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Financial Analysis of Indian

Insurance Sector
Presented By –
Abhinav Tripathi (09P062)
Anunay Priyesh (09P69)
Mohit Kumar (09P093)
Harkaran Singh (09P080)
Riddhi Jain (09P109)
Siddharth Shah (09P117)
Bajaj Allianz
• JV between Bajaj Finserv Ltd. and Allianz SE
• Received IRDA Certificate of Registration in 2001 to
carry on General Insurance business in India
• Only private insurer to cross Rs. 100 crore mark in
PBT in last three years
• iAAA rating from ICRA Limited for Claims Paying
Ability
• Various insurance services offered are Motor, Asset,
Health, Travel and Corporate Insurance
United India Insurance
• Incorporated as Company in February, 1938
• Later formed as merger of 22 companies after the
nationalization of general insurance business in
India
• Pioneer for implementing complex covers for
ONGC Ltd, Mumbai International Airports etc
• One of the first to provide insurance to rural
masses through Universal Health Insurance
Programme and Vijaya Raji Janani Kalyan
Yojana
New India Insurance

• Established by Sir Dorab Tata in 1919


• Insured the first domestic airlines in 1946
• Pioneered satellite insurance in 1980
• Largest Non-Life insurer in Afro-Asia excluding
Japan
• First Indian non-life company to cross Rs. 5000
crores Gross Premium
PERFORMANCE

• Growth in Profits after Tax
• Growth in Net Premium
• Cash Flows
PERFORMANCE
- Growth in Profits after Tax

Growth in Profits ( Rs . ‘ 000 )


2004 - 05 2005 - 06 2006 - 07 2007 - 08
United India Insurance 30,77,100 42,52,300 52,88,649 63,16,244
New India Assurance 40,22,319 71,63,773 1,45,99,494 1,40,11,281
Bajaj Allianz 4,70,656 5,16,870 7,53,691 10,56,179
PERFORMANCE
- Growth in Net Premium

Growth in Sales ( Rs . ‘ 000 )

2004 - 05 2005 - 06 2006 - 07 2007 - 08

United India Insurance 2,17,26,600 2,22,58,500 2,52,95,273 2,88,06,594

New India Assurance 3,89,51,047 4,34,26,512 4,75,17,702 4,91,42,750

Bajaj Allianz 37,09,431 58,64,230 83,85,343 1,41,54,427


PERFORMANCE
- Cash Flows 2006-07
PERFORMANCE
- Cash Flows 2007-08
PROFITABILITY RATIOS
• Earnings per Share
• Dividends per Share
• Book Value per Share
• Return on Net Worth
• Combined Ratio
• Expenses of Management to Gross Premium
• Operating Profit Ratio
• Net Earnings Ratio
• Return on Equity
PROFITIABILITY
- Earnings Per Share (PAT/No. of Shares)

Earnings Per Share ( Rs .)


2006 - 07 2007 - 08
United India Insurance 35.258 42.108
New India Insurance 73.997 70.056
Bajaj Allianz 6.843 9.582
PROFITIABILITY
- Dividends Per Share (Dividend Declared/No. of Shares)

Dividend Per Share ( Rs .)


2006 - 07 2007 - 08
United India Insurance 7.052 8.422
( UII )
New India Insurance ( NII ) 14.6 14.15
PROFITIABILITY
- Book Value Per Share (Net Worth/No. of Shares)

Book Value of Shares ( Rs .)


2006 - 07 2007 - 08
United India Insurance 184.124 216.379
New India Insurance 301.008 348.64
Bajaj Allianz 36.63 52.375
PROFITABILITY
- Return on Net Worth (PAT/Net worth)

Return on Net worth


2006 - 07 2007 - 08
United India Insurance 19.1% 19.5%
New India Insurance 24.3% 20.1%
Bajaj Allianz 18.7% 18.3%
BREAK UP OF CLAIMS AND EXPENSES
PROFITABILITY
- Combined Ratio [(Claims + Expenses)/Gross Premium]
PROFITABILITY
- Expenses of Management to Gross Premium Ratio
PROFITABILITY
- Operating Profit Ratio (Operating Profit/Net Premium)

Operating Profit Ratio


2006 - 07 2007 - 08
United India Insurance 4.5% 4.5%
New India Insurance 31% 34%
Bajaj Allianz 8% 9%
PROFITABILITY
- Net Earnings Ratio (PAT/Net Premium)

Net Earnings Ratio / Net Profit Ratio


2006 - 07 2007 - 08
United India Insurance 20.9% 21.9%
New India Insurance 30.7% 28.5%
Bajaj Allianz 81.1% 85.5%
PROFITABILITY
- Return on Equity (PAT/Net Worth)

Return on Equity
2006 - 07 2007 - 08
United India Insurance 3.526 4.211
New India Insurance 7.3 7.006
Bajaj Allianz 0.187 0.183
LIQUIDITY RATIOS

• Current Ratio
• Liquid Ratio
• Super Quick Ratio
LIQUIDITY
- Current Ratio (Current Assets/Current Liabilities)

Current Ratio
2006 - 07 2007 - 08
United India Insurance 0.422 0.448
New India Insurance 0.711 0.841
Bajaj Allianz 0.482 0.543
LIQUIDITY
- Liquid Ratio (Liquid Assets/Current Liabilities)
LIQUIDITY
- Super Quick Ratio (Cash and Bank/Current Liabilities)

Super Quick Ratio


2006 - 07 2007 - 08
United India Insurance 0.18 0.141
New India Insurance 0.416 0.368
Bajaj Allianz 0.319 0.256
EFFICIENCY RATIOS

• Fixed Assets Turnover Ratio
• Total Assets Turnover Ratio
• Working Capital Turnover Ratio
EFFICIENCY
- Fixed Assets Turnover Ratio (Net Premium/Fixed Assets)

Fixed Assets Turnover Ratio


2006 - 07 2007 - 08
United India Insurance 25.707 34.978
New India Insurance 35.823 42.643
Bajaj Allianz 1.945 1.238
EFFICIENCY
- Total Assets Turnover Ratio (Net Premium/Total Assets)

Total Assets Turnover Ratio


2006 - 07 2007 - 08
United India Insurance 0.19 0.189
New India Insurance 0.173 0.154
Bajaj Allianz 0.055 0.048
EFFICIENCY
- Working Capital Turnover Ratio (Net Premium/Working Capital)
OTHER RATIOS

• Reinsurance Ratio
• Net Commission Ratio
• Financial Leverage

OTHER RATIOS
- Reinsurance Ratio
OTHER RATIOS
- Net Commission Ratio (Net Commission/Net Premium)
OTHER RATIOS
- Financial Leverage (Total Assets/Net worth)

Financial Leverage
2006 - 07 2007 - 08
United India Insurance 88.541 101.819
New India Insurance 136.985 159.721
Bajaj Allianz 15.4 23.158
DU PONT ANALYSIS

• Helps us understand the performance of a


company in a better way
• Divides ROE into 3 parts –
▫ Operating Efficiency – Net Earnings Ratio
▫ Asset Usage Efficiency – Assets Turnover Ratio
▫ Financial Leverage
• ROE = Net Earnings Ratio * Assets Turnover
Ratio * Financial Leverage
Du Pont Analysis
2006 - 07 2007 - 08

ROE NER TATR FLR ROE NER TATR FLR

UII 3.526 0.209 0.19 88.541 4.211 0.219 0.189 101.819

NIA 7.3 0.307 0.173 136.985 7.006 0.285 0.154 159.721

Bajaj 0.187 0.811 0.055 15.4 0.183 0.855 0.048 23.158

The ratio tells us the source of superior or inferior return


when compared with other companies in the same industry
as well as enables cross industry comparison.

It may be said that all three companies are ‘High Leverage’


Industries.
Significant Accounting Policies