P O RT F O L I O M A N A G E M E N T

F UNDAMENTAL A NALYSIS OF I NSURANCE S ECTOR

PRESENTED BY;
POOJA AGARWAL 02

SHAGUFTA QURESHI
YASHMEEN SHAIK ROHIT SHARMA

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37 40

MOHIT SURANA
CHIT DESAI

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Contents
Sr.No 1 2 3 4 5 6 Topic Introduction to Insurance Need of Insurance Business Model of Insurance Company Types of Insurance Companies Life Insurance Companies and Non-Life Insurance Companies Licensed by IRDA Life Insurance Industry in India

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8 9 10

Development of India Insurance Industry

Fundamental Principle of the Insurance General / Non-Life Insurance Company Analysis

Introduction to Insurance

Insurance is a social device in which a group of individuals transfer risk to another party in

order to combine loss experience, which permits statistical prediction of losses and provides
for payment of losses from funds contributed by all members who transferred risk.

Insurance sector in India was traditionally dominated by state owned Life Insurance Corporation and General Insurance Corporation and its four subsidiaries.

The term risk is used in insurance business to also mean either a peril to be insured against

(e.g. fire is a risk to which property is exposed) or a person or property protected by insurance
(e.g. young drivers are often not considered good risk for motor insurance companies).

Need of Insurance
Today, there is no shortage of investment options for a person to choose from. Life insurance is a unique investment that helps you to meet your dual needs - saving for life's important goals, and protecting your assets. Some of the unique benefits of life insurance in detail:

Asset Protection: Life insurance is unique in that it gives the customer the reassurance of asset protection, along with a strong element of asset appreciation.

Goal based savings :As the stage of your life change, your financial goals change, the instrument in which you invest should offer corresponding benefits pertinent to the new life stage.
Life insurance ensures that the benefits offered to the customer reflect the needs of the customer at that particular life stage

Need of Insurance
The table below gives a general guide to the plans that are appropriate for different life stages.
Life Stage Young & Single Primary Need Asset Creation Life Insurance Product Wealth Creation Plans

Young & Just Married Married with kids

Asset Creation & Protection Childrens Education, Asset Creation & Protection

Wealth Creation & Mortgage Protection Plan

Education, Wealth Creation & Mortgage Protection Plan

Middle age with grown up kids

Planning for Retirement & Asset Protection

Retirement Solutions & Mortgage Protection Plan

Across all life stages

Health Plans

Health Insurance

Business Model of Insurance Company

Insurance Business Model: Profit = Earned Premium + Investment Income - Incurred

Loss - Underwriting Expenses

The investment regulations are made in exercise of power conferred by Sections 27A, 27B, 27D and 114A of the Insurance Act, 1938. Investments which are in accordance with the provisions of section 27A & 27B of Insurance Act, 1938 for life & general insurance respectively are Approved investments Insurance companies in India have to invest as per IRDA guidelines. IRDA has given guidelines for investment to Insurance companies in India

Ty p e s o f I n s u r a n c e C o m p a n i e s

Life insurance companies, who sell life insurance, annuities and pensions products.
Non-life or general insurance companies, who sell other types of insurance.

Reinsurance companies, who cover risks of other insurance companies, allowing them to
reduce their risks and protect themselves from very large losses.

In India, insurance business is divided into the following major categories: 1) Life Insurance (Transacted by life insurers) 2) Fire Insurance 3) Marine Insurance and 4) Miscellaneous Insurance (Transacted by non-life insurers) No composite insurance companies are permitted as

per law.

Life Insurance and Non -Life Insurance Companies Licensed by IRDA

Life Insurance Companies Licensed by IRDA

Non-Life Insurance Companies Licensed by IRDA

Life Insurance Corporation of India SBI Life Insurance Co. Ltd Birla Sun Life Insurance Co. Ltd

Bajaj Allianz General Insurance Co. Ltd ICICI Lombard General Insurance Co. Ltd IFFCO Tokio General Insurance Co. Ltd

HDFC Standard Life Insurance Co. Ltd

ICICI Prudential Life Insurance Co. Ltd Tata AIG Life Insurance Company Limited

National Insurance Co. Ltd

The New India Assurance Co. Ltd The Oriental Insurance Co. Ltd

Life Insurance Industry in India

More than a century in India, large mobilization of savings next only to banks. Significant participant is the capital markets.

Insurance Regulatory and Development Authority (IRDA) has the power to guide & regulate the insurance companies in India

The objective of insurance regulation is to ensure that the business is runs fairly, conducted

by competent persons, does not result in undue losses to the insurers themselves resulting in
their insolvency and that the legitimate interest of the insuring public is protected.

IRDA has come out with various guidelines and regulations on different subjects.

Development of India Insurance Industry

The Indian Insurance Industry is nearly two centuries old. Bombay Mutual life assured Society, formed in 1870 was the first Indian owned life insurer. The first piece of legislation to regulate the conduct of life business was the Indian Life Assurance Companies Act, 1912. A comprehensive law was enacted in 1938 (the Insurance Act) which consolidated

earlier legislation and provided for administrative and regulatory measures for the regulation of insurance
business in India.

Around the time of India's Independence, there were 236 insurers in India, comprising of foreign

companies and branches and provident societies.

In 1968, Tariff Advisory Committee (TAC) was formed and rates and terms in Fire, Marine, Motor and Engineering businesses were brought under tariff.

Development of India Insurance Industry

In 1994, the Committee on Reforms in Insurance Sector (CRIS) submitted the report and some of the key recommendations was regarding to Structure, Competition, Regulatory Body, Investments, & Customer Service.

General Insurance Corporation of India (GIC) was separated from 4 state owned general insurance companies in 2001 and was made exclusively a reinsurance company

Fundamental Principle of the Insurance

In all General Insurance contracts we know that a property or interest or liability or life is offered for insurance and the insured has to take decisions on the acceptance of the proposal. Some of the key principles of the Insurance are:

Insurable Interest Contribution Proximate cause

Indemnity Subrogation Intermediaries in insurance

Insurance legislation
Scope for actuarial profession

Actuary

Underwriting

General / Non-Life Insurance

Insuring anything other than human life is called non-life or general insurance or Property & casualty insurance. General Insurance comprises of insurance of property against fire, burglary etc. personal insurance such as Accident and Health Insurance and liability insurance which covers legal liabilities. Marine Hull & Cargo also fall under this group. There are also other miscellaneous covers. There are general insurance products that are in the nature of package policies offering a combination of the covers. For instance, there are package policies available for householders and shop keepers. Most general insurance covers are annual contracts. In India general insurance policies are annual and the premium payment is in advance as per sec. 64 VB of insurance act. General insurance is not meant to be for savings or investment returns. It is meant for protection.

General / Non-Life Insurance

Some General Insurance Products:

Fire Insurance

Consequential Loss Insurance

Marine Insurance
Health Insurance Money Insurance Workmen's Compensation Insurance Machinery Breakdown Insurance

Motor Insurance
Personal Accident Insurance Fidelity Guarantee Insurance Public Liability Insurance

Contractors All Risks Insurance

General / Non-Life Insurance

Some Terms used in General insurance Proposer/applicant

Business
Claim

interruption

Deductible/excess Exclusions Insurer

Insured
Penetration

Company Analysis
After analyzing the economy and the respondent industry that are taken into consideration now its turn of the companies in the insurance industry and their performance and the environment they are operating into. The 2 companies taken into consideration are; ICICI Prudential Life Insurance Company & Bajaj Allianz Life Insurance Company Limited While analyzing the company the factor considered are,

CURRENT RATIO =Current Assets /Current Liabilities Debt to Equity =Total Debt (Short Term +Long Term)/Equity + Preference Interest Coverage=Earnings Before Interest And Tax/Interest

Company Analysis
ICICI Prudential Life Insurance Company

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier
financial powerhouse, and Prudential plc.

ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000

ICICI Prudential Life's of capital stands at Rs.4,780 crores (as December 31, 2009) with ICICI Bank and Prudential plc. holding 74% and 26% stake respectively

ICICI Prudential Life has one of the largest distribution networks amongst private life insurers in
India

Company Analysis
Bajaj Allianz Life Insurance Company Limited

Bajaj Allianz Life Insurance Company Limited engages in life insurance business in India. The company was founded in 2001 and is headquartered in Pune, India

Bajaj Allianz Life Insurance Company Limited is a subsidiary of Bajaj Holdings and Investment Limited.

As on the end of March 2009, the income of Bajaj Allianz Insurance went up to Rs.2,866 crores with a growth of 11% over the previous year

It also registered a net profit of Rs.95 crore, highest by any private insurer, in the last financial

year(2009)

Company Analysis
CURRENT RATIO:
ICICI Prudential Life Insurance Company
2006
Current Asset
3,580,046

Bajaj Allianz Life Insurance Company Limited

2006
2,646,097
4,081,074 0.648382509

2007
7,183,106
10,061,083 0.713949582

2008
10,711,662
16,081,873 0.66607055

2009
7,174,265
11,303,713 0.634682162

2007
3,358,711
7,016,903 0.47866003

2008
5,288,350
10,104,661 0.523357488

2009
8,295,295
14,495,261 0.572276346

Current Liability
5,934,917

Current Ratio
0.603217534

Company Analysis
DEBT EQUITY RATIO:
ICICI Prudential Life Insurance Company 2006
DEBT EQUITY DEBT/EQUITY
14247 11850000 0.001202278

Bajaj Allianz Life Insurance Company Limited 2006

54035 47801758 0.00113038 0 2670720 -

2007
40393 20716828 0.001949768

2008
37935 37724213 0.001005588

2009

2007
0 4034165

2008
0 5773150 -

2009
0 6724719 -

Company Analysis
INTEREST COVERAGE RATIO:
ICICI Prudential Life Insurance Company
2006
PBIT INTEREST PBIT/ INTEREST
-11840436 165786 -71.41999

Bajaj Allianz Life Insurance Company Limited

2006
1184287 98061 12.077043

2007
-23611574 267100 -88.39975

2008
-46042734 117134 -393.07744

2009
-47258763 256924 -183.94063

2007
1935565 205122 9.4361648

2008
2965405 335559 8.8372089

2009
3911618 492334 7.94504949