CASE STUDY ON SUN LIFE FINANCIAL & INDIAN ECONOMIC SURGE

By:Bharti Virmani-0121pg030 Ashish Sundriyal-0121pg106 Maninder Singh-0121pg Danish Parvez-0121pg Saurabh Draweria-0121pg Raj Bardhan-0121pg Vikeyel-0121pg Anuj Raghav-0121pg

Case Analysis International Business

The entry of Sun Life Financials, a leading international financial services organization into the Indian insurance market is analyzed here and also the attractiveness of Insurance markets in India is discussed. Also Indian Insurance Market scenario and growth after the arrival of Birla Sunlife Financial Insurance Company has been discussed here.

Overview Of Sun life Financial

Leading international financial services organization Provides Diverse range of protection and wealth accumulation products Started in 1865,operating worldwide in countries like canada,US,UK,Ireland,Hong Kong,Japan,india,china bermuda etc. In 2007,company had total asset of CDN$427 bn

Indian Economic Scenario-2007

Why only india??

Population:1.05 bn Saving rate: around 26% of GDP Estimated middle class population:300 million Insured Population: 110 million only Annual growth rate in the average insurance premium in india has been 8.2% compared with the global averahe of 3-4% The share of life insurance premium to GDP is 1.29% in india

After entering INDIA

BSLI is a joint venture between the aditya brila group and Sunlife financial Services of Canada. Company started its operations with the launch of innovative unit-linked insurance products. The company geared up through superior value creation and technology to provide multiple product and benefits Provides greater investment opportunities Provide the vast investors populace in india with liquidity and security

Q.(1) How is the insurance market in India changing? Why is India an attractive market for investment?

Indian insurance is a flourishing industry, with several national and international players competing to excel.

Insurance is a federal subject in India. There are two legislations that govern the sector- The Insurance Act- 1938 and the IRDA Act- 1999. The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again.

Present Scenario

The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership.
In Oct.2000, IRDA issued license to three companies- HDFC Life Standard, Sundaram Royal Alliance Insurance Company and Reliance General Insurance.

At the same time, Principle approval was given to Max New York Life, ICICI Prudential Life Insurance Company and IFFCO Tokyo General Insurance Company. Today, total 22 LICs including 1 public sector are successfully operating in India.

Growth of Indian Insurance Market2001 to 2011

Research Findings

Indian Insurance Industry: New Avenues for Growth 2012a survey found that LIC, has clocked 21.87% growth in business at Rs.197.86 billion by selling 2.4 billion new policies in 2004-05. Estimates indicate a 14-15% growth in Nifty EPS for 2012-13. In life insurance business, India ranked 9th among the 156 countries During 2010-11, the estimated life insurance premium in India grew by 4.2 per cent. However, during the same period, the global life insurance premium expanded by 3.2 per cent. The share of Indian life insurance sector in global market was 2.69 per cent during 2010, as against 2.45 per cent in 2009.

INDIA-An attractive Insurance Market

There are very few opportunities in the world that are as large as the India opportunity: with a population of almost 1.2 billion, the market is enormous; the number of skilled, English-speaking people in the workforce is impressive; and the government has proven to be very stable. Most economists agree that India will have solid, stable growth for the next 20 to 30 years. Investing at the ground floor of the growth phase of the Indian economy is a once-in-a-lifetime opportunity. There are very few investment opportunities that can compare to the Indian market in the long term.

Q2) Why did Sun Life Financials enter the Indian Market?

With a huge population base and large untapped market, insurance

industry is a big opportunity area in India for national as well as foreign investors.

India is the fifth largest life insurance market in the emerging insurance economies globally and is growing rapidly.

This impressive growth in the market has been driven by

liberalization, with new players significantly enhancing product awareness and promoting consumer education and information.

Health insurance is poised to become the second largest business for non-life insurers after motor insurance in next three years. A booming life insurance market has propelled the Indian life insurance agents into the top 10 country list in terms of membership to the Million Dollar Round Table (MDRT) an exclusive club for the highest performing life insurance agents.

Q3) What was the entry mode in India for Sun Financials and Why?
Sun Financials made a Foreign Direct Investment in India by forming a Joint Venture with Aditya Birla Group.
Sun Life acquired 50% of the equity in Birla Capital International AMC Limited and Birla Capital International Trustee Company Limited.

Sun Life and Aditya Birla Group also established a new sales and distribution company to market a broad range of financial products and services across India

Reasons for forming Joint Venture: To enter into a foreign country. Sharing risks as well as costs involved in setting up the business. Good brand name and relations of the Local company can be capitalized. Suppliers, distributors and established channel partners of local company can be utilized. Cultural bridge can be minimized. Joint ventures are a necessity by government. Profit sharing/market sharing.