and to add value to our services to the customers.

2.Foreign Exchange Earnings and Expenditure

DIRECTORS' RESPONSIBILITY STATEMENT

Based on representations from the Management, your Directors state, in pursuance of Section 217(2AA) of the Companies Act, 1956, that:

a. Your Company has, in the preparation of the annual accounts for the year ended 31st March, 2013, followed the applicable accounting standards alongwith proper explanations relating to material departures, if any;

b. The Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of your Company as at 31st March, 2013, of the surplus in the Revenue Account and the surplus in the Profit and Loss Account of your Company for the financial year ended 31st March, 2013;

c. The Directors have taken proper and sufficient care to the best of their knowledge and ability, for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities; and

d The Directors have prepared the annual accounts on a going concern basis

ACKNOWLEDGEMENTS

The Directors thank the Insurance Regulatory and Development Authority for its continuous support. The Directors are grateful for the continued faith that the policyholders have reposed. The Directors acknowledge the support extended by their shareholders and express their appreciation of employees for their efforts, teamwork and professionalism.