STRATEGIC MANAGEMENT MBC 9

By Dr. Gitesh Shelar. 2010HE025 Mr. Sachin Karte. 2010HO030 Dr. Nitin Gurav. 2010HE015

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

Major Players

Market Share
Kotak Reliance Met Others Tata Bajaj Max SBI 2% 1% 2% Birla ICICI 3% 4% 6% 5% 50% 8% 4% 5% 10% HDFC LIC

Joint venture b/w ICICI bank & prudential life insurance company. ICICI bank has 76% of stake & rest is of prudential. ICICI bank is In2nd largest bank. Prudential is international financial service group having headquarter in U.K. It started its operations in December 2000, after getting approval by IRDA & today this is the no. 1 co. in private sector in India. 1. ICICI Bank Limited 73.88% 2. Prudential Corporation Holdings 25.95% 3. Others 0.17%

Directors:
Chanda Kochhar, Chairperson N. S. Kannan K. Ramkumar Rajiv Sabharwal Barry Stowe Adrian OConnor Keki Dadiseth Marti G. Subrahmanyam Rama Bijapurkar Vinod Kumar Dhall Sridar Iyengar Sandeep Bakhshi, Managing Director & CEO Puneet Nanda, Executive Director Madhivanan Balakrishnan, Executive Director

Registered & Corporate Office: ICICI PruLife Towers, 1089 Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025.

Management Discussion
Future diagnosis Year ahead with extremely high inflationary pressure. Moderate growth is expected. Inflation is likely to result in further increase in policy rates. Liquidity conditions are expected to remain in deficit on an average during the year. The organization is expected to maintain status quo after completing its ongoing bond purchase programme.

Asset Costs
Particulars Freehold Land Office Buildings on Freehold Land Improvements to Leasehold Property Furniture and Fixtures Office Equipment/plan Information Technology/Equipment/Computer Communication Networks Motor Vehicles Software Total March 31, 2011 903,280 83,188 741,510 15,020 24,412 2,446 12,351 2,244 184,976 1,969,427 March 31, 2010 903,280 84,639 1,342,030 36,615 29,668 2,400 13,242 509 209,971 2,622,354

Ratio Analysis
Ratios PROFITABILITY RATIO PROFIT MARGIN RETURNS ON ASSETS (INVESTMENT) RETURN ON EQUITY ASSETS UTILIZATION RATIO INVENTORY TURNOVER FIXED ASSETS TURNOVER TOTAL ASSETS TURNOVER 2011 2010 2009 2008

0.96 0.93 0.16

0.89 0.29 0.05

11.34 0.74 0.16

21.67 0.99 0.36

4.22 0.97

1.09 0.33

0.20 0.06

0.19 0.04

Ratio Analysis
RATIOS 2011 2010 2009 2008 LIQUIDITY RATIO

CURRENT RATIO

0.41 0.41

0.38 0.38

0.63 0.63

0.66 0.66

QUICK RATIO DEBT UTILIZATION RATIO DEBT TO TOTAL ASSETS

1.83

1.85

1.08

1.15

Profit / (Loss) after Tax

Expense Ratio

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

SWOT Analysis of
ICICI Prudential life insurance

Strengths:
1. 2. 3. 4. 5. 6. 7. 8. 9. ICICI Prudential is No. 1 private life player in India. Innovative insurance policies with rider benefits. Motivation factors provided by the company. One of the largest financial Institution of Indias. Second largest bank with network of 469 branches and 1740 ATMs across India. A huge database of corporate clients, retail customer, and bank customers of ICICI. Training provided to all people associating with ICICI prudential. Highest paid up capital deposited in IRDA, in comparison to all players. Assets base of ICICI is more then Rs 1,08,000 Crores.

Weakness:
1.Very huge premiums of policies, compared to other insurance sector. 2. Minimum premium is 19000.(Except tax saving policy only 10,000) 3.Target upper class people only. 4. Policy charges are very high. 5. Problematic to advisors also. 6. Poor distribution: since it is in English language only.

Opportunities:
1. Tie up with more corporate agents all over India. 2.Tie up with broker also 3. No. of adopting new technology. 4.Strong Brand of Company Helps to boost sales inn market 5. Attract more people of providing customer centric products

Threats:
1. Threat from existing life insurance players. 2. Threat from new entrance. 3. Threat to substitute products 4. Change in the policy of IRDA 5. Competition from more & more new players 6. People dont aware of different distribution channel

 HDFC Standard Life Insurance Company Ltd is one of India's Leading private insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.), India's leading housing finance institution and a Group Company of the Standard Life, UK. HDFC as on December 31, 2007 holds 72.38 per cent of equity in the joint venture. Shareholding Pattern: HDFC 72.5%; Standard Life 26.0%; Individuals / ESOP Trust 1.5%

BOARD OF DIRECTORS
Mr. Deepak S. Parekh (Chairman) Directors Mr. Keki M. Mistry Ms. Renu Sud Karnad Mr. David Nish Mr. Nathan Parnaby Mr. Norman K. Skeoch Mr. Gautam R. Divan Mr. Ranjan Pant Mr. Ravi Narain Mr. A K T Chari Mr. Gerald E. Grimstone (Alternate to Mr. David Nish) Mr. Michael Connarty (Alternate to Mr. Norman K.Skeoch)
Mr. Amitabh Chaudhry Managing Director & Chief Executive Officer Mr. Paresh Parasnis Executive Director & Chief Operating Officer Registered Office Ramon House, H. T. Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai 400 020. Corporate Office HDFC Standard Life Insurance Company Ltd. 12th & 13th Floor, Lodha Excelus, Apollo Mills Compound, N M Joshi Marg, Mahalaxmi, Mumbai- 400011.

Management Discussion
Future diagnosis
Continue to focus on New business growth Operational efficiencies to bring down our operating expenses; and Customer retention to improve the persistency of the in force policies. Long term strategy is aligned to 5 strategic themes Providing long term life insurance solutions Diversifying distribution channel mix Delivering variety of products choices to every customer segment Achieving cost leadership across the value chain Ensuring customers have exceptional experiences in our services

Asset Costs
Particulars March 31, 2011 1,699,610 3,129 191,994 185,330 March 31, 2010 3,92 ,72 322, 9 Freehold Land Office Buildings on Freehold Land Improvements to Leasehold Property Furniture and Fixtures Office Equipment/plan

309,788 325,852

Information 155,140 Technology/Equipment/Comp uter Capital Work in Progress Motor Vehicles Software Total 21,437 4,572 124,517 2,395,729

7, 49 2, 77 , 43,777

Ratio Analysis
Ratios PROFITABILITY RATIO PROFIT MARGIN RETURNS ON ASSETS (INVESTMENT) RETURN ON EQUITY ASSETS UTILIZATION RATIO INVENTORY TURNOVER FIXED ASSETS TURNOVER TOTAL ASSETS TURNOVER

2011

2010

2009

2008

0.96 0.07 0.04

3.39 0.30 0.13

4.47 0.45 0.27

2.94 0.24 0.18

0.42 0.07

0.70 0.08

0.77 0.10

0.61 0.08

Ratio Analysis
RATIOS LIQUIDITY RATIO CURRENT RATIO QUICK RATIO DEBT UTILIZATION RATIO DEBT TO TOTAL ASSETS 2011 2010 2009 2008

0.81 0.81

0.63 0.63

1.09 1.09

1.3 1.3

1.0

1.37

0.79

0.61

SWOT Analysis of
HDFC life insurance

 STRENGTH:
1) First private life insurance company who got license by IRDA . 2) Domestic image of HDFC supported by Standard Lifes international image is strength of the company. 3) Strong and well spread network of qualified intermediaries and sales person. 4) Strong capital and reserve base. 5) The company provides customer service of the highest order. 6) Huge basket of product range which are suitable to all age and income groups. 7) Large pool of technically skilled manpower with in depth knowledge and under standing of the market. 8) The company also provides innovative products to cater to different needs of different customers.

 WEAKNESS:
1) less number of branches compare to nearest competitors 2) Heavy management expenses and administrative costs. 3) Low customer confidence on the private players. 4) Vertical hierarchical reporting structure with many designations and cadres leading to power politics at all levels without any exception. 5) Poor retention percentage of tied up agents. 6) Every employee does not have enough knowledge about insurance products and commission rates

 OPPORTUNITIES: 1. Insurable population : According to IRDA only 10% of the population is insured which represents around 30% of the insurable population. This suggests more than 300m people, with the potential to buy insurance, remain uninsured. 2. There will be inflow of managerial and financial expertise from the world s leading insurance markets. Further the burden of educating consumers will also be shared among many players. 3. International companies will help in building world class expertise in local market by introducing the best global practices.

 THREATS:
1. Other private insurance companies also aiming for the same uninsured population. 2. Big public sector insurance companies like Life Insurance Corporation (LIC) of India, National Insurance Company Limited, Oriental Insurance Limited, New India Assurance Company Limited and United India Insurance Company Limited. People have more trust in these companies. 3. Poaching of customer base by other companies. 4. Most people dont under stand the need or are not willing to take insurance policies in general. People prefer short term investment rather than insurance.

Operating Expenses or Cost:

The operating expenses relating to insurance business are allocated to the Participating, Non-participating, Annuity, Pension, Health and Unit Linked business funds in proportion to one or combination of some of the following parameters: i) effective premium income iii) number of employees v) premium income vii) sum assured ii) number of policies iv) man hours utilized vi) mean fund size viii) expenses already allocated

OPERATING COST
Operating cost related to insurance business
Employees remuneration and welfare benefits Travel, conveyance and vehicle running expenses Rents, rates and taxes Communication expenses Repairs Printing & stationary Legal and professional charges Medical fees Auditors fees Advertisement and publicity Interest and bank charges Agents training, recruitment and incentives Depreciation Administration support expenses Office running expenses Data entry related expenses Unit fund expenses Others Information technology cost

Operating cost other than related to insurance business Employees remuneration and welfare benefits Travel, conveyance and vehicle running expenses Legal and professional charges Loss on sale/write off of Fixed Assets (Net) Printing and stationery Communication expenses Interest and bank charges Depreciation Others

Operating Costs 2011

Operating costs Operating cost related to Insurance business(A) Important heads under (A) Employees remuneration and welfare benefits Rents ,Rates and Taxes Advertising and Publicity Interest and Bank charges Operating costs not related to insurance 8 40090 727389 8 9792 2429 7 52752 242 87 99 457 3359509 3 325 94 2 ICICI PRU 2 873948 HDFC LIFE 49520

Special Measures: Reducing Operating Costs

Operating expense ratio has reduced over the last 3 years due to management action on cost containment and productivity enhancement programmes. Operating expenses have increased marginally by 4% against individual new business growth of 27%

Ratio Analysis
ICICI PRU Ratios 2011 PROFITABILITY RATIO PROFIT MARGIN RETURNS ON ASSETS (INVESTMENT) RETURN ON EQUITY ASSETS UTILIZATION RATIO INVENTORY TURNOVER FIXED ASSETS TURNOVER TOTAL ASSETS TURNOVER 2010 2011 2010 HDFC LIFE

0.96 0.93 0.16

0.89 0.29 0.05

0.96 0.07 0.04

3.39 0.30 0.13

4.22 0.97

1.09 0.33

0.42 0.07

0.70 0.08

Ratio Analysis
ICICI PRU RATIOS 2011 2010 2011 2010 HDFC LIFE

LIQUIDITY RATIO

CURRENT RATIO

0.41 0.41

0.38 0.38

0.81 0.81

0.63 0.63

QUICK RATIO DEBT UTILIZATION RATIO DEBT TO TOTAL ASSETS

1.83

1.85

1.0

1.37

4Ps of Marketing

ICICI Prudential Increase In share capital

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

Promotion

Claim settlement within promised TAT

Place

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

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

4Ps of Marketing

ICICI Prudential Comparatively higher rates than other private players. But despite higher premium rates the returns expected are Higher. Insurance Solutions for Individuals Savings & Wealth Creation Solutions Protection Solutions Child Plans Retirement Solutions Health Solution Group Insurance Solutions Flexible Rider Options

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

Price

Product

Protection Plans Children's Plans Retirement Plans Savings & Investment Plans Health Plans

Product Profile:
1. Insurance Solutions for Individuals 2. Savings & Wealth Creation Solutions
Cash Plus SavenProtect Cash Back Lifetime Super & Lifetime Plus Life Link Super Premier Life Gold Invest Shield Life (New Invest Shield Cash back)

3.Protection Solutions
Life Guard Home Assure

4.Child Plans
Education insurance Smart Kid

5.Retirement Solutions
Forever Life Life Time Super Pension Life Link Super Pension

6.Health Solution
Health Assure and Health Assure Plus Cancer Care

7.Group Insurance Solutions

Group Gratuity Plan Group Superannuation Plan Group Immediate Annuities Group Term Plan

8.Flexible Rider Options

Accident & disability benefit Critical Illness Benefit Income Benefit Waiver of Premium

HDFC LIFE Products

Protection Plans HDFC Terms Assurance Plan HDFC Premium Guarantee Plan HDFC Loan Cover Term Assurance Plan HDFC Home Loan Protection Plan Children's Plans HDFC Childrens Plan HDFC SL YoungStar Super II HDFC SL YoungStar Super Premium Retirement Plans HDFC Life ClassicPension Insurance Plan HDFC Personal Pension Plan HDFC Immediate Annuity HDFC SL Pension Maximus

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

Health Plans HDFC Critical Care Plan HDFC SurgiCare Plan

Strategy
Organization
Sustained private market leadership Strong team of around 3,000 professionals Strong parentage: ICICI Bank & Prudential PLC INR 47.80 bn of capital infused

Brand

Highest brand recall and consideration value amongst private players

Distribution

More than 5000 distribution touch points About 7 07 advisors More than 50 Corporate tie ups and Bank assurance partners

Product

Products catering to all life cycle needs

Service

Over 0,000 servicing Touch points High customer convenience with more than 0% service transaction through electronic modes Rated most Customer responsive company Balance between Risk and Customer convenience 89% policies without medical Low claim Ratio Low Claim rejection rate

Strategy and Way forward

Position as Leader
Brand Promise. Long Term oriented product. Need Based Selling

Diversifying distribution channel Identifying customer segments / product categories Deliver a unique customer experience TATs Aim for cost leadership through the entire delivery chain

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

Customer Lifecycle Segmentation Products, Distribution Channels; 3 segments identified to be worked on Unified Customer-led view, Financial Planning Tool, Pioneering Service Initiatives, End-to-End TATs(process 3 0)

Persistency, Branch Profitability. Low Cost Delivery Models

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