BySanthosh.Golla121411672032

Project guide:Dhanam Theresa

Chapter 1 : Introduction

IntroductionIndia is the third most attractive foreign

direct investment destination in the world. Due to the growing demand for insurance,

more and more insurance companies are now emerging in the Indian insurance sector.

In fact, FDI provides a win – win situation to the host and the home countries. Both countries are directly interested in inviting FDI, because they benefit a lot from such type of investment.

DefinitionForeign direct investment (FDI) is direct

investment into production in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country.

The investing company may make its overseas investment in a number of ways - either by setting up a subsidiary or associate company in the foreign country, by acquiring shares of an overseas company, or through a merger or joint venture.

Need for the StudyIt is important to know the different source of

capital as well as a source of advanced and developed technologies that are involved in FDI.

To know the investors who bring along best global practices of management.

To study its influence in increasing employment. To study how FDI helps in promoting

international trade and to understand the reasons how the host country undergoes development with FDI.

ObjectivesTo Study the pattern of FDI in Insurance

Sector and the Government regulation involved in them.

To study the current trend in Insurance sector, the challenges and the prospects ahead.

To study the Effect of FDI on Indian Insurance Sector.

To analyze the significance of Foreign Direct Investment for Indian Insurance Industry.

Research MethodologyRESEARCH DESIGNThis project provides a plan of the study, which

include statement of the problem, need for study, review of the previous studies, objectives, definition of concepts, scope, methodology, sample design, sources of data, tool and techniques for data collection, limitations and an overview of chapter scheme

ScopeThe study aims to understand the fundamental

analysis and its impact on insurance sector. It provides the relevant information about the economy, industry, and different companies in insurance sector.

The study entitled ” A study on fundamental analysis and its impaction insurance sector” is undertaken with an intention to study the fundamentals analysis on insurance sector and will find the problems in insurance sector and performance of insurance sector

Data CollectionSECONDARY DATA:Secondary data refers to those data that has

already been collected and analyzed by someone else. In other words secondary data is the information that already exists somewhere having been collected for another purpose.

Secondary data is collected through- Published dataJournals web sources

Chapter 2 : Review of Literature

Foreign Direct Investment

Foreign direct investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land.

Increasing foreign investment can be used as one measure of growing economic globalization.

The largest flows of foreign investment occur between the industrialized countries ( North America, Western Europe and Japan).But flows to non-industrialized countries are increasing sharply.

MethodsThe foreign direct investor may acquire

voting power of an enterprise in an economy through any of the following methods:by incorporating a wholly owned subsidiary or

companyby acquiring shares in an associated enterprisethrough a merger or an acquisition of an

unrelated enterpriseparticipating in an equity joint venture with

another investor or enterprise

Benefits of FDI

Increase investment level and thereby income & employment.

Increase tax revenue of government.Facilitates transfer of technology.Encourage managerial revolution through

professional management.Increase exports and reduce import requirements.Increase competition and break domestic

monopolies.Improves quality and reduces cost of inputs.

Factors affecting FDIProfitability: Attract where return on investment is

higher.Costs of production: Encouraged by lower costs of

production like raw materials, labour .Economic Conditions: Market potential,

infrastructure, size of population, income level etcGovernment policies: Policies like foreign

investment, foreign collaboration, remittances, profits, taxation, foreign exchange control, tariffs etc.

Political factors: Political stability, nature of important political parties and relations with other countries.

Chapter 3 : Industry Profile

Introduction of the IndustryInsurance in India started without any regulations in

the nineteenth century.After the independence, the Life Insurance Company

was nationalized in 1956, and then the general insurance business was nationalized in 1972.

Only in 1999 private insurance companies were allowed back into the business of insurance with a maximum of 26 per cent of foreign holding (World Bank Economic Review 2000).

Government of India now decided to move ahead with its proposal to hike foreign investment ceiling in the insurance sector to 49 percent from the present 26 percent.

Firstly, domestic private-sector companies were permitted to enter both life and non-life insurance business .

Secondly, foreign Companies were allowed to participate, albe it with a cap on shareholding at 49%.Since its inception IRDA has been taking steps to promote insurance sector and also protect interest of people.

List of all life insurance company granted permission by IRDA.

1. Bajaj Allianz Life Insurance Company Limited 2. Birla Sun Life Insurance Co. Ltd 3. HDFC Standard Life Insurance Co. Ltd 4. ICICI Prudential Life Insurance Co. Ltd. 5. ING Vysya Life Insurance Company Ltd. 6. Life Insurance Corporation of India 7. Max New York Life Insurance Co. Ltd 8. Met Life India Insurance Company Ltd. 9. Kotak Mahindra Old Mutual Life Insurance Limited 10. SBI Life Insurance Co. Ltd11. Tata AIG Life Insurance Company Limited

12. Reliance Life Insurance Company Limited. 13. Aviva Life Insurance Co. India Pvt. Ltd. 14. Sahara India Life Insurance Co, Ltd. 15. Shriram Life Insurance Co, Ltd. 16. Bharti AXA Life Insurance Company Ltd. 17. Future Generali Life Insurance Company Ltd. 18. IDBI Fortis Life Insurance Company Ltd. 19. Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd 20. AEGON Religare Life Insurance Company Limited.

21. DLF Pramerica Life Insurance Co. Ltd. 22. Star Union Dai-ichi Life Insurance Comp. Ltd.

CHAPTER-4

ICICI PRUDENTIAL:

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, one of the foremost financial services companies of India and Prudential plc, one of the leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector life insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA).

YEAR ICICI PRUDENTIAL Prudential plc

2011-12 1428.85 370.78

2010-11 1428.46 370.78

2009-10 1428.14 370.78

2008-09 1427.26 370.73

2007-08 1401.11 363.63

Interpretation: In the year of 2012 ICICI PRUDENTIAL ended up with the

first rank among private insurance companies. The capital of the company has been increasing every year

from 2007-12.the foreign promoter investment has increased for two years 07-08&08-09,&then remained constant for the last three years.

HDFC-Standard:HDFC Life (HDFC Standard Life Insurance Company) is an

Indian private life insurance company. It is a joint venture between Housing Development Finance Corporation Ltd (HDFC) and Standard Life plc, provider of financial services in the UK. It was established after private companies were allowed to enter the insurance industry in the year 2000. HDFC holds 74% of the equity while Standard Life holds 26%.

YEAR HDFC Stand Standard Life plc

2011-12 1994.88 518.67

2010-11 1994.88 518.67

2009-10 1968 511.68

2008-09 1796 466.96

2007-08 1271 330.46

Interpretation: For the year 2012 HDFC Stand stood in second place among all the life insurance companies of india.We can observe a drastical growth in the year 2007-08,2008-09&2009-10 and remained constant in the last two years.The equity capital of foreign promoter increased in the same manner.

SBI LIFE: SBI Life Insurance is a joint venture life insurance company

between State Bank of India (SBI), the largest state-owned banking and financial services company in India, and BNP Paribas Assurance. SBI owns 74% of the total capital and BNP Paribas Assurance the remaining 26% of the capital. SBI Life Insurance has an authorized capital of 2,000 crore (US$364 million)and a paid up capital of 1,000 crore (US$182 million).

YEAR SBI LIFE BNP Paribas

2011-12 1000 260

2010-11 1000 260

2009-10 1000 260

2008-09 1000 260

2007-08 1000 260

Interpretation: The turnover of the SBI LIFE is constant for the last five years.The equty captal of the foreign promoter is constant since 2007-08.

YEAR ICICI PRUDENTIAL HDFC Standard SBI LIFE

2011-12 1428.85 1994.88 1000

2010-11 1428.46 1994.88 1000

2009-10 1428.14 1968 1000

2008-09 1427.26 1796 1000

2007-08 1401.11 1271 1000

YEAR Prudential plc Standard Life plc BNP Paribas

2011-12 370.78 518.67 260

2010-11 370.78 518.67 260

2009-10 370.78 511.68 260

2008-09 370.73 466.96 260

2007-08 363.63 330.46 260

0

100

200

300

400

500

600

Prudential plc Standard Life plc BNP Paribas

2011-12

2010-11

2009-10

2008-09

2007-08

Interpretation: FDI is playing a major role in these three companies along with the other private companies. HDFC Standard has the high capitalization of foreign currency.

CHAPTER-5

FINDINGS:

The life insurance industry recorded a premium income of Rs2, 87,072 crore during 2011-12 as against Rs2, 91,639 crore in the previous year , registering a negative growth of 1.57 per cent. While private sector insurers posted 4.52 per cent decline in their premium income, LIC recorded 0.29 per cent decline.

Industry experts believe that most of the challenges can be addressed through higher capitalization.

With the increase in stake, foreign players will be able to contribute in the technical aspects of insurance business.

This includes product innovation, claims settlement process, effective distribution models and other technological best practices.

Increase in solvency capital will motivate insurers to ramp up their operations and expand to smaller cities and towns.

CONCLUSIONS:•This is a very capital intensive industry. Already about Rs33,000 crore has been invested as capital and a further Rs50,000-60,000 crore is required before companies actually breakeven and start making profits. •A well-developed and evolved insurance sector is a boon for economic development as it provides long-term funds for infrastructure development at the same time strengthening the risk taking ability of the country. •Nearly 80% of the Indian population is without life, health and non-life insurance. The insurance sector in India is a colossal one and is growing at a rate of 15-20%. Together with banking services, insurance services add about 7% to the country’s Gross domestic product (GDP) LIMITATIONS:I narrowed down my study to FDI in insurance sector.I again narrowed it to life insurance companies.Since, to study the whole 24 life insurance companies becomes a big task, so i took three companies to analyse the data.

BIBILIOGRAPHY:International finance-AvadhaniInternational business-Subbaraowww.irda.gov.in/Web sources