Final Accounts of Life Insurance Companies


IRDA has prescribed specified formats for the preparation of financial statements. These formats are in the V of Schedule A of IRDA (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations, 2002

1 . Revenue Account ( Policyholder ' s Account - Technical Account )

  The Revenue Account sets out all income and expenses relating to the insurance business ) The income of this account comprises :
( a ) Premium after adjusting reinsurance ceded and reinsurance accepted , and
( b ) Income from investments .

Expenses include :
( a ) commission
( b ) operating Expenses
( c ) , Benefits paid
( d ) Interim bonus paid , and
( e ) Change in valuation of liability against life policies in force

 2 . Profit and Loss Account ( Shareholders Account - on - - Technical Account )

This Account represents all income and expenses relating to share holder ' s account ( Those not relating to insurance business ) . The income of this account comprises mainly of investment or other income created out of shareholder ' s fund . The major components of expenses are :

(a) Depreciation relating to assets held by shareholders fund,investment expenses, Director's Fees etc
(b) Transfer of funds to Policyholder's Fund, and
(c) Preliminary Expenses written off.

The profit or loss as per this Account is carried to the Balance Sheet

3 . Balance Sheet 

The items in the Balance Sheet of a Life Insurance Company | includes , other than the normal items - ( a ) Shareholder ' s Fund ( b ) Policy Holder ' s Fund and , ( c ) Investments related to Policyholder ' s Fund , Shareholder ' s Fund and Assets held to cover linked liabilities .

Shareholder ' s Fund includes share capital less preliminary expenses , reserves and surplus and fair value change account .

Policy holder ' s Fund consists of Policy liabilities , fair value change relating to policy fund investments , insurance reserves , provision for linked liabilities , surplus allocated to shareholders etc .

4 . Receipts and Payments Account ( Cash Flow statement ) 

The cash flow statement of the insurance company needs to be worked out as Direct Method as per the IRDA requirements . This statement depicts the receipts and payments from various business activities . The major items are ;

( a ) Operating Activities which include Receipts and Payments from Policyholders , Payments to Reinsurers , Payments to Agents , Employee expenses and investment income.

(b ) Investing Activities which stand for purchase and sale of investment , and purchase of fixed assets , and

(c ) Financing Activities which represent the issue of share capital or raising of funds from other sources .

5. Segmental Reporting

As per the regulations, every insurance company has to make a segment wise Revenue Account and Balance Sheet. The company is required to report the segment results separately for Participating, Non - Participating,Pension, Annuity business and Unit Linked business. In order to work out results of such segments, Company will decide on the bases on which revenue, expenses, assets and liabilities are to be allocated.

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