Comparative Financial Statements of HDFC Standard Life Insurance.

Introduction
Introduction 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, 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

➢ The science of managing money,

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

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Comparative Financial Statements of HDFC Standard Life Insurance.

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. 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.

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Comparative Financial Statements of HDFC Standard Life Insurance.

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.

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.

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Comparative Financial Statements of HDFC Standard Life Insurance.

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.

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Comparative Financial Statements of HDFC Standard Life Insurance.

1.
a)

Specific objectives:
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.
a)

General objective:
Balance asset structure:

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Comparative Financial Statements of HDFC Standard Life Insurance.

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:

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Comparative Financial Statements of HDFC Standard Life Insurance.

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

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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.

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Comparative Financial Statements of HDFC Standard Life Insurance.

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.

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Comparative Financial Statements of HDFC Standard Life Insurance.

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

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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

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Comparative Financial Statements of HDFC Standard Life Insurance.

Vice-President Marketing

Vice-President Finance

Vice-President Production

Chief Finance Manager (Controlle Tax Manager Financial Accounting Manager Data Processing Manager

Chief Finance Manager (Treasurer) Capital Expenditur e Manager Credit Collection Manager Appraisal or Reporting Cash Manager

Cost Accounting Manager Appraisal or Reporting

Portfolio Manager

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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. 2. The Balance Sheet The Profit and Loss Account

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Comparative Financial Statements of HDFC Standard Life Insurance.

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

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Comparative Financial Statements of HDFC Standard Life Insurance.

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:

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Comparative Financial Statements of HDFC Standard Life Insurance.

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:

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Comparative Financial Statements of HDFC Standard Life Insurance.

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:
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

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Comparative Financial Statements of HDFC Standard Life Insurance.

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.

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Comparative Financial Statements of HDFC Standard Life Insurance.

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:

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Comparative Financial Statements of HDFC Standard Life Insurance.

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

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Comparative Financial Statements of HDFC Standard Life Insurance.

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

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Comparative Financial Statements of HDFC Standard Life Insurance.

purpose. The following are the principal tools of analysis of financial statements. a) b) c) d) e) f) g) h) Comparative Financial Statements. Common-size Financial Statements. Trend percentage analysis. Funds flow statement. Cash flow statement Net working capital analysis Cost-volume profit analysis 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

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Comparative Financial Statements of HDFC Standard Life Insurance.

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:

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Comparative Financial Statements of HDFC Standard Life Insurance.

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...

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Comparative Financial Statements of HDFC Standard Life Insurance.


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

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Comparative Financial Statements of HDFC Standard Life Insurance.

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.

1.

Common-size statements:

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Comparative Financial Statements of HDFC Standard Life Insurance.

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.

2.

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

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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.

3.

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:

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Comparative Financial Statements of HDFC Standard Life Insurance.

“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.”

4.

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.

5.

Statements changes in working capital:

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Comparative Financial Statements of HDFC Standard Life Insurance.

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.

6.

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.

7.

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

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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.

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Comparative Financial Statements of HDFC Standard Life Insurance.

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

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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.

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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

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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

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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.

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➢ ➢

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

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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

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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.

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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.

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➢ 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:

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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

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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

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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
Birla Sunlife Om Kotak HDFC-Standard Life Royal Sundaram ICICI-Prudential Max New York Life Tata-AIG ING Vysya Aviva Metlife India Bajaj Allianz

Indian partner
Aditya Birla Group Kotak Mahindra HDFC Sundaram Finance ICICI Max India Tata group Vysya Bank Dabur SBI Bajaj Auto

Foreign insurer
Sunlife, Canada Old Mutual, Standard Life UK Roya Sun, UK Prudential, UK New USA AIG USA ING Insurance, Cardiff, France Metlife, USA Allianz York Life

Area
Life Life Life Life & Non life Life Life Life & non Life Life Life Life Life & non Life

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SBI Life Insurance

Sanmar Group

AMP, Australia

Life

SOURCE: 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

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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?

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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:

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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 parttime 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.

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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

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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 reinsurance 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.

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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

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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
1912

Milestone’s in Life Insurance Business in India
The Indian Life Insurance Companies Act enacted as the first statue to regulate the Life Insurance Business The Indian Life Insurance Companies Act enacted to enable the

1928

government to collect statistical information about both Life and Non-life insurance business.

1938

Earlier legislation consolidated and amended by the Insurance Act with the objective of protecting the interest of the insuring public.

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245 Indian and foreign insures and provident societies taken over by 1956 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

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Year
1907

Milestone’s in the general insurance business in India
The Indian Mercantile Insurance Ltd. set up the first company to transact all classes of general insurance business. General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 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.

1957

1968

1972

History of insurance in India:

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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.

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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

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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

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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

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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

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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

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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.

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Company profile
Introduction:

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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.

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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

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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:

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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:

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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”

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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

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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

TATA AIG Life Insurance

ORGANISATION STRUCTURE

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Zonal Administration InsuranceManager Chief Finance Officer Chief TeamOfficer Sales Administration Finance Branch Branch Executive FinanceBranch Zonal Finance Administrative Business Manager National Sales Senior consultants Zonal Manager Asst. Dept. C.E.O B.O.D Officer Supervisor Executive Manager Officer

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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

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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

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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.

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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:

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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.

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

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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

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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:

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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

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Income, Fixed Interest and Bond Funds: Invested in corporate bonds, Government securities and other fixed income instruments. Risk and Return: Medium 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. Risk and Return: Medium

Charges of HDFC standard life insurance company:

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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 Regular Allocation rate 1st & 2nd Year 3 rd Year

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Onwards Up to 1,99,999 From 2,00,000 to 4,99,999 premiums From 500,000 to 9,99,999 From 10,00,000 to 19,99,999 From 20,00,000 to above Single premium top ups 70% 80% 85% 90% 95% 97.5%

onwards 99% 99% 99% 99% 99% 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.

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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 Policy administration charge Explanation 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. 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. 24 switches will be given free in a policy year and any additional switch will be charged at Rs. 100 per switch.

Mortality and other risk benefit charges

Switching charge

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Partial withdrawal Charge Revival 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. A charge of Rs. 250 is for revival to cover for administration expenses. 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.

Miscellaneous charge

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

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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.

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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

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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,

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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,

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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

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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

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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”

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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.

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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.

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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

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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

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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

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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.

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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.

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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.

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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.

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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.

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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.

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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

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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

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Comparative Financial Statements of HDFC Standard Life Insurance. 2010 Particular Rs. (000) Sources of funds: Shareholders’ funds: Share capital Reserves and surplus Credit/[debit] fair 184,435 value change account Sub-Total Policyholder funds: Credit/[debit] fair 205,087 value change account Policy liabilities Provision for linked liabilities Add: fair value change Total provision for linked 155,217,800 Liabilities Sub-Total Funds for future appropriations 193,089,795 1,490,013 97,578,470 586,395 +95,511,325 +903,618 97.9 154.1 68,782,936 +86,434,864 125.7 37,666,908 127,701,636 27,516,164 29,092,419 84,085,083 (15,302,147) +8,574,489 +43,616,553 +42,818,311 29.5 51.9 279.8 (296,885) +501972 169.1 20,417,327 18,433,462 +1,983,865 10.8 (77,610) +262045 337.6 19,680,000 552,892 17,958,180 552,892 +1,721820 0 9.6 0 Rs. (000) Rs. (000) % 2009 Increase / decrease in

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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.

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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.

Comparative balance sheet for the year 2009 & 2008

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Comparative Financial Statements of HDFC Standard Life Insurance. 2009 Particular Rs. (000) Sources of funds: Shareholders’ funds: Share capital Reserves and surplus Credit/[debit] fair (77,610) value change account Sub-Total Policyholder funds: Credit/[debit] fair (296,885) value change account Policy liabilities Provision for linked liabilities Add: fair value change Total provision for 68,782,936 linked liabilities Sub-Total Funds for future appropriation97,578,470 586,395 84,012,076 +13,566,394 +586,395 16.15 100 59,451,584 +9,331,352 15.7 29,092,419 84,085,083 (15,302,147) 24,366,747 56,317,976 3,133,608 +4,725,672 +27,767,107 -18,435,755 19.4 49.3 - 588 193,745 -490,630 -253.2 18,433,462 13,263,132 +5,170,330 38.98 3881 -81,491 17,958,180 552,892 12,706,359 552,892 +5,251,821 0 41.3 0 Rs. (000) Rs. (000) % 2008 Increase / decrease in

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Interpretation (comparative balance sheet of 2008 & 2009):
The comparative balance sheet of the company reveals that during 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.

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The overall financial position of the company is satisfactory.

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Comparative Financial Statements of HDFC Standard Life Insurance. 2008 Particular Rs. (000) Sources of funds: Shareholders’ funds: Share capital Share application money Receiv. pending allotment Reserves and surplus Credit/[debit] fair 3881 value change account Sub-Total Policyholder funds: Credit/[debit] fair 193,745 value change account Policy liabilities Provision for linked liabilities Add: fair value change 24,366,74 7 56,317,97 6 3,133,608 17,391,531 25,934,264 2,582,499 +6,975,213 +30,383,712 +551,109 40.1 117.2 21.3 91,247 +102,498 112.3 13,263,13 2 8,360,441 +4,902,691 58.6 +3881 100 552,892 65,902 +486,990 738.9 6 287,391 - 287,391 - 100 12,706,35 9 8,007,148 +4,699,211 58.7 Rs. (000) Rs. (000) % 2007 Increase / decrease in

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Comparative balance sheet for the year 2008 & 2007

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Interpretation (comparative balance sheet of 2007 & 2008):
The comparative balance sheet of the company reveals that during 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.

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The overall financial position of the company is satisfactory.

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2007 Particular Rs. (000) Sources of funds: Shareholders’ funds: Share capital Share application money received pending allotment Reserves and surplus Credit/[debit] fair value change account Sub-Total Policyholder funds: Credit/[debit] fair 91,247 value change account Policy liabilities Provision for linked liabilities Add: fair value change Total provision for linked 28,516,763 Liabilities Sub-Total Funds for future appropriation45,999,541 59,485 23,633,655 25,516 +22,365,886 +33,969 94.6 133.1 11,936,090 +16,580,673 139 17,391,531 25,934,264 2,582,499 11,487,996 9,732,781 2,203,309 +5,903,535 +16,201,483 +379,190 51.4 166.5 17.2 209,569 -118,322 -56.5 8,360,441 6,331,725 +2,028,716 32.04 73,105 -73,105 -100 8,007,148 287,391 65,902 6,192,718 65,902 +1,814,430 +287,391 0 29.3 100 0 Rs. (000) Rs. (000) % 2006 Increase / decrease in

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Comparative balance sheet for the year 2007 & 2006

Interpretation (comparative balance sheet of 2006 & 2007):
The comparative balance sheet of the company reveals that during 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. The overall financial position of the company is satisfactory.

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1.

Table showing percentage change in share capital:
(In Rs.000)
Years Amount omitted 8,007,148 12,706,359 Aggregate change amount 1,814,430 4,699,211 29.3 58.7 % change

2006-2007 2007-2008

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2008-2009 2009-2010

17,958,180 19,680,000

5,251,821 1,721,820

41.3 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):

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X – Axis indicates the number of years. Y – Axis indicates the changes amount in Percentages. 1. Table showing percentage change in reserves and surplus:
(In Rs.000)

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Years

Amount omitted 65,902 552,892 552,892 552,892

Aggregate change amount 0 486,990 0 0

% change

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

0 738.96 0 0

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Comparative Financial Statements of HDFC Standard Life Insurance.

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..

a.

Diagram showing percentage change in reserve and surplus:

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Comparative Financial Statements of HDFC Standard Life Insurance.

X – Axis indicates the number of years. Y – Axis indicates the changes amount in Percentages.

1.

Table showing percentage change in policy liabilities:
(In Rs.000)

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Comparative Financial Statements of HDFC Standard Life Insurance.

Years

Amount omitted 17,391,531 24,366,747 29,092,419 37,666,908

Aggregate change amount 5,903,535 6,975,216 4,725,672 8,574,489

% change

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

51.4 40.1 19.4 29.5

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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%

a.

Diagram showing percentage change in policy liabilities:

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Comparative Financial Statements of HDFC Standard Life Insurance.

X – Axis indicates the number of years. Y – Axis indicates the changes amount in Percentages. 1. Table showing percentage change in provision for linked liabilities:
(In Rs.000)
Years Amount omitted 28,516,763 59,451,584 68,782,936 155,217,800 Aggregate change amount 16,580,673 30,934,821 9,331,352 86,434,864 138.9 108.5 15.7 125.7 % change

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

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Comparative Financial Statements of HDFC Standard Life Insurance.

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.

a.

Diagram showing percentage change in provision for linked liabilities:

X – Axis indicates the number of years. Y – Axis indicates the changes amount in Percentages.

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Comparative Financial Statements of HDFC Standard Life Insurance.

1.

Table showing percentage change in funds for future appropriation:
(In Rs.000)
Years Amount omitted 586,395 1,490,013 Aggregate change amount 586,395 903,618 100 154.1 % change

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

INTERPRETATION:

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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.

a.

Diagram showing percentage change in funds for future appropriation:

X – Axis indicates the number of years. Y – Axis indicates the changes amount in Percentages.

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Comparative Financial Statements of HDFC Standard Life Insurance.

1.

Table showing percentage change in shareholder investment:
(In Rs.000)
Years Amount omitted 1,529,743 4,213,064 4,291,597 6,304,757 Aggregate change amount 148,833 2,683,321 78,533 2,013,160 10.8 175.4 1.9 46.9 % change

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

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

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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.

a.

Diagram showing percentage change in shareholder investment:

X – Axis indicates the number of years. Y – Axis indicates the changes amount in Percentages.

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Comparative Financial Statements of HDFC Standard Life Insurance.

1.

Table showing percentage change in policyholder investment:
(In Rs.000)
Years Amount omitted 17,782,886 23,299,043 30,050,097 43,415,382 Aggregate change amount 6,087,876 5,516,157 6,751,054 13,365,285 52.1 31.01 28.97 44.47 % change

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

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

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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.

a.

Diagram showing percentage change in policyholder investment:

X – Axis indicates the number of years. Y – Axis indicates the changes amount in Percentages. 1. Table showing percentage change in loans:
(In Rs.000)

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Comparative Financial Statements of HDFC Standard Life Insurance.

Years

Amount omitted 12,638 18,618 30,248 40,366

Aggregate change amount -16,718 5,980 11,630 10,118 -56.9 47.3 62.5 33.5 % change

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

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

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up and down direction. The company needs to take measures for collection of loans and advances made by it to retain its liquidity.

a.

Diagram showing percentage change in loans:

X – Axis indicates the number of years. Y – Axis indicates the changes amount in Percentages.

1.

Table showing percentage change in fixed assets
(In Rs.000)

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Comparative Financial Statements of HDFC Standard Life Insurance.

years

Amount omitted 736,054 1,331,800 1,447,706 1,143,777

Aggregate change amount 131,540 595,746 115,906 -303,929 21.75 80.93 8.70 -21 % change

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

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

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amount to increases its assets to improve its profitability. The company needs to focus on increasing its fixed assets.

a.

Diagram showing percentage change in fixed assets:

X – Axis indicates the number of years. Y – Axis indicates the changes amount in Percentages. 1. Table showing percentage change in cash and bank balances:
(In Rs.000)

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Comparative Financial Statements of HDFC Standard Life Insurance.

Years

Amount omitted 3,363,556 4,493,238 4,108,660 2,826,362

Aggregate change amount 483,934 1,129,682 -384,578 -1,282,298 16.8 33.6 -8.55 -31.2 % change

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

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.

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

Diagram showing percentage change in cash and bank balances:

X – Axis indicates the number of years. Y – Axis indicates the changes amount in Percentages.
1.

Table showing percentage change in advances and others assets:
(In Rs.000)
Years Amount omitted Aggregate change amount % change

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Comparative Financial Statements of HDFC Standard Life Insurance.

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

1,961,980 4,082,489 5,534,969 4,917,758

975,043 2,120,509 1,452,480 -617,211

98.8 108.1 35.6 -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.

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a.

Diagram showing percentage change in advances and others assets:

X – Axis indicates the number of years. Y – Axis indicates the changes amount in Percentages.

1.

Table showing percentage change in current liabilities:
(In Rs.000)
Years Amount omitted 3,874,652 Aggregate change amount 1,216,085 45.74 % change

2006-2007

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Comparative Financial Statements of HDFC Standard Life Insurance.

2007-2008 2008-2009 2009-2010

6,129,149 8,820,225 12,281,585

2,254,497 2,691,076 3,461,360

58.2 44 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.

a.

Diagram showing percentage change in current liabilities:

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Comparative Financial Statements of HDFC Standard Life Insurance.

X – Axis indicates the number of years. Y – Axis indicates the changes amount in Percentages.

1.

Table showing percentage change in provision:
(In Rs.000)
Years Amount omitted 30,845 122,019 208,813 Aggregate change amount 2,116 91,174 86,794 7.4 295.6 71.1 % change

2006-2007 2007-2008 2008-2009

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2009-2010

187,617

-21,196

-10.2

INTERPRETATION: We can see the provision have increased during the year 20072008. The provision is fluctuating and it shows negative trend in the year 2009-2010. There is increased in provision during the year 20072008. It does affect working capital there by decreased liquidity and management will find it difficult to manage day to day expenses.

a.

Diagram showing percentage change in provision:

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Comparative Financial Statements of HDFC Standard Life Insurance.

X – Axis indicates the number of years. Y – Axis indicates the changes amount in Percentages. 1. Table showing percentage change in net current assets:
(In Rs.000)
Years Amount omitted 1,420,039 2,324,559 614,591 -4,725,082 Aggregate change amount 240776 904520 -1709968 -5339673 20.4 63.7 -73.6 -868.8 % change

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

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Comparative Financial Statements of HDFC Standard Life Insurance.

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.

a.

Diagram showing percentage change in net current assets:

X – Axis indicates the number of years. Y – Axis indicates the changes amount in Percentages.

Finding

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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%

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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.

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Comparative Financial Statements of HDFC Standard Life Insurance.

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.

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Comparative Financial Statements of HDFC Standard Life Insurance.

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.

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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.

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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

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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.

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Bibliography Referred Books:
COST & FINANCIAL ACCOUNTING
  S.K. GUPTA NEETI GUPTA

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MANAGEMENT ACCOUNTING
      SHASHI K. GUPTA R. K. SHARMA SHASHI K. GUPTA

FINANCIAL MANAGEMENT FINANCIAL ACCOUNTING
REDDY REDDY

Referred web sites:
   

www.hdfcslic.co.in www.googlesearch.com www.mapsofindia.com www.wikipedia.com

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