Understanding of Financial

Statement of General Insurance

August 4, 2018 CA Rakesh Rathi

 Indian General Insurance Industry Overview
15th largest market - 0.83% of global non-life premium; Low penetration, insurance
density & favourable demographics present growth opportunity
Non-Life Penetration: Premium as % of GDP (2016) Non-Life Density: Premium per capita (in USD, 2016)
4.3 2449.2

2.8 2.7
1.9 1.8
658.1
0.8
285.3 147.2
113.6 13.2
World US Europe Asia China India World US Europe Asia China India
Source: Swiss Re sigma No. 3/2017 Source: Swiss Re sigma No. 3/2017

Insurance penetration low across segments Non-Life Insurance Industry Premium: Projections
Global
Asset / Risk category Penetration
Benchmark 4800 Bn
17-19%
New cars (<3 yrs.) 80% 85%
Old cars (>3 yrs.) 60% 85% 3900 Bn
15-16%
Commercial vehicles 70% >85%
3500 Bn
Two Wheelers 25% >90% 14-15%

Home < 1% >95%

Retail Health: Mass Affluent 20% 90%
Retail Health: Mass market Very low 75%
Source: FICCI – India General Insurance ‘Vision 2025’ Source: McKinsey

2
2
Indian General Insurance Industry Overview
24 private insurers in the market today; driving growth

In ` Cr.
1973 2001 2007 2012 2015 2017

Nationalization: Sector opened to pvt. Detariffing of market; Motor Pool Insurance Amendment Bill Listing of
107 insurers participation; Motor Pool formed for disbanded:  FDI up to 49% allowed non-life
consolidated into FDI upto 26% allowed; Commercial Vehicles Industry losses  Reinsurance branches insurers
4 state insurers Market size ` 100 Bn at ~ `150 Bn allowed

Key Industry Statistics Non-Life Insurance Industry Premium (in ` Bn)

General Insurers Public – 4 | Pvt. – 21
17 year CAGR (FY01 to FY18)
Standalone Health Insurers (SAHI) 6 Industry Premium – 17.5%
Specialized Insurers (Agri | EXIM) 2 Nominal GDP – 12.8%
1,506
Reinsurers – Indian & Branches 1 | 8 branches
Agents & Brokers ~726,000 and 400
Gross Direct Premium - FY18 ~` 150,600 Cr
Retail: Corporate: Agri share 57 : 26 : 17
98
Public: Private 51 : 49
Policy Count & Average Ticket Size ~180 mn | ~ ` 8,200 FY01 FY18

Offices & Employees ~11,300 offices | Source: GI Council, MOSPI

~125,000 employees
 Free pricing except Motor Third Party Liability
 Partial wording detariffed for Fire /Engg. /Motor

Source: IRDAI, GI Council 3

3
Industry Overview
Industry growth at 18% for FY18; Motor TP, Health & PA drive growth
In ` Cr
FY17 FY18
Name of the Insurer
GDP Mkt Shr Growth GDP Mkt Shr Growth
ICICI Lombard 10,725 8.4% 33% 12,357 8.2% 15%
Bajaj Allianz 7,633 6.0% 31% 9,445 6.3% 24%
HDFC ERGO 6,189 4.9% 46% 7,290 4.9% 18%
IFFCO Tokio 5,564 4.4% 51% 5,632 3.7% 1%
Tata AIG 4,168 3.3% 41% 5,436 3.6% 30%
Reliance 3,935 3.1% 41% 5,069 3.4% 29%
Cholamandalam 3,133 2.5% 28% 4,102 2.7% 31%
SBI General 2,604 2.0% 28% 3,544 2.4% 36%
Royal Sundaram 2,204 1.7% 29% 2,623 1.7% 20%
Universal Sompo 1,287 1.0% 42% 2,311 1.5% 80%
Shriram 2,041 1.6% 2% 2,101 1.4% 3%
Future Generali 1,816 1.4% 17% 1,906 1.3% 5%
Bharti AXA 1,297 1.0% 2% 1,758 1.2% 36%
Others 1,145 0.9% 35% 1,852 1.2% 53%
Private Total 53,742 42.1% 35.4% 65,426 43.4% 21.6%
Star Health 2,962 2.3% 48% 4,145 2.8% 40%
Apollo Munich 1,302 1.0% 27% 1,718 1.1% 32%
SAHI Others 1,596 1.3% 42% 2,436 1.6% 53%
SAHI Total 5,860 4.6% 41.1% 8,298 5.5% 41.7%
New India 19,098 15.0% 26% 22,696 15.1% 19%
United India 15,801 12.4% 29% 17,300 11.5% 8%
National 14,001 11.0% 17% 16,339 10.9% 15%
Oriental 10,798 8.5% 30% 11,450 7.6% 6%
Public Total 59,698 46.8% 25.0% 67,785 45.1% 13.8%
AIC 7,064 5.5% 101% 7,823 5.2% 11%
ECGC 1,268 1.0% -4% 1,240 0.8% -2%
Spl PSUs Total 8,332 6.5% 73.0% 9,063 6.0% 8.8%
Grand Total 1,27,631 100% 32.0% 1,50,572 100.0% 18.0%

4
Source: GI Council 4
Framework of the Financial system of India

Ministry of
Finance

SEBI
RBI IRDAI PFRDA
(Capital Market, MF & (Insurance)
(Banking) (Pension funds)
Commodity market)

NHB
(Housing)

5
Statutes and Regulations-Governing Laws

 Regulator - Insurance Regulatory and Development Authority (IRDAI) operating under

the Ministry of Finance, Government of India.
 Insurance Act, 1938, Insurance Law (Amendment) Act, 2015 and Rules thereunder
– Amendments to be approved by parliament only
 Regulations – Amendments by Board of IRDAI
 Circulars, corrigendums, guidelines & Orders issued by operative management of
IRDAI
 The Companies Act, 2013 w.e.f April 1, 2014; The Companies Act 1956 upto March
31, 2014
 The Income Tax Act, 1961 and Rules made thereunder
 Good and Services Tax Act, 2017 and Service Tax under The Finance Act 1994
 Foreign Exchange Management Act, 1999
 Labour related laws

6
Important Provisions -Insurance
Rural & Social Obligation:
• Obligation of doing business in the Rural and Social sector (Sec. 32B, 32C and IRDAI (Obligations of
Insurers to Rural and Social Sectors) Regulations 2015)
 Rural Obligation – 7% of the Direct Written Premium
 Social Obligation (No. of lives) – basis no. of years in operations – 5% of last year’s total lives
covered under individual and group policies in relation to A&H.
Commission, Brokerage & Rewards :
 Prohibition to pay commission / brokerage or otherwise for procuring business to person(s) other than
agent(s) or broker(s) (Sec.40)
 Agency Commission / Brokerage / Rewards can be paid only to the extent permitted by IRDAI (Payment
of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries)
Regulations, 2016. The insurance Company cannot pay to agents / brokers any amount other than
Commission/Brokerage /Reward under any other name.
Prohibition of rebates (Sec. 41):
 No person shall allow or offer any rebate of premium for taking out or renewing or continuing a policy
except such rebate as may be allowed in accordance with the publish prospectus or tables of the
insurer.
64 VB – Premium to be received in advance:
 No risk to be assumed unless receipt of premium in advance in the manner prescribed by IRDAI. Also,
any refund of premium (cancellation of policy, excess premium received etc.) should be in the name of
insured. (Sec.64VB)

7
Important Provisions -Insurance
40 C – Limitation of Expenses :
• The total expenses (Commission/Brokerage and operating expense) regulated
under Section 40C of the Insurance Act 1938 and IRDAI (Expense of
Management of Insurers transacting General or Health Insurance business)
Regulations, 2016, not to exceed approx. 32%-33% of GWP
Implication: To ensure compliance, need to maintain balanced composition of
business with corporate and rural business at ~ 35-40% of GWP
Solvency Ratio
 The total Available Solvency Margin (ASM) to Required Solvency Margin (RSM).
Both ASM and RSM is calculation as per the method prescribed under regulation
and circulars issued by the authority in this regard
Implication: Solvency ratio determines health of the insurance company and
thereby its ability to honour claims when they arise

8
Investment Regulations

Government Securities Minimum 20%

Minimum 30%
Government Securities or Other Approved Securities
including 20% in
Government sec.

Housing and loans to State Government for housing Minimum 15%

and fire fighting equipments and Investments
in infrastructure sector

Other Investments Maximum 55%

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Insurance Terminology
 Gross Written Premium (GWP)
 Gross Direct premium (GDPI) plus
 Reinsurance accepted
 Net Written Premium (NWP) = GWP less Reinsurance ceded
 Unexpired Premium Reserve (UPR)
 1/365 method
 Net Earned Premium (NEP)
 NWP less Change in UPR (Unearned Premium c/f (less) Unearned Premium b/f)
 Net commissions
 Gross commission and brokerage less
 Reinsurance commission income
 Net incurred claims
 Gross claims paid direct & Reins accepted less
 Recoveries on reinsurance ceded plus
 Change in Outstanding claims (net of RI ceded) plus
 Change in IBNR & IBNER: Claim (Accident Event) may have incurred in the year
of accounting but not intimated/reported/ Not enough reported till year-end.
Valued based on actuarial methods.
 Other Claims related expenses (Solatium Fund, TPA charges, Pre inspection
charges, etc.,)
 Expenses of management
 All operating expenses of the Company
10
 Basis of preparation of Financial Statement
The basic accounting principles remain same for accounting of general insurance business. On
account of peculiar nature of general insurance business, there are certain intricacies in accounting
of various general insurance transactions

Insurance Regulatory and Development Authority (Preparation of Financial Statements & Auditor’s
Report of Insurance Companies) Regulations, 2002

All mandatory Accounting Standards issued by The Institute of Chartered Accountants of India to
be adhered to subject to the following:

(i) Accounting Standard 3 (AS 3), Cash Flow Statements – Cash Flow Statement shall be prepared
only under the Direct Method.

(ii) Accounting Standard 13 (AS 13), Accounting for Investment is not applicable.

(iii) Accounting Standard 17 (AS 17) – Segment Reporting – as prescribed under IRDAI Regulation –
Any other segment contributing more than 10% of the total premium of the insurer shall be shown
separately.
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11
 Financial statements

The financial statements of a General Insurance Company include:

Profit and Loss

Revenue Account Balance Sheet
Account

Misc Miscellaneous –
Fire Marine
Motor, Work e ’s Co p.,
Engineering, Public/Product Liability,
Marine – Marine Cargo and Aviation, Personal Accident,
Marine Others Health, Weather /Crop and Others

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12
Revenue Account

 As per IRDAI, separate revenue accounts to be prepared for Fire, Marine

and Miscellaneous business.

 Miscellaneous business includes Motor, Workmen’s Comp., Engineering,

Public/Product Liability, Aviation, Personal Accident, Health and Others
lines of businesses.

The contents of a Revenue Account is as under:

Income
 Premium Earned (Net) (NEP)
 Investment Income (Policy holders’ share)
Total Income (A)
Expenses
 Claims Incurred (Net of reinsurance recovery)
 Commission, Brokerage (Net of commission on RI ceded)
 Operating Expenses
Total Expenses (B)
Operating Profit (Loss) for the Period (A-B)

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Sample Revenue Account
( ` '000)
Particulars Schedule FIRE MARINE MISCELLANEOUS
TOTAL
INSURANCE INSURANCE INSURANCE

1 Premiums Earned (Net) 1 976,000 590,000 20,472,000 22,038,000

Profit/Loss on Sale/Redemption of
2 Investments (Net) 23,000 8,000 494,000 525,000
Accretion/(Amortisation) of Debt
3 Securities (2,000) (1,000) (78,000) (81,000)

4 Others: - - - -

5 Interest, Dividend and Rent – Gross 326,000 65,000 5,547,000 5,938,000

TOTAL (A) 1,323,000 662,000 26,435,000 28,420,000

1 Claims Incurred (Net) 2 626,000 374,000 16,302,000 17,302,000

2 Commission (Net) 3 (186,000) 35,000 (2,427,000) (2,578,000)

Operating Expenses Related to
3 Insurance Business 4 748,000 267,000 6,849,000 7,864,000

4 Premium Deficiency - - - -

TOTAL (B) 1,188,000 676,000 20,724,000 22,588,000

Operating Profit/(Loss) (A-B) 135,000 (14,000) 5,711,000 5,832,000

APPROPRIATIONS

Transfer to Shareholders' Account 135,000 (14,000) 5,711,000 5,832,000

Transfer to Catastrophe Reserve - - - -

Transfer to Other Reserves - - - -

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TOTAL (C) 135,000 (14,000) 5,711,000 5,832,000
Profit and Loss Account

 Operating Profit /(Loss) ( As per three Revenue Accounts)

 Add: Income from Investments ( Shareholders’ share)
 Less: Expenses other than those relating to Insurance business
(e,g. Bad Debts, Expenses indicated by IRDAI to be borne by
Shareholders etc.,)
 Profit / (Loss) before tax (PBT)
 Less: Provision for Taxation
 Net profit / (Loss) for the period after tax (PAT)
 Less: Appropriations (Dividends, Transfer to Reserve)
 Balance carried forward to Balance sheet

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Sample Profit and Loss Account
Particulars ( ` '000)
OPERATING PROFIT/(LOSS)
Fire Insurance 135,000
Marine Insurance (14,000)
Miscellaneous Insurance 5,711,000
5,832,000
INCOME FROM INVESTMENTS
Interest, Dividend and Rent – Gross 1,102,000
Profit on sale of investments 186,000
Accretion/(Amortisation) of Debt Securities (28,000)
1,260,000
OTHER INCOME -
TOTAL (A) 7,092,000
PROVISIONS (OTHER THAN TAXATION)
For dimunition in the value of investments -
For doubtful debts -
-
OTHER EXPENSES
Expenses other than those related to insurance business
Employees' related remuneration and welfare benefits 35,000
Corporate Social Responsibility Expenses 46,000
Remuneration to directors and others 4,000
Interest on Debentures 1,90,000
TOTAL (B) 2,75,000

PROFIT/(LOSS) BEFORE TAX 6,817,000

Provision for Taxation
- Current Tax / Minimum Alternate Tax (MAT) 10,55,000
- Deferred Tax 86,000
PROFIT/(LOSS) AFTER TAX 5,676,000
APPROPRIATIONS
Balance of Profit/(Loss) brought forward from previous year 4 51,000
BALANCE CARRIED FORWARD TO BALANCE SHEET 6,127,000

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Balance sheet
Balance sheet : Summarises Assets and Liabilities of a Company on a specific
date.
Major component of Balance sheet of a General insurer include :
 Liabilities
 Share capital
 Reserves & Surplus
 Accumulated profits
 General reserve
 Share Premium
 Any other Specific Reserve
 Fair Value Change (Change in Market value of Equity and Mutual fund
Investments)
 Borrowings includes Other forms of Capital
 Assets
 Investments – Shareholder’s and Policy holder’s
 Fixed assets
 Net Current assets (Current assets (less) Current liabilities)
 Debit Balance in Profit and loss a/c (Accumulated Losses)

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Sample Balance sheet
Particulars ( ` '000) ( ` '000)
SOURCES OF FUNDS
SHARE CAPITAL 7,050,000
RESERVES AND SURPLUS 13,127,000

FAIR VALUE CHANGE ACCOUNT - SHAREHOLDERS 48,000

FAIR VALUE CHANGE ACCOUNT - POLICY HOLDERS 155,000

BORROWINGS 2,500,000

DEFERRED TAX LIABILITY 86,000

TOTAL 22,966,000
APPLICATION OF FUNDS
INVESTMENTS - SHAREHOLDERS 18,900,000
INVESTMENTS - POLICYHOLDERS 67,269,000
LOANS -
FIXED ASSETS 2,110,000
CURRENT ASSETS
Cash and Bank Balances 3,406,000
Advances and Other Assets 28,949,000
Sub-Total (A) 32,355,000
CURRENT LIABILITIES 72,365,000
PROVISIONS 25,303,000
Sub-Total (B) 97,668,000

NET CURRENT ASSETS/(LIABILITIES) (C) = (A-B) (65,313,000)

MISCELLANEOUS EXPENDITURE -
(to the extent not written off or adjusted)
DEBIT BALANCE IN PROFIT AND LOSS ACCOUNT -
TOTAL 22,966,000

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Investment

Investment is Segregated in Policy holders fund and Shareholders fund

as prescribed under IRDAI Regulation
Policyholders’ Fund comprise of followings :
 Reserves for outstanding Claims
 Reserves for IBNR and IBNER
 Reserves for Unexpired risk (URR)
 Policy Holder’s Due
 Balance due to / from insurance and Reinsurance Companies
 Outstanding Premium
 Premium Received in Advance
 Unallocated Premium

Shareholders’ Fund :
 Balance amount after reducing Policy holders fund from total
Investment

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Current Assets / Current Liabilities
Current Assets
 Cash and Bank Balance
 Advances to employees and suppliers.
 Income accrued on Investments (due dates of interest after reporting date)
 Outstanding Premium
 Due from other entities carrying insurance business (co-insurance and
reinsurance receivables)
 Deposits for premises
Current Liabilities and Provisions
 Balance due to other Insurance Companies (co-insurance and reinsurance
payables)
 Premium received in advance (for policies commencing after reporting date)
 Sundry Creditors (mainly suppliers)
 Claims outstanding including IBNR (pending approval, payment)
 Unclaimed Amount of Policy holders
 Reserve for Unexpired Risk (premium portion proportionate to policy period falling
into next reporting period)

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Accounting policies and Notes

 Disclosure as per Accounting standards, IRDAI regulations (including

circulars and notifications), Companies Act 1956 and Companies Act
2013

 Major component of Notes to accounts includes:

 Significant accounting policies of the Company
 Disclosures pertaining to IRDAI Regulations such as LOB wise
Reinsurance cession and retention, Claims paid in India and Outside
India, Rural / Social Obligation, etc.
 Details of deferred tax Assets/ (Liabilities)
 Related party disclosure
 Segment wise reporting

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Ratios for Performance Evaluation
Gross ratios
Net retention ratio = NWP / GWP
Explaining the quantum of risk retained by a Company
Gross Expense ratio = EOM / GWP
Expenses incurred for running the Company
Net ratios
Net Loss Ratio = Net incurred claims / NEP
Claims borne by the Company on the earned premiums
Net Expense ratio = Total Expenses (commission (net of RI
commission) (plus) EOM) / NWP
Total expenses of the Company to the amount of premium retained
Combined ratio = Net loss ratio + Net Expense ratio
Indicating the quality of the business of the Company
Solvency ratio = Ratio of Available Solvency Margin to
Required Solvency Margin
(Minimum 1.50)
Solvency ratio determines health of the insurance company and thereby its ability to honour claims
when they arise 22
Ratios for Performance Evaluation

( ` in Cr)
Particulars FY 20XX
Gross Written Premium 6,603
Net Written Premium 2,665
NWP/ GWP Ratio 40.4%
Net Earned Premium (NEP) 2,204
Net Claim Incurred 1,730
Net Commission (258)
Operating Expenses 786
Underwriting Profit / (Loss) (55)
Investment Income 764
Other Expenses 28
Profit/(Loss) before Taxes 682
Taxes 114
Profit/(Loss) after Taxes 568
Networth 2,018
Key Ratios
Expense Ratio to GWP 11.9%
Expense Ratio to NWP 19.8%
Loss Ratio 78.5%
Combined Ratio 98.3%
ROE 28.1%

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Valuation of Listed Insurance Companies
( ` in Crore)
Valuation at IPO At Current Performan
Name of the Insurer IPO Market Price Current Market Valuation ce Since
Price Cap Price Cap P/ Listing
Non Life Listing Date ( in ` ) ( in ` ) P/E P/GWP P/B ( in ` ) ( in ` ) P/E GWP P/B
ICICI Lombard General
Insurance Company Ltd Sep 27, 2017 661 29,992 42.7 2.4 8.1 716 33,424 37.8 2.7 7.1 8.32%
General Insurance
Corporation of India Oct 25, 2017 912 80,001 25.6 1.9 4.5 702 61,833 19.1 1.5 1.2 -23.03%
The New India
Assurance Company Ltd Nov 13, 2017 800 65,920 65.4 2.5 6.0 649 52,904 24.2 2.0 3.6 -18.88%
Our General Insurance
Company - - - 252 17,767 31.3 2.7 8.8

Note: Market Cap is considered as of June 5, 2018 and Book Value, PAT and GWP is taken as of FY18.
Valuation of Our General Insurance Company is done based on simple average of values arrived considering
multiples of ICICI Lombard General Insurance Company Limited being only one private insurer

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Update on IND AS -Insurance
The Ministry of Corporate Affairs vide Notification no. G.S.R 111(E) dated 16 Feb
2015 notified the Companies (Indian Accounting Standards) Rules, 2015 (Rules).

The Insurance Regulatory and Development Authority of India (IRDAI) vide

circular no. IRDA/ F&A/ CIR/IFRS/038/03/2016 dated March 1, 2016, directed
insurance companies to constitute steering committee to monitor and implement
IND AS, in order:

 To prepare first IND AS financial statements from April 1, 2018 onwards, and
 To submit proforma IND AS Financial statements to the Authority from the
quarter ended December 31, 2016, onwards.

Further, The Insurance Regulatory and Development Authority of India (IRDAI)

vide circular no. IRDA/ F&A/ CIR/ACTS/146/06/2017 dated June 28, 2017,
deferred the implementation of IND AS in the Insurance Sector in India for a
period of two years and the same shall now be implemented effective 2020-21.
Deferment is done in view of new IND AS 117 on Insurance Contracts (replaces
IND AS 104) would be applicable from April-2020-21.

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Thank You
Schedules 1 to Revenue Account
PREMIUM EARNED (NET) ( ` '000)
Marine
*
Fire Total
Marine Cargo Marine Hull Marine Total Miscellaneous

Premium from direct business written-net of

Service tax/GST 6,197,000 1,146,000 397,000 1,543,000 57,184,000 64,924,000

Add: Premium on Re-insurance accepted 705,000 128,000 - 128,000 277,000 1,110,000

Less: Premium on Re-insurance ceded (5,602,000) (714,000) (344,000) (1,058,000) (32,728,000) (39,388,000)

Net Premium 1,300,000 560,000 53,000 613,000 24,733,000 26,646,000

Add/(Less): Adjustment for changes in
reserve for unexpired risks (324,000) (22,000) (1,000) (23,000) (4,261,000) (4,608,000)

Total Premium Earned (Net) 976,000 538,000 52,000 590,000 20,472,000 22,038,000

 Premium - In the contract of insurance, it is the price for which the

insurer undertakes to discharge his liabilities under the contract to pay
the sum insured in case the event insured against happens.

 Coinsurance: Is the distribution of the insurance business made by the

insured amongst various insurers. The liability of each insurer in the loss
shall be limited to the proportion set against each.

 Reinsurance: Arrangement by an insurer with another insurer (re-insurer)

for spreading the accepted risks and protecting retained risks
27
Schedules 1 to Reve ue Accou t Co t…
Workmens Total
Miscellaneous Premium Public Personal Health
Motor-OD Motor-TP Motor Total Compensati Engineering Aviation Weather/Crop Others Miscellaneo
Breakup Liability Accident Insurance
on us

Premium 7,166,000 9,389,000 16,555,000 134,000 43,000 1,231,000 210,000 5,424,000 9,913,000 21,011,000 2,663,000 57,184,000
Add: Premium on Re-
insurance accepted - - - - - 84,000 71,000 3,000 13,000 - 106,000 277,000
Less: Premium on Re-
insurance ceded (3,451,000) (2,392,000) (5,843,000) (5,000) (22,000) (1,051,000) (203,000) (1,725,000) (4,282,000) (18,102,000) (1,495,000) (32,728,000)

Net Premium 3,715,000 6,997,000 10,712,000 129,000 21,000 264,000 78,000 3,702,000 5,644,000 2,909,000 1,274,000 24,733,000
Add/(Less): Adjustment for
changes in reserve
for unexpired risks (1,277,000) (770,000) (2,047,000) (3,000) 3,000 (15,000) 56,000 (837,000) (962,000) (248,000) (208,000) (4,261,000)
Total Premium Earned
(Net) 2,438,000 6,227,000 8,665,000 126,000 24,000 249,000 134,000 2,865,000 4,682,000 2,661,000 1,066,000 20,472,000

28
Schedules to Reve ue Accou t co t….
Schedule 2 - CLAIMS INCURRED (NET) ( ` '000)
Marine
*
Fire Marine Total
Marine Cargo Marine Hull Miscellaneous
Total

Claims paid direct 2,559,000 871,000 55,000 926,000 32,789,000 36,274,000

Add: Claims on Re-insurance accepted 196,000 27,000 2,000 29,000 105,000 330,000

Less: Claims on Re-insurance ceded (2,216,000) (481,000) (69,000) (550,000) (21,379,000) (24,145,000)

Net Claims paid 539,000 417,000 (12,000) 405,000 11,515,000 12,459,000

Add: Claims Outstanding at the end of the
year 761,000 504,000 3,000 507,000 27,685,000 28,953,000
Less: Claims Outstanding at the
beginning of the year (674,000) (533,000) (5,000) (538,000) (22,898,000) (24,110,000)

Total Claims Incurred (Net) 626,000 388,000 (14,000) 374,000 16,302,000 17,302,000

Note: Claims Outstanding includes IBNR (incurred but not reported )and IBNER (incurred but not enough reported)

Schedule 3 - COMMISSION (NET) ( ` '000)

Marine
*
Fire Marine Total
Marine Cargo Marine Hull Miscellaneous
Total

Commission paid direct 445,000 101,000 3,000 104,000 4,574,000 5,123,000

Add: Commission paid on Re-insurance
accepted 51,000 7,000 - 7,000 29,000 87,000
Less: Commission received on Re-
insurance ceded (682,000) (68,000) (8,000) (76,000) (7,030,000) (7,788,000)

Net commission paid/(received) (186,000) 40,000 (5,000) 35,000 (2,427,000) (25,78,000)

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Schedules to Reve ue Accou t co t….
OPERATING EXPENSES RELATED TO INSURANCE BUSINESS ( ` '000)
Marine
Fire * Miscellaneous Total
Marine Cargo Marine Hull Marine Total
Employees’ remuneration and welfare
benefits 273,000 50,000 15,000 65,000 2,280,000 2,618,000

Travel, conveyance and vehicle running

expenses 9,000 1,000 - 1,000 78,000 88,000

Training expenses 57,000 10,000 3,000 13,000 477,000 547,000

Rents, rates and taxes 41,000 7,000 2,000 9,000 340,000 390,000

Repairs 15,000 2,000 - 2,000 126,000 143,000

Printing and stationery 11,000 2,000 - 2,000 93,000 106,000

Communication 6,000 1,000 - 1,000 47,000 54,000

Legal and professional charges 165,000 29,000 8,000 37,000 1,375,000 1,577,000
Auditors' fees, expenses etc
(a) as auditors - - - - 4,000 4,000
(b) as advisor or in any other capacity, - - - - - -
(c) in any other capacity - - - - 2,000 2,000

Advertisement and publicity 66,000 16,000 1,000 17,000 866,000 949,000

Interest and bank charges 5,000 101,000 - 101,000 324,000 430,000

Others: - - - - -

Electricity expenses 7,000 1,000 - 1,000 63,000 71,000

Office expenses 3,000 - - - 26,000 29,000

Miscellaneous expenses 7,000 1,000 - 1,000 57,000 65,000

Information Technology expenses 37,000 7,000 2,000 9,000 311,000 357,000

Postage and courier 14,000 2,000 - 2,000 116,000 132,000

Loss on sale of assets (net) 4,000 - - - 30,000 34,000

Depreciation 28,000 5,000 1,000 6,000 234,000 268,000

Total Operating Expenses 748,000 235,000 32,000 267,000 6,849,000 7,864,000 30

Solvency

LoB Factor
Fire 0.50
Marine: Cargo 0.60
Marine: Hull 0.50
Motor 0.75
Engineering 0.50  Solvency calculation is governed by IRDAI (Assets, Liabilities and Solvency Margin of
Aviation 0.50 General Insurance Business) Regulations, 2016
Liability 0.75  IRDAI has prescribed minimum solvency ratio to be maintained at 1.5 times
Crop insurance 0.50  Solvency return submission to IRDAI on a Quarterly basis
Others 0.70

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Combined Ratio
Key indicator of the performance of a Product / Line of business and company as a
whole

Combined Ratio

Net Expense
Net Claims Ratio +
Ratio

Claims Paid Acq. Cost

Net Earned Net Written
Add: Chg. In OS ÷ Add: Opex ÷
Premium (NEP) Premium (NWP)
Add: Chg. In IBNR Less: RI Income

Ratio lower than 100% indicated that the product / line of business / company is profitable

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