This document provides an overview of IDBI Federal Life Insurance Company, including its sponsors and joint venture partners. IDBI Federal is a joint venture between IDBI Bank, Federal Bank, and Ageas, a European insurance giant. IDBI Bank owns 48% equity, while Federal Bank and Ageas each own 26% equity. The company offers life insurance and retirement products through the branches of IDBI Bank and Federal Bank, as well as advisors and partners. As of January 2011, the company had over 2.68 lakh policies with Rs. 14,230 crores of sum assured. The sponsors, IDBI Bank and Federal Bank, are described as leading Indian banks.
This document is a summer training project report submitted by Rahul Pal for their MBA program. The report analyzes the financial statements of IDBI Federal Life Insurance Co. Ltd. over several years. It includes an introduction to the insurance industry in India and background on IDBI Federal Life Insurance. The report then covers literature review, research methodology, analysis of financial statements including comparative statements, ratios, findings and suggestions. The analysis examines the financial performance and strength of IDBI Federal Life Insurance.
This document provides an overview of the insurance industry in India and IDBI Federal Life Insurance. It discusses the history of insurance in India dating back to ancient texts. Key developments include private players entering the market in 2000 which has led to growth. The future of the industry is promising with projections of the market reaching $63 billion by 2014 and insurance penetration increasing to 5-6% over the next 5 years. IDBI Federal Life Insurance aims to increase its brand awareness and market share through new products and improved services.
The document is a project report submitted by U.Sindhu to VIT Business School in partial fulfillment of the requirements for a Master's degree in Business Administration. The project examines customer retention at IDBI Federal Life Insurance Corporation Limited. It includes an introduction outlining the importance of customer retention, objectives of the project, scope, methodology, and limitations. It also provides a literature review on topics related to customer retention including definitions, importance, advantages, and factors that influence retention.
The study of life Insurance products being offered by the global market in in...Ankit Pal
This document appears to be a report submitted by Ankit Mohan Lal to IDBI Federal Life Insurance Co. Ltd. as part of an MBA program. It includes an introduction, table of contents, declarations, acknowledgements, and the beginning of the main report. The introduction provides background on life insurance products offered globally and in India. It also outlines the structure and contents of the report, which will examine life insurance products, research methodology, SWOT analysis, and recommendations.
A SUMMER INTERNSHIP PROJECT REPORT ON “CONSUMER BEHAVIOR” AT IDBI FEDERAL LIF...Gaurav Mehta
The document is a summer internship project report submitted by a student to Gujarat Technological University. It analyzes consumer behavior for IDBI Federal Life Insurance Company. The report provides an overview of IDBI Federal, discusses its strengths, weaknesses, opportunities and threats. It then describes the research methodology used, including hypotheses tested, data collection instruments, sample size and limitations. Key findings are that while people prefer life insurance for security, tax benefits and investment, awareness remains low, especially in rural areas.
This document provides information about IDBI Federal Life Insurance, including its sponsors IDBI Bank and Federal Bank. IDBI Federal is a joint venture between IDBI Bank, Federal Bank, and Ageas, an insurance company based in Europe. The document discusses IDBI Federal's rapid growth since inception in 2008. It also provides background on IDBI Bank and Federal Bank, the leading development bank and private sector bank in India that sponsor IDBI Federal.
The document is a report on the marketing mix and promotional strategies of IDBI Federal Life Insurance Co. Ltd. It begins with declarations, acknowledgements, and an executive summary providing details about the organization, project guide, objectives, and methodology. The body of the report analyzes IDBI Federal's marketing mix, products, promotional strategies, and brand awareness. It concludes with recommendations to improve IDBI Federal's marketing and promotions.
This document discusses customer retention at IDBI Federal Life Insurance Co. Ltd. in Hyderabad, India. It aims to study the factors that help IDBI retain customers and identify ways to improve customer satisfaction. A survey was conducted of 120 existing customers. The results found that over 60% of customers were satisfied with their experience and benefits. However, only 33% felt IDBI offers higher benefits than competitors. The document recommends ways for IDBI to retain customers like offering rewards for continuous purchase, gifts, and membership programs. It suggests developing policies targeting unmarried customers and increasing promotions to educate all customer types.
This document is a summer training project report submitted by Rahul Pal for their MBA program. The report analyzes the financial statements of IDBI Federal Life Insurance Co. Ltd. over several years. It includes an introduction to the insurance industry in India and background on IDBI Federal Life Insurance. The report then covers literature review, research methodology, analysis of financial statements including comparative statements, ratios, findings and suggestions. The analysis examines the financial performance and strength of IDBI Federal Life Insurance.
This document provides an overview of the insurance industry in India and IDBI Federal Life Insurance. It discusses the history of insurance in India dating back to ancient texts. Key developments include private players entering the market in 2000 which has led to growth. The future of the industry is promising with projections of the market reaching $63 billion by 2014 and insurance penetration increasing to 5-6% over the next 5 years. IDBI Federal Life Insurance aims to increase its brand awareness and market share through new products and improved services.
The document is a project report submitted by U.Sindhu to VIT Business School in partial fulfillment of the requirements for a Master's degree in Business Administration. The project examines customer retention at IDBI Federal Life Insurance Corporation Limited. It includes an introduction outlining the importance of customer retention, objectives of the project, scope, methodology, and limitations. It also provides a literature review on topics related to customer retention including definitions, importance, advantages, and factors that influence retention.
The study of life Insurance products being offered by the global market in in...Ankit Pal
This document appears to be a report submitted by Ankit Mohan Lal to IDBI Federal Life Insurance Co. Ltd. as part of an MBA program. It includes an introduction, table of contents, declarations, acknowledgements, and the beginning of the main report. The introduction provides background on life insurance products offered globally and in India. It also outlines the structure and contents of the report, which will examine life insurance products, research methodology, SWOT analysis, and recommendations.
A SUMMER INTERNSHIP PROJECT REPORT ON “CONSUMER BEHAVIOR” AT IDBI FEDERAL LIF...Gaurav Mehta
The document is a summer internship project report submitted by a student to Gujarat Technological University. It analyzes consumer behavior for IDBI Federal Life Insurance Company. The report provides an overview of IDBI Federal, discusses its strengths, weaknesses, opportunities and threats. It then describes the research methodology used, including hypotheses tested, data collection instruments, sample size and limitations. Key findings are that while people prefer life insurance for security, tax benefits and investment, awareness remains low, especially in rural areas.
This document provides information about IDBI Federal Life Insurance, including its sponsors IDBI Bank and Federal Bank. IDBI Federal is a joint venture between IDBI Bank, Federal Bank, and Ageas, an insurance company based in Europe. The document discusses IDBI Federal's rapid growth since inception in 2008. It also provides background on IDBI Bank and Federal Bank, the leading development bank and private sector bank in India that sponsor IDBI Federal.
The document is a report on the marketing mix and promotional strategies of IDBI Federal Life Insurance Co. Ltd. It begins with declarations, acknowledgements, and an executive summary providing details about the organization, project guide, objectives, and methodology. The body of the report analyzes IDBI Federal's marketing mix, products, promotional strategies, and brand awareness. It concludes with recommendations to improve IDBI Federal's marketing and promotions.
This document discusses customer retention at IDBI Federal Life Insurance Co. Ltd. in Hyderabad, India. It aims to study the factors that help IDBI retain customers and identify ways to improve customer satisfaction. A survey was conducted of 120 existing customers. The results found that over 60% of customers were satisfied with their experience and benefits. However, only 33% felt IDBI offers higher benefits than competitors. The document recommends ways for IDBI to retain customers like offering rewards for continuous purchase, gifts, and membership programs. It suggests developing policies targeting unmarried customers and increasing promotions to educate all customer types.
This document provides a summary of a report comparing Unit Linked Insurance Plans (ULIPs) offered by IDBI Fortis Life Insurance Company to those of other major insurance companies in India. The report was submitted as part of an internship program. It includes an analysis of secondary data on ULIPs from IDBI Fortis, Tata AIG Life Insurance, Bajaj Allianz Life Insurance, LIC, HDFC Standard Life Insurance, and ICICI Prudential Life Insurance. Primary data was also collected through a survey of 133 respondents in Hyderabad on their preferences, awareness and perceptions of various insurance products and companies. The report evaluates the strengths and weaknesses of IDBI Fortis based on the
IDBI Federal life insurance summer internship reportPrachi Shastri
This is my summer internship report on consumer behavior towards insurance products in IDBI. I have interviewed and surveyed a reasonable amount of people to get proper insights and find out conclusions.
This document appears to be a training report submitted by Jyoti Priya Roul analyzing the financial statements of IDBI Federal Life Insurance Co Ltd. over multiple years to evaluate the company's performance and financial health. The report includes declarations, certificates, acknowledgements, tables of contents, and chapters covering the insurance industry, company profile, literature review, research methodology, financial statement analysis including ratios, findings, suggestions and conclusions.
This document is a project report on the brand awareness of IDBI Federal Life Insurance Co Ltd. It was submitted by Ribu Abraham Varghese to Aurora's Business School in partial fulfillment of a postgraduate diploma program. The report contains an introduction to the insurance sector, the objectives and scope of the study, and the methodology used. It also includes tables, figures, acknowledgments and a certificate of completion. The main focus of the report is to analyze and assess the brand awareness of IDBI Federal Life Insurance among consumers.
This document summarizes a study on target customer behavior and marketing approach for IDBI Federal Life Insurance Company. It identifies key managerial problems such as lack of brand awareness and trust. Through qualitative and quantitative research involving surveys and segmentation, it analyzes customer perceptions, preferences and behavior across different income and age groups. The results show gaps in IDBI Federal's marketing activities and awareness. Recommendations focus on targeting specific income segments, positioning products as lower risk options, and boosting marketing efforts through referrals and newspapers.
A project report on Training & Recruitment of Life Insurance Agent. Guwahati ...Riyaj Shah
The Summer Excel Training I have done in Bharti AXA life Insurance Company Ltd. Guwahati, in the partial fulfillment of MBA course for 30 days was a memorable one in my management education.
I gathered a very good practical experience with this project.
This document provides information about a project report on Customer Relationship Management at Reliance Life Insurance. It includes an introduction, objectives to study the company's customer retention procedures, current CRM trends, and efforts to motivate advisors. It also provides details about Reliance Capital, the parent company of Reliance Life Insurance, and its expansion into the life insurance business through acquisitions. The report will analyze Reliance Life Insurance's CRM strategies and techniques using data collection and interpretations.
The document is an industrial training project report submitted by Swadha Mishra, a final year student of Bachelor of Business Administration, as part of a professional development activity at Jayoti Vidyapeeth Women's University in Jaipur, India from December 11th-31st 2012. The report focuses on recruitment of financial consultants at HDFC Standard Life Insurance Company Limited during the training period. It includes an introduction, objectives, company profile, training methodology used, study of human resources, data analysis, results, conclusions and recommendations.
This document provides an overview of IDBI Federal Life Insurance, including:
1) IDBI Federal Life Insurance is a joint venture between IDBI Bank, Federal Bank, and Ageas insurance. It offers various insurance products to customers in India.
2) Information is provided on the partner organizations IDBI Bank, Federal Bank, and Ageas insurance.
3) An organizational structure of IDBI Federal Life Insurance is shown, including the CEO and heads of different divisions.
The document discusses new IRDA guidelines for unit-linked insurance policies (ULIPs). Key changes include: 1) Minimum sum assured of 50% of annual premium or 5 times annual premium. 2) Lock-in period for top-up premiums increased to 3 years from investment. 3) Withdrawals only allowed after 3 years except in last 2 years before death. The guidelines aim to increase consumer protection by reducing risk and improving transparency of charges.
The document provides background information on the insurance industry in India. It discusses how the industry was nationalized in 1956 but opened up to private players in the 1990s. Currently there are 52 insurance companies operating in India, with the life insurance industry experiencing a decline in growth of 1.57% in 2011-12. The insurance sector has significant growth potential as penetration rates remain low compared to other Asian countries, providing opportunities for interested companies.
The document is a project report on comparative analysis of insurance products offered by different life insurance companies in India. It was submitted by Anubhav Bhushan to his company guide at Reliance Life Insurance Company Ltd. in partial fulfillment of post graduate diploma in management. The report contains 13 chapters discussing the Indian insurance industry, various insurance companies and their products, marketing strategies used, research methodology adopted for the comparative analysis, findings of the analysis and recommendations.
The document appears to be a report on the potential of the life insurance industry in Surat market. It includes an introduction, objectives, limitations, methodology and data collection sections. The objectives are to understand the life insurance industry, analyze Kotak Life Insurance's brand awareness and customer preferences, conduct a market survey to understand the potential in Surat, and make recommendations based on findings. Limitations discussed include lack of awareness, perceptions of insurance, competition in the industry, and more. The methodology section outlines a descriptive research approach using primary and secondary data collection methods.
Reliance Life Insurance Summer Project Report 2010 ANUBHAV BHUSHAN
The document is a project report submitted by Mr. Anubhav Bhushan in partial fulfillment of the requirements for a Post Graduate Diploma in Management. The report includes two research studies - a perception study on money back life insurance policies and a comparative analysis of products offered by Reliance Life Insurance and other private insurance companies. It outlines the research methodology, which involved primary data collection through surveys in Varanasi as well as secondary research. The findings of the perception study on money back policies are presented through data analysis and interpretation sections that include various charts and tables presenting respondents' demographic details and perspectives.
This document provides an executive summary and index for a project report on Reliance Life Insurance Company Limited. The executive summary outlines that Reliance Life Insurance was officially launched in 2006 after acquiring AMP Sanmar Life Insurance. It has over 600 employees and 118 branches focused in South India. The company aims to be customers' preferred life insurer. The index previews that the report will cover topics like the insurance industry, Reliance Life Insurance's products, human resources, marketing, research methodology, and finance.
This document is a research report on customer preferences towards child education plans offered by Life Insurance Corporation of India (LIC). It includes an introduction discussing how customer perceptions can change over time. It then provides background on the benefits of life insurance and LIC's child education plans. The report contributes that LIC contributes 4% to India's gross domestic product and pays large dividends to the government. It concludes with an executive summary stating the report studies customer perceptions of insurance providers in Bhilai to help private and public insurers improve standards and customer facilities.
Summer internship taining project report kotak life insuranceShubham Aggarwal
its a full project report on kotak mahindra life insurance based on summer internship. it covers the survey of 50 people that what was their perception regarding kotak and other insurance provider by filling up a questionnaire.
The document is a project report submitted by Mr. Kishan Kumar Sharma to Aurora's Business School analyzing the ratio performance of IDBI Federal Life Insurance Co Ltd. over three years from 2011-2012 to 2013-2014. The report contains an introduction on the importance of ratio analysis, the theoretical background of insurance ratio analysis, an industry analysis of the life insurance sector, a company profile of IDBI Federal Life Insurance, objectives, methodology and detailed analysis of key financial ratios of the company along with conclusions.
This document provides an index and table of contents for a research report. The index lists 8 chapters that will be covered in the report, including introductions to the industry and company, research methodology, objectives, conclusions, and recommendations. It also includes acknowledgments and an executive summary. The executive summary previews that the report will compare life insurance products from HDFC Standard Life to major competitors in the market.
This document is a summer training report submitted to Guru Jambheshwar University by Mohit Agarwal after completing an internship at HDFC Standard Life Insurance. The report includes an introduction to the life insurance industry in India and HDFC Standard Life. It also describes the research methodology, findings, data analysis, and conclusions from a study conducted on the awareness of financial planning in the emerging Indian market. Key recommendations are provided at the end.
This document provides a summary of a report comparing Unit Linked Insurance Plans (ULIPs) offered by IDBI Fortis Life Insurance Company to those of other major insurance companies in India. The report was submitted as part of an internship program. It includes an analysis of secondary data on ULIPs from IDBI Fortis, Tata AIG Life Insurance, Bajaj Allianz Life Insurance, LIC, HDFC Standard Life Insurance, and ICICI Prudential Life Insurance. Primary data was also collected through a survey of 133 respondents in Hyderabad on their preferences, awareness and perceptions of various insurance products and companies. The report evaluates the strengths and weaknesses of IDBI Fortis based on the
IDBI Federal life insurance summer internship reportPrachi Shastri
This is my summer internship report on consumer behavior towards insurance products in IDBI. I have interviewed and surveyed a reasonable amount of people to get proper insights and find out conclusions.
This document appears to be a training report submitted by Jyoti Priya Roul analyzing the financial statements of IDBI Federal Life Insurance Co Ltd. over multiple years to evaluate the company's performance and financial health. The report includes declarations, certificates, acknowledgements, tables of contents, and chapters covering the insurance industry, company profile, literature review, research methodology, financial statement analysis including ratios, findings, suggestions and conclusions.
This document is a project report on the brand awareness of IDBI Federal Life Insurance Co Ltd. It was submitted by Ribu Abraham Varghese to Aurora's Business School in partial fulfillment of a postgraduate diploma program. The report contains an introduction to the insurance sector, the objectives and scope of the study, and the methodology used. It also includes tables, figures, acknowledgments and a certificate of completion. The main focus of the report is to analyze and assess the brand awareness of IDBI Federal Life Insurance among consumers.
This document summarizes a study on target customer behavior and marketing approach for IDBI Federal Life Insurance Company. It identifies key managerial problems such as lack of brand awareness and trust. Through qualitative and quantitative research involving surveys and segmentation, it analyzes customer perceptions, preferences and behavior across different income and age groups. The results show gaps in IDBI Federal's marketing activities and awareness. Recommendations focus on targeting specific income segments, positioning products as lower risk options, and boosting marketing efforts through referrals and newspapers.
A project report on Training & Recruitment of Life Insurance Agent. Guwahati ...Riyaj Shah
The Summer Excel Training I have done in Bharti AXA life Insurance Company Ltd. Guwahati, in the partial fulfillment of MBA course for 30 days was a memorable one in my management education.
I gathered a very good practical experience with this project.
This document provides information about a project report on Customer Relationship Management at Reliance Life Insurance. It includes an introduction, objectives to study the company's customer retention procedures, current CRM trends, and efforts to motivate advisors. It also provides details about Reliance Capital, the parent company of Reliance Life Insurance, and its expansion into the life insurance business through acquisitions. The report will analyze Reliance Life Insurance's CRM strategies and techniques using data collection and interpretations.
The document is an industrial training project report submitted by Swadha Mishra, a final year student of Bachelor of Business Administration, as part of a professional development activity at Jayoti Vidyapeeth Women's University in Jaipur, India from December 11th-31st 2012. The report focuses on recruitment of financial consultants at HDFC Standard Life Insurance Company Limited during the training period. It includes an introduction, objectives, company profile, training methodology used, study of human resources, data analysis, results, conclusions and recommendations.
This document provides an overview of IDBI Federal Life Insurance, including:
1) IDBI Federal Life Insurance is a joint venture between IDBI Bank, Federal Bank, and Ageas insurance. It offers various insurance products to customers in India.
2) Information is provided on the partner organizations IDBI Bank, Federal Bank, and Ageas insurance.
3) An organizational structure of IDBI Federal Life Insurance is shown, including the CEO and heads of different divisions.
The document discusses new IRDA guidelines for unit-linked insurance policies (ULIPs). Key changes include: 1) Minimum sum assured of 50% of annual premium or 5 times annual premium. 2) Lock-in period for top-up premiums increased to 3 years from investment. 3) Withdrawals only allowed after 3 years except in last 2 years before death. The guidelines aim to increase consumer protection by reducing risk and improving transparency of charges.
The document provides background information on the insurance industry in India. It discusses how the industry was nationalized in 1956 but opened up to private players in the 1990s. Currently there are 52 insurance companies operating in India, with the life insurance industry experiencing a decline in growth of 1.57% in 2011-12. The insurance sector has significant growth potential as penetration rates remain low compared to other Asian countries, providing opportunities for interested companies.
The document is a project report on comparative analysis of insurance products offered by different life insurance companies in India. It was submitted by Anubhav Bhushan to his company guide at Reliance Life Insurance Company Ltd. in partial fulfillment of post graduate diploma in management. The report contains 13 chapters discussing the Indian insurance industry, various insurance companies and their products, marketing strategies used, research methodology adopted for the comparative analysis, findings of the analysis and recommendations.
The document appears to be a report on the potential of the life insurance industry in Surat market. It includes an introduction, objectives, limitations, methodology and data collection sections. The objectives are to understand the life insurance industry, analyze Kotak Life Insurance's brand awareness and customer preferences, conduct a market survey to understand the potential in Surat, and make recommendations based on findings. Limitations discussed include lack of awareness, perceptions of insurance, competition in the industry, and more. The methodology section outlines a descriptive research approach using primary and secondary data collection methods.
Reliance Life Insurance Summer Project Report 2010 ANUBHAV BHUSHAN
The document is a project report submitted by Mr. Anubhav Bhushan in partial fulfillment of the requirements for a Post Graduate Diploma in Management. The report includes two research studies - a perception study on money back life insurance policies and a comparative analysis of products offered by Reliance Life Insurance and other private insurance companies. It outlines the research methodology, which involved primary data collection through surveys in Varanasi as well as secondary research. The findings of the perception study on money back policies are presented through data analysis and interpretation sections that include various charts and tables presenting respondents' demographic details and perspectives.
This document provides an executive summary and index for a project report on Reliance Life Insurance Company Limited. The executive summary outlines that Reliance Life Insurance was officially launched in 2006 after acquiring AMP Sanmar Life Insurance. It has over 600 employees and 118 branches focused in South India. The company aims to be customers' preferred life insurer. The index previews that the report will cover topics like the insurance industry, Reliance Life Insurance's products, human resources, marketing, research methodology, and finance.
This document is a research report on customer preferences towards child education plans offered by Life Insurance Corporation of India (LIC). It includes an introduction discussing how customer perceptions can change over time. It then provides background on the benefits of life insurance and LIC's child education plans. The report contributes that LIC contributes 4% to India's gross domestic product and pays large dividends to the government. It concludes with an executive summary stating the report studies customer perceptions of insurance providers in Bhilai to help private and public insurers improve standards and customer facilities.
Summer internship taining project report kotak life insuranceShubham Aggarwal
its a full project report on kotak mahindra life insurance based on summer internship. it covers the survey of 50 people that what was their perception regarding kotak and other insurance provider by filling up a questionnaire.
The document is a project report submitted by Mr. Kishan Kumar Sharma to Aurora's Business School analyzing the ratio performance of IDBI Federal Life Insurance Co Ltd. over three years from 2011-2012 to 2013-2014. The report contains an introduction on the importance of ratio analysis, the theoretical background of insurance ratio analysis, an industry analysis of the life insurance sector, a company profile of IDBI Federal Life Insurance, objectives, methodology and detailed analysis of key financial ratios of the company along with conclusions.
This document provides an index and table of contents for a research report. The index lists 8 chapters that will be covered in the report, including introductions to the industry and company, research methodology, objectives, conclusions, and recommendations. It also includes acknowledgments and an executive summary. The executive summary previews that the report will compare life insurance products from HDFC Standard Life to major competitors in the market.
This document is a summer training report submitted to Guru Jambheshwar University by Mohit Agarwal after completing an internship at HDFC Standard Life Insurance. The report includes an introduction to the life insurance industry in India and HDFC Standard Life. It also describes the research methodology, findings, data analysis, and conclusions from a study conducted on the awareness of financial planning in the emerging Indian market. Key recommendations are provided at the end.
This document is a summer internship report submitted by NEHA to the School of Management at Gautam Buddha University. It presents a comparative study of two life insurance companies in India - IDBI Federal Life Insurance Co. Ltd. and LIC. The report includes declarations, certificates of work completion, acknowledgements, an executive summary, and outlines of chapters on the insurance industry in India, company descriptions, product profiles, research methodology, data analysis, findings and recommendations.
The document provides an overview of the general insurance sector in India. It discusses the origin and development of the sector from its early beginnings in the 1850s through nationalization in the 1970s. It then describes the current state of the industry, with 12 companies operating - 4 public sector companies and 8 private sector companies established after regulatory reforms in 1999. The future of the industry is discussed as very promising, with projections of over 200% growth by 2009-2012 and increasing penetration of insurance across the population from the current 20%. Private players are expected to grow faster than public sector companies.
Comparative analysis of insurance market in india on hdfc-life-1-1Flex
This document is a project report submitted by Vivek Kumar to SavitriBai Phule Pune University for the degree of Master of Business Administration. The report is about life insurance and taxation in India, with a focus on HDFC Standard Life Insurance. It includes approval letters for the internship and project, a certificate confirming the original work, and declarations. It also provides acknowledgements, preface, index, and executive summary sections.
SIP Report - Equity Research (Fundamental and Technical Analysis).docxHrishikeshHimesh
This report summarizes an equity research project conducted during a summer internship at HDFC Life. The report analyzes the mining and insurance sectors through fundamental analysis techniques such as ratio analysis and index formulation. Research was conducted on large cap companies within the sectors. Graphs were used to represent the mining and insurance sectors. The analysis and research aims to help investors make informed investment decisions within the sectors.
In this paper an attempt is made to study the financial performance and investment performance of Life Insurance Corporation of India Ltd. (LIC) during the period 2001-02 to 2015-16. To examine financial performance income, outgo and their sub-components are chosen. As far as investment performance is concerned sector-wise, instrument-wise and also their sub-components are taken. This paper is divided into two Sections. In the first section financial and investment performance is examined. In the second section the impact of sector-wise and instrument-wise investment on total income of LIC is assessed.
This document provides an overview of the life insurance industry in India. It discusses how the industry has grown significantly over the years and now represents a major economic sector. While insurance penetration is still low compared to other countries, there is huge growth potential as nearly 80% of the population lacks adequate life or health insurance. The regulatory framework for insurance is outlined, including the key acts governing the industry and the role of the Insurance Regulatory and Development Authority. Segment-wise splits of new business premiums collected in 2010 and 2011 are also presented in charts.
The document provides an overview of the life insurance and financial planning industry in India. It discusses key topics such as the historical development of the insurance sector, current regulatory framework, major players and their market shares, various insurance products offered, and distribution channels. The industry is set for rapid growth in the coming years driven by increasing incomes, financial awareness and the entry of private players. Customer service and use of new distribution channels like bancassurance are becoming important for companies to succeed in this competitive environment.
The document summarizes the insurance sector in India. It discusses the evolution of the sector from being a public sector monopoly to allowing private players. It provides an overview of life and general insurance services and major public and private players. It notes that while LIC remains the largest insurer, private players have grown their market share in recent years. The insurance sector contributes significantly to the Indian economy through long-term savings and funding for development.
This document provides an overview of the insurance industry in India, including its history and current regulatory structure. It discusses the establishment of the Insurance Regulatory and Development Authority (IRDA) in 1999 and 2000 to regulate the industry and allow private companies. The life insurance industry is growing rapidly, projected to reach $2000 billion by 2009-2010, with private companies growing at 140% compared to 35-40% for state-owned companies. Private companies have increased their market share from 3% to 30% in recent years by offering competitive policies and rates of return. The overall insurance sector size is estimated to be $500 billion currently and expected to continue growing significantly.
A project report on hdfc standard life insuranceProjects Kart
This document provides an acknowledgement and index for a project report on HDFC Standard Life Insurance Company. It thanks the company and project guide for their support and guidance. The index outlines the contents of the report, which will cover topics like the history of insurance, HDFC's products and services, barriers to entry in the insurance sector, growth potential, and recommendations.
Effectiveness of CRM in HDFC Standard Life Insurance into Increase the SalesProjects Kart
The CRM softwares are one of the great tools for life insurance sector where they can track their customers term insurance, tax saving investments, life insurance, in a customizable and user friendly way. Life Insurance in its modern form came to India from England in the year 1818. Oriental Life Insurance Company started by Europeans in Calcut-ta was the first life insurance company on Indian Soil. All the insurance companies established during that period were brought up with the purpose of looking after the needs of European community and these companies were not insuring Indian natives. However, later with the efforts of eminent peo-ple like Babu Muttylal Seal, the foreign life insurance companies started in-suring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance com-pany in the year 1870, and covered Indian lives at normal rates. Starting as Indian enterprise with highly patriotic motives, insurance companies came into existence to carry the message of insurance and social security through insurance to various sectors of society. Bharat Insurance Company (1896) was also one of such companies inspired by nationalism. With largest number of life insurance policies in force in the world, Insurance happens to be a mega opportunity in India. It’s a business growing at the rate of 15-20 per cent annually and presently is of the order of Rs 450 billion. Together with banking services, it adds about 7 percent to the coun-try’s GDP. Gross premium collection is nearly 2 per cent of GDP and funds available with LIC for investments are 8 per cent of GDP.
Yet, nearly 80 per cent of Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. And this part of the population is also subject to weak social security and pension systems with hardly any old age income security. It is an indicator that growth potential for the insurance sector is immense. Visit http://www.projectskart.com/p/contact-us.html for more information
This document discusses the insurance sector in India. It provides background on insurance sector reforms and the Malhotra Committee of 1993. It then discusses the key players in the Indian insurance sector and some issues facing life insurance in India, including the need to raise foreign direct investment limits, high expense ratios for private players, strengthening core product offerings, delays in profitability for private insurers, lack of professional agency channels, promoting bancassurance, and other global issues impacting insurance. The document provides an overview of the current state and challenges within the Indian insurance industry.
A CII-EY Report on the Insurance Industry titled ‘Building Growth, Building Value’ recommends chasing efficiency in distribution by finding greater synergy among the different channels. This will help in well-rounded industry growth and enable maximum value creation for all the stakeholders. The report also states that insurers must be careful in identifying the right ways to employ additional capital inflows that they may receive over the next few years with capital infusion from the foreign partners.
This document provides a summary of the history and development of the insurance industry in India. It discusses how insurance has ancient roots in India but the modern industry was heavily influenced by British companies starting in the 1800s. The life insurance industry was nationalized in 1956 with the formation of LIC, which had a monopoly until the late 1990s when private players were allowed. The general insurance industry also originated from British trade but remained fragmented until steps towards consolidation in the 1900s. Overall the document outlines the evolution of insurance from early concepts to the nationalized structure to recent private sector liberalization.
Person who helps the agent in his work.
Beneficiary: Person who receives the insurance money in case of claim.
Broker: Person who acts as an intermediary between the insurer and insured for negotiating insurance contracts and
placing insurance on behalf of insured with one or more insurers.
Claim: Demand made by the insured for indemnity of loss under an insurance contract.
Coinsurance: Sharing of a loss between the insured and the insurer in a specified proportion.
Contribution: Sharing of a loss between co-insurers in a specified proportion.
Deductible: Portion of each loss which insured agrees to bear before insurer becomes liable to pay.
Endorse
This document provides an overview of the Indian insurance industry and Beacon Insurance Brokers Pvt. Ltd. It discusses the history of insurance in India, including key milestones and the nationalization and privatization of the industry. The Insurance Regulatory and Development Authority (IRDA) was established in 1999 to regulate the private insurance sector. Beacon Insurance Brokers Pvt. Ltd operates within this growing private insurance market in India, working with both public and private insurers. The document outlines Beacon's role in brokering insurance products between insurers and clients.
3. Table of Contents
Acknowledgement ............................................................................................................................ 3
Executive Summary .......................................................................................................................... 4
Industry Overview..................................................................................................................................5
Company Overview……………………………………………………………………………………………………………….………..11
Financial Markets………………………………………………………………………………………………………………………..….13
Primary and secondary market
Trading in secondary market
Money market
Bond Market........................................................................................................................................15
Macaulay Duration and Modified Duration
Financial Analysis and Valuation…………………………………………………………………………………………………….17
Valuation of stocks
Managing a Portfolio………………………………………………………………………………………………………………………20
The CAPM Model
Calculation of Beta
Arbitrage Pricing Theory
Sharpe Ratio
Treynor Ratio
Jenson Measure or Portfolio Alpha
Analysis of a portfolio
Market Research…………………………………………………………………………………………………………………………….63
Objective
Methodology
Questionnaire
Analysis
Findings
Recommendations………………………………………………………………………………………………………………………..68
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4. Acknowledgement
I take this opportunity to thank various people who have made it possible for me to
successfully complete my internship program with the project at IDBI Federal Life. I would
like to thank the following people:
Mrs. Shanthi Yagyanath – Manager Distribution, Chief, IDBI Federal who gave me this
wonderful opportunity to work on such a fruitful project.
Mr. Sathya Balan M.A. – Business Mentor, IDBI Federal for guiding and assisting me in
the project and for his valuable feedback at every step of the project.
Mr. Hemanth Nagaraj – Corporate Trainer, IDBI Federal for briefing about the company‘s
background and products and helping me throughout the project.
Also I would like to thank Prof. Nirmalya Bandyopadhyay – Faculty Guide, Goa Institute
of Management for his critical views, suggestions and support during the course of the
project.
Apart from these, I would like to thank the other officers and staff of IDBI Federal Life
Insurance Co. Ltd. where I had received immense support in carrying out my internship
program.
I would like to thank all other people who are in some way or the other involved with my
internship. These include my friends and other colleagues.
Pankaj Arora
Goa Institute of Management
Batch of 2010-12
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5. Executive Summary
Life Insurance companies collect the money from the policyholders in the form of premiums
and invest this money in various investment opportunities available like fixed bonds,
securities, stocks, mutual funds, etc. The investment strategy depends on the investment
objective and future expectations of cash flow. This includes effective management of a
portfolio of investments by the Insurance company in order to meet the future liabilities.
This research work deals with the review of an existing portfolio of IDBI Federal Life
Insurance Co. Ltd. by calculating the Beta of all the stocks held in the portfolio and hence
giving a critical feedback to the company to how to improvise the portfolio and increase the
returns by mitigating risks.
The findings will give a better combination of stocks to be held as a portfolio in order to
increase the returns.
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6. Industry Overview
Indian insurance is a flourishing industry, with several national and international players
competing and growing at rapid rates. Thanks to reforms and the easing of policy regulations,
the Indian insurance sector been allowed to flourish, and as Indians become more familiar
with different insurance products, this growth can only increase, with the period from 2010 -
2015 projected to be the 'Golden Age' for the Indian insurance industry.
The insurance sector in India has come a full circle from being an open competitive market to
nationalisation and back to a liberalised market again. Tracing the developments in the Indian
insurance sector reveals the 360-degree turn witnessed over a period of almost two centuries.
Indian insurance companies offer a comprehensive range of insurance plans, a range that is
growing as the economy matures and the wealth of the middle classes increases. The most
common types include: term life policies, endowment policies, joint life policies, whole life
policies, loan cover term assurance policies, unit-linked insurance plans, group insurance
policies, pension plans, and annuities. General insurance plans are also available to cover
motor insurance, home insurance, travel insurance and health insurance.
Due to the growing demand for insurance, more and more insurance companies are now
emerging in the Indian insurance sector. With the opening up of the economy, several
international leaders in the insurance sector are trying to venture into the India insurance
industry.
A brief history of the Insurance sector
The history of the Indian insurance sector dates back to 1818, when the Oriental Life
Insurance Company was formed in Kolkata. A new era began in the India insurance sector,
with the passing of the Life Insurance Act of 1912. The Indian Insurance Companies Act was
passed in 1928. This act empowered the government of India to gather necessary information
about the life insurance and non-life insurance organizations operating in the Indian financial
markets.
Some of the important milestones in the life insurance business in India are:
1912: The Indian Life Assurance Companies Act enacted as the first statute to
regulate the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to
collect statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act with the
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7. objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies taken over by the
central government and nationalised. LIC formed by an Act of Parliament, viz.
LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government
of India.
The General insurance business in India, on the other hand, can trace its roots to the Triton
Insurance Company Ltd., the first general insurance company established in the year 1850 in
Calcutta by the British.
Some of the important milestones in the general insurance business in India are:
1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all
classes of general insurance business.
1957: General Insurance Council, a wing of the Insurance Association of India,
frames a code of conduct for ensuring fair conduct and sound business
practices.
1968: The Insurance Act amended to regulate investments and set minimum solvency
margins and the Tariff Advisory Committee set up.
1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the
general insurance business in India with effect from 1st January 1973.
107 insurers amalgamated and grouped into four companies viz. the National
Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental
Insurance Company Ltd. and the United India Insurance Company Ltd. GIC
incorporated as a company.
Indian Insurance: Sector Reforms
In 1993, Malhotra Committee headed by former Finance Secretary and RBI Governor R.N.
Malhotra was formed to evaluate the Indian insurance industry and recommend its future
direction.The aim of the Malhotra Committee was to assess the functionality of the Indian
insurance sector. This committee was also in charge of recommending the future path of
insurance in India.
The Malhotra committee was set up with the objective of complementing the reforms
initiated in the financial sector. The reforms were aimed at creating a more efficient and
competitive financial system suitable for the requirements of the economy keeping in mind
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8. the structural changes currently underway and recognizing that insurance is an important part
of the overall financial system where it was necessary to address the need for similar reforms.
In 1994, the committee submitted the report and some of the key recommendations included:
1) Structure
Government stake in the insurance Companies to be brought down to 50%.
Government should take over the holdings of GIC and its subsidiaries so that these
subsidiaries can act as independent corporations.
All the insurance companies should be given greater freedom to operate.
2) Competition
Private Companies with a minimum paid up capital of Rs.1bn should be allowed to
enter the industry.
No Company should deal in both Life and General Insurance through a single entity.
Foreign companies may be allowed to enter the industry in collaboration with the
domestic companies.
Postal Life Insurance should be allowed to operate in the rural market.
Only One State Level Life Insurance Company should be allowed to operate in each
state.
3) Regulatory Body
The Insurance Act should be changed.
An Insurance Regulatory body should be set up.
Controller of Insurance (Currently a part from the Finance Ministry) should be made
independent.
4) Investments
Mandatory Investments of LIC Life Fund in government securities to be reduced from
75% to 50%.
GIC and its subsidiaries are not to hold more than 5% in any company (There current
holdings to be brought down to this level over a period of time).
5) Customer Service
LIC should pay interest on delays in payments beyond 30 days.
Insurance companies must be encouraged to set up unit linked pension plans.
Computerisation of operations and updating of technology to be carried out in the
insurance industry The committee emphasized that in order to improve the
customer services and increase the coverage of the insurance industry should be
opened up to competition.
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9. But at the same time, the committee felt the need to exercise caution as any failure on the part
of new players could ruin the public confidence in the industry. Hence, it was decided to
allow competition in a limited way by stipulating the minimum capital requirement of Rs.100
crores. The committee felt the need to provide greater autonomy to insurance companies in
order to improve their performance and enable them to act as independent companies with
economic motives. For this purpose, it had proposed setting up an independent regulatory
body.
The Insurance Regulatory and Development Authority Act of 1999 brought about several
crucial policy changes in the insurance sector of India. It led to the formation of the Insurance
Regulatory and Development Authority (IRDA) in 2000.
The goals of the IRDA are to safeguard the interests of insurance policyholders, as well as to
initiate different policy measures to help sustain growth in the Indian insurance sector.
The Authority has notified 27 Regulations on various issues which include Registration of
Insurers, Regulation on insurance agents, Solvency Margin, Re-insurance, Obligation of
Insurers to Rural and Social sector, Investment and Accounting Procedure, Protection of
policy holders' interest etc. Applications were invited by the Authority with effect from 15th
August, 2000 for issue of the Certificate of Registration to both life and non-life insurers. The
Authority has its Head Quarter at Hyderabad.
Major Policy Changes
Insurance sector has been opened up for competition from Indian private insurance
companies with the enactment of Insurance Regulatory and Development Authority Act,
1999 (IRDA Act). As per the provisions of IRDA Act, 1999, Insurance Regulatory and
Development Authority (IRDA) was established on 19th April 2000 to protect the interests of
holder of insurance policy and to regulate, promote and ensure orderly growth of the
insurance industry. IRDA Act 1999 paved the way for the entry of private players into the
insurance market which was hitherto the exclusive privilege of public sector insurance
companies/ corporations. Under the new dispensation Indian insurance companies in private
sector were permitted to operate in India with the following conditions:
Company is formed and registered under the Companies Act, 1956;
The aggregate holdings of equity shares by a foreign company, either by itself or
through its subsidiary companies or its nominees, do not exceed 26%, paid up
equity capital of such Indian insurance company;
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10. The company's sole purpose is to carry on life insurance business or general insurance
business or reinsurance business.
The minimum paid up equity capital for life or general insurance business is Rs.100
crores.
The minimum paid up equity capital for carrying on reinsurance business has been
prescribed as Rs.200 crores.
The Authority has notified 27 Regulations on various issues which include Registration of
Insurers, Regulation on insurance agents, Solvency Margin, Re-insurance, Obligation of
Insurers to Rural and Social sector, Investment and Accounting Procedure, Protection of
policy holders' interest etc. Applications were invited by the Authority with effect from 15th
August, 2000 for issue of the Certificate of Registration to both life and non-life insurers. The
Authority has its Head Quarter at Hyderabad.
Insurance companies:
IRDA has so far granted registration to 12 private life insurance companies and 9 general
insurance companies. If the existing public sector insurance companies are included, there are
currently 13 insurance companies in the life side and 13 companies operating in general
insurance business. General Insurance Corporation has been approved as the "Indian
reinsurer" for underwriting only reinsurance business.
Protection of the interest of policy holders:
IRDA has the responsibility of protecting the interest of insurance policyholders. Towards
achieving this objective, the Authority has taken the following steps:
IRDA has notified Protection of Policyholders Interest Regulations 2001 to provide
for: policy proposal documents in easily understandable language; claims procedure in
both life and non-life; setting up of grievance redressal machinery; speedy settlement
of claims; and policyholders' servicing. The Regulation also provides for payment of
interest by insurers for the delay in settlement of claim.
The insurers are required to maintain solvency margins so that they are in a position
to meet their obligations towards policyholders with regard to payment of claims.
It is obligatory on the part of the insurance companies to disclose clearly the benefits,
terms and conditions under the policy. The advertisements issued by the insurers
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11. should not mislead the insuring public.
All insurers are required to set up proper grievance redress machinery in their head
office and at their other offices.
The Authority takes up with the insurers any complaint received from the
policyholders in connection with services provided by them under the insurance
contract.
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12. Company Overview
IDBI Federal Life Insurance:-
IDBI Federal Life Insurance Co Ltd is a joint-venture of IDBI Bank, India‘s premier
development and commercial bank, Federal Bank, one of India‘s leading private sector banks
and Ageas, a multinational insurance giant based out of Europe. In this venture, IDBI Bank
owns 48% equity while Federal Bank and Ageas own 26% equity each. At IDBI Federal, we
endeavour to deliver products that provide value and convenience to the customer. Through a
continuous process of innovation in product and service delivery we intend to deliver world-
class wealth management, protection and retirement solutions to Indian customers. Having
started in March 2008, in just five months of inception we became one of the fastest growing
new insurance companies to garner Rs.100 Cr in premiums. The company offers its services
through a vast nationwide network across the branches of IDBI Bank and Federal Bank in
addition to a sizeable network of advisors and partners. As on January 31st 2011, the
company has issued over lakh 2.68 lakh policies with over Rs.14,230 Cr in Sum Assured.
Sponsors of IDBI Federal Life Insurance:-
IDBI Bank Ltd. continues to be, since its inception, India‘s premier industrial development
bank. Created in 1956 to support India‘s industrial backbone, IDBI Bank has since evolved
into a powerhouse of industrial and retail finance. Today, it is amongst India‘s foremost
commercial banks, with a wide range of innovative products and services, serving retail and
corporate customers in all corners of the country from 783 branches and 1328 ATMs. The
Bank offers its customers an extensive range of diversified services including project
financing, term lending, working capital facilities, lease finance, venture capital, loan
syndication, corporate advisory services and legal and technical advisory services to its
corporate clients as well as mortgages and personal loans to its retail clients. As part of its
development activities, IDBI Bank has been instrumental in sponsoring the development of
key institutions involved in India‘s financial sector –National Stock Exchange of India
Limited (NSE) and National Securities Depository Ltd, SHCIL (Stock Holding Corporation
of India Ltd), CARE (Credit Analysis and Research Ltd)
Federal Bank is one of India‘s leading private sector banks, with a dominant presence in the
state of Kerala. It has a strong network of over 739 branches and 797 ATMs spread across
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13. India. The bank provides over four million retail customers with a wide variety of financial
products. Federal Bank is one of the first large Indian banks to have an entirely automated
and interconnected branch network. In addition to interconnected branches and ATMs, the
Bank has a wide range of services like Internet Banking, Mobile Banking, Tele Banking, Any
Where Banking, debit cards, online bill payment and call centre facilities to offer round the
clock banking convenience to its customers. The Bank has been a pioneer in providing
innovative technological solutions to its customers and the Bank has won several awards and
recommendations.
Ageas is an international insurance company with a heritage spanning more than 180 years.
Ranked among the top 20 insurance companies in Europe, Ageas has chosen to concentrate
its business activities in Europe and Asia, which together make up the largest share of the
global insurance market. They are grouped around four segments: Belgium, United Kingdom,
Continental Europe and Asia. It is an undisputed leader in the Belgian market for individual
life and employee benefits, as well as a leading non-life player, through AG Insurance.
Internationally Ageas has a strong presence in the UK, where it is the second largest player in
private car insurance. The company also has subsidiaries in France, Germany and Hong
Kong. Ageas has a track record in developing partnerships with strong financial institutions
and key distributors in different markets around the world and successfully operates
partnerships in Luxembourg, Italy, Portugal, China, Malaysia, India and Thailand. Ageas
employs more than 13,000 people and has annual inflows of almost EUR 18 billion.
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14. Financial Markets
Financial markets can mainly be classified into money markets and capital markets.
Instruments in the money markets include mainly short-term, marketable, liquid, low-risk
debt securities. Capital markets, in contrast, include longer-term and riskier securities, which
include bonds and equities. There is also a wide range of derivatives instruments that are
traded in the capital markets.
Both bond market and money market instruments are fixed-income securities but bond
market instruments are generally of longer maturity period as compared to money market
instruments. Money market instruments are of very short maturity period. The equities
market can be further classified into the primary and the secondary market. Derivative market
instruments are mainly futures, forwards and options on the underlying instruments, usually
equities and bonds.
Primary and Secondary Markets:-
A primary market is that segment of the capital market, which deals with the raising of
capital from investors via issuance of new securities. New stocks/bonds are sold by the issuer
to the public in the primary market. When a particular security is offered to the public for the
first time, it is called an Initial Public Offering (IPO). When an issuer wants to issue more
securities of a category that is already in existence in the market it is referred to as Follow-up
Offerings.
The secondary market (also known as ‗aftermarket‘) is the financial market where securities,
which have been issued before are traded. The secondary market helps in bringing potential
buyers and sellers for a particular security together and helps in facilitating the transfer of the
security between the parties. Unlike in the primary market where the funds move from the
hands of the investors to the issuer (company/ Government, etc.), in case of the secondary
market, funds and the securities are transferred from the hands of one investor to the hands of
another. Thus the primary market facilitates capital formation in the economy and secondary
market provides liquidity to the securities.
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15. Trading in Secondary Markets:-
Trading in secondary market happens through placing of orders by the investors and their
matching with a counter order in the trading system. Orders refer to instructions provided by
a customer to a brokerage firm, for buying or selling a security with specific conditions.
These conditions may be related to the price of the security (limit order or market order or
stop loss orders) or related to time (a day order or immediate or cancel order). Advances in
technology have led to most secondary markets of the world becoming electronic exchanges.
Disaggregated traders across regions simply log in the exchange, and use their trading
terminals to key in orders for transaction in securities.
The Money Market:-
The money market is a subset of the fixed-income market. In the money market, participants
borrow or lend for short period of time, usually up to a period of one year. These instruments
are generally traded by the Government, financial institutions and large corporate houses.
These securities are of very large denominations, very liquid, very safe but offer relatively
low interest rates. The cost of trading in the money market (bid-ask spread) is relatively small
due to the high liquidity and large size of the market. Since money market instruments are of
high denominations they are generally beyond the reach of individual investors.
T-Bills-T-Bills or treasury bills are largely risk-free, short-term, very liquid instruments that
are issued by the central bank of a country. The maturity period for T-bills ranges from 3-12
months. T-bills are circulated both in primary as well as in secondary markets.
Commercial Paper-Commercial papers (CP) are unsecured money market instruments
issued in the form of a promissory note by large corporate houses in order to diversify their
sources of short-term borrowings and to provide additional investment avenues to investors.
Issuing companies are required to obtain investment-grade credit ratings from approved
rating agencies.
Certificate of Deposits- A certificate of deposit (CD), is a term deposit with a bank with a
specified interest rate. The duration is also pre-specified and the deposit cannot be withdrawn
on demand.
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16. The Bond Market:-
Bond markets consist of fixed-income securities of longer duration than instruments in the
money market. The bond market instruments mainly include treasury notes and treasury
bonds, corporate bonds, Government bonds etc.
T-Notes & T-Bonds- Treasury notes and bonds are debt securities issued by the Central
Government of a country. Treasury notes maturity range up to 10 years, whereas treasury
bonds are issued for maturity ranging from 10 years to 30 years. Another distinction between
T-notes and T-bonds is that T-bonds usually consist of a call/put option after a certain period.
In order to make these instruments attractive, the interest income is usually made tax-free.
State & Municipal Government Bonds- Various State Governments and sometimes
municipal bodies are also empowered to borrow by issuing bonds. They usually are also
backed by guarantees from the respective Government. These bonds may also be issued to
finance specific projects.
Corporate Bonds- Bonds are also issued by large corporate houses for borrowing money
from the public for a certain period.
International Bonds- These bonds are issued overseas, in the currency of a foreign country
which represents a large potential market of investors for the bonds. Bonds issued in a
currency other than that of the country which issues them are usually called Eurobonds.
Others-
Zero Coupon Bonds- Zero coupon bonds (also called as deep-discount bonds or discount
bonds) refer to bonds which do not pay any interest (or coupons) during the life of the bonds.
The bonds are issued at a discount to the face value and the face value is repaid at the
maturity.
Convertible Bonds- Convertible bonds offer a right (but not the obligation) to the
bondholder to get the bond converted into predetermined number of equity stock of the
issuing company, at certain, pre-specified times during its life.
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17. Callable Bonds- In case of callable bonds, the bond issuer holds a call option, which can be
exercised after some pre-specified period from the date of the issue. The option gives the
right to the issuer to repurchase (cancel) the bond by paying the stipulated call price.
Puttable Bonds- The bondholder has a right (but not the obligation) to sell back the bond to
the issuer after a certain time at a pre-specified price. The right has a cost and hence one
would expect a lower yield in such bonds.
The pricing of Bonds:-
The cash inflow for an investor in a bond includes the coupon payments and the payment on
maturity (which is the face value) of the bond. Thus the price of the bond should represent the
sum total of the discounted value of each of these cash flows (such a total is called the present
value of the bond). The discount rate used for valuing the bond is generally higher than the
risk-free rate to cover additional risks such as default risk, liquidity risks, etc.
Bond Price = PV (Coupons and Face Value)
Bond Price= t C(t)/(1+y)t
(Where C(t) is the cash flow at time t and y is the discount rate.)
Or, Bond Price= tT Coupon/(1+y)t + Face Value/(1+y)T
Macaulay Duration and Modified Duration:-
The effect of interest rate risks on bond prices depends on many factors, but mainly on
coupon rates, maturity date etc. Unlike in case of zero-coupon bonds, where the cash flows
are only at the end, in the case of other bonds, the cash flows are through coupon payments
and the maturity payment. One needs to average out the time to maturity and time to various
coupon payments to find the effective maturity for a bond. The measure is called as duration
of a bond. It is the weighted (cash flow weighted) average maturity of the bond.
Duration= t=1T t*wt
wt= (CFt/(1+y)t)/Bond Price
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18. Financial Analysis and Valuation
Investments in capital markets primarily involve transactions in shares, bonds, debentures,
and other financial products issued by companies. The decision to invest in these securities is
thus linked to the evaluation of these companies, their earnings, and potential for future
growth. Valuation is all about how well we predict the cash flows,
their growth in future, taking into account future risks involved.
Income Statement- A profit & loss statement provides an account of the total revenue
generated by a firm during a period, the expenses involved and the money earned.
In its simplest form, revenue generation or sales accrues from selling the products
manufactured, or services rendered by the company.
Balance Sheet- Assets owned by a company are financed either by equity or debt and the
balance sheet of a company is a snapshot of this capital structure of the firm at a point in
time; the sources and applications of funds of the company.
Cash Flow Statement- such a statement is used to track the cash flows in the company over
a period. Cash flows are tracked across operating, investing, and financing activities. Cash
flows from operations include net income generation adjusted for changes in working capital,
and non-core accruals.
Valuation of Stocks:-
The problem of valuing the stock translates into one of predicting the future free cash flow
profile of the company, and then using the appropriate discount factor to measure what they
are worth today. The appropriately named discounted-cash flow technique is also referred to
as absolute valuation, particularly when compared to another widely-followed approach in
valuation, called relative valuation.
Discounted Cash Flow- The discounted cash flow method values the share based on the
expected dividends from the shares. The price of a share according to the discounted cash
flow method is calculated as under:
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19. P= t=1∞ Divt/(1+r)t
Constant Dividend Growth- where the dividend amount grows at a constant rate, the
constant dividend growth model states that the share price can be obtained using the simple
formula:
P= Div1/r-g
Present Value of Growth Opportunities- One can split the value of the shares as computed
in the constant growth model into two parts – the present value of the share assuming level
stream of earnings and the present value of growth opportunities.
PVGO =Share Price – Present value of level stream of earnings
=Share price– EPS / r
Discounted Free Cash Flow Valuation Models-
Market value of equity (V0) = Value of the firm + Cash in hand – Debt Value
Earning per Share- Earning per share is the firms‘ net income divided by the average
number of shares outstanding during the year.
EPS= (Net Profit- Dividend on preference Shares)/ Average number of shares
outstanding during the year
Dividend per Share- Dividends are a form of profit distribution to the shareholders. The
firm may not distribute the entire income to the shareholders, but decide to retain some
portion of it for financing growth opportunities. The dividend payout ratio (DPR) measures
the percentage of income that the company pays out to the shareholders in the form of
dividends. The formula for calculating DPR is:
DPR= Dividends/Net Income= DPS/EPS
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20. Price-Earnings Ratio- Price earning ratio for a company is calculated by dividing the market
price per share with the earnings per share (EPS).
PE ratio= Market Price per share/ Annual earning per share
The Dupont Model- The Du Pont model is widely used to decide the determinants of return
profitability of a company, or a sector of the economy. Returns on shareholder equity are
expressed in terms of a company‘s profit margins, asset turn, and its financial leverage.
DuPont Model breaks the Return on equity as under:
RoE= Return on Equity
= Net Profits/Equity
=Net Profits/Sales * Sales/Assets * Assets/Equity
= Profit Margin * Asset Turnover * Financial Leverage
The first component measures the operational efficiency of the firm through its net margin
ratio. The second component, called the asset turnover ratio, measures the efficiency in usage
of assets by the firm and the third component measures the financial leverage of the firm
through the equity multiplier.
Dividend Yield- Dividend yield is the ratio between the dividend paid during the last 1-year
period and the current price of the share. The ratio could also be used with the forward
dividend yield instead— expected dividends, for either the next 12 months, or the financial
year.
Dividend Yield= Last Year Price/Current Price per Share
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21. Managing a Portfolio
The age-old wisdom about not putting ―all your eggs in one basket‖ applies very much in the
case of portfolios. Portfolio risk (generally defined as the standard deviation of returns) is not
the weighted average of the risk (standard deviation) of individual assets in the portfolio. This
gives rise to opportunities to eliminate the risk of assets, at least partly, by combining risky
assets in a portfolio.
Let us now examine why and how portfolio risk is different from the weighted risk of
constituent assets. Assume that we have two stocks and the returns of the two hypothetical
stocks behave in opposite directions. When A gives high returns, B does not and vice versa.
For a portfolio with 60% invested in A, the portfolio standard deviation becomes zero.
Although the two stocks involved were risky (indicated by the standard deviations), a
portfolio of the two stocks with a certain weight may become totally risk-free. Intuitively, the
negative deviation in the returns of one stock is getting offset by the positive deviation in the
other stock.
Let us assume that you can form portfolios with two stocks, A & B, having the following
characteristics:
Return on stock A= RA
Mean return on stock A= R*A
Std. deviation of the return of stock A= SDA
Return on Stock B= RB
Mean return on stock B= R*B
Std. deviation of the return of stock B= SDB
Investment in stock A=W
Investment in stock B= (1-W)
Hence, Portfolio Risk:-
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22. SDP= W2 * SDA2 + (1-W)2 * SDB2 + 2W(1-W)*Cov(A,B)
That is, we would show that the variance of our portfolio, as denoted by the left hand side of
this equation, is dependent on the variance of stock A, that of stock B, and a third term, called
Cov(A,B). It is this third term that denotes the interrelationship between the two stocks.
And the Portfolio Return is given by:-
RP = W*RA + (1-W)*RB
The CAPM Model
The most important insight from the analysis of portfolio risk is that a part of the portfolio
variance can be diversified away (unsystematic or diversifiable risk) by selecting securities
with less than perfect correlation.
The assumptions required are as follows:
• All investors are mean-variance optimizers. This implies that investors are concerned only
about the mean and variance of asset returns. Investors would either prefer portfolios which
offer higher return for the same level of risk or prefer portfolios which offer minimum risk
for a given level of return (the indirect assumption of mean-variance investors is that all other
characteristics of the assets are captured by the mean and variance).
• Investors have homogenous information about different assets. The well-organized financial
markets have remarkable ability to digest information almost instantaneously (largely
reflected as the price variation in response to sensitive information).
• Transaction costs are absent in the market and securities can be bought and sold without
significant price impact.
• Investors have the same investment horizon.
Calculation of Beta:-
Let RM be the required rate of return on the market (market portfolio, M), R F be the required
rate of return on the risk free asset and SDM be the standard deviation of the market portfolio.
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23. The rate of risk premium required for unit variance of the market is estimated as,
(RM – RF)/SDM2
The risk premium on stock is:-
(RM-RF)/SDM2 * Cov(i,M)
where, Cov(i,M), is the covariance between the returns of stock i and the market returns.
The quantity represented by Cov(i,M)/SDM2 is popularly called Beta(β). This measures
the sensitivity of the security compared to the market. A beta of 2.0 indicates that if the
market moves down (up) by 1%, the security is expected to move down (up) 2%. Therefore,
we would expect twice the risk premium as compared to the market.
Therefore, the total required Rate of return on any stock is:-
Ri = RF + (RM-RF)*β
The beta of a stock can be estimated with the formula discussed above. Practically, the beta
of any stock can be conveniently estimated as a regression between the return on stock and
that of the market, represented by a stock index like NIFTY (the dependent variable is the
stock return and the independent variables is the market return).
Accordingly the Regression equation is:-
Ri = αi + βi * RM + ei
where the regression coefficient bi represents the slope of the linear relationship between the
stock return and the market return and aI denote the risk-free rate of return.
The beta of an existing firm traded in the market can be derived directly from the market
prices. However, on many occasions, we might be interested to estimate the required rate of
return on an asset which is not traded in the market. For instances like, pricing of an IPO,
takeover of another firm, valuation of certain specific assets etc.. In these instances, the
required rate of return can be estimated by obtaining the beta estimates from similar firms in
the same industry.
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24. The beta can be related to the nature of the assets held by a firm. If the firm holds more risky
assets the beta shall also be higher. Now, it is not difficult to see why investors like venture
capitalists demand higher return for investing in start-up firms. A firm‘s beta is the weighted
average of the beta of its assets (just as the beta of a portfolio is the weighted average of the
beta of its constituent assets).
The Arbitrage Pricing Theory:-
The CAPM is founded on the following two assumptions (1) in the equilibrium every mean
variance investor holds the same market portfolio and (2) the only risk the investor faces is
the beta. Evidently, these are strong assumptions about the market structure and behaviour of
investors. A more general framework about asset pricing should allow for relaxation of these
strong and somewhat counterfactual assumptions. A number of alternative equilibrium asset
pricing models, including the general arbitrage pricing theory (APT), attempt to relax these
assumptions to provide a better understanding about asset pricing. The arbitrage pricing
theory assumes that the investor portfolio is exposed to a number of systematic risk factors.
Arbitrage in the market ensures that portfolios with equal sensitivity to a fundamental risk
factor are equally priced. It further assumes that the risk factors which are associated with any
asset can be expressed as a linear combination of the fundamental risk factors and the factor
sensitivities (betas). Arbitrage is then assumed to eliminate all opportunities to earn riskless
profit by simultaneously selling and buying equivalent portfolios (in terms of risk) which are
overpriced and underpriced.
Under these assumptions, all investors need not have the same market portfolio as under
CAPM. Hence, APT relaxes the assumption that all investors in the market hold the same
portfolio. Again, as compared to CAPM, which has only one risk dimension, under the APT
characterization of the assets, there will be as many dimensions as there are fundamental
risks, which cannot be diversified by the investors. The fundamental factors involved could
for instance be the growth rate of the economy (GDP growth rate), inflation, interest rates
and any other macroeconomic factor which would expose the investor‘s portfolio to
systematic risk.
In the lines of the assumptions of arbitrage pricing theory, a number of multifactor asset
pricing models have been proposed. One such empirically successful model is the so-called
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25. Fama-French three-factor model. The Fama-French model has two more risk factors, viz.,
size, and book-to-market ratio as the additional risk factors along with the market risk as
specified by CAPM. The size risk factor is the difference between the expected returns on a
portfolio of small stocks and that of large stocks. And the book-to-market ratio is the
difference in the expected return of the portfolio of high book-to market-ratio stocks and that
of low book-to market-ratio stocks.
Theoretical and empirical evidence suggests that in the real market, expected returns are
probably determined by a multifactor model. Against this evidence, the most popular and
simple equilibrium model, CAPM, could be regarded as a special case where all investors
hold the same portfolio and their only risk exposure is the market risk.
Sharpe Ratio:-
Sharpe ratio or ‗excess return to variability‘ measures the portfolio excess return over the
sample period by the standard deviation of returns over that period. This ratio measures the
effectiveness of a manager in diversifying the total risk(SD M).
This measure is appropriate if one is evaluating the total portfolio of an investor or a fund, in
which case the Sharpe ratio of the portfolio can be compared with that of the market. The
formula for measuring the Sharpe ratio is:
Sharpe Ratio=(RP* - RF*)/SDP
Treynor Ratio:-
Treynor‘s measure evaluates the excess return per unit of systematic risks ( b ) and not total
risks. If a portfolio is fully diversified, then b becomes the relevant measure of risk and the
performance of a fund manager may be evaluated against the expected return.
The formula for measuring the Treynor Ratio is:
Treynor Ratio= (RP* - RF*)/βP
Jensen Measure or Portfolio Alpha:-
The Jensen measure, also called Jensen Alpha, or portfolio alpha measures the average return
on the portfolio over and above that predicted by the CAPM, given the portfolio‘s beta and
the average market returns. It is measured using the following formula:
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26. Portfolio Alpha= RP – [RF + β * (RM – RF)]
Analysis of a Portfolio held by IDBI Federal Life
The stepwise procedure for analysis of the portfolio is:-
Collection of the market index figures for BSE-100 for the past 10 years.
Collection of the opening and closing prices of all the stocks in the portfolio for every
year for the past 10 years.
Comparison of the each stock‘s growth with the market growth by calculating the
covariance between both.
Calculation of the Standard Deviation of the stock‘s price over the 10 year period.
Calculation of the Beta for each stock using the formula:-
Beta= Covariance/Sq. of Std. Deviation
BSE 100
%
Year Open Price Close Price Price Change Change
2001 2042.15 1557.22 -484.93 -23.75
2002 1557.37 1664.67 107.3 6.89
2003 1668.05 3074.87 1406.82 84.34
2004 3089.58 3580.34 490.76 15.88
2005 3593.58 4953.28 1359.7 37.84
2006 4964.64 6982.56 2017.92 40.65
2007 6999.7 11154.28 4154.58 59.35
2008 11186.45 4988.04 -6198.41 -55.41
2009 5021.58 9229.71 4208.13 83.80
2010 9212.74 10675.02 1462.28 15.87
Aditya Birla Nuvo
Price %age %age Market
Year Open Price Close Price Change Growth Change
2001 82 72.65 -9.35 -11.40 -23.75
2002 72 94.05 22.05 30.63 6.89
2003 95 270 175 184.21 84.34
2004 272 388.25 116.25 42.74 15.88
2005 395 667.2 272.2 68.91 37.84
2006 672 1247.5 575.5 85.64 40.65
2007 1241 2017.25 776.25 62.55 59.35
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