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Accounting Policies of General Insurance Corporation of India Company
Mar 31, 2024
I. SIGNIFICANT ACCOUNTING POLICIES:
1. ACCOUNTING CONVENTION
The Balance Sheet, the Profit and Loss Account and the Revenue Accounts are drawn up in accordance with the provisions of Section 11(1) of the Insurance Act, 1938 and to comply with the Generally Accepted Accounting Principles in India (Indian GAAP), including the Accounting Standards notified under the relevant provisions of the Companies Act, 2013. The Financial Statements also conform to the stipulation specified under the Insurance Regulatory and Development Authority of India (Preparation of Financial Statements and Auditors Report of Insurance Companies) Regulations, 2002. The said statements are prepared on historical cost convention and on accrual basis except as otherwise stated and conform to the statutory provisions and practices prevailing in the General Insurance Industry in India.
2. REINSURANCE BUSINESS
2.1. Use of Estimates
The preparation of financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the Balance Sheet date, revenue and expenses for the year ended and disclosure of contingent liabilities as of the Balance Sheet date. The estimates and assumptions used in accompanying financial statements are based upon Management''s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any revision to accounting estimates is recognized prospectively in current and future periods.
2.2. reinsurance revenues
Premium is accounted based on accounts rendered by ceding companies upon receipt of accounts. At the period end, estimates are made for accounts not yet received, based on available information and current trends. In respect of Insurance pool business, where GIC Re is one of the members of the Pool, only the Corporation''s share of revenue is recorded in the books of accounts.
2.3. Outstanding Claims
2.3.1. Estimated liability for outstanding claims in respect of Reinsurance business carried out in India is based on advice received as of different dates up to the date of finalization of claim figures in the books for submission of the data to the "Appointed Actuary" and wherever such advices are not received, on estimates based on available information, current trends, past underwriting experience of the management and actuarial estimation bases.
2.3.2. Provision for claims incurred but not reported (IBNR) is made as certified by the Appointed Actuary based on accepted actuarial methods.
2.4. receivables
Provisions for Doubtful Debts for receivables are provided as under:
(i) Companies in liquidation
(ii) Companies having non-moving balances over a period of 3 years
(iii) Companies having moving balances, apart from various parameters, has primarily outstanding dues more than 3 years: The Provision for doubtful debts does not include Domestic Pools and Structured Quota share treaties.
3. FOREIGN CURRENCY TRANSACTIONS
Revenue transactions in foreign currencies are converted at the daily rate of exchange on the day accounts are received and transactions are booked. The rates have been taken from Thomson Reuters India Pvt. Ltd.
3.1 Non-Monetary items including fixed assets and investments abroad are reported using the exchange rate applicable on the date of acquisition.
3.2 Monetary items such as receivables, payables and balances in bank accounts held in foreign currencies are converted using the closing rates of exchange at the balance sheet date.
3.3 The exchange gain/loss relating to revenue transaction, due to conversion of foreign currencies, is accounted for as revenue in respective revenue accounts. The common exchange gain/loss due to conversion are apportioned between Revenue Account and Profit and Loss Account in same proportion as stated in Significant Accounting Policy No. 5.
3.4 Foreign branch operations are considered as "non-integral business" as prescribed in AS11 "The effects of changes in foreign exchange rate (revised 2003)"and translated accordingly.
4. RESERVE FOR UNEXPIRED RISKS (URR)
The URR provisions are made as under:
4.1 Non-Life Business:
(i) For HO:
Reserve for Unexpired Risk in respect of Marine Insurance (Hull) and Terrorism Risk Business (included in Fire and Engineering) is made at 100% of Net Premium, while for all other classes of insurance is made at 50% of Net Premium of trailing 12 months other than Agriculture Insurance Business where premium is earned fully within the accounting period.
(ii) London, Dubai, and Malaysia Branch:
Reserve for Unexpired Risk is provided as per local practice. Adjustment for excess or short provision in URR, as per IRDAI requirement, is accounted at Head Office.
4.2 life Business:
Reserve for Unexpired Risk is provided as determined by Appointed Actuary based on accepted Actuarial methods.
5. apportionment of interest, dividend and rent
The income from interest, dividends and rent is apportioned between Profit and Loss Account and Revenue Accounts in the ratio of Shareholders'' Fund and Policyholders'' Fund respectively at the end of the period. The same is further apportioned amongst the Revenue accounts on the basis of the respective Policyholder''s fund at the end of the period.
Calculations of Shareholders'' fund and Policyholders'' fund is based on IRDAI circular IRDA/F&A/CIR/CPM/010/01/2017. Shareholder''s fund consists of share capital plus all Reserves and Surplus (except catastrophe reserve).
Policy holders fund for this purpose consists of estimated liability for outstanding claims including IBNR and IBNER, unexpired risk reserve (URR), Premium deficiency (if any), catastrophe reserve (if any) and Other Liabilities net of Other Assets (relating to policy holders) as per the guidelines of IRDAI.
6. FixED ASSETS AND Intangibles
Fixed Assets:
Fixed assets are stated at cost less depreciation. Cost of shares in Co-operative Societies/Companies for property rights acquired is included under the head ''Buildings'' under Fixed Assets.
Tangible Fixed Assets are stated at cost (including incidental expenses relating to acquisition and installation) less accumulated depreciation.
Intangible Assets:
Intangible Fixed Assets representing software are recorded at its acquisition price and are amortized over their estimated useful life on a straight-line basis, commencing from the date the assets are available for use. The management has estimated the useful life for such software as five years. The useful life of the asset is reviewed by the management at each Balance Sheet date.
6.1. Depreciation on Fixed Assets
Depreciation is provided on straight line method based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 and residual value of the assets shall be '' 1/-.
Depreciation is provided on pro-rata basis on additions to fixed assets and on assets sold /discarded /demolished / destroyed during the year.
All assets individually costing up to ? 10,000 are fully depreciated in the period in which they are acquired.
6.2. Impairment of Assets
Fixed assets are reviewed for impairment at the end of the year whenever events or changes in circumstances warrant that the carrying amount of an asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to future net discounted cash flows expected to be generated by the asset. If such an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the recoverable amount of the asset.
7. EMPLOYEE BENEFITS Short term employee benefits
Employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits and are recognised in the period in which the employee renders the related service. All short term employee benefits are accounted on undiscounted basis.
long term employee benefits
These include Provident Fund, Gratuity, Leave Salary, Settlement and Pension. These are provided on the basis of actuarial valuation including actuarial gains/losses at balance sheet date and is recognised in the revenue account(s) and profit and loss account.
8. apportionment of expenses
(i) Head office business:
Operating expenses relating to insurance business are apportioned to the Revenue Accounts on the basis of Reinsurance Premium accepted during the period for which accounts are prepared, giving weightage of 75% for Marine business & 100 % for Fire, Miscellaneous & Life Reinsurance business.
(ii) Foreign business:
Operating expenses relating to insurance business are also apportioned to the revenue accounts of branches on the same basis as mentioned in 8 (i) above.
(iii) Investment Expenses:
Expenses relating to investment are apportioned between Revenue and Profit & Loss Account in the same proportion as stated in Significant Accounting Policy No.5. Interest, Dividend and Rent income is net of Investment expenses. Refer Note No 14.
9. INVESTMENTS
9.1 Prudential norms prescribed by Reserve Bank of India and the IRDAI are followed in regard to:
(i) Revenue recognition
(ii) Classification of assets into performing and non-performing and
(iii) Provisioning against performing and non-performing assets.
9.2 Purchases and Sales of shares are accounted for on the date of contracts whereas bonds, debentures and Government securities are accounted for on the date of settlement.
9.3 The cost of investments includes premium on acquisition, Securities Transaction Tax, Goods & Service tax and their related expenses.
9.4 Short term money market instruments such as Triparty Repo (TREPS), Commercial Paper and Treasury bill, which are discounted at the time of contract at the agreed rate are accounted at their discounted value.
9.5 Investment portfolio in respect of equity shares are segregated into actively traded and thinly traded as prescribed by the IRDAI (Preparation of Financial Statements and Auditor''s Report of Insurance Companies) Regulations, 2002.
9.6 All investments are reviewed for impairment at the end of the Period whenever events or changes in circumstances warrant that the carrying amount of an investment may not be recoverable. Basis the same, Impairment loss (i.e., other than temporary diminution in value) is recognized over and above specific assessment-based impairment as required separately as per the Significant Accounting Policies.
(a) Investment in actively traded equity shares are required to be valued as per the guidelines of IRDA issued vide circular ref. no. IRDA/F&I/INV/QR/213/10/2013 dated October 30, 2013. The Corporation has chosen NSE as primary stock exchange and BSE as secondary exchange. Accordingly, the valuation of equity shares is made at Fair Value being the closing price of NSE. If such security is not listed / not traded on NSE on closing day, the closing price of BSE is considered.
(i) Provisioning for diminution in the value of equity shares/Preference shares
Impairment loss (i.e., other than temporary diminution in value) is recognized in respect of an equity/preference share which is actively traded in the stock exchange, and which has been held by the Corporation for a period of more than three years, provided, the current average book value is more than the Fair value as on the Balance Sheet date as well as persistently on previous three years from the Balance Sheet date.
Provision to the extent of difference between the re-measured fair value of the security/investment and its acquisition cost as reduced by any previous impairment loss will be recognized as expense in the Profit and Loss Account.
(b) Investment in units of mutual funds are valued at Fair value as per IRDAI guidelines 2003-04. Fair value for this purpose is the last quoted NAV as at the balance sheet date.
(c) In case of Equity Exchange Traded Funds (ETF) the investment is valued on the same basis as traded equity shares, in compliance with Para 3.1 of the IRDAI (Investment) Regulations, 2016 of August 2016.
Whereas Passive ETFs shall be valued at NAV as on the reporting date (IRDAI, Investment Regulations, 2016, Version - 02, 3.1)
9.7 Unrealized Gains/Losses
(a) Unrealized gains/losses (excluding impairment loss of other than temporary diminution in value) arising due to changes in the fair value of listed equity shares and mutual fund units are taken under the head "Fair Value Change Account" and on realization reported in Profit and Loss Account.
(b) Pending realization, the credit balance in the "Fair Value Change Account" is not available for distribution.
(c) Provision is made for diminution in value of investments relating to thinly traded and unlisted shares equivalent to the amount of difference in average book cost and breakup value of the shares except in companies where demerger has taken place during the Financial Year and latest audited accounts are not available.
Breakup value is computed from the annual reports of companies not beyond 21 months irrespective of date of closure of annual accounts of the companies.
(d) Provision is made for diminution in value of investment relating to units of venture capital funds equivalent to the amount of difference in book cost and the latest Net Asset Value (NAV).
9.8 Investments in Equity and Preference shares of companies whose latest available audited accounts are beyond 21 months irrespective of date of closure of annual accounts of the companies as on the date of balance sheet or whose net worth has been fully impaired (negative net worth) are valued as under:
9.9 Investments in Subsidiary and Associate Companies are valued at cost as these are strategic investments. Provision for diminution in the value of these investments is made only if the decline is other than temporary.
9.10 Final Dividend is accounted for as income in the year of declaration and Interim dividend is accounted as income when the amount is received or credited.
9.11 Dividends/Interest on shares/debentures under objection/pending deliveries is accounted for on realization/payment.
9.12 Profit or Loss on sale of investments is apportioned between Profit and Loss Account and Revenue Accounts in same proportion as stated in Significant Accounting Policy No. 5.
Profit/Loss on sale of investments is computed at average book value of investments on the date of sale.
9.13 Expenses relating to safe custody, straight through processing and bank charges etc. on investments are charged to Profit and Loss Account and Revenue Accounts as stated in Significant Accounting Policy No.8.
9.14 Debt securities including Government securities and Redeemable Preference shares have been considered as ''held to maturity'' securities and have been measured at historical cost subject to amortization of premium paid over residual period. The call date has been considered as maturity date for amortization of Perpetual Bonds.
9.15 In case of repos transaction, difference between the selling and buying value is treated as interest income.
9.16 Investments are apportioned between Shareholders'' Fund & Policyholders'' Fund basis ratio calculated as per IRDAI circular IRDA/F&A/CIR/CPM/010/01/2017.
10. AMORTIZATION OF PREMIUM AND PROVISION FOR DOUBTFUL LOANS, INVESTMENTS & DEBTS
Amortization of premium, provision for doubtful loans, doubtful debts and diminution in the value of investments written off,
are recognized in the Profit & Loss account. Securities purchased at a discount are booked at the discounted price.
11. COMPLIANCE WITH ACCOUNTING STANDARDS
The Corporation has complied with relevant accounting standards prescribed by ICAI to the extent applicable and IRDAI guidelines in preparation of its financial statements.
12. PREMIUM DEFICIENCY RESERVE(PDR)
Non-Life Business: Wherever applicable, Premium deficiency is worked out separately for each segmental revenue level basis viz. fire, marine and miscellaneous. As per IRDAI circular no. IRDAI /Reg/7/119/2016 dated 07 April 2016, PDR is calculated by Non-Life Appointed Actuary.
Life Re business: As per IRDAI circular no. IRDAI /Reg/9/121/2016 dated 13 April 2016, PDR is calculated by Life Re Appointed Actuary.
13. deferred commission
London BO has accounted for deferred commission as per the local laws. The same is accounted as Commission at Head Office, in compliance to IRDAI requirements.
14. TAxATIoN Current tax
The Company provides for income tax on the basis of taxable income for the current accounting period in accordance with the provisions of the Income Tax Act, 1961.
Current income tax expense comprises taxes on income from operations in India and in foreign jurisdiction. Income tax payable in India is determined in accordance with the provisions of the Income Tax Act 1961. Tax expense relating to foreign operations is determined in accordance with tax laws applicable in countries where such operations are domiciled.
Interest on Refund of income tax is accounted on realization basis.
Deferred tax
Deferred tax assets and liabilities are recognised on timing differences between the accounting income and the taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date.
Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future, however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date and appropriately adjusted to reflect the amount that is reasonably/virtually certain to be realised.
Mar 31, 2023
SIGNIFICANT ACCOUNTING POLICIES AND NOTES FORMING PART OF THE ACCOUNTS I. SIGNIFICANT ACCOUNTING POLICIES
1. ACCOUNTING CONVENTION
The Balance Sheet, the Profit and Loss Account and the Revenue Accounts are drawn up in accordance with the provisions of Section 11(1) of the Insurance Act, 1938 and to comply with the Generally Accepted Accounting Principles in India (Indian GAAP), including the Accounting Standards notified under the relevant provisions of the Companies Act, 2013. The Financial Statements also conform to the stipulation specified under the Insurance Regulatory and Development Authority of India (Preparation of Financial Statements and Auditors Report of Insurance Companies) Regulations, 2002. The said statements are prepared on historical cost convention and on accrual basis except as otherwise stated and conform to the statutory provisions and practices prevailing in the General Insurance Industry in India.
2. REINSURANCE BUSINESS
2.1 Use of Estimates
The preparation of financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the Balance Sheet date, revenue and expenses for the year ended and disclosure of contingent liabilities as of the Balance Sheet date. The estimates and assumptions used in accompanying financial statements are based upon Management''s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any revision to accounting estimates is recognized prospectively in current and future periods.
2.2 Reinsurance Revenues
Premium is accounted based on accounts rendered by ceding companies upon receipt of accounts. At the period end, estimates are made for accounts not yet received, based on available information and current trends. In respect of Insurance pool business, where GIC Re is one of the members of the Pool, only the Corporation''s share of revenue is recorded in the books of accounts.
2.3 Outstanding Claims
2.3.1 Estimated liability for outstanding claims in respect of Reinsurance business carried out in India is based on advice received as of different dates up to the date of finalization of claim figures in the books for submission of the data to the "Appointed Actuary" and wherever such advices are not received, on estimates based on available information, current trends, past underwriting experience of the management and actuarial estimation bases.
2.3.2 Provision for claims incurred but not reported (IBNR) is made as certified by the Appointed Actuary based on accepted actuarial methods.
2.4 Receivables
Provisions for Doubtful Debts for receivables are provided as under:
(i) Companies in liquidation
(ii) Companies having non-moving balances over a period of 3 years
(iii) Companies having moving balances, apart from various parameters, has primarily outstanding dues more than 3 years:
The Provision for doubtful debts does not include Domestic Pools and Structured Quota share treaties.
3. FOREIGN CURRENCY TRANSACTIONS
Revenue transactions in foreign currencies are converted at the daily rate of exchange on the day accounts are received and transactions are booked. The rates have been taken from Thomson Reuters India Pvt. Ltd.
3.1 Non-Monetary items including fixed assets and investments abroad are reported using the exchange rate applicable on the date of acquisition.
3.2 Monetary items such as receivables, payables and balances in bank accounts held in foreign currencies are converted using the closing rates of exchange at the balance sheet date.
3.3 The exchange gain/loss relating to revenue transaction, due to conversion of foreign currencies, is accounted for as revenue in respective revenue accounts. The common exchange gain/loss due to conversion are apportioned between Revenue Account and Profit and Loss Account in same proportion as stated in Significant Accounting Policy No. 5.
3.4 Foreign branch operations are considered as "non-integral business" as prescribed in AS-11 "The effects of changes in foreign exchange rates" (revised 2003) and translated accordingly.
4. RESERVE FOR UNEXPIRED RISKS (URR)
The URR provisions are made as under:
4.1 Non-Life Business
(i) For HO
Reserve for Unexpired Risk in respect of Marine Insurance (Hull) and Terrorism Risk Business (included in Fire and Engineering) is made at 100% of Net Premium, while for all other classes of insurance is made at 50% of Net Premium of trailing 12 months.
(ii) London, Dubai, and Malaysia Branch
Reserve for Unexpired Risk is provided as per local practice. Adjustment for excess or short provision in URR, as per IRDAI requirement, is accounted at Head Office.
4.2 Life Business
Reserve for Unexpired Risk is provided as determined by Appointed Actuary based on accepted Actuarial methods.
5. APPORTIONMENT OF INTEREST, DIVIDEND AND RENT
The income from interest, dividends and rent is apportioned between Profit and Loss Account and Revenue Accounts in the ratio of Shareholders'' Fund and Policyholders'' Fund respectively at the end of the period. The same is further apportioned amongst the Revenue accounts on the basis of the respective Policyholder''s fund at the end of the period.
Calculations of Shareholders'' fund and Policyholders''fund is based on IRDAI circular IRDA/F&A/CIR/CPM/010/01/2017. Shareholder''s fund consists of share capital plus all Reserves and Surplus (except Revaluation Reserve and fair value change account).
Policy holders fund for this purpose consists of estimated liability for outstanding claims including IBNR and IBNER, unexpired risk reserve (URR), Premium deficiency (if any), catastrophe reserve (if any) and Other Liabilities net of Other Assets (relating to policy holders) as per the guidelines of IRDAI.
6. FIXED ASSETS AND INTANGIBLES Fixed Assets
Fixed assets are stated at cost less depreciation. Cost of shares in Co-operative Societies/Companies for property rights acquired is included under the head ''Buildings'' under Fixed Assets.
Tangible Fixed Assets are stated at cost (including incidental expenses relating to acquisition and installation) less accumulated depreciation.
Intangible Assets
Intangible Fixed Assets representing software are recorded at its acquisition price and are amortized over their estimated useful life on a straight-line basis, commencing from the date the assets are available for use. The management has estimated the useful life for such software as five years. The useful life of the asset is reviewed by the management at each Balance Sheet date.
6.1 Depreciation on Fixed Assets
Depreciation is provided on straight line method based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 and residual value of the assets shall be ? 1/-.
Depreciation is provided on pro-rata basis on additions to fixed assets and on assets sold/discarded/demolished/destroyed during the year.
All assets individually costing up to ? 10,000 are fully depreciated in the period in which they are acquired.
6.2 Impairment of Assets
Fixed assets are reviewed for impairment at the end of the year whenever events or changes in circumstances warrant that the carrying amount of an asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to future net discounted cash flows expected to be generated by the asset. If such an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the recoverable amount of the asset.
7. EMPLOYEE BENEFITS Short term employee benefits
Employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits and are recognised in the period in which the employee renders the related service. All short-term employee benefits are accounted on undiscounted basis.
Long term employee benefits
These include Provident Fund, Gratuity, Leave Salary, Settlement and Pension. These are provided on the basis of actuarial valuation including actuarial gains/losses at balance sheet date and is recognised in the revenue account(s) and profit and loss account.
8. APPORTIONMENT OF EXPENSES
(i) Head office business
Operating expenses relating to insurance business are apportioned to the Revenue Accounts on the basis of Reinsurance Premium accepted during the period for which accounts are prepared, giving weightage of 75% for Marine business & 100 % for Fire, Miscellaneous & Life Reinsurance business.
(ii) Foreign business
Operating expenses relating to insurance business are also apportioned to the revenue accounts of branches on the same basis as mentioned in 8 (i) above.
(iii) Investment Expenses
Expenses relating to investment are apportioned between Revenue and Profit & Loss Account in the same proportion as stated in Significant Accounting Policy No.5. Interest, Dividend and Rent income is net of Investment expenses. Refer Note No 14.
9. INVESTMENTS
9.1 Prudential norms prescribed by Reserve Bank of India and the IRDAI are followed in regard to:
(i) Revenue recognition
(ii) Classification of assets into performing and non-performing and
(iii) Provisioning against performing and non-performing assets.
9.2 Purchases and Sales of shares are accounted for on the date of contracts whereas bonds, debentures and Government securities are accounted for on the date of settlement.
9.3 The cost of investments includes premium on acquisition, Securities Transaction Tax, Goods & Service tax and their related expenses.
9.4 Short term money market instruments such as Triparty Repo (TREPS), Commercial Paper and Treasury bill, which are discounted at the time of contract at the agreed rate are accounted at their discounted value.
9.5 Investment portfolio in respect of equity shares are segregated into actively traded and thinly traded as prescribed by the IRDAI (Preparation of Financial Statements and Auditor''s Report of Insurance Companies) Regulations, 2002.
9.6 All investments are reviewed for impairment at the end of the Period whenever events or changes in circumstances warrant that the carrying amount of an investment may not be recoverable. Basis the same, Impairment loss (i.e., other than temporary diminution in value) is recognized over and above specific assessment-based impairment as required separately as per the Significant Accounting Policies.
(a) Investment in actively traded equity shares are required to be valued as per the guidelines of IRDA issued vide circular ref. no. IRDA/F&I/INV/CIR/213/10/2013 dated 30th October 2013. The Corporation has chosen NSE as primary stock exchange and BSE as secondary exchange. Accordingly, the valuation of equity shares is made at Fair Value being the closing price of NSE. If such security is not listed/not traded on NSE on closing day, the closing price of BSE is considered.
(i) Provisioning for diminution in the value of equity shares/Preference shares
Impairment loss (i.e., other than temporary diminution in value) is recognized in respect of an equity/preference share which is actively traded in the stock exchange, and which has been held by the Corporation for a period of more than three years, provided, the current average book value is more than the Fair value as on the Balance Sheet date as well as persistently on previous three years from the Balance Sheet date.
Provision to the extent of difference between the re-measured fair value of the security/investment and its acquisition cost as reduced by any previous impairment loss will be recognized as expense in the Profit and Loss Account.
(b) Investment in units of mutual funds are valued at Fair value as per IRDAI guidelines 2003-04. Fair value for this purpose is the last quoted NAV as at the balance sheet date.
(c) In case of Equity Exchange Traded Funds (ETF) the investment is valued on the same basis as traded equity shares, in compliance with Para 3.1 of the IRDAI (Investment) Regulations, 2016 of August 2016.
Whereas Passive ETFs shall be valued at NAV as on the reporting date (IRDAI, Investment Regulations, 2016, Version - 02, 3.1)
9.7 a) Unrealized gains/losses (excluding impairment loss of other than temporary diminution in value) arising due to changes in
the fair value of listed equity shares and mutual fund units are taken under the head "Fair Value Change Account" and on realization reported in Profit and Loss Account.
b) Pending realization, the credit balance in the "Fair Value Change Account" is not available for distribution.
c) Provision is made for diminution in value of investments relating to thinly traded and unlisted shares equivalent to the amount of difference in average book cost and breakup value of the shares except in companies where demerger has taken place during the Financial Year and latest audited accounts are not available.
Breakup value is computed from the annual reports of companies not beyond 21 months irrespective of date of closure of annual accounts of the companies.
d) Provision is made for diminution in value of investment relating to units of venture capital funds equivalent to the amount of difference in book cost and the latest Net Asset Value (NAV).
9.8 I nvestments in Equity and Preference shares of companies whose latest available audited accounts are beyond 21 months irrespective of date of closure of annual accounts of the companies as on the date of balance sheet or whose net worth has been fully impaired (negative net worth) are valued as under:
|
a) |
Where shares are Actively Traded, and Book Value is less than : Market Value |
Fair Value Change Account at Market Value |
|
Diminution in value of such investments is recognized in the Balance Sheet at period end by writing down in the following cases: |
||
|
b) |
Where shares are Actively Traded, and Book Value is greater : than Market Value |
Written down to Market Value |
|
c) |
Thinly traded Equity Shares : |
Written down to nominal value of ? 1/- per company |
|
d) |
Preference Shares : |
At a value proportionate to the face value of the equity shares that bears to its market value and carrying cost is reduced by the diminution value. |
9.9 Investments in Subsidiary and Associate Companies are valued at cost as these are strategic investments. Provision for diminution in the value of these investments is made only if the decline is other than temporary.
9.10 Final Dividend is accounted for as income in the year of declaration and Interim dividend is accounted as income when the amount is received or credited.
9.11 Dividends/Interest on shares/debentures under objection/pending deliveries is accounted for on realization/payment.
9.12 Profit or Loss on sale of investments is apportioned between Profit and Loss Account and Revenue Accounts in same proportion as stated in Significant Accounting Policy No. 5.
Profit/Loss on sale of investments is computed at average book value of investments on the date of sale.
9.13 Expenses relating to safe custody, straight through processing and bank charges etc. on investments are charged to Profit and Loss Account and Revenue Accounts as stated in Significant Accounting Policy No.8.
9.14 Debt securities including Government securities and Redeemable Preference shares have been considered as ''held to maturity'' securities and have been measured at historical cost subject to amortization of premium paid over residual period. The call date has been considered as maturity date for amortization of Perpetual Bonds.
9.15 In case of repos transaction, difference between the selling and buying value is treated as interest income.
9.16 Investments are apportioned between Shareholders'' Fund & Policyholders'' Fund basis ratio calculated as per IRDAI circular IRDA/F&A/CIR/CPM/010/01/2017.
10. AMORTIZATION OF PREMIUM AND PROVISION FOR DOUBTFUL LOANS, INVESTMENTS & DEBTS
Amortization of premium, provision for doubtful loans, doubtful debts and diminution in the value of investments written off, are recognized in the Profit & Loss account. Securities purchased at a discount are booked at the discounted price.
11. COMPLIANCE WITH ACCOUNTING STANDARDS
The Corporation has complied with relevant accounting standards prescribed by ICAI to the extent applicable and IRDAI guidelines in preparation of its financial statements.
12. PREMIUM DEFICIENCY RESERVE (PDR)
Non-Life Business: Where Applicable, Premium deficiency is worked out separately for each segmental revenue level basis viz. fire, marine and miscellaneous. As per IRDAI circular no. IRDAI/Reg/7/119/2016 dated 7th April 2016, PDR is calculated by Non-Life Appointed Actuary.
Life Re business: As per IRDAI circular no. IRDAI/Reg/9/121/2016 dated 13th April 2016, PDR is calculated by Life Re Appointed Actuary.
13. DEFERRED COMMISSION
London BO has accounted for deferred commission as per the local laws. The same is accounted as Commission at Head Office, in compliance to IRDAI requirements.
14. TAXATION Current tax
The Company provides for income tax on the basis of taxable income for the current accounting period in accordance with the provisions of the Income Tax Act, 1961.
Current income tax expense comprises taxes on income from operations in India and in foreign jurisdiction. Income tax payable in India is determined in accordance with the provisions of the Income Tax Act 1961. Tax expense relating to foreign operations is determined in accordance with tax laws applicable in countries where such operations are domiciled.
Interest on Refund of income tax is accounted on realization basis.
Deferred tax
Deferred tax assets and liabilities are recognised on timing differences between the accounting income and the taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date.
Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future, however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date and appropriately adjusted to reflect the amount that is reasonably/virtually certain to be realised.
15. PROVISIONS AND CONTINGENCIES
A provision is recognised when an enterprise has 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 not discounted to their present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
Contingent Losses arising from claims other than insurance claims under policies, litigation, assessment, fines, penalties, etc. are recorded as a disclosure made when there is a possible obligation, but probably will not require an outflow of resources.
When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote or cannot be ascertained, no provision or disclosure is made.
Contingent asset is neither recognised nor disclosed in the financial statements.
16. CATASTROPHE RESERVE
Catastrophe Reserve is created by appropriation of 10 % of Operating profits of Revenue Accounts in respect of Fire, Marine and Miscellaneous business. This reserve forms part of Policyholders'' Funds and is reflected in Schedule 6-Reserves & Surplus, of the balance sheet as per IRDAI format.
Mar 31, 2022
I. SIGNIFICANT ACCOUNTING POLICIES:1. ACCOUNTING CONVENTION
The Balance Sheet, the Profit and Loss Account and the Revenue Accounts are drawn up in accordance with the provisions of Section 11(1) of the Insurance Act, 1938 and to comply with the Generally Accepted Accounting Principles in India (Indian GAAP), including the Accounting Standards notified under the relevant provisions of the Companies Act, 2013. The Financial Statements also conform to the stipulation specified under the Insurance Regulatory and Development Authority of India (Preparation of Financial Statements and Auditors Report of Insurance Companies) Regulations, 2002. The said statements are prepared on historical cost convention and on accrual basis except as otherwise stated and conform to the statutory provisions and practices prevailing in the General Insurance Industry in India.
2. REINSURANCE BUSINESS2.1 Use of Estimates
The preparation of financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the Balance Sheet date, revenue and expenses for the year ended and disclosure of contingent liabilities as of the Balance Sheet date. The estimates and assumptions used in accompanying financial statements are based upon Management''s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any revision to accounting estimates is recognized prospectively in current and future periods.
Premium is accounted based on accounts rendered by ceding companies upon receipt of accounts. At the year end, estimates are made for accounts not yet received, based on available information and current trends. In respect of Insurance pool business, where GIC Re is one of the members of the Pool, only the Corporation''s share of revenue is recorded in the books of accounts.
2.3.1 Estimated liability for outstanding claims in respect of Reinsurance business carried out in India is based on advice received as of different dates up to the date of finalization of claim figures in the books for submission of the data to the "Appointed Actuary" and wherever such advices are not received, on estimates based on available information, current trends, past underwriting experience of the management and actuarial estimation bases.
1.2.2 Provision for claims incurred but not reported (IBNR) is made as certified by the Appointed Actuary based on accepted actuarial methods.
Provisions for Doubtful Debts for receivables are provided as under:
(i) Companies in liquidation
(ii) Companies having non-moving balances over a period of 3 years
(iii) Companies having moving balances, apart from various parameters, has primarily outstanding dues more than 3 years:
The Provision for doubtful debts does not include Domestic Pools and Structured Quota share treaties.
3. FOREIGN CURRENCY TRANSACTIONS
Revenue transactions in foreign currencies are converted at the daily rate of exchange on the day accounts are received and transactions are booked. The rates have been taken from Thomson Reuters India Pvt. Ltd.
3.1 Non-Monetary items including fixed assets and investments abroad are reported using the exchange rate applicable on the date of acquisition.
3.2 Monetary items such as receivables, payables and balances in bank accounts held in foreign currencies are converted using the closing rates of exchange at the balance sheet date.
3.3 The exchange gain/ loss relating to revenue transaction, due to conversion of foreign currencies, is accounted for as revenue in respective revenue accounts. The common exchange gain/loss due to conversion are apportioned between Revenue Account and Profit and Loss Account in same proportion as stated in Significant Accounting Policy No. 5.
3.4 Foreign branch operations are considered as "non-integral business" as prescribed in AS11 "The effects of changes in foreign exchange rates" (revised 2003) and translated accordingly.
4. RESERVE FOR UNEXPIRED RISKS (URR)
The URR provisions are made as under:
4.1 Non-Life Business:(i) For HO:
Reserve for Unexpired Risk in respect of Marine Insurance (Hull) and Terrorism Risk Business (included in Fire and Engineering) is made at 100% of Net Premium, while for all other classes of insurance is made at 50% of Net Premium of the period for which accounts are prepared.
(ii) London, Dubai, and Malaysia Branch:
Reserve for Unexpired Risk is provided as per local practice. Adjustment for excess or short provision in URR, as per IRDAI requirement, is accounted at Head Office.
Reserve for Unexpired Risk is provided as determined by Appointed Actuary based on accepted Actuarial methods.
5. APPORTIONMENT OF INTEREST, DIVIDEND AND RENT
As per the requirement of IRDAI, the income from interest, dividends and rent is apportioned between Profit and Loss Account and Revenue Accounts in the ratio of Shareholders'' Fund and Policyholders'' Fund respectively at the end of the year. The same is further apportioned amongst the Revenue accounts on the basis of the respective Policyholder''s fund at the end of the year. Shareholder''s fund consists of share capital and free reserves. Policyholder''s fund consists of provision for outstanding claims and reserves for unexpired risks and premium deficiency reserve.
Fixed assets are stated at cost less depreciation. Cost of shares in Co-operative Societies/Companies for property rights acquired is included under the head ''Buildings'' under Fixed Assets.
Tangible Fixed Assets are stated at cost (including incidental expenses relating to acquisition and installation) less accumulated depreciation.
Intangible Fixed Assets representing software are recorded at its acquisition price and are amortized over their estimated useful life on a straight-line basis, commencing from the date the assets are available for use. The management has estimated the useful life for such software as five years. The useful life of the asset is reviewed by the management at each Balance Sheet date.
Depreciation is provided on straight line method based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 and residual value of the assets shall be ''1/-.
Depreciation is provided on pro-rata basis on additions to fixed assets and on assets sold /discarded /demolished / destroyed during the year.
Fixed assets are reviewed for impairment at the end of the year whenever events or changes in circumstances warrant that the carrying amount of an asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to future net discounted cash flows expected to be generated by the asset. If such an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the recoverable amount of the asset.
7. RETIREMENT BENEFITS TO EMPLOYEES
Liabilities on account of retirement benefits to the employees such as pension, gratuity and leave encashment are provided for on accrual basis, based on actuarial valuation and in compliance with Accounting Standard 15.
8. APPORTIONMENT OF EXPENSES(i) Head office business:
Operating expenses relating to insurance business are apportioned to the Revenue Accounts on the basis of Reinsurance Premium accepted during the period for which accounts are prepared, giving weightage of 75% for Marine business & 100% for Fire, Miscellaneous & Life Reinsurance business.
(ii) Foreign business:
Operating expenses relating to insurance business are also apportioned to the revenue accounts of branches on the same basis as mentioned in 8 (i) above.
(iii) Investment Expenses:
Expenses relating to investment are apportioned between Revenue and Profit & Loss Account in the same proportion as stated in Significant Accounting Policy No.5.Interest, Dividend and Rent income is net of Investment expenses. Refer Note No 15
9.1 Prudential norms prescribed by Reserve Bank of India and the IRDAI are followed in regard to:
(i) Revenue recognition
(ii) Classification of assets into performing and non-performing and
(iii) Provisioning against performing and non-performing assets.
9.2 Purchases and Sales of shares are accounted for on the date of contracts whereas bonds, debentures and Government securities are accounted for on the date of settlement.
9.3 The cost of investments includes premium on acquisition, Securities Transaction Tax, Goods & Service tax and their related expenses.
9.4 Short term money market instruments such as Triparty Repo (TREPS), Commercial Paper and Treasury bill, which are discounted at the time of contract at the agreed rate are accounted at their discounted value.
9.5 Investment portfolio in respect of equity shares are segregated into actively traded and thinly traded as prescribed by the IRDAI (Preparation of Financial Statements and Auditor''s Report of Insurance Companies) Regulations, 2002.
9.6 (a) Investment in actively traded equity shares are required to be valued as per the guidelines of IRDA issued vide circular ref.
no. IRDA/F&I/INV/CIR/213/10/2013 dated October 30, 2013. The Corporation has chosen NSE as primary stock exchange and BSE as secondary exchange. Accordingly, the valuation of equity shares is made at Fair Value being the closing price of NSE. If such security is not listed / not traded on NSE on closing day, the closing price of BSE is considered.
(i) Provisioning for diminution in the value of equity shares/Preference shares
Impairment loss (i.e., other than temporary diminution in value) is recognized in respect of an equity/preference share which is actively traded in the stock exchange, and which has been held by the Corporation for a period of more than three years, provided, the current average book value is more than the Fair value as on the Balance Sheet date as well as persistently on previous three years from the Balance Sheet date.
Provision to the extent of difference between the re-measured fair value of the security/investment and its acquisition cost as reduced by any previous impairment loss will be recognized as expense in the Profit and Loss Account.
(b) Investment in units of mutual funds are valued at Fair value as per IRDAI guidelines 2003-04. Fair value for this purpose is the last quoted NAV as at the balance sheet date.
(c) In case of Equity Exchange Traded Funds (ETF) the investment is valued on the same basis as traded equity shares, in compliance with Para 3.1 of the IRDAI (Investment) Regulations, 2016 of August 2016.
Whereas Passive ETFs shall be valued at NAV as on the reporting date (IRDAI, Investment Regulations, 2016, Version - 02, 3.1)
9.7 a) Unrealized gains/losses (excluding impairment loss of other than temporary diminution in value) arising due to changes in
the fair value of listed equity shares and mutual fund units are taken under the head "Fair Value Change Account" and on realization reported in Profit and Loss Account.
b) Pending realization, the credit balance in the "Fair Value Change Account" is not available for distribution.
c) Provision is made for diminution in value of investments relating to thinly traded and unlisted shares equivalent to the amount of difference in average book cost and breakup value of the shares except in companies where demerger has taken place during the Financial Year and latest audited accounts are not available.
Breakup value is computed from the annual reports of companies not beyond 21 months irrespective of date of closure of annual accounts of the companies.
d) Provision is made for diminution in value of investment relating to units of venture capital funds equivalent to the amount of difference in book cost and the latest Net Asset Value (NAV).
9.8 Investments in Equity and Preference shares of companies whose latest available audited accounts are beyond 21 months irrespective of date of closure of annual accounts of the companies as on the date of balance sheet or whose net worth has been fully impaired (negative net worth) are valued as under:
|
a) |
Where shares are Actively Traded, and Book Value is less than : Market Value |
Fair Value Change Account at Market Value |
|
Diminution in value of such investments is recognized in the Balance Sheet as at 31st March by writing down in the following cases: |
||
|
b) |
Where shares are Actively Traded, and Book Value is greater : than Market Value |
Written down to Market Value |
|
c) |
Thinly traded Equity Shares : |
Written down to nominal value of '' 1/- per company |
|
d) |
Preference Shares : |
At a value proportionate to the face value of the equity shares that bears to its market value and carrying cost is reduced by the diminution value. |
9.9 Investments in Subsidiary and Associate Companies are valued at cost as these are strategic investments. Provision for diminution in the value of these investments is made only if the decline is other than temporary.
9.10 Final Dividend is accounted for as income in the year of declaration and Interim dividend is accounted as income when the amount is received or credited up to 31st March.
9.11 Dividends/Interest on shares/debentures under objection/pending deliveries is accounted for on realization/payment.
9.12 Profit or Loss on sale of investments is apportioned between Profit and Loss Account and Revenue Accounts in the ratio of Shareholders'' Fund and Policyholders'' Fund respectively at the end of the year. The same are further apportioned amongst the revenue accounts on the basis of the respective Policyholders'' Fund at the end of the year. Shareholders'' fund consists of Share Capital and Free Reserves. Policyholders'' fund consists of provisions for outstanding claims and reserves for unexpired risks.
Profit/Loss on sale of investments is computed at average book value of investments on the date of sale.
9.13 Expenses relating to safe custody, straight through processing and bank charges etc. on investments are charged to Profit and Loss Account and Revenue Accounts as stated in Significant Accounting Policy No.8.
9.14 Debt securities including Government securities and Redeemable Preference shares have been considered as ''held to maturity'' securities and have been measured at historical cost subject to amortization of premium paid over residual period. The call date has been considered as maturity date for amortization of Perpetual Bonds.
9.15 In case of repos transaction, difference between the selling and buying value is treated as interest income.
9.16 Investments are apportioned between Shareholders'' Fund & Policyholders'' Fund in the ratio of balance available in the respective funds at the end of the year.
10. AMORTIZATION OF PREMIUM AND PROVISION FOR DOUBTFUL LOANS, INVESTMENTS&DEBTS
Amortization of premium, provision for doubtful loans, doubtful debts and diminution in the value of investments written off, are recognized in the Profit & Loss account. Securities purchased at a discount are booked at the discounted price.
11. COMPLIANCE WITH ACCOUNTING STANDARDS
The Corporation has complied with relevant accounting standards prescribed by ICAI to the extent applicable and IRDAI guidelines in preparation of its financial statements.
12. PREMIUM DEFICIENCY RESERVE (PDR)
Non-Life Business: Where Applicable, Premium deficiency is worked out separately for each segmental revenue level basis viz. fire, marine and miscellaneous. As per IRDAI circular no. IRDAI /Reg/7/119/2016 dated 7th April, 2016, PDR is calculated by Non-Life Appointed Actuary.
Life Re business: As per IRDAI circular no. IRDAI /Reg/9/121/2016 dated 13th April, 2016, PDR is calculated by Life Re Appointed Actuary.
London BO has accounted for deferred commission as per the local laws. The same is accounted as Commission at Head Office, in compliance to IRDAI requirements.
II. NOTES FORMING PART OF THE ACCOUNTS:
The Insurance Regulatory and Development Authority of India (Preparation of Financial Statements and Auditors'' Report of Insurance Companies) Regulations, 2002 have been adopted for presentation of the accounts.
1. (a) Out of Investment held in Shares, Debentures & Venture Capital Fund of the value of '' 596,677,085 thousand (Previous Year
'' 541,064,353 thousand) no confirmations or other documentary evidence was available regarding actual custody for
(i) Investments in debenture of 16 Scrip of the value as per Books amounting '' 6,589 thousand (Previous year '' 6,589 thousand), (The Corporation has fully provided for these amounts in earlier years)
(ii) Investments in Preference shares of five Scrip of the value as per Books amounting '' 0.004 thousand (Previous year ? 0.004 thousand) (Four Scrip Written down to?, 1/- and One Script Written Down to Zero in earlier years)
(b) The Investments actually held by the Custodian of the Corporation is in excess of the number held as per the books of the Corporation.
(i) A Bonds having value as per Books of Accounts amounting to '' 1,300 thousand (previous year '' 1,300 thousand)
(ii) One Preference Shares having value as per Books of Accounts of '' 0.001 thousand (previous year '' 0.001 thousand) (One Scrip Written down to '' 1 in the Previous Year)
(c) During the year, Excess Dividends of '' 1,413 thousand (Previous Year '' 6986 thousand), Excess Profits '' 45 thousand (Previous Year '' 1 thousand) and Excess Interests '' 15 thousand (Previous Year '' 1 thousand) were transferred to Dividend, Profit and Interest Income of the Corporation respectively. The Excess Dividend balance as on 31st March, 2022, amounts to '' 12,77 thousand (Previous Year '' 2,987 thousand). The interest received in the excess Bonds / Debentures and profit on excess equity / debentures as on 31st March, 2022 amounts to '' NIL (Previous Year '' 15 thousand) & '' NIL (Previous Year '' 110 thousand). This excess dividend is shown as Liability.
2. (a) Provision includes provision for standard assets @ 0.40% as per IRDAI-Prudential norms for Income recognition, Asset
Classification and provisioning and other related methods in respect of debt portfolio amounting to '' 538,671 thousand (Previous Year '' 497,846 thousand).
(b) During the year, the Corporation has not undertaken under CDR (Corporate Debt Restructuring) System, any case of restructuring of corporate debt/loan. (Previous Year NIL)
(c) The Corporation has considered latest available NAV for the provisioning of units of venture capital. The details of latest available NAV considered are as follows:
|
NAV as on |
No. of Venture Capital Funds |
|
31st December, 2021 |
2 |
|
30th September, 2021 |
1 |
|
30th June, 2021 |
1 |
|
31st March, 2021 |
10 |
|
Nil NAV |
11 |
|
Total |
25 |
3. For valuation of actively traded equity shares, March 31,2022, has been considered as closing day.
4. During the year, the corporation has waived / written off debts, loans, and interest as follows:
|
Waver during the year 2021-22 & 2020-21 |
('' in thousand) |
||||
|
Financial Year 2021-22 |
Financial Year 2020-21 |
||||
|
rdrutuidD No. of cases |
Write off |
Waiver |
No. of cases |
Write off |
Waiver |
|
Compound Interest/ Late Dues 6 |
925,938.75 |
5.08 |
7 |
0 |
8.91 |
|
Simple Interest / Interest on Delayed 3 |
490,380.43 |
0 |
0 |
0 |
0 |
|
payment of Principal |
|||||
|
Total 9 |
1,416,319.18 |
5.08 |
7 |
0 |
8.91 |
|
Debts / Equity written off during year 2021-22 & 2020-21 |
|||||
|
('' in thousand) |
|||||
|
Financial Year 2021-22 |
Financial Year 2020-21 |
||||
|
No of Companies Amount written down/written off No of Companies Amount written down/written off |
|||||
|
3 1,319,006 |
2 |
0.761 |
|||
Diminution in the value of Investments written off during the year 2021-22 & 2020-21
|
('' in thousand) |
|||
|
Financial Year 2021-22 |
Financial Year 2020-21 |
||
|
No of Companies |
Amount written down/written off |
No of Companies |
Amount written down/written off |
|
4 |
15,741 |
28 |
340,249 |
5. There is no difference between title of ownership in respect of CGS/SGS/ bonds/debentures etc. available in physical/demat format vis-a-vis shown in books of accounts except for the differences pointed out in Point No 1.
6. As at 31st March, 2022, all the assets of the Corporation in and outside India are free from encumbrances except for:
(a) The Government of India Stock, 7.95% 2032 for ? 40,000 thousand, 8.24% 2027 for ^1,71,000 thousand, 8.28% 2027 for '' 17,500 thousand, 8.33% 2026 for '' 20,000 thousand, 8.60% 2028 for '' 2,000 thousand, 6.19% 2034 for '' 50,000 thousand, 6.68% 2031 for '' 50,000 thousand, 6.22% 2035 for '' 50,000 thousand, 6.64% 2035 for '' 50,000 thousand, 6.67% 2035 for '' 30,000 thousand, total amounting to '' 480,500 thousand (Previous year total amounting to '' 430,500 thousand) and cash deposit of '' 8,600 thousand (Previous year '' 8,600 thousand) with Clearing Corporation of India Limited as deposit towards Settlement Guarantee Fund.
Out of the Cash Deposit, '' 1,500 thousand is maintained as Cash collateral Deposit towards Triparty Repo Default fund (Previous year total amounting to '' 1,500 thousand) and '' 800 thousand towards Securities Default fund (Previous year total amounting to '' 800 thousand).
(b) (i) In view of margin requirements as recommended by SEBI vide Circular dated 19/03/2008, Corporation has assigned a
Government of India security 6.30% 2023 amounting to '' 3,00,000 thousand (Previous year Fixed Deposits amounting to '' 200,000 thousand) as Pledge towards Margins in cash segments. This Pledge covers margin obligations arising out of trades done in NSE & BSE.
(ii) Margin FDR of '' 525 thousand (Previous year '' 500 thousand) against Bank Guarantee to Municipal Corporation of Greater Mumbai (MCGM) to undertake development activities at plot bearing CTS.NO.1606OF Fort Division measuring 1844.40 sq. metre.
(c) As per SUSEP Resolution CNSP No. 330 of 2015, Article 13, foreign reinsurers shall have account in foreign currency in BRAZIL with SUSEP in bank authorized to operate with exchange in the country with minimum balance in cash for guarantee of its operations in the country in the amount of US$ 5,000 thousand or comparable in another foreign currency of free translation for reinsurers acting in the field of damages and lives.
Further as per SUSEP Circular No. 527 of February 2016, Article 4 (I) the registration of the admitted reinsurer may be granted after the submission and analysis of evidence of foreign currency account, linked to SUSEP, in a bank authorized to deal in a foreign exchange within the country with a minimum balance of US$ 5,000 thousand or equivalent in another free convertible foreign currency for reinsurers operating in all lines.
Accordingly, GIC Re has opened a bank account in BNP Paribas Brazil and deposited an amount of US$ 5,000 thousand (Previous year US$ 5,000 thousand)
(d) Margin FDR held by Bank for issue as LC/BG of '' 77,542,036 thousand (Previous year '' 61,052,250 thousand).
7. The Commitments made and outstanding for Loans, Investments and Fixed Assets (if any) as at 31st March, 2022 are '' 248,432 thousand (Previous year '' 964,544 thousand).
8. Value of contracts in relation to investments, for
a) Purchases, where deliveries are pending '' NIL (Previous year'' NIL).
b) Sales, where payments are overdue '' NIL (Previous year '' NIL).
9. The Book Value of Investments valued on Fair Value basis is: Equity '' 113,598,241 thousand (Previous year '' 117,453,945 thousand) & Mutual Funds '' 4,199,999 thousand (Previous year '' 13,127,179 thousand). For some Actively traded shares falling under "Fair value Depreciation" category, an amount of '' 15,079,948 thousand (Previous Year NIL) is considered under "Provision for Diminution of Listed equity shares" category.
10. The basis of amortization of debt securities is as stated in Significant Accounting Policy No.9.14.
11. The Corporation does not hold any properties for investment purposes.
12. Provisions regarding unrealized gains/losses have been stated in the Significant Accounting Policy No. 9.7.
13. '' 1,088 thousand (Previous Year '' 1,088 thousand) is placed in a Liquidation fund for GIC AMC. This is to be retained till 31.12.2022.
14. Interest, Dividend and Rent income is net of Investment expenses of '' 62,537 thousand (previous year '' 49,361 thousand).
15. A Provision has been made for '' 16,036,240 thousand (Previous year '' 17,809,259 thousand towards Non-Performing Assets (Other than Standard Assets). Therefore, the incremental provision (reduction) accounted during the year is '' 1,773,018 thousand (Previous year incremental provision (addition) '' 2,777,362 thousand).
16. During the year the Corporation has made changes is significant accounting policies with respect to impairment loss (i.e., other than temporary diminution in value) in accordance with the applicable provisioning of diminution in value of equity as per clause 2.8 of IRDAI Master Circular on Preparation of Financial Statements General Insurance Business, October 2012 resulting into valuation of equity shares at market price on balance sheet date.
Consequently, a sum of '' 15,079,949 thousand has been recognized as expense in the profit and loss account resulting in reduction of profit to the extent of '' 15,079,949 thousand and enhancement of fair value change account by the same amount.
Apportionment of '' 15,079,949 thousand between profit & loss and revenue account has not been done in absence of the required field under Revenue Account as per format advised by IRDAI. Out of '' 15,079,949 thousand, an amount of '' 11,611,236 thousand pertain to Revenue account (policyholder''s fund) and '' 3,468,713 thousand pertains to Profit & loss account (Shareholder''s fund).
17 Provisioning for Piramal Capital & Housing Finance Ltd:
The Corporation has investments in Secured Debentures of Piramal Capital & Housing Finance Ltd. Ltd. amounting to '' 389,109 thousand as on 31st March, 2022, received on account of re-structuring of Debentures of Dewan Housing Finance Ltd. The Corporation has made a 100% provision on these Debentures. The above provision, in the opinion of the management is considered appropriate and is made as per the Prudential Norms for Income Recognition, Asset Classification and Provisioning issued by RBI and IRDAI.
Reinsurance
18. Underwriting of Direct business stopped from 1st April, 2001. Figures included in Revenue Accounts Pertaining to direct business (if any) are on account of run-off business. Run-off liabilities are sufficiently provided for based on advice received.
19. Structured solution cover:
The Structured Solutions Reinsurance Contract covering risk from various class of business was in place for the years from June 2014 to May 2020 as per agreed terms and conditions. Subsequent to notice of cancellation as at 31.5.2021, the contract has been cancelled during the year. Consequently, complying the condition of the contract and after having obtained due confirmation from Reinsurer the Corporation has booked profit commission of '' 12,409,926 thousand (including prior period profit commission of '' 729,910 thousand) at the end of third quarter and released the reinsurers of remaining Outstanding Claims liabilities to the extent of '' 5,294,389 thousand.
20. Premiums, less reinsurance, written from business during the financial year 2021-22 in India are: '' 246,453,546 thousand (Previous year '' 269,061,269 thousand) and outside India are '' 141,536,746 thousand (Previous year '' 152,913,720 thousand).
21. Incremental Provision in URR, for 31.3.2022, in respect of long-term Facultative Policies. -
Whilst on above, for long-term Facultative policies, where the Premium income is spread over a period covering more than 2 accounting years, URR has been provided using 1/365 days basis.
|
Arising out of the above development additional URR provided for is as under: |
||
|
Department |
No of policies |
('' In thousand) |
|
Domestic |
37 |
356,616 |
|
Foreign including aviation |
27 |
55,260 |
|
Total |
64 |
411,876 |
|
Previous figure as on 31.03.2021 |
||
|
Department |
No of policies |
('' In thousand) |
|
Domestic |
22 |
338,005 |
|
Foreign including aviation |
58 |
34,054 |
|
Total |
80 |
372,059 |
22. Claims less reinsurance during the financial year 2021-22 paid in India are:
'' 210,503,658 thousand (Previous year '' 255,584,313 thousand) and outside India are '' 100,219,684 thousand (Previous year '' 97,540,209 thousand).
23. Segment Reporting as per Accounting Standard -17 "Segment Reporting" of ICAI, has been complied with as required by IRDAI (Preparation of Financial Statements and Auditor''s Report of Insurance Companies) Regulations, 2002.
Mar 31, 2019
SIGNIFICANT ACCOUNTING POLICIES AND NOTES FORMING PART OF THE ACCOUNTS
I. SIGNIFICANT ACCOUNTING POLICIES:
1. ACCOUNTING CONVENTION
The Balance Sheet, the Profit and Loss Account and the Revenue Accounts are drawn up in accordance with the provisions of Section 11(1) of the Insurance Act, 1938 and to comply with the Generally Accepted Accounting Principles in India (Indian GAAP), including the Accounting Standards notified under the relevant provisions of the Companies Act, 2013. The financial statements also conform to the stipulation specified under the Insurance Regulatory and Development Authority of India (Preparation of Financial Statements and Auditors Report of Insurance Companies) Regulations, 2002. The said statements are prepared on historical cost convention and on accrual basis except as otherwise stated and conform to the statutory provisions and practices prevailing in the General Insurance Industry in India.
2. REINSURANCE BUSINESS
2.1 Use of Estimates
The preparation of financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the Balance Sheet date, revenue and expenses for the year ended and disclosure of contingent liabilities as of the Balance Sheet date. The estimates and assumptions used in accompanying financial statements are based upon management''s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any revision to accounting estimates is recognized prospectively in current and future periods.
2.2 Reinsurance Revenues
Premium is accounted based on accounts rendered by ceding companies upon receipt of accounts. At the year end, estimates are made for accounts not yet received, based on available information and current trends. In respect of Insurance pool business, where GIC Re is one of the members of the Pool, only the Corporation''s share of revenue is recorded in the books of accounts.
2.3 Outstanding Claims
2.3.1 Estimated liability for outstanding claims in respect of Reinsurance business carried out in India is based on advices received as of different dates up to the date of finalization of claim figures in the books for submission of the data to the "Appointed Actuary" and wherever such advices are not received, on estimates based on available information, current trends, past underwriting experience of the management and actuarial estimation bases.
2.3.2 Provision for claims incurred but not reported (IBNR) is made as certified by the appointed actuary based on accepted actuarial methods.
2.4 Receivables
Provisions for doubtful debts for receivables are provided as under
(i) Companies in liquidation.
(ii) Companies having non-moving balances over a period of three years.
(iii) Non-realizable balances of companies having moving balances and outstanding for more than four years.
3. FOREIGN CURRENCY TRANSACTIONS
Revenue transactions in foreign currencies are converted at the daily rate of exchange on the day accounts are received and transactions are booked. The rates have been taken from Thomson Reuters India Pvt. Ltd.
3.1 Non-Monetary items including fixed assets and investments abroad are reported using the exchange rate applicable on the date of acquisition.
3.2 Monetary items such as receivables, payables and balances in bank accounts held in foreign currencies are converted using the closing rates of exchange at the balance sheet date.
3.3 The exchange gain/ loss relating to revenue transaction, due to conversion of foreign currencies, is accounted for as revenue in respective revenue accounts. The common exchange gain/loss due to conversion are apportioned between Revenue Account and Profit and Loss Account in same proportion as stated in Significant Accounting Policy No. 5.
3.4 Foreign branch operations are considered as"non-integral business" as prescribed in AS11 "The effects of changes in foreign exchange rates" (revised 2003) and translated accordingly.
4. RESERVE FOR UNEXPIRED RISKS (URR)
The URR provisions are made as under: 4.1 Non-Life Business:
(i) For HO:
Reserve for Unexpired Risk in respect of Marine Insurance (Hull) and Terrorism Risk Business (included in Fire and Engineering) is made at 100% of Net Premium, while for all other classes of insurance is made at 50% of Net Premium of the period for which accounts are prepared.
(ii) London, Dubai and Malaysia Branch:
Reserve for Unexpired Risk is provided as per local practice. Adjustment for excess or short provision in URR, as per IRDAI requirement, is accounted at Head Office. Till previous year Malaysia branch was calculating Unexpired Risk Reserve as per IRDAI requirement. This year Malaysia branch has changed the method of calculation and provided as per Local practice.
4.2 Life Business:
Reserve for Unexpired Risk is provided as determined by Appointed Actuary based on accepted Actuarial methods.
5. APPORTIONMENT OF INTEREST, DIVIDENDS AND RENTS
As per the requirement of IRDAI, the income from interest, dividends and rent is apportioned between Profit and Loss Account and Revenue Accounts in the ratio of Shareholders'' Fund and Policyholders'' Fund respectively at the end of the year. The same is further apportioned amongst the revenue accounts on the basis of the respective Policyholder''s fund at the end of the year. Shareholder''s fund consists of share capital and free reserves. Policyholder''s fund consists of provision for outstanding claims and reserves for unexpired risks.
6. FIXED ASSETS
Fixed assets are stated at cost less depreciation. Cost of shares in Co-operative Societies/Companies for property rights acquired is included under the head ''Buildings'' under Fixed Assets.
Tangible Fixed Assets are stated at cost (including incidental expenses relating to acquisition and installation) less accumulated depreciation.
Intangible Assets:
Intangible Fixed Assets representing software are recorded at its acquisition price and are amortized over their estimated useful life on a straight-line basis, commencing from the date the assets are available for use. The management has estimated the useful life for such software as five years. The useful life of the asset is reviewed by the management at each Balance Sheet date.
6.1 Depreciation
Depreciation is provided on straight line method based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 and residual value of the assets shall be Rs. 1/-.
Depreciation is provided on pro-rata basis on additions to fixed assets and on assets sold / discarded / demolished / destroyed during the year.
6.2 Impairment of Assets
Fixed assets are reviewed for impairment at the end of the year whenever events or changes in circumstances warrant that the carrying amount of an asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to future net discounted cash flows expected to be generated by the asset. If such an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the recoverable amount of the asset.
7. RETIREMENT BENEFITS TO EMPLOYEES
Liabilities on account of retirement benefits to the employees such as pension, gratuity and leave encashment are provided for on accrual basis, based on actuarial valuation and in compliance with Accounting Standard 15.
8. APPORTIONMENT OF EXPENSES
(i) Head office business:
Operating expenses relating to insurance business are apportioned to the Revenue Accounts on the basis of Reinsurance Premium accepted during the period for which accounts are prepared, giving weightage of 75% for Marine business & 100 % for Fire, Miscellaneous & Life Reinsurance business.
(ii) Foreign business:
Operating expenses relating to insurance business are also apportioned to the revenue accounts of branches on the same basis as mentioned in 8 (i) above.
(iii) Investment Expenses:
Expenses relating to investment are apportioned between Revenue and Profit & Loss Account in the same proportion as stated in Significant Accounting Policy No.5. Interest, Dividend and Rent income is net of Investment expenses. Refer Note No 15
9. INVESTMENTS
9.1 Prudential norms prescribed by Reserve Bank of India and the IRDAI are followed in regard to:
(i) Revenue recognition
(ii) Classification of assets into performing and non-performing and
(iii) Provisioning against performing and non-performing assets.
9.2 Purchases and Sales of shares are accounted for on the date of contracts whereas bonds, debentures and Government securities are accounted for on the date of settlement.
9.3 The cost of investments includes premium on acquisition, Securities Transaction Tax, Goods & Service tax and their related expenses.
9.4 Short term money market instruments such as Triparty Repo (TREPS), Commercial Paper and Treasury bill, which are discounted at the time of contract at the agreed rate are accounted at their discounted value.
9.5 Investment portfolio in respect of equity shares are segregated into actively traded and thinly traded as prescribed by the IRDAI (Preparation of Financial Statements and Auditor''s Report of Insurance Companies) Regulations, 2002.
9.6 (a) Investment in actively traded equity shares are required to be valued as per the guidelines of IRDA issued vide circular ref. no. IRDA/F&I/INV/CIR/213/10/ 2013 dated October 30, 2013. The corporation has chosen NSE as primary stock exchange and BSE as secondary exchange. Accordingly, the valuation of equity shares is made on the closing price of NSE. If such security is not listed / not traded on NSE on closing day, the closing price of BSE is considered.
(b) Investment in units of mutual funds are valued at Fair value as per IRDAI guidelines 2003-04. Fair value for this purpose is the last quoted NAV in the month of March.
(c) In case of Equity Exchange Traded Funds (ETF) the investment is valued on the same basis as traded equity shares, in compliance with Para 3.1 of the IRDAI (Investment) Regulations, 2016 of August 2016.
Whereas Passive ETFs shall be valued at NAV as on the reporting date (IRDAI, Investment Regulations, 2016, Version - 02, 3.1)
9.7 a) Unrealized gains/losses arising due to changes in the fair value of listed equity shares and mutual fund units are taken under the head "Fair Value Change Account" and on realization reported in Profit and Loss Account.
b) Pending realization, the credit balance in the "Fair Value Change Account" is not available for distribution.
c) Provision is made for diminution in value of investments relating to thinly traded and unlisted shares equivalent to the amount of difference in average book cost and breakup value of the shares except in companies where demerger has taken place during the Financial Year and latest audited accounts are not available.
Breakup value is computed from the annual reports of companies not beyond 21 months irrespective of date of closure of annual accounts of the companies.
d) Provision is made for diminution in value of investment relating to units of venture capital funds equivalent to the amount of difference in book cost and the latest Net Asset Value (NAV).
9.8 Investments in Equity and Preference shares of companies whose latest available audited accounts are beyond 21 months irrespective of date of closure of annual accounts of the companies as on the date of balance sheet or whose net worth has been fully impaired (negative net worth) are valued as under:
|
a) |
Where shares are Actively Traded and Book Value is less than Market Value |
: Fair Value Change Account at Market Value |
Diminution in value of investments is recognized in the following cases:
|
b) |
Where shares are : Actively Traded and Book Value is greater than Market Value |
: Written down to Market Value |
|
c) |
Thinly traded : Equity Shares |
: Written down to nominal value of Rs. 1/-per company |
|
d) |
Preference Shares : |
: At a value proportionate to the face value of the equity shares that bears to its market value and carrying cost is reduced by the diminution value. |
9.9 Investments in Subsidiary and Associate Companies are valued at cost as these are strategic investments. Provision for diminution in the value of these investments is made only if the decline is other than temporary.
9.10 Final Dividend is accounted for as income in the year of declaration and Interim dividend is accounted as income when the amount is received or credited up to 31st March.
9.11 Dividends/Interest on shares/debentures under objection/pending deliveries is accounted for on realization/payment.
9.12 Profit or Loss on sale of investments is apportioned between Profit and Loss Account and Revenue Accounts in the ratio of Shareholders'' Fund and Policyholders'' Fund respectively at the end of the year. The same are further apportioned amongst the revenue accounts on the basis of the respective Policyholders'' Fund at the end of the year. Shareholders'' fund consists of Share Capital and Free Reserves. Policyholders'' fund consists of provisions for outstanding claims and reserves for unexpired risks.
Profit/Loss on sale of investments is computed at average book value of investments on the date of sale.
9.13 Expenses relating to safe custody, straight through processing and bank charges etc. on investments are charged to Profit and Loss Account and Revenue Accounts as stated in Significant Accounting Policy No.8.
9.14 Debt securities including Government securities and Redeemable Preference shares have been considered as ''held to maturity'' securities and have been measured at historical cost subject to amortization of premium paid over residual period. The call date has been considered as maturity date for amortization of Perpetual Bonds.
9.15 In case of repos transaction, difference between the selling and buying value is treated as interest income.
9.16 Income received from the Fixed Maturity Mutual fund (Dividend Option) is booked as dividend.
9.17 Investments are apportioned between Shareholders'' Fund & Policyholders'' Fund in the ratio of balance available in the respective funds at the end of the year.
10. AMORTIZATION OF PREMIUM AND PROVISION FOR DOUBTFUL LOANS, INVESTMENTS & DEBTS
Amortization of premium, provision for doubtful loans, doubtful debts and diminution in the value of investments written off, are recognized in the profit & loss account. Securities purchased at a discount are booked at the discounted price.
11. COMPLIANCE WITH ACCOUNTING STANDARDS
The Corporation has complied with relevant accounting standards prescribed by ICAI to the extent applicable and IRDAI guidelines in preparation of its financial statements.
12. PREMIUM DEFICIENCY RESERVE (PDR)
Non-Life Business: Premium deficiency is worked out separately for each segmental revenue level basis viz. fire, marine and miscellaneous. As per IRDAI circular no. IRDAI /Reg/7/119/2016 dated 07 April 2016, PDR is calculated by Non-Life Appointed Actuary.
Life Re business: As per IRDAI circular no. IRDAI /Reg/ 7/121/2016 dated 13 April 2016, PDR is calculated by Life Re Appointed Actuary.
13. DEFERRED COMMISSION
London BO has accounted for deferred commission as per the local laws.The same is accounted as Commission at Head Office, in compliance to IRDAI requirements.
II. NOTES FORMING PART OF THE ACCOUNTS:
The Insurance Regulatory and Development Authority of India (Preparation of Financial Statements and Auditors'' Report of Insurance Companies) Regulations, 2002 have been adopted for presentation of the accounts.
> Investments
1. (a) Out of Investment held in shares and debentures
of the value of Rs. 545,686,632 thousand (Previous Year Rs. 526,398,152 thousand) no confirmations regarding actual custody or other documentary evidence for investments in debenture of the value of Rs. 682 thousand (Previous year Rs. 682 thousand) were available.
(b) The number of equities shares actually held by the Corporation/ Custodian of the Corporation is in excess of number held as per the books of the Corporation. The face value of such excess is Rs. 1,124 thousand (Previous year Rs. 785 thousand) and book value of such excess is Rs. 130 thousand (Previous Year Rs. 130 thousand). The Market Value of these excess shares is Rs. 81,609 thousand (Previous year Rs. 77,938 thousand).
(c) The dividend received on the excess shares, for FY 2018-19, amounts to Rs. 8,726 thousand (Previous Year Rs. 7,828 thousand)
2. The Fixed Maturity Mutual Fund Schemes are close ended mutual fund schemes with definite maturity date and with indicative returns.
3. (a) Provision includes provision for standard assets @ 0.40% as per IRDAI-Prudential norms for Income recognition, Asset Classification and provisioning and other related methods in respect of debt portfolio amounting to Rs. 494,577 thousand (Previous Year Rs. 498,935 thousand).
(b) During the year, the Corporation has not undertaken under CDR (Corporate Debt Restructuring) System, any case of restructuring of corporate debt/loan. (Previous Year NIL)
(c) Pending clarification from IRDAI in respect of applicability of prudential norms, as prescribed by RBI, for provisions on investment in State Government Securities, the Corporation has followed the prudential norms of provisions for loans and advances as prescribed by IRDAI for the said investments.
(d) The Corporation has considered latest available NAV for the provisioning of units of venture capital. The details of latest available NAV considered are as follows:
Mar 31, 2018
I. SIGNIFICANT ACCOUNTING POLICIES:
1. ACCOUNTING CONVENTION
The Balance Sheet, the Profit and Loss Account and the Revenue Accounts are drawn up in accordance with the provisions of Section 11(1) of the Insurance Act, 1938 and to comply with the Generally Accepted Accounting Principles in India (Indian GAAP), including the Accounting Standards notified under the relevant provisions of the Companies Act, 2013. The financial statements also conform to the stipulation specified under the Insurance Regulatory and Development Authority of India (Preparation of Financial Statements and Auditors Report of Insurance Companies) Regulations, 2002. The said statements are prepared on historical cost convention and on accrual basis except as otherwise stated and conform to the statutory provisions and practices prevailing in the General Insurance Industry in India.
2. REINSURANCE BUSINESS
2.1 Use of Estimates
The preparation of financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the Balance Sheet date, revenue and expenses for the year ended and disclosure of contingent liabilities as of the Balance Sheet date.The estimates and assumptions used in accompanying financial statements are based upon managementâs evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any revision to accounting estimates is recognized prospectively in current and future periods.
2.2 Reinsurance Revenues
Premium is accounted based on accounts rendered by ceding companies upon receipt of accounts. At the year end, estimates are made for accounts not yet received, based on available information and current trends. In respect of Insurance pool business, where GIC Re is one of the members of the Pool, only the Corporationâs share of revenue is recorded in the books of accounts.
2.3 Outstanding Claims
2.3.1 Estimated liability for outstanding claims in respect of Reinsurance business carried out in India is based on advices received as of different dates up to the date of finalization of claim figures in the books for submission of the data to theâAppointed Actuaryâ and wherever such advices are not received, on estimates based on available information, current trends, past underwriting experience of the management and actuarial estimation bases.
2.3.2 Provision for claims incurred but not reported (IBNR) is made as certified by the appointed actuary based on accepted actuarial methods.
2.4 Receivables
Provisions for doubtful debts for receivables are provided as under
(i) Companies in liquidation.
(ii) Foreign Companies having non-moving balances over a period of three years.
(iii) Non-realizable balances of foreign companies having moving balances and outstanding for more than four years.
3. FOREIGN CURRENCY TRANSACTIONS
Revenue transactions in foreign currencies are converted at the daily rate of exchange on the day accounts are received and transactions are booked. The rates have been taken from Thomson Reuters India Pvt. Ltd.
3.1 Non-Monetary items including fixed assets and investments abroad are reported using the exchange rate applicable on the date of acquisition.
3.2 Monetary items such as receivables, payables and balances in bank accounts held in foreign currencies are converted using the closing rates of exchange at the balance sheet date.
3.3 The exchange gain/loss relating to revenue transaction, due to conversion of foreign currencies, is accounted for as revenue in respective revenue accounts.The common exchange gain/loss due to conversion are apportioned between Revenue Account and Profit and Loss Account in same proportion as stated in Significant Accounting Policy No. 5.
3.4 Foreign branch operations are considered asânon-integral businessâas prescribed in AS11 âThe effects of changes in foreign exchange ratesâ (revised 2003) and translated accordingly.
4. RESERVE FOR UNEXPIRED RISKS (URR)
The URR provisions are made as under:
4.1 Non-Life Business:
(i) For HO and Malaysia Branch:
Reserve for Unexpired Risk in respect of Marine Insurance (Hull) and Terrorism Risk Business (included in Fire and Engineering) is made at 100% of Net Premium, while for all other classes of insurance is made at 50% of Net Premium of the period for which accounts are prepared.
(ii) London and Dubai Branch:
Reserve for Unexpired Risk is provided as per local practice. Adjustment for excess or short provision in URR, as per IRDAI requirement, is accounted at Head Office.
4.2 Life Business:
Reserve for Unexpired Risk is provided as determined by Appointed Actuary based on accepted Actuarial methods.
5. APPORTIONMENT OF INTEREST, DIVIDENDS AND RENTS
As per the requirement of IRDAI, the income from interest, dividends and rent is apportioned between Profit and Loss Account and Revenue Accounts in the ratio of Shareholdersâ Fund and Policyholdersâ Fund respectively at the end of the year. The same is further apportioned amongst the revenue accounts on the basis of the respective Policyholderâs fund at the end of the year.Shareholderâs fund consists of share capital and free reserves. Policyholderâs fund consists of provision for outstanding claims and reserves for unexpired risks. Till previous year the apportionment was done in the ratio of Shareholderâs Fund and Policyholderâs Fund respectively at the beginning of the year (Refer Note No. 44 of Notes Forming Part of the Accounts).
6. FIXED ASSETS
Fixed assets are stated at cost less depreciation. Cost of shares in Co-operative Societies/Companies for property rights acquired is included under the head âBuildingsâ under Fixed Assets.
Tangible Fixed Assets are stated at cost (including incidental expenses relating to acquisition and installation) less accumulated depreciation.
Intangible Assets:
Intangible Fixed Assets representing software are recorded at its acquisition price and are amortized over their estimated useful life on a straight-line basis, commencing from the date the assets are available for use. The management has estimated the useful life for such software as three years. The useful life of the asset is reviewed by the management at each Balance Sheet date.
6.1 Depreciation
Depreciation is provided on straight line method based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 and residual value of the assets shall be Rs.1/-.
Depreciation is provided on pro-rata basis on additions to fixed assets and on assets sold/discarded/demolished/ destroyed during the year.
7. RETIREMENT BENEFITS TO EMPLOYEES
Liabilities on account of retirement benefits to the employees such as pension, gratuity and leave encashment are provided for on accrual basis, based on actuarial valuation and in compliance with Accounting Standard 15.
8. APPORTIONMENT OF EXPENSES
(i) Head office business:
Operating expenses relating to insurance business are apportioned to the Revenue Accounts on the basis of Reinsurance Premium accepted during the period for which accounts are prepared, giving weightage of 75% for Marine business & 100 % for Fire, Miscellaneous & Life Reinsurance business.
(ii) Foreign business:
Operating expenses relating to insurance business are also apportioned to the revenue accounts of branches on the same basis as mentioned in 8 (i) above.
(iii) Investment Expenses:
Expenses relating to investment are apportioned between Revenue and Profit & Loss Account in the same proportion as stated in Significant Accounting Policy No.5.
9. INVESTMENTS
9.1 Prudential norms prescribed by Reserve Bank of India and the IRDAI are followed in regard to:
(i) Revenue recognition
(ii) Classification of assets into performing and nonperforming and
(iii) Provisioning against performing and non-performing assets.
9.2 Purchases and Sales of shares, bonds, debentures and Government securities are accounted for on the date of contracts.
9.3 The cost of investments includes premium on acquisition, Securities Transaction Tax and their related expenses.
9.4 Short term money market instruments such as Collateralized Borrowing and Lending Operations (CBLO), Commercial Paper and Treasury bill,which are discounted at the time of contract at the agreed rate are accounted at their discounted value.
9.5 Investment portfolio in respect of equity shares are segregated into actively traded and thinly traded as prescribed by the IRDAI (Preparation of Financial Statements and Auditorâs Report ofInsurance Companies) Regulations, 2002.
9.6 (a) Investment in actively traded equity shares are required to be valued as per the guidelines of IRDA issued vide circular ref. no. IRDA/F&I/INV/CIR/213/10/2013 dated 30th October, 2013. The corporation has chosen NSE as primary stock exchange and BSE as secondary exchange. Accordingly, the valuation of equity shares is made on the closing price of NSE. If such security is not listed/not traded on NSE on closing day, the closing price of BSE is considered.
(b) Investment in units of mutual funds are valued at Fair value as per IRDAI guidelines 2003-04. Fair value for this purpose is the last quoted NAV in the month of March.
(c) In case of Equity Exchange Traded Funds (ETF) the investment is valued on the same basis as traded equity shares, in compliance with Para 3.1 of the IRDAI (Investment) Regulations, 2016 of August 2016.
Whereas Passive ETFs shall be valued at NAV as on the reporting date (IRDAI, Investment Regulations, 2016, Version - 02, 3.1)
9.7 a) Unrealized gains/losses arising due to changes in the fair value of listed equity shares and mutual fund units are taken under the head âFair Value Change Accountâ and on realization reported in Profit and Loss Account.
b) Pending realization, the credit balance in theâFair Value Change Accountâ is not available for distribution.
c) Provision is made for diminution in value of investments relating to thinly traded and unlisted shares equivalent to the amount of difference in average book cost and breakup value of the shares except in companies where demerger has taken place during the Financial Year and latest audited accounts are not available.
Breakup value is computed from the annual reports of companies not beyond 21 months irrespective of date of closure of annual accounts of the companies. The impact as on 31st March, 2018 due to change in Accounting Policy of Equity Valuation is Rs. NIL.
d) Provision is made for diminution in value of investment relating to units of venture capital funds equivalent to the amount of difference in book cost and the latest Net Asset Value (NAV).
9.8 Investments in Equity and Preference shares of companies whose latest available audited accounts are beyond 21 months irrespective of date of closure of annual accounts of the companies as on the date of balance sheet or whose net worth has been fully impaired (negative net worth) are valued as under, the impact as on 31st March, 2018 due to change in Accounting Policy of Equity Valuation is NIL.
a) Where shares are : Fair Value Change
Actively Traded Account at
and Book Value is Market Value
less than Market Value
Diminution in value of investments is recognized in the following cases:
b) Where shares are : Written down to
Actively Traded Market Value
and Book Value is
greater than Market Value
c) Thinly traded : Written down to
Equity Shares nominal value of Rs.1/per company
d) Preference Shares : At a value proportionate to the face value of the equity
shares that bears to its market value and carrying
cost is reduced by the diminution value.
9.9 Investments in Subsidiary and Associate Companies are valued at cost as these are strategic investments. Provision for diminution in the value of these investments is made only if the decline is other than temporary.
9.10 Final Dividend is accounted for as income in the year of declaration and Interim dividend is accounted as income where the warrants are dated 31st March or earlier.
9.11 Dividends/Interest on shares/debentures under objection/pending deliveries is accounted for on realization/payment.
9.12 Profit or Loss on sale of investments is apportioned between Profit and Loss Account and Revenue Accounts in the ratio of Shareholdersâ Fund and Policyholdersâ Fund respectively at the end of the year. The same are further apportioned amongst the revenue accounts on the basis of the respective Policyholdersâ Fund at the end of the year.Shareholdersâfund consists of Share Capital and Free Reserves. Policyholdersâ fund consists of provisions for outstanding claims and reserves for unexpired risks.
Profit/Loss on sale of investments is computed at average book value of investments on the date of sale.
9.13 Expenses relating to safe custody, straight through processing and bank charges etc. on investments are charged to Profit and Loss Account and Revenue Accounts as stated in Significant Accounting Policy No.8.
9.14Debt securities including Government securities and Redeemable Preference shares have been considered as âheld to maturityâsecurities and have been measured at historical cost subject to amortization of premium paid over residual period. The call date has been considered as maturity date for amortization of Perpetual Bonds.
9.15 In case of repos transaction, difference between the selling and buying value is treated as interest income.
9.16 Income received from the Fixed Maturity Mutual fund (Dividend Option) is booked as dividend.
9.17 Investments are apportioned between Shareholdersâ Fund & Policyholdersâ Fund in the ratio of balance available in the respective funds at the end of the year.
10. AMORTIZATION OF PREMIUM AND PROVISION FOR DOUBTFUL LOANS, INVESTMENTS & DEBTS
Amortization of premium, provision for doubtful loans, doubtful debts and diminution in the value of investments written off, are recognized in the profit & loss account.
11. COMPLIANCE WITH ACCOUNTING STANDARDS
The Corporation has complied with relevant accounting standards prescribed by ICAI to the extent applicable and IRDAI guidelines in preparation of its financial statements.
12. PREMIUM DEFICIENCY RESERVE (PDR)
Non-Life Business: Premium deficiency is worked out separately for each segmental revenue level basis viz. fire, marine and miscellaneous. As per IRDAI circular no. IRDAI/Reg/7/119/2016 dated 7th April, 2016, PDR is calculated by Non-Life Appointed Actuary.
Life Re business: As per IRDAI circular no. IRDAI/Reg/7/ 121/2016 dated 13th April, 2016, PDR is calculated by Life Re Appointed Actuary.
13. DEFERRED COMMISSION
London BO has accounted for deferred commission as per the local laws. The same is accounted as Commission at Head Office, in compliance to IRDAI requirements.
Mar 31, 2017
SIGNIFICANT ACCOUNTING POLICIES AND NOTES FORMING PART OF THE ACCOUNTS I. SIGNIFICANT ACCOUNTING POLICIES:
1. ACCOUNTING CONVENTION
The Balance Sheet, the Profit and Loss Account and the Revenue Accounts are drawn up in accordance with the provisions of Section 11(1) of the Insurance Act, 1938 and to comply with the Generally Accepted Accounting Principles in India (Indian GAAP), including the Accounting Standards notified under the relevant provisions of the Companies Act, 2013. The financial statements also conform to the stipulation specified under the Insurance Regulatory and Development Authority of India (Preparation of Financial Statements and Auditors Report of Insurance Companies) Regulations, 2002. The said statements are prepared on historical cost convention and on accrual basis except as otherwise stated and conform to the statutory provisions and practices prevailing in the General Insurance Industry in India.
2. REINSURANCE BUSINESS
2.1 Use of Estimates
The preparation of financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the Balance Sheet date, revenue and expenses for the year ended and disclosure of contingent liabilities as of the Balance Sheet date. The estimates and assumptions used in accompanying financial statements are based upon management''s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any revision to accounting estimates is recognized prospectively in current and future periods.
2.2 Reinsurance Revenues
Premium is accounted based on accounts rendered by ceding companies upon receipt of accounts. At the year end, estimates are made for accounts not yet received, based on available information and current trends. In respect of Insurance pool business, where GIC Re is one of the members of the Pool, only the Corporation''s share of revenue is recorded in the books of accounts.
2.3 Outstanding claims
2.3.1 Estimated liability for outstanding claims in respect of Reinsurance business carried out in India is based on advices received as of different dates up to the date of finalization of claim figures in the books for submission of the data to the "Appointed Actuary" and wherever such advices are not received, on estimates based on available information, current trends, past underwriting experience of the management and actuarial estimation bases.
2.3.2 Provision for claims incurred but not reported (IBNR) is made as certified by the appointed actuary based on accepted actuarial methods.
2.4 Receivables
Provisions for doubtful debts for receivables are provided as under:-
(i) Companies in liquidation.
(ii) Foreign Companies having non-moving balances over a period of three years.
(iii) Non realizable balances of foreign companies having moving balances.
3. FOREIGN CURRENCY TRANSACTIONS:
Revenue transactions in foreign currencies are converted at the daily rate of exchange on the day accounts are received and transactions are booked.
The rates have been taken from Thomson Reuters
India Pvt. Ltd.
3.1 Non-Monetary items including fixed assets and investments abroad are reported using the exchange rate applicable on the date of acquisition.
3.2 Monetary items such as receivables, payables and balances in bank accounts held in foreign currencies are converted using the closing rates of exchange at the balance sheet date.
3.3 The exchange gain/loss relating to revenue transaction, due to conversion of foreign currencies, is accounted for as revenue in respective revenue accounts. The common exchange gain/loss due to conversion are apportioned between Revenue Account and Profit and Loss Account in same proportion as stated in Significant Accounting Policy No. 5.
3.4 Foreign branch operations are considered as "non-integral business" as prescribed in AS11 "The effects of changes in foreign exchange rates"(revised 2003) and translated accordingly.
4. Reserve for Unexpired Risk (URR)
The URR provisions are made as under:
4.1 Non-Life Business:
(i) For HO and Malaysia Branch:
Reserve for Unexpired Risk in respect of Marine Insurance (Hull) and Terrorism Risk Business (included in Fire and Engineering) is made at 100% of Net Premium, while for all other classes of insurance is made at 50% of Net Premium of the period for which accounts are prepared.
(ii) Marine Cargo - URR is made at 50% as per IRDAI circular Ref. IRDAI/F&A/CIR/CPM/056/03/2016 dated 04 April 2016, whereas till previous year URR was provided at 100% of net premium. The impact due to change in policy is shown in note no. 25 (a).
(iii) London and Dubai Branch -
Reserve for Unexpired Risk is provided as per local practice. Adjustment for excess or short provision in URR, as per IRDAI requirement, is accounted at Head Office.
4.2 Life Business:
Reserve for Unexpired Risk is provided as determined by Appointed Actuary based on accepted Actuarial methods.
5. APPORTIONMENT OF INTEREST, DIVIDENDS AND RENTS
The income from interest, dividends and rent is apportioned between Profit and Loss Account and
Revenue Accounts in the ratio of Shareholders âFund
and Policyholders'' Fund respectively at the beginning of the year. The same is further apportioned amongst the revenue accounts on the basis of the respective Policyholders'' Fund at the beginning of the year. Shareholders'' fund consists of share capital and free reserves. Policyholders'' Fund consists of provisions for outstanding claims and reserves for unexpired risks.
6. FIXED ASSETS
Fixed assets are stated at cost less depreciation. Cost of shares in Co-operative Societies/Companies for property rights acquired is included under the head ''Buildings'' under Fixed Assets.
Tangible Fixed Assets are stated at cost (including incidental expenses relating to acquisition and installation) less accumulated depreciation.
Intangible Assets
Intangible Fixed Assets representing software are recorded at its acquisition price and are amortized over their estimated useful life on a straight-line basis, commencing from the date the assets are available for use. The management has estimated the useful life for such software as three years. The useful life of the asset is reviewed by the management at each Balance Sheet date.
6.1 Depreciation
Depreciation is provided on straight line method based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 and residual value of the assets shall be '' 1/-.
Depreciation is provided on pro-rata basis on additions to fixed assets and on assets sold/discarded/ demolished/destroyed during the year.
7. Retirement Benefits to Employees
Liabilities on account of retirement benefits to the employees such as pension, gratuity and leave encashment are provided for on accrual basis, based on actuarial valuation and in compliance with Accounting Standard 15.
8. Apportionment of Expenses
(i) Head office business :
Operating expenses relating to insurance business are apportioned to the Revenue Accounts on the basis of Reinsurance Premium accepted during the period for which accounts are prepared, giving weight age of 75% for Marine business & 100 % for Fire, Miscellaneous & Life Reinsurance business.
(ii) Foreign business :
Operating expenses relating to insurance business are also apportioned to the revenue accounts of branches on the same basis as mentioned in 8 (i) above.
(iii) Investment Expenses :
Expenses relating to investment are apportioned between Revenue and Profit & Loss Account in the same proportion as stated in Significant Accounting Policy No.5.
9. INVESTMENTS
9.1 Prudential norms prescribed by Reserve Bank of India and the IRDAI are followed in regard to:
(i) Revenue recognition,
(ii) Classification of assets into performing and nonperforming and
(iii) Provisioning against performing and nonperforming assets.
9.2 Purchases and Sales of shares, bonds, debentures and Government securities are accounted for on the date of contracts.
9.3 The cost of investments includes premium on acquisition, Securities Transaction Tax and their related expenses
9.4 Short term money market instruments such as Collateralized Borrowing and Lending Operations (CBLO), Commercial Paper and Treasury bill, which are discounted at the time of contract at the agreed rate are accounted at their discounted value.
9.5 Investment portfolio in respect of equity shares are segregated into actively traded and thinly traded as prescribed by the IRDAI (Preparation of Financial Statements and Auditor''s Report of Insurance Companies) Regulations, 2002.
9.6 (a) Investment in actively traded equity shares are required to be valued as per the guidelines of IRDA issued vide circular ref.no. IRDA/F&I/INV/CIR/213/10/ 2013 dated October 30, 2013. The Corporation has chosen NSE as primary stock exchange and BSE as secondary exchange. Accordingly, the valuation of equity shares is made on the closing price of NSE. If such security is not listed/not traded on NSE on closing day, the closing price of BSE is considered.
(b) Investment in units of mutual funds are valued at Fair value as per IRDAI guidelines 2003-04. Fair value for this purpose is the last quoted NAV in the month of March.
(c) In case of Equity Exchange Traded Funds (ETF) the investment is valued on the same basis as traded equity shares, in compliance with Para 3.1 of the IRDAI (Investment) Regulations, 2016 of August 2016.
Till previous year, ETF were valued at NAV on the same basis as the investments in Mutual funds as mentioned in para (b) above. However, from FY 201617, ETF are valued as per policy 9.6 (c). The effect of change in policy is shown in Note no. 14.
9.7 a) Unrealized gains/losses arising due to changes in the fair value of listed equity shares and mutual fund units are taken under the head "Fair Value Change Account" and on realization reported in Profit and Loss Account.
b) Pending realization, the credit balance in the "Fair Value Change Account" is not available for distribution.
c) Provision is made for diminution in value of investments relating to thinly traded and unlisted shares equivalent to the amount of difference in average book cost and break-up value of the shares except in companies where de-merger has taken place during the Financial Year and latest audited accounts are not available.
Breakup value is computed from the annual reports of companies not beyond 21 months in case of those companies which close their annual accounts on dates other than 31st March or beyond 12 months in case of those companies which close their accounts on 31st March.
d) Provision is made for diminution in value of investment relating to units of venture capital funds equivalent to the amount of difference in book cost and the latest Net Asset Value (NAV).
9.8 Investments in Equity and Preference shares of companies whose latest available audited accounts are beyond 21 months (in case of those companies which close their annual accounts on dates other than 31st March), or beyond 12 months (in case of those companies which close their annual accounts on 31st March), as on the date of Balance Sheet or whose Net Worth has been fully impaired (negative Net Worth) are valued as under:
a) Where shares are : Fair Value Change Actively Traded Account at and Book Value is Market Value less than Market Value
Diminution in value of investments is recognized in the following cases :
b) Where shares are : Written down to Actively Traded Market Value and Book Value is greater than Market Value
c) Thinly traded : Written down to Equity Shares nominal value of Rs, 1/per company
d) Preference : At a value proportionate Shares to the face value of the equity shares that bears to its market value and carrying cost is reduced by the diminution value.
9.9 Investment in Subsidiary and Associate entities are valued at cost as these are strategic investments.
Impairment
The carrying amounts of all assets and strategic investments are reviewed by the Company at each Balance Sheet date. If there is any indication of impairment based on internal/external factors, an impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is greater of the assets net selling price and value in use. Value in use is the present value of the estimated future cash flows expected to arise from the continuing use of the assets and from its disposal at the end of its useful life.
In assessing value in use the estimated future cash flows are discounted to their present value at a rate that reflects current market assessments of the time value of money and the risks specific to the asset, as determined by the management.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life, if any.
9.10 Final Dividend is accounted for as income in the year of declaration and Interim dividend is accounted as income where the warrants are dated 31st March or earlier.
9.11 Dividends/Interest on shares/debentures under objection/pending deliveries is accounted for on realization/payment.
9.12Profit or Loss on sale of investments is apportioned between Profit and Loss Account and Revenue Accounts in the ratio of Shareholders'' Fund and Policyholders'' Fund respectively at the beginning of the year. The same are further apportioned amongst the revenue accounts on the basis of the respective Policyholders'' Fund at the beginning of the year. Shareholders''fund consists of Share Capital and Free Reserves. Policyholders'' fund consists of provisions for outstanding claims and reserves for unexpired risks.
Profit/Loss on sale of investments is computed at average book value of investments on the date of sale.
9.13Expenses relating to safe custody, straight through processing and bank charges etc. on investments are charged to Profit and Loss Account and Revenue Accounts as stated in Significant Accounting Policy No.8.
9.14Debt securities including Government securities and Redeemable Preference shares have been considered as ''held to maturity'' securities and have been measured at historical cost subject to amortization of premium paid over residual period. The call date has been considered as maturity date for amortization of Perpetual Bonds.
9.15In case of repos transaction, difference between the selling and buying value is treated as interest income.
9.16Income received from the Fixed Maturity Mutual fund (Dividend Option) is booked as dividend.
9.17Investments are apportioned between Shareholders'' fund & Policyholders'' fund in the ratio of balance available in the respective funds at the beginning of the year.
10. AMORTIZATION OF PREMIUM AND PROVISION FOR DOUBTFUL LOANS, INVESTMENTS AND DEBTS
Amortization of premium, provision for doubtful loans, doubtful debts and diminution in the value of investments written off, are recognized in the profit & loss account.
11. COMPLIANCE WITH ACCOUNTING STANDARDS
The Corporation has complied with relevant accounting standards prescribed by ICAI to the extent applicable and IRDAI guidelines in preparation of its financial statements.
12. PREMIUM DEFICIENCY RESERVE (PDR):
Non-Life Business: Premium deficiency is worked out separately for each segmental revenue level basis viz. fire, marine and miscellaneous. As per IRDAI circular no. IRDAI/Reg/7/119/2016 dated 07 April 2016, PDR is calculated by Non-Life Appointed Actuary, as against earlier practice of providing PDR as the difference between incurred claim and earned premium.
Life Re business: As per IRDAI circular no. IRDAI/ Reg/7/121/2016 dated 13 April 2016, PDR is calculated by Life Re Appointed Actuary, as against earlier practice of providing PDR as difference between incurred claim and earned premium.
The impact due to change in policy is shown in Note no. 27.
13. DEFERRED COMMISSION
London BO has accounted for deferred commission as per the local laws. The same is accounted as Commission at Head Office, in compliance to IRDAI requirements
Mar 31, 2016
SIGNIFICANT ACCOUNTING POLICIES
AND NOTES FORMING PART OF THE ACCOUNTS I. SIGNIFICANT ACCOUNTING POLICIES:
1. ACCOUNTING CONVENTION
The Balance Sheet, the Profit and Loss Account and the Revenue Accounts are drawn up in accordance with the provisions of Section 11(1) of the Insurance Act, 1938 and to comply with the Generally Accepted Accounting Principles in India (Indian GAAP), including the Accounting Standards notified under the relevant provisions of the Companies Act, 2013. The financial statements also conform to the stipulation specified under the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditors Report of Insurance Companies) Regulations, 2002. The said statements are prepared on historical cost convention and on accrual basis except as otherwise stated and conform to the statutory provisions and practices prevailing in the General Insurance Industry in India.
2. REINSURANCE BUSINESS
2.1 Reinsurance Revenues
Premium is accounted based on accounts rendered by ceding companies upon receipt of accounts. At the year end, estimates are made for accounts not yet received, based on available information and current trends.
In respect of Indian Market Terrorism Risk Insurance pool and Indian Motor Declined Pool, only the Corporation''s share of revenues is recorded as premium.
2.2 Outstanding claims
2.2.1 Estimated liability for outstanding claims in respect of Reinsurance business carried out in India is based on advices received as of different dates up to the date of finalization of accounts and wherever such advices are not received, on estimates based on available information, current trends, past underwriting experience of the management and actuarial estimation bases.
2.2.2 Provision for claims incurred but not reported (IBNR) is made as certified by the appointed actuary.
2.3 Receivables
Provisions for doubtful debts for receivables are provided as under:-
(i) Companies in liquidation.
(ii) Foreign Companies having non-moving balances over a period of three years.
(iii) Non realizable balances of foreign companies having moving balances.
3. FOREIGN CURRENCY TRANSACTIONS:
Revenue transactions in foreign currencies are converted at the daily rate of exchange on the day accounts are received and transactions are booked. The rates have been taken from Thomson Reuters India Pvt. Ltd.
3.1 Non-Monetary items including fixed assets and investments abroad are reported using the exchange rate applicable on the date of acquisition.
3.2 Monetary items such as receivables, payables and balances in bank accounts held in foreign currencies are converted using the closing rates of exchange at the balance sheet date.
3.3 The exchange gain/loss relating to revenue transaction, due to conversion of foreign currencies, is accounted for as revenue in respective revenue accounts. The common exchange gain/loss due to conversion are apportioned between Revenue Account and Profit and Loss Account in same proportion as stated in Significant Accounting Policy No. 6.
3.4 Foreign branch operations are considered as "non-integral business" as prescribed in AS11 "The effects of changes in foreign exchange rates"(revised 2003) and translated accordingly.
4. RESERVE FOR UNEXPIRED RISK
The URR provisions are made as under:
4.1 Non-Life Business:
(i) For HO, Dubai and Malaysia Branch:
Reserve for Unexpired Risk in respect of Marine Insurance and Terrorism Risk Business (included in Fire and Engineering) is made at 100% of Net Premium, while for all other classes of insurance is made at 50% of Net Premium of the period for which accounts are prepared.
(ii) For London Branch:
Reserve for Unexpired Risk is provided as per local practice. Further, any additional provision as required by IRDAI is provided at HO.
4.2 Life Business:
Reserve for Unexpired Risk is provided as determined by Actuary.
5. OPERATING EXPENSES RELATING TO INSURANCE BUSINESS (EXPENSES OF MANAGEMENT)
5.1 Depreciation
Depreciation is provided on straight line method based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 and residual value of the assets shall be '' 1/-.
Depreciation is provided on pro-rata basis on additions to fixed assets and on assets sold/ discarded/demolished/destroyed during the year.
5.2 Retirement Benefits to Employees
Liabilities on account of retirement benefits to the employees such as pension, gratuity and leave encashment are provided for on accrual basis, based on actuarial valuation and in compliance with Accounting Standard 15.
5.3 Apportionment of Expenses
(i) Head office business :
Operating expenses relating to insurance business are apportioned to the Revenue Accounts on the basis of Reinsurance Premium accepted during the period for which accounts are prepared, giving weightage of 75% for Marine business & 100 % for Fire, Miscellaneous & Life Reinsurance business.
(ii) Foreign business :
Operating expenses relating to insurance business are also apportioned to the revenue accounts of branches on the same basis as mentioned in 5.3 (i) above.
(iii) Investment Expenses :
Expenses relating to investment are apportioned between Revenue and Profit & Loss Account in the same proportion as stated in Significant Accounting Policy No. 6.
6. APPORTIONMENT OF INTEREST, DIVIDENDS AND RENTS
The income from interest, dividends and rent is apportioned between Profit and Loss Account and Revenue Accounts in the ratio of Shareholders'' Fund and Policyholders'' Fund respectively at the beginning of the year. The same is further apportioned amongst the revenue accounts on the basis of the respective Policyholders'' Fund at the beginning of the year. Shareholders'' fund consists of share capital and free reserves. Policyholders âFund consists of provisions for outstanding claims and reserves for unexpired risks.
7. INVESTMENTS
7.1 Prudential norms prescribed by Reserve Bank of India and the IRDAI are followed in regard to:
(i) Revenue recognition,
(ii) Classification of assets into performing and non-performing and
(iii) Provisioning against performing and non-performing assets.
7.2 Purchases and Sales of shares, bonds, debentures and Government securities are accounted for on the date of contracts.
7.3 The cost of investments includes premium on acquisition, Securities Transaction Tax and their related expenses
7.4 Short term money market instruments such as Collateralized Borrowing and Lending Operations (CBLO), Commercial Paper and Treasury bill, which are discounted at the time of contract at the agreed rate are accounted at their discounted value.
7.5 Investment portfolio in respect of equity shares are segregated into actively traded and thinly traded as prescribed by the IRDAI (Preparation of Financial Statements and Auditor''s Report of Insurance Companies) Regulations, 2002.
7.6 (a) Investment in actively traded equity shares are required to be valued as per the guidelines of IRDA issued vide circular ref. no. IRDA/F&I/INV/ CIR/213/10/2013 dated October 30, 2013. The Corporation has chosen NSE as primary stock exchange and BSE as secondary exchange. Accordingly, the valuation of equity shares is made on the closing price of NSE. If such security is not listed/not traded on NSE on closing day, the closing price of BSE is considered.
(b) Investment in units of mutual funds are valued at Fair value as per IRDAI guidelines 2003-04. Fair value for this purpose is the last quoted NAV in the month of March.
7.7 a) Unrealized gains/losses arising due to changes in the fair value of listed equity shares and mutual fund units are taken under the head "Fair Value Change Account" and on realization reported in Profit and Loss Account.
b) Pending realization, the credit balance in the "Fair Value Change Account" is not available for distribution.
c) Provision is made for diminution in value of investments relating to thinly traded and unlisted shares equivalent to the amount of difference in average book cost and break-up value of the shares except in companies where de-merger has taken place during the Financial Year and latest audited accounts are not available.
Breakup value is computed from the annual reports of companies not beyond 21 months in case of those companies which close their annual accounts on dates other than 31st March or beyond 12 months in case of those companies which close their accounts on 31st March.
d) Provision is made for diminution in value of investment relating to units of venture capital funds equivalent to the amount of difference in book cost and the latest Net Asset Value (NAV).
7.8 Investments in Equity and Preference shares of companies whose latest available audited accounts are beyond 21 months (in case of those companies which close their annual accounts on dates other than 31st March), or beyond 12 months (in case of those companies which close their annual accounts on 31st March), as on the date of Balance Sheet or whose Net Worth has been fully impaired (negative Net Worth) are valued as under:
a) Where shares are : Fair Value Change Actively Traded Account at and Book Value is Market Value less than Market Value
Diminution in value of investments is recognized in the following cases :
b) Where shares are : Written down Actively Traded to Market Value and Book Value is greater than Market Value
c) Thinly traded : Written down to Equity Shares nominal value of '' 1/per company
d) Preference : At a value proportionate Shares to the face value of the equity shares that bears to its market value and carrying cost is reduced by the diminution value.
7.9 Investment in Subsidiary and Associate entities are valued at cost as these are strategic investments.
7.10 Final Dividend is accounted for as income in the year of declaration and Interim dividend is accounted as income where the warrants are dated 31st March or earlier.
7.11 Dividends/Interest on shares/debentures under objection/pending deliveries is accounted for on realization/payment.
7.12 Profit or Loss on sale of investments is apportioned between Profit and Loss Account and Revenue Accounts in the ratio of Shareholders'' Fund and Policyholders'' Fund respectively at the beginning of the year. The
same are further apportioned amongst the revenue accounts on the basis of the respective Policyholders âFund at the beginning of the year. Shareholders âfund consists of Share Capital and Free Reserves. Policyholders'' fund consists of provisions for outstanding claims and reserves for unexpired risks.
Profit/Loss on sale of investments is computed at average book value of investments on the date of sale.
7.13 Expenses relating to safe custody, straight through processing and bank charges etc. on investments are charged to Profit and Loss Account and Revenue Accounts as stated in Significant Accounting Policy No. 5.3.
7.14 Debt securities including Government securities and Redeemable Preference shares have been considered as ''held to maturity'' securities and have been measured at historical cost subject to amortization of premium paid over residual period. The call date has been considered as maturity date for amortization of Perpetual Bonds.
7.15 In case of repos transaction, difference between the selling and buying value is treated as interest income.
7.16 Income received from the Fixed Maturity Mutual fund (Dividend Option) is booked as dividend.
7.17 Investments are apportioned between Shareholders'' fund & Policyholders'' fund in the ratio of balance available in the respective funds at the beginning of the year.
8. FIXED ASSETS
Fixed assets are stated at cost less depreciation. Cost of shares in Co-operative Societies/Companies for property rights acquired is included under the head ''Buildings'' under Fixed Assets.
9. AMORTIZATION OF PREMIUM AND PROVISION FOR DOUBTFUL LOANS, INVESTMENTS AND DEBTS
Amortization of premium, provision for doubtful loans, doubtful debts and diminution in the value of investments written off, are recognized in the profit & loss account.
10. COMPLIANCE WITH ACCOUNTING STANDARDS
The Corporation has complied with relevant accounting standards prescribed by ICAI to the extent applicable and IRDA guidelines in preparation of its financial statements.
11. PREMIUM DEFICIENCY:
Premium deficiency is worked out separately for each class of business such as fire, marine, miscellaneous and life. Premium Deficiency is provided for where the incurred claim is higher than the earned premium for any class of business. Premium deficiency is the difference between incurred claim and earned premium.
II. NOTES FORMING PART OF THE ACCOUNTS:
The Insurance Regulatory and Development Authority of India (Preparation of Financial Statements and Auditors'' Report of Insurance Companies) Regulations, 2002 have been adopted for presentation of the accounts.
Mar 31, 2015
I. SIGNIFICANT ACCOUNTING POLICIES: 1. ACCOUNTING CONVENTION
The Balance Sheet, the Profit and Loss Account and the Revenue Accounts are drawn up in accordance with the provisions of Section 11(1) of the Insurance Act, 1938 and to comply with the Generally Accepted Accounting Principles in India (Indian GAAP), including the Accounting Standards notified under the relevant provisions of the Companies Act, 2013. The financial statements also conform to the stipulation specified under the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditors Report of Insurance Companies) Regulations, 2002. The said statements are prepared on historical cost convention and on accrual basis except as otherwise stated and conform to the statutory provisions and practices prevailing in the General Insurance Industry in India.
2. REINSURANCE BUSINESS
2.1 Reinsurance Revenues
Premium is accounted based on accounts rendered by ceding companies upon receipt of accounts. At the year end, estimates are made for accounts not yet received, based on available information a nd current trends.
In respect of Indian Market Terrorism Risk Insurance pool and Indian Motor Declined Pool, only the Corporation''s share of revenues is recorded as premium.
2.2 Outstanding claims
2.2.1 Estimated liability for outstanding claims in respect of Reinsurance business carried out in India is based on advices received as of different dates up to the date of finalization of accounts and wherever such advices are not received, on estimates based on available information, current trends, past underwriting experience of the management and actuarial estimation bases.
2.2.2 Provision for claims incurred but not reported (IBNR) is made as certified by the appointed actuary.
2.3 Receivables
Provisions for doubtful debts for receivables are provided as under:-
(i) Companies in liquidation
(ii) Foreign Companies having non-moving balances over a period of three years
(iii) Non realizable balances of foreign companies having moving balances.
3. FOREIGN CURRENCY TRANSACTIONS:
Revenue transactions in foreign currencies are converted at the daily rate of exchange on the day accounts are received and transactions are booked. The rates have been taken from Thomson Reuters India Pvt. Ltd.
3.1 Non-Monetary items including fixed assets and investments abroad are reported using the exchange rate applicable on the date of acquisition.
3.2 Monetary items such as receivables, payables and balances in bank accounts held in foreign currencies are converted using the closing rates of exchange at the balance sheet date.
3.3 The exchange gain/ loss relating to revenue transaction, due to conversion of foreign currencies, is accounted for as revenue in respective revenue accounts. The common exchange gain/loss due to conversion are apportioned between Revenue Account and Profit and Loss Account in same proportion as stated in Significant Accounting Policy No. 6
3.4 Foreign branch operations are considered as "non-integral business" as prescribed in ASll "The effects of changes in foreign exchange rates" (revised 2003) and translated accordingly.
4. RESERVE FOR UNEXPIRED RISK The URR provisions are made as under:
A. Non-Life Business:
(i) For HO, Dubai and Malaysia Branch:
Reserve for Unexpired Risk in respect of Marine Insurance and Terrorism Risk Business (included in Fire and Engineering) is made at 100% of Net Premium, while for all other classes of insurance is made at 50% of Net Premium of the period for which accounts are prepared.
(ii) For London Branch:
Reserve for Unexpired Risk is provided as per local practice. Further, any additional provision as required by IRDA is provided at HO.
B. Life Business:
Reserve for Unexpired Risk is provided as determined by Actuary.
5. OPERATING EXPENSES RELATING TO INSURANCE BUSINESS (EXPENSES OF MANAGEMENT)
5.1 Depreciation
Depreciation is provided on straight line method based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 and residual value of the assets shall be Re. 1/-.
Depreciation is provided on pro-rata basis on additions to fixed assets and on assets sold / discarded/demolished/destroyed during the year.
5.2 Retirement Benefits to Employees
Liabilities on account of retirement benefits to the employees such as pension, gratuity and leave encashment are provided for on accrual basis, based on actuarial valuation and in compliance with Accounting Standard 15.
5.3 Apportionment of Expenses
(i) Head office business
Operating expenses relating to insurance business are apportioned to the Revenue Accounts on the basis of Reinsurance Premium accepted during the period for which accounts are prepared, giving weight age of 75% for Marine business & 100 % for Fire, Miscellaneous & Life Reinsurance business.
(ii) Foreign business
Operating expenses relating to insurance business are also apportioned to the revenue accounts of branches on the same basis as mentioned in 5.3 (i) above.
(iii) Investment Expenses
Expenses relating to investment are apportioned between Revenue and Profit & Loss Account in the same proportion as stated in Significant Accounting Policy No. 6.
6. APPORTIONMENT OF INTEREST, DIVIDENDS AND RENTS
The income from interest, dividends and rent is apportioned between Profit and Loss Account and Revenue Accounts in the ratio of Shareholders'' Fund a nd Policyholders'' Fund respectively at the beginning of the year. The same is further apportioned amongst the revenue accounts on the basis of the respective Policyholders'' Fund at the beginning of the year. Shareholders'' fund consists of share capital and free reserves. Policyholders'' Fund consists of provisions for outstanding claims and reserves for unexpired risks.
7. INVESTMENTS
7.1 Prudential norms prescribed by Reserve Bank of India and the RDA are followed in regard to:
(i) Revenue recognition,
(ii) Classification of assets into performing and nonperforming and
(iii) Provisioning a g a inst performing and nonperforming assets.
7.2 Purchases and Sales of shares, bonds, debentures and Government securities are accounted for on the date of contracts.
7.3 The cost of investments includes premium on acquisition and other related expenses.
7.4 Short term money market instruments such as Collateralized Borrowing and Lending Operations (CBLO), Commercial Paper and Treasury bill, which are discounted at the time of contract at the agreed rate are accounted a t their discounted value.
7.5 Investment portfolio in respect of equity shares are segregated into actively traded and thinly traded as prescribed by the IRDA (Preparation of Financial Statements and Auditor''s Report of Insurance Companies) Regulations, 2002.
7.6 (a) Investment in actively traded equity shares are required to be valued as per the guidelines of IRDA issued vide circular ref. no. IRDA/F&I/INV/CIR/213/10/2 013 dated October 30, 2013. The corporation has chosen NSE as primary stock exchange and BSE as secondary exchange. Accordingly, the valuation of equity shares is made on the closing price of NSE. If such security is not listed / not traded on NSE on closing day, the closing price of BSE is considered.
(b) Investment in units of mutual funds are valued at Fair value as per IRDA guidelines 2003-04. Fair value for this purpose is the last quoted NAV in the month of March.
7.7 a) Unrealized gains/losses arising due to changes in the fair value of listed equity shares and mutual fund units are taken under the head "Fair Value Change Account" and on realization reported in Profit and Loss Account.
b) Pending realization, the credit balance in the "Fair Value Change Account" is not available for distribution.
c) Provision is made for diminution in value of investments relating to thinly traded and unlisted shares equivalent to the amount of difference in average book cost and break-up value of the shares except in companies where de-merger has taken place during the Financial Year and latest audited accounts are not available.
Break-up value is computed from the annual reports of companies not beyond 21 months in case of those companies which close their annual accounts on dates other than 31st March or beyond 12 months in case of those companies which close their accounts on 31st March.
d) Provision is made for diminution in value of investment relating to units of venture capital funds equivalent to the amount of difference in book cost and the latest Net Asset Value (NAV).
7.8 Investment in equity and preference shares of companies, the net worth of which has been fully impaired or where the latest available audited accounts are beyond 21 months in case of those companies which close their annual accounts on dates other than 31st March or beyond 12 months in case of those companies which close their annual accounts on 31st March, as on the date of Balance Sheet revalued as under:
1. Actively traded
equity shares : At their Market Value.
2. Thinly traded equity shares : Written down to nominal value of Re.l/- per company.
3. Preference shares : At a value proportionate to the face value of the equity shares that bears to its market value and carrying cost is reduced by the diminution value.
7.9 Final Dividend is accounted for a s income in the year of declaration and Interim dividend is accounted as income where the warrants are dated 31st March or earlier.
7.10 Dividends/Interest on shares/debentures under objection/pending deliveries is accounted for on realization/payment.
7.11 Profit or Loss on sale of investments is apportioned between Profit a nd Loss Account and Revenue Accounts in the ratio of Shareholders'' Fund and Policyholders'' Fund respectively at the beginning of the year. The same are further apportioned amongst the revenue accounts on the basis of the respective Policyholders'' Fund at the beginning of the year. Shareholders'' fund consists of Share Capital and Free Reserves. Policyholders'' fund consists of provisions for outstanding claims and reserves for unexpired risks.
Profit/Loss on sale of investments is computed at average book value of investments on the date of sale.
7.12 Expenses relating to safe custody, straight through processing and bank charges etc. on investments are charged to Profit and Loss Account and Revenue Accounts as stated in Significant Accounting Policy No.5.3.
7.13 Debt securities including Government securities and Redeemable Preference shares have been considered a s ''held to maturity'' securities a nd have been measured at historical cost subject to amortization of premium paid over residual period. The call date has been considered as maturity date for amortization of Perpetual Bonds.
7.14 In case of repos transaction, difference between the selling and buying value is treated as interest income.
7.15 Investments in foreign equities are valued at cost as these are only strategic investments in associate companies. Impairment if any will be recognized as an expense.
7.16 Income received from the Fixed Maturity Mutual fund (Dividend Option) is booked as dividend.
7.17 Investments are apportioned between Shareholders'' fund & Policyholders'' fund in the ratio of balance available in the respective funds at the beginning of the year.
8. FIXED ASSETS
Fixed assets are stated at cost less depreciation. Cost of shares in Co-operative Societies/Companies for property rights acquired is included under the head ''Buildings'' under Fixed Assets.
9. A MORTIZATION OF PREMIUM A ND PROVISION FOR DOUBTFUL LOANS, INVESTMENTS A ND DEBTS
Amortization of premium, provision for doubtful loans, doubtful debts and diminution in the value of investments written off, are recognized in the profit & loss account.
10. COMPLIA NCE WITH A CCOUNTING STANDARDS
The Corporation has complied with relevant accounting standards prescribed by ICAI to the extent applicable and IRDA guidelines in preparation of its financial statements.
11. PREMIUM DEFICIENCY:
Premium deficiency is worked out separately for each class of business such as fire, marine, miscellaneous and life. Premium Deficiency is provided for where the incurred claim is higher than the earned premium for any class of business. Premium deficiency is the difference between incurred claim and earned premium.
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General Insurance Corporation of India Reports
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Indian equities open higher as Nifty tops 23,100 and Sensex climbs over 700 points -
Intraday Stocks To Buy Today, March 25: Top Picks By Anand James of Geojit Investments On Wednesday
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Stock Market Today: Nifty Closes Near 23,000, Sensex Up 1.8%: IndiGo, L&T, Eternal, Asian Paints Top Gainers -
Steel Stock Gains 5.14% On Getting NCLT Nod For Key Merger; Do You Own? -
Stock Market Opens Strong: Nifty Up 1.5%, Sensex Rallies 1,516 Pts; Rupee Recovers as Trump Delays Iran Strike -
D-Street Mayhem: Rs 15 Lakh Cr Wiped Out As Nifty-Sensex Close 2.5% Lower, Rupee In Free-Fall Amid Iran-US War -
Indian equities outlook today as Bank Nifty remains weak and Nifty tests support -
Stock Market Crash: Sensex, Nifty Hit 1-Year Low; How US-Israel-Iran War Wiped Out Rs 4,753,333 Crore -
Intraday Stocks To Buy Today, March 23: Top Picks By Anand James of Geojit Investments On Monday
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Nifty, Sensex Down 8% Amid Iran-US War, Crude Oil At Sky High: How Past Geopolitical Crises Have Shaped Market -
Stock Market Weekly Wrap: Sensex, Nifty End In Green Amid Iran-US War, Crude Surge, Rupee Slide -
Nifty Falls as Global Cues Persist and Gulf Tensions Weigh on Indian Markets -
Intraday Stocks To Buy Today, March 20: Top Picks By Anand James of Geojit Investments On Friday
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Nifty, Sensex Stage Sharp Rebound After Biggest Crash; IT Stocks in Green | Why Is Stock Market Rising Today? -
Biggest Single-Day Market Crash! Rs 13 Lakh Cr Wiped Out as Sensex-Nifty Tank 3%; HDFC, ITC Hit 52-Week Lows -
Indian Equities Open Weak as Nifty Holds Key Levels and Bank Nifty Eyes Support
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