National Insurance skirts loss via accounting rejig

National Insurance Company (NIC) would have dipped deeper into red and reported an increased operating loss of Rs 284 crore against a declared loss of Rs 231 crore for 2003-04 had it followed its regular accounting policy for marine cargo insurance. The net profit figure of Rs 73 crore would also been affected as a result.

According to the auditors of the public sector company, N C Banerjee & Co and K C Bhattacherjee & Paul, a change in accounting policy of the company resulted in an increased operating profit from marine cargo insurance to the extent of Rs 53.28 crore.

In its report filed in the Annual Report the auditors said, "So long the company had a practice of transferring 100 per cent of net premium collection from marine cargo business to reserve for unexpired risk (RUR), but in 2003-04 it changed its standing accounting policy and transferred 50 per cent of the net premium collection to RUR."

The auditors have also qualified that as a result the operating profit of marine revenue account for the year increased by Rs 53 crore. The reason, that necessitated the company to change this policy has not been explained in the notes on accounts as required under Accounting Standard -5 (AS-5).

AS-5, a mandatory accounting norm, issued by the Institute of Chartered Accountants of India (ICAI) compulsorily requires a company to explain any major change in accounting policy, which NIC did not. Chairman and managing director H S Wadhwa was not available for comments.

NIC declared a Rs 23 crore loss from core operations for 2003-04 against operating profit of Rs 69 crore in the previous fiscal., while income from investments was to the tune of 159 crore.

Other income was to the tune of Rs 143 crore against Rs 193 crore in the previous year.

This translated into a reduced profit before tax (PBT) figure of Rs 73 crore at NIC against Rs 139 crore in the previous year.

Profits would have been still lower if the Rs 53 crore declined would have to be considered.