sbi finance
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INTRODUCTION
The story of insurance is probably as old as the story of mankind. Tendency of a human
being to secure themselves against loss and disaster has been from the starting of world.
They sought to avert the evil consequences of fire and flood and loss of life and were
willing to make some sort of sacrifice in order to achieve security. Though the concept of
insurance is largely a development of the recent past, particularly after the industrial era
past few centuries yet its beginnings date back almost 6000 years as per records.
Insurance business is divided into four classes:
Life Insurance Fire
Marine
Miscellaneous Insurance.
Insurance provides: Protection to investor.
Accumulation of savings.
Channeling these savings into sectors needing huge long term investment.
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FUNCTIONS OF INSURANCE
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Provide protection: The primary function of insurance is to provide protection
against future risk, accidents and uncertainty. Insurance cannot check the
happening of the risk, but can certainly provide for the losses of risk. Insurance is
actually a protection against economic loss, by sharing the risk with others.
Collective bearing of risk : Insurance is an instrument to share the financial
loss of few among many others. Insurance is a mean by which few losses are
shared among larger number of people. All the insured contribute the premiums
towards a fund and out of which the persons exposed to a particular risk is paid.
Assessment of risk : Insurance determines the probable volume of risk by
evaluating various factors that give rise to risk. Risk is the basis for determining
the premium rate also .
Provide certainty : Insurance is a device, which helps to change from
uncertainty to certainty. Insurance is device whereby the uncertain risks may be
made more certain .
Small capital to cover larger risk : Insurance relieves the businessmen from
security investments, by paying small amount of premium against larger risks and
uncertainty.
Contributes towards the development of industries : Insurance provides
development opportunity to those larger industries having more risks in their
setting up. Even the financial institutions may be prepared to give credit to sick industrial units which have insured their assets including plant and machinery.
Means of savings and investment: Insurance serves as savings and
investment, insurance is a compulsory way of savings and it restricts the
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unnecessary expenses by the insured's For the purpose of availing income-tax
exemptions also, people invest in insurance.
Source of earning foreign exchange: Insurance is an international business.
The country can earn foreign exchange by way of issue of marine insurance
policies and various other ways.
Risk free trade: Insurance promotes exports insurance, which makes the
foreign trade risk free with the help of different types of policies under marine
insurance cover .
LIFE INSURANCELife insurance is a contract under which the insurer (Insurance Company) in
Consideration of a premium paid undertakes to pay a fixed sum of money on
The death of the insured or on the expiry of a specified period of time
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Whichever is earlier? In case of life insurance, the payment for life insurance policy is
certain. The Event insured against is sure to happen only the time of its happening is not
known. So life insurance is known as Life Assurance. The subject matter of insurance is
life of human being. Life insurance provides risk coverage to the life of a person. On
death of the person insurance offers protection against loss of income and compensate the
titleholders of the policy.
Roles of life insurance
Life insurance as an investment: - Insurance products yield more than anyother investment instruments and it also provides added incentives or bonus offered by
insurance companies.
Life insurance as risk cover: - Insurance is all about risk cover and protection
of life. Insurance provides a unique sense of security that no other form of invest
can provide.
Life insurance as tax planning: - Insurance serves as an excellent tax saving
mechanism too.
Importance of life insurance:- Protection against untimely death: - Life insurance provides protection to
the dependents of the life insured and the family of the assured in case of his
untimely death. The dependents or family members get a fixed sum of money in
case of death of the assured.
Saving for old age: - After retirement the earning capacity of a person reduces.
Life insurance enables a person to enjoy peace of mind and a sense of security in
his/her old age.
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Promotion of savings: - Life insurance encourages people to save money
compulsorily. When life policy is taken, the assured is to pay premiums regularly
to keep the policy in force and he cannot get back the premiums, only surrender
value can be returned to him. In case of surrender of policy, the policyholder gets
the surrendered value only after the expiry of duration of the policy . Initiates investments: - Life Insurance Corporation encourages and mobilizes
the public savings and canalizes the same in various investments for the economic
development of the country. Life insurance is an important tool for the
mobilization and investment of small savings.
Credit worthiness: - Life insurance policy can be used as a security to raise
loans. It improves the credit worthiness of business. Social Security: - Life insurance is important for the society as a whole also.
Life insurance enables a person to provide for education and marriage of children
and for construction of house. It helps a person to make financial base for future.
Tax Benefit: - Under the Income Tax Act, premium paid is allowed as a
deduction from the total income under section 80C.
Indian insurance industryHistory:
Life insurance came to India from England in 1818 when oriental life
insurance company started in Calcutta by Europeans. After this many insurance
companies had been started in India. But these companies were looking after only the
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The global insurance industry is growing at rapid pace. Most of the markets are
undergoing globalization. Lot of mergers and acquisition are taking place in the insurance
world. The rapidity in the industry, technological improvement has resulted in pressures
on a few economic parameters. The world insurance industry is at peak of its
globalization process.
Global insurance market is increasing by an average of six percent per year
since 1990. Insurance companies have collected $2443.7 billion premium world wide
according to the global development of premium volume in 144 countries in 2005.
$1521.3 has been generated as life insurance premium and $922.7 as non life insurance
premium. The US accounted for 35% of global life and non life premium, Japan had
global share of 21%, and UK was having 10% of global share.
Influence on Indian insurance industry :In this era of globalization, insurance companies face a dynamic global environment.
Dramatic changes are taking place owing to the internationalization of activities,
appearance of new risk, new types of covers to match with new risk situations, and
unconventional and innovative ideas on customer services. Low growth rates in
developed markets, changing customers needs, and the uncertain economic conditions in
the developing world are exerting pressure on insurers resources and testing their abilityto survive. Now the existing insurers are facing difficulties from non-traditional
competitors those are entering the retail market with new approaches and through new
channels.
India has a rapidly growing middle class and this section can afford to buy
insurance products. This shows the attraction that the Indian market holds for foreign
insurers who have been putting pressure on developing countries as well as on India to
open up its market.
Life insurance penetration as a % of GDP
United kingdom 8.9%Japan 8.3%Korea 7.3%United states 4.1%
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Malaysia 3.6%India 3.0%China 1.8%Brazil 1.3%
Source: - www.indianinsuranceresearch.com
FUNCTIONING OF INSURANCE INDUSTRYInsurers business model:
Profit = earned premium + investment income - incurred loss - underwriting expenses
Insurers make money in two ways: (1) through underwriting , the processes by which
insurers select the risks to insure and decide how much in premiums to charge for
accepting those risks and (2) by investing the premiums they collect from insured.The most difficult aspect of the insurance business is the underwriting of policies. Using
a wide assortment of data, insurers predict the likelihood that a claim will be made
against their policies and price products accordingly. To this end, insurers use actuarial
science to quantify the risks they are willing to assume and the premium they will charge
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to assume them. Data is analyzed to fairly accurately project the rate of future claims
based on a given risk. Actuarial science uses statistics and probability to analyze the risks
associated with the range of perils covered, and these scientific principles are used to
determine an insurer's overall exposure. Upon termination of a given policy, the amount
of premium collected and the investment gains thereon minus the amount paid out in
claims is the insurer's underwriting profit on that policy.
An insurer's underwriting performance is measured in its combined ratio. The loss ratio
(incurred losses and loss-adjustment expenses divided by net earned premium) is added
to the expense ratio (underwriting expenses divided by net premium written) to determine
the company's combined ratio. The combined ratio is a reflection of the company's
overall underwriting profitability. A combined ratio of less than 100 percent indicates
underwriting profitability, while anything over 100 indicates an underwriting loss.
Insurance companies also earn investment profits on float. Float or available reserve
is the amount of money, at hand at any given moment that an insurer has collected in
insurance premiums but has not been paid out in claims. Insurers start investing insurance
premiums as soon as they are collected and continue to earn interest on them until claims
are paid out.
. Naturally, the float method is difficult to carry out in an economically depressed
period. Bear markets do cause insurers to shift away from investments and to toughen up
their underwriting standards. So a poor economy generally means high insurance
premiums. This tendency to swing between profitable and unprofitable periods over time
is commonly known as the "underwriting" or insurance cycle .
Finally, claims and loss handling is the materialized utility of insurance. In managing the
claims-handling function, insurers seek to balance the elements of customer satisfaction,
administrative handling expenses, and claims overpayment leakages.
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COMPARISON OF INSURANCE WITH OTHER SIMILAR
FACTORS
(1) Insurance and gambling compared
Insurance is often erroneously confused with gambling .There are two important
differences between them .First ,gambling creates a new speculative risk ,while insuranceis a technique for handling an already existing pure risk .thus ,if you bet Rs 300 on a
horse ,a new speculative technique is created ,but if you pay Rs 300 to an insurer for fire
insurance ,the risk of fire is already present and is transferred to the insurer by a contract.
No new risk is created by the transaction.
The second difference between insurance and gambling is that gambling is
socially unproductive, because the winners gain comes at the expense of the loser .In
contract; insurance is always socially productive, because neither the insurer nor the
insured is placed in a position where the gain of the winner comes at the expense of the
loser. The insurer and the insured have a common interest in the prevention of a loss.
Both parties win if the loss does occur .Moreover, consistent gambling transaction
generally never restore the losers to their former financial position .
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2.Insurance and hedging compared
The concept of hedging is to transferring the risk to the speculator through
purchase of future contracts .An insurance contract, however, is not the same thing as
hedging .Although both technique are similar in that risk is transferred by a contract, andno new risk is created, there are some important difference between them. First, an
insurance transaction involves the transfer of insurable risks, because the requirement of
an insurable risk generally can be met .However, hedging is a technique for handling
risks that are typically uninsurable ,such as protection against a decline in the price
agriculture products and raw materials.
A second difference between insurance and hedging is that insurance and hedging is that
insurance can reduce the objective risk of an insurer by application of the law of large
numbers. As the number of exposure units increases, the insurers prediction of future
losses improves, because the relative variation of actual loss from expected loss will
decline .thus, many insurance transactions reduce objective risk. In contract, hedging
typically involves only risk transfer , not risk reduction .The risk of adverse price
fluctuation is transferred because of superior knowledge of market conditions .The risk is
transferred, not reduced, and prediction of loss generally is not based on the law of large
numbers.
TYPES OF LIFE INSURANCE POLICY
Endowment policies: This type of policy covers risk for a specifiedperiod, and at the end of the maturity sum assured is paid back to
policyholder with the bonuses during the term of the policy.
Money back policies: This type of policy is for periodic payments of partialsurvival benefits during the term of the policy as long as the policy holder is alive.
Group insurance: This type of insurance offers life insurance protection under group policies to various groups such as employers-employees, professionals, co-
operatives etc it also provides insurance coverage for people in certain approved
occupations at the lowest possible premium cost.
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Term life insurance policies: This type of insurance covers risk only during theselected term period. If the policy holder survives the term, risk cover comes to an
end. These types of policies are for those people who are unable to pay larger
premium required for endowment and whole life policies. No surrender, loan or paid
up values are in such policies.
.Whole life insurance policies: This type of policy runs as long as the policyholder is alive and is covered for the entire life of the policyholder. In this
policy the insured amount and the bonus is payable only to nominee on the death of
policy holder.
Pension plan: A pension plan or annuity is an investment over a certain number of
years but does not provide any life insurance cover. It offers a guaranteed income
either for a life or certain period.
Unit linked insurance plan: ULIP is a kind of insurance plan which provides lifecover as well as return on premium paid over a certain period of
INSURANCE AND ECONOMY Indian economy is growing in reference to global market. Business of insurance
with its unique features has a special place in Indian economy.
It is a highly specialized technical business and customer is the most concern people in this business, therefore this business is able to spur the growth of
infrastructure and act as a catalyst in the overall development of Indian economy.
The high volumes in the insurance business help spread risk wider, allowing a
lowering of the rates of the premium to be charged and in turn, raising profits.
When there is a bigger base, the probabilities become more predictable, and with
system wide risks balanced out, profits improve. This explains the current
scenario of mergers, acquisitions, and globalization of insurance.
Insurance is a type of savings. Insurance is not only important for tax benefits, but
also for savings and for providing security. It can be serving as an essential
service which a welfare state must make available to its people.
Insurance play a crucial role in the commercial lives of nations and act as the
lubricants of economic activities. Insurance firms help to spread the potentially
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financial consequences of risk among the large number of entities, to mobilize
and distribute savings for productive use, facilitate investment, support and
encourage external trade, and protect economic entities against external risk.
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COMPANY PROFILE
SBI Life insurance is a joint venture between the State Bank of India and Cardiff SA of
France. SBI Life insurance is registered with an authorized capital of Rs 500 crore and a
paid up capital of Rs 350 crores. SBI owns 74% of the total capital and Cardiff the
remaining 26%. State Bank of India enjoys the largest banking franchise in India. Along
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with its 7 Associate Banks, SBI Group has the unrivalled strength of over 14,000
branches across the country, the largest in the world.
Cardiff is a wholly owned subsidiary of BNP Paribas, which is The Euro Zones leading
Bank. BNP is one of the oldest foreign banks with a presence in India dating back to
1860. It has 9 branches in the metros and other major towns in the country. Cardiff is a
vibrant insurance company specializing in personal lines such as long-term savings,
protection products and creditor insurance. Cardiff has also been a pioneer in the art of
selling insurance products through commercial banks in France and 29 more countries .In
2004, SBI Life insurance became the first company amongst private insurance players to
cover 30 lakh lives.
The company expects to carve a niche in the Indian insurance market through extensive
product innovation and aims to provide the highest standards of customer service through
a technological interface. To facilitate this, call centres have been already installed and
help lines will be installed and customers will have access to their accounts through the
Internet or through SBI branches. SBI Life insurance is uniquely placed as a pioneer to
usher banc assurance into India. The company hopes to extensively utilize the SBI Group
as a platform for cross-selling insurance products along with its numerous banking
product packages such as housing loans, personal loans and credit cards. SBIs access toover 100 million accounts provides a vibrant base to build insurance selling across every
region and economic strata in the country.
Under section 88 of insurance act 1961 an individual is entitled to a rebate of 20 per cent
on the annual premium payable on his/her life and life of his/her children or adult
children. The rebate is deductible from tax payable by the individual or a Hindu
Undivided Family. This rebate is can be availed up to a maximum of Rs 12,000 on
payment of yearly premium of Rs 60,000. By paying Rs 60,000 a year, you can buy
anything upwards of Rs 10 lakh in sum assured. (Depending upon the age of the insured
and term of the policy) This means that you get an Rs 12,000 tax benefit. The rebate is
deductible from the tax payable by an individual or a Hindu Undivided Family.
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SBI Life Insurance is currently growing at an impressive rate of 200%. As per the latest
IrDA report SBI Life ranks No. 3 amongst the private insurers. The company's market
share has increased to 10% amongst the private players and is 2.25% in the total industry.
This year, the company is aiming at a growth of 150%. The new business premium of the
company from beginning of the year to September 2006 is Rs 660 crores. The total
business premium of the company from the beginning of the year till September 2006 is
Rs 765 crores. The company aims to collect first year premium of over Rs 2,000 crores.
SBI Life follow a multi distribution channel approach and expect all channels to
contribute to the overall growth. Today, the agency channel contributes over 50% and
banc assurance channel contributes to 40% of the business. Other channels like Credit
Life and Group Corporate are also performing very well.
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DISTRIBUTION OF INSURANCE PRODUCT
Insurance has to be sold the world over. The Touch point with the ultimate customer is
the distributor or the producer and the role played by them in insurance markets is
critical. It is the distributor who makes the difference in terms of the quality of advice for
choice of product, servicing of policy post sale and settlement of claims. In the Indian
market, with their distinct cultural and social ethics, these conditions will play a major
role in shaping the distribution channels and their effectiveness. In today's scenario,
insurance companies must move from selling insurance to marketing an essential
financial product. The distributors have to become trusted financial advisors for the
clients and trusted business associates for the insurance Companies.
Challenges for insurance companies and intermediaries in India-
Building faith about company in the mind of clients.
Building personal credibility with the clients.
Different distribution channels in India:-
A multi-channel strategy is better suited for the Indian market. Indian insurance
market is a combination of multiple markets. Each of the markets requires a different
approach. Apart from geographical spread the socio-cultural and economic
segmentation of the market is very wide, exhibiting different traits and needs.
Different multi-distribution channels in India are as follows
Agents : Agents are the primary channel for distribution of insurance. The public
and private sector insurance companies have their branches in almost all parts of
the country and have attracted local people to become their agents. Today'sinsurance agent has to know which product will appeal to the customer, and also
know his competitor's products to be an effective salesman who can sell his
company, the product, and himself to the customer. To the average customer,
every new company is the same. Perceptions about the public sector companies
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are also cemented in his mind. So an insurance agent can play an important role to
create a good image of company.
Banks: Banks in India are all pervasive, especially the public sector banks.Many insurance companies are selling their products through banks. Companies
which are bank owned, they are selling their products through their parent bank.
The public sector banks, with their vast branch networks, are helpful to insurance
companies. This channel of selling insurance is known as Banc assurance.
Source: - Hindu Business Line, January 08, 2007
Brokers: Now a days different financial institution are selling insurance. These
financial institutions are known as brokers. They are taking some underwriting
charges from the insurance companies to sell their insurance products.
Corporate agents: Corporate agency is a cross selling type of channel.Insurance companies tie-up with business houses in other industries to sell
insurance either to their employees or their customers. Insurance industry, during
the past 2 years has witnessed a number of such strategic tie-ups and alliances.
Corporate agents have become a major force to reckon with in distributing
INSURANCE COMPANY ASSOCIATE BANKSICICI prudential ICICI bank, bank of India, Citibank,
Allahabad bank, Federal bank, south Indian
bank, Punjab and Maharashtra cooperative
bank SBI life State bank of
India,SBBJ,SBP,SBI,SBS,SBT etc.Birla sun life Deutsche bank, Citibank, bank of
Rajasthan, Andhra bank ING Vysya bank Vysya bank
Aviva life insurance ABN amro bank, canara bank HDFC standard life Union bank, Indian bank Met life Karnataka bank, j&k bank
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insurance products. Such as- Bajaj Allianz tied up with Maruti Udyog and Ford
for auto insurance and Tata AIG life has tied up with Tata tea, khaitans
Williamson major and bridge foundation for selling rural policies.
Internet: In this technological world internet is also a channel of sellinginsurance. This can be as direct marketing.
COMPETITORS OF SBI LIFE INSURANCE
ICICI prudential: ICICI prudential insurance is a joint venture of ICICI bank and prudential plc a leading financial service group in the UK. Total capital stands for
Rs. 37.72 billion, with ICICI Bank holding a stake of 74% and Prudential plc holding
26%. ICICI begin their operations in December 2000 after receiving approval from
IRDA. Now ICICI prudential is having over 1000 offices, over 270000 advisors and
21bancassurance partners. ICICI Prudential was the first life insurer in India to receive a
National Insurer Financial Strength rating of AAA from Fitch ratings. ICICI prudential is
working on the base of five core values-
Integrity
Customer first Boundary less
Ownership
Key features:
Understanding the needs of customers and offering them superior products
and service.
Leveraging technology to service customers quickly, efficiently and
conveniently.
Developing and implementing superior risk management and investment
strategies to offer sustainable and stable returns to policyholders.
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Providing an enabling environment to foster growth and learning for
employees.
HDFC standard life insurance : HDFC Standard Life Insurance Company Ltd. is one
of India's leading private insurance companies. It is a joint venture of Housing
Development Finance Corporation Limited, India's leading housing finance institution
and a Group Company of the Standard Life in UK. HDFC as on March 31, 2007 holds
81.9 per cent of equity venture. Gross premium income of the HDFC for the year ending
March 31, 2007 was Rs. 2, 856 crores and new business premium income was Rs. 1,624
crores. The company has covered over 8, 77,000 lives year ending March 31, 2007.
HDFC standard is having 1000 advisors in 11 towns.
Key features:
Creating corporate agents through HDFC bank in India.
Creating agents to provide total financial consultancy.
Introducing low cost group schemes for companies and NGOs.
Reliance life insurance: Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd. of the Reliance - Anil Dhirubhai Ambani Group. Reliance Capital
is one of Indias leading private sector financial services companies, and ranks among the
top 3 private sector financial services and banking companies, in terms of net worth.
Reliance Capital has interests in asset management and mutual funds, stock broking, life
and general insurance, proprietary investments, private equity and other activities in
financial services. Reliance Capital Limited (RCL) is a Non-Banking Financial Company
(NBFC) registered with the Reserve Bank of India under section 45-IA of the Reserve
Bank of India Act, 1934.
Aviva life insurance: Aviva is UKs largest and the worlds fifth largest insuranceGroup. It is one of the leading providers of life and pensions products to Europe and has
substantial businesses elsewhere around the world. Aviva has a joint venture of Dabur,
one of India's oldest, and largest Group of companies. And country's leading producer of
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traditional healthcare products. In accordance with the government regulations Aviva
holds a 26 per cent stake in the joint venture and the Dabur group holds the balance 74
per cent share. Aviva has 193 Branches in India (including rural branches) supporting its
distribution network. Through its Banc assurance partner locations, Aviva products are
available in more than 2,795 locations across India. Aviva has a sales force of over 30000
financial planning advisors.
Key features: Through the Financial Health Check (FHC) Avivas sales force has been able to
establish its credibility in the market. The FHC is a free service administered by the
FPAs for a need-based analysis of the customers long-term savings and insurance
needs. Depending on the life stage and earnings of the customer, the FHC assesses
and recommends the right insurance product for them.
Introduced the concept of Banc assurance in India.
Products to provide customers flexibility, transparency and value for money.
Differentiation in fund management operations.
MetLife insurance: MetLife India Insurance Company Limited is an affiliate of
MetLife, Inc. and was incorporated as a joint venture between MetLife International
Holdings, Inc.and The Jammu and Kashmir Bank, M. Pallonji and Co. Private Limited
and other private investors. MetLife is one of the fastest growing life insurance
companies in the country. It offers a range of innovative products to individuals and
group customers at more than 600 locations through its bank partners and company-
owned offices. MetLife has more than 32,000 Financial Advisors. It has approximately
70 million customers all over world. MetLife is working on the base of six core values-
Innovation
Long term relationship
Customer centered and result focused vision
Creating high performance organization
Working with integrity, fairness and financial prudence
Partnering with internal and external customers
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Max New York life insurance: Max New York Life Insurance Company Ltd. is a
joint venture between New York Life, a Fortune 100 company and Max India Limited,
one of India's leading multi-business corporations The Company's paid up capital is Rs.
907.4 crore. Max New York life is working on the base of six core values-
Excellence,
Honesty,
Knowledge,
Caring,
Integrity
The Company practices a lot of importance on its selection process of insurance advisors
which comprises four stages - screening, psychometric test, career seminar and finalinterview. 337 agent advisors have qualified for the Million Dollar Round Table (MDRT)
membership in 2007 and Max New York Life has moved up to 21st rank in MDRT
global list.
Key features: Max New York Life has adopted prudent financial practices to ensure safety of
policyholder's funds.
Investing significantly in its training programme and each agent is trained for 152hours as opposed to the mandatory 100 hours stipulated by the IRDA before
beginning to sell in the marketplace.
Using a five-pronged strategy to pursue alternative channels of distribution which
include the franchisee model, rural business, direct sales force involving group
insurance and telemarketing opportunities, banc assurance and corporate
alliances.
Bharti Axa life insurance: Bharti Axa life insurance is a joint venture between
Bharti, one of Indias leading business groups with interests in telecom, agri business and
retail, and Axa world leader in financial protection and wealth management. The joint
venture company has a 74% stake from Bharti and 26% stake of Axa. The company
started its operations in December 2006. Now company is having over 5200 employees
across over 12 states in the country. Company is working on the base of five core values-
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Professionalism
Innovation
Team Spirit
Pragmatism Integrity
Key features: Using multi-distribution, multi product platform techniques.
Adapting AXA's best practices as a sound platform for profitable growth.
Leveraging Bharti's local knowledge, infrastructure and customer base.
Delivering high levels of shareholder return.
Building long term value with business partners by enhancing the proposition
to their customers.
Retaining the best talent in India.
Tata AIG life insurance: Tata AIG Life Insurance Company Limited (Tata AIG
Life) is a joint venture company of the Tata Group and American International Group,
Inc. (AIG). The Tata Group holds 74 per cent stake in the insurance venture with AIG
holding the balance 26 percent. Tata AIG Life provides insurance solutions to individualsand corporate. Tata AIG Life Insurance Company started to operate its business in India
on April 1, 2001. Tata AIG is having 3000 advisors all over India.
Key features: Establishing direct mailers; call-centers in 60 centers.
Creating awareness workshops in housing societies.
15-day trial period with refund, premium payment through credit card.
Bajaj Allianz life insurance: Bajaj Allianz life insurance company ltd. Is a joint
venture of Allianz AG, one of the worlds largest insurance companies and Bajaj auto,
one of the biggest two and three wheeler manufacturing companies in the world.
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Company is having over 440000 satisfied customers in India. Company is having 550
branches across the country and over 60000 advisors.
Key features: Tying up with seven regional rural banks sponsored by Syndicate Bank to tap the
rural market.
Introducing micro-insurance products and coming out with a new capital
guarantee product.
Expanding its agency force from 1.60 lakh to 2 lakh and the branch network will
also be increased from 900 to 1400.
ING Vysya life insurance: ING Vysya Life Insurance Company Limited a part of
the ING group the worlds largest financial services provider entered in the private life
insurance industry in India in September 2001.ING Vysya Life is currently present in 246
cities and has a network of over 300 branches, staffed by 7,000 employees and over
51,000 advisors, serving over 5.5 lakh customers. ING Vysya Life has a diversified
distribution channels,. While Tied Agency remains the strongest channel, the Alternate
Channels business within ING Vysya Life is one of the fastest growing distribution
channels. ING Vysya Life has strengthened its position as the unparallel leader in the life
insurance industry in cooperative banks tie ups. The company currently has tie ups with
130 cooperative banks across the country. The Alternate Channels division has Banc
assurance, ING Vysya Bank, Corporate Agents and SMINCE. ING Vysya is working on
the base of five core values-
Professionalism
Entrepreneurial
Trustworthy
Approachable
Caring
Birla sun life insurance: Birla Sun Life Insurance Company Limited (BSLI) is a joint
venture between the Aditya Birla Group and the Sun Life Financial Services of Canada.
It started operations in March 2001 after receiving its registration license from IRDA in
January 2001. Company is having more than 45 branches across India.
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Key features: Focus on unit linked insurance products supported with protection products to
maintain leadership in product innovation.
Use of multi distribution channels- Direct Sales Force, Alternate Channels andoffering convenient channels of purchase to customers.
Web-enabled IT systems for superior customer services and issuing policies on
the internet.
High degree of transparency in all business practices and procedures.
Working on operational Business Continuity Plan.
Market share of different insurance companies:
ICICI Prudential 9.1%HDFC Standard 2.4%SBI Life 3.0%Bajaj Allianz 4.2%Aviva life insurance 1.3%MetLife insurance 0.6%Reliance life insurance 1.1%Birla sun life insurance 1.0%Max new York life insurance 2.3%Bharti AXA life insurance 0.1%Tata AIG 1.6%ING Vysya 0.7%Kotak Mahindra 0.9%
Source: - www.irdaindia.org
Growth in premiums of different insurance companies:-
Companies Premium up to
oct 08(Rs.mill.)
Premium up to
oct 07(Rs.mill.)
Growth %
ICICI Prudential 431831.8 20808.5 53HDFC Standard 410675.7 6595.7 61.9SBI Life 714717.4 8142.4 80.8Bajaj Allianz 126498.1 15208.2 74.2Aviva life insurance 4586.8 3464.2 32.4
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minimum premium- 20,000 rs.
min/max age at entry - 30 days to 60 years.
sum assured- face amount + policy fund.
fund management charges- 1% for all the fund options.fixed monthly expenses- 22 rs.+ annual charges as applicable.
partial withdrawals- 2 free partial withdrawals in a year.
charges on top ups- 2%.
switching charges- 2 free switches in a year, and 100 rs. Per switching.
HDFC Standard Life Insurance
fund options- growth fund, balanced fund, defensive fund, secure fund, liquid fund.
allocation to equities- 100% in growth fund, 30-60% in balanced fund, 15-30% in
defensive fund, 0% in secure and liquid fund.
minimum premium - 10,000.
min/max age at entry- 18- 65 years.
sum assured- annual premium*term/2, to 40 times the regular premium amount.
fund management charges- .80%.fixed monthly expenses- 20 rs.
partial withdrawals allowed- above 6 partial withdrawals 250 rs. per withdrawal.
charges on top ups- 2.5% for initial 2 years, after 1%.
switching charges- 24 free switching and then 100 rs. per switching.
SBI Life Insurance
fund options- equity fund, bond fund, growth fund, balanced fund.
allocation to equities - upto 100% in equity fund, upto 20% in bond fund, 40 - 100% ingrowth fund, 40 60% in balanced fund.
minimum premium- 24,000.
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min/max age at entry- 7 65 years.
sum assured- 5 50 times the regular premium amount.
fund management charges- 1.5% for equity fund, 1.35% for growth fund, 1.25% for
balanced fund, 1% for bond fund.fixed monthly expenses - 60 rs.
partial withdrawals allowed- above 4 partial withdrawals 100 rs. per withdrawals.
charges on top ups- 1%.
switching charges- above 4 switching 100 rs. per switching.
Max New York Life Insurance
fund options- growth fund, balanced fund, conservative fund, secure fund.
allocation to equities- 20 70% in growth fund, 10 40% in balanced fund, 0 15%in conservative fund, 0% in secure fund.
minimum premium- 15,000.
min/max age at entry- 12 60 years.
sum assured- minimum sum assured 100,000 rs.
fund management charges- .90% - 1.25% of net assets in the fund.
fixed monthly expenses- 50 rs.charges on top ups - nil.
switching charges- above 2 switching per year 500 rs. Per switching.
Reliance Life Insurance
fund options- equity fund, growth fund, balanced fund, capital secure fund.
allocation to equities- upto 100% in equity fund, upto 40% in growth fund, upto 20%in balanced fund, 0% in capital secure fund.
minimum premium- 10,000.
min/max age at entry - 30 days to 65 years.
sum assured- for age of 12 years 5 times, above 12 years 5 times to unlimited.
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fund management charges- 1.75% in equity and growth fund, 1.5% in capital securefund.fixed monthly expenses- 40 rs.
partial withdrawals allowed- rs. 100 for every withdrawal.
charges on top ups- 2%.switching charges- above 1 switching 100 rs. Per switching.
Insurer Market
view
Product
focus
Distribution
strategy
Others
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ICICI
Prudential
Market growth
at 60%CAGR
in medium
term, target to
maintain share
at 30% in
private
segment.
Pension and
healthy products
likely to grow
given aging
population and
increasing life
expectancy.
Product
awareness is
slightly behind
LIC despite a
significant timedisadvantage;
health could
comprise 3 5%
of product mix in
5 years.
Significantly
diversified with
40% from non
agency force,
expanding
reach to non
metro areas.
Significant
capital
requirement for
maintain share
in a high
growth market,
both partners
willing to
contribute,
HDFC
Standard life
insurance
Expect high
double digit
market growth
Focus on regular
premium
products and
Prefer own
offices versus
franchisees,
Breakeven not
necessarily in
next 18
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PROJECT OVERVIEW
INTRODUCTION
Meaning of Working Capital
current assets less current liabilities, properly called net working capital . Working capital
is a measure of a company's liquidity. Sources of working capital are (1) net income, (2)
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increase in noncurrent liabilities, (3) increase in stockholders' equity, and (4) decrease in
noncurrent assets .
Definition of working capital
The net working capital of a business is its current assets less its current liabilities
Current Assets include:
- Stocks of raw materials
- Work-in-progress
- Finished goods
- Trade debtors
- Prepayments
- Cash balances
Current Liabilities include:
- Trade creditors
- Accruals
- Taxation payable- Dividends payable
- Short term loans
Every business needs adequate liquid resources in order to maintain day-to-day cash
flow. It needs enough cash to pay wages and salaries as they fall due and to pay creditors
if it is to keep its workforce and ensure its supplies.
Maintaining adequate working capital is not just important in the short-term. Sufficient
liquidity must be maintained in order to ensure the survival of the business in the long-
term as well.
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Even a profitable business may fail if it does not have adequate cash flow to meet its
liabilities as they fall due. Therefore, when businesses make investment decisions they
must not only consider the financial outlay involved with acquiring the new machine or
the new building, etc, but must also take account of the additional current assets that are
usually involved with any expansion of activity.
Increased production tends to engender a need to hold additional stocks of raw materials
and work in progress. Increased sales usually means that the level of debtors will
increase. A general increase in the firms scale of operations tends to imply a need for
greater levels of cash.
Decisions relating to working capital and short term financing are referred to as working
capital management . These involve managing the relationship between a firm's short-
term assets and its short-term liabilities . The goal of Working capital management is to
ensure that the firm is able to continue its operations and that it has sufficient cash flow to
satisfy both maturing short-term debt and upcoming operational expenses.ing capital
management
CONCEPTS OF WORKING CAPITAL
There are two concepts of working capital:-
Gross Working Capital: It represents the total current assets and is also referred to ascirculating capital because current capital as current assets, are circulating in nature.
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Net Working Capital: It is a measure of liquidity and it can be defined in two ways.
The most usually implied definition of net working capital is that it represents the
difference between current assets and current liabilities. Some people also define it as
excess of current assets over the current liabilities.
It is that portion of the firms current assets, which is financed by long-term funds.
Net working capital as a measure of liquidity is generally not very useful to compare the
performance of different units due to difference in scales of operation, efficiency, and
creditability in the market etc., between the different firms. However it is a very useful
measure for internal control purposes. It can also be used to compare the liquidity
position of the same unit over a period of time. This will help in maintaining the
acceptable level of net working capital.
Implementing an effective working capital management system is an excellent way for
many companies to improve their earnings. The two main aspects of working capital
management are ratio analysis and management of individual components of working
capital. A few key performance ratios of a working capital management system are the
working capital ratio, inventory turnover and the collection ratio. Ratio analysis will lead
management to identify areas of focus such as inventory management, cash management,
accounts receivable and payable management.
CONCEPT OF CAPITAL OF SBI LIFE
Capital and Liabilities: Mar '07 Mar '08 Mar '09 Mar '10 Mar '11
Total Share Capital 526.30 526.30 526.30 631.47 634.88Equity Share Capital 526.30 526.30 526.30 631.47 634.88Share Application Money 0.00 0.00 0.00 0.00 0.00Preference Share Capital 0.00 0.00 0.00 0.00 0.00Reserves 23,545.84 27,117.79 30,772.26 48,401.19 57,312.82
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Revaluation Reserves 0.00 0.00 0.00 0.00 0.00Net Worth 24,072.14 27,644.09 31,298.56 49,032.66 57,947.70Deposits 367,047.53 380,046.06 435,521.09 537,403.94 742,073.13Borrowings 19,184.31 30,641.24 39,703.34 51,727.41 53,713.68Total Debt 386,231.84 410,687.30 475,224.43 589,131.35 795,786.81
Other Liabilities & Provisions 49,578.89 55,538.17 60,042.26 83,362.30 110,697.57Total Liabilities 459,882.87 493,869.56 566,565.25 721,526.31 964,432.08
Mar '07 Mar '08 Mar '09 Mar '10 Mar '11 Assets 12 mths 12 mths 12 mths 12 mths 12 mths
Cash & Balances with RBI 16,810.33 21,652.70 29,076.43 51,534.62 55,546.17CallBalance with Banks, Money 22,511.77 22,907.30 22,892.27 15,931.72 48,857.63
Advances 202,374.45 261,641.53 337,336.49 416,768.20 542,503.20Investments 197,097.91 162,534.24 149,148.88 189,501.27 275,953.96Gross Block 6,691.09 7,424.84 8,061.92 8,988.35 10,403.06
Accumulated Depreciation 4,114.67 4,751.73 5,385.01 5,849.13 6,828.65Net Block 2,576.42 2,673.11 2,676.91 3,139.22 3,574.41Capital Work In Progress 121.27 79.82 141.95 234.26 263.44Other Assets 18,390.71 22,380.84 25,292.31 44,417.03 37,733.27Total Assets 459,882.86 493,869.54 566,565.24 721,526.32 964,432.08Contingent Liabilities 131,325.40 191,819.34 259,536.57 736,087.59 614,603.47
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Bills for collection 44,794.10 57,618.44 70,418.15 93,652.89 152,964.06Book Value (Rs) 457.39 525.25 594.69 776.48 912.73
TYPES OF WORKING CAPITAL
A. Permanent Working Capital
B. Temporary Working Capital
Permanent Working Capital:
The operating cycle is a continuous feature in almost all the going concerns and
therefore creates the need for working capital and their efficient management. However
the magnitude of working capital required will not be constant, but will fluctuate. At any
time, there is always a minimum level of current assets which is constantly and
continuously required by a business unit to carry on its operations. This minimum amount
of current assets, which is required on a continuous and uninterrupted basis is after
referred to as fixed or permanent working capital. This type of working capital should befinanced (along with other fixed assets) out of long term funds of the unit. However in
practice, a portion of these requirements also is met through short term borrowings from
banks and suppliers credit.
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For eg., In a manufacturing unit, basic raw materials required for production has to be
available at all times and this has to be financed without any disturbance.
Temporary Working Capital
Any amount over and above the permanent level of working capital is variable,
temporary or fluctuating working capital. This type of working capital is generally
financed from short term sources of finance such as bank credit because this amount is
not permanently required and is usually paid back during off season or after the
contingency. As the name implies, the level of fluctuating working capital keeps on
fluctuating depending on the needs of the unit unlike the permanent working capital
which remains constant over a period of time.
COMPETITORS
CompetitionLast Price Market Cap.
(Rs. cr.)Net InterestIncome
Net Profit Total Assets
SBIL 2,199.00 139,610.16 63,788.43 9,121.24 964,432.08ICICI PRU 847.00 26,706.12 19,326.16 3,090.88 246,918.62BAJAJ ALLIANZ LIFE 408.00 21,427.15 16,347.36 3,007.35 225,501.75BIRLA SUN LIFE 510.00 18,577.59 15,091.58 2,227.20 227,406.73TATA AIG 269.75 13,625.56 11,889.38 1,726.55 160,975.51ING VAISYA 330.50 13,550.50 17,119.06 2,072.42 219,645.80BHARTI HEXA 117.65 8,527.26 11,631.62 858.53 172,402.33
AVIVA LIFE INS. 162.45 6,981.61 6,830.33 1,245.32 84,121.74IOB 115.20 6,276.10 9,641.40 1,325.79 121,073.40Oriental Bank 249.00 6,238.44 8,856.47 905.42 112,582.58
DETERMINANTS OF WORKING CAPITAL
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Working capital management is an indispensable functional area of management.
However the total working capital requirements of the firm are influenced by the large
number of factors. It may however be added that these factors affect differently to the
different units and these keep varying from time to time. In general, the determinants of
working capital which are common to all organizations can be summarized as under:
a. Nature and Size of Business
b. Production Cycle
c. Business Cycle
d. Production Policy
e. Credit Policy
f. Growth & Expansion
g. Proper availability of raw materials
h. Profit level
i. Inflation
j. Operating Efficiency
7. SOURCES OF WORKING CAPITAL
The working capital necessary and what constitutes working capital have been analyzed
in depth. Now we look out what are the ways we can generate working capital.
a. Trade Credits
b. Bank Credit
c. Current provisions and non-bank short term borrowings: and
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d. Long term sources ie., equity share capital, preference share capital and
other long term borrowings.
Short term source of funds are generally available at comparatively lower costs but
theoretically these funds can be called back any moment and therefore it is more
appropriate to meet at least two thirds of the permanent working capital requirements
from the long term
sources. The advantages of long term sources is, it reduces risk as there is no need to
repay the loans at frequent intervals and funds can be employed gainfully and it increases
liquidity.
INTRODUCTION TO WORKING CAPITAL MANAGEMENT
The perfect world does not requires or concentrates about current assets or current
liabilities because there would not be uncertainty, no transaction costs, information
search costs, scheduling costs or production and technology constraints. The unit cost of
production would not vary with the quantity produced. Capital, Labour and products
markets shall be perfectly competitive and would reflect all available information. Thus
in such an environment, there would be no advantage for investing in short term assets.
Whereas, the world in which we live is not perfect.
It is characterized by considerable amount of uncertainty regarding the demand, market
price, quality and availability of own products and those of suppliers. There are
transaction costs for purchasing or selling goods or securities. Information is costly to
obtain and is not equally distributed. There are spreads between the borrowing and
lending rates for investments and financing of equal risk. Similarly each organization is
faced with its own limits on the production capacity and technology it can employ. There
are fixed as well as variable costs associated with producing goods. In other words, the
markets in which real firms operate are not perfectly competitive.
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These real world facts introduce problems and require the necessity of working capital.
The most important areas in the day to day management of the firm, is the management
of working capital. Working capital management is the functional area of finance that
covers all the current accounts of the firm. It is concerned with management of the level
of individual current assets as well as the management of total working capital. Working
capital management involves the relationship between a firm's short-term assets and its
short-term liabilities.
The goal of working capital management is to ensure that a firm is able to continue its
operations and that it has sufficient ability to satisfy both maturing short-term debt and
upcoming operational expenses. The management of working capital involves managing
inventories, accounts receivable and payable, and cash.
For example, an organization may be faced with an uncertainty regarding availability of
sufficient quantity of crucial inputs in future at reasonable price. This may necessitate the
holding of inventory ie., current assets. Similarly an organization may be faced with an
uncertainty regarding the level of its future cash inflows and insufficient amount of cash
may incur substantial costs. This may necessitate the holding of a reserve of short term
marketable securities, again a short term capital asset. The unpredictable and uncertain
global market plays a vital role in working capital. Though the globalization of economyand free trading of products envisages the continuous availability of products but how
much its cost effective and quality based varies concern to concerns.
Working capital refers to the funds invested in current assets, ie., investment in stocks,
sundry debtors, cash and other current assets. Current assets are essential to use fixed
assets profitably. The term current assets refers to those assets which in the ordinary
course of business can be converted into cash within one year without undergoing
diminish in value and without disrupting the operations of the firm. The current assets are
cash, marketable securities, accounts receivable and inventory. Current liabilities are
those which are to be paid within a year out of the current assets or earnings of the
concern. The current liabilities are accounts payable, bills payable, bank overdraft and
outstanding expenses.
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The financial manager plays a vital role in management of working capital. The financial
management of any business organization involves the three following vital functions:
1. Management of Long Term Assets
2. Management of Long Term Capital
3. Management of Short Term Assets and Liabilities
In most of the organizations the first & second one which refers to Capital Budgeting and
Capital Structure respectively will be maintained and cope up with organization growth.
The third one which refers to Working Capital Management requires more skills for
sustaining and steady growth rate for any organization.
The working capital management includes decisions
i. How much stock/inventory to be hold
ii. How much cash/bank balance should be maintained
iii. How much the firm should provide credit to its customers
iv. How much the firm should enjoy credit from its suppliers
v. What should be the composition of current assets
vi. What should be the composition of current liabilities
For eg., a machine cannot be used without raw material. The investment on the purchase
of raw material is identified as working capital. It is obvious that a certain amount of
funds is always tied up in a raw material inventories, work in progress, finished goods,
consumable stores, sundry debtors and day to day cash requirements. However the
businessman also enjoys credit facilities from his suppliers who may supply raw material
on credit. Similarly, a businessman may not pay immediately for various expenses. For
instance, the labourers are pain only periodically. Therefore, a certain amount of funds is
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automatically available to finance the current assets requirements. However, the
requirements for current assets are usually greater than the amount of funds payable
through current liabilities. The satisfactory level of working capital is the main object of
working capital management. Any organization which fails to maintain satisfactory level
of working capital may be forced to bankruptcy. The current assets should always be
large enough to cover its current liabilities in order to ensure a reasonable margin of
safety. Thus the interaction between current assets and current liabilities is the main aim
of working capital management.
The basic objective of financial management is to maximize shareholders wealth. This
objective can be achieved when the company earns sufficient profits. The amount of
profits largely depends on the magnitude of sales. But, sales do not convert into cashinstantly. There is time lag between the sale of goods and the receipt of cash. Working
capital is required to purchase the materials, pay wages and other expenses in order to
sustain sales activity the time lag. The time gap between the sale of goods and realization
of cash is called operating cycle. What operating cycle stands for?
a. Conversion of cash into raw materials
b. Conversion of raw materials to finished goods
c. Conversion of finished goods into receivables
Conversion of receivables into cash
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Working Capital Management
A managerial accounting strategy focusing on
maintaining efficient levels of both components of working capital,
current assets and current liabilities, in respect to each other.
Working capital management ensures a company has sufficient
cash flow in order to meet its short-term debt obligations and
operating expenses.
Implementing an effective working capital management system is
an excellent way for many companies to improve their earnings.
The two main aspects of working capital management are ratio
analysis and management of individual components of working
capital.
A few key performance ratios of a working capital management
system are the working capital ratio, inventory turnover and the
collection ratio. Ratio analysis will lead management to identify
areas of focus such as inventory management, cash
management, accounts receivable and payable management.
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Decision criteria
By definition, working capital management entails short term decisions - generally,
relating to the next one year period - which are "reversible". These decisions are therefore
not taken on the same basis as Capital Investment Decisions (NPV or related, as above)
rather they will be based on cash flows and / or profitability.
One measure of cash flow is provided by the cash conversion cycle - the net number of
days from the outlay of cash for raw material to receiving payment from the customer. As
a management tool, this metric makes explicit the inter-relatedness of decisions relating
to inventories, accounts receivable and payable, and cash. Because this number
effectively corresponds to the time that the firm's cash is tied up in operations and
unavailable for other activities, management generally aims at a low net count.
In this context, the most useful measure of profitability is Return on capital (ROC). The
result is shown as a percentage, determined by dividing relevant income for the 12
months by capital employed; Return on equity (ROE) shows this result for the firm's
shareholders. Firm value is enhanced when, and if, the return on capital, which results
from working capital management, exceeds the cost of capital , which results from capital
investment decisions as above. ROC measures are therefore useful as a management tool,
in that they link short-term policy with long-term decision making. See Economic value
added (EVA).
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Management of working capital
Guided by the above criteria, management will use a combination of policies and
techniques for the management of working capital. These policies aim at managing the
current assets (generally cash and cash equivalents , inventories and debtors ) and the
short term financing, such that cash flows and returns are acceptable.
Cash management . Identify the cash balance which allows for the business to meet day to
day expenses, but reduces cash holding costs.
Inventory management. Identify the level of inventory which allows for uninterrupted
production but reduces the investment in raw materials - and minimizes reordering costs -
and hence increases cash flow; see Supply chain management ; Just In Time (JIT);
Economic order quantity (EOQ); Economic production quantity (EPQ).
Debtors management. Identify the appropriate credit policy , i.e. credit terms which will
attract customers, such that any impact on cash flows and the cash conversion cycle will
be offset by increased revenue and hence Return on Capital (or vice versa ); see Discounts
and allowances .
Short term financing. Identify the appropriate source of financing, given the cash
conversion cycle: the inventory is ideally financed by credit granted by the supplier;
however, it may be necessary to utilize a bank loan (or overdraft), or to "convert debtors
to cash" through " factoring ".
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OBJECTIVES OF WORKING CAPITAL MANAGEMENT
The main objective is to ensure the maintenance of satisfactory leve of saworking capital
in such a way that it is neither inadequate nor excessive. It should not only be sufficient
to cover the current liabilities but ensure a reasonable margin of safety also.
1. To minimize the amount of capital employed in financing the current assets. This also
leads to an improvement in the Return of Capital Employed.
2. To manage the current assets in such a way that the marginal return on investment in
these assets is not less than the cost of capital acquired to finance them. This will ensure
the maximization of the value of the business unit.
3. To maintain the proper balance between the amount of current assets and the current
liabilities in such a way that the firm is always able to meet its financial obligations,
whenever due. This will ensure the smooth working of the unit without any production
held ups due to paucity of funds.
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DATA ANALYSIS AND INTERPRETATION
1.Do you have knowledge about insurance?
Yes
No
1. Do you have knowledge about insurance.
Yes
99%
No
1%
Yes
No
2. Do you have purchase any insurance policy.
Yes
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No
2. Do you have purchase any insurancepolicy.
Yes
22%
No
78%
Yes
No
If Yes
3. Which co.?
Company Percentage
LIC 65%
ICICI PRU 8%
BAJAJ ALLIANZ 5%
BIRLA SUN LIFE 1%
AVIVA 1%
OTHERS 20%
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3. Which co.
66%
10% 10%5% 5%
14%
0%10%20%30%40%50%60%
70%
LIC ICICI PRU BAJAJ ALLIANZ
BIRLA SUNLIFE
AVIVA OTHERS
Companies
P e r c e n
t a g e
1.Which insurance policy
General Insurance
Life Insurance
4. Which insurance policy
LifeInsurance
58%
GeneralInsurance
42%General Insurance
Life Insurance
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1.Do you know we are giving more security with high rate of returns?
Yes
No
5. Do you know we are giving moresecurity with high rate of returns?
No95%
Yes
5%Yes
No
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(6) Quarries regarding policy in your co.
Returns 12%
Claims on time 22%
Services 35%
Others 31%
14%
24%
33%29%
0%5%
10%
15%20%25%30%35%
Percentage
Returns Claims on time Services Others
Queries
5. Quarries regarding policy in your co.
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If No
1.Whats your annual earning?
Earning Percentage
Less than 1,00,000 52
1-3 lakh 22
3-5 lakh 17
More than 5 lakh 9
52
23 178
0
20
40
60
Percentage
Earning
1. Whats your annual earning?
1. Whats your annual earning?
52 23 17 8
Less 1-3 lakh 3-5 lakh More
1.How you have make secure yourself and your family?
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Property 12%
Fixed deposit 36%
Educate children 22%
Not secure 30%
2. How you have make secure yourself andyour family?
30%22%
36%
12%
0%5%
10%15%20%25%30%35%40%
Property Fixed deposit Educatechildren
Not secure
Securities
P e r c e n
t a n g e
3. Do you know we are giving more security with high rate of returns?
Yes 5 persons
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No 70 persons
3. Do you know we are giving more security withhigh rate of returns?
Yes7%
No93%
Yes
No
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4.Which facility does you like most provided by us?
Facility PercentageRate of return 46
Wavier of premium 22
Timely claim settlement 26
Easy exit 2
Others 4
3. Which facility does you like mostprovided by us?
46
2226
2 4
0
10
20
30
40
50
Rate of return Wavier of premium
Timely claimsettlement
Easy exit Others
Facilities
P e r c e n t a g e
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Insurance companies are deploying their products mostly based on
customer needs and demands. Insurance companies are not doing
enough market researches to know the potential of the market.
Most of the insurance companies are differentiating themselves from
the competitors by providing better service quality. Some companies
are differentiating themselves providing better pricing of the product.
Branch managers of most of the companies think that providing better
service quality is the best tool to compete in the market. Better service
quality may be in the form-
1. Issuing policy in time.
2. Providing claims in time.
3. Making customers aware about their status of policy.
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RECOMMENDATIONS
SBI Life should start recruiting advisors through placement agencies.
By practicing this SBI Life will get more capable advisors who can
work efficiently. Inactive advisors kind of thing would not happen.
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SBI Life should also promote the term and endowment insurance
products including ULIP products. Because these are basic insurance products. Promote products as life insurance products not an as
investment products.
Somewhat the brand name of SBI is harming the SBI Life insurance,
because most of the people are not happy with the service provide by
SBI bank, so it is necessary to change the mentality of the people that
SBI Life insurance is different from SBI bank. SBI Life should
promote their product features rather than promoting their brand
name.
To increase awareness in rural market SBI Life should do some
activities in villages and small towns. This can be done by putting
kiosk in fairs and festival melas organizing in villages.
SBI Life can sell their products through charitable institutions.
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SBI Life should sell their products through head of the villages or
through panchayat in villages. People in villages believe on the head
and panchayat so selling insurance will be easier in villages.
SBI Life can introduce some special policies for the farmers to tap the
rural market, and pricing for these kinds of products should be less so
farmers can easily afford to take policies.
As SBI Life is coming in general insurance so it can introduced
products like cattle insurance and water pump insurance. It will also
help to promote the products of SBI Life insurance.
Make aware about SBIs products by seminars conducted by
mangers and senior dignitaries to clear the myth related to it twice a
year.
Regular advertisement in media & newspaper can educate about our
product, and keep in touch with public in Jodhpur.
By communicating our competitive advantages, we can grab the
belief of public in insurance sector.
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Many clients of other policies are not satisfied by their services we
can make them agree to purchase our policies by effective sales
management.
Still market is full of opportunities; only a realistic strategy or plan
is needed to be implemented.
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QUESTIONNAIRE
1. Name ____________________________
2. Age Group (Tick appropriate One)
20-25 25-30 3 0-35 35-40 40-45
45-50 50(Above)
3. Sex
Male Female
4. Educational Qualification _____________________________
5. Do You Know About Life Insurance/General Insurance
(Y/N) If Yes
___________________________________________________
6. Do You Have any Life Insurance Policy (If Yes, Mention It)?
________________________________________________
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11.What are changes do you like to have in Life Insurance Company
and their policy, comment?
___________
_______________________________________________________
12.What is your suggestion to the Life Insurance Company and their
policy?
Address Phone No.
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APPENDIX
A.S.I : AREA SERVICE IN CHARGEA.S.M : AREA SALES MANAGER
B.S.I : BRANCH SERVICE IN CHARGE
CAC : COMMERCIAL AIR CONDITIONING
SYSTEM
C.S NET : CUSTOMER SERVICE NET
D.S.C : DIRECT SERVICE CENTRE
L.H.D : LOGISTIC HEAD OF DEPARTMENT
R.E.F : REFRIGERATOR.
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BIBLIOGRAPHY
Website
www.sbi.com
Books Philip Kotler Marketing Management.
C.R.Kothari Research Methodology.
K. Ashwathappa Human Resoures Management.
Stephen Robins Organizational Behaviour.
Hawkins Marketing Research.
Consumer Behaviour.
SBI Life Product Module.
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