Fundamental analysis and its impact on insurance sector

A Study On Fundamental Analysis And Its Impact On Insurance Sector

EXECUTIVE SUMMARY

Insurance sector in India is one of the booming sectors of the

economy and is growing at the rate of 15-20 per cent annum. Together

with banking services, it contributes to about 7.8 per cent to the country's

GDP. Insurance is a federal subject in India and Insurance industry in

India is governed by Insurance Act, 1938, the Life Insurance Corporation

Act, 1956 and General Insurance Business (Nationalization) Act, 1972,

Insurance Regulatory and Development Authority (IRDA) Act, 1999 and

other related Acts.

The total life insurance premium in India is projected to grow Rs

1,230,000 Crore by 2010-11.Total non-life insurance premium is

expected to increase at a CAGR of 25% for the period spanning from

2008-09 to 2010-11.Home insurance segment is set to achieve a 100%

growth as financial institutions have made home insurance obligatory for

housing loan approvals. Health insurance is poised to become the

second largest business for non-life insurers after motor insurance in next

three years. A booming life insurance market has propelled the Indian life

insurance agents into the 'top 10 country list' in terms of membership to

the Million Dollar Round Table (MDRT) - an exclusive club for the highest

performing life insurance agent.

This study focuses on fundamental analysis and it will help me to

follow insurance market closely. Fundamental analysis is the process of

looking at a business at the basic or fundamental financial level. This type

of analysis examines the key ratios of business like EPS, Debt-equity,

interest coverage etc., to determine its financial health.

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 1


The major objectives of the study were to find out the factors affecting

insurance industry and to study the performance of various insurance

companies. Another major objective was to study the movement of stock

prices of insurance companies with respect to present economic and

government polices.

The major findings of the study that emerged after studying the

insurance sector for selecting appropriate company through analyzing

economy, industry and companies are the global economies are getting

interrelated; the Indian market will no longer be limited to domestic

economic situation. Agricultural growth rate and the monsoon both have

direct influence on insurance and is responsible for the economy to

become prosperous. Health insurance is poised to become the second

largest business for non-life insurers after motor insurance in next three

years.

Finally, the conclusion drawn was that fundamental analysis always

holds good only if the company statement are revealed clearly and

analyzed properly. Investment is serious business and not making

decision on vague and fundamental analysis has a direct impact on

insurance market and my important suggestions are that Insurance

companies have lot of opportunities to grow. So investing in these types

of industries help the investors in the long run and before investing in any

company, it’s required to implement all the data and financial results.



CHAPTER-1

INTRODUCTION



INTRODUCTION

Insurance is defined as the contract between Insurance co.

(Insurer) and the customer (Insured). In this legal contract, the insurer

agrees to indemnify (compensate) the insured in lieu of payment of

premium, for any financial loss due to risks covered in the Policy.

Insurance sector in India is one of the booming sectors of the

economy and is growing at the rate of 15-20 per cent per annum.

Together with banking services, it contributes to about 7 per cent to the

country's GDP. Insurance is a federal subject in India and Insurance

industry in India is governed by Insurance Act, 1938, the Life Insurance

Corporation Act, 1956 and General Insurance Business (Nationalization)

Act, 1972, Insurance Regulatory and Development Authority (IRDA) Act,

1999 and other related Acts.

The origin of life insurance in India can be traced back to 1818

with the establishment of the Oriental Life Insurance Company in

Calcutta. It was conceived as a means to provide for English Widows. In

those days a higher premium was charged for Indian lives than the non-

Indian lives as Indian lives were considered riskier for coverage. The

Bombay Mutual Life Insurance Society that started its business in 1870

was the first company to charge same premium for both Indian and non-

Indian lives. In 1912, insurance regulation formally began with the

passing of Life Insurance Companies Act and the Provident Fund Act.

By 1938, there were 176 insurance companies in India. But a

number of frauds during 1920s and 1930s tainted the image of insurance

industry in India. In 1938, the first comprehensive legislation regarding

insurance was introduced with the passing of Insurance Act of 1938 that

provided strict State Control over insurance business.



Insurance sector in India grew at a faster pace after independence.

In 1956, Government of India brought together 245 Indian and foreign

insurers and provident societies under one nationalized monopoly

corporation and formed Life Insurance Corporation (LIC) by an Act of

Parliament, viz. LIC Act, 1956, with a capital contribution of Rs.5 crore.

The (non-life) insurance business/general insurance remained with

the private sector till 1972. There were 107 private companies involved in

the business of general operations and their operations were restricted to

organized trade and industry in large cities.

The General Insurance Business (Nationalizations) Act, 1972

nationalized the general insurance business in India with effect from

January 1, 1973. The 107 private insurance companies were

amalgamated and grouped into four companies: National Insurance

Company, New India Assurance Company, Oriental Insurance Company

and United India Insurance Company. These were subsidiaries of the

General Insurance Company (GIC).

In 1993, the first step towards insurance sector reforms was

initiated with the formation of Malhotra Committee, headed by former

Finance Secretary and RBI Governor R.N. Malhotra. The committee was

formed to evaluate the Indian insurance industry and recommend its

future direction with the objective of complementing the reforms initiated

in the financial sector.

Since 1956, with the nationalization of insurance industry, the

state-run Life Insurance Corporation of India (LIC) has held the monopoly

in that country's life insurance sector. General Insurance Corporation of

India (GIC), with its four subsidiaries, was its counterpart in the general

insurance sector. In 1999, the government passed the IRDA Bill to open

up the insurance sector in India.



In the last years, the country saw a large number of Indian and

foreign players rushing to enter this lucrative and untapped insurance

market of India. The Indian Insurance sector is thus at the beginning of a

new era. It has been only a year since the new players became active

and it is difficult to say whether the reforms were successful. But it is

believed that the country has a vast untapped potential and the new

players will surely use this to their best advantage.

The insurance sector in India has completed all the facets of

competition –from being an open competitive market to being

nationalized and then getting back to the form of a liberalized market

once again. The history of the insurance sector in India reveals that it has

witnessed complete dynamism for the past two centuries approximately.

INTRODUCTION OF FUNDAMENTAL ANALYSIS

Fundamental analysis is an important part of learning to

understand the markets. In the short run, the results are not always

straightforward, they can even seem backwards. In the long run,

currencies will always move along with fundamentals. Learning to use

fundamental analysis will help you to understand the reasons behind

trends and give you insight into currency movements.

There are different cycles and causing for movements in the economy

such as “Boom, Depression, Recession” etc., the performance of the

economy depends basically on the monsoon and the growth rate of

agriculture. The most important factor is the “Fiscal Policy”, which

incorporates government expenditure, taxation, borrowing, deficit

financing and which influences both public and private sector in the

economy. The industrial growth in general and of infrastructural industries

in particular influences the corporate performance.



A method of evaluating a security by attempting to measure

its intrinsic value by examining related economic, financial and other

qualitative and quantitative factors. Fundamental analysts attempt to

study everything that can affect the security's value, including

macroeconomic factors (like the overall economy and industry

conditions) and individually specific factors (like the financial

condition and management of companies).we can do fundamental

analysis in 3 steps,

1. Economic Analysis

2. Industry Analysis

3. Company Analysis

ECONOMIC ANALYSIS

Economic analysis is a process whereby strengths and

weaknesses of an economy are analyzed. Economic analysis is

important in order to understand exact condition of an economy. It can



cover a number of important economic issues that keep cropping up

within a particular economy, which is being analyzed. Many countries of

world are plagued by a rising rate of inflation. Economic analysis helps in

providing an explanation of why inflation has taken place. It also suggests

ways in which rate of inflation could be brought down, so that economic

development could continue.

The Indian economy is one of the fastest growing economies in

the world. The economic survey has projected for the year 2010-11 our

growth rate would be 8.5 percent plus, minus 0.25 percent. The study

highlights some of the major economic factors that influence corporate

earnings and hence insurance industry in Indian context.

Ultimately, investor must make intelligent judgment about the current

state of the market and possible changes in the future. A logical starting

point in assessing the market is to understand the economic factor that

determines the stock price. Understanding the current and future state of

the economy is the first step in understanding what is happening and

what is likely to happen to the market.

Economic policies: This is the major variable affecting the stock

market, especially in the context of the highly regulated environment like

India. While some policies affect specific industries, some have general

positive or negative impact on the entire market the recent moves

towards economic liberalization have noticeably affect the market

sentiments. Changes in credit policies announced by Reserve Bank of

India are seen to affect corporate performance.

Fiscal policies: Measures employed by governments to stabilize

the economy, specifically by adjusting the levels and allocations of taxes

and government expenditures. Preparation of national budget is a major

event in the insurance market. While changes in tax structure introduce in



the budget may affect specific industries, companies some provision

affect the entire corporate sector.

INDUSTRY ANALYSIS

A market assessment tool designed to provide a business with an

idea of the complexity of a particular industry. Industry analysis involves

reviewing the economic, political and market factors that influence the

way the industry develops. Major factors can include the power wielded

by suppliers and buyers, the condition of competitors, and the likelihood

of new market entrants.

The porter’s five-force model will help the industry analysis. Five

Forces Analysis assumes that there are five important forces that

determine competitive power in a situation. These are:

1. Supplier Power

2. Buyer Power

3. Competitive Rivalry

4. Threat of Substitution

5. Threat of New Entry

Strategic Consideration in Industry Analysis

Implication of projected growth in gross national product for

various industries

Implications of plan priorities and plan expenditures for various

industries.

Implication of industrial and fiscal policies of the government for

an industry.

Degree of dependence on scarce non-renewable or imported

materials and energy intensity.

Vulnerability of industry to business cycle.

Linkage between the sectors vulnerable to business cycle and the

industry.


http://www.businessdictionary.com/definition/competitor.html

http://www.businessdictionary.com/definition/condition.html

http://www.businessdictionary.com/definition/buyer.html

http://www.businessdictionary.com/definition/supplier.html

http://www.businessdictionary.com/definition/power.html

http://www.businessdictionary.com/definition/factor.html

http://www.businessdictionary.com/definition/develop.html

http://www.businessdictionary.com/definition/influence.html

http://www.businessdictionary.com/definition/market-factor.html

http://www.investorwords.com/1639/economic.html

http://www.investorwords.com/208/analysis.html

http://www.businessdictionary.com/definition/industry.html

http://www.businessdictionary.com/definition/complexity.html

http://www.businessdictionary.com/definition/business.html

http://www.businessdictionary.com/definition/provide.html

http://www.businessdictionary.com/definition/tool.html

http://www.businessdictionary.com/definition/assessment.html

http://www.businessdictionary.com/definition/market.html


Life cycle position of industry.

Price and income elasticity of end product of industry.

An analysis of competitive conditions is reflected in barriers to

entry.

COMPANY ANALYSIS

After understanding the linkages between Economy and Industry

Analysis, detailed company analysis gives us more clarity about the

company. We need to select a single company in already selected

industry. Understanding business model will help us how the company

generates revenue and how much it converts into profit. The analysis

focuses on understanding of operating, financial and capital market

performance of the company. These strategies will have major impact on

the future top-line and bottom-line. The industry analysis enables us to

shortlist industries for the purpose of insurance investment. The next step

is to identify the superior performers in the industry. Even though an

industry might be doing well, some companies in the industries can be in

doldrums

Strategic consideration of Company Analysis

A trend analysis of company’s market share.

An analysis of cost structure and BEP analysis.

An analysis of turnover of assets, operating and production

efficiencies through ratio analysis.

Leverage and coverage ratio analysis.

Fund flow analysis.

Profitability analysis.

A trend analysis of book value per share.

An assessment of the quality of the asset.

An assessment of the quality of management.



CHAPTER-2

RESEARCH DESIGN



RESEARCH DESIGN

2.1 TITLE OF THE STUDY

“A STUDY ON FUNDAMENTAL ANALYSIS AND ITS IMPACT ON

INSURANCE SECTOR “

2.2 REVIEW OF LITERATURE

1.A study done by THE GENEVA ASSOCIATION (SYSTEMIC RISK IN

INSURANCE) The Geneva Association is the leading international

insurance “think tank” for strategically important insurance and risk

management issues. The financial crisis has exposed flaws in the

supervisory system and engendered calls to further regulate the

financial sector. Among the many proposals under consideration or

implementation is the idea of applying more stringent supervision and,

perhaps, more onerous regulation to “systemically relevant

institutions”. This proposal is usually conceived as applying to banks.

However, some institutions and governments have recently suggested

that a similar approach be taken to insurers. This report examines the

performance of the insurance industry during the crisis, assesses the

application of the FSB’s proposal on systemic risk to insurance, and

develops initial recommendations to address current regulatory gaps and

strengthen industry risk management practices.

2. A study done by Dr.B.Vijaylakshmi. “Impact of Globalization:

Overview Of Insurance Industries In India. “ Volume III, Number:

1,January, 2009.A global risk exposure, a challenging business

environment requires insurance companies to rethink the fundamentals of

their business. The insurance industry has also succumbed to the

general trend towards globalized market and the risk which is evident by

more rapid growth in global trade, direct investment and portfolio

insurance merely restricted to the production of goods and services.



These global firms face a number of unique kind of loss exposures that

arises as a result of conducting business in multiple countries. This

include risk such as terrorism, political instability, uncertain legal

environment, currency risk, import export restriction, technological and

communicational problems, financial market weakness, and substandard

infrastructure. The inability to assess the accurate risk by the global firm

may also be due to improper information retrieval in the under developed

and developing countries. Multinational insurance are keenly watching

the transformation of Indian insurance sector, mainly because the

domestic markets have become saturated for the indigenous insurer, the

other reason for the global insurer to show their interest in Indian market

is based on the principle of spreading the area of operations over a wide

geographical area that would eliminate sudden dips in earnings due to

the unexpected risk.

3. A study done by JAN FREDERIK SLIJKERMAN (AEGON Asset

Management) on Insurance Sector Risk, July 2006,Tinbergen

Institute Discussion Paper No. 06-062/2. We model and measure

simultaneous large losses of the market value of insurers to understand

the impact of shocks on the insurance sector. The downside risk of

insurers is explicitly modeled by common and idiosyncratic risk factors.

Since reinsurance is important for the capacity of insurers, we measure

risk dependence among European insurers and reinsurers. The results

point to a relatively low insurance sector wide risk. Dependence among

insurers is higher than among reinsurers.

2.3 STATEMENT OF THE PROBLEM

The study entitled ” A study on fundamental analysis and its impact

on insurance sector” is undertaken with an intention to study the

fundamentals analysis on insurance sector and will find the problems in

insurance sector and performance of insurance sector



2.4 OBJECTIVES OF THE STUDY

To find out the factors affecting insurance industry

To study the performance of various insurance company

To study the movement of stock prices of insurance companies

with respect to present economic and government polices

2.5 SCOPE OF THE STUDY

The present study is carried to know the following aspects. The study

aims to understand the fundamental analysis and its impact on insurance

sector. This study will provide the relevant information about the

economy, industry, and different companies in insurance sector

2.6 OPERATIONAL DEFINITION OF THE CONCEPT

Insurance Premium

The periodic payment made on an insurance policy is called premium

Insurance Policy

A contract of insurance describing the term coverage, premium, and

deductibles is called policy

Protection policies

Polices designed to provide a benefit in the event of specified event,

typically a lump sum payment. A common form of this design is term

insurance.

Investment policies

Polices where the main objective is to facilitate the growth of capital by

regular or single premiums. Common forms (in the US anyway) are whole

life universal life and variable life policies.

Economic Analysis



Economic analysis refers to the analysis of the factors or indicators of the

economy that affects the insurance market

Economic integration

The merging to various degrees of the economies and economic policies

of two or more countries in a given region. See also common market,

customs union, and free-trade area, trade creation, and trade diversion.

Economic policy

A statement of objectives and the methods of achieving these objectives

(policy instruments) by government, political party, business concern, etc.

Industry analysis

Industry analysis refers to analyze the plan , priorities and vulnerability of

an industry for government regulation. The competitive conditions as

reflected in any barriers to industry also taken into consideration.

Company analysis

Company analysis includes analysis the company as potentiality for

growth, present performance of insurance sector

Life Insurance

Life insurance or life assurance is a contract between the policy owner

and the insurer where the insurer agrees to pay a designated beneficiary

a sum of money upon the occurrence of the insured individual's or

individuals' death or other event, such as terminal illness or critical illness.

In return, the policy owner agrees to pay a stipulated amount at regular

intervals or in lump sums.



2.7 METHODOLOGY

TYPES OF DATA

Only secondary data

SECONDARY DATA: Secondary data refers to those data that has

already been collected and analyzed by someone else. In other words

secondary data is the information that already exists somewhere having

been collected for another purpose.

SAMPLE SIZE

A study on four companies was done. Analyzed all the four companies by

different methods. Equations are:

1.CAGAR SALES =(sales of 2009/sales of 2006)^(1/3)-1

2.CAGAR EPS= (Eps of 2009/Eps of 2006)^(1/3)-1

3.CURRENT RATIO =Current Assets /Current Liabilities

4.Debt to Equity =Total Debt (Short Term +Long Term)/Equity

+Preference

5.Interest Coverage=Earnings Before Interest And Tax/Interest

2.8 LIMITATIONS OF THE STUDY

An in depth study could not be done because of time constraints

The study is limited to the extent of available data

The findings and conclusions made during the study might not be

applicable for a long period of time.



2.9 CHAPTER SCHEME

1. INTRODUCTION

It includes introduction to the study about the specific area chosen.

2. RESEARCH DESIGN

This chapter provides a plan of the study, which include statement of

the problem, need for study, review of the previous studies, objectives,

definition of concepts, scope, methodology, sample design, sources of

data, tool and techniques for data collection, limitations and an overview

of chapter scheme.

3. PROFILE OF THE INDUSTRY AND COMPANIES

This chapter contains a complete profile of the industry and

companies that is history, nature of business, product and services etc..

4. ANALYSIS AND INTERPRETATION OF THE DATA

It provides an analysis of the data with required interpretation with the

help of tables.

5. SUMMARY OF FINDINGS, CONCLUSIONS AND SUGGESTIONS

This chapter must start with an overview of the dissertation, summarize

the findings under each objective, provide conclusions and

recommendations based on the findings. It is to be noted that the

recommendations are practical, acceptable and comprehensive.

BIBLIOGRAPHY

It includes the list of the articles, books, websites that are referred and

useful for research of the topic.

ANNEXURE



CHAPTER 3

INDUSTRY PROFILE



INSURANCE INDUSTRY

In India, insurance has a deep-rooted history. It finds mention in

the writings of Manu (Manusmrithi), Yagnavalkya (Dharma Astra ) and

Kautilya ( Arthasastra ). The writings talk in terms of pooling of resources

that could be re-distributed in times of calamities such as fire, floods,

epidemics and famine. This was probably a pre-cursor to modern day

insurance. Ancient Indian history has preserved the earliest traces of

insurance in the form of marine trade loans and carriers’ contracts.

Insurance in India has evolved over time heavily drawing from other

countries, England in particular.

1818 saw the advent of life insurance business in India with the

establishment of the Oriental Life Insurance Company in Calcutta. This

Company however failed in 1834. In 1829, the Madras Equitable had

begun transacting life insurance business in the Madras Presidency.

1870 saw the enactment of the British Insurance Act and in the last three

decades of the nineteenth century, the Bombay Mutual (1871), Oriental

(1874) and Empire of India (1897) were started in the Bombay

Residency. This era, however, was dominated by foreign insurance

offices which did good business in India, namely Albert Life Assurance,

Royal Insurance, Liverpool and London Globe Insurance and the Indian

offices were up for hard competition from the foreign companies.

In 1914, the Government of India started publishing returns of

Insurance Companies in India. The Indian Life Assurance Companies

Act, 1912 was the first statutory measure to regulate life business. In

1928, the Indian Insurance Companies Act was enacted to enable the

Government to collect statistical information about both life and non-life

business transacted in India by Indian and foreign insurers including

provident insurance societies. In 1938, with a view to protecting the



interest of the Insurance public, the earlier legislation was consolidated

and amended by the Insurance Act, 1938 with comprehensive provisions

for effective control over the activities of insurers.

The Insurance Amendment Act of 1950 abolished Principal

Agencies. However, there were a large number of insurance companies

and the level of competition was high. There were also allegations of

unfair trade practices. The Government of India, therefore, decided to

nationalize insurance business.

An Ordinance was issued on 19th January, 1956 nationalizing the

Life Insurance sector and Life Insurance Corporation came into existence

in the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers

as also 75 provident societies—245 Indian and foreign insurers in all. The

LIC had monopoly till the late 90s when the Insurance sector was

reopened to the private sector.

The history of general insurance dates back to the Industrial

Revolution in the west and the consequent growth of sea-faring trade and

commerce in the 17th century. It came to India as a legacy of British

occupation. General Insurance in India has its roots in the establishment

of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the

British. In 1907, the Indian Mercantile Insurance Ltd, was set up. This

was the first company to transact all classes of general insurance

business. 1957 saw the formation of the General Insurance Council, a

wing of the Insurance Association of India. The General Insurance

Council framed a code of conduct for ensuring fair conduct and sound

business practices.

In 1968, the Insurance Act was amended to regulate investments

and set minimum solvency margins. The Tariff Advisory Committee was

also set up then.



In 1972 with the passing of the General Insurance Business

(Nationalization) Act, general insurance business was nationalized with

effect from 1st January, 1973. 107 insurers were amalgamated and

grouped into four companies, namely National Insurance Company Ltd.,

the New India Assurance Company Ltd., the Oriental Insurance Company

Ltd and the United India Insurance Company Ltd. The General Insurance

Corporation of India was incorporated as a company in 1971 and it

commence business on January 1sst 1973.

This millennium has seen insurance come a full circle in a journey

extending to nearly 200 years. The process of re-opening of the sector

had begun in the early 1990s and the last decade and more has seen it

been opened up substantially. In 1993, the Government set up a

committee under the chairmanship of RN Malhotra, former Governor of

RBI, to propose recommendations for reforms in the insurance sector.

The objective was to complement the reforms initiated in the financial

sector. The committee submitted its report in 1994 wherein, among other

things, it recommended that the private sector be permitted to enter the

insurance industry. They stated that foreign companies be allowed to

enter by floating Indian companies, preferably a joint venture with Indian

partners.

A brief history of the Insurance sector

The business of life insurance in India in its existing form started in

India in the year 1818 with the establishment of the Oriental Life

Insurance Company in Calcutta.



Some of the important milestones in the life insurance business in

India are:

1912: The Indian Life Assurance Companies Act enacted as the

first statute to regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the

government to collect statistical information about both life and

non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the

Insurance Act with the objective of protecting the interests of the

insuring public.

1956: 245 Indian and foreign insurers and provident societies

taken over by the central government and nationalized. LIC formed

by an Act of Parliament, viz. LIC Act, 1956, with a capital

contribution of Rs.5 crore from the Government of India.

The General insurance business in India, on the other hand, can

trace its roots to the Triton Insurance Company Ltd., the first general

insurance company established in the year 1850 in Calcutta by the

British.

Some of the important milestones in the general insurance business in

India are:

1907: The Indian Mercantile Insurance Ltd. set up, the first

company to transact all classes of general insurance business.

1957: General Insurance Council, a wing of the Insurance

Association of India, frames a code of conduct for ensuring fair

conduct and sound business practices.

1968: The Insurance Act amended to regulate investments and set

minimum solvency margins and the Tariff Advisory Committee set

up.



1972: The General Insurance Business (Nationalization) Act, 1972

nationalized the general insurance business in India with effect

from 1st January 1973.

107 insurers amalgamated and grouped into four companies viz.

the National Insurance Company Ltd., the New India Assurance

Company Ltd., the Oriental Insurance Company Ltd. and the

United India Insurance Company Ltd. GIC incorporated as a

company.

LIFE INSURERS

Public sector

1.Life Insurance Corporation Of India

Private sector

1.Bajaj Allianz Life Insurance Company Limited

2. Birla Sun Life Insurance Co. Ltd

3. HDFC Standard Life Insurance Co. Ltd

4. ICICI Prudential Life Insurance Co. Ltd.

5. ING Vysya Life Insurance Company Ltd.

6. Max New York Life Insurance Co. Ltd

7. Met Life India Insurance Company Ltd.

8. Kotak Mahindra Old Mutual Life Insurance Limited

9. SBI Life Insurance Co. Ltd

10. Tata AIG Life Insurance Company Limited

11. Reliance Life Insurance Company Limited.

12. Aviva Life Insurance Co. India Pvt. Ltd.

13. Sahara India Life Insurance Co, Ltd.

14. Shriram Life Insurance Co, Ltd.

15. Bharti AXA Life Insurance Company Ltd.

16. Future Generali Life Insurance Company Ltd.



17. IDBI Fortis Life Insurance Company Ltd.

18. Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd

19. AEGON Religare Life Insurance Company Limited.

20. DLF Pramerica Life Insurance Co. Ltd.

21. Star Union Dai-ichi Life Insurance Comp. Ltd.

GENERAL INSURERS

Public sector

1.National Insurance Company Limited

2.New India Assurance Company Limited

3.Oriental Insurance Company Limited

4.United India Insurance Company Limited

Private Sector

1.Bajaj Allianz General Insurance Co. Limited

2.ICICI Lombard General Insurance Co. Ltd.

3.IFFCO-Tokio General Insurance Co. Ltd.

4.Reliance General Insurance Co. Limited

5.Royal Sundaram Alliance Insurance Co. Ltd.

6.TATA AIG General Insurance Co. Limited

7.Export Credit Guarantee Corporation

8.Cholamandalam General Insurance Co. Ltd.

REINSURER

1.General Insurance Corporation of India



PRESENT SCENARIO OF INSURANCE INDUSTRY

India with about 200 million middle class household shows a huge

untapped potential for players in the insurance industry. Saturation of

markets in many developed economies has made the Indian market even

more attractive for global insurance majors. The insurance sector in India

has come to a position of very high potential and competitiveness in the

market. Indians, have always seen life insurance as a tax saving device,

are now suddenly turning to the private sector that are providing them

new products and variety for their choice.

Consumers remain the most important centre of the insurance

sector. After the entry of the foreign players the industry is seeing a lot of

competition and thus improvement of the customer service in the

industry. Computerization of operations and updating of technology has

become imperative in the current scenario. Foreign players are bringing

in international best practices in service through use of latest

technologies

The insurance agents still remain the main source through which

insurance products are sold. The concept is very well established in the

country like India but still the increasing use of other sources is

imperative. At present the distribution channels that are available in the

market are listed below.

Direct selling

Corporate agents

Group selling

Brokers and cooperative societies

Banc assurance



Customers have tremendous choice from a large variety of products

from pure term (risk) insurance to unit-linked investment products.

Customers are offered unbundled products with a variety of benefits as

riders from which they can choose. More customers are buying products

and services based on their true needs and not just traditional money

back policies, which is not considered very appropriate for long-term

protection and savings. There is lots of saving and investment plans in

the market. However, there are still some key new products yet to be

introduced - e.g. health products.

The rural consumer is now exhibiting an increasing propensity for

insurance products. A research conducted exhibited that the rural

consumers are willing to dole out anything between Rs.3,500 and

Rs.2,900 as premium each year. In the insurance the awareness level for

life insurance is the highest in rural India, but the consumers are also

aware about motor, accidents and cattle insurance. In a study conducted

by MART the results showed that nearly one third said that they had

purchased some kind of insurance with the maximum penetration skewed

in favor of life insurance. The study also pointed out the private

companies have huge task to play in creating awareness and credibility

among the rural populace. The perceived benefits of buying a life policy

range from security of income bulk return in future, daughter's marriage,

children's education and good return on savings, in that order, the study

adds.



FEATURES OF INSURANCE INDUSTRY

Insurance Policy India provides the clients with the details required

for the coverage in the policy, date of commencement of the policy and

their adopting organizations. It plays a important role in the Indian

insurance sector.

The Insurance Policy India is regulated by certain acts like the Insurance

Act (1938), the Life Insurance Corporation Act (1956), General Insurance

Business Nationalization) Act (1972), Insurance Regulatory and

Development Authority IRDA) Act (1999). The insurance policy

determines the covers against risks, sometime opens investment options

with insurance companies setting high returns and also informs about the

tax benefits like the LIC in India. There are two types of insurance covers:

1. Life insurance

2. General insurance

Life insurance – this sector deals with the risks and the accidents

affecting the life of the customer. Alongside, this insurance policy also

offers tax planning and investment returns. There are various types of life

Insurance Policy India:

a. Endowment Policy

b. Whole Life Policy

c. Term Life Policy

d. Money-back Policy

e. Joint Life Policy

f. Group Insurance Policy

General Insurance – this sector covers almost everything related to

property, vehicle, cash, household goods, health and also one's liability



towards others. The major segments covered under general Insurance

Policy India are:

a. Home Insurance

b. Health Insurance

c. Motor Insurance

d. Travel Insurance

Some of the well-known Insurance Policy India are:

Social Security Group Scheme – a scheme covering the age group of

18-60 years and an insurance of Rs.5000 for natural death and of

Rs.25000 on due to accidental death.

Shiksha Sahyog Yojana – a scheme providing an educational

scholarship of Rs.300 per quarter per child is given for a period of four

years.

Jan Arogya Bima Policy – a scheme for the adult’s up to the age of 45

years is Rs.70 and for children it is Rs.50. The limit coverage is fixed at

Rs.5000 per annum.

Mediclaim Insurance Policy – a scheme covering the age group from 5-

80 years with a tax benefit of up to Rs.10,000.

Jana Shree Bima Yojana – this is coverage of Rs.2,000 on natural death

and Rs.50,000 for accidental death. The premium amount is fixed at

Rs.200 for single member.

Videsh Yatra Mitra Policy – a scheme-covering medical expenses

during the period of overseas travel.

Bhagya Shree Child Welfare Bima Yojana – a scheme covering one

girl child in a family up to the age of 18 whose parents age does not

exceed 60 years, with a premium of Rs.15 per annum.



Raj Rajeshwari Mahila Kalyan Yojana – a scheme providing protection

to woman in the age group of 10 to 75 years with an insurance of

Rs.25,000 and premium Rs.15 per annum.

Ashray Bima Yojana – scheme-covering workers in case of loss of jobs.

Personal Accident Insurance Scheme for Kissan Credit Card – a scheme

covering all the KCC holders up to an age of 70 years. Insurance

coverage includes 50,000 for accidental death and 25,000 for partial

disability.

The functions of Insurance can be bifurcated into two parts:

1. Primary Functions

2. Secondary Functions

3. Other Functions

The primary functions of insurance include the following:

Provide Protection - The primary function of insurance is to provide

protection against future risk, accidents and uncertainty. Insurance

cannot check the happening of the risk, but can certainly provide for the

losses of risk. Insurance is actually a protection against economic loss,

by sharing the risk with others.

Collective bearing of risk - Insurance is a device to share the financial

loss of few among many others. Insurance is a mean by which few losses

are shared among larger number of people. All the insured contribute the

premiums towards a fund and out of which the persons exposed to a

particular risk is paid.

Assessment of risk - Insurance determines the probable volume of risk

by evaluating various factors that give rise to risk. Risk is the basis for

determining the premium rate also.



Provide Certainty - Insurance is a device, which helps to change from

uncertainty to certainty. Insurance is device whereby the uncertain risks

may be made more certain.

The secondary functions of insurance include the following:

Prevention of Losses - Insurance cautions individuals and businessmen

to adopt suitable device to prevent unfortunate consequences of risk by

observing safety instructions; installation of automatic sparkler or alarm

systems, etc. Prevention of losses cause lesser payment to the assured

by the insurer and this will encourage for more savings by way of

premium. Reduced rate of premiums stimulate for more business and

better protection to the insured.

Small capital to cover larger risks - Insurance relieves the

businessmen from security investments, by paying small amount of

premium against larger risks and uncertainty.

Contributes towards the development of larger industries - Insurance

provides development opportunity to those larger industries having more

risks in their setting up. Even the financial institutions may be prepared to

give credit to sick industrial units which have insured their assets

including plant and machinery.

The other functions of insurance include the following:

Means of savings and investment - Insurance serves as savings and

investment, insurance is a compulsory way of savings and it restricts the

unnecessary expenses by the insured's For the purpose of availing

income-tax exemptions also, people invest in insurance.

Source of earning foreign exchange - Insurance is an international

business. The country can earn foreign exchange by way of issue of

marine insurance policies and various other ways.



Risk Free trade - Insurance promotes exports insurance, which makes

the foreign trade risk free with the help of different types of policies under

marine insurance cover.

DEMAND DRIVERS

Before Independence

The insurance industry originated in India in the year 1818 with the

formation of Life Insurance Corporation in Calcutta. The idea behind

starting LIC was to provide insurance coverage for English widows and

different premium was charged for the English and for the Indians. In

1870 Bombay Mutual Life Insurance Society established its Insurance

business and the same premium was charged for both Indians and

English. In 1912 the Insurance sector came under the purview of

regulations when the government passed the Life Insurance Companies

Act. But it was in the year 1938 when the government came up with the

first legislation to bring the insurance sector under state control.

Post Independence

In 1956, the Government of India nationalized insurance

companies bringing Indian Insurance sector under the purview of the

Government. These state owned Insurance companies became highly

inefficient and bureaucratic, had excess manpower and countless delay

in settlement of claims but the nation did not have an alternative. Any

effort by the government to privatize the industry met with stiff resistance

from the trade unions.

Post Liberalization Policies regarding Insurance

Under the recommendation of Malhotra Committee the Insurance

Regulatory And Development Authority was set up to monitor and control

the Insurance industry some of the initiatives taken by the government

after Insurance sector reforms are:



Government to have not more than 50 per cent stake in insurance

companies.

Insurance sector to be opened up for private companies and any

number of insurance enterprises can operate.

Private players with minimum paid up capital of Rs.1 billion should

be given opportunity to do business.

Foreign companies can enter Indian market through joint ventures

with Indian companies.

The state controlled Insurance companies like LIC and GIC faced stiff

competition from private insurance companies post reforms. The

monopoly of the national Insurance companies came to an end. The

private Insurance companies were able to exploit the shortcomings in the

state run Insurance companies. The private insurance companies

launched a variety of new insurance products like health care, pension

plans, annuity plans, income protection, market linked products, which

were welcomed by the end customers. The business for the private

sector boomed in both urban and rural sector alike.

FDI Policy Regarding Insurance Sector

THE Finance Minister, while presenting the first Budget of the UPA

government, has proposed to raise the FDI cap in three sectors.

Elaborating upon the decision he said, “The NCMP declares that FDI will

continue to be encouraged and actively sought, particularly in areas of

infrastructure, high technology and exports. Three sectors of the

economy fully meet this description. They are telecommunications, civil

aviation and insurance.” The specific proposal for the insurance sector is

to raise the FDI cap from 26 to 49 per cent. We argue below that this

move is unjustifiable on several grounds.



Bodies that regulate the sector:

For better regulation purpose of the insurance sector the

government has established following bodies;

1. IRA: Insurance Regulatory Authority.

2. IRDA: Insurance Regulatory and Development Authority.

3. TAC: Tariff Advisory Committee.

1.IRA: INSURANCE REGULATORY AUTHORITY:

The IRA, under the chairmanship of Rangachary, was set-up in

January 1996. The IRA Bill has to be passed by parliament to make the

IRA a statutory body. Comprehensive legislation aimed at reviewing the

insurance Act of 1938 and repealing the life insurance corporation Act of

1956 have to be passed.

The IRA is also preparing an internal rating system to screen all

applications, as entry will be in phases. The joint venture status of life

insurance companies (with majority holding of the domestic partner) is

likely to be approved by the parliament. Consensus also seems to be

emerging on the minimum of Rs.1 bn capital stipulations for new

insurance companies.

The IRA has stipulated a minimum rural presence for all

companies. The exhaustive guidelines have been issued for the

appointment of intermediaries (brokers, agents, surveyors and actuaries).

Feature of IRA:

1. The Bill allowed for up to 26% foreign equity participation in the

insurance sector.

2. The current India monopoly companies were required to bring

down their equity holding to 26% within a period of 10 years.



Government pronouncement:

1. IRA will be sole Authority, which will be responsible for awarding

of, licenses i.e. little or no government or political interference in

licensing process.

2. No restriction on the number of licenses.

3. No composite license for life insurance business.

4. Licensing to be only on national basis (no city by city approach)

5. IRA allowed for up to 26% foreign equity participation in the life

insurance sector.

6. The current Indian monopolies companies are required to bring

down their equity holding to 26% within a period of 10 years.

IRA proposals:

1. New player should start their business within 15-18 months.

2. Trafficking of licenses not to be permitted.

3. IRA to seek business plan with 5-year protection for all applicants.

4. A system of direct brokers to be introduced.

5. IRA to vet top management appointments.

2. IRDA: INSURANCE REGULATORY AND DEVELOPMENT

AUTHORITY:-

The Insurance Regulatory and Development Authority, constituted

under the IRDA Act, 1999, provide for the establishment of an authority to

protect the interest policyholders, to regulate, promote and ensure orderly

growth of the life insurance industry.



Business Requirement:-

A company will not be issued a license unless the IRDA is satisfied

with the sound financial condition, the general character of management,

the volume of business, the capital structure, earning prospects for the

insurers and that the interests of the general public will be served if

registration is granted to the insurer.

Foreign insurance companies have been allowed to have a

maximum 26% share holding. No life insurance company can be

registered under the Act unless they have a paid up capital of Rs.100

crores. Every life insurer shall deposit with the reserve bank of India one

percent of the total gross premium written in India in any financial year,

not exceeding Rs.10 crores.

This amount would not be susceptible to any assignment or

charge nor would it be available for the discharge of any liabilities other

than liabilities arising out of policies issued, so long as any such liabilities

remain undercharged.

Investment of Assets:-

Every insurer is required to invest, and keep invested, assets

equivalent to not less than the net liabilities as follows:

a. 25 % in government securities,

b. a least 25% of the said sum in government securities or other

approved securities and

c. the balance in any approved investment rated as “very stron” or

more by reputed rating agencies, which include various debt

instruments on which dividend on its ordinary shared for the five

years immediately preceding or for at least five out of the six or

seven years immediately preceding have been paid and which



have priority in payment over ordinary shares of the company in

winding up.

The IRDA may in the interest of the policyholder’s directions

relation the time, manner and other conditions and investments of assets

to be held by an insurer. The IRDA may also direct the insurer to realize

the investment, if it sees the investments to be unsuitable or undesirable.

The Act prohibits an insurer from directly or indirectly investing

policyholder funds outside India.

Further, every insurer has to always maintain an excess of the

value of his assets over the amount of his liabilities of not less than Rs.50

crores in the case of an insurer carrying of life insurance business. If at

any time an insurer does not maintain the required solvency margin, he is

required to submit a financial plan, as per directions issued by the IRDA,

indicating a plan of action to correct the deficiency within three months.

In order to ensure that the company does not risk the money of the

policyholder’s, the Act provides that an insurer who does not comply with

the aforesaid provisions may be deemed to be insolvent and may be

would up by the court.

Insurers are required to get an actuary to investigate the financial

conditions of the life insurance business including a valuation of liabilities

every year in order to ensure continual compliance

In order to maintain transparency in its dealings, insurers would

have to keep separate account relating to funds of shareholders and

policyholders.

3. TARIFF ADVISORY COMMITTEE:

The tariff advisory committee established under the Act is

empowered to control and regulate the rates, terms, and etc. that may be

offered by insurers in respect of any risk or of any category of risks. It is



provided that in fixing, amending or modifying such rates etc. the

committee shall try to ensure as far as possible that there is no unfair

discrimination between risk of essentially the same hazard and also that

consideration is given to past and prospective loss experience. Every

insurer is required to make payment to the TAC of the prescribed annual

fees.

TAX POLICY AND INSURANCE SECTOR:

Another factor, which affects the insurance sector, is the tax policy.

The tax reforms in India are such that it encourages the citizens to invest

in the insurance sector.

The tax policy of the government is particular relevant for life

insurance which is a long-term contract and inculcates among the

policyholders the habit of saving. Taxation of returns on investment

influences, investment decisions and high rates of taxation will

discourage the desire to save. Already in India there are complaints that

the rates of return on life policies are not what they could be. Therefore

tax incentives play a vital role in determining the attractiveness of such

policies. Such tax breaks are available in many countries and have

helped in the development of their life sector. In western countries the

gain from the proceeds of a life insurance policy is paid free of tax.

Provided the policy satisfies certain qualifying conditions. Non-qualifying

policies get basic rate tax relief, though higher rate taxpayers may still

have to pay tax on the gain, although at a reduced rate. The insurance

companies can use such tax concessions rate. The insurance companies

can use such tax concessions to design products for different categories

of taxpayers.

The other factors, which affect the insurance sector, are the

employment law, and government stability. These are the factors, which

affect the insurance industry



CHAPTER-4

DATA ANALYSIS

AND

INTERPRETATION



DATA ANALYSIS AND INTERPRETATION

4.1 ECONOMIC ANALYSIS

Overview of Indian Economy

India, an emerging economy, has witnessed unprecedented levels

of economic expansion, along with countries like China, Russia, Mexico

and Brazil. India, being a cost effective and labor-intensive economy, has

benefited immensely from outsourcing of work from developed countries,

and a strong manufacturing and export oriented industrial framework.

With the economic pace picking up, global commodity price have staged

a comeback from their lows and global trade has also seen healthy

growth over the last two years.

As per the advance estimates of GDP for 2009-10 released by the

Central Statistical Organization (CSO), the economy is expected to grow

at 7.2 per cent in 2009-10, with the industrial and the service sectors

growing at 8.2 and 8.7 per cent respectively. India’s gross domestic

product (GDP) grew by 6 per cent during October to December 2009,

over the corresponding quarter of the previous year, as per data released

by the CSO.

The economic activities which registered significant growth in the

third quarter of 2009-10 over the corresponding period in 2008-09 are

'mining and quarrying' at 9.6 per cent, 'manufacturing' at 14.3 per cent,

'construction' at 8.7 per cent, 'trade, hotels, transport and communication'

at 10 per cent and 'financing, insurance, real estate and business

services' at 7.8 per cent.

According to the latest estimates available on the Index of Industrial

Production (IIP), the index of mining, manufacturing and electricity,

registered growth rates of 9.6 per cent, 14.3 per cent and 4 per cent,

respectively in Q3 of 2009-10, as compared to the growth rates of 2 per



cent, 0.5 per cent and 2.9 per cent in these industries in same period in

2008-09. The key indicators of construction sector, namely, cement and

finished steel registered growth rates of 8.5 per cent and 7.7 per cent,

respectively in Q3 of 2009-10.

The Economic scenario

Foreign institutional investors (FIIs) were net investors of US$ 4.37

billion in equity and US$ 2.09 billion in debt instruments in the month of

March 2010, according to the data released by Securities and Exchange

Board of India (SEBI). The number of registered FIIs was 1713 as on

March 31, 2010 and the total FII inflow in equity during January to March

2010 was US$ 4.54 billion while it was US$ 4.71 billion in debt.

As on March 26, 2010, India's foreign exchange reserves totaled

US$ 277.04 billion, an increase of US$ 24.71 billion over the same period

last year, according to the Reserve Bank of India's Weekly Statistical

Supplement.

Moreover, India received FDI worth US$ 20.92 billion during April-

December 2009, taking the cumulative amount of FDI inflows from

August 1991 to December 2009 to US$ 127.46 billion, according to the

Department of Industrial Policy and Promotion.

Six-core infrastructure industries grew at 4.5 per cent in February

2010 against 1.9 per cent during the corresponding month last year,

primarily due to increased output in electricity. The six infrastructure

sectors—crude, petroleum refinery products, coal, electricity, cement and

finished steel—that constitute 26.68 per cent in IIP, recorded a growth of

5.3 per cent in the period April-February 2009-10, as against 2.9 per cent

in the same period last year.

Moreover, according to latest data from RBI, loan disbursement by

scheduled commercial banks, including regional rural banks, recorded

16.04 per cent growth at the end of March 12, 2010, on a year-on-year



basis. This is above RBI's projection of 16 per cent credit growth in this

financial year.

Of the more than 200 companies from over 50 countries that form part of

the World Economic Forum's Global Growth Companies (GGC)

Community, India today has the second largest representation, with a

total of 18 GGCs. Indian GGCs come from every sector, with a strong

representation in information technology and electronics, retail, consumer

goods and banking.

The GGC Community was formed to engage high-growth

companies with the potential to be tomorrow's industry leaders and drive

economic and social change.

INDIA GDP GROWTH RATE

The Gross Domestic Product (GDP) in India expanded at an

annual rate of 7.20 percent in the last quarter. India Gross Domestic

Product is worth 1217 billion dollars or 1.96% of the world economy,

according to the World Bank. India's diverse economy encompasses

traditional village farming, modern agriculture, handicrafts, a wide range

of modern industries, and a multitude of services. Services are the major

source of economic growth, accounting for more than half of India's

output with less than one third of its labor force. The economy has posted

an average growth rate of more than 7% in the decade since 1997,

reducing poverty by about 10 percentage points.



GRAPH NO-4.1India GDP growth rate

Interest Rate

Interest rates might soon be on an upward move. But if one is

planning to break that lower-paying fixed deposit (FD) to get higher rates,

it will cost . The Reserve Bank of India (RBI) currently expects banks to

convert FD’s without penalizing or reducing the interest rate as long as

the money is rotated into a new FD. “Banks can formulate their own

policies towards conversion of deposits,” the RBI said. This means banks

can penalize for aborting existing FD’s. The RBI raised repo rates by

0.25% and the cash reserve ratio (CRR) by the same amount. The latter

change will immobilize Rs.12,500 crore of bank funds.



TABLE NO-4.1Cash Reserve Ratio and Interest Rates

Item / Week Ended 2010 2010

Apr. 2 Apr. 9 Apr. 16 1 2 3

Cash Reserve Ratio (per cent)(1) 5.75 5.75 5.75Bank Rate 6.00 6.00 6.00I.D.B.I.(2) 10.25 10.25 10.25

Prime Lending Rate(3)11.00-12.00 11.00-12.00 11.00-12.00

Deposit Rate(4) 6.00-7.50 6.00-7.50 6.00-7.50Call Money Rate (Low / High)(5)

- Borrowings 1.75/5.75 1.25/3.75 2.00/3.90- Lendings 1.75/5.75 1.25/3.75 2.00/3.90(1) Cash Reserve Ratio relates to Scheduled Commercial Banks (excluding Regional Rural Banks).(2) Minimum Term Lending Rate (MTLR).(3) Prime Lending Rate relates to five major Banks.(4) Deposit Rate relates to major Banks for term deposits of more than one year maturity.(5) Data cover 90-95 per cent of total transactions reported by participants.

Inflation

On March 19, 2010, the Reserve bank of India raised its

benchmark reverse repurchase rate to 3.5% percent, after this rate

touched record lows of 3.25%. The repurchase rate was raised to 5%

from 4.75% as well, in an attempt to curb Indian inflation. India’s 2009-10

Economic Survey Report suggests a high double-digit increase in food

inflation, with signs of inflation spreading to various other sectors as well.

The Deputy Governor of the Reserve Bank of India, however, expressed

his optimism in March 2010 about an imminent easing of Indian

wholesale price index-based inflation, on the back of falling oil and food

prices.



For 2009, Indian inflation stood at 11.49% Y-o-Y. This rate reflects

the general increase in prices, taking into account the purchasing power

of the common man. According to the Economic Survey Report for 2009-

10, economic growth decelerated to 6.7% in 2008-09, from 9% in 2007-

08. The economy is expected to grow by 8.7% in 2010-11, with a return

to a growth rate of 9% in 2011-12.

Food Inflation Up 16.61%

India's annual food price inflation eased in mid-April, but fuel price

inflation quickened maintaining an upside pressure on the wholesale

price index that could prompt further monetary tightening by the central

bank. The food price index rose 16.61 percent in the 12 months to April

17, lower than an annual rise of 17.65 percent in the previous week,

government data showed on Thursday. The fuel price index rose an

annual 12.69 percent, higher than the previous week's reading of 12.45

percent.

Wholesale price inflation in March touched a 17-month high of 9.9

percent, prompting the Reserve Bank of India (RBI) to raise rates in April

for the second time in as many months. Reserve Bank of India Governor

Duvvuri Subbarao said rising prices for food, fuel and wages have made

inflation more of a generalized and demand-side problem. Much of the

country's inflationary pressures were initially on the supply-side as a

result of the 2009 monsoon failure that pushed up food prices. But

summer monsoon is likely to be normal this year, with rainfall expected to

be 98 percent of the long-term average, the government said last Friday.

The RBI has forecast the headline inflation to ease to 5.5 percent at end-

March 2011 on normal monsoon.



Exchange Rate

Rupees are used in a number of countries including India and Pakistan.

The Reserve Bank of India (RBI) issues the Indian currency. The Indian

rupee exchange rate measured against six-currency trade weighted

indices. These currencies belong to countries that have a strong trade

relationship with India.

The exchange rate of the Indian rupee (or INR) is determined by market

conditions. However, in order to maintain effective exchange rates, the

RBI actively trades in the USD/INR Currency market. The rupee currency

is not pegged to any particular foreign currency at a specific exchange

rate. The RBI intervenes in the currency markets to maintain low volatility

in exchange rates and remove excess liquidity from the economy.

TABLE NO-4.2

Exchange rates (using values from Friday, April 30, 2010)

1 INR In INR

American Dollar 0.022543 44.3597

Argentine Peso 0.0882526 11.3311

Australian Dollar 0.0241972 41.3271

Brazilian Real 0.0388709 25.7262

British Pound 0.0147346 67.8673

Bulgarian Lev 0.0331127 30.1999

Canadian Dollar 0.0226514 44.1474

Chilean Peso 11.6528 0.0858164

Chinese Yuan 0.153861 6.49937

Colombian Peso 43.9392 0.0227587

Croatian Kuna 0.122797 8.14352

Danish Krone 0.126005 7.93617

Estonian Kroon 0.264905 3.77494

Euro 0.0169305 59.0649



Hong Kong Dollar 0.175006 5.7141

Hungarian Forint 4.51741 0.221366

Iceland Krona 2.88264 0.346904

Israeli New Shekel 0.0839016 11.9187

Japanese Yen 2.13003 0.469477

Latvian Lat 0.0119767 83.4957

Lithuanian Litas 0.0584578 17.1064

Malaysian Ringgit 0.0717888 13.9297

Mexican Peso 0.275054 3.63565

New Zealand Dollar 0.0309051 32.3571

Norwegian Kroner 0.132812 7.52947

Pakistan Rupee 1.89406 0.527967

Romanian Leu 0.0699229 14.3015

Russian Ruble 0.657565 1.52076

Singapore Dollar 0.0308424 32.4229

South African Rand 0.165289 6.05

South Korean Won 24.9803 0.0400315

Sri Lanka Rupee 2.56866 0.389308

Swedish Krona 0.1629 6.13872

Swiss Franc 0.0242801 41.1859

Taiwan Dollar 0.706459 1.41551

Thai Baht 0.729383 1.37102

Trinidad/Tobago

Dollar 0.143244 6.98109

Turkish Lira 0.0334497 29.8956

Venezuelan Bolivar 0.0968343 10.3269

Agricultural out put (monsoon impact)



The share of agriculture to the gross domestic product (GDP) has

dropped from 25% in 2002 to 17% currently. Yet, agriculture contributes a

huge chunk to the GDP, making it a very important sector for India's

growth. The performance of this sector is very crucial to the Indian

economy not only with regard to GDP but also as a huge chunk of the

Indian population is dependant on agriculture. Rainfall in India so far this

year is 28% below par and this is a major cause of concern as the impact

could be devastating. Monsoon in the northwestern region of India, the

main growing area, is 40% below average. If agricultural production goes

down in India then the direct impact would be a decline in the income of

people. The economy as a whole and the GDP will get affected. This

factor could lower production of food but raise the prices. Hence, the

significance of the monsoon for the economic system cannot be under-

estimated. The monsoon can directly affect government savings, public

investment and foreign exchange reserves.

It is not only important for the monsoon to commence, but the time

of commencement is also important. For farmers, it is highly critical to

know when the onset will occur as this affects the timing of the planting of

crops. If rainfall is deficient then more than two-thirds of the seedlings can

die. To prevent this, the prediction systems play a very important role.

60% of Indian Agriculture is monsoon dependent. With rainfall this time

being deficient by 45%, the agriculture sector has been hit hard.

Also, post-economic disaster, rural India has become the focus for many

organizations. But with monsoon showing no sign of rain, the rural

income is bound to decrease, which eventually will affect the

organization's plans and economic conditions.



Apart from this, a severe problem that bad monsoon is to bring is the rise

in the price of cash crops, vegetables and fruits. This is the most

dreading consequence of deficient rainfall as the basic needs of people

might have to be compromised. This increase in the price of food will

cause inflation to go up.

Economic Policies

As per latest reports from Press Trust of India, Reserve Bank of

India has come up with a new India economic policy whereby it would be

relaxing its money supply activities. It has also said that its economic

policy of India would be successful to help this country recover fiscally by

2011 only. However, there is a pre-condition for this situation to be

realized. This economic policy in India would be able to bear fruit

provided other advanced economies of world are able to recover from

aftereffects of global financial meltdown.

In recent times many a Indian economic policy have been

formulated whereby three back to back economic stimulus packages

have been provided to weaker sections of Indian economy. However,

such India economic policies have only led to increasing of financial

deficit. An important part of India economic policy of national government

is bringing back confidence of business establishments in India financial

system.

As per latest India economic policy, economy would be moving

towards a single goods and service tax by doing away with differences

between rates of service tax and CENVAT. In interim budget for fiscals

2009-10 service taxes and excise duties have been reduced. According

to this India economic policy a significant amount of money would be lost

as a result of these tax benefits – losses are expected to amount to INR

29,000 crores. Maximum amount of losses to tune of INR 14,000 crores

would be incurred in services tax selection. Customs duties sector would



face losses of INR 6,600 crores and for excise duties it would be INR

8,500 crores.

MONETARY POLICY

RBI came out with its annual monetary policy for 2010-11, which

was more or less in line with market expectations. RBI hiked repo,

reverse repo and CRR by 25 bps each. The policy rates are with

immediate effect, while the CRR hike will be effective from April 24. The

increase in CRR is expected to absorb about Rs.12500cr from the

system.

MONETARY MEASURES

1. Repo Rate hiked from 5.0% to 5.25% (with immediate effect).

2. Reverse Repo Rate hiked from 3.5% to 3.75% (with immediate effect).

3. Cash Reserve Ratio hiked from 5.75% to 6.0% (effective from April

24). As a result of the hike in CRR, Rs.12500cr (approx.) of excess

liquidity will be absorbed from the system.

4. Bank Rate unchanged at 6.0%.

5. Statutory Liquidity Ratio unchanged at 25%.

MONETARY PROJECTION

. The projection of money supply growth for 2010-11 is placed at 17%.

. Consistent with this, aggregate deposits of Scheduled Commercial

banks (SCBs) are projected to grow by 18%.

. The growth in non-food credit of SCBs is placed at 20%.

. Introduction of a reporting platform for all secondary market transactions

in Certificate of Deposits (CDs) and Corporate Papers (CPs)

. FIMMDA has been requested to start work on developing a platform for

CDs and CPs similar to its existing platform for corporate bonds.



. To allow banks to classify their investments in non SLR bonds issued by

companies engaged in infrastructure activities and having a minimum

residual maturity of seven years under the held to maturity (HTM)

category

. The much awaited paper on bank licenses for the private companies will

be placed on RBI website by end July 2010.

. By end of June, the bank proposes to prepare the draft for Credit

Default Swaps (CDS) introduction. Around the same time, it will finalize

OTC forex derivatives norms.

The hike in policy rates and CRR is broadly in line with

expectations. The well-balanced measures taken by the RBI is aimed at

controlling inflation and promoting sustainable growth. But it considers

tempering of liquidity equally important.

There are speculations of the lending getting more expensive but

the system still possess a lot of liquidity and April-June quarter is a lean

period for credit off takes and hence the interest rates should not move

sharply on an upward trend.

RBI has given indications to act on rates again if Inflation will not

curtail by the current rate hike. Consumer finance loans may rise

marginally but it will not affect much of the growth, as demand for

consumer goods is very strong and may not be impacted by a 25 basis

point hike in key policy rates. Central bank has remained cautious in

increasing rates to ensure that the growth is not hampered while

checking inflationary pressures.



4.2 INDUSTRY ANALYSIS

The forgoing section in this report had a perspective of overall

Economy in India. The next step is to analyze the particular industry.

Once the economic analysis is over; getting the prospects of the likely

trend in the economy, analyzing the industry would be taken importance,

knowing which group are promising in the year makes possible better

entry in to the company. There is however, no perfect correlation

between the economy and the industry on one hand and of industry and

companies on the other.

India has mixed economy, where private and public sector play a

complementary role and promote a planned development. Since from

1991 reforms, even foreign enterprises and MNC’s given an important

role to play in the development of the economy.

INDIAN INSURANCE INDUSTRY

Globalization is the key source, which is bringing about an

"irreversible transformation" in the Asian insurance market. India and

China are "dynamically" driving the growth of insurance markets in Asia

and the outlook for this industry in the region is "sanguine" despite short-

term uncertainties. Asia is becoming an important growth engine for

global insurers. The changing socio-economic dynamics present

attractive opportunities. According to a latest research report from HSBC,

in order to be long-term winners, life insurance companies in Asia need to

diversify their income streams such that at least 25% of earnings are

sourced overseas, while maintaining a dominant position in the domestic

market.



The Indian insurance market in spite of having a history covering

almost two centuries took a turn after the establishment of the Life

insurance corporation in India in 1956. From being an open competitive

market to being nationalized and then back to a liberalized market again,

the insurance sector has witnessed all aspects of contest. The Indian

insurance market conventionally focused around life insurance until

recently, a various range of other insurance policies covering sectors like

medical, automobile, health and other classes falling under general

insurance came up, generally provided by the private companies. The life

insurance of India added 4.1% to the GDP of the economy in 2009, an

immense growth since 1999, when the gates were opened for the private

company in the market.

Major Driving Factors

Globalization

Deregulation which is opening up the markets

Cheaper and more effective distribution channels

Ongoing industry consolidation

Increment in the policy holder firms

Boost in Merger and Acquisitions activities

Changing socio-economic dynamics

Market offering wider margins

Unique combination of size, age profile and growth prospects

Major Issues, Trends and Opportunities

Continuous increment in intra-Asian trade

Need for diversification in the income streams

Rise in selling investment type products like annuities

Chance to compete directly with financial services companies

Focus on paying out more in claims



Drastic increment in marine and cargo insurance sectors

Developments in countries, who were closely regulated by their

government

Lack of proper agent quality

Change in the distribution method

Difficulties in building networks and brands

Hindrance in expansion in some of the emerging markets

Risk management concerns in insurance companies

Global Expansion

Transformation in the organizational system to win customer

loyalty

Weak equity markets

Impact of sub-prime

Regulatory and market obstacles in the emerging markets

Life Insurance

The US$ 41-billion Indian life insurance industry is considered the

fifth largest life insurance market, and growing at a rapid pace of 32-34

per cent annually, according to the Life Insurance Council. Since the

opening up of the insurance sector in India, the industry has received FDI

to the tune of US$ 525.6 million. The government is likely to reintroduce

the Insurance Bill, which proposes to increase the FDI cap in private

sector insurance companies from 26 per cent to 49 per cent.

The total number of life insurers registered with the Insurance

Regulatory Development Authority (IRDA) has gone up to 23, with

registration of the India First Life Insurance Company Limited, a joint

venture life insurance company promoted by Bank of Baroda and Andhra

Bank, India and Legal & General Middle East Limited, UK. The Life

Insurance Corporation (LIC) posted a 50 per cent growth in new premium



collection in the first nine months of the 2010 fiscal, increasing its market

share to 65 per cent from 56 per cent a year ago.

LIC’s new premium collection touched US$ 9.58 billion in the April-

December 2009 period while the combined business of the 22 private

insurers grew to US$ 5.07 billion from the previous year, as per data

collated by the Insurance Regulatory and Development Authority (IRDA).

Overall the industry grew at 29 per cent in the April-December period of

the fiscal year 2010.

The life insurance industry had earlier been expected to grow by 15 per

cent in the 2010 fiscal year and cross the US$ 54.1 billion mark in total

premium income by the end of March 2010, according to industry body,

Life Insurance Council.

However, industry experts now believe that India's life insurance

industry is likely to grow by around 10 per cent in 2010 over the previous

year, mainly due to increased efficiency but also due to expansion in

small towns and villages.

In order to support the aggressive growth in premium income in the

current financial year, Future Generali India Life Insurance (a joint

venture between the Future Group and the Italy-based Generali Group)

has proposed to infuse an additional equity of US$ 32.55 million before

the end of March 2010.

General Insurance

The total number of general insurers registered with IRDA has

gone up to 22, with the registration of SBI General Insurance Company

Limited, a joint venture general insurance company promoted by State

Bank of India and Insurance Australia Group, Australia, as a general

insurer in December 2009. Moreover, L&T General Insurance is readying

to launch its operations in the next three to five months.



The Gross Premium underwritten by public sector non-life insurers

for the April-December 2009 period posted year-on-year growth of 11.37

per cent as compared to the year-on-year growth of 7.93 per cent posted

by private sector non-life insurers. Overall, the non-life insurance sector

grew 9.95 per cent in April-December 2009, compared to the

corresponding period last year. According to IRDA data, out of the US$

5.46 billion premium underwritten by the industry during the April-

December 2009 period, US$ 3.24 billion came from the four public sector

companies as compared to US$ 2.91 billion during the same period in

2008.

Moreover, in the 2010-11 budget, Finance Minister, Mr. Pranab

Mukherjee, has decided to roll back the government’s decision to tax the

unrealized gains of non-life insurance companies. “The appreciation in

the value of investments, being in the nature of unrealized gain is not

taken into account for determining profit or loss of non-life insurance

business as per the IRDA regulations. It is, therefore, proposed that the

unrealized gains due to appreciation in the value of investments will not

be included in the total income,” according to the budget documents.

According to data from the IRDA (Summary Reports of Motor Data

of Public and Private Sector Insurers - 2008-09), in 2008-09, nearly 30

million vehicles were registered and a total premium worth US$ 2.03

billion was collected.

Project Insurance

Insurance companies are also witnessing increasing demand for

project insurance in the last few months. Corporate are beginning to

demand project insurance across sectors such as power generation with

the cover beginning right from the start of the project till it is declared

ready for commercial use. Some of the big projects also take cover for

financial loss arising out of delay in completion.



Industry players estimate that premiums collected from project

insurance will be around US$ 216.2 million for the industry as a whole

and is expected to increase significantly.

Oriental Insurance Company Ltd will be offering comprehensive

project insurance for the Tata Power Project at Mundra in Gujarat.

Health Insurance

The health insurance market stood at around US$ 1.5 billion in 2008-

09 and is expected to grow to US$ 9 billion by 2016-17. While health

insurance policies are mostly provided by general insurance companies,

life insurers contribute about five per cent to the overall health insurance

business.

Apollo DKV Health Insurance has renamed itself Apollo Munich

Health Insurance as a part of its five-year strategic plan to gain a

five per cent market share. Apollo Munich is a joint venture

between Asia’s largest integrated healthcare provider, The Apollo

Hospitals Group, and Germany-based Munich Re's segment,

Munich Health.

Max India is planning to invest US$ 43.25 million in its health

insurance joint venture (Max Bupa ) and will launch a product over

the January–June 2010 period.

Star Health and Allied Insurance expects to invest US$ 38.9

million during the current financial year to grow its health insurance

business, taking the total invested capital to US$ 67 million.

US-based health insurer CIGNA is looking at entering the Indian

market.

Reinsurance

Reinsurance is a contract between the insurance company

(insurer) and a third party (re-insurer), wherein the latter will protect the

former by paying losses sustained by it under the original contract of

insurance.



Re-insurers from London, as well as other parts of Europe, see significant

potential in the re-insurance market in India. Top four global re-insurers,

Lloyds, Swiss Re, Munich Re and Berkshire Hathaway are amongst

those eyeing India.

Bancasssurance

Private insurers have adopted bancassurance in a much bigger

way than the state-owned Life Insurance Corporation (LIC) in the recent

years. Bancassurance is distribution of insurance products through a

bank's network.

In 2009-10, private insurers forked out US$ 44.4 million as commission

for banassurance, while the payout by LIC for this distribution model was

US$ 25,948.

Investment Policy

The FDI limit in the insurance space for foreign players is capped

at 26 per cent—permissible under the automatic route subject to a

licence from the official regulator, IRDA—but the government is

planning to raise it to 49 per cent and a bill to give effect to the

proposal is pending in the Rajya Sabha.

IRDA has stipulated that the mandatory ceding by every general

insurer in the country to the national reinsurer – General Insurance

Corporation (GIC), would continue to remain at 10 per cent as

under current regulations.

IRDA has also allowed insurance companies to offer 'Health plus

Life Combi Product', a policy that would provide life cover along

with health insurance to subscribers.

Pension Fund Regulatory and Development Authority (PFRDA)

would launch a low-cost pension scheme on April 1, 2010, to

provide social security cover to economically weaker sections like

rickshaw pullers, barbers and daily-wage labourers.



The Road Ahead

Saturation of insurance markets in many developed economies has

made the Indian market more attractive for international insurance

players, according to 'Booming Insurance Market in India (2008-2011)”.

Further, according to the report,

Total life insurance premium in India is projected to grow US$ 266

billion by 2010-11

Total non-life insurance premium is expected to increase at a

compound annual growth rate (CAGR) of 25 per cent for the

period spanning from 2008-09 to 2010-11

The home insurance segment is set to achieve a 100 per cent

growth as financial institutions have made home insurance

obligatory for housing loan approvals

In the next three years, health insurance is poised to become the

second largest business for non-life insurers after motor insurance

With a huge population base and large untapped market,

insurance industry is a big opportunity area in India for national as well as

foreign investors. India is the fifth largest life insurance market in the

emerging insurance economies globally and is growing at 32-34%

annually. This impressive growth in the market has been driven by

liberalization, with new players significantly enhancing product awareness

and promoting consumer education and information. The strong growth

potential of the country has also made international players to look at the

Indian insurance market. Moreover, saturation of insurance markets in

many developed economies has made the Indian market more attractive

for international insurance players, according to "Booming Insurance

Market in India (2008-2011)".



Key Players

The major players discussed in the report include LIC, Bajaj Allianz and

HDFC Standard under life insurance segments, and New India, United

India and ICICI Lombard under non-life insurance segments.

Porters Five Force Model In Insurance Sector

1. Threat of New Entrants. The average entrepreneur can't come

along and start a large insurance company. The threat of new

entrants lies within the insurance industry itself. Some companies

have carved out niche areas in which they underwrite insurance.

These insurance companies are fearful of being squeezed out by

the big players. Another threat for many insurance companies is

other financial services companies entering the market. What

would it take for a bank or investment bank to start offering

insurance products? In some countries, only regulations that

prevent banks and other financial firms from entering the industry.

If those barriers were ever broken down, like they were in the U.S.

with the Gramm-Leach-Bliley Act of 1999, you can be sure that the

floodgates will open.

2. Power of Suppliers. The suppliers of capital might not pose a big

threat, but the threat of suppliers luring away human capital does.

If a talented insurance underwriter is working for a smaller

insurance company (or one in a niche industry), there is the

chance that person will be enticed away by larger companies

looking to move into a particular market.

3. Power of Buyers. The individual doesn't pose much of a threat to

the insurance industry. Large corporate clients have a lot more

bargaining power with insurance companies. Large corporate

clients like airlines and pharmaceutical companies pay millions of



dollars a year in premiums. Insurance companies try extremely

hard to get high-margin corporate clients.

4. Availability of Substitutes. This one is pretty straight forward, for

there are plenty of substitutes in the insurance industry. Most large

insurance companies offer similar suites of services. Whether it is

auto, home, commercial, health or life insurance, chances are

there are competitors that can offer similar services. In some areas

of insurance, however, the availability of substitutes are few and

far between. Companies focusing on niche areas usually have a

competitive advantage, but this advantage depends entirely on the

size of the niche and on whether there are any barriers preventing

other firms from entering.

5. Competitive Rivalry. The insurance industry is becoming highly

competitive. The difference between one insurance company and

another is usually not that great. As a result, insurance has

become more like a commodity - an area in which the insurance

company with the low cost structure, greater efficiency and better

customer service will beat out competitors. Insurance companies

also use higher investment returns and a variety of insurance

investment products to try to lure in customers. In the long run,

we're likely to see more consolidation in the insurance industry.

Larger companies prefer to take over or merge with other

companies rather than spend the money to market and advertise

to people.



PROSPECTS

Total life insurance premium in India is projected to grow Rs

1,230,000 Crore by 2010-11.

Total non-life insurance premium is expected to increase at a

CAGR of 25% for the period spanning from 2008-09 to 2010-11.

With the entry of several low-cost airlines, along with fleet

expansion by existing ones and increasing corporate aircraft

ownership, the Indian aviation insurance market is all set to boom

in a big way in coming years.

Home insurance segment is set to achieve a 100% growth as

financial institutions have made home insurance obligatory for

housing loan approvals.

Health insurance is poised to become the second largest business

for non-life insurers after motor insurance in next three years.

A booming life insurance market has propelled the Indian life

insurance agents into the 'top 10 country list' in terms of

membership to the Million Dollar Round Table (MDRT) - an

exclusive club for the highest performing life insurance agents.



4.3 COMPANY ANALYSIS

After analyzing the economy and the respondent industry that are

taken into consideration now its term of the companies in the insurance

industry and their performance and the environment they are operating

into. Here I have taken 4 companies in insurance industry and analyzing

it. The companies are,

1. ICICI Prudential Life Insurance Company

2. Bajaj Allianz Life Insurance Company Limited

3. New India Assurance Company Limited

4. Birla Sun Life Insurance Company Limited

While analyzing the company the factor considered are SALES AND EPS

of each company. Some valuation ratios also used in some cases.

VALUATION RATIOS

CURRENT RATIO =Current Assets /Current Liabilities

Debt to Equity =Total Debt (Short Term +Long Term)/Equity

+Preference

Interest Coverage=Earnings Before Interest And Tax/Interest



4.3.1. ICICI Prudential Life Insurance Company

Incorporation Year 2000

Chairperson Ms.Chanda D. Kochhar

Managing Director Mr.V. Vaidyanathan,

Registered Office ICICI Pru Life Towers,

1089 Appasaheb Marathe Marg,

Prabhadevi, Mumbai 400025.

Email

Website www.iciciprulife.com

The Company

ICICI Prudential Life Insurance Company is a joint venture

between ICICI Bank, a premier financial powerhouse, and Prudential plc,

a leading international financial services group headquartered in the

United Kingdom. ICICI Prudential was amongst the first private sector

insurance companies to begin operations in December 2000 after

receiving approval from Insurance Regulatory Development Authority

(IRDA).

ICICI Prudential Life's capital stands at Rs.4,780 crores (as of

December 31, 2009) with ICICI Bank and Prudential plc holding 74% and

26% stake respectively. For the period April 1, 2009 to September 30,

2009, the company has garnered total received premium new business

premium of Rs 2,128 crores and has underwritten over 10 million policies

since inception. The company has assets held over Rs.53,000 crores as

on December 31, 2009. For the past nine years, ICICI Prudential Life has

retained its leadership position in the life insurance industry with a wide



range of flexible products that meet the needs of the Indian customer at

every step in life.

Distribution

ICICI Prudential Life has one of the largest distribution networks

amongst private life insurers in India. It has a strong presence across

India with 1,960 branches (including 1,096 micro-offices) and an advisor

base of over 230,000 (as on December 31, 2009) .The company has 6

bancassurance partners having tie-ups with ICICI Bank, Jalgaon Peoples

Co-op Bank, Ratanagiri District Central Co-op Bank, Ballia Kshetriya Co-

operative Bank, Renuka Nagrik Sahakari Bank, Bhandara Urban Co-

operative Bank

About the Promoters

ICICI BANK

About ICICI Bank: ICICI Bank Ltd (NYSE:IBN) is India's largest

private sector bank and the second largest bank in the country with

consolidated total assets of about US$ 102 billion as of June 30, 2009.

ICICI Bank’s subsidiaries include India’s leading private sector insurance

companies and among its largest securities brokerage firms, mutual

funds and private equity firms. ICICI Bank’s presence currently spans 19

countries, including India.

Prudential Plc

Established in London in 1848, Prudential plc, through its

businesses in the UK, Europe, US, Asia and the Middle East, provides

retail financial services products and services to more than 21 million

customers, policyholder and unit holders and manages over £249 billion

of funds worldwide (as of March, 2009). In Asia, Prudential is the leading

Europe-based life insurer with life operations in China, Hong Kong, India,

Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan,



Thailand, and Vietnam. Prudential is one of the largest asset

management companies in terms of overall assets sourced in Asia ex-

Japan, with £36.8 billion funds under management (as of March, 2009)

and operations in ten markets including China, Hong Kong, India, Japan,

Korea, Malaysia, Singapore, Taiwan, Vietnam and United Arab Emirates.

TABLE NO-4.3

CAGR SALES OF ICICI PRUDENTIAL

Rs’000

YEAR 2009 2008 2007 2006

SALES 3,34,440 21,168 346,062 75,862

CAGR SALES = 63.97%

INTERPRETATION

The above table shows the SALES of ICICI PRUDENTIAL in 2009

is RS.33,44,40,000, in 2008 it was RS.2,11,68,000 ,in 2007 it was

RS.34,60,62,000 and in 2006 it was RS.7,58,62,000

INFERENCE

In terms of SALES of ICICI PRUDENTIAL the higher sales was in 2007

and lower sales was in 2008 and the CAGR SALES is 63.97%



GRAPH NO-4.2

TABLE NO-4.4

CAGR EPS OF ICICI PRUDENTIAL

YEAR 2009 2008 2007 2006

EPS -5.5 -10.28 -5.28 -1.82

CAGR EPS = 44.57%

INTERPRETATION

The above table shows the EPS of ICICI PRUDENTIAL in 2009 is

-5.5 in 2008 it was-10.28,in 2007 it was -5.28and in 2006 it was -1.82



INFERENCE

In terms of EPS of ICICI PRUDENTIAL the high EPS 2006 was in

2007 and low EPS was in 2008 and the CAGR EPS is 44.57%

GRAPH NO -4.3



TABLE NO-4.5

CURRENT RATIO

YEAR 2009 2008 2007 2006

CA 7,174,265 10,711,662 7,183,106 3,580,046

CL 11,303,713 16,081,873 10,061,083 5,934,917

CR 0.634682162 0.66607055 0.713949582 0.603217534

INTERPRETATION

The above table shows the Current Ratio of ICICI PRUDENTIAL in

2009 is 0.6346, in 2008 it was 0.6660,in 2007 it was 0.7139 and in 2006 it

was 0.6032

INFERENCE

In terms of Current Ratio, ICICI PRUDENTIAL is high in 2007 and

lower in 2006



GRAPH NO-4.4

TABLE NO-4.6

DEBT EQUITY RATIO

YEAR 2009 2008 2007 2006

DEBT 54035 37935 40393 14247

EQUITY 47801758 37724213 20716828 11850000

DEBT/

EQUITY 0.00113038 0.001005588 0.001949768 0.001202278

INTERPRETATION

The DEBT EQUITY RATIO in 2009 was 0.0011303,in 2008 it was

0.0010055, in 2007 it was 0.0019497, and in 2006 it was 0.0012022



INFERENCE

The high D/E Ratio is in 2007 and lower is in 2008

GRAPH NO-4.5



TABLE NO-4.7

INTEREST COVERAGE RATIO

YEAR 2009 2008 2007 2006

PBIT -47258763 -46042734 -23611574 -11840436

INTEREST 256924 117134 267100 165786

PBIT/

INTEREST -183.94063 -393.07744 -88.39975

-71.41999

INTERPRETATION

The Interest coverage ratio in 2009 was -183.94,in 2008 it was -393.077,

in 2007 it was -88.399 and in 2006 it was -17.419

INFERENCE

Low Interest Coverage ratio (<2) is perceived to have a high degree of

financial risk. Therefore ICICI PRUDENTIAL is at a high financial risk in

all the four years

GRAPH NO-4.6



4.3.2.BAJAJ ALLIANZ Life Insurance Company Limited


Chairman Mr.Rahul Bajaj

Company Secretary Sameer Bakshi

Registered Office Bajaj Allianz Life Insurance Company

Limited

Grnd floor, G.E Plaza, Airport Road

Yerawada,Pune-411006

Email [email protected]

Website www.bajajallianz.co.in

Bajaj Allianz Life Insurance Company Limited engages in life

insurance business in India. It offers unit linked insurance products,

including regular and single premium; pension products, such as annuity

and retirement; endowment and money back products; protector, term

care, and risk care term plans; women insurance; health insurance; non

employer employee and employer employee insurance products; and

other products, such as children plans, family assure, fortune plus, capital

shield, and micro insurance. The company was founded in 2001 and is

headquartered in Pune, India. Bajaj Allianz Life Insurance Company

Limited is a subsidiary of Bajaj Holdings and Investment Limited.

Bajaj Allianz Insurance started its journey on May 2, 2001 when it

received the certificate of Registration from Insurance Regulatory and

Development Authority (IRDA) for conducting General Insurance

business in India including Health Insurance. As on the end of March

2009, the income of Bajaj Allianz Insurance went up to Rs.2,866 crores


http://www.bajajallianz.co.in/

mailto:[email protected]


with a growth of 11% over the previous year. It also registered a net profit

of Rs.95 crore, highest by any private insurer, in the last financial year.

Bajaj Allianz Life Insurance is a union between Allianz SE, one of the

largest Insurance Company and Bajaj Finserv.

Allianz SE is a leading insurance conglomerate globally and one

of the largest asset managers in the world, managing assets worth over a

Trillion (Over INR. 55, 00,000 Crores). Allianz SE has over 115 years of

financial experience and is present in over 70 countries around the world.

At Bajaj Allianz Life Insurance, customer delight is our guiding principle.

Our business philosophy is to ensure excellent insurance and investment

solutions by offering customized products, supported by the best

technology.

According to the company's annual report 2007-08, the company

tops in collection of new business premium as well as the policies sold. It

wrote a new business of Rs.66,745 million as against Rs.43,027 million in

2006. The insurer has a market share of 7 per cent as against 5.7 per

cent in 2006.



TABLE NO-4.8

Accelerated Growth of Bajaj Allianz

Fiscal Year No. of policies sold New Business in FY

2001-

2002(6mths)21,37 Rs.7 cr.

2002-2003 1,15,965 Rs.63.3 cr.

2003-2004 1,86,443 Rs.180 cr.

2004-2005 2,88,189 Rs.857 cr.

2005-2006 7,81,685 Rs.2,717 cr.

2006-2007 20,79,217 Rs.4,302 cr.

2007-2008 37,44,742 Rs.6,674 cr.

TABLE NO -4.9

CAGR SALES OF BAJAJ ALLIANZ

Rs.’000

YEAR 2009 2008 2007 2006

SALES 964,050 1,239,486 929,389 668,239

CAGR SALES = 12.99%



INTERPRETATION

The above table shows the sales of BAJAJ ALLIANZ in 2009 was

RS.96,40,50,000 ,in 2008 it was RS.1,23,94,86,000, in 2007 it was

RS.92,93,89,000 and in 2006 it was RS.66,82,39,000

INFERENCE

In terms of sales of BAJAJ ALLIANZ, the higher sales was in 2008 and

lower sales was in 2006 and the CAGAR SALES is 12.99%

GRAPH NO- 4.7



TABLE NO-4.10

CAGR EPS FOR BAJAJ ALLIANZ

YEAR 2009 2008 2007 2006

EPS 8.63 9.59 6.85 4.69

CAGR EPS =22.54%

INTERPRETATION

The above table shows the EPS of BAJAJ ALLIANZ in 2009 was 8.63,in

2008 it was 9.59, in 2007 it was 6.85 and in 2006 it was 4.69

INFERENCE

In terms of EPS of BAJAJ ALLIANZ, the high EPS was in 2008 and lower

EPS was in 2006 and the CAGAR EPS is 22.54%

GRAPH NO-4.8



TABLE NO-4.11

CURRENT RATIO

Year 2009 2008 2007 2006

Current assets 8,295,295 5,288,350 3,358,711 2,646,097

Current liabilities 14,495,261 10,104,661 7,016,903 4,081,074

Current ratio 0.572276346 0.523357488 0.47866003 0.648382509

INTERPRETATION

The above table shows the Current Ratio of BAJAJ ALLIANZ in

2009 was 0.5722,in 2008 it was 0.5233, in 2007 it was 0.4786 and in

2006 it was 0.6483

INFERENCE

In terms of Current Ratio of BAJAJ ALLIANZ, the higher is in 2006 and

lower is in 2007



GRAPH NO-4.9

TABLE NO -4.12

DEBT EQUITY RATIO

YEAR 2009 2008 2007 2006

DEBT 0 0 0 0

EQUITY 6724719 5773150 4034165 2670720

DEBT/EQUITY - - - -

INFERENCE

There is no debt –equity ratio, therefore the company has no financial

problem.



TABLE NO-4.13


YEAR 2009 2008 2007 2006

PBIT 3911618 2965405 1935565 1184287

INTEREST 492334 335559 205122 98061

PBIT/

INTEREST 7.94504949 8.8372089 9.4361648 12.077043

INTERPRETATION

The Interest coverage ratio in 2009 was 7.94,in 2008 it was 8.83, in 2007

it was 9.43 and in 2006 it was 12.07

INFERENCE


financial risk. Therefore in BAJAJ ALLIANZ all the four years it was >2

therefore the company is in a good financial condition

GRAPH NO-10



4.3.3.NEW INDIA ASSURANCE COMPANY LIMITED


Chairman M.Ramadoss

Company Secretary A R Sekar

Registered Office New India Assurance Company building

87, Mahatma Gandhi Road ,Fort

Mumbai-400001

Email [email protected]

Website www.newindia.co.in

Established by Sir Dorab Tata in 1919, New India is the first

fully Indian owned insurance company in India. New India is a pioneer

among the Indian Companies on various fronts, right from insuring the

first domestic airlines in 1946 to satellite insurance in 1980. With a wide

range of policies New India has become one of the largest non-life

insurance companies, not only in India, but also in the Afro-Asian region.

Gross Premium (in India) of Rs.5508.20 cores in the year

2008-2009, as against Rs. 5276.91 in the year 2007-2008. Assets

Rs.27444.57crores as on 31st March 2007. Network of Offices-26

Regional Offices, 393 Divisional Offices, 614 Branches and 34 Direct

Agent Branches. Rank No.1 in the Indian market. Largest Non-Life

insurer in Afro-Asia excluding Japan. First Indian Non-life Company to

cross Rs.5000crores Gross Premium. Global Re-insurance facilities.

Over-seas presence in countries like Japan, U.K, Middle East, Fiji and

Australia. Gross Direct Premium has increased from Rs.6151.46crs. (07-

08) to Rs.6455.78crs.(08-09) registering a growth of 4.95% (08-09) as


http://www.newindia.co.in/

mailto:[email protected]


against 3.62% growth registered during 07-08.

FOREIGN OPERATIONS

The Gross Premium is a Rs.1376.90 core in 2008-09 as against

Rs.1143.63 crores in 2007-08 showing an accretion of 20.4%. The Net

Premium is Rs.1164.28 crores in 2008-09 as against Rs.932.07 cores in

2007-08 showing an increase of 24.9%. Our operations in Saudi Arabia

show premium income up to August 2008 only as we had stopped

functioning as an Agency and are operating as an Associate Company in

Saudi Arabia.

Foreign operations show underwriting profit of Rs.78.08crores in

2008-09 as against underwriting loss of Rs.70.07 crores in 2007-08. The

underwriting profit is after a provision of Reserve Strain of Rs.121.17

crores in 2008-09 in respect of unexpired risks. No major claims were

reported during the year. The foreign exchange earning during the year

2008-09 amounted to Rs8.62 crores towards dividend and repatriation of

management fees from our Associate and Subsidiary companies.

Overseas operational result for the year ended 31st March 2009 is as

under: (Rupees in Crores)



TABLE NO-4.14

CAGR SALES OF NEW INDIA ASSAURANCE COMPANY

YEAR 2009 2008 2007 2006

SALES 877927 292325 161459 152161

Rs.’000

CAGR SALES = 79.35%

INTERPRETATION

The above table shows the sales of NEW INDIA ASSURANCE in

2009 was RS.87,79,27,000,in 2008 it was RS.29,23,25,000, in 2007 it

was RS.16,14,59,000 and in 2006 it was RS.15,21,61,000

INFERENCE

In terms of sales of NEW INDIA ASSURANCE, the higher sales was in

2009 and lower sales was in 2006 and the CAGAR SALES is 79.35%

GRAPH NO-4.11



TABLE NO-4.15

CAGR EPS FOR NEW INDIA ASSAURANCE COMPANY

YEAR 2009 2008 2007 2006

EPS 11.21 70.06 73 35.82

CAGR EPS = 32.10%

INTERPRETATION

The above table shows the EPS of NEW INDIA ASSURANCE in

2009 was 11.21,in 2008 it was 70.06, in 2007 it was 73 and in 2006 it

was 35.82

INFERENCE



In terms of EPS of NEW INDIA ASSURANCE ,the high EPS was in 2007

and lower EPS was in 2009 and the CAGAR EPS is 32.10%

GRAPH NO-4.12

TABLE NO-4.16

CURRENT RATIO



YEAR 2009 2008 2007 2006

CA 83878540 65281059 54082391 52898303

CL 89761083 77620843 76047865 71347424

CR 0.934464438 0.841024865 0.711162516 0.741418541

INTERPRETATION

The above table shows the Current Ratio of NEW INDIA

ASSURANCE in 2009 was 0.93.44,in 2008 it was 0.8410, in 2007 it was

0.7111 and in 2006 it was 0.7414

INFERENCE

In terms of Current Ratio of NEW INDIA ASSURANCE, the higher is in

2009 and lower is in 2007

GRAPH NO-4.13



TABLE NO-4.17

DEBT EQUITY RATIO

YEAR 2009 2008 2007 2006

DEBT 5938624 6577647 7454533 7865186

EQUITY 73221519 69728035 60201558 48080308

DEBT/

EQUITY 0.0811049 0.0943328 0.1238262 0.1635843

INTERPRETATION

The above table shows the D/E Ratio of NEW INDIA

ASSURANCE in 2009 was 0.0811,in 2008 it was 0.0943, in 2007 it was

0.1238 and in 2006 it was 0.1635

INFERENCE

The high D/E Ratio of NEW INDIA ASSURANCE was in 2006 and low

D/E Ratio was in 2009

GRAPH NO -4.14



TABLE NO-4.18


YEAR 2009 2008 2007 2006

PBIT 4531919 14011281 11176571 5457853

INTEREST 5426859 4986562 4208621 3642405

PBIT/

INTEREST 0.83509061 2.8098078

2.6556373

2 1.49842013

INTERPRETATION

The Interest coverage ratio in 2009 was 0.8350,in 2008 it was 2.809, in

2007 it was 2.655 and in 2006 it was 1.498

INFERENCE


financial risk. Therefore NEW INDIA ASSURANCE faced a financial risk

in 2009 and 2006



GRAPH NO-4.15

4.3.4. Birla Sun Life Insurance Company Limited




Managing Director Mr. Ajay Srinivasan

General Manager Mr. Sanjiv Bhasin

Registered Office Birla Sun Life Insurance Company Limited,

One India bulls Centre,

Tower 1, 15th & 16th Floor, Jupiter Mill

Compound,

841,Senapati Bapat Marag,

Elphinstone Road Mumbai- 400013

Website www.Insurance.birlasunlife.com

Established in 2000, Birla Sun Life Insurance Company Limited

(BSLI) is a joint venture between the Aditya Birla Group, a well known

and trusted name globally amongst Indian conglomerates and Sun Life

Financial Inc, leading international financial services organization from

Canada. The local knowledge of the Aditya Birla Group combined with

the domain expertise of Sun Life Financial Inc., offers a formidable

protection for its customers’ future.

With an experience of over 9 years, BSLI has contributed

significantly to the growth and development of the life insurance industry

in India and currently ranks amongst the top 5 private life insurance

companies in the country. Known for its innovation and creating industry

benchmarks, BSLI has several firsts to its credit. It was the first Indian

Insurance Company to introduce “Free Look Period” and the same was


http://www.Insurance.birlasunlife.com/


made mandatory by IRDA for all other life insurance companies.

Additionally, BSLI pioneered the launch of Unit Linked Life Insurance

plans amongst the private players in India. To establish credibility and

further transparency, BSLI also enjoys the prestige to be the originator of

practice to disclose portfolio on monthly basis. These category

development initiatives have helped BSLI be closer to its policy holders’

expectations, which gets further accentuated by the complete bouquet of

insurance products (viz. pure term plan, life stage products, health plan

and retirement plan) that the company offers. Add to this, the extensive

reach through its network of 600 branches and 1,75,000 empanelled

advisors.

This impressive combination of domain expertise, product range,

reach and ears on ground, helped BSLI cover more than 2 million lives

since it commenced operations and establish a customer base spread

across more than 1500 towns and cities in India. To ensure that our

customers have an impeccable experience, BSLI has ensured that it has

lowest outstanding claims ratio of 0.00% for FY 2008-09. Additionally,

BSLI has the best Turn Around Time according to LOMA on all claims

Parameters. Such services are well supported by sound financials that

the Company has. The AUM of BSLI stood at Rs. 8165 crs as on

February 28, 2009, while as on March 31, 2009, the company has a

robust capital base of Rs. 2000 crs.

TABLE NO-4.19



CAGR SALES OF BIRLA SUN LIFE INSURANCE COMPANY LIMITED

RS.’000

YEAR 2009 2008 2007 2006

SALES 286159 260674 153828 93606

CARG SALES = 45.1

INTERPRETATION

The above table shows the sales of BIRLA SUNLIFE in 2009 was

RS.28,61,59,000, in 2008 it was RS.26,06,74,000, in 2007 it was

RS.15,38,28,000 and in 2006 it was RS. 9,36,06,000

INFERENCE

In terms of sales of BIRLA SUNLIFE, the higher sales was in 2009

and lower sales was in 2006 and the CAGAR SALES is 45.15%

GRAPH NO-4.16



TABLE NO-4.20

CAGAR EPS OF BIRLA SUN LIFE INSURANCE COMPANY LIMITED

YEAR 2009 2008 2007 2006

EPS -4.44 -5.11 -2.58 -1.57

CAGR EPS = 41.41

INTERPRETATION

The above table shows of EPS of BIRLA SUNLIFE in 2009 was -

4.44,in 2008 it was -5.11, in 2007 it was -2.58 and in 2006 it was -1.57

INFERENCE



In terms of EPS of BIRLA SUNLIFE, the high EPS was in 2006

and low EPS was in 2008 and the CAGAR EPS is 41.41%

GRAPH NO-4.17

TABLE NO-4.21



CURRENT RATIO

YEAR 2009 2008 2007 2006

CA 6234018 4827288 2418278 1204597

CL 7399580 5385957 3089879 1607110

CR 0.842482681 0.89627303 0.782644887 0.749542346

INTERPRETATION

The above table shows of Current Ratio of BIRLA SUNLIFE in

2009 was 0.8424, in 2008 it was 0.8962, in 2007 it was 0.7826 and in

2006 it was 0.7495

INFERENCE

In terms of Current Ratio of BIRLA SUNLIFE, the higher is in 2008 and

lower is in 2006

GRAPH NO-4.18



TABLE NO -4.22

DEBT EQUITY RATIO

YEAR 2009 2008 2007 2006

DEBT 223516 149932 81639 20249

EQUITY 19995000 12745000 6715000 4600000

DEBT/

EQUITY 0.01117859 0.01176398 0.01215770 0.00440195

INTERPRETATION

The above table shows the D/E Ratio of BIRLA SUNLIFE in 2009

was 0.01117,in 2008 it was 0.01176, in 2007 it was 0.01215 and in 2006

it was 0.0044

INFERENCE



The high D/E Ratio of BIRLA SUNLIFE was in 2007 and lower was in

2006

GRAPH NO-4.19

TABLE NO-4.23




YEAR 2009 2008 2007 2006

PBIT -23570002 -13842368 -5997165 -3753456

INTEREST 301761 200110 157061 107270

PBIT/

INTEREST -78.108178 -69.173794 -38.183667 -34.99073

INTERPRETATION

The Interest coverage ratio in 2009 was -78.108,in 2008 it was -69.17, in

2007 it was -38.18 and in 2006 it was -34.99

INFERENCE


financial risk. Therefore BIRLA SUNLIFE is in a high financial risk

GRAPH NO-4.20



CHAPTER -5

SUMMARY OF FINDINGS,

CONCLUSION

AND

SUGGESTIONS



5.1 FINDINGS

Now at the final the following facts emerge from the study of insurance

sector for selecting appropriate company through analyzing economy,

industry and companies

When come to the economic factor the global economies are

getting interrelated, the Indian market will no longer be limited to

domestic economic situation.

Agricultural growth rate and the monsoon both have direct

influence on insurance and responsible for the economy to

become prospers.

With the entry of several low-cost airlines, along with fleet

expansion by existing ones and increasing corporate aircraft

ownership, the Indian aviation insurance market is all set to boom

in a big way in coming years.

Home insurance segment is set to achieve a 100% growth as

financial institutions have made home insurance obligatory for

housing loan approvals.

Health insurance is poised to become the second largest business

for non-life insurers after motor insurance in next three years.



5.2 CONCLUSION

Fundamental analysis always holds good only if the company

statement are revealed clearly and analyzed properly. Investment is

serious business and not making decision on vague. Fundamental

analysis has a direct impact on insurance market.

Competition will surely cause the market to grow beyond current

rates, create a bigger "pie," and offer additional consumer choices

through the introduction of new products, services, and price options. Yet,

at the same time, public and private sector companies will be working

together to ensure healthy growth and development of the sector.

Challenges such as developing a common industry code of conduct,

contributing to a common catastrophe reserve fund, and chalking out

agreements between insurers to settle claims to the benefit of the

consumer will require concerted effort from both sectors. The market is

now in an evolving phase where one can expect a lot of actions in coming

days.

The current impediments for foreign participation – like 26% equity

cap on foreign partner, ill defined regulatory role of IRDA (Insurance

Regulatory development Authority- the watchdog of the industry) in

pension business etc.—are expected to be removed in near future. The

early-adopters will then have a clear advantage compared to laggards in

gaining the market share and market leadership. They will need to make

sure right now that all their infrastructure is in place so that they can reap

the benefit of an "unlimited potential."



SUGGESTIONS

Insurance companies have lot of opportunities to grow. So

investing in these types of industries help the investors at long run.

Before investing in any company, it’s required to implement all the

data and financial results.

Much of the demand may not be accessible because of poor

distribution, large distances or high costs relative to returns.

There is a tendency to target the business of existing companies

rather than expanding the market. New players find it easier to try

to capture existing customers by offering better service or other

advantages.



BIBLIOGRAPHY



BIBLIOGRAPHY

NEWS PAPERS

Economic Times

Business Standard

Financial Express

BOOKS

Prasanna Chandra, 2009, Investment Analysis And Portfolio

Management, Third edition, Tata McGraw-Hill publishing company ltd.

WEBSITES

www.economywatch.com

www.iciciprulife.com

www.bajajallianz.co.in

www.newindia.co.in

www.insurance.birlasunlife.com

www.iloveindia.com

ANNEXURE


http://www.iloveindia.com/

http://www.insurance.birlasunlife.com/

http://www.newindia.co.in/

http://www.bajajallianz.co.in/

http://www.iciciprulife.com/

http://www.economywatch.com/

Fundamental analysis and its impact on insurance sector

Documents

Transcript of Fundamental analysis and its impact on insurance sector