General Insurance Corporation of India
Report on the Audit of Standalone Financial Statements
1. Opinion
We have audited the accompanying Standalone Financial Statements of General Insurance Corporation of India ("the Corporation"), which comprise the Balance Sheet as at March 31st, 2023, the Revenue Accounts of Fire, Miscellaneous, Marine and Life Insurance (Collectively known as 'Revenue Accounts'), Profit and Loss Account, the Cash Flow statement for the year then ended, and notes to the Standalone Financial Statements, including a summary of significant accounting policies and other explanatory information, in which are incorporated financial information of three foreign branches out of which two branches have been audited by local auditors appointed by the Corporation and one unaudited foreign branch and one domestic branch whose auditors are appointed by Comptroller and Auditor General of India, New Delhi.
In our opinion and to the best of our information and according to the explanations given to us, we report that the aforesaid Standalone Financial Statements give the information required in accordance with the requirements of the Insurance Act 1938 as amended by the Insurance Laws (Amendment) Act, 2015 ('the Insurance Act'), the Insurance Regulatory and Development Authority Act, 1999 ('the IRDAI Act'), the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations, 2002 ('the IRDAI Financial Statements Regulations), the Companies Act, 2013 ('the Act') including the Accounting Standard specified under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 ('the Accounting Standards') to the extent applicable and in manner so required and give a true and fair view, in conformity with the accounting principles generally accepted in India as applicable to the Insurance Companies, of state of affairs of the Corporation as on March 31st, 2023, surplus of revenue accounts of Fire, Miscellaneous, Marine and Life business, in case of profit and loss account of the profit for the year ended on that date and its cash flows for the year ended on that date.
2. Basis For Opinion
We conducted our Audit in accordance with the Standards on Auditing ('SA's') specified under section 143(10) of the Act and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India ("ICAI"). Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Corporation in accordance with the Code of Ethics issued by the ICAI together with the ethical requirements that are relevant to our Audit of the financial statements under the provisions of the Companies act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidences we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. Emphasis of Matter
a) We draw attention to Note No. 26 (b) of the Standalone Financial Statements, some of the balances due to/from entities carrying on Insurance business including reinsurance businesses are subject to confirmations and/or reconciliation, and as stated in the note the consequential impact (If any) will be accounted after complete confirmations and/or reconciliation.
b) We draw attention to Note No. 27 of the Standalone Financial Statements wherein Corporation has mentioned about creation of Catastrophe Reserve during the current financial year.
Our opinion is not modified on the above matters.
4. Key Audit Matters
Key Audit Matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Financial Statements of the current period. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the Standalone Financial Statements as a whole, and in forming our opinion thereon, and we do not provide
|
a separate opinion on these matters. We have determined the matters below to be the key audit matters to be communicated in our report.
|
|
|S. No.
|
Key Audit Matters
|
Auditor's response
|
|
1.
|
Revenue Recognition:
The Corporation recognizes reinsurance premium income based on the statement of accounts or closing statements received from the ceding companies. At the year end, estimates are made for the accounts not received based on the Estimated Premium Income (EPI) agreed upon by both the Corporation and the Ceding Companies at the time of inception of the treaty or policy slip. Premium estimation is the differential of EPI and the booked premium for the year by the Corporation. Estimation of Income can be right only if the factors involved are incorporated in the system and extracted correctly from the system.
|
Our audit procedures on revenue recognized included:
Tested the design, implementation and operating effectiveness of key controls over Revenue Recognition.
Verified Premium Estimation with the guidelines of the Corporation and have performed test of controls, test of details and analytical review procedures on estimation of income.
Verified EPI from the treaty or policy slip as the case may be and verified Actual Premium booked from Statement of Accounts or Closing statements received from the Cedants of the sample cases.
|
|
2.
|
Claim Provisioning:
Insurance Claim is the major area of expense for the insurance company. Total claims incurred include paid claims, Outstanding Loss Reserve (OSLR) and Claims Incurred But Not (Enough) Reported (IBN(E)R).
The Provision and payment of claims was considered to be one of the areas which required significant auditor attention and was one of the matter of most significance in the Standalone Financial Statements as the quantum involved is significant.
|
Verified operational guidelines of the Corporation relating to claim processing, have performed test of controls, test of details and analytical review procedures on the outstanding claims. Verified the claim paid and provision on sample basis with payment proof and Preliminary Loss advice received from the Cedant Company and the same is further verified from the surveyor's report.
For the claim cases which has been incurred but not reported and cases in which claim has been reported but not enough reported these cases has been captured by the actuary appointed by the Corporation. The actuarial valuation of liability in respect of Claims Incurred but Not Reported (IBNR) and those Incurred but Not Enough Reported (IBNER) as at March 31st, 2023, is as certified by the Corporation's Appointed Actuary and we had verified the amounts and the related liability, based on such report.
|
|
3.
|
Investments:
The Corporation's investments represents substantial portion of the assets as at March 31st, 2023 which are to be valued in accordance with accounting policy framed as per the extent of the regulatory guidelines.
The valuation of all investments should be as per the investment policy framed by the Company which in turn should be in line with IRDAI Investment Regulations and Preparation of Financial Statement Regulations. The valuation methodology specified in the regulation is to be used for each class of investment.
|
Our audit procedures on Investment included the following:
• Understood Management's process and controls to ensure proper classification and valuation of Investment.
• Verified and obtained appropriate external confirmation for availability and ownership rights related to these investments.
• Tested the design, implementation, management oversight and operating effectiveness of key controls over the classification and valuation process of investments.
• Test-checked valuation of different class of investments to assess appropriateness of the valuation methodologies with reference to IRDAI Investment Regulations along with Company's own investment policy.
|
|
S. No.
|
Key Audit Matters
|
Auditor's response
|
| |
The Company has a policy framework for Valuation and impairment of Investments. The Company performs an impairment review of its investments periodically and recognizes impairment charge when the investments meet the trigger/s for impairment provision as per the criteria set out in the investment policy of the Company. Further, the assessment of impairment involves significant management judgment.
The classification and valuation of these investments was considered one of the matters of material significance in the audit of Standalone Financial Statements due to the materiality of the total value of investments to the Standalone Financial Statements.
|
• Reviewed the Company's impairment policy and assessed the adequacy of its impairment charge on investments outstanding at the year end.
Based on procedures above, we found the company's impairment, valuation and classification of investments in its Standalone Financial Statements in all material respects to be fair.
|
5. Information Other than the Financial Statements and Auditor's Report Thereon
The Corporation's Board of Directors is responsible for preparation of the other information. The other information comprises the information included in the Board's Report including Annexures to Board's Report, Management Discussion and Analysis, Business Responsibility Report and Report on Corporate Governance, but does not include the Standalone Financial Statements and our auditor's report thereon. These other information are expected to be made available to us after the date of this auditor's report. Our opinion on the Standalone Financial Statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the Standalone Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Standalone Financial Statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
When we read the other information, If we conclude that there is a material misstatement therein, we are required to communicate the matters to those charged with governance and determine the actions under the applicable laws and regulations.
6. Responsibilities of the management and those charged with governance for the financial statements
The Corporation's Board of Directors is responsible for matters as stated in section 134(5) of the companies act, 2013 ("the act") with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance and Cash flows of the Corporation in accordance with the Insurance Act 1938 as amended by the Insurance Laws (Amendment) Act, 2015 ('the Insurance Act'), the Insurance Regulatory and Development Authority Act, 1999 ('the IRDAI Act'), the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations, 2002 ('the IRDAI Financial Statements Regulations'), the Companies Act, 2013 ('the Act') including the Accounting Standard specified under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014.
This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the act for safeguarding of the assets of the Corporation and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation & presentation of the Standalone Financial Statements that give a true and fair view and are free from material misstatements, whether due to fraud or error.
In preparing the Standalone Financial Statements, management is responsible for assessing the ability of the Corporation's to continue as Going Concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Corporation or to cease operations, as has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Corporation's financial reporting process.
7. Auditor's Responsibilities for the Audit of the Financial Statements
Our Objective are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatements, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SA's will always detect a material misstatements when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Financial Statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatements of the Standalone Financial Statements, whether due to fraud and error, design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentation, or the override of internal controls.
• Obtain and understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on whether the Corporation has in place and adequate internal financial control systems over financial reporting and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of the management use of going concern basis of accounting and, based on audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Corporation's ability to continue as a going concern. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or condition may cause the Corporation to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of Standalone Financial Statements, including the disclosures, and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with the relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of Standalone Financial Statements of the current period and are therefore the Key Audit Matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
8. Other Matters:
a) We did not audit the financial information of three foreign branches and one Indian branch included in the Standalone Financial Statements, whose audited financial information reflect Premiums earned (Net) (before eliminations) of ? 2,35,35,300 thousands and total profit after tax (before eliminations) of ? 27,32,985 thousands for the year ended March 31st, 2023, as considered in the audited Standalone Financial Statements. These financial information other than Malaysian Branch have been audited by another auditor whose report has been furnished to us except Malaysian Branch. The Corporation's management has converted the financial information of such branches located outside India to accounting principles generally accepted in India and certain conversion adjustments were accounted. We have audited these conversion adjustments made by the Corporation's management.
Our opinion on the Standalone Financial Statements, in so far as it relates to the amounts and disclosures included in respect of these three foreign branches and one Indian branch is based solely on the report of another auditor except for unaudited Malaysian Branch where we have relied on Management certified financial information.
b) The Standalone Financial Statements include the financial information of Dubai branch which has intimated the Run-off branch status as per the audited financial information received for the year ended March 31st, 2023. The auditors of the branch have also stated that the Branch is not looked upon as a Going Concern in the future as a Portfolio Transfer Agreement has been entered on September 14th, 2022 between GIC Gift City Branch and Dubai Branch.
c) The actuarial valuation of liability in respect of Claims Incurred but not Reported (IBNR) and those Incurred but not Enough Reported (IBNER) as at March 31st, 2023 is as certified by the Corporation's Appointed Actuaries and our opinion in so far as it relates to the amounts and disclosures related to such liability, is based solely on such report.
d) The Standalone Financial Statements of the Corporation for the year ended March 31st, 2022, were audited by D.R. Mohnot & Co, one of the joint auditors of the Corporation and other previous joint auditor whose report dated May 27th, 2022 expressed a modified opinion on the Standalone Financial Statements.
Our Report is not modified in respect of the above matters.
9. Report on Other Legal and Regulatory Requirements
1. As required by the IRDAI Financial Statements Regulations, we have issued a separate certificate dated May 25th, 2023 certifying the matters specified in paragraphs 3 and 4 of Schedule C to the IRDAI Financial Statement Regulations.
2. As required by Section 143 (3) of the Companies Act, 2013 and Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations, 2002 and orders or direction issued by the Insurance Regulatory and Development Authority, we report that:
a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and have found them to be satisfactory.
b) In our opinion and to the best of our information and according to the explanations given to us, proper books of account as required by law have been kept by the Corporation so far as it appears from our examination of those books and proper returns (audited/certified) have been received from the four branches, not visited by us.
c) The reports of the three foreign branches and one domestic branch on the accounts of the branch offices of the Corporation audited/certified by the branch auditors under section 143(8) of the Act, have been sent to us and have been properly dealt with by us in preparing this report.
d) The Balance Sheet, Revenue Accounts, Profit and Loss Account and Cash Flow Statement dealt by this Report are in agreement with the books of accounts and with the returns received from the branches/representative offices not visited by us.
e) The Actuarial valuation of liabilities as on March 31st, 2023 is duly certified by the appointed actuary including to the effect that the assumptions for such valuation are in accordance with the guidelines issued by the Institute of Actuaries of India to its members and has been forwarded to IRDAI.
f) The Balance Sheet, Revenue Accounts, Profit and Loss Account have been drawn in accordance with the Insurance Act 1938, IRDAI Act, 1999 and the Act except for the Cash Flow Statement, (Refer Note 55) which is prepared under indirect method, whereas IRDAI regulations require Cash Flow Statements to be prepared under Direct Method.
g) Investments have been valued in accordance with the provisions of the Insurance Act, the regulations and orders/directions issued by IRDAI in this regard except investment which have been considered as fully impaired are not fair valued as required by para 6(c) of the IRDAI Financial Statements Regulations.
h) The Accounting policies selected by the Corporation are appropriate and are in accordance with the applicable accounting standards and with the accounting principles, as prescribed in the IRDAI (Auditor's Report) Regulations, 2002 or any order or direction issued by IRDAI in this behalf.
i) On the basis of written representations received from the directors as on March 31st, 2023 taken on record by the board of directors, none of the directors is disqualified as on March 31st, 2023 form being appointed as a director in terms of section 164(2) of the Act.
j) In our opinion the aforesaid Standalone Financial Statements comply with the Accounting Standards specified under section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014 and Companies (Accounting Standards) Amendment Rules 2016, and also in conformity with the accounting principles prescribed in the IRDAI regulations.
k) With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of section 197(16) of the Act, as amended, we report that the provisions of section 197 of the act are not applicable to the Corporation vide notification No. GSSR 463 (E) dated June 5th, 2015. Hence reporting u/s 197 (16) of the Act is not required.
l) The Corporation being an Insurance Company, the Companies (Auditor's Report) Order, 2020 ("the order") as amended, issued by the Central Government of India in terms of sub section (11) of Section 143 of the Act is not applicable.
m) With respect to the adequacy of the internal financial controls over financial reporting of the Corporation and the operating effectiveness of such controls, refer to our separate report in "Annexure A".
n) As required under section 143(5) of the Companies Act, 2013 based on our audit as aforesaid, we enclose herewith, as per "Annexure B" the directions including the additional directions issued by Comptroller and Auditor General of India, action taken thereon and the financial impact on the accounts and the Standalone Financial Statements of the Corporation.
o) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit & Auditors) Rules 2014, in our opinion and to the best of our information and according to the explanations given to us:
i. The Corporation has disclosed the impact of pending Litigations on its financial position in Note 47 to the Standalone Financial Statements;
ii. Provisions has been made as on March 31st, 2023 in the Standalone Financial Statements, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long term contracts. There were no derivative contracts as on March 31st, 2023.
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Corporation.
iv. (a) The Management has represented that, to the best of their knowledge and belief, no funds (which are material
either individually or in the aggregate) have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entity ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(b) The Management has represented, that, to the best of their knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(c) Based on the audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
v. The Board of Directors of the Company have proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The amount of dividend proposed is in accordance with section 123 of the Act, as applicable.
vi. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 relating to maintenance of audit trail in software systems involved in financial reporting is applicable with effect from April 1st, 2023 to the Company, accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31st, 2023.
For PKF SRIDHAR & SANTHANAM LLP For D.R. MOHNOT & CO
Chartered Accountants Chartered Accountants
ICAI Firm Registration ICAI Firm Registration
No:0039905/S200018 No:001388C
Partner: S Narasimhan Partner: D.R. Mohnot
Membership No. 206047 Membership No. 070579
UDIN: 23206047BGUMVE2414 UDIN: 23070579BGUINC8823
Place: Mumbai Place: Mumbai
Date: May 25th, 2023 Date: May 25th, 2023
|