CHAPTER I

1.1 INDUSTRY PROFILE

Insurance: Introduction :Insurance is a system of spreading the risk of one onto the shoulders of many. While it becomes somewhat impossible for a man to bear by himself 100% loss to his own property or interest arising out of an unforeseen contingency, insurance is a method or process which distributes the burden of the loss on a number of persons within the group formed for this particular purpose. Basic human trait is to be averse to the idea of risk taking. Insurance, whether life or non-life, provides people with a reasonable degree of security and assurance that they will be protected in the event of a calamity or failure of any sort. Insurance may be described as a social device to reduce or eliminate risk of loss to life and property. Under the plan of insurance, a large number of people associate themselves by sharing risks attached to individuals. The risks, which can be insured against, include fire, the perils of sea, death and accidents and burglary. Any risk contingent upon these, may be insured against at a premium commensurate with the risk involved. Thus collective bearing of risk is insurance. History of Indian Insurance The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the non-Indian lives as Indian lives were considered more risky for coverage. The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge same premium for both Indian and non-Indian lives. The Oriental Assurance Company was established in 1880. The General insurance business in India, on the other hand, can trace its roots to the Triton (Tital) Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Till the end of nineteenth century insurance business was almost entirely in the hands of overseas companies. Insurance.. Insurance can be defined as assurance for uncertainty. Insurance is about something going wrong. Its often about things going right.; One of the Wonders of human nature is that we never believe anything can actually go wrong. The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to liberalized market again. Tracking the development in Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries. 1

The business of life insurance in Indian in its existing form started in India in the year 1818 with the establishment of Oriental Life. Insurance Company in Calcutta. Some of the important milestones in life insurance business in India are. 1912: The Indian Life insurance Companies Act enacted as first statue to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about 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. 1965: 245 Indian and foreign insurers and provident societies take 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 Crores from the government of India.

Indian Insurance: Sector Reform Formation of the Malhotra Committee in 1993 initiated reforms in the Indian insurance sector. The aim of the Malhotra Committee was to assess the functionality of the Indian insurance sector. This committee was also in charge of recommending the future path of insurance in India. The Malhotra Committee attempted to improve various aspects of the insurance sector, making them more appropriate and effective for the Indian market. The recommendations of the committee put stress on offering operational autonomy to the insurance service providers and also suggested forming an independent regulatory body. The Insurance Regulatory and Development Authority Act of 1999 brought about several crucial policy changes in the insurance sector of India. It led to the formation of the Insurance Regulatory and Development Authority (IRDA) in 2000. The goals of the IRDA are to safeguard the interests of insurance policyholders, as well as to initiate different policy measures to help sustain growth in the Indian insurance sector. 2

Current position of Indian insurance industry India is the fifth largest life insurance market in the emerging insurance economies globally. The market size of Indian insurance sector went up to US $47.89 billion in 2007, from US $21.71 billion in 2000, increasing at the rate of 120 percent. Between 2000 and 2007, overall premiums sustained an average growth rate of 11.96 per cent. This was one of most steady growth pattern witnessed amongst emerging economies in Asian as well as global markets. Increasing from just one company a decade ago, there are 22 life insurance companies in the country. With increasing competitiveness amongst these, the players are bringing out newer products to attract more customers into their pool. Foreign direct investment (FDI) up to 26 per cent is permitted under the automatic route subject to obtain a licence from the official regulator, Insurance Regulatory and Development Authority (IRDA). As major portion of the business come from urban market, the next step for these firms would be to tap semi-urban and rural markets.

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY

Reforms in the Insurance sector were initiated with the passes of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously such to its schedule of framing regulations and registering the private sector insurance companies. The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA online service for issue and renewal of licenses to agents.

1.2 COMPANY PROFILE HDFC Standard Life is one of Indias leading private life insurance. Companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC),Indias leading housing finance (HDFC), Indias leading housing finance institution and Standard Life plc, a leading provider of financial services in the United Kingdom. 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 their Plans, by adding optional benefits called riders, at a nominal price. The company currently has 25 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 through a network of 595 offices serving over 720 cities and towns across the country. The company has also increased its depth in existing markets with a strong base of more than 207,000 Financial Consultants. HDFC Standard Life Insurance Company Limited. is one of India's leading private insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Limited), India's leading housing finance institution and a Group Company of the Standard Life Plc, UK. As on February 28, 2009 HDFC Ltd. holds 72.43% and Standard Life (Mauritius Holding) 2006, Ltd. holds 26.00% of equity in the joint venture, while the rest is held by Others. At HDFC Standard Life, we work towards helping our customers to live with pride and self respect. Being customer centric is a value dear to our heart. "Raising the bar", "Soar for More" is our business mantra; in doing so, rigor of processes is also what we adhere to .Integrity is our way of life. Providing a challenging work environment to employees goes hand in hand with our motto of customer delight. 8 incredible years and still going strong, we have literally made our mark with footprints over 600 cities & towns in India. The growth engine is driven by more than 16,000 committed employees who take pride in working for HDFC Standard Life, a distribution channel with over 2,00,000 customer centric financial consultants and equally strong channel partners in private and public sector banking. While accelerating our growth, we foster a learning culture towards creating thought leadership in the industry. HDFC's finest investment is in its Human Resources. We believe that the combination of growth and talented work force will take the organization to newer heights. We believe that our people are our building blocks on which the company's performance & productivity is based. 4

HDFC Standard Life is a leading life Insurance Company. Its the endeavor of the organization to attract talent in a competitive landscape and retain them through effective people processes. Our talent acquisition strategy is to hire the right people who align and demonstrate HDFC Standard Life values. Our learning and leadership initiatives emphasize on capability development at each level to create an environment which allows contribution towards business growth. Alignment with our values is the starting point in HDFCSL. Our talent management initiatives recognize individual aspirations and provide opportunities for employees to fulfill their potential. Our employee engagement endeavors are geared to build a culture where employees partner the organization building processes.

Incorporation Of Hdfc Standard Life Insurance Co. Ltd.: The company was incorporated on 14th August 2000 under the name of HDFC Standard Life Insurance Company Limited. Their ambition from the beginning was to be the first private company to re-enter the life insurance market in India. On the 23rd of October 2000, this Ambition was realized when HDFC Standard Life was the first life company to be granted a Certificate of registration. HDFC are the main shareholders in HDFC Standard Life, with 81.4%, while Standard Life owns 18.6%. HDFC Standard Life Insurance Company Ltd. is one of Indias leading private life insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.), Indias leading housing finance institution and one of the subsidiaries of Standard Life plc, leading providers of financial services in the United Kingdom.

HDFC Standard Life Insurance Company Ltd. HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has since emerged as the largest residential mortgage finance institution in the country The corporation has had a series of share issues raising its capital to Rs. 119 crores. The gross premium income for the year ending March 31, 2007 stood at Rs. 2, 856 crores and new business premium income at Rs. 1,624 crores. The company has covered over 8,77,000 lives year ending March 31, 2007. HDFC operates through almost 450 locations throughout the country with its corporate head quarters in Mumbai, India. HDFC also has an International Office in Dubai, UAE, with service associates in Kuwait, Oman and Qatar. HDFC is the largest housing Company in India for the last 27 years.

Mr. Deepak S. Parekh is the Chairman of the Company. He is also the Executive Chairman of Housing Development Finance Corporation Limited (HDFC Limited). He joined HDFC Limited in a senior management position in 1978. He was inducted as a wholetime director of HDFC Limited in 1985 and was appointed as its Executive Chairman in 1993. He is the Chief Executive Officer of HDFC Limited. Mr. Parekh is a Fellow of the Institute of Chartered Accountants (England & Wales).

Snapshot-I Incorporated in 1977 as the first specialized mortgage company in India. Almost 90% of initial shareholding in the hands of domestic intuitions and retail investors. Current 77% of shares held by foreign institutional investors. Besides the core business of mortgage HDFC has evolved into a financial conglomerate with holdings In: HDFC Standard Life insurance Company- HDFC holds 78.07 %. HDFC Asset Management Company HDFC holds 50.1% HDFC Bank- HDFC holds 22.25%. Intelenet Global (Business Process Outsourcing) HDFC holds 50%.

Snapshot-II Loan Approvals (up to Mar 2009) Loan Disbursements (up to Dec. 2007) Housing Units Financed Distribution Offices Outreach Programs Rs. 805 billion. (US $ 18.30 bn.) Rs.669 billion (US $ 15.20 bn) 2.5 million. 254

Group 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. Associate Companies HDFC Limited HDFC Bank HDFC Mutual Fund HDFC Sales HDFC ERGO General Insurance Other Companies HDFC Trustee Company Ltd. GRUH Finance Ltd. HDFC Developers Ltd. HDFC Property Ventures Ltd. HDFC Ventures Trustee Company Ltd. HDFC Investments Ltd.

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 and group 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.

1.2.1Background and inception of the company HDFC Standard Life Insurance Company Limited. is one of India's leading private insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Limited), India's leading housing finance institution and a Group Company of the Standard Life Plc, UK. As on February 28, 2009 HDFC Ltd. holds 72.43% and Standard Life (Mauritius Holding) 2006, Ltd. holds 26.00% of equity in the joint venture, while the rest is held by others. The company was incorporated on 14th august 2000 under the name of Hdfc Standard Life Insurance Company Ltd.

The ambition of the company from as far back as October 1995 was to be the first private company to re enter the life insurance market in India ,on 23rd of October 2000,this ambition was realized when HDFC STANDARD LIFE was the only life insurance company to be granted certification of registration . Hdfc Standard Life has a long and close relationship build upon shared value and trust. The ambition of Hdfc Standard Life is to mirror the success of the parent company and be the yard stick by which all other insurance companies in India are measured. Hdfc Standard Life Insurance Company LTD is a joint venture between HDFC, Indias largest housing finance institution standard life assurance company , Europes largest housing finance institution and standard life assurance companies , Europes largest mutual life company HDFC over RS- 280000 CRORES In assets and standard life over us $ 100 billion in assets . 1.2.2 Nature Of Business HDFC STANDARD LIFE is into a business of insurance. It is one of the first private insurance companies. Its sell various insurance policy based on the needs of consumer. Its has traditional insurance plan as well as modern ulip plan in its portfolio.

1.2.3 Vision ,Mission Statement. 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. Mission We aim to be the top new life insurance company in the market , this does not just mean being the largest or most productive company in the market rather it is a combination of several thing like Customer service of the highest order Value for money for customer Professionalism in carrying our business Innovative product to cater to different needs of different customer Use of technology to improve service standard Increasing market share

Key Strength Financial Expertise: As a joint venture of leading financial services groups. HDFC standard Life has the financial expertise required to manage your long-term investments safely and efficiently. Range of Solutions We have a range of individual and group solutions, which can be easily customized to specific needs. Our group solutions have been designed to offer you complete flexibility combined with a low charging structure. Strong Ethical Values: HDFC is an ethical and Cultural Organization. False selling or false commitment with the customers is not allowed. Most respected Private Insurance Company: HDFC was awarded No-1 Private Insurance Company In 2004 by the World Class Magazine Business World. Integrity, Innovation and Customer Care. 1.2.4 Products Protection Plans HDFC Term Assurance Plan. HDFC Loan Cover Term Assurance Plan. HDFC Home Loan Protection Plan. Children's Plans HDFC Children's Plan. HDFC Unit Linked Young Star II. HDFC Unit Linked Young Star Plus II. HDFC Unit Linked YoungStar Champion. Retirement Plans HDFC Personal Pension Plan. HDFC Unit Linked Pension II.

HDFC Unit Linked Pension Maximiser II. HDFC Immediate Annuity. Rural Products HDFC Garmin Bima Mitra Yojana. HDFC Bima Bachat Yojana. HDFC Development Insurance Plan.

Savings & Investment Plans HDFC Unit Linked Endowment Plus II. HDFC SimpliLife. HDFC Unit Linked Endowment II. HDFC Unit Linked Enhanced Life Protection II. HDFC Unit Linked Wealth Maximiser Plus. HDFC Unit Linked Wealth Multiplier. HDFC Unit Linked Endowment Winner. HDFC Endowment Assurance Plan. HDFC Money Back Plan. HDFC Single Premium Whole of Life Insurance Plan. HDFC Assurance Plan. HDFC Savings Assurance Plan. Health Plans HDFC Critical Care Plan. HDFC SurgiCare Plan.

Group Plans Group Term Insurance Plan. Group Variable Term Insurance Plan. Group Unit Linked Plan - Gratuity. Group Unit Linked Plan Superannuation. Group Unit Linked Plan - Leave Encashment.

1.2.5 AREA OF OPERATION (Servicing the customer)

During the year, company continued to increase its focus on service quality. The company aims to provide consistent and high quality service across the country through, all channels of delivery - branches, call centers, internet and the customer portal. Towards this end, periodic service audits conducted across all regional offices and at the call centers provide useful insights into customer requirements and expectations helping the company improve its processes. The company has implemented a Quality Initiative across its offices which regularly measures the effectiveness of its processes, reduces leakage and contributes to increasing revenues, managing costs and improving service quality. The company has also launched a completely revamped website with a big focus on customer education and knowledge. The company has continued to strengthen its presence in the virtual world, both for creating awareness and facilitating self service. Your company continues to explore strategic outsourcing partnerships with a focus on handling volumes and reaping economies of scale. The combination of outsourcing partnerships and technology implemented by the company is assisting in improvement of service turnaround times. As part of its Corporate Social Responsibility, your company continues to explore partnerships with

1.2.6 Ownership Pattern Though, the existing rule says that a foreign partner can hold 26% equity in an insurance company, a proposal to increase this limit to 49% is pending with the government. Since opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into the Indian market and 21 private companies have been granted licenses.

1.2.7

COMPIPTATORS

Life Insurance Corporation Life insurance made its debut in India well over 100 years ago. Its salient features are not as widely understood in our county, as they ought to be. What follows is an attempt to acquaint readers with some of the concept of life insurance, with special reference to LIC. It should, however, be clearly understood that the following narration is by no means an exhaustive description of terms and conditions of LIC policy or its benefits or privileges. For more details, please contact our branch or divisional office. An LIC it will be glad to help you choose the life insurance plan to meet your needs and render policy servicing.

ICICI Prudential ICICI Prudential life insurance company is a joint venture between ICICI bank, a premier financial powerhouse and prudential plc. A leading international financial service group headquartered in the United Kingdom. ICICI prudential was amongst the first private sector insurance company to being operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA) . ICICI Prudential equity base 74% and 26% stake respectively. In the period April-December 2004, the company earned Rs. Billion of new business premium for a total sum assured of over Rs 73.6 billion and wrote nearly 345000 policies.

The company has a network of over 50000 advisor; as well as 7 bank assurance tie-ups. Today, ICICI Prudential has emerged as the No -1 Private Life insured in the country. With a wide range of flexible products that meet the needs of the customer at every step in life. Bajaj Allianz: A household name in India teams up with a global conglomerate Bajaj Auto Ltd, the flagship company of the Rs. 8000 corers Bajaj group is the largest manufactured of twowheelers and three-wheelers in Indian and one of the largest in the world. A household name in India, Bajaj Auto has a strong brand image and locality synonymous with quality and customer focus. With over 15000 employees, the company is a Rs. 4000 crores auto giant. It is the largest 2/3 wheelers manufactured in India and the 4th in the world .AAA rated by crises, Bajaj auto has in a operation for over 55 years. It has joined hands with Allianz to provide the Indian consumer with a distance option in term of life insurance products. As a promoter of Bajaj Allianz Life Insurance Co. Ltd. Bajaj auto has following to offerFinancial strength and stability to support the Insurance Business. A Strong brand-equity. A good market reputation as a world class organization. Adequate experience of running a large organization.

Hdfc Standard Lifes Market Share Insurance Company LIC ICICI Prudential Bajaj Allianz SBI Life HDFC Standard Life Birla Sun life Reliance Life Max New York OM Kotak AVIVA Tata AIG Met Life Market Share(in per cent) 48.1% 13.7 % 10.3% 6.2% 4.1% 3.4% 3.4% 2.4% 1.9% 1.8% 1.5% 1.4%

1.2.8 Infrastructure Facilities The company opened 23 offices during the year, taking the total to 595 across the country. Telephone Intranet and internet Conference room Seminar room Training room Laptop from IT department to senior manager Help line : product knowledge of HDFCSL Company e-mail For each and every employee and advisors of the company will get their personal I D where in they can login from any part of the country and update things , Like perk, commission account, keep in track of product, target. 1.2.9Acheivements Got licensed from IRDA as a Financial and Recruitment Recruited eight financial consultants for company. Achieved the target of 3 lakhs business in june 2009 upto 22nd date. Also recommended for star of the month in this june. Increase in confidence level. Developing friendly relationship with my customers. Got the knowledge about, how to differentiate our product form that of LIC. Made more and more people aware about my companies Products (Policies) Taken some appointments for policies and got positive response from 12 Persons with the help of my SDM. And BM. Hdfc Milestones Received the PC Quest Best IT Implementation Award 2008 for Consultant Corner, the applications for its financial consultants, providing centralized control over a vast geographical spread for key business units such as inventory , training, licensing, etc. Consultant.

Received the 2008 CIO Bold 100 Award for its mobile workforce portal and the Special 2008 CIO Security Award for a secure computing environment, including identity management respectively. Mr. Deepak M Satwalekar Awarded QIMPRO Gold Standard Award

1.2.10 Work Flow Model Of Hdfc Standard Life During the year the company launched ATLAS (Agents Training and Licensing Administration System),a workflow based system, which enables efficient processing of data for training and licensing of Financial Consultants. Life insurance is a mechanism for pooling the resources by issuing policy to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread among a wide cross-section of industries and sectors thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at same time. Hence through diversification the insurance company earns return through there investment and which is passed back to the investors.This is just like a Life Cycle which repeat in nature

WORK FLOW MANAGER CHANNEL DEVELOPMENT MANAGER FINANCIAL CONSULTANTS CUSTOMERS

MANAGER

CORPORATES

CUSTOMERS

1.2.11 Future growth and prospects Track Record so far

The gross premium income of HDFC, for the year ending March 31, 2007 stood at Rs. 2, 856 crores and new business premium income at Rs. 1,624 crores. The company has covered over 8,77,000 lives year ending March 31, 2007. Company also declared our 5th consecutive bonus in as many years for our with profit policyholders. GRAPH 1.1 SHOWS THE LOAN APPROVALS & DISBURSEMENTS.

2 .0 50 0

1 .5 91 7
2 .0 00 0 1 .0 50 0 1 .0 00 0 50 00 . 00 . 0

1 .6 51 2 1 .2 13 7 1 .7 29 6 95 91 .

1 .7 60 2

F0 Y 3

F0 Y 4

F0 Y 5

LA A R E O SP O D N P V

LA D U E O SI B S N S RD

GROWTH IN PREMIUM

FY 2008-09 Changes in unit linked product guidelines premium reduction capped at 25% Investment norms tightened (Process and risk management related) Reduction in solvency norms Change in service tax from 12% to 10% Insurers instructed to separate out assets backing the required Solvency Margin, from the other shareholder assets and hold it in a separate account New requirement to disclose payouts to non individual distributors

FY 2009-10 PFRDA launches pension solutions for unorganized sector Committee set up for review of multi-ties for banking companies Corporate governance framework in process Changes in investment and accounting regulations likely

CHAPTER II MCKENSEYS 7S MODEL

Structure: A little about HDFC Standard Life Insurance. The company was on 14th August 2000, and is based in Mumbai, India. HDFC Standard Life Insurance Company Limited operates as a subsidiary of Housing Development Finance Corporation Limited . HDFC Standard Life Insurance Co. Ltd. is a joint venture between Housing Development Finance Corporation Limited (HDFC Limited) - India's leading housing finance institution, and a Group Company of the Standard Life Plc, UK. HDFC Standard Life Insurance is a new Indian life insurance company that operates out of 52 locations. HDFC Standard Life Insurance Company Ltd. is one of Indias leading private life insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.), Indias leading housing finance institution and one of the subsidiaries of Standard Life plc, leading providers of financial services in the United Kingdom. Both the promoters are well 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 Standard Life Insurance is the first private life insurance company to be granted a license by IRDA. Skill Introduction At HDFC Standard Life, we work towards helping our customers to live with pride and self respect. Being customer centric is a value dear to our heart. "Raising the bar", "Soar for More" is our business mantra; in doing so, rigor of processes is also what we adhere to .Integrity is our way of life. Providing a challenging work environment to employees goes hand in hand with our motto of customer delight. 8 incredible years and still going strong, we have literally made our mark with footprints over 600 cities & towns in India. The growth engine is driven by more than 16,000 committed employees who take pride in working for HDFC Standard Life, a distribution channel with over 2,00,000 customer centric financial consultants and equally strong channel partners in private and public sector banking. While accelerating our growth, we foster a learning culture towards creating thought leadership in the industry. Strategy Lead a life of respect and dignity even after retirement HDFC Unit Linked Pension Maximizer II Ideally, just how spending comes to you, so must saving and investing. You are able to finance your expenses and take care of your expenses in present times. However, to ensure that you are able to maintain the same standard of living post

retirement, you need to make the right kind of investment today. HDFC Unit Linked Pension Maximize II is a unique Single Premium unit linked plan, designed to provide a post-retirement income for life with the freedom to maximize your investment returns. This plan also gives Bumper Addition of 10% of initial single premium at vesting and on death. 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 initial single premium, the investment strategy and retirement date. At the end of the policy term, you will receive the accumulated value of your funds including Bumper Additions, which will be used to provide your pension income in your golden years

Strategies: Strategies Employed to achieve the target are as follows: Tele calling Contacting the person directly (interview) Collect references. Shared Values: These are the core values of the company that are evidenced in the corporate culture & the general work ethic. The values followed by HDFC SLIC are: Style: One element of manager is how he\she choose tom spend time, another aspect is symbolic behavior. This suggests a seconds attribute that is by no means confused to that of top. The style is reflected of culture, more than to change the organization or performance. The HDFC is basically is a democratic system. Before taking any decision meeting is conducted and a final decision is taken and decision is taken with the consent of all. Every employee gets chance to give his \her opinion. Every employee can participate decision making processes of the organization .The HDFC is a unit union body hence it takes people into confidence. it does not take any decision unilaterally .Managers are Integrity Innovation Customer centric People Care One for all and all for one Team work Joy and Simplicity

evaluated based on the quality of their decision making and opinion of fellow employee.Hence participative and democratic type of system is the best system for such a big organization like HDFC standard life ltd.

Staff: Work Culture The company attributes its success to the contributions made by its employees. We believe that our strength is our people, so our endeavour is to surpasstheir expectations and give them the best possible work environment and benefits that match the best in the industry. Talent management initiatives in HDFC Standard Life are driven by a set of organizational core competencies (Mantra 10) as well as position-specific competencies. The competency set includes knowledge, skills, experience, and personal traits (demonstrated through defined behaviors) based on the bedrock of sharp vision and strong values of HDFC Standard Life. In this endeavor of shaping and nurturing our talent pool, HDFC Standard Life adopts a four-step model: Acquiring and Retaining Talent HDFC Standard Life believes in building capability for superior performance leading to a superior shareholder value. We have a bouquet of people processes like Assessments, Potential Review. The company had 14,506 employees as of March 31, 2009 as compared to 15,411 employees as of March 31, 2008. Under the provisions of Section 217 (2A) of the Companies Act, 1956 and the rules framed there under, the names and other particulars of employees are set out in the annexure to this Report Systems: All the processes & information flows that links the organization together. Communications practice and system. Management reporting system. Approval process. Planning/budgeting system. CHAPTER III

1.4 Swot Analysis SWOT analysis is an acronym for the internal strengths and weaknesses of affirm and the external opportunities and threads facing that firm. SWOT analysis helps managers to have aquick overview of the firms strategic situation and assess whether there is a sound fit between internal resources, values, and external environment. Strength The company is positioned it is first private company in the insurance sector in India Huge source of reserve base The company opened 23 offices during the year, taking the total to 595 across the country. Corporate Agents and Brokers are able to service customers in over 720 cities and towns across the country. The company also reduced premium rates on its term insurance plans and passed on a substantial benefit to customers. Effective user of banc assurance The company also provides innovative products to cater to different needs of different Domestic image of HDFC supported by Prudentials international image is strength of the company. Large pool of technically skilled manpower with in depth knowledge and understanding of the market Weakness The year 08-09 has been a difficult year for the financial sector and the impacts have been felt in the Indian life insurance industry. Growth rate in the private sector have declined over the year on the back of a much more cautious attitude adopted by individual customers. The return given by the company on its ULIP plan is very much below the market leader which reflects poor investment strategy. Though company is positioned as first private company in the insurance sector in India its market share stand at 3% which is very much low. Dividend - As the company has not earned profits, the directors do not recommend any Dividend. Unable to exploit rural market Low customer confidence on the private players Vertical hierarchical reporting structure with many designations and cadres

Leading to power politics at all levels without any exception. Heavy management expenses and administrative costs. Poor retention percentage of tied up agents. Opportunities HDFC should tie up with business organization and private maternity hospital to expand business. Innovative products, smart marketing, and aggressive distribution have enabled insurance companies to sign up Indian customers faster than anyone expected. Indians, who had always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative product. Till date, only 20% of the total insurable population of India is covered under various life insurance schemes, the penetration rates of health and other non-life insurances in India is also well below the international level. Insurable population According to ING only 10% of the population is insured, which represents around 30% of the insurable population. This suggests more than 300m People, with the potential to buy insurance, remain uninsured. There will be inflow of managerial and financial expertise from the worlds leading insurance markets. Further the burden of educating consumers will also be shared among many players. International companies will help in building world class expertise in local market by introducing the best global practices Insurance liberalization in India is expected to result in a wider choice of major commercial insurance covers, such as fire, export credit,. Threats Changing government regulation Huge competition in the market put pressure on the profit margin Provision for entry of foreign player Price Ware With Competitors Taxation On The Product And Service Competitors Have Superior Access To Channels Of Distribution

CHAPTER IV FINANCIAL STATEMENT REVIEW

Ratio of expenses of management Managerial expenses\gross premium=21915907/55646937=39.38% Commission ratio Gross commission \gross premium=4248904/55646937=7.64% Gross profit ratio Net profit ratio

The Company does not have any profit after tax and therefore this ratio cannot be calculated

CHAPTER V Learning experience

My research project at HDFC STANDARD Life Insurance Company has been an extremely enriching one. My project was divided into two main parts. Though I did not have the opportunity of sitting in the office and have much corporate exposure I dont regret it as I got full hands-on on-the field experience. To summarize my experience in one line I would say that my experience At HDFC was a really great learning experience with a lot of new things learnt and as I also wish to specialize in FINANCE this experience is really a big bonus for me. The Learning I gained during my project are mentioned below: I gained a broader perspective about various investment opportunities and the risk involved in them. I came to know about the various technicalities about the Indian insurance industry. Through this research I enriched my knowledge on various competitive strategies adopted by different companies y to survive in a highly competitive market. Learnt in a more detailed way about the nature of work existing in the insurance industry, the kind of deadlines they have to meet, the kind of pressure and levels of stress which they work under and the kind of recognitions given to them after they meet or exceed their targets

CHAPTER VI Introduction Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by establishing the relationship between the items of the balance sheet and profit and loss account. Financial analysis can be undertaken by management of the firm, or by parties outside the firm. Financial statements provide a summarized view of the financial position and operations of a firm. Basic limitation of the traditional financial statements is that, they do not give all the information related to the financial operations of a firm. Nevertheless they provide some extremely useful information to the extent that the balance sheet mirrors the financial position on a particular date in terms of structure of assets liabilities and owners equities and profit and loss account shows the results of operations during certain period of time in terms the revenues obtained and cost incurred during the year. Therefore much can be leant about firm from a careful examination of its financial statements as invaluable documents. The analysis of financial statements is thus an important aid to financial analysis. The focus of financial analysis is on key figures in the financial statements and the significant relationship that exists between them. The analysis of the financial statement is a process of evaluating the relationship between component parts of financial statements to obtain a better understanding of the firms position and performance. Financial analysis in brief is the process of selection, relation, evaluation of relevant information. Ratio analysis is the most widely used technique of financial statement analysis. Financial statement refers to statement (1) Income statement or profit and loss account and (2) Balance sheet or position statement at the end of every year. Balance sheet: The balance sheet is the most significant financial statement. It indicates the firms financial solvency and liquidity. It communicates about assets, liabilities, owners equity. Profit and loss account: The earning capacity and potential of the firm are reflected by its profit and loss account.

SOME RELEVANT PROVISIONS OF INSURANCE ACT, 1938 The insurance act 1938 and the insurance rules,1939 set out the provisions and rules which have a bearing a accounts and audit. After the nationalization of general insurance business, many of the provisions contained in the act have become irrelevant. This sub-section deals with the relevant provisions of the law. Section 11(1) of the act requires that every insurer in respect of all insurance business shall prepare (a) a balance sheet in accordance with regulations contained in part 1 of the first schedule. (b) a profit and loss account with the regulations contained in part 1 of first schedule in the set forth in part 2 of the schedule. (c) a revenue account as per regulations and 3rd schedule in respect of each class. Section11(2) of the act requires that the account and statement shall be signed by all chairman if any 2 directors and principal officer of the company. IRDA REGULATIONS, 2002 As per the IRDA guidelines, an insurer carrying on life insurance business shall comply with requirements given in schedule A. the following table depicts the structure of schedule A. Schedule A for life insurance business Part 1 accounting principles for preparation of financial statement. Part 2 disclosures forming part of financial statements Part 3 general instructions for preparation of financial statements Part 4 contents of management report Part 5 preparation of financial statements The insurance company carrying life insurance business is required to prepare balance sheet form A-BS, revenue account form A-RA, profit and loss account form A-PL.

Need of the study

This study helps the company to identify its competitive position among its industrial competitors by which the company can further improve its performance to enjoy high reputation among clients. This study also helps in making necessary changes in the attributes of the insurance cover offered by the company so that the customers can enjoy the benefits of the insurance cover. The need for the study also arises to identify and offer additional insurance products according to the expectations of the customers. To know the financial performance of the company for past 2 years

TITLE OF THE STUDY FINANCIAL STATEMENT ANALYSIS A Study has been conducted in the area of FINANCIAL STATEMENT ANALYSIS at HDFC STANDARD LIFE. 6.1Statement Of The Problem Financial statement analysis of HDFC standard life to know the financial growth in market. To know the investment plans organizations funds. Financial analysis is the technique which helps to know the financial position of the company. Many changes take place in the assets, equities, revenues and expenses in the course of business operations. These changes in an asset or an equity account or in revenue or an expenses account over a period of time can be examined and presented in the form of a flow statement. The flow statement may, therefore be defined as a statement which explains increases or decreases in different related accounts for a specified period of time. 6.2Objectives of the study This widely used by the financial analysiss and credit granting institutions and financial managers in performance of their jobs. It has become a useful tool in their analytical kit. This is because the financial statements, i.e., Income Statement and the Balance Sheet have a limited role to perform. Income Statement measures flow restricted to transitions that pertain to rendering of goods and services to customers. The Balance Sheet is merely a static statement. It is a statement of assets and liabilities as on a particular date. To explains the financial consequences of business operations: Financial statement analysis provides a ready answer to so many conflicting situations, such as:

a. Why the liquid position of the business is becoming more and more unbalanced in spite of business making more and more profits? b. How was it possible to distribute dividends in excess of current earnings or in the presence of a net loss for the period? c. How the business could have good liquid position in spite of business making losses or acquisition of fixed assets? d. Where have the profits gone? To study the current financial performance To analyze the liquidity position of the business using the 2 year financial statements To analyse long term profitability To analyze the financial growth compare to previous year statement of HDFC To study the working condition of HDFC life Insurance Industry To study strengths and weaknesses of the companys insurance schemes To analyze the performance of HDFC using Ratio Analysis. To suggest their allocation of funds of HDFC Life Insurance using appropriate ratios.

6.3 Scope Of The Study This study has a wider scope among the insurance sector. The study which focuses on various aspects such as competitive position of Hdfc Standard Life Insurance Company Ltd, strengths and weaknesses of insurance covers, customers perception, etc also holds good for other companies in the life and non-life insurance segment. The outcome of the study, which are based on the above aspects can be utilized by the department of both life and non-life insurance companies. 6.4 Methodology

6.4.1Research method Exploratory Research - an exploratory research focuses on the delivery of ideas and is generally based on secondary data. Its is a preliminary investigation a preliminary investigation which does not have a rigid deign. This is because a researcher engaged in exploratory study may have to change his focus as a result of new ideas and relation among the variables.

The study conducted through exploratory research with the help of data obtain from the secondary data, there is no specific sample design made or questionnaire used to obtain information Data Type: The data used for the study is secondary data 6.4.2 Source of data Insurance company broacher IRDA web site Companies web sites Annual report of company

7 Limitations of the study The survey conducted may not be considered as comprehensive as only limited respondents could be contacted because of the time constraint. Lack of information of hdfc.. It depends on past information.. Only the last 2 years data is considered for the study Only limited sample size had been considered for the study and therefore, the conclusions drawn based on this may not be a reflection of the entire industry.

Financial statement Profit and loss account is prepared to ascertain the results of business operations called net profit or net loss of the business for an accounting year. The balance sheet is prepared to indicate the financial position. Object of balance sheet is prepared to know the soundness of the business indicated by its assets and liabilities

In balance sheet there are 2 major things to learn before is 1. Current Assets: The term Current Assets includes assets which are acquired with the intention of converting them into cash during the normal business operations of the company. 2. Current Liabilities: The term Current Liabilities is used principally to designate such obligations whose liquidation is reasonably expected to require the use of assets classified as current assets in the same balance sheet or the creation of other current liabilities or those expected to be satisfied within a relatively short period of time usually one year. The term current liabilities also includes amounts set apart or provided for any known liability of which the amount cannot be determined with substantial accuracy e.g., provision for taxation, pension etc.

Chapter VII Finacial Statement Analysis And Interpretation The complete evaluation of the above terms will be done in the following sessions using the ratio analysis tool. Ratio analysis is a widely used tool of financial analysis.

Importance Of Ratio Analysis Liquidity Position: with the help of ratio analysis can know the liquidity position of the firm. We can know whether it is able to meet its short term liabilities. This ability is reflected in the liquidity ratios of the firm.

Long Term Solvency: ratio analysis is useful to assessing the long term financial viability of the firm. This aspect of the financial position is concerned to the long term creditors, security analyst and present and potential owners of a business. The long term solvency is measured by leverage ratios.

Operating Efficiency: it throws light on the degree of efficiency in the management and utilization of assets. the activity ratios measures the efficiency of the management. Over-All Profitability: the management is constantly concerned about the overall growth in the enterprise. It to meet short and long term obligations to creditors.

Trend Analysis: It shows whether the financial position of the firm is improving or deteriorating over the years. Significance of trend analysis ratios lies in the fact to know the direction of the financial position. Limitations Of Ratio Analysis Difficulty In Comparison: One serious limitation of ratio analysis arises out of the difficulty associated with their comparability. The differences may relate to: Differences in the basis of inventory valuation Different depreciation methods. Estimated life of assets Amortization of intangible assets like goodwill. Patents. Amortization of deferred revenue expenditure such as preliminary expenditure and discount on issue of shares.

Impact Of Inflation: weakness of traditional finance statements which are based on historical costs. Assets are acquired at different prices and shown in the balance sheet. These prices may over value or under value. It enters the balance sheet at different book value affect the profitability ratio of the firm.

Conceptual Diversity: yet another factor influences the ratios is that there is a difference of opinion regarding the various concepts used to compute the ratios. There is always room for diversity of opinion as to what constitutes shareholders equity, debt, assts, profit, and so on different firms may use these terms in different senses or the same firm may use them to different mean different things and different times.

Ratios are relative figures reflecting the relationship between variables. Comparison with related facts is the basis of ratio analysis.

They are four types of comparisons Trend ratios Inter firm comparison Comparison of items within a single years financial statement of a firm. Comparison with standards Currently we are using the trend ratios analysis to analyze financial statements. Trend ratio involves a comparison of present ratios with past ratios for the same firm. Trend ratio indicates the direction of change in the performance, improvement, deterioration or constancy - over the years. Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms. In some cases, ratio analysis can predict future bankruptcy. Ratios can be classified into four groups, Liquidity ratios. Capital structure ratios. Profitability ratios. Activity ratios. Liquidity Ratios The adequate liquidity in the sense of the ability of a firm to meet current/short term obligations when they become due for payment can hardly be overstressed. (1) Net working-Capital Ratios, (2) Current ratios, (3) Acid test ratio ratios (4) Super quick ratios, (5) Turnover ratios. Liquidity ratios provide information about a firm's ability to meet its short-term financial obligations. They are of particular interest to those extending shortterm credit to the firm. Two frequently-used liquidity ratios are the current ratio (or workingcapital ratio) and the quick ratio. Net working capital It represents the excess of current assets over current liabilities. An enterprise should have sufficient NWC in order to be able to meet the claims of the creditors and the day to day needs of the business. NWC measures the firms reservoir of funds. It can be related to net assets are capital employed. The greater is the amount of Net Working capital, greater is the liquidity position of the firm. NWC=current assets- current liabilities

Table-1 Particulars Total Current assets Total current Liabilities Net working capital

Net working capital Ratio Current Year 96,43,629 90,29,038 614,591

(amount in Rs. 000) Previous Year 87,57,727 62,51,168 2,506,559

Graph-1

Here NWC has gone down for the firm from 25, 06,559.00 to 6, 14,591.00 that is 18, 91,968.00. There is in reality deterioration in liquidity position. In the Previous year the firm had Rs 1.4 of current assets for each Re of current liabilities but by the end of the current year the amount of current year for each rupee of current liabilities declined to Rs 1.07 only i.e. 24% decline. Therefore NWC is not a satisfactory measure so better indicator is the current ratio. Current ratio Is the ratio of total current assets to total current liabilities. Short-term creditors prefer a high current ratio since it reduces their risk. Shareholders may prefer a lower current ratio so that more of the firm's assets are working to grow the business. Typical values for the current ratio vary by firm and industry. For example, firms in cyclical industries may maintain a higher current ratio in order to remain solvent during downturns. Current ratio=Current Assets/Current Liabilities.

TABLE-2

Current Ratio Particulars Previous year Current year

Current assets current liabilities Current ratio

9,643,629 90,29,038 1.4:1

87,57,727 62,51,168 1.07:1

GRAPH-2

It shows rupee value of current asset for each rupee of current liabilities. The higher the current ratio, the larger is the amount of rupees available per rupee of current liability. The more is the firm ability to meet current obligations and greater is the safety of funds of short term liabilities, current assets of 1.07 available to meet them. In the previous year current ratio is 1.4:1 signifies that current assets are 1.4 times its short term obligations. The liquidity position is better in previous year as compare to current year. Acid test ratio It refers as quick ratio because its a measurement of a firms ability to convert its current assets quickly into cash in order to meet current liabilities. Its a ratio between quick current assets and current liabilities. Acid ratio=quick current assets/current liabilities. The current assets used in the quick ratio are cash, accounts receivable, and notes receivable. These assets essentially are current assets less inventory. The quick ratio often is referred to as the acid test. Here quick current asset=all current asset- prepayment- inventory. Table-3

Quick Ratio (Acid Test Ratio) Particulars Quick current assets

(amount in Rs. 000) Current year 82,18,747 Previous year 78,57,565

Current liabilities Quick ratio

90,29,038 0.91

62,51,168 1.25

Graph-3

Acid test ratio is satisfactory when the ratio is 1: 1 , here current year ratio is 0.91 rupee of current asset to each rupee of current liability. And previous year ratio is 1.25 rupee of current asset to each rupee of current liability. Currently the quick ratio is less than the standard norm, the interpretation that can be placed on the current ratio and acid test ratio is that a large part of the current asset of the firm tied up in slow moving and unsalable inventories and slow paying debts. The quick ratio is a more rigorous and penetrating test of the liquidity position of the firm. Finally, the cash ratio is the most conservative liquidity ratio. It excludes all current assets except the most liquid: cash and cash equivalents. The cash ratio is defined as follows:

Cash + Marketable Securities Turnover ratio Cash Ratio = Current Liabilities it is another way of examining the liquidity is to determine how quickly certain current assets are converted into cash. (1) Debtors (2) Creditors turnover ratio turnover ratio

Debtors turnover ratio is determined by dividing the net credit sales by average debtors outstanding during the year. Debtors turnover ratio = net credit sales/average debtors. Since its insurance company turnover ratio is not applicable.

Defensive Interval Ratio it is a ratio between quick liquid assets and a projected daily cash requirement. Apart from paying current liabilities the liquidity position of the firm should also be examined in relation to its ability to meet projected daily expenditure from operations. The defensive interval ratio measures the time span a firm can operate on present liquid asset without resorting to next years income.

(amount in Rs. 000) Table-4 Quick current assets Defensive-Interval Ratio 78,57,565

Particulars Projected daily cash requirement Projected cash operating expenditure/ no of days(365)

Previous year 37410.9 13654973/365

Since the companys defensive interval ratio is 210 days the firm has liquid assets which can meet the operating cash requirements of the firm for 210 days without resorting to future revenues.

Leverage ratio/ capital structure ratio It is the ratio to calculate the long term liquidity position of the firm. There are thus 2 aspects of the long term solvency of the firm. Ability to repay principle when due . Regular payment of the interest . There are 2 different types of leverage ratios I. Ratios which are based on relationship between borrowed funds and owners capital.

Debt-equity ratio Debt-asset / capital ratio II. Ratio which are based on p/l account (coverage ratios)

Interest coverage ratio Dividend coverage ratio Total fixed coverage ratio Cash flow coverage ratio Debt equity ratio It indicates the relative proportions of debt and equity in financing the asset of the firm. There 2 approaches in calculating debt equity ratio. The debt equity ratio is the relationship between borrowed funds and owners capital is a popular measure of the long term financial solvency of the firm. total long term debt does not include current liabilities like sundry creditors banks redit etc, which are ostensibly short term, are renewed year by year and remain by and large permanently in the business. Debt equity ratio= total debt/ share holders equity

(amount in crores) Table-5 Debt-Equity Ratio 05Mar 256 544 800 2.125

EQUITY DEBT TOTAL RATIO

06-Mar 1062 1298 2360 1.222

07-Mar 08-Mar 09-Mar 2222 4625 4768 2408 3939 5827 4630 8564 10595 1.083 0.85 1.22

Here the debt equity ratio is calculated by taking 5 previous year data

Graph-4

The debt equity ratio shows the safety margin of the firm. It implies low safety margin. This is an important tool of financial analysis to appraise the financial structure of a firm. it has important implications from the view point of creditors, owners and the firm by itself. High ratio shows a large share of financing by outsiders. The debt equity ratio is high the owners are putting up relatively less money of their own. It is danger signal for the creditors. A lower debt equity ratio has just the opposite implications to the creditors. The relatively high stake of the owners implies sufficiently safety margin and substantial protection against shrinkage in assets. Conclusion: here for every 1.22 rupee of debt has one rupee of equity. So the debt equity ratio is high. This lead to inflexibility in the operations of the firm as creditors would exercise treasure and interfere in management. Therefore firm would able to borrow only under restrictive terms and conditions. Debt asset ratio Shows the relation between the total debt to total asset. The total debt comprises long term debt plus current liabilities. As the ratio is like the debt equity ratio, it gives result similar to debt equity in respect of capital structure of the firm. Debt to total assets ratio = total debt / total assets Another variant of D/E ratio is to relate the owners/ proprietors funds with total assets. = proprietors funds / total assets. Total asset is calculated by adding all fixed assets and all current assets.

Table-6

Debt Asset Ratio Particulars Total debt Total assets debt asset ratio Current year 15,599,032 11,091,335 1.4064161

Here for each rupee of assets is equal to the 1.4 of every debt. Profitability ratios Apart from the creditors both short term and long term, also interested in the financial soundness of a firm are the owners and management. The management of the firm is naturally eager to measure its operating efficiency. The operating efficiency depends ultimately on the profit earn by it. The profitability ratios are designed to provide answers to questions such as Is the profit earn by the firm adequate What rate of return does it represent? What is the rate of profit for various divisions and segments of the firm. What are the earnings per share. What was the amount paid in dividends. What is the rate of return to equity holders etc.

profitability ratios are

profit margin ratio expenses ratio return on assets return on shareholders equity

Profit margin ratio net profit margin ratio this measures the relation between profit and revenues of a firm. The net profit margin is indicative of managements ability to operate the business with sufficient success not only recover from revenues of the period, the cost of merchandise or services, the expenses of operating the business and the cost of the borrowed funds, but also to leave a margin of reasonable compensation to the owners for providing their capital at risk. Net profit ratio= earnings after tax and interest / revenues EBIT= earnings- interest- tax Table-7 revenues= 55,183,763 . (amount in Rs. 000)

Particulars Profit/ loss after interest and tax Revenues NET profit Ratio

Current year 5,029,631 55,183,763 0.0911433

Previous year 2,435,094 48,585,616 0.05011965

Graph-5

Here the profit and loss account showing negative balance. So the ratio of net loss to the revenues is (0.0911433). A high return margin would ensure adequate return to the owners as well as enable a firm to withstand adverse economic conditions when revenues is declining, cost of production is rising and demand for the product is falling. Return on equity*(ROE)* It is one of the profitability ratio which shows the relationship between the profit and loss account and the equity (Net Worth) of the firm. Common or ordinary share holders are entitled to residual profit. Rate of dividend is not fixed; the earnings may be distributed to shareholders. Never the less, the profits after taxes represents their returns. A return on

shareholders equity is calculated to see the profitability of owners investment. The shareholders equity or net worth will include paid up capital, share premium and reserves and surplus less accumulated losses. Net worth can also be found by subtracting total liabilities from total assets

Table-8 Return on Equity Particulars Profit/( loss after tax) Net worth (Return on equity) Current year 5,029,631 6,520,340 0.7714 Previous year 2,435,094 6,379,641 0.3817

Graph-6

The ROE indicates how well the firm has used the resources of owners. In fact this ratio is one of the most important relationships in financial analysis. The earning of a satisfactory return is the most desirable objective of a business. The ratio of net profit to owners equity reflects the extent to which this objective has been accomplished. This will reveal the relative performance and strength of the companys in attracting future investments. Here the current years ratio is -0.7714 which is less than previous years ratio is -0.3817, comparatively current year relative performance of the company in attracting future investment is quite good. Net Retention ratio

(Net Premium divided by Gross premium) Net retention ratio is the relationship between net premium and gross premium. This measure the ability of the insurer to retain investment made by the insured(policyholder). The difference between net premium and gross premium is reinsurance ceded.

Table-9 Particulars Net Premium Gross Premium Retention ratio

current year 55,183,763 55,646,937 0.99167

previous year 48,176,166 48,585,616 0.99157

Graph-7

Interpretation reinsurance plays an important role in the insurance business of virtually every type. The service provided by the reinsurer is similar to that provided by the insurance company to their policyholders. In general insurance there are risks which, because of their magnitude or nature, one insurance company cannot afford to cover, such cases, an insurance company insures the whole risk itself and lays off the amount it has accepted to other insurance of reinsurance companies, retaining only that much risk which it can absorb. Here the current years retention ratio is 0.99167. company retaining 99.17% of risk with itself, ceding 0.83% to the reinsurer. In the previous year retention ratio is 0.99157, ceding

0.0084 to the reinsurer. This shows company has taken high risk compared to previous year, i.e. 0.01%.

Administrative expenses ratio is another profitability ratio related to revenue. It is computed by dividing expenses by revenue. Administrative expenses= (administrative expenses / net sales) 100 TABLE-10 Particulars Administrative expenses Net revenue Administrative expenses ratio Current year 5,307 329,343 0.016114 (amount in Rs. 000) Previous year 12,596 308,838 0.0407

GRAPH-8

The expense ratio is very important for analyzing the profitability of the firm. It should compared over a period of time with the industry average. As a working proposition a lower ratio is favorable. The implication of high expenses is that relatively small percentage of share of revenue is available for meeting financial liabilities.

Here current years administrative expenses ratio is 0.016114, compared to previous year it is high. Therefore this is not a favorable ratio, because percentage of revenue available for meeting short term obligation is less. Management expenses ratio It is another ratio which shows the relationship between expenses and gross premium of the business. The management ratio explains the changes in the profit margin. This ratio is computed by dividing management expenses viz, operating expenses relating to insurance business excluding interest. Ratio of expenses of management (Expenses of management divided by Total gross direct premium) TABLE-11 Particulars Management Expenses Total Gross Premium Ratio

Current year 21,915,907 55,646,937 39.38%

Previous year 13,704,946 48,585,616 28.20%

GRAPH-9

Operating expenses ratio= operating expenses / net revenues A higher management expenses ratio is unfavorable since it will leave a small amount of operating income to meet interest dividend etc. To get a comprehensive idea of the behavior of operating expenses, variations in the ratio over a number of years should be analyzed. The

year to year variation in the management expenses ratio are temporary in nature arising due to some temporary condition. This ration is a yard stick of operating efficiency of the firm. Conclusion: Here the management expenses ratio is 39.38% which is higher compared to previous year 28.20%. this indicates company is inefficient to meet other obligations Here the current years retention ratio is 0.99167. company retaining 99.17% of risk with itself, ceding 0.83% to the reinsurer. In the previous year retention ratio is 0.99157, ceding 0.0084 to the reinsurer. This shows company has taken high risk compared to previous year, i.e. 0.01%. Return on capital employed (ROCE) Here the profits related to the total capital employed. The term capital employed refers to long term funds supplied by creditors and owners. Return on capital employed second type of ROI. Here profits are related to the total capital employed. The term capital employed refers long term funds supplied by the creditors and owners of the firm.

TABLE-12 Particulars Net profit earnings Average total capital employed ROCE ratio

(amount in Rs. 000) Current year 5,029,631 15,332,270 -0.3280422 previous year 2,435,094 10359484 -0.235059

GRAPH-10

This ratio would provide sufficient insight into how efficiency the long term funds of owners and creditors are being used. Higher the ratio, the more efficient is the use of capital employed. Thus the ratio provides a test of profitability related to the sources of long term funds. Here another alternatively, it is equivalent to net working capital plus fixed assets. Conclusion; here current year ratio is -0.3280422 which comparatively lower than previous year. So the long term funds of owners and creditors are not used effectively. Earnings per share Measures the profit available to the equity shareholders on a per share basis, is the share they can get on every share held. It is calculated by dividing the profits available to equity holders by the number of outstanding shares. Number of shares= share capital / price per share =17,960,000 / 10 =1,796,000 Earnings per share (EPS) = Net profit available to equity holders / number of shares. = 5,029,631/1,796,000 =2.8007465 (amount in Rs. 000)

Here EPS is -2.8 and each share earning Rs. -2.80 loss. Company had loss during current year.

Price earnings ratio It is closely related to earning price ratio. Its actually reciprocal of earning price ratio. Price earnings ratio= market price of share / EPS As on 31st march 2009 the market value per share =42.85 PE Ratio for this company is =42.85/ (2.8) (15.30). Here the PE Ratio reflects the price currently being paid by the market for each rupee of currently reported EPS. The PE Ratio

measures investors expectation and market appraisal of performance of a firm. Here we have a loss so investor cannot expect anything about market appraisal. Unless and until any extra ordinary item expected to occur.

CASH FLOW STATEMENT An analysis of cash flow is useful for short run planning. A firm needs sufficient cash to pay debts maturing in the near future, to pay interest and other expenses and to pay dividends to shareholders. The cash balance can be matched with the firms needs for cash during the year, and accordingly, arrangements can be made to meet the deficit or invest the surplus cash temporarily. A statement of changes in financial position on cash basis, commonly known as the cash flow statement, summarizes the causes of changes in cash position between two balance sheets. Components of cash flow Initial investment Annual net cash flows Terminal cash flows

Sources and uses of cash Sources Profitable operation Decrease in assets Increase in liabilities Sales proceeds cash

Applications Loss from operations Increase in assets Decrease in liabilities Redemption of preference shares, and Dividends

Cash flow versus profit Cash flow should not be confused with the profit for 2 reasons. Profit measured by accountant, is based on accrual concept- revenue is considered when it is earned, rather than when cash received. Expenses are recognized when it is incurred, rather than when cash paid. Profit involves the entire revenue expenditure and while capital expenditure are not. Profit calculation charged capital expenditure which does not involves cash flow. Profit Cash flow = revenues- expenses- depreciation = revenues- expenses- capital expenditure

AS-3 describes cash equivalent as an item which is of short term nature, highly liquid, and is readily convertible into known amount of cash with insignificant risk of change in value.

Cash flow statement for the year ended March 31, 2009 CASH FLOW FROM OPERATING ACTIVITIES Current Year Rs 000 Amounts received from Policyholders Amounts paid to Policyholders Amounts received / (paid) to Reinsurers Amounts paid as Commission Payments to Employees and Suppliers Deposit with Reserve Bank of India Taxes Paid Others 54,747,190 (5,248,135) (550,719) (4,156,520) (16,025,349) (2,627) (219,808) 765,819 Previous Year Rs 000 47,554,360 (4,224,779) (415,081) (3,377,762) (8,621,462) (8,758) (214,763)

Net Cash from Operating Activities CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Investments (Net) Income from InvestmentS Net Cash Flow from Investing Activities CASH FLOW FROM FINANCING ACTIVITIES Issue of Shares during the year Share application money received pending allotment

29,309,851

30,691,755

(578,182) 319 (38,958,793) 4,592,227 (34,944,429)

(663,248) 368 (36,020,822) 2,711,629 (33,972,073)

5,250,000

4,697,391 (287,391)

Net Cash Flow from Financing Activities

5,250,000

4,410,000

Net Increase in Cash and Cash Equivalents

(384,578)

1,129,682 3,363,556

Cash and Cash Equivalents as at the beginning of the 4,493,238 year

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

4,108,660

4,493,238

Analysis of cash flow statement Operating activities Here high profitable operation shows the firms cash inflow. A huge amount of inflow received from policyholders which remains positive after deducting all operating expenses. The operating expenses are, amounts paid to Policyholders, amounts received / (paid) to Reinsurers, amounts paid as Commission, taxes paid etc. these expenses paid reduces the current liabilities of the firm. Reduction in current liability shows cash outflow of the firm. But the reduction in the current asset is more than the reduction in current liability. So operating activity is profitable. Comparative analysis of cash flow statement shows that the amount received from policyholders increased by 7,192,830,000 is less than increase in the amount paid to employees and suppliers. The amount paid to employees and suppliers is 7,403,887,000. So the cash flow from the operating activities reduced to current year. The other cash flows received is increased by 980,582,000. Investment activities Here the purchase of fixed assets is more than the sale of fixed assets. There is increase in investments is 2,937,971. There is also increase in return on investment, purchase of assets. But huge increase in investment reflects decrease in cash flow from investment activities. The shares issued increase the cash inflow of the firm. The investment activities showing negative balance due to increase in investment. Financial activities

This year the cash inflow is increased by 840,000. It increases the cash inflow of the firm. The overall net cash inflow is reduced due to over investment. Comparatively increase in net cash flow is 1,500 million. The cash flow carry to the balance sheet is reduced to 4,108,660 from 4,493,238.

Chapter VIII Findings of cash flow statement HDFC standard life utilized Rs 578,182 crores in acquiring fixed assets. After adjusting for investment income and sale of assets, the net outflow on account of investment activities was Rs 34,944,429 crores. HDFC STANDARD LIFE generated Rs 29,309,851crore from operating activities. HDFC standard life insurance net cash flow from operating investment financial activities was a negative figure of 384,578 Crore. Hence the cash balance is reduced by this amount. The previous year company had a positive net cash flow of Rs 1,129,682 crore. HDFC standard life insurance companys cash generating ability is not appropriate. The evaluation is based on quantum of cash flows from operating activities rather investing or financial activities. Here HDFC SL is generating funds from either sale of goods or out of borrowings, and quantum of funds so generated is not an appropriate indicator for evaluation. Realizing the importance of the cash flow statement the stock exchange requires listed companies in India to include cash flow statement in their annual reports. A projected statement of changes in financial position is an important planning tool. The estimates of working capital for a long period, say ,for 5 to 10 years, help management to plan the repayment of long term debt and interest, acquisition of fixed assets and payment of cash dividends. If the firm needs working capital for expansion, which cannot be ordinarily provided from operations, it can plan on the basis of the estimate how much and from what sources the required working capital will be procured in the future. Findings There is a great future of the life insurance sector in India as 80% of the Indian population is still without life cover and people are just now coming in response to the awareness campaigns being carried out by almost all the insurance companies. Life Insurance Corporation (LIC) of India is still the undisputed market leader as 63% Need to improve its investment strategy Need to enter rural India as their exist huge potential

HDFC STANDARD LIFES NWC has gone down from 25, 06,559.00 to 6, 14,591.00 that is 18, 91,968.00 There is in reality deterioration in liquidity position. In the Previous year the firm had Rs 1.4 of current assets to current liabilities but by the end of the current year, the amount of current assets to current liabilities declined to Rs 1.07 only ie, 24% decline. Therefore NWC is not a satisfactory measure so better indicator is the current ratio. HDFC STANDARD LIFE having current assets of 1.07 available to meet their current liabilities. In the previous year current ratio is 1.4:1 signifies that current assets are 1.4 times its short term obligations. The liquidity position is better in previous year as compare to current year. Liquidity ratios measure the firms ability to meet current obligations, and are, calculated by establishing relationships between current assets and current liabilities. HDFC STANDARD LIFE having current assets of 1.07 available to meet their current liabilities. In the previous year current ratio is 1.4:1 signifies that current assets are 1.4 times its short term obligations. The liquidity position is better in previous year as compare to current year.

Recommendations

HDFC has to improve its distribution network as its reach to a common man is very limited .Also the number of agents working for the company is very less right now when compared to the other companies. The company should constantly come out with innovative products as the competition is very tough with around 22 companies fighting hard for the market share. Some new innovative ideas have been suggested below. An insurance plan for the unborn babies. The premium payment term could be for 6 months and it could start once the fetus is 3 months old inside the mothers womb. There could be various benefits under this plan for the customers like in case of a premature or a complicated birth the company would bear the expenses till the baby is healthy again through the insurance policy. An insurance plan for mentally retarded and physically handicapped people. This might be hard to digest but if at all plans like these are possible and really come out then a good amount of Indian population would really be interested. The company could also come out with a plan for both the husband and wife where automatically the wife gets insured along with her husband when her husband purchases the

policy. This could also be the other way round. This could be called the combo family plan. In simple words it means buy one policy and get another free. No other company has done something like this till now. The company could start using star personalities for their endorsements especially cricket stars and film stars as India is a nation of crazy cricket and film followers and there is nothing better than reaching to the hearts of people through cricket.

Disclosures Basis of Revaluation of Investment Property The premises owned by the company (Gross value Rs. 220,831 thousand; book value Rs. 204,648 thousand) used as an office in the past has been reclassified during the year 2005-2006 as investment properties real estate. The property has been revalued by an expert during the previous year. The gain of Rs. 486,990 thousand on revaluation arising due to change in the carrying amount of the investment property was taken to the Revaluation Reserve. Value of contracts outstanding The value of contracts outstanding as at 31st March 2009 in relation to the purchase of investments where deliveries are pending is Rs. 801,020 thousand (Previous Year Rs. 1,606,543 thousand). The value of contracts in relation to the sales of investments where receipts are pending as on 31st March 2009 is Rs. 99,693 thousand (Previous year Rs. 402,598 thousand).

Conclusion For Financial Analysis. The statement of changes in financial position as an analytical value as well as important planning tool. It gives a clear picture of the causes of changes in the companys working capital or cash flow positions. It indicates the financing and investment policies followed by the companies in the past. The statement reveals the non-current assets acquired by the co and the manner in which they have been financed from the internal and external sources. The statement is useful as a tool of historical analysis as it helps to answer questions such as given below. What is the liquidity position of the firm?

What are the causes of changes in the firms working capital or cash positions? What fixed assets are acquired by the firm? Did the firm pay dividend to the shareholders or not? How much of the firms working capital needs were met by the funds generated from current operations? Did the firm use external sources of finances to meet its needs of funds? If the external finance was used what is the debt and equity was maintained? Did the firm sell any of its non-current assets, if so what were the proceeds from such sales? Could the firm pays the long term debt as per the schedules? What were the significant investment and financing activities of the firm that did not involve working capital? Suggestions Customers should be made aware of the brand name of Insurance company through advertisement. The fear in the customer mind should be removed by company. The insurance companies should try to nurture their brand name timely and attractive facility provide to customer. Conclusion After collection of data, interpretation is done on that basis conclusion is drawn.. Conclusion prefer government insurance company other than private insurance companies due to its reliability.Customers are more brand oriented rather than product oriented. Customers are less aware about the private insurance companies. Private Players in order to encase maximum number of customers are introducing new and innovative scheme for their FC. Customers like to invest in other investment zones due to the hectic rules and regulations associated with, entering into a contract with insurance companies. Customers do not feel secure with private insurance companies. Customers dont want commission base job. The central problem with the insurance companies is having that they are trying to convince customers for a product which do not have any present relevance, i.e. each policy which the customer is going to purchase will have a future set of action and benefits. Due to which most of the people like to invest in those securities or investment, which will give them a fruitful return in short period of time Bibliography Reference: To obtain more information regarding present study and to subordinate it with theoretical proof following references were made. Books Referred: FINANCIAL MANAGEMENT-Khan and Jain, I M Pandey.

Book of license training program for insurance advisers. ICAI study material. Economic times. Business world magazine