REPORT ON THE AUDIT OF THE FINANCIALSTATEMENTSOpinion
We have audited the accompanying financial statements of ICICI LOMBARD GENERAL INSURANCE COMPANY LIMITED
("the Company"), which comprise the Balance Sheet as at March 31, 2023, the Revenue accounts of fire, marine and miscellaneous insurance (collectively known as the 'Revenue accounts'), the Profit and Loss account and the Receipts and Payments account for the year then ended, the schedules annexed there to, a summary of the significant accounting policies and other explanatory notes thereon.
In our opinion and to the best of our information and according to the explanations given to us, we report that the aforesaid financial statements, prepared in accordance with the requirements of Accounting Standards as specified under Section 133 of the Companies Act, 2013 (the 'Act'), including relevant provisions of the Insurance Act, 1938, the Insurance Regulatory and Development Authority of India Act, 1999 (the "IRDAI Act") and other accounting principles generally accepted in India, to the extent considered relevant and appropriate for the purpose of these financial statements and which are not inconsistent with the accounting principles as prescribed in the Insurance Regulatory and Development Authority of India (Preparation of Financial Statements and Auditors' Report of Insurance Companies) Regulations, 2002 (the "Regulations") and orders/directions/circulars issued by the Insurance Regulatory and Development Authority of India ("IRDAI"/"Authority"), to the extent applicable ("Applicable Accounting Framework"), 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 Balance Sheet, of the state affairs of the Company as at March 31,2023;
b. in the case of Revenue accounts, of the operating profit in the Fire, Marine and Miscellaneous business for year ended on that date;
c. in the case of Profit and Loss account, of the profit for the year ended on that date; and
d. in the case of Receipts and Payments account, of the receipts and payments for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the 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 together with the ethical requirements that is relevant to our audit of the financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. 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 financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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Sr. No.
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Key Audit Matter
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How our Audit addressed this Key Matter
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1.
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Information Technology Systems and Controls (IT
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Our key audit procedures included, but were not limited to the following:
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Controls):
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We
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obtained an understanding of the Entity's IT related control
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The Company is highly dependent on its complex IT
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environment. Furthermore, we conducted a risk assessment and identified
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architecture comprising hardware, software, multiple
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IT applications that are key for the Company's financial reporting.
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applications, automated interfaces and controls in
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systems for recording, storing and reporting financial
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For the key IT systems relevant to reporting of financial information,
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transactions.
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our
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areas of audit focus included application access, program change
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management, automated transaction and interface controls.
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Large volume of transactions that are processed on daily
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basis as part of its operations, which impacts key financial
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In particular:
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accounting and reporting items such as premium income,
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•
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We obtained an understanding of the Entity's IT environment and
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claims, commission expenses and investments among others.
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key changes if any during the audit period that may be relevant to the audit.
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There exists a risk that, gaps in the IT control environment could result in the financial accounting and reporting
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•
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We sample tested the design, implementation and operating effectiveness of the General IT controls over the key IT systems
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records being materially misstated.
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that are critical to financial reporting. This included evaluation of the Entity's controls to ensure segregation of duties and appropriate
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The controls implemented by the Entity in its IT environment determine the integrity, accuracy,
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access rights.
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completeness, and the validity of the data that is
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•
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Controls over changes to software applications were evaluated to
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processed by the applications and is ultimately used for
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verify whether the changes were approved, tested in an environment
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financial reporting. These controls contribute to mitigating
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that was segregated from operation and moved to production by
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risk of potential misstatements caused by fraud or errors.
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appropriate users.
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Our audit approach relies on automated controls and
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•
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We also evaluated the design and tested the operating effectiveness
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therefore procedures are designed to test control over
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of critical & key automated controls within various business
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IT systems, segregation of duties, interface and system
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processes around the software systems. This included testing
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application controls over key financial accounting and
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the integrity of system interfaces, the completeness and accuracy
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reporting systems.
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of data feeds, system reconciliation controls and automated calculations.
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•
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We also reviewed the Information System Audit Reports and Key audit findings of Internal Audit to assess the impact of observations and management's response if any on financial reporting.
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Results of our tests has provided audit evidence which we have used to draw conclusions including our reporting.
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2.
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Investments (Refer Schedule 8 and 8A):
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Our audit procedures on Investments included the following:
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The Company's investments represent 78% of the
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•
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Understood Management's process and controls to ensure proper
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assets as at March 31, 2023 which are to be valued in accordance with accounting policy framed as per the
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classification and valuation of Investment.
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extant regulatory guidelines.
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•
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Verified and obtained appropriate external confirmation for availability and ownership rights related to these investments.
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The valuation of all investments should be as per the investment policy framed by the Company which in turn
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•
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Tested the design, implementation, management oversight and
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should be in line with IRDAI Investment Regulations
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operating effectiveness of key controls over the classification and
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and Preparation of Financial Statement Regulations. The valuation methodology specified in the regulation is
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valuation process of investments.
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to be used for each class of investment.
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•
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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.
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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
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• Examining the rating downgrades by credit rating agencies and assessing the risk of impairments to various investments.
• Reviewed the Company's impairment policy and assessed the adequacy of its impairment charge on investments outstanding at the year end.
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management judgment.
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Based on procedures above, we found the Company's impairment, valuation and classification of investments in its financial statements in
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The classification and valuation of these investments was considered one of the matters of material significance in the financial statements due to the materiality of the total value of investments to the financial statements.
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all material respects to be fair.
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3.
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Migration of databases used by erstwhile Bharti Axa General Insurance Limited's insurance business
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Our audit procedures included following;
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("Insurance Undertaking") with the Company
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• Obtained understanding of internally approved migration strategy
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and timelines, which also includes business criteria for identifying
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During the year the Company formulated a plan and
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data that needs to be migrated.
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started migrating the historical and as well currently active policy, claims and other relevant electronic data as
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• Obtained understanding of controls designed and implemented
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part of the integration of the Insurance Undertaking.
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as part of migration strategy at various stages of migration and evaluated their adequacy.
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Data Migration involves carefully planning the cutover and data movement strategy, controls to ensure accuracy,
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• Test the checked the operating effectiveness of the designed
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completeness, system of validation and a process for
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controls.
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handling errors in Data Migration. Data Migration is crucial to ensuring integrity and accuracy of the data
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• Enquired and reviewed the process of error handling including
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flowing into financial accounting system that generates
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their ultimate resolution. Designed and executed few audit tests to
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the financial statements of the Company.
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validate accuracy and completeness of the Migrated data.
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Being a one-time activity carrying an important audit risk
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Results of our tests has provided audit evidence which we have used to
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which required our appropriate response as a critical part of our audit strategy.
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draw conclusions including our reporting.
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INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITOR'S REPORT THEREON
The Directors are responsible for the preparation of other information. The other information comprises Directors Report and Management Discussion & Analysis but does not include the financial statements and our auditor's report thereon.
Our opinion on the 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 financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We confirm that we have nothing material to report, add or draw attention to in this regard.
RESPONSIBILITIES OF THE MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS
The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these financial statements that give a true and fair view of the financial position, underwriting results, financial performance and
cash flows of the Company in accordance with the Applicable Accounting Framework.
This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the 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 is also responsible for overseeing the Company's financial reporting process.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the 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 assurance, but it is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, that could reasonably be expected to influence the economic decisions of users taken on the basis of these 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 misstatement of the 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 financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has an 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 ability of the Company to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the 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 auditor's 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 financial statements, including the disclosures, and whether the 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 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.
OTHER MATTERS
The actuarial valuation of liabilities in respect of Incurred But Not Reported (the "IBNR"), Incurred But Not Enough Reported (the "IBNER") and Premium Deficiency Reserve (the "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, 2023 has been duly certified by the Appointed Actuary and in his opinion, the assumptions considered by him for such valuation are in accordance with the guidelines and norms issued by the IRDAI and the Institute of Actuaries of India in concurrence with the IRDAI. We have relied upon the Appointed Actuary's certificate in this regard for forming our opinion on the valuation of liabilities for outstanding claims reserves and the PDR contained in the financial statements of the Company.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by the IRDAI Financial Statements Regulations, we have issued a separate certificate dated 18 April 2023 certifying the matters specified in paragraphs 3 and 4 of Schedule C to the IRDAI Financial Statement Regulations.
2. As required by the paragraph 2 of Schedule C to the IRDAI Financial Statement Regulations and Section 143(3) of the Act, in our opinion and according to the information and explanations give to us, 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 purposes of our audit.
b) As the Company's accounts are centralised and maintained at the corporate office, no returns for the purposes of our audit are prepared at the branches and other offices of the Company.
c) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.
d) The Balance sheet, the Revenue accounts, the Profit and Loss account and the Receipts and Payments account dealt with by this report are in agreement with the books of account.
e) In our opinion, the aforesaid financial statements comply with the applicable Accounting Standards specified under Section 133 of the Act, to the extent they are not inconsistent with the accounting principles prescribed by the Regulations and orders/ directions prescribed by IRDAI in this regard.
f) Investments have been valued in accordance with the provisions of the Insurance Act, the Regulations and orders/directions issued by IRDAI in this regard.
g) On the basis of the written representations received from the directors as on 31st March 2023 taken on record by the Board of Directors, none of the directors is disqualified as on 31 st March 2023 from being appointed as a director in terms of Section 164 (2) of the Act.
h) With respect to the adequacy of the internal financial controls with reference to the financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A".
i) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, 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 financial statements - Refer Note no. 5.1.1 to the financial statements;
ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts. The Company did not have any outstanding long term derivative contracts - Refer Note no. 5.2.22 to the financial statements and "Other Matter" para above;
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended March 31, 2023 - Refer Note no. 5.2.23 to the financial statements.
iv. (a) The Management has represented that,
to the best of its 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 its 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. As stated in Note 5.2.25 to the financial statements:
a) The final dividend proposed in the previous year, declared and paid by the Company during the year is in accordance with Section 123 of the Act, as applicable.
b) The interim dividend declared and paid by the Company during the year and until the date of this report is in compliance with Section 123 of the Act.
c) 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 1, 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 31,2023.
3. With respect to the other matters to be included in the Auditor's report, in terms of the requirements of Section 197(16) of the Act, we report that managerial remuneration payable to the Company's Directors is governed by the provisions of Section 34A of the Insurance Act, 1938 and is approved by IRDAI. Accordingly, the managerial remuneration limits specified under Section 197 of the Act do not apply.
For Chaturvedi & Co. For PKF Sridhar & Santhanam LLP
Chartered Accountants Chartered Accountants
(Firm Registration No. 302137E) (Firm Registration No. 003990S/S200018)
S N Chaturvedi R. Suriyanarayanan
Partner Partner
Membership No. 040479 Membership No. 201402
UDIN: 23040479BGRZNY7592 UDIN: 23201402BGYBTW2044
Place: Mumbai Place: Mumbai
Date: 18 April 2023 Date: 18 April 2023
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