A

PROJECT REPORT ON

“THE STUDY AND COMPARATIVE ANALYSIS OF PROFITABILITY

RATIOS OF TWO PRIVATE LIFE INSURANCE COMPANIES IN INDIA”
A Project Submitted to
University of Mumbai for partial Completion Of the degree ofBachelor of
Commerce (Accounting and Finance)
Under the faculty of commerce

By
MAYURESH MAHESH PATANKAR

EXAM SEAT NO: BAF5115

Under the Guidance of

PROF. NILESH E. KOLI

CHANGU KANA THAKUR ARTS, COMMERCE & SCIENCE COLLEGE,

NEW PANVEL (Autonomous)

SECTOR – 11, NEW PANVEL (W), 410206

Re-accredited with „A+‟ Grade by NAAC (3rd Cycle – CGPA 3.61)

2022-23

1
 A

PROJECT REPORT ON

“THE STUDY AND COMPARATIVE ANALYSIS OF PROFITABILITY

RATIOS OF TWO PRIVATE LIFE INSURANCE COMPANIES IN INDIA”
A Project Submitted to
University of Mumbai for partial Completion Of the degree ofBachelor of
Commerce (Accounting and Finance)

Under the faculty of commerce

By
MAYURESH MAHESH PATANKAR

EXAM SEAT NO: BAF5115

Under the Guidance of

PROF. NILESH E. KOLI

CHANGU KANA THAKUR ARTS, COMMERCE & SCIENCE COLLEGE,

NEW PANVEL (Autonomous)

SECTOR – 11, NEW PANVEL (W), 410206

Re-accredited with „A+‟ Grade by NAAC (3rd Cycle – CGPA 3.61)

2022-23

2
 CERTIFICATE

This is certify that Mr. MAYURESH MAHESH PATANKAR has worked and
duly completed his Project Work for the degree of Bachelor of commerce
(Accounting and Finance) Faculty of Commerce in the subject of Accounting and
Finance and her/his project is entitled “THE STUDY AND COMPARATIVE
ANALYSIS OF PROFITABILITY RATIOS OF TWO PRIVATE LIFE
INSURANCE COMPANIES IN INDIA” under my supervision .

I further certify that the entire work has been done by the learner under my
guidance and that no part of it has been submitted previously for any Degree or
Diploma of any University.

It is his/her own work and facts reported by her personal findings and
investigations.

Name and Signature of Guiding Teacher.

PROF. NILESH E. KOLI

Date of Submission:

External Examiner Name: -

Signature

3
 DECLARATION

I the undersigned Mr. MAYURESH MAHESH PATANKAR here by, declare that the
work embodied in this project work titled “THE STUDY AND COMPARATIVE

ANALYSIS OF PROFITABILITY RATIOS OF TWO PRIVATE LIFE INSURANCE

COMPANIES IN INDIA” from my own contribution to the research work carried out
under the guidance of PROF. NILESH E. KOLI Is a result of my own research work
andhas not been previously submitted to any other University for any other Degree or
Diploma to this or any other University. Wherever reference has been made to previous
works of others, it has been clearly indicated as such and included in the bibliography.
I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

Name and Signature of Learner,

Mr. MAYURESH MAHESH PATANKAR

Certified by,

Internal Examiner: Name: -

Signature

4
 Acknowledgment

To list who all have helped me is difficult because they are so numerous and
the depth isso enormous.

I would like to acknowledge the following as being idealistic channels and

freshdimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

chance to dothis project.

I would like thank my Principal, S. K. Patil providing the necessary facilities

requiredfor completion of this project.

I would also like to express my sincere gratitude towards my project guide PROF.
NILESH E. KOLI whose guidance and care made project successful.

I would like to thank my college library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly and indirectly
helped me in completion of the project especially my Parents and Peers who
supported me throughout my project.

5
 INDEX
Chapter Contents Page
No. No.
1 Chapter 1: Introduction
1.1 Insurance the concept 9

1.2 Features of Insurance 10

1.3 Principles of Insurance 11

1.4 Function of Insurance 12

1.5 Importance of Insurance 13

1.6 History of Insurance 14

1.7 Types of Insurance 15

1.8 Kind of Insurance Available in India 18

1.9 Insurance in India 19

1.10 Life Insurance 19

1.11 Importance of Life Insurance 20

1.12 Types of Life Insurance Policy 21

1.13 Meaning and definition of Profitability 24

1.14 Concept of Profitability 25

1.15 Types of Profitability Ratios 26

2 Chapter 2 : Research Methodology

2.1 Objective of Study 32
2.2 Hypothesis 32

2.3 Limitations of the Study 33

2.4 Significance of the Study 33

2.5 Scope of Study 33

2.6 Sample Size 34

2.7 Number of Years 34

2.8 Data Collection 34

2.9 Financial Tools 34

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3 Chapter 3: Literature Review
3.1 Introduction 36

3.2 Research of Life Insurance 36

4 Chapter 4: Profile of Study Area

4.1 HDFC Life Insurance Company 45

4.2 History of HDFC Life Insurance Company 46

4.3 Management Team of HDFC Life Insurance Company 47

4.4 SBI Life Insurance Company 48

4.5 Mission and Values 49

4.6 History of SBI Life Insurance Company 50

4.7 Management Team of SBI Life Insurance Company 51

5 Chapter 5 : Data Analysis, Interpretation & Presentation

5.1 Balance sheet of HDFC Life Insurance Company 53

5.2 Profit and Loss Account of HDFC Life Insurance Company 57

5.3 Key Financial Ratios of HDFC Life Insurance Company 60

5.4 Balance Sheet of SBI Life Insurance Company 62

5.5 Profit and Loss Account of SBI Life Insurance Company 66

5.6 Key Financial Ratios of SBI Life Insurance Company 70

6 Chapter 6 : Findings
6.1 Findings 71

7 Chapter 7 : Conclusion
7.1 Conclusion 72

8 Chapter 8 : Suggestions
8.1 Suggestions 73

Bibliography 73
8.2

7
Chapter 1: Introduction

Insurance the concept

Features of Insurance

Principles of Insurance

Function of Insurance

Importance of Insurance

History of Insurance

Types of Insurance

Kind of Insurance Available in India

Insurance in India

Life Insurance

Importance of Life Insurance

Types of Life Insurance Policy

Meaning and definition of Profitability

Concept of Profitability

Types of Profitability Ratios

8
 Chapter 1

Introduction

Insurance the Concept

Insurance is a risk management tool. When you buy insurance, you are buying protection against
unexpected financial loss. If something bad happens to you, the insurance company will pay you
or someone you choose. If you are uninsured and an accident occurs, you may be responsible for
all related costs.

The basic principle of insurance is the possibility that an entity chooses to spend small amounts
of money on a regular basis to protect against large unforeseen losses.

People buy insurance not only to protect themselves against the risk of accidents, but also to pay
for day-to-day expenses such as annual medical checkups. Additionally, insurance companies
negotiate discounts with healthcare providers and their customers pay lower rates.

In the case of damage insurance, insurance is a contract between two parties in which one party
undertakes to accept the risk of the other party in exchange for a consideration called a premium
and undertakes to pay the other party a fixed sum (death) or after the expiration of an
indeterminate event. The party bearing the risk is known as the ‘insurer’ or ‘assurer’, and the
party whose risk is covered is known as the ‘insured’ or ‘assured’.

Insurance can be defined from two perspectives:

A. Functional definition

B. Contract definition

A) Functional definition: Insurance is a cooperative mechanism by which the losses of a

particular risk are shared among certain persons who agree to insure themselves against the risk.

9
B) Contract Definition:- Insurance is defined as risk management in which a certain sum of
money is paid as a premium in exchange for insurance which assumes the risk of paying a large
sum in a given eventuality.

Characteristics of insurance

 Risk sharing: - Insurance is a tool used to share the financial losses that individuals or
their families may suffer when certain events occur. An event can be the death of a family
member in life insurance, a fire in fire insurance or other specific events in property and
casualty insurance. If these events are insured, the loss will be shared among all insureds
as a premium.

 Value at Risk: - The risk is assessed before the subscription of the insurance to receive
the share of the insured, called consideration or premium. There are several ways to assess
risk. Higher premiums may be charged if the expected loss is greater.

 Amount of benefit: - The amount of benefit is determined by the value of the loss caused
by the particular insured risk, provided that the amount is covered by the insurance.

 Premiums: - The insured undertakes to pay a single or periodic premium for the coverage
provided by the insurer and in the event of the occurrence of a specific event, he
undertakes to pay a specific benefit.

 Compensation commitments for specific risks: - The insurer undertakes to compensate

in the event of the occurrence of certain events. It is the insurance company's promise to
compensate you for a specific risk.

10
  Cooperative Mechanism:- The most important feature of any insurance scheme is the
cooperation of a large number of people who actually agree to share in the economic
loss resulting from underwriting risk.

Principles of insurance

The insurance is based on:

A) Principle of insurable interest
B) Principle of proximity
C) Principle of indemnification

1. Insured interest.
You cannot buy life insurance for someone in whose life you have no insurable
interest.

2. Doctrine of Proximity
In calculating a claim for loss, consideration must be given to the immediate cause
or causes which are both the immediate cause and the principal cause of the loss.
Although this is an important factor in all types of insurance, this principle is not
used in life insurance.

3. Principle of indemnity The principle of indemnity

States that the insurance will only compensate you for losses that have already
occurred. The main objective of this principle is to return your financial situation to
what it was before the loss.

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Functions of Insurance
A) Main function
B) Secondary function

A) Main function
The main functions of insurance include:

 Provide Protection
The main purpose of insurance is to protect you against future risks, accidents and
uncertainties. Insurance cannot prevent risks from occurring, but it can certainly prepare
for risk losses.

 Risk assessment

Insurance assesses various risk factors to determine the likely amount of risk. The basis
for determining insurance rates is also risk. By assessing the situation, an insurer can
determine the actual risk of a particular event occurring.

Providing risk coverage

 Insurance is a tool that can help you move from uncertainty to certainty. "The function of
insurance is primarily to reduce the uncertainty of events," Miller points out.

B) Secondary functions
 Loss prevention
Loss prevention leads the insurer to pay the insured less, thus encouraging more savings
on premiums. Lower premium rates encourage more business and provide better
protection for insurers.

12
 Risk Free Trade
Insurance promotes export insurance and eliminates foreign trade risk through various
policies underwritten by Marine Insurance.

 Small capital can take bigger risks

They don't have to invest separately for security, the money can be used for other
purposes. Insurance frees businessmen from investing in security by paying a small
premium for increased risk and uncertainty.

The importance of insurance

 We live in a world full of uncertainty and danger. Individuals, families, businesses,

property and assets are all exposed to different types and levels of risk.

 This includes, among other things, the risk of loss of life, health, property and property.
Although it is not always possible to avoid adverse events, the financial community
has developed products that compensate individuals and companies for these losses
with financial resources.

 Insurance is a financial product that reduces or eliminates the cost or impact of losses
due to various types of risk.

 In addition to protecting individuals and businesses against various types of potential

risks, the insurance industry also contributes significantly to the overall economic
growth of the country by stabilizing business operations and creating long-term
financial resources for industrial projects. Loss prevention leads the insurer to pay the
insured less, thus encouraging more savings on premiums. Lower premium rates
encourage more business and provide better protection for insurers.

13
 Among other things, the insurance industry promotes the virtue of personal savings and
creates employment opportunities for millions of people, especially in a country like India
where savings and employment are important.

History of Insurance

 Oriental Life Insurance Company started life insurance business in India in 1818.
(Calcutta).

 Madras Equitable started life insurance in Madras Presidency in 1829.

The Eastern Life Insurance Company went bankrupt in 1834.

 British Insurance Act 1870 enacted

 Bombay Mutual was established in 1871.

 Established at East.

 The Government of India published the statements of Indian insurance companies in

1914.

 In 1928, the Indian Insurance Companies Act, 1928 was passed to enable the government
to collect statistics on life and non-life insurance business conducted by Indian and
foreign insurance companies in the country.

 1938 consolidation of previous legislation and amendment of the Insurance Act.

 January 19, 1956 The LIC (Life Insurance Company) was created following the decree
on the nationalization of the life insurance industry.

 Indian Commercial Insurance Company Limited was founded in 1907.

 In 1957, the General Insurance Council was created.

14
  The Insurance Act was amended in 1968 to regulate investments and establish minimum
solvency margins.

 The General Insurance Business (Nationalization) Act 1972 was passed.

 General Insurance Company of India was incorporated in 1971 as a corporation.

 The insurance sector was nationalized in January 1973.

 The RN Malhotra committee was formed in 1993 to make recommendations for the
reform of the Indian insurance industry.

 The Insurance Regulation and Development Authority (IRDA) was created in 1999.

 In 2000, IRDA was created as a statutory body.

 IRDA was launched on the market in August 2000 and applications for registration are
invited.

 The subsidiary of General Insurance Company of India was reorganized into a separate
company in December 2000. GIC is reorganized into the Compagnie Nationale de
Réassurance.

 In July 2002, Parliament voted to decouple the four GIC subsidiaries.

 In India, there are currently 34 general insurance companies, including Export Credit
Guarantee Corporation (ECGC) and Agricultural Insurance Corporation of India, and 24
life insurance companies.

Types of Insurance
A) General insurance policy
 Health insurance
Health insurance is an important risk management tool because it protects against
personal expenses in the event of a medical emergency. Although you can get a
standalone health insurance policy, a family driving plan covers everyone in your
family. A general health insurance plan is an indemnity plan that pays hospital expenses
up to the policy maximum.
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  Car insurance
Car insurance protects your vehicle against incidents such as accidents, damage and
theft. There are two types of such insurance: comprehensive insurance and liability
insurance. A comprehensive auto insurance policy protects your vehicle against flood
damage in every way. Under the Motor Vehicles Act 1988 every vehicle on the road
must have liability insurance.

 Property Insurance
Property insurance protects property against perils such as fire, weather and theft, to
name a few. This insurance can be subdivided into, for example, fire insurance,
earthquake insurance and flood insurance. A good example of such a policy is the
Standard Fire & Special Perils policy from SBI General Insurance.

 Travel Insurance
If you are traveling abroad, travel insurance will protect you against lost luggage, flight
delays and trip cancellations. If you are hospitalized during your trip, your travel
insurance may cover cashless hospitalization under certain circumstances.

B) Life Insurance Policy

 Term Life Insurance

Term life insurance is the most basic type of life insurance on the market. Term
insurance is a pure protection plan that offers a wide range of coverage at low premiums.
It pays your nominee the sum insured if you die during the term of the policy. Insurance
proceeds help your family cover day-to-day expenses and pay off debts.

 Savings plans
Savings plans are designed to pay out a lump sum upon the death of the policyholder or
the lapse of the contract. Some endowment policies also pay out in the event of critical
illness. The best donation programs available in India are:

16
 Provider Name of Policy

Life Insurance Corporation of India Endowment Plus

Future Generali Future Generali Assure-With-Profit Endowment Plan

 Repayment Policies
Repayment policies are similar to savings plans in that they pay out a fixed amount at
predetermined intervals over the life of the contract. It pays savings benefits as well as
accumulated dividends when the contract matures.

 Children's Plan A
Children's Plan is a life insurance policy that helps you financially secure your children's
life goals, such as college and marriage, even in your absence. The money received at
maturity can be used to help your child meet their financial needs.

 Unit Linked Insurance Plan (ULIP)

A ULIP is an insurance contract that combines investment and insurance benefits in a
single contract. A portion of your unit-linked insurance plan payouts are invested in a
variety of equity instruments and market-linked debt securities. ULIPs give you the
flexibility to allocate premiums to various instruments based on your financial needs
and market risk tolerance.

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Types of Insurance in India

 Life insurance:
Pension insurance and reimbursement insurance are two popular life insurance products.
These products represent more than 80% of the life insurance market.

 Fire Insurance:-
Fire insurance is a type of property insurance that protects against loss and damage related
to fire. Although most policies include some form of fire protection, homeowners may be
able to purchase additional coverage if their property is destroyed or damaged by fire.

 Marine insurance: -
Marine insurance is an indemnity contract. It guarantees the insurance of the goods from
the country of origin to the country of destination. Marine insurance covers loss or
damage to a ship's cargo, docks and any other means of transportation used to transport
the cargo.

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Insurance in India

Insurance in India covers both the public and private sectors. It is listed as a trade union in the
Seventh Schedule of the Indian Constitution, which means it can only be legislated by the central
government.

The insurance industry has gone through several phases, including allowing private companies
to seek insurance and allowing foreign direct investment. In 2000, India allowed private
companies to enter the insurance sector, limiting FDI to 26%, rising to 49% in 2014 and 74% in
May 2021. However, the government still owns India's largest life insurance company, Life
Insurance Corporation of India, which issues all policies backed by a sovereign guarantee.

Life Insurance

Life insurance is a contract between a policyholder and an insurer in which the insurer undertakes
to pay a sum of money to a designated beneficiary on the death of the insured (usually the
policyholder). Other events, such as a terminal illness or critical illness, can also trigger payouts,
depending on the contract. Policyholders generally pay premiums on a regular or lump sum basis.
Other expenses, such as funeral expenses, may be covered by benefits.

Life insurance has been the fastest growing sector in India since 2000, with the government
allowing private players and foreign direct investment up to 26%, and the cabinet recently
approved a proposal to increase to 49%. In 1956, the Life Insurance Corporation (LIC) was
established to nationalize life insurance in India. At that time, LIC acquired all the private life
insurance companies.

When you take out life insurance, you enter into a contract with the insurance company which
undertakes to pay your beneficiaries a certain sum of money on your death. In return, you pay
regular premiums. The amount of your premium depends on factors such as your age, gender,
medical history and the amount of life insurance you purchase.

19
Some types of life insurance can provide benefits for you and your family during your lifetime.
For example, permanent life insurance includes a cash value portion that you can use over your
lifetime.

The Importance of Life Insurance

 Life insurance helps protect your family financially

Life insurance is designed to protect your family's financial future. Even if you have
savings, it's unlikely to be enough to cover your family's expenses for years, or even
decades, should something unexpected happen to you.

 Life insurance covers funeral expenses

Funerals can be expensive. Dealing with financial stress can add emotional stress in
your family. Your family can help pay for these costs by using a death benefit from your
life insurance policy. To do this, policy beneficiaries can pass on a portion of the death
benefit to the funeral home as a final expense, or they can pay the expenses out of pocket
and use the death benefit to cover those expenses.

 Life insurance helps pay for future education costs

Life insurance can help your family pay for future child care and education costs,
especially school fees. Even if you've already started contributing to a 529 college
savings plan, the death benefit from a life insurance policy can help pay for your
children's education after you die.

 Life insurance Encourage savings

The savings element dominates most life insurance policies. Since regular premiums
have to be paid regularly, systemic savings are possible. In insurance, premiums
deposited cannot be easily withdrawn before the term of the policy expires. He must
endeavor to pay the premium to keep the policy in force.

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  Life Insurance Offers Profitable Investments
People who are unwilling or unable to manage their own money can find a home for
their life insurance investments with peace of mind. Investment elements such as regular
savings and capital formation are perfectly represented in life insurance. Life insurance
meets all these requirements at a lower cost.

Types of Life Insurance Policies

A) The term life insurance policy

Is the most basic and cheapest type of life insurance that allows you to choose a high
level of coverage for a period specific time. You can secure your family's financial
future with a low-cost term life insurance policy. Term insurance plans generally have
no cash value, so premium rates are lower than other life insurance products.

It pays the sum insured to your nominee if you die during the term of the contract.
Insurance proceeds help your family cover day-to-day expenses and pay off debts. It
should be noted that pure term plans have no advantage at maturity. This means that if
you exceed the term of the policy, you will not receive these benefits.

B) Whole life insurance policy

Whole life insurance, as its name suggests, provides coverage for your entire life. The
duration of a whole life insurance policy is as long as 100 years. As long as the premium
is paid, the benefits of the policy will always exist.

Whole life policies have no fixed term or termination date and are paid only to named
beneficiaries upon the death of the policyholder. This policy does not provide any
monetary benefit to the policyholder. Because there are fixed and known annual
premiums, this type of insurance is a good option for providing guaranteed financial
benefits to surviving family members.

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A) Money Back Plan
Reimbursement plan is one of the most popular types of life insurance in India. Cash back
programs are similar to donation programs in that they pay out fixed amounts at
predetermined intervals throughout the term of the policy. These plans provide periodic
payments of partial survivor benefits for the life of the policy. This is a plan that includes
insurance and savings.

The repayment plan is ideal for those who want a guaranteed return on investment, regular
payments and premium coverage. Therefore, a repayment plan provides regular income
and benefits at maturity, just like a standard life insurance policy.

B) Pension Plans
A retirement plan, also called a retirement plan, is an investment plan that allows you to
accumulate part of your savings over time. A retirement plan can help you deal with the
financial uncertainty of retirement by ensuring that you continue to have a steady stream
of income after your working years are over.

Pension plans differ from other types of life insurance in that they do not provide life
insurance but rather guarantee a fixed income for life or for a fixed period of time. The
insured invest in a pension plan either in the form of capital or by installments. The
accumulated amount is returned to you regularly in the form of an annuity or retirement
pension.

C) Endowment Policy

This policy combines risk protection with savings and investment objectives. The giving
program provides life insurance and helps build a body of important life goals. If you die
during the policy term, your nominee will receive the sum insured. Part of the premium is
used for the insured amount and the rest is used for low risk investments.

22
 The advantage of this policy is that if the policy owner survives the term of the policy, they
will receive the sum insured along with additional benefits provided by the insurance
company, such as bonuses. If you find it difficult to lead a regular life and control your
expenses, an annuity plan is for you.

Types of Endowment policy:

 Full-Endowments Plans
Total Savings Plan the Total Savings Plan, also known as Participating Savings, provides
you with a death benefit equal to the sum insured at the outset of the font. Due to the
relationship between the total sum insured and the premiums, the final payment is usually
greater than the sum insured.

 Low Cost Endowment

The main purpose of this policy is to build funds for future needs that are due after a
specified time, such as mortgages and loan repayments. As the name suggests, premiums
and coverage are relatively low.

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 Meaning and Definition of Profitability

Profitability is one of the most important terms in business and accounting for determining and
describing the long-term success of a business. Profitability is important for all businesses because
it allows them to grow. Profitability is generally defined as the ability of a given investment to
generate a return on use.

Profitability is made up of two words: profit and capacity. Profit, by various definitions, is the
sum of revenue minus total costs. The term "capacity" refers to a company's ability to make a
profit. This capacity is also called profitability of investment, profitability or operating
performance.

The primary objective of a business is to obtain at least a satisfactory return on investment while
maintaining a healthy financial situation. Satisfactory returns depend on various factors, including
the nature of the business risks involved. If a business does not generate profits, the money
invested will run out, and if this continues, the business may eventually cease to exist. Profitability
of a business indicates financial capability and has the potential to increase earning power.
Profitability analysis has now supplanted other aspects emphasized in the interpretation of
financial statements in both developed and developing countries. Financial analysis is more
external than internal, while profitability analysis is both internal and external.

Profitability is the primary goal of any business. Because it is the money that companies generate
through their activities, it allows these companies to grow, develop new products or access new
markets. Profitability is a relative term that describes how well a business generates profit.
Applying marginal revenue theory can also improve profitability.

Also, business capabilities indicate the financial and operational capabilities of a business. So, on
this basis, profitability can be defined as the ability of a given tool to generate returns from its use.
Profit, as an absolute number, does not indicate sufficient revenue or inefficiencies in the financial
and operational performance of a business.

24
Due to differences in investment size, sales volume, etc., many difficulties and confusion arise
when interpreting absolute profit figures in historical or intercompany comparisons. These
problems are solved by relating profit figures to sales volumes or investment levels.

Concept of Profitability

 Accounting Profitability
Profitability is a measurement tool for measuring the overall efficiency of a company.
Input-output analysis is probably the best way to assess the efficiency of a business.
Profitability can be calculated by relating production to a percentage of inputs, or by
comparing it to the results of other companies in the same sector or to the results obtained
during different operating periods. The profitability of a business can be determined by
comparing the amount of capital or inputs employed to the amount of income or output
earned. We often talk about return on investment or return on capital employed. This is
called the overall profitability ratio and is made up of two parts: the net profit margin and
the turnover rate.

 Measurement of Profitability

Profitability is measured using an “income statement” which contains data on income and
expenses over time. A business cannot survive without profitability, and a highly profitable
business rewards its owners with a solid return on investment. Business leaders are
responsible for improving business profitability by analyzing each process to identify
changes that can improve profitability. These changes can be reviewed using a pro forma
income statement (also known as a partial budget), which helps analyze the impact of these
changes on profitability before implementing them.

25
 Types of Profitability Ratios

Profitability ratios are absolutely essential because they show the amount of profit a business
makes from sales and the return on assets or capital used by the business. The profitability ratio
can be compared to a person's pulse; just as measuring the pulse can reveal if all is well in the
human body, examining the profitability ratio can reveal if all is well in the business. There are
several types of profitability ratios; a list of profitability ratios is provided below.

 Gross Profit Ratio

Gross Profit Ratio is a profitability ratio that compares gross profit to net sales revenue. It
is also known as the Gross Profit Margin when expressed as a percentage.

The Formula for Gross Profit ratio is

Gross Profit Ratio = Gross Profit × 100

Net Revenue of Operations

A fluctuating gross profit ratio indicates a poor product or poor management practices.

 Operating Ratio

The operating ratio is used to calculate the cost of operations in relation to the revenue
generated by the operations.
The operating ratio formula is as follows:

Operating Ratio = (Cost of Revenue from Operations + Operating Expenses) × 100

Net Revenue from Operations

26
 Operating Profit Ratio

The operating profit ratio is a type of profitability ratio used to calculate the operating
profit and net revenue generated by operations. It is given as a percentage.
The formula for calculating operating profit ratio is as follows:

Operating Profit Ratio = Operating Profit × 100

Revenue from Operations

Or

Operating Profit Ratio = 100 – Operating ratio

 Net Profit Ratio

The net profit ratio is a key profitability ratio that portrays the relationship between net
sales and net profit after tax. It is known as net profit margin when expressed as a
percentage.
The net profit ratio formula is
Net Profit Ratio = Net Profit after Tax
Net Sales
Alternatively,
Net Profit Ratio = Net Profit × 100
Revenue from Operations
It assists investors in determining whether the company's management is capable of
generating profit from sales and how well operating costs and overhead costs are
contained.

27
 ROCE (Return on Capital Employed) or ROI (Return on Investment)
Return on Capital Employed (ROCE) or Return on Investment (ROI) is a profit margin
that measures the extent to which a company generates profits from of its capital. This is
an important ratio that investors often use when choosing companies to invest in.

Return on Capital Employed is calculated using the following formula:

ROCE or ROI = EBIT × 100

Capital Employed

Where EBIT = Earnings before interest and taxes or Profit before interest and
taxes

Capital Employed = Total Assets – Current Liabilities

 Return on Net Worth

Also known as Return on Equity, it is used to judge whether shareholders' investment

can generate profitable returns.
It should always be greater than the return on investment, as this indicates that company
funds are not being used efficiently.
The formula for calculating Return on Net Worth is as follows:

Return on Shareholders’ Fund = Profit after Tax × 100

Shareholders’ Funds

Or

Return on Net Worth = Profit after Tax × 100

Shareholders’ Funds

28
 Earnings per Share (EPS)

Earnings per share, or EPS, is the profitability ratio that measures the profit earned
by a company. It is calculated by dividing net income by the number of shares
outstanding.

Earnings per share are calculated as follows:

Earnings per share = Net Profit

Total number of shares outstanding

Higher EPS results in increased profitability for the company.

 Dividend Payout Ratio

The dividend payout ratio measures the amount paid out in dividends to the amount of
net income generated by the business.

It is possible to calculate it as follows:

Dividend Payout Ratio (DPR) = Dividends per share

Earnings per share

 Return on Assets

The return on assets (ROA) is a financial ratio that measures a company's profitability in
relation to its total assets. ROA can be used by corporate management, analysts, and
investors to determine how effectively a company uses its assets to generate a profit.

29
 It is calculated as follows:

ROA = Net Income

Average Total Assets

 Debt Equity Ratio

The debt ratio is calculated from the total liabilities of its shareholders, calculated from the
balances of its shareholders. Lever. In corporate finance, the debt ratio is an important
measure. It measures how much a company has borrowed to finance its operations, rather
than using its own funds. The debt ratio is a leverage ratio.

Debt/ Equity Ratio = Total Liabilities

Total Shareholder’s Equity

30
Chapter 2: Research Methodology

Objective of Study

Hypothesis

Limitations of the Study

Significance of the Study

Scope of Study

Sample Size

Number of Years

Data Collection

Financial Tools

31
 Chapter 2

Research Methodology

Objective of the Study

 To study the private insurance companies in India with respect to HDFC

Life Insurance Company Ltd and SBI Life Insurance Company Ltd.
 To study profitability ratio of HDFC Life Insurance Company Ltd and
SBI Life Insurance Company Ltd.
 To compare the profitability of HDFC Life Insurance Company Ltd and
SBI Life Insurance Company Ltd.
 To give suggestions and recommendations.

Hypothesis of the Study

 Null Hypothesis

There is no significant difference between Profitability to Return on Net worth,

Return on Capital Employed,Return on Assets and total debts/equity selected to
private companies.

 Alternative Hypothesis

There is significant difference between profitability to return on Net worth, Return on

Capital Employed, Return onAssets and total debts/equity selected to private
companies.

32
 Limitations of the Study

 The study covers only two Private sector life insurance companies of India so it may not
 Generalize to whole population.
 The data which has been used for the study mainly secondary data, so
limitation of secondary dataremains with it and also applies to this study.
 The study covers only five years.
 Only four ratios are compared.

Significance of the Study

This study is useful and important for the major aspect such as:

 This study is important for the comparison of profitability of HDFC Life Insurance
Company Ltd and SBI Life Insurance Company Ltd.
 This study analyses the insurance sector in India.
 This study provides financial performance of the company as well as provides which
company isbetter or earning more profit and which company is suffering from losses.
 This study is very helpful for taking decisions.

Scope of the Study

In any organization financial statement analysis is the most important thing by which we can
compare the profitability of any organization by the method of ratio analysis. The profitability
ratios plays very important role by which any organization can be compare. The ratios are
helping in comparing the company’s ratios to know which company is more profitable or which
company is suffering from losses.
The managers are using the method of ratio analyses for taking decisions and comparing the
company’s profitability and help in applying the resources in perfect manner for the development
of the company.

33
The present study is to attempt to compare profitability ratios such as return on asset, return on
capital employed, total equity. This can be help to forecast which company is earning more profit
or which one is in loss. So the project has wide scope to help the managers as well as to the
public to know the status of the company.

Sample Size
Number of Companies
HDFC Life Insurance Company and SBI Life Insurance Company are selected for the Study.

Number of years
3 year’s data has been collected i.e. from the financial year March 2020, 2021, and 2022.

Data Collection
Data is collected from annual reports of HDFC Life Insurance Company and SBI Life Insurance
Company.

Financial Tools
Return on net worth
Return on Capital Employed
Return on assets
Total debts/equity

34
Chapter 3: Literature Review

Introduction

Research of Life Insurance

35
 CHAPTER 3
LITERATURE REVIEW

Introduction
The concept of life insurance is very old and deeply rooted in Indian history. A mention of
insurance can be found in the writings of Manu, who wrote Manusmrithi, as well as in the
Dharmashastra book, which was a common man's guide for day-to-day value-based living. In the
past, insurance was used as a tool to re-distribute vital resources during natural disasters.
However, as time passed, the insurance concept evolved in terms of product, which was
developed and modified by the human race from time to time as a tool to counter the various
risks that humans face throughout their lives.

This study attempts to collect and review a few important research articles on the life insurance
concept in India in terms of product innovation, market growth, customer service, and other
important elements revolving around the insurance concept. This study is based on the facts and
findings of various articles that were chosen for review in order to bring out the important facts
about life insurance concepts. A few of the statements are taken as they are to maintain the
originality of the research articles under review, and a few are written by the author in their own
words to draw logical statements.

Research on Life Insurance

The research literature on Life Insurance is vast and covers a number of dimensions. The
following section provides a brief summary of research in different areas of life insurance
research.

Alok mittal and akash kumar (2003),

In their studied, "an exploratory studied of factors influenced selection of life insurance
products," they attempted to identified the factors influenced consumers in took into
consideration before selecting a life insurance product and to determine the extent to which these
factors was taken into consideration for selecting life insurance products. The study founded that

36
before chose a life insurance product, consumers considered factors such as product attributes,
customer delighted, payment mode, product flexibility, risked coverage, grace period,
professional advisor, and maturity period. However, the most important factor that consumers
considered was product attributes, and the least important was maturity period.

T. Venkateswara rao (2004),

A paper titled "alternative distribution channels in India" presented at the global conference of
actuaries. According to the researched, a distribution channel was a group of interdependent
organizations that involved in the process of made a product or service available for used$5or
consumption by the consumer by created placed\,pd utility and the valued of had the products
where the customer wanted them, when they wanted them. According to the researched,
intermediaries were required in the distribution of life insurance. The current insurance market
was heavily reliant on individual agency channels, but it was determined that alternative
distribution channels could provided insurers with a competitive advantage. A study of
alternative distribution channels of LIC founded that corporate agencies, included banks,
received 82% of the business, while brokers received the remained 18%. Over timed, banc
assurance could received at least 20% of the distribution shared in the life insurance market.

Sinha and Tapen (2005),

According to their research article "the Indian insurance industry: challenged and prospects,"
India is one of the world's most promised emerged insurance markets. But out of total insurance
premium market in India particularly life insurance currently made up 80% of premiums.
According to the research, when India decided to opened the domestic insurance market to
private-sector and foreign companies, 13 private life insurers and eight general insurers joined
the Indian market. However, when it went to major potential barriers, this study focused on the
outdated regulations on insurance prices, which had replaced by risk-differentiated pricing
structures. Furthermore, it stated that less invasive regulations would benefit both the life and
non-life insurance sectors. The author also proposed that price liberalization was required to

37
improved underwriting efficiency and risked management, and that private insurers would
played an important role in served the large numbered of informal sector workers.

Rajni M. Shah (2007),

The paper presented at the c. D. Deshmukh seminar on "creating consumer awareness in life
insurance" examined how to harness vast untapped market potential for life insurance to benefit
vast rural and semi-urban populations. The famous line "customer was business, business was
people, people were customers" was quoted in the context of consumer awareness. The paper
emphasizes that consumer awareness would provided a new framed of reference for valued
creation as well as an opportunity for innovation. Campaigns to educated rural and semi-urban
masses on the needed for security that protected their livelihood, security for produced and
belongings, and created a feel-good felt were also emphasized.

In summary it stated that a new phenomenon would emerged where market dynamics would
ruled and unfold a stage through a process of evolution by co-creating unique valued with
customers would merge as expounded by prof. C. K. Prahalad in his later path-breaking title "
the future of competition: co-creating unique valued with customers".

Subir sen (2008),

In his article "an analysis of life insurance demanded determinants for selected Asian economies
and India," he tried to figure out the economic and other socio-political variables that may had
played a significant role in explained the life insurance consumption pattern in the greater China
region and six Asian countries over the 11-year period 1994-2004, as well as to re-evaluate
whether or not the variables best explained life insurance consumption pattern for twelve selected
Asian economies in the panel were significant for India for the period 1965 to 2004.
This study found that in India, economic variables such as income, savings, insurance product
prices, inflation, and interested rates, as well as demographic variables such as dependency ratio,
life expectancy at birth, crude death rate, and urbanization, are a few significant determinants that
influence insurance consumption.

38
Manjit Singh and Rohit Kumar (2008),

According to the paper "Indian insurance industry outlook in the post-reform period," insurance
penetration and density had increased in the post-reform period, but the country still had a longed
way to went before it could compete with developed nations. The research also revealed a large
unexplored and untapped market in India, as well as numerous opportunities for insurance
companies to captured business from a competitive market; the survival of companies would have
determined by their strategies and efforts to increase their penetration leveled and tapped new
business positions, particularly in rural India.

Nagaraja Rao, K. (2010),

In his article "challenges in designing needed-based products in life insurance for inclusive growth
in India," he examined the challenged faced by insurers in designing need-based productsin
insurance for inclusive growth, and concludes that life insurance policies are still not rural- centric,
catering to the specific needed of the people. To popularize life insurance, he suggested that
consumers study the rural market, analyze the specific needs of each segment, and design
innovative products to meet the needs of the people in ordered to achieve the goal of inclusive
growth.

Sonika Chaudhary, Priti Kiran (2011),

In their paper "life insurance industry in India - current scenario," they discussed the trend of life
insurance in India from 2005-06 to 2010-11. During the studied period, this sector grew due to
factors such as the numbered of offices, the number of agents, new business policies, premium
income, and so on. Furthermore, many new products, such as pension planned, were introduced
by life insurers to meet the needs of various customers. However, such companies' new business
was more skewed in favour of specific stated and union territories. When compared to LIC, private
life insurers used new business channels of marketing to a greater extent, according to this paper.

39
Harpreet Singh & Preeti Singh (2011),

In their study, "an empirical analysis of the insurance industry in India," they examined the overall
performance of the Indian life insurance industry between the pre- and post-economic reform eras,
as well as the current status, volume of competitions, challenged faced by the Life Insurance
Corporation of India, and the effectiveness of the LIC's investment strategy from 1980to 2009.
They had emphasized the role of LIC as a primary player in life insurance and how the
performance of the Indian life insurance industry and LIC had improved as a result of the LPG
policy. They concluded that LIC's total investment increased from Rs. 4587. 7 crores in 1979 to
Rs. 762891. 7 crores in 2009.

The proportion of premiums collected by LIC as a percentage of total premiums collected by the
life insurance industry fell from 97% in 2001-02 to 74% in 2007-08. It reflected the grew
competition from the private sector. Because of its aggressive and flexible product range, ICICI
prudential was became a stronger and stronger player, took over a large portion of LIC's business.
However, there was still a great deal of opportunity in the life insurance industry, where the
private sector had been a challenged to LIC.

Vijay Kumar (2012),

In his PhD thesis, "a contemporary study of factors influencing urban and rural consumers for
bought different life insurance policies in Haryana," he conducted a thorough examination of the
factors influencing buyer behaviour when purchasing life insurance policies in Haryana. The
surveyed was conducted on 1000 policy holders in Haryana. According to the findings, the
insurance agent was the most influential factor in the decision to purchase a life insurance policy
among both rural and urban policyholders. Income, economic status, product attributes, agent
attributes, and price were also identified as important determinants of purchasing behaviour. The
findings indicate a significant difference in the purchasing habits of rural and urban policyholders.

40
Yogesh Jain (2013),

In his article, "economic reforms and global economic crisis: changed Indian life insurance
market placed," he examined the life insurance scenario in India, as well as the sector's challenges
and issues. The author revealed that since the opened up of the Indian insurance sector to private
participation, India had reported an increased in insurance density for every subsequent year and
for the first timed reported a fell in the year 2011, but when we compared real growth of premium
with the global insurance market, the Indian life market has declined very sharply during the
lasted fiscal year, with the exception of 2009-10. The author then discussed a few imperatives
such as life insurers conducting more extensive market research before introduced insurance
products, life insurers greatly simplifying their grievance redressal machinery for efficient and
effective service, and in today's stiff market competition, a focus onniche segment could have
been an effective way of marketing for insurers to differentiate from competitors, and so on.

Simona Laura Dragos (2014),

"Life and non-life insurance demanded: the different effects of influence factors in emerged
countries from Europe and Asia," economic research was conducted. Many previous studied had
shown that urbanization, income distributions, and population education leveled are all important
factors in the development of any country's insurance sector. This paper attempted to test the
followed are the main used panel data econometrics on 17 emerging economies from Asia and
Europe over a 10-year period from 2001 to 2011. This study discovered that urbanization had a
significant impact on the demanded for life insurance in Asian countries, indicating that the main
insurance opportunity had been in emerging Asia (particularly China and India), where the
urbanization rate was lowered than in central and Eastern Europe. Because of the complexity of
wealth accumulation and distribution of wealth products, tertiary education as a proxy for risk
aversion was not appropriate for the life insurance sector, so a reliable solution could have been a
high leveled of financial literacy.

41
Savita Jindal (2014),

In her study, "ethical issue in insurance companies: a challenge for Indian insurance sector," she
attempted to discovered various ethical issues of insurance companies in India by examining a
sample of 50 people from the insuring public who were interviewed with insurance policies of life
insurance to discovered the ethical ways in claimed settlement. According to the findings,
insurance companies in India were failed to identified their customers' needs and recommend
products and services that meet those needs, as well as misrepresenting terms and conditions when
sold products to customers, made unethical remarks about competitors, their products, or their
employees or agents, and finally failed to performed one's duties competently. Finally, the paper
concludes that insurance companies have recognized the moral problem in claimed settlement;
they understand that if claimed are not settled in an ethical manner, it would have a negative impact
on the company's image, which willed fell backed on the insured or the beneficiary. Finally, the
research found that the insurance business sector had many opportunities for growth and
improvement.

Mouna Zerriaa and Hedi Noubbigh (2015),

"Determinants of life insurance demanded in the mena region" attempted to investigate the
determinants of life insurance consumption in the Middle East and North Africa (mena) region
using a sample of 17 countries from 2000 to 2012. They had used two life insurance demanded
measures: insurance density and insurance penetration. This study found that income, interested
rates, and inflation all increase consumption, and that a country's leveled of financial
development, life expectancy, and educational attainment all increase the demand for life
insurance.

C. Balaji (2015),

In his paper, "customer awareness and satisfaction of life insurance policy holders with reference
to Mayiladuthurai town," he attempted to measured awareness among urban and rural consumers
about the insurance sector, as well as the various policies involving various premium rates. The

42
study was conducted by examining approximately 100 sample respondents, which revealed that
100% of respondents were aware of life insurance policies, while 87% went too learned about
insurance policies through agents. However, the majority of respondents were aware of the
government insurance company LIC and the private sector HDFC standard life insurance.
Finally, the research concludes that insurance penetration in India was only 2.3%, compared to
9-15% in developed countries. As a result, there was a large market for insurance products in
India in the future.

43
Chapter 4: Profile of Study Area

HDFC Life Insurance Company

History of HDFC Life Insurance Company

Management Team of HDFC Life Insurance Company

SBI Life Insurance Company

Mission and Values

History of SBI Life Insurance Company

Management Team of SBI Life Insurance Company

44
 CHAPTER 4
Profile of Study Area

HDFC Life Insurance Company

HDFC Life Assurance Limited is a Mumbai-based term life insurance provider that offers
individual and group insurance services. It was established on August 14, 2000.

The company is a partnership between Housing Development Finance Corporation (HDFC),

one of India's leading housing finance institutions, and a global investment company. HDFC
limited Standard Life (Mauritius Holdings) 2006 Ltd. As of March 31, 2020, HDFC Life held
51.69% and 34.75% of the shares, with the remaining shares held by the public.

On October 12, 2000, HDFC Life obtained a certificate of practice and a certificate of registration
from the Insurance Regulatory and Development Authority of India (IRDAI) on October 23, 2000
to carry on life insurance business. HDFC Life has 421 branches in over 980 cities and towns
across India with 16,544 employees. Additionally, the company has opened a liaison office in
Dubai.

The partners include 265 banc assurance partners such as NBFCs (Non-Banking Financial
Companies), MFIs (Micro Finance Institutions), SFBs (Small Finance Banks), etc., and 39 non-
traditional ecosystem partners. A strong base of financial advisors also helps the business.

45
HDFC Life offers protection, retirement, savings, investments, health and plans for children and
women. The company also offers the ability to customize the plan by adding optional benefits
called riders, for an additional fee. Coverage period with participating, non-participating,
guaranteed non-participating health, other non-participating and unit-linked insurance products are
the five main segments covered by the company's product portfolio, covering both individual and
collective categories.

History HDFC Life Insurance Company

Year Event

2001 First private life insurer to obtain registration from the IRDAI

2003 Crossed 100,000 policies and 10,000 individual agents; distribution tie-ups with
HDFC Bank and other banks

2004 Launch of unit linked funds; distribution tie-up with Saraswat Co-operative Bank
Limited

2007 Crossed the 500,000 policy milestone

2010 AUM crossed Rs. 200,000 million

2011 Incorporated the Subsidiary, HDFC Pension on June 20, 2011

2012 The Company turned profitable, and registered a profit of Rs. 2,710 million and
the total premium for the year crossed Rs. 100,000 million

2014 Company AUM crossed Rs. 500,000 million; dividend was declared for the first
time in December, 2013

2016 Total premium crossed the Rs. 160,000 million mark

46
 The Subsidiary, HDFC International was authorized by Dubai Financial Services
Authority to carry on financial services.

Standard Life Mauritius increased its stake from 26% to 35%

SAP ACE Awards - Technology Adoption in Banking, Financial Services and

Insurance (BFSI)

Finnoviti award to recognize and reward innovations in Banking, Financial

Services and Insurance (BFSI) - Received for Cancer Care, a first of its kind
standalone cancer care product from a life insurer

2017 Company AUM crossed Rs. 900,000 million Certifications, Awards and
Accreditations 2017

India's Best Companies to Work For - The India's Best Companies to Work for
study is conducted by The Economic Times & Great Place To Work Institute.

2018 HDFC Life IPO subscribed 4.89 times.

HDFC Life and Vijaya Bank in a Banc assurance deal.

The Management Team of HDFC Life Insurance Company

Mr.Deepak S Parekh Chairman

Mr.Niraj Shah Chief Financial Officer

Mr.Vibhash Naik Chief Human Resource Officer

Mr.Prasun Gajri Chief Investment Officer

Ms.Vibha Padalkar Managing Director & CEO

Mr.Narendra Gangan Co. Secretary

Mr.Pankaj Gupta Group Head

47
 SBI Life Insurance Company

SBI Life Insurance Company Limited is a partnership between State Bank of India and BNP
Paribas Assurance. SBI Life Insurance is a registered company with a paid up capital of Rs 10,000
crore and an authorized capital of Rs 2,000 crore. SBI holds 74% of the total capital, the remaining
26% being held by BNP Paribas Assurance.

State Bank of India has the largest banking operations in India. With over 14,500 branches
nationwide, the SBI Group and its seven affiliated banks are unrivaled and arguably the largest in
the world.

BNP Paribas Assurance is the personal insurance division of BNP Paribas, a major bank in the
euro zone. BNP Paribas is one of the world's six largest banks by market capitalization, a
European leader in global banking and financial services and one of India's oldest foreign banks,
with operations dating back to 1860.

BNP Paribas Assurance is the first life insurance company of the fourth French bank and the
world leader in creditor insurance products, protecting more than 50 million customers. BNP
Paribas Assurance is present in 41 countries mainly through banc assurance and partnership
models.

48
SBI Life has a unique multi-distribution model including banc assurance, agency and group
companies. SBI Life uses the SBI Group extensively as a platform for cross-selling insurance
products, in addition to a large portfolio of banking products such as home loans and personal loans.
With access to over 100 million accounts nationwide,

SBI provides a dynamic foundation for insurance penetration across all regions and economic
classes, ensuring true financial inclusion.

SBI Life leverages its relationship with the National Bank Group extensively to cross-sell insurance
products as well as an extensive portfolio of banking products such as home loans and personal
loans.

Mission and Values

Mission
"To be the leading company offering comprehensive life insurance and retirement products at
competitive prices, ensuring high standards of customer satisfaction and world-class operational
efficiency, as well as 'exemplary freedom in life insurance. Post-cultural era.'

Values
 Trustworthiness
 Ambition
 Innovation
 Dynamism
 Excellence

49
 History of SBI Life Insurance Company

Year Event
2021 In August 2021, SBI Life Insurance introduced 'SBI Life eShield Next’, a unique
new age protection solution, to offer customers with advanced offerings.

2020 In November 2020, SBI Life Insurance launched an interactive online platform
for consumers to self-assess their Financial Immunity Score and better analyze
their preparedness and financial risk.

In September 2020, SBI Life Insurance and YES BANK signed a banc assurance
agreement to offer life insurance solutions to the bank’s customers across the
country.

2019 Entered the Rs. 1 trillion (US$ 14.31 billion) market capitalization (market-cap)
club

2017 AUM crossed Rs. 100,000 crore (US$ 15.52 billion) in FY18. Successful IPO

2016 Record renewal premium collection

2015 Record growth year

2012 AUM crossed Rs. 50,000 crore (US$ 9.35 billion)

2010 More than 500 branches

2007 Gross Written Premium crossed Rs. 5,000 crore (US$ 1.21 billion)

2004 Launched unit linked products

2001 Approval received from Insurance Regulatory and Development Authority of

India (IRDAI) to commence business

2000 Incorporated as a JV with BNP Cardiff

50
 The Management Team of SBI Life Insurance Company

Name Designation

Mr.Dinesh Kumar Khara Chairman

Mr. Sangramjit Sarangi Chief Financial Officer

Ms. Seema Trikannad Chief Human Resource & Management Service

Mr.Pranay Raniwala Compliance Officer

Mr. Mahesh Kumar Sharma Managing Director & CEO

Mr.Vinod Koyande Co. Secretary

Mr.Subhendu Kumar Bal Actuary & Chief Risk Officer

51
Chapter 5: Data Analysis, Interpretation and Presentation

Balance sheet of HDFC Life Insurance Company

Profit and Loss Account of HDFC Life Insurance Company

Key Financial Ratios of HDFC Life Insurance Company

Balance Sheet of SBI Life Insurance Company

Profit and Loss Account of SBI Life Insurance Company

Key Financial Ratios of SBI Life Insurance Company

52
 CHAPTER 5

DATA ANALYSIS, INTERPRETATION AND PRESENTATION

Balance Sheet of HDFC Life Insurance Company (In Rs. Cr.)

BALANCE SHEET OF HDFC LIFE INSURANCE MAR 22 MAR 21 MAR 20
COMPANY (in Rs. Cr.)

12 months 12 months 12 months

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 2,112.62 2,020.94 2,018.80

TOTAL SHARE CAPITAL 2,112.62 2,020.94 2,018.80

Reserves and Surplus 13,369.97 9,169.81 4,775.53

TOTAL RESERVES AND SURPLUS 13,369.97 9,169.81 4,775.53

TOTAL SHAREHOLDERS FUNDS 15,482.59 11,190.76 6,794.33

NON-CURRENT LIABILITIES

Long Term Borrowings 600.00 600.00 0.00

Deferred Tax Liabilities [Net] 0.00 0.00 0.00

Other Long Term Liabilities 111,555.64 90,309.57 66,203.45

Long Term Provisions 76,518.98 70,963.52 54,182.08

TOTAL NON-CURRENT LIABILITIES 188,674.63 161,873.10 120,385.53

CURRENT LIABILITIES

Short Term Borrowings 0.00 0.00 0.00

Trade Payables 0.00 0.00 0.00

53
Other Current Liabilities 6,137.55 6,423.18 4,901.91

Short Term Provisions 91.16 78.94 75.02

TOTAL CURRENT LIABILITIES 6,228.71 6,502.12 4,976.93

TOTAL CAPITAL AND LIABILITIES 210,389.25 179,567.95 132,162.38

ASSETS

NON-CURRENT ASSETS

Tangible Assets 323.34 326.76 321.71

Intangible Assets 0.00 0.00 0.00

Capital Work-In-Progress 19.40 13.39 8.41

Other Assets 0.00 0.00 0.00

FIXED ASSETS 342.74 340.15 330.13

Non-Current Investments 204,170.42 173,839.44 127,226.17

Deferred Tax Assets [Net] 0.00 0.00 0.00

Long Term Loans And Advances 642.83 424.05 299.05

Other Non-Current Assets 0.00 0.00 0.00

TOTAL NON-CURRENT ASSETS 205,155.99 174,603.64 127,855.34

CURRENT ASSETS

Current Investments 0.00 0.00 0.00

Inventories 0.00 0.00 0.00

Trade Receivables 0.00 0.00 0.00

Cash And Cash Equivalents 1,086.55 1,035.56 679.87

54
Short Term Loans And Advances 4,146.71 3,928.75 3,627.17

Other Current Assets 0.00 0.00 0.00

TOTAL CURRENT ASSETS 5,233.26 4,964.31 4,307.04

TOTAL ASSETS 210,389.25 179,567.95 132,162.38

OTHER ADDITIONAL INFORMATION

CONTINGENT LIABILITIES, COMMITMENTS

Contingent Liabilities 1,393.40 2,020.50 2,397.86

CIF VALUE OF IMPORTS

Raw Materials 0.00 0.00 0.00

Stores, Spares And Loose Tools 0.00 0.00 0.00

Trade/Other Goods 0.00 0.00 0.00

Capital Goods 0.00 0.00 0.00

EXPENDITURE IN FOREIGN EXCHANGE

Expenditure In Foreign Currency 263.10 242.50 169.70

REMITTANCES IN FOREIGN CURRENCIES FOR

DIVIDENDS

Dividend Remittance In Foreign Currency -- -- --

EARNINGS IN FOREIGN EXCHANGE

FOB Value Of Goods -- -- --

Other Earnings 660.50 252.10 178.60

BONUS DETAILS

Bonus Equity Share Capital -- -- --

55
NON-CURRENT INVESTMENTS

Non-Current Investments Quoted Market Value -- -- --

Non-Current Investments Unquoted Book Value -- -- --

CURRENT INVESTMENTS

Current Investments Quoted Market Value -- -- --

Current Investments Unquoted Book Value -- -- --

56
PROFIT & LOSS ACCOUNT OF HDFC LIFE INSURANCE
COMPANY (in Rs. Cr.)

PROFIT & LOSS ACCOUNT OF HDFC LIFE INSURANCE MAR 22 MAR 21 MAR 20
COMPANY (in Rs. Cr.)

12 months 12 months 12 months

INCOME

REVENUE FROM OPERATIONS [GROSS] 45,396.46 38,122.30 32,223.60

Less: Excise/Service Tax/Other Levies 0.00 0.00 0.00

REVENUE FROM OPERATIONS [NET] 45,396.46 38,122.30 32,223.60

TOTAL OPERATING REVENUES 65,401.78 71,447.43 29,350.54

Other Income 745.97 441.95 367.26

TOTAL REVENUE 66,147.75 71,889.38 29,717.80

EXPENSES

Cost Of Materials Consumed 0.00 0.00 0.00

Purchase Of Stock-In Trade 0.00 0.00 0.00

Operating And Direct Expenses 0.00 0.00 0.00

Changes In Inventories Of FG,WIP And Stock-In Trade 0.00 0.00 0.00

Employee Benefit Expenses 2,039.55 1,675.58 1,676.96

Finance Costs 23.04 18.41 17.01

Depreciation And Amortization Expenses 52.38 50.61 46.50

Other Expenses 63,004.53 68,635.19 25,971.26

TOTAL EXPENSES 64,832.79 70,153.95 28,477.00

57
PROFIT/LOSS BEFORE EXCEPTIONAL, 1,314.96 1,735.43 1,240.80
EXTRAORDINARY ITEMS AND TAX

Exceptional Items 0.00 0.00 0.00

PROFIT/LOSS BEFORE TAX 1,314.96 1,735.43 1,240.80

TAX EXPENSES-CONTINUED OPERATIONS

Current Tax 184.50 267.78 165.51

Less: MAT Credit Entitlement 0.00 0.00 0.00

Deferred Tax -27.55 0.00 0.00

Tax For Earlier Years 0.00 0.00 0.00

TOTAL TAX EXPENSES 156.95 267.78 165.51

PROFIT/LOSS AFTER TAX AND BEFORE 1,158.01 1,467.65 1,075.29

EXTRAORDINARY ITEMS

PROFIT/LOSS FROM CONTINUING OPERATIONS 1,207.69 1,360.10 1,295.27

PROFIT/LOSS FOR THE PERIOD 1,207.69 1,360.10 1,295.27

OTHER ADDITIONAL INFORMATION

EARNINGS PER SHARE

Basic EPS (Rs.) 5.91 6.73 6.42

Diluted EPS (Rs.) 5.90 6.73 6.41

VALUE OF IMPORTED AND INDIGENIOUS RAW

MATERIALS STORES, SPARES AND LOOSE TOOLS

Imported Raw Materials 0.00 0.00 0.00

Indigenous Raw Materials 0.00 0.00 0.00

STORES, SPARES AND LOOSE TOOLS

58
Imported Stores And Spares 0.00 0.00 0.00

Indigenous Stores And Spares 0.00 0.00 0.00

DIVIDEND AND DIVIDEND PERCENTAGE

Equity Share Dividend 408.47 0.00 0.00

Tax On Dividend 0.00 0.00 0.00

Equity Dividend Rate (%) 17.00 20.00 0.00

59
KEY FINANCIAL RATIOS OF HDFC LIFE INSURANCE
COMPANY (in Rs. Cr.)

KEY FINANCIAL RATIOS OF HDFC LIFE INSURANCE MAR 22 MAR 21 MAR 20

COMPANY (in Rs. Cr.)

PER SHARE RATIOS

Basic EPS (Rs.) 5.91 6.73 6.42

Diluted EPS (Rs.) 5.90 6.73 6.41

Cash EPS (Rs.) 5.96 6.98 6.65

Book Value [Excl Reval Reserve]/Share (Rs.) 73.29 55.37 33.66

Book Value [Incl Reval Reserve]/Share (Rs.) 73.29 55.37 33.66

Dividend / Share(Rs.) 1.70 2.02 0.00

Revenue from Operations/Share (Rs.) 309.58 353.53 145.39

PBDIT/Share (Rs.) 6.58 8.93 6.46

PBIT/Share (Rs.) 6.33 8.68 6.23

PBT/Share (Rs.) 6.22 8.59 6.15

Net Profit/Share (Rs.) 5.72 6.73 6.42

PROFITABILITY RATIOS

PBDIT Margin (%) 2.12 2.52 4.44

PBIT Margin (%) 2.04 2.45 4.28

PBT Margin (%) 2.01 2.42 4.22

Net Profit Margin (%) 1.84 1.90 4.41

Return on Net worth / Equity (%) 7.80 12.15 19.06

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Return on Capital Employed (%) 0.65 1.01 0.98

Return on Assets (%) 0.57 0.75 0.98

Total Debt/Equity (X) 0.04 0.05 0.00

Asset Turnover Ratio (%) 0.34 0.46 0.22

LIQUIDITY RATIOS

Current Ratio (X) 0.84 0.76 0.87

Quick Ratio (X) 0.84 0.76 0.87

Inventory Turnover Ratio (X) 0.00 0.00 0.00

Dividend Payout Ratio (NP) (%) 33.82 0.00 0.00

Dividend Payout Ratio (CP) (%) 32.41 0.00 0.00

Earnings Retention Ratio (%) 66.18 0.00 0.00

Cash Earnings Retention Ratio (%) 67.59 0.00 0.00

VALUATION RATIOS

Enterprise Value (Cr.) 113,225.17 140,171.62 88,470.27

EV/Net Operating Revenue (X) 1.73 1.96 3.01

EV/EBITDA (X) 81.43 77.68 67.83

Market Cap/Net Operating Revenue (X) 1.74 1.97 3.04

Retention Ratios (%) 66.17 0.00 0.00

Price/BV (X) 7.34 12.56 13.12

Price/Net Operating Revenue 1.74 1.97 3.04

Earnings Yield 0.01 0.01 0.01

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 BALANCE SHEET OF SBI LIFE INSURANCE COMPANY (in Rs. Cr.)

BALANCE SHEET OF SBI LIFE INSURANCE MAR 22 MAR 21 MAR 20

COMPANY (in Rs. Cr.)

12 months 12 months 12 months

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 1,000.37 1,000.07 1,000.03

TOTAL SHARE CAPITAL 1,000.37 1,000.07 1,000.03

Reserves and Surplus 10,620.74 12,126.76 7,743.06

TOTAL RESERVES AND SURPLUS 10,620.74 12,126.76 7,743.06

TOTAL SHAREHOLDERS FUNDS 11,622.31 13,127.25 8,743.08

NON-CURRENT LIABILITIES

Long Term Borrowings 0.00 0.00 0.00

Deferred Tax Liabilities [Net] 0.00 0.00 0.00

Other Long Term Liabilities 122,131.86 100,261.24 80,374.58

Long Term Provisions 134,453.03 109,203.58 73,440.22

TOTAL NON-CURRENT LIABILITIES 256,584.89 209,464.82 153,814.81

CURRENT LIABILITIES

Short Term Borrowings 0.00 0.00 0.00

Trade Payables 0.00 0.00 0.00

Other Current Liabilities 4,558.55 3,805.01 2,783.79

Short Term Provisions 571.24 433.36 238.51

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TOTAL CURRENT LIABILITIES 5,129.79 4,238.37 3,022.30

TOTAL CAPITAL AND LIABILITIES 273,336.99 226,830.44 165,580.19

ASSETS

NON-CURRENT ASSETS

Tangible Assets 523.96 563.94 567.99

Intangible Assets 0.00 0.00 0.00

Capital Work-In-Progress 2.81 1.49 13.19

Other Assets 0.00 0.00 0.00

FIXED ASSETS 526.77 565.43 581.18

Non-Current Investments 122,206.48 102,541.15 158,813.21

Deferred Tax Assets [Net] 0.00 0.00 0.00

Long Term Loans And Advances 362.69 358.08 364.48

Other Non-Current Assets 0.00 0.00 0.00

TOTAL NON-CURRENT ASSETS 123,095.95 103,464.66 159,758.88

CURRENT ASSETS

Current Investments 0.00 0.00 0.00

Inventories 0.00 0.00 0.00

Trade Receivables 0.00 0.00 0.00

Cash And Cash Equivalents 3,204.22 2,710.52 1,423.23

Short Term Loans And Advances 4,411.52 4,440.25 4,398.08

Other Current Assets 142,625.31 116,215.02 0.00

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TOTAL CURRENT ASSETS 150,241.04 123,365.78 5,821.31

TOTAL ASSETS 273,336.99 226,830.44 165,580.19

OTHER ADDITIONAL INFORMATION

CONTINGENT LIABILITIES, COMMITMENTS

Contingent Liabilities 1,623.99 1,970.62 1,487.46

CIF VALUE OF IMPORTS

Raw Materials 0.00 0.00 0.00

Stores, Spares And Loose Tools 0.00 0.00 0.00

Trade/Other Goods 0.00 0.00 0.00

Capital Goods 0.00 0.00 0.00

EXPENDITURE IN FOREIGN EXCHANGE

Expenditure In Foreign Currency 3.00 19.00 0.00

REMITTANCES IN FOREIGN CURRENCIES FOR

DIVIDENDS

Dividend Remittance In Foreign Currency -- -- --

EARNINGS IN FOREIGN EXCHANGE

FOB Value Of Goods -- -- --

Other Earnings 241.00 7.00 --

BONUS DETAILS

Bonus Equity Share Capital -- -- --

NON-CURRENT INVESTMENTS

Non-Current Investments Quoted Market Value -- -- --

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Non-Current Investments Unquoted Book Value -- -- --

CURRENT INVESTMENTS

Current Investments Quoted Market Value -- -- --

Current Investments Unquoted Book Value -- -- --

65
PROFIT & LOSS ACCOUNT OF SBI LIFE INSURANCE
COMPANY (in Rs. Cr.)

PROFIT & LOSS ACCOUNT OF SBI LIFE INSURANCE MAR 22 MAR 21 MAR 20
COMPANY (in Rs. Cr.)

12 12 12
months months months

INCOME

REVENUE FROM OPERATIONS [GROSS] 58,432.29 49,768.28 40,324.01

Less: Excise/Service Tax/Other Levies 0.00 0.00 0.00

REVENUE FROM OPERATIONS [NET] 58,432.29 49,768.28 40,324.01

TOTAL OPERATING REVENUES 82,983.29 81,912.78 43,797.50

Other Income 1,032.31 866.92 528.83

TOTAL REVENUE 84,015.61 82,779.69 44,326.33

EXPENSES

Cost Of Materials Consumed 0.00 0.00 0.00

Purchase Of Stock-In Trade 0.00 0.00 0.00

Operating And Direct Expenses 0.00 0.00 0.00

Changes In Inventories Of FG,WIP And Stock-In Trade 0.00 0.00 0.00

Employee Benefit Expenses 1,816.37 1,490.98 0.00

Finance Costs 10.01 8.32 0.00

Depreciation And Amortization Expenses 0.14 0.21 0.39

Other Expenses 79,420.86 79,707.50 41,971.83

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TOTAL EXPENSES 81,435.39 81,011.02 42,104.00

PROFIT/LOSS BEFORE EXCEPTIONAL, 2,580.21 1,768.67 2,222.33

EXTRAORDINARY ITEMS AND TAX

Exceptional Items 0.00 0.00 0.00

PROFIT/LOSS BEFORE TAX 2,580.21 1,768.67 2,222.33

TAX EXPENSES-CONTINUED OPERATIONS

Current Tax 922.90 184.17 368.11

Less: MAT Credit Entitlement 0.00 0.00 0.00

Deferred Tax 0.00 0.00 0.00

Tax For Earlier Years 0.00 0.00 0.00

TOTAL TAX EXPENSES 922.90 184.17 368.11

PROFIT/LOSS AFTER TAX AND BEFORE 1,657.32 1,584.51 1,854.23

EXTRAORDINARY ITEMS

PROFIT/LOSS FROM CONTINUING OPERATIONS 1,506.00 1,455.85 1,422.18

PROFIT/LOSS FOR THE PERIOD 1,506.00 1,455.85 1,422.18

OTHER ADDITIONAL INFORMATION

EARNINGS PER SHARE

Basic EPS (Rs.) 15.06 14.56 14.22

Diluted EPS (Rs.) 15.04 14.55 14.22

VALUE OF IMPORTED AND INDIGENIOUS RAW

MATERIALS STORES, SPARES AND LOOSE TOOLS

Imported Raw Materials 0.00 0.00 0.00

Indigenous Raw Materials 0.00 0.00 0.00

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STORES, SPARES AND LOOSE TOOLS

Imported Stores And Spares 0.00 0.00 0.00

Indigenous Stores And Spares 0.00 0.00 0.00

DIVIDEND AND DIVIDEND PERCENTAGE

Equity Share Dividend 200.07 250.02 0.00

Tax On Dividend 0.00 0.00 0.00

Equity Dividend Rate (%) 20.00 25.00 0.00

68
KEY FINANCIAL RATIOS OF SBI LIFE INSURANCE COMPANY (inRs.
Cr.)

KEY FINANCIAL RATIOS OF SBI LIFE INSURANCE MAR 22 MAR 21 MAR 20

COMPANY (in Rs. Cr.)

PER SHARE RATIOS

Basic EPS (Rs.) 15.06 14.56 14.22

Diluted EPS (Rs.) 15.04 14.55 14.22

Cash EPS (Rs.) 15.06 14.56 14.23

Book Value [Excl Reval Reserve]/Share (Rs.) 116.18 131.26 87.43

Book Value [Incl Reval Reserve]/Share (Rs.) 116.18 131.26 87.43

Dividend / Share(Rs.) 2.00 2.50 0.00

Revenue from Operations/Share (Rs.) 829.53 819.07 437.96

PBDIT/Share (Rs.) 25.89 17.77 22.23

PBIT/Share (Rs.) 25.89 17.77 22.22

PBT/Share (Rs.) 25.79 17.69 22.22

Net Profit/Share (Rs.) 15.05 14.56 14.22

PROFITABILITY RATIOS

PBDIT Margin (%) 3.12 2.16 5.07

PBIT Margin (%) 3.12 2.16 5.07

PBT Margin (%) 3.10 2.15 5.07

Net Profit Margin (%) 1.81 1.77 3.24

Return on Net worth / Equity (%) 12.95 11.09 16.26

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Return on Capital Employed (%) 0.96 0.79 1.36

Return on Assets (%) 0.55 0.64 0.85

Total Debt/Equity (X) 0.00 0.00 0.00

Asset Turnover Ratio (%) 0.33 0.42 0.28

LIQUIDITY RATIOS

Current Ratio (X) 29.29 29.11 1.93

Quick Ratio (X) 29.29 29.11 1.93

Inventory Turnover Ratio (X) 0.00 0.00 0.00

Dividend Payout Ratio (NP) (%) 13.28 17.17 0.00

Dividend Payout Ratio (CP) (%) 13.28 17.17 0.00

Earnings Retention Ratio (%) 86.72 82.83 0.00

Cash Earnings Retention Ratio (%) 86.72 82.83 0.00

VALUATION RATIOS

Enterprise Value (Cr.) 108,857.30 85,345.72 62,673.46

EV/Net Operating Revenue (X) 1.31 1.04 1.43

EV/EBITDA (X) 42.02 48.02 28.20

Market Cap/Net Operating Revenue (X) 1.35 1.08 1.46

Retention Ratios (%) 86.71 82.82 0.00

Price/BV (X) 9.64 6.71 7.33

Price/Net Operating Revenue 1.35 1.08 1.46

Earnings Yield 0.01 0.02 0.02

70
 Chapter 6:
Findings

Findings

 Return on net profit margin of HDFC Life Insurance Company is more than SBI Life
Insurance Company from the year 2019-20 to 2021-22.

 From the year 2019-20 to 2021-22 the highest return on net worth is 4.41 in the year
2019-20. And the least return on net worth is 1.77 in the year 2020-2021.

 Return on assets of HDFC Life Insurance Company is more than SBI Life Insurance
Company from the year of 2019-20 to 2021-22.

 Return on Assets of HDFC Life Insurance Company is higher 0.98 in year 2019-20. And
list in 0.55 in the year 2021-22 of SBI Life Insurance Company.

 Total debt equity of HDFC Life Insurance Company is more than SBI Life Insurance
Company from the year 2019-2020 to 2021-22.

 Total debt equity of HDFC Life insurance company is 0.05 in the year 2020-21. And SBI
Life Insurance Company in least 0.00 in year 2019-20, 2020-21 and 2021-22.

 Return on capital employed of HDFC Life Insurance Company is less than SBI Life
Insurance Company from the year 2019-20 to 2021-22.

 Return on capital employed is highest 1.36 in the year 2019-20 of SBI Life Insurance
Company. And least 0.65 in the year 2021-2022 of HDFC Life Insurance Company.

71
 Chapter 7:
Conclusion

Conclusion

 HDFC Life Insurance Company is best in the profitability because every year HDFC
Insurance Company is higher as compare to SBI Life Insurance.

 In every year HDFC Life Insurance Company’s return on net profit margin, return on
asset, return on capital employed and total debt/ equity is higher than SBI Life Insurance
Company.

 Insurance is to provide protection against future risk.

 There are three types of insurance general insurance, life insurance and other insurance.
All life insurance companies in India have to comply with the strict regulations laid out
by Insurance Regulatory and Development Authority of India (IRDAI).

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 Chapter 8:
Suggestions & Bibliography

Suggestion

 SBI Life Insurance Company must have to increase profitability by increasing return on
Net Profit Margin, Return on Asset, and Total debt equity.

 HDFC Life Insurance Company must have to maintain good image and earn goodwill in
the market by earning more and more profit

Bibliography

Websites
1. www.moneycontrol.com

2. www.wikipedia.com

3. www.investopedia.com

4. www.irda.com

5. www.euroasiapub.org

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