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Technology with a human touch

Annual Report 2008- 2009

Contents

Message from the Chairperson 02

Board of Directors 05

Message from the Chairman & CEO, Fairfax Asia 06

Message from the Managing Director and CEO 08

Financial Graphs 11

Company Profile 12

Impact of Technology 13

Business Overview 18

Directors’ Report 40

Management Report 44

Auditors’ Report 52

Balance Sheet 54

Profit and Loss Account 55

Revenue Accounts 56

Schedules 58

Receipt and Payment Account 96

Product Portfolio 99

Glossary 100

 Message from the Chairperson

Our vision is backed by concrete steps to prepare for future growth and we continue to invest in the infrastructure required to expand the delivery of financial services across the country.

 iscal 2009 was a challenging year for the global economy, with several developed economies experiencing sharp recessions. The crisis was transmitted to emerging market economies Fthrough the trade and corporate channels. The repercussions of the instability in the financial sector worldwide also impacted India temporarily through the reversal of capital flows and the sharp decline in exports. The Indian economy however demonstrated its resilience in the face of these challenges, with its financial institutions and corporate sector remaining sound and solvent. The unfolding events across the world’s financial arena also highlighted the opportunity that exists for India. The fundamentals of our economy continue to be strong and the Indian financial system is well-capitalised. While we have seen a moderation in GDP growth, our economy is performing significantly better most other countries. India’s growth is likely to accelerate well ahead of other major economies.

At the ICICI Group, we continue to be committed to partnering India’s growth through delivery of a wide range of financial products and services to meet the needs of business and households. Our vision is backed by concrete steps to prepare for future growth and we continue to invest in the infrastructure required to expand the delivery of financial services across the country. Over the last year, we have taken several strategic actions to manage the risks of the environment. We are committed to serving our customers and capitalising on the growth opportunities across our businesses, while appropriately managing risks in the evolving environment.

The year gone by has been an eventful year for the general insurance industry. The impact of detariffing was felt in the form of considerable pricing pressure and increased competition. A positive aspect of these industry developments was the emergence of insurance as a customers’ market. Customers now have competitive choice in their purchase decisions putting the onus on insurance companies to provide the best risk solutions at the right price. As a result, the critical success factors in a detariffed insurance environment are risk based underwriting, innovative product development, superior customer service, depth of distribution and cost efficient operations. Insurers who are able to develop capability and expertise in these areas will succeed more than others in building a sustainable business. ICICI Lombard has consistently invested in these areas keeping in mind the overarching objective of profitable growth. The challenges of the last financial year have only served to underline the criticality of these efforts and have enabled us to consolidate our focus in each function while strengthening their alignment with customer and market requirements.

Our experience shows that enhanced customer service with fair and efficient claims settlement is a significant source of competitive advantage in the insurance context. We believe that future innovation in the general insurance sector will largely be in the area of customer centric service delivery. We continue to make relevant investments in infrastructure, manpower and processes to deliver best- in-class experience to our customers. Some of the key initiatives in this area include setting up our in-house processing hub for health claims; introducing a single 24x7 toll free number to access all our services; and establishing our own claim desks within motor garages.  Early on, we identified technology as a core element that linked all aspects of the business providing a scaleable and robust platform for sustained growth. The influence of technology pervades all functions across the policy life cycle and has allowed ICICI Lombard to reduce operational costs and pass on the benefits to the customer. Efficient operations also need to be balanced with high quality service orientation. An important element of our approach has been to keep technology subservient and sensitive to customer needs engendering a human touch to our technology solutions. The positive feedback from customers and stakeholders who have personally experienced the impact of this approach reinforces our belief that this is the way forward in building lasting customer loyalty and advocacy.

Rural India represents a significant frontier of opportunity for the insurance sector and if addressed effectively has the potential to make India’s insurance penetration at par with international benchmarks. The need for risk mitigating solutions is also acutely felt in the segments at the bottom of the pyramid which usually have maximum exposure to risks that directly impact livelihood. ICICI Lombard continued to focus in developing cost effective solutions to reach out to and service this segment while partnering with the Central and State Governments. Technology again provided the platforms to drive financial inclusion for insurance be it the use of weather stations for weather insurance, RFID chips for cattle insurance or biometric smart cards for enrolment in rural health insurance schemes.

We see robust potential for the general insurance sector as key growth drivers such as infrastructure investments, industrial activity and per capita incomes in urban and rural India show positive trends. Our business model allows us the flexibility and adaptability to capitalise on this growth opportunity and we are well positioned in each segment of the market with dedicated business teams focused on delivering value to customers and stakeholders. Our human capital continues to be our biggest strength. An enduring mindset of continuous quality growth through strong customer orientation permeates the organisation, building on a foundation of core values that are aligned around creating trust amongst all stakeholders.

ICICI Lombard is an integral and critical part of the ICICI Group’s strategy of being a diversified financial services group. Our multi-segment presence has enabled us to contribute and be a catalyst to the growth process of our country. The future holds both challenge and promise. We are confident of realising the objectives that we have set for ourselves and look forward to the continued support of all our stakeholders.

Chanda D. Kochhar Chairperson

 Board of Directors

Board Investment Committee K. V. Kamath Chandran Ratnaswami Chairman (upto April 23, 2009) Chairman Chanda D. Kochhar Chanda D. Kochhar Chairperson (w.e.f. April 23, 2009) Director (w.e.f. September 1, 2008) R. Athappan Sandeep Bakhshi Director Managing Director & CEO (upto April 30, 2009) B.V. Bhargava Bhargav Dasgupta Director Managing Director & CEO (w.e.f. May 1, 2009) Dileep Choksi S. Gopalakrishnan Director Head - Investments James F. Dowd Rakesh Jain Director Director - Corporate Centre & CFO N.S. Kannan Liyaquat Khan Director (w.e.f. May 1, 2009) Appointed Actuary S. Mukherji Director Chandran Ratnaswami Director M.K. Sharma Director H. N. Sinor Audit Committee Director S. Mukherji Sandeep Bakhshi Chairman Managing Director & CEO (upto April 30, 2009) Dileep Choksi Director - (w.e.f. May 1, 2009) Director Bhargav Dasgupta James F. Dowd Managing Director & CEO (w.e.f. May 1, 2009) Director H. N. Sinor Director

Board Governance Committee Chanda D. Kochhar Chairperson (w.e.f. September 1, 2008) Chandran Ratnaswami Director Auditors H. N. Sinor N. M. Raiji & Co. Director Chartered Accountants M.K. Sharma PKF Sridhar & Santhanam Director Chartered Accountants

 Message from James F. Dowd

ICICI Lombard’s management performed well in planning for and adapting to this new regime. The singularity of their devotion to getting it right is impressive and comforting to us as a shareholder.

 welcome the opportunity to once again share the observations of Fairfax Financial Holdings Limited from our perspective as a very supportive shareholder of ICICI I Lombard General Insurance Company. It is an accepted maxim that the best test of management is performance during periods of change. The changes in India are transformative. Our management team has managed them with distinction.

The detariffing initiative in India is designed to modernize the market mechanism. Not surprisingly, it has unsettled and changed the way risk is priced and managed. Security and certainty, byproducts of the long standing tariff system are history. A free form competitive market has taken their place. Market forces now more than ever shape the actions, tactics and strategies of all players. This change required a careful re-examination of the fundamental skills employed by our management team. In the transition period the inherent risks of the enterprise increase and require a new level of surveillance, measurement and transparency. ICICI Lombard’s management performed well in planning for and adapting to this new regime. The singularity of their devotion to getting it right is impressive and comforting to us as a shareholder.

At the end of the day the successful management of that voyage will redound to the benefit of the consumers of our products, our employees and shareholders. The insurance market benefits by becoming more vibrant, diverse and responsive to the expectations of our clients.

We are in a position to have a view on insurance markets and insurance companies across the globe. As our relationship with ICICI Lombard deepens our decision to invest in India is regularly and consistently reaffirmed. Our continuous capital support confirms that commitment.

James F. Dowd Chairman & CEO, Fairfax Asia Limited

 Message from the Managing Director & CEO

We believe that ICICI Lombard is well positioned to capitalise on the redefined industry paradigm. Our business architecture is customer centric and service oriented while we have built critical mass in all key product-market segments.

 CICI Lombard completed seven years of operations this fiscal and continued to maintain its leadership position amongst the private sector general insurers in India. The year Iwas a challenging one for the industry due to the combined impact of difficult economic conditions and full detariffing of insurance premiums. There was pressure on margins as well as heightened competition. Our robust business platform which has been built over the years enabled us to successfully meet these challenges while sustaining our market share. We consolidated our operating model and continued to develop new customer segments and routes to market. We have always differentiated ourselves through thought leadership and continuous innovation resulting in pioneering service offerings across market segments. We remained committed to investing in avenues of profitable growth keeping in view the resilience of the domestic Indian economy and the visible potential of the general insurance sector.

India’s economic profile has undergone a fundamental shift over the last decade as a result of sustained structural reform and growth of consumer demand coupled with robust capital investments. Notwithstanding the recent recessionary events the long term Indian growth story remains intact. We continue to see positive trends in overall asset creation and enhancement in consumer lifestyle, which are two key drivers of growth for general insurance. Furthermore it has been seen that in a stable economic scenario growth of the general insurance industry is two to three times GDP growth and we expect this to be the case once the effects of detariffing recede. Clearly, the strongest impact of detariffing as well as the reversal in the economic cycle is behind us and we believe that the industry is now at a positive inflexion point in its evolution.

There is an increased focus on developing robust customer value propositions for achieving success in a competitive market. Innovative product development, development of virtual channels of distribution, differentiated customer service, competitive advantage through the use of technology, analytics and expertise in underwriting will become factors critical for success. The importance of brand as a key factor for customer decision making in a multi-player scenario is being realised. A disciplined approach that is anchored around the customer will be required to expand the market and drive penetration. Two areas which offer significant growth potential are health insurance and insurance solutions for rural India. We will see continual industry efforts in developing these segments.

We believe that ICICI Lombard is well positioned to capitalise on the redefined industry paradigm. Our business architecture is customer centric and service oriented while we have built critical mass in all key product-market segments. Our biggest strength is our human resource which has within them a depth of expertise across a range of business scenarios. The strength of our core values enables the organisation to leverage cross

 functional learnings to synergistically address the complex challenges thrown up by an evolving business environment. Our focus going forward is to build on our capabilities and take our business model to the next level to deliver profitable growth.

The general insurance industry in its capacity as a risk pooling mechanism plays a critical role in a country’s economic growth and development. Its ability to transfer risk across segments ranging from corporate to government and retail to rural gives it a central role across the economic spectrum. Furthermore the industry is operating at a combined ratio of more than 100% which indicates that it is giving more that it receives. This pivotal aspect of the role of general insurance is often less understood and it will be our endeavour to position the industry in general and ICICI Lombard’s contribution in particular in a positive way amongst relevant customers and stakeholders.

These are exciting times for the general insurance industry which has a positive future momentum. The industry’s latent potential is also validated when compared with international benchmarks. ICICI Lombard has set up a strong business model and we continue to strengthen and enhance our capabilities to fully leverage the available opportunity. We are confident that our customer centric approach and depth of expertise hold the key to our success and we are committed to playing a leading role in the ongoing evolution of the industry. We look forward to the continued support of our stakeholders as we scale up our business in line with our strategic plans.

Bhargav Dasgupta Managing Director & CEO

10 Financial Graphs

11 Awards & Recognition

Company Profile

About ICICI Lombard General Insurance

CICI Lombard is a 74:26 joint venture between ICICI Bank Limited, India’s second largest bank with USD 75 billion in assets and Fairfax IFinancial Holdings Limited, a Canada based USD 27 billion diversified financial services company engaged in general insurance, reinsurance, insurance claims management and investment management.

ICICI Lombard is the largest private sector general insurance company in India with a Gross Written Premium (GWP) of Rs. 37,492 million for the year ended March 31, 2009.

ICICI Lombard General Insurance has been conferred the Customer and Brand Loyalty award in the “Insurance Sector - Non-Life” at the 2nd Loyalty awards, 2009. It was awarded the ‘General Insurance Company of the Year’ at the 11th Asia Insurance Industry Awards. The company also won the NDTV Profit Business Leadership Award 2007 and was adjudged as the most Customer Responsive Company in the Insurance category at the Economic Times Avaya GlobalConnect Customer Responsiveness Award 2006. It has the Gold Shield for “Excellence in Financial Reporting” by the ICAI (Institute of Chartered Accountants of India) for the year ended March 31, 2006.

The company has been assigned a domestic rating of iAAA by ICRA (an associate of Moody’s Investors Service) for highest claim paying ability and a fundamentally strong position.

For more details about the company, log on to the website www.icicilombard.com

12 Impact of Technology

he usage of technology permeated every aspect of ICICI Lombard security threats and challenges. It is critical for insurance companies including operations, sales, human resources and remote to safeguard information about customers residing on their networks. Tbranches. The impact of technology was felt by customers, Security governance, security policy and its implementation and partners, agents and employees across the country in urban as well as the well-tested and reliable business continuity measures assume rural areas. ICICI Lombard was at the forefront developing innovative importance. The requirement of encryption solutions, digital techniques across business areas. The company launched initiatives certificates, secure connectivity and hosting environment are like biometric cards for rural health insurance, Radio Frequency extremely critical. ICICI Lombard ensures that information captured Identification (RFID) chips for identifying cattle covered under cattle from customers is protected. ICICI Lombard ensures that information insurance and facilities like electronic channels— mobile phone and captured from customers is protected. ICICI Lombard is a licensee of the internet to buy and renew insurance policies online. the Entrust Privacy Program. An Entrust security certificate provides robust encryption and safeguards critical information transmissions Usage of technology is core to the success of the organization. In the across networks while upholding data integrity. Visual cues like lock detariffed regime and with increased competition, profitability would icon in the browser, the secure ‘https’ designation in the URL of the be driven by risk-based pricing. Applications like the ‘Sector Intelligence webpage and a seal on the website identifying entrust as the SSL System’ and ‘Physical Risk Rating System’ were built to provide specific certificate provider signify that the session is digitally protected. These inputs and intelligence to the underwriting team to equip them with efforts at innovation in building solutions will sustain the trust ICICI relevant information for risk management and underwriting. The data Lombard shares with its customers. warehouse and business intelligence solutions further strengthened the analytics and forecasting capabilities of internal teams. ICICI ICICI Lombard developed an online transaction platform on its website Lombard recently installed an actuarial software solution, which will www.icicilombard.com keeping the evolving needs of customers be useful in risk based pricing and claims reserving. in mind. Customers can avail of instant policy issuance with no paperwork along with multiple payment options including payment The company focused on creating differentiators for growth in a through credit cards, internet banking, debit cards and cash cards. competitive market. One of the key differentiators is the ease and A digitally signed e-Policy is issued immediately with the hard copy convenience of transactions in the areas of policy purchase, renewal couriered the next day. An online account is created with a secure and claims processing. End customers availing the benefits of login-id and password through which the customer can view, print, electronic media based interaction could be susceptible to associated renew and extend his policies. The online channel facilitates the

“We often refer to ourselves as a technology led business “Technology facilitated automation and integration of distributor. An understanding of the organization’s strategic processes resulting in efficiency and data integrity across ICICI objectives and its applications enhanced the IT team’s Lombard’s systems. In the detariffed regime and with increased ability to architect, design, review, implement and oversee competition, profitability would be driven by risk-based pricing. the development of business oriented solutions. Usage of Data warehouse and business intelligence solutions further technology was a vital contributor in enhancing customer strengthened our analytics and forecasting capabilities.” service at ICICI Lombard.” Rakesh Jain, Anuj Gulati, Director, Corporate Centre and Chief Financial Officer Director, Services and Business Development

13 instant purchase as well as renewal of insurance policies across all company introduced toll free numbers for India as well as US and UK ICICI Lombard’s retail products including travel, health, motor, two to cater to NRI customers. There are multiple payment options-credit, wheeler and home insurance. The company empowered its agents debit, cheque or demand draft. The company’s e-commerce strategy through a portal to issue policies through an internet based platform is aimed at enhancing efficiency and re-engineering processes. thus enabling real time service for its customers. Corporate customers of ICICI Lombard can now issue marine certificates or buy travel ICICI Lombard offers online insurance solutions embedded in rural policies for their employees at their convenience from their office. e-governance kiosks in collaboration with 3i-Infotech and Comat Technologies in Haryana and Karnataka. Through 3i Infotech’s Enterprise Architecture(EA) facilitates an organization to deliver I-SERV initiative electronic kiosks have been set up to offer one stop its strategic objectives comprising quality portfolio, compliance to service to rural customers for government related transactions. These regulations, innovative products and services, superior services kiosks act as a medium to sell on-the-spot insurance policies to rural across every customer touch point and efficient as well as cost communities. 3i Infotech started operations with 300 kiosks functional effective delivery to customers. EA gave ICICI Lombard the flexibility in Haryana. The next leg will be in Goa and Gujarat. 3i Infotech is setting to configure products and processes thus reducing time to market. up 12,500 I-SERV stores across nine Indian states including Uttar Through automation EA reduced manual intervention in service Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Goa, Andhra Pradesh, delivery thus reducing errors and cost. Tamil Nadu and Delhi. These stores will deliver services related to banking, insurance, mobile, education, ticketing, and utilities. A rural ICICI Lombard’s website was designed to give a transparent view to consumer could walk into the nearest e-kiosk to purchase and renew the customer on policy coverage, exclusions, premium and the claims appropriate and adequate insurance covers. Customers could also visit process. Customers can also view the detailed policy wording before the same outlet for claiming insurance as well thus making a range of buying the policy. ICICI Lombard’s online platform thus transfers insurance services available and accessible for rural customers. Through full control to the customer during the policy life cycle with 24x7 these kiosks ICICI Lombard provides its entire suite of general insurance access to ICICI Lombard from anywhere in the world. Customers are products like motor, home, travel and health to rural consumers. more open to the idea of buying policies online as it saves time, is convenient and transparent. A customer can be issued a digitally The Unified Customer View (UCV) initiative provides customers a signed policy online immediately. All transactions can be conducted single view of their relationship with the company. It aims to identify online with 24X7 support via email, online chat and telephone. The the customer based on his needs, behaviours, preferences, buying

“Technology usage brought in efficiency in functioning of the “ICICI Lombard is driven by the conviction in the role of organization resulting in a better customer experience. We help technology that has propelled investments in a focused e- identify and implement practical, sustainable technologies that commerce strategy, its point of sale system based on a robust our people could use to improve the quality of service.” technology platform and its platform agnostic architecture enabling organization-wide data integration.” Alok Agarwal, Director, Corporate Neelesh Garg, Director, Retail

14 patterns and so on. This information is used to identify the potential ICICI Lombard unveiled a unique, first of its kind mobile commerce customer, predict future sales, marketing and promotions to set service initiative enabling customers to buy an insurance cover using suitable prices. It records a history of multiple interactions across their mobile phones. Customers can select the product, pay the premium policies that the customer has had with the company. Processes are using a credit card and avail of the insurance cover immediately. They integrated with text messaging technology to keep customers informed can also take a print out the policy from the website. of transactions regarding payments, claims status, policy dispatch and Further, ICICI Lombard’s virtual presence improved nationwide with the delivery details. The endeavor is to execute all transactions regarding ’Dial-a-Policy‘ solution, which provides access to the customer through claims with care and speed displaying the core value of sensitivity. The a single toll free number from a landline and/or mobile. Web-chat has company continues to identify new trends in technology that affect the also proven to be an efficient platform for servicing customers. ICICI way claims are processed and managed. An enhanced work flow tool, Lombard will continue to explore various other technological solutions Fast Track Claims which includes automated decision management was developed to manage the entire lifecycle of a claim. The growing to augment the distribution network and channels and make inroad number of claims processed through this system improved processing into households. ICICI Lombard has built robust systems for improving efficiency and eventually reduced the processing cycle from days and its servicing capabilities. The core policy administration system has weeks to hours and minutes. been tested for scalability. The Customer Relationship Management (CRM) tool with a single screen view of the customers’ transactions ICICI Lombard partnered with the Ministry of Labour and Employment, enhances servicing capabilities. The workflow system enables Government of India and State Governments to implement a smart end-to-end tracking of applications ensuring quality service to the card based health insurance scheme the Rashtriya Swasthya Bima customers. The claims management system for various products Yojana’ which is the Government’s drive to ensure better health for facilitates prompt claim servicing in an efficient manner. the Below Poverty Line (BPL) workers in the unorganized sector. Challenging the common practice of claims reimbursement where Technology has had its positive impact on employees as well. Today the patient needs to pay cash upfront prior to the availing of health employees are provided with convenient, web-based, self-service care services, biometric cards using user-identification technology are access with visibility to benefits information and the ability to manage provided to rural beneficiaries which are valid at the network of private their own benefits, anytime. Administrative functions now work on hospitals empanelled with ICICI Lombard. The card facility ensures the self-service mode via the usage of online technology. Automation speedy admission in hospitals. Card holders simply have to present encompasses functions like salary planning, work-schedule changes, their cards at a hospital kiosk in order to avail treatment. appraisals, recruitment, terminations and promotions. The company’s

“Enterprise architecture integrates business processes with “The ILPOS online offline solution enables the usage of the technology applications seamlessly enabling flexibility in the system in minimal infrastructure. It allows the user to conduct business. It resulted in shrinking the time it takes to set up all the all his transactions in the offline mode. Connectivity is required support services needed for a new policy (these services include for just three to four minutes a day for synchronization.” changes customers want to make to their policies, renewals and claim handling). Earlier it took six months to set up the entire Suresh S, administration and claims services for a new policy today, it takes Senior Project Manager, Technology less than 90 days.” Sunita Sharma, National Manager, Technology

15 leave management systems allow employees to apply for leave and synchronized with the central services. ILPOS allows the agent to plug check their leave balances online. It maintains a record of employee his laptop into the 64 Kilo byte (KB) line for just a few minutes. The attendance, manages leave sanctions and records significantly transactions of the entire day are synchronized with the insurance crunching time. company’s main server. Technology was used to save costs at ICICI Lombard. The online medium is used to automate tasks using paper-work and optimize ICICI Lombard Point of Sales system (ILPOS) the personnel involved in performing these tasks. Usage of e-mail Agents are key contributors to an insurance company’s business. cascades instead of faxes for announcing meetings and targeted It is of utmost importance that the agents are well equipped to communications like press releases saves time, effort, paper and service the company’s end customers. ICICI Lombard used a money. Group e-mail lists are used to broadcast important messages technology solution to empower agents and intermediaries on efficiently. Frequently requested information is put up on the website/ the field by providing them a technology platform that would intranet and made accessible to everyone. Storage of documents continue to function even with limited infrastructure and using online electronic archives using compression software like challenging circumstances. The ICICI Lombard Point of Sale WinZip saves filing cabinets and floor space. Office intranet solutions (ILPOS) technology solution tackled issues of a rapidly expanding are employed that allow open or pass-word protected access to business network especially in smaller towns, untapped semi important documents, presentations or databases. Documents for urban and rural markets where business could not be potentially editing and reviewing are transferred via e-mail or by net meeting expanded due to lack of required infrastructure. In remote locations the only available infrastructure was low-end desktops rather than sending a printed copy to save paper, prevent burning of with dial-up or no connectivity. The need to access online portals CDs, usage of courier services and costs in a big way. Customers are using such dial-ups and PCs, growing volumes of transactions and updated with the help of online newsletters and email cascades. a low API-index (Average Policies generated per Intermediary) In order to achieve this, the robust and scalable desktop based ICICI resulting in slower pace of underwriting were the factors that Lombard Point of Sale (ILPOS) solution on an Occasionally Connected created the need for a robust alternate service delivery system Computing Model (OCC) was developed. With the rapid increase in that could function effectively in minimal IT infrastructure the distribution footprint spreading to remote locations, the ILPOS conditions using a barebones network and support. application reduced the dependency on internet connectivity. This application allows policies to be issued in the offline mode which are ILPOS was developed as an alternate service delivery system to serve

“An automated decision management work flow tool, Fast “Customers can avail of instant policy issuance with no Track Claims was developed to manage the entire lifecycle paperwork along with multiple payment options including of a claim. The growing number of claims processed through payment through credit cards, internet banking, debit cards and this system improved processing efficiency and eventually cash cards. A digitally signed e-Policy is issued immediately reduced the processing cycle from days and weeks to hours with the hard copy couriered the next day. An online account and minutes.” is created with a secure login-id and password through which the customer can view, print, renew and extend his policies.” Arif Syed, Project Manager, Technology Kolla Suresh, Project Manager, Technology

16 as a business continuity platform for the company’s core insurance ICICI Lombard’s innovative approach resulted in an Operations policy issuance platform – Pathfinder. The core system – Pathfinder System (OS) agnostic software solution that can function on a thin caters to policy issuance and other allied services including servicing, client, personal computer and laptop. Its synching mechanism is endorsement, quote, refund and cancellations. The system is reengineered with compression utility in data transmission and 70% deployed for agents and dealers across locations enabling dealers compression achieved to reduce time for data packets. This ensured to operate independent of the main server, issue policies on behalf better communication between ICICI Lombard and the intermediaries of ICICI Lombard, issue cheques and synchronize data with the main on collection status/reports and customer delight as the policy is made database. The system has the capability to have 1000 users logged available at the point of sale (POS), strengthening of the distribution in at any point of time and enables 400 concurrent user transactions network and high security and data transparency reducing possibility with 99.6% uptime. of paper based frauds. The ILPOS system is supported by a toll free number. The Service Level Agreement (SLA) specifies a turnaround Approach in aiding business continuity time of 24 hours for support requests. ILPOS also helps in issuing the • ILPOS- An online offline solution enables the usage of the system cheques and works in emergency situations effectively. The cost of in minimal infrastructure. It allows the user to conduct all his issuing policies has reduced to 1/6th after the introduction of ILPOS. transactions in the offline mode It has also crunched the time of manually issuing policies as policy • Connectivity is required for just three to four minutes a day for issuance and claims servicing can be done online. There is no internet synchronization. The synch runs at 99.3% uptime cost as it needs to be connected just once in a day. It has escalated sales and significantly benefited dealers. • The Operating System (OS) agnostic software application can be downloaded on a 64 kilo byte line and installed on a personal computer • The system is benchmarked for 22,000 transactions per hour • Updates to the application can be sent automatically from the server • The product has been running successfully since June 2006 • Apart from providing business continuity, the application results in improved sales, increased efficiency and customer delight

“The Unified Customer View (UCV) initiative provides customers “The requirement of an encryption solution, digital certification, a single view of their relationship with the company. It aims to secure connectivity and secured hosting environment for identify the customer based on his needs, behaviours, preferences, customers has become extremely critical. While offering buying patterns and so on. This information is used to identify the technology driven options to customers, the information given potential customer, predict future sales, marketing and promotions by them is protected. ICICI Lombard is a licensee of the Entrust to set suitable prices. Processes are integrated with text messaging Privacy Program.” technology to keep the customers informed of transactions regarding payments, claims status, policy dispatch and delivery details.” Goutam Datta, Project Manager, Technology Manish Dodeja, Project Manager, Technology

17 Business Overview

General Insurance Sector Overview Detariffing significantly influences the approach towards underwriting and product development. Internationally insurance is seen as a risk he year 2008-2009 heralded the deepening of the detariffed management tool. In India after liberalization there has begun a shift in environment with the full impact of flexible pricing leading to a T mindset from insurance being a mandatory and a tax saving instrument softening of rates. The gross written premium of the industry for the to one that is a mechanism for transferring risk. Detariffing has aided this period April 2008-March 2009 grew from Rs.280.52 billion to Rs.306.01 further with general insurers being able to price effectively, based on merit billion on a year-on-year basis, with a growth of about 9%, down from while offering innovative and relevant solutions for risk management. the double digit growths experienced before detariffing. The market share of private sector insurance companies for the corresponding In this detariffed scenario, insurance companies arrived at premiums period grew marginally from 40% to 41%. ICICI Lombard led the based on their assessment of risk and are building robust and practical private players with a market share of 27.2% in the private sector and rating models to arrive at the correct premium with the available risk an overall industry market share of 11.2%. data. The ongoing validation and refinement of these models with their underlying assumptions would be based on the subsequent claims experience. As a result, customers with a lower risk profile would ‘IRDA withdrew the administered pricing mechanism (the tariff enjoy lower premium. There would be heightened awareness of the regime) in respect of fire and engineering along with motor drivers of risk and their impact on premium. Insurance companies and insurance in 2007. A gradual movement towards complete customers would also become aligned towards the common objective detariffing facilitated product innovation and customization to suit of safety and risk reduction. specific requirements of customers. This led to the emergence of new product options for customers, differentiation of product At the corporate level, intra-portfolio cross subsidization was replaced and service offerings, customer segmentation and creation of by product level pricing resulting in reduction of fire insurance targeted products for different segments.’ premiums. Group health and marine insurance premiums moved up with companies reviewing their coverage in order to optimize pricing. Motor insurance gravitated towards risk based pricing. Motor Insurance Motor and health insurance formed the biggest share of the general has two components - the mandatory Third Party Liability and Own insurance market in India, followed by property and casualty. Motor Damage which is voluntary. The Third Party Liability cover plays a vital insurance continued to dominate the general insurance business. role in ensuring that the affected party in an accident has access to Health insurance replaced fire insurance to occupy the second place. the appropriate compensation. The IRDA laid down the premium rates The global slowdown impacted the marine insurance business as chargeable for Third Party Liability and also introduced the concept of well various construction projects in turn affecting the sale of project a motor pool at the industry level for commercial vehicle claims. related policies. Intermediaries continued to play a significant role in helping their Detariffing has been a logical step in the liberalization process marking a customers to identify the best options for their insurance needs. Pricing significant inflexion point in the evolution of the industry and catalyzing its and service levels were key areas of focus while assessing insurance further development. Phased detariffing in the Indian insurance industry options. The role of intermediaries has increased as they need to educate started from January 01, 2007 with full flexibility in pricing announced their customers and compare the various product-pricing options that in January 1, 2008. The flexibility to have add-on product coverage on became available. Brand image played an important role as a proxy for base line policy wordings was announced on January 1, 2009. A gradual value in the context of an increasingly complex decision making process movement towards complete detariffing facilitates product innovation as customers had a wider choice. The role of the regulator revolved and customization to suit specific requirements of customers. This leads around setting the rules of the game in a way that ensured protection to the emergence of new product options for customers, differentiation of policy holders’ interests as well as allowed the players to create of product and service offerings, customer segmentation and creation sustainable growth. Insurers who retained a bottom line focus were in of targeted products for different segments. a better position to manage the transition to a detariffed scenario. 18 Business Overview Prominent developments in fiscal 2009 uring the year, ICICI Lombard focused on meeting the organizational • The total number of general insurers registered with the IRDA Dobjectives of integrity in all business dealings, developing went up to 21 products driven by the needs of the customer, continuing to expand • The need for terror insurance following the 26/11 Mumbai distribution and geographical reach, controlling costs, identifying new attacks prompted general insurance companies to introduce business opportunities, strategic alliances and investing for growth. mid-term terror cover. The mid-term inclusion of terror cover ICICI Lombard retained its position of an ace private general insurance will now be available to the property policies, subject to provider amidst challenging business conditions generated due to the economic upturn as well as a calibrated movement towards consideration complete detariffing. The core of the strategy has been to identify the • All general insurance companies adopted the following uniform key business drivers and to work accordingly to build competencies definition of all medical expenses policies issued or renewed to sustain growth. ICICI Lombard achieved a Gross Written Premium after June 1, 2008. The new uniform definition of a pre-existing (GWP) of Rs. 37,492.1 million in fiscal 2009 over Rs. 36,010.2 million disease is “Any condition, ailment or injury or related condition(s) in fiscal 2008 and reported a claim disposal ratio (percentage of claims for which you had signs or symptoms, and / or were diagnosed, settled against claims reported) of 97% as on March 31, 2009. In the and / or received medical advice/ treatment, within 48 months financial year ended March 31, 2009, the company issued 3,957,048 prior to your first policy with the insurer.” policies across India and handled 3,313,830 claims. The company presently has 5697 employees in 409 branches.

Organisation Structure Wholesale Business he concept of providing solutions to specific needs of the customers Corporate is part of ICICI Lombard’s DNA. The company’s operating structure T he Corporate Solutions Group (CSG) focuses on the general is therefore designed from a customer viewpoint. ICICI Lombard has insurance needs of corporate houses in the private as well as four business segments: Wholesale, Retail, Rural and Agriculture and T Government sectors. CSG provides product innovation through the Shared Services. The wholesale business group concentrates on large Corporate Product Group. The Techno-Marketing Group seeks feedback conglomerates, Small and Medium Enterprises (SME), State and Central from clients and provides it to the Customer Service and Reinsurance Governments and Government-owned enterprises. Its product portfolio Groups. Leading corporate houses including oil, telecom, IT and comprises fire, marine, engineering and liability solutions. Employee infrastructure across locations are serviced by CSG. The group has a group insurance schemes and large scale health and personal accident wide service footprint. The total number of corporate houses serviced schemes are also covered by this group. The Retail segment concentrates by CSG stood at nearly 1000 as of March 2009. The CSG team currently on individual customers using various channels encompassing agents, has over 200 dedicated resources across locations. It has a corporate brokers, bancassurance, tele-sales, direct alliances, worksites and the marketing group that is spread across major cities in the country. internet. Its product portfolio consists of health, home, motor, travel and personal accident. The Rural and Agriculture Business Group provides The product categories handled by CSG are Fire, Engineering, Marine, insurance solutions to rural consumers with weather, cattle, health and Motor, Heath and Personal Accident, Liability, Credit and Political Risks personal accident covers as its key product segments. The Shared Services insurance. Fire and Engineering are the biggest product categories group pursues opportunities to better serve the business verticals. This within CSG and together account for 30% of the group’s revenues. group consists of finance and accounts, technology, operations, customer The CSG business model is based on in-depth understanding of risk. service, underwriting, human resources, legal, marketing, administration This defines the way it approaches business acquisitions and reflects and fraud control. in its claim settlement policy. For corporates it offers complete risk

19 Technology spurs Innovation “The health insurance card issued to below poverty line (BPL) families insured under the Rashtriya Swasthya Bima Yojana (RSBY) uses biometric technology. Each card bears the family photograph and fingerprints of each family member to ensure that the right beneficiaries avail of the insurance cover. This card then becomes the gateway to financial inclusion for those at the bottom of the economic pyramid.” management solutions including risk inspection as well as advisory and Engineering, Health and Accident) along with Aviation and niche services in the areas of risk improvement, optimizing insurance products like Credit Insurance and Political Risks Insurance. CSG built coverage and structuring of policies. ICICI Lombard also continued to a range of credit insurance products for export and domestic credit. focus on the Liability business with a consulting-led approach in order The credit insurance cover is designed for companies that are selling to stimulate demand through customer education. their goods and services on open credit to international and domestic buyers. It protects the insured against the risk of non-payment by its “Prompt efficient service and quick settlement of claims is the buyers due to insolvency or protracted default. Political risk insurance hallmark of ICICI Lombard.” covers corporates for project exports and permanent investment insurance for overseas acquisitions. The risks covered include contract Dinyar M. Jivaasha frustration, confiscation, expropriation, nationalization of assets (such Group Global Head - Corporate Risk & Insurance Management, as mobile machinery and stocks), transfer and inconvertibility risk of Essar Group funds, war, terrorism and political violence. Solutions are always tailor made depending on the requirements and nature of customers which Fiscal 2009 has been the year of discounts as corporates have seen include corporates, financial institutions and contractors. significant reduction in premium outgo. During the year under review CSG focused on growing a quality portfolio with a risk-based rating system, consolidation and strengthening of relationships. The growth “The capability and quality of service offered by an organization comes of the Small and Medium Enterprise (SME) sector has been triggered to the fore during challenging times. ICICI Lombard’s capability to empathize with customers and reinsure risks that are unique on account by the consumption driven growth of the Indian economy. Identifying of one-off transaction needs, differentiates it from its competitors. this as an opportunity for profitable growth CSG launched a range The cooperation and efficiency shown by the ICICI Lombard officials of insurance products for SME clients in various sectors, including to settle our claims so fast post the recent terrorist attack was quite education, religious establishments, hospitality and auto ancillaries. commendable. It has always been a pleasure partnering with ICICI After studying each sector in detail, pre-underwritten packaged Over Lombard and we look forward to a long term relationship.” the Counter (OTC) products relevant to their peculiar needs were developed for seven sectors. A separate distribution team leverages Sumit P. Zaveri General Manager - Finance a diverse spectrum of direct field force, internet, intermediaries and The Indian Hotels Company Limited the bancassurance channel to reach out to this dispersed customer segment. A separate panel takes care of the partnerships with co- CSG focuses on developing products for corporates that offer benefits operative banks and insures the assets financed by them. This panel in terms of better features, risk improvement measures and customized recognizes the different kind of service required by this sector as well choices. It enables corporate customers to avail of tailor-made products as the need for cost sensitivity. that are designed to suit their varying insurance needs. The increase in width and depth of insurance penetration was supported by the “We have been dealing with ICICI Lombard for the past three years. spread of customer service networks along with standardization of I am pleased to put on record that we are happy with our decision. processes to ensure quality and uniform service delivery over a wider We appreciate your prompt and excellent service standards. We geography. Customers have a wider choice with better risk covers and hope our association will go a long way in future.” can maintain a quality profile for a positive risk rating. As detariffing Suvalal Gundecha intensified competition, the group rationalized cost by using better Senior Director, Nagar Urban, Co-operative Bank Limited. operational efficiencies, better technology, effective risk management solutions and lesser time to market them, the benefits of which are The focus on growing a balanced portfolio has propelled investments ultimately passed on to end customers. CSG’s effort to ensure that in strategies aiding the traditional Property and Casualty business (Fire its customers are satisfied over the long-term is rewarded by better

22 returns through repeat business, referral sales, decreased customer medical claim balance available and fool proof authentication of the maintenance costs and reduced exposure to price competition. beneficiary. Usage of these biometric cards considerably reduces hospital and other administrative costs and eliminates the need for Government cumbersome admission procedures in hospitals as well. Innovation he Financial Inclusion Solutions Group (FISG) at ICICI Lombard and efficient usage of technology forms the backbone of this scheme Tfocuses on providing insurance solutions for government welfare touching all aspects of implementation and providing an innovative initiatives. These insurance solutions are aimed at protection of assets sustainable model to deliver cashless health insurance. Through this and income amongst the low-income strata of society with the vision scheme ICICI Lombard reaches out to economically challenged citizens of reaching out to those segments with the maximum exposure to in remote and otherwise ‘technology-unfriendly’ areas. risks to their livelihood and minimal avenues to mitigate them. ICICI Niramaya Lombard covered over 4.5 crore lives under all the FISG schemes in fiscal 2009. Some of the significant schemes in which FISG has been ‘National Trust’ under the Union Ministry of Social Justice and deeply involved are elaborated below. Empowerment launched ‘Niramaya’, a health insurance scheme for the welfare of people with autism, cerebral palsy, mental retardation Rashtriya Swasthya Bima Yojana and multiple disabilities. The Union Ministry of Social Justice and The ‘Rashtriya Swasthya Bima Yojana’ (RSBY) is part of the Empowerment partnered with ICICI Lombard to provide health Government’s drive to ensure better health for Below Poverty Line insurance to 100,000 such disabled people across the country. The (BPL) workers in the unorganized sector. This mass health scheme policy is issued to the National Trust and individuals are covered is implemented by the State Governments through general insurance on a named basis. This scheme offers a host of benefits including companies with premium subsidy from the Government of India as cover for pre-existing conditions, cashless hospitalization, domiciliary well as the State Governments. ICICI Lombard partnered with the hospitalization, nursing charges, corrective surgery for existing Ministry of Labour and Employment, Government of India and State disability including congenital disability, surgery to prevent further Governments to implement this smart card based health insurance aggravation and post operative care including therapies for six months scheme in the states of Maharashtra, Haryana and Uttar Pradesh. This as also the transportation costs. effort promises to give a fillip to the ongoing efforts at driving financial Weavers’ scheme inclusion in rural India. Five districts in Maharashtra, 16 districts in Haryana and all 71 districts in Uttar Pradesh will be covered by ICICI Weavers and ancillary workers constitute an important segment of the Lombard. Over 1.45 million BPL families have been enrolled under this unorganized sector of the economy. Weaving started as a part-time scheme as of date. activity in rural areas. It transformed into a flourishing economic activity due to significant market demand over the years. Handloom weaving Coverage extends to the head of the household, the spouse and up has significant potential and holds the key for sustaining the millions of to three dependent children or parents. The company ensures spot weavers spread across the country. Presently, handloom weaving is the registration of eligible citizens and instant policy issuance. As part of second largest employment generator after agriculture and contributes this scheme, smart cards having biometric technology are issued to substantially to export. The weavers’ scheme covers handloom weavers the family and the fingerprints and photographs of the beneficiaries are and ancillary workers. Ancillary handloom workers like those engaged stored in these cards. A swipe of the smart card along with biometric in warping, winding, dyeing, printing, finishing, sizing, jhala making and authentication ensures that the beneficiary gets cashless access to jacquard cutting are also eligible to be covered. The scheme entails a medical care as per the policy terms in public and private hospitals cashless facility with empanelled hospitals across locations. empanelled with ICICI Lombard. ICICI Lombard covered around 1.9 million families and settled close This usage of biometric technology ensures that each beneficiary to two million claims under its health insurance scheme for handloom has a unique identification. This also enables instant validation of the 23 weavers. The scheme was launched by the Government in association for personal accident for primary members as well as pre-existing with ICICI Lombard in 2005-2006 and is in its fourth year of operation. diseases in the network of hospitals empanelled with ICICI Lombard. The scheme aims to provide the weaver community comprehensive FISG focused on working closely with the Government to deliver healthcare assistance. It provides medical assistance for a wide range insurance solutions to geographically dispersed segments at the of common aliments including substantial provision for outpatient bottom of the pyramid. The governing objective is to develop risk department (OPD) services besides allowing the insured to avail of solutions relevant to these segments coupled with cost effective policy alternative systems of medicine. The scheme provides coverage to and claims administration over a wide geographical area. The national the weaver and his family and covers pre-existing as well as new agenda of financial inclusion necessitates innovative approaches in diseases with the annual limit per family at Rs.15,000. It has a number line with the ones described above. of firsts and has reached a critical mass because of focused measures to spread awareness and has been implemented successfully in the Retail states of Andhra Pradesh, Uttar Pradesh, West Bengal, Assam and n fiscal 2009 the retail segment remained an area of focus as part of Tamil Nadu. The challenge was to provide claims settlement service the company’s strategic objective to diversify its portfolio and create over a dispersed geography and the company has innovatively activated I stable annuity streams. Motor insurance including private cars as well over 750 clinics providing cashless OPD facility in weavers’ clusters as commercial vehicles constituted over 75 % of the company’s retail covering around seven million lives (weavers+ family members). business in fiscal 2009. Health insurance and other retail insurance Mobile OPDs have also been started to make doctors and medicines segments including travel accounted for the rest. on wheels available along with the required infrastructure. The first project of this kind was piloted in Rani in Kamrup district of Assam on The overall health portfolio at ICICI Lombard grew at a rate of 30% June 10, 2008 where 114 patients were treated. Over the past year, in fiscal 2009 while the mass health insurance products registered the scope of the OPDs expanded to include speciality consultation a substantial growth of 50%. Key factors that contributed to the and medicine which helped rural customers avail of gynaecology, significant growth were government health schemes, growing ophthalmic, cardio and dental treatments. ICICI Lombard conducted awareness about the need for health insurance and rising cost of health camps for weavers to provide them preventive healthcare quality health care, especially in urban markets. As a result, health measures. In 2008 the company organized 196 health camps treating continued to be the focal point in fiscal 2009. 108,371 weavers. The implementation of these initiatives has helped ICICI Lombard laid significant emphasis on bringing the entire range of pursue the larger objective of meeting the health requirements of the health services and wellness information aimed at making a difference weavers in a multi-dimensional manner. to customers’ health and lifestyle as a whole. On April 1, 2008 the company launched ‘iHealthcare’ an in-house integrated health claim Rajiv Gandhi Shilpi Swasthya Bima Yojana processing and wellness services solution provider which partnered The office of the Development Commissioner-Handicraft, Ministry of with hospitals, diagnostic centres, wellness centres and other Textiles and ICICI Lombard launched a comprehensive health insurance healthcare service providers. ‘iHealthcare’ became the largest service scheme for handicraft artisans across the country. The scheme titled provider for all group health policies underwritten by ICICI Lombard. ‘Rajiv Gandhi Shilpi Swasthya Bima Yojana’ is the first ever health Close to 40% health policies were serviced by ‘iHealthcare’ within the insurance initiative for artisans in the country. This policy aims to first nine months of the launch. financially enable the artisans’ community to access healthcare facilities in the country. This scheme covers the artisan, spouse and ICICI Lombard launched an individual personal accident policy two children. ICICI Lombard’s health cover offers comprehensive pre ‘Personal Protect’ which provides comprehensive covers on accidental and post hospitalization expenses through 750 cashless OPD clinic hospitalization and reimbursement of expenses. The policy covers a facilities and access to over 2,250 hospitals across the country. Apart wide range of eventualities like death, permanent total disability (PTD) from the list of ailments eligible for coverage, artisans are also covered due to accident and accidental hospitalization with reimbursement 24 benefits. ICICI Lombard also continued to focus on its core health safety. The company conducted eye check-up camps for commercial insurance product - The Family Floater plan. The cashless facility vehicle drivers. Nearly 400 eye check-up camps were conducted till available under the health policy eased the requirement of cash when date treating close to 30,000 beneficiaries. hospitalized across ICICI Lombard’s 4,500 network hospitals. In fiscal ICICI Lombard emphasized on increased usage of virtual channels to 2009 a top-up health insurance product ‘HealthCare Plus’ was launched. reach and service customers in order to reduce operational costs and This product provides coverage for medical expenses incurred in pass on these benefits to the end customer. The company continued excess of the deductible amount per instance of hospitalization. The to focus on acquisition of new relationships to expand business. The company also introduced a ‘Secure Mind’ policy in January 2009 Maruti dealership registered significant growth during the year and which has a ‘loss of job’ component that covers three months worth acquired an exit run rate of 10% market share in new Maruti sales. of EMIs for those who lose jobs due to retrenchment. ICICI Lombard’s wider base of retail customers gave opportunities to Motor insurance being the largest product category contributes cross-sell and up-sell to maintain growth and also aided in reduction more than 50% of ICICI Lombard’s gross retail premiums. In fiscal of overall costs of acquisition. 2009, ICICI Lombard consolidated its presence in all key segments The company continued to retain its sharp focus on the bottom of motor insurance including two-wheelers, four wheelers, tractors, line and underwritten profits. A unique product proposition linked construction equipment and commercial vehicles. The company to the parent product coupled with seamless process integration targeted new vehicles as well as renewals with a strong distribution helped drive business through Fullerton, which is a financial service footprint through dealers, garages as well as manufacturer tie-ups. provider. All business entities aligned with ICICI Lombard became self A dedicated team for Motor retention utilized a range of fulfilment contained profit centers. The company also focused on creating a channels to reach the customer through agents, feet-on street, large captive distribution through the agency channel. Fiscal 2009 also telephone, internet and direct mail resulting in increased retention saw an increase in the rate of customer retention of motor and health ratios in a cost effective manner. ICICI Lombard continued to focus segments by 70%. on risk based rating of motor vehicles and differentiation through better service delivery. The company also developed an online motor Bancassurance is the key contributor to the company’s retail volumes. insurance training module to educate new entrants to the network. Currently ICICI Lombard has tie-ups with 19 bancassurance partners. The company’s key partners include ICICI Bank, Barclays and American The ‘Red Carpet’ claims initiative was introduced in Motor insurance Express. The success of ICICI Lombard’s bancassurance model rests with the objective of retaining large customers, specifically those on an integrated approach and seamless product delivery to the bank’s insuring 50 vehicles or more with the company. This service initiative customers. entailed special benefits for such customers, inclusive of relaxation in spot survey in case of a claim by allowing the shifting of the vehicle Technology applications were leveraged to integrate business from the loss location. ICICI Lombard also made advance payment for processes. In fiscal 2009 the company established stronger control claims over Rs. 100,000, by paying 50% of assessed liability upfront over manual cover notes, Non MICR cheques and cases of cheque with dues settled immediately after the final invoice was raised. bounce to increase process hygiene and reduce exposure to possibility of fraud. A single interface called ‘Samadhan’ was developed as a ICICI Lombard set up Claim Shops at nominated garages in order to platform to resolve customer queries. The company focused on make claim settlements easier for customers. Company representatives reaching out to a large number of customers to expand business. at the Claims Shops assessed the damage and arrived at the amount of compensation on the spot. This reduced the gap between the time ICICI Lombard enhanced its engagement with technology and took the vehicle arrived in the garage to the time taken for the survey. Claim on the development of the Inward Tracking System for motor files Shops served as a one stop solution for all claim related queries faced (ITS) and Transaction Tracking System for health files (TTS) so that by the customer. There are 50 ICICI Lombard claim shops at present. they serve as business continuity platforms. A single user interface ICICI Lombard was also involved in an initiative to promote driver technology platform ‘Edison’ was also developed. The system was 25 Technology builds Trust “Tagging ensures authenticity of the identity of the cattle being insured. The ability to settle genuine claims after due authentication enhances the perception of the insurance process in a positive way.” deployed for intermediaries across locations enabling them to store established focused verticals for rural beneficiaries and government consolidated information of customers in one system independent partnerships. These verticals were involved in understanding the of the main server, issue policies on behalf of ICICI Lombard, issue unique needs of each market and developing customized products cheques and synchronize data with the main database. An Integrated for the targeted segments. These verticals have teams comprising Approval System was launched as a common touch point for any kind empowered decision makers involved in building cost effective of approval related to sales. distribution mechanisms and robust processes for claims servicing.

ICICI Lombard’s partnership with Jet Airways to launch ‘JetProtect’ In fiscal 2009, ICICI Lombard expanded its reach in rural areas by gave an impetus to domestic as well as overseas travel insurance activating rural marketing channels across 970 towns. These include wherein customers have the option of purchasing a travel insurance rural marketing agents and chains of rural retail outlets like the Hariyali policy along with a Jet Airways ticket. This policy can be purchased Kisan Bazaar and Tata Kisan Vikas Kendra. ICICI Lombard’s pioneering instantly online from www.jetairways.com and also from the ‘Plan work in introducing insurance to rural India encompassed protection Your Travel’ section of the Jet Airways website. This domestic and for agri-based products, livestock and health insurance for the rural overseas travel insurance policy covers situations such as medical population. expenses caused by accidents, possible loss due to trip cancellation Agriculture contributes around 22% of the Indian Gross Domestic and loss or delay of checked-in baggage. Product (GDP) and provides livelihood support to two-thirds of the ICICI Lombard’s robust e-commerce platform focused on the population. Any change in this sector has a multiplier effect on convenience of the customer through self-service. A customer can the economy. ICICI Lombard was the pioneer in the introduction of issue a digitally signed policy online within just ten minutes and without weather insurance in India. Weather insurance covers weather related cumbersome paperwork. All transactions can be conducted online risks faced by crops like excess or deficit rainfall, temperature variation with 24x7 support via email, online chat and telephone. The company and humidity. Weather insurance schemes facilitate immediate introduced toll free numbers for India as well as US and UK to cater to redressal based on objective data obtained from the meteorological NRI customers. There are multiple payment options, credit card, debit department. Weather insurance also gives farmers the flexibility to card, cheques or demand draft. Processes were integrated with text take up insurance for a particular critical stage of crop growth or for messaging technology to keep customers informed of transactions the entire crop cycle. The company tied up with national bodies like regarding payments, claims status, policy dispatch and delivery the Indian Meteorological Department to obtain the latest weather details. The ease of conducting transactions appealed to customers reports and historical charts. The company also collaborated with the on the move and online renewal of policies gained popularity. National Collateral Management Services Limited (NCMSL), a group company of National Commodities Exchange of India (NCDEX) to install Rural automated weather stations in 163 locations across the country.

ndia’s large rural population is characterised by low penetration The company partnered with micro-finance institutions (MFIs) like BASIX Iof risk management solutions and offers significant potential for and Self Employed Women’s Association (SEWA) in Gujarat as well as growth of general insurance. The key to success is offering covers various local bodies like agriculture input dealers, seed companies and that are relevant to the rural context at the right price while controlling cooperative societies across locations for distribution of products. ICICI operational costs of policy administration and claims servicing. Future Lombard insured nearly 69,000 farmers and over 230,000 acres of land growth will come from expansion of markets and focus on volumes for Kharif crops. For Rabi crops the company insured around 32,000 in smaller towns and rural areas leveraging established distribution farmers and 220,000 acres of land. In fiscal 2009, weather insurance networks. The economic stability of India’s rural populace is impacted was offered across a larger geography and with a wider range of crops. by the vagaries of weather, poor health of cattle and accidental deaths. During the year, the company insured over 340,000 farmers and 725,000 Recognising these factors ICICI Lombard made pioneering efforts acres of land for wheat, paddy, oranges, cotton, coriander, grapes, in creating awareness about insurance in rural India. The company

28 cumin, fenugreek, kinnu, castor and soybean across 210 locations in penetration of cattle insurance among rural customers in Rajasthan, the states of Rajasthan, Punjab, Haryana, Madhya Pradesh, Chattisgarh, Maharashtra, Gujarat, Haryana, Punjab and Andhra Pradesh. This Andhra Pradesh, Karnataka, Uttar Pradesh, Tamil Nadu, Jharkhand, initiative was targeted at creating an asset for the rural consumers Maharashtra, Orissa, West Bengal and Gujarat. through cattle loans along with hedging their economic loss in the event of loss of the cattle due to illness or other perils. Five months ICICI Lombard collaborated with PepsiCo International for covering prior to the project the company had insured 3,500 cattle. This rose farmers supplying potatoes to PepsiCo for its potato chips business. to about 22,000 cattle after Kamdhenu. Through this campaign the Under the Pepsi project 1,100 farmers were insured against the vagaries cattle owner was provided information about cattle insurance and was of weather that affect their crop resulting in losses. This partnership explained the process of issuance of an instant policy and the claims covers 2,000 acres of land in Maharashtra, 1,800 acres in Karnataka process in case of an unfortunate event. The company leveraged the and 900 acres in Punjab. Following the success of trial runs in Punjab, association with dairies and local veterinarians for tagging purposes. Maharashtra and Karnataka, the scheme was rolled out for potato A film explaining the importance of cattle insurance was screened at growers in 10 other Indian states covering an area of 14,000 hectares. various locations in villages to create awareness amongst the target The project took off in Khed and Peth from Pune district and Khatao audience. Project Kamdhenu was conferred with the prestigious Rural from Satara district of Maharashtra. Certain districts of Karnataka, West Marketing Association of India (RMAI) award. The 50 day campaign Bengal and Punjab are also being covered under the project. covered five states touching around 10,000 high potential customers. Livestock is a key element of rural economic activity and insurance of ICICI Lombard continued its association with SKS Microfinance, cattle is one of the major requirements. ICICI Lombard addressed this India’s third-largest microfinance institution that has undertaken a pilot by offering a cattle insurance product through MFIs and government programme for rural health insurance in Andhra Pradesh, Karnataka and sponsored programs across eight states. Cattle insurance indemnifies Orissa. The policy named as ‘Swayam Shakti’, offers low cost health the cattle owner against loss sustained as a result of death of the cattle insurance coverage for beneficiaries in the lower socio-economic occurring during the period of insurance due to accident, surgery, strike, strata in semi-urban and rural areas. The policy covers existing and riot or civil commotion, terrorism, earthquake, acts of God and diseases. potential illnesses, snake bites, maternity expenses and accidents This policy covers indigenous cross bred and exotic cattle owned by and provides a three-month cover for newborns. So far the schemes private owners, various financial institutions, dairy farms, cooperatives have been implemented in Khurda, Jagatsinghpur, Ganjam, Angul and and corporate dairies. ICICI Lombard is the only company that provides Dhenkanal districts of Orissa along with the states of Maharashtra, 100% indemnity to the insured and issues an instant policy certificate. Andhra Pradesh and Karnataka. The company focused mostly on ICICI Lombard tied up with large financers like ICICI Bank, KAS women self help groups (WSHGs) and covered over 120,000 members Foundation, Fullerton and the Government’s Livestock development of WSHGs in Orissa. Under this scheme beneficiaries could avail of Authority (LDA) to insure close to 250,000 heads of cattle. the cashless facility in 277 hospitals empanelled with ICICI Lombard. The company also insured around 3,000 cattle in Maharashtra with The endeavour is to develop suitable micro- insurance products and KAS Foundation and Fullerton concentrated mainly in Ahmednagar explore the most effective methods of distribution in rural areas to district. There are tie-ups with dairies in Rahuri, Sangamner, Nashik, increase the penetration of health insurance in the rural market. Karad, Phaltan and Sangli districts of Maharashtra. The company ICICI Lombard’s collaboration with 3i-Infotech to offer a comprehensive developed the required service network which includes veterinary range of insurance services to rural customers is gaining traction. doctors for speedy settlement of claims. The initial response was Through the I-SERVE initiative rural customers are offered positive in these locations and is indicative of a large potential in this on-the-spot online insurance solutions embedded in rural field and will be further enhanced during the current year. e-governance kiosks. Their network of kiosks allows the company ICICI Lombard’s participation in Project Kamdhenu in association with a platform to penetrate well into the hinterland, with one kiosk for ICICI Bank cattle loans in September and October 2008 led to increased every six villages, which is managed by a local operator. Each kiosk is

29 Technology drives Responsiveness “In the time of crisis we need to be at the spot to expedite the claims process. A centralized data management system enables us to be accessible to the customer, crunch timelines and release payment…when the customer needs it the most. “ equipped with two computers and a printer, scanner, copier and fax with automation of various processes in order to increase efficiency machine. UPS backup and an Internet connection are utilized to book and optimize expenses on various cost elements. business sourced through the local area. These kiosks enable rural During the year, the company launched a web platform ‘Idea Manch’ for consumers to access quality and reliable banking as well as insurance employees to send in suggestions on any area pertaining to enhancing services along with faster claims process that help them mitigate risks the company’s performance. All suggestions pertaining to cost were such as loss of income due to natural calamities, illness of the family directed to the cost management team and suggestions were taken member or illness of cattle. The company provides rural consumers up for action. As part of the company’s cost saving initiative the ‘Make an entire suite of general insurance products like motor, home, travel a difference’ series was launched. This initiative involved sensitizing and health through these I-SERVE stores that led to instant issuance, employees about cost saving measures that can be applied during the renewals and tracking of policies 24X7 online. Policies can be issued course of one’s work. instantly and funds are transferred electronically. These internet- enabled booking platforms provide multiple services under one In fiscal 2009, ICICI Lombard kept pace with the changing market roof right from booking proposed policies at the location to handing scenario and achieved maximum efficiency for spends like travel, them over to the customer in real-time resulting in higher customer communication, employee welfare related expenses and office satisfaction. In the limited connectivity area the ICICI Lombard point equipment. The travel desk was converted from the decentralized of sales (ILPOS) system allows teams to work in the offline mode to the centralized mode resulting in better efficiency, tracking and and issue the policy to the customer instantly. Around 300 kiosks reporting. Based on the cost benefit analysis, new offices were have been functional in Haryana and the next leg would be Goa and rationalized during the year. Gujarat. 3i-Infotech will be setting up 12,500 I-SERV stores across Going forward the team would focus on automation and cost effective nine Indian states including Uttar Pradesh, Madhya Pradesh, Gujarat, tools aimed at benefiting internal and external customers. Maharashtra, Goa, Andhra Pradesh, Tamil Nadu and Delhi. E-enabled kiosks termed as Citizen Service Centres (CSC) were also set up in Customer Service rural areas in association with and Comat Technologies and around n the competitive insurance industry customer service is a key 768 e-enabled kiosks were functional in Karnataka. Idifferentiator. ICICI Lombard accorded highest importance to ICICI Lombard’s focus has been on developing the required service maintaining and enhancing the quality of customer service provided to network so that the rural consumer could avail of fairly priced and its customers across touch points. The company’s customer contact cost effective insurance products. Product innovation is also a key programs encompassed customer service through online insurance, differentiator. The company has adopted a focused approach that helps mobile updates, tele-sales, toll free numbers and online chat with over build a model that is viable, sustainable and scalable. The endeavour 100 customer service resources managing the entire process. ICICI is to provide customers technologically enabled processes and easy Lombard leveraged technology to provide prompt and convenient service accessibility to quality service to enhance customer satisfaction while to customers through the online and mobile platforms. The customer keeping costs under control. service philosophy at ICICI Lombard is driven by the commitment to settle all genuine claims. Cost Management ICICI Lombard’s network of garages and hospitals offering the cashless rowing organizations need to continuously optimize expenditure claims service stood close to 3,000 and 4,500 respectively in fiscal 2009. Gand control fiscal latitude. To give this area the desired focus, ICICI Lombard has a dedicated Cost Management group which looks ICICI Lombard continued to leverage technology for fast and cost at cost planning, co-ordination, control and reporting of the cost efficient service delivery. ICICI Lombard set up online kiosks at key aspects of the company. The team assists in identifying, developing, branches to allow customer self service using the online medium. improving and optimizing the use of the company’s resources along The online channel also facilitated the purchase as well as renewal

32 of insurance policies across segments. The company also explored company follows commensurate risk management practices with an multiple channels of electronic renewal to reduce operational cost objective to strengthen the existing business and manage risks arising and offer ease to the customer. Customers were able to renew their out of duration, market, credit, legal and operations. policies using interactive voice recording (IVR) and mobile in addition As of March 31, 2009, investments amounted to Rs. 30.74 billion to the physical channel. The need for customers to visit branches was growing by 24% over the previous year. The investment portfolio has reduced as the company provided alternate channels for renewal. Also grown at a Compounded Annual Growth Rate (CAGR) of 60% over the the point of sale (POS) mode enabled instant policy issuance across past five years while the realized return and total return averaged at the counter. Through the Unified Customer View (UCV) initiative, the 11.28% and 10.13% respectively. The ratio of year end investment company provided the customers positive and intelligent service at all assets to net worth stood at 2 times. customer touch points. ICICI Lombard integrated all processes with text messaging technology to keep customers informed of transactions Operations regarding payments, claims status, policy dispatch and delivery details. uring fiscal 2009 ICICI Lombard concentrated on providing Introduction of smart card technology allowed cashless transactions enhanced service to customers and leveraging technology to for mass health schemes across the country and opened the doors of D ensure processes are seamlessly deployed. The year under review healthcare facilities to beneficiaries in remote locations. has also been a year of consolidation in the scale of operations and The customer grievance redressal cell was created for customers to ensuring readiness for future growth. The focus was on enhancing register their grievances on the website. In fiscal 2009 the company the quality of service, lessening the time to market, accelerating in outsourced its contact centre operations to a service provider which services to our policy holders and making ourselves readily accessible has one of the largest BPO operations in the world allowing the at the time of need. company immediate scalability and flexibility. Dedicated customer ICICI Lombard has taken on an organizational level initiative to drive quality service helpdesks were set up across branches in order to service and excellence is business operations. The ISO 9001:2000 certifications customers. This enabled immediate servicing of customer requests obtained earlier were a first step in this direction and which has been and also in realizing the potential business from customers walking renewed for the next three years. The Six Sigma program which was into ICICI Lombard branches. The agent servicing group set up at the initiated during January 2006 was expanded in newer areas of the branch level conducted monthly meets with agents across the country business. Six sigma projects were undertaken for various customer and helped them share their sales experiences and discuss product facing units and cost items. The benefit of this initiative was reflected in and processes with their co-advisors. terms of delivery, customer service and cost effectiveness. Investments The general insurance industry is characterised by operational complexity n fiscal 2009 ICICI Lombard achieved its investment objective of across products, channels, customer segments and through the policy Ia superior total return on the investment portfolio adhering to the life cycle. The Operations team is focused on streamlining the process company’s investment philosophy as well as regulations as applicable. and extracting maximum efficiencies at all levels. Process management ICICI Lombard has an experienced team of investment professionals was further enhanced with constitution of a Process Approval and its investments in fiscal 2009 continued to be governed by its core Committee (PAC) and intense usage of online process repository. The value investing principles. updated process repository is made available in a secure manner to all employees through the BPM tool: System Architect. The latest ICICI Lombard’s asset mix is determined by two key factors - availability version of the same was deployed for better navigation of processes. of superior investments at the right price and the company’s claim An e-circular application was deployed for all process roll-out and online obligations. The investment committee oversees the implementation of the clarification with the process owner. The e-circular is also deployed for investment policies laid down by the Board and guides the asset allocation process sign-off from various process managers. strategy that ensures financial liquidity, security and diversification. The 33 Technology enables Transparency “Insurance policy wordings are available on www.icicilombard.com so customers can read and understand policy terms and conditions before making a purchase decision. Coverage, exclusions, premiums and claims process are easily accessible and explained in simple language. Customers can make an informed decision with 24x7 support from our call centre executives on online chat and toll free phone.” ICICI Lombard’s Operations team serves customers through a network of ‘intrapreneurial mindset’ with employees encouraged to display a ‘can 409 branches in India. The company issued close to four million policies do’ attitude. A high level of empowerment with a mix of experience in the current year translating to an average of 13,000 policies per day from various industries led to effective and innovative solutions. reaching a peak of over 50,000 policies. The number of claims handled ICICI Lombard is a young organization with the average employee age went up to 3.3 million reflecting the shift towards a retail portfolio. of 27 years. The company had 5,697 employees across 409 branches Effective usage of technology strengthened ICICI Lombard’s as of March 31, 2009. The company strengthened its employee base operational efficiency and helped the company synergize and grow in smaller towns while enhancing its distribution reach. in its business. ICICI Lombard altered the traditional process of policy Fiscal 2009 focused on upgrading employees skills. Employees were issuance by using technology effectively which reduced the cost of provided learning opportunities and means of knowledge and required policy issuance and also the turn around time (TAT). The underwriting resources to perform optimally and to excel in their duties. Frequent and hub was merged with the process hub to form a single operating unit. personalized attention was provided to career development and planning. The company has migrated more than 85% of the motor business and the complete travel business to ILPOS mode for providing over- Training programs were organized to help employees address their the counter services to customers. It aided in enhancing the quality developmental needs. A company-wide training initiative titled ‘Josh’ and accuracy of policy documentation and reduced the TAT of policy was launched under which sales trainees pan India from the feet- issuance to less than an hour. on-street, property, loyalty and geo-location teams were trained. This training program comprised tips for sales improvement, sales Mobile based applications were developed which enabled the sales coaching, tools and sales presentation skills designed to help sales teams to generate quotes, check policy status, renew policies and professionals improve their conversion rate. Another significant register claims as well as track the claim status. This application also training initiative ‘Passion at work’ was also launched aimed at making aided the claims servicing team in claim intimation and assessment employees realize the manifestation of passion at the workplace. along with payment tracking. ‘Leadership Guide for Young Managers’ was another program aimed In fiscal 2009 the company focused on customer service enhancement. at infusing enthusiasm in young managers and help them evolve as The CRM, Unified Customer View (UCV) was further enhanced to achievers in their sphere of work. improve the first transaction resolution. Grievance redressal channel was created as an additional touch-point for customers to register Reinsurance requests. Customer education campaigns have been initiated to guide iven the environment of the global economic slowdown, ICICI Lombard customers to contact suitable channel for quick resolution. Gfocused on consolidation and maximization of retentions in fiscal ICICI Lombard’s endeavour to enhance productivity enabled 2009. The reinsurance program continued to be a mix of proportional and collaboration within and across groups and shortened the approval non-proportional treaties. As done in the past, the reinsurance program processes as well as provided faster access to data. It improved was structured keeping in mind the company’s philosophy of buying accountability by using a service tracker and aided in tracking of adequate cover in order to protect value at risk at all times. turnaround time. In addition, the business continuity site for back During 2008-2009 the company increased the size of its proportional office processing at Hyderabad also provided consistent service for program across all product classes. In order to protect the net account various critical processes like motor claim servicing. against single large losses and catastrophic events, the reinsurance structure was augmented through appropriate risk and catastrophe Human Resource protection. The company continued to have a one-in-500 year his has been the year of consolidation. At the strategic level it catastrophe protection. The accumulated exposure of the company Tmeant driving productivity, quality and customer orientation across various geographies was run through CAT models by an with emphasis on profitability. ICICI Lombard operated with an international agency to ensure the adequacy of the CAT protection.

36 The reinsurance program at ICICI Lombard was further assessed on the CSR Initiatives strength and spread of securities used. General Insurance Corporation CICI Lombard is committed to give back to society and contribute of India (GIC) remained our strongest reinsurance partner. During the Ito alleviate the conditions of the underprivileged. The large-scale year ICICI Lombard collaborated with Scor of France to launch extended effort of the Financial Inclusion Solutions Group in taking insurance warranty for private cars. The company continued its association with to the segments at the bottom of the pyramid is driven by a similar Swiss Re and Scor for the weather insurance portfolio and Coface for philosophy. Credit insurance. In fiscal 2009, ICICI Lombard’s Corporate Social Responsibility (CSR) Underwriting efforts were directed towards school going children. The company partnered with the Rotary Club of Bangalore to sponsor additional he underwriting team forms the backbone of the product and facilities at the Sakalvara Government School in the outskirts of pricing strategies of an insurance company. This function carries the T Bangalore. These facilities included three new classrooms, a hall responsibility of balancing customer needs and competitive positioning for computer education, a new and leveled playground with sports with the health of the portfolio’s combined ratio. Regulatory changes in facilities and separate toilet facilities for both boys and girls, along an evolving insurance market often merit fundamental shifts in approach with water storage tanks. This is probably the only government school and engender the need for enhanced underwriting capabilities. to have a water harvesting facility demonstrating its commitment A calibrated movement towards complete detariffing in the Indian towards water conservation. Plans for the school include collaborating general insurance market has led to more product options for with Tidaldata Inc., California, to distribute hand held e-pods to the customers, focus on differentiated service offerings and deeper children that carry their complete syllabus in several languages that customer segmentation. In a completely flexible pricing environment can guide, teach and rapidly enhance their learning skills and establish the company’s underwriting teams developed new pricing strategies credibility in rural education programmes that achieve objectives at with the underlying objective of correct pricing of risk and avoided cross affordable costs. subsidization. At the industry level, the detariffed environment resulted ICICI Lombard also sponsored the mid-day meal at a Municipal School in enhancement of risk assessment skills and product innovation. in Mumbai. Most of the students of this school are underprivileged In fiscal 2009 ICICI Lombard’s underwriting team emphasized on arriving children living in slums. For many of them, the mid-day meal served at premiums based on assessment of risk and built robust and practical in their school is perhaps the only full wholesome meal they enjoy in rating models to arrive at the correct premium with the available risk the entire day. Cooked in the most cost-effective manner, the meal data. The underwriting capability in the company is organized along consists of ‘khichadi’ a mix of rice, dal, vegetables, cooked in pure product lines to build deeper capability and experience within each ghee with spices and tomatoes. The preparation for the cooking of and the team continued to refine the rate engines based on ongoing these meals begins at 5 a.m. every morning. The meals are cooked claims experience. ICICI Lombard focused on accurate collection of in steam-jacketed cauldrons which have an individual capacity of customer information at all customer interaction checkpoints viz. sales 300 kilograms. The cooked food is stacked in stainless steel sealed at the time of policy issuance, customer support at the time of claim containers and transported in vans to schools. During the lunch break, intimation and customer service at the time of claims processing. hot and nutritious food is served to the students.

In January 1, 2009 the regulator announced another step in the journey ICICI Foundation supports initiatives to enhance access to financial towards full product detariffing by allowing flexibility to add on product services, by creating complementary infrastructure to address basic covers to the baseline policy wordings. This would ensure that the health and education needs. The foundation strives to improve the customer continues with the benefit of a familiar base product along livelihood and productivity in rural India and contibutes to the full with the ability of customizing the value added covers as per individual realisation of India’s vast untapped potential. ICICI Lombard contributes needs. 1% of its Profit After Tax (PAT) to ICICI Foundation annually.

37 Technology ensures Sensitivity “In times of an emergency, customers can call our 24 x 7 helpline 1800 209 8888 which is toll free from a landline as well as from a mobile phone ensuring that we can be reached anytime, anywhere. This is a single number for all policy requirements including purchase, renewal, claims and service requests giving insurance at arms length to our customers.” Directors’ Report

To the Members, Your Directors have pleasure in presenting the Ninth Annual Report fire and engineering portfolio. Further, ICICI Lombard’s focus on the of ICICI Lombard General Insurance Company Limited (ICICI Lombard) non-subsidized approach led to substantial growth in the health and with the audited statement of accounts for the financial year ended marine portfolio. March 31, 2009. During fiscal 2009, ICICI Lombard’s gross written premium increased INDUSTRY OVERVIEW from Rs.33,444.2 million in fiscal 2008 to Rs.34,198.4 million (excluding The gross written premium of the industry for the period April 2008- share of premium from motor third party pool). During fiscal 2009, the March 2009 grew from Rs.280.52 billion to Rs.306.01 billion on a year- number of policies sold increased from 3,526,961 in fiscal 2008 to on-year basis, a growth of about 9%. The market share of private sector 3,957,048, a growth of 12%. insurance companies for the corresponding period grew marginally Underwriting and claims from 40% to 41%. ICICI Lombard led the private players with a market The underwriting function was realigned in line with the mandate of share of 27.2% in the private sector and an overall industry market the detariffed regime, to enable efficient functioning of lines such as share of 11.2%. property, marine, corporate health, aviation as well as hull and energy. FINANCIAL HIGHLIGHTS This yielded focus on specialized underwriting, claims management and risk management within each of these lines of businesses. Fiscal 2008 Fiscal 2009 Rs. in million The underwriting approach was reconfigured to focus on class wise Gross written premium 33,444.2 34,198.4 profitability management. The underwriting teams are responsible for Earned premium 15,671.9 19,736.5 portfolio management for their respective lines of businesses, which in turn depend on thorough analysis of different businesses, channels and Profit before tax 1,302.2 2.7 product segments. Specialized risk management services have become Profit after tax 1,028.7 236.2 a prerequisite for the writing of different segments of risks followed by APPROPRIATIONS thorough ’underwriting‘ of risks in terms of contract terms and price The profit after tax for the year ended March 31, 2009 is Rs.236.2 variables. Claims management further gave specialized treatment to million. The profit available for appropriation is Rs.1,168.6 million after frequency and severity losses separately. taking into account the balance of profit of Rs.932.4 million brought ICICI Lombard is working on a collaborative approach along with other forward from the previous year. Your Directors have not recommended industry players for better risk based price modeling and fair contract any dividend for the year. terms in order to cater to new opportunities and capitalize on untapped OPERATIONAL REVIEW opportunities. Company Performance Claim servicing is the core insurance product offering. During fiscal 2009, The general insurance industry has witnessed complete detariffing of ICICI Lombard set up an in-house health claims administration department price effective from January 1, 2008 for all products except motor third ’i-health care‘ to service all ICICI Lombard health customers. The Health party. The detariffing of terms & conditions is taking place in stages. Wellness program offers a bouquet of health services and wellness The transition to total tariff price free regime has impacted market information. A wide variety of value added services are offered on the web growth whereby the industry witnessed downward pressure on pricing platform. Overall health claim registration and settlement process turn of fire, engineering and motor products and upward trend in pricing around time (TAT) and disposal ratio exceeded the industry benchmark. of health and marine products. ICICI Lombard has responded to the The Motor claim team initiated express claim service in selected cities, uncertainty created in the market by following a balanced approach which is a one stop claim processing centre. This will improve the overall between opportunity and risk. ICICI Lombard’s approach in terms of customer experience with the claim settlement process. Customers can client selection and risk based pricing led to negative growth in the track the status of their claim through the website and SMS. 40 Information technology and customer support services large loss or catastrophe affecting retentions, ICICI Lombard continues ICICI Lombard’s current technology architecture is equipped to cater to to take excess of loss and catastrophe protection with a catastrophe the functionality requirements of the business and support growth. ICICI cover limit to protect itself for a 1-in-500 year catastrophe event, based Lombard’s portfolio provides for round the clock customer self-service, on exposure modeling by international agencies. integration with the partner network to provide bundled services with ICICI Lombard has over the years increased retentions as well as its other organizations and empowering of agents through a portal to issue automatic capacities thereby having an optimal retention-reinsurance policies through an internet based platform. This enables real time balance. Furthermore, ICICI Lombard deals with a diversified panel of service to customers including target rural markets through various credible reinsurers, thereby mitigating any concentration risk and ensuring product configurations and automation of complex business processes. adequate spread. ICICI Lombard has robust processes in place to periodically With the rapid increase in the distribution footprint spreading to remote monitor the credit ratings assigned by International Rating agencies. The locations, the Integrated Service Point-of-Sale (ILPOS) application has program is in compliance with the guidelines laid down by IRDA. reduced the dependency on internet connectivity. This application Capital allows policies to be issued in the offline mode which are synchronized In order to meet the solvency requirements, capital was raised through with the central services. ICICI Lombard also focused on Direct-to- private placements aggregating to Rs.5.0 billion including a premium Customer models through e-channel. The channel not only provides of Rs.4.75 billion, which was subscribed by the promoters - ICICI Bank for sales, but also electronic fulfillment. The e-channel has enabled Limited and Fairfax Financial Holdings Limited. savings in commissions and operating cost. At ICICI Lombard, all customer facing processes are oriented towards Registration providing consistent and reliable service. In fiscal 2009, policy issuance, The certificate of registration of ICICI Lombard has been renewed claims and customer support processes were revisited to enhance by the Insurance Regulatory and Development Authority for the year customer satisfaction. Web based policy issuance was simplified 2009-2010. further to reduce transaction time and enable instant fulfillment. The Employees Web Policy Issuance process is free of paper work and provides multiple ICICI Lombard continued to optimise employee productivity with a slight payment options. Retail product variants are available on the website, increase in employee strength from 5,570 in the previous year to 5,697 as which allows customers to conduct transactions at their convenience. on March 31, 2009. Over 95% of employees are professionally qualified. The policy issuance turn around time (TAT) was further reduced due to ICICI Lombard further strengthened its human resource processes to the point of sale mode of policy issuance. The point of sale mode also enable quality staffing at all levels. Employees have relevant opportunities enabled instant policy issuance across the counter. for growth and development in their own function as well through job ICICI Lombard customers can renew their policies over the phone, web, rotation. ICICI Lombard’s value systems have been the biggest contributor interactive voice recording (IVR) and mobile in addition to physical channel. to growth over the years and this has also provided an opportunity to The need for customers to visit a branch was reduced by providing recruit experienced resources from diverse industries. alternate channels for renewal. The customer grievance redressal cell ICICI Lombard’s focus on upgrading the skills of employees continued was created for customers to register their grievances on the website. wherein the company wide training initiative ‘Deeksha’ which started ICICI Lombard remains committed to setting higher standards in terms last year was taken both deeper and wider. Training on processes, of response time and providing immediate relief to the insured, when it soft skills and customer service was imparted at various locations to is most required. During fiscal 2009, ICICI Lombard handled 3,313,830 ensure positive customer experience across delivery channels. Middle claims as compared to 812,096 during fiscal 2008. and senior managers were nominated for appropriate behavioural and Reinsurance soft skills training to build depth of management leadership. The strong The Reinsurance program of ICICI Lombard is structured with a view to focus of ICICI Lombard on training will enable the company to be well having adequate risk coverage. In order to mitigate the risk of a single positioned to leverage the opportunities in the year ahead. 41 SOCIAL RESPONSIBILITY General Meeting. Subsequently, the appointment was approved by the ICICI Lombard issued more than 400,000 policies in rural areas, Insurance Regulatory And Development Authority (IRDA). The Board amounting to over 10% of total policies issued by it during the year places on record its appreciation for the invaluable contribution made by under review. It also covered more than 2,000,000 lives falling within Sandeep Bakhshi to the growth and development of ICICI Lombard. the norms of social business. Pursuant to Article 132 of the Articles of Association of ICICI Lombard, the ICICI Bank Limited had withdrawn the nomination of V. Vaidyanathan PUBLIC DEPOSITS as Director from the Board of ICICI Lombard effective May 1, 2009. The During the year under review, ICICI Lombard has not accepted any Board places on record its appreciation for invaluable contribution made deposit from the public. by V.Vaidyanathan to the growth and development of ICICI Lombard.

DIRECTORS Pursuant to Article 131,132 and 145 of Articles of Association of ICICI During the year under review, Kalpana Morparia, Director of ICICI Lombard, Sandeep Bakhshi and N.S. Kannan have been appointed as Lombard nominated by ICICI Bank Limited, resigned effective August Nominee Directors effective May 1, 2009 by ICICI Bank Limited in place 29, 2008 from the Board of ICICI Lombard. The Board placed on of K.V. Kamath and V. Vaidyanathan. The Nominee Directors are not record its deep appreciation for the invaluable contribution of Kalpana liable to retire by rotation. Morparia as a Director. In terms of the provisions of the Companies Act, 1956 and the Articles of Association of ICICI Lombard, R. Athappan, James Dowd and S. Chanda D. Kochhar was appointed as Nominee Director effective Mukherji would retire at the forthcoming Annual General Meeting and, September 1, 2008 by ICICI Bank Limited in place of Kalpana Morparia. being eligible, offer themselves for re-appointment. Pursuant to Article 131,132 and 145 of Articles of Association of ICICI Lombard, the Nominee Director is not liable to retire by rotation. AUDITORS The Joint Statutory Auditors, N.M.Raiji & Co., Chartered Accountants Consequent to the appointment of Vishakha Mulye as Managing and PKF Sridhar & Santhanam, Chartered Accountants, will retire at Director and CEO of ICICI Venture Funds Management Company Limited, the ensuing Annual General Meeting. As recommended by the Audit Vishakha Mulye resigned from ICICI Lombard as Executive Director of Committee, the Board, at its meeting held on April 23, 2009, has proposed the company effective April 20, 2009. The Board places on record its the re-appointment of N.M.Raiji & Co., Chartered Accountants and PKF gratitude for the invaluable service rendered by her as Executive Director Sridhar & Santhanam, Chartered Accountants, as Joint Statutory Auditors of ICICI Lombard. to audit the accounts of the company for the financial year ending March K. V. Kamath, Chairman of the Board of Directors of ICICI Lombard 31, 2010. You are requested to consider their appointment. tendered his resignation effective April 23, 2009. The Board places on record its deep appreciation for the invaluable contribution made by FOREIGN EXCHANGE EARNING AND EXPENDITURE K.V. Kamath to the growth and development of the company during his During fiscal 2009 expenditure in foreign currencies amounted to tenure as the Chairman. The Board appointed Chanda D. Kochhar as the Rs.2,088.09 million and earnings in foreign currencies amounted to Chairperson of the Board with effect from April 23, 2009. Rs.1,216.56 million.

Sandeep Bakhshi was nominated by ICICI Bank as the Managing Director PERSONNEL AND OTHER MATTERS & CEO of ICICI Lombard effective March 19, 2007 for a period of five As required by the provisions of Section 217 (2A) of the Companies Act, years. Consequent to the appointment of Sandeep Bakhshi as Deputy 1956, read with the Companies (Particulars of Employees) Rules, 1975, Managing Director of ICICI Bank Limited, he resigned as the Managing as amended, the names and other particulars of the employees are set Director and CEO of ICICI Lombard effective May 1, 2009. The Board in out in the Annexure to the Directors’ Report. its Meeting held on April 25, 2009 appointed Bhargav Dasgupta as the Since ICICI Lombard does not own any manufacturing facility, the Managing Director and CEO for a period of five years effective May 1, disclosure of information on other matters required to be disclosed in 2009, subject to the approval of the Members in the forthcoming Annual terms of Section 217 (1) (e) of the Companies Act, 1956 read with the 42 Companies (Disclosure of Particulars in the Report of Board of Directors) Amount realised by exercise of options (Rs.) 60,837,650 Rules, 1988, are not applicable and hence not given. Total number of options in force 14,398,162

AUDIT COMMITTEE * includes 1,312,500 options granted to Sandeep Bakhshi, Managing Director & CEO and The Audit Committee consists of four Directors - S. Mukherji, James 275,000 options granted to Ms. Vishakha Mulye, Executive Director. Dowd, Dileep Choksi and H.N. Sinor and is chaired by S. Mukherji. There DIRECTORS’ RESPONSIBILITY STATEMENT were four meetings of the Committee during the year. The functions The Directors confirm that: of the committee include reviewing the quarterly and annual financial statements, internal control systems and significant accounting policies 1. In the preparation of the annual accounts, the applicable accounting of ICICI Lombard and discussing the audit findings and recommendations standards have been followed along with proper explanation of the internal and statutory auditors of ICICI Lombard. relating to material departures; 2. They have selected such accounting policies and applied them EMPLOYEE STOCK OPTION SCHEME consistently and made judgments and estimates that are In fiscal 2006, ICICI Lombard instituted an Employee Stock Option reasonable and prudent so as to give a true and fair view of the Scheme (ESOS) to enable the employees and directors of ICICI Lombard state of affairs of ICICI Lombard at the end of the financial year and to participate in its future growth and financial success. As per the ESOS, of the profit or loss of ICICI Lombard for that period; the maximum number of options granted to any employee / director in 3. They have taken proper and sufficient care for the maintenance of a year shall not, except with the approval of the Board, exceed 0.10% adequate accounting records in accordance with the provisions of ICICI Lombard’s issued equity shares at the time of grant and the of the Companies Act, 1956 for safeguarding the assets of aggregate of all such options is limited to 5% of ICICI Lombard’s issued ICICI Lombard and for preventing and detecting fraud and other equity shares on the date of the grant. irregularities; and Options granted vest in a graded manner over a four-year period, with 4. They have prepared the annual accounts on a going concern basis. 20%, 20%, 30% and 30% of the grants vesting each year, commencing not earlier than 12 months from the date of grant. Options can be ACKNOWLEDGEMENTS exercised within 10 years from the date of grant or five years from the ICICI Lombard is grateful to the Insurance Regulatory and Development date of vesting, whichever is later. Authority, Tariff Advisory Committee, Reserve Bank of India, General Particulars of options granted by ICICI Lombard up to March 31, 2009 Insurance Council and other regulatory authorities for their support and are given below: advice. The Directors also place on record their sincere thanks for the support and cooperation extended by the policyholders, reinsurers, Options granted * 19,288,560 bancassurance partners, insurance agents and brokers. Options vested 6,144,392 ICICI Lombard would like to express its gratitude for the unstinted Options exercised 1,641,600 support and guidance received from ICICI Bank and its group companies Number of shares allotted pursuant to exercise of options 1,636,940 and Fairfax Financial Holdings Limited. Options forfeited / lapsed 3,248,798 The Directors would also like to place on record their appreciation for the Extinguishment or modification of options - commitment and team effort shown by the employees of ICICI Lombard.

For and on behalf of the Board

Chanda D. Kochhar Chairperson Mumbai, May 7, 2009 43 Management Report

Management Report

In accordance with the provisions of the Insurance Regulatory & While in property lines (Fire) the net retention has not exceeded Development Authority (IRDA) (Preparation of Financial Statements Rs. 250 million on a PML basis (Previous year: Rs. 250 million) and Auditor’s Report of Insurance Companies) Regulations, 2002 (the in any single risk, this also gets graded down to between Rs. 5 Regulation) the following Management Report is submitted: million to Rs. 250 million (Previous year: between Rs. 5 million to Rs.250 million) on a case-to-case basis, depending on exposure 1. The Certificate of Registration under Section 3 of the Insurance levels and prudent underwriting standards. The excess of loss Act, 1938 was granted by IRDA on August 03, 2001. The treaties protect the accumulation of the net retentions. Company has obtained renewal of registration certificate from IRDA for the financial year 2009-10 as required under Section Further, before underwriting any major property risk, a risk 3A of the Insurance Act, 1938; inspection is carried out, and on being satisfied about the acceptability of risk, the same is accepted. In addition various 2. We certify that all the dues payable to the statutory authorities loss prevention / risk-mitigating measures are also suggested to have been duly paid; the clients to help improve the risks.

3. We confirm that the shareholding pattern and transfer of shares 8. We confirm that there are no operations of the Company outside are in accordance with statutory and regulatory requirements. India;

4. The management has not invested any funds of holders of 9. a) For ageing analysis of claims outstanding during the policies in India, directly or indirectly as required by IRDA, preceding five years, please refer Annexure 1. outside India; b) For average claims settlement time during the preceding five years, please refer Annexure 2. 5. We confirm that the required solvency margin has been maintained; 10. We certify that the Investments made in debt securities have 6. We certify that the values of all the assets have been reviewed been valued at historical cost subject to amortisation of premium on the date of the Balance Sheet and that in our belief the / discount. The same is in accordance with the Insurance assets set forth in the Balance Sheet are shown in aggregate Regulatory and Development Authority (Preparation of Financial at amounts not exceeding their realisable or market value under Statements and Auditor’s Report of Insurance Companies) several headings- Investments, agents balances, outstanding Regulations, 2002. premiums, amount due from others entities carrying on For the purpose of comparison, the fair value of debt securities insurance business, interest and dividend accrued, cash and have been arrived on a Yield to maturity (YTM) basis by using several items specified under other accounts except unlisted the appropriate discount rates derived from the yield curve equity, venture fund, securitised receipt’s, debt securities which data provided by the Fixed Income and Money Market Dealers are stated at cost / amortised cost; Association (FIMMDA) in respect of Government Securities and 7. The entire gross risk exposure of the portfolio is consisting of Crisil Bond Valuer in respect of other debt instruments. fire, engineering, hull, aviation, motor, casualty, health, travel, Listed equity shares and convertible preference shares as at energy, personal accident, rural and credit insurance and other the balance sheet date are stated at fair value, being the lower lines of business; of last quoted closing price on the National Stock Exchange or The over all exposure is spread over various sectors including but Bombay Stock Exchange Limited. not limited to power, textiles, heavy and light engineering, paper, Mutual fund investments are stated at fair value, being the services, fast moving consumer goods, auto components etc closing net asset value as at balance sheet date. across urban and rural segments as well as across demography. Investments other than mentioned above are valued at cost. The business underwritten pertains to the various products filed by us with IRDA, as per the file and use procedure: this includes In accordance with the Regulations, unrealized gain / loss tariff as well as non tariff products. arising due to changes in fair value of listed equity shares and 44 mutual fund investments are not taken to revenue(s)/profit and are within the investment regulation and guidelines of IRDA. loss account but are taken to the Fair value change account. This balance in the fair value change account is not available for 12. We also confirm: distribution, pending realization. (a) In the preparation of financial statements, the applicable accounting The Company assesses at each balance sheet date whether standards, principles and policies have been followed along with there is any indication that any investment in equity or units of proper explanations relating to material departures, if any; mutual fund may be impaired. If any such indication exists, the (b) The management has adopted accounting policies and applied carrying value of such investment is reduced to its recoverable them consistently and made judgments and estimates that are amount and the impairment loss is recognized in the revenue(s)/ reasonable and prudent so as to give a true and fair view of the profit and loss account. If at the balance sheet date there is any state of affairs of the company at the end of the financial year indication that a previously assessed impairment loss no longer and of the operating loss and of the profit of the company for the exists, then such loss is reversed and the investment is restated year; to that extent. (c) The management has taken proper and sufficient care for the 11. Investments as on March 31, 2009 amount to Rs. 30,307.42 maintenance of adequate accounts records in accordance with million (Previous year: Rs. 23,737.60 million). Income from the applicable provisions of the Insurance Act, 1938 (4 of 1938) Investments amounted to Rs. 3,222.21 million (Previous year: / Companies Act, 1956 (1 of 1956), for safeguarding the assets Rs. 2,197.27 million). of the company and for preventing and detecting fraud and other irregularities; Investments other than deposits with the banks, loans, units of mutual fund, units of venture fund and security receipts are only (d) The management has prepared the financial statements on a in regularly traded instruments in the secondary markets. The going concern basis; company debt investment comprises of government securities, (e) The management has ensured that an internal audit system central government guaranteed bonds, AAA and AA/P1+ rated commensurate with the size and nature of the business exists security. and is operating effectively. All are performing investments with no arrears of any payments 13. For payments made to individuals, firms, companies and due. Investments are managed in consonance with the organizations in which Directors are interested, please refer to investment policy framed from time to time by the board and Annexure 3

For and on behalf of the Board K. V. Kamath Chanda D. Kochhar Chairman Director S. Mukherji V. Vaidyanathan Director Director Sandeep Bakhshi Rakesh Jain Managing Director & CEO Director –Corporate Centre & CFO Mumbai, Pratap Salian April 23, 2009 Company Secretary

45 Details of Claims Outstanding during the preceding five years

Annexure -1

Product Fire Marine Cargo Marine Others Motor OD Motor TP Workmen’s Compensation Period No of Amount No of Amount No of Amount No. of Amount No. of Amount No. of Amount Claims Claims Claims Claims Claims Claims As on March 31,2005 30 days 109 83.5 231 42.8 10 9.7 2,041 57.9 17 15.4 - 0.7 30 days to 6 months 157 325.2 410 61.3 26 40.4 1,233 53.3 73 37.2 - - 6 months to 1 year 50 53.6 119 23.9 9 23.8 154 6.9 32 10.5 1 0.3 1 year to 5 years 41 269.8 19 12.1 - - 5 1.4 13 6.3 - - 5 years and above ------Grand Total 357 732.1 779 140.1 45 73.9 3,433 119.5 135 69.4 1 1.0

Product Fire Marine Cargo Marine Others Motor OD Motor TP Workmen’s Compensation Period No of Amount No of Amount No of Amount No. of Amount No. of Amount No. of Amount Claims Claims Claims Claims Claims Claims As on March 31,2006 30 days 69 54.9 344 82.3 5 11.9 4,325 141.3 131 179.7 - 1.4 30 days to 6 months 192 1,273.4 454 61.5 16 829.0 1,722 125.3 388 116.4 7 0.2 6 months to 1 year 98 422.9 116 15.4 19 145.1 153 15.1 225 67.4 - - 1 year to 5 years 35 135.6 23 35.6 27 51.4 36 5.4 79 30.1 - - 5 years and above ------Grand Total 394 1,886.8 937 194.8 67 1,037.4 6,236 287.2 823 393.4 7 1.6

Product Fire Marine Cargo Marine Others Motor OD Motor TP Workmen’s Compensation Period No of Amount No of Amount No of Amount No. of Amount No. of Amount No. of Amount Claims Claims Claims Claims Claims Claims As on March 31,2007 30 days 71 477.7 729 49.8 3 0.5 13,623 514.6 528 473.2 2 0.1 30 days to 6 months 201 623.9 1,084 165.6 28 33.2 6,024 371.1 3,327 632.6 19 1.0 6 months to 1 year 161 359.9 303 73.6 17 161.8 369 10.5 929 189.2 - - 1 year to 5 years 76 946.8 73 27.8 36 551.0 120 4.7 551 108.6 - - 5 years and above ------Grand Total 509 2,408.3 2189 316.8 84 746.5 20,136 900.9 5,335 1,403.6 21 1.1

46

(Rs in Mn) Public/Product Engineering Aviation Personal Accident Health Others Grand Total Liability No of Amount No of Amount No of Amount No. of Amount No. of Amount No of Amount Count Total Claims Claims Claims Claims Claims Claims

- 0.7 134 32.5 1 1.7 361 27.6 1,632 55.6 116 29.6 4,652 357.6 3 0.2 290 104.9 - - 557 35.5 612 12.0 333 40.6 3,694 710.7 1 1.7 69 93.0 - - 97 7.9 28 0.5 94 8.6 654 230.8 - - 25 10.3 - - 8 1.6 - - 28 23.0 139 324.4 ------4 2.6 518 240.7 1 1.7 1,023 72.6 2,272 68.1 571 101.8 9,139 1,623.5

(Rs in Mn) Public/Product Engineering Aviation Personal Accident Health Others Grand Total Liability No of Amount No of Amount No of Amount No. of Amount No. of Amount No of Amount Count Total Claims Claims Claims Claims Claims Claims

- - 85 45.1 3 44.4 435 153.2 5,396 175.9 444 44.4 11,237 934.5 - - 251 183.7 1 3.4 677 43.7 1,823 33.5 1,015 124.3 6,546 2,794.4 1 0.5 101 96.9 - - 113 9.3 167 26.9 299 46.5 1,292 846.0 - - 54 35.4 - - 10 2.0 131 1.8 66 13.9 461 311.2 ------1 0.5 491 361.1 4 47.8 1,235 208.2 7,517 238.1 1,824 229.1 19,536 4,886.0

(Rs in Mn) Public/Product Engineering Aviation Personal Accident Health Others Grand Total Liability No of Amount No of Amount No of Amount No. of Amount No. of Amount No of Amount Count Total Claims Claims Claims Claims Claims Claims

- - 84 213.1 - 2.2 890 284.7 9,832 470.3 449 183.2 26,211 2,669.4 3 8.2 359 201.3 - - 1,291 134.7 5,444 321.0 1,262 581.7 19,042 3,074.2 1 0.3 165 181.2 2 3.4 17 2.4 593 15.1 420 93.3 2,977 1,090.7 1 0.5 98 103.9 2 43.1 1 0.1 140 3.1 135 16.3 1,233 1,805.9 ------5 9.0 706 699.5 4 48.7 2,199 421.9 16,009 809.5 2,266 874.5 49,463 8,640.2

47 Product Fire Marine Cargo Marine Others Motor OD Motor TP Workmen’s Compensation Period No of Amount No of Amount No of Amount No. of Amount No. of Amount No. of Amount Claims Claims Claims Claims Claims Claims As on March 31,2008 30 days 118 327.9 588 71.2 9 476.2 12,912 706.8 1,941 2,556.7 21 8.6 30 days to 6 months 295 680.2 1,035 112.7 36 123.7 6,616 475.4 7,329 983.4 39 4.3 6 months to 1 year 194 250.5 529 57.6 34 411.0 512 48.1 4,785 919.1 5 0.6 1 year to 5 years 146 699.3 250 121.8 54 248.7 17 1.8 3,084 591.7 1 0.1 5 years and above 4 5.8 ------1 0.1 - - Grand Total 757 1,963.7 2,402 363.3 133 1,259.6 20,057 1,232.1 17,140 5,051.0 66 13.6

Product Fire Marine Cargo Marine Others Motor OD Motor TP Workmen’s Compensation Period No of Amount No of Amount No of Amount No. of Amount No. of Amount No. of Amount Claims Claims Claims Claims Claims Claims As on March 31,2009 30 days 177 1,686.2 1,350 193.7 71 580.8 14,501 815.4 2,638 5,634.4 35 18.4 30 days to 6 months 207 879.3 672 182.7 32 297.5 8,715 630.0 10,433 1,721.5 70 5.5 6 months to 1 year 183 831.7 355 89.2 52 132.1 670 67.2 9,895 1,500.5 5 0.4 1 year to 5 years 143 469.7 146 115.5 82 1,299.8 181 24.4 12,154 2,085.6 - - 5 years and above 5 4.9 ------1 0.1 - - Grand Total 715 3,871.8 2,523 581.1 237 2,310.2 24,067 1,537.0 35,121 10,942.1 110 24.3

48 (Rs in Mn) Public/Product Engineering Aviation Personal Accident Health Others Grand Total Liability No of Amount No of Amount No of Amount No. of Amount No. of Amount No of Amount Count Total Claims Claims Claims Claims Claims Claims

- 0.6 171 82.0 1 6.7 824 189.0 15,223 685.7 439 58.2 32,247 5,169.6 1 0.1 361 267.3 - - 1,057 156.4 14,784 267.4 1,585 161.2 33,138 3,232.1 - - 243 243.7 2 10.5 267 31.3 1,759 35.4 1,099 171.4 9,429 2,179.2 4 9.0 172 245.3 3 44.0 91 16.0 763 12.0 506 116.1 5,091 2,105.8 ------5 5.9 5 9.7 947 838.3 6 61.2 2,239 392.7 32,529 1,000.5 3,629 506.9 79,910 12,692.6

(Rs in Mn) Public/Product Engineering Aviation Personal Accident Health Others Grand Total Liability No of Amount No of Amount No of Amount No. of Amount No. of Amount No of Amount Count Total Claims Claims Claims Claims Claims Claims

190 10.1 157 124.2 8 23.4 745 334.9 62,155 1,034.5 695 136.0 82,722 10,592.0 122 8.0 338 435.7 2 123.4 1,276 130.5 44,082 605.4 1,506 186.6 67,455 5,206.1 12 2.4 232 363.3 3 6.2 165 31.1 3,713 110.0 864 169.8 16,149 3,303.8 4 4.8 118 246.4 6 54.2 267 39.8 1,267 49.3 561 252.1 14,929 4,641.8 - - 2 0.9 ------1 0.03 9 5.9 328 25.3 847 1,170.5 19 207.2 2,453 536.3 111,217 1,799.2 3,627 744.5 181,264 23,749.6

49 Details of Average Claim Settlement time for the preceding five years

Annexure -2 For the year ended For the year ended For the year ended For the year ended For the year ended Particulars March 31, 2009 March 31, 2008 March 31, 2007 March 31, 2006 March 31, 2005

No of Average No of Average No of Average No of Average No of Average claims Settlement claims Settlement claims Settlement claims Settlement claims Settlement settled Time settled Time settled Time settled Time settled Time

Fire 2,089 145 1,636 129 1,605 111 2,138 92 832 110 Marine Cargo 12,139 84 12,992 75 13,858 53 9,500 51 7,725 51 Marine Hull 82 350 108 147 91 173 74 160 41 82 Motor 298,161 20 278,240 19 211,010 20 81,066 15 11,353 21 Workmen Compensation 685 48 389 26 262 13 338 12 281 9 Public/Product Liability 3,142 16 1 1 9 78 15 117 15 75 Engineering 2,667 167 1,755 144 1,572 119 1,897 112 1,709 94 Aviation 10 26 10 73 7 176 6 11 1 19 Personal Accident 39,302 51 15,744 35 23,949 58 19,359 32 5,533 38 Health 2,947,748 26 493,867 26 353,752 18 121,470 24 51,138 15 Others 7,805 58 7,354 68 7,273 64 7,702 65 6,342 40 Total Amount 3,313,830 26 812,096 26 613,388 22 243,565 25 84,970 25

The above ageing does not include Motor third party claims which have to be settled through MACT and other judicial bodies.

50 List of payments to parties in which Directors are interested

Annexure 3 (Rs in Mn) Sl. Entity in which Director is interested Name of Director Interested For the year For the year No. as March 31, 2009 March 31, 2008 1 3i Infotech Limited Mr. H.N. Sinor Director 118.6 58.1 Ms. Vishakha Mulye Director 2 Bata India Limited Mr. M.K. Sharma Director 17.4 37.1 3 Bhushan Steel and Scrips Limited Mr. Sandeep Bakhshi Director 100.8 127.4 4 CMC Limited Ms. Kalpana Morparia* Director 112.5 41.3 5 CRISIL Limited Mr. B.V.Bhargava Director 15.5 11.9 Mr. H.N. Sinor Director 6 Dr. Reddy Laborataries Company Limited Ms. Kalpana Morparia* Director 0.7 7.3 7 Excel Crop Care Limited Mr. B.V.Bhargava Director 0.4 0.2 8 Grasim Industries Limited Mr. B.V.Bhargava Director 20.5 13.3 9 Gujarat Alkalies and Chemicals Limited Mr. H.N. Sinor Director - 1.6 10 ICICI Bank Limited Mr. K.V. Kamath Director 2,405.0 2,214.2 Mr. M.K. Sharma Director Ms. Chanda D. Kochhar ** Director Mr. V. Vaidyanathan Director 11 ICICI Home Finance Company Limited Mr. V. Vaidyanathan Director 301.0 82.7 12 ICICI Prudential Asset Management Company Limited Mr. K.V. Kamath Director 5.4 5.3 Ms. Kalpana Morparia * Director Ms. Chanda D. Kochhar ** Director 13 ICICI Prudential Life Insurance Company Limited Mr. K.V. Kamath Director 134.7 56.8 Ms. Kalpana Morparia Director Ms. Chanda D. Kochhar ** Director 14 ICICI Securities Limited Mr. K.V. Kamath Director 99.6 27.6 Ms. Kalpana Morparia * Director Ms. Chanda D. Kochhar *** Director Mr. S.Mukherji Director Mr. V. Vaidyanathan Director 15 ICICI Securities Primary Dealership Limited Mr. S.Mukherji Director 0.8 1.1 Ms. Vishakha Mulye Director 16 ICICI Venture Funds Management Co. Limited Mr. H.N. Sinor Director 4.3 0.5 17 Indian School of Business Mr. K.V. Kamath Director - 0.3 18 L & T Infrastructure Finance Company Limited Mr. B.V.Bhargava Director 0.7 0.6 19 Manipal University Mr. K.V. Kamath Director 59.7 46.6 20 National Collateral Management Services Limited Mr. H.N. Sinor Director 9.4 6.7 21 National Commodity & Derivative - Exchange Limited Mr. B.V.Bhargava Director 3.1 2.1 Mr. H.N. Sinor Director 22 NSE IT Limited Mr. Dileep Choksi Director 9.1 2.8 23 Raymond Limited Mr. B.V.Bhargava Director 0.2 0.3 24 Sanmar Group Of Companies Mr. M.K. Sharma Director- 1.4 2.0 Advisory Board 25 SI Group - India Limited Mr. B.V.Bhargava Director - 39.2 26 Supreme Industries Limited Mr. B.V.Bhargava Director - 0.5 27 Tata Motors Finance Limited Mr. H.N. Sinor Director 0.1 - 28 Odyssey Re Mr. James F Dowd Director 9.8 65.4 * ceased to be Director w.e.f. 29.08.2008 ** appointed as Director w.e.f. 01.09.2008 in ICICI Lombard *** appointed as Director w.e.f. 15.10.2008 in ICICI Securities Ltd.

51 Auditors’ Report

To the Members of ICICI Lombard General Insurance Company Limited We have audited the attached balance sheet of ICICI Lombard General (IBNER) as at March 31, 2009, other than for reinsurance accepted Insurance Company Limited (‘the Company’) as at March 31, 2009, from Indian Motor Third Party Insurance Pool, has been duly certified the revenue accounts of fire, marine and miscellaneous insurance by the Appointed Actuary of the Company and relied upon by us. (collectively known as the ‘Revenue account’), the profit and loss The Appointed Actuary has also certified that the assumptions account and the receipts and payments account, for the year ended considered by him for such valuation are in accordance with the on that date annexed thereto. guidelines and norms prescribed by the IRDA and the Actuarial These financial statements are the responsibility of the Company’s Society of India in concurrence with the IRDA; and management. Our responsibility is to express an opinion on these • On the basis of the written representations received from the financial statements based on our audit. directors of the Company, as on March 31, 2009 and taken on We conducted our audit in accordance with standards of auditing record by the Board of Directors, no director of the Company generally accepted in India. Those standards require that we plan is disqualified as on March 31, 2009 from being appointed as and perform the audit to obtain reasonable assurance as to whether director of the Company under clause (g) of sub-section (1) of the financial statements are free of material misstatement. An Section 274 of the Act. audit includes examining, on a test basis, evidence supporting the In our opinion and according to the information and explanations given amounts and disclosures in the financial statements. An audit also to us, we further report that: includes assessing the accounting principles used and significant • Investments have been valued in accordance with the provisions estimates made by management, as well as evaluating the overall of the Insurance Act, 1938, the Regulations and orders/directions financial statement presentation. We believe that our audit provides a issued by IRDA in this regard; reasonable basis for our opinion. • The accounting policies selected by the Company are appropriate The balance sheet, the revenue account, the profit and loss account and are in compliance with the applicable Accounting Standards and receipts and payments account, have been drawn up in accordance referred to under sub section 3C of Section 211 of the Act and with the Insurance Act, 1938, Insurance Regulatory and Development with the accounting principles prescribed by the Regulations and Authority (‘IRDA’) (Preparation of Financial Statements and Auditor’s orders/directions prescribed by IRDA in this regard; Report of Insurance Companies) Regulations, 2002 (‘the Regulations’) • The balance sheet, the revenue account, the profit and loss read with Section 211 of the Companies Act, 1956 (‘the Act’). account and receipts and payments account referred to in this We report thereon as follows: report comply with the accounting standards referred to under • We have obtained all the information and explanations which, sub section 3C of Section 211 of the Act; to the best of our knowledge and belief were necessary for the • Proper books of accounts as required by law have been maintained purposes of the audit and have found them to be satisfactory; by the Company so far as appears from our examination of those • As the Company’s accounts are centralized and maintained at books; and the Corporate office, no returns for the purposes of our audit are • The balance sheet, the revenue account, the profit and loss account prepared at the branches and other offices of the Company; and receipts and payments account read together with the notes • The balance sheet, the revenue account, the profit and loss thereon are prepared in accordance with the requirements of the account and receipts and payments account referred to in this Insurance Act, 1938, the Insurance Regulatory and Development report are in agreement with the books of account; Act, 1999 and the Companies Act, 1956 to the extent applicable, • The actuarial valuation of liabilities in respect of claims Incurred But and in a manner so required, and give a true and fair view in Not Reported (IBNR) and those Incurred But Not Enough Reported conformity with the accounting principles generally accepted in 52 India as applicable to insurance companies: us and to the best of our knowledge and belief, we certify that: - in the case of balance sheet, of the state affairs of the • We have reviewed the management report attached to the Company as at March 31, 2009; financial statements for the year ended March 31, 2009 and - in the case of revenue account, of the deficit, for the year there are no apparent mistakes or material inconsistency with ended on that date; the financial statements; and - in the case of profit and loss account, of the profit for the year • Based on the information and explanations received during the ended on that date; and normal course of our audit and management representation - in the case of receipts and payments account, of the receipts by officers of the Company charged with compliance, nothing and payments for the year ended on that date. has come to our attention which causes us to believe that the Further, on the basis of examination of books and records of the Company has not complied with the terms and conditions of the Company and according to the information and explanations given to registration as stipulated by the IRDA.

For N. M. Raiji & Co. For PKF Sridhar & Santhanam Chartered Accountants Chartered Accountants Jayesh M. Gandhi R. Suriyanarayanan Partner Partner Membership No. 37924 Membership No. 201402 Place : Mumbai, Date : April 23 , 2009

Auditors’ certificate

In accordance with the information and explanations given to us and to • No part of the assets of the policyholders’ fund has been directly the best of our knowledge and belief and based on our examination of or indirectly applied in contravention to the provisions of the the books and records maintained by ICICI Lombard General Insurance Insurance Act, 1938 relating to the application and investment of Company Limited (‘the Company’) for the year ended March 31, the policyholders’ funds. 2009, we certify that: This certificate has been issued to comply with Schedule C of the • We have verified the cash balances maintained by the Company. Insurance Regulatory and Development Authority (Preparation of As regards the securities relating to the Company’s investments, Financial Statements and Auditor’s Report of Insurance Companies) the same have been verified with the dematerialized statement/ Regulations 2002, (‘the Accounting Regulations’), read with Regulation confirmations received from the custodian; 3 of the Accounting Regulations and may not be suitable for any other • The Company is not the trustee of any trust; and purpose. For N. M. Raiji & Co. For PKF Sridhar & Santhanam Chartered Accountants Chartered Accountants Jayesh M. Gandhi R. Suriyanarayanan Partner Partner Membership No. 37924 Membership No. 201402 Place : Mumbai, Date : April 23 , 2009 53 Balance sheet as at March 31, 2009

Registration No. 115 dated August 03, 2001 (Rs. in ‘000s) Particulars Schedule As at As at March 31, 2009 March 31, 2008 Sources of funds Share capital 5 4,031,369 3,773,578 Reserves and Surplus 6 11,995,095 6,986,011 Share application money-pending allotment (Refer note 5.1.16) 176 - Fair value change account (743,219) (178,715) Borrowings 7 - - Total 15,283,421 10,580,874 Application of funds Investments 8 30,307,422 23,737,603 Loans 9 - - Fixed assets 10 1,567,691 1,253,088 Deferred Tax Asset (Refer note 5.2.11) 596,650 298,150 Current assets Cash and Bank Balances 11 730,475 1,363,317 Advances and Other assets 12 21,639,788 11,289,692 Sub-Total (A) 22,370,263 12,653,009 Current liabilities 13 27,984,456 17,362,211 Provisions 14 11,574,149 9,998,765 Sub-Total (B) 39,558,605 27,360,976 Net current assets (C) = (A - B) (17,188,342) (14,707,967) Miscellaneous expenditure (to the extent not written off or adjusted) 15 - - Debit balance in profit and loss account - - Total 15,283,421 10,580,874 Significant accounting policies and notes to accounts 16

The schedules referred to above form an integral part of the balance sheet.

As per our attached report of even date For and on behalf of the Board

For N. M. Raiji & Co. For PKF Sridhar & Santhanam K. V. Kamath Chanda D. Kochhar Chartered Accountants Chartered Accountants Chairman Director Jayesh M. Gandhi R. Suriyanarayanan S. Mukherji V. Vaidyanathan Partner Partner Director Director Membership No. 37924 Membership No. 201402 Sandeep Bakhshi Rakesh Jain Managing Director & CEO Director-Corporate Centre & CFO Mumbai Pratap Salian April 23, 2009 Company Secretary 54 Profit & Loss Account for the year ended March 31, 2009

Registration No. 115 dated August 03, 2001 (Rs. in ‘000s) Particulars Schedule Year ended Year ended March 31, 2009 March 31, 2008 1. Operating profit/(loss) (a) Fire Insurance (230,096) 160,455 (b) Marine Insurance (573,997) (381,160) (c) Miscellaneous Insurance (73,542) 693,981 2. Income from investments (a) Interest, Dividend & Rent - Gross 814,092 667,875 (b) Profit on sale/redemption of investments 645,211 225,841 Less : loss on sale/redemption of investments (127,195) (13,355) 3. Other income (a) Interest income on tax refund - 2,027 (b) Profit on sale of fixed assets 98 6 Total (A) 454,571 1,355,670 4. Provisions (Other than taxation) (a) For diminution in the value of investments 435,226 47,509 (b) For doubtful debts - - (c) Others - - 5. Other expenses (a) Expenses other than those related to Insurance Business (i) Employees’ remuneration and welfare benefits 5,748 5,267 (ii) Directors’ fees 480 660 (b) Bad debts written off - - (c) Loss on sale of fixed assets 10,372 - Total (B) 451,826 53,436 Profit before tax 2,745 1,302,234 Provision for taxation: (a) Current tax - 393,000 (b) Deferred tax (298,500) (175,000) (c) Fringe benefit tax 65,000 (233,500) 55,500 273,500 Profit after tax 236,245 1,028,734 Appropriations (a) Interim dividends paid during the year - 591,157 (b) Proposed final dividend - - (c) Dividend distribution tax - 100,467 (d) Transfer to General Reserve - - 86,328 777,952 Balance of profit brought forward from last year 932,370 681,588 Balance carried forward to balance sheet 1,168,615 932,370 Basic earnings per share of Rs. 10 face value (refer note 5.2.10) Rs 0.60 Rs 2.76 Diluted earnings per share of Rs. 10 face value (refer note 5.2.10) Rs 0.59 Rs 2.74 Significant accounting policies & notes to accounts 16 The schedules referred to above form an integral part of the profit & loss account. As per our attached report of even date For and on behalf of the Board For N. M. Raiji & Co. For PKF Sridhar & Santhanam K. V. Kamath Chanda D. Kochhar Chartered Accountants Chartered Accountants Chairman Director Jayesh M. Gandhi R. Suriyanarayanan S. Mukherji V. Vaidyanathan Partner Partner Director Director Membership No. 37924 Membership No. 201402 Sandeep Bakhshi Rakesh Jain Managing Director & CEO Director-Corporate Centre & CFO Mumbai Pratap Salian April 23, 2009 Company Secretary 55 Revenue Accounts for the year ended March 31, 2009

Registration No. 115 dated August 03, 2001 Particulars Schedule Fire 2008-09 2007-08 1. Premium earned (net) 1 1,010,370 1,086,452 2. Profit on sale/redemption of investments 46,875 15,384 Less : Loss on sale/redemption of investments (9,241) (910) 3. Others - Foreign exchange gain/(loss) 127 - 4. Interest, Dividend & Rent–Gross 59,144 45,493 Total (A) 1,107,275 1,146,419 1. Claims Incurred (net) 2 969,792 579,398 2. Commission (net) 3 (273,375) (362,918) 3. Operating expenses related to Insurance Business 4 640,954 769,484 4. Others – Premium Deficiency - - Total (B) 1,337,371 985,964 Operating Profit/(Loss) C = (A - B) (230,096) 160,455 APPROPRIATIONS Transfer to Shareholders’ Account (230,096) 160,455 Transfer to Catastrophe Reserve - - Transfer to Other Reserves - - Total (C) (230,096) 160,455 Significant accounting policies and notes to accounts 16

As required by Section 40C(2) of the Insurance Act, 1938, we certify that, to the best of our knowledge and according to the information and explanations given to us, and so far as appears from our examination of the Company’s books of account, all expenses of management, wherever incurred, whether directly or indirectly, have been fully recognised in the Revenue Accounts as expense. The schedules referred to above form an integral part of the revenue accounts.

As per our attached report of even date

For N. M. Raiji & Co. For PKF Sridhar & Santhanam Chartered Accountants Chartered Accountants Jayesh M. Gandhi R. Suriyanarayanan Partner Partner Membership No. 37924 Membership No. 201402

Mumbai April 23, 2009

56 (Rs. in ‘000s) Marine Miscellaneous Total 2008-09 2007-08 2008-09 2007-08 2008-09 2007-08 272,818 183,046 18,453,334 14,402,350 19,736,522 15,671,848 31,607 5,322 1,047,797 329,311 1,126,279 350,017 (6,231) (315) (206,560) (19,474) (222,032) (20,699) 60 (2,293) 3,655 (1,039) 3,842 (3,332) 39,880 15,737 1,322,054 973,866 1,421,078 1,035,096 338,134 201,497 20,620,280 15,685,014 22,065,689 17,032,930 550,246 322,036 15,325,324 11,381,770 16,845,362 12,283,204 (132,892) (133,010) (349,570) (869,712) (755,837) (1,365,640) 426,777 363,131 5,718,068 4,478,975 6,785,799 5,611,590 68,000 30,500 - - 68,000 30,500 912,131 582,657 20,693,822 14,991,033 22,943,324 16,559,654 (573,997) (381,160) (73,542) 693,981 (877,635) 473,276

(573,997) (381,160) (73,542) 693,981 (877,635) 473,276 ------(573,997) (381,160) (73,542) 693,981 (877,635) 473,276

For and on behalf of the Board

K. V. Kamath Chanda D. Kochhar Chairman Director S. Mukherji V. Vaidyanathan Director Director Sandeep Bakhshi Rakesh Jain Managing Director & CEO Director-Corporate Centre & CFO Pratap Salian Company Secretary

57 Schedules forming part of the financial statements

Schedule – 1 Premium

Particulars Fire Marine Marine- Marine- Marine- Motor-OD Motor-TP Cargo Others Total

2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 Premium from direct business written-net of service tax 2,830,234 865,040 1,299,663 2,164,703 8,746,918 4,466,025 Add: Premium on reinsurance accepted 237,102 16,727 61,173 77,900 - 2,924,480 Less: Premium on reinsurance ceded 2,110,133 639,123 1,319,990 1,959,113 2,714,706 3,388,174 Net premium 957,203 242,644 40,846 283,490 6,032,212 4,002,331 Adjustment for change in reserve for unexpired risks (53,167) 8,118 2,554 10,672 (108,151) 396,518 Total premium earned (Net) 1,010,370 234,526 38,292 272,818 6,140,363 3,605,813

Particulars Fire Marine Marine- Marine- Marine- Motor-OD Motor-TP Cargo Others Total

2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 Premium from direct business written-net of service tax 4,173,495 668,279 1,498,893 2,167,172 9,057,810 3,732,935 Add: Premium on reinsurance accepted 208,969 4,440 73,923 78,363 6,953 2,563,287 Less: Premium on reinsurance ceded 3,237,694 495,299 1,537,253 2,032,552 3,192,609 2,978,304 Net premium 1,144,770 177,420 35,563 212,983 5,872,154 3,317,918 Adjustment for change in reserve for unexpired risks 58,318 21,976 7,961 29,937 (617,796) 1,074,536 Total premium earned (Net) 1,086,452 155,444 27,602 183,046 6,489,950 2,243,382

58 (Rs. in ‘000s) Miscellaneous Total Motor Workmens’ Public/ Engineering Aviation Personal Health Others Total Total Compensa- Product Accident Insurance Miscella- tion Liability neous 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 13,212,943 98,184 141,056 1,810,101 518,782 1,125,187 9,738,035 2,381,127 29,025,415 34,020,352 2,924,480 - 96 125,270 27,624 5,024 72,308 1,954 3,156,756 3,471,758 6,102,880 19,916 53,789 1,536,723 449,442 786,934 1,960,853 1,347,570 12,258,107 16,327,353 10,034,543 78,268 87,363 398,648 96,964 343,277 7,849,490 1,035,511 19,924,064 21,164,757 288,367 46 17,232 1,201 8,395 127,289 1,002,006 26,194 1,470,730 1,428,235 9,746,176 78,222 70,131 397,447 88,569 215,988 6,847,484 1,009,317 18,453,334 19,736,522

(Rs. in ‘000s) Miscellaneous Total Motor Workmens’ Public/ Engineering Aviation Personal Health Others Total Total Compensa- Product Accident Insurance Miscella- tion Liability neous 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 12,790,745 100,854 107,572 1,717,593 413,061 1,081,824 8,158,892 2,360,002 26,730,543 33,071,210 2,570,240 95 774 77,532 186 - - 2,829 2,651,656 2,938,988 6,170,913 20,392 46,130 1,411,143 358,756 921,711 2,750,618 1,262,617 12,942,280 18,212,526 9,190,072 80,557 62,216 383,982 54,491 160,113 5,408,274 1,100,214 16,439,919 17,797,672 456,740 4,978 20,244 39,939 37,439 (42,516) 1,342,043 178,702 2,037,569 2,125,824 8,733,332 75,579 41,972 344,043 17,052 202,629 4,066,231 921,512 14,402,350 15,671,848

59 Schedules forming part of the financial statements

Schedule – 2 Claims Incurred (net)

Particulars Fire Marine Marine- Marine- Marine- Motor-OD Motor-TP Cargo Others Total

2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 Claims paid- Direct 2,406,393 540,490 334,868 875,358 5,193,411 1,764,028 Add: Re-insurance accepted 43,003 1,197 - 1,197 3,054 182,193 Less: Re-insurance ceded 1,808,321 396,739 260,601 657,340 1,770,316 789,303 Net Claims paid 641,075 144,948 74,267 219,215 3,426,149 1,156,918 Add: Claims Outstanding at the end of the year 706,911 150,156 414,900 565,056 1,136,073 7,485,080 Less: Claims Outstanding at the beginning of the year 378,194 92,148 141,877 234,025 909,575 4,100,013 Total claims incurred 969,792 202,956 347,290 550,246 3,652,647 4,541,985

Particulars Fire Marine Marine- Marine- Marine- Motor-OD Motor-TP Cargo Others Total

2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 Claims paid- Direct 2,549,150 611,034 332,915 943,949 4,557,633 639,866 Add: Re-insurance accepted 11,262 - - - - - Less: Re-insurance ceded 2,188,422 445,956 312,381 758,337 1,572,287 186,596 Net Claims paid 371,990 165,078 20,534 185,612 2,985,346 453,270 Add: Claims Outstanding at the end of the year 378,194 92,148 141,877 234,025 909,575 4,100,013 Less: Claims Outstanding at the beginning of the year 170,786 75,663 21,938 97,601 676,033 1,121,688 Total claims incurred 579,398 181,563 140,473 322,036 3,218,888 3,431,595

60 (Rs. in ‘000s) Miscellaneous Total Motor Workmens’ Public/ Engineering Aviation Personal Health Others Total- Total Compensation Product Accident Insurance Miscella- Liability neous 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 6,957,439 25,106 70,163 631,513 61,393 1,594,901 6,523,406 773,944 16,637,865 19,919,616 185,247 - - 1,635 - - - - 186,882 231,082 2,559,619 4,844 14,115 500,510 54,999 1,308,677 1,234,917 357,684 6,035,365 8,501,026 4,583,067 20,262 56,048 132,638 6,394 286,224 5,288,489 416,260 10,789,382 11,649,672 8,621,153 21,952 14,819 221,012 6,470 352,654 1,401,295 301,558 10,940,913 12,212,880 5,009,588 11,819 1,768 153,506 7,300 158,376 795,897 266,717 6,404,971 7,017,190 8,194,632 30,395 69,099 200,144 5,564 480,502 5,893,887 451,101 15,325,324 16,845,362

(Rs. in ‘000s) Miscellaneous Total Motor Workmens’ Public/ Engineering Aviation Personal Health Others Total- Total Compensation Product Accident Insurance Miscella- Liability neous 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 5,197,499 17,880 567 734,521 21,539 964,207 4,884,418 771,259 12,591,890 16,084,989 - - - - - 776 - - 776 12,038 1,758,883 3,576 114 604,205 18,743 822,801 1,005,984 469,679 4,683,985 7,630,744 3,438,616 14,304 453 130,316 2,796 142,182 3,878,434 301,580 7,908,681 8,466,283 5,009,588 11,819 1,768 153,506 7,300 158,376 795,897 266,717 6,404,971 7,017,190 1,797,721 276 1,066 119,317 2,719 172,197 657,381 181,205 2,931,882 3,200,269 6,650,483 25,847 1,155 164,505 7,377 128,361 4,016,950 387,092 11,381,770 12,283,204

61 Schedules forming part of the financial statements

Schedule- 3 Commission

Particulars Fire Marine Marine- Marine- Marine- Motor-OD Motor-TP Cargo others Total

2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 Commission paid 114,075 56,615 21,808 78,423 779,788 - Direct - Add: Commission on Re-insurance accepted 8,403 669 387 1,056 - 292,448 Less: Commission on Re-Insurance ceded 395,853 128,747 83,624 212,371 845,960 433,542 Net Commission (273,375) (71,463) (61,429) (132,892) (66,172) (141,094)

Particulars Fire Marine Marine- Marine- Marine- Motor-OD Motor-TP Cargo others Total

2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 Commission paid - Direct 328,328 83,486 18,848 102,334 795,780 - Add: Commission on Re-insurance accepted 9,544 844 56 900 975 256,329 Less: Commission on Re-Insurance ceded 700,790 112,703 123,541 236,244 948,518 376,770 Net Commission (362,918) (28,373) (104,637) (133,010) (151,763) (120,441)

Schedule- 3 A Commission Paid - Direct (Rs. in ‘000s)

Particulars 2008-09 2007-08

Agents 451,675 380,664

Brokers 465,762 423,062

Corporate Agency 730,832 768,782

Referral 587,770 963,992

Total (B) 2,236,039 2,536,500

62 (Rs. in ‘000s) Miscellaneous Total Motor Workmens’ Public/ Engineering Aviation Personal Health Others Total- Total Compensation Product Accident Insurance Miscellaneous Liability

2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 779,788 8,303 9,801 98,730 14,190 104,618 795,871 232,240 2,043,541 2,236,039

292,448 - - 10,545 3,844 - - 125 306,962 316,421 1,279,502 3,959 3,292 399,364 2,945 104,914 738,803 167,294 2,700,073 3,308,297 (207,266) 4,344 6,509 (290,089) 15,089 (296) 57,068 65,071 (349,570) (755,837)

(Rs. in ‘000s) Miscellaneous Total Motor Workmens’ Public/ Engineering Aviation Personal Health Others Total- Total Compensation Product Accident Insurance Miscellaneous Liability

2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08

795,780 8,472 7,485 145,300 12,241 78,557 710,380 347,623 2,105,838 2,536,500 257,304 - - 3,598 9 - - 240 261,151 271,595 1,325,288 3,851 6,370 389,331 14,291 167,656 1,148,910 181,004 3,236,701 4,173,735 (272,204) 4,621 1,115 (240,433) (2,041) (89,099) (438,530) 166,859 (869,712) (1,365,640)

63 Schedules forming part of the financial statements

Schedule – 4 Operating expenses related to insurance business

Particulars Fire Marine Marine- Marine- Marine- Motor OD Motor TP Cargo Others Total

2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 Employees’ remuneration & welfare benefits 302,031 92,313 138,695 231,008 933,434 476,596

Travel, conveyance and vehicle running expenses 31,567 9,648 14,496 24,144 97,560 49,812

Training expenses 3,736 1,142 1,715 2,857 11,545 5,895

Rents, rates & taxes 38,249 11,691 17,564 29,255 118,210 60,356

Repairs & maintenance 27,653 8,452 12,698 21,150 85,462 43,636

Printing & stationery 11,446 3,498 5,256 8,754 35,374 18,062

Communication 41,351 12,639 18,989 31,628 127,798 65,251

Legal & professional charges 114,036 9,497 14,268 23,765 96,025 49,029 Auditors’ fees, expenses etc - -

(a) as auditor 266 81 122 203 823 420

(b) as adviser or in any other capacity, in respect of - -

(i) Taxation matters ------

(ii) Insurance matters ------

(iii) Management services; and ------

(c) in any other capacity ------Advertisement and publicity 12,754 3,898 5,857 9,755 39,417 20,125

Interest & Bank charges 6,614 2,022 3,037 5,059 20,442 10,438

Others

(a) Miscellaneous expenses 14,183 4,335 6,513 10,848 43,832 22,380

(b) Business & Sales Promotion 15,074 4,607 6,922 11,529 46,588 23,787

Depreciation 21,994 6,722 10,100 16,822 67,972 34,705

Service tax on premium account ------Total 640,954 170,545 256,232 426,777 1,724,482 880,492

64 (Rs. in ‘000s) Miscellaneous Total Motor Workmens’ Public/ Engineering Aviation Personal Health Others Total- Product Total Compensation Liability Accident Insurance Miscellaneous 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 2008-09 1,410,030 10,478 15,053 193,166 55,362 120,075 1,039,203 254,104 3,097,471 3,630,510

147,372 1,095 1,573 20,189 5,786 12,550 108,614 26,558 323,737 379,448

17,440 130 186 2,389 685 1,485 12,853 3,143 38,311 44,904

178,566 1,327 1,906 24,463 7,011 15,206 131,605 32,180 392,264 459,768

129,098 959 1,378 17,686 5,069 10,994 95,146 23,264 283,594 332,397

53,436 397 570 7,320 2,098 4,551 39,383 9,632 117,387 137,587

193,049 1,435 2,061 26,447 7,580 16,440 142,279 34,790 424,081 497,060

145,054 1,078 1,549 19,872 5,695 12,352 106,906 26,141 318,647 456,448

1,243 10 13 170 49 106 916 224 2,731 3,200

------

------

------

------59,542 442 636 8,157 2,338 5,070 43,883 10,732 130,800 153,309

30,880 229 330 4,230 1,212 2,630 22,759 5,565 67,835 79,508

66,212 492 707 9,071 2,600 5,639 48,799 7,539 141,059 166,090

70,375 523 751 9,641 2,763 5,993 51,867 12,683 154,596 181,199

102,677 763 1,096 14,066 4,031 8,744 75,674 18,504 225,555 264,371

------2,604,974 19,358 27,809 356,867 102,279 221,835 1,919,887 465,059 5,718,068 6,785,799

65 Schedules forming part of the financial statements

Schedule – 4 (Contd.) Operating expenses related to insurance business

Particulars Fire Marine Marine- Marine- Marine- Motor OD Motor TP Cargo Others Total

2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 Employees’ remuneration & welfare benefits 381,313 61,058 136,947 198,005 827,570 341,061

Travel, conveyance and vehicle running expenses 44,707 7,159 16,056 23,215 97,028 39,987

Training expenses 2,272 364 816 1,180 4,932 2,032

Rents, rates & taxes 61,764 9,890 22,182 32,072 134,047 55,244

Repairs & maintenance 35,096 5,620 12,605 18,225 76,170 31,391

Printing & stationery 17,397 2,786 6,248 9,034 37,757 15,560

Communication 50,703 8,119 18,210 26,329 110,041 45,351

Legal & professional charges 99,294 4,663 10,458 15,121 63,201 26,046 Auditors’ fees, expenses etc

(a) as auditor 290 46 104 150 630 260

(b) as adviser or in any other capacity, in respect of

(i) Taxation matters 25 4 9 13 55 22

(ii) Insurance matters ------

(iii) Management services; and 33 5 12 17 72 30

(c) in any other capacity ------Advertisement and publicity 12,896 2,065 4,631 6,696 27,988 11,534

Interest & Bank charges 9,464 1,515 3,399 4,914 20,540 8,465

Others

(a) Miscellaneous expenses 10,824 1,733 3,887 5,620 23,491 9,681

(b) Business & Sales Promotion 16,767 2,685 6,022 8,707 36,391 14,997

Depreciation 26,639 4,266 9,567 13,833 57,816 23,827

Service tax on premium account ------Total 769,484 111,978 251,153 363,131 1,517,729 625,488

66 (Rs. in ‘000s) Miscellaneous Total Motor Workmens’ Public/ Engineering Aviation Personal Health Others Total- Product Total Compensation Liability Accident Insurance Miscellaneous 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 2007-08 1,168,631 9,215 9,828 156,929 37,739 98,841 745,440 215,623 2,442,246 3,021,564

137,015 1,080 1,152 18,399 4,425 11,589 87,398 25,280 286,338 354,260

6,964 55 59 935 225 589 4,442 1,285 14,554 18,006

189,291 1,493 1,592 25,419 6,113 16,010 120,744 34,926 395,588 489,424

107,561 848 905 14,444 3,474 9,097 68,611 19,846 224,786 278,107

53,317 420 448 7,160 1,722 4,510 34,010 9,838 111,425 137,856

155,392 1,225 1,307 20,867 5,018 13,143 99,121 28,671 324,744 401,776

89,247 704 751 11,984 2,882 7,548 56,929 16,467 186,512 300,927

890 7 7 120 29 75 568 164 1,860 2,300

77 1 1 10 2 7 50 14 162 200

------

102 1 1 14 3 9 65 19 214 264

------39,522 312 332 5,307 1,276 3,343 25,210 7,292 82,594 102,186

29,005 229 244 3,895 937 2,453 18,502 5,352 60,617 74,995

33,172 262 279 4,454 1,071 2,806 21,159 6,120 69,323 85,767

51,388 405 432 6,901 1,660 4,346 32,779 9,481 107,392 132,866

81,643 643 687 10,963 2,637 6,905 52,078 15,064 170,620 211,092

------2,143,217 16,900 18,025 287,801 69,213 181,271 1,367,106 395,442 4,478,975 5,611,590

67 Schedules forming part of the financial statements

Schedule – 5 Share capital

(Rs. in ‘000s) Particulars As at As at March 31, 2009 March 31, 2008 Authorised Capital 450,000,000 (previous year : 450,000,000) Equity Shares of Rs 10 each 4,500,000 4,500,000 Issued Capital 403,136,940 (previous year : 377,357,772) Equity Shares of Rs 10 each 4,031,369 3,773,578 Subscribed Capital 403,136,940 (previous year : 377,357,772) Equity Shares of Rs 10 each 4,031,369 3,773,578 Called up Capital 403,136,940 (previous year : 377,357,772) Equity Shares of Rs 10 each 4,031,369 3,773,578 Less : Calls unpaid Add : Equity Shares forfeited (Amount originally paid up) - - Less : Par value of Equity Shares bought back - - Less : (i) Preliminary Expenses to the extent not written off - - (ii) Expenses including commission or brokerage on underwriting or subscription of shares - - Total 4,031,369 3,773,578

Note: Of the above, 297,552,950 shares are held by the holding company, ICICI Bank Limited (previous year : 278,610,000 shares)

Schedule – 5A Share Capital Pattern of shareholding [As certified by the management]

Shareholder As at March 31, 2009 As at March 31, 2008

Number of Shares % of Holding Number of Shares % of Holding

Promoters - Indian 297,552,950 73.80% 278,610,000 73.83% - Foreign 104,392,936 25.90% 97,890,000 25.94% Others - Employees 1,191,054 0.30% 857,772 0.23% Total 403,136,940 100.00% 377,357,772 100.00%

68 Schedule – 6 Reserves and Surplus

(Rs. in 000’s) Particulars As at As at March 31, 2009 March 31, 2008

1. Capital Reserve - - 2. Capital Redemption Reserve - - 3. Share Premium (refer note 4.14) Opening balance 5,933,135 3,854,194 Additions during the year 4,772,839 2,078,941 Deductions during the period- share issue expenses - - Closing balance 10,705,974 5,933,135 4. General Reserves Opening balance 120,506 34,178 Additions during the year - 86,328 Deductions during the year - - Closing balance 120,506 120,506 Less: Debit balance in Profit and Loss Account - - Less: Amount utilized for Buy-back - - 5. Catastrophe Reserve - - 6. Other Reserves - - 7. Balance of Profit in Profit and Loss Account 1,168,615 932,370 Total 11,995,095 6,986,011

Schedule- 7 Borrowings

, (Rs. in 000s) Particulars As at As at March 31, 2009 March 31, 2008

Debentures/ Bonds - - Banks - - Financial Institutions - - Others - - Total - -

69 Schedules forming part of the financial statements

Schedule- 8 Investments (Rs. in ‘000s) Particulars As at As at March 31, 2009 March 31, 2008 Long term investments Government securities and Government guaranteed bonds including Treasury Bills (note 3) 9,392,066 6,436,861 Other Approved Securities - 1,174,154 Other Investments (a) Shares (aa) Equity 4,327,311 4,027,224 (bb) Preference - 2,774 (b) Mutual Funds - - (c) Derivative Instruments - - (d) Debentures/ Bonds (note 4 below) 3,992,507 1,939,573 (e) Other Securities - - (f) Subsidiaries - - (g) Investment Properties-Real Estate - - Investments in Infrastructure and Social Sector 6,795,345 6,002,274 Other than Approved Investments (Note 4) 758,389 1,094,960 Short term investments Government securities and Government guaranteed bonds including Treasury Bills 2,089,868 948,928 Other Approved Securities - 198,078 Other Investments (a) Shares (aa) Equity - - (bb) Preference - - (b) Mutual Fund units - - (c) Derivative Instruments - - (d) Debentures/ Bonds 811,234 792,417 (e) Other Securities - - (f) Subsidiaries - - (g) Investment Properties-Real Estate - - Investments in Infrastructure and Social Sector 198,721 450,339 Other than Approved Investments (Note 4 & 5) 1,941,981 670,021 Total investments 30,307,422 23,737,603

Notes:1. Aggregate book value of investments (other than listed equities) is Rs 25,734,871 thousand (previous year: Rs 19,195,336 thousand ). 2. Aggregate market value of investments (other than listed equities) is Rs 25,755,271 thousand (previous year: Rs 19,152,405 thousand ) 3. Includes investment of FRB GOI 2014 of Rs 100,000 thousand under Section 7 of Insurance Act, 1938 (previous year: FRB GOI 2014 of Rs 100,000 thousand). 4. Investments in Venture funds & other than approved equities have been reclassified and regrouped to long term investment. 5. Includes investment in mutual fund.

70 Schedules forming part of the financial statements

Schedule- 9 Loans (Rs. in ‘000s) Particulars As at As at March 31, 2009 March 31, 2008 Security wise classification Secured (a) On mortgage of property (aa) In India - - (bb) Outside India - - (b) On Shares, Bonds, Govt. Securities - - (c) Others - - Unsecured - -

Total - - Borrower wise classification (a) Central and State Governments - - (b) Banks and Financial Institutions - - (c) Subsidiaries - - (d) Industrial Undertakings - - (e) Others - -

Total - - Performance wise classification (a) Loans classified as standard (aa) In India - - (bb) Outside India - - (b) Non-performing loans less provisions (aa) In India - - (bb) Outside India - -

Total - - Maturity wise classification (a) Short Term - - (b) Long Term - -

Total - -

Note:- There are no loans subject to restructuring (previous year : Rs NIL).

71 Schedules forming part of the financial statements

Schedule - 10 Fixed assets

Particulars Cost/ Gross Block

April 1, 2008 Additions Deductions March 31, 2009

Goodwill - - - - Intangibles - Computer Software 390,041 261,685 - 651,726 Land-Freehold - - - - Leasehold Property - - - - Buildings 4,271 - - 4,271 Furniture & Fittings 562,860 253,170 10,664 805,366 Information Technology Equipment 444,595 70,702 3,763 511,534 Vehicles 4,166 3,235 - 7,401 Office Equipment 256,588 103,487 7,853 352,222 Others - - - - Total 1,662,521 692,279 22,280 2,332,520 Work in Progress Grand total 1,662,521 692,279 22,280 2,332,520 Previous year 1,154,620 508,302 401 1,662,521

Schedule - 11 Cash and bank balances

(Rs. in ‘000s) Particulars As at As at March 31, 2009 March 31, 2008 Cash (including cheques, drafts and stamps) 37,820 115,112 Balances with scheduled banks : (a) Deposit Accounts (aa) Short-term (due within 12 months) 601,150 1,023,086 (bb) Others - - (b) Current Accounts 91,505 225,119 (c) Others - - Money at Call and Short Notice (a) With Banks - - (b) With other institutions - - Others - - Total 730,475 1,363,317 72 (Rs. in ‘000s) Depreciation Net Block

April 1, 2008 For the year On Sales/ March 31, 2009 March 31, 2009 March 31, 2008 ended Adjustments ------164,558 92,482 - 257,040 394,686 225,483 ------378 70 - 448 3,823 3,893 96,098 56,507 3,105 149,500 655,866 466,762 247,091 97,933 3,300 341,724 169,810 197,504 977 556 - 1,533 5,868 3,189 36,009 16,823 2,676 50,156 302,066 220,579 ------545,111 264,371 9,081 800,401 1,532,119 1,117,410 35,572 135,678 545,111 264,371 9,081 800,401 1,567,691 1,253,088 334,420 211,092 401 545,111 1,253,088

73 Schedules forming part of the financial statements

Schedule - 12 Advances and other assets

(Rs. in ‘000s) Particulars As at As at March 31, 2009 March 31, 2008 Advances Reserve deposits with ceding companies - - Application money for investments - - Prepayments 111,734 72,585 Advances to Directors / Officers - - Advance tax paid and taxes deducted at source (net of provisions for tax) 394,085 170,821 Others - Sundry Deposits 180,099 161,690 - Advance to Employees - -

180,099 161,690 Total (A) 685,918 405,096 Other assets Income accrued on investments/deposits 606,156 529,129 Outstanding Premiums 9,778 4,571 Agents’ Balances - - Foreign Agencies’ Balances - - Due from other Entities carrying on Insurance business (net) (including reinsurers) 19,822,296 10,057,352 Due from subsidiaries/ holding - - Deposit with Reserve Bank of India - - [Pursuant to section 7 of Insurance Act, 1938] Others - Inter Corporate Deposits - 56,500 - Service Tax unutilised credit 386,893 225,379 - Service Tax paid in advance - 270 - Other receivables 128,747 11,395

515,640 293,544

Total (B) 20,953,870 10,884,596

Total (A+B) 21,639,788 11,289,692

74 Schedules forming part of the financial statements

Schedule - 13 Current liabilities

(Rs. in ‘000s)

Particulars As at As at March 31,2009 March 31,2008

Agents’ Balances 48,116 58,327 Balances due to other insurance companies (net) 533,396 344,601 Deposits held on re-insurance ceded 33,128 - Premiums received in advance 263,952 1,331,553 Unallocated Premium 359,717 435,015 Sundry Creditors 1,367,441 1,288,390 Due to holding company 70,196 41,481 Claims Outstanding 23,749,581 12,692,757 Due to Officers/ Directors - - Others- a. Statutory Dues 81,083 124,690 b. Salary Payable 558 2,492 c. Collections- Environment Relief Fund 166 50,565 d. Book Overdraft 1,403,902 992,340 e. Employee rewards 73,220 - f. Service Tax Liability - - 1,558,929 1,170,087 Total 27,984,456 17,362,211

75 Schedules forming part of the financial statements

Schedule - 14 Provisions

(Rs. in ‘000s)

Particulars As at As at March 31, 2009 March 31, 2008

Reserve for unexpired risk 11,285,873 9,857,638 Reserve for premium deficiency 98,500 30,500 For taxation (less advance tax paid and taxes deducted at - - source) For proposed dividends - - For dividend distribution tax - - Others (a) Gratuity 70,938 23,676 (b) Leaves accrued 118,838 86,951 189,776 110,627 Total 11,574,149 9,998,765

Schedule - 15 Miscellaneous expenditure (To the extent not written off or adjusted)

(Rs. in ‘000s)

Particulars As at As at March 31, 2009 March 31, 2008

Discount Allowed in issue of shares/ debentures - -

Others - -

Total - -

76 Schedules forming part of the financial statements

SCHEDULE: 16 Significant accounting policies and notes forming part of the financial statements for the year ended March 31, 2009 1 Background ICICI Lombard General Insurance Company Limited (‘the Company’) was incorporated on October 30, 2000 and is a 74:26 joint venture between ICICI Bank Limited and Fairfax Financial Holdings Limited. The Company obtained regulatory approval to undertake General Insurance business on August 3, 2001 from the Insurance Regulatory and Development Authority (‘IRDA’) and has also obtained its certificate of renewal of registration.

2 Basis of preparation of financial statements The financial statements have been prepared and presented under the historical cost convention, on the accrual basis of accounting, and comply with the applicable accounting standards issued by the Institute of Chartered Accountants of India (‘ICAI’), and in accordance with the provisions of the Insurance Act, 1938, Insurance Regulatory and Development Authority Act, 1999, the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor’s Report of Insurance Companies Regulations), 2002 (‘the Regulations’) and orders / directions prescribed by the IRDA in this behalf , the Companies Act, 1956 to the extent applicable in the manner so required and current practices prevailing within the insurance industry in India.

3 use of estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the balance sheet date, reported amounts of revenues and expenses for the year ended and disclosure of contingent liabilities as of the balance sheet date. The estimates and assumptions used in these financial statements are based upon management’s evaluation of the relevant facts and circumstances as on the date of the financial statements. Actual results may differ from those estimates. Any revision to accounting estimates is recognized prospectively.

4 Significant accounting policies 4.1 Revenue recognition Premium income Premium is recorded for the policy period at the commencement of risk and for installment cases, it is recorded on installment due dates. Premium earned is recognized as income over the period of risk or the contract period based on 1/365 method, whichever is appropriate on a gross basis net of service tax. Any subsequent revision to premium is recognized over the remaining period of risk or contract period. Adjustments to premium income arising on cancellation of policies are recognized in the period in which it is cancelled.

Income from reinsurance ceded Commission on reinsurance ceded is recognized as income in the period of ceding the risk. Profit commission under reinsurance treaties, wherever applicable, is recognized as income in the year of final determination of profits and combined with commission on reinsurance ceded.

Income earned on investments Interest income on investments is recognized on an accrual basis. Accretion of discount and amortization of premium relating to debt securities and non convertible preference shares is recognized over the holding/maturity period on a straight-line basis. Dividend income is recognized when the right to receive dividend is established. Realised gain/loss on securities, which is the difference between the sale consideration and the carrying value in the books of the Company is recognized on the trade date. In determining the realised gain/loss, cost of securities is arrived at on ‘Weighted average cost’ basis. Further, in case of listed equity shares and mutual fund units the profit or loss on sale also includes the accumulated changes in the fair value previously

77 recognized in the fair value change account under the equity. Sale consideration for the purpose of realized gain/loss is net of brokerage and taxes, if any, and excludes interest received on sale.

4.2 Premium received in advance This represents premium received during the period, where the risk commences subsequent to the balance sheet date. 4.3 Reinsurance premium Insurance premium on ceding of the risk is recognized in the period in which the risk commences. Any subsequent revision to premium ceded is recognized in the period of such revision. Adjustment to reinsurance premium arising on cancellation of policies is recognized in the period in which it is cancelled.

4.4 Reserve for unexpired risk (refer note 5.2.2 and 5.2.3) Reserve for unexpired risk is recognized net of reinsurance ceded and represents premium written that is attributable and to be allocated to succeeding accounting periods for risks to be borne by the Company under contractual obligations on a contract period basis or risk period basis, whichever is appropriate. It is calculated on a daily pro-rata basis subject to a minimum of 50% of the aggregate premium, written on policies during the twelve months preceding the balance sheet date for fire, marine cargo and miscellaneous business and 100% for marine hull business, on all unexpired policies at balance sheet date, in accordance with section 64 V(1)(ii)(b) of the Insurance Act, 1938.

4.5 Claims Claims incurred comprise claims paid, estimated liability for outstanding claims made following a loss occurrence reported and estimated liability for claims Incurred But Not Reported (‘IBNR’) and claims Incurred But Not Enough Reported (‘IBNER’). Further, claims incurred also include specific claim settlement costs such as survey / legal fees and other directly attributable costs. Claims (net of amounts receivable from reinsurers/coinsurers) are recognized on the date of intimation based on estimates from surveyors/ insured in the respective revenue accounts. Estimated liability for outstanding claims at Balance Sheet date is recorded net of claims recoverable from/payable to co-insurers/reinsurers and salvage to the extent there is certainty of realisation. Estimated liability for outstanding claims is determined by management on the basis of ultimate amounts likely to be paid on each claim based on the past experience. These estimates are progressively revalidated on availability of further information. IBNR represents that amount of claims that may have been incurred during the accounting period but have not been reported or claimed. The IBNR provision also includes provision, if any, required for claims IBNER. Estimated liability for claims Incurred But Not Reported (‘IBNR’) and claims Incurred But Not Enough Reported (‘IBNER’) is based on an actuarial estimate duly certified by the appointed actuary of the Company. IBNR/IBNER has been created on re-insurance accepted from Indian Motor Third Party Insurance Pool (IMTPIP) based on actuarial estimates received from the IMTPIP (refer note 5.2.1). 4.6 Acquisition costs Acquisition costs are those costs that vary with, and are primarily related to the acquisition of new and renewal of insurance contracts viz. commission, policy issue expenses, etc. These costs are expensed in the period in which they are incurred. 4.7 Premium deficiency Premium deficiency is recognized when the sum of expected claim costs and related expenses exceed the reserve for unexpired risks and is computed at a business segment level.

4.8 Investments Investments are recorded at cost on trade date and include brokerage, transfer charges, stamps etc, if any, and excludes interest accrued up to the date of purchase. 78 Classification Investments maturing within twelve months from balance sheet date and investments made with the specific intention to dispose off within twelve months are classified as ‘short term investments’. Investments other than ‘short term investments’ are classified as ‘long term investments’.

Valuation Investments are valued as follows:

Debt securities and Non- convertible preference shares All debt securities including government securities and non convertible preference shares are considered as ‘held to maturity’ and accordingly stated at historical cost subject to amortization of premium or accretion of discount on a straight line basis over the holding/maturity period.

Equity shares and Convertible preference shares Listed equities and convertible preference shares as at the balance sheet date are stated at fair value, being the lowest of last quoted closing price on the National Stock Exchange or Bombay Stock Exchange Limited.

Mutual fund units (Other than Venture Capital Fund) Mutual fund investments are stated at fair value, being the closing net asset value as at balance sheet date. In accordance with the Regulations, unrealized gain / loss arising due to changes in fair value of listed equity shares and mutual fund investments are taken to the fair value change account. This balance in the fair value change account is not available for distribution, pending realization. Investments other than mentioned above are valued at cost.

Impairment of Investments The Company assesses at each balance sheet date whether there is any indication that any investment in equity or units of mutual fund may be impaired. If any such indication exists, the carrying value of such investment is reduced to its recoverable amount and the impairment loss is recognized in the revenue(s)/profit and loss account. If at the balance sheet date there is any indication that a previously assessed impairment loss no longer exists, then such loss is reversed and the investment is restated to that extent.

4.9 employee Stock Option Scheme (“ESOS”) The Company follows the intrinsic method for computing the compensation cost, for options granted under the scheme(s). The difference if any, between the intrinsic value and the grant price, being the compensation cost is amortized over the vesting period of the options.

4.10 Fixed assets, Intangibles and Impairments Fixed assets and depreciation Fixed assets are stated at cost less accumulated depreciation. Cost includes the purchase price and any cost directly attributable to bringing the asset to its working condition for its intended use. Depreciation on assets purchased/disposed off during the year is provided on pro rata basis with reference to the month of additions / deductions. Depreciation is provided on a straight-line basis, pro-rata for the period of use at the rates prescribed in Schedule XIV to the Companies Act, 1956 except in the case of IT equipment where depreciation is provided at a rate of 25% which is higher than that prescribed under Schedule XIV to the Companies Act, 1956.

Leases Lease payments for assets taken on operating lease are recognised as an expense in the revenue(s) and profit and loss account over the lease term. 79 Intangibles Intangible assets comprising computer software are stated at cost less amortization. Computer software including improvements are amortized over a period of 5 years, being the management’s estimate of the useful life of such intangibles. All assets including intangibles individually costing less than Rs. 5,000 are fully depreciated/amortized in the year in which acquired.

Impairment of assets The Company assesses at each balance sheet date whether there is any indication that any asset may be impaired. If any such indication exists, the carrying value of such assets is reduced to its recoverable amount and the impairment loss is recognized in the profit and loss account. If at the balance sheet date there is any indication that a previously assessed impairment loss no longer exists, then such loss is reversed and the asset is restated to that extent.

4.11 employee benefits Provident fund This is a defined contribution scheme and contributions payable to the Regional Provident Fund Authority is provided on the basis of specified percentage of salary and is charged to profit and loss account and revenue account(s).

Gratuity Gratuity, which is a defined benefit scheme is provided on the basis of actuarial valuation at period end and is recognized in the profit and loss account and revenue account(s).

Accrued leave Compensated absences are provided based on actuarial valuation as at balance sheet date and is recognized in the profit and loss account and revenue account(s).

4.12 Foreign currency transactions Transactions denominated in foreign currencies are recorded at the rates prevailing on the date of the transaction. Foreign exchange denominated monetary assets and liabilities, are re-stated at the rates prevalent at the date of the balance sheet. The gains/ losses on account of restatement and settlement are recognized in the profit and loss account and revenue account(s).

4.13 taxation Current tax The Company provides for income tax on the basis of taxable income for the current accounting period in accordance with the provisions of the Income Tax Act, 1961.

Deferred tax Deferred tax assets and liabilities are recognised for the future tax consequences attributable to timing differences between the accounting income as per the Company’s financial statements and the taxable income for the year. Deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future, however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and appropriately adjusted to reflect the amount that is reasonably/virtually certain to be realised. 80 Fringe benefit tax Provision for fringe benefit tax is made on the basis of expenses incurred on employees/other expenses as prescribed under the Income Tax Act, 1961.

4.14 Share issue expenses Share issue expenses are adjusted against share premium account.

4.15 Provisions and Contingencies A provision is recognized when an enterprise has a present obligation as a result of past event, it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to their present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent losses arising from claims other than insurance claims, litigation, assessment, fines, penalties, etc. are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. A disclosure for a contingent liability other than those under policies is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

5 Notes to accounts

5.1 Statutory disclosures as required by IRDA 5.1.1 Contingent liabilities (Rs. in ‘000s) As at As at Particulars March 31, 2009 March 31, 2008

Partly-paid up investments NIL NIL Claims, other than those under policies, not acknowledged as debt NIL NIL Underwriting commitments outstanding NIL NIL Guarantees given by or on behalf of the Company NIL NIL Statutory demands/liabilities in dispute, not provided for (see note below) 295,870 62,740 Reinsurance obligations to the extent not provided for in accounts NIL NIL Others NIL NIL

Note : The Company has disputed the demand raised by Income Tax Department for assessments completed of past years and the appeals are pending before the appropriate authorities.

5.1.2 The assets of the Company are free from all encumbrances.

5.1.3 Estimated amount of commitment pertaining to contracts remaining to be executed in respect of fixed assets (net of advances) is Rs.39,296 thousand (previous year : Rs. 124,036 thousand).

5.1.4 Commitment in respect of loans and investments is Rs.76,080 thousand (previous year : Rs. 5,000 thousand).

81 5.1.5 Claims Claims, less reinsurance paid to claimants in / outside India are as under: (Rs. in‘000s) Particulars For the year ended For the year ended March 31, 2009 March 31, 2008

In India 11,413,131 8,455,188 Outside India 236,541 11,095

The Company does not have any liability relating to claims where the claim payment period exceeds four years. Ageing of claims is set out in the table below: (Rs. in ‘000s) Particulars As at As at March 31, 2009 March 31, 2008

More than six months 7,951,484 4,290,994 Others 15,798,097 8,401,763 Claims settled and remaining unpaid for more than six months is Rs. NIL (previous year: Rs. NIL).

5.1.6 Premium Premium, less reinsurance, written from business in/outside India is given below: (Rs. in ‘000s) Particulars For the year ended For the year ended March 31, 2009 March 31, 2008 In India 21,151,607 17,779,006

Outside India 13,150 18,666

5.1.7 The Company has recognized 0.5% percent (previous year: 0.6 percent) of the total premium earned from Miscellaneous - Engineering class of business based on varying risk pattern. The risk pattern is determined based on underwriting estimates, which are in turn based on project related information received from the customers, and these are relied upon by the company.

5.1.8 Sector wise details of the policies issued/outstanding are given below:

Sector For the year ended For the year ended March 31, 2009 March 31, 2008

GWP No. of No. GWP No. of No. % of GWP % of GWP Rs.in ‘000s policies of lives Rs.in ‘000s policies of lives

Rural 3,900,173 401,174 - 10.40 2,447,805 438,816 - 6.80

Social 178,455 3 1,616,838 0.48 25,667 2 403,843 0.07

Urban 33,413,482 3,555,871 - 89.12 33,536,726 3,088,143 - 93.13

Total 37,492,110 3,957,048 100.00 36,010,198 3,526,961 100.00

82 5.1.9 Extent of risks retained and reinsured is set out below (excluding excess of loss and catastrophe reinsurance)

Particulars As at As at Basis March 31, 2009 March 31, 2008

Retention Ceded Retention Ceded

Fire Total sum insured 33% 67% 28% 72%

Marine – Cargo Value at risk 30% 70% 29% 71%

Marine – Hull Value at risk 3% 97% 2% 98%

Miscellaneous

- Engineering Total sum insured 23% 77% 23% 77%

- Motor (refer note 5.2.3) Total sum insured 54% 46% 60% 40%

- Workmen Compensation Value at risk 80% 20% 80% 20%

- Public Liability Value at risk 72% 28% 69% 31%

- Personal Accident Value at risk 35% 65% 16% 84%

- Health Value at risk 80% 20% 66% 34%

- Others Value at risk 45% 55% 44% 56%

5.1.10 In accordance with regulatory guidelines, there is no premium deficiency on an overall basis in the miscellaneous segment.

5.1.11 Investments

Value of contracts in relation to investments for:

- Purchases where deliveries are pending Rs. 367 thousand (previous year: Rs. NIL); and

- Sales where payments are overdue Rs. NIL (previous year: Rs. NIL).

Historical cost of investments that are valued on fair value basis is Rs.7,688,507 thousand (previous year: Rs. 5,341,103 thousand).

All investments are made in accordance with the Insurance Act, 1938 and Insurance Regulatory and Development Authority (Investment) Regulations, 2000 and are performing investments.

- Investments that are earmarked, are allocated separately to policy holders or share holders, as applicable;

- Other investments have not been allocated into policy holders and share holders as the same are not earmarked separately.

The Company does not have any investment in property as at March 31, 2009 (previous year: Rs. NIL).

5.1.12 Employee Benefit Plans Reconciliation of opening and closing balance of the present value of the defined benefit obligation for gratuity benefits of the Company is given below.

83 (Rs. in ‘000s)

For the year ended For the year ended Reconciliation of Benefit Obligations and Plan Assets March 31, 2009 March 31, 2008

Change in Defined Benefit Obligation Opening Defined Benefit Obligation 67,800 35,479 Current Service Cost 27,024 18,801 Interest Cost 7,115 2,784 Actuarial Losses / (Gain) 43,758 11,130 Liabilities assumed on Acquisition 5,250 - Benefits Paid (9,134) (394) Closing Defined Benefit Obligation 141,813 67,800

Change in the Fair Value of Assets Opening Fair Value of Plan Assets 44,124 23,448 Expected Return on Plan Assets 3,556 1,933 Actuarial Gains / (Losses) (6,597) 13,887 Contributions by Employer 33,676 5,250 Assets acquired on acquisition 5,250 - Benefits paid (9,134) (394) Closing Fair Value of Plan Assets 70,875 44,124 Expected Employer’s contribution Next Year 40,000 9,000

(Rs. in ‘000s)

Reconciliation of present Value of the obligation and the Fair value of As at As at the plan Assets March 31, 2009 March 31, 2008

Fair Value of plan assets at the end of the year (70,875) (44,124) Present value of the defined obligations at the end of the year 141,813 67,800 Liability recognised in the balance sheet 70,938 23,676 Investment details of plan assets 100% Insurer Managed Funds 70,875 44,124 Assumptions Discount Rate 7.10% p.a. 7.60% p.a. Expected Rate of Return on Plan Assets 7.50% p.a. 8.50% p.a. Salary Escalation Rate 8.00% p.a. 8.00% p.a.

84 Experience adjustments of last four years is given below (Rs. In 000’s)

Period Ended March 31, 2006 March 31, 2007 March 31, 2008 March 31, 2009 Defined Benefit Obligation 21,188 35,479 67,800 141,813 Plan assets 16,313 23,448 44,124 70,875 Surplus / (Deficit) (4,875) (12,031) (23,676) (70,938) Exp.Adj on Plan Liabilites - 8,021 672 26,355 Exp.Adj on Plan Assets - (107) 13,887 (6,597)

5.1.13 Employees’ remuneration & welfare benefits in Schedule 4 includes Rs. 135,712 thousand pertaining to bonus for earlier year, crystallized during the year.

5.1.14 Allocation of income and expenses

Allocation of investment income Investment income has been allocated between revenue account(s) and profit and loss account on the basis of the ratio of average policyholders funds to average shareholders funds respectively; average being the balance at the beginning of the period and at the end of the period. Further, investment income across segments within the revenue account(s) has also been allocated on the basis of segment-wise policyholders funds.

Allocation of expenses Operating expenses relating to insurance business are allocated to specific classes of business on the following basis: − Expenses that are directly identifiable to a business class are allocated on actuals; − Other expenses, that are not directly identifiable, are broadly allocated on the basis of gross written premium in each business class; and − Depreciation expenditure has been allocated on the assessment that the use of assets is proportionate to gross written premium of the respective segments.

5.1.15 Managerial remuneration The details of remuneration of Wholetime Directors’ as per the terms of appointment are as under: (Rs. in ‘000s) For the year ended For the year ended Particulars (see note below) March 31, 2009 March 31, 2008

Salaries and allowances 28,401 17,696

Contribution to provident and other funds 2,501 951

Perquisites 1,569 1,165

Note: Expenses towards gratuity and leave accrued are determined actuarially on an overall basis and accordingly have not been considered for the above disclosure. Stock options granted to the Wholetime Directors’ under ESOS are set out in note 5.1.20.

5.1.16 Share Application As at March 31, 2009 the Company had received share application money of Rs. 176 thousand (previous year: Rs. NIL thousand) against which shares are yet to be allotted. 85 5.1.17 Outsourcing, business development and marketing support expenses Expenses relating to outsourcing, business development and marketing support are : (Rs. in ‘000s) For the year ended For the year ended Particulars March 31, 2009 March 31, 2008 Outsourcing expenses 1,407,027 1,212,572 Business development 181,197 132,866 Marketing support 153,309 102,186

5.1.18 Summary of Financial Statements for the last five years: (Rs. in ‘000s) Particulars 2008-09 2007-08 2006-07 2005-06 2004-05 Operating Result Gross premium written 37,492,110 36,010,198 30,034,479 15,919,959 8,851,671 Net premium income # 21,164,757 17,797,672 14,507,715 7,338,721 3,208,892 Income from Investments (net) @ 2,325,325 1,364,414 783,667 520,809 237,597 Other income 3,842 (3,332) (4) 726 (223) Total income 23,493,924 19,158,754 15,291,378 7,860,256 3,446,266 Commissions (net of reinsurance commission) (755,837) (1,365,640) (1,904,751) (1,257,264) (892,716) Brokerage - - - - - Operating expenses 6,785,799 5,611,590 4,987,328 2,982,737 1,509,398 Claims, increase in Unexpired Risk Reserve & other outgoes 18,341,597 14,439,528 11,979,649 5,954,428 2,565,266 Operating Profit / loss (877,635) 473,276 229,152 180,355 264,318 Non - Operating Result Total income under shareholder’s account (net of expenses) 880,380 828,958 572,059 364,913 274,401 Profit / (loss) before tax 2,745 1,302,234 801,211 545,268 538,719 Provision for tax (233,500) 273,500 117,600 42,200 55,250 Profit / (loss) after tax 236,245 1,028,734 683,611 503,068 483,469 Miscellaneous Policy holder’s account: Total funds 23,498,753 16,874,828 10,933,687 5,135,354 2,405,407 Total investments Not applicable as investments are not earmarked Yield on Investments Shareholder’s account: Total funds 12,369,209 8,514,813 8,068,030 2,839,993 1,980,292 Total investments Not applicable as investments are not earmarked Yield on Investments Paid up equity capital 4,031,369 3,773,578 3,357,075 2,450,000 2,200,000 Net worth* 16,026,640 10,759,589 9,427,035 3,729,201 2,494,041 Total assets 54,842,026 37,941,850 29,540,353 16,390,867 7,689,222 Yield on total Investments (annualized) 14% 11% 10% 13% 13% Earnings per share (Rs.) 0.60 2.76 2.35 2.28 2.20 Book value per share (Rs.) 39.75 28.51 28.08 15.22 11.34 Total dividend (excluding dividand tax) - 591,157 438,365 232,500 220,000 Dividend per share (Rs.) - 1.60 1.50 1.00 1.00

# Net of Reinsurance @ Net of Losses * Excluding Fair Value Change Account 86 5.1.19 Ratio Analysis:

Performance Ratio Ratios as at March 31, 2009 Ratios as at March 31, 2008 Total Fire Marine Misc Total Fire Marine Misc Gross Premium Growth Rate 4% (30%) 0% 10% 20% 9% 45% 20% Gross Premium to average Shareholders 280% 357% Fund ratio Growth rate of Shareholders Funds: 49% 14%

Net Retention ratio (net of XOL) 56% 31% 13% 62% 49% 26% 9% 56%

Net Commission ratio 4% 29% 47% 2% 8% 32% 62% 5%

Expense ratio to Gross direct Premium 20% 17%

Combined ratio 71% 60%

Technical ratio 166% 127%

Underwriting balance ratio (15%) (34%) (202%) (11%) (5%) 14% (173 %) (3%)

Operating profit ratio 0% 7%

Liquid asset to liability ratio 3% 8%

Net earning ratio 1% 6%

Return on Net worth 1% 10%

Reinsurance ratio 44% 51%

5.1.20 Employee Stock Option Scheme (ESOS) The Company has granted Stock options to employees in compliance with the Securities and Exchange board of India (Employee stock option scheme and employee stock purchase scheme) guidelines, 1999 based on an independent valuer’s report. The salient features of the Scheme which are stated below: Founder ESOPs : Scheme Others Managing Director

Date of grant April 26, 2005 April 26, 2005

No. of Options granted (in 000’s) 854 63

Grant Price Rs. 35 Rs. 35 Graded Vesting Period 1st Year 50% of option 50% of option 2nd Year 50% of option 50% of option Later of the tenth anniversary of the date of grant of options or fifth anniversary of the date Maximum term of option granted of vesting Mode of settlement Equity

87 Performance ESOPs (2005, 2006, 2007 & 2008):

Scheme Others Whole time Director

Date of grant 2005 April 26, 2005 April 26, 2005

2006 April 24, 2006 April 24, 2006

2007 April 21, 2007 April 21, 2007

2008 April 24, 2008 April 24, 2008

No. of Options granted (in 000’s) 16,847 1,525

Grant Price Rs. 35 - Rs. 200 Rs. 35 - Rs. 200

Graded Vesting Period

1st Year 20% of option 20% of option

2nd Year 20% of option 20% of option

3rd Year 30% of option 30% of option

4th Year 30% of option 30% of option

Maximum term of option granted Later of the tenth anniversary of the date of grant of options or Fifth anniversary of the date of vesting

Mode of settlement Equity

The estimated fair value computed on the basis of Black Scholes pricing model, of each stock option granted for Founder ESOPs and Performance ESOPs is within the range of Rs.7.72 to Rs.73.62 per option. Accordingly, compensation cost for the year ended March 31, 2009 would have been higher by Rs.171,999 thousand and proforma profit after tax would have been Rs.122,708 thousand. On proforma basis the Company’s basic and diluted earnings per share would have been Rs.0.31 and Rs.0.30 respectively. The key assumptions used to estimate the fair value of options are::

Risk-free interest rate 6.39% - 8.17% p.a.

Expected life 3 - 7 years

Expected volatility* 17 % - 29 % p.a.

Expected dividend yield 0.80 % - 2.85 % p.a.

*Expected volatility is based on estimates of management in the absence of data on historical volatility as at the period end.

88 A summary of status of Company’s Employee Stock Option Scheme in terms of option granted, forfeited and exercised by the employees and Wholetime Directors is given below: (Rs. in 000’s)

Particulars Other than Wholetime Director Wholetime Director

As at As at As at As at March 31, 2009 March 31, 2008 March 31, 2009 March 31, 2008

Outstanding at the beginning of the year 11,438 6,900 942 492

Add: Granted during the year 4,475 5,175 575 450

Less: Forfeited / lapsed during the year 2,247 487 NIL NIL

Less: Exercised during the year 784 150 NIL NIL

Outstanding at the end of the year 12,882 11,438 1,517 942

Exercisable at the end of the year 909 1,276 341 203

5.2 Other disclosures

5.2.1 Basis used by the Actuary for determining provision required for IBNR/IBNER Liability for IBNR including IBNER (excluding on IMTPIP) for the year ending March 31, 2009 has been estimated by the Appointed Actuary in compliance with the guidelines issued by IRDA vide circular no. 11/IRDA/ACTL/IBNR/2005-06 and applicable provisions of the Guidance Note 21 issued by the Actuarial Society of India. The Appointed Actuary has adopted the Chain Ladder Method to those lines of business where claims development in the past years are thought to be representative for the future claims development and adopted Bornheutter-Ferguson method to those lines of business where claims development in the past years are not thought to be representative for the future claims development. In the previous year for Health line of business, the Appointed Actuary had arrived at the estimate for IBNR/IBNER based on Chain Ladder method. However, this year the Company has shifted from Chain Ladder method to Bornheutter-Ferguson for the aforesaid line of business. Had the company continued to provide liability for IBNR/IBNER using the earlier method, the transfer to shareholder’s account, operating profit before tax would have been higher by Rs.121,836 thousand and the liability for IBNR/IBNER and claims outstanding would have been lower by Rs.121,836 thousand.

5.2.2 Contribution to terrorism pool The Company in accordance with the requirements of IRDA has participated in contributing to the Terrorism Pool. This pool is managed by the General Insurance Corporation of India (‘GIC’). Amounts collected as terrorism premium in accordance with the requirements of the Tariff Advisory Committee (‘TAC’) are ceded at 100% of the terrorism premium collected to the Terrorism Pool, subject to conditions and an overall limit of Rs. 6 billion.

In accordance with the terms of the agreement, GIC retrocedes, to the Company, terrorism premium to the extent of the Company’s share in the risk, which is recorded as reinsurance accepted. Such reinsurance accepted is recorded based on monthly intimation/confirmation received from GIC. Accordingly, reinsurance accepted on account of the Terrorism Pool has been recorded only upto December 31, 2008 (previous year: December 31, 2007) as per the last confirmation received and which has been carried forward to the subsequent accounting period as Unexpired Risk Reserve for subsequent risks, if any. 89 5.2.3 Contribution to Motor third party pool In accordance with the directions of IRDA, effective April 1, 2007 the Company, together with other insurance companies has participated in the Indian Motor Third Party Insurance Pool (IMTPIP), a multilateral reinsurance arrangement, administered by the General Insurance Corporation of India (‘GIC’). The IMTPIP covers reinsurance of third party risks of commercial vehicles. The Company has ceded 100% of the third party premium collected to the pool and has recorded its share of results in the pool on the basis of unaudited result received from pool for the period from March, 2008 upto February, 2009.

5.2.4 Contribution to Solatium fund In accordance with the requirements of the IRDA circular dated March 18, 2003 and based on recommendations made at the General Insurance Council meeting held on February 4, 2005, the Company has provided 0.10% of gross written premium on all motor policies (excluding reinsurance premium accepted on motor third party for commercial vehicles) towards contribution to the solatium fund.

5.2.5 Environment Relief Fund An amount of Rs.166 thousand (previous year: Rs. 50,565 thousand) collected towards Environment Relief fund (ERF) under Public Liability policies has been disclosed under current liabilities and the same will be remitted to the fund manager (United India Insurance Co. Ltd.) During the year, ERF amount collected along with interest till February’2009 has been transferred to the designated fund manager (United India Insurance Co. Ltd.) in accordance with Ministry of Environment & Forests vide notification number F.NO.18-13/91-PL-HSMD (Part I) Dated November 12, 2008.

5.2.6 Leases In respect of premises taken on operating lease, the lease agreements are generally mutually renewable / cancelable by the lessor/lessee. Non Cancelable operating lease The detail of future rentals payable are given below (Rs. in ‘000s)

As at March 31, 2009 As at March 31, 2008

a. not later than one year 4,610 609

b. later than one year and not later than five year 2,058 1,828

c. later than five years NIL NIL

An amount of Rs.4,498 thousand (previous year: Rs. 609 thousand) towards lease payments has been recognized in the statement of revenue account.

5.2.7 Micro and Small scale business entities There is no Micro, Small & Medium enterprise to which the company owes dues, which are outstanding for more than 45 days during the year ended March 31, 2009. This information as required to be disclosed under Micro, Small and Medium Enterprises Development Act 2006 has been determined to the extent such parties have been identified on the basis of information available with the company.

5.2.8 Segmental reporting Primary reportable segments The Company’s primary reportable segments are business segments, which have been identified in accordance with AS 17 – Segment Reporting read 90 with the Regulations. The income and expenses attributable to the business segments are allocated as mentioned in paragraph 5.1.13 above. Segmental Assets & Liabilities (Rs. in 000’s)

Current Liabilities Current Assets Claims Unallocated Advance Outstanding Segment Year Outstanding Premium Premium Premium Fire 2008-09 3,871,758 2,105 2007-08 1,963,736 - - 2,049 Engineering 2008-09 1,170,541 2,353 2007-08 838,273 - - 1,413 Marine Cargo 2008-09 580,992 2,821 2007-08 363,280 - - 1,041 Marine Hull 2008-09 2,310,229 2,331 2007-08 1,259,619 - - - Motor OD 2008-09 1,536,984 - 2007-08 1,232,085 - - - Motor TP 2008-09 10,942,081 - 2007-08 5,050,982 - - - Workmen Compensation 2008-09 24,399 - 2007-08 13,667 - - - Public / Product Liability 2008-09 25,325 - 2007-08 9,720 - - - Personal Accident 2008-09 536,266 - 2007-08 392,719 - - - Aviation 2008-09 207,200 2007-08 61,216 - - - Health 2008-09 1,799,223 125 2007-08 1,000,510 - - 59 Others 2008-09 744,583 43 2007-08 506,950 - - 9 Total Amount 2008-09 23,749,581 9,778 2007-08 12,692,757 - - 4,571 Fixed assets, investments and other current assets and liabilities to the extent identifiable have been allocated to business segments. Unallocated premium and advance premium is not identifiable to any business segment. Secondary reportable segments There are no reportable geographical segments since the Company provides services to customers in the Indian market only and does not distinguish any reportable regions within India. 91 5.2.9 Related party Related parties, nature of relationship and description of transactions. Name of the related Party Nature of relationship ICICI Bank Limited Holding Company ICICI Venture Funds Management Company Limited Fellow subsidiary ICICI Securities Primary Dealership Limited Fellow Subsidiary ICICI Prudential Life Insurance Company Limited Fellow Subsidiary ICICI Home Finance Company Limited Fellow Subsidiary ICICI Equity Fund Fellow Subsidiary ICICI Wealth Management Inc. Fellow Subsidiary ICICI Securities Inc. Fellow Subsidiary ICICI Prudential Trust Limited Fellow Subsidiary TCW/ICICI Investment Partners LLC Fellow Subsidiary ICICI Kinfra Limited Fellow Subsidiary ICICI West Bengal Infrastructure Development Corporation Limited Fellow Subsidiary Loyalty Solutions & Research Limited Fellow Subsidiary ICICI Securities Limited Fellow Subsidiary ICICI Bank Canada Fellow Subsidiary ICICI Eco-net Internet and Technology Fund Fellow Subsidiary ICICI Emerging Sectors Fund Fellow Subsidiary ICICI Strategic Investments Fund Fellow Subsidiary ICICI Securities Holdings Inc. Fellow Subsidiary ICICI Investment Management Company Limited Fellow Subsidiary ICICI International Limited Fellow Subsidiary ICICI Bank Eurasia LLC. Fellow Subsidiary ICICI Prudential Asset Management Company Limited Fellow Subsidiary ICICI Trusteeship Services Limited Fellow Subsidiary ICICI Bank UK PLC Fellow Subsidiary Fairfax Financial holdings Limited Associate ICICI Foundation for Inclusive Growth Associate K V Kamath, Chairman Key Management Personnel Sandeep Bakhshi, Managing Director & CEO (with whom transactions have taken place) Vishakha Mulye, Executive Director Relatives of Key Management Personnel (with whom transactions have taken place) Mohan Kamath Brother of K.V.Kamath Ajay Kamath Son of K.V.Kamath Mona Bakhshi Wife of Sandeep Bakhshi Aarti Kochhar Daughter of Chanda D. Kochhar Rajlakshmi V. Kamath Wife of K. V. Kamath Gauresh Palekar Brother of Vishakha Mulye

92 Details of transaction with related parties for the year ended March 31, 2009 are given below: (Rs. in 000’s)

With Key Particulars Holding ICICI Home ICICI Securities ICICI Other Fellow Associates Management Company Finance Co Primary Prudential Life subsidiaries Personnel Ltd Dealership Ltd Insurance Co (& their Ltd relatives)

Premium income 1,039,878 136,689 545 139,526 98,867 - 175 (974,825) (105,892) (3,225) (128,875) (71,182) (-) (144)

Income from interest & dividend 94,330 18,195 3,310 - - - - (50,396) (-) (8,800) (-) (416) (-) (-)

Other income - - - - 3,646 - - (-) (-) (-) (-) (-) (-) (-)

Issue of Share Capital including 3,704,430 - - - - 1,300,000 - premium (1,842,600) (-) (-) (-) (-) (647,400) (-)

Purchase of fixed assets 1,338 ------(28,304) (-) (-) (-) (-) (-) (-)

Claim payments 924,091 90,608 964 117,779 81,873 - - (688,916) (81,969) (1,132) (48,806) (27,283) (-) (-)

Commission/ Brokerage payouts 552,829 94,912 - - 20,211 - - (911,656) (744) (-) (-) (5,745) (-) (-)

Investment - Purchases 6,090,552 250,000 4,022,251 - 143,600 - - (471,446) (-) (703,379) (249,487) (750,323) (-) (-) - Sales 6,108,174 - 1,118,409 862,206 143,600 - - (-) (-) (-) (100,991) (-) (-) (-)

Premium Paid - - - 8,322 - - - (-) (-) (-) (7,985) (-) (-) (-)

Establishment & other expenditure 272,565 1,562 - - 733 - 28,401 (263,662) (-) (-) (-) (-) (-) (19,812)

Donation - - - - - 17,213 - (-) (-) (-) (-) (-) (-) (-)

Dividend paid ------(436,619) (-) (-) (-) (-) (153,407) (114)

Figures in brackets represent previous year figures.

93 Balances with related parties as at March 31, 2009, are as under: (Rs. in 000’s) With Key ICICI Particulars Holding ICICI Home ICICI Securities Other Fellow Associates Management Prudential Company Finance Co Primary subsidiaries Personnel Life Insurance Ltd Dealership Ltd Co Ltd (& their relatives) Assets Cash, Bank Balances & Deposits (740,994) ------(222,270) (-) (-) (-) (-) (-) (-) Investments - 250,000 - - - (-) (-) (100,000) (-) (-) (-) (-) Income accrued on investments 995 18,038 - - 3,646 - - (4,283) (-) (5,810) (-) (-) (-) (-) SAP Asset License Fee 60 ------(-) (-) (-) (-) (-) (-) (-) Liabilities Capital 2,975,530 - - - - 1,043,929 713 (2,786,100) (-) (-) (-) (-) (978,900) (713) Application Money received ------(-) (-) (-) (-) (-) (-) (-) Premium received in advance 17,236 16,870 211 2,551 39,270 - - (100,215) (16,370) (259) (3,791) (3,875) (-) (-) Others liabilities/ Payables 295,765 46,092 50 17,910 16,122 - - (270,329) (60,030) (300) (14,414) (4,355) (-) (-) Figures in brackets represent previous year figures.

5.2.10. Details of earning per share for the year ended March 31, 2009 (Rs. in 000’s) Particulars As at As at March 31, 2009 March 31, 2008 Profit available to equity shareholders 236,245 1,028,734 Weighted average number of equity shares Number of shares at the beginning of the year 377,358 335,708 Share issued during the year 25,779 41,650 Total number of equity share outstanding at the end of the year 403,137 377,358 Weighted average number of equity shares outstanding during the year 395,351 372,358 Add : Effect of dilutive issues of employee options and share application money pending allotment 7,617 2,480 Diluted weighted average number of equity shares outstanding during the year 402,968 374,838 Nominal value of equity shares – Rs. 10 10 Basic earning per share – Rs. 0.60 2.76 Diluted earning per share – Rs. 0.59 2.74

94 5.2.11 Deferred taxes The major components of temporary differences that account for deferred tax assets are as under: (Rs. in 000’s)

Particulars Deferred tax asset as at Deferred tax asset as at March 31, 2009 March 31, 2008

Timing differences on account of: Reserve for Unexpired Risks 206,142 268,600 Leaves accrued 37,389 29,550 Carry forward losses * 353,119 - Total 596,650 298,150 Net deferred tax asset/(liability) 596,650 298,150 Deferred tax expense/(income) recognised in the Profit and loss account (298,500) (175,000)

* Created after considering substantial reduction in operating expenses achieved and revision in reinsurance arrangement concluded by the Company.

5.2.12 Prior year figures have been regrouped, reclassified wherever necessary, to conform to current period classifications.

For and on behalf of the Board K. V. Kamath Chanda D. Kochhar Chairman Director

S. Mukherji V. Vaidyanathan Director Director

Sandeep Bakhshi Rakesh Jain Managing Director & CEO Director - Corporate Centre & CFO

Pratap Salian Company Secretary

Mumbai, April 23, 2009

95 Product Portfolio

Receipts & Payment Account for the year ended March 31, 2009

(Rs. in ‘000s) Year ended Year ended March 31, 2009 March 31, 2008

Cash flow from operating activities

- Premium received from policyholders, including advance receipts 39,872,197 38,973,581 - Premium received from coinsurer 2,130,673 3,716,516 - Other receipts (Collection-Environment Relief Fund) 4,559 13,300 - Payment to re-insurer net of commissions & claims (8,698,935) (9,874,105) - Payment to co-insurer net of claims recovery (3,390,738) (3,006,696) - Payments of Claims (net of salvage) (19,238,956) (16,212,014) - Payments of Commission and brokerage (2,812,150) (3,035,051) - Payments of other operating expenses (6,300,888) (5,462,541) - Preliminary and pre-operative expenses - - - Deposits, advances & staff loans 486,251 459,230 - Income tax paid (Net) (287,995) (576,741) - Service Taxes Paid (2,610,032) (2,277,157) - Other payments (50,566) - - Cash flows before extraordinary items (896,580) 2,718,322 - Cash flows from extraordinary operations - - Net cash flow from operating activities (896,580) 2,718,322 Cash flow from investing activities - Purchase of fixed assets (including capital advances) (592,172) (594,845) - Proceeds from sale of fixed assets 2,926 (589,246) 24 (594,821)

- Purchases of investments (39,577,324) (16,730,508) - Loans disbursed - - - Sale of investments 37,387,458 10,168,421 - Repayments received - - -Rent/Interest/Dividends received 1,243,947 1,360,911 -Investments in money market instruments and in liquid mutual fund (Net) (3,226,155) 686,974

-Expenses related to investments (5,748) (4,177,822) (5,267) (4,519,469)

Net cash flow from investing activities (4,767,068) (5,114,290)

96 (Rs. in ‘000s) Year ended Year ended March 31, 2009 March 31, 2008

Cash flow from financing activities

- Proceeds from issuance of share capital 5,030,806 995,443 (including share premium & net of share issue expenses) - Proceeds from borrowing - - - Repayments of borrowing - - - Interest / dividends Paid (including dividend tax) - (715,157) Net cash flow from financing activities 5,030,806 280,286

Effect of foreign exchange rates on cash and cash - - equivalents, net Net increase/(decrease) in cash and cash equivalents (632,842) (2,115,682) Cash and cash equivalents at the beginning of the year 1,363,317 3,478,998 Cash and cash equivalents at end of the year 730,475 1,363,317

*Cash and cash equivalent at the end of the period includes short term deposits of Rs 601,150 thousand (previous year: Rs 1,023,086 thousand), balances with banks in current accounts Rs 91,505 thousand (previous year: Rs 225,119 thousand) and cash including cheques and stamps in hand amounting to Rs 37,820 thousand (previous year: 115,112 thousand)

As per our attached report of even date For and on behalf of the Board

For N. M. Raiji & Co. For PKF Sridhar & Santhanam K. V. Kamath Chanda D. Kochhar Chartered Accountants Chartered Accountants Chairman Director Jayesh M. Gandhi R. Suriyanarayanan S. Mukherji V. Vaidyanathan Partner Partner Director Director Membership No. 37924 Membership No. 201402 Sandeep Bakhshi Rakesh Jain Managing Director & CEO Director-Corporate Centre & CFO Mumbai Pratap Salian April 23, 2009 Company Secretary

97 1 1 - 1 2 9 4 0 8 1 1 3 1 0 3 2 0 0 9

N I L N I L

N I L 2 5 0 0 0 0

4 0 3 1 3 6 9

G E N E R A L I N S U R A N C E N - A

98 Product Portfolio

BUSINESS SOLUTIONS LIABILITY SOLUTIONS Aviation Clinical Trials Insurance Marine Cargo and Marine Hull Commercial General Liability Burglary Crime Insurance Fire and Engineering Directors’ and Officers’ Liability Event Insurance Errors and Omissions Group Health Kidnap and Ransom Insurance Group Personal Accident Product and Public Liability Fidelity Guarantee Professional Indemnity Money Insurance Product Recall Insurance Shopkeepers’ Insurance Public Offering of Securities Insurance Banker’s Indemnity Workmen’s Compensation MOTOR SOLUTIONS CREDIT AND POLITICAL RISK SOLUTIONS Commercial Vehicle Private Car Export Credit Two-Wheeler Domestic Credit Factoring Insurance Single Risk / Projects Credit & political risks Insurance RURAL SOLUTIONS Contract Frustration Insurance Cattle Investment Insurance Livestock Mobile Assets Insurance Janata Personal Accident Rural Health HOME SOLUTIONS Tractor Home Building and Contents Weather Home Loan Insurance

HEALTH & ACCIDENT SOLUTIONS TRAVEL SOLUTIONS Critical Care Corporate Overseas Travel Comprehensive Health Insurance Group Domestic Travel Group Health Individual Overseas Travel Group Personal Accident Senior Citizens’ Overseas Travel Health Advantage Plus Students’ Overseas Travel Personal Protect Secure Mind 99 Glossary

Accretion EMI Incremental growth over a period of time. Equated Monthly Installments comprise of a fixed payment amount made by a borrower to a lender at a specified date each calendar Actuary month. These are used to pay off both interest and principal each An actuary is a business professional who deals with the financial month, so that over a specified number of years, the loan is paid off impact of risk and uncertainty. in full.

Automatic Weather Station EPS An Automatic Weather Station (AWS) is a standard meteorologi- Earning Per Share is arrived at by dividing net profit upon number of cal equipment with sensors for measuring temperature, pressure, outstanding shares. humidity, wind speed, direction and rainfall at the ground level. It isused either to save human labour or to enable measurements from Fair Value Change Account remote areas. It represents unrealised gains or losses at the end of the period with respect to listed equity securities and derivative instruments. Book value per share GPS This is computed as networth divided by number of outstanding Global Positioning System is a satellite-based navigation system and shares. is a means for locating any point on the earth. It can provide immedi- Brand consideration ate information regarding position on the earth’s surface, altitude, One or more brands considered by a prospective customer with an speed, direction of travel and time. intention to purchase. GPRS Catastrophe Reserve General Packet Radio Service is a standard for wireless communica- Reserve created to protect against uncertainities such as catastro- tions which runs at speeds up to 115 kilobits per second. It supports phes. a wide range of bandwidths, is an efficient use of limited bandwidth and is particularly suited for sending and receiving small bursts of Claims Disposal Ratio data, such as e-mail and web browsing, as well as large volumes of Ratio of number of claims settled to total number of claims reported. data.

Co-insurance Gross Written Premium Sharing of same risk by multiple insurance companies. Gross Written Premium is the sum of gross direct premium and the reinsurance premium accepted. Commission paid Amount paid to intermediaries for acquiring business. IBNR & IBNER provision IBNR (Incurred But Not Reported) & IBNER (Incurred But Not Enough D&O Reported) are estimates of claim provisions certified by an inde- D&O insurance is a source of financial protection for Directors and pendent professional (Actuary) in accordance with the guidelines Officers in addition to the indemnification extended by the company. prescribed by IRDA & other relevent regulations. It affords coverage for loss which is otherwise not covered by other Incurred Claims types of insurance purchased by the company and may not be It is claims paid during the period plus the change in outstanding indemnifiable by the company. claims at the end of the period vs at the beginning of the period.

100 Incurred Loss Ratio Policyholder (Insured) The percentage of losses (claims) incurred to premiums earned dur- The person/entity whose risk of financial loss from an insured peril is ing the period. protected by the policy.

Industry Market Share Premium Deficiency Ratio of gross written premium of respective insurer to the total Premium deficiency arises if the sum of expected claim costs, gross premium written of the general insurance industry. related expenses and maintenance cost exceeds related reserve for unexpired risk. IRDA Premium received in advance Insurance Regulatory and Development Authority of India is the apex Represents premium received prior to the commencement of the authority formed to protect the interests of the policyholders to regu- risk. late, promote and ensure orderly growth of the insurance industry. Unexpired risks reserve Net Premiums Earned Reserves with respect to the unexpired insurance contracts as at the Net premium written adjusted for the change in unexpired risk end of the period reserve. Reinsurance Net Premiums Written A means by which an insurance company can protect itself against Gross premium less reinsurance. the risk of losses with other insurance companies. Solvency Margin Net Retention The amount by which total assets of an insurance company exceeds Total risk underwritten less the reinsurance ceded. its liabilities (calculated as per IRDA guidelines). Net worth SEC Total assets minus total liabilities. Socio Economic Class is a household status, which is determined by NGO education and occupation of the chief wage earner of the household. The term Non-Governmental Organization can be applied to any non- The chief wage earner is the member of the household who contrib- profit organization which is independent from government. utes the maximum for household expenses.

OPD TOM An Outpatient Department is a hospital department which is primarily Top-of-Mind awareness means the first brand or product recalled designed to enable consultants and members of their teams to by the respondent when asked to list in a specific category. It is the provide non-urgent ambulatory medical care to walk-in patients highest degree of share of mind or what is present in the uppermost level of consciousness. Operating Expenses Expenses for carrying out the insurance business. Treaty A reinsurance contract between the reinsured & reinsurer company Operating Profit or Loss to share the risk / benefits Surplus/deficit from carrying out insurance business activities i.e. profit before tax excluding investment and other income.

Outstanding Premium Premium receivable as at end of the period.

101 Registered Office ICICI Lombard General Insurance Company Limited ICICI Bank Towers, Bandra Kurla Complex, Mumbai - 400 051.

Mailing Address ICICI Lombard General Insurance Company Limited Zenith House, Keshavrao Khadye Marg, Opp. Race Course, Mahalaxmi, Mumbai - 400 034. e-mail: [email protected] Visit us at www.icicilombard.com

Insurance is the subject matter of the solicitation