A

PROJECT REPORT

ON

‘Analysis of financial statements of Life insurance companies ’

Submitted by:

GOURAVRAJ VENKATESH PATWEKAR

ROLL NO : 110 ( ‘B’ BATCH )

EXAM SEAT NO:

Guided by:

PROF. MR. AHISHEK GILL SIR

(Department of Management)

Submitted to:

INSTITUTE OF TECHNOLOGY & MANAGEMENT,

NANDED

Affiliated to:

S.R.T.M.UNIVERSITY,NANDED (2020-2021)
 ACKNOWLEDGEMENT

It is said , the most important single word is ‘We’ and the zero important single word
is ‘I’. This true even in today’s modern era. It is absolutely impossible for a single individual
to complete the assigned job without help and assistance from others. It gives me great
pleasure & privilege to express my heartily thanks & deep sense of gratitude towards my
guide, Prof. Mr. ABHISHEK GILL SIR for his sterling efforts, amicable assistance, &
inspiration in all phases of the project work toward the path of completion.

I also wish to thank ITM COLLEGE NANDED staff whose contribution cannot be
overemphasized. With all their encouragement & well wishes, my project proved to be
fruitful.

Date:-

Place:-

GOURAVRAJ VENKATESH PATWEKAR

 DECLARATION

I hereby declare that the information on gathered during the period 2020-21 shall be
strictly utilized only for the project report. The project which is to be completed as per the
rules of SRTM University, Nanded for full time BBA course that I am pursuing in Institute of
Technology & Management Nanded.

I honestly express that the information is not collected with any commercial intention
and motivation. The solemotive is to learn the real business practices and prepare project on
it. Thus the sole objective to collecting information is of academic purpose and assures that
collected information shall be put to use only for the project report and nothing else.

Date:

Place:

GOURAVRAJ VENKATESH PATWEKAR

 INDEX

Sr. No. CHAPTER Page No.

1 Introduction & Theoretical Background 01-12

1.1 Life Insurance

1.2 Life insurance market in India

1.3 Financial analysis

1.3.1 Types of Financial Analysis

1.4 Objectives of LIC

1.5 Brief history of insurance

2 Research Methodology 13-14
3 Research & Analysis 15-24

3.1 Data analysis & Interpretation

4 Conclusion 25
5 Bibliography 26
 CHAPTER I - INTRODUCTION

1.1 Life Insurance:-

Life insurance is an agreement between an insurance policy holder and an insurer or assurer,
where the insurer vows to pay an assigned recipient a whole of cash (the advantage) in return
for a premium, upon the demise of a safeguarded individual (regularly the policy holder).
Depending upon the agreement, different occasions, for example, terminal disease or basic
ailment can likewise trigger installment. The policy holder commonly pays a premium, either
routinely or as one single amount.

Life policies are legitimate contracts and the details of the contract depict the limitations of
the insured events. specific rejections are often mentioned into the contract to restrain the
liability of the insurer; normal examples are claims identifying with suicide, fraud, war, civil
commotion and riot.

The earliest traces of the life insurance found until now is in Rome where there were ‘burial
clubs’ which paid the funeral expenses and supported the survivors and their families
financially. The first life assurance (also called as life insurance in European countries) was
sold by company named ‘Amicable Society for a Perpetual Assurance Office’, founded in
London in 1706 by William Talbot and Sir Thomas Allen.

Reasons to buy life insurance:-

 To replace loss of income

A life insurance policy pays out benefits in the event of the policyholder's demise. This is
generally a total amount that can help the insured's family deal with the loss of income. Life
insurance helps us secure the future of your dependents by offering financial support.

 To improve your financial security

Among other things, a life insurance policy can be the safety net you need to fall back on if
life throws a curveball your way. The maturity benefits promised under the policy can be a

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reassuring cushion that your post-retirement needs will be taken care of. It also ensures that
your legal heirs are financially secure in the unfortunate event of your death.

 To repay pending debts

Debts taken in the name of the insured continue to remain a financial obligation even after the
demise of the policyholder. However, without an alternate source of income, the legal heirs
of the deceased can become incapable of repaying the debts. That’s why the maturity benefits
from a life insurance policy can be of significant help.

 To save for retirement

Saving and investing a part of the income in retirement policies of life insurance companies
can guarantee us an income after retirement which is very much helpful for the retirement
life.

 To receive tax benefits

Life insurance is also among the many tax-saving investment options available to investors.
The premiums you pay can be deducted from your total taxable income as per the provisions
of section 80C, up to Rs. 1.5 lakhs. In addition to this deduction, the maturity or death
benefits received under an insurance plan are also tax-free as per section 10.

 To diversify your investments

Life insurance is an investment option which carries low risk. Hence this can help in
balancing out the our investment portfolio which can include high risk investment strategies.

 To leave behind an inheritance

The claim amount will help us in keeping our inheritance in form of ownership of house, car,
shops and similar assets safe from indebtedness and hence the further generation can use
them.

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1.2 Life insurance market in India:-

Insurance Regulatory and Development Authority (IRDA) is an autonomous body that

regulates and promotes the insurance and re-insurance enterprises in India.

The Indian insurance industry has seen significant development in the previous few years
with the availability of a wide range of advanced insurance products and services. It consists
of both life and non-life insurance companies. Out of the 52 insurance companies working in
India, 24 are in the life insurance business, and 28 companies are working in the non-life
insurance sector.

 Market Insights:-

The life insurance market in India was valued at INR 4,185 Bn in FY 2017 and is probably
going to extend at a compound annual growth rate (CAGR) of ~11.6% during FY 2018 to FY
2023. In 2016, India's offer in the global life insurance market was ~2.36% and positioned 10
among 88 nations. The Indian life insurance sector offers around 360 million life insurance
policies, which is the biggest number of policies offered by any insurance sector globally. In
this sector, 49% foreign direct investment (FDI) through programmed course is permitted,
letting overseas companies buy 49% stake at the household insurance companies without
earlier endorsement from the government.

 Impact of GST on insurance policies:-

Implementation of goods and services tax (GST) has made the insurance and banking
services expensive. 18% GST on premium receipts and related documentation has replaced
the older system of applying service tax on this services. Indian government has exempted
tax (GST) for the policies offered by the government for example - Pradhan Mantri Jan Dhan
Yogana (PMJDY), and Pradhan Mantri Vaya Vandana Yojana (PMVVY), Janashree Bima
Yojana (JBY), Aam Aadmi Bima Yojana (AABY), Pradhan Mantri Jeevan Jyoti Bima
Yojana (PMJJBY).

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  Market share:-

LIC has the highest market share in the whole life insurance market of India. LIC accounts
over whopping 74.71% of market share in total sales as of 2019. The reasons for this huge
market share of LIC is due to cheaper policies as compared to private companies, huge
financial backing by the government, marketing campaigns, good and word of mouth. The
other four companies included in project analysis garners only 12.89% of the whole market
share as of year 2019.

Growing importance of life insurance, increasing literacy, huge marketing campaigns,

importance and support given by the government are some of the drivers of growth of life
insurance market in India.

Taxation in India is done according to the section 80C of the Income Tax Act, 1961 (of
Indian penal code) premiums paid towards a valid life insurance policy can be exempted from
the taxable income. Along with life insurance premium, section 80C allows exemption for
other financial instruments such as, Public Provident Fund (PPF), Equity Linked Savings
Scheme (ELSS), Employee Provident Fund (EPF), National Savings Certificate (NSC),
health insurance premium are some of the examples. The total amount that can be exempted
from the taxable income for section 80C is capped at a maximum of INR 150,000.

Apart from tax benefit under section 80C, in India, a policy holder is entitled for a tax
exemption on the death benefit received. The received amount is fully exempt from Income
Tax under Section 10(10D).

1.3 Financial analysis:-

Financial analysis is used to evaluate economic trends, set monetary policy, build long plans
for the endeavour, and establish comes or corporations for investment. this can be done
through the synthesis of economic numbers and knowledge. A securities analyst can examine
a company's money statements—the statement, record, and income statement. money
analysis is conducted in each finance and investment finance setting.

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One of the foremost common ways to investigate money data is to calculate ratios from the
information within the financial statements to check against those of different corporations or
the company's historical performance.

For example, return on assets (ROA) could be a common ratio wont to verify however
economical an organization is at victimization its assets and as a live of profitability. This
ratio may well be calculated for many corporations within the same trade and compared to 1
another as a part of a bigger analysis.

1.3.1 Types of Financial Analysis:-

 Technical Analysis: -

Technical analysis uses statistical trends gathered from trading activity, such as moving
averages (MA). technical analysis assumes that a security’s worth already reflects all
publicly-available data and instead focuses on the applied mathematics analysis of price
movements. Technical analysis attempts to grasp the market sentiment behind worth trends
by searching for patterns and trends instead of analyzing a security’s elementary attributes.

 Fundamental Analysis: -

Fundamental analysis uses ratios gathered from knowledge inside the money statements,
equivalent to a company's earnings per share (EPS), to see the business's price. victimization
ratio analysis additionally to a radical review of economic and money things encompassing
the corporate, the associate degree list is ready to attain an intrinsic price for the safety. The
top goal is to attain a variety that associate degree capitalist will compare with a security's
current worth to envision whether or not the safety is undervalued or overvalued.

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 Board of Directors (Members on the Board of Corporation)

S.No Name Designation

1 Shri. M R Kumar Chairman, LIC of India

2 Shri. Rajeev Ranjan Member

3 Shri. Pankaj Jain Member

4 Shri Vipin Anand Managing Director, LIC of India

5 Shri. Mukesh Kumar Gupta Managing Director, LIC of India

6 Shri. Raj Kumar Managing Director, LIC of India

7 Shri. Siddhartha Mohanty Managing Director, LIC of India

8 Ms. Padmaja Chunduru Member

9 Shri. Devesh Srivastava Ex-Officio Member

1.4 OBJECTIVES OF LIC :

 Spread Life Insurance widely and in particular to the rural areas and to the socially
and economically backward classes with a view to reaching all insurable persons in the
country and providing them adequate financial cover against death at a reasonable cost.
 Maximize mobilization of people's savings by making insurance-linked savings
adequately attractive.

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 Bear in mind, in the investment of funds, the primary obligation to its
policyholders, whose money it holds in trust, without losing sight of the interest of the
community as a whole; the funds to be deployed to the best advantage of the investors as
well as the community as a whole, keeping in view national priorities and obligations of
attractive return.
 Conduct business with utmost economy and with the full realization that the
moneys belong to the policyholders.
 Act as trustees of the insured public in their individual and collective capacities.
 Meet the various life insurance needs of the community that would arise in the
changing social and economic environment.
 Involve all people working in the Corporation to the best of their capability in
furthering the interests of the insured public by providing efficient service with courtesy.
 Promote amongst all agents and employees of the Corporation a sense of
participation, pride and job satisfaction through discharge of their duties with dedication
towards achievement of Corporate Objective.

 VISION – MISSION STATEMENT OF LIC

Mission
"Ensure and enhance the quality of life of people through financial security by providing
products and services of aspired attributes with competitive returns, and by rendering
resources for economic development."

Vision
"A trans-nationally competitive financial conglomerate of significance to societies and
Pride of India."

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OPERATIONS –

LIC operate all over India

1.5 BRIEF HISTORY OF INSURANCE:

The story of insurance is probably as old as the story of mankind. The same instinct that
prompts modern businessmen today to secure themselves against loss and disaster existed in
primitive men also. They too sought to avert the evil consequences of fire and flood and loss
of life and were willing to make some sort of sacrifice in order to achieve security. Though

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the concept of insurance is largely a development of the recent past, particularly after the
industrial era – past few centuries – yet its beginnings date back almost 6000 years.

Life Insurance in its modern form came to India from England in the year 1818. Oriental Life
Insurance Company started by Europeans in Calcutta was the first life insurance company on
Indian Soil. All the insurance companies established during that period were brought up with
the purpose of looking after the needs of European community and Indian natives were not
being insured by these companies. However, later with the efforts of eminent people like
Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But
Indian lives were being treated as sub-standard lives and heavy extra premiums were being
charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian
life insurance company in the year 1870, and covered Indian lives at normal rates. Starting as
Indian enterprise with highly patriotic motives, insurance companies came into existence to
carry the message of insurance and social security through insurance to various sectors of
society. Bharat Insurance Company (1896) was also one of such companies inspired by
nationalism. The Swadeshi movement of 1905-1907 gave rise to more insurance companies.
The United India in Madras, National Indian and National Insurance in Calcutta and the Co-
operative Assurance at Lahore were established in 1906. In 1907, Hindustan Co-operative
Insurance Company took its birth in one of the rooms of the Jorasanko, house of the great
poet Rabindranath Tagore, in Calcutta. The Indian Mercantile, General Assurance and
Swadeshi Life (later Bombay Life) were some of the companies established during the same
period. Prior to 1912 India had no legislation to regulate insurance business. In the year 1912,
the Life Insurance Companies Act, and the Provident Fund Act were passed. The Life
Insurance Companies Act, 1912 made it necessary that the premium rate tables and periodical
valuations of companies should be certified by an actuary. But the Act discriminated between
foreign and Indian companies on many accounts, putting the Indian companies at a
disadvantage.

The first two decades of the twentieth century saw lot of growth in insurance business. From
44 companies with total business-in-force as Rs.22.44 crore, it rose to 176 companies with
total business-in-force as Rs.298 crore in 1938. During the mushrooming of insurance
companies many financially unsound concerns were also floated which failed miserably. The
Insurance Act 1938 was the first legislation governing not only life insurance but also non-

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life insurance to provide strict state control over insurance business. The demand for
nationalization of life insurance industry was made repeatedly in the past but it gathered
momentum in 1944 when a bill to amend the Life Insurance Act 1938 was introduced in the
Legislative Assembly. However, it was much later on the 19th of January, 1956, that life
insurance in India was nationalized. About 154 Indian insurance companies, 16 non-Indian
companies and 75 provident were operating in India at the time of nationalization.
Nationalization was accomplished in two stages; initially the management of the companies
was taken over by means of an Ordinance, and later, the ownership too by means of a
comprehensive bill. The Parliament of India passed the Life Insurance Corporation Act on the
19th of June 1956, and the Life Insurance Corporation of India was created on 1st September,
1956, with the objective of spreading life insurance much more widely and in particular to the
rural areas with a view to reach all insurable persons in the country, providing them adequate
financial cover at a reasonable cost.

LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate
office in the year 1956. Since life insurance contracts are long term contracts and during the
currency of the policy it requires a variety of services need was felt in the later years to
expand the operations and place a branch office at each district headquarter. Re-organization
of LIC took place and large numbers of new branch offices were opened. As a result of re-
organisation servicing functions were transferred to the branches, and branches were made
accounting units. It worked wonders with the performance of the corporation. It may be seen
that from about 200.00 crores of New Business in 1957 the corporation crossed 1000.00
crores only in the year 1969-70, and it took another 10 years for LIC to cross 2000.00 crore
mark of new business. But with re-organisation happening in the early eighties, by 1985-86
LIC had already crossed 7000.00 crore Sum Assured on new policies.

Today LIC functions with 2048 fully computerized branch offices, 113 divisional offices, 8
zonal offices, 1381 satallite offices and the Corporate office. LIC’s Wide Area Network
covers 113divisional offices and connects all the branches through a Metro Area Network.
LIC has tied up with some Banks and Service providers to offer on-line premium collection
facility in selected cities. LIC’s ECS and ATM premium payment facility is an addition to
customer convenience. Apart from on-line Kiosks and IVRS, Info Centres have been

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commissioned at Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New
Delhi, Pune and many other cities. With a vision of providing easy access to its
policyholders, LIC has launched its SATELLITE SAMPARK offices. The satellite offices
are smaller, leaner and closer to the customer. The digitalized records of the satellite offices
will facilitate anywhere servicing and many other conveniences in the future.

LIC continues to be the dominant life insurer even in the liberalized scenario of Indian
insurance and is moving fast on a new growth trajectory surpassing its own past records. LIC
has issued over one crore policies during the current year. It has crossed the milestone of
issuing 1,01,32,955 new policies by 15th Oct, 2005, posting a healthy growth rate of 16.67%
over the corresponding period of the previous year.

From then to now, LIC has crossed many milestones and has set unprecedented performance
records in various aspects of life insurance business. The same motives which inspired our
forefathers to bring insurance into existence in this country inspire us at LIC to take this
message of protection to light the lamps of security in as many homes as possible and to help
the people in providing security to their families.

» Some of the important milestones in the life insurance business in India are:

1818: Oriental Life Insurance Company, the first life insurance company on Indian soil
started functioning.

1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started
its business.

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the
life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect
statistical information about both life and non-life insurance businesses.

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1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective
of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies are taken over by the central
government and nationalised. 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 milestones in the general insurance business in India are:

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

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

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

1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general
insurance business in India with effect from 1st January 1973.

107 insurers 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.

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 CHAPTER II :- RESEARCH METHODOLOGY

 Type of Analysis:-

The study being undertaken is descriptive in nature. Descriptive statistics are important
because in the event that we basically introduced our raw information it is difficult to picture
what the information was showing, particularly if there was a great deal of it. Descriptive
statistics therefore empowers us to introduce the information in a more meaningful manner,
which permits less difficult interpretation of the information. For instance, in the event that
we had the consequences of 100 pieces of students' coursework, we may be interested in the
overall performance of those students. We would also be interested in the distribution or
spread of the marks. Descriptive statistics permit us to do this.

Source of data used for Analysis:-

In the chapter of analysis all the data entered is a secondary type of data. The data is collected
from secondary sources mainly like company websites, stock market websites, websites
providing public articles and journals like google scholar, shodhganga, academia and
eboscohost.

Presentation of data:-

The data relating to a specific company is entered under that specific company’s heading
only. Separate tables for elements under liabilities, assets, profit and loss and ratios are
created using Microsoft excel. The elements included in the analysis are selected on the basis

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of their importance to an investor while selecting a company on the basis of its performance
Tables are created for easy understanding which can help us know the year-on-year
comparisons of a single element and also growth and negative growth of that element. Charts
formed on the basis of the tables are included for good visual representation. Financial ratios
are important aspect of the data as it can clearly defines a company’s performance also expert
investors always use ratio to judge the performance of the company. Important financial ratio
specific to the insurance sector only are included in the research and analysis for eg.- claim
settlement ratio.

Objectives:-

 To evaluate & understand the financial efficiency and strength of selected companies
in the life insurance sector.
 To compare the performance of the selected companies.
 To analyze the top companies that belong to the life insurance sector in India.

Limitations:-

 The research carried out is a desk research, hence all the limitations of desk research
are inevitable.
 All the data included in research and analysis is gathered from the secondary source of
data
 Only limited and important elements are included for analysis due to the vastness of
the financial data of all the company and confinements of the project.
 The project is completed in a limited time frame.
 Some ratios are not mentioned by the company in their annual reports.

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 CHAPTER III :- RESEARCH & ANALYSIS

LIC:-

Liabilities:-

Balance sheet values (in lakhs rs.)

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Figure 1 Value over the years

Figure 2 Growth rate of current liabilities.

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 Figure 3 Growth rate over the years.

Assets:-

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Profit and Loss:-

Balance sheet values ( in Rs. Lakhs).

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Interpretation:-

LIC has been profitable company throughout the period selected for the research. The growth curve
as seen in the chart is in a shape of a heartbeat. The profit increases in 2015-2016, falls in 2016-2017,
then after 2017 the profit increases till 2019.

Ratio:-

Claim Settlement ratio:-

Claim settlement Ratio (CSR) indicates how many claims a company has settled against the total
number of claims received. Higher the CSR, the greater are the chances of settlement of a claim. The
Claim Settlement Ratio is expressed in terms of percentage. This is the most important ratio for
insurance companies as this defines the performance of the company in the case of settling the claims
of the customers.

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Interpretation:-

The CSR has increased marginally from 2015 to 2016. After 2016 the ratio starts to fall until 2019.
The CSR falls 0.40% from 2016 to 2019.

Net Retention Ratio:-

Net Retention Ratio is the percentage of Net income which is retained to be used in business, instead
of being paid as dividends. The formula of Net Retention Ratio is, (Retained earning / Net income)
X100.

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 Interpretation:-

The percentage amount retained to be used in business remains same for the year 2015-2016. The
ratio starts to fall after 2016 untill 2018, the decrease is of just 0.04%. the ratio increases after 2018
in 2019.

Commission Ratio:-

Commission ratio is the ratio found out to measure the commissions given against the premiums
earned by the insurance company. A high commission ratio states that the company is paying high
rate of commission to the middle men employed for selling the insurance policies.

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Interpretation:-

The ratio starts to fall from 6.31% in 2015 to 5.53% in 2017. After 2017 the ratio increases in 2018
are remains stable in 2019.

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  Claim Settlement Ratio comparison:-

In this segment, the claim settlement ratio of the life insurance companies selected for the
analysis is compared. Claim settlement ratio is a ratio unique to the insurance companies. The
ratio signifies that what percentage of total claims have been paid by the company to the
customers of the total claims in a year. By investor’s point of view he can simply refer to the
claim settlement ratio for knowing the claim processing ability of the life insurance company.
The comparison includes the five companies selected for the analysis and claim settlement
ratio of five year endings (2015-2019).

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Interpretation:-

 LIC of India has a consistent claim settlement ratio around the mark of 98%. It also
beats all its competitors by large margin in the year 2015.
 Bajaj Allianz though has been consistent over the period but still lacks behind when
compared to the other competition.
 The highest claim settlement ratio value is provided by HDFC life Ltd. in the year
2019, even beating LIC of India.
 Benchmark of 99% is only broken by HDFC life Ltd. (99.04%) in the year 2019
 The lowest Claim settlement ratio value is provided by SBI life Ltd. (89.43%) in the
year 2015
 HDFC life Ltd. and ICICI Ltd. have seen a continuous growth from 2015 to 2019.

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 CHAPTER IV: CONCLUSION

This study has analyzed the data collected from the policy holders and has brought out the
expectations of the policy holders and their preferences.

After overhauling the all situation that boosted a number of Pvt. Companies associated with
multinational in the Insurance sector to give befitting competition to the established behemoth LIC in
public sector, we come at the conclusion that :

1) There is very tough competition among the private insurance companies on the level of new trend
of advertising to lull a major part of Customers.

2) LIC is not left behind in the present race of advertisement.

3) The entry of the Pvt. Players in the insurance Sector has expanded the product segment to meet
the different level of the requirement of the customers. It has brought about greater choice to the
customers.

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4) Private insurers have restricted reach to the customers.

5) LIC has vast market and very firm grip on its traditional customers and monopoly of life insurance
products.

6) Bank assurance – that allows life insurers to leverage on the risk products through bank network,
was adopted by private players. But LIC was also not left behind as picking up majority stake in the
corporation Bank and large equity stake in the Oriental Bank of Commerce

IRDA is also playing very comprehensive role by regulating norms mandating to private players in
this sector, that increases the confidence level of the customers to the private players

CHAPTER V: BIBLOGRAPHY

www.licindia.com

www.moneycontrol.com

www.valueresearch.com

www.economictimes.com

www.scholar.google.com

www.shodhganga.inflibnet.ac.in

LIC annual report

Book – Dr.Mahesh A kulkarni, nirali prakashan, Mumbai.

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