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DIRECTOR'S REPORT

ICICI Lombard General Insurance Company Ltd.

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Market Cap. (₹) 52132.24 Cr. P/BV 9.65 Book Value (₹) 118.85
52 Week High/Low (₹) 1174/639 FV/ML 10/1 P/E(X) 49.69
Bookclosure 30/10/2018 EPS (₹) 23.09 Div Yield (%) 0.52
Year End :2018-03 

To the Members,

The Directors have pleasure in presenting the Eighteenth Annual Report of ICICI Lombard General Insurance Company Limited (ICICI Lombard/the Company) along with the audited financial statements for the year ended March 31, 2018 (FY 2018).

INDUSTRY OVERVIEW

The gross direct premium income (GDPI) of the industry grew from Rs.1,282.13 billion in FY2017 to Rs.1,507.05 billion in FY2018, a growth of 17.5%. ICICI Lombard’s GDPI increased from Rs.107.25 billion in FY2017 to Rs.123.57 billion in FY2018, a growth of 15.2%. ICICI Lombard led the private sector players in the general insurance sector with a market share of 16.8% and had an overall industry market share of 8.2%. ICICI Lombard has now become the 4th largest player overall in the general insurance sector at March 31, 2018.

FINANCIAL HIGHLIGHTS

The financial performance for FY2018 is summarised in the following table:

(Rs. billion)

FY2017

FY2018

Gross written premium

109.60

126.00

Earned premium (net)

61.64

69.12

Income from Investments

12.83

14.82

Profit before tax

9.10

11.96

Profit after tax

7.02

8.62

EPS-Basic

15.66

19.01

EPS-Diluted

15.58

18.99

APPROPRIATIONS

The profit after tax for the year ended March 31, 2018 is Rs.8.62 billion. The profit available for appropriation is Rs.25.69 billion after taking into account the balance of profit of Rs.17.07 billion brought forward from the previous year. The Board had approved payment of interim dividend of Rs.1.50 per equity share during the year. The Board of Directors at its meeting held on April 25, 2018 has further recommended a final dividend of Rs.2.50 per equity share to the shareholders’ subject to their approval.

SECRETARIAL STANDARDS

During FY2018, the Company was in compliance with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India with respect to Board and General Meetings.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The provisions of Section 186(4) of the Companies Act, 2013 (the Act) requiring disclosure in the financial statements of the full particulars of the loans given, investment made or guarantee given or security provided and the purpose for which the loan or guarantee or security are proposed to be utilised by the recipient of the loan or guarantee or security are not applicable to the Company.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS OF THE COMPANY AND ITS FUTURE OPERATIONS

There are no significant and/or material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of future operations of the Company.

DIRECTORS AND OTHER KEY MANAGERIAL PERSONNEL

The Board of Directors of ICICI Lombard as on March 31, 2018 consisted of ten Directors, out of which five are independent Directors, two are non-executive non-independent Directors and three are whole-time Directors.

All the Directors of the Company have given declarations that they meet the criteria of ‘fit and proper’ as laid down under Corporate Governance Guidelines of IRDAI.

Name of Director

Resignation/Cessation

With effect from

R. Athappan Non-Executive, Nominee of Fairfax Financial Holdings Limited

Cessation

June 8, 2017

Chandran Ratnaswami Non-Executive, Nominee of Fairfax Financial Holdings Limited

Cessation

July 2, 2017

S Mukherji Non-Executive, Nominee of ICICI Bank Limited

Cessation

July 3, 2017

Vijay Chandok Non-Executive, Nominee of ICICI Bank Limited

Cessation

July 3, 2017

The Board at its Meeting held on April 25, 2018 appointed Vishal Mahadevia as an Additional Director of the Company in the category of non-executive independent with effect from April 25, 2018 subject to shareholders’ approval. The appointment is accordingly proposed to the shareholders’ for their approval.

Independent Directors

All independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013, SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 and ‘fit and proper’ declaration as laid down under Corporate Governance Guidelines of IRDAI.

Retirement of Director by Rotation

In accordance with the provisions of Section 152 of the Companies Act, 2013, and the Articles of Association of the Company, N. S. Kannan, being non-executive non-independent Director of the Company, would retire by rotation at the forthcoming AGM and is eligible for re-appointment. N. S. Kannan has offered himself for re-appointment.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and guidelines for insurance companies issued by Insurance Regulatory and Development Authority of India (IRDAI), the Board has carried out an annual performance evaluation of its own performance as a whole and that of its statutory committees and that of its individual directors both executive and non-executive including independent Directors and the Chairperson. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

Deposits

During the year under review, ICICI Lombard has not accepted any deposits from the public.

Listing of Equity Shares

During FY2018, ICICI Lombard completed its Initial Public Offer (“IPO”) by way of an offer for sale of 86,247,187 equity shares of face value Rs.10 each of the Company, by the selling shareholders ICICI Bank Limited and FAL Corporation.

The shares of the Company were listed on National Stock Exchange of India Limited (NSE) and BSE Limited (BSE) on September 27, 2017.

AUDITORS

Statutory Auditors

IRDAI vide circular dated May 18, 2016, had issued Corporate Governance Guidelines (CG guidelines) wherein criteria for appointment of statutory auditors of insurance companies had been stated.

The present term of office of the joint statutory auditors of the Company, namely, Chaturvedi & Co., Chartered Accountants and PKF Sridhar & Santhanam LLP Chartered Accountants expires at the conclusion of the ensuing Annual General Meeting (AGM); however both the audit firms are eligible for re-appointment. Chaturvedi & Co., Chartered Accountants, has completed its first term of five years and PKF Sridhar & Santhanam LLP Chartered Accountants, has completed two years out of their first term of five years as on March 31, 2018.

The re-appointment of Chaturvedi & Co., Chartered Accountants, as recommended by the Audit Committee and approved by the Board, is proposed for a second term of five years i.e. from the conclusion of the Eighteenth AGM upto the conclusion of the Twenty-third AGM subject to ratification by the Members every year. The appointment of PKF Sridhar & Santhanam LLP Chartered Accountants is proposed for a period of three years i.e. from the conclusion of the Eighteenth AGM till the conclusion of the Twenty-first AGM subject to ratification by the Members every year.

Chaturvedi & Co. and PKF Sridhar & Santhanam have confirmed their eligibility under Section 141 of the Act and the rules framed thereunder for re-appointment as Auditors of the Company.

The appointment is accordingly proposed in the Notice of the forthcoming AGM vide item no. 4.

Auditor’s Report

There is no qualification, reservation, adverse remark or disclaimer made by the auditors in their report.

Secretarial Auditors

Pursuant to provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company had appointed Dholakia & Associates LLP, a firm of practising company secretaries, to conduct the secretarial audit of the Company for FY2018. The Secretarial Audit Report is annexed herewith as Annexure A. There are no qualifications, reservation, adverse remark or disclaimer made by the auditor in the report save and except disclaimer made by them in discharge of their professional obligation.

PARTICULARS OF EMPLOYEES

The statement containing particulars of employees as required under Section 197 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms part of this Report as “Annexure B” to the Directors’ Report.

The statement containing particulars of employees as required under Section 197 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this report. In terms of the provisions of Section 136 of the Companies Act, 2013 the Directors’ Report is being sent to the shareholders of ICICI Lombard excluding the aforesaid Annexure. Any shareholder interested in obtaining a copy of the Annexure may write to the Company Secretary at the registered office of the Company.

RELATED PARTY TRANSACTIONS

ICICI Lombard undertakes various transactions with related parties in the ordinary course of business. ICICI Lombard has a Board-approved Policy on Related Party Transactions.

The transactions between the Company and its related parties, during the year ended March 31, 2018 were in the ordinary course of business and based on the principles of arm’s length basis. The details of related party transactions are disclosed under Note No. 5.2.12 of the Notes to Financial Statements for FY2018.

All materially significant related party transactions are placed before the Audit Committee on a quarterly basis. The policy on dealing with related party transactions has been hosted on the website and can be viewed at https://www.icicilombard.com/docs/default-source/ default-document-library/policy-on-related-party-transactions.pdf

EXTRACT OF ANNUAL RETURN

Extract of Annual Return pursuant to the prescribed provisions of Companies Act, 2013, and the rules framed thereunder is furnished in Form MGT-9, annexed as “Annexure C” to this report.

RISK MANAGEMENT FRAMEWORK

A statement indicating development and implementation of risk management policy including identification therein of elements of risk, if any, which may pose significant risk to the Company has been given in the Corporate Governance Report.

DISCLOSURES AS PER THE SEXUAL HARASSEMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

ICICI Lombard has a policy against sexual harassment and a formal process for dealing with complaints of harassment or discrimination. The said policy is in line with relevant Act passed by Parliament in 2013. ICICI Lombard through its policy ensures that all such complaints are resolved within defined timelines. Seven cases were reported and were disposed off.

RURAL AND SOCIAL RESPONSIBILITY

ICICI Lombard issued more than 565,000 policies in rural areas and covered more than 17,500,000 lives falling within the norms of social responsibility, as prescribed by IRDAI.

CAPITAL

The total capital invested till March 31, 2018 including share premium, was Rs.20.21 billion. The net worth of ICICI Lombard increased from Rs.37.25 billion at March 31, 2017 to Rs.45.41 billion at March 31, 2018. The solvency position of ICICI Lombard at March 31, 2018 was 2.05 times as against minimum of 1.50 times prescribed by IRDAI.

DIVIDEND AND DIVIDEND DISTRIBUTION POLICY

The operations have resulted in a profit after tax of Rs.8.62 billion as compared to a profit after tax of Rs.7.02 billion for the previous year. The Board had approved payment of interim dividend of Rs.0.75 per equity share for the first quarter of the FY2018 by way of circular resolution on June 23, 2017 and second interim dividend of Rs.0.75 per equity share, for the second quarter of the FY2018 at its Meeting held on October 17, 2017. Further, the Board at its Meeting held on April 25, 2018, has recommended a final dividend of Rs.2.50 per equity share to the shareholders’ for their approval.

In terms of Regulation 43A of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”) the Dividend Distribution Policy of the Company has been hosted on the Company’s website and can be viewed at, https://www.icicilombard.com/docs/default-source/ Policy-Wordings-product-Brochure/dividend-policy.pdf

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company has constituted Corporate Social Responsibility (CSR) Committee in accordance with the provisions of the Companies Act, 2013. The CSR Committee was constituted comprising of members of the board of directors of the Company consisting of three directors including independent Directors. The CSR policy of the Company and the details about the development of the CSR policy and initiatives taken by the Company on CSR during the year are in accordance with the Companies (Corporate Social Responsibility Policy) Rules, 2014 as given in Annexure D to this report.

CREDIT RATING

During the year, ICICI Lombard has maintained credit rating of “AAA” by ICRA and “Crisil AAA/Stable” by Crisil for subordinate debt raised by the Company. This is the highest rating regarding safety and timely servicing of financial obligations.

Further, the Company maintained its credit rating of “iAAA” awarded by ICRA for claims paying ability by the Company. This indicates that the Company has highest claims paying ability and has a fundamentally strong position.

I. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 relating to conservation of energy and technology absorption do not apply to ICICI Lombard. ICICI Lombard has, however, used information technology extensively in its operations.

During FY2018, expenditures in foreign currencies amounted to Rs.4.05 billion and earnings in foreign currencies amounted to Rs.1.98 billion.

II. Employee Stock Option Scheme

In FY2006, ICICI Lombard had instituted an Employee Stock Option Scheme (ESOS) to enable the employees and Directors of ICICI Lombard to participate in its future growth and financial success. As per ESOS, the maximum number of options granted to any employee/Director in a year shall not, except with the approval of the Board, exceed 0.10% of ICICI Lombard’s issued equity shares at the time of grant and the aggregate of all such options (net of forfeited/lapsed) is limited to 5% of ICICI Lombard’s issued equity shares on the date of the grant.

The Board at its Meeting held on January 14, 2015 and the Shareholders at the Extra-Ordinary General Meeting held on March 4, 2015 had approved an amendment in the Employee Stock Option Scheme, 2005 to extend the exercise period by three more years in respect of options granted in the years 2005, 2006 and 2007.

Options granted in the years 2005, 2006, 2007, 2008 and 2010 vest in a graded manner over a four-year period, with 20%, 20%, 30% and 30% of the grants vesting each year, commencing not earlier than 12 months from the date of grant. Options granted the year 2009 vest in over a five year period with no vesting in the first year and 20%, 20%, 30% and 30% of the grant vesting each year in the subsequent four years. Options granted for the year 2011 vest over a two-year period, with 40% and 60% of the grants vesting each year, commencing not earlier than 12 months from the date of grant. Options can be exercised within a period of 13 years in respect of options granted in 2005, 2006 and 2007. Option other than those years can be exercised over a period of 10 years from the date of grant or five years from the date of vesting.

Particulars of options granted by ICICI Lombard up to March 31, 2018 are given below:

Options granted

23,572,260

Options vested

18,204,108

Options exercised

14,163,448

Number of shares allotted pursuant to exercise of options

2,797,618

Options forfeited/lapsed

8,913,672

Extinguishment or modification of options*

Nil

Amount realised by exercise of options (?)

356,974,940

Total number of options in force

495,140

* The exercise period for stock options granted between 2005 to 2007 has been modified from tenth anniversary to thirteenth anniversary.

III. Fit and Proper criteria for investors and continuous monitoring requirement

The IRDAI guidelines for Listed Indian Insurance Companies prescribes the following:

1. Self-certification of “Fit and proper person” criteria by a person holding/intending to acquire equity shares of 1% or more of paid-up equity share capital.

2. Prior permission of IRDAI for holding shares beyond 5% of the paid-up equity share capital.

Further information on detailed procedure and format for self-certification is hosted on the Company’s website

IV. Implementation Strategy on Ind-As

IRDAI vide the circular dated March 1, 2016 had advised all Insurers to follow the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject to any guideline or direction issued by the IRDAI. Insurance Companies are required to comply with Ind AS for financial statements for accounting periods beginning from April 1, 2017 onwards, with comparatives for the period ending March 31, 2018.

In compliance with the regulatory requirements, the Company has constituted a Steering Committee headed by Sanjeev Mantri, Executive Director to oversee the implementation of Ind AS. The scope of the Steering Committee includes evaluating the impact on the following areas:

(a) Ind AS technical requirements

(b) Systems and processes

(c) Business impact

(d) People

(e) Project management

The Steering Committee oversees the implementation of Ind AS and the Audit Committee is updated on a quarterly basis. Further, in compliance with the above Circular, the Company has also submitted the proforma Ind AS financial statements for the nine months ended December 31, 2017 to IRDAI.

V. DIRECTORS’ RESPONSIBILITY STATEMENT

Directors confirm that:

1. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

2. they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit of the company for that period;

3. they have taken proper and sufficient care for the maintenance of adequate accounting records, in accordance with the IRDAI (Preparation of Financial Statements and Auditor’s Report of Insurance Companies) Regulations, 2002 and provisions of the Companies Act, 2013 for safeguarding the assets of ICICI Lombard and for preventing and detecting fraud and other irregularities;

4. they have prepared the annual accounts on a going concern basis;

5. they have laid down internal financial controls to be followed by the Company and that such internal financial controls were adequate and were operating effectively and;

6. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

VI. ACKNOWLEDGEMENTS

ICICI Lombard is grateful to the Insurance Regulatory and Development Authority of India, Government of India, Reserve Bank of India and Securities and Exchange Board of India for their continued cooperation, support and guidance. ICICI Lombard wishes to thank its investors, rating agencies depositories, Registrar & Share Transfer Agent & Stock Exchanges for their support.

ICICI Lombard would like to express its gratitude for the continued support and guidance received from ICICI Bank and its group companies.

ICICI Lombard would like to take this opportunity to express sincere thanks to its valued clients and customers for their continued patronage. The Directors express their deep sense of appreciation to all the employees, whose outstanding professionalism, commitment and initiative have made the organisation’s growth and success possible and continue to drive its progress. Finally, the Directors wish to express their gratitude to the Members for their trust and support.

For and on behalf of the Board

Chanda Kochhar

June 6, 2018 Chairperson

Mumbai DIN: 00043617

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