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Comparative Financial Statements of HDFC Standard Life Insurance.

IntroductionIntroduction to finance:

Finance studies and addresses the ways in which individuals,

businesses, and organizations raise, allocate, and use monetary resources

over time, taking into account the risks entailed in their projects. The

term "finance" may thus incorporate any of the following:

The study of money and other assets.

The management and control of those assets,

Profiling and managing project risks,

The science of managing money,

As a verb, "to finance" is to provide funds for business or for an

individual's large purchases (car, home, etc.).

The field of finance deals with the concepts of time, money and

risk and how they are interrelated. It also deals with how money is spent

and budgeted. Finance works most basically through individuals and

business organizations depositing money in a bank. The bank then lends

the money out to other individuals or corporations for consumption or

investment, and charges interest on the loans.

The activity of finance is the application of a set of techniques that

individuals and organizations (entities) use to manage their money,

particularly the differences between income and expenditure and the

risks of their investments.

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An entity whose income exceeds its expenditure can lend or invest

the excess income. On the other hand, an entity whose income is less

than its expenditure can raise capital by borrowing or selling equity

claims, decreasing its expenses, or increasing its income.

Finance is used by individuals (personal finance), by governments

(public finance), by businesses (corporate finance), as well as by a wide

variety of organizations including schools and non-profit organizations.

In general, the goals of each of the above activities are achieved through

the use of appropriate financial instruments, with consideration to their

institutional setting.

Finance is one of the most important aspects of business

management. Without proper financial planning a new enterprise is

unlikely to be successful. Managing money (a liquid asset) is essential to

ensure a secure future, both for the individual and an organization.


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Financial Management:

Management of funds is an important aspect of financial

management. Management of funds acts as the primary concern

whether it may be in a business undertaking or in an educational

institution. Financial management, which is simply meant dealing with

management of money matters.

Meanings of Financial Management:

Financial Management mean efficient use of economic resources

namely capital funds. According to Phillippatus, "Financial management

is concerned with the managerial decisions that result in the acquisition

and financing of short term and long term credits for the firm". Here it

deals with the situations that require selection of specific assets, the

selection of specific problem of size and growth of an enterprise. Here

the analysis deals with the expected inflows and outflows of funds and

their effect on managerial objectives. So the analysis simply states two

main aspects of financial management like procurement of funds and

an effective use of funds to achieve business objectives.

Objective of Financial Management:

Financial management of any business firm has to set goals for

and interpret them in relation to the objectives of the firm. Broadly there

are only two alternative goals/ objective of financial management.



1. Specific objectives:

a) Profit Maximization:

It is consider as an important goal in financial decision making in

an organization. Maximization is the condition achieving the maximum

target profit with available resources in an economic and efficient

manner.

b) Wealth maximization:

It refers to the maximization of wealth by maximization in the

market value of shares of a company. The efficient of an organization

maximizes present not only for shareholders but for including

employees, customers, suppliers and community at large. It is the

ultimate objective of every organization.

1. General objective:

a) Balance asset structure:

A proper balance between the fixed assets and current assets is an

important factor for efficient managements of funds. This is one of the

objectives of financial management that size of current asset must permit

the company to exploit the investment on fixed assets.



b) Liquidity:

Liquidity refers to available cash and it is an indication of positive

growth of a company. It is an important factor for meeting the short and

long term obligation of a firm.

c) Proper planning of funds:

Proper planning of funds include acquisition and allocation of

funds in the best possible manner that is minimum cost of acquisition of

funds but maximum returns through wise decision.

d) Efficiency:

Efficiency and effectiveness are very much necessary in

controlling flow of funds. The efficiency level should continuously

increase for betterment of statements etc.

e) Financial discipline:

There shouldn’t be any mishandling of funds, misuse etc. Proper

discipline should be practiced in matters relating to finance, its flow and

control. This can be done through various techniques like budgeting

funds flow statement etc.



Scope of financial management:

The scope of financial management is determined from the stages

of development of the study. Financial management developed as a

separate subject from economics in the year 1920. Its scope has enlarged

to make it an integrated and complete subject for every organization.

Since 1950 it has assumed an important status.

Traditional scope of financial management:

Traditionally financial management was used by corporate

organizations mainly for the purpose of finding the sources of funds and

the methodologies of raising them from such sources and utilizing them

for the organizations requirements. It also incorporated the legal and

accounting requirements relating to sources and uses of funds.

Traditionally Financial Management was known as Corporation Finance

and was called the outsider looking approach.

Its emphasis was centred on the following three issues:

To organize funds from different sources like banks, investment

companies and financial institutions.

To use financial instruments in the form of shares, debentures,

bonds, fixed deposits for company’s requirements.

To settle the organization of funds through proper administration,

legal advice and proper accounting records.



Modern Financial Management:

Modern Financial Management is a concept of overall

management of a company. Its scope is broadly divided into three

important decisions which may also be called the functions of financial

management. These are investment decisions, financing decisions and

dividend decisions. It covers the areas of sourcing of funds, financial

analysis, attaining an optimum capital structure, profit planning and

control, project planning and evaluation and corporate taxation. It takes

care of internal and external management of funds and covers the

requirements of different groups of people such as shareholders,

management, investors, government, customers and suppliers.

1. Investment Decision Making:

A firm is required to take decisions relating to acquisition of long term

assets and current assets. Capital investment proposals require heavy

investment.

2. Financing Decisions:

A financial manager has to procure funds from different sources. He has

to decide the quantum of funds and the type of source that he should use

for the firm. There is a cost attached to every source of fund and hence

balance has to be maintained between debt and equity.



3. Dividend Decisions Making:

Dividend decision making pertains to an analysis of the right amount of

dividend to be distributed to shareholders. It has to take care of the legal

restrictions and accounting processes before giving a dividend. The

correct decisions have to be taken regarding the percentage of reserves

before distribution of dividends.

4. Balancing Profitability And Liquidity:

Conflicts in goals have to be solved as they are within the ambit of the

scope of financial management. A firm has to balance its conflicts

between being profitable and liquid. When profitability increases a

financial manager may have the problem of low liquidity as all the funds

may be used to make the profitable. Similarly, if there is too much

availability of funds but the firm does not make use of them then a cost

will be attached to it. Hence the scope of financial management is to

balance conflicts in profitability and liquidity.

5. Risk and Return:

High return brings about high risk but an organization has to consider

several factors before undertaking high risk because it can make loss if

decisions are not taken properly. Therefore, the scope of financial

management is to invest cautiously through proper calculations by

applying techniques through matching of risk with return.



The organizations structure of financial management:


BOARD OF DIRECTORS

PRESIDENT

Vice-President Marketing

Vice-President Finance

Vice-President Production

Chief Finance Manager

(Controller)

Chief Finance Manager

(Treasurer)

Tax Manager

Data Processing Manager

Capital Expenditure

Manager

Appraisal or Reporting

Cost Accounting Manager

Financial Accounting

Manager

Appraisal or Reporting

Cash

Manager

Portfolio Manager

Credit Collection Manager


Financial performance:

Financial performance is about knowing how the firm is doing and

what its financial condition. The stakeholders of a firm are interested

broadly knowing about the firm’s financial conditions. Of course, their

specific concern may differ. Trade creditor and short term lenders are

interested primarily in the short term liquidity of the firm its ability to

pay its due in the next 12 months or so. Terms lending institutions and

debenture holders have a relatively longer time horizon are concerned

about the ability to service its debt over the next five to ten years. Long

term shareholders and managers who want to make a career with the

firm are interested in the profitability and growth of the firm over an

extended period of time. To understand the financial performance and

conditions of a firm, its stakeholders look at their financial

statements .viz.

1. The Balance Sheet

2. The Profit and Loss Account

Note: The companies Act requires that the annual report of the

company, a public document that is sent to shareholders, contain the

balance sheet, the profit and loss and account, the Director’s report and

the auditor’s report. Though not presently required by law, most of the

companies present fund flow and cash flow statement as well in the

annual report.



Analyzing financial performance:

Financial analysis depends primarily on financial; statements to

diagnose financial performance. If properly analyzed and interpreted,

financial statement can provide valuable insights into a firm’s

performance.

Financial statements, their uses and significance:

Financial statements are formal records of the financial activities

of a business, person, or other entity. Financial statements provide an

overview of a business or person's financial condition in both short and

long term. All the relevant financial information of a business enterprise

presented in a structured manner and in a form easy to understand, is

called the financial statements. There are four basic financial statements:

1. Balance sheet:

It is also referred to as statement of financial position or condition,

reports on a company's assets, liabilities, and Ownership equity at a

given point in time.

2. Income statement:

It is also referred to as Profit and Loss statement (or a "P&L"), reports on

a company's income, expenses, and profits over a period of time. Profit

& Loss account provide information on the operation of the enterprise.



3. Statement of retained earnings:

It explains the changes in a company's retained earnings over the

reporting period.

4. Statement of fund flows:

It indicates various means of how the funds have been obtained and the

way of using the funds in a certain period.

5. Statement of cash flows:

It reports on a company's cash flow activities; particularly its operating,

investing and financing activities.

Financial statement analysis:

Financial statement analysis refers to an assessment of the

viability, stability and profitability of a business, sub-business or project.

It is performed by professionals who prepare reports which are usually

presented to top management as one of their bases in making business

decisions.

Steps involved in the analysis of financial statement:

From a study of the meaning of analysis of the financial statement,

it is clear that the work of analysis of financial statements involved three

steps or processes they are:


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1. Analysis:

The data shown in the financial statements are either the balance of

individual account or groups of balance of many accounts. As a result,

they lack homogenizing and uniformity. They are not of much help to an

analyst, who requires homogenize and comparable data for judging the

profitability and the financial position of concern. So, to obtain the

desired homogeneous and comparable data (i.e the inter connected data)

the figures founding the financial statement have to be analyzed.

2. Comparison:

Mere splitting up or regrouping of the figures found in the

financial statements into the desired component part is not sufficient for

judging the profitability and the financial status of an enterprise. After

the figures contained in the financial statements are dissected or split into

the required comparable compound parts and must be compared with

each other and their relative magnitudes (i.e., their relationship must be

measured)

3. Interpretation

After the financial statement are analyzed or dissected into

comparable components parts and it is measured through comparison the

results must be interpreted.



Types of Financial Statement Analysis:

a. Internal and External Analysis.

When analysis in done on behalf of the management who have access to

the internal accounting records of the firm, it is called internal analysis.

External analysis is done by outsiders like shareholders, creditors,

investors and potential investors, government agencies, etc. who don't

have access to the detailed internal records of the firm.

b. Horizontal and Vertical Analysis.

Horizontal analysis is that which covers financial data of more than one

year. The figures for various years are presented horizontally over a

number of columns. This type of analysis is also called dynamic

analysis. Vertical analysis, also known as static analysis, covers a period

of one year only and analysis is made on the basis of one set of financial

statements.

c. Long term and short term analysis.

This analysis is made in order to study the Long term stability, solvency

and liquidity as well as profitability and earning capacity of a business

concern.

Short term analysis is made to determine the short term solvency,

stability and liquidity as well as earning capacity of a business concern.



User of Financial Statement Analysis:

Information contained in financial statements is useful to different

categories of users of financial data:

1. Management:

Management of a company is interested in its financial condition,

profitability and progress. It uses a number of methods, tools and

techniques available to it to analyze the financial data.

2. Shareholders:

Shareholders are the suppliers of basic capital to run the business.

Such capital is exposed to all the risks of ownership. Shareholders are

interested in the profitability, dividends declared and market value of

their holdings.

3. Creditors:

Creditors include short-term creditors like bankers, trade creditors

and also long term credit grantors like debenture-holders and financial

institutions etc. All creditors are mainly interested in the short term and

long-term solvency of the company. They are also interested in

profitability because profit is viewed as the primary source for payment

of interest on loans and debentures.



4. Purchaser of Business:

Any person interested in the purchase of a going concern analyses

the financial statements to determine its real value. It makes an

assessment of the financial and operating strengths and weaknesses of

the business.

5. Government:

Financial statements are used by various government departments

like Income Tax, Sales Tax, Excise Duty etc. to determine the tax

liability of the company.

Tools of Financial Statements:

In the analysis of financial statements, the analyst has available a

number of tools from which he has to choose best suited for his specific

purpose. The following are the principal tools of analysis of financial

statements.

a) Comparative Financial Statements.

b) Common-size Financial Statements.

c) Trend percentage analysis.

d) Funds flow statement.

e) Cash flow statement

f) Net working capital analysis

g) Cost-volume profit analysis

h) Ratio analysis



1. Comparative financial analysis:

These statement are prepared in away so as to provide time perspective

to the consideration of various element of finance position embodied in

such statements. This is done to make the financial data more

meaningful. The statement of two or more years are prepared to show

absolute data of two or more years is increased or decreased in absolute

data in value and in terms of percentages

Comparative statements can be prepared for both

a) Income statement, as well as

b) Position statement or balance sheet.

Comparative financial statement analysis:

Comparative financial statement analysis is an important tool of

horizontal analysis it is very effective in analyzing and interpreting

financial statements.

Meaning of comparative financial statement analysis:

Comparative financial statement analysis is the study of the trend

of the same items, group of items and computed items in two or more

financial statement of the same business on different dates. In other

words, it is an analytical study of the different item in the financial

statement of a business under taking over a period of time.



Definition of comparative financial statement analysis:

In other words, Fouke, comparative financial statements of the

financial position of a business so planned as to provide time perspective

to the consideration of various element of financial position embodied in

such circumstances.

Contents of comparative financial statements:

Comparative financial statements generally contain the following

data for the purpose of analysis.

Absolute data in money values, as found in the financial

statements of the current period and preceding period.

Change in absolute data in money values in the current period.

Changes in absolute data in terms of percentages.

Comparisons of absolute data expressed in ratios.

Objective of comparative financial statements:

The main Objective of comparative financial statements is...

To indicate the magnitude and direction of changes in various

accounting figures.

To ascertain the strength and weakness of business

undertaking in terms of liquid, solvency and profitability.



Advantages of comparative financial statements analysis:

Financial data become more meaningful when compared with

similar data of a previous period.

a. An analyst will be able to draw useful conclusion easily where

figure of more periods are given side by side in a comparative

statements. For instance, when sales figure of previous period are

given a long with the sales figure of the current period, an analyst

will be able to interpret the result easily.

b. Comparative financial statements facilitate comparisons between

two or more years side by side. The trends in a number of

accounting figure relating to the performance, efficiency and

financial position of a business can be understood through the use

of comparative financial statements. For instance, comparative

income statement indicates the trend in sales, cost of production,

gross profits, operating expenses and efficiency of the undertaking.

Similarly, comparative position statement indicates the trends

in working capital, fixed capital and retained profits, helping the

analyst to evaluate the liquidity, solvency and profitability of the

undertaking.



c. Comparative financial statements are useful for meaningful

forecasting and planning of business activities. On the basis of the

nature of changes, quality of changes and direction of changes

disclose of comparative financial statements, future trends of the

concern can be forecast with greater precision.

2. Common-size statements:

The percentage balance sheet is often known as the common size

balance sheet. Such balance sheet are, in a broad sense ratio analysis

general items in the profit and loss accounts and in the balance sheet are

expressed in analytical percentages when expressed in the form, the

balance sheet and profit and loss account are referred to as a common

size statement. Such statements are useful in comparative analysis of the

financial position in operating results of the business.

3. Trend percentage:

This analysis is an important tool of horizontal financial analysis.

This method is immensely helpful in making a comparative study of the

financial statements of several years. Under this method trend

percentages are calculated for each item of the financial statements

taking the figures of base year as in the starting year is usually taken as

the base year. The trend percentages show the relationship of each item

with preceding year’s percentages. These percentages can also be



presented in the form index. Numbers showing relative changes in

financial fact of certain period. This will exhibit the directions (i.e.,

upward or downward trend) to which the concern is proceeding. The

trend nations may be compared with the industry in order to know the

strong or weak point of the concern. These calculations are only for

major items instead of calculating for all items in the financial

statements.

4. Fund flow analysis:

Fund may be interpreted in various ways as Cash, Total current

assets, Net working capital, and Net Current Assets. For this purpose

Fund flow statement is prepared. The term fund means net working

capital. The flow of fund will occur in a business, when a transaction

results in a change in increase or decrease in the amount of funds.

Definition:

Foulke, define this statement as:

“a statement of source and application of fund is a technical

device designed to analyze the changes in the financial condition of a

business enterprise between two dates.”



5. Cash flow statement:

A cash flow statement is the financial analysis of the net income

or profit after including book expense items which currently do not use

cash; for example, depreciation, depletion and amortization. Revenue

items, which do not currently provide funds, are to be deducted. A gross

cash flow is net profit after tax plus provision for depreciation. A net

cash flow is arrived after deducting dividends from the gross cash flow.

The cash flow is very significant because it represents the actual amount

of cash available to the business.

6. Statements changes in working capital:

This statement is prepared to know the net changes in working

capital of the business between two specified dates. It is prepared from

current assets and current liabilities of the said dates to show the net

increased or decrease in working capital.

7. Cost–Volume–Profit Analysis:

Cost – Volume – Profit Analysis is a technique for studying the

relationship between cost, volume and profit. Profit of an understanding

depends upon a large number of factors. But the most important of these

factors are the cost of manufacture, volume of sales and the selling prices

of the product.



8. Ratio Analysis:

Financial ratio analysis is the calculation and comparison of ratios

which are derived from the information in a company's financial

statements. The level and historical trends of these ratios can be used to

make inferences about a company’s financial condition, its operations

and attractiveness as an investment.

Financial ratios are calculated from one or more pieces of

information from company’s financial statements. For example, the

"gross margin" is the gross profit from operations divided by the total

sales or revenues of a company, expressed in percentage terms. In

isolation, a financial ratio is a useless piece of information. In context,

however, a financial ratio can give a financial analyst an excellent

picture of a company's situation band the trends that are developing.



Introduction to insurance:

Life Assurance was born in England when the first policy

providing temporary cover for a period of 12 months was issued as easy

as 1583 A.D. The Amicable Society started granting fluctuating sum on

death since 1705 and a fix sum since 1757, with the development of

mortality tables, the life Assurance acquired a scientific character. The

Equitable Society founded in 1762 was the first Society established on

scientific basis.

Origin of life insurance in India:

In India, after failure of to British companies, the European and

the Albert in 1870, which attempted writing business on Indian lives,

first Indian Life Assurance Society was formed in the same year called

Bombay Mutual Assurance Society Limited. The Oriental Life

Assurance Company Limited in 1874, Bharat in 1896 and Empire of

India in 1897 followed it. The idea of insurance was born out of a desire

of the people to share loss of an individual by many. Originally it

restricted to forms other than life assurance. It started with Marine

Insurance, where the losses on account of perils of sea forms of

insurance, is found in the codes of Hammurabi, Manu (Manav Dharma

Shastra). The word ‘Yogakshema’ is used in the Rig Veda suggesting

that some form of community insurance was practiced by the Aryans in

India over 3000 years ago.



In India during Buddhist period burial societies existed which

were mutual in their character and used to help a family by building a

house, protecting the widow, marrying the girls.

The Swadeshi Movement of 1905 provided impetus to the

formation of several companies such as the “Hindustan Cooperative’, the

‘United India’, the ‘Bombay Life’, the ‘National’. Further in the wake of

freedom movement number of companies such as the ‘New India’, the

Jupiter the ‘Lakshmi’ emerged.

The government began to exercise a certain measure of control on

Insurance business by passing the ‘Insurance Act’ in 1912. For

controlling investment of funds, expenditure and management, a

comprehensive Act was passed know as the insurance Act 1938’. For

controlling the affairs, the office of Controller of Insurance was

established. The act was extensively amended in 1950. In the year 1955,

approximately 170 Insurance offices and 80 Provident Fond Societies

had been registered for transacting Life Assurance business in India. The

concept of trusteeship was lacking. Many insurance companies went into

liquidation. There were malpractices in insurance business. For

achieving the following purposes it was felt necessary to nationalize the

insurance business in India.



The first in this direction was taken by the Government of India by

issuing the life Insurance (the Emergency provisions) Ordinance, 1956

on 19th January. The then Finance Minister, Shri C.D. Deshmukh

mentioned the purpose of nationalization as reaching the goal of

socialistic pattern of society, rendering genuine service to the people in

the rural areas.

Insurance activity in India is going on for more than 150 years. In

India, life insurance in its modern form was brought for the first time by

the Britishers. The Oriental Life Insurance Company started in 1818 in

Calcutta was the first to be founded in India by Europeans to help the

widows of their community. The general insurance business in India, on

the other hand, can trace its roots to him Triton Insurance Company Ltd,

the first general insurance company established in the year 1850 in

Kolkata by the British. The year 1870, saw the birth of first Indian

Insurance Company namely, Bombay Mutual Life Assurance Society.

The basic aim of this company was to insure Indian lives at normal rates

since in the earlier period. Indian lives were treated as subnormal and

loaded with an extra premium of fifteen to twenty per cent. However,

right up to the end of 19th century, the foreign insurance companies in

India had an upper hand in matters of Insurance business. Insuring

Indian lives with 10 percent of extra premium was a common practice

prevalent in those times. The Indian Life Assurance Companies were the



first to regulate the life insurance business in 1912. In 1928, the Indian

Insurance companies act enabled the government to collect statistical

information about both life and non life insurance business. Later, the

insurance Act of 1938 was passed and department of insurance under

authority of superintendent of insurance was established for the

administration of the Act. Up to 1939, 199 companies were working in

India. However, the period 1939-55 was marked by:

Series of amendments to the insurance Act, 1938.

Appointment of a committee under the Chairmanship of Sir

Cowasji Jahangir to enquire into and to recommend measures to

check certain trends and undesirable features in the management of

insurance companies.

The findings of the subcommittee on insurance under the National

Planning Commission headed by Pt. Jawaharlal Nehru.

Partition of India.

De-valuation of rupee on September 18, 1949.

The insurance Amendment Act.

The rate war and cut throat competition between insurance

companies.

The founding of the Jiwanlal Chimanlal Setawad Memorial--The

Federation of Insurance Institutes.



Need for life insurance:

Risks and uncertainties are part of life's great adventure -- accident,

illness, theft, natural disaster - they're all built into the workings of

the Universe, waiting to happen.

Insurance then is man's answer to the vagaries of life. If you cannot

beat man-made and natural calamities, well, at least be prepared for

them and their aftermath.

Insurance is a contract between two parties - the insurer (the

insurance company) and the insured (the person or entity seeking

the cover) - wherein the insurer agrees to pay the insured for

financial losses arising out of any unforeseen events in return for a

regular payment of "premium".

These unforeseen events are defined as "risk" and that is why

insurance is called a risk cover. Hence, insurance is essentially the

means to financially compensate for losses that life throws at people

- corporate and otherwise.

The principle of insurance works on the concept of a large number

of people exposed to a similar risk making a contribution to a

common fund. Those who suffer losses due to the occurrence of

these events are compensated for them from this fund.



Life insurance as an investment:

Insurance is an attractive option for investment. While most

people recognize the risk hedging and taxes saving potential of

insurance, many are not aware of its advantages as an investment option

as well. Insurance products yield more compared to regular investment

options, and this is besides the added incentives offered by insurers.

You cannot compare an insurance product with other investment

schemes for the simple reason that it offers financial protection from

risks, something that is missing in non-insurance products. In fact, the

premium you pay for an insurance policy is an investment against risk.

Thus, before comparing with other schemes, you must accept that a part

of the total amount invested in life insurance goes towards providing for

the risk cover, while the rest is used for savings.

In life insurance, unlike non-life products, you get maturity

benefits on survival at the end of the term. In other words, if you take a

life insurance policy for 20 years and survive the term, the amount

invested as premium in the policy will come back to you with added

returns. In the unfortunate event of death within the tenure of the policy,

the family of the deceased will receive the sum assured.



Insurance sector reforms:

The government in a bid to complement the reforms initiated in

the financial sector established a committee headed by former finance

secretary and Reserve Bank of India (RBI) governor, Mr R.N. Malhotra

to evaluate the insurance industry and to recommend its future direction.

This committee suggested the following changes:

Government stake in insurance companies be brought down to 50

percent.

Allowing private enterprise in the sector with companies with a paid

up capital of a minimum of Rs 100 crore.

Foreign companies to be allowed only in combination with an Indian

partner.

Changed to be made to the insurance Act.

Reduction in the mandatory investments of LIC Life Fund in

government securities to be brought down from 75 percent to 50

percent.

GIC and its subsidiaries are not to hold more than 5 percent in any

company.

Use of revised mortality tables by LIC and revision of premiums after

every 10 years.

Transfer of LALGI and IRDP schemes to concerned government

authorities.



The insurance sector began its reform process with the passage of

the IRDA (the Insurance Regulatory and development authority) bill in

Parliament in December 1999. However with the setting up of IRDA, the

government has once again de-regulated the sector opening it for the

private players. The entry of private players has enabled the industry to

look at alternative distribution channels. To get the maximum pie of the

premium, every insurance company is adopting new distribution and

marketing strategies. In the last two years alone, the economy has

witnessed some fundamental changes in the Indian insurance industry.

Present status of insurance industry:

Insurance is a Rs.400 billion business in India, and together with

banking services adds about 7% to India’s GDP. Gross premium

collection is about 2% of GDP and has been growing by 15-20% per

annum. India also has the highest number of life insurance policies in

force in the world, and total investible funds with the LIC are almost 8%

of GDP. Yet more than three-fourths of India’s insurable population has

no life insurance or pension cover. Health insurance of any kind is

negligible and other forms of non-life insurance are much below

international standards.



Some few years ago the entry of private players was banned in

India but its only after first stage of economic reforms the situation has

become better with the entry of private sector. As of now the govt

insurance companies like Life Insurance Corporation of India, GIC

etc. It holds the majority of market share whereas the private players are

slowly catching up the race. As of now the private players have

concentrated on urban markets more and less on the rural markets and

their lies a huge untapped potential at rural markets. Even in urban

markets the penetration levels in India in terms of life insurance is very

less and thus there is a huge market potential for the companies to grow.

The problem is how the companies can untapped the unawake Ned

demand among the target market. Also the awareness levels among the

consumers about insurance product is very low and the advertisement

campaigns launched by the private players like ICICI, HDFC, KOTAK

MAHINDRA has increased the level of awareness among the consumers

and have arisen the need for insurance.

Private players in the market:

The new insurance companies used all channels of advertising

from newspapers and the television to insurance agents and direct

mailers. The new companies focused their campaigns primarily on

building an image of trustworthiness and reliability for themselves. Their

advertisement focused on insurance as an investment option and not a



mere tax saving tool. Most of these advertisements carried messages like

the family’s happiness. It has been more than 5 years since private

insurance companies’ lunched operations in India, which is depicted in

the Table given below.

Table: Private players in the Indian insurance market

Company Indian partner Foreign insurer Area

Birla Sunlife Aditya Birla Group Sunlife, Canada Life

Om Kotak Kotak Mahindra Old Mutual, Life

HDFC-Standard Life HDFC Standard Life UK Life

Royal Sundaram Sundaram Finance Roya Sun, UK Life & Non life

ICICI-Prudential ICICI Prudential, UK Life

Max New York Life Max IndiaNew York Life

USALife

Tata-AIG Tata group AIG USA Life & non Life

ING Vysya Vysya Bank ING Insurance, Life

Aviva Dabur Cardiff, France Life

Metlife India SBI Metlife, USA Life

Bajaj Allianz Bajaj Auto Allianz Life & non Life

SBI Life Insurance Sanmar Group AMP, Australia Life

SOURCE: www.knowledgedigest.com.


http://www.knowledgedigest.com/


Industry profile

Introduction:

The Insurance sector in India governed by Insurance Act, 1938,

The Life Insurance Corporation Act, 1956 and General Insurance

Business (Nationalization) Act, 1972 Insurance Regulatory and

Development Authority (IRDA) Act, 1999 and other related acts. With

such a large population and the untapped market area of this population

insurance happens to be a very big opportunity in India. Today it stands

as a business growing at the rate of 15 - 20% annually. Together with

banking services, it adds about 7% to the country’s GDP. In spite of all

this growth the statistics of the penetration of the insurance in the

country is very poor. Nearly 80% of Indian populations are without Life

Insurance cover and the Health Insurance. This is an indicator that

growth potential for the insurance sector is immense in India. It was due

to this immense growth that the regulations were introduced in the

insurance sector and in continuation “Malhotra Committee” was

constituted by the Government in 1993 to examine the various aspects of

the industry. The key element of the reform process was participation of

overseas insurance companies with 26% capital. Creating a more

efficient and competitive financial system suitable for the requirements

of the economy was the main idea behind this reform.



Since then the insurance industry has gone through many sea

changes. The competition LIC started facing from these companies were

threatening to the existence of LIC. Since the liberalization of the

industry the insurance industry has never looked back and today stand as

the one of the most competitive and exploring industry in India.

What Is Insurance?

Insurance is a contract between two parties, the insurer or the

insurance company, and the insured, the person seeking the cover.

Within this contract, the insurer agrees to pay the insurer for financial

losses arising out of any unforeseen events or risk in return for a regular

payment of premium. Thus, these insurance plans are also called as a

Risk Cover Plans, which means to financially compensate for losses that

occur uncertainly through accident, illness, theft, natural disaster.

Types of Insurance:

Insurance policies cover the risk of life as well as other assets and

valuables, such as, home, automobiles, jewellery at all. On the basis of

the risk they cover, insurance policies can be classified into two

categories: Life Insurance and General Insurance. As the term suggests,

Life Insurance covers the risk involved in a person's life, while General

Insurance provides financial protection against unforeseen events, like

accident, flood, earthquake, disease, etc.



Insurance - Kind of Investment:

Insurance is an attractive option for investment but most people

are not aware of its advantages as an investment option. Remember that

first and foremost, insurance is about risk cover and protection. By

buying life insurance, you buy peace of mind. Insurance also serves as

an excellent tax saving mechanism. The Government of India has offered

tax incentives to life insurance products in order to facilitate the flow of

funds into productive assets.

Insurance Regulatory & Development Authority:

Insurance Regulatory & Development Authority is regulatory and

development authority under Government of India in order to protect the

interests of the policyholders and to regulate, promote and ensure orderly

growth of the insurance industry. It is basically a ten members' team

comprising of a Chairman, five full time members and four part-time

members, all appointed by Government of India. This organization came

into being in 1999 after the bill of IRDA was passed in the Indian

parliament.

Impact of IRDA on Indian Insurance Sector:

The creation of IRDA has brought revolutionary changes in the

Insurance sector. In last 10 years of its establishment the insurance sector

has seen tremendous growth. When IRDA came into being; only players



in the insurance industry were Life Insurance Corporation of India (LIC)

and General Insurance Corporation of India (GIC), however in last

decade 23 new players have emerged in the field of insurance. The

IRDA also successfully deals with any discrepancy in the insurance

sector.

Power and function of IRDA:

It issues the applicants in insurance arena, a certificate of

registration as well as renewal, modification, withdrawal,

suspension or cancellation of such registrations.

It also specifies obligatory credentials, code of conduct and

practical instructions for mediator as well as the insurance

company. Apart from this, it also defines the code of conduct for

the surveyors and loss assessors involved with the insurance

business.

IRDA specifies the terms and pattern in which books of accounts

are to be maintained and statement of accounts shall be provided by

insurers and other insurance mediators.

It also regulates investment of funds by insurance companies as

well as the maintenance of margin of solvency.

It is also entitled to supervise the functioning of the Tariff Advisory

Committee.



One of the major functions of IRDA includes endorsing

competence in the insurance business. Apart from this, upholding

and regulating professional organizations in insurance and re-

insurance business is also a major duty of IRDA.

IRDA is also entitled to for asking information, undertaking

inspection and investigating the audit of the insurers, mediators,

insurance intermediaries and other organizations related to the

insurance sector.

It is also concerned with the regulation of the rates, profits,

provisions and conditions that may be offered by insurers in respect

of general insurance business if it is not controlled or regulated by

the Tariff Advisory Committee.

It is also empowered to be involved in the arbitration of

disagreements between insurers and intermediaries or insurance

intermediaries.

IRDA also specifies the share of life insurance business and general

insurance business to be accepted by the insurer in the rural or

social sector.

It protects the interests of the policy holders in any insurance

company in the matters related to the assignment of policy,

nomination by policy holders, insurable interest, and resolution of

insurance claim, submission value of policy and other terms and

proposals in the contract.



HISTORY OF INSURANCE SECTOR:

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. Tracing the developments in the Indian insurance sector

reveals the 360- degree turn witnessed over a period of almost 190 years.

The business of life insurance in India its existing form started in India in

the year 1818 with the establishment of the oriental Life Insurance

Company in Calcutta. Some of the important milestones in the Life

Insurance Business in India are given in the table.

Table: Milestone’s in the Life Insurance Business in India:

Year Milestone’s in Life Insurance Business in India

1912The Indian Life Insurance Companies Act enacted as the first statue

to regulate the Life Insurance Business

1928

The Indian Life Insurance Companies Act enacted to enable the

government to collect statistical information about both Life and

Non-life insurance business.

1938Earlier legislation consolidated and amended by the Insurance Act

with the objective of protecting the interest of the insuring public.

1956

245 Indian and foreign insures and provident societies taken 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

crore from the government of India.



The General Insurance Business in India, on the other hand, can

trace its roots to the Triton Insurance Company Ltd. The first general

insurance company established in the year 1850 in Calcutta by the

British.

Some of the important Milestone’s in the general insurance

business in India are given in the table.

Table: Milestone’s in the general insurance business in India

Year Milestone’s in the general insurance business in India

1907The Indian Mercantile Insurance Ltd. set up the first company to transact all classes of general insurance business.

1957General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices.

1968The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.

1972

The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India which effect from 1st January 1973. 107 insures amalgamated and grouped into four companies viz. the National Insurance Company Ltd. The New India Assurance Company Ltd. The oriental Insurance Company Ltd. And the United India Insurance Company Ltd. GIC incorporated as a company.

History of insurance in India:



Insurance has a long history in India. Life Insurance in its current

form was introduced in 1818 when Oriental Life Insurance Company

began its operation in India. Triton insurance company limited was the

first General Insurance company to have established in India in 1850,

whose share were mainly held by the British. The first General insurance

company to be set up by an Indian was Indian Mercantile insurance

company limited which was established in 1907. There emerged many a

player on the Indian scene thereafter.

The General Insurance 3 Business was nationalized after the

promulgation of General Insurance Business (Nationalization) Act, 1972.

The General Insurance Corporation of India and its 4 subsidiaries

undertook the post-nationalization general insurance business:

a) Oriental Insurance Company Limited.

b) New India Assurance Company limited.

c) National Insurance Company Limited.

d) United India Insurance Company Limited.

Towards the end of 2000, the relation ceased to exist and the four

companies are at present, operating as independent companies.



The Indian insurance industry saw a new sun when the Insurance

Regulatory and Development Authority (IRDA) invited the applications

for registration as insures in August 2000. With the liberalization and

opening up the sector to private players, the industry has presented

promising prospects for the coming future. The transition has also

resulted into introduction of ample opportunities for the professional

including chartered Accountants.

Insurance Market-Present:

The insurance sector was opened up for private participations four

years ago. For years now, the private players are active in the liberalized

environment. The insurance market have witnessed dynamic charges

which includes presence of a fairly large number of insures both life and

non-life segment. Most of the private insurance companies have formed

joint venture partnering well recognized foreign players across the globe.

There are now 29 insurance companies operating in the Indian

market 14 private insurers, nine private non life insurers and six public

sector companies. With many more joint venture in the offing, the

insurance industry in India today stands at a crossroads as competition

intensifies and companies prepare survival strategies in a detariffed

scenario.



There is pressure from both within the country and outside on the

Government to increase the Foreign Direct Investment (FDI) limit from

the current 26% to 49%, which would help JV partners to bring in funds

for expansion.

There are opportunities in the pensions sector where regulations

are being framed. Less than 10% of Indians above the age of receive

pensions. The IRDA has issued the first license for a standalone health

company in the country as many more players wait to enter. The health

insurance sector has tremendous growth potential, and as it matures and

new it matures and new players enter, product innovation and

enhancement will increase. The depending of the health database over

time will also allow players to develop and price products for larger

segment of society.

State insurers continue to dominate:

There may be room for many more players in a charge under

insured market like India with a population of over one billion. But the

reality is that the intense competition in the last five years has made it

difficult for new entrants to keep pace with the leaders and there by

failing to make any impact in the market.



Also as the private sector control over 30% of the life insurance

market and non - life market, the public sector companies still call the

shots. The country’s largest life insurer, Life Insurance Corporation of

India (LIC), had a share of 70% in the new business premium income in

2009.

Similarly, the four public- sector non-life insures – New India

Assurance, National Insurance, oriental Insurance and United India

Insurance – had a combined market share of 73.47% as of October 2005.

ICICI Prudential Life Insurance Company continues to lead the private

sector with a 7.26% market share in terms of fresh premium, whereas

ICICI Lombard General Insurance Company is the leader among the

private non-life players with an 8.11% market share.

Reaching out to customers:

No doubt, the customer profile in the insurance industry is

changing with the introduction of large number of divergent

intermediaries such as broker, corporate agent and bank assurance. The

industry now deals with customers who knows what they want and

when, and are more demanding in terms of better service and speedier

responses With the industry all set to move to a detariffed regime by

2007, there will be considerable improvement in customer service level,

product innovation and newer standards of under writing.



Intense competition:

In a de-terrified environment, competition will manifest itself in

prices, products, underwriting criteria, innovative sales and credit

worthiness. Insurance company will vie with each other to capture

market share through batter pricing and client segmentation. The battle

has so far been fought in the big urban cities, but in the next few years,

increase competition will drive insurers to rural and semi-urban markets.

Global standards:

While the world is eyeing India for growth and expansion, Indian

company are becoming increasingly world class. Take the case of LIC,

which has set its site on becoming a major global player following a

280–crore investment from the Indian government. The company now

operates in Mauritius, Fiji, the UK, Sri Lanka, and Nepal and will soon

start operation in Saudi Arabia. It also plans to venture into the African

and Asia-Pacific regions in 2006.

The year 2005 was a testing phase for the general insurance

industry with a series of catastrophes hitting the Indian sub-continent.

However, with robust reinsurance programme in place, insurers have

successfully managed to tide over the crisis without any adverse impact

on their balance sheets.



With life insurance premiums are being just 2.5% of GDP and

general insurance premiums being 0.65% of GDP. The opportunity in

the Indian market place is immense. The next 5 year will be challenging

but those that can build scale and market share will.



Company profile

Introduction:

Established on 14th August 2000, 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. The

Company is one of leading private insurance companies, offering a range

of individual and group insurance solutions, in India. Being a joint

venture of top financial services groups, HDFC Standard Life has

adequate financial expertise to manage long-term investments safely and

resourcefully.

HDFC Standard Life Insurance offers a range of individual and

group solutions, which can be easily personalized to specific needs. Its

group solutions have been planned to offer complete flexibility, together

with a low charging structure. As of 31 December, 2008, the Company's

new business premium income stood at Rs. 1,839.70 Crores; it has

covered over 812,811 lives so far.



The partnership: HDFC Standard Life first came together for a possible joint

venture; enter the Life Insurance market, in January 1995. It was clear

from the outset that both companies shared similar value and beliefs and

a strong relationship quickly formed. In October 1995 the companies

signed a 3 years joint venture agreement. Around this time Standard Life

purchased a further 5% stake in HDFC and a 5% stake in HDFC Bank,

further strengthening the relationship.

The next three years were filled with uncertainty, due to changes

in government and ongoing delays in getting the IRDA (Insurance

Regulatory and Development authority) Act passed in parliament.

Despite this companies remained firmly committed to the venture.

In October 1998, the joint venture agreement was renewed and

additional resource made available. Around this time Standard Life

purchased 2% of Infrastructure Development Finance Company Ltd.

(IDFC). Standard Life also started to use the service of the HDFC

Treasury department to advise them upon their investments in India.

Towards the end of 1999, the opening of the market looked very

promising and both companies agreed the time was right to move the

operation to the next level. Therefore, in January 2000 an expert team

from the UK joined a handpicked team from HDFC to form the core

project team, based in Mumbai.



Vision, mission & values:

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'.

'The most obvious choice for all'.

Mission:

To be the top new life insurance company in the market. This does

not just mean being the largest or the most productive company in the

market, rather it is a combination of several things like – Customer

service of the highest order Value for money for customer

professionalism in carrying out business. Innovative products to cater to

different need of different customers, Use of technology to improve

service standards Increasing market share.

Their mission is to be the best new life insurance company in

India and these are the values that will guide the country.



Values:

SECURITY:

Providing long term financial security to our policy holders will be

our constant Endeavour. We will be do this by offering life

insurance and pension products.

TRUST:

We appreciate the trust placed by our policy holders in us. Hence,

we will aim to manage their investments very carefully and live up

to this trust.

INNOVATION:

Recognizing the different needs of our customer, we will be

offering a range of innovative products to meet these needs.

Values that we observe while we work:

Integrity

Innovation

Customer centric

People Care “One for all and all for one”

Team work

Joy and Simplicity



Goals of the Company:Emerge as transactional Life Insurer of global scale and standard.

Achieve impeccable reputation and credentials through best

business practices.

Guiding Principles:Customer Care and Satisfaction.

Corporate Governance.

Creativity and Innovation.

Competitiveness.

COMPETITORS:Life Insurance Companies

Aviva Life Insurance

Bajaj Allianz Life Insurance

Birla Sun-Life Insurance

HDFC Standard Life Insurance

ING Vysya Life Insurance

Life Insurance Corporation

Max New York Life Insurance

MetLife Insurance

Om Kotak Mahindra Life Insurance

Reliance Life Insurance

Sahara India Life Insurance

SBI Life Insurance


http://business.mapsofindia.com/insurance/sbi-life-insurance.html

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http://business.mapsofindia.com/insurance/om-kotak-mahindra-insurance-india.html

http://business.mapsofindia.com/insurance/metlife-insurance.html

http://business.mapsofindia.com/insurance/max-life-insurance-india.html

http://business.mapsofindia.com/india-insurance/lic.html

http://business.mapsofindia.com/insurance/ing-vysya-life-insurance-india.html

http://business.mapsofindia.com/insurance/standard-life-insurance-india.html

http://business.mapsofindia.com/insurance/birla-sun-life-financial-services.html

http://business.mapsofindia.com/insurance/bajaj-allianz-insurance-india.html

http://business.mapsofindia.com/india-insurance/aviva-life.html

http://business.mapsofindia.com/india-insurance/life.html


TATA AIG Life Insurance

ORGANISATION STRUCTURE


B.O.D

C.E.O

National Sales Manager

Chief Administration

Officer

Chief Finance Officer

Zonal Finance Manager

Zonal Manager Zonal Administration Officer

Senior Branch Supervisor

Branch Manager Senior Branch Supervisor

Finance Officer Business Dept. Manager

Asst. Branch Supervisor

Finance Executive Sales Team Manager

Administrative Executive

Insurance consultants


Policies and products:



Given below is a comprehensive list of policies and products offer

by HDFC Standard Life Insurance:

Health Plans:

HDFC Critical Care Plan

HDFC SurgiCare Plan

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 Young Star Champion

Retirement Plans:

HDFC Personal Pension Plan

HDFC Unit Linked Pension II

HDFC Unit Linked Pension Maximiser II

HDFC Immediate Annuity

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 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

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



HDFC Standard Life believes that establishing a strong and ethical

foundation is an essential prerequisite for long-term sustainable growth.

We have concentrated our focus on expansion of branch network,

organizing an efficient and well trained sales force, and setting up

appropriate systems and processes with optimum use of technology. As

all these areas form the basic infrastructure for establishing the highest

possible customer service standards.

Our core values are drilled down to all levels of employees, as

these are inviolable. We continue to promote high integrity in business

practices and shun short cuts and unethical practices, as we wish to be

perceived as an institution with high moral standing. Since our inception

in 2000, when the Indian insurance space was opened for private

participation, we have consistently focused on setting benchmarks in all

aspect on insurance business. Being the first private player to be

registered with the IRDA and the first to issue a policy on December 12,

2000, our differentiators are:



Strong Promoter:

HDFC Standard Life is a strong, financially secure business

supported by two strong and secure promoters – HDFC Ltd and Standard

Life. HDFC Ltd’s excellent brand strength emerges from its unrelenting

focus on corporate governance, high standards of ethics and clarity of

vision. Standard Life is a strong, financially secure business and a

market leader in the UK Life & Pensions sector.

Preferred and Trusted Brand:

Our brand has managed to set a new standard in the Indian life

insurance communication space. We were the first private life insurer to

break the ice using the idea of self-respect instead of ‘death’ to convey

our brand proposition (Sar Utha Ke Jiyo). Today, we are one of the few

brands that customers recognize, like and prefer to do business.

Moreover, our brand thought, Sar Utha Ke Jiyo, is the most recalled

campaign in its category.

Investment Philosophy:

We follow a conservative investment management philosophy to

ensure that our customer’s money is looked after well. The investment

policies and actions are regularly monitored by a formal Investment

Committee comprising non-executive directors and the Principal Officer

& Executive Director.



We understand that customers have invested their savings with us

for the long term, with specific objectives in mind. Thus, our investment

focus is based on the primary objective of protecting and generating

good, consistent, and stable investment returns to match the investor’s

long-term objective and return expectations, irrespective of the market

condition.

Need Based Selling Approach?

Despite the criticality of life insurance, sales in the industry have

been characterized by over reliance on tax benefits and limited advice-

based selling. Our eight-step structured sales process ‘Disha’ however,

helps customers understand their latent needs at the first instance itself

without focusing on product features or tax benefits. Need-based selling

process, 'Disha', the first of its kinds in the industry, looks at the whole

financial picture. Customers see a plan not piecemeal product selling.

Risk Control Framework:

HDFC Standard Life has fully implemented a risk control

framework to ensure that all types of risks (not just financial) are

identified and measured. These are regularly reported to the board and

this ensures that the company management and board members are fully

aware of any risks and the actions taken to ensure they are mitigated



Focus on Training:

Training is an integral part of our business strategy. Almost all

employees have undergone training to enhance their technical skills or

the softer behavioural skills to be able to deliver the service standards

that our company has set for itself. Besides the mandatory training that

Financial Consultants have to undergo prior to being licensed, we have

developed and implemented various training modules covering various

aspects including product knowledge, selling skills, objection handling

skills and so on.

Focus on Long term Value:

HDFC Standard Life does not focus in the business of ramping up

the top line only, but to create maximisation of stakeholder's value.

Today, we are extremely satisfied with the base that we have created for

the long-term success of this company.

We are one of the few companies whose product details, pricing,

clauses are clearly communicated to help customers take the right

decision.

Diversified Product Portfolio:

HDFC Standard Life’s wide and diversified product portfolio help

individual meet their various needs, be it:



Protection:

Need for a sound income protection in case of your unfortunate demise

Investment:

Need to ensure long-term real growth of your money

Savings:

Save for the milestones and protect your savings too

Pension:

Need to save for a comfortable life post retirement

Health:

Cover for health related exigencies

Nature of investment / Risk and return category:

Equity funds:

Primary invested in company stock with a general aim of capital

appreciation.

Risk and Return: Medium

Income, Fixed Interest and Bond Funds:

Invested in corporate bonds, Government securities and other

fixed income instruments.




Cash Funds:

Some time known as money market funds invested in cash, Bank

deposits and money market instruments.

Risk and Return: Low

Balanced Funds:

Combining equity investment with fixed interest in the

instruments.


Charges of HDFC standard life insurance company:

HDFC Standard Life Insurance follows the method of cancelling

the units in order to recover the charges. Some of the charges are:

Premium allocation charge:

This is a premium based charge, after deducting this charge from

your premium, the reminders is invested to buy units. The table given

below will help show how percentage of premium will help to buy units.

This % is called the allocation rate. The allocation rates are guaranteed

for the entire duration of the policy term.



Table showing premium allocation charge:

Premium paid during years Allocation rate

Regular

premiums

1st & 2nd YearOnwards

3 rd Yearonwards

Up to 1,99,999 70% 99%

From 2,00,000 to 4,99,999

80% 99%

From 500,000 to 9,99,999

85% 99%

From 10,00,000 to 19,99,999

90% 99%

From 20,00,000 to above

95% 99%

Single premium top ups 97.5% 99%

Fund management charge (FMC):

In the long term the key to build great maturity values is a low

FMC. The daily unit price already increases our low fund management

charge of only o.8% per annum of the funds value.

Surrender charge:

This is the charge we will apply when the policy is surrendered. It

is equal to 30% of the difference between the regular premiums expected

and received in the first two years of the contract.



Other charges:

The following is the set of other charges that we will take from

your policy.

Charges Explanation

Policy administration charge

A charge of Rs. 20 per month is charged to cover regular administration costs. We take the charge by cancelling units proportionately from each of the funds you have chosen.

Mortality and other risk benefit charges

Every month we make a charge for providing you with the death or critical illness cover in your policy. The amount of the charge taken each month depends on your age. We take the charge by cancelling units proportionately from each of the funds you have chosen.

Switching charge 24 switches will be given free in a policy year and

any additional switch will be charged at Rs. 100 per switch.

Partial withdrawal Charge

6 partial withdrawal requests will be free in a policy year and any additional partial withdrawal requests will be charged at Rs. 250 per request.

Revival charge A charge of Rs. 250 is for revival to cover for

administration expenses.

Miscellaneous charge

This is a charge levied for any alterations within contract like premium redirection or adhoc policy servicing, 12 premium redirection requests will be free in a policy year any premium redirection requests will be charge at 250 per request, 6 policy servicing requests will be free in a policy year and any additional policy. Servicing requests will be charged at Rs.250 per request.

Service tax and education is payable at the applicable rates on the

mortality and other risk benefit charges.



Alteration charges:

Current charges cannot be charged without prior approval from

IRDA. The fund management charge cannot exceed 2% per annum. The

surrender charge can be increased subject to a maximum of 10% of the

fund applicable for the first 3 years. The policy administration charge

can increase in line with inflation subject to a maximum of 5% per

annum over the period since inception. The mortality charge rates and

accidental death benefit charge rate are guaranteed for full duration of

your policy term and critical illness charge rates can be reviewed at the

end of every 3 years from date of launch of this product. And can be

increased subject to a maximum increase 200% of every rate.

The maximum switching charge allowed is Rs. 100 per switch

increased in line with inflation subject to a maximum of 5% per annum

over period since inception.

We can charge up to Rs. 250 per request for premium redirection,

partial withdrawal and other adhoc policy servicing requests. We can

increase this amount in line with inflation subject to a maximum of 5%

per annum over the period since inception.



Parentage:

HDFC Limited:

HDFC Limited, India's premier housing finance institution has

assisted more than 3.4 million families own a home, since its inception

in 1977 across 2400 cities and towns through its network of over 271

offices. It has international offices in Dubai, London and Singapore with

service associates in Saudi Arabia, Qatar, Kuwait and Oman to assist

NRI's and PIO's to own a home back in India. As of December 2009, the

total asset size has crossed more than Rs. 104,560 crores including the

mortgage loan assets of more than Rs.90,400 crores. The corporation has

a deposit base of over Rs. 23,000 crores, earning the trust of nearly one

million depositors. Customer Service and satisfaction has been the

mainstay of the organization. HDFC has set benchmarks for the Indian

housing finance industry. Recognition for the service to the sector has

come from several national and international entities including the World

Bank that has lauded HDFC as a model housing finance company for the

developing countries. HDFC has undertaken a lot of consultancies

abroad assisting different countries including Egypt, Maldives, and

Bangladesh in the setting up of housing finance companies .



Standard Life Group (Standard Life plc and its

subsidiaries):

The Standard Life Group has been looking after the financial

needs of customers for over 180 years. It currently has a customer base

of around 7 million people who rely on the company for their insurance,

pension, investment, banking and health-care needs. Its investment

manager currently administers £190 billion in assets. It is a leading

pensions provider in the UK, and is rated by Standard & Poor's as

'strong' with a rating of A+ and as 'good' with a rating of A1 by Moody's.

Standard Life was awarded the “Best Companies to Work for in India in

2010, YoungStar Super voted Product of the Year 2010, Received CIO

'The Ingenius 100 2009' Award, Received Diamond EDGE Award 2009,

Best Pension Provider in 2004, 2005 and 2006 at the Money Marketing

Awards, and it was voted a 5 star life and pension’s provider at the

Financial Adviser Service Awards for the last 10 years running. The '5

Star' accolade has also been awarded to Standard Life Investments for

the last 10 years, and to Standard Life Bank since its inception in 1998.

Standard Life Bank was awarded the 'Best Flexible Mortgage Lender' at

the Mortgage Magazine Awards in 2006.



HDFCSL Milestone

Received the PCQuest 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.

HDFCSL expanded its reach in the Bancassurance channel by

arrangements with co-operative banks in the rural areas.

Continued to increase its focus on quality service, by putting in

place a robust mechanism to capture 'Voice of the Customer' through

service audits across its offices. This was complemented by use of

technology that enabled capture of all interactions with customers across

all touch points



Sar Utha Ke Jiyo was honoured as 'Among India's 60 Glorious

Advertising Moments. The advertisements of the company were ranked

6th amongst 'The 10 most effective Advertisements' in September 2007.

Received the PCQuest Best IT Implementation Award 2007 for

Wonders, its path-breaking implementation of an enterprise-wide

workflow system. In addition the company also bagged the EMC storage

award for being the most innovative users of storage and storage

management.

Pension Plan Tops Mint's Survey of Best TV Ads.

HDFC Standard Life's advertising created high awareness for the

brand and bagged 2 silver and 1 bronze awards at the ADFEST 2007

National Awards organised by the Advertising Agencies Association of

India (AAAI). The 3 awards are the highest won by any single brand in

the financial services business (including banking, mutual fund,

insurance and other financial services).

Ranked 29th most trusted Indian Brands amongst the Top 50

Service Brands of 2006 according to a study conducted by the Brand

Equity – Economic Times, the leading business publication of India



Research Methodology

Title of the study:

‘Financial statement analysis’

A Study has been conducted in the area of “Financial statement

analysis.” And title of the study is:

“A report on Analysis of Financial Statement using a technique of

comparative balance sheet, conducted at HDFC Standard Life Insurance

Company Limited”

Objectives 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 objectives of the study are:

To analyse the financial statement.

To forecast and prepare the plans for the future.

To establish ideal standards of the different items of the business.

To provide useful information to the management.

To simplifies and summarizes a long array of accounting data and

make them understandable.

To will reveal the trend of costs, sales, profits and other important

facts.

Scope of the study:

It is useful for the management.

It gives information to the investors about the earning capacity of

the business.

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.



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:

Primary Sources are original sources from which the researcher

directly collects data that have not been previously collected. Primary

data are first-hand information collected through various methods such

as observation, interviewing, etc.

Here, the primary data is collected as follows:

Interview with the Sales Manager.

Discussions with other personnel such as advisors and trainers.

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 following

sources:

Annual Report

Other material and report published by company

Research 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. It is a preliminary investigation a

preliminary investigation which does not have a rigid deigns. 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:

Source of data:

Insurance company broacher

IRDA web site

Companies web sites

Annual report of company

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.

Lacks of information of company.

It depends on past information.

Only the last 4 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

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.

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 SCHEME

Introduction:

This chapter deals with giving complete information about the title

selected.

Industrial profile:

This chapter contains details on which industry belongs to.

Company profile:

This chapter describe the nature of the company when, who and

where the company was established. The profit, growth, losses, its

competitors, objective, mission, vision of the organization etc.

Research design:

This chapter deals with the framework of the entire project.

Analysis and interpretation:

This chapter deals with the conversion of collected data into

meaningful observation by utilizing statistical technique and

converting data into charts, diagrams and graphs.



Findings:

This chapter analyses the important finding done during the start

and completion of the project.

Suggestion:

This chapter explains in providing probable suggestion to the

various issues related to the project title.

Conclusion:

This chapter deals with providing an overall conclusion of how the

project was selected, its important findings, corresponding

suggestion and the experience of the researcher in taking up such a

project.



Analysis and interpretation

In this chapter the method comparative statement is uses

to find, analyzed and interprets the data of the firm to know the

financial position of the firm.

Comparative Statements:

The elements of financial position are shown in a comparative

form so as to given an idea of financial position at two or more periods.

Any statement prepared in a comparative form will be covered in

comparative statements. From practical point of view , generally two

financial statements (balance sheet and income statement) are prepared

in comparative form for financial analysis purpose. Not only the

comparison of the figures of two financial position and operative results.

The comparative statement show:

Absolute figures ( rupee amounts )

Changes in absolute figures i.e., increase or decrease in absolute

figures.

Absolute data in terms of percentages.

Increase or decrease in terms of percentages.



The financial data will be comparative only when same

accounting principles are used in preparing these statements. In case of

any deviation in the use of accounting principles this fact must be

mentioned at the foot of financial statements and the analyst should be

careful in using these statements. The two comparative statements are

balance sheet and income statement.

Comparative Balance Sheet:

The comparative balance sheet analysis is the study of the trend of

the same items, group of items and computed items in two or more

balance sheet of the same business enterprise on different dates. The

changes in periodic balance sheet items reflect the conduct of a business.

The changes can be observed by comparison of the balance sheet at the

beginning at the end of period and these changes can help in forming an

opinion about the progress of an enterprise

Procedure of Comparative Balance Sheet

The Comparative balance sheet has two columns for the data of

original balance sheet.

Third column is used to show increases in figures.

The Fourth column is use to give percentages of increase or

decrease.



Comparative balance sheet for the year 2010 & 2009


Particular2010

Rs. (000)2009

Rs. (000)Increase / decrease in

Rs. (000) %Sources of funds:Shareholders’ funds:Share capital 19,680,000 17,958,180 +1,721820 9.6Reserves and surplus 552,892 552,892 0 0Credit/[debit] fairvalue change account

184,435 (77,610) +262045 337.6

Sub-Total 20,417,327 18,433,462 +1,983,865 10.8Policyholder funds:Credit/[debit] fairvalue change account

205,087 (296,885) +501972 169.1

Policy liabilities 37,666,908 29,092,419 +8,574,489 29.5Provision for linked liabilitiesAdd: fair value change

127,701,63627,516,164

84,085,083(15,302,147)

+43,616,553+42,818,311

51.9279.8

Total provision for linkedLiabilities

155,217,800 68,782,936 +86,434,864 125.7

Sub-Total 193,089,795 97,578,470 +95,511,325 97.9Funds for future appropriations 1,490,013 586,395 +903,618 154.1Funds for future appropriation- 1,064,831 531,970 +532,861 100.2

Total 216,061,966 117,130,297 +98,931,669 84.5

Application of funds:Investments:Shareholders’ 6,304,757 4,291,597 +2,013,160 46.9Policyholders’ 43,415,382 30,050,097 +13,365,285 44.5Assets held to cover linkedLiabilities

155,217,800 68,782,936 +86,434,864 125.7

Loan 40,366 30,248 +10118 33.5Fixed assets 1,143,777 1,447,706 -303929 21Current assetsCash and bank balances 2,826,362 4,108,660 -1,282,298 -31.2Advances and other assets 4,917,758 5,534,969 -617,211 -11.2Sub-TOTAL (A) 7,744,120 9,643,629 -1,899,509 -19.7Current liabilities 12,281,585 8,820,225 +3,461,360 39.2Provisions 187,617 208,813 -21,196 -10.2Sub-total (B) 12,469,202 9,029,038 +3,440,164 38.1Net current asset (C)=(A-B) (4,725,082) 614,591 -5,339,673Debit balance in profit/loss 14,664,966 11,913,122 +2,751,844 23.1

Total 216,061,966 117,130,297 +98,931,669 84.5


Interpretation (comparative balance sheet of 2009 & 2010):

The comparative balance sheet of the company reveals that during

2009-2010, there has been a decrease in fixed assets of -21% at 2010 as

compared to 2009. This fact depicts the policy of the company is not to

purchase fixed assets from the long-term sources of finance there by not

affect the working capital.

Current assets have decreased by -19.7% from previous year and

cash and bank balances also decreased 31.2%, an investment is increased

by 44.78%. The current liabilities have increased by Rs. 38.1%. This

further confirms that the company working capital is decreased due to

increased in huge current liabilities and there is a decreased of -19.7% in

current assets as compared to previous year 2009.

From profit and loss account we find that the company has

increased by 23.1% of profit from previous year.

The overall financial position of the company is satisfactory.




Particular2009

Rs. (000)2008

Rs. (000)Increase / decrease inRs. (000) %

Sources of funds:Shareholders’ funds:Share capital 17,958,180 12,706,359 +5,251,821 41.3Reserves and surplus 552,892 552,892 0 0Credit/[debit] fair value change account

(77,610) 3881 -81,491 -

Sub-Total 18,433,462 13,263,132 +5,170,330 38.98Policyholder funds:Credit/[debit] fair value change account

(296,885) 193,745 -490,630 -253.2


84,085,083(15,302,147)

56,317,9763,133,608

+27,767,107-18,435,755

49.3- 588

Total provision for linked liabilities

68,782,936 59,451,584 +9,331,352 15.7

Sub-Total 97,578,470 84,012,076 +13,566,394 16.15Funds for future appropriation- 586,395 - +586,395 100Funds for future appropriation- 531,970 246,951 +285,019 115.4

Total 117,130,297 97,522,159 +19,608,138 20.1

Application of funds:Investments:Shareholders’ 4,291,597 4,213,064 +78,533 1.9Policyholders’ 30,050,097 23,299,043 +6,751,054 28.97Assets held to cover linked liabilities

68,782,936 59,451,584 +9,331,352 15.7

Loan 30,248 18,618 +11,630 62.5Fixed assets 1,447,706 1,331,800 +115,906 8.7Current assetsCash and bank balancesAdvances and other assets

4,108,6605,534,969

4,493,2384,082,489

-384,578+1,452,480

- 8.635.6

Sub-TOTAL (A) 9,643,629 8,575,727 +1,067,902 12.5Current liabilitiesProvisions

8,820,225208,813

6,129,149122,019

+2,691,076+86,794

43.971.7

Sub-total (B) 9,029,038 6,251,168 +2,777,870 44.4Net current asset (C)=(A-B) 614,591 2,324,559 -1,709,968 -73.6Debit balance in p/l account 11,913,122 6,883,491 +5,029,631 73.1

Total 117,130,297 97,522,159 +19,608,138 20.1





2008 & 2009, there has been an increased on issuing share capital of

41.3% and fixed assets also increase by 8.7%. This fact depicts that the

company has purchase more fixed assets from previous year from the

long-term sources of finance.

Current assets have increased by 12.5% from previous year, but

cash and bank balances is decreased 8.6% but advances and other assets

is increased by 35.6%, an investment is increased by 25%. The current

liabilities have increased by 44%. This further confirms that the

company working capital is decreased by 73.6% due to increased in huge

current liabilities.

From profit and loss account we find that the company has

increased by 73.1% of profit from previous year.






Particular2008

Rs. (000)2007

Rs. (000)Increase / decrease in

Rs. (000) %Sources of funds:Shareholders’ funds:Share capital 12,706,359 8,007,148 +4,699,211 58.7Share application moneyReceiv. pending allotment

- 287,391 - 287,391 - 100

Reserves and surplus 552,892 65,902 +486,990 738.96Credit/[debit] fair value change account

3881 - +3881 100


193,745 91,247 +102,498 112.3


56,317,9763,133,608

25,934,2642,582,499

+30,383,712+551,109

117.221.3

Total provision for linked Liabilities

59,451,584 28,516,763 +30,934,821 108.5

Sub-Total 84,012,076 45,999,541 +29,592,609 64.3Funds for future appropriation- 246,951 59,485 +187,466 315.1

Total 97,522,159 54,419,467 +43,102,692 79.2

Application of funds:Investments:Shareholders’ 4,213,064 1,529,743 +2,683,321 175.4Policyholders’ 23,299,043 17,782,866 +5,516,177 30.0Assets held to cover linked liabilities

59,451,584 28,516,763 +30,934,821 108.5

Loan 18,618 12,638 +5980 47.3Fixed assets 1,331,800 736,054 +595,746 80.9Current assets:Cash and bank balancesAdvances and other assets

4,493,2384,082,489

3,363,5561,961,980

+1,129,682+2,120,509

33.6108.1


6,129,149122,019

3,874,65230,845

+2,254,497+91174

58.2295.6

Sub-total (B) 6,251,168 3,905,497 +2,345671 60.1Net current asset (C)=(A-B) 2,324,559 1,420,039 +904,520 63.7Debit balance in profit & loss 6,883,491 4,421,039 +2,462,452 55.7

Total 97,522,159 54,419,467 +43,102,692 79.2




2007 & 2008, there has been on increase in fixed assets of 81%. This

fact depicts the company has purchase fixed assets from the long-term

sources of finance.

Current assets have increased by 61% and cash and bank balances

also increased 33.6%, investments also have huge increased on the other

hand there has been an increase in loan by 47.3%. The current liabilities

have increased by 60%. This further confirms that the company has

revised long term finances. It doesn’t affect the working capital.







Particular2007

Rs. (000)2006

Rs. (000)Increase / decrease inRs. (000) %

Sources of funds:Shareholders’ funds:Share capital 8,007,148 6,192,718 +1,814,430 29.3Share application money received pending allotment

287,391 - +287,391 100

Reserves and surplus 65,902 65,902 0 0Credit/[debit] fair value change account

- 73,105 -73,105 -100


91,247 209,569 -118,322 -56.5


25,934,2642,582,499

9,732,7812,203,309

+16,201,483+379,190

166.517.2

Total provision for linked Liabilities

28,516,763 11,936,090 +16,580,673 139

Sub-Total 45,999,541 23,633,655 +22,365,886 94.6Funds for future appropriation- 59,485 25,516 +33,969 133.1

Total 54,419,467 29,990,896 +24,428,571 81.5

Application of funds:Investments:Shareholders’ 1,529,743 1,380,910 +148,833 10.8Policyholders’ 17,782,866 11,695,010 +6,087,856 52.1Assets held to cover linked liabilities

28,516,763 11,936,090 +16,580,673 139

Loan 12,638 29,356 -16,718 -56.9Fixed assets 736,054 601,345 +134,709 22.4Current assets:Cash and bank balancesAdvances and other assets

3,363,5561,961,980

2,879,622990,106

+483,934+971,874

16.898.2


3,874,65230,845

2,658,56728,729

+1,216,085+2116

45.77.4

Sub-total (B) 3,905,497 2,687,296 +1,218,201 45.3Net current asset (C)=(A-B) 1,420,039 1,182,432 +237,607 20.1Debit balance in p/l account 4,421,039 3,165,753 +1,255,286 39.7

Total 54,419,467 29,990,896 +24,428,571 81.5



2006 & 2007, there has been an increase in fixed assets of 22%. This fact

depicts the company has purchase fixed assets from the long-term

sources of finance.

Current assets have increased by 37.6% and cash and bank

balances also increased 16.8%, investments also have huge increased on

the other hand there has been an increase in loan by 56.9%. The current

liabilities have increased by 45%. This further confirms that the

company working capital is affect.


1. Table showing percentage change in share capital:



(In Rs.000)

YearsAmount

omitted

Aggregate

change

amount

% change

2006-2007 8,007,148 1,814,430 29.3

2007-2008 12,706,359 4,699,211 58.7

2008-2009 17,958,180 5,251,821 41.3

2009-2010 19,680,000 1,721,820 9.6

INTERPRETATION:

The above table shows that the share capital has huge increased in

the second year. While comparing all the year there is a big jump in

second year, but in the year 2010 there is a small increased in share

capital of 9.6% only. To make more strength of financial position of the

firm, the firm needs to increase the shareholder funds.



a. Diagram showing percentage change in shareholder capital

(funds):

2006-2007 2007-2008 2008-2009 2009-20100

10

20

30

40

50

60

70

29.3

58.7

41.3

9.6

share capital

X – Axis indicates the number of years.

Y – Axis indicates the changes amount in Percentages.



2. Table showing percentage change in reserves and

surplus:

(In Rs.000)

INTERPRETATION:The table shows that the reserves and surplus are increasing only

in the year 2007-2008. It shows that there is no change of reserve and

surplus in the year 2008-2009, & 2009-2010. The company needs to

focus on ploughing back of profit to retain more reserves and surplus in

future.

To retain more reserves and surplus they need to provide good

measures which can help to obtain more profit..


YearsAmount

omitted

Aggregate change amount

% change

2006-2007 65,902 0 0

2007-2008 552,892 486,990 738.96

2008-2009 552,892 0 0

2009-2010 552,892 0 0


b. Diagram showing percentage change in reserve and

surplus:

2006-2007 2007-2008 2008-2009 2009-20100

100

200

300

400

500

600

700

800

0

738.96

0 0

reserve and surplus





3. Table showing percentage change in policy liabilities:

(In Rs.000)

INTERPRETATION:

The table shows that the policy liabilities are decreasing in all the

years. It means the policyholder funds are decreasing day by day. In the

year 2010 the policy liabilities is 29.5. While comparing to 2009, the

policy liabilities are increasing by 10.1%


YearsAmount omitted

Aggregate change amount

% change

2006-2007 17,391,531 5,903,535 51.4

2007-2008 24,366,747 6,975,216 40.1

2008-2009 29,092,419 4,725,672 19.4

2009-2010 37,666,908 8,574,489 29.5


c. Diagram showing percentage change in policy

liabilities:

2006-2007 2007-2008 2008-2009 2009-20100

10

20

30

40

50

60

51.4

40.1

19.4

4.5

policy liabilities





4. Table showing percentage change in provision for

linked liabilities:

(In Rs.000)

YearsAmount

omitted

Aggregate

change

amount

% change

2006-2007 28,516,763 16,580,673 138.9

2007-2008 59,451,584 30,934,821 108.5

2008-2009 68,782,936 9,331,352 15.7

2009-2010 155,217,800 86,434,864 125.7

INTERPRETATION:

The above table shows that the provision for linked liabilities is

fluctuating. And in this current year there is a huge increased in

provision for linked liabilities while comparing to previous year which is

not good for company.



d. Diagram showing percentage change in provision for

linked liabilities:

2006-2007 2007-2008 2008-2009 2009-20100

20

40

60

80

100

120

140

160

138.9

108.5

15.7

125.7

provision for linked liabilities





5. Table showing percentage change in funds for future

appropriation:

(In Rs.000)

YearsAmount

omitted

Aggregate

change

amount

% change

2006-2007 - - -

2007-2008 - - -

2008-2009 586,395 586,395 100

2009-2010 1,490,013 903,618 154.1

INTERPRETATION:

It shows that the funds for future appropriation is increasing after

second year, it means that the firm is saving the funds for future. It is a

good management decision of the firm.



e. Diagram showing percentage change in funds for future

appropriation:

2006-2007 2007-2008 2008-2009 2009-20100

20

40

60

80

100

120

140

160

180

0 0

100

154.1

fund for future appropriation





6. Table showing percentage change in shareholder

investment:

(In Rs.000)

YearsAmount

omitted

Aggregate

change

amount

% change

2006-2007 1,529,743 148,833 10.8

2007-2008 4,213,064 2,683,321 175.4

2008-2009 4,291,597 78,533 1.9

2009-2010 6,304,757 2,013,160 46.9

INTERPRETATION:

We can see that shareholder investment of the firm is increasing

very fast as compared to 2008. The investment in the year 2008 is very

high as compared to other years. In 2008-2009 there is a small increased

in investment of the firm and in the year 2009-2010 the investment

change to 46.9%, it means there is high change in investment.



f. Diagram showing percentage change in shareholder

investment:

2006-2007 2007-2008 2008-2009 2009-2010

0

20

40

60

80

100

120

140

160

180

200

10.8

175.4

1.9

46.9

shareholder investment





7. Table showing percentage change in policyholder

investment:

(In Rs.000)

YearsAmount

omitted

Aggregate

change

amount

% change

2006-2007 17,782,886 6,087,876 52.1

2007-2008 23,299,043 5,516,157 31.01

2008-2009 30,050,097 6,751,054 28.97

2009-2010 43,415,382 13,365,285 44.47

INTERPRETATION:

We can see that policyholder investment of the firm is decreasing

year by year as compared to 2007. In 2008 & 2009 the investment of the

firm are decreased and in the year 2009-2010 the investment is increased

to 44.7% as compared to 2008 & 2009. This is the indication of good

financial position of the firm.



g. Diagram showing percentage change in policyholder

investment:

2006-2007 2007-2008 2008-2009 2009-20100

10

20

30

40

50

60

52.1

31.0128.97

44.47

policyholder investment





8. Table showing percentage change in loans:

(In Rs.000)

YearsAmount

omitted

Aggregate

change

amount

% change

2006-2007 12,638 -16,718 -56.9

2007-2008 18,618 5,980 47.3

2008-2009 30,248 11,630 62.5

2009-2010 40,366 10,118 33.5

INTERPRETATION:

The above table shows that the loans have increased during the

year 2008, 2009 & 2010 as compared to 2007. The liquidity position of

the company shows wide fluctuation. From the below graph it is clear

that the short term loans made by the company have gradually fluctuated

up and down direction. The company needs to take measures for

collection of loans and advances made by it to retain its liquidity.



h. Diagram showing percentage change in loans:

2006-2007 2007-2008 2008-2009 2009-2010

-80

-60

-40

-20

0

20

40

60

80

-56.9

47.3

62.5

33.5

loans





9. Table showing percentage change in fixed assets

(In Rs.000)

yearsAmount

omitted

Aggregate

change

amount

% change

2006-2007 736,054 131,540 21.75

2007-2008 1,331,800 595,746 80.93

2008-2009 1,447,706 115,906 8.70

2009-2010 1,143,777 -303,929 -21

INTERPRETATION:

The above table shows that fixed assets of the firm are fluctuating.

In the year 2010 the company fixed assets value shows negative results it

means the fixed assets is not purchasing from the sources of long term

finance. The firm needs to invest fairly good amount to increases its

assets to improve its profitability. The company needs to focus on

increasing its fixed assets.



i. Diagram showing percentage change in fixed assets:

2006-2007 2007-2008 2008-2009 2009-2010

-40

-20

0

20

40

60

80

100

21.75

80.93

8.7

-21

fixed assets





10. Table showing percentage change in cash and bank

balances:

(In Rs.000)

YearsAmount

omitted

Aggregate

change

amount

% change

2006-2007 3,363,556 483,934 16.8

2007-2008 4,493,238 1,129,682 33.6

2008-2009 4,108,660 -384,578 -8.55

2009-2010 2,826,362 -1,282,298 -31.2

INTERPRETATION:

The cash balance is showing an increased trend during the year

2007-2008. We can infer that liquidity position of the firm is good in the

year 2007-2008. Liquidity position of the firm is fluctuated and it is

showing negative sign in the year 2008-2009 and 2009-2010. In the

above graph we can see that the liquidity position of the firm sounds bad

during the year 2008-2009 and2009- 2010 and it shows negative trends.

The company has to take measures to improve the cash and bank balance

position.



j. Diagram showing percentage change in cash and bank

balances:

2006-2007 2007-2008 2008-2009 2009-2010

-40

-30

-20

-10

0

10

20

30

40

16.8

33.6

-8.5

-31.2

cash and bank balances





11. Table showing percentage change in advances and

others assets:

(In Rs.000)

YearsAmount

omitted

Aggregate

change

amount

% change

2006-2007 1,961,980 975,043 98.8

2007-2008 4,082,489 2,120,509 108.1

2008-2009 5,534,969 1,452,480 35.6

2009-2010 4,917,758 -617,211 -11.15

INTERPRETATION:

The above table shows that advances and others assets of the firm

are fluctuating. In the year 2010 the company advances and others assets

value is showing negative results it means the advances and others assets

is losing from the company. The firm needs to take good measures to

increases its advances and others assets. The company needs to focus on

increasing its advances and others assets to increased in working capital.



k. Diagram showing percentage change in advances and

others assets:

2006-2007 2007-2008 2008-2009 2009-2010

-20

0

20

40

60

80

100

120

98.3

108.1

35.6

-11.15

advances and others





12. Table showing percentage change in current liabilities:

(In Rs.000)

YearsAmount

omitted

Aggregate

change

amount

% change

2006-2007 3,874,652 1,216,085 45.74

2007-2008 6,129,149 2,254,497 58.2

2008-2009 8,820,225 2,691,076 44

2009-2010 12,281,585 3,461,360 39.2

INTERPRETATION:

We can see that current liabilities have increased during the year

2007-2008. The current liabilities are fluctuating and it shows decreasing

in the year 2009 and 2010. It does affect working capital there by

decreased liquidity and management will find it difficult to manage day

to day expenses of the firm. More the current liabilities then current

assets decreased at net current assets or working capital.



l. Diagram showing percentage change in current

liabilities:

2006-2007 2007-2008 2008-2009 2009-20100

10

20

30

40

50

60

70

45.74

58.2

44

39.2

current liabilities





13. Table showing percentage change in provision:

(In Rs.000)

YearsAmount

omitted

Aggregate

change

amount

% change

2006-2007 30,845 2,116 7.4

2007-2008 122,019 91,174 295.6

2008-2009 208,813 86,794 71.1

2009-2010 187,617 -21,196 -10.2

INTERPRETATION:

We can see the provision have increased during the year 2007-

2008. The provision is fluctuating and it shows negative trend in the year

2009-2010. There is increased in provision during the year 2007-2008. It

does affect working capital there by decreased liquidity and management

will find it difficult to manage day to day expenses.



m. Diagram showing percentage change in provision:

2006-2007 2007-2008 2008-2009 2009-2010

-50

0

50

100

150

200

250

300

350

provision





14. Table showing percentage change in net current assets:

(In Rs.000)

YearsAmount

omitted

Aggregate

change

amount

% change

2006-2007 1,420,039 240776 20.4

2007-2008 2,324,559 904520 63.7

2008-2009 614,591 -1709968 -73.6

2009-2010 -4,725,082 -5339673 -868.8

INTERPRETATION:

From the above table we can see that the company needs to

improve its current assets to avoid its adverse effect on working capital.

The above table makes it clear that company needs to increase its current

assets to maintain working capital. From the graph we find that the

financial position of the company sounds bad.



n. Diagram showing percentage change in net current

assets:

2006-2007 2007-2008 2008-2009 2009-2010

-1000

-800

-600

-400

-200

0

200

20.463.7

-73.6

-868.8

net current assets





Finding

The aggregate change amount of share capital for 2007, 2008, 2009

& 2010 are 1,814,430 i.e. 29.3% 4,699,211 i.e. 58.7% 5,251,821 i.e.

41.3% and 1,721,820 i.e. 9.6%. There is a small increased of share

capital i.e. 9.6% only in 2010. Share capital is increasing in all the

year, while comparing all the year there is a big jump of 58.7% in

2008. To make more strength of financial position of the firm, they

need to increase the shareholder funds.

In 2007-2008 there was a sudden increase of 738.96% of reserve

and surplus. After 2008 there was no change in reserve and surplus.

If the company needs more reserve then they need to focus on

ploughing back of profit to retain maximum reserve and surplus.

The aggregate change amount of policy liabilities for 2007, 2008,

2009 & 2010 are 5,903,535 i.e. 51.4%, 6,975,216 i.e. 40.1%,

4,725,672 i.e. 19.4% and 8,574,489 i.e. 29.5%

Policy liabilities are decreasing in percentage for every year. And

linked liabilities are fluctuating. At the end of 2010 we find that the

linked liabilities are increasing 29.5%.



The aggregate change amount of shareholder investment for 2007,

2008, 2009 & 2010 are 148,833 i.e. 10.8%, 2,683,321 i.e. 175.4%,

78,533 i.e. 1.9% and 2,013,160 i.e. 46.9%. In 2009-2010 the

shareholder investment are increasing in percentage as compare to

2009 and 2007, but comparing to 2008 the investment is decreasing.

In 2009-2010 the policyholder investment is increasing in

percentage while compared to 2008 and 2009. It indicates good

financial position.

The aggregate change amount of fixed assets for 2007, 2008, 2009

& 2010 are 131,540 i.e. 21.75%, 595,746 i.e. 80.93%, 115,906 i.e.

8.7% and -303,929 i.e. -21%. In 2007-2008 there was an increase in

percentage of fixed asset. At the end of 2010 there is a huge

decrease in the value of fixed assets as compared to all the years.

In 2007-2008 there was an increase of 33.6% of cash and bank

balances. There is a wide fluctuation in the cash and bank balances

of the company. In the year 2009 & 2010 the company cash and

bank balance is showing negative value i.e. 8.55% and 31.2%. A

steady percentage of liquidity is advisable.



In 2007-2008 there was an increase of 108% in advances and other

assets. After 2009 there is a huge decrease in advances and other

assets i.e. -11.15%, which is not good for company.

In 2007-2008 there was an increase of 58.2% in current liabilities.

As compared to current assets the current liabilities is increasing in

the year 2009 and 2010 which is not good for company working

capital.

In 2009-2010 there is a decrease in percentage of provision which

indicate increased in working capital.

There is a decrease in percentages of working capital of the

company which indicates the bad sounds of financial position of

company.



Suggestion

Company has to develop zeal to increase its profit. The company

should utilize the available resources in proper manner.

As a company is facing a stiff competition from competitors it has

to work hard to meets its targets. It needs to give more importance

for research and development.

It needs to update with latest technology to match with its

competitors. And the company can invest fairly good amount in

investments of fixed assets.

The company assets in the form of loans and advances are to be

verified and appropriate measures have to be taken for the

collection of same time.

The liquidity position of the company in the base year is weak; still

the company should take steps to improve the liquidity position.

The overall analysis reveals that the company’s performance all the

year is good. But they are suffering from inadequate working

capital, so the steps have to be taken to improve it for all the years.



Conclusion

We can say that there should be an efficient financial management

system in the organization. It should overcome the adverse condition and

minimize its losses and protect firm from facing the negative condition

of liquidity. In tomorrow’s economy the world will belong to those who

are open to creative, imaginative and flexible to changes, having open

mindless, strength of taking risk and an innovative spirit. These entire

characteristics can lead the company on a successful path.

Based on this study the major findings are that from the overall

finance point of view, company is not performing to a very high degree

level of achievement. This study indicates that in order to improve the

overall performance of company (‘HDFC Standard Life Insurances

Company Ltd’) the management must take all possible steps to review

and modify various policies, cash budgets, inventory status by using

sound information management system. This will enable the

management to have a close control over the various operations.



Though this study may be of academic in nature it may serve a

starting point for the managerial action plan towards enhancing not only

the operational efficiently but also will prove a great help in

understanding and determining appropriate strategic plans to bring

various important comparative analysis of financial statements results to

the level of industry standards.



Bibliography

Referred Books:

COST & FINANCIAL ACCOUNTING S.K. GUPTA NEETI GUPTA

MANAGEMENT ACCOUNTING SHASHI K. GUPTA R. K. SHARMA

FINANCIAL MANAGEMENT SHASHI K. GUPTA

FINANCIAL ACCOUNTING REDDY REDDY

Referred web sites: www.hdfcslic.co.in www.googlesearch.com www.mapsofindia.com www.wikipedia.com


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http://www.mapsofindia.com/

http://www.googlesearch.com/

http://www.hdfcslic.co.in/

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