SUMMER TRAINING PROJECT REPORT

ON
Profitability and Financial Position of
IDBI Federal Life Insurance

(Submitted in the partial fulfillment for the award of the degree of Masters of Business
Administration 2016-18)

PROJECT GUIDE SUBMITTED BY

Balwinder Kaur Annu
Faculty (DIAS) 01212303916

I
 Acknowledgement
Any work of this magnitude requires the inputs, efforts and encouragement of people from all
sides. In this project report I have been fortunate in having the active co-operation of many
people, whom I would like to thank. I am deeply indebted to all people who have guided,
inspired and helped me in the successful completion of this project. I owe a debt of gratitude
to all of them, who were so generous with their time and expertise.

I offer my sincere thanks and humble regards to DELHI INSTITUTE OF ADVANCED

STUDIES for imparting us very valuable professional training in MBA.

It gives me great pleasure to express my heartfelt gratitude to MS BALWINDER KAUR,

my project Guide for giving me the cream of her knowledge.

I would like to thank Mr. Manas Das (Sr. Branch Head) and Mr. Ezad Ahmed (Sr.
Agency Manager) at IDBI Federal Life Insurance, for giving me an opportunity to work
and enlightening my ways whenever I need in completion of this project. My project will be
incomplete if I will fail to thank Mr. Zakir Hussain from IDBI federal Life Insurance, for
all his insightful lectures during the training period. The strong interest evinced by them has
helped me with dealing with the problem, I faced during my course of project work.

I am also thankful to my family and friends for constantly motivating me to complete the
project and providing me an environment which enhanced my knowledge.

II
 Student Declaration

This is to declare that I (Annu, Roll No. 01212303916) have carried out this project work
titled Profitability & Financial Position Of IDBI Federal Life Insurance Co. Ltd myself in
part fulfillment of the Post Graduate Degree of Master of Business Administration from
Delhi Institute Of Advanced Studies.

The work is original, has not been copied from anywhere else and has not been submitted to
any other University/Institute for an award of any degree/diploma.

Annu

01212303916

III
 Executive Summary
This financial analysis report examines the financial strength of IDBI Federal Life Insurance
Co. Ltd. in insurance industry. It is to check the performance and financial health of the
Company. Overall company strategies were reviewed and considered along with the financial
analysis to come at a conclusion for recommendation.

Summer training at IDBI Federal Life Insurance Co. Ltd. has been a period of great
experience and learning which gave an insight to the functioning of the Finance and
Accounts department of the company.

The report introduction gives an overview to the insurance industry and expands on the
Strategies executed by IDBI Federal Life Insurance Co. Ltd. The financial analysis covers
both Balance Sheet and Income Statement of the Company.

It includes income statements and balance sheets, and various financial statement ratios such
as liquidity, capital structure and solvency, return on investment, operating performance,
asset utilization etc.

It also includes the description of varieties of products being offered by the co. . Till date, 21
products are being by the co. in the market if insurance plans.

Some Industry related ratios are also calculated like persistency ratio, Growth rate of
shareholders funds and these ratios shows the strangeness of the business of the company.

IV
 Table Of Contents

Chapter Title Page

No. No.
ACKNOWLEDGEMENT I
CERTIFICATE BY PROJECT GUIDE II
STUDENT DECLARATION III
EXECUTIVE SUMMARY IV

1. INTRODUCTION 1-3

2. COMPANY PROFILE 4-10

2.1 About the company
2.2 Co. principles
2.3 Milestones
2.4 Nature of business
2.5 Product range
2.6 Size of the co.
2.7 Market share
2.8 Key People
3. LITERATURE REVIEW 11-12
4. RESEARCH METHODOLOGY 13-15
4.1 Research Design
4.2 Methods of Data Collection
4.3 Objective of The Study
5. DATA ANALYSIS & INTERPRETATION 16-33
5.1 Work Methodology

V
 5.1.1 Trend Analysis
5.1.2 Ratio Analysis
5.2 SWOT Analysis
5.3 Marketing Mix Of Co.
6. Findings, Suggestions & Conclusions 34-38
Limitations of the Study 39
Appendix 40-44
Bibliography & References 45

VI
CHAPTER -1
Introduction

1
 Introduction to Insurance Sector

Insurance penetration reached 3.4 per cent in FY16 and is expected to cross 4 per cent in
FY17.
In Union Budget 2017, government increased the coverage from 30 per cent to 40 per cent
under Pradhan Mantri Fasal Bima Yojna

The insurance industry of India consists of 57 insurance companies of which 24 are in life
insurance business and 33 are non-life insurers. Among the life insurers, Life Insurance
Corporation (LIC) is the sole public sector company. Apart from that, among the non-life
insurers there are six public sector insurers. In addition to these, there is sole national re-
insurer, namely, General Insurance Corporation of India (GIC Re). Other stakeholders in
Indian Insurance market include agents (individual and corporate), brokers, surveyors and
third party administrators servicing health insurance claims.
Out of 33 non-life insurance companies, five private sector insurers are registered to
underwrite policies exclusively in health, personal accident and travel insurance segments.
They are Star Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance
Company Ltd, Max Bupa Health Insurance Company Ltd, Religare Health Insurance
Company Ltd and Cigna TTK Health Insurance Company Ltd. There are two more
specialised insurers belonging to public sector, namely, Export Credit Guarantee
Corporation of India for Credit Insurance and Agriculture Insurance Company Ltd for crop
insurance.
Government's policy of insuring the uninsured has gradually pushed insurance
penetration in the country and proliferation of insurance schemes are expected to catapult

2
this key ratio beyond 4 per cent mark by the end of this year, reveals
the ASSOCHAM latest paper.
The number of lives covered under Health Insurance policies during 2015-16 was 36 crore
which is approximately 30 per cent of India's total population. The number has seen an
increase every subsequent year as 28.80 crore people had the policy in the previous fiscal.
During June 2016 to May 2017 period, the life insurance industry recorded a new premium
income of Rs 1.87 trillion (US$ 29.03 billion. . The life insurance industry reported 9 per
cent increase in overall annual premium equivalent in April-November 2016. In the period,
overall annual premium equivalent (APE)- a measure to normalise policy premium into the
equivalent of regular annual premium- including individual and group business for private
players was up 16 per cent to Rs 1,25,563 crore (US$ 18.76 billion) and Life Insurance
Corporation up 4 per cent to Rs 1,50,456 crore (US$ 22.48).

Government Initiatives
The Union Budget of 2017-18 has made the following provisions for the Insurance
Sector:
By providing tax relief to citizens earning up to Rs 5 lakh (US$ 7500), the
government will be able to increase the number of taxpayers. Life insurers will be
able to sell them insurance products, to further reduce their tax burden in future. As
many of these people were understating their incomes, they were not able to get
adequate insurance cover.
Demand for insurance products may rise as peoples preference shifts from formal
investment products post demonetization.
The Budget has attempted to hasten the implementation of the Digital
India initiative. As people in rural areas become more tech savvy, they will use
digital channels of insurers to buy policies.
The Insurance Regulatory and Development Authority of India (IRDAI) plans to
issue redesigned initial public offering (IPO) guidelines for insurance companies in
India, which are to looking to divest equity through the IPO route.
IRDAI has allowed insurers to invest up to 10 per cent in additional tier 1 (AT1)
bonds, that are issued by banks to augment their tier 1 capital, in order to expand the
pool of eligible investors for the banks .

3
 Chapter -2
Company profile

4
2.1 About IDBI Federal Life Insurance
(... inspired to be the best)

IDBI Federal Life Insurance (henceforth known as IDBI Federal / the Company) is one of
Indias prominent life insurance companies and offers a diverse range of wealth management,
protection and retirement solutions to individual and corporate customers. While we have
grown significantly since our inception in 2008; steered by our future-focused mindset, we
are driven not by our past accomplishments, but by the vision to be the leaders in the
industry. Through a nationwide network of 2,964 branches of IDBI Bank and Federal Bank,
and a sizeable network of advisors and partners, IDBI Federal Life Insurance has achieved
presence across the length and breadth of the country. As on March 31, 2017, the company
has issued nearly 10.29 lakh policies with a sum assured of over Rs. 58,653.76 crores. IDBI
Federal Life Insurance has total assets under management of 6,090 crores and a robust
capital base of over 800 crores, as on March 31, 2017.

5
IDBI Federal Life Insurance is a Joint Venture of:

Indias premier development and A leading private sector bank A multinational insurance giant,
commercial bank, serving retail having a pan-India network of Ageas has a proud heritage
and corporate customers in all 1,247 branches and 1,485 ATMs, spanning 190 years. One of
corners of the country. Through with a dominant presence in Europes larger insurance
its 1,717 branches, the bank Kerala. It offers a robust companies, it is ranked among
offers a wide spectrum of portfolio of financial solutions to the top 20 in Europe, the No.1
innovative products and services. meet diverse needs of retail insurer in Belgium and among
customers. the market leaders in most of the
countries in which it operates.

2.2 Principles that Drive Co. Ahead

Co. Purpose
Empowering customers to create the life and lifestyle of their choice.
Mission
Reaching out to customers, through empowered & engaged employees and distributors
facilitated by cutting-edge technology, right selling & seamless service to meet their ever
evolving needs.
Vision
to Go Further is underpinned by their strong legacy, having been formed by a three-way
joint venture among leading entities.
Values
Passion
Integrity
Execution
Ambition
Transparency

6
GUIDING PRINCIPLES
Think Different
Display Ownership
Be Solution Focused
Be Agile
Embrace Openness

2.3 Milestones

2006 1DBI Bank, Federal Bank and Belgian-Dutch insurance major Fords Insurance
International NV signed a Moll to start a life insurance company
2008 IDBI Fortis Life Insurance Co. Ltd., which started its operations in March 2008
2008 IDBI Federal becomes one of the fastest growing new life insurers to collect
premiums worth Rs .100 crores
2009 IDBI Fortis announces Rs. 250cr capital infusion
2009 Nimbus ropes in IDBI Fortis as title sponsor of India-Sri Lanka series
2009 'IDBI Fortis' Boss-Ka-Boss receives PRCI Award
2009 IDBI Fortis receives bronze Dragon at 'PMAA 2009
2010 IDBI Fortis now renamed as IDBI Federal Life Insurance Company
2011 IDBI Federal launches Retiresurance Guaranteed Pension Plan
2012 IDBI Federal makes its online debut
2013 IDBI Federal in association with Phoenix Foundation organizes a trek for the
physically challenged
2013 IDBI Federal breaks-even in Five years; posts maiden profit of Rs. 9.24 crores
2016 Sold over 10 lakh policies
2017 Reached a robust capital base of Rs. 800 Crores

2.4 Nature of Business

Direct Marketing
Channel Agency
Bank Assurance

7
2.5 PRODUCT RANGE OF IDBI FEDERAL
As on March 31, 2017, IDBI Federal has strong product suite comprising 21 products
available for sale across product and need categories. In the quest to develop products that
resonate with customer expectations, co. launched I-Innovate contest wherein co. gleaned
ideas from the sales people who are constantly in touch with customers and know what they
need and expect. Over 100 product ideas were received across four zones through this
campaign.
In FY 2016-17, co. filed 10 products for approval with IRDAI of which 6 were approved.

Online Plans
insurance Flexi Term Plan
iSurance Online Term Insurance Plan

Term Plans
Online plans &
Termsurance Sampoorn Suraksha Micro-insurance Plan
Termsurance Life Protection Insurance Plan

Child Plan
Childsurance Savings Protection Insurance Plan
Wealthsurance Future Star Insurance Plan

ULIP Plans
Wealthsurance Future Star Insurance plan
Wealth Gain Insurance Plan
Wealthsurance Growth Insurance Plan
Wealthsurance Growth Insurance Plan SP

Savings Plans
Wealth Gain Insurance Plan
Lifesurance Savings Insurance Plan
POS Guaranteed Plan
POS Guaranteed Income Plan

8
 Incomesurance Guaranteed Money Back Insurance Plan
Incomesurance Guaranteed Money Back Insurance Plan 7 Pay
Wealthsurance Growth Insurance Plan
Wealthsurance Growth Insurance Plan SP

Retirement Solutions
Wealth Gain Insurance Plan
Lifesurance Savings Insurance Plan
Wealthsurance Growth Insurance Plan
Wealthsurance Growth Insurance Plan SP

Group Plans
Group Employee Benefit Plan
Group Loan Secure Plan
Group Microsurance Plan
Loansurance Group Insurance Plan SP
Retiresurance Group Insurance Plan
Termsurance Group Insurance Plan
Termsurance Group Protection Insurance Plan
Loansurance Group Insurance Plan

2.6 Size of the Company

In terms of manpower
IDBI Federal Life Insurance Co. has 1,941 employees on roll and over 10000 agents who
are working for the company.

In terms of turnover
The size of the company in terms of turnover is approximate 1400 crores. The company
achieved its break even in just 5 years and is making huge profits.

9
2.7 Market Share
The market shares of leading companies in terms of life insurance premium collected are as
described in the table:

2.8 Key People in the Company

Person Position in the Company

Vighnesh Sahane Chief Executive Officer
Dr. Ajay Oberoi Chief People Officer
Aneesh Srivastava Chief Investment Officer
Arvind Shahi Chief Risk Officer
Ganesha Ratnam Chief Distribution Officer
Karthik Raman Chief Marketing Officer
Lalitha Bhatia Chief Operating Officer
Kedar Patki Chief Financial Officer

10
 Chapter -3
Literature Review

11
 Literature Review

Neelaveni (2012) explains how to evaluate the performance of insurance company at the time
period of 2014-2016 in the annual report. The public sector of insurance company was
lagging due to the competition of private sector had well performed in financial aspects.

Kumara (2013) found that the financial performance of insurance industry has various
parameters. It was observed by calculating the financial ratios. There has been a significant
increase in the overall business performance of insurance industry.

Prof. S.J.Parmar has analyzed the profitability and liquidity aspects at insurance sector in his
research under the title of profitability analysis at insurance sector in India

Shri N..P Aggarwal in this study at financial statements at Indian Insurance industries were
analysed for the title at analysis at financial statements

D. S.C.Jain has made a study at profitability and other aspects of financial management at
Indian Insurance Industry.

Dr. Sumninder Kaur Bawa* Samiya Chattha** has analysed the financial Performance of
Life Insurers in Indian Insurance Industry.

Mr.R.Murugan in his project, titled, Fire Insurance in Sivakasi has highlighted the
significance of life insurance business to match and boost industries.

12
 Chapter-4
Research
Methodology

13
METHODOLOGY:

4.1 Research Design

The study used a descriptive research design for the purpose of getting an insight over the
issue. It is to provide an accurate picture of some aspects of market environment. Descriptive
research is used when the objective is to provide a systematic description that is as factual
and accurate as possible.

4.2 Method of Data Collection:

Primary Data: Primary data have collected through companys annual reports, policies
brochures, employees of the company and through direct face to face conversations with few
customers of the company.

Secondary Data: The internal sources are datas being collected from employees, customers
etc. And the external sources include the collection of data from published articles, books,
research reports etc. as well as commercial, panel research, reports etc.
Online sources which may include web pages of government organizations, companies,
symposium, seminar etc., For this study, secondary data were gathered from books, journal
and articles using the college library as well as the through internet e.g. Google scholar,
Ebsohost, IRDA website.

14
4.3 Objectives of the Study

To analyze the financial position & performance evaluation of the IDBI Federal
Insurance Co. Ltd.
To review the growth and progress of the Company.
To offer suitable suggestions for the improvement of services being offered by the
Company.
To identify the wide range of insurance products offered by the company.

15
 Chapter -5
Data Analysis &
Interpretation

16
5.1 Work Methodology:

5.1.1 TREND RATIOS / Analysis

Trend ratio can be defined as index number of the movement of the various financial items in
the financial statement for the number of periods. It is a statistical device applied in the
analysis of the financial statement to reveal the trend of the items with the passage of time.
Trend ratio shows the nature and rate of movements in various financial factors they provide
a horizontal analysis of comparative statements and reflect the behavior of various items with
the passage of time. Time ratio can be graphically presented for a better understanding by the
management. That is very useful in predicting the behavior of the various financial factors in
the future. However, it should be noted that conclusion is arrived at. Since trends are
sometimes significantly affected by externalities.

17
Conclusion of the above Trend Ratio / Analysis
Asset under the companys hand is continuously increasing whereas the total premium
received by the company is increased at a slow pace in 13-14 but there & after it is
increasing.
Operating expenses of the company are decreasing i.e. 19% to 16% . So, it is a positive sign
for the company. Since the company is just incorporated in 2008 so having losses in the
beginning but company manage the loss in year 2013-14 , having profit of Rs. 155cr. in 14-
15 and still able to continue with positive figures of Rs. 52 cr. in 16-17.

5.1.2 Ratio Analysis

According to Myers Ratio analysis of financial statements is a study of relationship among
various financial factors in a business as disclosed by a single set of statements and a study of
trend of these factors as shown in a series of statements."

Ratio analysis helps the management to know about the earning capacity of the business
concern. In this way profitability ratios show the actual performance of the business. There is
no much increase in the profitability ratios of IDBI Life Insurance Co. Ltd. On the other side
as compared to the other existing established Insurance Company the profit margin and
returns of IDBI Federal are good.

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the indicated
quotient of two mathematical expressions and the relationship between two or more
things. In financial analysis, a ratio is used as a benchmark for evaluation the financial
position and performance of a firm. The absolute accounting figures reported in the financial
statements do not provide a meaningful understanding of the performance and financial
position of a firm. An accounting figure conveys meaning when it is related to some other
relevant information. For example, an Rs.5 core net profit may look impressive, but the
firms performance can be said to be good or bad only when the net profit figure is related to
the firms Investment.
The relationship between two accounting figures expressed mathematically, is known as a
financial ratio (or simply as a ratio). Ratios help to summarize large quantities of financial
data and to make qualitative judgment about the firms financial performance. For example,
consider current ratio. It is calculated by dividing current assets by current liabilities; the ratio

18
indicates a relationship- a quantified relationship between current assets and current
liabilities. This relationship is an index or yardstick, which permits a quantitative judgment
to be formed about the firms liquidity and vice versa. The point to note is that a ratio
reflecting a quantitative relationship helps to form a qualitative judgment. Such is the nature
of all financial ratios.

Managerial uses of ratio analysis:

1. Helps in decision making:
Financial statements are prepared primarily for decision-making. Ratio analysis helps in
making decision from the information provided in these financial Statements.
2. Helps in financial forecasting and planning:
Ratio analysis is of much help in financial forecasting and planning. Planning is looking
ahead and the ratios calculated for a number of years a work as a guide for the future. Thus,
ratio analysis helps in forecasting and planning.
3. Helps in communicating:
The financial strength and weakness of a firm are communicated in a more easy and
understandable manner by the use of ratios. Thus, ratios help in communication and enhance
the value of the financial statements.
4. Helps in co-ordination:
Ratios even help in co-ordination, which is of at most importance in effective business
management. Better communication of efficiency and weakness of an enterprise result in
better co-ordination in the enterprise
5. Helps in control:
Ratio analysis even helps in making effective control of business.The weaknesses are
otherwise, if any, come to the knowledge of the managerial, which helps, in effective control
of the business.
(B) Utility to shareholders/investors:
An investor in the company will like to assess the financial position of the concern where he
is going to invest. His first interest will be the security of his investment and then a return in
form of dividend or interest. Ratio analysis will be useful to the investor in making up his
mind whether present financial position of the concern warrants further investment or not.
(C) Utility to creditors:

19
 The creditors or supplier extent short-term credit to the concern. They are invested to know
whether financial position of the concern warrants their payments at a specified time or not.
(D) Utility to employees:
The employees are also interested in the financial position of the concern especially
profitability. Their wage increases and amount of fringe benefits are related to the volume of
profits earned by the concern.
(E) Utility to government:
Government is interested to know overall strength of the industry. Various financial
statement published by industrial units are used to calculate ratios for determining short term,
long-term and overall financial position of the concerns.
(F) Tax audit requirements:
Sec44AB was inserted in the income tax act by financial act; 1984.Caluse 32 of the income
tax act requires that the following accounting ratios should be given:
Gross profit/turnover.
(1) Net profit/turnover.
(2) Stock in trade/turnover.
(3) Material consumed/finished goods produced.
Further, it is advisable to compare the accounting ratios for the year under consideration with
the accounting ratios for earlier two years so that the auditor can make necessary enquiries, if
there is any major variation in the accounting ratios.

Limitations
Ratio analysis is very important in revealing the financial position and soundness of the
business. But, in spite of its advantages, it has some limitations which restrict its use. These
limitations should be kept in mind while making use of ratio analysis for interpreting the
financial the financial statements. The following are the main limitations of ratio analysis:

1. False results:
Ratios are based upon the financial statement. In case financial statement are in correct or the
data of on which ratios are based is in correct, ratios calculated will all so false and defective.
The accounting system itself suffers from many inherent weaknesses the ratios based upon it
cannot be said to be always reliable.
2. Limited comparability:

20
The ratio of the one firm cannot always be compare with the performance of other firm, if
uniform accounting policies are not adopted by them. The difference in the methods of
calculation of stock or the methods used to record the deprecation on assets will not provide
identical data, so they cannot be compared.
3. Absence of standard universally accepted terminology:
Different meanings are given to a particular term, egg. Some firms take profit before interest
and tax; others may take profit after interest and tax. A bank overdraft is taken as current
liability but some firms may take it as non-current liability. The ratios can be comparable
only when all the firms adapt uniform terminology.
4. Price level changes affect ratios:
The comparability of ratios suffers, if the prices of the commodities in two different years are
not the same. Change in price effect the cost of production, sale and also the value of assets.
It means that the ratio will be meaningful for comparison, if the prices do not change.
5. Ignoring qualitative factors:
Ratio analysis is the quantitative measurement of the performance of the business. It ignores
qualitative aspect of the firm; how so ever important it may be. It shoes that ratio is only a
one sided approach to measure the efficiency of the business.
6. Personal bias:
Ratios are only means of financial analysis and an end in it self. The ratio has to be
interpreted and different people may interpret the same ratio in different ways.
7. Window dressing:
Financial statements can easily be window dressed to present a better picture of its financial
and profitability position to outsiders. Hence, one has to be very carefully in making a
decision from ratios calculated from such financial statements.
8. Absolute figures distortive:
Ratios devoid of absolute figures may prove distortive, as ratio analysis is primarily a
quantitative analysis and not a qualitative analysis.

Classification of ratios:
Several ratios, calculated from the accounting data can be grouped into various classes
according to financial activity or function to be evaluated. Management is interested in
evaluating every aspect of the firms performance. They have to protect the interests of all

21
 parties and see that the firm grows profitably. In view of thee requirement of the various
users of ratios, ratios are classified into following four important categories:
Liquidity ratios - short-term financial strength
Leverage ratios - long-term financial strength
Profitability ratios - long term earning power

Liquidity ratios measure the firms ability to meet current obligations;

Leverage ratios show the proportions of debt and equity in financing the firms assets;
Profitability ratios measure overall performance and effectiveness of the firm

LIQUIDITY RATIOS:
It is extremely essential for a firm to be able to meet the obligations as they become due.
Liquidity ratios measure the ability of the firm to meet its current obligations (liabilities).
The liquidity ratios reflect the short-term financial strength and solvency of a firm. In fact,
analysis of liquidity needs the preparation of cash budgets and cash and funds flow
statements; but liquidity ratios, by establishing a relationship between cash and other current
assets to current obligations, provide a quick measure of liquidity. A firm should ensure that
it does not suffer from lack of liquidity, and also that it does not have excess liquidity. The
failure of a company to meet its obligations due to lack of sufficient liquidity, will result in a
poor credit worthiness, loss of credit worthiness, loss of creditors confidence, or even in
legal tangles resulting in the closure of the company. A very high degree of liquidity is also
bad; idle assets earn nothing. The firms funds will be unnecessarily tied up in current assets.
Therefore, it is necessary to strike a proper balance between high liquidity and lack of
liquidity.

The most common ratios which indicate the extent of liquidity are lack of it, are:

1. Current Ratio:
Current ratio is calculated by dividing current assets by current liabilities.

Current assets
Current Ratio =
Current Liabilities

22
YEAR 2015 2016 2017
CURRENT RATIO 1.66 1.85 1.79

INFERENCE
As compared the amount of Current Assets Rs.3,952,222,000 in 2016 to that of 2017 of Rs.
5,222,595,000 .There is an increase in the amount of it .

Current ratio is decreased due to the increase in the amount of Current Liabilities from Rs.
2,139,248,000 to Rs. 2,917,198,000 .

Decreased current ratio represents the decreased co. short-term solvency in current year. It
indicates the decreased availability of current assets in rupees for every one rupee of current
liability. A ratio of greater than one means that the firm has more current assets than current
claims against them Current liability.

2. Quick Ratio:
Quick ratio also called Acid-test ratio, establishes a relationship between quick, or liquid,
assets and current liabilities. An asset is a liquid if it can be converted into cash immediately
or reasonably soon without a loss of value. Cash is the most liquid asset. Other assets that
are considered to be relatively liquid and included in quick assets are debtors and bills
receivables and marketable securities (temporary quoted investments). Inventories are
considered to be less liquid. Inventories normally require some time for realizing into cash;
their value also has a tendency to fluctuate. The quick ratio is found out by dividing quick
assets by current liabilities.

Quick assets*
Quick Ratio =
Current Liabilities

*Quick Asset = Current Asset Stock prepaid expense

23
YEAR 2015 2016 2017

QUICK RATIO 1.66 1.85 1.79

INFERENCE
Since the company is belonging to the Service sector and not having any kind of stock with
it. So it will be equal to current ratio.

3. Net Working Capital Ratio

Net working capital is a financial metric, a business owner should use in order to help
measure the cash and operating liquidity position of the business. It is the sum of all current
assets and current liabilities. It is a measure of the short-term liquidity of a business, and can
also indicates the ability of company management to utilize assets in an efficient manner.

Net working capital (NWC)

NWC Ratio =
(Net asset or Capital employed)

Year Net Working Capital Net Asset Ratio

(CA-CL) (FA + Working Capital)
Rs.(000) Rs.(000)
2015 1,364,825 1,470,082 0.93

2016 1,812,974 3,114,461 0.58

2017 2,305,397 3,775,910 0.61

INFERENCE
As there is an increase in the amount of Net Working Capital & Net Assets in 2017 as
compared to that of 2016 . Hence the ratio has increased .
Whereas the company performance is not satisfactory if 2015 data is compared to that of
CY.

24
LEVERAGE RATIO:
The short-term creditors, like bankers and suppliers of raw materials, are more concerned
with the firms current debt-paying ability. On other hand, ling-term creditors like debenture
holders, financial institutions etc are more concerned with the firms long-term financial
strength. In fact a firm should have a strong short as well as long-term financial strength. In
fact, a firm should have a strong short-as well as long-term financial position. To judge the
long-term financial position of the firm, financial leverage, or capital structure ratios are
calculated. These ratios indicate mix of funds provided by owners and lenders. As a general
rule there should be an appropriate mix of debt and owners equity in financing the firms
assets.
Leverage ratios may be calculated from the balance sheet items to determine the proportion
of debt in total financing.

1. Debt-Equity Ratio:
The relationship describing the lenders contribution for each rupee of the owners
contribution is called debt-equity (DE) ratio is directly computed by dividing total debt by net
worth:

Total debt (TD)

Debt - equity ratio =
Net worth (NW)

Year 2015 2016 2017

D/E Ratio 0.78 0.24 0.56

INFERENCE
It means that the liabilities are 56% of stockholders equity or we can say that the creditors
provide 56 cents for each rupees provided by stockholders to finance the assets in 2017.

25
2 Proprietary Ratio
This ratio indicates that the proportion of total assets funded by the owner or shareholders. It
is calculated as under

Equity
Proprietary ratio =
Total Asset

A higher proprietary ratio indicates high sound financial position of the company from the
long term point of view because it means that a large proportion of total asset is provided by
equity and hence the firm is less dependent on external sources.

Year Equity Share Current Asset Fixed Asset Total Asset Proprietary
Capital (Rs.000) (Rs.000) (Rs.000) (Rs.000) Ratio
2015 7,997,824 3,436,895 106,257 3,543,152 2.257
2016 7,998,912 3,946,889 1,301,487 4,248,376 1.88
2017 8,000,000 5,222,595 1,470,513 6,693,108 1.20

INFERENCE
The proprietary ratio is 120%. It means stockholders has contributed 120% of the total
tangible assets.
A high proprietary ratio, therefore, indicates a strong financial position of the company and
greater security for creditors
Whereas, the ratio has been decreased in CY.

PROFITABILITY RATIOS
A company should earn profits to survive and grow over a long period of time. Profits are
essential, but it would be wrong to assume that every action initiated by management of a

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 company should be aimed at maximizing profits, irrespective of concerns for customers,
employees, suppliers or social consequences. It is unfortunate that the word profit is looked
upon as a term of abuse since some firms always want to maximize profits ate the cost of
employees, customers and society. Except such infrequent cases, it is a fact that sufficient
profits must be able to obtain funds from investors for expansion and growth and to
contribute towards the social overheads for welfare of the society.
Profit is the difference between revenues and expenses over a period of time (usually one
year). Therefore, the financial manager should continuously evaluate the efficiency of the
company in terms of profit. The profitability ratios are calculated to measure the operating
efficiency of the company. Besides management of the company, creditors and owners are
also interested in the profitability of the firm. Creditors want to get interest and repayment of
principal regularly. Owners want to get a required rate of return on their investment. This is
possible only when the company earns enough profits.
Generally, two major types of profitability ratios are calculated:
Profitability in relation to sales.
Profitability in relation to investment.

1. Return on Equity (ROE) A return on shareholders equity is calculated to see the

profitability of owners investment. The shareholders equity or net worth will include paid-
up share capital, share premium, and reserves and surplus less accumulated losses. Net worth
also be found by subtracting total liabilities from total assets. The return on equity is net
profit after taxes divided by shareholders equity, which is given by net worth:

Profit after taxes

Return on Equity =
Equity

ROE indicates how well the firm has used the resources of owners. In fact, this ratio is one
of the most important relationships in financial analysis. The earning of a satisfactory return
is the most desirable objective of business. The ratio of net profit to owners equity reflects

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the extent to which this objective has been accomplished. This ratio is, thus, of great interest
to the present as well as the prospective Shareholders and also of great concern to
management, which has the responsibility of maximizing the owners welfare.

Year Profit After Tax Equity ROE

(Rs.000) (Rs.000)
2015 1,545,563 7,987,824 19.325
2016 152,819 7,998,912 1.910
2017 520,624 8,000,000 0.07

INFERENCE
ROE is decreasing drastically year after year. Year 2017 reflecting the lowest of the return to
shareholders as compared to the couple of previous years.

2. Earnings per Share (EPS)

The profitability of the shareholders investments can also be measured in many other ways.
One such measure is to calculate the earnings per share. The earnings per share (EPS) are
calculated by dividing the profit after taxes by the total number of ordinary shares
outstanding.

Profit after taxes

EPS =
No of Shares

Year EPS
2015 1.93
2016 0.02
2017 0.01

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INFERENCE
As ROE is showing very less return to shareholders on their equity . Hence EPS will also
going to reflect the same scenario, i.e. decreased level of earnings per share year after year.

3. Net Profit Margin

Net profit ratio establishes a relationship between net profit and sales and indicates and
managements in manufacturing, administrating and selling the products. This ratio is the
overall measure of the firms ability to turn each rupee sales into net profit. If the net margin
is inadequate the firm will fail to achieve satisfactory return on shareholders funds. This
ratio also indicates the firms capacity to withstand adverse economic conditions. A firm with
high net margin ratio would be advantageous position to survive in the face of falling prices,
selling prices, cost of production.

Profit after tax

Net Profit Margin = * 100
Net Sales

Year Profit after tax Sales/ technical Net Profit

Premium Account Margin
(Rs.000) (Rs.000) (%)
2015 1,545,563 1,917,848 80.59

2016 1,52,819 4,27,821 35.72

2017 5,20,624 6,05,386 86.00

INFERENCE
As the profit earned after tax is increased in 2017, hence NPM is increased.
It shows that company is more efficient at converting sales into actual profit & is improving
its performance year on year in this area.

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5.2 SWOT Analysis of the Company
Strengths
IDBI Federal boasts of its strength, as because of these strengths it has completed its
break even in just a short span-of time whereas its other competitors are still struggling.
The skilled manpower and in-depth knowledge of subjects related to their industry surely
turn table in their favor and they even try to retain and motivate their employees as they
promote within their organization. They generate services according to the needs and
wants of the customer like payment terms and premium to be made. With the venture of
three companies comprising of Ageas, Federal and IDBI Bank, the image of IDBI is then
supported by Federal which is a foreign bank, therefore, attracting both the NRIs and Indian
customers. It has a strong capital as to deal with future contingencies. They even manage
to have low management expenses and administrative cost.

Weakness
It even has some weaknesses comprising of telecalling agents as they need more skills to
talk to customers and giving them clearer picture of their queries. The tied-up agents
have poor retention percentage as they mostly do not contribute to the company.

Opportunities
Since it is a dynamic environment, so we need to keep on innovate the product according
to the customers need, offering a right mix of flexibility/ risk/ return. Educating the
customers about the product is a difficult task, so one need to inflow of managerial
and financial expertise from the worlds leading insurance markets.

Threats
There are n numbers of private insurance companies vying for the same uninsured
population. As recently there was rule by IRDA to stop running all the previous products,
and one has to launch all the new products in the market this results in starting from the
niche and then making a brand-name again therefore, legislation could impact and great
risk is involved. There are many substitutes available in the market which results in very
high competition prevailing in the industry. With the changing in technological, political,

30
economic, socio cultural environment one has to keep pace with these changing
environments and only hence, one can survive in the industry.

5.3 Marketing mix of IDBI Federal

Marketing mix refers to the planned mix of the controllable elements of a product's marketing
plan. The marketing mix is the tactical or operational part of a marketing plan. It specifies set
of actions, or tactics, that a company uses to promote its brand or product in the market. The
marketing mix is all about getting the right combination of 4 P`s (Product, Price, Place,
Promotion). In services marketing we have three additional P`s to play around which are
People, Physical evidence, and Process.
7 P`s of IDBI federal
1. Product IDBI Federal offers a range of insurance products some of which are
incomesurance, lifesurance, wealthsurance, termsurance, loansurance among others. The
products are launched keeping in view the needs of the consumers, offerings of competitors,
and future trends. The company doesn`t focus much on term plans because the market is
highly competitive and the margins are less. The focus is more on providing endowment
plans which promises to grow the money while taking care of the insurance needs
simultaneously.
2. Price The pricing in insurance is in the form of premium rates. Mortality, expense and
interest are three main factors used for determining the premium rates under a life insurance
plan. Premium rates are revised if there are changes in any of these factors.
Mortality (deaths in a particular area) - The average rate of mortality is one of the
main considerations when deciding upon the pricing strategy.
Expenses: The cost of processing, cost to reinsurance companies, commission are all
included into the premium sum and cost of instalments and forms the integral part of
the pricing strategy.
Interest: The rate of interest has to be competitive enough compared with other
financial instruments for people to have willingness to invest in insurance.
3. Place - This component is essential to identify distribution channels and positioning the
product in the market. Traditionally insurance is offered through network of distributors and
agents. IDBI also rely heavily on its field agents and distributors to offer its products. Of late
the company has started to sell its products online as well. Online medium gives consumers
easy access and price advantage over the traditional medium. At present, the company is

31
offering only term insurance plan online. The company has branches in every major city to
serve the customers well. IDBI and FEDERAL bank, the parents of IDBI Federal, also offer
its products at all their branches.
4. Promotion IDBI federal uses both personal and impersonal promotional strategies. It`s
highly imperative for the company to train its workforce and agents well who are the face of
the company. The agents using their personal contacts and leads promote the services of IDBI
Federal and the brand.
Advertising and Publicity, organisation of conferences and seminars, contests and prizes,
incentive to policyholders are impersonal communication that the company uses for
converting prospects to actual policy holders.
5. People In insurance industry, relationship building with customers is of the prime
importance because the face value of the agent has a great impact on customers choosing the
company`s products. The products offered by competitors are almost similar and it takes a
great deal of persuasion and trust to convert prospects into actual customers. For this reason,
the company believes in giving highly sophisticated training about the industry and the
products to its sales force. The sales commission are designed in a way to keep the workforce
motivated.
6. Process The process should be customer friendly in insurance industry. Speed of settling
claims is a highly critical aspect which customer inquires before purchasing the product of
any company. IDBI Federal guarantees fifteen days settlement assurance while the industry
standard is thirty days. It also has a twenty four hours customer helpline to register and sort
out any grievances. The company has made some of its products online for serving its
customers better.
7. Physical evidence Insurance is an intangible product but the customers need some kind
of physical cues to evaluate these products before they purchase it. Physical evidence is the
material part of services. Physical environment, ambience, spatial layout, and corporate
branding (signs, symbols and artefacts) are used by companies like IDBI Federal to have a
greater impact on customers.

4C`s of IDBI Federal

1. Company IDBI Federal Life Insurance is one of Indias growing life insurance
companies and offers a diverse range of wealth management, protection and retirement

32
solutions to individual and corporate customers. The uniqueness of the company can be
summarised as
Achieved breakeven within just 5 years after commencing its business in 2008.
The company offers its products through a strong network of 2964 branches of IDBI
and Federal banks and it also has sizeable network of advisors partners.
As on March 31, 2017, the company has issued nearly 10.29 lakh policies with a sum
assured of over Rs. 58,653.76 crore.
IDBI Federal Life Insurance has total assets under management of 6,090 crore and a
robust capital base of over 800 crores, as on March 31, 2017.
2. Customer Being a new player in the market, the company differentiates itself by
presenting itself as a customer focused company. A claim settlement period of 15 days only
reaffirms its commitment to customer service. The life insurance market grew from USD
10.5 billion in FY02 to USD 56.05 billion in FY16. The insurance penetration reached 3.4%
in 2016 and it only shows a huge potential in the coming years. Against this backdrop, by
establishing itself as a customer oriented company it intends to capture a greater share of the
insurance business.
3. Competitors Insurance business is highly competitive in nature. The products are almost
similar across various companies and so the companies operate on a very thin margin. To
survive in this market, the companies play on volumes. Competitors of IDBI Federal include
LIC, ICICI Lombard, HDFC Life, Birla Sun life, Reliance Life among other players.
4. Collaborators These are the partners of the insurance companies which help in selling
its products. Insurers collaborate with agents, brokers, insurance marketing firms, and partner
banks to promote and sell insurance policies banks helps insurers to access a large customer
base of the banks without incurring any cost. IDBI Federal insurance company also offers its
products through its partner banks IDBI and Federal across the country.. Since this is a
commission based business, partnering through these channels saves on cost for the insurers
as they don`t need to develop entire infrastructure for the same.

33
 Chapter-6
Findings ,
Suggestions &
Conclusions

34
 FINDINGS
Despite the uncertain regulatory framework and contrarian to the unsatisfactory performance
by industry peers, IDBI Federal registered some decline and achieved following results in FY
2016-17.

Individual new business grew 30%

77% persistency for 13th month amongst the best in the industry
Market share for total NBP amongst private players rose to 1.57% from 1.44%
Operating cost to gross premium stood at 16%
The gross booked premium was Rs. 1,565 crore, a growth of 26% over the previous year.
Total New Business Premium for the year stood at Rs. 794 crore with a growth of 35% with
contribution of 61% from non-unit linked products. At Rs. 772 crore, the renewal premium
grew by 18% over the previous year.
The Company reported a total new business premium growth of 35% and a 18% growth in
renewal premium.
IDBI Federal Life Insurance is among the top 10 trusted life insurance brands in the country,
as per Economic Times Brand Equity Survey
The Company had received Gold Award named League of Communications Professionals
(LACP) Awards 2015 for Annual Report 2015-16 in the Insurance Category.
The Company retained market ranking at 13 for the New Business Individual Life with
growth of 30% over the previous year.
Market share amongst private insurers for individual new business premium rose from 1.91%
to 1.97% in the fiercely competitive life insurance market. With the robust overall growth of
26%, total premium of the Company rose to ` 1,565 crore. With this growth on one hand and
hawk-eye on operating expenses, the Operating Cost Ratio (Operating cost to gross written
premium) reduced from 18.65% to 16.37% during the year.
As per latest published IRDAI handbook, IDBI Fedral is the only Company to have retained
over 50% of our customers at the end of five years. The Companys superlative performance
reflects in profit before tax growing at more than 200% over prior year.
Expenses ratio as operating cost to gross premium stands at 16.37%, which is credible among
the peers in the industry.
The Company is having 13th ranking for single premium against8th recorded last year

35
 Co. 13th month persistency stands at a healthy 77.00% based on premiums, which is among
the best in the industry.
share of online payment has increase to 12% in FY 2016-17.
Non-Participating fund of Company has seen a growth of 26%. Equity exposure in this fund
is 5% against maximum permitted limit of 10%.
Participating fund has almost doubled in size during the year; core duration of this portfolio is
8.9 years against required duration of 21.4 years. Up to last year, permitted equity exposure
in this fund was 24% which was considered high and hence it was decided to reduce
maximum permissible equity limits to 10%.
Total funds under management are at 6,090 crore and have seen a growth of 24% over last
year.
8 Day Claims Guarantee remained an important highlight of the year.Till date, not a single
rupee paid as penalty or interest on account of delay under our 8-Day Claims Guarantee
complaints ratio is the lowest among the life insurance players, underlining co. focus towards
customer satisfaction
Repudiation ratio reduced from 13% in 2015-16 to 7% in the current year
Since the Company still has accumulated losses, the Directors are unable to recommend any
dividend to the shareholders.
The Company has not proposed to transfer any amount to general reserves as the Company
still has accumulated losses.
The solvency margin ratio of the Company as at March 31, 2017 stood at 352% which is
above the requirement of 150% prescribed by IRDAI for Financial Year ending March 2017.
7 out of 10 employees feel that life at IDBI Fedral has changed for better over the last 2
years.
Nearly 80% of employees feel a sense of pride in being a part of the organization
74% employees feel that they get an opportunity to try new ideas in their areas.

36
 Suggestions
Company is in the situation of the loss from past few years. However it a new company as
compared to the other players in the insurance sector so losses are usual and the Company
belongs to the Insurance business in which a long period required to come to the profits but
still company should try to minimize the losses.

Cash Amount Available in the Balance Sheet of the Company is less than the required
because as the nature of the business, An Insurance Company should require a higher amount
of Cash balance in its Accounts to meet out the Claim Settlement requirements of the Cash.

Fixed Assets of the Company is decreasing, IDBI Federal is a newly established Company
and should require increasing the fixed Assets of the Company for future Growth
prospective.

As the deposits are increasing in very low rate as compare to the other Insurance Sector
Companies, Company should require to work on the Marketing of the product.

Company is adopting a good policy to get it in a safe Zone and reach to a breakeven point in
5 years of Incorporation, which is very good as compare to another Insurance Companies.

Discontinued policies are increasing, Discontinuation of the policies is considered as a main

drawback factor in the Insurance Sector Company should work on it.

Products available with company are less comparatively less preferred by the clients, In some
area company dont have the product e.g. Health Insurance, Retirement plan.

Company is carrying a Loss since incorporation and claiming the set off of the carry forward
losses, Company should try to finish that loss because this loss is over shadowing the profits
earned by the company in the current year.

Company should reduce their premium to sustain in the market. They also focus on customer
services & they must be aware about the current market trend.

37
Conclusion

IDBI Federal Life Insurance Co. Ltd. is consistently driving product and service innovations
to cater to the need based priorities of Indian masses and help them enjoy the goodness of
life. Despite challenges, we have expanded our customer reach, strengthened our Operations,
and developed a range of innovative savings and protection Solutions to address evolving
customer aspirations. As we strengthen our industry presence, we are inspired to do more.
We are driven by our belief to touch and transform peoples lives and create value for all
stakeholders.

IDBI Federal Life Insurance CO. Ltd. is a newly started Insurance Company and trying their
best to get in a positive position since it belongs to Insurance business. It takes a lot of time to
recover the cost of starting of business.

However IDBI Federal achieved Break Even in Year 2013 and on moving to generate profits.
Company is doing good business because the premium received by the Company is
increasing year by year and customer of the Company is also satisfied with the product of the
Company because Persistency Ration is regularly increasing now it is 78% which is very
high than other insurance companies.

In the Product wise Company is only in Life Insurance and to success in competitive business
Company require to start more products like in retirement plan, Health Insurance, Low Cost
Accidental Insurance etc.

As per the study, they are earning profit but if we ask any customer for feedback they always
prefer to go to their others players in the insurance sector. So it is a good strategy to connect
with new customers but it is of utmost importance that they should maintain the loyalty with
existing customer.

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LIMITATIONS OF THE STUDY :

The financial details of the bank are collected for current and previous year only.

Co. is a joint venture of two more companies, market financial position cannot be studied in a
couple of month so time is considered as main constraint .

The information given from the co. was limited.

The survey conducted was more of subjective kind and results will be completely based on
secondary data.

The data collected for the study depends on published financial statements of the companies
which may incorporate some drawbacks.

The horizon of the study merely confined to very less number of variables as the
determinants of insurance company's profitability and measuring financial performance
without considering any overall performance measurement tool.

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APPENDIX

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Bibliography and References:

Books Referred:
Marketing Management by Philip Kotler
Financial Statement Analysis and Reporting by Peddina Mohana Rao

Websites Referred:
https://www.idbifederal.com/
https://www.irdai.gov.in/Defaulthome.aspx?page=H1
http://www.idbifederal.com/Pages/home.aspx
https://www.policybazaar.com/
http://www.livemint.com/
https://en.wikipedia.org/wiki/IDBI_Federal_Life_Insurancehttp://shodhganga.inflibne
t.ac.in/bitstream/10603/50725/14/14_performance%20evaluation%20of%20united%2
0india%20insurance%20company%20limited.pdf
https://www.ibef.org/industry/insurance-sector-india.aspx

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