STRATEGIC MANAGEMENTMBC 9

ByDr. Gitesh Shelar. 2010HE025Mr. Sachin Karte. 2010HO030Dr. Nitin Gurav. 2010HE015

Insurance

• Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed and known small loss to prevent a large, possibly devastating loss.

Major Player

s

Market Share

2% 1% 2% 3%4%

6%

5%

8%

4%

5%

10%

50%

Kotak Met Tata Max Birla HDFCReliance Others Bajaj SBI ICICI LIC

Joint venture b/w ICICI bank & prudential life insurance company. ICICI bank has 76% of stake & rest is of prudential.

ICICI bank is In2nd largest bank. Prudential is international financial service

group having headquarter in U.K. It started its operations in December 2000,

after getting approval by IRDA & today this is the no. 1 co. in private sector in India.

1. ICICI Bank Limited – 73.88%2. Prudential Corporation Holdings –

25.95%3. Others – 0.17%

Directors:

• Chanda Kochhar, Chairperson

• N. S. Kannan• K. Ramkumar • Rajiv Sabharwal • Barry Stowe • Adrian O’Connor • Keki Dadiseth • Marti G.

Subrahmanyam • Rama Bijapurkar • Vinod Kumar Dhall • Sridar Iyengar • Sandeep Bakhshi,

Managing Director & CEO

• Puneet Nanda, Executive Director

• Madhivanan Balakrishnan, Executive Director

• Registered & Corporate Office:

ICICI PruLife Towers,1089 Appasaheb Marathe Marg,Prabhadevi, Mumbai – 400 025.

Management Discussion

Future diagnosis• Year ahead with extremely high inflationary

pressure. • Moderate growth is expected.• Inflation is likely to result in further increase in

policy rates.• Liquidity conditions are expected to remain in

deficit on an average during the year.• The organization is expected to maintain status

quo after completing its ongoing bond purchase programme.

Asset CostsParticulars

March 31,2011

March 31,2010

Freehold Land 903,280 903,280

Office Buildings on Freehold Land 83,188 84,639

Improvements to Leasehold Property

741,510 1,342,030

Furniture and Fixtures 15,020 36,615

Office Equipment/plan 24,412 29,668

Information Technology/Equipment/Computer

2,446 2,400

Communication Networks 12,351 13,242

Motor Vehicles 2,244 509

Software 184,976 209,971

Total 1,969,427 2,622,354

Ratio AnalysisRatios 2011 2010 2009 2008

PROFITABILITY RATIO

PROFIT MARGIN 0.96 0.89 11.34 21.67RETURNS ON

ASSETS (INVESTMENT) 0.93 0.29 0.74 0.99

RETURN ON EQUITY 0.16 0.05 0.16 0.36ASSETS

UTILIZATION RATIO

INVENTORY TURNOVER - - - -

FIXED ASSETS TURNOVER 4.22 1.09 0.20 0.19

TOTAL ASSETS TURNOVER 0.97 0.33 0.06 0.04

Ratio Analysis

RATIOS 2011 2010 2009 2008

LIQUIDITY RATIO

CURRENT RATIO0.41 0.38 0.63 0.66

QUICK RATIO0.41 0.38 0.63 0.66

DEBT UTILIZATION

RATIO

DEBT TO TOTAL ASSETS 1.83 1.85 1.08 1.15

Profit / (Loss) after Tax

Expense Ratio

Total Expense ratio: All expenses (incl. commission) / (Total premium – 90% of single premium)Expense ratio: All expenses (excl commission and front line sales cost) / (Total premium – 90% of single excl. premium)Here we can see that over the years both the Total expense ratio and Expense ratio has been on decline which is considered as a good sign as it increases the Profit margin. This may be due to the cost containment strategy that may have been employed over these years.

SWOT Analysis of ICICI Prudential life

insurance

Strengths:

1. ICICI Prudential is No. 1 private life player in India.

2. Innovative insurance policies with rider benefits.

3. Motivation factors provided by the company.

4. One of the largest financial Institution of India’s.

5. Second largest bank with network of 469 branches and 1740 ATM’s across India.

6. A huge database of corporate clients, retail customer, and bank customers of ICICI.

7. Training provided to all people associating with ICICI prudential.

8. Highest paid up capital deposited in IRDA, in comparison to all players.

9. Assets base of ICICI is more then Rs 1,08,000 Crores.

Weakness:

1.Very huge premiums of policies, compared to other insurance sector.

2.Minimum premium is 19000.(Except tax saving policy only 10,000)

3.Target upper class people only.4.Policy charges are very high.5.Problematic to advisors also.6.Poor distribution: since it is in English

language only.

Opportunities:

1.Tie up with more corporate agents all over India.

2.Tie up with broker also3.No. of adopting new technology.4.Strong Brand of Company

Helps to boost sales inn market 5.Attract more people of providing

customer centric products

Threats:

1.Threat from existing life insurance players.

2.Threat from new entrance.3.Threat to substitute products4.Change in the policy of IRDA5.Competition from more & more

new players6.People don’t aware of different

distribution channel

• HDFC Standard Life Insurance Company Ltd is one of India's Leading private insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.), India's leading housing finance institution and a Group Company of the Standard Life, UK.

• HDFC as on December 31, 2007 holds 72.38 per cent of equity in the joint venture.

• Shareholding Pattern:HDFC 72.5%; Standard Life 26.0%; Individuals / ESOP Trust 1.5%

BOARD OF DIRECTORS • Mr. Deepak S. Parekh (Chairman)

Directors• Mr. Keki M. Mistry• Ms. Renu Sud Karnad• Mr. David Nish• Mr. Nathan Parnaby• Mr. Norman K. Skeoch• Mr. Gautam R. Divan• Mr. Ranjan Pant• Mr. Ravi Narain• Mr. A K T Chari• Mr. Gerald E. Grimstone

(Alternate to Mr. David Nish)• Mr. Michael Connarty

(Alternate to Mr. Norman K.Skeoch)

Mr. Amitabh ChaudhryManaging Director &Chief Executive Officer

• Mr. Paresh ParasnisExecutive Director &Chief Operating Officer

• Registered OfficeRamon House, H. T. Parekh Marg,169, Backbay Reclamation,Churchgate, Mumbai 400 020.

• Corporate OfficeHDFC Standard Life Insurance Company Ltd.12th & 13th Floor, Lodha Excelus,Apollo Mills Compound,N M Joshi Marg, Mahalaxmi,Mumbai- 400011.

Management DiscussionFuture diagnosisContinue to focus on –• New business growth • Operational efficiencies to bring down our operating expenses; and • Customer retention to improve the persistency of the in force

policies.

Long term strategy is aligned to 5 strategic themes • Providing long term life insurance solutions • Diversifying distribution channel mix • Delivering variety of products choices to every customer segment • Achieving cost leadership across the value chain • Ensuring customers have exceptional experiences in our services

Asset CostsParticulars March 31,

2011March 31,2010

Freehold Land - -

Office Buildings on Freehold Land

1,699,610 13,921

Improvements to Leasehold Property

3,129 1,721

Furniture and Fixtures 191,994 322,669

Office Equipment/plan 185,330 309,788

Information Technology/Equipment/Computer

155,140 325,852

Capital Work in Progress 21,437 7,649

Motor Vehicles 4,572 -

Software 124,517 162,177

Total 2,395,729 1,143,777

Ratio AnalysisRatios 2011 2010 2009 2008

PROFITABILITY RATIO

PROFIT MARGIN 0.96 3.39 4.47 2.94RETURNS ON ASSETS

(INVESTMENT) 0.07 0.30 0.45 0.24RETURN ON EQUITY 0.04 0.13 0.27 0.18

ASSETS UTILIZATION RATIO

INVENTORY TURNOVER

FIXED ASSETS TURNOVER 0.42 0.70 0.77 0.61

TOTAL ASSETS TURNOVER 0.07 0.08 0.10 0.08

Ratio Analysis

RATIOS 2011 2010 2009 2008

LIQUIDITY RATIO

CURRENT RATIO 0.81 0.63 1.09 1.3

QUICK RATIO 0.81 0.63 1.09 1.3DEBT

UTILIZATION RATIO

DEBT TO TOTAL

ASSETS 1.0 1.37 0.79 0.61

SWOT Analysis of HDFC life

insurance

• STRENGTH:1) First private life insurance company who got license by IRDA .2) Domestic image of HDFC supported by Standard Life’s international image is strength of the company.3) Strong and well spread network of qualified intermediaries and sales person.4) Strong capital and reserve base.5) The company provides customer service of the highest order.6) Huge basket of product range which are suitable to all age and income groups.7) Large pool of technically skilled manpower with in depth knowledge and under standing of the market.

8) The company also provides innovative products to cater to different needs of different customers.

• WEAKNESS:1) less number of branches compare to

nearest competitors 2) Heavy management expenses and

administrative costs.3) Low customer confidence on the private

players.4) Vertical hierarchical reporting structure

with many designations and cadres leading to power politics at all levels without any exception.

5) Poor retention percentage of tied up agents.

6) Every employee does not have enough knowledge about insurance products and commission rates

• OPPORTUNITIES:1. Insurable population : According to IRDA only 10% of the population is insured which represents around 30% of the insurable population. This suggests more than 300m people, with the potential to buy insurance, remain uninsured.

2. There will be inflow of managerial and financial expertise from the world’ s leading insurance markets. Further the burden of educating consumers will also be shared among many players.

3. International companies will help in building world class expertise in local market by introducing the best global practices.

• THREATS:1. Other private insurance companies also aiming for the same uninsured population.

2. Big public sector insurance companies like Life Insurance Corporation (LIC) of India, National Insurance Company Limited, Oriental Insurance Limited, New India Assurance Company Limited and United India Insurance Company Limited. People have more trust in these companies.

3. Poaching of customer base by other companies.

4. Most people don’t under stand the need or are not willing to take insurance policies in general. People prefer short term investment rather than insurance.

Operating Expenses or Cost:

• The operating expenses relating to insurance business are allocated to the Participating, Non-participating, Annuity, Pension, Health and Unit Linked business funds in proportion to one or combination of some of the following parameters:

i) effective premium income ii) number of policies

iii) number of employees iv) man hours utilized v) premium income vi) mean fund size vii) sum assured viii) expenses already

allocated

OPERATING COST

Operating cost related to insurance businessEmployees’ remuneration and welfare benefits

Travel, conveyance and vehicle running expensesRents, rates and taxes

Communication expensesRepairs

Printing & stationaryLegal and professional charges

Medical feesAuditors’ fees

Advertisement and publicityInterest and bank charges

Agents training, recruitment and incentivesDepreciation

Administration support expensesOffice running expenses

Data entry related expensesUnit fund expenses

OthersInformation technology cost

Operating cost other than related to insurance business

Employees’ remuneration and welfare benefits Travel, conveyance and vehicle running

expenses Legal and professional charges

Loss on sale/write off of Fixed Assets (Net) Printing and stationery

Communication expenses Interest and bank charges

Depreciation Others

Operating Costs 2011Operating costs ICICI PRU HDFC LIFE

Operating cost related to Insurance business(A)

21873948 14952066

Important heads under (A)

Employees remuneration and welfare benefits

8640090 6242187

Rents ,Rates and Taxes 1727389 991457

Advertising and Publicity 869792 3359509

Interest and Bank charges 242967 31325

Operating costs not related to insurance

52752 9412

Special Measures: Reducing

Operating Costs

Operating expense ratio has reduced over the last 3 years due to management action on cost containment and productivity enhancement programmes.

Operating expenses have increased marginally by 4% against individual new business growth of 27%

Ratio AnalysisRatios

ICICI PRU HDFC LIFE

2011 2010 2011 2010

PROFITABILITY RATIO

PROFIT MARGIN 0.96 0.89 0.96 3.39RETURNS ON

ASSETS (INVESTMENT) 0.93 0.29 0.07 0.30

RETURN ON EQUITY 0.16 0.05 0.04 0.13ASSETS

UTILIZATION RATIO

INVENTORY TURNOVER - - - -

FIXED ASSETS TURNOVER 4.22 1.09 0.42 0.70

TOTAL ASSETS TURNOVER 0.97 0.33 0.07 0.08

Ratio Analysis

RATIOS

ICICI PRU HDFC LIFE

2011 2010 2011 2010

LIQUIDITY RATIO

CURRENT RATIO0.41 0.38 0.81 0.63

QUICK RATIO0.41 0.38 0.81 0.63

DEBT UTILIZATION

RATIO

DEBT TO TOTAL ASSETS 1.83 1.85 1.0 1.37

4P’s of Marketing

ICICI Prudential HDFC Life

Promotion Increase In share capital

Claim settlement within promised TAT

performance rating in the claims management benchmarking study has been rated as either ‘Outstanding’ or ‘Excellent’ by Swiss Re on 7 of 9 performance levers. This is reflected in claim repudiation, which stood at 4% for FY 10-11, of the total number of claims and was amongst the lowest in the private life insurance space.

Place The Company reaches its customers through 1,404 offices in 1,256 locations.Rural and Social Business constituting over 25.66% of total policy issuances.

The Company currently has 498 offices across the country and through the network of these offices they are able to service customers in over approximately 700 cities and towns across the country.

4P’s of Marketing

ICICI Prudential HDFC Life

Price Comparatively higher rates than other private players.But despite higher premium rates the returns expected are Higher.

Premium rates is strength when compared to ICICI PRU which is market leader in private sector.Low performance in terms of returns with return on equity being 0.04% IN 2011.

Product Insurance Solutions for IndividualsSavings & Wealth Creation SolutionsProtection SolutionsChild PlansRetirement Solutions Health Solution Group Insurance SolutionsFlexible Rider Options

Protection PlansChildren's PlansRetirement PlansSavings & Investment PlansHealth Plans 

Product Profile:

1. Insurance Solutions for Individuals

2. Savings & Wealth Creation Solutions» Cash Plus » Save’n’Protect » Cash Back» Lifetime Super & Lifetime Plus » Life Link Super » Premier Life Gold » Invest Shield Life (New Invest Shield Cash back)

3. Protection Solutions • Life Guard

• Home Assure

4. Child Plans • Education insurance

• Smart Kid

5.Retirement Solutions • Forever Life

• Life Time Super Pension

• Life Link Super Pension

6.Health Solution • Health Assure and Health Assure Plus

• Cancer Care

7.Group Insurance Solutions• Group Gratuity Plan

• Group Superannuation Plan

• Group Immediate Annuities

• Group Term Plan

8.Flexible Rider Options • Accident & disability benefit

• Critical Illness Benefit

• Income Benefit

• Waiver of Premium

HDFC LIFE ProductsProtection Plans• HDFC Terms Assurance Plan • HDFC Premium Guarantee Plan • HDFC Loan Cover Term Assurance Plan • HDFC Home Loan Protection Plan

Children's Plans• HDFC Children’s Plan • HDFC SL YoungStar Super II • HDFC SL YoungStar Super

Premium

Retirement Plans• HDFC Life ClassicPension Insurance Plan • HDFC Personal Pension Plan • HDFC Immediate Annuity • HDFC SL Pension Maximus

Savings & Investment Plans• HDFC Life Sampoorn Samridhi Insurance Plan • HDFC Endowment Assurance Plan • HDFC SL Crest • HDFC SL ProGrowth Super II • HDFC SL ProGrowth Flexi • HDFC SL ProGrowth Maximiser • HDFC SL New Money Back Plan • HDFC Single Premium Whole of Life Insurance Plan • HDFC Assurance Plan • HDFC Savings Assurance Plan • Endowment Gain Insurance Plan • ClassicAssure Insurance Plan

Health Plans• HDFC Critical Care Plan • HDFC SurgiCare Plan

Strategy

•Sustained private market leadership•Strong team of around 13,000 professionals•Strong parentage: ICICI Bank & Prudential PLC•INR 47.80 bn of capital infused

Organization

•Highest brand recall and consideration value amongst private playersBrand

•More than 5000 distribution touch points•About 176076 advisors•More than 50 Corporate tie ups and Bank assurance partners

Distribution

•Products catering to all life cycle needsProduct

•Over 10,000 servicing Touch points•High customer convenience with more than 60% service transaction through electronic modes•Rated most Customer responsive company•Balance between Risk and Customer convenience• 89% policies without medical

• Low claim Ratio• Low Claim rejection rate

Service

Strategy and Way forward•Brand Promise. •Long Term oriented product. Need Based Selling

Position as Leader

•Tied Agency Productivity. New opportunities in non-agency, non-bank assurance space

Diversifying distribution channel

•Customer Lifecycle Segmentation –Products, Distribution Channels; 3 segments identified to be worked on

Identifying customer segments / product

categories

•Unified Customer-led view, Financial Planning Tool, Pioneering Service Initiatives, End-to-End TATs(process 360)

Deliver a unique customer experience

•Persistency, Branch Profitability. Low Cost Delivery Models

TATs Aim for cost leadership through the entire delivery chain

THANK YOU