PART - A

1
 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

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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.

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

KEY MILESTONES

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.

3
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.

PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIA

The life insurance industry in India grew by an impressive 47.38%, with premium income at Rs.
1560.41 billion during the fiscal year 2006-2007. Though the total volume of LIC's business
increased in the last fiscal year (2006-2007) compared to the previous one, its market share came
down from 85.75% to 81.91%.

The 17 private insurers increased their market share from about 15% to about 19% in a year's
time. The figures for the first two months of the fiscal year 2007-08 also speak of the growing
share of the private insurers. The share of LIC for this period has further come down to 75
percent, while the private players have grabbed over 24 percent.With the opening up of the
insurance industry in India many foreign players have entered the market. The restriction on
these companies is that they are not allowed to have more than a 26% stake in a company’s
ownership.

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Since the opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have
poured into the Indian market and 19 private life insurance companies have been granted
licenses.

Innovative products, smart marketing, and aggressive distribution have enabled fledgling private
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 products on offer. Some of these products include
investment plans with insurance and good returns (unit linked plans), multi – purpose insurance
plans, pension plans, child plans and money back plans.

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.

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1.2 COMPANY PROFILE

HDFC Standard Life is one of India’s 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),India’s leading housing finance (HDFC),
India’s leading housing finance institution and Standard Life plc, a leading provider of financial
services in the United Kingdom. HDFC Standard Life’s 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.

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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.

HDFC Standard Life is a leading life Insurance Company. It’s 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.

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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 India’s
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.), India’s leading housing finance institution and one of the subsidiaries of Standard
Life plc, leading providers of financial services in the United Kingdom.

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 whole-
time director of HDFC Limited in 1985 and was appointed as its Executive Chairman in 1993.

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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 Rs. 805 billion.

(up to Mar 2009) (US $ 18.30 bn.)

• Loan Disbursements Rs.669 billion

(up to Dec. 2007) (US $ 15.20 bn)

• Housing Units Financed 2.5 million.

• Distribution
 Offices 254
 Outreach Programs
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.

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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.

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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 Moody’s and
Standard and Poor’s. 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 India’s 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.) India’s 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, India’s
largest housing finance institution standard life assurance company , Europe’s largest
housing finance institution and standard life assurance companies , Europe’s 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.

2.4 FUNCTIONAL DEPARTMANT OF THE ORGANIZATION

1. Human resource department:

The HR department performs the role of recruiting the efficient employees and financial
consultants for the company. It also takes care of their appraisal to track their
performance and contribution to the company. It gets the resume of applicants and
processes it to check for its eligibility criteria, after that put that resume for the further
processing of selection.

2. Marketing department:

Marketing department takes care of the marketing of all the products of the company. It
helps in the increase of the business. It plays the major role in making the people aware
of their product. It concentrates on making the strategies of how to increase the sales of
the products. How they can segment the market to tap out its maximum potential profits.
It also works on sales promotion to increase the sales of company.

3. Sales department:
Controlling the sales force that brings the business to the company. Maintain the regular
flow of information about the product. These are sales manager only who see after the
acquiring and maintaining their agents.

The sales manager goes to different places and acquires the sales agents who are IRDA
certified.

4. Finance department:

This department keeps the proper track record of all the transactions taking place. It
maintains the record of all the insurance policies being issued and their premium
payments.

2.5 ORGANIZATION STRUCTURE AND ORGANIZATION CHART

The design of an organization at structure is a critical task of the top management of an

organization. It is the selection of whole organization . It refers to organizational
arrangement and relationships. It prescribes formal relationship among various positions
and attitudes. Arrangement about reporting relationship, how an organization members
are all part of organization structure.

Operations are mainly classified into four:

1. Administration
2. Operations
3. Marketing
4. Finance
ORGANIZATIONAL CHART

Chairman
 MD

Zonal
Manager

Regional
Manager

Retail
Marketing

Territory Alternative Operation Human

Manager Chanel Chanel Resource

Branch Manager Territory Team Manager HR Executive

Manager

Asst. B.M. Branch Manager Operation

Manager

Busines Dev. Channel

Mgr. Executive

Sales Dev. Mgr.

1.2.7 COMPITATORS

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 two-
wheelers 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 4 th 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 offer-

Financial 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 Life’s Market Share

Insurance Company Market Share(in per cent)

LIC 48.1%
 ICICI Prudential 13.7 %

Bajaj Allianz 10.3%

SBI Life 6.2%

HDFC Standard Life 4.1%

Birla Sun life 3.4%

Reliance Life 3.4%

Max New York 2.4%

OM Kotak 1.9%

AVIVA 1.8%

Tata AIG 1.5%

Met Life 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.

1.2.9 ACHEIVEMENTS

• Got licensed from IRDA as a Financial and Recruitment consultant.

 • Recruited 2 financial consultants for company.
• Increase in confidence level.
• Developing friendly relationship with my customers.
• Got the knowledge about, how to differentiate our product form that of LIC.

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.

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 (Agent’s 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 FINANCIAL CUSTOMERS

DEVELOPMENT CONSULTANTS
MANAGER

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.

250.00
197.15
200.00
162.07
152.16
150.00 117.32 126.97
99.51
100.00

50.00
GRAPH 1.1 SHOWS THE LOAN APPROVALS & DISBURSEMENTS.
0.00
FY03 FY04 FY05

LOANSAPPROVED LOANSDISBURSED
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

MCKENSEY’S 7’S 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 India’s 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.), India’s 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:

• Integrity
• Innovation
• Customer centric
• People Care “One for all and all for one”
• Team work
• Joy and Simplicity
Style:

One element of manager is how he\she choose tom spend time, another aspect is
symbolic behavior. This suggests a second’s 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
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
PEST Analysis

PEST analysis of any industry sector investigates the important factors that are affecting
the industry and influencing the companies operating in that sector. PEST is an acronym
for political, economic, social and technological analysis. Political factors include
government policies relating to the industry, tax policies, laws and regulations, trade
restrictions and tariffs etc. The economic factors relate to changes in the wider economy
such as economic growth, interest rates, exchange rates and inflation rate, etc. Social
factors often look at the cultural aspects and include health consciousness, population
growth rate, age distribution, changes in tastes and buying patterns, etc. The
technological factors relate to the application of new inventions and ideas such as R&D
activity, automation, technology incentives and the rate of technological change.

4.1 Political Factors

Increased service tax on premium

5% discount on corporate premium

Hike in FDI limit

Favorable regulation for rural insurance

4.2 Economic Factors

Increase in Gross Domestic Savings

Increased economic activities

Interest rates

Inflation rate
4.3 Social Factors

Low insurance coverage

Rise in elderly population

Changing Indian perception

Growth of Islamic insurance

Increase in lifestyle diseases

Level of education

Level of earnings

4.4 Technological Factors

Automation of processes

Increase in CRM solutions

Internet driven information era

Business Process Monitoring (BPM)

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 Prudential’s 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 world’s 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 War With Competitors
Taxation On The Product And Service
Competitors Have Superior Access To Channels Of Distribution

CHAPTER IV

FINANCIAL STATEMENT REVIEW

 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 don’t
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.

RESEARCH DESIGN

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

6.1Statement Of The Problem

Financial statement analysis of HDFC standard life to know the financial growth in market. To
know the investment plans organization’s funds. Financial analysis is the technique which helps
to know the financial position of the company. There is rising competition between HDFC
Standard Life and other companies.
TITLE OF THE STUDY

‘FINANCIAL STATEMENT ANALYSIS’

A Study has been conducted in the area of “FINANCIAL STATEMENT ANALYSIS” at HDFC
STANDARD LIFE.

6.2OBJECTIVES OF THE STUDY

This widely used by the financial analysis’s 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.

The main objective of the study are:-

• To analyzing the financial statement.

• To simplifies and summarizes a long array of accounting data and makes them
understandable.
• To forecasting and preparing the plans for the future.
• To will reveal the trend of costs, sales, profits and other important facts.
• To establish ideal standards of the different items of the business.
• To discloses the liquidity , solvency and profitability of business enterprise.
• To provide useful information to the management.
6.3 SCOPE OF THE STUDY

• It is useful for the management.

• It gives information to the investors about the earning capacity of the business.
• With the help of Ratio Analysis comparison of profitability and financial soundness can
be made between one firm and another.
• Current year's ratios are compared with those of previous years and if some weak spots
are thus located remedial measures are taken to correct them.
• It gives information to the financial institution for providing the finance to the company
• It gives information to the taxation authorities.
• It gives information to the researchers for conducting research in respect of profitability,
efficiency, financial soundness and growth of that company.

6.4 RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. In it, step-by-step
Research Methodology is a way to systematically solve the research problem. In it, step-by-step
methods are followed to solve a particular problem. It refers to a search for knowledge. It can
also be defined as a scientific and systematic search for pertinent information on a specific topic.
In fact, research is an art of scientific investigation.

DATA COLLECTION:

The data can be of two types:

• Primary Data
• Secondary Data

Secondary Data are those data which are already collected and stored and which has been passed
through statistical research. In this project, secondary data has been collected from
followingsources:-

• Annual Report
 • Articles in Journal, Magazines.
• Books
• Other material and report published by company

RESEACH DESIGNS

Research Design is the way in which the research is carried out. It works as a blue print.
Research Design is the arrangement of conditions for the collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure.

The present project is descriptive in nature. In Descriptive Research Design, those studies are
taken which are concerned with describing the characteristics of a particular group. The major
purpose of descriptive research is the description of state of affairs, as it exists at present.

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 year’s 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 short-term
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

Net working capital= total current assets

Total current liabilities

TABLE - 1

particulars 2005 2006 2007 2008 2009

Total Current assets 11,43,024 38,69,728 53,25,536 87,57,727 96,43,629

 Total current liabilities 10,90,355 26,87,296 39,05,497 62,51,168 90,29,038

Net working capital 52,669 11,82,432 14,20,039 2,506,559 614,591

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.

Current ratio

Particulars 2005 2006 2007 2008 2009

Current assets 11,43,024 38,69,728 53,25,536 87,57,727 9,643,629

Current liabilities 10,90,355 26,87,296 39,05,497 62,51,168 90,29,038

Current ratio 1.04:1 1.44:1 1.36:1 1.4:1 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 or quick ratio

It refers as quick ratio because it’s a measurement of a firms ability to convert its current assets
quickly into cash in order to meet current liabilities. It’s 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.

Quick ratio = quick current assets

current liabilities

Quick Ratio (Acid Test Ratio)

Table 3

Particulars 2005 2006 2007 2008 2009

Quick 1013888 36,83,194 48,99,231 78,77,283 82,18,747
current
assets

Current 10,90,355 26,87,296 39,05,497 62,51,168 90,29,038

liabilities

Quick ratio .93 1.37 1.25 1.26 0.91

GRAPH - 3

Quick 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 =
it is another Current Liabilities
way of
examining the
liquidity is to determine how quickly certain current assets are converted into cash.

(1)Debtors turnover ratio

(2) Creditors turnover ratio

Debtor’s 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.

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 owner’s 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

Table-4 Debt-Equity Ratio

Particulars 2005 2006 2007 2008 2009

Equity 256 1062 2222 4625 4768

Debt 544 1298 2408 3939 5827

Ratio 2.125 1.222 1.083 0.85 1.22

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-5 Debt Asset Ratio

Debt asset ratio

Particulars 2005 2006 2007 2008 2009

Total debt 1,74,980 2,09,569 26,73,746 33,27,353 1,55,99,032

Total assets 18,74,848 44,71,073 60,61,590 99,07,527 1,10,91,335

debt asset ratio .0933302 .0468721 .4410964 .3358409 1.4064161

Graph 5

Debt asset ratio

Here for each rupee of assets is equal to the 1.4 of every debt.
Interest coverage ratio

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 shareholder’s 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 management’s 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 revenues= 55,183,763

Net profit ratio

Table - 6 .

Particulars 2005 2006 2007 2008 2009

Profit/ loss after (897,348) (1,287,572) (1,255,611) (2,435,094) (5,029,631)

interest and tax

Revenues 6,729,283 15,469,501 28,226,248 48,176,166 55,183,763

NET profit Ratio -.1333497 -.0832329 -.0444838 -0.0505456 -0.0911433

Graph-6

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.
Gross profit ratio

2005 2006 2007 2008 2009

Gross profit (897,347) (1,287,572) (1,255,611 (2,435,094 (5,029,631)

) )

Net revenue 6,729,283 15,469,501 28,226,248 48,176,166 55,183,763

Gross profit
margin
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 shareholder’s equity is
calculated to see the profitability of owner’s 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.

Return on equity = profit/(loss after tax)

Net worth

Table-7

Return on Equity

Particulars 2005 2006 2007 2008 2009

Profit/( loss after 8,97,348 12,87,572 12,55,611 2,435,094 5,029,631

tax)

Net worth 1,316,269 3,165,972 3,939,077 6,379,641 6,520,340

(Return on .6817 0.4066 0.31875 0.3817 0.7714

equity)
Graph-7

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 company’s 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-8

Retention ratio = net premium income

Gross premium income

Retention ratio

Particulars 2005 2006 2007 2008 2009

Net Premium 6,729,28 15,469,50 28,226,24 48,176,166 55,183,763

3 1 8

Gross Premium 6,866,34 15,699,12 28,558,65 48,585,616 55,646,937

6 6 6

Retention ratio .98003 .98537 .98836 0.99157 0.99167

Graph-8

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 year’s 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 revenue

TABLE-9

Particulars 2005 2006 2007 2008 2009

Administrative 10,490 18,251 8,252 12,596 5,307

expenses

Net revenue 6,729,28 15,469,50 28,226,248 48,176,16 55,183,763

3 1 6

Administrative
expenses ratio
GRAPH-9

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 year’s 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-10

Particulars 2005 2006 2007 2008 2009

Management Expenses 3,038,442 5,214,991 7,902,455 13,704,946 21,915,907

Total Gross Premium 6,866,346 15,699,126 28,558,656 48,585,616 55,646,937

Ratio .4425 .3321 .2767 .2820 .3938

GRAPH-10
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 year’s 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%.
Particulars 2005 2006 2007 2008 2009

Pretax profit (3,038,442) (5,214,991) (7,902,455) (13,704,946) (21,915,907)

Net revenue 6,729,283 15,469,501 28,226,248 48,176,166 55,183,763

Ratio -.4515 -.3371 -.2799 -.2844 -.3971

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.

ROCE = net profit earnings

Average total capital employed

TABLE-11

ROCE ratio

Particulars 2005 2006 2007 2008 2009

Net profit earnings 897,347 1,287,572 1,255,61 2,435,094 5,029,631

1

Average total capital 2,870,69 4,763,087. 7,346,08 10,811,786. 15,848,297

employed 5 5 3 5

ROCE ratio -0.3126 -0.2703 -0.1709 -0.2252 -0.3174

GRAPH-11

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

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
investor’s 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 firm’s 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 Applications
Profitable operation Loss from operations
Decrease in assets Increase in assets
Increase in liabilities Decrease in liabilities
Sales proceeds Redemption of preference shares, and
cash 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 = revenues- expenses- depreciation

Cash flow = 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 2009 2008

Amounts received from Policyholders 54,747,190 47,554,360

Amounts paid to Policyholders 5,248,135 4,224,779

Amounts received / (paid) to Reinsurers 550,719 415,081

Amounts paid as Commission 4,156,520 3,377,762

Payments to Employees and Suppliers 16,025,349 8,621,462

Deposit with Reserve Bank of India 2,627 —

Taxes Paid 219,808 8,758

Others 765,819 214,763

Net Cash from Operating Activities 29,309,851 30,691,755

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets 578,182 663,248

Sale of Fixed Assets 319 368

Investments (Net) 38,958,793 36,020,822

Income from InvestmentS 4,592,227 2,711,629

Net Cash Flow from Investing Activities 34,944,429 33,972,073

CASH FLOW FROM FINANCING ACTIVITIES

Issue of Shares during the year 5,250,000 4,697,391

Share application money received pending allotment — 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

Cash and Cash Equivalents as at the beginning of the 4,493,238 3,363,556

year

CASH AND CASH EQUIVALENTS AT THE END

4,108,660 4,493,238
OF THE YEAR

Analysis of cash flow statement

Operating activities

Here high profitable operation shows the firm’s 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 company’s 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 LIFE’S 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 firm’s 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.

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 LIFE’S 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 firm’s 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.

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 company’s 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 firm’s 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 don’t 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