Financial Analysis

1. INTRODUCTION
Financial management has always vital and an integrated part of business management. Financial management is concerned with the planning and controlling of the firms financial resource. It is often said that the financial management has receives less emphasis as compared to topics like production and marketing. However the task of financial planning and on tolling will assume relative more important role than in the past due to certain changes that have taken place or will take place in economy. Factors such as increasing pace of industrialization, technological innovations land inventions, raising price levels, increasing influence of government in financial matters etc. definition of financial management Financial management as an application of general managerial principles to the area of financial decision-making. Howard and Upton Financial management is an area of financial decision making harmonizing individual motives and enterprise goals. Objectives of financial management: The financial objective of a company is to maximize owners economic welfare. However, there is disagreement as to how the economic welfare of owners can be maximized. They are mainly two points discussed. 1. Profit maximization. 2. Wealth maximization Western and Brigham

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Profit Maximization: 1. An individual firm performing any economic activity rationally aim at utility maximization. Utility can be measured in term of profit. 2. Profit maximization ensures the use of resources the best of their advantage to gain maximize out of them. 3. It maximizes the social economic welfare. 4. It will be a motive force to acquire monopoly power in the perfect product market. Wealth Maximization: According to Prof. Solman, maximization of wealth provides a useful and meaningful objective as basic guideline by which financial decision should be valuated. Wealth maximization means maximizing the net present value of a course of action to share holders. The net present value its benefits and present value of the cost. The positive net present value creates wealth and its desirable. The negative present value should be rejected.

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FINANCIAL ANALYSIS Financial statements are prepared primarily for decision-making. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. The information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements. Financial analysis is The process of identifying the financial strengths and weaknesses of the firm by establishing relationship between the items of the Balance sheet and the Profit and Loss account. There are various methods or techniques used in financial analysis such as comparative balance sheet statements, trend analysis, common size statements, schedule of changes in working capital, funds flow analysis, cost volume-profit analysis, ratio analysis etc. Financial Analysis refers to the assessment of a business to deal with the planning, budgeting, monitoring, forecasting, and improving of all financial details within an organization. Financial analysis is the process of identifying the financial strengths and weaknesses of the firm .It is done by establishing the relationships between the items of financial statements ,Balance sheet and Profit &loss a\c It can be undertaken by management of the firm or by parties outside the owners ,creditors, investors and others. Analysis of financial statements is a process of evaluating the relationship between the component parts of the financial statements to obtain a better understanding of a Firms position & performance.

Financial statement is a largely study of relationships among the various financial factors in a business, as disclosed by a single set of statements and study of these factors as shown in a series of statement. It is the evaluation of the economic

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and financial data presented in the financial statements for making decisions and maintaining control. Financial statements are the instrumental panels of a business which provide a summary of the accounts of a business organization. The financial statement analysis involves a systematic and careful examination of the information of the information contained in the financial statements with a specific purpose. It is a detailed inquiry into financial data to evaluate concerns performance, future risks and potential. It attempts to determine the significance and meaning of the business information as depicted by financial statements so that the forecast may be made by made of the prospects for future earnings , bility to pay a interest the and debt maturities . The purpose of financial analysis is to diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the firm. The analysis and interpretation of financial statements is essential to bring out the mystery behind the figures in financial statements. Financial statements analysis is an attempt to determine the significance and meaning of the financial statements data so that forecast may be made of the future earnings, ability to pay interest and debt maturities (both current and long term) and profitability of sound dividend policy. The term financial statement analysis includes both 'analyses, and 'interpretation'. A distinction should be made between the two terms, While the term 'analysis' is used to mean the simplification of financial data by methodical classification of the data given in financial statements, 'interpretation' means 'explaining the meaning and significance of the data so simplified'. However, both 'analysis and interpretation' are interlinked and complementary to each other. Analysis is useless without interpretation and interpretation without analysis is difficult or even impossible. Financial statements refer to formal and original statements prepared by business concern to disclose its financial information.

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Financial analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project. It is performed by professionals who prepare reports using ratios that make use of information taken from financial statements and other reports. These reports are usually presented to top management as one of their bases in making business decisions. Based on these reports, management may:
y y y

Continue or discontinue its main operation or part of its business; Make or purchase certain materials in the manufacture of its product; Acquire or rent/lease certain machineries and equipment in the production of its goods;

y y y

Issue stocks or negotiate for a bank loan to increase its working capital; Make decisions regarding investing or lending capital; Other decisions that allow management to make an informed selection on various alternatives in the conduct of its business

DEFINITIONS:
1.

According to KENNEDY & MULLER, The analysis and interpretation of financial statements reveal each every aspect regarding the well-being financial soundness, operational efficiency and credit worthiness of the concern

2.

In the words of Myers, Financial Statement analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements, and a study of the trend of these factors as shown in a series of statements.

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Types of financial analysis: Financial analysis can be classified into different categories depending upon 1. The material used and 2. The modus operandi of analysis

1. On the basis of material used: According to material used, financial analysis can be of two types: a. External analysis b. Internal analysis a. External analysis: This analysis is done by those who are outsiders for the business. The term out siders includes investors, credit agencies, government agencies and other creditors who have no access to the internal records of the company. These persons mainly depend up on the Published financial statements. Their analysis serves only a limited purpose. b. Internal analysis: This analysis is done by persons who have access to the books of account and other information related to the business. Such an analysis can, therefore be performed by executives and employees of the organization as well as government agencies which have statutory powers vested in them.
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2. On the basis of modus operandi: According to the method of operation followed in the analysis, financial analysis can also be of two types: a. Horizontal analysis: Horizontal analysis refers to the comparison of financial data of a company for several years. The current years figures are compared with the standard or base year. A base year is a year chosen as beginning point. This type of analysis is also called Dynamic analysis as it is based on the data from year to year rather than on data of any one year. (Or) Analysis of changes in different components of the financial statements over different periods with the help of series of the statements is known as Horizontal analysis. Such analysis makes it possible to study periodic fluctuations in different components of the financial statements, study of trends in debt or share capital or in their relationship over the past ten-year period or study of profitability trends for a period of five or ten years or examples of horizontal type analysis. Horizontal analysis is also known as Dynamic analysis since this reflects changes in financial position of firm over a long period of time b. vertical analysis: Vertical analysis refers to the study of relationship of the various items in the financial statements of one accounting period. In this type of analysis the figures from financial statement of a year are compared with a based selected from some year statement. It is also known as Static Analysis. Common-size financial statements and financial ratios are the two tools employed in vertical analysis. Analysis of relationship between different individual components and are between these components and their totals for a given period of time. Such an analysis is known as vertical analysis

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It also regarded as static analysis, comparison of current assets to current liabilities or comparison of debt to equity or comparison of debt to total assets for one point of time are concrete examples of vertical analysis
y

Management Management of the firm would be interested in every aspect of the financial

analysis. It is their overall responsibility to see that the resources of the firm are used most efficiently and effectively, and that the firms financial condition is sound. Before we enter into the methodology and procedure for financial analysis, it is desirable to identify to whom such information is useful and how? Financial analysis serves the following purposes to the concerned authorities/bodies.
y

The shareholders as well as perspective investors desirous to know the present and anticipated trends.

The Government to take different projects and to study performance, growth etc.

Banks, financial institutions and insurance who are interested with project to ascertain the credit worthiness of the firm.

Financial data is to be person concerned either external or internal as regards the firm. Before commencing analysis and the type of information needed are to be ascertained as well as identification of source, data and analytical tools to be employed. Basically a financial analysis consists of a 3 step process as under:
1.

Identify the source of information relevant to the decision to be made from the total pool of data provided by the annual financial statements.

2. 3.

Rearrange the particular data selected to highlight significant relationship. Study the analyzed information critically and draw pertinent conclusions.

Statement of Research Objectives: The statement of the problem is financial performance related to HDFC Standard Life insurance scheme.
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The study concentrate on understanding and

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analyzing the various transaction of the company which were carried to attain its main objectives, to evaluate the growth achieved in terms of finance and the problems involved in various decision making. The other objectives are as follows:  To analyze the current financial position of the Company.  To estimate the future profit of the Company.  To know about the fund management of the company.  To know about the past financial drawbacks.  To analyze the financial statement of Company with others.  To analyze about the products that were sold for the last five years.

2.1 INDUSTRY PROFILE

Introduction
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Life is a roller coaster ride and is full of twists and turns. You cannot take anything for granted in life. Insurance policies are a safeguard against the uncertainties of life. Insurance is system by which the losses suffered by a few are spread over many, exposed to similar risks. Insurance is a protection against financial loss arising on the happening of an unexpected event. Insurance policy helps in not only mitigating risks but also provides a financial cushion against adverse financial burdens suffered. Insurance policies cover the risk of life as well as other assets and valuables such as home, automobiles, jewelry et al. On the basis of the risk they cover, insurance policies can be classified into two categories: 1. Life insurance policy 2. General insurance policy Life insurance is a guarantee that your family will receive financial support, even in your absence. Put simply, life insurance provides your family with a sum of money should something happen to you. It thus permanently protects your family from financial crises. In addition to serving as a protective cover, life insurance acts as a flexible money-saving scheme, which empowers you to accumulate wealth-to buy a new car, get your children married and even retire comfortably. Life insurance also triples up as an ideal tax-saving scheme. Need for Life Insurance Today, there is no shortage of investment options for a person to choose from. modern day investments include gold, property, fixed income instruments, mutual funds and of course, life insurance. Given the plethora of choices, it becomes imperative to make the right choice when investing your hard-earned money. Life insurance is a unique investment that helps you to meet your dual needs - saving for life's important goals, and protecting your assets. Asset Protection From an investor's point of view, an investment can play two roles - asset appreciation or asset protection. While most financial instruments have the underlying

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benefit of asset appreciation, life insurance is unique in that it gives the customer the reassurance of asset protection, along with a strong element of asset appreciation. Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individual's or individuals' death. In return, the policy owner (or policy payer) agrees to pay a stipulated amount called a premium at regular intervals or in lump sums (so-called "paid up" insurance). There may be designs in some countries where: (Assets, Bills, and death expenses plus catering for after funeral expenses should be included in Policy Premium. Anyone whose assets equal more than the value of their primary residence should not be compensated beyond that value in case they cannot sell their house. In the case of those who have lost their spouse should be compensated also for one full year the wages of their spouse which would or should be included to avoid lawsuits.) However in the United States, the predominant form simply specifies a lump sum to be paid on the insured's demise. Origin and Development of Insurance Industry Insurance began as a way of reducing the risk of traders, as early as 5000 BC in China and 4500 BC in Babylon. Life insurance dates only to ancient Rome; "burial clubs" covered the cost of members' funeral expenses and helped survivors monetarily. Modern life insurance started in late 17th century England, originally as insurance for traders: merchants, ship owners and underwriters met to discuss deals at Lloyd's Coffee House, predecessor to the famous Lloyd's of London. The first insurance company in the United States was formed in Charleston, South Carolina in 1732, but it provided only fire insurance. The sale of life insurance in the U.S. began in the late 1760s. The Presbyterian Synods in Philadelphia and New York created the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759; Episcopalian priests organized a similar fund in 1769. Between 1787 and 1837 more than two dozen life insurance companies were started, but fewer than half a dozen survived.

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Prior to the American Civil War, many insurance companies in the United States insured the lives of slaves for their owners. In response to bills passed in California in 2001 and in Illinois in 2003, the companies have been required to search their records for such policies. New York Life for example reported that Nautilus sold 485 slave holders life insurance policies during a two-year period in the 1840s; they added that their trustees voted to end the sale of such policies 15 years before the Emancipation Proclamation. Growth & Present Status of Insurance Industry Before insurance sector was opened to the private sector Life Insurance Corporation (LIC) was the only insurance company in India. After the opening up of Insurance sector in India there has been a glut of insurance companies in India. These companies have come up with innovative and flexible insurance policies to cater to varying needs of the individual. Opening up of the Insurance sector has also forced the LIC to tighten up its belt and deliver better service. All in all it has been a bonanza for the consumer. Major Life insurance Companies in India are: 1. Aviva Life Insurance 2. Bajaj Allianz 3. Birla Sun Life Insurance 4. HDFC Standard Life Insurance 5. ICICI Prudential 6. ING Vysya 7. Kotak Mahindra 8. LIC 9. Max New York Life Insurance 10. Metlife India Insurance 11. Reliance Life Insurance 12. SBI Life Insurance 13. Shriram Life Insurance
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14. TATA AIG Life Insurance Future of Insurance Industry Many hypotheses address why the incidence of insurance has declined in the past decade: People are anti-insurance; they're buying term and investing the rest; changing life expectancies and delayed family formation have shifted the need for insurance; buyers are more sophisticated and prefer other products; agents are forsaking the middle class and focusing on the wealthy; Boomers refuse to grow up, and buying life insurance acknowledges mortality; people need less life insurance, and with the declining need, the industry is shrinking; agents are unpleasant to deal with; property/casualty insurance is replacing life insurance; and so on. Clearly, a strong factor in the increase in surplus capital lies at the door of favourable economic conditions, with equity markets up by around 10%. Reflecting this more buoyant environment, the results also indicate that the realistic reporters were net purchasers of equities, with the marginal 0.4bn reversing the downward sales trend that had emerged since we started collecting this data in 2006. The aggregate Equity Backing Ratio for assets backing asset shares also increased over the full year moving from 39% to 43%.All in all, these results are very encouraging and while the economic environment clearly has had its part to play, the industry has worked hard to deliver some long awaited stability. And, in terms of the capital with-profits insurers have at their disposal, the sector is in a far better position to ensure that policyholder commitments are honored as they fall due, and as such that customers are treated fairly. In conclusion, we are looking forward to a future for the life industry characterized by adequate capital, sound management and fair treatment of customers. We think we are most likely to get there by adopting a more principle based, outcome focused approach to regulation. To a significant degree this is already happening in the areas that I have chosen to highlight today the emphasis now needs to be on making sure that policy decision is turned into effective implementation.

2.2 COMPANY PROFILE

Origin of HDFC standard life insurance:
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HDFC Standard Life Insurance Co. Ltd was incorporated on 14th august 2000. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.) India and UK based Standard Life Company. Both the joint venture partners being one of the leaders in their respective areas came together in this 81.4:18.6 joint venture to form HDFC Standard Life Insurance Company Limited. The MD and CEO of HDFC Standard Life Mr. Deepak Satwalekar, has given the company new directions and has helped the company achieve the status it currently enjoys. HDFC Standard Life brings to you a whole range of insurance solutions be it group or individual or NAV services for corporations; Growth and development of HDFC slp: HDFC Standard Life Insurance Company Ltd. is one of Indias leading private life insurance companies, which offers a range of individual and Housing Development Finance Corporation Limited (HDFC Ltd.), Indias leading housing finance institution and The Standard Life Assurance Company, a leading provider of financial services from the United Kingdom. As a joint venture of leading financial services groups, HDFC Standard Life has the financial expertise required to manage your long-term investments safely and efficiently. The company has a range of individual and group solutions, which can be easily customized to specific needs. The group solutions have been designed to offer complete flexibility combined with a low charging structure. HDFC Standard Life Insurance is the first private life insurance company to be granted a license by IRDA Rated by Business world as Indias Most Respected Private Life Insurance Company in 2004 Has grown over 130% in the last year, with more than 8 lakh policyholders Has one of the widest branch networks with offices in over 100 cities servicing over 440 towns Has the highest brand recall, close to 80% (Source: AC Neilson ORG MARG, April 2005). HDFC Standard Life, one of the leading private insurance companies in the country, is in an expansion mode in the state of Madhya Pradesh. The company has inaugurated its branch office in Morena and will subsequently open offices in Datia, Bhind and Dabra by the second week of May 2007.' This expansion comes in line with the companys strategy to strengthen its presence in the state of Madhya Pradesh, thereby also consolidating its premier
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position in the insurance business in India. Speaking on its increasing presence in the region, Mr. Deepak Satwalekar, CEO & MD HDFC Standard Life Insurance said, The Company wants to be as close to its customers as possible and wants to ensure complete customer convenience and delight. We felt the need to increase our spread in MP because of its growing potential and hence expansion is an obvious choice. With the launch of four branches consecutively in the region, HDFC Standard Lifes presence will increase to 13 branch locations and 16 spoke locations in MP. PRESENT STATUS OF HDFCSLI Nationally HDFC Standard Life Insurance covers over 693 cities and towns through its offices in India with over 79,000 Financial Consultants appointed by the company. HDFC Standard Life Insurance also has 833 corporate agents and other sales intermediaries including banks for distribution of insurance products. HDFC Standard Lifes Product portfolio comprises solutions, which meet various customer needs, like Protection, Pension, Savings and Investment. Customers have the added advantage of customizing the Plans, by adding optional benefits called riders, at a nominal price. The company currently has 21 retail and 6 group products in its portfolio. HDFC Standard Life maintains very high professional standards, during product offerings, by providing sound financial advice, efficient post-sale service and immaculate financial security. Ongoing training for conventional products, and specialized training, for unit-linked products, for its financial consultants, has also helped its customers choose the product, best suited for their needs. FUTURE PLANS OF HDFCSLI HDFC Life Insurance Ltd is targeting a 250 per cent growth in its first premium income in 2009-09 and will soon infuse a further Rs 37.5 crore to its existing share capital of Rs 255.5 crore. "Major expansion of branches, higher productivity and contribution from unit-linked products will enable the company to achieve this high growth in current year," said Pankaj Seith, head, alternative channels, HDFC Standard Life Insurance.Over the next 3-4 years, the company will increase its capital base to Rs 700-800 crore. The company will increase its branch network from 60 to 103 by the end of 2008-09. In Gujarat, the company is doubling

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its branch network from 4 to 8 branches by setting up branches at Vapi, Gandhidham, Bhavnagar and Jamnagar. "Business growth in Gujarat has been higher than the national average during FY07 and that is why the company has decided to double its network," said Sanjay Vij, regional manager of Gujarat. The state constitutes for around 7-8 per cent of the national business. "The unit-linked product launched by the company in January 04 has met with a strong response from Gujarat as it offers partial investment in equities. As against the national growth of 30-35 per cent, the unit-linked business in Gujarat has grown by 40-45 per cent." HDFC Life is also pushing sales through the bancassurance route. "The company is in talks with a few banks and even some cooperative banks in Gujarat and elsewhere for marketing insurance products. Currently, HDFC Bank, Union Bank of India, Indian Bank and Saraswat Bank are selling HDFC Life products and contribute to around 25 per cent of total business," said Seith. A special bancassurance product is going to be launched in future. The company has met its rural market targets and as against 12 per cent of total policies sold in FY07, it will raise it to 14 per cent in current year. FUNCTIONAL DEPARTMENT OF HDFCSLI: Customer service and Operation The Operations department oils the work processes between the customer and the company to ensure consistent and quality service to the customer. To streamline the operations, the Operations department interfaces between the clients and the agents, the branches and the underwriters, and manages work processes. The Vision at Customer Service is to deliver 'World Class Service' at every opportunity. Units such as the 9 to 9 contact centre, Outbound Call Centre, Customer Care and Query Resolution Unit are all committed to providing effective solutions to over lakhs of customers across the country.

Information Technology The Information Technology function at HDFC Standard Life Insurance is committed to enable business through the use of technology. It is segmented into 4
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groups to enable highest levels of delivery to the customers: Life Asia Solutions Group that provides flexibility in designing better product offerings to end-users, the Solutions Group- Web that provides real-time information to customers and is responsible for customer relationship management, IT Architecture & Corporate Solutions Group is in charge of developing and maintaining a blueprint for the IT architecture for the enterprise as a whole. This team works as an in house R&D Solution Group, exploring new technological initiatives and also caters to information needs of corporate functions in the organization. IT Infrastructure group is responsible for providing hardware, software, network services to the whole organization. This group runs the 'Digital Nervous System' of the Enterprise at the highest levels of efficiency and provide robust, scalable and highly available platform for deployment of business application. Marketing The Marketing function at HDFC Standard Life Insurance covers an array of activities - brand and media management, channel support, direct marketing and corporate communications. The Brand and Communications team is in charge of advertising, consumer research, media planning & buying and Public Relations; that helps develop and nurture HDFC Standard Life Insurance corporate identity while effectively communicating its varied product offerings to the customer. Channel marketing provides support to the sales force by streamlining the design and development of collaterals and sales tools across distribution channels. The Direct marketing team was set up to generate high quality leads for profitable business. The team achieves this through target database acquisition and communicating customized product information through e-mailers, telemarketing and innovative direct mailers. Bank assurance and Alliances HDFC Standard Life Insurance was a pioneer in offering life insurance solutions through banks and alliances. Within a short span of two years, and with nearly a large number of partners, B & A has emerged as a vital component of the company's sales and distribution strategy, contributing to approximately one third of company's total business. The business philosophy at B&A is to leverage distribution synergies with our partners and add value to its customers as well as the partners.
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Flexibility, adaptation and experimenting with new ideas are the hallmarks of this channel. Finance Finance function in HDFC Standard Life Insurance is committed to create an infrastructure that is aligned to shareholder expectations. Finance basically comprises of four functions. Corporate Planning and MIS provide feedback on business

strategies. This includes driving the budgeting process, providing strategic inputs for decision-making and management reporting and analysis. The Accounts function includes preparation and maintenance of financial records, funds management, and expense processing and treasury operations. Compliance ensures that every action is within the regulatory framework. This includes reviewing compliance requirements and supporting the ethical framework of HDFC Standard Life Insurance life. Internal audit provides assurance to the management over the organizations' control framework and includes process risk management, information security assessment and business continuity assessment. HR The people strategy of HDFC Standard Life Insurance is "To build a committed team with a culture of innovation, learning and growth. The Human Resource Function at HDFC Standard Life Insurance drives the people strategy of the business. With its initial focus on operational excellence to deliver benefits and services to staff members, HR is now committed to building capability through state of the art processes. A robust performance management system, compensation system and a segmented training architecture enable it to deliver value to organization Business The Business Excellence function is committed to building a quality mindset across the organization Industry that has adopted the Six Sigma Methodology for process efficiency and measurement

ORGANIZATIONAL STRUCTURE AND ORGANIZATIONAL CHART

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HDFCSLI has a Functional structure because here the core product is insurance. A functional structure is well suited to organizations which have a single or dominant core product because each subunit becomes extremely adept at performing its particular portion of the process. The organization is structured according to functional areas instead of product lines. The functional structure groups specialize in similar skills in separate units. This structure is best used when creating specific, uniform
products.

They

are

economically

efficient,

but

lack

flexibility.

Communication between functional areas can become efficient if there is proper coordination between HR, Customer Service & Operation, IT, Finance, Sales and Marketing team etc.

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REGIONAL MANAGER

TERRITORY MANAGER

BRANCH MANAGER

OPERATIONS MANAGER

BUSINESS DEVELOPMENT MANAGER

AREA SALES MANAGER

SALES DEVELOPMENT MANAGER

FINANCIAL CONSULTANTS

FINANCIAL CONSULTANTS

SALES DEVELOPMENT MANAGER

SALES DEVELOPMENT MANAGER

SALES DEVELOPMENT MANAGER

FINANCIAL CONSULTANTS

TELECALLERS

FRONT OFFICE

OFFICE BOY

SECURITY

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2.3 PRODUCT PROFILE

At HDFC Standard Life, we offer a bouquet of insurance solutions to meet every need. We cater to both, individuals as well as to companies looking to provide benefits to their employees. This section gives you details of all our products. We have incorporated various downloadable forms and product details so that you can make an informed choice about buying a policy. For individuals, we have a range of protection, investment, pension and savings plans that assist and nurture dreams apart from providing protection. You can choose from a range of products to suit your life-stage and needs. For organizations we have a host of customized solutions that range from Group Term Insurance, Gratuity, Leave Encashment and Superannuation Products. These affordable plans apart from providing long term value to the employees help in enhancing goodwill of the company. Individual Products: We at HDFC Standard Life realize that not everyone has the same kind of needs. Keeping this in mind, we have a varied range of Products that you can choose from to suit all your needs. These will help secure your future as well as the future of your family Protection Plans: You can protect your family against the loss of your income or the burden of a loan in the event of your unfortunate demise, disability or sickness. These plans offer valuable peace of mind at a small price. Our Protection range includes our Term Assurance Plan & Loan Cover Term Assurance Plan. PRODUCTS Since insurance is a concept selling, the products are classified in to Traditional Plans and Unit Linked Plans on the basis of concepts such as :y y y y

Protection Investment Pension Savings

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The products which come under Traditional plans and Unit Linked plans are as follows:-

Traditional plans 1. Childrens Plan 2. Endowment Assurance Plan 3. Personal Pension Plan 4. Money Back Plan 5. Loan Cover Term Assurance Plan 6. Term Assurance Plan 7. Single Premium Whole of Life Plan

Unit linked plans

1. 2. 3. 4. 5.

Unit Linked Young Star Plus II Unit Linked Endowment Plus II Unit Linked Pension Plan Unit Linked Pension Plus Plan Unit Linked Enhanced Life Protection II

The detailed explanations of the above plans are given below:Traditional plans 1. Childrens Plan: - It is designed to secure the childs future by giving the child a guarantee lump sum on maturity or incase of your unfortunate demise, early in the policy terms.

2. Endowment Assurance Plan: - This plan is a with profits insurance plan which will pay your family the sum assured you had chosen. At the end of the term an additional terminal bonus may be paid depending on the performance of the investment.

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3. Personal Pension Plan: - This plan is an insurance policy that is designed to provide a post-retirement income for life with the freedom to choose your retirement date.

4. Money Back Plan: - It is a valuable protection to your family by way of lump sum payment in case of your unfortunate death within the policy term. This is over and above any earlier pay outs.

5. Loan Cover Term Assurance Plan: - This Plan is an insurance policy to cover your home loan or any other loan liabilities.

6. Term Assurance Plan: - It is a pure risk cover plan which gives you protection against the uncertainties of life.

7. Single Premium Whole of Life Plan: - As the name suggests the premium for this plan is paid only once and it adds the life coverage.

Unit linked plans 1. Unit Linked Young Star Plus II: - This plan gives you valuable protection to your child in case you are not around. It provides loyalty units to boost your fund value every year. It has an additional benefit option such as critical illness benefit.

2. Unit Linked Endowment Plus II: - This plan can ensure that your family remains financially independent. It is also having flexible benefit combination and premium paying options.

3. Unit Linked Pension Plan: - This is an insurance policy that is design to provide a retirement income for life with the freedom to maximize your investments returns.

4. Unit Linked Pension Plus Plan: - It is a plan which gives a post to retirement income for life and it provides regular loyalty unit to boost your fund value every year.
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5. Unit Linked Enhanced Life Protection II: - It is an outstanding investment opportunity by providing a choice of thoroughly researched and selected investments. Its adds life protection every. MARKET PROFILE OF THE ORGANIZATION

HDFC Standard Life Insurance holds market share of 8.7% and ranks 4 among the private sectors. HDFCSLI is expecting to capture 12% of market share by 2010 and to be in top position among the private sector. The company is increasing the brand awareness through continuous advertisement on TVC and print. Company is focusing on complete solution of investment for the customer delighting them through their service and return on their investment. The Marketing function at HDFC Standard Life Insurance covers an array of activities - brand and media management, channel support, direct marketing and corporate communications.The Brand and Communications team is in charge of advertising, consumer research, media planning & buying and Public Relations; that helps develop and nurture HDFC Standard Life Insurance corporate identity while effectively communicating its varied product offerings to the customer. Channel marketing provides support to the sales force by streamlining the design and development of collaterals and sales tools across
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distribution channels. The Direct marketing team was set up to generate high quality leads for profitable business. The team achieves this through target database acquisition and communicating customized product information through e-mailers, telemarketing and innovative direct mailers.

The above pie chart showing the percentage of all types of insurences in this mainly the HDFC standard life insurance have taken 9.3% . And ICICI Prodentioal is capturing the highest percentage i.e.29.1%.

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SWOT ANALYSIS
Company Strengths Financial Expertise As a joint venture of leading financial services groups, HDFC Standard Life has the financial expertise required to manage customers long- term investments safely and efficiently. Range of Solutions Company has a range of individual and group solutions, which can be easily customized to specific needs. Companys group solutions have been designed to offer customers complete flexibility combined with a low charging structure. Track Record so far Company cumulative premium income, including the first year premiums and renewal premiums is Rs 1532.21 Crores Apr-Mar 2005-06. Company has covered over 1.6 million individuals out of which over 5,00,000 lives has bee n covered through group business tie-ups. Company Weakness Company is week making conventional plans successful (Than unit link plans), as it brings break-even point to the company it takes time to reach break-even point. IRDA regulations take more time which results timely loss to the company.

Company Opportunities
y

India has vast market of uninsured lives it is said that only 1% of the whole population is insured.

Its strengths in the unit link products.

Company Threats
y

Growing competitors in the market Entry of other players

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3.1 NEED FOR THE STUDY

Financial management is always vital and an integrated part of business management. Since the finance is the life blood of any organization proper utilization of finances determines the success of organization. Financial statement analysis facilitates study of relationships among various financial factors in a business. The present study focuses on analyzing financial performance of HDFC SLI ltd, by using various ratios overview a period of 5years.

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3.2 SCOPE OF THE STUDY

The present study entitled on financial analysis carried out at HDFC SLI ltd. a reference period of 5years i.e. from 2005-2006 to 2009-10.Activity leverage and proprietary ratios are being applied to evaluate the performance of the company and trend analysis is also done to show the trend in growth of various vital parameters of the company.

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3.3 STATEMENT OF THE PROBLEM

The organization are functioning in increasingly competitive and complex environment. The decisions regarding invested in various assets is very crucial. In financial services industry , the organization are accountable for every rupee they spend to the investors. The effectiveness of financial management of the company must be constantly watched by using appropriate tools so that necessary action can be taken to maintain healthy financial state of the company. Hence the present study is taken up.

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3.4 OBJECTIVES OF THE STUDY

 To give on overview of financial management and ratio analysis.  To study the financial performance of the select organization , i.e. HDFC SLI ltd, by using ratio analysis.  To give trend analysis of the select organization.  To offer constructive suggestions for effective employment of the companys funds for various activities.

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3.5 RESEARCH METHODOLOGY

SAMPLING TECHNIQUES
The Sample unit for the present study is by financials analysis by vendors judgment of sampling method.
METHODOLOGY The objective of the present study can be accomplished by conducting a systematic analysis of the balance sheet of the company. This constitutes the secondary source of data which includes collection of annual report of the company and many journals. PRIMARY DATA Primary data is the first hand data collected for the main and sole purpose of the study, Primary data was collected in the finance department of the company with the direct interaction with the officials there. SECONDARY DATA
y

The secondary data was obtained through the companys audit reports and the annual reports. Data was also collected from many newspapers and journals for deeper understanding of the company progress and achievements. Apart from the Text books, periodicles ,company litareture, web source have been used.

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3.6 LIMITATIONS OF THE STUDY

y y y

The study was limited to HDFC Standard life insurance only. The study is confined to last 5years only i.e. from 2005-06 to 2009--10. The provided in the balance sheet is not comprehensive and the content of the balance sheet are assumed to be accurate.

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REVIEW OF LITERATURE
Carl B. McGowan, Jr. (2010)

He opines financial analysis of a bank in a rapidly changing environment based on the DuPont system of financial analysis. The DuPont system of financial analysis is based on analysis of return on equity which is disaggregated into net profit margin, total asset turnover and the equity multiplier. AFFIN Bank Malaysia is one of the largest banks in Malaysia and is one of the core banks from the consolidatio n process of the banking industry in response to the Southeast Asian economic crisis in 1997-98. The analysis covers begins in 1999 which is the year that AFFIN Bank was formed until 2006. The DuPont system of financial analysis shows the impact of the Asian financial crisis and the restructuring of the banking industry in Malaysia on the financial performance of AFFIN Bank and the gradual recovery of AFFIN Bank to return to steady performance over the past eight years.

A Birts, L McAulay and M King (1993) He feels that financial analysis expert systems have been developed but there is little evidence to suggest that such expert systems are as widely used in the financial analyst community as other information technology products. The research findings presented here suggest that one explanation for this non use of expert systems may be that users do not have a need to use the existing technology. We arrived at this conclusion by researching the rich picture of the task and the needs of a small number of fi nancial analysts. In so doing, we were able to develop insights into the topic area which to our knowledge are new. Our analysis may confirm a need to re -orientate expert systems development. Thus, the selection and use of research methods which are geared to shedding light on users' needs may be valuable to practitioners, in developing product development strategies, and to researchers, in casting new light on their topic areas.

admin In (2010)

According to Admin In The financial analysis allows abstract form to transcribe the actual situation of a company at some point. It is a rigorous and rational tool based on the study of economic and accounting data by focusing on a holistic view of the company. The analyst can place a view inside or outside the company and its work needs to reconstruct the policies pursued by it keeping in mind that they result from a compromise between different
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concerns. He can then position the company against its main competitors. Its objective is to identify chronic problems by isolating specific problems to avoid a succession of blunders and stabilize the financial situation of the company. . The G20 is preparing a list of 20 banks to closely monitor ege of Goldman Sachs, December 16, 2008 in New York Rich countries G20 and eme rging, including heads of state and government opened a summit in Seoul Thursday, preparing a list of twenty financial institutions whose collapse would have global implications, the Financial Times reported Wednesday. The establishments on this list, prepared by the Financial Stability Board (FSB), could be subjected to supervision and capital requirements strengthened. But the G20 is not expected to rule this week on the possibility of overloading capital for these banks, shifting the topic later. Accordi ng to a list obtained by the newspaper business, among the financial institutions identified by the G20 are a German (Deutsche Bank), Americans (Bank of America -Merrill Lynch, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley), the UK (Barclays, HSBC, Royal Bank of Scotland, Standard Chartered), one of Canada (RBC) of Spain (Santander, BBVA), of UK (BNP Paribas, Societe Generale), the Italian (Intesa Sanpaolo, UniCredit), the Japanese (Mitsubishi UFJ, Mizuho, Nomura, Sumitomo Mitsui), a Dutch (ING) and Switzerland (Credit, UBS). But some could be withdrawn. The FSB also working on a second list of banks whose failure would be prejudicial to national levels, according to the newspaper. Last week, the International Association of Insurance Supervisors (IAIS) had already indicated that it would establish, with the FSB and other regulators, a confidential list of establishments present a systemic risk, that is to say to destabilize the financial system. Caise BNP Paribas, January 19, 2010 in Paris IAIS had mentioned the adoption of standards more stringent capital and regulation of these institutions. Designer very clearly suggests systemic establishments as they will be saved in case of slippage, a banker said on condition of anonymity. Labeling as an inst itution therefore introduce systemic, he said, a moral hazard, which would facilitate risk behaviors. On the same subject, the G20 would have waived an agreement on ways to coordinate an international plan of action among regulators to manage the default by a system, according to the FT. The European Commission has before it the subject and has already presented a mid -October, a series of proposals that should help organize the controlled collapse of a major international bank. These proposals must be filed by next spring.
by Martin Eling, Thomas Parnitzke, and Hato Schmeiser (1999)

Martin, Thomas and Hato feels that Dynamic financial analysis (DFA) has become an important tool in analyzing the financial condition of insurance companies. Constant development and documentation of DFA tools has occurred during recent years.

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However, several questions concerning the implementation of DFA systems have not yet been answered in the DFA literature. One such important issue is the consideration of management strate gies in the DFA context. The aim of this paper is to study the effects of different management strategies on a nonlife insurers risk and return profile. Therefore, we develop several management strategies and test them numerically within a DFA simulation study.

Steven H. Ott and Dustin C. Read (2005)

Steven aims at combining the Chaos theory postulates and Artificial Neural Networks classification and predictive capability, in the field of financial time series prediction. Chaos theory, provides valuable qualitative and quantitative tools to decide on the predictability of a chaotic system. Quantitative measurements based on Chaos theory, are used, to decide a -priori whether a time series, or a portion of a time series is predictable, while Chaos theory based qualitative tools are used to provide further observations and analysis on the predictability, in cases where measurements provide negative answers. Phase space reconstruction is achieved by time delay embedding resulting in multiple embedded vectors. The cognitive approach suggested, is inspired by the capability of some chartists to predict the direction of an index by looking at the price time series. Thus, in this work, the calculation of the embedding dimension and the separation, in Takensembedd ing theorem for phase space reconstruction, is not limited to False Nearest Neighbor, Differential Entropy or other specific method, rather, this work is interested in all embedding dimensions and separations that are regarded as different ways of looking at a time series by different chartists, based on their expectations. Prior to the prediction, the embedded vectors of the phase space are classified with Fuzzy -ART, then, for each class a back propagation Neural Network is trained to predict the last elem ent of each vector, whereas all previous elements of a vector are used as features.

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DATA ANALYSIS AND INTERPRETATION

1. Current Ratio: Current ratio is the relationship between current assets and current liabilities. Current assets normally mean assets convertible and meant to be converted into cash within a years time. Current assets usually include cash in hand, cash at bank, prepaid expenses, bills receivable, sundry debtors, inventories, loans and advance, deposits and other short term high quality investments. Current liabilities fall due for payment within a year. It usually includes sundry creditors, outstanding and accrued expenses, bills payable and provision for income tax, unclaimed dividends and bank overdrafts.

Current Assets
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5.1.a TABLE SHOWING CURRENT RATIO (Rs. 000) Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Current asset Current liabilities Current Ratio 969650 2710288 7183106 10534684 13156976 1637931 3875046 10061083 13168355 16654400 0.65 0.73 0.72 0.80 0.79

5.1.b GRAPH SHOWING THE CURRENT RATIO

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Interpretation: In a sound business a current ratio of 2:1 is considered an ideal one. In the above table we can see that, in all the years the ratio is below one. Following are those factors due to which the current liability is higher than the current asset at the end of each financial year. 1. Company accepts premiums from its policy holders every year, which forms major portion of current liability. Companys accrued liabilities expenses payable is also found in huge volume & acquires equivalent

2. Leverage Ratio or Solvency Ratio: These ratios explain how the structure of a firm is made up or the debt-equity mix adopted by the firm. The short-term creditors who are interested in the current financial position would, as already observed, use the liquidity ratios. The long term creditors would judge the soundness of a firm on the basis of the long term financial strength measured in terms of its ability to pay the interest regularly as well as repay the installment of the principal on due dates or in one lump sum at the time of maturity. a. Fixed Assets to Net worth Ratio: It is the ratio between the fixed assets and Net worth.

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Fixed Assets Net Worth

5.2.a FIXED ASSETS TO NETWORTH RATIO (Rs. 000) Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Fixed Asset 548131 630124 1253745 1536159 1723579 Net worth 2009708 2393146 3998158 5297100 6629150 Ratio 0.28 0.27 0.32 0.29 0.26

5.2.b GRAPH SHOWING THE FIXED ASSET TO NET WORTH RATIO

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Interpretation: This ratio shows the relation between fixed assets and shareholders fund. Over the past years, the ratio is less than one, which means that the ownership funds are sufficient to finance fixed assets. And the company has not depended on outsiders fund to finance fixed assets. Note: standard ratio is 2/3 or 67%. (The current assts are mostly financed out of share holders funds.

b. Current Assets to Net worth Ratio: It is the ratio between current assets and net worth.

Current Assets Net worth

5.3.a CURRENT ASSETS TO NETWORTH RATIO (Rs. 000)

Year 2005-2006 2006-2007 2007-2008

Current Asset 969650 2710288 7183106

Net worth 2009708 2393146 3998158

Ratio 0.48 1.13 1.79

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2008-2009 2009-2010 10534684 13156976 5297100 6629150 1.98 1.98

5.3.b GRAPH SHOWING THE CURRENT ASSETS TO NET WORTH RATIO

Interpretation: It is clear from above data that, current asset to net worth ratio has improved considerably from 0.48 as in 2005-2006 to 1.98 the end of 2009-10 period. Generally cash & bank balances and advance constitutes major portion of current assets. If company inflows in the form of premium are more, then the liquidity status as well as the feel of security to the existing shareholder will get boosted.

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C. Current Liabilities to Net worth Ratio: It is the ratio between current liabilities and net worth. This ratio indicates the relative contribution of the short term creditors and the owners in the capital of an enterprise.

Current Liabilities Net Worth

5.4.a CURRENT LIABILITIES TO NETWORTH RATIO (Rs. 000) Year 2005-2006 Current liabilities 1637931 Net worth 2009708 Ratio 0.82

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2006-2007 2007-2008 2008-2009 2009-2010 3875046 10061083 13168355 16654400 2393146 3998158 5297100 6629150 1.62 2.51 2.48 2.51

5.4.b GRAPH SHOWING THE CURRENT LIABILITIES TO NET WORTH RATIO

Interpretation: It has been observed from the facts found in above table that, ratio of current liabilities to net worth has considerably increased. we can observe that during 200506 it was found at 0.82, in 2006-07 it was fount at 1.62 & the same has reached to 2.51 in 2007-08 which highlight that amount of current liabilities is increasing at an increasing rate, year by year & which even puts risk over the existing shareholders.Net worth is less than the current liabilities.

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5.5. a Table showing Long Term Invests to Total Capital:

(Rs. 000) Year 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Investment 6662441 16580220 32726589 50922548 79493837 93574637 Shareholders fund 4239293 6750450 9597240 10225411 14639749 15941165 Ratio 1.60 2.50 3.41 4.98 5.43 5.87

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5.5 b GRAPH SHOWING THE LONG TERM INVESTS TO TOTAL

CAPITAL

Interpretation: Company has taken many steps to increase its earnings from investment on various securities & consequent to above enormous amount have been invested especially from 2005-06. As per the table the ratio shows an increasing trend. So it is good for the company to attract more customers. Decisions to investment is very important factor as it translates idle money into earning money & enables the company to gain financial strengths. 3. Proprietary Ratio: It establishes relationship between the proprietors fund and the total tangible assets. This ratio focuses the attention on the general financial strength of the business enterprise. The ratio is of particular importance to the creditors who can find out the proportion of shareholders funds in the total assets employed in the business. Shareholders fund = Share Capital + Reserves + Profit

Shareholders Funds Total Tangible Assets

5.6.a TABLE SHOWINGPROPRIETARY RATIO

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(Rs. 000) Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Shareholder funds 6750450 9250099 9868389 14639749 15941165 Total tangible Assets 18119620 41161088 31758283 43919247 54969534 Ratio 0.37 0.22 0.31 0.30 0.29

5.6.b GRAPH SHOWING THE PROPRIETARY RATI0

Interpretation: The acceptable norm of the ratio is 1:3. i.e., 0.33.Proprietory ratio had a slight variation in the year 2006-2007 i.e., 0.22. In 2005-06 the ratio increased one. But in the year 2008-09 and 2009-10 the ratio is below the standard. This indicates that, shareholders funds have not been utilized to create the fixed assets of the company.

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TREND ANALYSIS:
A study of the trend may be useful in itself and also in the separation of deviation of periodic movements; it may be useful for comparison with the past and other present trends and particularly helpful to have a peep in to the probable future i.e.-forecasting Useful to the trend Analysis  Understanding the past behavior of the variables.  Knowing the existing nature or variation  Predicting the future trend  Comparison with other similar variables Trend Percentage:
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Trend percentages are immensely helped in making a comparative study of the financial statements from several years. The method of calculating trend percentages involves the calculation of percentage relationship that each item bears to the same item in the base year. Any year may be taken as the base year. It is usually the earliest year. These percentages can also be taken as index numbers showing relative changes in the financial data resulting with the passage of time. The method of trend percentages is a useful analytical device for the management since by substitution of percentages for large amounts; the brevity and readability are achieved. However, trend percentages are not calculated for all of the items in the financial statements. They are usually calculated only for major items since the purpose is to highlight important changes.

5.7. a TABLE SHOWING PERCENTAGE OF CURRENT ASSETS:

Year Current Assets (In %)

2005-06

2006-07

2007-08

2008-09

2009-10

183

510

1354

1986

2480

Base: 2005-06 530442(Cash and Bank balance + advances and other assets)

5.7.b GRAPH SHOWING THE PERCENTAGE OF CURRENT

SSETS.
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Interpretation: A) 2005-06 company cash balance got increased by 327% along with huge increase in its balance with bank inform of short term deposit and balance in current a/c. B) These upward trends in cash and bank balance and advances have even taken place in year 2009 also. C) Particularly in 2009, cash and bank balance has increased by approximately 441% from the balance which had prevailed as at the end of 2008. Even the advances and other assets also have increased by 53%.

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5.8.a TABLE SHOWING PERCENTAGE OF SHARE CAPITAL:

Year Share capital (In %) 2005-06 159 2006-06 226 2007-08 241 2008-09 345 2009-10 376

5.8.b GRAPH SHOWING THE PERCENTAGE OF SHARE CAPITAL.

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Interpretation: Increasing the issue of the share capital 1. Affected by losses incurred in other share also influence the share holders. 2. Increase in equity share capital through issue of fresh equity shares open market. 3. HDFC Standard Life is number 1 private life insurance company in India. This factor also influenced by the share capital. in the

5.9.a TABLE SHOWING PERCENTAGE OF INVESTMENT:

Year Investment (In %)

2005-06 249

2006-07 491

2007-08 764

2008-09 2009-10 1193 1405

5.9.b GRAPH SHOWING THE PERCENTAGE OF INVESTMENT

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Interpretation: In the year 2005-06 the percentage was 249 but when the years going on the trends are increasing one. Company has taken many steps to increase its earnings from investment on various securities & consequent to above enormous amount have been invested especially from 2006-07. Decisions to investment is very important factor as it translates idle money into earning money & enables the company to gain financial strength.

5.10.a TABLE SHOWING PERCENTAGE OF FIXED ASSETS:

Year Fixed Assets (In %)

2005-06 132

2006-07 152

2007-08 2008-09 2009-10 302 371 41

5.10.b GRAPH SHOWING THE PERCENTAGE OF FIXED ASSET

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Interpretation 1. All branches worked in computerization. 2. Operations are increased. 3. Establishing the new branches opened in many areas. 4. Increasing business activity in rural market. This factor expanding wide range of business. 5. More investment on fixed assets i.e. more and more fixed assets are purchased. Advance technology used for the operation

5.11.a TABLE SHOWING PERCENTAGE OF CASH AND BANK BALANCE:

Year Cash and Bank balance

2005-06 314

2006-07 839

2007-08 1276

2008-09 4854

2009-10 5348

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5.11.b GRAPH SHOWING THE PERCENTAGE OF CASH AND BANK

BALANCE.

Interpretation: Cash & bank balance and advances constitutes major portion of current assets. Companys inflows in the form of premiums are more than the liquidity. Inflow of funds has increased year by year.

FINDINGS
 The current ratio of the company is below the standard. Because the company accepts premiums from the policy holder every year that comprises the major portion of the current liability.  Companys accrued liabilities like expenses payable is also found in huge volume & acquires equivalent status like premium.

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 Over the past years, the fixed asset to net worth ratio is less than one, which means that the ownership funds are sufficient to finance fixed assets. And the company has not depended on outsiders fund to finance fixed assets.  By analyzing the proprietary ratio, the companys solvency position is good, i.e. below the first three years. But in the year2006-07 and2007-08 ratios is below 0.33, the acceptable norm. So at this stage solvency is not good for company.  By analyzing the trend analysis, the company shows an increasing trend in its current assets, share capital ,cash and bank balance, fixed assets and investments

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SUGGESTIONS
 The companies current ratio must be improved as it is far less than the desirable level throughout the study period.  Current liabilities to net worth ratio have been raising alarmingly since 2006-and 07, which is not a good sign for the company. Which may put existing shareholders into risk, so it is recommended to maintain healthy proportion of current liabilities and net worth?  It is recommended that the company should continue to put its money diligently across various investment option that yield maximum returns with minimum exposure.  The overall financial performance of the company can be improved by campaigning of its products and better customer services evolving suitable products from time to time keeping in view the market trends.  While making investments on securities, company must invest on such securities, which have ability to bring more profits.  Company must observe the competitors products knowledge, their strategies and tactics, decision-making principles etc.  The overall Financial Performance of the company must be improved.

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CONCLUSION
Financial management is always vital and integrated part of business management. The study or financial performance of HDFC Standard life insurance ltd, shows mixed trends increase in investment, which means increase in income declining trend. The overall financial position is satisfactory, however the measures should be content to strengthen the same to support future plans and grow in competitive environment.

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