New India Assurance Company Ltd Directors Report.

To the Members of

The New India Assurance Company Limited

Report on the Audit of the Standalone Financial Statements

I. Qualified Opinion

We have audited the standalone financial statements of The New India Assurance Company Limited ("the Company"), which comprise the Balance sheet as at March 31, 2021, the Revenue Accounts of Fire, Marine and Miscellaneous Insurance Business (collectively known as Revenue Accounts), Profit and Loss Account and the Receipts and Payments Accounts for the year then ended, and notes to the standalone financial statements, including a summary of significant accounting policies and other explanatory information, in which are incorporated returns for the year ended on that date:

(a) From Forty four Regional offices (including 7 LCBOs), Four hundred and seventy three Divisional offices 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 Nine Foreign Branches and Seven Foreign Agency offices audited by local auditors appointed by the Company; and

(c) From Two Foreign Run off offices and One Foreign representative office which are unaudited, prepared and furnished to us by the management.

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 by the Insurance Laws (Amendment) Act, 2015 (the Insurance Act), the Insurance Regulatory and Development Authority Act, 1999 (the IRDAI Act), the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditors Report of Insurance Companies) Regulations, 2002 (the IRDAI Financial Statements Regulations), orders/ directions issued by the Insurance Regulatory and Development Authority of India (the IRDAI), the Companies Act (the Act)including the accounting Standards specified under section 133 of the Companies Act, 2013 read with rule 7 of the Companies (Accounts) Rules, 2014 (the Accounting Standards), to the extent applicable in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2021, the Revenue Accounts, Profit and Loss Account and the Receipts and Payments Accounts for the year ended on that date.

II. Basis for Qualified Opinion

(a) Balances due to/from persons or bodies carrying on Insurance Business including reinsurers and the balances related to Co-insurance accounts are subject to confirmations, reconciliation and records relating to old balances are being compiled by the company. (Refer Note 9(a) and (b) of Schedule 16B);

(b) Balances of Inter office accounts, control accounts, certain loans and other accounts at certain offices are pending for reconciliation/confirmation and consequential adjustments, effect of which, if any, is not ascertainable and cannot be commented upon. (Refer Note 9(c) of Schedule 16B).

(c) The impact on account of reconciliation relating to various accounts and balances under confirmation with respect to compliance of tax laws which may arise out of such reconciliation (Refer Note 9(d) of Schedule 16B).

Overall impact of the above para (a) to (c) above and the consequential effects on the state of affairs of the Company as at March 31, 2021, the Revenue Accounts, Profit and Loss Account and the Receipts and Payments Accounts 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 together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Companies Act, 2013 and the Rules there under, 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 qualified opinion.

III. Emphasis of Matter

Without qualifying our report in respect of the following, we draw attention to:

i. Note No.3 (a) and (b) of Schedule 16B regarding Un-amortized Gratuity and Pension Liability as per IRDAI Circular.

ii. Note No. 22 of Schedule 16B specifying that the management is currently in process of identifying enterprises which have been providing goods and services to the Company which qualify under the definition of medium and small enterprise as defined under Micro, Small and Medium Enterprise Development Act, 2006 and disclosure in respect of amount payable to such Micro, Small and Medium Enterprise as at March 31, 2021 has not been made in the standalone financial statement.

iii. Note No. 25 of Schedule 16B regarding Expenses of Management incurred under Government Health Segment exceeding the allowable limit as prescribed in IRDAI Regulations.

iv. Note No. 26 of Schedule 16B regarding strengthening of Internal control System and Internal Audit specially in area of data input and validation in softwares relating to Reinsurance accounts, PMFBY and other Government sponsored Health schemes requires strengthening.

v. Note No 28 of Schedule 16B regarding the managements assessment of the financial impact due to restrictions and conditions related to COVID - 19 pandemic situation.

Our opinion is not modified in respect of the above matters.

IV. 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.

Sr. Key Audit Matters No. Auditors Response
1. Claim Provisioning - Principal Audit Procedures
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 surveyors 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 surveyors immediate loss assessment reports, advocate advices 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. We carried out the following audit procedures:
The audit matters for verification of claims provisioning is handled at the regional and divisional offices of the Company. The component 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 surveyors claim estimate, advocate advices, co-insurer leader communication and the companys 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.
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.
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, 2021, is as certified by the Companys Appointed Actuary and we had relied upon on the appointed actuarys certificate in this regard with respect to the claim amounts and the related liability.
2. Strengthening of Internal control System and Internal Audit required by the Company - Principal Audit Procedures
We carried out the following audit procedures:
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, 2021 with respect to: We had designed our audit procedures to access the Companys 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 weakness were identified in areas of reconciliation of various receivable and/or payable balances, in area of data input and validation in various software, manual processing of PMFBY claims, etc.
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;
Internal Control system of a Company should be designed to provide a substantial degree of assurance in achieving business objective, while complying with the policies and laws, safeguarding the assets, maintaining efficiency and effectiveness in regular operations and reliability of the standalone financial statements.
b) Manual processing of claims for PMFBY, system module of claims is not utilized for processing the same;
c) The Companys internal control systems especially in area of data input and validation in various software and recording of intimated claims at the offices of the Company. The Company is advised to strengthen the Internal Audit specially in area of data input and validation in software, Reinsurance accounts, PMFBY and other Government sponsored Health schemes as the entire revenue accounting is dependent on systems of the Company. The impact of pending reconciliation, if any on the standalone financial statements is unascertainable.
d) Strengthening of process required relating to audit of health claims processed by TPA which is conducted by the offices of 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 paragraph of opinion, emphasis of matter and opinion on internal control over financial reporting in the standalone audit report.

V. Information other than the standalone financial statements and Auditors report thereon

The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Annual report, but does not include the standalone financial statements and our auditors report thereon. The Annual report 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 do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

When we read the other information included in the above reports, if we conclude that there is material misstatement therein, we are required to communicate the matter to those charged with governance and determine the actions under the applicable laws and regulations.

VI. Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements

The Companys 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 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, 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 Companys 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 Companys financial reporting process.

VII. 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 auditors 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:

i. 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.

ii. 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.

iii. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

iv. Conclude on the appropriateness of managements 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 Companys 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 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.

v. 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.

Materiality is the magnitude of misstatements in the financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone financial statements.

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.

VIII. Other Matters

i. We did not audit the financial statements of Forty Four Regional offices (including 7 LCBOs), Four hundred and seventy three Divisional offices, Nine Foreign Branches and Seven Foreign Agency offices, included in the standalone financial statements of the Company whose financial statements reflect total assets of Rs 15,81,006.96 Lakhs as on March 31, 2021 and total revenues of Rs. 30,63,656.60 Lakhs for the year ended on that date, as considered in the standalone financial statements. The financial statements / information of these offices have been audited by the other firm of 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 offices, is based solely on the report of such component auditors.

ii. We have relied on the financial statements of two Foreign Run off offices and one Foreign representative office included in the standalone financial statements of the Company whose financial statements reflect total assets of Rs 15.41 Lakhs as on March 31, 2021 and total revenues of Rs. Nil for the year ended on that date, as considered in the standalone financial statements which have been furnished to us by the management and our audit report in so far as it relates to the amounts included in respect of the said foreign branches is solely based on the financial statements furnished by the management which has not been subject to audit in their respective countries.

iii. 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, 2021, is as certified by the Companys Appointed Actuary and our opinion in so far as it relates to the amounts and disclosures related to such liability, is based solely on such report. 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 (IRDAI) and the Actuarial Society of India in concurrence with the IRDAI. We have relied upon on the Appointed Actuarys certificate in this regard for forming our opinion on the financial statements of the Company.

iv. Due to the COVID-19 pandemic lockdown and other restrictions imposed by the Government and local administration, the audit processes were carried out based on the remote access to the extent available/ feasible and necessary records made available to us by the management through digital medium.

Our opinion is not modified in respect of this matter.

IX. Report on Other Legal and Regulatory Requirements

As required by Section 143 (3) of the Companies Act 2013 and Insurance Regulatory and Development Authority (Preparation of financial Statements and Auditors Report of Insurance Companies) Regulations, 2002 and orders or direction issued by the Insurance Regulatory and Development Authority, we report that:

a) We have sought and 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, in our opinion, proper books of accounts have been maintained by the Company, so far as it appears from our examination of those books and proper returns both audited and unaudited from Regional offices, Divisional Offices, branches and other offices, not visited by us, have been received.

c) The reports of the Regional Auditors consolidating the Divisional Auditors report, Reports of foreign branches and foreign agency offices, audited under section143(8) of the Act by the component auditors have been sent to us and have been properly dealt with by us in preparing this report in the manner considered necessary by us.

d) The Balance Sheet, the Revenue Account, Profit and Loss Account, and the Receipt and Payment 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, 1938 (4 of 1938), the Insurance Regulatory and Development Act, 1999 (41 of 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 Rule 7 of the Companies (Accounts) Rules, 2014.

g) On the basis of the written representations received from the directors as on March 31, 2021 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2021 from being appointed as a director in terms of Section 164 (2) of the Act.

h) The accounting policies adopted by the company are appropriate and in compliance with the applicable Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and with the Accounting Principles as prescribed in the Insurance Regulatory and Development Authority (Preparation of financial Statements and Auditors Report of Insurance Companies) Regulations, 2002 and orders or direction 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.

i) 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, 2021, have been duly certified by the Companys 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 (IRDAI) and the Actuarial Society of India in concurrence with the IRDAI.

j) As per the information and explanations provided to us, the investments have been valued in accordance with the provisions of the Insurance Act, the regulations and orders/directions issued by IRDAI in this regard.

k) Further on the basis of our examination of books and records of the company and according to the information and explanation given to us and to the best of our knowledge and belief, we certify that:

i) i) We have reviewed the management report attached with the Standalone Financial Statements and there are no apparent mistakes or material inconsistencies between the management report and the standalone financial statements;

ii) Based on the management representation made by the management of the company charged with compliance, nothing has come to our attention which causes us to believe that the company has not complied with the terms and conditions of registration as stipulated by IRDAI; and

iii) No part of the assets of the policyholders funds has been directly or indirectly applied in contravention of the provisions of the Insurance Act, 1938 (4 of 1938) relating to the application and investments of the policyholders funds.

l) 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, 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 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 long-term contracts including derivative contracts - The liability for Insurance Contracts, is determined by the Companys Appointed Actuary and is covered by the Appointed Actuarys certificate, referred to 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.

m) 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. GSsR 463(E) dated 5th June 2015. Hence reporting u/s 197(16) of the Act is not required.

n) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A".

o) As required under section 143(5) of the Companies Act, 2013, based on our audit as aforesaid, we enclose herewith, as per "Annexure B", the directions including additional directions issued by the Comptroller and Auditor General of India, action taken thereon and the financial impact on the accounts and standalone financial statements of the Company.

ANNEXURE A TO THE INDEPENDENT AUDITORS REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF THE NEW INDIA ASSURANCE COMPANY LIMITED

(Referred to in paragraph IX (n) of our Report on Other Legal and Regulatory Requirements forming part of the Independent Auditors Report dated June 07, 2021)

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013

We have audited the internal financial controls over financial reporting of THE NEW INDIA ASSURANCE CO LTD. ("the Company") as of March 31, 2021 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date. These standalone financial statements incorporated returns received:

a) From Forty four Regional offices (including 7 LCBOs), Four hundred and seventy three Divisional offices 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 Nine Foreign Branches and Seven Foreign Agency offices audited by local auditors appointed by the company; and

c) From Two Foreign Run off offices and One Foreign representative office which are unaudited, prepared and furnished to us by the management.

Managements Responsibility for Internal Financial Controls

The Companys management is responsible for establishing and maintaining internal financial controls based on "the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India"("the Guidance Note"). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion on the Companys internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A companys internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Other Matter

The actuarial valuation of Policy Liabilities as at March 31, 2021 has been duly certified by the Appointed Actuary of the Company and has been relied upon by us as mentioned in Para VIII (iii) of our Audit Report on the standalone financial statements for the year ended March 31,2021. Accordingly, our opinion on the internal financial controls over financial reporting does not include reporting on the adequacy and operative effectiveness of the internal controls over the valuation and accuracy of the aforesaid actuarial liabilities.

Qualified Opinion

On the basis of selective checks carried out during the course of our audit and according to the information and explanation given to us and based on the report of external consultant appointed to assess the internal financial control framework in the Company, the following internal control weaknesses of material nature have been identified as at March 31, 2021:

a. Confirmation and reconciliation of various balances relating to co insurers, reinsurers and other control accounts are pending and are at various stages;

b. Manual processing of claims for PMFBY, system module of claims is not utilized for processing the same;

c. The Companys internal control systems especially in area of data input and validation in various software and recording of intimated claims at the offices of the company including internal audit require strengthening.

d. Adequate coverage of audit of health-related claims processed by TPAs to be conducted by the respective offices of the Company.

A material weakness is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the companys financial statement will not be prevented or detected on a timely basis.

In our opinion, except for the possible effects of the internal control weaknesses described above on the achievements of the objectives of the control criterion, the company has maintained , in all material respects , adequate internal financial control over financial reporting and such internal financial controls over financial reporting were operating effectively as of March 31,2021, based on "the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note issued by the Institute of Chartered Accountants of India".

We have considered the material weaknesses identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2021 standalone financial statements of the Company, and these material weaknesses do not affect our opinion on the Standalone financial statements of the Company except to the extent of our qualification as contained in our separate report on the Standalone financial statements of the company.

ANNEXURE "B" REFERRED TO IN PARA IX (o) IN REPORT ON OTHER LEGAL AND REGULATORY MATTERS REFERRED TO IN OURS STATUTORY AUDIT REPORT OF EVEN DATE FOR THE YEAR 2020-21 ON THE ACCOUNTS OF THE NEW INDIA ASSURANCE COMPANY LIMITED

Sr No. Directions under Section 143(5) of Companies Act 2013 Action taken and Financial Impact
1 Whether the company has system in place to process all the accounting transactions through IT system? If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated. The Company has system in place to process all the accounting transactions through IT systems except for - 1. Facultative Inward business where the process of system automation is being implemented. Underwriting and claims modules have started during the year in case of Fire, Engineering and Marine Hull segments, whereas the same is under testing stage in case of Marine Cargo and Aviation Segments. As informed to us, in F.Y. 2021-22 the accounts module will also get implemented, after which reconciliation will be done through system.
2. Pradhan Mantri Fasal Bima Yojana (PMFBY) where it is understood that though the systems are in place the claims related to the PMFBY are processed manually.
It is informed to us that Ministry of Agriculture and Farmers Welfare are planning for integration of National Crop Insurance Portal (NCIP) with the IT Systems of "PMFBY-Implementing Insurance Companies" for seamless flow of data and "auto calculation" of claims in NCIP As per the requirement of the Ministry, the Company has provided them their IP address for whitelist for inflow/outflow of data to and from NCIP. Once the integration is completed, the Company will redesign the system for claim processing for PMFBY.
3. IFSC GIFT City office, Gandhinagar is the only office in India rendering the reinsurance service in foreign currency, having the Accounts in Tally software. The transactions are reviewed/ authorised by Region-in charge and approved as per the financial authority established in the Company. The Company has initiated implementation of accounting software where underwriting module for fac has been started and testing of remaining modules are under process.
2 Whether there is any restructuring of an existing loan or cases of waiver/write off of debts /loans/interest etc. made by a lender to the company due to the companys inability to repay the loan? If yes, the financial impact may be stated. Whether such cases are properly accounted for? (in case, lender is a government company, then its directions is also applicable for statutory auditor of lender company) Not Applicable.
3 Whether funds (grants/subsidy etc.) received/receivable for specific schemes from central/ state government or its agencies were properly accounted for/ utilized as per its term and conditions? List the cases of deviation. The Company received part of subsidy relating to PMFBY/RSBY and various other schemes relating to insurance from central and state agencies. Funds received/receivable under PMFBY/RSBY scheme from Central/State agencies were accounted for/utilised as per its terms and conditions and no deviation is observed.

Additional directions issued by C&AG of India as applicable to The New India Assurance Company Limited for the year 2020-21

1 Number of titles of ownership in respect of CGS/SGS/Bonds/ Debentures etc. available in physical/demat form and out of these, number of cases which are not in agreement with the respective amounts shown in the Companys books of accounts may be verified and discrepancy found may be suitably reported. The Central Government/ State Government securities balances are tallied as per the books of accounts of the Company with the custodian statements. In case of Bonds/ Debenture/ Equities/Preference Shares balances are tallied as per the books of accounts of the Company and custodian statement except for the following differences:
a) In case of debentures securities of 2 Companies having face value of Rs. 37.74 Lakhs (number - 20,496) not reflecting in custodian statement, these securities has been fully provided/written off;
b) In case of debenture/bonds/preference shares of 3 Companies having face value of Rs. 367.48 Lakhs (number - 384308) these are lying with official liquidator/debenture trustees and the same has been fully provided/written off.
c) In case of equity shares of 8 Companies having face value of Rs. 20.68 Lakhs (number - 2,00,167) not reflecting in custodian statement, these securities were having book value of Rs. 10.26 lakhs which has been fully provided for;
d) 1,335 equity shares of 5 Companies are not reflecting in custodian statement; e) 15,715 equity shares of 2 Companies, these are reflecting in custodian statement and not in books of the company.
The Company has not received any interest/dividend on the above-mentioned investments.
The Company have been receiving dividend from various companies since previous years, which are not reflecting as investment both in the books of accounts of the company and statement of its custodian. These dividends amounting to Rs. 8.33 Lakhs as on March 31, 2021 are shown as liability and is be taken to income after three years from the respective year of receipt as per the Companys accounting policy.
The Company is in the process of taking adequate steps for reconciliation and adjustment wherever required.
2 Whether stop loss limits have been prescribed in respect of the investments. If yes, whether or not the limit was adhered to. If no, details may be given. As informed to us, the investments of the Company are long term in nature and therefore Stop loss policy is not applicable for the long-term investments. We are informed by the Company that, as and when the Company proposes to have a trading portfolio, it will frame stop loss policy for trading portfolio at that time.
3 Whether Company has carried out reconciliation exercise for inter-company balances reflected in their financial statements with other PSU insurers and whether confirmation has been obtained from other PSU insurers for balances due from them? As informed to us, reconciliation and settlement of Coinsurance balances were carried out across all offices throughout the year by the Company. Importance was given to clear old balances and out of the total Rs. 6,59,547.96 Lakhs (P.Y. Rs. 9,52,714.94 Lakhs) settled during the year, Rs.3,19,073.82 Lakhs (PSUs Rs. 1,94,800.18 Lakhs and Private Rs. 1,24,273.64 Lakhs) were related to more than one year balance. This has reduced the old balances.
The age wise details of settlement are given below: - (Rs. In Lakhs.)
Description 2020-21 2019-20 2018-19 PRIOR TOTAL
Settled Received and Paid) 3,40,474.15 1,86,034.45 79,777.32 53,262.05 6,59,547.97
Percentage 52% 28% 12% 8% 100%
As informed to us, the Company is planning to continue focus on clearing old balances in 2021-22 also as clearing exercise for old balances was seriously interrupted due to impact of Covid-19 and restrictions prevailing. Balance appearing in the amount due to/ due from persons or bodies carrying on insurance business including reinsurance business except terrorism Pool and Nuclear Pool with GIC Re are subject to confirmation/ reconciliation and consequential adjustments if any. These balances include Rs. 3,89,076.12 lakhs (Net) Dr. comprising of debit balances of Rs. 6,29,811.49 lakhs and credit balances of Rs. 2,40,735.37 lakhs against which party-wise balances in the records indicate (Dr.) of Rs. 5,45,899.46 lakhs relating to 948 parties and (Cr.) of Rs. 1,56,823.34 lakhs relating to 872 parties. As against these amounts the Company is maintaining a provision of Rs. 14,952.04 Lakhs up to March 31,2021 towards doubtful debts as a prudent measure. The
Company has not received balance confirmation relating to the reinsurance business. Precise gross debit and gross credit balances against each of such parties and age-wise analysis of these balances are also being compiled. These balances include old cases including migration differences for which supporting records are being identified and necessary action is being taken.
The Impact of the above, if any, on the standalone financial statements are unascertainable. Refer note no. 9 (a) and (b) of Schedule 16B of the Standalone Financial Statements for reconciliation related matter with respect to Coinsurance and Reinsurance balances. We have issued modified opinion in this independent audit report with regards to this matter.
4 (a) Whether the method of accounting of premium and reported claims are as per conditions of agreement/scheme relating to Pradhan Mantri Fasal Bima Yojana As informed to us, in F.Y. 2020-21, the company has accounted Pradhan Mantri Fasal Bima Yojana (PMFBY)/ Restructured Weather Based Crop Insurance Scheme (RWBCIS) through Incoming co-insurance from Agricultural Insurance Company of India Limited (AIC).
The Companys net share of premium accounted under Crop insurance portfolio for the year 2020-21 is Rs. 1,06,752.85 Lakhs. The Companys net share of claims paid during the year 2020-21 is Rs. 2,61,067.05 Lakhs. These claim disbursements pertain to the year 2016-17 to 2019-20 approved till date.
The data for claims for the year 2019-20 in respect of rabi crop year, for state of Madhya Pradesh and 2020-21 from AIC is yet to be received by the Company. Hence, provision for outstanding claims have been made based on IBNR claims as assessed by the actuary. Necessary reconciliation relating to the above data are to be carried out in due course.
As informed to us, the Company is in the process of strengthening internal controls and internal audit in the area of PMFBY to ensure the compliance of laid down operational guidelines issued by Ministry of Agriculture, Government of India.
Refer note no. 9 (e) of Schedule 16B of the Standalone Financial Statement for reconciliation of amount received by Nodal offices of the state with enrolment data and premium data as per the Government portal is under process and certified yield data is not available for the crop year 2019-20 hence precise amount of claims liability admissible is not yet determined.
4 (b) Whether the method of accounting of premium and reported claims are as per conditions of agreement/scheme relating to Rashtriya Swasthya Bima Yojana (RSBY) As informed to us, the Company has not implemented RSBY scheme in F.Y. 2020-21.
4 (c) Whether the method of accounting of premium and reported claims are as per conditions of agreement/scheme relating to Prime Minister Jan Arogya Yojana As informed to us, in F.Y. 2020-21, the Company has not undertaken any business under the Prime Minister Jan Arogya Yojana.
5 Whether the Company has complied with IRDAI circular (No. IRDA/F&A/CIR/MISC/052/03/2018 dated 27 March 2018) regarding exemption of re-insurance scheme of specified insurance schemes such as Pradhan Mantri Fasal Bima Yojana, Pradhan Suraksha Bima Yojana etc. from the purview of GST and passed on the insured/ Government the benefit of reduction in premium? Pradhan Mantri Fasal Bima Yojana on direct business is exempted from GST and in case of reinsurance ceded business the GST rate is Nil. As informed to us, while pricing the product, the GST on ceding premium has not been factored by the Company. Therefore, the premium has not been loaded for GST on the ceded amount, passing on the benefit to the customer/ government does not arise. As informed to us, in case of other Government schemes like Pradhan Mantri Suraksha Bima Yojana etc, the Company has not entered into any re-insurance arrangement.
6. Whether entire input tax credit (ITC) available on GST portal in respect of the company has been availed within prescribed time limits. The Company avails GST input credit only on the basis of valid tax invoice at the time of making payment of invoices. It has a process of not availing the ineligible GST input credits even if the same is reflecting on the GST portal. The Company claims the input credit with respect to GST paid on RCM which constitutes the significant portion of the entire GST input credit of the Company, in the month of payment and the same is claimed through the system automatically.
For a portion of the expenses, where input is claimed based on the valid invoices received from the suppliers, necessary validation checks are incorporated in the system, and on compliance of the validations the system allows for claiming input. Input GST is claimed in respect of those invoices for which actual payment has been made. Input is not claimed on those invoices lying unpaid, as the same can be availed up to September 30, 2021 for those invoices raised during the F.Y 2020-21. Hence the input credit in respect of such unpaid invoices would be reflected in GSTR 2A but the same would not have been claimed in a particular month. In case of expenses, where input credit is not eligible, the same is being reflected in the GSTR 2A but credit has not been availed. The System has been designed to take care of the aforesaid process.
Based on the above facts and as per information and explanation given by the Company, we have verified and observed that the Company have availed the eligible input credit diligently as per the provisions of GST law to the extent possible.
For Mukund M. Chitale & Co For Kailash Chand Jain & Co.
Chartered Accountants Firm Reg. No. 106655W Chartered Accountants Firm Reg. No. 112318W
Abhay. V. Kamat Saurabh Chouhan
Partner Partner
M. No. - 039585 M. No. - 167453
UDIN - 21039585AAAAFE9299 UDIN - 21167453AAAAJZ8083
Place : Mumbai
Date : June 07, 2021