EXECUTIVE SUMMARY

This report provides an analysis and evaluation of the current and prospective
profitability, liquidity and financial stability of PNB Met Life . Methods of
analysis includes Ratio analysis, cash flow statement . Results of data analyzed
show that all ratios are above industry averages. In particular, comparative
performance is satisfactory in the areas of profit margins, liquidity, credit control.

The report finds the prospects of the company in its current position are positive.
The major areas of weakness require further investigation and remedial action by
management. Recommendations discussed include:
The company wants to keep an eye on the current assets flow.
To utilize its working capital efficiently that is the excess current assets should
be adjusted according to current scenario.
The company should focus on the debt and long term funds which are utilized
in the company

I
 CHAPTER – 1

INTRODUCTION

1
 CHAPTER 1: INTRODUCTION

Financial statement analysis is the process of analyzing a company's financial

statements for decision-making purposes and to understand the overall health of
an organization. Financial statements record financial data, which must be
evaluated through financial statement analysis to become more useful to
investors, shareholders, managers, and other interested parties.

Financial statement analysis is an evaluative method of determining the past,

current, and projected performance of a company. Several techniques are
commonly used as part of financial statement analysis including which compares
two or more years of financial data in both dollar and percentage form; vertical
analysis, in which each category of accounts on the balance sheet is shown as a
percentage of the total account; and ratio analysis, which calculates statistical
relationships between data.

Financial statement analysis allows analysts to identify trends by comparing ratios

across multiple periods and statement types. These statements allow analysts to
measure liquidity, profitability, company-wide efficiency, and cash flow. There
are three main types of financial statements: the balance sheet, income statement
and cash flow statement. The balance sheet is a snapshot of the company's
assets, liabilities and shareholder at a specific period. Analysts use the balance
sheet to analyze trends in assets and debts. The income statement begins with
sales and ends with net income. It also provides analysts with the gross profit,
operating profit, and net profit. Each of these is divided by sales to determine
gross profit margin, operating profit margin, and net profit margin, respectively.
The cash flow statement provides an overview of the company's cash flows from
operating activities, investing activities, and financing activities. The financial
statement provides the basic data for financial performance analysis. The financial
statements provide a summarized view of the financial position and operations of

2
a firm. Financial analysis (also referred to as financial statement analysis or
accounting analysis) refers to an assessment of the viability, stability and
profitability of a business. The analyst first identifies the information relevant to
the decision under consideration from the total information contained in the
financial statements. Therefore, much can be learnt about a firm from a careful
examination of its financial statements as invaluable documents and performance
reports.

The analysis of financial statements is an important aid to financial analysis. They

provide information on how the firm has performed in the past and what is its
current financial position. Financial analysis is the process of identifying the
financial strengths and weakness of the firm from the available accounting data
and financial statements. The analysis is done by establishing relationship
between the different items of financial statements.

The focus of financial analysis is on key figures in the financial statements and
the significant relationship that exists between them. The analysis of financial
statements is a process of evaluating relationship between component parts of
financial statements to obtain a better understanding of the firm’s position and
performance.

Financial Statements of Insurance Companies insurance companies includes:

Revenue Account (Form A-RA):

Previously Revenue Account is to be prepared according to Form ‘D’ of the First
Schedule to the Insurance Act, 1938. But at present, as per the provisions of
IRDA Act, 2002, the Revenue Account of Life Insurance companies are to be
prepared as per the requirement of Schedule ‘A’ of the said regulations. This
account is prepared for the purpose of ascertaining incomes and expenditures for a
particular period as per accrual basis of accounting.

3
Items Appearing in Revenue Account:
(a) Premium (Schedule 1):
It is needless to say that premium paid by policyholders is the major sources of
income of Life Insurance companies.
It includes:
(i) Premiums;
(ii) Re-insurance ceded;
(iii) Re-insurance accepted.
Schedule I contains the details of premium so received.
(b) Income from Investment:
These include:
(i) Interest Dividends; Rent;
(ii) Profit on sale/redemption of investments;
(iii) Loss on sale/redemption of investments;
(iv) Transfer/Gain on revaluations, etc.

These are also the sources of Insurance companies. Accrual Basis of accounting
should be followed.
(c) Commission (Schedule 2):
Commission is paid on premium paid by the policyholders on first year, or on
renewal or on single premium. The life insurance companies pay premium to their
agents.
(d) Operating Expenses (Schedule 3):
Operating expenses include office and administration, selling and distributions
expenses and comes under the head Schedule 3. These expenses include: Rents,
Rates and Taxes, Training Expenses, Depreciation, Repairs, Auditor Fees etc. It
must be remembered that expenses excluding percentage of net premiums or Rs.
5, 00,000, whichever is higher, should separately be mentioned.
(e) Benefits paid (Net) (Schedule 4):
It includes:

4
(i) Annuities;
(ii) Surrenders; and
(iii) Claims.
(f) Interim Bonus Paid:
B. Profit and Loss Account:
The incomes or expenses which are not related to any particular fund are recorded
in this account (including tax payable to Government). It is practically the Profit
and Loss Account of a business as a whole. It highlights the amount of profit paid
to the shareholders and the amount that is transferred to any particular fund.
C. Balance Sheet:
As per IRDA Regulation, a Balance Sheet is divided into two parts:
(a) Sources of Fund; and
(b) Application of Funds.
Sources of Fund (Schedule 5):
The first one under this head is the Shareholders’ Fund. Under the head, various
classification of capital is to be shown separately (viz, Authorized Capital, Issued
Capital, etc.).
Reserves and Surplus (Schedule 6):
All kinds of reserves (viz. Capital Redemption Reserve, General Reserve,
Revaluation Reserve Securities Premium, etc.) will be shown separately.
Borrowings (Schedule 7):
All kinds of borrowings by way of Bonds, Debentures, Bank Loan, Loan from
financial institutions etc. are to be shown separately. Similarly, unsecured
borrowings and secured borrowings are to be shown separately.
Policyholders’ Fund:
Any kind of fund related to policyholders must be shown separately under the
head Policyholders’ Fund.
Application of Funds Investments (Schedule 8):

5
It must be remembered that Shareholders’ Fund and Policyholders Fund are to be
shown separately, i.e. Schedules 8 contains the investment of Shareholders’ Fund.
On the contrary, Schedule 8A contains the Policyholders’ Fund.
Loans (Schedule 9):
Proper classifications of loan should be made first, i.e. as per security-wise,
performance-wise, borrower- wise etc.
Fixed Assets (Schedule 10):
Detailed descriptions of all the, fixed assets must be made. They include: All
tangible assets (viz. Plant and Machinery, Land and Building, etc.) and intangible
assets (viz. patent, etc.).
Current Assets = Cash at Bank (Schedule 11):
Cash and Bank (balances should be shown separately)
Advances and Other Assets (Schedule 12):
These also include various kinds of advances made by the insurance company.
Current Liabilities (Schedule-13):
Current liabilities are those which need payment within one year, i.e. liabilities
which are repayable within a short period of time, e.g., Creditors, Provisions for
Tax, etc.
Provisions (Schedule 14):
All kinds of provisions .
Miscellaneous Expenditure (Schedule15):
These include – Discount on Issue of Shares or Debentures, Preliminary
Expenses.

Essentially, the analysis requires the calculation (usually as a percentage) of both

the total existing business still in force at the end of the latest financial accounting
period (the balance date) and the experience for that period, usually one year. The
calculated values are used directly to indicate the degree to which the life insurer

6
satisfies the various requirements of both life insurance legislation and the
regulations on solvency, capital, and liquidity, as well as the progress made in
operational matters such as new business, claims, expenses, and profitability. The
ratios are calculated for each licensed life insurer and life reinsurer, and the results
are then closely compared with the specified statutory criteria and other
supervisory indicators. . Any trend in the ratio values over those years may also
be useful for understanding the insurer’s future prospects and may indicate
particular matters of concern that warrant further investigation. Comparing the
assessments in successive years makes it possible to detect adverse changes in the
insurer’s financial condition at an early stage, enabling the insurer to take
remedial action with or without formal intervention by the supervisory authority. .
Comparing the progress and performance of an insurer’s life business with those
of the market is of interest. The supervisor may require further information to
assess the insurer’s likely future because the information available is sufficient
only to provide a preliminary view and further investigation is needed to confirm
that view. Analyzing the calculated ratios across the licensed insurers in the
jurisdiction will, subject to a few caveats, enable the supervisory authority to
assess the general soundness of the industry as a whole.
Relevant ratios
The financial statements are best analyzed separately for each business class.
These can be divided into three categories:  Earnings  Liquidity Ratios 
Solvency These are given in detail below:
A. Earnings ratios Profitable operations are necessary for insurance companies to
operate as a going concern. Measurement of earnings focuses on an insurers’
ability to efficiently translate its strategies and competitive strengths into growth
opportunities and sustainable profit margins

B. Liquidity ratios Good liquidity helps an insurance company to meet

policyholder’s obligations promptly. An insurer’s liquidity depends upon the
degree to which it can satisfy its financial obligations by holding cash and

7
investments that are sound, diversified and liquid or through operating cash flows.
A high degree of liquidity enables an insurer to meet the unexpected cash
requirements without untimely sale of investments, which may result in
substantial realized losses due to temporary market conditions and/or tax
consequences

C. Solvency Parameters
Adequacy of solvency margin forms the basic foundation for meeting
policyholder obligations. All insurance companies are required to comply with
solvency margin requirements of the regulator as prescribed from time to time.
Currently, IRDA has prescribed 1.5 times ‘Solvency Margin’ for insurance
companies in India. ‘Solvency Margin’ for insurance companies is akin to
‘Capital Adequacy Ratio’ of Banks.

Cash Flow Statement

Another tool of financial analysis is Cash Flow Statement deals with flow of cash
which includes cash equivalents as well as cash. This statement is an additional
information to the users of Financial Statements. The statement shows the
incoming and outgoing of cash. The statement assesses the capability of the
enterprise to generate cash and utilize it. Thus a Cash-Flow statement may be
defined as a summary of receipts and disbursements of cash for a particular period
of time. It also explains reasons for the changes in cash position of the firm. Cash
flows are cash inflows and outflows. Transactions which increase the cash
position of the entity are called as inflows of cash and those which decrease the
cash position as outflows of cash. Cash flow Statement traces the various sources
which bring in cash such as cash from operating activities, sale of current and
fixed assets, issue of share capital and debentures etc. and applications which
cause outflow of cash such as loss from operations, purchase of current and fixed

8
assets, redemption of debentures, preference shares and other long-term debt for
cash. In short, a cash flow statement shows the cash receipts and disbursements
during a certain period.

Cash Flows are inflows and outflows of cash and cash equivalents. The statement
of cash flow shows three main categories of cash inflows and cash outflows,
namely : operating, investing and financing activities.
(a) Operating activities are the principal revenue generating activities of the
enterprise.
(b) Investing activities include the acquisition and disposal of longterm assets and
other investments not included in cash equivalents.
(c) Financing activities are activities that result in change in the size and
composition of the owner’s capital (including Preference share capital in the case
of a company) and borrowings of the enterprise.

The Company has established a governance framework and a control

environment, commensurate with the size, scale and complexity of its operations.
The corporate governance framework of the Company is based on an effective
independent Board, separation of Board’s supervisory role from the executive
management and constitution of Board Committees, generally comprising a
majority of independent/non-executive directors and chaired by independent
directors to oversee critical areas. The Board committees are supported by
executive committees to oversee at an operational level. All employees are bound
by the Code of business conduct and ethics approved by the Board of Directors.
The Company has a reporting and review framework comprising quarterly
reporting and review of audited financials and investment returns to regulators
and shareholders. The financials prepared are audited by joint statutory auditors,
and are reviewed by Audit Committee on a quarterly basis. They are also
submitted to IRDAI. The Company has in place adequate internal financial
controls across all major processes with respect to financial statements.

9
 1.1 NEED FOR THE STUDY

The Financial Statements are mirror which reflects the financial position and
strengths or weakness of the concern. The insurance Company has been
witnessed intense competition from domestic and international companies .
Every business needs to view the financial performance analysis.

The study on effectiveness of operational and financial performance of PNB Met

Life is conducted to measure the overall performance of company. The financial
analysis strengthens the firms to make their best use, and to be able to spot out
financial weakness of the firm to state suitable corrective actions.

This study aims at analyzing the overall financial performance of the company by
using various financial tools like Comparative Analysis, common size statement
analysis, Ratio Analysis, and Cash Flow Analysis.

10
 1.2 OBJECTIVES OF THE STUDY

1.2.1 PRIMARY OBJECTIVE:

• To study the financial performance analysis of PNB Met Life

1.2.2 SECONDARY OBJECTIVES:

• To compare and analyze the financial statements for the past five
financial years (2014,2015 2016,2017and 2018)

• To know the profitability, liquidity and solvency position of PNB

Met Life .

11
 1.3 SCOPE OF THE STUDY

The study is based on the accounting information of the PNB Met Life . The
study covers the period of 2013-2018 for analyzing the financial statement such as
income statements and balance sheet.

The scope of the study involves the various factors that affect the financial
efficiency of the company. To increase the profit and sales growth of the
company. This study finds out the operational efficiency of the organization and
allocation of resources to improve the efficiency of the organization.

The data of the past five years are taken into account for the study. The
performance is compared within those periods. This study finds out the areas
where PNB Met Life can improve to increase the efficiency of its assets and funds
employee.

12
 1.4 INDUSTRY PROFILE

Insurance companies may be classified into two groups:

• Life insurance companies, which sell life insurance, annuities and pensions
products.

• Non-life or property /casulty insurance companies, which sell other types of

insurance.

General insurance companies can be further divided into these sub categories.

• Standard lines

• Excess lines

In most countries, life and non-life insurers are subject to different regulatory
regimes and different tax and accounting rules. The main reason for the
distinction between the two types of company is that life, annuity, and pension
business is very long-term in nature – coverage for life assurance or a pension can
cover risks over many decades. By contrast, non-life insurance cover usually
covers a shorter period, such as one year.

Insurance companies are generally classified as either mutual or proprietary

companies. Mutual companies are owned by the policyholders, while
shareholders (who may or may not own policies) own proprietary insurance
companies.

Demutulization of mutual insurers to form stock companies, as well as the

formation of a hybrid known as a mutual holding company, became common in
some countries, such as the United States, in the late 20th century. However, not
all states permit mutual holding companies.

13
Other possible forms for an insurance company include reciprocals, in which
policyholders reciprocate in sharing risks, and Lloyd's organizations.

Insurance companies are rated by various agencies such as A.M. Best . The
ratings include the company's financial strength, which measures its ability to pay
claims. It also rates financial instruments issued by the insurance company, such
as bonds, notes, and securitization products.

Resurance companies are insurance companies that sell policies to other insurance
companies, allowing them to reduce their risks and protect themselves from very
large losses. The reinsurance market is dominated by a few very large companies,
with huge reserves. A reinsurer may also be a direct writer of insurance risks as
well.

Captive Insurance companies may be defined as limited-purpose insurance

companies established with the specific objective of financing risks emanating
from their parent group or groups. This definition can sometimes be extended to
include some of the risks of the parent company's customers. In short, it is an in-
house self-insurance vehicle. Captives may take the form of a "pure" entity
(which is a 100% subsidiary of the self-insured parent company); of a "mutual"
captive (which insures the collective risks of members of an industry); and of an
"association" captive (which self-insures individual risks of the members of a
professional, commercial or industrial association). Captives represent
commercial, economic and tax advantages to their sponsors because of the
reductions in costs they help create and for the ease of insurance risk management
and the flexibility for cash flows they generate. Additionally, they may provide
coverage of risks which is neither available nor offered in the traditional insurance
market at reasonable prices.

The types of risk that a captive can underwrite for their parents include property
damage, public and product liability, professional indemnity, employee benefits,
employers' liability, motor and medical aid expenses. The captive's exposure to
such risks may be limited by the use of reinsurance.

14
Captives are becoming an increasingly important component of the risk
management and risk financing strategy of their parent. This can be understood
against the following background:

• Heavy and increasing premium costs in almost every line of coverage

• Difficulties in insuring certain types of fortuitous risk

• Differential coverage standards in various parts of the world

• Rating structures which reflect market trends rather than individual loss
experience

• Insufficient credit for deductibles or loss control efforts

There are also companies known as "insurance consultants". Like a mortgage

broker, these companies are paid a fee by the customer to shop around for the best
insurance policy amongst many companies. Similar to an insurance consultant, an
'insurance broker' also shops around for the best insurance policy amongst many
companies. However, with insurance brokers, the fee is usually paid in the form
of commission from the insurer that is selected rather than directly from the client.

Neither insurance consultants nor insurance brokers are insurance companies and
no risks are transferred to them in insurance transactions. Third party
administrators are companies that perform underwriting and sometimes claims
handling services for insurance companies. These companies often have special
expertise that the insurance companies do not have.

The financial stability and strength of an insurance company should be a major

consideration when buying an insurance contract. An insurance premium paid
currently provides coverage for losses that might arise many years in the future.
For that reason, the viability of the insurance carrier is very important. In recent
years, a number of insurance companies have become insolvent, leaving their
policyholders with no coverage (or coverage only from a government-backed
insurance pool or other arrangement with less attractive payouts for losses). A

15
number of independent rating agencies provide information and rate the financial
viability of insurance companies.

16
1.5 Insurance Regulatory and Development Authority

The Insurance Regulatory and Development Authority of India(IRDAI) is an

autonomous, statutory body tasked with regulating and promoting the insurance
and re-insurance industries in India.It was constituted by the Insurance Regulatory
and Development Authority Act, 1999,an Act of Parliament passed by
the Government of India. The agency's headquarters are in Hyderabad, Telangana
where it moved from Delhi in 2001.

IRDAI is a 10-member body including the chairman, five full-time and four part-
time members appointed by the government of India.

Background

1991: Government of India begins the economic reforms programme and

financial sector reforms

1993: Committee on Reforms in the Insurance Sector, headed by Mr. R. N.

Malhotra, (Retired Governor, Reserve Bank of India) set up to recommend
reforms.

1994: The Malhotra Committee recommends certain reforms having studied the
sector and hearing out the stakeholders

Some recommended reforms

17
Private sector companies should be allowed to promote insurance companies

Foreign promoters should also be allowed

Government to vest its regulatory powers on an independent regulatory body

answerable to Parliament

Birth of IRDAI

Insurance Regulatory and Development Authority (IRDA) set up as autonomous

body under the IRDA Act, 1999

IRDAI’s Mission: To protect the interests of policyholders, to regulate, promote

and ensure orderly growth of the insurance industry and for matters connected
therewith or incidental thereto.

IRDAI’s Activities

Frames regulations for insurance industry in terms of Section 114A of the

Insurance Act 1938

From the year 2000 has registered new insurance companies in accordance
with regulations

Monitors insurance sector activities for healthy development of the industry and
protection of policyholders’ interests

18
The functions of the IRDAI are defined in Section 14 of the IRDAI Act,
1999, and include:

 Issuing, renewing, modifying, withdrawing, suspending or cancelling

registrations

 Protecting policyholder interests

 Specifying qualifications, the code of conduct and training for

intermediaries and agents

 Specifying the code of conduct for surveyors and loss assessors

 Promoting efficiency

 Promoting and regulating professional organisations connected with the

insurance and re-insurance industry

 Levying fees and other charges

 Inspecting and investigating insurers, intermediaries and other relevant

organisations

 Regulating rates, advantages, terms and conditions which may be offered

by insurers not covered by the Tariff Advisory Committee under section
64U of the Insurance Act, 1938 (4 of 1938)

Objectives of IRDA:

To promote the interest and rights of policy holders.

To promote and ensure the growth of Insurance Industry.
To ensure speedy settlement of genuine claims and to prevent frauds and
malpractices
To bring transparency and orderly conduct of in financial markets dealing with
insurance.

19
Ministry of Finance Government of India)

Ministry of Finance
Government of India

Insurance Regulatory
and Development
Authority (IRDA)

Foreign
Life Insurance (24 General Insurance (21 Specialised Insurers Standalone Health Re- Insurance (2
players) players) (2 players) Insurance (6 player) player) Reinsurers branc
hes (7players

Public (1) Public (4) Public (2) Private(6) Private (1) Private(7)

Private (23) Private (17) Public (1)

Section 4 of the IRDAI Act 1999 specifies the authority's composition. It is a ten-
member body consisting of a chairman, five full-time and four part-time members
appointed by the government of India.At present ( 1 Sept, 2018 ), the authority is
chaired by Subhash C. Khuntia and its full-time members are P. J. Joseph, Nilesh
Sathe, Pournima Gupte, Praveen Kutumbe and Sujay Banarji

20
 1.6 INDIAN INSURANCE MARKET

The insurance industry of India consists of 57 insurance companies of which 24

are in life insurance business and 33 are non-life insurers. Among the life
insurers, Life Insurance Corporation (LIC) is the sole public sector company.
Apart from that, among the non-life insurers there are six public sector insurers.
In addition to these, there is sole national re-insurer, namely, General Insurance
Corporation of India (GIC). Other stakeholders in Indian Insurance market
include agents (individual and corporate), brokers, surveyors and third party
administrators servicing health insurance claims.

Out of 33 non-life insurance companies, five private sector insurers are registered
to underwrite policies exclusively in health, personal accident and travel
insurance segments. They are Star Health and Allied Insurance Company Ltd,
Apollo Munich Health Insurance Company Ltd, Max Bupa Health Insurance
Company Ltd, Religare Health Insurance Company Ltd and Cigna TTK Health
Insurance Company Ltd. There are two more specialised insurers belonging to
public sector, namely, Export Credit Guarantee Corporation of India for Credit
Insurance and Agriculture Insurance Company Ltd for crop insurance.

In FY19 (up to August 2018), premium from new life insurance business
increased 6.20 per cent year-on-year to Rs 755.88 billion (US$ 11.28 billion). In
FY19 (up to July 2018), gross direct premiums of non-life insurers reached Rs
49,067.47 crore (US$ 7.32 billion), showing a year-on-year growth rate of 13.91
per cent.

Investments and Recent Developments

The following are some of the major investments and developments in the Indian
insurance sector.

21
  In September 2018, HDFC Ergo launched ‘E@Secure’ a cyber insurance
policy for individuals.

 Insurance sector companies in India raised around Rs 434.3 billion (US$

6.7 billion) through public issues in 2017.

 In 2017, insurance sector in India saw 10 merger and acquisition (M&A)

deals worth US$ 903 million.

 India's leading bourse Bombay Stock Exchange (BSE) will set up a joint
venture with Ebix Inc to build a robust insurance distribution network in
the country through a new distribution exchange platform.

Government Initiatives

The Government of India has taken a number of initiatives to boost the

insurance industry. Some of them are as follows:
 National Health Protection Scheme will be launched under Ayushman
Bharat to provide coverage of up to Rs 500,000 (US$ 7,723) to more than
100 million vulnerable families. The scheme will be launched on
September 25, 2018.
 Over 47.9 million famers were benefitted under Pradhan Mantri Fasal
Bima Yojana (PMFBY) in 2017-18.
 The Insurance Regulatory and Development Authority of India (IRDAI)
plans to issue redesigned initial public offering (IPO) guidelines for
insurance companies in India, which are to looking to divest equity
through the IPO route.
 IRDAI has allowed insurers to invest up to 10 per cent in additional tier 1
(AT1) bonds that are issued by banks to augment their tier 1 capital, in
order to expand the pool of eligible investors for the banks.

22
Road Ahead
The future looks promising for the life insurance industry with several
changes in regulatory framework which will lead to further change in the way
the industry conducts its business and engages with its customers.
The overall insurance industry is expected to reach US$ 280 billion by 2020.
Demographic factors such as growing middle class, young insurable
population and growing awareness of the need for protection and retirement
planning will support the growth of Indian life insurance.
Exchange Rate Used: INR 1 = US$ 0.0149 as on June 29, 2018

23
 1.7 THE INDIAN MARKET SCENARIO OF INSURANCE SECTOR

Post liberalisation, the insurance industry in India has recorded significant growth.
The Indian insurance industry is expected to grow to US$ 280 billion by FY2020,
owing to the solid economic growth and higher personal disposable incomes in
the country. Overall insurance penetration in India reached 3.69 per cent in 2017
from 2.71 per cent in 2001. Gross premiums written in India reached Rs 5.53
trillion (US$ 94.48 billion) in FY18, with Rs 4.58 trillion (US$ 71.1 billion) from
life insurance and Rs 1.51 trillion (US$ 23.38 billion) from non-life insurance.
Over FY12–18, premium from new business of life insurance companies in India
have increased at a 14.44 per cent CAGR to reach Rs 1.94 trillion (US$ 30.1
billion) and non-life insurance premiums (in Rs) increased at a CAGR of 16.65
per cent. In FY19 (up to August 2018), premium from new life insurance business
increased 6.20 per cent year-on-year to Rs 755.88 billion (US$ 11.28 billion). In
FY19 (up to July 2018), gross direct premiums of non-life insurers reached Rs
49,067.47 crore (US$ 7.32 billion), showing a year-on-year growth rate of 13.91
per cent.
In 2017, insurance sector in India saw 10 merger and acquisition (M&A) deals
worth US$ 903 million. Enrolments under the Pradhan Mantri Suraksha Bima
Yojana (PMSBY) reached 130.41 million in 2017-18. National National Health
Protection Scheme was announced under Budget 2018-19 as a part of Ayushman
Bharat. The scheme will provide insurance cover of up to Rs 500,000 (US$ 7,723)
to more than 100 million vulnerable families in India.
Going forward, increasing life expectancy, favourable savings and greater
employment in the private sector is expected to fuel demand for pension plans.
Likewise, strong growth in the automotive industry over the next decade would be
a key driver for the motor insurance market.

24
INCREASING PENETRATION AND DENSITY OF INSURANCE OVER
THE YEARS

Insurance Penetration (Premiums as % of GDP)

3.5

2.5

2 LIFE
NON-LIFE
1.5

0.5

0
2014 2015 2016 2017

Insurance penetration (premium as a percentage of GDP )in India reached 3.69

per cent in 2017 from 3.3 per cent in 2014.

25
 Insurance Density (Premiums Per Capita) (US$ )

80

70

60

50

40 LIFE
NON-LIFE
30

20

10

0
2014 2015 2016 2017

Insurance penetration in India reached 73 per cent in 2017 from 55 per cent in
2014. Gross premiums written in India reached Rs 5.53 trillion (US$ 94.48
billion) in FY18, with Rs 4.58 trillion (US$ 71.1 billion) from life insurance and
Rs 1.51 trillion (US$ 23.38 billion) from non-life insurance.

26
 CHAPTER 2:
COMPANY PROFILE

27
 Chapter 2 :COMPANY PROFILE

2.1 PARENTAGE :

MetLife, Inc. (NYSE: MET), through its subsidiaries and

affiliates ("MetLife"), is one of the world's leading financial
services companies with over 150 years of experience in
providing insurance, annuities, employee benefits and asset
management services to help its individual and institutional
customers navigate their changing world. Founded in 1868,
MetLife has operations in more than 40 countries and holds
leading market positions in the United States, Japan, Latin
America, Asia, Europe and the Middle East.

Punjab National Bank (PNB), India’s first Swadeshi Bank

launched in 1895, is recognised as the second largest public sector
bank in India by total assets. PNB has always been a people’s
bank, serving millions throughout India and also had the proud
distinction of serving great national leaders in the past. During the
long history of over 123 years of the Bank, 7 banks have merged
with PNB and it has become stronger and bigger with a network
of 6950 domestic branches as on 30th September, 2017.

28
Punjab National Bank (PNB) is an Indian multinational banking and financial
services company. It is a state owned corporation based in New Delhi, India . The
bank was founded in 1894. As of 31 March 2017, the bank has over 80 million
customers, 6,937 branches, and 10681 ATMs across 764 cities.

PNB has a banking subsidiary in the UK (PNB International Bank, with seven
branches in the UK), as well as branches in Hong Kong, Kowloon, Dubai.It has
representative offices in Almaty (kazakasthan), Dubai (United Arab
Emirates), Shanghai (China), Oslo (Norway), and Sydney (Australia).
In Bhutan it owns 51% of Druk PNB Bank, which has five branches.
In Nepal PNB owns 20% of Everest Bank Limited , which has 50 branches.
Lastly, PNB owns 84% of JSC (SB) PNB Bank in Kazakhstan, which has four
branches.

Other bancassurance partnerships, which include JKB and KBL, both of which
have been partners for more than 14 years each. These other relationships
complement the PNB branch network. JKB has 940 bank branches as of
December 31, 2017 . JKB had a 44.1% share of all bank branches in Jammu and
Kashmir state, which is highest among all banks in that state as of December 31,

29
2017 . JKB holds 5.08% of our equity shares and exclusively distributes life
insurance products. KBL had 806 bank branches as of December 31, 2017. The
Company benefit from the strong market position of KBL in South India .
Relationships with five Regional Rural Banks (“RRBs”), which are sponsored by
PNB. Also partnered with American Express Banking Corporation since July
2012 to distribute life insurance products.

30
 2.2 HISTORY

PNB MetLife was initially launched as MetLife India Insurance Company

Limited in 2001. In 2011, PNB picked up a 30% stake in MetLife India Insurance.
Both PNB and MetLife India approached the Competition Commission of
India(CCI) on December 7, 2012. In January 2013, PNB received full approval
for acquiring 30% stake in MetLife India Insurance. This new private sector life
insurer was re-branded as PNB MetLife India Ltd.

PNB MetLife is now present in over 150 locations across the country and serves
customers in more than 7,000 locations through its bank partnerships
with PNB, Jammu and Kashmir Bank Limited (JKB) and Karnataka Bank
Limited. PNB MetLife brings together the financial strength of a leading global
life insurance provider, MetLife, Inc., and the credibility and reliability of PNB,
one of India's oldest and leading nationalised banks. The vast distribution reach of
PNB together with the global insurance expertise and product range of MetLife
makes PNB MetLife a strong and trusted insurance provider.
PNB MetLife is present in 107 locations across the country with access to over
100 million customers in more than 10,000 locations through its strong bank
partnerships with PNB, JKB, KBL and RRB.
PNB MetLife provides a wide range of protection and retirement products
through its Agency sales of over 10,000 financial advisors and multiple bank
partners, and provides access to Employee Benefit plans for over 800+ corporate
clients in India. The company continues to be consistently profitable and has
declared profits for last five Financial Years

31
 2.3 MD&CEO

MD & CEO Ashish kumar Srivastava

Established in India : 2001
Regional Headquarters : Hong Kong
Employees : 9845*
Offices : 110 locations
Products : Life Insurance ,Retirement Solutions, and Employee benefit programs
*As of March 31,2018
KEY PERSONS:

Ashish Srivastava
M.D. & CEO

Sameer Bansal Shishir Agarwal Niraj A Singh

Anjan Bhattacharya Vijaya Nene Director & Head
Director & Head Director & Head Chief Financial Officer
Chief RiskOfficer operations & Services
Bancassurance Human resources

Bhawani Pathania
SArsng Chaeema Samrat Das P K Dinkar
Director & Head
Chief Compliance Officer Chief Information Officer Appointed Actuary
Direct, Alteranate

Hemant Khera Viraj Taeja

Sanjay Kumar
Head -Employee benefits Head -Internal Audit
Chief Investment Officer
Alliances& sales Training

Agnipushp Singh
Khalid Ahmed
Head
Head - Products
Legal & Board Affairs

Nipun Kausha
Chief Marketing Officer Yagya Turker
Company Secretary

32
Other Board Members

Name Type of Primary Company

(Connections) Board
Members
Lyndon Chairman PNB Metlife India
oliver of the Insurance Company
Board Limited
Sanjiv Member PNB MetLife India
Sharan of the InsuranceCompany
Board of Limited
Directors
Neeraj Member PNB MetLife India
Swaroop of the Insurance Company
Board of Limited
Directors
Bharat Member PNB MetLife India
kannan of the Insurance Company
Board of Limited
Directors
doulat Member PNB MetLife India
mohnot of the Insurance Company
Board of Limited
Directors

33
 2.4 PNB METLIFE MEDICLAIM PRODUCT PORTFOLIO

PNB MetLife India Insurance Company Limited (PNB MetLife) is one of

the foremost life insurance companies in India. It is a joint venture
between MetLife International Holdings Inc. (M IHI), Punjab National
Bank Limited (PNB), Jammu & Kashmir Bank Limited (JKB), M. Pallonji
and Company Private Limited and other private investors, with MIHI and
PNB being the major shareholders. Earlier known as MetLife India, PNB
MetLife is present in India since 2001.

PNB MetLife blends the financial strength of MetLife, Inc., a leading life
insurance company and credibility of PNB, one of India's oldest
nationalized banks. The vast distribution reach of PNB along with the
global life insurance expertise and product range of MetLife makes PNB
MetLife a trusted insurance company. At present, PNB MetLife is present
in more than 120 locations throughout the country a nd serving customers
across 7,000 locations through its partnerships with PNB, JKB and
Karnataka Bank Limited.
PNB MetLife offers a wide array of protection and retirement
products through its Agency sales of more than 15,000 financial
advisors and multiple bank partners. With its corporate office in
Gurgaon and headquarter in Bangalore, PNB MetLife is recognized as one
of the fastest growing life insurance companies in India.

34
PNB MetLife Plans are innovative and cater to individual and group
customers and are categorized into the following:
PNB MetLifeTerm Plans
These are pure life insurance plans that give you a higher life cover and
ensure that all your liabilities are covered. They are high on the protection
component.
• Met Family Income Protector Plus
PNB MetLife ULIP Plans
These are wealth plans that have dual advantage of life cover and wealth
optimization. They also provide you a number of flexibilities and fund
options to choose from.
PNB MetLife Child Plans
PNB MetLife child policies help you plan your child’s future, so that you
can fulfil all your child’s needs without facing any financial hindrances.
• Met Smart Child
• Met College Plan
PNB MetLife Pension Plans

These pension plans aim to give you a tension free old age.
• Met Monthly Income Plan – 10 Pay

PNB MetLife Investment Plans

35
These are savings plans that help you to realize different milestones in
your life by provisioning for your future.
• Met Money Back Plan
• Met Dhan Samriddhi
• Met Smart One
• Metlife Bachat Yojana
• MetLife Bhavishya Plus

To explore the best insurance plan that suit your needs compare all PNB
MetLife insurance plans from other life insurance companies in India.

36
 2.5 PNB METLIFE DISTRIBUTION NETWORK:

Since its inception PNB MetLife insurance company has built its presence
in over 600 cities and distributes its products through its 29 bank partners
across retail and group business, strong broker network and an agency
force of over 30,000 financial advisors.
You can also buy their products online through insurance aggregators. A
pan-India multi-channel distribution network that includes productive
bancassurance relationships and strong direct sales and agency channels that they
manage through a consolidated operating model. Their distribution presence
enables us to access a geographically and demographically broad Indian customer
base, including a wide set of attractive, under-penetrated customer segments. As
of March 31, 2018, distribution network comprised the following channels:
•Bancassurance channel, which includes key partnerships with PNB, as well as
JKB and KBL, which together with other bancassurance partners, provided us
access to 11,239 branches as of December 31, 2017.
• Direct sales and agency channels, which complement their bancassurance
channel by allowing us to target more affluent, metro- and urban-based customers
through a sales process adapted to their needs:
• Direct sales channel, which included 4,048 insurance managers as of March 31,
2018, who are experienced insurance sales professionals employed by the
Company to market and sell their products to new customers through their own
networks and 225 loyalty managers who focus on servicing existing policies and

37
cross selling additional products to their existing customers with the support of
their lead management systems as of March 31, 2018, as well as sales of
individual products online through their website and group sales; and
• Agency channel, which comprised 6,452 exclusive agents as of March 31, 2018.
they compensate their agents based on their performance. They seek to ensure
that their agents provide quality services to their customers and source business
efficiently.
• Other distribution channel, which includes insurance marketing firms, micro
insurance and licensed insurance brokers. Through bancassurance, direct sales,
agency and other distribution channels, they generated 65.02%, 27.53%, 4.80%
and 2.65% of total new business premium, respectively, and 64.59%, 29.48%,
5.43% and 0.51% of their individual new business premium, respectively, in
Fiscal 2018.

Geographic mix

Distribution network provides with a balanced geographic business mix. In Fiscal

2018, compnany generated 42.47%, 39.30% and 18.23% of their individual new
business premium from metro, urban and semiurban, and rural geographies in
India, respectively. Company focuses on targeting their products at the respective
customer segments that they can access through each of their distribution
channels. For example, They offer credit life and individual term products to
bancassurance customers, individual term products to their direct sales and
agency sales customers and group term products to their corporate customers.
They do this in order to capture the growing need for protection products across
various customer segments in India. Consequently, they have consistently written
a high proportion of protection products, which accounted for 17.14%, 15.75%
and 14.89% of their total new business premium in Fiscal 2016, Fiscal 2017 and
Fiscal 2018, respectively. As of March 31, 2018, they offer 9 protection products
aimed at helping to address India’s growing protection needs. Similarly, their
unit-linked segments cater to the specific customer needs of the more affluent
metro- and urban customers that they are able to access through their loyalty

38
manager channel due to its focus on 18 key Indian cities and its strong presence in
metro areas. In metro areas, unit-linked segments accounted for 25.57% of their
individual new business premium in Fiscal 2018, while unit-linked segments
accounted for 15.10% in urban and semi-urban areas and 16.73% in rural areas,
respectively. In urban and semiurban areas, their bancassurance channel is a high
proportion of their distribution mix and they offer a balanced mix of participating
and non-participating products while their unit-linked product mix is significantly
lower in urban and semi-urban areas relative to their unit linked segment in metro
areas. In rural areas, their bancassurance channel is a relatively high proportion of
their distribution mix and they offer a balanced mix of participating and non-
participating products while their unit-linked product mix is low.

39
 2.6 AWARDS

Category Award

Innovation Banking Frontiers Finnoviti Award (2018) for our conVRse

platform

Best Use of Technology to Enhance Customer Experience, for

conVRse customer service platform at the Zendesk Customer
Experience Awards (2018 )

Innovation of the Year, 21st Annual Asia Insurance Industry

Awards (2017) for conVRse customer service platform (together
with LumenLab)

Best Technology Innovation, Fintelekt Insurance Awards

(2017) for conVRse

Digital Innovation Award, in the Virtual Reality category at the

BFSI Digital Innovation Awards (2017) hosted by Indian
Express Group for our conVRse platform

Products and Marketing Best Use of Social Media in Marketing, Global Marketing
Excellence Awards (2017) for our #MakeTime social media
campaign

Best Product Innovation Award for Mera Heart and Cancer Care
(MHCC), National Awards for Excellence in Insurance (2017)

Best Product Innovation, Life Insurance Leadership Awards

(2017) for Mera Heart and Cancer Care (MHCC)

40
 Spikes Asia Bronze Award (2016) for our Life Mein Twist
campaign

Best Use of Social Media in Marketing, ABP News (2016) for

#AnythingCanHappen social media campaign

Best Employee Diversity & Inclusion Company, Employee

Beyond Business Engagement Leadership Awards (2018)

100 Best Companies for Women, Working Mother and AVTAR

(2017 and 2016)

ACEF for the CSR programme, CSR Excellence Awards (2016)

Most Sustainable Company of India, India Sustainability

Leadership Summit (2015)

Training National Award for Best Use of Technology in Training and

Development, World HRD Congress (2017)

Best Education Training Campaigns, Asia Training &

Development Excellence Awards (2016)

Best Sales Development Program, Asia Training &

Development Excellence Awards (2016)

41
 2.7 Swot analysis

1.Pan-India, multi-channel distribution network

positions us to access a demographically and
geographically broad customer base across India.
Strengths
2.Comprehensive product portfolio addresses the
diverse and evolving needs of Indian customers, and
is complemented by an end-to-end customer-centric
service experience.

3. Scalable platform positions us for profitable

growth.

4.An experienced management team

1.Lacking in global recognition as compared to

Competitors
Weakness
2.Brand not established yet in India

3. Limited awareness in the market

1.Expansioninothercountries
2.Diversifyingportfoliosforcustomers
3.JVs
Opportunities
4.New Emerging marketsHuge
5.Untapped potential
6. Primary focus is on Middle class.

42
 1.Changing government regulations and financial
Threats crisis
2.Naturaldisasters
3.Life Insurance Corporation of India

4.ICICI Prudential Life Insurance

5.Bajaj Allianz Life

6.Increasing number of private insurance companies

43
 2.8 SOME COMPETITORS OF PNB MET LIFE

S.No. Registration Date of Name of the Company

Number Reg.
1 101 23.10.2000 HDFC Standard Life Insurance Company Ltd.
2 104 15.11.2000 Max New York Life Insurance Co. Ltd.
3 105 24.11.2000 ICICI Prudential Life Insurance Company Ltd.
4 107 10.01.2001 Kotak Mahindra Old Mutual Life Insurance
Limited
5 109 31.01.2001 Birla Sun Life Insurance Company Ltd.
6 110 12.02.2001 Tata AIG Life Insurance Company Ltd.
7 111 30.03.2001 SBI Life Insurance Company Limited
8 114 02.08.2001 ING Vysya Life Insurance Company Private
Limited
9 116 03.08.2001 Bajaj Allianz Life Insurance Company
Limited
10 117 06.08.2001 PNB Metlife India Insurance Company Pvt.
Ltd.
11 121 03.01.2002 AMP Sanmar Life Insurance Co. Ltd.
12 122 14.05.2002 Aviva Life Insurance Co. India Pvt. Ltd.
13 127 06.02.2004 Sahara India Life Insurance Co. Ltd.
14 128 17.11.2005 Shriram Life Insurance Co. Ltd.
15 121 01.08.2005 Reliance Life Insurance Co. Ltd.
16 130 14.07.2006 Bharti AXA Life Insurance Co. Ltd.
17 133 04.09.2007 Future Generali Life Insurance Co. Ltd.
18 135 19.12.2007 IDBI Federal Life Insurance Co. Ltd.
19 136 08.05.2008 Canara HSBC OBC Life Insurance Co.Ltd.
20 138 27.07.2008 AEGON Religare Life Insurance Co. Ltd.
21 140 27.06.2008 DLF Pramerica Life Insurance Co. Ltd.
22 142 26.12.2008 Star Union Dai-ichi Life Insurance Co. Ltd.

44
23 143 05.11.2009 India First Life Insurance Co. Ltd.
24 147 10.05.2011 Edelweiss Tokio Life Insurance Co. Ltd.

2.9PUBLIC AND PRIVATE LIFE INSURANCE COMPANIES MARKET

SHARE

With a renewed thrust on group covers and success of golden jubilee policy 'Bima
Gold', LIC saw 27 per cent growth in business at over Rs 10,000 crore till October
this year but private players aggressively increased their market share reports
Economic Times.

Amid a stiff competition between the state-owned LIC and private players, the
life insurance industry logged a handsome 38 per cent growth in premium income
from fresh policies at Rs 13,763 crore during April-October 2005, as per data
compiled by Insurance Regulatory and Development Authority.

Insurers Amount of contribution % of contribution

Public sector 7426 crore 74.26

Private sector 2618 crore 26.18

TOTAL 10044 100.44

45
Though most of the insurers continue to grow their businesses, two private - Birla
Sunlife and SBI Life - saw a decline in business till October.

Life Insurance Corporation grew its business by a 27 per cent to collect Rs 10,160
crore in premium after selling about 1.11 crore policies in the first seven months
of 2005-06. LIC improved its market share in the group insurance schemes
significantly from 67 to 83 per cent in a month's time after covering 5.33 million
lives in October alone taking the overall coverage to 8.15 million lives.

But, LIC's market share came down marginally to 73.82 per cent till October this
year from 74.26 per cent a month ago, as private players increased their share to
26.18 per cent.

The life insurance behemoth is not worried over erosion in market share as market
continues to grow and new players entered the space.

46
The 13 private players are slowly but steadily increasing their market pie to over
26 per cent after collecting Rs 3,602 crore till October.

2.9.1PRIVATE LIFE INSURANCE COMPANIES MARKET SHARE

WITH ACCORDANCE TO PREMIUM

The life insurance industry clocked 49 per cent growth in new businesses, while
general insurance players saw 16 per cent increase in April, the first month of the
current financial year.

Strong performance by Life Insurance Corporation, ICICI Prudential and SBI

Life helped the 16 player-strong life insurance industry to mop up Rs 2,982 crore
in April this year compared with Rs 1,996 crore collected in the same month last
year, according to data compiled by the Insurance Regulatory and Development
Authority.

However, some life insurers such as Bajaj Allianz, ING Vysya Life and Reliance
Life saw a decline in premium collections during the period under review.

The country’s largest life insurer, LIC, saw new premiums grow 57 per cent to Rs
2,134 crore in April by selling 15,89,684 policies against Rs 1,355 crore a year
ago. It had a market share of 71.56 per cent in April.

The 15 private players together saw their business grow 32 per cent to Rs 848
crore with a market share of 28.44 per cent.

47
 PREMIUM
INSURERS
(Rs. in crores)
ICICI Prudential 271.00
Bajaj Allianz 124.00
SBI Life 90.00
HDFC Standard 70.00
Max New York Life 69.00
Tata AIG 48.00
Aviva 39.00
Reliance Life 33.00
Birla Sun life 28.00
Kotak Mahindra Old Mutual 26.00
ING Vysya 22.00
PNB Met Life 19.00
Shriram Life 4.50
Sahara Life 1.70
Bharti Axa Life 0.72

48
This chart represents private life insurer’s market share in accordance with
annual premium

49
 CHAPTER 3 :
RESEARCH
OBJECTIVES AND
METHODOLOGY

50
 Chapter 3 : RESEARCH OBJECTIVES AND METHODOLOGY

3.1 RESEARCH METHODOLOGY

Research can be defined as “A Scientific and Systemic Search for pertinent

information on a specific topic”. Therefore, research could be understood as an
organized activity with specific objectives on a problem or issues supported by
compilation of related data and facts, involving application of relevant tools of
analysis and deriving logically on originality.
Research methodology is a way to systematically solve the research problem. It
may be understood as a science of studying how research is done scientifically. In
it we study the various steps that are generally adopted by a researcher in studying
his research problem along with the logic behind them. It is necessary for the
researcher to know not only the research methods/techniques but also the
methodology. Researchers not only need to know how to develop certain indices
or tests, how to calculate the mean, the mode, the median or the standard
deviation or chi-square, how to apply particular research techniques, but they also
need to know which of these methods or techniques, are relevant and which are
not, and what would they mean and indicate and why. Researchers also need to
understand the assumptions underlying various techniques and they need to know
the criteria by which they can decide that certain techniques and procedures will
be applicable to certain problems and others will not. All this means that it is
necessary for the researcher to design his methodology for his problem as the
same may differ from problem to problem. For example, an architect, who
designs a building, has to consciously evaluate the basis of his decisions, i.e., he
has to evaluate why and on what basis he selects particular size, number and
location of doors, windows and ventilators, uses particular materials and not
others and the like. Similarly, in research the scientist has to expose the research
decisions to evaluation before they are implemented. He has to specify very

51
clearly and precisely what decisions he selects and why he selects them so that
they can be evaluated by others also

RESEARCH DESIGN

Research Design is the arrangement of condition for collection and analysis of

data in manner that aims to combine relevance to the research purpose with the
economy in procedure. Research Design is important primarily because of the
increased complexity in the market as well as marketing approaches available to
the researchers. A research design specifies the methods and procedures for
conducting a particular study.
The research design refers to the overall strategy that you choose to integrate the
different components of the study in a coherent and logical way, thereby, ensuring
you will effectively address the research problem; it constitutes the blueprint for
the collection, measurement, and analysis of data.Research design can be
divided into two groups: exploratory and conclusive. Exploratory research,
according to its name merely aims to explore specific aspects of the research area.
Exploratory research does not aim to provide final and conclusive answers to
research questions. The researcher may even change the direction of the study to a
certain extent, however not fundamentally, according to new evidences gained
during the research process.

52
 Research Objectives

The main objective is “to analyze the Financial Statements of PNB

MET LIFE.” Given this principal objective, there are some other
objectives which can be pursued as the subsidiary objectives of the
study :

 To understand the concept of Financial Performance.

 To know the practice of presenting financial statements.

 To know about the accounting practices i.e. legal provisions,

standards etc.

 To evaluate Financial Performance Analysis of PNB MET

LIFE functioning as insurance unit in India in terms of
Profitability, Productivity, Capital Structure, Working Capital,
Earnings, Liquidity Ratios ,Solvency parameters .

 To assess the financial strength of PNB MET LIFE .

 To examine liquidity position of PNB MET LIFE .

 To measure the financial efficiency of PNB MET LIFE.

 To examine the relationship between the analysis of Financial

Performance and decision making process of the insurance
company.

 To suggest ways and means to improve financial and overall

performance of insurance company functioning as insurance unit
in insurance Industry in India.

53
 3.2 TYPE OF RESEARCH

ANALYTICAL RESEARCH

In this type of research has to use facts or information already available, and
analyze these to make a critical evaluation of the material. The researcher depends
on existing data for his research work. The analysis revolves round the material
collected or available.
Analytical research is a specific type of research that involves critical thinking
skills and the evaluation of facts and information relative to the research being
conducted. A variety of people including students, doctors and psychologists use
analytical research during studies to find the most relevant information. From
analytical research, a person finds out critical details to add new ideas to the
material being produced.

54
Research of any type is a method to discover information. Within analytical
research articles, data and other important facts that pertain to a project is
compiled; after the information is collected and evaluated, the sources are used to
prove a hypothesis or support an idea. Using critical thinking skills (a method of
thinking that involves identifying a claim or assumption and deciding if it is true
or false) a person is able to effectively pull out small details to form greater
assumptions about the material.

3.3 SOURCE OF DATA

A data source, in the context of computer science and computer applications, is
the location where data that is being used come from. In a database management
system, the primary data source is the database, which can be located in a disk or
a remote server.

SECONDARY DATA
Secondary Data refers to the information or facts already collected such data are
collected with the objectives of understanding the past status of any variable or

55
the data collected and reported by some source is accessed and used for the
objective of a study. Normally in research, the scholars collect published data,
journals, annual reports and websites.

Sources of Secondary Data

While primary data can be collected through questionnaires, depth interview,
focus group interviews, case studies, experimentation and observation; The
secondary data can be obtained through
Internal Sources - These are within the organization
External Sources - These are outside the organization
Internal Sources of Data
If available, internal secondary data may be obtained with less time, effort and
money than the external secondary data. In addition, they may also be more
pertinent to the situation at hand since they are from within the organization. The
internal sources include :
Accounting resources- This gives so much information which can be used by the
marketing researcher. They give information about internal factors.
Sales Force Report- It gives information about the sale of a product. The
information provided is of outside the organization.
Internal Experts- These are people who are heading the various departments.
They can give an idea of how a particular thing is working
Miscellaneous Reports- These are what information you are getting from
operational reports.
If the data available within the organization are unsuitable or inadequate, the
marketer should extend the search to external secondary data sources.
External Sources of Data
External Sources are sources which are outside the company in a larger
environment. Collection of external data is more difficult because the data have
much greater variety and the sources are much more numerous.
External data can be divided into following classes.

56
Government Publications- Government sources provide an extremely rich pool
of data for the researchers. In addition, many of these data are available free of
cost on internet websites. There are number of government agencies generating
data. These are:
Ministry of Commerce and Industries- This ministry through the office of
economic advisor provides information on wholesale price index. These indices
may be related to a number of sectors like food, fuel, power, food grains etc. It
also generates All India Consumer Price Index numbers for industrial workers,
urban, non manual employees and cultural labourers.
Planning Commission- It provides the basic statistics of Indian Economy.
Reserve Bank of India- This provides information on Banking Savings and
investment. RBI also prepares currency and finance reports.
Labour Bureau- It provides information on skilled, unskilled, white collared jobs
etc.
National Sample Survey- This is done by the Ministry of Planning and it
provides social, economic, demographic, industrial and agricultural statistics.
Department of Economic Affairs- It conducts economic survey and it also
generates information on income, consumption, expenditure, investment, savings
and foreign trade.
Syndicate Services- These services are provided by certain organizations which
collect and tabulate the marketing information on a regular basis for a number of
clients who are the subscribers to these services. So the services are designed in
such a way that the information suits the subscriber. These services are useful in
television viewing, movement of consumer goods etc. These syndicate services
provide information data from both household as well as institution.

57
 3.4 TOOLS USED FOR ANALYSIS

(1) Ratio Analysis

(2) Cash Flow Statement Analysis

3.4.1 RATIO ANALYSIS

Financial ratios are used to make a holistic assessment of financial performance of

the entity, and also help evaluating the entity’s performance vis-à-vis its peers
within the industry. Financial ratios are not an ‘end’ by themselves but a ‘means’
to understanding the fundamentals of an entity. These can be divided into three
categories:  Earnings  Liquidity Ratios  Solvency These are given in detail
below: A. Earnings ratios Profitable operations are necessary for insurance
companies to operate as a going concern.

A. (3.4.1.1) Earnings ratios Profitable operations are necessary for insurance

companies to operate as a going concern. The measurement of earnings
focuses on an insurers’ ability to efficiently translate its strategies and
competitive strengths into growth opportunities and sustainable profit
margins and analyze the profitability of the underwriting and investment
functions separately.

58
 Ratio Formula Significance in analysis

Gross Premium Written(Y1)

- Gross PremiumWritten
Premium Growth Indicates growth in business
(Y0) x 100
undertaken by the insurance entity

Gross Premium Written

(YO)

Net retention Net premium Written Indicates the level of risks retained
by the insurer. Reinsurance plays
Gross Premium written
an essential role in the risk
spreading process.

The ratio measures the company’s

loss experience as a proportion of
Loss Ratio Net claims Incurred x 100
premium income earned during the
Net Premium Earned year. The loss ratio is a reflection
on the nature of risk underwritten
and the adequacy or inadequacy of
pricing of risks

59
 Expense Ratio Management Expenses +/(-) Expense ratio reflects the efficiency
Net commission paid/ of insurance operations. Expense
(earned) x 100 ratio for an insurer would be
Net Premium Earned analysed by class of business,
along with the trend of the same

Profit afteTax This particular calculation makes it

easier to understand how much
Return on Networth Average Networth
profit the business is generating
with the investments provided by
the shareholders.

This ratio measures the average

return on the company’s invested
Interest income, rents and
assets before and after capital gains
other investment income
Investment Yield and losses. While calculating the
Average total investments investment yield including capital
gains, both realised as well as
unrealised capital gains are
considered.

60
 Gross commission paid Commission ratio is a reflection of

Gross premium the underwriting expense e of the

Commission ratio
insurer.

61
 3.4.1.2 Liquidity ratios

Good liquidity helps an insurance company to meet policyholder’s obligations

promptly. An insurer’s liquidity depends upon the degree to which it can satisfy
its financial obligations by holding cash and investments that are sound,
diversified and liquid or through operating cash flows. A high degree of liquidity
enables an insurer to meet the unexpected cash requirements without untimely
sale of investments, which may result in substantial realized losses due to
temporary market conditions and/or tax consequences.

Ratio Formula Significance in Analysis

Current Liquidity Current Assets This ratio indicates an insurer’s

Current Liabilities ability to settle its current
liabilities without prematurely
selling long term investments
or to borrow money. If this
ratio is less than one, then the
insurer’s liquidity becomes
sensitive to the cash flow from
premium collections

62
 3.4.1.3 Solvency Parameters

Adequacy of solvency margin forms the basic foundation for meeting

policyholder obligations. All insurance companies are required to comply with
solvency margin requirements of the regulator as prescribed from time to time.
Currently, IRDA has prescribed 1.5 times ‘Solvency Margin’ for insurance
companies in India. ‘Solvency Margin’ for insurance companies is akin to
‘Capital Adequacy Ratio’ of Banks.

Adequacy of solvency margin

forms the basic foundation for
Solvency Margin Net premiums Written
meeting policyholder obligations.
Net worth
All insurance companies are
required to comply with solvency
margin requirements of the
regulator as prescribed from time to
time.

63
 3.4.2 CASH FLOW STATEMENT

The cash flow statement is one of the main financial statements of a business or
a nonprofit entity. (It is also known as the statement of cash flows.) The cash
flow statement reports a company's major sources and uses of cash during the
same period of time as the company's income statement.
Cash flow includes cash inflows and out flows - cash receipts and cash payments
during a period. A cash flow statement is a statement which portrays the changes
in the position between two accounting period. Cash flow analysis can reveal the
causes for even highly profitable firms experiencing acute cash shortages.

64
 CHAPTER 4 :

DATA ANALYSIS
AND
INTERPRETATION

65
 CHAPTER 4: DATA ANALYSIS AND INTERPRETATION

4.1 RATIO ANALYSIS

4.1.1 EARNING RATIOS

Table : 4.1.1 PREMIUM GROWTH RATIO

S.N Description March March March March March

o. 31,2018 31, 2017 31,2016 31,2015 31,2014

1. New business premium

income growth (segment-wise)

Participating policies 0.32% 8.38% 79.88% -18.56% 9.94%

Non-participating policies 27.17% 126.57% -6.49% 47.99% 20.09%

Par Pension 17.59% 342.53% 13669.14% NA -100.00%

Non- Par Annuity 7.62% 339.99% NA NA NA

Non- Par Pension -33.72% 28.20% -95.71% 0.77% -59.76%

Health -75.03% -45.43% 5457412.5% -87.19% 98.13%

Group - linked 991.87% 37.89% -79.69% -74.18% -52.00%

Individual Life - Linked 145.45% -63.12% -12.24% 85.32% -49.93%

Pension - linked NA -171.43% 4.00% -96.72% -731.09%

66
 (current year new business
premium -previous year new
business premium)/ previous
year new business premium

67
 Table : 4.1.2 Net Retention Ratio

S.No Description March March March March March

. 31,2018 31, 2017 31,2016 31,2015 31,2014

2. Net retention ratio 97.65% 97.00% 96.44% 96.11% 97.08%

98

97.5

97

96.5

96

95.5

95
2013-2014 2014-2015 2016-2016 2016-2017 2017-2018

YEARS

Chart : 4.1.2 Net Retention Ratio

INFERENCES: Retention ratio (also known as plowback ratio) is the

percentage of a company's earnings retained and reinvested by the company.
Retention ratio is the opposite of payout ratio..A higher ratio means that more
money is put back into the company. This can mean the company is poised for
growth. A lower retention ratio means that the company's management is not so
confident about future profitability and has elected to pay back cash to the
investors.

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 Table : 4.1.3 Ratio of Expenses of Management

S.No Description March March March March March

. 31,2018 31, 2017 31,20 31,2015 31,2014
16

2. Ratio of expenses of 26.06% 28.62% 32.21 30.15% 29.85%

management %

35
30
25
20
15
10
5
0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Chart :4.1.3 Ratio of Expenses of Management

INFERENCES:

The expenses can include advertising, employee wages and commissions for the
sales force. The expense ratio signifies an insurance company's efficiency before
factoring in claims on its policies and investment gains or losses. The expense
ratio is combined with the loss ratio to give an insurance company's combined
ratio.

69
 Table : 4.1.4 Ratio of Return on Net Worth

S.No. Description March March March March March

31,2018 31, 2017 31,2016 31,2015 31,2014

4 Return on net worth 14.11% 11.73% 8.50% 8.55% 28.57%

Chart : 4.1.4 Ratio of Return on Net Worth

30

25

20

15

10

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

INFERENCES:

Return on Net worth (RONW) is used in finance as a measure of a

company’s profitability .It reveals how much profit a company
generates with the money that the equity shareholder’s have
invested. A high return on net worth percentage is indicative of the
prudent use of shareholders’ money while a low percentage indicates
less efficient deployment of equity resources.

70
 Table :4.1.5 Commission Ratio

S.No. Description March March March March March

31,2018 31, 2017 31,2016 31,2015 31,2014

5 Commission Ratio 5.45% 5.55% 5.71% 5.62% 5.66%

Chart :4.1.5 Commission Ratio

5.75

5.7

5.65

5.6

5.55

5.5

5.45

5.4

5.35

5.3
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

INFERENCES:

A ratio below 10 percent indicates that the company is making

underwriting profit, while a ratio above 10 percent means that it is
paying out more money in claims that it is receiving from premiums.
Even if the commission ratio is above 10 percent, a company can
potentially still be profitable because the ratio does not include
investment income.

71
 Table :4.1.6 Investment Yield

S.N Description March March March March March

o. 31,2018 31, 2017 31,2016 31,2015 31,2014

6 Investment yield (gross & net) 27.81% 41.19% 33.62% 58.08% 22.56%
Total

Non linked Par (With 5.24% 12.37% 7.95% 21.63% 1.40%

unrealised gains/ losses)

Non linked Par (With realised 8.99% 8.85% 9.03% 9.08% 8.99%
gains/ losses)

Non linked Non Par (With 5.32% 11.58% 7.78% 18.22% 3.21%
unrealised gains/losses)

Non linked Non Par (With 8.26% 8.39% 8.86% 9.15% 8.96%
realised gains/losses)

Chart :4.1.6 Investment Yield

70

60

50

40

30

20

10

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

72
INFERENCES:

The investment yield ratio is used in the calculation of an insurance

company’s overall operating ratio, which is a measurement of the
insurer’s overall performance. Investment yield ratio is the ratio of
an insurance company’s net investment income to its earned
premiums. The investment income ratio compares the income that an
insurance company brings in from its investment activities rather
than its operations. It is used to determine the profitability of an
insurance company.

73
 4.1.2 LIQUIDITY RATIOS

4.1.2.1 CURRENT LIQUIDITY

Table No 4.1.7 CURRENT RATIO

S.No Description March March 31, March March March

. 31,2018 2017 31,2016 31,2015 31,2014

5 Liquidity Ratio (In 1.0 0.9 0.8 1.2 1.2

Times)

Chart No 4.1.7 CURRENT RATIO

1.4
1.2
1
0.8
0.6
0.4
0.2
0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
YEARS

INFERENCES:

Generally, a current ratio of 2:1 is considered to be acceptable. The higher the current
ratio is, the more capable the company is to pay its obligations. If current ratio is
bellow 1 (current liabilities exceed current assets), then the company may have

74
problems paying its bills on time. However, low values do not indicate a critical
problem but should concern the management.

75
 4.1.3 SOLVENCY RATIO

Table No 4.1.8 SOLVENCY RATIO

CHART No. 4.1.8 SOLVENCY RATIO

S.No. Description March March March March March

31,2018 31, 2017 31,2016 31,2015 31,2014

Solvency Ratio 201.94 203.15% 211.14% 219.30 227.88%

% %

230
225
220
215
210
205
200
195
190
185
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

INFERENCES:

The solvency ratios also referred to as Leverage ratios / gearing

ratios measures the company’s ability (in the long term) to sustain its
day to day operations. Leverage ratios measure the extent to which
the company uses the debt to finance growth.

76
A company with lesser solvency ratio may or may not indicate
weaker company profile. The lower a company's solvency ratio, the
greater the probability that it will default on its debt obligations.

But in the other side, A higher solvency ratio indicates strong

company profile.

77
 4.2 CASH FLOW STATEMENT

Particulars Schedule March 31,2018 March31,2017

A. Cash Flow From Operating

Activities

Premium received from policyholders, 40,150,38 33,678,690

including advance receipts

Other receipts 219,646 196,088

Payments to the re -insurers, net of (122,820) (162,205)

commissions and claims /benefits

Payments of claims / benefits (21,427,895) (18,624,135)

Payments of commission and brokage (2,088,727) (1,753,271)

Payment of other operating expenses (7,917,529) (9,767,255)

Preliminary and pre-operative - -

expenses

Deposits,advances and staff (49,351) (25,928)

loans

Income tax paid (net) - -

Services tax /goods services tax paid (1,282,786) (1,232,226)

Other payments - -

Cash flows before extraordinary items 7,480,976 2,309,758

78
 Cash flow from extraordinary - -
operations

Net cash flow from operating activities 7,480,976 2,309,758

(A)

B. Cash flows from Investing

Activities:

Purchase of fixed assets (247,796) (199,839)

Proceeds from sale of fixed 2,019 22,539

assets

Purchase of Investements (77,008,195) (68,208,909)

Loans disbursed (85,125) (45,876)

Loans against policies - -

Sales/ Maturity of investments 59,334,522 53,625,202

Repayments received - -

Rents/Interests/Dividends received 9,460,805 8,024,838

Investments in money market instruments 1,335,923 4,872,482

and in liquid mutual funds (Net)

Expenses related to investments - -

Net cash flow from (7,207,847) (1,909,563)

investing activities (B)

C. Cash flows from Financing

Activities:

79
Proceeds from issuance of sharecapital - -

Proceeds from borrowing - -

Repayments of borrowing - -

Interest/dividends paid - -

Net cash flow from financing - -

activities (C)

Effect of foreign exchange

rates on cash and cash
equivalents, net

Net increase/(decrease) in cash 273, 129 400,195

and cash equivalents: (A+B+C)

Cash and cash equivalents 2,625,062 2,224,867

at the beginning of the year

Cash and cash equivalents 2,898,191 2,625,062

at the end of the year

INFERENCES:

The best way to check how successful a company is at this is to read

their statement of cash flows. A simple analysis of cash flow
statement will reveal if the earnings reported are real or an
accounting gimmick. Equally, it also lets the investor see where the
free cash flow is funnelled to, alerting him of possible scams and
saving him from potential losses. Smart investors shun any company
that uses EBITDA to measure performance, and dig into the cash
flow statement instead.

80
Net cash flow generated from operating activities

Net cash flow generated from operating activities increased from

₹2,309.75 million in Year 2017 to ₹7,480.98 million in Year 2018,
primarily due to increase in premium received, partially offset by
increase in benefits paid.Net cash flow generated from operating
activities decreased from ₹4,965.56 million in Year 2016 to
₹2,309.75 million in Year 2017, primarily due to an increase in
payment for benefits and operating expenses, partially offset by an
increase in premium received from policy holders.

Net cash flow from/(used in) investing activities :

Net cash flow used in investing activities increased from ₹(1,909.56)

million in Year 2017 to ₹(7,207.85) million in Year 2018, primarily
due to an increase in cash outflow from purchase of investments in
Year 2018, partially offset by cash inflow from sale or maturity of
investments.Net cash flow used in investing activities decreased
from ₹(4,456.03) million in Year 2016 to ₹(1,909.56) million in
Year 2017, primarily due to lower cash inflow from sale of
investments in money market instruments and liquid mutual funds in
Year 2017, partially offset by an increase in purchase of
investments, which include equity and corporate bonds, in Year
2017.

Net cash flow from/(used in) financing activities

The company did not have any cash flows from or used in financing
activities for the Year 2016, Year 2017 and Year 2018. After
taking into account the expected cash to be generated from
operations, the company has sufficient liquidity for their present as

81
well for requirements and anticipated requirements for capital
expenditure and working capital .

82
Chapter 5: FINDINGS,
RECOMMENDATIONS
AND CONCLUSION

83
Chapter 5: FINDINGS, RECOMMENDATIONS AND CONCLUSION

5.1 Findings

PNB Met Life is one of the top 10 private life insurance companies
in India based on total new business premium in year 2018 and are
growing rapidly with a compounded annual growth rate of 19.85% in
total new business premium from year 2015 to year 2018. From year
2017 to year 2018, total new business premium increased at a
compounded annual growth rate of 24.23%, compared to the total
new business premium for the Indian life insurance sector increasing
at a compounded annual growth rate of 10.77%.

A pan-India, multi-channel distribution network and a

comprehensive product portfolio and provide an end-to-end
customer-centric service experience. This positions to access a broad
Indian customer base and address the diverse and evolving needs of
Indian customers.. The Indian life insurance market is the tenth
largest life insurance market in the world and the fifth largest in Asia
in terms of total premium in year 2017.

Total new business premium in the Indian life insurance market

grew at a compounded annual growth rates of 19.66% between year
2015 and year 2018 and 10.77% from Year 2017 to Year 2018.
However, India continues to be an under penetrated insurance
market with a life insurance penetration of only 2.7% in Year 2016,
compared to a global average of 3.5% . In addition, the protection
gap in India, which is the difference between the insurance
protection cover required and the cover actually insured in a
particular period, is amongst the highest globally at US$8.5 trillion
in 2014. In Year 2018, it had the fourth highest individual product
mix based on total new business premium in India.

84
The individual new business premium accounted for 92.12%,
89.74% and 87.90% of the company total new business premium in
Year 2016, Year 2017 and Year 2018, respectively.

The individual new business premium increased at a compounded

annual growth rate of 20.25% from Year 2015 through Year 2018.

In Year 2018, their

embedded value growth was 17.5%,company’s operating return on

embedded value was 16.1% and company’s 315 value of new
business margin was 17.1%. Profit before tax was ₹677.11 million,
₹1,034.22 million and ₹1,416.92 million in Year 2016, Year 2017
and Year 2018, respectively.

Distribution network consists of bancassurance, direct sales, agency

and other distribution channels, through which we generated
65.02%, 27.53%, 4.80% and 2.65% of total new business premium,
respectively, and 64.59%, 29.48%, 5.43% and 0.51% of individual
new business premium, respectively, in Year 2018.

Product portfolio covers three principal customer needs – savings,

protection and pension, which in Year 2018 accounted for 82.10%,
14.89% and 3.01% of company’s total new business premium,
respectively, and 93.41%, 4.09% and 2.51% of company’s
individual new business premium, respectively.

Operating expense ratio is operating expenses (excluding

commission) divided by GWP. Gross written premium is the total
premium written by the Company before deductions for reinsurance
ceded. The operating expense ratio decreased from 26.50% in Year
2016 to 23.07% in Year 2017 and 20.61% in Year 2018.

85
Commission expense includes commission paid/payable to third-
party intermediaries and their distribution partners for sourcing of
new business and collection of renewal premium. In line with
premium, commissions are classified into first year, renewal and
single premium commissions.

The Company’s risk exposure could also be in the areas of adverse

claims experience, shortfall in investment performance and high
expense levels.

5.2 RECOMMENDATIONS

The current ratio is improving rapidly so the company wants to keep an

eye on the current assets flow. The company has been suggested to reduce
the expenditure as it increases every year. Decrease in expenses will
increase the profitability.

If the company wants to utilize its working capital efficiently that is the excess
current assets should be adjusted according to current scenario. The net profit is
increased. A higher ratio means that more money is put back into the company.
This can mean the company is poised for growth.

The company should focus on the debt and long term funds which are utilized in
the company. The excess cash flow should or can be utilized in any new ventures
if the company wishes to do.

In a process oriented industry like insurance, it is important to integrate and

strengthen the role of risk management in business processes and decisions. In

86
order to enable the same, the risk management in the Company is managed by an
independent risk management function.

5.3 CONCLUSION

In the study of Financial Performance of PNB Met Life it is clear that the
company’s financial performance is satisfactory. The company has stable growth
and it shows a greater efficiency in all the areas it works.

If the company utilizes its working capital then the company can go heights which
it wanted to achieve. To improve the efficiency the company will strive for better
performance and increase the market share the company.

The suggestions provided through the study will help the company to improve the
operational performance efficiently. The suggestions provided through the study
will help the company to improve the operational performance efficiently.

87
ANNEXURE

88
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Websites:

 www.google.com

 www.pnbmetlife.com

 http://scholar.google.com

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91