Insert Cover Image using Slide Master View Do not distortICT Adoption in Insurance Industry ‐ ICT Adoption in Insurance Industry India February 2012 Executive Summary The ICT adoption in insurance market was valued at INR xyz bn in 2011 and is anticipated to grow at a CAGR of xxx% to reach INR 230.85 bn by 20‐‐ Out of the overall ICT expenditure in 2011, insurers spent about INR aa bn and INR cc bn on IT and telecommunications respectively Hardware Software and Services comprise of 45 4% 19 2% and 33 7% respectively of the Hardware, Software and Services comprise of 45.4%, 19.2% and 33.7% respectively of the overall IT expenses of insurers Some of the prevailing key technologies identified within the Indian insurance sector so far comprise of: Market Key y Technologies aaa bbb ccc ddd Technology trends identified in the industry can be summarized as below: Technology trends identified in the industry can be summarized as below: Trends xyz – zzz abc – yyy def – xxx Major Players Co pet t o Competition IBM Wipro Microsoft CMC Red Hat TCS ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 2 •Insurance Industry – Snapshot •ICT in Insurance – Overview Key Technologies Adopted h l d d Government Initiatives Drivers and Challenges •Trends in Insurance Industry SOA Cloud Computing Cl d C i Web 2.0 •Key ICT Vendors y •IT Landscape – Indian Insurers •Strategic Recommendations •Appendix ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 3 Indian Insurers ‐ History xxx Insurers ‐ India Numbers 25 20 15 10 5 0 11 1 4 3 1 10 13 1 12 13 1 12 14 1 13 14 1 13 16 1 15 16 1 15 22 1 22 1 23 1 21 21 22 a b 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 xxx Insurers ‐ I di I India Numbers 25 20 15 10 5 0 22 14 5 8 1 22 6 15 24 6 15 6 8 1 15 6 8 1 15 6 8 1 16 6 9 17 6 10 6 15 8 4 1 3 11 4 6 1 17 a x c 1 2006 1 2007 1 2008 1 2009 1 2010 2000 2001 2002 2003 2004 2005 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 4 Rise in working class population and growing disposable income is driving the insurance sector in India Insurance Industry – Snapshot (India) •The highly dynamic Insurance sector can be primarily segregated into Life and Non‐Life Insurance segments • Indian Life insurance business is ranked 9th amongst 156 countries and contributes to about 2.69% to the global market in 2010 • On the other hand, the non‐life insurance business was ranked at the 19th position in 2010 and contributes to about 0.58% of the global market xxx Insurers – India (2011) x Numbers 60 40 20 0 y z 41 23 8 1 xxx 6 1 0 zzz 18 No. of Insurers taken are as of 30th Sep, 2011 •Post liberalization in India, the sector P t lib li ti i I di th t witnessed a persistent entry of foreign players As of now, state owned LIC maintains its leadership with approximately 76% in terms of l d hi ith i t l 76% i t f new business premiums while the remaining 25% is split amongst 23 private players 3 2 1 0 xxx Insurance ‐ Market Share INR tr 2.65 xxx yyy 2.92 •Favorable economic demography and rising disposable incomes are the primary growth disposable incomes are the primary growth drivers for the sector 0.35 0.43 2009‐10 2010‐11 5 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT Insurance Industry Hierarchy – India Public State run LIC governs the entire public life insurance domain Life Insurance Currently, a stiff competition prevails amongst il t 23 private players Private Ministry of Finance IRDA Public Non‐life Insurance Players have y primarily targeted the retail segment and brought in efficient strategies to strengthen their distribution distribution channel Private players have carved a niche for themselves in terms th l i t of service quality 6 Private Pi t ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT Insurance industry relies majorly on technology and has shown a strong IT adoption over the years ICT in Insurance ‐ Overview •Gradual entry of private players in the sector has resulted in the formation of a stiff competition which in turn has forced insurers to adopt IT so as to gain a competitive edge over other players •The ICT spending of insurers was valued at INR 76.17 bn in 20‐‐ and is expected to attain a CAGR of h d f l d b d d f 13.1% to reach INR xxx bn by 2020 •Primarily, areas of policy administration, claims management, HR solutions, re‐insurance management and business intelligence are automated by insurers With the advent of technology players have also shifted their focus on tools such as portal services and sales IVR With the advent of technology, players have also shifted their focus on tools such as portal services and sales, IVR and request SMS Apart from the above mentioned, insurance vendors also emphasize on touch points for customers, agents and sales managers IT adoption Phases IT adoption Phases ‐ Insurers Phase I Phase II Phase III Phase IV xxx yyy zzz aaa ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 7 ICT spending of insurers in India is expected to witness a significant momentum in the ensuing years SAMPLE ICT Spending – Indian Insurance Industry IT Telecom e H 2013e f G g F h E 2014e 2015e 2016e INR bn Z Y X W 0 2009 2010 2011 2012e a L b K c J d I i j k l D C B A 2017e 2018e 2019e 2020e Analysis of ICT Spending Indian Insurance Industry Analysis of ICT Spending – Indian Insurance Industry • ICT in Insurance industry was pegged at INR xx bn in 20‐‐ and is expected to witness an impressive CAGR of 13.1% • Over the years, incorporation of IT has been the top choice amongst insurers in India as compared to telecommunications services compared to telecommunications services • IT spending of insurers hovered at around INR AAA bn in 2011, whereas amount spent on telecommunications stood at INR BBB bn during the same year • An analysis of the overall spending brings forth the fact that insurers in India will shell out more on IT expenses as compared to telecommunication expenditures IT expenses mainly include the amount invested in hardware, software and services ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 8 Insurers exhibit a tendency to shell out more on hardwares as compared to software and services IT Expenditure Segmentation ‐ Insurance A 120% 100% 80% 60% 40% 20% 0% 20.6% 19.9% 19 9% 19.2% 19 2% 18.8% 18 8% 19.0% 19 0% 18.7% 18 7% 18.3% 18 3% 100% SAMPLE B C D 45.0% 44.0% 34.9% 1.3% 2012e 36.0% 1.0% 2013e 46.4% 45.9% 45.4% 43.1% 42.2% 38.6% 17.0% 30.8% 2.2% 2009 32.3% 2.0% 2010 33.7% 1.7% 2011 37.3% 1.0% 2014e 38.6% 1.0% 2015e 44.0% 0.4% 2020e A B C •XXX •YYY •ZZZ ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 9 BBB Expenditure – Insurance Industry SAMPLE BBB Expenditure – Segmentation 2011 2010 2012e 23.4% 52.3% 52.3% 24.3% 25.3% 22.4% 52.3% 2009 24.4% 52.3% 23.3% 23 3% 23.9% 23.8% 23 8% 2013e 2014e 2015e 2020e 21.3% 52.3% 26.4% 20.7% 52.3% 27.0% 19.5% 52.3% 28.2% 14.3% 33.4% 52.3% ABC DEF GHI ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 10 XYZ Basic Framework SAMPLE DDD Platform 1 Feature Phone AAA BBB EEE Platform 2 Tablet PC Smartphone CCC Platform 3 Portable Media Player End Users Digital Distribution Platform Where applicable ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 11 Popular Technologies Implemented (X/X) Usage of enterprise softwares also has found immense popularity amongst insurers, wherein these customer relationship management and business intelligence tools are most widely used SAMPLE abc def • xxx • xxx ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 12 Government Initiatives •The insurance sector in India is primarily governed by the IRDA (Insurance Regulatory and Development Authority •It has taken several initiatives which have directly or indirectly or indirectly acted as a driver for the ICT industry •Some of the major initiatives has been mentioned as under: •Some of the major initiatives has been mentioned as under: SAMPLE SAMPLE Selling of high value ULIPs via telemarketing forbidden f bidd Setting up Integrated Grievances Management System (IGMS) M S (IGMS) • xxx • xxx ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 13 Drivers & Challenges – Summary Drivers Need for better customer service Presence of huge volume of data Rise in internet usage Rise in enterprise mobility Challenges Cyber threats Lack of technology awareness ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 14 Need for better xxx is increasing the demand for xxx oriented ICT tools Need for better customer service •At present, there are 49 insurers operating in the nation, thus making the sector very competitive with so many players vying for greater market share Insurers are now forced to revamp their services and product quality on a regular basis so as to survive the prevailing competition Impact •A better and efficient customer service happens to be the top priority of major insurers and thus they have shifted their focus onto IT implementation y p Customer service oriented tools and solutions such as xxx, xxx and other xxx tools are currently experiencing a dynamic demand and hence is boosting the overall ICT usage by manifolds Insurance Penetration ‐ abc USD 60 40 Insurance Penetration ‐ def % 55.7 abc def 6 4 8.7 2 0 abc def 4.4 20 0 2.2 0.6 0.7 9.1 2.4 2001 2010 xxx 2001 2010 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 15 xxx with its ability to reach a massive amount of audience happens to be a significant tool for insurers yyy – Insurance Industry • yyy is another nascent technology which is yet to experience a full fledged take off within the insurance sector in India • A slow but steady popularity about yyy is seen amongst the sector which in turn happens to be a splendid opportunity for ICT Vendors for ICT Vendors • The primary reason supporting the growth of yyy is the mammoth use of social media space all over the world • Social media websites such as Twitter, Facebook and Linkedin are constantly attracting people across all age groups, culture and geographic demographics and hence have become the most effective way to facilitate visibility • The following illustration will provide better understanding of yyy in insurance sector: Insurance Player xxx xxx ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 16 Major Public Companies ‐ Summary Net Profit/Loss 3,000 2,500 2,000 1,500 1,000 500 0 ‐500 ‐1,000 ‐2,000 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 Size of the Bubble represents Market Capitalization in INR bn Total income xxx yyy zzz Note: All figures are in INR mn and are based on the latest financials available ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 17 Public: Domestic Company – xxx. (x/x) Company Information Corporate Address Tel No. Fax No. Website Year of Incorporation Ticker Symbol Stock Exchange Head Office New Delhi Offices and Centres – India Products and Services Products and Services Category Logistics Education & Training g Data Services Outsourcing Others Products/Services Key People Name N Designation D i ti MD & CEO Chief Financial Officer Chief Operating Officer Vice President ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 18 Public: Domestic Company – xxx (x/x) Financial Snapshot i i lS h INR mn 4 a 3 2 0 2008 2009 2010 2011 b c Total Income Net Profit/Loss d INR mn 4 3 2 1 0 Key Ratios K i Particulars y‐o‐y change 2011 (2011‐10) ‐0.18 0.17 0.39 ‐0.61 ‐0.49 5.08 0.48 ‐36.68 18.41% 16.42% 19.39% 27.43% 30.75% 40.66% 17.95% 88.11% 2010 2009 2008 Profitability Ratios Operating Margin Net Margin Profit Before Tax Margin Return on Equity Return on Capital Employed Return on Working Capital Return on Assets Return on Fixed Assets 18.59% 16.26% 19.01% 28.05% 31.24% 35.58% 17.47% 12.44% 12.02% 14.88% 28.52% 26.40% 32.79% 14.98% 11.35% 8.63% 11.53% 29.53% 35.72% 59.62% 13.36% Financial Summary • The company incurred a net profit of INR xxx mn in FY 2011, as compared to net profit of INR xxx mn in FY 2010 • The company reported total income of INR zzz mn in FY 2011, as compared to total income of INR zzz mn in FY 2010 compared to total income of INR mn in FY 2010 • The company earned an operating margin of 18.41 per cent in FY 2011, a decrease of 0.18 percentage points over FY 2010 • The company reported debt to equity ratio of 0.53 in FY 2011, a decrease of 12.75 per cent over FY 2010 124.79% 119.76% 108.85% Cost Ratios Operating costs (% of Sales) Administration costs (% of Sales) Interest costs (% of Sales) Interest costs (% of Sales) 0.20 ‐0.97 ‐0.36 81.39% 9.35% 0.02% % 81.19% 10.32% 0.38% % 87.21% 10.78% 0.26% % 88.60% 13.50% 0.10% % Liquidity Ratios Current Ratio Cash Ratio ‐3.57% ‐8.10% 2.28 0.82 2.36 0.89 2.11 0.63 1.44 0.42 Leverage Ratios Debt to Equity Ratio Debt to Capital Ratio b i l i Interest Coverage Ratio ‐12.75% ‐100.00% 1742.04% 0.53 0.00 914.14 0.61 0.03 49.63 0.90 0.11 49.66 1.21 0.08 116.68 Key Financial Performance Indicators Indicators Market Capitalization (INR mn) Total Enterprise Value (INR mn) EPS (INR) EPS (INR) PE Ratio (Absolute) Value (08/02/2012) Efficiency Ratios Fixed Asset Turnover Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover ‐30.05% 1.79% 10.14% 13.22% ‐3.10% 5.31 1.08 1.37 2.45 1.65 7.59 1.06 1.25 2.16 1.71 9.69 1.21 1.39 2.65 2.31 12.55 1.54 2.10 6.87 3.40 Improved Decline ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 19 Public: Domestic Company – xxx (3/3) Key Business Segments a 100% Key Geographic Segments abc 100% b c e def ghi jkl 53% 50% 36% 4% 6% 41% 46% 28% 55% 25% 54% 50% 79% 1% 18% 2% 69% 26% 2% 4% 57% 38% 3% 2% 51% 43% 0% 5% 8% 2009 13% 5% 2010 16% 5% 2011 0% 3% 2% 2011 2008 2008 2009 2010 Key Recent Developments Description Overview Parent Company Most Recent Auditor News • xxx • xxx • xxx ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 20 SWOT Analysis – xxx SAMPLE SAMPLE Weakness •Limited liquidity SWOT Strength •Wide and dynamic range of Wid dd i f products and services •Capability to serve key industry verticals Threat •Rapid change in technology Rapid change in technology •Intense competition Opportunity •Global growth in the IT services market •Growth in domestic ICT adoption in insurance industry ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 21 General Insurer‐ yyy Corporate Information Company Snapshot Foundation: Headquarter: Address: Website: b Phone: Business Highlights • Operates as a subsidiary of yyyy zz • Through its subsidiaries, provides insurance solutions for protection, health, wealth with protection, for protection, health, wealth with protection, children, and retirement needs • The company comprises of … Products and Services P d t dS i a b c d e f g h i j ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 22 Technology Implementation (x/x) SAMPLE SAMPLE ICT Vendor – abc Solution Benefit • BI and CRM initiative provided valuable insights for all sales, marketing and customer marketing and customer service‐related business units within the Financial Services Group • Increased efficiencies in productivity and deployment of its services its services • Currently, customers receive improved, relevant and timely services Requirements • Gain a better understanding of customers across the financial services businesses services businesses • Provide better, relevant and timely service to its customer base Technology Used xxx ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 23 Sales Intelligence (1/x) Mr. xxx CFO Mr. xxx Vice President ‐ IT E‐mail Phone Professional History: y xxx yyy •xxx E‐mail Phone Professional History: y xxx yyy •xxx ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 24 Strategic Recommendations abc def ghi • xxx • xxx ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 25 Appendix Ratio Operating Margin Net Margin Profit Before Tax Margin Return on Equity (ROE) Return on Capital (ROCE) Return on Working Capital Return on Assets Return on Fixed Assets Operating Costs (% of Sales) Administration Costs (% of Sales) Interest Costs (% of Sales) SAMPLE Calculations (Operating Income/Revenues)*100 (Net Profit / Revenues) *100 (Income Before Tax / Revenues *100 (Net Income / Shareholders (N I / Sh h ld Equity)*100 EBIT / (Total Assets – Current Liabilities)*100 (Net Income / Working Capital) (N I / W ki C i l) *100 (Net Income / Total Assets)*100 (Net Income / Fixed Assets) *100 (Operating Expenses / Sales) *100 (Administrative Expenses / Sales) *100 (Interest Expenses / Sales) *100 Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover Sales / Total Assets Sales / Current Assets Sales / Working Capital Sales / Shareholders Equity / q y Debt to Equity Debt to Capital Ratio Interest Coverage Ratio Fixed Asset Turnover Ratio Current Ratio Calculations Current Assets / Current Liabilities {(Cash & Bank Balance + Marketable Securities) / Current Liabilities)} Total Liabilities / Shareholders Equity E it {Total Debt / (Shareholders Equity + Total Debt)} EBIT / Interest Expense Sales / Fixed Assets Cash Ratio ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 26 Thank you for the attention The ICT Adoption in Insurance Industry – India report is a part of Research on India’s h d i i d di i f h di ’ Information Technology Series. 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