portfolio & wealth management at icici prudential life insur final

8/3/2019 Portfolio & Wealth Management at Icici Prudential Life Insur Final

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SUMMER TRAINING PROJECT REPORT

ICICI PRUDENTIAL LIFE INSURANCE LTD.

PORTFOLIO & WEALTH

MANAGEMENT

TRAINING SUPERVISOR: SUBMITTED BY:

MR. AMIT BANSAL ADITI VARUN

(Branch Manager) Enrollment No.


2/95

STUDENTS DECLARATION

I hereby declare that the Summer Training Report conducted at Portfolio and

Wealth Management at ICICI Prudential Life Insurance submitted is my

original work and the same has not been submitted for the award of any other

Degree/diploma / fellowship or other similar titles or prizes.

(ADITI VARUN)

Student signature

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PREFACE

Incredible India is the buzzword these days, not only because India is one of the

most attractive tourist destination but also due to fact that it is coming out as an

economic power in the world arena. This has been reflected in the surge of Sensex,

which acts as a barometer of the Indian economy. This has also manifested the

importance of not only the Financial Service Industry but also Life Insurance sector,

which has grown leaps and bounce after its liberalization.

India presents good opportunity for foreign companies to set up their bases here with

some companies which have already made so. Achieving a growth of more than 8%

back to back speaks volume for the development that India is going through. With

lack of knowledge about the financial industry and more than 30 million prospects,

financial sector in India is colossal. Now this is where the importance ofwealth and

portfoliomanagement comes into picture.

This project report brings to light the Importance of Portfolio management, its impact

on returns and benefits attached. It aims at understanding investors needs and

designing a good customized portfolio. This report also enlightens on the types of

investment option available to the investor and focuses mainly on Life insurance and

Mutual funds.

During this project a study was conducted to understand consumer behavior for

gauging the impetus before an individual makes an investment. Various personal

factors such as objective, age, time horizon and risk appetite were analyzed. Fundsselection parameters like risk associated, expenses involved, past performances etc,

were also taken into account before designing the portfolios. Different portfolios were

made according to the different requirements of the clients.

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ACKNOWLEDGEMENT

Any accomplishment requires the efforts of many people and this work is no different.

I am happy to take this opportunity to express my heartfelt gratitude towards all those

who made the successful completion of this project, possible.

I express my profound gratitude to MR. Amit Bansal (Branch Manager) my project

guide who enlightened me with his experience and knowledge. He provided me a

valuable opportunity to undergo training at ICICI and have a wonderful experience. I

am exquisitely grateful for his constant encouragement, consistent direction and

precious criticism during the whole period of my learning.

Last but not the least; I would like to thank whole ICICI who treated me as one of

them and offered me their inflicting support and advice.

Finally a cordial thanks to all who helped me in my learning process directly and

indirectly.

ADITI VARUN

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TABLE OF CONTENTS

CHAPTERS PAGE NO

1. INTRODUCTION 1-22

1.1 Overview of Industry as a whole 1

1.2Profile of the Organization 6

1.3 Problems of the organization 15

1.4 Competition information 16

1.5 S.W.O.T Analysis of the organization 21

2. OBJECTIVE & METHODOLOGY 23-30

2.1 Significance 23

2.2 Managerial usefulness of the study 24

2.3 Objectives 26

2.4 Scope of the study 28

2.5 Methodology 29

3. CONCEPTUAL DISCUSSION 31-67

4.DATA ANALYSIS 68-77

5. FINDINGS AND RECOMMENDATIONS 78-83

ANNEXURE

BIBLIOGRPHY

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CHAPTER 1

INTRODUCTION

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1.1 OVERVIEW OF THE INDUSTRY AS A WHOLE

A Chinese proverb says, Wealth never survives three generations. With the

accumulation of wealth, need for its management arises. This should not lead to the

conclusion that only wealthy people invest their money. Need for investment arises

out of several reasons. Uncertainty of future is one of the primary causes that

trigger investment. Investment alone will not solve the problem of uncertainty. A

prudent approach in managing ones investment is equally important. The task of

managing investment is indeed a complex one for many individual investors. These

individuals seek the help of an investment manager for better management of their

wealth.

In the past, there was a great deal of investment in banks, which was considered to be

safe and risk-free. Investors were content with returns on their investment in bank

deposits, were very conservative and had only a few options at that point of time.

But the situation has changed drastically now. There are many investment avenues

and a wide variety of choices are open to the investors these days. Investors can

choose a particular investment on the basis of their risk and return objectives. There

are number of financial products in the market like fixed deposits, shares, bonds,

mutual funds, post office schemes and life insurance.

Life insurance and mutual funds are popular investment vehicles in India. There are

wide varieties of schemes for investment under these products. Currently, there are 34

mutual fund companies in India offering more then 669 schemes and there are more

than 1,800 Net Asset Values(NAVs) being declared by mutual funds, across various

schemes everyday. And after ULIP came in insurance offering new products and

variety in choices, life insurance has become a major investment tool.

But after being used to decades of passbook savings, people are facing severe

difficulties understanding the concept of asset allocation and investment performance

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analysis. Therefore, investors rely on guidance from advisors and need a financial

advisor to manage their portfolios.

A portfolio is a collection or diversification of investments held by an institution or a

private individual. And as per the well known adage Do not put all the eggs in one

basket, there is a need for diversification in investment in different products and

schemes to gain the maximum benefit. But managing a portfolio is not everybodys

cup of tea. One should have a clear knowledge about the markets and products, with

the analytical ability.

With the change in the market scenario of investment, need for managing the

portfolios has increased significantly. It is booming field and in order to get greater

understanding this project was undertaken.

The project aims at analyzing the consumer behavior, their mindset towards the

product, different parameters considered while providing investment advice to the

clients, designing a customized portfolio and then to keep a periodic check on the

performance of these portfolios. The project also looks out for the focus areas for

ICICI bank.

WHAT IS PORTFOLIO MANAGEMENT..??

A portfolio is a collection of investments held by an institution or a private individual.

Holding a portfolio is part of an investment and risk-limiting strategy called

diversification. By owning several assets, certain types of risk (in particular specific

risk) can be reduced.

The aim of Portfolio Management is to achieve the maximum return from a portfolio

which has been delegated to be managed by an individual manager or financial

institution. The manager has to balance the parameters which define a good

investment i.e. security, liquidity and return. The goal is to obtain the highest return

for the client of the managed portfolio.

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While doing the portfolio management of customers it is ensured that the portfolio has

multiple objectives and achieves a sound balance between the competing objectives,

which are: -

Safety of investment

Stable current returns

Appreciation in capital value

Liquidity

Tax planning

Minimizing Risk

Diversification

INVESTMENT OPTIONS AVAILABLE

Before liberalization Indian people were investing their money mainly in government

backed instruments and traditional instruments. With the development of Indianeconomy the investors are now having various financial instruments to add in their

portfolio. Some of the available investment options are as follows:

Bank fixed deposit

Bank recurring deposit

Shares

Company fixed deposit Bonds / Debentures

Tax saving bonds

LIFE INSURANCE

Public Provident Fund

MUTUAL FUNDS

Gold / Real estate

Post Office Schemes

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The focus of this project is on Life Insurance and Mutual Funds. Hence, they are

explained in detail:

LIFE INSURANCE

Life Insurance is one of the most popular savings/ investment vehicles in India.

Ironically, its probably the least understood too. An insurance policy offers much

more than just tax planning and investment returns. It offers you the ability to plan for

unforeseen events that could affect your family's financial profile adversely.

WHAT IS LIFE INSURANCE..??

Life insurance is a financial resource for ones family and loved ones in case of his

death. It is a contract between insurer and an insurance company in which the

company provides the beneficiaries with a certain amount of money upon insurer

death. In return, you insurer periodic payments (premiums) in an amount that depends

on medical history, age, gender, and occupation

Insurance is a colossal sector in India that is growing at a speedy rate of 15-20%. The

insurance sector is approximately 450 billion yet 95 percent of the population in India

is not insured. This gives you a peek into the huge growth opportunity that exists for

this segment.

The insurance business is based on customers trust & confidence as it deals with the

finances of the customer. The basis for a well-planned and well-executed marketing

strategy is effective market segmentation. Insurance is broadly segmented intoindividuals, institutions, industry, and trade customers. Most industry players offer

specialized services to cater to the needs of these segments. Some marketers target

niche markets and offer customized services.

Risks and uncertainties are part of life's great adventure -- accident, illness, theft,

natural disaster - they're all built into the working of the Universe, waiting to happen.

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Insurance then is man's answer to the vagaries of life. If you cannot beat man-made

and natural calamities, well, at least be prepared for them and their aftermath.

Hence, insurance is essentially the means to financially compensate for losses that

life throws at people.

Thus, the need can be classified as:

Provision for the education & marriage of children.

Post retirement income for self & dependents.

Special needs like loss of income due to disabilities, accidents, treatment of

diseases, sickness etc. To protect against inflation

The insurance sector was opened up for private participation five years ago and

the private players are active in the liberalized environment. The insurance

markets have witnessed dynamic changes that include presence of a fair number

of insurers both life and non-life segment. Most of the private insurance

companies have formed joint venture partnering well with recognized foreign

players across the globe. The Indian Insurance market accounts only for 0.60% of

global Insurance market. Consumer awareness has improved. Competition has

brought more products and better customer servicing. It has had a positive impact

on the economy in terms of income generation and employment growth.

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1.2 PROFILE OF THE ORGANIZATION

ICICI Bank is India's second-largest bank with total assets of about Rs.1,676.59

bn(US$ 38.5 bn) at March 31, 2005 and profit after tax of Rs. 20.05 bn(US$ 461 mn)

for the year ended March 31, 2005 (Rs. 16.37 bn(US$ 376 mn) in fiscal 2004). ICICI

Bank has a network of about 573 branches and extension counters and over 2,000

ATMs. ICICI Bank offers a wide range of banking products and financial services to

corporate and retail customers through a variety of delivery channels and through its

specialised subsidiaries and affiliates in the areas of investment banking, life and non-

life insurance, venture capital and asset management. ICICI Bank set up its

international banking group in fiscal 2002 to cater to the cross border needs of clients

and leverage on its domestic banking strengths to offer products internationally. ICICI

Bank currently has subsidiaries in the United Kingdom, Canada and Russia, branches

in Singapore and Bahrain and representative offices in the United States, China,

United Arab Emirates, Bangladesh and South Africa.

ICICI Bank's equity shares are listed in India on the Bombay Stock Exchange and the

National Stock Exchange of India Limited and its American Depositary Receipts

(ADRs) are listed on the New York Stock Exchange (NYSE).

ICICI Bank has formulated a Code of Business Conduct and Ethics for its directors

and employees.

At September 20, 2005, ICICI Bank, with free float market capitalization* of about

Rs. 400.00 billion (US$ 9.00 billion) ranked third amongst all the companies listed on

the Indian stock exchanges.

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial

institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank

was reduced to 46% through a public offering of shares in India in fiscal 1998, an

equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's

acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001,

and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal

2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government

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of India and representatives of Indian industry. The principal objective was to create a

development financial institution for providing medium-term and long-term project

financing to Indian businesses. In the 1990s, ICICI transformed its business from a

development financial institution offering only project finance to a diversified

financial services group offering a wide variety of products and services, both directly

and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI

become the first Indian company and the first bank or financial institution from non-

Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the

emerging competitive scenario in the Indian banking industry, and the move towards

universal banking, the managements of ICICI and ICICI Bank formed the view that

the merger of ICICI with ICICI Bank would be the optimal strategic alternative for

both entities, and would create the optimal legal structure for the ICICI group's

universal banking strategy. The merger would enhance value for ICICI shareholders

through the merged entity's access to low-cost deposits, greater opportunities for

earning fee-based income and the ability to participate in the payments system and

provide transaction-banking services. The merger would enhance value for ICICI

Bank shareholders through a large capital base and scale of operations, seamless

access to ICICI's strong corporate relationships built up over five decades, entry into

new business segments, higher market share in various business segments,

particularly fee-based services, and access to the vast talent pool of ICICI and its

subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank

approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries,

ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with

ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank inJanuary 2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the

High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002.

Consequent to the merger, the ICICI group's financing and banking operations, both

wholesale and retail, have been integrated in a single entity.

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OUR VISION:

To make ICICI Prudential the dominant Life and Pensions player built on trust by

world-class people and service.

This we hope to achieve by:

Understanding the needs ofcustomers and offering them superior products and

service

Leveraging technology to service customers quickly, efficiently and conveniently

Developing and implementing superiorrisk management and investment

strategies to offer sustainable and stable returns to our policyholders

Providing an enabling environment to foster growth and learning for our

employees

And above all, building transparency in all our dealings.

The success of the company will be founded in its unflinching commitment to 5 core

values -- Integrity, Customer First, Boundary less, Ownership and Passion. Each of

the values describes what the company stands for, the qualities of our people and the

way we work.

We do believe that we are on the threshold of an exciting new opportunity, where we

can play a significant role in redefining and reshaping the sector. Given the quality of

our parentage and the commitment of our team, there are no limits to our growth.

THE COMPANY

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ICICI Prudential Life Insurance Company is a joint venture between ICICI, a premier

financial powerhouse and Prudential plc, a leading international financial services

group headquartered in the United Kingdom. ICICI Prudential was amongst the first

private sector insurance companies to begin operations in December 2006 after

receiving approval from Insurance Regulatory Development Authority (IRDA).

ICICI Prudentials equity base stands at Rs. 4.25 billion with ICICI Bank and

Prudential plc holding 74% and 26% stake respectively. As of March 31, 2007, the

company had issued nearly 350,000 policies with a sum assured in excess of Rs 8,700

crore and total premium income of over Rs. 500 crore. Today the company is the #1

private life insurer in the country.

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FUTURE PLANS

ICICI Bank plans to increase its points of presence in rural areas throughout the

country from 3,500 to about 17,500 by FY06.

The bank has an agriculture finance portfolio of Rs 6,373 crore and hopes to create an

asset base of up to Rs 200,000 crore, said Mr Nachiket Mor, Executive Director,

ICICI Bank.

The points of presence include rural branches, franchisees, kiosks and tie-ups with

micro-finance institutions (MFIs) and co-operative banks.

Mr Mor said the bank hoped to tie up with around 80 more micro-finance institutions

by the end of this year and with 200 more in two to three years.

Currently, ICICI Bank has tie-ups with 45 MFIs and NGOs and an asset base of

around Rs 400 crore. The bank has over 200 rural branches, 1,500 franchisees and

5,000 kiosks.

These MFIs reach one million households and have zero default, Mr Mor said. Apartfrom providing funds, the bank also provides technical service to the MFI partners.

"Our aim is to ensure that no customer will be more than 3-4 km away from an ICICI

point of presence," Mr Mor said.

Once the Reserve Bank of India permits banking correspondents, their service too can

be used to cater to the rural areas, he added.

According to Mr Mor, the country has a natural competitive advantage in agriculture.

"Because of the tropical climate we can grow agriculture produce almost throughout

the year," Mr Mor said. It can even beat the information technology sector, he added.

Investment in supply chain and lending against warehousing receipts are businesses

with huge potential, which have not been tapped fully yet.

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ICICI Bank is also developing specialised products to help farmers cut their losses.

These include financing against commodities, index based products, health insurance

at a micro level and weather insurance.

Some of the States where weather insurance is offered include Rajasthan, Andhra

Pradesh and Maharashtra.

The bank is also working with corporates to offer services such as giving working

capital to farmers and selling insurance. Setting up independent weather stations is

also part of the bank's future plans.

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DISTRIBUTION:

ICICI Prudential has one of the largest distribution networks amongst private life

insurers in India, having commenced operations in 29 cities and towns in India. These

are: Ahmedabad, Bangalore, Chandigarh, Chennai, Coimbatore, Gurgaon, Hyderabad,

Indore, Jaipur, Jalandhar, Kanpur, Kochi, Kolkata, Kottayam, Lucknow, Ludhiana,

Madurai, Mangalore, Meerut, Mumbai, Nagpur, Nasik, Noida, New Delhi, Pune,

Surat, Thane, Vadodara and Vashi.

The company has the largest number of bank assurance tie-ups, having agreements

with ICICI Bank, Citibank, Allahabad Bank, Federal Bank, South Indian Bank, Bank

of India, Lord Krishna Bank, and Punjab & Maharashtra Co-operative Bank, as well

as some corporate agents. It has also tied up with organizations like Dhan for

distribution of Salaam Zindagi, a policy for the socially and economically

underprivileged sections of society.

ICICI Prudential has recruited and trained over 19,000 insurance agents to interface

with and advise customers, and has the highest number amongst private life insurers

on the renowned Million Dollar Round Table (MDRT). Further, it leverages its state-

of-the-art IT infrastructure to provide superior quality of service to customers.

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1.3 PROBLEMS OF THE ORGANIZATION

Incredible India is the buzzword these days, not only because India is one of the

most attractive tourist destination but also due to fact that it is coming out as an

economic power in the world arena. This has been reflected in the surge of Sensex,

which acts as a barometer of the Indian economy. This has also manifested the

importance of not only the Financial Service Industry but also Life Insurance sector,

which has grown leaps and bounce after its liberalization.

India presents good opportunity for foreign companies to set up their bases here with

some companies which have already made so. Achieving a growth of more than 8%

back to back speaks volume for the development that India is going through. With

lack of knowledge about the financial industry and more than 30 million prospects,

financial sector in India is colossal. Now this is where the importance ofwealth and

portfoliomanagement comes into picture.

This project report will bring to light the Importance of Portfolio management, its

impact on returns and benefits attached. It will aim at understanding investors needs

and design a good customized portfolio. This report will also enlighten on the types of

investment option available to the investor and focuses mainly on Life insurance andMutual funds.

During this project a study will be conducted to understand consumer behavior for

gauging the impetus before an individual makes an investment. Various personal

factors such as objective, age, time horizon and risk appetite were analyzed. Funds

selection parameters like risk associated, expenses involved, past performances etc,

will also be taken into account before designing the portfolios. Different portfolios

will be made according to the different requirements of the clients.

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1.4 COMPETITION INFORMATION

LIC remains to be the biggest competitor of ICICI Prudential Life Insurance. It has

been India No. 1 Private Life Insurance Player for the last 5 years (3 times its nearestcompetitor in terms of size of business done). However, the No. 2 & No. 3 Position

keeps changing. For 2004-05 No.2 was Birla Sunlife while No.3 was Allianz Bajaj

and at the present Allianz Bajaj & HDFC Standard Life have No.2 & No.3 position

respectively. Other major competitors amongst private players would be SBI Life,

Tata AIG, ING Vysya, Max New York Life Insurance, MetLife, etc.

Figure 1

94%87%

75%66%

9%

17%

11%

4%

23%

2% 9%5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2002-03 2003-04 2004-05 2005-06*

LIC Private Others ICICI Pru

Source: ICICI Prudential Life Insurance

MARKET SHARE OF VARIOUS PRIVATE PLAYERS OPERATING IN THE

MARKET

Private and foreign players entered the Indian insurance market in 1999 after the

reforms were initiated. Innovative products, smart marketing, and aggressive

distribution have enabled fledgling private insurance companies to sign up Indian

customers faster than anyone expected. Their entry ushered in new competition and

improved the service quality offered to the customer. With awareness increasing,

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customer expectations also increased. New distribution channels and innovative

promotional strategies also evolved because of the increased competition. All these

led to the development of the insurance industry and expanded the market in India.

Indians, who had always seen life insurance as a tax saving device, are now suddenly

turning to the private sector and snapping up the new innovative products on offer.

In INDIA there are a total of 14 Life Insurance Companies operating in India

including the mammoth LIC. Listed below is the list of operators.

o Birla Sun-Life Insurance Company Limited

o Allianz Bajaj Life Insurance Company Limited

o HDFC Standard Life Insurance Company Limited

o ICICI Prudential Life Insurance Company Limited

o ING Vysya Life Insurance Company Limited

o MetLife Insurance Company Limited

o TATA AIG Life Insurance Company Limited

o LIFE Insurance Corporation of India

o ROYAL SUNDARAM insurance company limited

BAJAJ ALLIANZ GENERAL INSURANCE

Bajaj Allianz General Insurance Company Limited is a joint venture between

Bajaj Auto Limited and Allianz AG of Germany. Both enjoy a reputation of

expertise, stability and strength.

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BIRLA SUN LIFE INSURANCE

The Aditya Birla Group contributes its knowledge of the Indian market while Sun

Life Financial contributes global expertise in the areas of protection and wealth

management.

HDFC STANDARD LIFE INSURANCE

HDFC and Standard Life have a long and close relationship built upon shared values

and trust. Providing long term financial security to policy holders will be the constant

endeavor.

ING VYSYA LIFE INSURANCE

ING, the worlds second largest life insurance company together with Vysya Bank,

one of Indias leading private sector banks, forms ING Vysya Life Insurance.

LIFE INSURANCE CORPORATION (LIC)

Life Insurance Corporation (LIC) has been one of the pioneering organizations in

India who introduced use of Information Technology in their business.

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METLIFE INDIA

The Metropolitan Life Insurance Company is the number one insurer in the U.S. It is

helping build financial independence for its customers.

ORIENTAL INSURANCE

The Oriental Insurance Company Ltd. (OICL) is one of the leading General Insurance

companies in India and is a subsidiary of the General Insurance Corporation (GIC) of

India.

ROYAL SUNDARAM ALLIANCE INSURANCE

Royal Sundaram marks the coming together of Sundaram Finance, one of Indias

most respected and trusted finance companies, and Royal and Sun Alliance, one of the

largest insurance groups in the world.

TATA AIG INSURANCE

Life insurance & general insurance for individuals & corporate by Tata AIG. This site

will guide you on how to capitalize on opportunities and protect against uncertainties.

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FIGURE-2

Market share of life insurance indus

02,000

4,0006,0008,000

10,00012,00014,00016,00018,00020,000

Bajaj

Allianz

SBILife

HDFC

Standard

Birla

Sunlife

ICICI

Prudential

LIC

Hundreds

Series1

The above graph gives the overview of the break up of revenue of the major players in

the Life Insurance market. This data corresponds to the revenue up till period ending

February 2006. Market share of the huge colossal company LIC have been slowly and

slowly declining with the entry of private life insurance companies. It had at one time

monopoly in Life Insurance sector; however it has come down to 72.40% for the

period ending February 2006 and ICICI Prudential has been the undisputed number

one in private life insurance company. Lately IPRU has been facing stiff competition

from BAJAJ Allianz who have been increasing their market share very rapidly mainly

on the back of one time investment.

1.5 S.W.O.T ANALYSIS

SWOT Analysis of the organization:

Business firms undertake Swot analysis to understand the external and internal

environment. SWOT, which is the acronym for Strength, Weakness, Opportunities

and Threats, is also known as WOT-UP Analysi. Through such an analysis strength

and weakness existing within an organization can be matched with the opportunities

and threats operating the environment so that an effective strategy can be formulated.

An effective organization strategy, therefore, is one that is capitalized on the

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opportunities and through the use of strengths and neutralizes the threats maximizing

the impact of weakness.

STRENGTH:

- Has sold 5 lakh policies, being maximum in the private sector.

- Brand power.

- Strong assets and infrastructure.

- Market share of 32.5%.

- Number I the private sector.

WEAKNESS:

- Industry in nascent stage.

- Awareness about private life insurance companies is very less.

- Still not very popular in rural market.

- Very few branches in the country.

- L. of operational activities.

OPPORTUNITY:

- Liberalization of Indian economy.

- Life Insurance sector opening up.

- Very small percentage of population insured in India One of best products

in the market.

- Global market opportunity.

THREAT:

- Lack of proper technical knowledge among the mass.

- Apprehension towards ICICI Prudential being a private life insurance

company.

- LIC: very big player.

Change in government policy may affect the growth and expansion of the Insurance

sector and the company.

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CHAPTER 2

OBJECTIVE & METHODOLOGY

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2.1 SIGNIFICANCE

Significant contributions made by their employees in an objective and transparent

manner and on demonstrated competence levels. Further they also recognize people

who walk the extra mile in living the ICICI PRUDENTIAL LIFE INSURANCE

values.

They provide significant learning and development conduits to employees to enhance

their domain expertise and leadership capabilities. To retain high potential, they offer

a challenging and fast paced work environment with accelerated career prospects.

They strive to create an organization where in each employee is a stakeholder in

building and defining the success of the organization and has the opportunity and

flexibility to define their canvas of roles and responsibilities. They never stop

communicating with their people and continue to seek feedback on and encourage

participation in critical business and people areas.

They continually endeavor to align their diverse workforce to a shared purpose and

vision, thereby creating a common organization culture and fabric. This is primarily

done through large-scale interactive processes at the organization and group level,

which primarily focuses on securing employee buy-in on all critical interventions.

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2.2 MANAGERIAL USEFULNESS OF THE STUDY

ICICI PRUDENTIAL LIFE INSURANCE offers you and your customer unmatched

financial strength and solidity. Their paid up capital of is higher than the norms

stipulated by the regulatory authority for insurance in India.

WHY SHOULD A PERSON INVEST

There are many reasons for which a person should invest:

1. To beat inflation2. To acquire financial assets for future needs

3. To take care of financial emergencies

4. Retirement Planning

5. Various other reasons

Even though one of the most significant factors in our life is the state of our personal

finances, we rarely spend time on managing them unlike businesses. The reason

being, we are not accountable to any one for our personal financial goals and results.

As a result we tend to get careless in our financial matters. All of us understand the

importance of savings but let us not get confused between savings and investment.

Mere savings (putting aside a portion of earnings) do not insure or guarantee

achievement of future financial goals. It is an investment process that nurtures the

savings in the direction of ones financial goals. We actually start saving at a very

early age. In fact we have been saving right since childhood. Did we not save in that

piggy bank our mother bought us?"

It is important to save but more important to invest your money. By merely stashing

away money into that neighborhood bank's savings account, one neither makes any

more money, nor preserves its value. Let apart the cost of better opportunities

foregone. Several people fail to understand the eroding effect inflation has on our

savings. The inflation rate at around 6 per cent p.a. in excess of the bank savings

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account rate at 3.5 per cent p.a. mercilessly erodes our wealth to that extent. And

some are among those whose cash has never left the precious almirah, no further

explanation is needed. The purchasing power of rupee keeps depreciating. So, to fight

against such depreciation one has to invest the money saved in assets that will help it

work for him and earn more than the erosion in value through inflation over a period

of time. Another more definitive reason is the Power of Compounding. Put simply, it

means that "Interest on Interest is Interesting". For example if a person is investing

Rs.100 for a period of 12 years @10% then hell be getting Rs.1454 instead of

Rs1100(Simple Interest). Hence investments grow faster.

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2.3 OBJECTIVES

The objectives of the project are: To know what is Portfolio Management and its importance

Understanding investors needs

How to design a good portfolio

Focus areas for ICICI

OBJECTIVE means the purpose for which the research has been conducted. We have

to clearly define the objective of the project to be made. This is the first and the most

important part of the Research Methodology.

The primary objective of my research is to study, understand and critically analyse the

ANALYTICAL ANALYSIS MULTI CHANNEL DISTRIBUTION OF HDFC SLIC.

To study the channel distribution of Insurance Industry and to understand consumer

perception with regard to the Insurance Sector and its upcoming growth stratum.

In the total market share, LIC has reduced its share from 91% to 70%. This means that

private insurance players have got more margins in their hands which have increased

from 9% to 30% in last 2years only.

In the private market share, HDFC SLIC leads with 39% of the market share in its

hand followed by Bajaj Allianz with 18% shares and then comes Birla Sun Life with

15% market shares.

HDFC SLIC has been maintaining its NO 2nd position since last 5 years because of

its prolific product range and commanding brand equity. It has a highest capital base

of Rs. 925 crores and a team of more than 56,300 well-trained advisors.

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To find whether life insurance is still synonymous with L.I.C.

To know how many people take insurance as what it is meant for and not as tax

saving financial instrument.

To know whether people know fully about the benefits an insurance advisor has

To know how many people are interested in becoming an insurance advisor?

To search for prospects who can become advisors and recruit and select the best.

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2.4 SCOPE OF THE STUDY

This Project is of immense importance in visualizing the present organizational health

of an enterprise and to devise strategies for creating a work centric nurturing culture

with the objective of having a spirited, committed, motivated and engaged workforce

to reckon with in this competitive environment.

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2.5 METHODOLGY

DATA SOURCES

(a) PRIMARY DATA SOURCES USED: -

Appointments with different people who seem to be prospective advisors.

Interview Method (Cold calling): This method involves presentation of oral verbal

stimuli and reply in terms of oral - verbal responses. This method can be used through

personal interviews and, if possible, through telephone interviews.

(b) SECONDARY DATA: -

Secondary data means data which is already available i.e. we refer to the data which

has already been collected and analyzed by someone else. Secondary data may be

either published data or unpublished data. In this project secondary data collected

from following sources. Usually published data are available:

Telephone directory, which contains telephone number of all residents of the

area, companies and shops.

Newspapers, books and magazines.

Reports and publications of various associations connected with business and

industry.

Websites and other publications of company.

Previous reports about ICICI PRUDENTIAL.

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SAMPLE DESIGN

SAMPLE SIZE:-

Sample study is been undertaken with a sample size of100 respondents conducted in

Delhi and NCR region.

STATISTICAL TOOL:-

The Microsoft excel template was used for analyzing the data collected .the various

statistical tool used for analyzing were

Bar graph

Simple percentages

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CHAPTER 3

CONCEPTUAL DISCUSSION

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INVESTMENT OPTIONS AVAILABLE

Before liberalization Indian people were investing their money mainly in government

backed instruments and traditional instruments. With the development of Indian

economy the investors are now having various financial instruments to add in their

portfolio. Some of the available investment options are as follows:

Bank fixed deposit

Bank recurring deposit

Shares

Company fixed deposit

Bonds / Debentures

Tax saving bonds

LIFE INSURANCE

Public Provident Fund

MUTUAL FUNDS

Gold / Real estate

Post Office Schemes

The focus of this project is on Life Insurance and Mutual Funds. Hence, they are

explained in detail:

(a) LIFE INSURANCE

Life Insurance is one of the most popular savings/ investment vehicles in India.

Ironically, its probably the least understood too. An insurance policy offers much

more than just tax planning and investment returns. It offers you the ability to plan for

unforeseen events that could affect your family's financial profile adversely.

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WHAT IS LIFE INSURANCE..??

Life insurance is a financial resource for ones family and loved ones in case of his

death. It is a contract between insurer and an insurance company in which the

company provides the beneficiaries with a certain amount of money upon insurer

death. In return, you insurer periodic payments (premiums) in an amount that depends

on medical history, age, gender, and occupation

INDUSTRY OVERVIEW

Insurance is a colossal sector in India that is growing at a speedy rate of 15-20%. The

insurance sector is approximately 450 billion yet 95 percent of the population in India

is not insured. This gives you a peek into the huge growth opportunity that exists for

this segment.

The insurance business is based on customers trust & confidence as it deals with the

finances of the customer. The basis for a well-planned and well-executed marketing

strategy is effective market segmentation. Insurance is broadly segmented into

individuals, institutions, industry, and trade customers. Most industry players offer

specialized services to cater to the needs of these segments. Some marketers target

niche markets and offer customized services.

Risks and uncertainties are part of life's great adventure -- accident, illness, theft,

natural disaster - they're all built into the working of the Universe, waiting to happen.

Insurance then is man's answer to the vagaries of life. If you cannot beat man-made

and natural calamities, well, at least be prepared for them and their aftermath.

Hence, insurance is essentially the means to financially compensate for losses that

life throws at people.

Thus, the need can be classified as:

Provision for the education & marriage of children.

Post retirement income for self & dependents.

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Special needs like loss of income due to disabilities, accidents, treatment of

diseases, sickness etc.

To protect against inflation

The insurance sector was opened up for private participation five years ago and

the private players are active in the liberalized environment. The insurance

markets have witnessed dynamic changes that include presence of a fair number

of insurers both life and non-life segment. Most of the private insurance

companies have formed joint venture partnering well with recognized foreign

players across the globe. The Indian Insurance market accounts only for 0.60% of

global Insurance market. Consumer awareness has improved. Competition has

brought more products and better customer servicing. It has had a positive impact

on the economy in terms of income generation and employment growth.

PRODUCTS OVERVIEW

Life insurance product covers mainly the two basic requirement of an individual

(1)...Risk Coverage

(2)...Saving for Future

Risk in the above lines is used to cover the risk of death in case of the unfortunate

death of the policyholder. It provides a lump sum amount to the family for the

absence of the breadwinner. This is called as a Term Insurance or just covering the

risk of death. Here only the lump sum amount is available only in case of death and

nothing on survival or the maturity of the policy. The second is the accumulation of

saving for a specific purpose. Here the lump sum amount is available only if the

insured survives a particular period and nothing on the death of the insured. These

two are also referred to as building blocks in all life insurance product design. On the

basis of these two requirements various other products can thus be designed.

Each product of an insurance company offers something unique. Term insurance

covers just the risk of life and nothing is payable on survival, so the premium that is

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charged is at its lowest and the time horizon for which it is available is also very high.

This is the most risky of the products that are offered by the company as for just a

meager premium, company covers the insurance of a very high amount. So before

allotting the policy to an individual the company has to carefully manage its under

writing with regards to the age at entry, amount of insurance, and term of the

insurance. Endowment is just like any other saving scheme which offers benefit just

in case of survival and nothing in case of death.

All insurance companies are very eager to sell ULIP plans, which provide the

company a handsome profit. It is in these ULIP plans that initial charges are very

high, which directly goes into the pocket of the insurer for bearing the cost of

distribution, promotion and advertising. Some part of that charges also goes into the

pocket of the advisor, who sells the insurance plan. With the capital markets are at its

record high some advisor finds it easy to sell, as long as you have the customer who is

ready to invest by taking the risk of the market.

ICICI Insurance offers a range of innovative, customer centric products that meet the

needs of customers at every life stage. Its products can be enhanced with up to 5

riders, to create a customized solution for each policyholder.

ULIP AND ENDOWMENT

Endowment plans are life insurance plans, which not only cover the individuals life

in case of an eventuality but also offer a maturity value at the end of the term. In the

event of the individuals demise, his nominees receive the sum assured with

accumulated profits/bonus on investments (till the time of his demise). In case the

individual survives the tenure, he receives the sum assured and accumulated

profits/bonus.

ULIPs attempt to fulfill investment needs of an investor with protection/insurance

needs of an insurance seeker. ULIPs work on the premise that there is class of

investors who regularly invest their savings in products like fixed deposits (FDs),

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coupon-bearing bonds, debt funds, diversified equity funds and stocks. There is

another class of individuals who take insurance to provide for their family in case of

an eventuality. So typically both these categories of individuals (which also overlap to

a large extent) have a portfolio of investments as well as life insurance. ULIP as a

product combines both these products (investments and life insurance) into a single

product. This saves the investor/insurance-seeker the hassles of managing and

tracking a portfolio of products.

The primary difference between conventional savings-based insurance plans like

endowment and ULIPs is the investment mandate- while ULIPs can invest upto 100%

of the premium in equities, the percentage is much lower (usually not more than 15%)

in case of conventional insurance plans. ULIPs are also available in multiple options

like aggressive ULIPs (which can invest upto 100% in equities), balanced ULIPs

(which invest 40-60% in equities) and debt ULIPs (which invest only in debt and

money market instruments).

PREMIUM STRUCTURE

The primary purpose of life insurance is to secure the financial future of the nominees

in case of an eventuality to the insured. The premium consists of three important

elements :

Mortality charges - Mortality charges are incurred by the insurance company

to cover the risk of an eventuality to the individual. The mortality expenses

differ depending on the age of the individual and the sum assured- they are

higher for a higher age and sum assured.

Sales & administrative expenses - These expenses are incurred by the

insurance company for operational purposes and recovered from the premiums

that the individual pays towards his policy.

Savings component - This portion of the premium is invested by the life

insurance company in various investment avenues like government securities,

bonds, money market instruments and equities in varying proportions. The

savings component is what helps generate the returns which insurance

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companies pay to the policyholder by way of bonuses and the maturity

amount.

CONCERNED PRODUCTS OF ICICI

1.

Lifelink Super is a unique single premium market linked investment-cum-insurance

solution. It is a plan that combines the security of a life insurance policy with the

opportunity to enjoy potentially high returns on your investments.

Low Allocation Charges: The premium allocation charges are amongst the

lowest across products.

Death Benefit: There are 2 options for sum assured - 125% to 500% of the

single premium In the event of an unfortunate death, the beneficiary will

receive higher of the value of units or the initial death benefit

Liquidity: In order to meet liquidity requirements, one can make partial

withdrawals from the accumulated value of the policy after completion of

three policy years.

Flexibility: Choose from four fund options, based on your investment

objective and risk appetite. If at a later stage your financial priorities change,

you can switch between the various fund options, absolutely free, 4 times a

year.

2.

Lifetime has been developed to meet the savings, protection and investment needs at

every stage in life.

Protection

Choose a specified level of protection

Flexibility to increase or decrease your sum assured.

Add-on riders to protect you against any eventuality.

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Savings

Flexibility to increase or decrease your contribution.

Facility of Premium Holiday, wherein the policy continues even if there is a

temporary break in the payment of annual contribution

Additional allocation of units on a periodic basis.

Facility to top-up your investment any time you have surplus funds.

Loans against the policy.

Investment

Choose from among four funds, based on your investment objective and risk

appetite.

Choice to switch between investments options.

3.

Smart Kid is especially designed to provide flexibility and safeguard childs future

education and lifestyle, taking all possibilities into account.

Financial Benefits: Regular payments at critical stages in your childs life,

like Board examinations, Graduation and Post-graduation.

Total peace of mind, even if you are not around

Sum Assured is paid immediately: Ensures that your loved ones stay

financially secure, even in your absence.

All future premiums are waived: Ensuring that your family is not financially

burdened in your absence.

Policy benefits continue: The educational benefits of the policy continue,

ensuring that your child can realize his or her dreams without any hassles.

Development Allowance: Smart Kid guarantees regular income to secure

your childs educational career and also ensures his or her all-round

development, for a nominal additional amount. The Income Benefit Rider

takes care of this through an annual payment of 10% of the sum assured, to

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your child, till the maturity of the policy, in the unfortunate event of the death

of the parent.

4.

Life Time Pension II gives you the freedom to choose the amount of premium, and

invest in market-linked funds, to generate potentially higher returns. On the future

retirement date, the accumulated value of the units will be used to purchase an annuity

- to provide you with regular income for life.

Power to choose the protection level: Choose from either a Zero sum assured

or a sum assured, which will be equal to the product of your annual

contribution and term.

Power to choose the retirement date: Take advantage of market movements

by choosing a vesting age between 45 - 75 years of age.

Power to increase your investments: Use your surplus funds to top-up your

investments during the deferment period.

Power to invest in a plan based on your priorities: Choose from among

four funds, based on your investment objective and risk appetite. If at a later

stage your financial priorities change, you can switch between the variousfund options, absolutely free, 4 times a year.

IMPACT OF BUDGET ON INSURANCE

The impact of this Budget on the insurance industry will be felt positively in the realm

of Pension plans and Group Superannuation funds. This years budget has taken a

positive step towards rationalizing tax-benefits on life insurance products. It has also

put a smile on individuals planning for retirement. The budget has enhanced the

overall Section 80CCC limit available on pension plans. In layman language, what it

means is that individuals can now contribute up to Rs 100,000 towards premiums paid

annually for pension / retirement plans. With this move, Section 80C (which is

inclusive of Section 80CCC) offers a lot more flexibility to the individual. He can

now take life insurance plans and/or pension plans in line with his needs without

worrying about the restrictive limits for the purpose of claiming tax benefits. In our

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view, there was a crying need for enhancing the pension plan Section 80CCC limit to

promote retirement planning. Till date, individuals were given benefits only to the

extent of Rs 10,000 for investments in pension plans.

Fixed deposits with a lock-in period of more than 5 years have also been roped into

the limit of Rs 1, 00,000 which is exempted u/s 80C. This also takes away the share of

the Life insurance which people used to look as the first priority for saving on the

taxes.

EEE (exempt, exempt, exempt) to continue

As things stand today, the exempt-exempt-exempt (EEE) regime of taxation holds

good. This regime is applicable to tax-saving instruments that fall under the Section

80C. With respect to life insurance products, an individual is eligible for tax

exemption based on the premium paid; similarly the maturity proceeds are also

exempt from tax in most cases.

In the last years budget, the finance minister spoke of moving towards an EET

(exempt-exempt-tax) regime. Under the proposed EET structure individuals would

have to pay a tax on the maturity proceeds. We expect EET to be introduced in a

phased manner as against a one-time full and final introduction. This is because as yet

there is much uncertainty with regards to the tax treatment on insurance products in

the proposed EET structure. Moreover, we are not sure how well-geared the system is

to implement the EET regime for the various investment avenues.

(b) MUTUAL FUNDS

WHAT IS A MUTUAL FUND?

A Mutual Fund is a body corporate that pools the savings of a number of investors

and invests the same in a variety of different financial instruments, or securities. The

income earned through these investments and the capital appreciations realized by the

scheme are shared by its unit holders in proportion to the number of units owned by

them. Mutual funds can thus be considered as financial intermediaries in the

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investment business that collect funds from the public and invest on behalf of the

investors. The losses and gains accrue to the investors only

BACKGROUND

The concept of mutual funds in India dates back to the year 1963. The era between

1963 and 1987 marked the existence of only one mutual fund company in India with

Rs.67bn assets under management (AUM), by the end of its monopoly era, the Unit

Trust of India (UTI). By the end of the 80s decade, few other mutual fund companies

in India took their position in mutual fund market.

The new entries of mutual fund companies in India were SBI Mutual Fund, Canbank

Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of

India Mutual Fund.

The succeeding decade showed a new horizon in Indian mutual fund industry. By the

end of 1993, the total AUM of the industry was Rs.470.04 bn. The private sector

funds started penetrating the fund families. In the same year the first Mutual Fund

Regulations came into existence with re-registering all mutual funds except UTI. The

regulations were further given a revised shape in 1996.

Kothari Pioneer was the first private sector mutual fund company in India which has

now merged with Franklin Templeton. Just after ten years with private sector players

penetration, the total assets rose up to Rs.1218.05 bn. Today there are 34 mutual fund

companies in India offering more then 669 schemes.

TYPES OF MUTUAL FUND SCHEMES

By Structure

o Open - Ended Schemes - An Open-ended Fund is one that is available

for subscription all through the year. These do not have a fixed

maturity. Investors can conveniently buy and sell units at Net Asset

Value (NAV) related prices.

o Close - Ended Schemes - A Close-ended Fund has a stipulated

maturity period, which generally ranges from 3 to 15 years. The fund is

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open for subscription only during a specified period. Investors can

invest in the scheme at the time of the initial public issue and thereafter

they can buy or sell the units of the scheme on the Stock Exchanges, if

they are listed

By Investment Objective

o Growth Schemes - The aim of growth funds is to provide capital

appreciation over the medium to long term. Such schemes normally

invest a majority of their corpus in equities. Growth schemes are ideal

for investors who have a long-term outlook and are seeking growth

over a period of time.

o Income Schemes - The aim of Income Funds is to provide regular and

steady income to investors. Such schemes generally invest in fixed

income securities such as bonds, corporate debentures and Government

securities. Income Funds are ideal for capital stability and regular

income. Capital appreciation in such funds may be limited, though

risks are typically lower than that in a growth fund.

o Balanced Schemes - The aim of Balanced Funds is to provide both

growth and regular income. Such schemes periodically distribute a part

of their earning and invest both in equities and fixed income securities

in the proportion indicated in their offer documents. Balanced funds

with equal allocation to equities and fixed income securities are ideal

for investors looking for a combination of income and moderate

growth.

o Money Market Schemes - The aim of Money Market Funds is to

provide easy liquidity, preservation of capital and moderate income.

These are ideal for corporate and individual investors as a means to

park their surplus funds for short periods.

Other Schemes

o Tax Saving Schemes - These schemes offer tax rebates to the

investors under specific provisions of the Indian Income Tax laws, as

the Government offers tax incentives for investment in specified

avenues.

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Investments made in Equity Linked Savings Schemes (ELSS) and

Pension Schemes are allowed as deduction under Section 88 of the

Indian Income Tax Act, 1961

o Special Schemes

Index Schemes - Index Funds attempt to replicate the

performance of a particular index such as the BSE Sensex or

the NSE S&P CNX 50.

Sector Specific Schemes - Sectoral Funds are those which

invest exclusively in specified sector(s) such as FMCG,

Information Technology, Pharmaceuticals, etc. These schemes

carry higher risk as compared to general equity schemes as the

portfolio is less diversified, i.e. restricted to sector(s) / industry

(ies).

Mutual fund schemes may be classified on the basis of their

structure and its investment objective.

OPTIONS AVAILABLE TO INVESTORS

Each plan of every mutual fund has three options Growth, Dividend and dividend

reinvestment. Separate NAV are calculated for each scheme.

Dividend Option

Under the dividend plan dividend are usually declared on quarterly or annual basis.

Mutual fund reserves the right to change the frequency of dividend declared.

Dividend reinvestment option

Instead of remittances of units through payouts, Units holder may choose to invest the

entire dividend in additional units of the scheme at NAV related prices of the next

working day after the record date. No sales or entry load is levied on dividend

reinvest.

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Growth Option

Under this plan returns accrue to the investor in the form of capital appreciation as

reflected in the NAV. The scheme will not declare the dividend under the Growth

plan and investors who opt for this plan will not receive any income from the scheme.

Instead of income earned on their units will remain invested within the scheme and

will be reflected in the NAV.

N E T A S S E T V A L U E

In the context of mutual funds, Net Asset Value (NAV) is defined as the total value of

the fund's portfolio less liabilities. The NAV is usually calculated on a daily basis.

The NAV is usually below the market price because the current value of the funds

assets is higher than the historical financial statements used in the NAV calculation.

C A L C U L A T I O N O F N A V

COSTS INVOLVED IN INVESTING IN MUTUAL FUNDS

Loads

Don't look at these as a burden; just think of them as tolls we pay on the highway to

big money!

Entry Load/Sale Load

This is the charge imposed at the time the investor enters a fund. He pays for the value

of the units plus an additional charge. That additional charge is termed entry/sale load.

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Exit Load/Repurchase Load

The opposite of the above! This is what the investor coughs up at the time of his exit

from the scheme. Operationally, therefore, what he gets back from the mutual fund

will be the value of the units minus the exit charge.

Contingent Deferred Sales Charge

A mutual fund may not want to charge an exit load in all cases. But it will still need

to recover the expenses incurred on the promotion and distribution of a scheme. What

it does then is impose a charge based on the time of withdrawal. Thus, a fund that

prefers long-term investors may stipulate that the exit charge will keep reducing with

the increasing duration of investment.

Such a charge is called Contingent Deferred Sales Charge (CDSC). The asset

management company is entitled to levy a CDSC for redemption during the first four

years after purchase, not exceeding 4% of the redemption proceeds in the first year,

3% in the second year, 2% in the third year and 1% in the fourth year. In order to

charge a CDSC, the scheme has to be a no-load scheme as per the regulations laid

down by SEBI.

Switchover/Exchange Fee

This is what the investor pays if he decides to switch his investment from one scheme

of the fund to another scheme from the same fund family.

Recurring Expense

Apart from loads, mutual funds also charge some other expenses, such as:

Investment Management & Advisory Fees

As the name suggests, this is meant to remunerate the asset management company for

managing the investor's money

Trustee Fees

These are fees payable to the trustees for managing the trust.

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Custodian Fees

These are paid by the fund to its custodians, the organization which handles the

possession of the securities invested in by the fund.

Registrar and Transfer Agents Charges

The fees payable to the registrar and the transfer agents for handling all formalities

related to the transfer of units and other related operations.

Broker/Dealer Remuneration, Audit Fees, Cost of Funds Transfer, Cost of

providing a/c statements, Cost of Statutory Advertisements

But all these are regulated and have an upper limit, so the investor won't go broke

trying to earn money!

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RISKS INVOLVED IN INVESTING IN MUTUAL FUNDS

Market risk - If the overall stock or bond markets fall on account of macro economic

factors, the value of stock or bond holdings in the fund's portfolio can drop, thereby

impacting the NAV.

Non-market risk - Bad news about an individual company can pull down its stock

price, which can negatively affect funds holding a large quantity of that stock. This

risk can be reduced by having a diversified portfolio that consists of a wide variety of

stocks drawn from different industries.

Interest rate risk- Bond prices and interest rates move in opposite directions. When

interest rates rise, bond prices fall and this decline in underlying securities affects the

NAV negatively. How bad the damage will be is dependant on factors such as

maturity profile, liquidity etc.

Credit risk - Bonds are debt obligations. So when the funds invest in corporate

bonds, they run the risk of the corporate defaulting on their interest and principal

payment obligations and when that risk crystallizes, it leads to a fall in the value of

the bond causing the NAV of the fund to take a beating.

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ADVANTAGES OF MUTUAL FUNDS

The advantages of investing in a Mutual Fund are:

Professional Management

Mutual Funds provide the services of experienced and skilled professionals,

backed by a dedicated investment research team that analyses the performance

and prospects of companies and selects suitable investments to achieve the

objectives of the scheme.

Diversification

Mutual Funds invest in a number of companies across a broad cross-section of

industries and sectors. This diversification reduces the risk because seldom do

all stocks decline at the same time and in the same proportion.

Convenient Administration

Investing in a Mutual Fund reduces paperwork and helps you avoid many

problems such as bad deliveries, delayed payments and follow up with brokersand companies.

Return Potential

Over a medium to long-term, Mutual Funds have the potential to provide a

higher return as they invest in a diversified basket of selected securities.

Low Costs

Mutual Funds are a relatively less expensive way to invest compared to

directly investing in the capital markets because the benefits of scale in

brokerage, custodial and other fees translate into lower costs for investors.

Liquidity

In open-end schemes, the investor gets the money back promptly at net asset

value related prices from the Mutual Fund. In closed-end schemes, the units can

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be sold on a stock exchange at the prevailing market price or the investor can

avail of the facility of direct repurchase at NAV related prices by the Mutual

Fund.

Transparency

One get regular information on the value of your investment in addition to

disclosure on the specific investments made by your scheme, the proportion

invested in each class of assets and the fund manager's investment strategy and

outlook.

Flexibility

Through features such as regular investment plans, regular withdrawal plans and

dividend reinvestment plans, you can systematically invest or withdraw funds

according to your needs and convenience.

Affordability

Investors individually may lack sufficient funds to invest in high-grade stocks.

A mutual fund because of its large corpus allows even a small investor to take

the benefit of its investment strategy.

Choice of Schemes

Mutual Funds offer a family of schemes to suit your varying needs over a

lifetime.

Well Regulated

All Mutual Funds are registered with SEBI and they function within the

provisions of strict regulations designed to protect the interests of investors. The

operations of Mutual Funds are regularly monitored by SEBI.

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PERFORMANCE MEASURES OF MUTUAL FUNDS

Mutual Fund industry today, with about 34 players and more than six hundred

schemes, is one of the most preferred investment avenues in India. However, with a

plethora of schemes to choose from, the investor faces problems in selecting funds.

Factors such as investment strategy and management style are qualitative, but the

funds record is an important indicator too.

The methodology adopted in measuring fund performance is a very crucial decision.

Generally, past records are used to measure fund performance. But past is not a

reliable predictor of the future.

Returns generated during past periods alone should not be considered as the basis of

measurement of the performance of a mutual fund scheme, it should also include the

risk taken by the fund manager because different funds will have different levels of

risk attached to them. Risk associated with a fund, in a general, can be defined as

variability or fluctuations in the returns generated by it. The higher the fluctuations in

the returns of a fund during a given period, higher will be the risk associated with it.

These fluctuations in the returns generated by a fund are resultant of two guiding

forces. First, general market fluctuations, which affect all the securities present in the

market, called market risk or systematic risk and second, fluctuations due to specific

securities present in the portfolio of the fund, called unsystematic risk.

Though past performance alone can not be indicative of future performance, it is,

frankly, the only quantitative way to judge how good a fund is at present. Therefore,

there is a need to correctly assess the past performance of different mutual funds.

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Banks vs. Mutual Funds : Why Should you invest in MF?????

Mutual funds are now also competing with commercial banks in the race for retail

investors savings and corporate float money. Traditional saving avenues are losing

out in the current scenario. Many investors are realizing that investments in savings

accounts are as good as locking up their deposits in a closet. The fund mobilization

trend by mutual funds in the current year indicates that money is going to mutual

funds in a big way. The power shift towards mutual funds has become obvious due to

following reasons:

Banks Mutual fund

Returns Low Better

Administrative exp. High Low

Risk Low Moderate

Investment options Less More

Network High penetration Low but improving

Liquidity At a cost Better

Quality of assets Not transparent TransparentInterest calculation Minimum balance between

10th. & 30th. Of every month

Everyday

Guarantee Maximum Rs.1 lakh on depositsNone

IMPACT OF BUDGET ON MUTUAL FUNDS

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The Union Budget 06 moved on predictable and there were some sops for the mutual

fund industry as well. The dividends from MF units continue to be tax-free for its

investors. Debt-oriented Mutual Funds schemes continue to pay distribution tax

amounting to 12.5 percent on the dividends declared, while equity-oriented mutual

funds schemes will not be required to pay distribution tax. Long-term capital gains tax

on equity funds remains nil while for debt funds it would be taxed at the prevailing

rates- 10% without indexation or 20% with indexation. The limit on FII investment in

corporate debt would be raised from $0.5bn to $1.5bn, which is expected to encourage

the investments in debt market. Open-ended equity-oriented schemes and close-ended

equity oriented schemes would now be treated on par for exemption from dividend

distribution tax..

The ceiling on aggregate investment by mutual funds in overseas instruments would

be raised from $1billion to $2billion and the requirement of 10% reciprocal share

holding would be removed and a limited number of qualified Indian mutual funds to

invest, cumulatively up to $1 billion, in overseas exchange traded funds would be

allowed. Mutual Fund investment abroad is currently restricted in companies that

have a holding of at least 10% in a listed Indian company. This will enable Indian

investors to invest in global equity markets with a wider choice of stocks to permit

greater diversification and the convenience of dealing with an Indian mutual fund.

However, now, investors would have to bear the brunt of increased rate of securities

transaction tax. The Investments in fixed deposits in scheduled banks for a term of not

less than five years has been included in section 80C of the Income tax Act, thereby

making them more attractive to the general public, which may affect debt-oriented

mutual fund schemes.

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MARKET SHARES OF MAJOR PLAYERS

No. Name of the Asset Management CompanyAsset Under Management

(Rs. in Crore)

A BANK SPONSORED (i) Joint Ventures - Predominantly Indian

1 SBI Funds Management Pvt. Ltd. 14506

Total A (i) 14506

(ii) OTHERS

1 BOB Asset Management Co. Ltd. 221

2 Canbank Investment Management Services Ltd. 3327

3 UTI Asset Management Company Pvt. Ltd. 30109

Total A (ii) 33657

Total A (i + ii) 48163

B INSTITUTIONS

1Jeevan Bima Sahayog Asset Management Co.

Ltd.6134

Total B 6134

C PRIVATE SECTOR

(i) INDIAN

1 Benchmark Asset Management Co. Pvt. Ltd. 782

2 Cholamandalam Asset Management Co. Ltd. 2146

3 Escorts Asset Management Ltd. 168

4 J.M.Financial Asset Management Pvt. Ltd. 2784

5 Kotak Mahindra Asset Management Co. Ltd. 10985

6 Quantum Asset Management Co. Pvt. Ltd. 30

7 Reliance Capital Asset Management Ltd. 26420

8 Sahara Asset Management Co. Pvt. Ltd. 254

9 Tata Asset Management Ltd. 10652

10 Taurus Asset Management Co. Ltd. 261

Total C (i) 54482

(ii) JOINT VENTURES -

PREDOMINANTLY INDIAN

1 Birla Sun Life Asset Management Co. Ltd. 17390

2 DSP Merrill Lynch Fund Managers Ltd. 13201

3 HDFC Asset Management Co. Ltd. 22539

4 Prudential ICICI Asset Management Co. Ltd. 27504

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5Sundaram BNP Paribas Asset Management

Company Ltd.3631

Total C (ii) 84265

(iii) JOINT VENTURES -

PREDOMINANTLY FOREIGN

1 ABN AMRO Asset Management (India) Ltd. 2886

2 Deutsche Asset Management (India) Pvt. Ltd. 4208

3 Fidelity Fund Management Private Ltd. 3692

4Franklin Templeton Asset Management (India)

Pvt. Ltd.19639

5 HSBC Asset Management (India) Private Ltd. 10078

6 ING Investment Management (India) Pvt. Ltd. 2684

7Morgan Stanley Investment Management Pvt.

Ltd.3000

8 Principal PNB Asset Management Co. Pvt. Ltd. 8946

9 Standard Chartered Asset Mgmt Co. Pvt. Ltd. 9322

Total C (iii) 64455

Total C (i + ii +iii) 203202

Total (A + B + C) 257499

PRODUCTS

SAVING PLANS:

ICICI Prudential offers a variety of policies that give you the benefits of protection

and the opportunity to save for important assets or events, like a home, a car wedding.

INVESTSHIELD LIFE

A regular premium unit-linked insurance plan with an assurance of Capital

Guarantee* and the facility of extended insurance cover.

INVESTSHIELD CASH

A regular premium unit-linked insurance plan with an assurance of Capital

Guarantee* along with flexible liquidity options.

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INVESTSHIELD GOLD

A unit-linked insurance plan with an assurance of Capital Guarantee*, which offers

you the benefit of a limited premium payment and coverage term.

PREMIER LIFE

A market linked insurance plans that meets your Investment and Protection needs.

LIFE TIME LIFETIME 2

Complete market-linked insurance plans that adapt itself to your changing protection

and investment needs, throughout a lifetime.

SECURE PLUS

Insurance plan that gives added protection savings and multiple options, all in one!

CASH PLUS

An insurance plan that gives added protection savings, multiple options, plus the

power of liquidity.

SAVE N PROTECT

A traditional endowment savings plan that offers both high returns and protection.

CASH BACK

An endowment savings plan that allows you to get back substantial survival benefits

without having to wait till the maturity date.

PROTECTION PLANS

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LIFE GUARD

ICICI Prudential Life Insurance offers LifeGuard - a set of pure protection plans.

Choose from amongst three different product structures to insure your life and provide

total security to your family, at a very affordable cost.

Level Term Assurance with return of premium

On death the entire sum assured will be paid.

On maturity, all the premiums paid will be returned.

Level Term Assurance without return of premium


No survival or maturity benefits.

You can also enhance the above two policies by adding Accident & Disability Benefit

Rider and Waiver of Premium Rider (WOP).

Level Term Assurance - Single premium


No survival or maturity benefits

SMARTKID EDUCATION PLANS

As a responsible parent, you will always strive to ensure a hassle-free, successful life

for your child. However, life is full of uncertainties and even the best-laid plans can

go wrong. Heres how you can give your child a 100% safe and assured tomorrow,

whatever the uncertainties. Smart Kid is especially designed to provide flexibility and

safeguard your childs future education and lifestyle, taking all possibilities into

account. For further information on our Smart Kid Education Plans, please download

the brochure.

1. SmartKid regular premium (Download Brochure)

2. SmartKid unit-linked regular premium (Download Brochure)

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3. SmartKid unit-linked regular premium II (Download Brochure

4. SmartKid unit-linked single premium II (Download Brochure)

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PROCEDURE

Following procedure was followed for the project:

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Finding potential customers

Identifying their investment needs

Designing portfolio

Evaluating its performance

Study of various financial services


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(a) STUDY OF FINANCIAL PRODUCTS

A wealth manager should know his product in and out then only he can design a

fruitful portfolio for his clients. Before suggesting any financial product to a client

one should have a clear understanding of the products.

The project started with the study of financial products. Training on life insurance and

mutual funds was given by the seniors of ICICI bank for 7 days. But, only that was

not sufficient, one could get the insight from reading.

Various books, magazines and journals were referred. Employees who had similar

kind of jobs and provided the practical knowledge about the job what all one should

know about the product, what queries investors ask and how to tackle different people

in different manner.

(b) FINDING POTENTIAL CUSTOMERS

The various methods used for finding potential customers are:

PHONE CALLS

Cold calls to different people spread across Delhi were made. The task was to inform

people about the Mutual Fund and Life Insurance, if possible fixan appointment with

them. This was a tedious task as the prospects were seldom in a mood to listen about

the product.

Advantages:-

1. Least time consuming method as compared to personal door to door visits

2. We get first hand information about the prospect hence we can plan better our call

and design an apt portfolio that suits his/her need.

3. The prospect feels comfortable in first face to face meeting, hence making the

discussion more fruitful.

4. An early Rapport is maintained

5. We can seek the prospects permission to call him back

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Disadvantages:-

1. The success rate is quite lo

portfolio & wealth management at icici prudential life insur final

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