1. The economy is highly influenced by the Financial System of the country. The Indian Financial System has been broadly divided into two segments: the organized and the unorganized. An investor has a wide array of investment avenues available. Economic well being in the long run depends significantly on how wisely he invests.
For todays complex financial scenario a Mutual Fund is the ideal investment option. Markets for other investment avenues have become information driven. The Mutual Fund Industry in India began with the setting up of the Unit Trust of India (UTI) in 1964 by the Government of India. Ever since then this industry has witnessed numerous changes and growth. In 1987 public sector banks and insurance companies were permitted to set up mutual funds. Securities Exchange Board of India (SEBI) formulated the Mutual Fund (Regulation) 1993, which for the first time established a comprehensive regulatory framework for the mutual fund industry. Since the private and joint sectors and the share of the private players have set up then several mutual funds has risen rapidly.
When investors are confronted with an astounding range of products, from traditional bank deposits to downright shady money-multiplier schemes, it has to be judged on the yardsticks of return, liquidity, safety, convenience and tax efficiency.
Insurance is defined as a co-operative device to spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to ensure themselves against that risk.Risk is uncertainty of a financial loss.It should not be confused with the chance of loss, which is the probable number of losses out of confused with peril, which is defined as the cause of loss or with hazard, which is a condition, may increase the chance of loss.
Every risk involves the loss of one or other kind.The function of insurance is to spread the loss over a large number of persons who are agreed to co-operate each other at the time of loss.The risk cannot be over rated but loss occurring due to a certain risk can be distributed amongst the agreed persons.They are agreed to share the loss because the chance of loss is there.
Everybodys greatest asset during his/her working years is his/her ability to earn an income.It is important to adequately safeguard this asset to ensure his/her cash flow will continue in the event of an unexpected disaster.His/her insurance policies will help to protect him/her (if any) against any unforeseen odds.
There are two kinds of insurance available viz. Life Insurance and General Insurance.
Life Insurance
Provides for dependents in case of death.
Replaces earning power, if disabled.
Protects his/her ability to meet accumulation / education / marriage goals.
General Insurance
Addresses health care concerns.
Provides for auto, home and personal liability protection.
Provides for potential long-term care costs.
Plans for business continuation.
GENERAL DEFINITION
The general definitions are given by the social scientists & they consider insurance as a device to protection against risks, or a provision against inevitable contingencies or a co-operative device of spreading risks.Some of such definitions are given below:
In the words of John Magee, Insurance is a plan by which large number of people associate themselves & transfer to the shoulder of all, risks that attach to individuals.
In the words of Sir William Bevridges, The collective bearing of risks is insurance.
In the words of Boone & Kurtz, Insurance is a substitution for a small known loss (the insurance premium) for a large unknown loss, which may or may not occur.
In the words of Thomas, Insurance is a provision, which a prudent man makes against for the loss or inevitable contingencies, loss or misfortune.
In the words of Allen Z. Mayerson, Insurance is a device for the transfer to an insurer of certain risks of economic loss that would otherwise come by the insured.
In the words of Ghosh & Agarwal, Insurance is a co-operative form of distributing a certain risk over a group of persons who are exposed to it.
FUNDAMENTAL STATEMENT
These are based on economic or business oriented since it is a device providing financial compensation against risk or misfortune.
In the words of D. S. Harsell, Insurance may be defined as a social device providing financial compensation for the effects of misfortune, the payments being made from the accumulated contribution of all parties participating in the scheme.
In the words of Robert I. Mehr & Emerson Cammark, Insurance is purchased to offset the risk resulting from hazards, which exposes a person to loss.
In the words of Riegel & Miller, Insurance is a social device whereby the uncertain risks of individuals may be combined in a group & thus made more certain small periodic contributions, by the individuals providing a fund, out of which, those who suffer losses may be reimbursed.
Insurance follows important characteristics.
Sharing of Risks
Insurance is a co-operative device to share the burden of risk, which may fall on happening of some unforeseen events, such as the death of head of the family, or on happening of marine perils or loss of by fire.
Co-operative Device
Insurance is a co-operative form of distributing a certain risk over a group of persons who are exposed to it (Ghosh & Agarwal).A large number of persons share the losses arising from a particular risk.
Evaluation of Risk
For the purpose of ascertaining the insurance premium, the volume of risk is evaluated, which forms the basis of insurance contract.
Payment of happening of specified event
On happening of specified event, the insurance company is bound to make payment to the insured.Happening of the specified event is certain in life insurance, but in the case of fire, marine or accidental insurance, it is not necessary.In such cases, the insurer is not liable for payment of indemnity.
Amount of payment
The amount of payment in indemnity insurance depends on the nature of losses occurred, subject to a maximum of the sum insured.In life insurance, however, a fixed amount is paid on the happening of some uncertain event or on the maturity of the policy.
Large number of insured persons
The success of insurance business depends on the large number of persons insured against similar risk.This will enable the insurer to spread the losses of risk among large number of persons, thus keeping the premium rate at the minimum.
Insurance is not a gambling
Insurance is not a gambling.Gambling is illegal, which gives gain to one party & loss to the other.Insurance is a valid contract to indemnity against losses.Moreover, insurable interest is present in insurance contracts & it has the element of investment also.
Insurance is not charity
Charity pays without consideration but in the case of insurance, premium is paid by the insured to the insurer in consideration of future payment.
Protection against risks
Insurance provides protection against risks involved in life, materials & property.It is a device to avoid or reduce risks.
Spreading of risk
Insurance is a plan, which spread the risks & losses of few people among a large number of people.John Magee writes, Insurance is a plan by which large number of people associates themselves & transfer to the shoulders of all, risks attached to individuals.
Transfer of risk
Insurance is a plan in which the insured transfers his risk on the insurer.This may be the reason that Mayerson observes, that insurance is a device to transfer some economic losses to the insurer, and otherwise such losses would have been borne by the insured themselves.
Ascertaining of losses
By taking a life insurance policy, one can ascertain his future losses in terms of money.This is done by the insurer to determining the rate of premium, which is calculated on the basis of maximum risks.
A contract
Insurance is a legal contract between the insurer & insured under which the insurer promises to compensate the insured financially within the scope of insurance policy, & the insured promises to pay a fixed rate of premium to the insurer.
Based upon certain principle
Insurance is a contract based upon certain fundamental principles of insurance, which includes utmost good faith, insurable interest, contribution, indemnity, causa proxima, subrogation, etc., which are the basis for successful operation of insurance plan.
Utmost Good Faith
Insurance is a contract based on good faith between the parties.Therefore, both the parties are bound to disclose the important facts affecting to the contract before each other.Utmost good faith is one of the important principles of insurance.
To conclude, insurance is a device for the transfer of risks from the insured to the insurers, who agree to it for a consideration (known as premium), & promises that the specified extent of loss suffered by the insured shall be compensated.It is a legal contract of a technical nature.
To conclude, insurance is a device for the transfer of risks from the insured to the insurers, who agree to it for a consideration (known as premium), & promises that the specified extent of loss suffered by the insured shall be compensated.It is a legal contract of a technical nature.
In order to go through the journey of LIC Path of private sector insurance companies to nationalize company to again private sector insurance companies is given as below:
Path
Private Life Insurance Companies
Nationalization
Privatization of Life Insurance Sector
1870 1956Life Insurance concept was accepted with almost 250 Private Life Insurance Companies1956Merging of almost 250 Private Sector Life Insurance Companies in one nationalizedLife Insurance Corporation of India1995Proposal to privatize life insurance businessJune 2000Registration process was notifiedAugust 2000Application was filedOctober 20001st license was issued with introduction of IRDA2002During the month of January, 11 Life and Non-Life Private Insurance license were issued
In order to elaborate the above path lets go through the history of Life Insurance Sector.
On 3rd December 1670, seven earnest men of Bombay with just seven rupees for initial expenses gave shape to a plan of offering insurance to the public without the risk of ruin and the Bombay Mutual Life Insurance Society came into existence.
Right up to the end of the 19th century, foreign insurance companies had an upper hand in the matter of insurance business and they enjoyed mere monopoly and the partiality were observed in the form that Indian lives were insured with 10% extra premium as a common practice, at that time Lala Harikishan Lal from Lahore was called The Napoleon of Indian Finance as he was then called to launch the Bharat Insurance Company at Lahore (1896) in Punjab.
Prior to 1912, India had no legislation for regulating insurance.The Life Insurance Companies Act 1912 and the Provident Fund Act 1912 were passed.
The Insurance Act 1938 was the first comprehensive legislation governing not only life but also non-life branches of insurance to provide strict state control over insurance business.
But after the introduction of Insurance Act 1938, the demand for nationalization of Life Insurance Industry was raised, there were so many reasons in order to nationalize the insurance sector.
They are:
Policyholders will be provided cent percent security.
Expenses will be reduced due to Absence of duplication, wasteful competition
Better service due to absence of profit motive.
The funds will be available for nation building activities.
Insurance is servicing sector and so that it should be in the hands of government only.
Above are few but strong reasons, which have contributed towards nationalization of insurance sector, and then after in the year 1956, all insurance companies were merged in to one and Life Insurance Corporation of India came into existence.
Till the year 1999, LIC of India was the only insurance sector in economic market with ever-increasing growth rate and market share with the capacity to earn high rate of profit and thus profitability.In spite of all these merits of LIC, the overall status of insurance sector was not so satisfactory.
Business figure before the introduction of IRDA
Population1.00 BillionInsurable Population0.36 BillionNo. Of insured individuals0.08 BillionPotential uninsured individuals0.28 BillionNew Business premium0.66 Billion
Above stated figures clearly shows that from 1 Billion population of India, almost 0.28 Billion population was uninsured.Again the existing government unit did not properly meet the emerging segments like retirement, disability.Moreover, the government wanted 25% p.a. growth rate in new business premium from insurance sector.All these factors combine forced the government to take the decision about the privatization of insurance sector.
In order to increase the business activities, the introduction of IRDA was made by Government.Thus, IRDA (Insurance Regulatory and Development Authority) witnessed the existence power to co-ordinate regular and control the insurance business.
Private Insurers in Indian Insurance Market
Registration No.Date of RegistrationName of the Company10123.10.2000HDFC Standard Life10415.11.2000Max New York Life10524.11.2000HDFC Life Life10710.01.2001Om Kotak Mahindra Life10931.01.2001Birla Sun Life Insurance11012.02.2001TATA AIG Life Insurance11130.03.2001SBI Life Insurance
LIFE INSURANCE CORPORATION OF INDIA
On January 19,1956 the president of Indian Union issued an ordinance, providing for the taking over, in public interest, of the management of life insurance pending nationalization of life insurance business.
In June 1956, the parliament passed a bill for nationalization of life insurance business in India and for setting up a corporation as the sole agency for carrying on this business in India.The corporation, set up under this Act, is known as Life Insurance Corporation of India, which started functioning on September 1, 1956.
For the purpose of servicing of policies issued before September 1, 1956, some integrated head offices & integrated branch office units were created.These offices have nothing to do with the policies issued by the corporation.Corporation also took over foreign life business of the Indian insurers.
Objectives of LIC
Maximize mobilization of peoples savings by making insurance linked savings adequately attractive.Conduct business with utmost economy & with the full realization that the moneys belong to the policyholders.
To publicize & extent the insurance business specifically in rural & remote areas.
To provide suitable financial security at reasonable cost.
To make the investments more dynamic by popularizing the savings plans attached with insurance.
To invest the insurance fund keeping with maximum benefit & interest of insureds.
To run the insurance business at minimum administrative costs.
To function as trusts of the insureds.
To fulfill the needs of the society in a changing social and economic environment.
To make the employees collectively responsible for providing efficient services to the insureds.
To develop work satisfaction among agents & employees.
HDFC STANDARD LIFE INSURANCE COMPANY
HDFC Standard Life Insurance Co. Ltd. is a joint venture between HDFC, Indias largest housing finance institution and Standard Life Assurance Company, Europes largest mutual life company.HDFC manages Rs. 21,450 Crores in assets and Standard Life manages over US $100 billion in assets.Both the promoters are well known for their ethical dealings, their financial strength and their commitment to be a long-term player in the life insurance industry.
MAX NEW YORK LIFE INSURANCE COMPANY
Max New York Life Insurance Company is a joint venture between New York Life International Inc. and Max India Limited.New York Life, a Fortune 100 Company, is one of the worlds experts in life insurance with over 156 years of experience in the business and over US$ 165 billion (Rs. 775,000 Crores) in assets under management.Max India Limited is a multi-business corporate, focused on the knowledge, people, and service-oriented business of life insurance, healthcare and information technology.
HDFC LIFE LIFE INSURANCE COMPANY
HDFC Life Life Insurance Company is a joint venture between HDFC Bank, a premier financial powerhouse and Standard Life, a leading international financial services group headquartered in the United Kingdom. HDFC Life was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA).
OM KOTAK MAHINDRA LIFE INSURANCE
Om Kotak Mahindra Life Insurance, a company under Kotak Mahindra Group is a 74:26 life insurance joint venture between Kotak Mahindra Finance Limited with Old Mutual, U.K.
The philosophy of Om Kotak Mahindra is helping their customers take financial decisions at every stage in life.Their aim is to consistently offer a wide range of innovative life insurance products, to help their customers remain financially independent, which is why they believe that freedom to take life on "Jeene Ki Aazadi"
The alliance of Om Kotak Mahindra with Old Mutual has given it unmatched expertise in life insurance area.With 156 years of experience in life insurance business, Old Mutual is today an International Financial Service Group based in London.Group
BIRLA SUN LIFE INSURANCE COMPANY
It is a joint venture of Aditya Birla Group and Sun Life Financial Services with the objective that Insurance is not about something going wrong. It's often about things going right. One of the wonders of human nature is that we never believe anything can actually go wrong. Surely, life has its share of ifs. At Birla Sun Life however, we believe it has its equally pleasant share of buts as well. We at Birla Sun Life stand committed to helping you realize those happy moments, which make a life. Be it living the same lifestyle in your post retirement days or providing a secure future for your loved ones, in case something happens to you.
TATA AIG LIFE INSURANCE COMPANY
Tata AIG is a joint venture that is backed by the Tata Group Indias most respected industrial conglomerate, with revenues of more than US $8.4 billion, and American International Group, Inc. (AIG) the leading US-based international insurance and financial services organization, with a presence in over 130 countries and jurisdictions throughout the world.Tata AIG offers a gamut of innovative products in the Life Insurance sector.
SBI LIFE INSURANCE COMPANY
SBI Life Insurance Company Ltd. is a joint venture between State Bank of India and Cardiff of France.SBI is the largest bank in India and Cardiff is a leading insurance company in France operating in 29 countries.Cardiff is a wholly owned subsidiary of BNP Paribas, the largest European Bank.
As per the figure available with IRDA reports for the period ended in August 2005, the 13 private players have grabbed nearly 26% market share from LIC in terms of premium underwritten as against 17.70% in August 2004 The list of insurer with premium underwritten, investment and their market share have been presented in table.
Table shows that the life insurance market has collected Rs. 16,604cr as a fresh premium. It grew about 2.8 times bigger than he 3 players put together in terms of premium collection. It is still growing at the rate 26% per annum. It is relevant to that the market share by them. Out of 13 pvt. Players, HDFC Life has leading pvt. Player in the Life insurance, invested rs. 625 cr which is the highest investments among the private players and captured first position with 7.11% of the market share. Secondly, Max New York life has invested Rs. 305 cr and had failed to capture the second position in terms of market share and was satisfied with only 1.32% Followed by HDFC standard Life had invested Rs. 255 cr and 2.96% of the market share was captured and stood third positioninterims of investments and capturing market share. Allianz Bajaj has invested Rs. 250 cr and stands fourth in terms of investment but captured second position with 6.12% of the market share. This indicates that there is no relation between investment and acquiring market share and mere capital is not alone playing any significant role in terms of capturing market share. There may be some other variables like: (a) innovative schemes, (b) brand loyalty, (c) professional outlook, (d) transference in theirtransactions, etc. It can be noticed that the capital is not playing any attaching, kindly significant role in terms of premium collection and capturing market share. It seems to be Bajaj Allianz would occupy the first position in near future in terms of market share as well as annual growth rate.
Chart 1 shows that. Among private players, the HDFC Life has captured the 28% of the market share up to December 2005, followed by Allianz Bajaj with 23% and HDFC Standard Life with 11% TATA Aig life and Birla Sunlife with 7% each and remaining other players have captured less than 5% of market share.
Chart 2 shows that the annual growth rate of the private life insurance players from November 2004-05. it is interesting to note that Allianz Bajaj has achived 264.09% annual growth rate in terms of premium collection and the fastest growing insurance players, followed by HDFC Standard with 143.1% and Metlife with 136.45%, and remaining other players have doubled their premium in a span of one year, whereas Birla Sunlife and SBI life have failed to collect the premium consistently and registered negative growth rates 7.93% and 2.48% respectively. Surprisingly, HDFC Life Co. has not been retrained in their leading position in 2005.
The market share of the LIC has been declining since 2000, after opening up of the sector to private companies, LICs higher market share in the number of policies sold compared with premium income, so it is to be inferred that the private players are cornering a larger share of high premium policies. Further all policymakers are expected that, insurance business will take wings under bancassurance but despite the belief SBI Life was registered negative 2.48% annual growth rate in corresponding period. It is need to be viewed serious by the RBI and IRDA authorities.
HDFC Lifes Market Share:
Insurance CompanyMarket Share(in per cent)LIC48.1%ICICI Prudential13.7 %Bajaj Allianz10.3%SBI Life6.2%HDFC Life4.1%Birla Sun life3.4%Reliance Life3.4%Max New York2.4%OM Kotak1.9%AVIVA1.8%Tata AIG1.5%Met Life1.4%
Formation of HDFC LIFE
Introduction to HDFC Group
HDFC:
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.
lefttopDecision Maker :
Mr. C. M. Vasudev holds a Master's Degree in Economics and Physics. He joined the Indian Administrative Services in 1966. Mr. Vasudev has worked as Executive Director of World Bank representing India, Bangladesh, Sri Lanka and Bhutan. Mr. Vasudev has extensive experience of working at policy making levels in the financial sector and was responsible for laying down policies and oversight of management. He chaired World Bank's committee on development effectiveness with responsibility of ensuring effectiveness of World Bank's operations. Mr. Vasudev has also worked as Secretary, Ministry of Finance for more than 8 years and has undertaken various assignments viz. Secretary, Department of Economic Affairs, Department of Expenditure, Department of Banking and Additional Secretary Budget with responsibility for framing the fiscal policies and policies for economic reforms and for coordinating preparation of budgets of the Government of India and monitoring its implementation. He has worked as Government nominee Director on the Boards of many companies in the financial sector including State Bank of India, IDBI, ICICI, IDFC, NABARD, National Housing Bank and also on the Central Board of the RBI. He was also member secretary of the Narasimhan Committee on financial sector reforms. He also chaired a committee on reforms of the NBFC sector. He also worked as Joint Secretary of Ministry of Commerce with responsibility for state trading, trade policy including interface with WTO.
Managing Director:
lefttopMr. Aditya Puri holds a Bachelors degree in Commerce from Punjab University and is an associate member of the Institute of Chartered Accountants of India. Mr. Aditya Puri has been the Managing Director of the Bank since September 1994. He has about 36 years of banking experience in India and abroad.Prior to joining the bank Mr.puri was the Chief Executive Officer of Citibank,Malaysia from 1992-1994.Mr.Puri holds 3,37,953 equity shares in the bank as on March 31,2010.
5895975-838200GROUP COMPANIES
HDFC Bank: World Class Indian Bank- among the top private banks in India.
HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager.
Intelent Global : BOP services for international customers.
CIBIL: Credit information services bureau.
HDFC Chubb: Upcoming Private companies in the field of General Insurance.
HDFC Bank deals with three key business segments. - Wholesale Banking Services, Retail Banking Services, Treasury. It has entered the banking consortia of over 50 corporates for providing working capital finance, trade services, corporate finance and merchant banking. It is also providing sophisticated product structures in areas of foreign exchange and derivatives, money markets and debt trading and equity research.
HDFC Bank is headquartered in Mumbai. The Bank has an network of 2000 branches spread in 771 cities across India. All branches are linked on an online real-time basis. Customers in over 500 locations are also serviced through Telephone Banking. The Bank has a presence in all major industrial and commercial centres across the country. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centres where the NSE/BSE have a strong and active member base.
-46962426504
Standard Life:
Founded in 1875, company supporting generation Standard Life is Europes largest mutual life assurance company. Standard Life, which has been in the life insurance business for the past 175 years is a modern company surviving quite a few changes since selling its first policyin 1825. The company expanded in the 19th century from kits original Edinburgh premises, opening offices in other towns and acquitting other similar businesses.
Standard Life Currently has assets exceeding over 70 billion under its management and has the distinction of being accorded AAA rating consequentlyfor the six years by Standard and Poor.
SNAPSHOT

• for last 179 years.

2. Currently over 5 m. Policy holders benefiting from the services offered.

3. Europes largest mutual life insurer.JOINT VENTURE
HDFC Standard Life Insurance Company Limited was one of the first companies to be granted license by the IRDA to operate in life insurance sector. Reach of the JV player is highly rated and been conferred with many awards. HDFC is rated AAA by both CRISIL and ICRA. Similarly, Standard Life is rated AAA both by Moodys and Standard and Poors. These reflect the efficiency with which HDFC and Standard Life manage their asset base of Rs. 15,000 Cr and Rs. 600,000 Cr. Respectively.
HDFC Standard Life Insurance Company Ltd was incorporated on 14th August 2000. HDFC is the majority stakeholder in the insurance JV with 81.4 %stale and Standard :of as a staple pf 18.6%Mr. Deepak Satwalekar is the MD and CEO of the venture.
HDFC Standard Life Insurance Company Ltd. Is one of Indias leading Private Life Insurance Companies., which offers a range of individual andgroup insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.) Indias leading housing finance institution and the Standard Life Assurance Company, a leading provider of financial services from the United Kingdom. Both the promoters are will known for their ethical dealings and financial strength and are thus committed to being a long-term player in the life insurance industry- all important factors to consider when choosing your insurer.
HDFC Ltd. holds 72.43% and Standard Life (Mauritius Holding) Ltd. holds 26.00% of equity in the joint venture, while the rest is held by others.
HDFC Standard Lifes product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health. Customers have the added advantage of customizing the plans, by adding optional benefits called riders, at a nominal price. The company currently has 32 retail and 4 group products in its portfolio, along with five optional rider benefits catering to the savings, investment, protection and retirement needs of customers.
HDFC Standard Life continues to have one of the widest reaches among new insurance companies with 568 branches servicing customer needs in over 700 cities and towns. The company has a strong presence in its existing markets with a base of 2,00,000 Financial Consultants.
VISION AND VALUES
Our Vision
'The most successful and admired life insurance company, which means that we are the most trusted company, the easiest to deal with, offer the best value for money, and set the standards in the industry'.
'The most obvious choice for all'.
Our Values
Values that we observe while we work:
Integrity
Innovation
Customer centric
People Care One for all and all for one
Team work
Joy and Simplicity
MANAGEMENT TEAM
lefttopMr. Amitabh ChaudhryManaging Director and Chief Executive OfficerMr. Amitabh Chaudhry is the Managing Director and Chief Executive Officer of HDFC Standard Life.Before joining HDFC Standard Life in January 2010, he was the Managing Director and CEO of Infosys BPO and was also heading an Independent Validation Services unit in Infosys Technologies. Mr. Chaudhry started his career with Bank of America delivering diverse roles ranging from Head of Technology Investment Banking for Asia, Regional Finance Head for Wholesale Banking and Global Markets and Chief Finance Officer of Bank of America (India). He moved to Credit Lyonnais Securities in 2001 in Singapore where he headed their investment banking franchise for South East Asia and structured finance practice for Asia before joining Infosys BPO in 2005.Mr. Chaudhry completed his Engineering in 1985 from Birla Institute of Technology and Science, Pilani and MBA in 1987 from IIM, Ahmedabad.
lefttopMr. Paresh ParasnisExecutive Director and Chief Operating OfficerMr. Paresh Parasnis is the Executive Director and Chief Operating Officer of HDFC Standard Life.A fellow of the Institute of Chartered Accountants of India, he has been associated with the HDFC Group since 1984. During his 16-year tenure at HDFC Limited, he was responsible, for driving and spearheading several key initiatives. As one of the founding members of HDFC Standard life, Mr. Parasnis has been responsible for setting up branches, driving sales and servicing strategy, leading recruitment, contributing to product launches and performance management system, overseeing new business and claims settlement, customer interactions etc.
lefttopMs. Vibha PadalkarChief Financial OfficerMs.Vibha Padalkar is the Chief Financial Officer of HDFC Standard Life.Ms. Padalkar joined HDFC Standard Life in August 2008 after a seven year stint as Executive Vice President-Finance at WNS Global Services, a NYSE listed leading global business process outsourcing company. Vibhas key achievement during her tenure at WNS was to lead a team that successfully completed the Groups IPO on the New York Stock Exchange in a short span of six months. Prior to WNS, Vibha was with Colgate Palmolive India for 7 years, including a short posting to the Group's New York headquarters.Ms.Padalkar became a member of the Institute of Chartered Accountants in England and Wales in 1992, after having completed the last part of her schooling as well as college education in London
lefttopMr. Prasun GajriChief Investment OfficerMr. Prasun Gajri is the Chief Investment Officer of HDFC Standard Life.Mr. Gajri joined HDFC Standard Life in April 2009 with a rich experience of 14 years in investments and banking industry. He started his career in 1995 with Citibank and was associated with it for over 6 years delivering various roles. He joined Tata AIG Life Insurance Company in October 2001 to start the investment function and stayed there until April 2009, the last role being that of the Chief Investment Officer.He holds a PGDM from IIM Ahmedabad and is also a CFA Charterholder.
HDFC LIFEPRODUCTS
Products:
1.Protection plans:
HDFC Term Assurance Plan
This plan is designed to help secure your familys financial needs in case of uncertainties. The plan does this by providing a lump sum to the family of the life assured in case of death or critical illness (if option is chosen) of the life assured during the term of the contract. One can choose the lump sum that would replace the income lost to ones family in the unfortunate event of ones death. This helps your family to maintain their financial independence, even when you are not around.
Features
Please roll over your mouse over circles for explanation.
Advantages
High cover at a very nominal cost.
Flexibility to choose the Sum Assured.
Additional benefit options can be availed at marginal costs.
Premium amount remains the same over the term of the policy in case of regular premium
Option of paying single premium or regular premium.
Tax benefits under sections 80C, 80D and 10(10D) of Income Tax Act, 1961.
HDFC Loan Cover Term Assurance Plan
HDFC Premium Guarantee Plan is an insurance plan that comes with twin advantage of protection and return of premiums* on maturity. So, you can enjoy life knowing that your familys financial independence is secure even in your absence. And your premiums are yours on your survival at maturity.
Features
Please roll over your mouse over circles for explanation.
Advantages
High cover at a very nominal cost.
Flexibility to choose the Sum Assured.
Return of all your premiums paid on maturity*
Tax benefits under sections 80C and 10(10D) of Income Tax Act, 1961.
HDFC Home Loan Protection Plan
This plan aims to protect your family from your loan liabilities in case of your unfortunate demise within the policy term. It ensures that your family does not lose the dream house that you have purchased for them, in case you are not around to repay the outstanding monthly installments on your housing loan. This provides you with the comfort of knowing that in your absence, a sum of money will be available towards repaying your housing loan, making sure that your family will be secure in your family home.
Features
Please roll over your mouse over circles for explanation.
Advantages
A decreasing Sum Assured payable if you die during the term of the contract. This sum assured is intended to help pay-off your outstanding home loan
Policy can be availed by paying a single premium in advance
The premium amount can be included in the housing loan and repaid as part of the loan repayment installments
Decreasing Sum Assured makes sure that you do not pay for protection you dont need
2. Childerns plans
HDFC Children's Plan
As a parent, your priority is your childs future and being able to meet your childs dreams and aspirations. With our HDFC Childrens Plan, you can start building your savings today and ensure a bright future for your child. ThisWith Profitsplan is designed to secure your childs future by giving your child (Beneficiary) a guaranteed lump sum on maturity or in case of your unfortunate demise, early into the policy term.
Features
Please roll over your mouse over circles for explanation.
Advantages

Lets you customise an ideal plan for your child and provide invaluable financial support

4. The Double Benefit Plan Option helps you secure your childs immediate and future needs. In case of your unfortunate demise, we will pay the Sum Assured to your child (Beneficiary). Your family need not pay any further premiums and the policy continues. And on maturity of the plan, we will pay you the Sum Assured plus Bonuses Declared 5. You can choose to pay your premium as either Annually, Half-Yearly or Quarterly depending on your convenience. You also have a range of convenient auto premium payment options 6. Tax benefits are offered under section 80C and 10(10D) of the Income Tax Act, 1961HDFC Unit Linked Young Star II
There is no bigger joy than being able to fulfill your child's dream on your own. With HDFC SL YoungStar Super II you can fulfill your childs immediate and future needs. So tomorrow when your child needs your support you dont have to depend on anyone else.
Features
Please roll over your mouse over circles for explanation.
Advantages
In case of your unfortunate demise or critical illness, we will pay the greater of Sum Assured (less partial withdrawals) or Fund Value to your child (Beneficiary). The policy will terminate. We will pay 100% of all the future regular premiums to the Beneficiary as and when due, on an annual basis. Please refer to the sales brochure for details.
You can customize the ideal plan for your child by choosing the premium you wish to invest along with the Sum Assured, depending on the level of protection required.
This plan can be taken by filling Short Medical Questionnaire, which may not require you to go for medicals. Kindly refer to the product brochure for details.
You can change your investment fund choices in two ways:
Switching: You can move your accumulated funds from one fund to another anytime
Premium Redirection: You can pay your future premiums into a different selection of funds, as per your need
Tax benefits are offered under section 80C and 10(10D) of the Income Tax Act, 1961
HDFC Unit Linked Young Star Plus II
With HDFC SL YoungStar Super Premium you can fulfill your childs immediate and future needs- all on your own. Start saving now with this unit linked insurance plan and be assured that savings for your child will continue, even in your absence. This plan offers you choice of cover options and benefit payment preferences- all designed to suit your needs.
Features
Please roll over your mouse over circles for explanation.
Advantages
The Triple Insurance Benefit helps you secure your childs immediate and future needs. In case of your unfortunate demise or critical illness, we will pay the Sum Assured to your child (Beneficiary). Your family need not pay any further premiums. With Save -n- Gain benefit ,we will pay 50% of all the original regular premiums towards your policy and 50% of the premiums will be paid to the Beneficiary as and when due, on an annual basis. Any Death Benefit or Critical Illness cover terminates immediately.
You can customize the ideal plan for your child by choosing the premium you wish to invest along with the Sum Assured, depending on the level of protection required and Benefit payment preference.
This plan can be taken by filling Short Medical Questionnaire, which may not require you to go for medicals. Kindly refer to the product brochure for details.
You can change your investment fund choices in two ways:
Switching: You can move your accumulated funds from one fund to another anytime
Premium Redirection: You can pay your future premiums into a different selection of funds, as per your need
Tax benefits are offered under section 80C and 10(10D) of the Income Tax Act, 1961
HDFC Young Star Champion
3. Retirement Plans
HDFC Personal Pension Plan
Today, you are busy climbing the ladder of success and realizing your dreams. Today, time is with you. Just take a moment and think. Will you be able to continue at the same pace? Will your income be the same forever? Will you be able to live life on your own terms even after you retire? The HDFC Personal Pension Plan is aWith Profitsinsurance policy that is designed to provide a post-retirement income for life with the freedom to choose your retirement date.
Features
Please roll over your mouse over circles for explanation.
Advantages
This plan is designed to provide you a post retirement income for life You can choose your premium, the Sum Assured and your retirement date. At the end of the policy term, you will receive the Sum Assured plus any attaching bonuses, which will provide you a post retirement income in your golden years
On your chosen retirement (Vesting) date, you will get the lump sum comprising the Sum Assured plus any attaching bonus.
You can take up to 1/3rd of your Sum Assured as a tax free cash lump sum
The rest must be converted to annuity
You can buy the annuity from us or any other insurer
For Regular Premium Policy, you can choose to pay your premium as either Annually, Half-Yearly or Quarterly depending on your convenience. You also have a range of convenient auto premium payment options
Tax benefits under sections 80CCC of the Income Tax Act, 1961 subject to the provisions contained therein
HDFC Immediate Annuity
The HDFC Immediate Annuity is a contract that uses your capital to provide you with a guaranteed gross income through out your lifetime or over a period of your choice. The income is guaranteed and is unaffected by the rise and fall of interest rates. This means you can plan your life the way you want it to be, safe in the knowledge that your gross income will not fall during the period you have selected. The HDFC Immediate Annuity offers a number of options to meet all your income needs.
Features
Please roll over your mouse over circles for explanation.
Advantages

Income for Temporary Period Option:You can choose to limit the payment period of annuity if you only require an income for a specified time. The annuity is payable for your selected term provided you are still alive. No annuity is payable after the chosen term has expired. You can choose to limit the payment term to between 5 and 25 years. The term selected must be at least for one year greater than any guarantee period

7. Death Benefits:In addition to a regular income, you can choose an annuity that will pay out a benefit on your death or, if you have chosen to provide an annuity for a named individual, on the later of your and the named individuals death. You can choose the level of death benefit: 8. Full purchase price, or a proportion of the purchase price 9. Capital protection option the amount paid on death is equal to the purchase price less the gross annuity installments already paid under the annuity 10. No death benefit is allowable where a guarantee period has been selected. No death benefit is allowable where a Joint Life annuity reducing on death of the first life has been selected 11. If you need to provide an income for someone after you die:The HDFC Immediate Annuity can also provide an annuity for a named individual specified in your application form. This annuity will be paid if you die before the named individual. The amount of their annuity can be the same as your annuity or a proportion of your annuityHDFC Unit Linked Pension II
HDFC Unit Linked Pension Maximiser II
4. Saving and Investments plans
HDFC Single Premium Whole of Life Insurance Plan
HDFC Endowment Assurance Plan
As a judicious family man, your priority is to secure the well-being of those who depend on you. Not just for today, but also for the long term. With our HDFC Endowment Assurance Plan, you can start building your savings today and ensure that your family remains financially independent, even when you are not around. ThisWith Profitsplan is designed to secure your familys future by giving your family a guaranteed lump sum on maturity or in case of your unfortunate demise, early into the policy term.
Features
Please roll over your mouse over circles for explanation.
Advantages
Ideal way to secure your long-term financial goals and your family's financial independence by giving a lump sum payment (basic Sum Assured plus any Bonus Additions) on survival up to Maturity date
Provides invaluable protection to your family by way of lump sum payment in case of unfortunate demise within policy term
Gives you the flexibility to customize your policy according to your needs by adding any one of the 3 benefit options available
You can choose to pay your premium as either Annually, Half-Yearly or Quarterly depending on your convenience. You also have a range of convenient auto premium payment options
Tax benefits under sections 80C, 80D and 10(10D) of Income Tax Act, 1961
HDFC Money Back Plan
HDFC Assurance Plan
To fulfill your dreams for your family and yourself, you need to start saving today. And you not only need to save enough but also need the assurance that your familys future is secure. Get the convenience of HDFC Assurance Plan. HDFC Assurance Plan helps you conveniently build your long-term savings while keeping your familys future protected. This With Profits savings plan helps you build your long-term savings while securing your familys future.
Features
Please roll over your mouse over circles for explanation.
Advantages
This plan is a With Profits savings plan, which offers the following features
The plan receives simple Reversionary Bonuses, which are usually added annually
At maturity, the plan pays out the basic Sum Assured plus Reversionary Bonuses declared during the policy term. Interim or Terminal Bonus may also be payable, if declared
The plan can be surrendered for cash value before maturity
Provides financial support to your family by way of a lump sum payment in case of your unfortunate death within the policy term. The lump sum is the basic Sum Assured plus any bonus additions
Tax benefit under Section 80C and 10(10D) of Income Tax Act 1961, subject to provisions contained therein
HDFC Savings Assurance Plan
Despite your best efforts, you do not end up saving regularly for your familys and your future. Unexpected expenses, unplanned purchases and often, sheer lack of time defeat your efforts. Dont you wish that someone would take on the responsibility of regularly saving your money for you? HDFC Savings Assurance Plan is a With Profits savings plan which helps you conveniently build your long-term savings and ensure that your family is protected even if you are not around.
Features
Please roll over your mouse over circles for explanation.
Advantages
The chosen amount is automatically invested from your bank account into the plan
This plan is a With Profits savings policy, which offers the following features
The policy receives simple reversionary bonuses, which are usually added annually
At maturity, the policy pays out the basic Sum Assured plus Reversionary Bonuses declared during the policy term. Interim or Terminal Bonus may also be payable, if declared
On death during the first year, a sum equal to 80% of premiums received is payable. On death after the first year and during the policy term, all premiums paid to date will be returned with compound interest calculated at 6% per annum, subject to a maximum of the Sum Assured plus Reversionary Bonuses declared till date
Tax benefit under Section 80C and 10(10D) of Income Tax Act 1961, subject to provisions contained therein
HDFC Unit Linked Wealth Maximiser Plus
HDFC Unit Linked Endowment II
HDFC Unit Linked Endowment Plus II
HDFC Unit Linked Enhanced Life Protection II
HDFC Simple Life
HDFC Unit Linked Endowment Winner
5. Health plans
HDFC Critical Care Plan
Critical Illness can strike anyone. Today with advancement in medical science it is possible to survive a critical illness. Expenses on survival with a critical illness can be very high. HDFC Critical care plan provides for a lump sum payment on survival post diagnosis of a critical illness, so that in the event a critical illness strikes, you dont have to dig into those precious savings of yours.
Features
Please roll over your mouse over circles for explanation.
Advantages
Provides valuable protection on survival post diagnosis of a critical illnesses
Covers as many as 30 critical illnesses
Lump sum benefit payment paid irrespective of medical expenses
The policy continues even after the benefit payment paid on selected illness
Choice of the level of health cover and premium payment
Convenient and hassle free claims
Tax benefits are available under section 80D under Income Tax Act, 1961
HDFC SurgiCare Plan
In the fast paced lives that we lead, medical contingencies may arrive at our doorstep uninvited.Surgery costs form a substantial portion of health care expenditure and needs to be provided for. Health issues can get compounded if left unattended and may require a surgery. Plus, the ever increasing costs of surgical procedures are sure to burn a hole in our pockets.
HDFC SurgiCare Plan provides you with timely support in case you have to undergo a major surgery and hospitalisation, as the case maybe, ensuring your financial independence at all times.
Features
Please roll over your mouse over circles for explanation.
Advantages
82 major surgical procedures are covered.
Option to include hospital cash benefit
Automatic increase in the level of health cover (subject to terms and conditions) ensures that the increasing medical costs are taken care of.
Lump sum benefits are paid regardless of the actual medical expenses.
The policy continues even after the after the payment of first or subsequent surgical procedures, subject to terms and conditions as stated in the policy brochure.
Flexibility to tailor-make the policy by choosing level of health cover, benefit options level and premium payment as per your needs.
Convenient and hassle free claims with cashless benefits on surgeries and hospitalization in any of the network hospitals.
Tax benefits can be availed under section 80D of the Income Tax Act, 1961
INTRODUCTION TO FINANCE MANAGEMENT
Financial management, as an academic discipline, has undergone fundamental changes in its scope and coverage.In the early years of its evolution it was treated synonymously with the raising of funds. In the current literature pertaining to financial
Management, a broader scope so as to include, in addition to procurement of funds, efficient use of resources is universally recognized. Similarly, the academic thinking as regards the objective of financial management is also characterized by a change over the years.
Financial management, as an integral part of overall management, is not a totally independent area. It draws heavily on related disciplines and fields of study, such as economics, accounting, marketing, production and quantitative methods. Although these disciplines are interrelated, there are key differences among them.The relationship between finance and accounting, conceptually speaking, has two dimensions:
They are closely related to the extent that accounting is an important input in financial decision-making and
There are key differences in viewpoints between them.
The viewpoint of accounting relating to the funds of the firm is different from that of finance. The measurement of funds (income and expenses) in accounting is based on the accrual principle/system.
Capitalization and Capital Structure:
Capital structure can affect the value of a company by affecting either its expected earnings or the cost of capital, or both.While it is true that financing-mix cannot affect the total operating earnings of a firm, as they are determined by the investment decisions, it can affect the share of earnings belonging to the ordinary shareholders.The capital structure decision can influence the value of the firm through the earnings available to the shareholders.But the leverage can largely influence the value of the firm through the cost of capital.In exploring the relationship between leverage and value of a firm the relationship between leverage and cost of capital from the standpoint of valuation.
The importance of an appropriate capital structure is, thus, obvious.There is a viewpoint that strongly supports the close relationship between leverage and value of a firm.There is an equally strong body of opinion, which believes that financing-mix or the combination of debt and equity has no impact on the shareholders wealth and the decision on financial structure is irrelevant. In other words, there is nothing such as optimum capital structure.
Capital structure theories are based on certain assumptions, they are:
[1]There are only two sources of funds used by a firm: perpetual risk less debt and ordinary shares.
[2] There are no corporate taxes. This assumption is removed later.
[3]The dividend-payout ratio is 100. That is, the total earnings are paid out as dividend to the shareholders and there are no retained earnings.
[4]The total assets are given and do not change. The investment decisions are, in other words, assumed to be constant.
[5]The total financing remains constant. The firm can change its degree of leverage (capital structure) either by selling shares and use the proceeds to retire debentures or by raising more debt and reduce the equity capital.
[6] The operating profits (EBIT) are not expected to grow.
[7] All investors are assumed to have the same subjective probability distribution of the future expected EBIT for a given firm.
[8] Business risk is constant over time and is assumed to be independent of its capital structure and financial risk.
[9] Perpetual life of the firm.
Leverage Analysis:
A firm can make use of different sources of financing whose costs are different. These sources may be, for purposes of exposition, classified into those that carry a fixed rate of return and those on which the returns vary.The fixed returns on some sources of finance have implications for those who are entitled to a variable return.Thus, since debt involves the payment of a stated rte of interest, the return to the ordinary shareholders is affected by the magnitude of debt in the capital structure of a firm.
The employment of an asset or source of funds for which the firm has to pay a fixed cost or fixed return may be termed as leverage. Consequently, the earnings available to the shareholders as also the risk are affected.If earnings les the variable costs exceed the fixed cost, or earnings before interest and taxes exceed the fixed return requirement, the leverage is called favorable. When they do not, the result is unfavorable leverage.
There are 2 types of leverage- operating and financial. The leverage associated with investment (asset acquisition) activities is referred to as operating leverage, while leverage associated with financing activities is called financial leverage. While we are basically concerned with financial leverage for purposes of the financing decision of a firm, the discussion of operating leverage is to serve as a background to the understanding of financial leverage because the two types of leverage are closely related. Operating leverage is determined by the relationship between the firms sales revenues and its earnings before interest and taxes (EBIT). The earnings before interest and taxes are also generally called as operating profits. Financial leverage represents the relationship between the firms earnings before interest and taxes (operating profits) and the earnings available for ordinary shareholders. The operating profits (EBIT) are thus, used as the pivotal point in defining operating and financial leverage.In a way, operating and financial leverage represent two stages in the stages in the process of determining the earnings available to the equity shareholders and, hence, their discussion in this chapter. Apart from the elaboration of the return-risk implications, their combined effect has also been discussed.
Operating leverage results from the existence of fixed operating expenses in the firms income stream. The operating leverage may be defined as the firms ability to use fixed operating costs to magnify the effects of changes in sales on its earnings before interest and taxes. Operating leverage occurs any time a firm has fixed costs that must be met regardless of volume. We employ assets with fixed cost in the hope that volume will produce revenues more than sufficient to cover all fixed and variable costs. In other words, with fixed costs, the percentage change in profits accompanying a change in volume is greater than the percentage change in volume. This occurrence is known as operating leverage.
Financial leverage relates to the financing activities of a firm. The sources from which funds can be raised by a firm, from the point of view of the cost/charges, can be categorized into [1] those which carry a fixed financial charge, and [2] those which do not involve any fixed charge. The sources of funds in the first category consist of various types of long-term debt, including bonds, debentures, and preference shares. Long-term debts carry a fixed rate of interest which is a contractual obligation for the firm. Although the dividend on preference shares is not a contractual obligation, it is fixed charge and must be paid before anything is paid to the ordinary shareholders.The equity shareholders are entitled to the remainder of the operating profits of the firm after all the prior obligations are met. Financial leverage results from the presence of fixed financial charges in the firms income stream. These fixed charges do not vary with the earnings before interest and taxes (EBIT) or operating profits.
Capital Budgeting:
Capital budgeting decision pertains to fixed/long-term assets which by definition refer to assets which are in operation, and yield a return, over a period of time, usually, exceeding one year. They therefore, involve a current outlay or series of outlays of cash resources in return for an anticipated flow of future benefits. In other words, the system of capital budgeting is employed to evaluate expenditure decisions which involve current outlays but are likely to produce benefits over a period of time longer than one year. These benefits may be either in the form of increased revenues or reduced costs. Capital expenditure management, therefore, includes addition, disposition, modification and replacement of fixed assets.
Capital budgeting decisions are of paramount importance in financial decision-making. In the first place, such decisions affect the profitability of a firm. They also have a bearing on the competitive position of the enterprise mainly because of the fact that they relate to fixed assets. The fixed assets represent, in a sense, the true earning assets of the firm. They enable the firm to generate finished goods that can ultimately be sold for profit. The current assets are not generally earning assets. Rather, they provide a buffer that allows the firms to make sales and extend credit. True, current assets are important to operations, but without fixed assets to generate finished products that can be converted into current assets, the firm would not be able to operate. Further, they are strategic investment decisions as against tactical- which involve a relatively small amount of funds. Therefore, such capital investment decisions may result in a major departure from what the company has been doing in the past. Acceptance of a strategic investment will involve a significant change in the companys expected profits and in the risks to which these profits will be subject.
Working Capital Management:
Working capital management is concerned with the problems that arise in attempting to manage the current assets, the current liabilities and the interrelationship that exists between them. The term current assets refer to those assets which in the ordinary course of business can be, or will be, converted into cash within one year without undergoing a diminution in value and without disrupting the operations of the firm. The major current assets are cash, marketable securities, accounts receivable and inventory.
Current liabilities are those liabilities which are intended, at their inception, to be paid in the ordinary course of business, within a year, out of the current assets or earnings of the concern. The basic current liabilities are accounts payable, bills payable, bank overdraft, and outstanding expenses. The goal of working capital management is to manage the firms current assets and liabilities in such a way that a satisfactory level of working capital, it is likely to become insolvent and may even be forced into bankruptcy. The current assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of safety. Each of the current assets must be managed efficiently in order to maintain the liquidity of the firm while not keeping too high a level of any one of them. Each of the short-term sources of financing must be continuously managed to ensure that they are obtained ad used in the best possible way. The interaction between current assets and current liabilities is, therefore, the main theme of the working capital management.
Receivables Management:
The receivables represent an important component of the current assets of a firm. The receivables are defined as debt owned to the firm by customers arising from sale of goods or services and in the ordinary course of businesses. When a firm makes an ordinary sale of goods or services and does not receive payment, the firm grants trade credit and creates accounts receivable, which could be collected in the future. Receivables management is also called trade credit management. Thus, accounts receivables represent an extension of credit to customers, allowing them a reasonable period of time in which to pay for the goods received.
The sale of goods on credit is an essential part of the modern competitive economic systems. In fact, credit sales and, therefore, receivables are treated as a marketing tool to aid the sale of goods. The credit sales are generally made on open account in the sense that there are no formal acknowledgements of debt obligations through a financial instrument. As a marketing tool, they are intended to promote sales and thereby profits. However, extension of credit involves risk and cost. Management should weigh the benefits as well as cost to determine the goal of receivables management. The objective of receivables management is to promote sales and profits until point is reached where the return on investment in further funding receivables is less than the cost of funds raised to finance that additional credit (i.e. cost of capital). The specific costs and benefits, which are relevant to the determination of the objectives of receivables management, are:
Cost
Collection cost
Capital cost
Delinquency cost
Default cost
Dividend policy:
Dividend refers to that portion of a firms net earnings which are paid out to the shareholders. Since dividends are distributed out of profits, the alternative to the payment of dividends is the retention of earnings/profits. The retained earnings constitute an easily accessible important source of financing the investment requirements of firms. There is, thus, a type of inverse relationship between retained earnings and cash dividends. Larger the retention, lesser dividends; and smaller retentions, larger dividends. Thus, the alternative uses of the net earnings-dividends and retained earnings-are competitive and conflicting.
A major decision of financial management is the dividend decision in the sense that the firm has to choose between distributing the profits to the shareholders and plugging them back into the business. The choice would obviously hinge on the effect of the decision on the maximizing present values; the firm should be guided by the consideration as to which alternative use is consistent with the goal of wealth maximization. That is, the firm would be well advised to use the net profits for paying dividends to the shareholders if the payment will lead to the maximization of wealth of the owners. If not, the firm should rather retain them to finance investment programs. The relationship between dividends and value of the firm should, therefore, be the decision criterion.
There are however, conflicting opinions regarding the impact of dividends on the valuation of a firm. According to one school of thought, dividends are irrelevant so that the amount of dividends paid has no effect on the valuation of a firm. On the other hand certain theories consider the dividend decision as relevant to the value of the value of the firm measured in terms of the market price of the shares. The crux of the argument supporting the irrelevance of dividends to valuation is that the dividend policy of a firm is a part of its financing decision.
As a part of the financing decision, the dividend policy of the firm is a residual decision and dividends are a passive residual. If the dividend policy is strictly a financing decision, whether dividends are paid out of profits, or earnings are retained, will depend upon the available investment opportunities. It implies that when a firm has sufficient investment opportunities, it will retain the earnings to finance them. Conversely, if acceptable investment opportunities are inadequate, the implication is that the earnings would be distributed to the shareholders.
The test of adequate acceptable investment opportunities is the relationship between the return on investments and the cost of capital. As long as investments exceed cost of capital, a firm has acceptable investment opportunities. In other words, ifs firm can earn a return higher tan its cost of capital; it will retain the earnings to finance investment projects. If the retained earnings fall short of the total funds required, it will raise external funds-both equity and debt-to make up the shortfall.
FINANCIAL HIGHLIGHTS:
Financial Data and Ratios:
Total Current Assets: 96,43,629 (in 000)
Total Current Liabilities: 90,29,038 (in 000)
Net Working Capital: 614,591 (in 000)
Quick Current Assets: 82,18,747 (in 000)
Current Ratio: 1.4:1
Quick Ratio: 0.91.
Debt Asset Ratio: 1.406 (1,55,99,032/1,10,91,335).
Growth in Total premium:
Composition of new business by EPI:
No of policies-new business and in force
Commission Ratio and expense ratio:
Growth in Assets under Management:
This are some of interesting financial Data of the company. This are from the Annual report of the 2010.They are planning to go to the IPO in 2011.
Marketing
Today the definition of marketing has been changed. The marketing activity of an organization before the product is produced and continues even after the product is sold. In the buyer market of recent times the sharpest weapon that a company can develop is globalize marketing place in the value creation and delivery. The proud and demanding customer of today brings before corporate a critical fact, when the customer is jury. It is the value generation for the customer that will separate the victor from vanquished. The value of customer service cascades all over the company. The aim of customer focus is not just satisfaction but delight satisfaction.
Till the year 1999 the life insurance business was exclusively conducted by the Life Insurance Corporation (LIC) while the general insurance business in India, was exclusive by General Insurance Corporation and its four subsidiaries. The insurance sector is opened for private participation since November, 2000.
Before 1999 there was no marketing done by LIC due to its monopoly but now after 5 years the picture has changed. Now there are private players in market. With the effective marketing techniques the private players has changed the whole scenario of the insurance sector. They are slowly and gradually driving the business out of the hands of the LIC. Before 1999 customer had no option other then LIC, but now they have got many options.
This is the significant change in insurance industry. Now the customer is back in the center state. All the companies are trying to please the customer with the innovative schemes and better service.
Relationship Marketing in Insurance
Introduction
It is five times more expensive to acquire a new customer than to retain an old one.
Relationship marketing is the practice of building long term satisfying relationship with key parties customers and suppliers. They accomplish this by promoting and delivering high quality, goods, services, and fair prices to other parties overview. Relationship marketing results in strong economic, technical and social ties among the parties.
Definition of Relation Marketing:
Relationship marketing can be defined as the process to identify, establish, maintain and other stakeholders at a profit so that the objective of all parties involved are net and this is done by mutual exchange and fulfillment of promises.
The important objectives of relationship marketing to acquire new customers maintain and enhance relationship with existing customers, re-activities of ex-customers and handling of customer terminations. The key objective of relationship marketing is to establish one to one relationship with all the customers. This may have sound like a day dream few dream few years ago but thanks to the technological breakthrough and technological solution providers, it is very much of a reality.
How to add value through relationship Marketing

Identify loyal customers

12. Recognize their special needs 13. Provide special reward for loyalty 14. Establish continuing relationship 15. Ensure increase in customer value 16. Relationship marketing is one of the hottest tread in the present marketing scenario. 17. Satisfied customers not only stay with a company but they are also walking talking advertisement for the companys product.The Operation department oils the work processes between the customer and company to ensure consistent and quality service to the customer. To streamline the operations, the operations department interfaces between the clients and the agents, the branches and the under writers, and manages work processes.
The vision at customer service
Is to deliver World Class Service at every opportunity. Units such as the 9 to 9 contact centre, out bound call centre, customer care. And query reduction unit are all committed across the country. HDFC Life has one of the largest distribution networks amongst private life insurers in India, having commenced operations in 58 cities and towns in India.
These are.. Agra, Ahmedabad, Ajmer, Amritsar, Aurangabad, Bangalore, Bhopal, Calicat, Chandigrah, Chennai, Coimbatur,Dehradun, Gurgaon, Hyderabad, Hubli, Indore, Jaipur, Jalandhar, Jamnagar, Kanpur, karnal, Kochi, Kolkatta, Kota, Kolhapur, Kottayan, Lucknow, Ludhiana, Madurai, Mangalore, Meerut, Mumbai, Nagpur, Nashik, Noida, New Delhi, Patiala, Pune, Raipur, Rajkot, Ranchi, Surat, Thane, Thrissur, Trichy, Trivendrum, Udaipur, Vadodara, Vashi, Vijayawada and Vizag.
HDFC Life has recruited and trained over 32000 insurance advisors to interface with and advice customers. Further, it leverages is State-of the art IT infrastructure to provide superior quality of service to customer.
The Operation Department of HDFC Life delivers the following services to the customers such as:
Out Bound Call Centre
Customer Care
Query Resolution Unit
Policy Login Process
9 to 9 Contact Centre
Role of Information Technology in Operation Department:
The Information Technology function at HDFC Life is committed to enables business through the use of technology. It is segmented into 4 groups to enable highest levels of delivery to the customers: Life Asia Solutions Group that provides flexibility in designing better product offering to end-users, the Solutions Group- Web that provides real-time information to customers and is responsible for customer relationship management, IT Architecture and Corporate Solutions Group is in charge of developing and maintaining a blueprint for the IT Architecture for the enterprise as a whole. This team works as an in house R & D Solution Group, exploring new technological initiatives and also caters to information needs of corporate functions in the organizations. IT Infrastructure group is responsible for providing hardware, software, network services to the whole organization. This group runs the Digital Nervous System of the Enterprise at the highest levels of efficiency and provide robust, scalable and highly available platform for development of business application.
With the help of Information Technology, an advisor and managers can login the policy fro any of the offices of HDFC Life. And also with the help of IT any employee or management can know any information, any thing about the policy, advisors record, any branchs sales, any new schemes, any managers record, and other thins at any time any place.
Introduction to HRM:-
Human resource management is a management function that helps managers recruit, select, train and develops members for an organization. HRM is concerned with the peoples dimension in organization. Manpower or human resource may be thought of as the total knowledge, shills, creative abilities, talents and aptitudes of an organizations work force, as well as the values, attitudes and benefits of an individual involved. It is the sum total of inherent abilities, acquired knowledge and shills represented by the talents and aptitudes of the employed persons.
Of all the Ms in management (i.e. the management of materials, machines, methods, money, motive power), the most important m for men or human resources. It is the most valuable asset of an organization, and not the money or physical equipment. It is in fact an important economic resource, covering all human resources- organized or unorganized, employed or capable of employment, working at all levels- supervisors, executives, government employees, blue and white' collar workers, managerial, scientific, engineering, technical, skilled or unskilled persons, who are employed in creating, designing, developing, managing and operating productive and service enterprises, and other economic activities.
Human resources are utilized to the maximum possible extent in order to achieve individual and organizational goals. And organizations performance and resulting productivity are directly proportional to the quantity of its human resources
Organization Structure:-
Organization is a group of people working together cooperatively under authority toward achieving goals and objectives that mutually benefit the participants and the organization. A well-known author of HRM Allen says the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing relationships for the purpose of enabling people to work most effectively together in establishing of objectives
The essence of this definition is that people who work together require a defined system or structure through which they relate to each other and through which their efforts can be coordinated. Every organization has goals or objectives for its existence. In the case of Personnel Management, it is to optimize the effectiveness of human resources. These goals can be achieved more suitably if the behavior of the workers and the composition of the organization can be predicted and integrated cooperatively. The formal organization structure attempts to give order and unity to the actions and efforts of those who work together.
An organization tries to establish an effective behavioral relationship among selected employees and in selected work places in order that a group may work together effectively. There are three kinds of work which must be performed whenever an organization comes into being:
Division of labor
Combination of labour and
Coordination
C.E.O Mr. C. M. VasudevThe organization structure at HDFC Life web trade is somewhat like this:
Board of Directors
National Head (at Mumbai-branch)
Unit manger/ In charge of Karnataka region (at Bangalore)
Assistant unit manager
SalesExecutiveSalesExecutiveSalesExecutiveSalesExecutive
In any organization there is what is termed a hierarchy, refers to various levels of authority in an organization, ranging from the Board of Directors at the top to the sales executives at the bottom.
Human Resource Planning:-
Human resource planning can be explained as the process by which a management determines how an organization should move from its current manpower position to its desired manpower position. Through planning, a management strives to have the right number and right kind of people at the right places, at the right time to do things which result in both the organization and the individual receiving the maximum long-range benefit.
Coloman has defined human resource or manpower planning as the process of determining manpower requirements and the means for meeting those requirements in order to carry out the integrated plan of the organization.
Stainer defines HRM as Strategy for the acquisition, utilization, improvement, and preservation of an enterprises human resources. It relates to establishing job specifications or the quantitative requirements of jobs determining the number of personnel required and developing sources of manpower.
Human resources planning are a double-edged weapon. If used properly, it leads to the maximum utilization of human resources, reduces excessive labor turnover and high absenteeism; improves productivity and aids in achieving the objectives of an organization. Faultily used, it leads to disruption in the flow of work, lower production, less job satisfaction, high cost of production and constant headaches for the management personnel. Therefore, for the success of an enterprise, human resource planning is a very important function, which can be neglected only at its own peril. It is as necessary as planning for production, marketing, or own peril. It is as necessary as planning for production marketing, or capital investment.
Recruitment Sources:-
Human resource planning helps to determine the number and type of people an organization needs. Job analysis and job design specify the tasks and duties of jobs and the qualifications expected from prospective jobholders. The next logical step is to hire the right number of people of the right broad groups of activities. Recruitment forms the first stage in the process which continues with selection and ceases with the placement of the candidate. It is the next step in the procurement function, the first being the manpower planning. Recruiting makes it possible to acquire the number and types of people necessary to ensure the continued operation of the organization.
Recruiting is the discovering of potential applicants for actual or anticipated organizational vacancies. In other words, it is linking activity bringing together those with jobs and those seeking jobs. As Dale Yoder and other point out: Recruitment is a process to discover the sources of manpower to meet the requirements of the staffing schedule and to employ effective measures for attracting that manpower in adequate numbers to facilitate effective selection of an efficient working force. Accordingly, the purpose of recruitment is to locate sources of manpower to meet job requirements and job specifications.
Recruitment has been regarded as the most important function of personnel administration, because unless the right types of people are hired, even the best plans, organization charts and control systems would not do much good. Flippo views recruitment both as positive and negative activity. He says it is a process of searching for prospective employees and stimulating and encouraging them to apply for jobs in an organization. It is often termed positive in that it stimulates people to apply for jobs to increase the hiring ratio i.e. the number of applicants for a job. Selection, on the other hand tends to be negative because it rejects a good member of those who apply, leaving only the best to be hired.
MANPOWER PLANNING AT HDFC Life
Human Resource Planning is the process by which an organization ensures that it has the right number and kind of people, at the right place, at the right time, capable of effectively and efficiently competing those tasks that will help the organization achieve its overall objectives. Human Resource Planning translates the organizations objectives and plans into the number of workers meet those objectives.Without a clear-cut planning, estimation of an organizations human resource need is reduced to mere guesswork.
HDFC Life Asset Management Company considers several factor in HRP are strategy of company, organization planning about new schemes, environment uncertainties, time horizons, and nature of jobs being filled. By considering these entire factors it helps to HDFC Life to coping with change, creates highly talented personnel, and helps to determine futures needs.
Manpower planning is needed with respect to persons who can work as sub-broker for the companies. Companies focused on Insurance Advisor and post office agent, Tax consultants and CAs for making sub-broker. HDFC Life AMC Forecast HR Demand it estimates the future quantity and quality of people required. It uses forecasting technique that is Management Judgment that involves bottom-up or top-down approach. After forecasting company forecast about HR supply that may be from Existing human resource, internal sources or External sources.
RECRUITMENT
The upper level members like zonal managers, regional managers, branch managers and senior executives are recruited. The regional manager has authority to select lower level employee like peon, marketing executives, financial accountant etc. by approval of zonal manager.
HDFC Life AMC recruits through following sources:
Internal Sources:
Present Employees
Employee Referrals
Previous Applicants
External Sources:
Advertisement
Campus interview
Consultants
Walk-ins
SELECTION
Selection is a process to select a fixed number of personnel from a large number of applicant received by employees, seeking the job and selecting those who suitable for the given job selection includes a number of steps. The purpose of selection is to pick up the right person for every job.
A scientific procedures of selection, requires 2 things:
Knowledge regarding the qualities which a person should posses in order to do the given job properly
The evaluation of qualities possessed by a candidate for the job.
HDFC Life has adopted the following steps for selection procedure:
PRELIMINARY INTERVIEW
The main purpose of preliminary interview is to screen out those who are unsuitable. Those interviews are quite short. If candidates are found suitable then an application blank may be given to him to fill up and return.
In HDFC Life AMC regional manager first interviews candidates, and if selected than he is interviewed by zonal manager & if he is found suitable than an application blank is given to them.
APPLICATION BLANK
Here the applicants are asked to complete a blank that provides space for him to record data relating to the name of candidates, experience etc. The application blank must not be too lengthy. In HDFC Life AMC this application blank is forwarded to Mumbai branch to hr department.
INTERVIEW
After the application blank reaches to the HR Department Mumbai, a telephonic interview is conducted by HR Manager to see that the regional manager & zonal manager has made the right choice or not.
MEDICAL CHECK UP
If the candidates clears all the above stages, company checks his medical report the basic purpose of medical check-up is to determine the job for which candidate is fit or not.
REFRENCES
Checking of references is an important part of selection process. The company prefers to select the candidate within the group or if the candidate gives the name of reputed person as his references.
FINAL SELECTION
If the candidate passes successfully from the above stages he is finally selected for the post. The final selection lies with the regional manager.
PLACEMENT
The last stage in selection process is the placement of candidate. After the final selection is done, the selected candidate is finally placed on the job.
TRAINING
THERE ARE TWO TYPES OF TRAINING PROGRAMS:
ON THE JOB TRAINING
OFF THE JOB TRAINING
Continuous training and upgrading technical, behavioral and managerial skills is a way of life inHDFC Life L AMC. HDFC Life AMC encourages agent or sub-broker to hone their skills regularly to enable them to face the challenges of the changing requirements of customers that fit market up and down.
Training needs analysis is done on a regular basis and systematic methodologies are ensured that skills and capabilities of all agents are constantly upgraded to enable them to perform in the challenging work. There is special training session at regular time period in local branch to all financial consultant and agents about new scheme and to improve their effectiveness.
PERFORMANCE APPRAISAL
It is the systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for development.
Objective of Performance appraisal if for Developmental uses for agents and Financial Consultants, for wages, transfer, promotion, for documentation and for organizational purpose like Human Resource Planning, Job analysis and for training and development.
HDFC Life first set the objective of performance appraisal then in establish job expectation and then decide whose performance should be rated and who the raters are. Basically raters are immediate supervisor, subordinates, peers, clients. For Performance Appraisal modern method is used like MBO (Management By Objectives) and 360 appraisal. But there is some limitation like Hello effect, Bias, Perception factor, Spill over etc
Selection Methods:
The selection procedure is concerned with securing relevant information about an applicant. This information is secured in a number of steps or stages. The objective of selection process is to determine whether an applicant meets the qualifications for a specific job and to choose the applicant who is most likely to perform well in that job.
The hiring procedure is not a single act but it is essentially a series of methods or steps or stages by which additional information is secured about the applicant. At each stage, facts may come to light which may lead to the rejection of the applicant. A procedure may be compared to a series of successive hurdles or barriers which an applicant must cross. These are intended as screens, and they are designed to eliminate an unqualified applicant at any point in the process. This technique is including all these hurdles.
Training and Development:-
HDFC is a kind of private sector bank where if you are confident and competent then you can get your carrier advancement and development at a very high speed. CEO Mr.Depak says, There are several young people in our organization who are on the threshold of making it to the board.He himself has this habit of dropping in unannounced on peo