DIRECTORS
TO MEMBERS
Your directors have pleasure in presenting the eleventh annual report together with the
audited financial statements of the Company for the year ended March 31, 2012.
Financial Highlights
Rs. in million
| Particulars |
2011-2012 |
2010-11 |
| Gross Written Premium (GWP) |
|
|
| i. Direct |
13465 |
9680 |
| ii. Reinsurance Acceptance |
1593 |
786 |
| Total GWP |
15058 |
10466 |
| Net Earned Premium |
7565 |
5576 |
| Net Claims Incurred |
4801 |
3407 |
| Net commission and expense of Management |
2933 |
2302 |
| Investment Income |
755 |
521 |
| Other Income (net) |
Nil |
Nil |
| Operating Profits |
586 |
388 |
| Motor pool losses (Net of investment income) |
431 |
(614) |
| Profit before tax |
155 |
(226) |
Industry Scenario
In FY 2011-12, the general insurance industry grew in the backdrop of strong growth in
industrial and service sector. The Gross Written Premium (GWP) of non-life Insurers is
reported at around Rs. 530,336 million, a growth of around 24% over the previous year.
Motor and health insurance continued to constitute a significant portion of the insurance
portfolio and are the prime engines of growth. However, the inadequate premium pricing in
the industry, particularly in the commercial lines of business continues to seriously
impact underwriting profitability.
Summary of Company Performance
The Company achieved a GWP of Rs.13,465 million registering a growth of 39% over the
previous year. The Companys market share was 2.53% during this year.
In its ninth full year of operations, the Company attained an operating profit before
tax of Rs. 586 million (other than motor pool). In line with the IRDA circulars / orders
mandating additional provisioning with respect to Indian Motor Third Party Insurance Pool
(IMTPIP) issued during the year, the Company had to absorb Rs.662 million during the year
(after availing the deferred absorption option provided by the Regulator) pegging the
profit before tax at Rs.155 million.
The dismantling of the IMTPIP effective March 31, 2012, the constitution of the Indian
Motor Third Party Declined Risk Pool for exclusive third party risks of commercial
vehicles effective April 1, 2012 (which size is expected to be a fraction of the IMTPIP),
the enhancement of private car claims deductibles and the increase in premium rates for
motor third party liability insurance by 17% to 20% from April 1, 2012 are all welcome
steps by IRDA that are likely to propel the industry forward in terms of profitability.
Business Operations
During the year ended March 31, 2012, the Company recorded (a) growth in its top-line
by clocking a GWP of Rs.13,465 million (b) highest operating profits of Rs.586 million (c)
improvements in productivity of staff and locations (d) strong progress in process
improvements through use of technology. Some of the specific steps taken by the Company
for achieving the growth with profitability include (a) leveraging on its bancassurance
tie-ups, (b) growing market share in its tie up with auto manufacturers (c) introduction
of new products (d) growing the government business (RSBY) (e) enhancing rural focus with
strong growth in tractor insurance (f) further improvement in combined ratio (g) improved
claims processes in recovery of stolen vehicles, salvage realization etc. and (h)
continued focus on control of operating expenditure.
Personal Lines
During the year, the Company continued to leverage the
"bancassurance-financier-manufacturer" tie-ups to grow its retail business. The
Company signed up the corporate agency agreement with M/s Central Bank of India during the
year.
The Company further continues to strengthen its proprietary channels - agents,
cross-selling teams etc. The Company partners with the respective state governments in
their insurance scheme under Rashtriya Swasthya Bhima Yojana scheme in the states of
Bihar, Gujarat, Jharkand, West Bengal and Maharashtra.
With a view to enhance the productivity of branches and consolidate its business
volumes, the Company continued to rationalise its branches and the total number of
branches as at the end of the year stood at 93. With an eye on profitability, the business
sourcing was also optimised across geographies in line with the risk-return matrix.
The GWP in personal lines viz., motor, travel and health grew to Rs. 9019 million
(previous year Rs. 6981 million).
Commercial Lines
The Company continued its cautious stance in the underwriting of fire and engineering
risks considering the intense competition and heavy discounting of premium. The
underwriting and pricing norms remained tightened for acceptance of group health accounts.
The Company continues to leverage on the strengths of Cholamandalam MS Risk Services
Ltd. which has considerable capabilities in the areas of process safety, construction
safety, fire investigations, transportation risk analysis etc.
The Company continues its leadership position amongst the Japanese & Korean
customers.
Underwriting
In the light of the current competitive business environment, the Company continues to
adopt prudent and cautious approach in selection of risks and pricing. The Company has
been leveraging its database and information technology capabilities efficiently, in
arriving at appropriate underwriting solutions to its clients, both corporate and
individual. By undertaking portfolio review process continuously for each line of
business, the Company strives to achieve significant quality improvement in its
underwriting practice to ensure proper underwriting controls and effecting periodic and
timely price corrections.
Claims
During the year under review, the claims management function of the Company undertook
several initiatives focused on customer centricity, process improvements and containing
the claims ratios. Over 1,00,000 claims were settled during the year.
More specifically, the focus areas during the year were (a) improving the turnaround
time of claim settlements across the lines of business (b) strengthening the processes for
minimising the impact of stolen vehicles claims (c) working on multiple initiatives aimed
at reducing the severity in motor claims (d) value added services to customers in the form
of health camps etc.
The Company was also recognised as the best insurance company for in time claims
settlement in the Governments RSBY scheme for the second consecutive year in FY 2011-12.
Reinsurance
The Company had formulated its reinsurance program in line with the guidelines laid
down by the Regulatory authority. GIC Re, as the lead reinsurer is supported by several
other global reinsurers. The reinsurance arrangement helps the Company to utilise its
capital efficiently besides ensuring that the Companys Balance Sheet is not significantly
impacted due to any single large loss or a loss affecting number of risks due to a single
catastrophic event.
Globally, year 2011-12 is considered as one of the adverse years of natural calamity
exposing the reinsurers to large losses worldwide - Japan Tsunami / New Zealand floods /
Thailand floods etc. which has led to the tightening of the reinsurance terms by
introduction of Event limits, sliding scale commissions etc.
Investments
The Companys investment portfolio (other than motor pool) grew to Rs. 9392 million as
at March 31, 2012 (Rs.7332 million as of March 31, 2011). During the year, the Company put
in place an Asset - Liability Management framework. The prudent investment management
policy with its emphasis on the objectives of safety, liquidity and optimising yield aided
by the interest rate environment helped in growing the investment income to Rs.755 million
(previous year Rs.521 million) and in securing a gross yield of 8.50% (previous year
7.84%)
Human Resources
The focus for the year under review continued to be on employee engagement including
talent management and training.
The employee engagement activities like festivity celebrations, sports activities,
health camps, rewards and recognition programmes continued during the year. Further, the
exclusive womens forum - Shakti facilitated several initiatives like flexi working hours
for women employees, quality working conditions etc., The employees of the Company also
carried out voluntary relief activities in Pondicherry for helping the victims of the
Thane cyclone in December 2011. Greater thrust on training - functional as well behavioral
was given during the year under review. This included both training by external faculty as
well as in house knowledge management progammes such as Bodhi, E-Guru etc., The internal
job posting mechanism provides opportunity for growth, enhances people capability and
mitigates risk of attrition.
The overall staff strength of the Company as of March 31, 2012 was 704.
Information Technology
To meet the expectations from customers/ partners in terms of speed, mobility and
innovation, the Company is gearing up quickly in this direction through investments in
cutting edge technology. The Company has extended its offerings in the online customer
portal by adding motor, travel, home and health products for on-line buying.
During the year under review, the Company has launched on-line transaction facility for
its partners by "Straight Through Processing (STP)" to enable online electronic
policy issuance.
Other customer centric technology initiatives in various stages of development are in
the area of mobile technology.
In September 2011, the Company won the Financial Insights Innovation Award at the Asian
Insurance Congress Singapore for innovation in mobile enablement adopting the mobile
computing technology for its claims survey process.
In order to reduce the turnaround time in servicing customer requests, a sophisticated
"Business
Process Management" system was implemented for Marine claims and motor claims
management enabling better work distribution and automation. Some of the other critical
technology enablements in progress are in the areas of "Customer Relationship
Management" facilitating the stake holders to understand the customers better and
make appropriate product offerings.
Support from MSI
Mitsui Sumitomo Insurance Company Limited (MSI) Japan, the joint venture partner
continues to provide excellent support especially in areas of reinsurance, business
development with Japanese and Korean clients in India, claims processes and training.
Networth and Solvency
In order to augment its solvency position and in accordance with the business plan for
the year, the Company had a capital infusion of Rs. 500.55 million by way of rights issue
made to the existing shareholders in September 2011. The paid-up capital as at March 31,
2012 was at Rs. 2836.45 million and the networth as at that date was Rs. 3256.94 million.
IRDA vide its Order dated March 22, 2012, permitted general insurers to avail the
option of absorbing the IMTPIP losses arising out of the differential provisioning over a
3 year period in the manner specified in the Order and accordingly the Company will be
absorbing Rs.850 million equally over the next two financial years.
The said Order also provided guidelines on the method of computation of solvency.
Accordingly, the Companys solvency ratio as at March 31, 2012 is 1.33 times (after
forbearance on account of outstanding premium from Central / State governments) as against
the mandated threshold limit of 1.30 times.
Dividend
Though the Company has reported net profits of Rs.191.24 million, the Board does not
recommend any dividend this financial year, considering the extent of divisible profits
available for distribution as well as the absorption of differential provisioning for
motor pool losses in this financial year and the deferred provisioning on this account for
the next two financial years.
Outlook for FY 2012-13
The industry growth in FY 2012-13 is expected to be around 15% with the industry GWP
poised to cross Rs.600 billion.
With the regulatory and business environment changing with the dismantling of motor
pool, formation of declined risk pool, proposed bancassurance regulations, hardened
reinsurance environment etc., the market dynamics is poised for changes and challenges.
The Company is planning a rationalised growth across lines, geographies and channels
enabled by its key initiatives in mobile technology, CRM and data analytics.
The Companys brand essence continues to be focused on customer centricity through
Trust, Transparency and Technology.
Corporate Governance
A report on the corporate governance, including the status of the implementation of
mandatory and non-mandatory norms as per IRDA circular no. IRDA/ F&A/CIR/025/2009-10
dated August 5, 2009 and the corporate governance voluntary guidelines, 2009 issued by the
Ministry of Corporate Affairs (MCA), is attached hereto and forms part of the directors
report.
Audit Committee
As required under Section 292A of the Companies Act, 1956, the Audit Committee
comprises three non-executive directors namely Mr. R Srinivasan, Mr. S B Mathur and Mr.
Katsuhiko Kaneyoshi. Mr. R Srinivasan, Independent director is the Chairman of the
Committee. The role of the Committee is detailed in the corporate governance report
attached hereto and forming part of this report.
Directors
During the year, Mr. S B Mathur and Mr. R Beri who held office as additional directors
till the 10th annual general meeting held on July 30, 2011 were appointed as
directors of the Company.
Mr.N.Srinivasan, Mr. Tsuyoshi Yamane and Mr. Hisatoshi Saito, directors, retire by
rotation at the ensuing Annual General Meeting and being eligible offer themselves for
re-appointment. The Board of directors recommend their re-appointment to the general body.
Public Deposits
The Company has not accepted any public deposits during the year under review.
Auditors
M/s Brahmayya & Co, Chartered Accountants, Chennai and M/s Sundaram &
Srinivasan, Chartered Accountants, Chennai retire at the ensuing Annual General meeting
and are eligible for re-appointment. The auditors have confirmed their eligibility under
the applicable IRDA regulations and Companies Act, 1956. Your directors recommend the
re-appointment of the joint auditors to the general body.
Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo
Particulars required to be furnished in this report under Section 217(1)(e) of the
Companies Act, 1956, relating to conservation of energy and technology absorption are not
applicable for the year under review as the Company is not engaged in any manufacturing
activity and hence not furnished. The foreign exchange earnings and outgo during the year
was Rs. 515.09 million and Rs. 657.47 million respectively.
Directors Responsibility Statement
Pursuant to Section 217(2AA) of the Companies Act, 1956, the directors accept the
responsibility for the integrity and objectivity of the Profit & Loss Account for the
year ended March 31, 2012 and the Balance Sheet as at that date ("financial
statements") and confirm that:
• in the preparation of the Profit & Loss account for the financial year ended
March 31, 2012 and the Balance Sheet as at that date ("financial statements"),
applicable accounting standards read together with IRDA Orders / Regulations mandating
financial statements related prescriptions have been followed;
• appropriate accounting policies have been selected and applied consistently
excepting the treatment on the differential provisioning with respect to IMTPIP (more
specifically dealt with in Note 4(d) of Schedule 16 to the financial statements) and such
judgments and estimates that are reasonable and prudent have been made (including those
with respect to the contingent liabilities more specifically dealt with in Note 7 of
Schedule 16 to the financial statements) so as to give a true and fair view of the state
of affairs of the Company as at the end of the financial year and of the Profit of the
Company for that period;
• proper and sufficient care has been taken for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act, 1956, for
safeguarding the assets of the Company and for preventing and detecting fraud and other
irregularities. To ensure this, the Company has established internal control system
consistent with the size and nature of operations, subject to the internet limitations
that should be recognized in weighting the assurance provided by any such system of
internal controls. These systems are reviewed and updated on an ongoing basis. Periodic
internal audits are conducted to provide reasonable assurance of compliance with these
systems. The audit committee meets at regular intervals;
• the financial statements have been prepared on a going concern basis.
Particulars of Employees
Information under Section 217 (2A) of the Companies Act, 1956, read with the Companies
(Particulars of Employees) Rules, 1975 is appended.
Management Report
In accordance with Part IV, Schedule B of the Insurance Regulatory and Development
Authority (Preparation of Financial Statements and Auditors Report of Insurance Companies)
Regulations 2002, the Management Report attached to this report forms part of the
financial statements.
Acknowledgement
The directors wish to thank the Insurance Regulatory Development Authority and other
statutory authorities for their continued support and guidance. The directors also place
on record their sincere thanks for the support and co-operation extended by the
policyholders, reinsures, bancassurance partners, insurance agent, brokers and other
constituents/ intermediaries.
The directors also thank the employees of the Company for their contribution to the
Companys operations during the year under review.
For and on behalf of the Board
| April 28, 2012 |
S B Mathur |
| Chennai |
Chairman |
+91-9892691696
