RESEARCH PROJECT

On

"Comparative analysis of ULIPS in India"

Submitted in partial fulfillment of the requirement for MBA Degree of Bangalore University
BY

Nandha Kishore.D
Registration Number: 04XQCM6059

Under the guidance of

Dr.N.S.MALLAVALLI

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

Bangalore-560001 2004-2006

Comparative analysis of ULIPS in India

DECLARATION

I hereby declare that the research project titled "Comparative analysis of ULIPS in India" is prepared under the guidance of Dr.N.S.MALLAVALLI in partial fulfillment of MBA degree of Bangalore University, and is my original work. This project does not form a part of any report submitted for degree or diploma under Bangalore University or any other university.

Place: Bangalore

Nandha Kisho

MM. P. Birla Institute of Management

PRINCIPAL'S CERTIFICATE

This is to certify that Mr. Nandha Kishore.D, bearing Registration No: 04XQCM6059 has done a research project on "Comparative analysis of ULIPS in India" under the guidance of Dr.N.S.MALLAVALLI M.P. Birla Institute of Management, Bangalore. This has not formed a basis for the award of any degree/diploma for any other university.

Place: Bangalore Date: MPBIM, Bangalore

Dr.N.S.MALLAVALLI PRINCIPAL

GUIDE'S CERTIFICATE

I hereby declare that the research work embodied in this dissertation entitled "Comparative analysis of ULIPS in India" has been undertaken and completed by Mr. Nandha Kishore.D under my guidance and supervision.

I also certify that he has fulfilled all the requirements under the covenant governing the submission of dissertation to the Bangalore University for the award of MBA Degree.

Place: Bangalore Date: Dr.N.S.MALLAV ALLI Research MPBIM, Bangalore Guide

ACKNOWLEDGEMENT

The successful accomplishment of any task is incomplete without acknowledging the contributing personalities who both assisted and inspired and lead us to visualize the things that turn them into successful stories for our successors. First of all I thank the Almighty God for his grace bestowed on us throughout this project. My special thanks to my project Guide Dr.N.S.MALLAVALLI, who guided me with the timely advice and expertise and has helped remarkably to complete the project.

Last, but not the least, I would like to thank my Parents and all my aFriends for their wholehearted direct and indirect support and encouragement.

Nandha Kishore.D

ABSTRACT

The Life Insurance sector in India is growing at a very high rate through the Unit Linked Insurance Plan (ULIPs). Most of the Life Insurance companies grow more than 100% every year all through ULIPs. In this study we have compared the ULIP's products of five leading Insurance companies, which are hot selling products at present and also we have concentrated on the ranking of those companies based on the some criteria like:

1. Minimum premium contribution 2. Minimum Term 3. Charges 4. Agents Commission 5. Returns from 11-01-05 to 11-05-05 6. Returns since inception

Net Asset Value for all those five companies is collected. Considering an investor wants to invest Rs.5000 every month, the charges and fund management between each and every companies will vary. After deduction of those charges what returns will an investor will get if he invest that amount in any of those five companies. (i.e.,)

1. ICICI Prudential 2. SBI Life 3. HDFC Standard Life 4. TATA AIG 5. BAJAJ Allianz.

INTRODUCTION
Indian insurance sector with the initiation of the deregulation created a tremendous change in the last 6 years; The monopoly of big public sector companies in life insurance as well as general (non-life insurance) has been broken. . Indian insurance industry showed an annual growth rate of 15-20% and the
largest number of life insurance policies in force..

New private players have entered the market and with

their innovative approaches and better use of distribution channels and technology. They are grabbing the market share of established public sector companies in Indian Insurance Market. Since the deregulation has been put in to place, the market share of Life Insurance Corporation of India has come down to 71.4% in life insurance sector. Total value of the Indian insurance market (2004-05) is
estimated at Rs. 450 billion. According to government sources, the insurance and banking services' contribution to the country's gross domestic product (GDP) is 7% out of which the gross premium collection forms a significant part.

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. These facts indicate the of immense growth potential of the insurance sector. In order to meet the competition, these private companies are coming with new strategies and innovative products. The introduction of unit-linked insurance plans (ULIPs) has possibly been the single-largest innovation in the field of life insurance. In a swoop, it has addressed and overcome several concerns that customers had about life insurance - liquidity, flexibility and transparency and the lack thereof. In this study I am trying to do a comparative analysis of the different hot selling UNIT LINKED PLANS (ULIPs) which is available in India, on the basis of their performance using different criteria's like premium contribution, term, charges etc. UNIT LINKED INSURANCE PLAN ULIP is the innovative insurance product launched by ICICI PRUDENTIAL in India on 24-11-01. Earlier only Endowment plans were there in Insurance companies for savings and investment purposes. Most insurers in the year 2004 have started offering at least a few unit-linked plans. Unit-linked life insurance products are those where the benefits are expressed in terms of number of units and unit price. They can be viewed as a combination of insurance and mutual funds.

The number of units that a customer would get would depend on the unit price when he pays his premium. The daily unit price is based on the market value of the underlying assets (equities, bonds, government securities, etc) and computed from the net asset value. The advantage of unit-linked plans is that they are simple, clear, and easy to understand. Being transparent the policyholder gets the entire upside on the performance of his fund. Besides all the advantages they offer to the customers, unit-linked plans also lead to an efficient utilization of capital. Unit-linked products are exempted from tax and they provide life insurance. Investors welcome these products as they provide capital appreciation even as the yields on government securities have fallen below 6 per cent, which has made the insurers slash payouts. According to the IRDA, a company offering unit-linked plans must give the investor an option to choose among debt, balanced and equity funds. If you opt for a unit-linked endowment policy, you can choose to invest your premiums in debt, balanced or equity plans. If customer chooses a debt plan, the majority of his premiums will get invested in debt securities like gilts and bonds. If he chooses equity, then a major portion of his premiums will be invested in the equity market. Customer chooses the plan according to his risk profile and investment need. The ideal time to buy a unit-linked plan is when one can expect long-term growth ahead. This is especially so if one also believes that current market values (stock valuations) are relatively low. So if investor opts for a plan that invests primarily in equity, the buzzing market could lead to windfall returns. However, should the buzz die down, investors could be left stung. WHY OFFER UNIT-LINKED POLICIES?

GENERAL CONSIDERATIONS

A product will only provide good sales volumes in a market if it meets the requirements of the parties involved in the transaction. For an insurance product, this means meeting the requirements of the client, the distributor (assumed to be an intermediary) and the insurer. In this section we look at how a unit-linked policy meets the needs of the three parties.

2. THE CLIENT

Smoothing of investment returns on conventional policies has been reduced as actuaries, through competitive Unit-linked policies can be designed to do almost anything a conventional policy can, but they can also offer more flexibility. The notable exception is achieving the smoothing of investment returns which was traditionally the objective of conventional policies.

Over the years, the pressures have increased the terminal bonus element of maturity payouts. The volatility of investment returns under conventional policies has therefore increased and the main perceived advantage of such policies has diminished.

The major disadvantage of conventional policies lies in their bundled nature and, in particular, that the cash value of the policy at a particular time is not clear to the client. The transparent nature of a unitlinked policy has a major appeal to clients who wish to monitor the progress of the value of their investment. This has enabled single premium life insurance policies to compete successfully with mutual funds and other open-ended collective investment schemes. Further advantages of unit-linking are that the client has control over the investment strategy for the policy and may be more comfortable with unit linking as the concept is closer to other collective investment vehicles than a conventional policy. Notably, clients may control the degree of investment risk by directing premiums to the funds most appropriate in relation to their risk tolerance. Those clients willing to take on more risk, for example by investing solely in an equity share fund, would expect to earn better returns over the long term.

3. THE INTERMEDIARY

The transparency and flexibility of unit-linked policies provide the intermediary with products that meet a wide variety of client needs and which are easy to explain (in principle) to clients, particularly in terms of demonstrating investment performance compared to that of competitors. It is also possible for the intermediary to show how unit-linked contracts have the potential to outperform their conventional with-profits counterparts based on past performance. In general, the maturity values of unit-linked policies invested in managed or balanced funds where the underlying investments are a mix of shares, bonds, property and cash should be similar to the maturity value of a conventional with-profits policy. The maturity values of unit-linked plans invested in equity share funds would be expected to be higher. In practice, results have varied considerably between insurers depending on their relative investment performance.

In addition, where the intermediary is acting as the client's investment adviser, the regular requirement to review the investment strategy for the policy with the client gives the intermediary a reason to contact the client with the possibility of further sales as a consequence of the meeting. The quality of

unit-linked business should be better than that of conventional business, in terms of persistency, for this reason. USES OF UNIT-LINKED PRODUCTS To date, unit-linked products have been structured in many different ways:

I. Endowment assurances II. Open-ended whole life policies

III. IV.

Savings for retirement (deferred pensions) Pensions in payment

Many of these offer the choice of I. Single or regular (monthly, annual or other) premiums II. Flexible premiums III. A single or a multiple life basis

A range of covers that can be added (depending on local licensing regulations), e.g.

I. Life cover II. Guaranteed insurability options

III. IV.
VI.

Critical illness Disability

V. Health Long term care

VII. Redundancy These products can be applied in a wide variety of situations. I. Personal lines II. Family protection III. Mortgage or loan repayment or estate tax planning

IV. Inheritance

V. Lump-sum investment VI. Saving for retirement VII. Saving for school or college fees

VIII. Drawing retirement income IX. Charitable giving X. Business lines XI. Key person insurance XII. Partnership buy-sell agreements XIII. Other partnership situations pension and other benefits

XIV. Employee XV.

Executive benefits

Of course, none of this is new just because a unit-linked policy is involved. The main points really are: I. Unit-linked policies can satisfy the same needs as conventional policies.

II. Unit-linked policies are easy for the intermediary to explain and easy for the client to understand. Of course, the actual level of understanding of the average client will still be very low, but will nonetheless be better than for typical conventional policies. III. The flexibility and choices under unit-linked policies enable clients to choose the insurance coverages they require and to control the level of investment risk associated with the policy. 1. THE INSURER The insurer should only offer unit-linked products in response to a demand from the market or where it is believed that market conditions will support unit linked innovation and where it can make a sufficient profit. Clear indications of where unit-linked plans may be successful are flat or stagnating sales of traditional with profits products, and increases in sales of pure investment linked trusts (or mutual funds). Offering unit-linked insurance would be a method to retain existing customers or attract new customers who may otherwise purchase pure protection insurance (term insurance) and place their savings in investment-linked trusts or other pure investments.

Unit-linked policies are usually less capital intensive than conventional with profits policies, i.e. the finance required to support equal volumes of with profits and unit-linked business is lower for unitlinked business. There are two main reasons for this:

I. The guarantees under unit-linked business are usually much weaker than under a conventional withprofits policy (if they exist at all).

II. The reserving requirements under a unit-linked policy are much less onerous than under a conventional with-profits policy. This partly reflects the weaker guarantees but is mainly a result of using a valuation basis under which the reserve is roughly equal to the surrender value at all times. The lower capital requirement for unit-linked business means that unit-linked products are suitable products for insurers in start-up situations. In countries where bancassurance has been successful, the bancassurers have often started by selling unit-linked products. In some cases, insurers have responded to competition from the bancassurers by introducing unit-linked products themselves.

Unit-linked policies are often more profitable than conventional with-profits policies, particularly for proprietary life offices. The reason for this is that many proprietary life offices operate a 90/10 (or other split) gate within their life fund.

This means that at least 90% of the profits of the business must go to the with profits policyholders, and the shareholders take a maximum of 10%. The requirement to split the profits in this way is written into the Memorandum and Articles of Association of the insurer (the basic documents governing its operations) and would be virtually impossible to circumvent. In some cases, the requirement to split the profits relates only to the profits arising from with profits business, but often the requirement covers profits arising from non-profit business as well. Non-profit business could include unit-linked business.

However, by writing unit-linked business in a separate fund or even a separate company, the requirement to distribute any profits arising from the business to anyone other than the shareholders is removed.

Insurers will need to decide whether to write unit-linked business either

I. In the existing life fund with segregated assets; II. In a separate fund

containing unit-linked assets only; III. In a separate company.

Comparative analysis of ULIPS in India

CRITICAL SUCCESS FACTORS FOR UNIT-LINKED BUSINESS

1. E F F I C I E N T I N V E S T M E N T M A R K E T S A key area in which a unit-linked policy differs from a conventional with-profits policy is that the investments of the unit-linked policy should be able to be valued at any point in time. This means that a price for the individual investments of a unit-linked fund should be available at any time, i.e. efficient investment markets. This covers not only share markets but also government bond markets, corporate bond markets and (as far as possible) property markets.

2. A DEMAND FOR TRANSPARENT INVESTMENTS In markets where shares, bonds and property are popular investment media, there is a predisposition towards investments that can be easily valued. This weighs heavily in favor of a unit-linked policy rather than a conventional policy.

3 . A W E L L - D E V E L O P E D L I F E I N S U R A N C E M A R K E T A well-developed life insurance market can be characterized by the following:

A need for protection and savings A stable economic background Consumer wealth A sophisticated banking system able to process mass transactions An advanced supervision system which allows the introduction of new classes of business Trust in financial services institutions A taxation regime that does not disadvantage life insurance in general or unit-linked life insurance
in particular

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4. ADEQUATE SYSTEMS

The flexibility of unit-linked products means that there can be a large number of options as to how the policy is put together. There are options regarding the choice of add-on insurance benefits, the term of the policy and whether the cash value is payable as part of the sum insured or in addition to the sum insured on the occurrence of the insured event. This means that complex point of- sale illustration systems are required to support unit-linked products.

Once written, unit-linked policies are complex from a record-keeping point of view, as, there are large amounts of data required to be held and large numbers of transactions to be processed. A powerful and efficient administration system is needed to manage a unit-linked portfolio.

5. AVIALABLE

DISTRIBUTION

SYSTEM

Access to the market through one or more of the following:

A tied sales force - well trained, well paid and well motivated A reliable independent sales network Another financial services organization (e.g. a bank) Other direct access to the market (direct response or other distribution agreements with third
parties) 6. A GOOD INVESTMENT TRACK RECORD To be successful in the unit-linked market, an insurer must be able to demonstrate a good history of investment performance. For a new entrant to the unit-linked market, this is clearly impossible (unless, for example, it relies on tracker funds which replicate the performance of well-known stock indices) and the insurer must rely on its reputation in the market or else rely on someone else's track record. This is often done by using external fund managers to manage the investments, or by investing

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in funds managed by another fund manager. In either case, the pedigree of the external fund manager becomes part of the marketing message.

PRODUCT DESIGN AND PRICING

I . PRODUCT DESIGN (TECHNICAL SPECIFICATION)

The product specification should include (where relevant):

1.1 CLASS OF PRODUCT

1. The technical class of product - e.g. whole life, endowment, pension 2. Versions available - single life, joint life (first death, last survivor), business 3. Premium options - single, regular, flexible 4. Allowable insurance benefit add-ons

1.2 INVESTMENTS I. Fund links available and investment objectives of each fund II. Investment guarantees (or lack of investment guarantees) Method and frequency of unit pricing The investment accounting and management system to be used

III. IV.

1.3 MARKETING AND DISTRIBUTION The distribution channels through which the product is available

1. Variations of product design by distribution channel, if any 2. The initial and renewal commission payable and clawback rules 3. Capabilities of illustration system to be used 4. Marketing material to be available 5. Other sales aids to be available 6. Training and qualification standards of unit-linked insurance intermediaries
1.4 ACTUARIAL AND TECHNICAL

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1. Charging structure 2. Insurance benefit charges 3. Review provisions (if relevant) 4. Policy limits (age limits, maximum and minimum premiums/sums insured, minimum investment
in individual funds, fund link rules, rules for fund switches, etc.)

5. Underwriting rules 6. Management and statistical information required 7. Valuation and reserving bases 8. Solvency margin requirements 9. Corporate tax implications 10.
Policyholder tax implications

1.5 ADMINISTRATION

1. Business processing rules - new and ongoing business 2. processing rules - allocation of cash to policies, late Policy and endorsement wordings 3. Cash processing rules 4. Permitted policy changes (by the insurer and by the client) 5. Availability of loans and/or partial withdrawals and the rules for administering them 6. Non-forfeiture provisions
1.6 OTHER SPECIFICATIONS REQUIRED

1. Administration system specification 2. Investment accounting and management system specification 3. Illustrations system specification 4. Management information system specification
2. PRODUCT PRICING

This means the level and type of charges that the insurer can take under the policy. The types of charge, which can be levied, are initial charges, surrender charges, renewal charges, fund management charges, and switch or redirection charges.

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In addition, charges are taken for add-on benefits if the premium for such benefits is not included in the total premium payable.

a. INITIAL CHARGES Initial charges are intended to cover the marketing, distribution and other new business costs relating to the policy. There are many different variations of initial charges, but essentially, whatever method is used, the effect is that less money is actually allocated to the policy than is received from the client for a period of time. Some possible ways of doing this are:

b. Allocate no money to the policy for a period of months. c. Allocate months. d. Allocate money received in the early months of a policy to units that have a higher fund management charge than those purchased by later premiums. e. In the event charges, these of in the policy of being the at will and surrendered, regular the be only fund charges of the that future would As of money excess have such, whether required to fund been the the to be only a proportion of each premium to the policy for a period of

management levied excess policy purchase on fund runs the

excess are

units,

levied

point received the

surrender. regardless of

management its full term net

charges or of not, the

amount

units

excess

management

charges

needs

allocated to the policy.

f. SURRENDER CHARGES Surrender charges (also called surrender penalties or back-end charges) are, as their name suggests, applied when a policy is surrendered. They are used to recover costs already incurred to the extent that they have not been recovered from the charges made prior to surrender.

g. RENEWAL CHARGES These are intended to cover the ongoing costs of administering the policy and any renewal commissions payable. There are various methods of taking renewal charges:

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Comparative analysis of ULIPS in India

I. An explicit percentage of each premium II. A policy fee deducted from the premium before it is allocated to units

III. IV.

A policy fee deducted from the funds under management A bid/offer spread, whereby the price at which units are bought by clients is higher than the

price at which the insurer will redeem them. For example, units may be sold at 100 and redeemed at 95 (redeemed in the case of surrenders, partial withdrawals, or to pay certain charges). Both the bid price and the offer price of the units will change over time to reflect the performance of the underlying investments and other factors, but the spread between these prices will usually remain within certain bounds established in the insurance contract, often close to a constant percentage such as 5%. . FUND MANAGEMENT CHARGES These are intended to cover the ongoing costs of managing the investments of the policy and any asset or trail commissions payable. These charges are almost always a percentage of the funds under management.

i. SWITCH OR REDIRECTION CHARGES These cover the additional administration costs associated with switching investments between funds and redirecting premiums. The objective of these charges is to discourage excessively frequent switches and premium redirections but often a number of free switches is allowed. Usually there is no charge for redirection of premiums.

j. ADD-ON BENEFIT CHARGES These are usually calculated using a current cost method (unless the premium for add-on benefits is included in the total premium). This means that risk premium rates are applied each month to the sum at risk under each benefit. Any charge over and above the pure risk premium charge will help offset expenses.

3. PROFITABILITY Some assumptions about the future must be made to price the product profitably. These are:

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The average size of policy the office expects to write, (i.e. the average premium and level of benefits), including the timing of premiums and charges for fully flexible policies. These averages may be related to age, sex and other factors such as the distribution channel. The expected costs for the product. They should be what the company thinks it needs to spend to acquire and administer the product. This should include overhead (or indirect) costs. The amounts might be divided into initial and renewal costs and might be related to premiums, benefits or simply to each policy. In order to allocate expenses at the policy level, sales volumes will have to be estimated.

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Comparative analysis of ULIPS in India

Any expected increases in these amounts, due to inflation or other factors, should also be considered. Economic assumptions such as future returns on unit-linked and other funds, future inflation rates, future tax rates and rules. Lapse assumptions - calculated in accordance with the time since the policy was written and (if possible) with age, distribution method or other factors. The expected death and other benefit claim rates. These are not necessarily the same as the charges for the benefits. The valuation method for the policy liabilities (or the reserves) and the need for any solvency margin. These will be in accordance with the rules laid down by the appropriate supervisory authorities. These assumptions need to be based on good information. The best information is the experience of similar existing policies. If such information does not exist (or is not available), research will be necessary.

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Comparative analysis of ULIPS in India

Problem Statement:

Investors are being confused because many insurance companies approach and explain that their product is better than other companies' product. They have been explained only about the NAV returns and not the actual returns what they (investors) will receive after amortizing the charges.

Objective:

To compare the hot selling Unit linked plans in India and to suggest the customers which company is giving better returns by ranking them. Awareness of Life Insurance is being created among the people. Standard of life is increasing day-byday; many people tend to cover their risk associated with their life by taking Insurance for their life. People are expecting high returns from ULIPs. Since ULIPs are hot selling product in Life Insurance Industry, contributing more than 70 % of the premium collected by each company per year.

Data Type:

The data used for the study is Secondary data. Source:

I. Insurance company brochures II. Irdaindia.org

Sample size: A sample of 5 leading Life insurance companies, whose ULIPs are popular in the market has been taken for the study.

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Methodology:

Fixing a certain amount of premium contribution of an investor in monthly mode (Rs.5000) and after deduction of charges, remaining amount will be converted into units by dividing with present day NAV.

Total value of units = total number of units * present NAV

Returns % =100* (Total value of units - Total Investment)/ Total Investment

Limitations: I. Only five Life Insurance companies have been considered for the study.

II. Risk (death) cover charges are not considered. III.

Only first two years of investment charges are taken for ranking.

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SBI LIFE INSURANCE: SBI Life Insurance is a joint venture between the State Bank of India and Cardif of France. SBI Life Insurance is registered with an authorized capital of Rs 500 crore and a paid up capital of Rs 350 crores. SBI owns 74% of the total capital and Cardif the remaining 26%. State Bank of India enjoys the largest banking franchise in India. Along with its 7 Associate Banks, SBI Group has the unrivalled strength of over 14,000 branches across the country, the largest in the world. Cardif is a wholly owned subsidiary of BNP Paribas, which is The Euro Zone's leading Bank. BNP is one of the oldest foreign banks with a presence in India dating back to 1860. It has 9 branches in the metros and other major towns in the country. Cardif is a vibrant insurance company specializing in personal lines such as long-term savings, protection products and creditor insurance. Cardif has also been a pioneer in the art of selling insurance products through commercial banks in France and 29 more countries. The company plans to make the insurance buying process quick, simple and based on well-informed judgment. In 2004, SBI Life Insurance became the first company amongst private insurance players to cover 30 lakh lives. The company expects to carve a niche in the Indian insurance market through extensive product innovation and aims to provide the highest standards of customer service through a technological interface. To facilitate this, call centers has been installed. Help lines will also be installed and customers will have access to their accounts through the Internet or through SBI branches.

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The company proposes to make available ready liquidity to its Life Insurance policies by way of loans at SBI counters. This will make Life Insurance a liquid asset in the financial portfolio of households. SBI Life Insurance is uniquely placed as a pioneer to usher banc assurance into India. The company hopes to extensively utilize the SBI Group as a platform for cross-selling insurance products, along with its numerous banking product packages such as housing loans, personal loans and credit cards. SBI's access to over 100 million accounts provides a vibrant base to build insurance selling across every region and economic strata in the country.

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BAJAJ ALLIANZ: Bajaj Allianz Life Insurance Co. Ltd. Is a joint venture between two leading conglomerates- Allianz AG, one of the world's largest insurance companies and Bajaj Auto, one of the biggest 2 and 3 wheeler manufacturers in the world. Bajaj Allianz Life Insurance: I. Is the fastest growing private life insurance company in India II. Currently has over 4,40,000 satisfied customers III. We have a presence in more than 550 locations with 60,000 Insurance Consultants providing the finest customer service. One of India's leading private life insurance companies Bajaj Auto Ltd, the flagship company of the Rs. 8000 crore Bajaj group is the largest manufacturer of two-wheelers and three-wheelers in India and one of the largest in the world. A household name in India, Bajaj Auto has a strong brand image & brand loyalty synonymous with quality & customer focus. A STRONG INDIAN BRAND- HAMARA BAJAJ One of the largest 2 & 3 wheeler manufacturers in the world. 21 million plus vehicles on the roads across the globe. Managing funds of over Rs. 4000 cr. Bajaj Auto finance is one of the largest auto finance companies in India. Rs. 4,744 Cr. Turnover & Profits of 538 Cr. n 2002-03. It has joined hands with Allianz to provide the Indian consumers with a distinct option in terms of life insurance products. As a promoter of Bajaj Allianz Life Insurance Co. Ltd., Bajaj Auto has the following to offer -

I. Financial strength and stability to support the Insurance Business. II. A strong brand-equity. III. IV.
A good market reputation as a world-class organization.

An extensive distribution network. V. Adequate experience of running a large organization

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ALLIANZ GROUP Allianz Group is one of the world's leading insurers and financial services providers. Founded in 1890 in Berlin, Allianz is now present in over 70 countries with almost 174,000 employees. At the top of the international group is the holding company, Allianz AG, with its head office in Munich. Allianz Group provides its more than 60 million customers worldwide with a comprehensive range of services in the areas of

I. Property and Casualty Insurance, II. Life and Health Insurance,

III. Asset Management and Banking. ALLIANZ AG- A GLOBAL FINANCIAL POWERHOUSE I. Worldwide 2nd by Gross Written Premiums - Rs.4,46,654 cr. II. 3rd largest Assets Under Management (AUM) & largest amongst Insurance cos. - AUM of Rs.51,96,959 cr.

III. IV.

12th largest corporation in the world 49.8 % of global business from Life Insurance

V. Established in 1890, 110 yrs of Insurance expertise VI. 70 countries, 173,750 employees worldwide INDIAN OPERATIONS Growing at a breakneck pace with a strong pan Indian presence Bajaj Allianz has emerged as a strong player in India... Bajaj Allianz Life Insurance Company Limited is a joint venture between two leading conglomerates Allianz AG and Bajaj Auto Limited. Characterized by global presence with a local focus and driven by customer orientation to establish high earnings potential and financial strength, Bajaj Allianz Life Insurance Co. Ltd. was incorporated on 12th March 2001. The company received the Insurance Regulatory and Development Authority (IRDA) certificate of Registration (R3) No 116 on 3rd August 2001 to conduct Life Insurance business in India. BAJAJ ALLIANZ- THE PRESENT

I. Pan India presence in more than 550 locations. II. Wide range of products to suit peoples needs.

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III. IV.

Decentralized organizational structure for increased response and service levels.

All CCCs networked with state of art IT systems. V. Highest standard of customer service & simplified claims process in the industry. 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 services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). For the year ended March 31, 2006, the company garnered Rs 24.12 billion of weighted new business premium and wrote 837,963 policies. The sum assured in force stands at Rs 458.88 billion. The company has a network of over 72,000 advisors; as well as 9 bancassurance partners and over 200 corporate agent and broker tie-ups. It is also the only life insurer in India to be assigned AAA credit rating from Fitch Ratings. For the past five years, ICICI Prudential has retained its position as the No. 1 private life insurer in the country, with a wide range of flexible products that meet the needs of the Indian customer at every step in life. Prudential plc is an international retail financial services group that aims to help people secure and enhance their own and their dependants' financial well-being by providing savings, protection and other products and services suited to their needs. We have strong franchises in three of the largest and most attractive markets in the world, where rising wealth and changing demographics are fuelling demand for life insurance and other long-term savings and protection products. Our strategy is to build successful and increasingly profitable businesses in each of these markets, and thereby maximize returns to our shareholders over time. ICICI Bank ICICI Bank is India's second largest bank and largest private sector bank with over 50 years of financial experience and with assets of Rs. 1812.27 billion as on 30th June, 2005. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. ICICI Bank is a leading player in the retail banking market and has over 13 million retail customer accounts. The Bank has a network of over 570 branches and extension counters, and 2,000 ATMs.

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Comparative analysis of ULIPS in India

Prudential plc Established in London in 1848, Prudential plc, through its businesses in the UK and Europe, the US and Asia, provides retail financial services products and services to more than 16 million customers, policyholder and unit holders worldwide. As of June 30, 2004, the company had over US$300 billion in funds under management. Prudential has brought to market an integrated range of financial services products that now includes life assurance, pensions, mutual funds, banking, investment management and general insurance. In Asia, Prudential is the leading European life insurance company with a vast network of 24 life and mutual fund operations in twelve countries - China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam.

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Comparative analysis of ULIPS in India

TATA AIG THE TATA GROUP The Tata Group (www.tata.com) is one of India's best-known industrial groups with an estimated turnover of around US $14.25 billion (approximately 2.6% of India's GDP). With more than 220,000 employees across 91 major companies, it is also India's largest employer in the private sector. The Tata Group pioneered several firsts in Indian industry firsts, including: India's first private sector steel mill, first private sector power utility, first luxury hotel chain and first international airline, amongst others. Recently, the Tata Group's pioneering spirit has been showcased by companies such as Tata Consultancy Services (TCS), Asia's largest software and Services Company, and Tata Motors, the first carmaker in a developing country to design and produce a car from the ground up.

By combining ethical values with business acumen, globalization with national interests and core businesses with emerging ones, the Tata Group aims to be the largest and most respected global brand from India whilst fulfilling its long-standing commitment to improving the quality of life of its stakeholders.

AIG

American International Group, Inc. is the world's leading international insurance and financial services organization, with operations in more than 130 countries and jurisdictions. AIG member companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer.

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Comparative analysis of ULIPS in India

In the United States, AIG companies are the largest underwriters of commercial and industrial insurance and AIG American General is a top-ranked insurer. AIG's global businesses also include retirement services, financial services, and asset management. AIG's financial services businesses include aircraft leasing, financial products, trading and market making. American General Finance leads AIG's growing global consumer finance business in the United States. AIG also has one of the largest U.S. retirement savings businesses through AIG SunAmerica and AIG VALIC, and is a leader in asset management for the individual and institutional markets, with specialized investment management capabilities in equities, fixed income, alternative investments and real estate. AIG's common stock is listed in the New York Stock Exchange and ArcaEx, as well as the stock exchanges in London, Paris, Switzerland and Tokyo.

M3- P- Birla Institute of Management

Comparative analysis of ULIPS in India

HDFC 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 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.

KEY STRENGTHS 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 A wide range of individual and group solutions, which can be easily customized to specific needs. Group solutions have been designed to offer you complete flexibility combined with a low charging structure. Track Record so far Cumulative premium income, including the first year premiums and renewal premiums is Rs. 1532.21 Crores Apr-Mar 2005 - 06.We have covered over 1.6 million individuals out of which over 5,00,000 lives have been covered through our group business tie-ups. Also declared as the 5th consecutive bonus in as many years for our 'with profit' policyholders.

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Comparative analysis of ULIPS in India

DATA ANALYSIS:

1. Returns are calculated by taking the Net Asset Value(NAV) from 11-1-05 to 1105-06 2. Returns are calculated from inception till 11-05-06

ASSUMPTIONS:

1. An investor wants to invest an amount of rupees 5000 every month in ULIP starting from 11-0105.

2. He is willing to invest only in equity fund. 3. investor is alive till 11-05-06

Investor's amount will be invested in equity fund of that company after paying the company charges. After payment of charges, the remaining amount (contribution) will be invested in equity fund and it will be converted into units by dividing the contribution by the respective day's NAV. Charges differ from company to company. After deducting all those charges annually fund management charges is deducted by cancellation of units. After the lock in period, investor can do partial withdrawal or whole withdrawal. The returns of the investor is calculated by finding the total number of units and multiply it with the NAV value on the day of withdrawal to find the total value. Then the invested amount is deducted from the total value and the result is divided by the total investment. To find the returns percent multiply it by 100. For analyzing the data the criteria's are,

1. Minimum premium contribution 2. Minimum term 3. Charges in first year 4. Charges in second year 5. Advisors(agents) commission 6. Returns from inception 7. Returns from 11-01-2005 to 11-01-2006.

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Comparative analysis of ULIPS in India

Ranking is done based on the above criteria. Returns from 11-01-2005 to 11-05-2006 are as follows:

1. 2. 3. 4. 5.

SBILIFE ICICIPRUDENTIAL HDFC TATAAIG BAJAJALLIANZ

38.85 % 24.41 % 18.83 % (6.04 ) % (32.43) %

Returns per year since inception:

1. ICICIPRUDENTIAL 2. SBILIFE 3. HDFC 4. TATAAIG 5. BAJAJALLIANZ CONCLUSION

30.04 % 25.01 % 8.08 % 7.09 % (2.71) %

As we have all know today's scenario, awareness of Life Insurance is being created among the people, standard of life is increasing day-by-day; many people tend to cover their risk associated with their life by taking Insurance for their life. People are expecting high returns from ULIPs. Since ULIPs are hot selling product in Life Insurance Industry, contributing more than 70 % of the premium collected by each company per year.

Investors need the clarity about the products of different life insurance companies particularly ULIP's. Hence we have tried to give our best to the investors by comparing the ULIP's of 5 leading insurance companies.

Based on the returns given by the companies, which we have compared, SBI has given the maximum return compared to the other 4 insurance companies. And, if we calculate the returns from the inception, the ICICI PRUDENTIAL has given good returns.

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Comparative analysis of ULIPS in India

As per the objective of this study we have ranked the 5 major players in ULIP's. And found that the ICICI PRUDENTIAL leads the other 4 insurance companies.
HDFC DATE 11/1/2005 11/2/2005 11/3/2005 11/4/2005 11/5/2005 11/6/2005 11/7/2005 11/8/2005 11/9/2005 11/10/2005 11/11/2005 11/12/2005 NAV 24.94 26.06 27.43 26.02 26.74 27.95 29 31.28 33.18 34.6 33.4 38.03 CONT MONTHLY PREMIUM % 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 73% 73% 73% 73% 73% 73% 73% 73% 73% 73% 73% 73% -0.80% 11/1/2006 11/2/2006 11/3/2006 11/4/2006 11/5/2006 39.88 42.65 45.99 50.81 54.12 5000 5000 5000 5000 5000 73% 73% 73% 73% 73% 15 15 15 15 15 TOTAL UNITS TOTAL VALUE RETURNS RETURNS % 3635 3635 3635 3635 3635 CONT. CHARGES 15 15 15 15 15 15 15 15 15 15 15 15 Rs.. 3635 3635 3635 3635 3635 3635 3635 3635 3635 3635 3635 3635 UNITS 145.75 139.49 132.52 139.70 135.94 130.05 125.34 116.21 109.55 105.06 108.83 95.58 1484.03 1472.16 91.15 85.23 79.04 71.54 67.17 394.12 1866.28 101003.21 16003.21 18.83

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Comparative analysis of ULIPS in India

ICICI DATE 20-1101 20-1201 20-0102 20-0202 20-0302 20-0402 20-0502 20-0602 20-0702 20-0802 20-0902 20-1002 10.17 10.42 10.71 11.13 11.12 10.79 10.27 10.73 10.69 10.27 9.91 9.91 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 NAV PREMIUM

CONTRIBUTION %

CONTRIBUTION Rs. UNITS

82% 82% 82% 82% 82% 82% 82% 82% 82% 82% 82% 82% 2.25%

4100 4100 4100 4100 4100 4100 4100 4100 4100 4100 4100 4100

403.15 393.47 382.82 368.37 368.71 379.98 399.22 382.11 383.54 399.22 413.72 413.72 4,688.03 4,582.55

20-1102 20-1202 20-0103 20-0203 20-0303 20-0403 20-0503 20-0603 20-0703 20-0803 20-0903 20-1003 10.36 11.19 11.47 11.38 10.77 10.79 11.3 12.34 13.11 14.39 14.87 17.71 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 92.50% 92.50% 92.50% 92.50% 92.50% 92.50% 92.50% 92.50% 92.50% 92.50% 92.50% 92.50% 2.25% 4625 4625 4625 4625 4625 4625 4625 4625 4625 4625 4625 4625 446.43 413.32 403.23 406.41 429.43 428.64 409.29 374.80 352.78 321.40 311.03 261.15 4,557.91 4,455.36

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Comparative analysis of ULIPS in India

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Comparative analysis of ULIPS in India

20-0206 35.84 20-0306 39.02 20-0406 20-0506 42.43 916.30 43.37 5000 5000 5000 96% 96% 96% 4800 4800 4800 123.01 113.13 110.68 5000 96% 4800 133.93

TOTAL UNITS TOTAL VALUE LESS: INV. RETURNS % RETURNS %/YEAR 15,070.57 653,610.45 378,610.45 137.67653 30.04 BAJAJ ALLIANZ

HDFC STANDA SBI LIFE RD TATA AIG

COMPANY ICICI PRU

CHARGESPRODUCT NAMEMIN PREMIUMMIN TERM1ST YEAR2 ND YEARLIFE TIMEINR 18,000.003 YRS20.0%7.5%UNIT GAININR 10,000.003 yrs70.0%2.0%ULIP ENDOWMENTINR 10,000.0010 yrs27.0%27.0%INVEST ASSUREINR 10,000.0015 yrs40.0%20.0%UNIT PLUSINR 24,000.005 yrs25.0%7.5%

ADVCOMM

* % OF RETURNS INCEPTION

SINCE

M1. P. Birla Institute of Management

Comparative analysis of ULIPS in India

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