We have audited the accompanying Standalone Financial statements of The New India Assurance Company Limited
(“the Company”), which comprise the Balance Sheet as at March 31, 2024, the Revenue Accounts of Fire, Marine and Miscellaneous Insurance Business (collectively known as 'Revenue Accounts'), Profit and Loss Account and the Receipts and Payments Account for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as “the standalone financial statements”), in which are incorporated the returns for the year ended on that date:
a) From 50 Regional offices (including 14 LCBO's, 2 Legal Hubs, 3 Auto Hub & Gift City), audited by the other firms of Auditors appointed by the Comptroller and Auditor General of India under section 139 of the Companies Act, 2013;
b) From 9 Foreign Branches (including 2 Foreign Run-off offices) and 6 Foreign Agency offices audited by local Auditors appointed by the Company; and
In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion section of our report, the aforesaid Standalone financial statements give the information required, in accordance with the Insurance Act, 1938, as amended (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, as amended (the “IRDAI Financial Statements Regulations”), orders / directions / circulars issued by the Insurance Regulatory and Development Authority of India (the “IRDAI”) and the Companies Act, 2013 (“the Act”), to the extent applicable, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, as applicable to Insurance companies:
a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2024;
b) in the case of Revenue Accounts, of the Operating Profit in so far as it relates to the Fire, Marine Insurance
business and of the Operating Loss so far as it relates to Miscellaneous business for year ended on that date;
c) in the case of the Profit and Loss Account, of the Profit for the year ended on that date; and
d) in the case of the Receipts and Payments Account, of the Receipts and Payments for the year ended on that date.
Basis for Qualified Opinion
Balances due to/from Reinsurers are subject to confirmation, reconciliation and records relating to old balances are being compiled by the Company. Also balances of Inter office accounts, control accounts, certain direct and indirect tax related accounts, unadjusted banking transactions and certain other accounts are pending for reconciliation/confirmation and consequential adjustments and effect thereof if any, is unascertainable and cannot be commented upon. The consequential impact of the above on compliance of tax laws is also unascertainable. [Refer Note No.8, Schedule 16B]
Overall impact of the above and the consequential effects on the state of affairs of the Company as at March 31, 2024, the Revenue Accounts, Profit and Loss Account and the Receipts and Payments Account for the year ended on that date are not ascertainable and cannot be commented upon.
We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditors' Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India ('ICAI') together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made there under, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.
Emphasis of Matter
We invite attention to the following:
a) Note No. 4 of Schedule 16B regarding recognition and utilization of MAT credit amounting to ?184,14.74 lakhs during the year and cumulative amount so recognized and utilized amounting to ?432,17.18 lakhs. The matter being sub-judice at various levels and management assessment of decisions in various forums being in favour of the company.
b) Note No. 8 (b) of Schedule 16B regarding provision of ? 340,75.19 lakhs made in respect of co-insurance balances as per board approved policy and pending confirmation and reconciliation of certain such balances.
c) Note No. 19 of Schedule 16B regarding computation of Reserve for unexpired risk based on actual treaty period for underlying policies during the year where the previous period figures are not comparable.
d) Note No. 21 of Schedule 16B regarding pending identification of MSME vendors and disclosure in respect of amount payable to such Micro and Small Enterprises as at March 31, 2024.
e) Note No. 23 of Schedule 16B regarding strengthening of Internal controls and Internal audit especially in the area of data input and validation in software and unreconciled/ uncompiled Reinsurance / Coinsurance / other accounts/
balances and internal audit system of the company.
f) Note No. 27 of Schedule 16B regarding provision towards wage revision for ?252,87.67 Lakhs based on management assessment.
g) Note No. 30 of Schedule 16B, regarding the compliance of Rule 3(1) of The Companies (Accounts) Rules, 2014 towards audit trail and edit log and pending compliance of Section 128 of the Companies Act 2013 and rules thereunder as amended regarding maintenance of the books of account and other books and papers in an electronic mode and backup thereof in respect of foreign branches which is not accessible in India at all times and backup thereof is not maintained at servers physically located in India.
Our opinion is not modified in respect of the above matters.
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 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 described below to be the key audit matters to be communicated in our report.
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Sr.
No.
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Key Audit Matters
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Auditor's Response
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1.
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Claim Provisioning
Insurance Claim is the major area of expense for the insurance company. The estimation of insurance contract liabilities involves a significant degree of judgement, where management estimate is involved based on the surveyor's report / feedback. The estimate of the claim is complex as it involves high degree of judgement. With regards to the claims provision, the claim department will make provision for claims upon claim intimation and subsequently revise basis the surveyor's immediate loss assessment reports, advocate advice pertaining to MACT / disputed cases, communications from co-insurer leader in cases of incoming co-insurance business etc. The estimates are revised again based on further information.
A range of methods are used to determine these liabilities. Underlying these methods are a number of assumptions relating to expected settlement amount and settlement pattern of claims.
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Principal Audit Procedures performed
• The audit matters for verification of claims provisioning are handled at the Regional Offices of the Company. We have observed that Regional Auditors while auditing the claim provision based on the operational guidelines of the Company relating to claim processing, have performed test of controls, test of details and analytical review procedures on the outstanding claims. They have verified the claim provision with the surveyor's claim estimate, advocate advice, coinsurer leader communication and the Company's feedback on the same. For all old outstanding large claims, fresh estimates from surveyors were called for by the Company and the claim provisions were revised accordingly.
• For the claim cases which has been incurred but not reported and cases where claim has been reported but not enough reported, these cases have been captured by the actuary appointed by the Company. 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 31, 2024, is as certified by the Company's Appointed Actuary.
We have relied upon the work carried out by the respective component auditors in relation to the audit of verification of claim provisions and on the work carried out by the appointed actuary with respect to provision of claims incurred but not reported and claims incurred but not enough reported.
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2.
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Strengthening of Internal control System and Internal Audit required by the Company
On the basis of selective checks carried out during the course of our audit and according to the information and explanation given to us, internal control weaknesses of material nature have been identified as at March 31, 2023 with respect to:
a) Confirmation and reconciliation of various balances relating to co insurers, reinsurers, inter office accounts and other control accounts are pending and are at various stages;
b) Strengthening of process required relating to audit of health claims processed by TPA which is conducted by the offices of the Company.
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Principal Audit Procedures
• We have designed our audit procedures to assess the Company's control risk. We had conducted control test to test the effectiveness of a control used by the Company to prevent or detect material misstatements. Based on the control test, control weaknesses were identified in areas of reconciliation of various receivable and/or payable balances, etc.
• We have considered the reports issued by the professional consultant with respect to review of operational effectiveness of internal controls for Risk Control matrix of the Company.
• Audit of health-related claims processed by TPAs are required to be audited as per policy framed by the Company, however it has been unable to carry out audit of adequate number of claims as per its policy.
Hence these areas are highlighted in paragraphs of Basis for qualified opinion, Emphasis of matter and opinion on internal financial control with reference to standalone financial statements in the Independent Auditors' Report.
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3
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Evaluation of uncertain tax positions
The Company has material uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes. The Company has disputes pending at various levels of tax authorities over the past several years. (Refer Note 1 of Schedule 16C to the Standalone financial statements).
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Principal Audit Procedures Performed
• We have evaluated the appropriateness of the design and tested the operating effectiveness of the management's controls over the tax litigation matters;
• Obtained from the management and perused details of completed tax assessments and demands for the year ended March 31, 2024;
• Reviewed the management's underlying assumptions in estimating the tax provision, the possible outcome of the disputes, legal precedence and other rulings in evaluating management's position on these uncertain tax positions.
• Relied upon the management judgements, industry level deliberations and estimates for possible outflow and opinion of internal experts/ External Tax Advisors/ lawyers of the Company in relation to such disputed tax positions.
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Other Matters
a) We did not audit the financial statements and other financial information of 50 Regional offices (including 14 LCBO's, 2 Legal Hubs, 3 Auto Hub & Gift City) and 9 Foreign Branches (including 2 Foreign Run-off offices) and 6 Foreign Agency offices, included in the Standalone financial statements of the Company whose financial statements reflect total assets of ? 11,27,400.79 Lakhs as at March 31, 2024 and total revenues of ? 40,69,600.50 Lakhs for the year ended on that date, as considered in the Standalone financial statements. The financial statements / information of these Branches/offices have been audited by the other auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these Branches/offices, is based solely on the report of such other auditors.
b) The actuarial valuation of liabilities in respect of Claims Incurred but Not Reported ('IBNR'), Incurred but Not Enough Reported ('IBNER') and Premium Deficiency Reserve ('PDR'), is the responsibility of the Company's Appointed Actuary (the “Appointed Actuary”). The actuarial valuation of these liabilities that are estimated using statistical methods as at March 31,2024 have been certified by the Appointed Actuary and in his opinion, the assumptions for such valuation are in accordance with the guidelines and norms issued by IRDAI and the Institute of Actuaries of India in concurrence with the Authority. We have relied upon the Appointed Actuary's certificate in this regard for forming our opinion on the valuation of liabilities for outstanding claims reserve and PDR, as contained in the standalone financial statements of the Company. [Refer Note No. 28 of Schedule 16B].
c) The standalone financial statements of the Company for the year ended March 31, 2023 were audited by the joint
auditors, one of which is predecessor audit firm and have issued their modified opinion dated May 29, 2023 on such financial statements.
Our opinion is not modified in respect of these matters.
Information other than the financial statements and
Auditor's report thereon
The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Directors' Report & Management Discussion and Analysis and Business Responsibility Report but does not include the Standalone financial statements and our auditors' report thereon. The other information as above is expected to be made available to us after the date of this auditors' report.
Our opinion on the Standalone financial statements does not cover the other information and we will 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 identified above when it becomes available 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 matter to those charged with governance.
Responsibilities of Management and Those Charged with
Governance for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in section 134(5) of 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 receipts and payments of the Company, in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act read with relevant rules issued thereunder, the requirements of the Insurance Act, the IRDAI Financial Statements Regulations and the orders/directions and circulars issued by the IRDAI in this regard, to the extent applicable and in the manner so required.
This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company 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 and presentation of the Standalone financial statements that give a true and fair view and are
free from material misstatement, whether due to fraud or error.
In preparing the Standalone financial statements, management is responsible for assessing the Company's ability to continue as a 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 Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditors' Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the Standalone financial statements as a whole are free from material misstatement, 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 Standard on Auditing will always detect a material misstatement 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 Standard on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the Standalone financial statements, whether due to fraud or 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, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Companies Act, 2013, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls system in place 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 management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the 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 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 the Standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' 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.
Report on Other Legal and Regulatory Requirements
1. As required by the IRDAI Financial Statements
Regulations, we have issued a separate certificate
dated May 22, 2024 certifying the matters specified in paragraphs 3 and 4 of Schedule C to the IRDAI Financial Statements Regulations.
2. As required by IRDAI Financial Statement Regulations and Section 143 (3) of the Act, we report that:
a) We have sought and except for the matters described
in the Basis for Qualified Opinion paragraph,
obtained all the information and explanations
which to the best of our knowledge and belief were necessary for the purposes of our audit.
b) Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph above read with Note No.30 regarding maintenance of audit trail, edit logs and accessibility
and back up of the books of accounts and papers at servers physically located India on a daily basis , in our opinion, proper books of account have been maintained by the Company, so far as it appears from our examination of those books and proper returns from Regional Offices, not visited by us, have been received and these were adequate for the purpose of our audit.
c) The reports of Auditors of Regional Offices, foreign branches and foreign agency offices/ Run-off office, audited under section143(8) of the Act by the respective component auditors have been forwarded to us and have been properly dealt with by us in preparing our report in the manner considered necessary by us.
d) The Balance Sheet, the Revenue Accounts, Profit and Loss Account, and the Receipts and Payments Account dealt with by this Report are in agreement with the books of account and with the returns received from offices not visited by us.
e) Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, the aforesaid Standalone financial statements have been prepared in accordance with the requirements of the Insurance Act, the Insurance Regulatory and Development Act, 1999 and the Companies Act, 2013 to the extent applicable and in the manner so required.
f) Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the aforesaid Standalone Financial Statements comply with the Accounting Standards specified under Section 133 of the Act read with relevant rules issued thereunder.
g) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above.
h) As per notification no. G.S.R 463(E) dated June 5, 2015, the Government Companies are exempted from the provisions of section 164(2) of the Act, accordingly, we are not required to report whether any of the directors of the Company is disqualified in terms of provisions contained in the said section.
i) The accounting policies selected by the company are appropriate and are in compliance with the applicable Accounting Standards specified under Section 133 of the Act read with relevant rules issued thereunder and with the Accounting Principles as prescribed in the IRDAI Financial Statements Regulations and orders or directions issued by the Insurance Regulatory and Development Authority, except for
the possible effects of the matter described in the Basis for Qualified Opinion paragraph above.
j) 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 31, 2024, have been duly certified by the Company's Appointed Actuary and relied upon by us. The Appointed Actuary has also certified that the assumptions considered by him for such valuations are in accordance with guidelines and norms prescribed by the Insurance Regulatory and Development Authority of India and the Actuarial Society of India in concurrence with the IRDAI.
k) As per the information and explanations provided to us, the investments have been valued in accordance with the provisions of the Insurance Act, IRDAI Financial Statements Regulations and orders/ directions issued by IRDAI in this regard.
l) With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure I”.
3. With respect to the other matters to be included in the Auditors' Report in accordance with the requirement of section 197(16) of the Companies Act 2013, as amended, we report that the provisions of section 197 of the Act are not applicable to the company vide notification No. GSR 463(E) dated 5th June 2015. Hence reporting u/s 197(16) of the Act is not required.
4. With respect to the other matters to be included in the Auditors' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us:
i) The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Note 4 (c) of Schedule 16B and Note 1 of Schedule 16C to the Standalone financial statements;
ii) The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on longterm contracts including derivative contracts - The liability for Insurance Contracts, is determined by the Company's Appointed Actuary and is covered by the Appointed Actuary's certificate, referred to in Other Matter paragraph above, on which we have placed reliance; and the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;
iii) There were no amounts which were required to be
transferred to the Investor Education and Protection Fund by the Company;
iv) a) The Management has represented that, to the
best of its knowledge and belief, no funds 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(s) or entity(ies), including foreign entities (“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 (Refer Note 25 (a) of Schedule 16B)
b) The Management has represented that , to the best of its knowledge and belief, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities (“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 (Refer Note 25 (b) of Schedule 16B); and
c) Based on 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 final dividend paid by the Company during the year in respect of the same declared for the previous year is in accordance with section 123 of the Act to the extent it applies to payment of dividend.
As stated in Note no.33, Schedule 16B of the financial statements, 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. Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph above, the dividend proposed is in accordance with section 123 of the Act to the extent it applies to declaration of dividend
vi) Based on our examination which included test checks and based on the reports received from the Regional Auditors and the branch auditors of Foreign Branches except as stated in Note No 30 of Schedule 16B regarding 1 office and certain processes where such compliance was pending,
the company has used accounting softwares for maintaining its books of account which have a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit, we did not come across any instance of audit trail feature being tampered with.
As proviso to Rule 3(1) of Companies (Accounts) Rules 2014 is applicable from April 01, 2023 reporting under Rule 11(g) of the Companies (Audit & Auditors) Rules, 2014 on preservation of audit trail
as per the statutory requirements for record retention is not applicable for the financial year ended March 31, 2024.
5. As required under section 143(5) of the Companies Act, 2013, based on our audit as aforesaid, we give in the “Annexure II”, a report on the directions including additional directions issued by the Comptroller and Auditor General of India ('C&AG'), action taken thereon and its impact on the accounts and financial statements of the Company.
For R. Devendra Kumar & Associates For O P Bagla & Co LLP
Chartered Accountants Chartered Accountants
FRN: 114207W FRN: 000018N/N500091
(Anand Golas) (Ninad Mulay)
Partner Partner
Memebership No. 400322 Memebership No. 161822
UDIN: 24400322BKEBBF3572 UDIN: 24161822BKGFPX8745
May 22, 2024 Mumbai
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