1. EPGP-09
Comparison of HDFC Life and ICICI Prudential
Financial Analysis and Portfolio Comparison
1/26/2010
Krishnakumar U 0910033
Mohammad Suheb Khan 0910034
Nilesh K Dattani 0910040
Vasim Khan 0910070

2. TABLE OF CONTENTS
TABLE OF CONTENTS........................................................................................................................................ 2
1. INTRODUCTION............................................................................................................................................ 3
OBJECTIVE ............................................................................................................................................................. 3
METHODOLOGY ...................................................................................................................................................... 3
ABOUT HDFC STANDARD LIFE INSURANCE................................................................................................................... 3
ABOUT ICICI PRUDENTIAL LIFE INSURANCE .................................................................................................................. 4
2. FINANCIAL ANALYSIS ................................................................................................................................... 5
SOLVENCY ANALYSIS ................................................................................................................................................ 5
HDFC Standard Life Insurance ........................................................................................................................ 5
ICICI Prudential Life Insurance ....................................................................................................................... 7
OPERATING EXPENSES .............................................................................................................................................. 8
EQUITY SHARE CAPITAL ............................................................................................................................................ 8
ASSETS UNDER MANAGEMENT ................................................................................................................................... 9
UNIT LINKED FUND.................................................................................................................................................. 9
3. PORTFOLIO COMPARISON: ICICI AND HDFC ............................................................................................... 10
ICICI .................................................................................................................................................................. 10
Life Insurance ............................................................................................................................................... 10
HDFC ................................................................................................................................................................. 11
Protection Plans ........................................................................................................................................... 12
4. PRODUCT COMPARISON – TERM ASSURANCE PLAN .................................................................................. 13
COMPARISON DATA SHEET ...................................................................................................................................... 13
INFERENCES ......................................................................................................................................................... 14
REFERENCES................................................................................................................................................... 15

3. 1. Introduction
Objective
This study attempts to compare two private sector insurance firms, HDFC Standard Life Insurance
and ICICI Prudential Life Insurance. The analysis will be conducted on the following dimensions:
Financial Analysis : This includes solvency analysis, assets, ULIP funds etc
Portfolio Analysis: The portfolio of products offered by each insurer will be analysed, and
a specific category will be taken for detailed feature comparison.
Methodology
The methodology adopted for the analysis is as depicted below:
Objective
Solvency Operating Equity share Assets under Unit linked Portfolio
Analysis expense capital management fund Comparison
Collection of Data
Corporate websites Financial results IRDA publications Business databases
Analysis of Data
Solvency Analysis Portfolio Analysis Price comparison
The study is conducted using data and information from secondary sources. The data is obtained
from corporate websites of the two firms, published financial results, publications of IRDA and other
business databases.
The analysis of the data collected above is then conducted, using the frameworks learned in the
course ‘Insurance and Pension Funds’. These concepts are utilized to study the solvency position of
the firms from the financial data available. The portfolio of offerings is compiled from the corporate
websites of the two firms, as on date of publication of this report. The compile data is then analyzed
at the portfolio level and at the level of a selected product category.
About HDFC Standard Life Insurance
HDFC Standard Life Insurance Company Limited is a joint venture between Housing Development
Finance Corporation Limited (HDFC Limited), India's leading housing finance institution and a Group
Company of the Standard Life Plc, UK. As on February 28, 2009 HDFC Ltd. holds 72.43% and Standard
Life (Mauritius Holding) 2006, Ltd. holds 26.00% of equity in the joint venture.

4. About ICICI Prudential Life Insurance
ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank - one of India's
foremost financial services companies-and Prudential plc - a leading international financial services
group headquartered in the United Kingdom. Total capital infusion stands at Rs. 47.80 billion, with
ICICI Bank holding a stake of 74% and Prudential plc holding 26%.

5. 2. Financial Analysis
Solvency Analysis
The solvency ratio is the ratio of the amount of Available Solvency Margin to the amount of Required
Solvency Margin. It is the key indicator of financial health of the insurance company. The stipulated
solvency ratio according to IRDA for life insurance companies is 1.5.
The solvency margin is designed to take care of problems that are usually not anticipated. It also
provides elbow room to the managers of insurers to rectify problems and take precautionary
measures.
In this section, we present the analysis of the solvency ratios of the two firms.
HDFC Standard Life Insurance
Balance sheet
The balance sheets dated March-09 is as produced below:
Balance Sheet of HDFC
Balance Sheet Mar-09
Assets
Cash on Hand and at Bank Rs. 41,08,660
Time Deposits Rs. 4,17,70,826
Premiums Receivable Rs. 25,50,016
Interest Accrual Rs. 8,05,636
Prepaid Expenses & Other Assets Rs. 29,84,953
Fixed Assets net of Depreciation Rs. 13,31,800
Total assets Rs. 5,35,51,891
Liabilities
Policyholder Reserves - Individual Business Rs. 1,34,54,228
Policyholder Reserves - Unexpired Premium Reserve Rs. 2,78,748
Policyholder Account Balances Rs. 16,66,398
Claims Payable Rs. 1,98,361
Reinsurance Payables Rs. 6,02,796
Accrued Expenses Rs. 1,76,00,683
Proposal Deposits Rs. 68,22,202
Other Liabilities Rs. 74
Total Liabilities Rs. 4,06,23,342
Equity
Paid-in Capital Rs. 1,79,58,180
Retained Earnings Rs. 50,29,631
Share Premium Rs. 0
Total Equity Rs. 1,29,28,549
Liabilities and Equity Rs. 5,35,51,891

6. Solvency Ratio Computation
The table for computing the solvency is as illustrated below:
Non-Linked Business - Individual RSM
Mathematical Reserves Rs. 13,454,228 Rs. 538,169
Sum at Risk Rs. 565,077,576 Rs. 1,695,233
Inforce Premiums Rs. 2,233,402
Non-Linked Business - Group
Mathematical Reserves Rs. 278,748 Rs. 2,787
Sum at Risk Rs. 334,497,600 Rs. 668,995
Inforce Premiums Rs. 671,783
Linked Business - Individual
Mathematical Reserves Rs. 1,666,398 Rs. 33,328
Sum at Risk Rs. 39,993,552 Rs. 79,987
Inforce Premiums Rs. 113,315
Total RSM based on Formula Requirement Rs. 3,018,500
RSM Floor Rs. 500,000
RSM Requirement for the Company Rs. 3,018,500
Available Solvency Margin [or Statutory Surplus] Rs. 12,928,549
Solvency Ratio 4.2831
Inference
HDFC Standard life’s solvency ratio of 4.28 is well above the stipulated requirement. Hence
according to our observation the company is well capitalized and will be able to meet unanticipated
claims. In comparison, solvency ratio of LIC, India’s largest life insurance company is 1.54 as reported
by IRDA.

7. ICICI Prudential Life Insurance
Balance Sheet
Balance sheet for ICICI Prudential, dated March-09, is as depicted below:
Balance Sheet of ICICI Prudential life insurance
Balance Sheet Mar-09
Assets
Cash on Hand and at Bank Rs. 35,58,761
Time Deposits Rs. 115416134
Premiums Receivable Rs. 2,66,465
Interest Accrual Rs. 8,61,068
Prepaid Expenses & Other Assets Rs. 33,49,039
Fixed Assets net of Depreciation Rs. 33,12,117
Total assets Rs. 12,67,63,584
Liabilities
Policyholder Reserves - Individual Business Rs. 4,24,21,916
Policyholder Reserves - Unexpired Premium Reserve Rs. 7,73,272
Policyholder Account Balances Rs. 32,51,153
Claims Payable Rs. 1,92,459
Reinsurance Payables Rs. 57,389
Accrued Expenses Rs. 2,55,11,692
Proposal Deposits Rs. 1,01,56,419
Other Liabilities Rs. 43,94,522
Total Liabilities Rs. 8,67,58,822
Equity
Paid-in Capital Rs. 1,42,72,573
Retained Earnings Rs. 77,96,996
Share Premium Rs. 3,35,29,185
Total Equity Rs. 4,00,04,762
Liabilities and Equity Rs. 12,67,63,584
Solvency Ratio Computation
Solvency ratio computation, based on the above information, is as depicted below:
Non-Linked Business - Individual RSM
Mathematical Reserves Rs. 42,421,916 Rs. 1,696,877
Sum at Risk Rs. 1,781,720,472 Rs. 5,345,161
Rs. 7,042,038
Non-Linked Business - Group
Mathematical Reserves Rs. 773,272 Rs. 7,733
Sum at Risk Rs. 927,926,400 Rs. 1,855,853
Rs. 1,863,586
Linked Business – Individual
Mathematical Reserves Rs. 3,251,153 Rs. 65,023

8. Sum at Risk Rs. 78,027,672 Rs. 156,055
Rs. 221,078
Total RSM based on Formula Requirement Rs. 9,126,702
RSM Floor Rs. 500,000
RSM Requirement for the Company Rs. 9,126,702
Available Solvency Margin [or Statutory Surplus] Rs. 40,004,762
Solvency Ratio 4.3833
Inference
ICICI Prudential life insurance has a solvency ratio of 4.38, which is well above the stipulated
requirement. Hence according to our observation the company is financially very healthy and will be
easily able to pay its claims. Again, in comparison the solvency ratio of LIC, India’s largest life
insurance company is 1.54 as reported by IRDA.
Observations
Our analysis indicated that both firms are well capitalized and are in a good position to meet any
unforeseen exigencies.
Operating expenses
In this section, we present the relevant data and findings with respect to the expenses as a
percentage of the premium received for both firms
Policy holders account (08-09):
Item HDFC ICICI
Premiums 556469 1356106
Operating expenses 176007 273873
Operating expense as % of premium 32% 20%
* - figures in lakhs
As can be inferred, ICICI has a lower expense as a percentage of the premium earned, in the period
2008-09.
Equity Share Capital
Insurer As on 31st Infusion As on 31st Foreign Indian FDI
March-08 during 08-09 March-09 Promoter Promoter
HDFC 1271 525 1796 467 1329 26%
ICICI 1401 26 1427 371 1057 26%
* - figures in crores
In the case of HDFC Life, there was a substantial infusion in this year, with both having the same FDI
percentage.

9. Assets under management
The assets under management as of 2008-09 for the two firms reveal some significance differences.
The data is as presented below:
Insurer C-Govt State govt. and Infrastructure Approved Other Total
securities Others securities investments Investments investments
HDFC 1248 76 497 681 35 2537
ICICI 1187 491 526 762 143 3110
* - amount in crores
HDFC ICICI
1% C-Govt securities C-Govt securities
5%
27% State govt. and Others 24% 38% State govt. and Others
49% securities securities
Infrastructure Infrastructure
20% investments 17% investments
3% Approved Investments 16% Approved Investments
Other investments Other investments
HDFC has a higher proportion (48%) in C-govt securities than ICICI (38%), while it has only 3% in State
govt securities, in contrast to a higher proportion of 16% in the case of ICICI.
Unit Linked Fund
The data for the ULIPs places both firms at the same level:
Insurer Approved investments Other investments Total (ULIP Funds)
HDFC 6658 526 7184
ICICI 25956 2658 28614
HDFC ICICI
46% 45%
50% Approved investments 50% Approved investments
Other investments Other investments
4% Total (ULIP Funds) 5% Total (ULIP Funds)
In the next section, we compare the two firms from the perspective of their respective portfolio
offerings.

10. 3. Portfolio comparison: ICICI and HDFC
In this section, we present the portfolio of products offered by the two firms, and take up one
category (term assurance) for detailed analysis.
It is to be noted that we have chosen to primarily use the nomenclature as used by the individual
firms, and wherever possible we would use the ‘generic’ technical names for the purpose of
comparison.
ICICI
The overall product mix offered by ICICI can be depicted by the illustration below:
Life Insurance Pension & Retirement Health Product Suite
• Education Insurance Plans Solutions • Hospitalisation Plans
• Wealth Creation Plans • ICICI Pru LifeTime Pension • MediAssure
• Protection Plans Maxima • Hospital Care
• ICICI Pru LifeStage Pension • Critical Illnessl Pans
Advantage • Crisis Cover
• ICICI Pru Elite Pension II
• ICICI Pru Assure Pension
• ICICI Pru ForeverLife
• ICICI Pru Immediate Annuity
The offerings are designed in three categories – Life Insurances, Retirement/ Pension and Health
Insurance. In the next section, we expand the life insurance category in order to inspect it in detail.
Life Insurance
On the basis of the particular stage of life and the needs thereon, ICICI offers three types of plans
under the Life Insurance category
Education Insurance Plans
These plans ensure that money is made available at the crucial junctures in a child's education - Class
X, Class XII, graduation and post-graduation - to fund crucial commitments for the child's future.
This plans ensures that in the unfortunate event of the death of a parent, the child's education
continues unhampered. The offerings in this category include the traditional and unit-linked forms:
Plan Name Type
ICICI Pru SmartKid Maxima Unit linked
ICICI Pru SmartKid Regular Premium Traditional

11. Wealth Creation Plans
These are designed along the lines of protection plans, using the unit linked approach. The offerings
in this category include the following unit-linked plans:
Plan Name Type
ICICI Pru Premier Wealth Unit linked
ICICI Pru Assure Wealth Unit linked
ICICI Pru LifeTime Maxima Unit linked
ICICI Pru Pinnacle Unit linked
Protection Plans
Several protection plans have been bundled under this category, as listed below:
Plan Name Type
Pure Protect Traditional
LifeGuard Traditional
Save'n'Protect Traditional
CashBak Traditional
Home Assure Traditional
HDFC
The overall product mix offered by HDFC is as depicted below:
Protection Plans Children’s Plans Retirement Plans Savings & Health Plans
• HDFC Term Assurance • HDFC Children's Plan • HDFC Personal Investment Plans • HDFC Critical Care
Plan • HDFC YoungStar Pension Plan • HDFC Endowment Super Plan
• HDFC Loan Cover Super • HDFC Pension Super • HDFC SimpliLife • HDFC SurgiCare Plan
Term Assurance Plan • HDFC Endowment Super
• HDFC YoungStar • HDFC Pension Suvidha
• HDFC Home Loan Super Suvidha Supreme • HDFC Endowment Supreme
Protection Plan • HDFC YoungStar • HDFC Immediate Suvidha
Supreme Suvidha Annuity • HDFC Wealth Builder
• HDFC Endowment
Assurance Plan
• HDFC Money Back Plan
• HDFC Single Premium Whole
of Life Insurance Plan
• HDFC Assurance Plan
• HDFC Savings Assurance
Plan
HDFC has organised the products in the five categories of Protection, Children’s plans, Retirement
plans, Savings/ Investment Plans and Health Plans. The maximum varieties seem to be on offer
under the Savings and Investment category.

12. In the next section, we inspect the Protection category.
Protection Plans
HDFC provides protection plans which assure a sum assured that can be choose by the
insured. These plans are further subdivided into term assurance plans, and loan protection
plans.
Term Assurance Plans
As with the standard protection plan design, there are no maturity benefits. The age band that can
be covered is 18-60. Additional riders such as Critical Illness benefit, Accidental benefit and
Accelerated Sum Assured can also be optionally included.
Loan Cover Term Assurance Plan
This provides the beneficiary with a lump sum amount, which is a decreasing percentage of the
initial Sum Assured. The additional benefit that can be incorporated is the Accelerated Sum Assured.
The age band is 18-55, with the minimum term being 18 and maximum being 30 years.
Home Loan Protection Plan
This plan provides for a sum of money that will be made available towards the repayment of house
loans. The age band is 18-50, with a maximum sum assured of 30 lakhs. The premium can be paid at
one time, or can be added on to the house loan EMI.

13. 4. Product Comparison – Term Assurance Plan
In this section we compare the term assurance plans provided by the two firms. Our focus would
incorporate the perspectives of the firm as well as the target customer.
The two specific products chosen for the comparison are the ‘HDFC Term Assurance Plan’ and the
‘ICICI Pru Pure Protect Classic’.
Comparison Data sheet
Parameter HDFC Term Assurance Plan ICICI Pru Pure Protect Classic
Minimum Term (yrs) 10 10
Maximum Term (yrs) 30 30
Minimum Entry age( yrs) 18 18
Maximum Entry age( yrs) 55 65
Maximum age at Expiry ( yrs) 65 75
Surrender benefits None None
Minimum sum assured (Rs) 8,00,000 None, subject to min premium of
2,400
Additional Feature Critical Illness Benefit Accidental Death and
Accidental Death Benefit Disability Benefit Rider
Accelerated sum assured (ASA) Waiver of Premium Rider
The comparison of indicative premiums for a male life assured paying annual premiums for 25 years,
for a sum assured of Rs 10,000, basic policy, is as below:
Age Policy Annual premium (rs)
25 HDFC 2280
ICICI 2558
30 HDFC 2580
ICICI 3092
35 HDFC 3310
ICICI 4206
The chart plotted from the above shows that ICICI charges more premium for the same age group,
and sum assured.
Annual premium (rs)
4500
4000
3500
3000
2500
2000
1500
1000
500
0
HDFC ICICI HDFC ICICI HDFC ICICI
25 30 35

14. Inferences
Mortality Risk
HDFC has a lower cap on the maximum entry age (55) in contrast to ICICI (65). Similarly, the expiry
age for HDFC is 65, as against 75 for ICICI.
In order to analyze the mortality risk inherent in the two product designs, we refer to the
information from the ‘MORTALITY RATES OF ANNUITANTS IN LIC OF INDIA, LIC A (96-98) ULTIMATE’,
as reproduced below.
Age Mortality Rate Life Expectation
25 0.001090 52.72
55 0.007401 25.17
65 0.013889 17.33
75 0.043272 10.56
As seen from the above, the mortality rate for age 65 is nearly double than that for age 55. Thus, the
increase in exposure to mortality risk due to the policy on maximum entry on age and expiry age is
significant in the case of ICICI.
Customer base
However, by having a relaxed entry age and a higher point of expiry, the ICICI plan does make it
more attractive to the customer. This will be more for the case of customers who are willing to part
with the higher premium amount that ICICI requires. Ignoring the effect of the premium, the ICICI
policy will certainly make it more competitive to the customers. However, there are other
considerations such as the minimum sum assured levels which would also need to be considered, as
discussed below.
Minimum sum assured
The lower limit for sum assured for HDFC is Rs 8,00,000. For ICICI this limit is not set at the sum
assured level, rather it is dictated by the minimum mandated premium level of Rs 2400. This
minimum premium requirement, for e.g., does not allow for a policy such as in the price table above
(sum assured = Rs 10,00,00), but for a period of 15 years. By extension, the minimum amount for a
25-year old male with a 15 year term works out to Rs 12,00,000. In the case of HDFC, any amount
above rs 8,00,000 lakh will be covered
Thus, there appears to be a certain focus on the premium collection in the case of ICICI, as against a
combination of premium, minimum sum assured in the case of HDFC.
Also a certain segment of the population whose requirement for sum assured is on the lower side is
excluded by the policy design.
Thus in contrast to HDFC, it could be hypothesized that, ICICI attracts customers with higher sum
assured, increasing the overall guarantee risk in the aggregate.

15. 5. References
HDFC Standard Life Website, http://www.hdfcinsurance.com/index.aspx
ICICI Prudential Life Website, http://www.iciciprulife.com/public/default.htm
IRDA Website, http://www.irdaindia.org/
IRDA Annual Report 2008-09, http://www.irdaindia.org/anualreport.html
o Assets under management
o Unit linked funds
o Operating expense
o Equity share capital