Report of Summer Training ConductedAt IDBI Federal Life insurance co. Ltd. Submitted in partial fulfillment of the requirements For the award of the degree of Master of Business Administration (MBA) To Guru Gobind Singh Indraprastha University, Delhi Guide: Submitted by: Guide Name: Ms. Swati Student Name: Janisha Gandhi Roll No.: 04780003912 Batch: 2012-2014 Gitarattan International Business School New Delhi – 110085 Batch 2012-14 CHAPTER-1: PROFILE OF THE COMPANY 1.1 Company’s Profile Name of the Firm : IDBI Federal Life Insurance Co. Ltd. Industry : Life Insurance Founded : March 2008 Address : IDBI Federal Life Insurance Co Ltd 907-908,9 th Floor, Kanchunjunga Building, Barakhamba Road, Connaught Place, New Delhi-110001, India Telephone : 1800 22 1120 (Toll Free) Email :
[email protected] Website : http://www.idbifederal.com Type : National, Joint Venture Registered Office : IDBI Federal Life Insurance Co Ltd. Trade View Oasis Complex, Kamala City, P.B Marg Lowe Parel (W),Mumbai-400013,India Key People : R.K Bansal Chairman G V Nageswara Rao, MD & CEO 1.2 IDBI Federal Life Insurance Co Ltd It is a joint-venture of IDBI Bank, India‟s premier development and commercial bank, Federal Bank, one of India‟s leading private sector banks and Ageas, a multinational insurance giant based out of Europe. In this venture, IDBI Bank owns 48% equity while Federal Bank and Ageas own 26% equity each. It started in March 2008, in just five months of inception; IDBI Federal became one of the fastest growing new insurance companies to garner Rs 100 Cr in premiums. Through a continuous process of innovation in product and service delivery IDBI Federal aims to deliver world-class wealth management, protection and retirement solutions that provide value and convenience to the Indian customer. The company offers its services through a vast nationwide network of 2,186 partner bank branches of IDBI Bank and Federal Bank in addition to a sizeable network of advisors and partners. As on 31 st March 2013, the company has issued over 4.99 lakhs policies with a sum assured of over Rs. 28,580 Cr. Figure no. 1 48% 26% 26% EQUITY IDBI BANK FEDERAL BANK AGEAS 1.2.1 About Their Heritage IDBI Bank IDBI Bank Ltd., since its inception, India‟s premier industrial development bank. It came into being as on July 01, 1964 (under the Companies Act, 1956) to support India‟s industrial backbone. Today, it is amongst India‟s foremost commercial banks, with a wide range of innovative products and services, serving retail and corporate customers in all corners of the country from 1082 branches and 1715 ATMs. The Bank offers its customers an extensive range of diversified services including project financing, term lending, working capital facilities, lease finance, venture capital, loan syndication, corporate advisory services and legal and technical advisory services to its corporate clients as well as mortgages and personal loans to its retail clients. As part of its development activities, IDBI Bank has been instrumental in sponsoring the development of key institutions involved in India‟s financial sector –National Stock Exchange of India Limited (NSE) and National Securities Depository Ltd, SHCIL (Stock Holding Corporation of India Ltd), CARE (Credit Analysis and Research Ltd). Federal Bank Federal Bank is one of India‟s leading private sector banks, with a dominant presence in the state of Kerala. It has a strong network of over 1104 branches and 1195 ATMs spread across India. The bank provides over four million retail customers with a wide variety of financial products. Federal Bank is one of the first large Indian banks to have an entirely automated and interconnected branch network. In addition to interconnected branches and ATMs, the Bank has a wide range of services like Internet Banking, Mobile Banking, Tele Banking, Any Where Banking, debit cards, online bill payment and call centre facilities to offer round the clock banking convenience to its customers. The Bank has been a pioneer in providing innovative technological solutions to its customers and the Bank has won several awards and recommendations. Ageas Ageas is an international insurance group with a heritage spanning more than 180 years. Ranked among the top 20 insurance companies in Europe, Ageas has chosen to concentrate its business activities in Europe and Asia, which together make up the largest share of the global insurance market. These are grouped around four segments: Belgium, United Kingdom, Continental Europe and Asia and served through a combination of wholly owned subsidiaries and partnerships with strong financial institutions and key distributors around the world. Ageas operates successful partnerships in Belgium, UK, Luxembourg, Italy, Portugal, Turkey, China, Malaysia, India and Thailand and has subsidiaries in France, Hong Kong and UK. Ageas is the market leader in Belgium for individual life and employee benefits, as well as a leading non-life player through AG Insurance. In the UK, Ageas has a strong presence as the fourth largest player in private car insurance and the over 50‟s market. Ageas employs more than 13,000 people and has annual inflows of more than EUR 21 billion. 1.2.2 Industry Profile - Insurance and Banking Wherever there is uncertainty there is risk. We do not have any control over uncertainties which involves financial losses. The risks may be certain events like death, pension, retirement or uncertain events like theft, fire, accident, etc. Insurance may be described as a social device to reduce or eliminate risk of loss to life and property. Under the plan of insurance, a large number of people associate themselves by sharing risks attached to individuals. The risks, which can be insured against, include fire, the perils of sea, death and accidents and burglary. Any risk contingent upon these may be insured against at a premium commensurate with the risk involved. Thus collective bearing of risk is insurance Insurance And Banking is coexisting financial institution while complementing and supplementing each other. The Insurance Regulatory and Development Authority Act, 1999 have created more opportunities for expansion of the markets. Industry serves the society in a very effective manner. Banking Institutions have got the opportunities to enter in insurance business while insurance institutions have already under the autonomy of start banking business. Many non-banking institutions have been opened, acquired funds and dissolved with public money at their stakes. Since they were totally in the hands of private persons, the Government control became ineffective. Banking institutions in India are mainly under the control of Reserve Bank of India. People need insurance but they prefer investment over risk coverage although latter is more important. Indian mentality for insurance is very bleak people do not feel need of insurance although they have dire-necessity for that. Insurance institutions in India have not considered forced insurance. The voluntary-purchasing of insurance policies is rare phenomena. They prefer to go to bank offices rather than going to insurance offices for getting risk coverage. The insurance institutions procure the business through their agents who are the main link between people and the company. The IRDA, Act is expected to mobiles insurance coverage and resources for investment in the economy. The Government has assured that there would not be any disinvestment in the LIC, GIC and their subsidiaries. Insurance Act, 1938, has not been sufficient to regulate the insurance business in India. 1.2.3 Milestones 2006 IDBI Bank, Federal Bank and Belgian-Dutch insurance major Fortis Insurance International NV signed a MoU to start a life insurance company 2008 IDBI Fortis Life Insurance Co. Ltd., which started its operations in March 2008 2008 IDBI Federal becomes one of the fastest growing new life insurers to collect premiums worth Rs 100 crores 2009 IDBI Fortis announces Rs 250cr capital infusion 2009 Nimbus ropes in IDBI Fortis as title sponsor of India–Sri Lanka series 2009 'IDBI Fortis' Boss-Ka-Boss receives PRCI Award 2009 IDBI Fortis receives bronze Dragon at 'PMAA 2009 2010 IDBI Fortis now renamed as IDBI Federal Life Insurance Company 2011 IDBI Federal launches Retiresurance Guaranteed Pension Plan 2012 IDBI Federal makes its online debut 2013 IDBI Federal in association with Phoenix Foundation organizes a trek for the physically challenged 2013 IDBI Federal breaks-even in Five years; posts maiden profit of Rs 9.24 crore Table no. 1 1.2.4 Functional Areas of IDBI Federal 1.2.4.1 Product Management Department The Product management department role is product development and product marketing, which are use different strategies for maximizing sales revenues, market share, and profit margin .The product department deals in following activities : Lead research and analysis of new product ideas and interprets results. Works with management to evaluate the cost/benefit of market opportunities and new initiatives. Develop new product ideas and move them through the Product Development Life Cycle (PDLC) keeping product sponsors updated. Serve as a key contact for developing and implementing new products or administrative practices specific to the product line. Provide direction and strategic perspective on product initiatives Monitor competition to ensure viability of existing product line. Provide prioritization on product related issues to internal areas to include technology, legal and state-filing units. Act as a product line expert and maintain a thorough knowledge of company product features and benefits as well as industry product trends .Provide product expertise to various internal areas to include sales, marketing, service and finance. 1.2.4.2 Actuarial Department Actuarial department evaluate the probability of events and quantify the contingent outcomes in order to minimize the impacts of financial losses associated with uncertain undesirable events. Pricing: Deciding premiums and profitability Valuation: Deciding liability base for company Budgeting: Deciding product mix Cash flows for risk management IRDA reporting requirements 1.2.4.3 Finance Department Finance department doing the allocation of assets and liabilities over time under conditions of certainty and uncertainty. Finance Department deals with Financial Accounting Reporting of key financial information to stakeholders Performance Management reporting Risk Management by set limits, risk management processes Operating in a cost efficient manner Provider of financial statements and management reports. 1.2.4.4 Investments Department The Investments department‟s role is to seek to attain superior returns while incurring prudent levels of risk for General Board managed funds. It deal with Team: Analysts and Fund manager headed by the CIO Function: Earning higher returns on the investments and delivering the returns promised and generate investment income 1.2.4.5 Human Resource Management The role of the Human Resource Department is to deal with management of people within an organization. The Department is responsible for hiring members of staff and ensuring that they perform to expectation. Plan, develop, organize, implement, direct and evaluate the organization's human resource function and performance. Participate in the development of the corporation's plans and programs as a strategic partner but particularly from the perspective of the impact on people. Translate the strategic and tactical business plans into HR strategic and operational plans. Evaluate and advise on the impact of long range planning of new programs/strategies and regulatory action as those items impact the attraction, motivation, development and retention of the people resources of the corporation. 1.2.4.6 Marketing Management Digital Marketing : Promoting the brand online and driving sales through the online marketing. Branding : Preparing marketing plans, advertising campaigns. Channel Marketing : Establishing and maintaining the distribution systems companies‟ use to market, sell, and deliver products to customers. Product Marketing : Promotional materials and end customer interaction modules. Figure no.2 Bancassurance It refers to selling of insurance products through banks. The IRDA is in discussion with insurers and bankers and wants to assess whether it would be possible for banks to sell products of multiple insurance companies. This will help banks with greater flexibility and provide a wider choice to customers. Direct Marketing : Incomesurance is the main product pushed through this channel. Success marketing programs like contests to support business performance. Insurance companies frequently use mailings as part of a direct marketing campaign. Prospective customers receive postcards or letters encouraging them to contact the company. Direct Marketing (3-4%) Agency Selling (16-17%) Bancassurance (80%) 1.3 Vision and Values of IDBI Federal 1.3.1 Vision To be the leading provider of wealth management, protection and retirement solutions that meets the needs of our customers and adds value to their lives. 1.3.2 Mission To continually strive to enhance customer experience through innovative product offerings, dedicated relationship management and superior service delivery while striving to interact with our customers in the most convenient and cost effective manner. To be transparent in the way we deal with our customers and to act with integrity. To invest in and build quality human capital in order to achieve our mission. 1.3.3 Values Transparency : Crystal Clear communication to our partners and stakeholders Value to Customers : A product and service offering in which customers perceive value Rock Solid and Delivery on Promise : This translates into being financially strong, operationally robust and having clarity in claims Customer-friendly : Advice and support in working with customers and partners Profit to Stakeholders : Balance the interests of customers, partners, employees, shareholders and the community at large. 1.4 Products of IDBI Federal IDBI federal is providing various insurance policies for the commonwealth of the people and its customer in particular. The various insurance policies provided by the company are: INCOMESURANCE : IDBI Federal Incomesurance Endowment and Money Back Plan is loaded with lots of benefits which ensure that policyholder get Guaranteed Annual Payout along with insurance protection which will help policyholder to reach their goals with full confidence. Incomesurance Plan is very flexible and allows policyholder to customise their Plan as per your individual and family‟s future requirements. Moreover it also allows policyholder to choose Premium Payment Period, Payout Period, Payout Options and more. HEALTHSURANCE : Presenting the IDBI Federal Healthsurance Hospitalisation and Surgical Plan. If policyholder aged 18 years to 55 years and currently in good health, this new insurance plan is designed to help policyholder to manage the extra financial burden that comes with hospitalisation, by providing a wide range of attractive benefits. TERMSURANCE : IDBI Federal Termsurance Protection Plan (Termsurance) comes with three cover options which policyholder can select on the basis their requirement. Termsurance is designed with a host of benefits & options aimed at satisfying their every need. It not only allows policyholder to customise their plan as per their individual and family‟s needs, it also comes with a host of benefits like convenient insurance cover options, flexible premium payment terms, choice of policy term and lots more flexible options. RETIRESURANCE : A retirement plan designed to accumulate money to aid a comfortable retirement. The plan provides a guaranteed return on investment and grows steadily over the years to ensure that policyholder have a corpus on their retirement date, guaranteed. CHILDSURANCE : Whether policyholder‟s child wants to be a doctor, an engineer, an MBA, a sportsman, a performing artist, or dreams of being an entrepreneur, the IDBI Federal Childsurance Dream builder Insurance Plan will keep you future-ready against both, changing dreams and life‟s twists. It allows policyholder to create build and manage wealth by providing several choices and great flexibility so that policyholder‟s plan meets their specific needs. Childsurance allows policyholder to protect their child plan with triple insurance benefits so that their wealth-building efforts remain unaffected by unforeseen events and their child‟s future goals can be achieved without any hindrance. WEALTHSURANCE : The Wealthsurance Milestone Plan is a unique Insured Wealth Plan designed to help cross different milestones in one‟s life. It enables customers to save and build wealth under the protection of Insurance to meet their financial goals. The Wealthsurance Milestone Plan offers a wide range of Investment options, Insurance options and unmatched flexibility that allows customers to customize a plan suited to their needs. Customers can plan for their milestones like completion of school education for their child, a marriage, acquisition of a new house and so on. This Plan comes with a wide range of 13 investment options and 7 insurance benefits - all packaged with a low charge structure and unmatched flexibility. BONDSURANCE : The IDBI Federal Bondsurance Advantage Plan is a single premium plan where policyholder needs to make just a one-time investment. At the end of the chosen period, policyholder will receive a guaranteed maturity amount. In case of death of the insured person before the Maturity Date, a guaranteed Death Benefit will be paid. GROUP MICROSURANCE : IDBI Federal Group Microsurance Plan provides affordable life insurance cover to groups. This plan is extremely useful to Micro Finance Institutions, Self Help Groups and NGOs to insure the lives of their group members and thus provide security to the group members‟ families. The plan can also be used for providing loan protection to the group members‟ families. HOMESURANCE : IDBI Federal Homesurance Plan is a mortgage reducing term assurance plan – MRTA, which offers protection to their home from their home loan. The Plan provides a cover equal to the outstanding balance of their home loan against any unfortunate events that may occur to policyholder. This plan gives people the option of a Single Premium. LOANSURANCE : Loansurance is a cost-effective way to ensure that the outstanding debt is settled in the unfortunate event of death of the insured member. This term assurance plan provides cover to a policyholder directly liable for loan repayment (and the partners, in case of a partnership), as per the benefit schedule. 1.5 Size of the Organization In terms of man power and turnover - Year of Establishment 2008 Nature of Business Life Insurance Number of Employees 10,000 employees (Approx) Turnover Rs. 500 crore (Approx) Table no.2 IDBI federal life insurance currently has over 10,000 on roll employees all over the country and over 2,00,000 licensed agents working towards the success. The company has reported a maiden profit of Rs 9.24 crore in 2012-13, thus making it one of the fastest to break-even in the Life Insurance industry. In an industry challenged by falling margins, shrinking new business volumes, high cost ratios and low profitability, this is a significant achievement. 1.6 Organization structure of the IDBI federal IDBI Federal has line structure as its Organizational structure. Features of line organization are: In line structure, authority flows from the top level to lower levels through various managerial positions. There is vertical flow of authority and responsibility. There are many levels of management depending upon the scale of business and decision-making ability of managers. Each level of management has equal rights. There is unity of command. Every person is accountable to his immediate boss. There is limit on subordinates under one manager. A manager has control only over the subordinates of his department. Figure no.3 Chairman CEO/CFO/COO HOD Zonal Manager Regional Manager Branch Manager Senior Manager Relationship Manager 1.7.1 Market Share of IDBI Federal Figure no. 4 IDBI Federal‟s New Business Premium grows by 23%, compared to industry‟s negative growth of -15%. Achieves 44% increase in the number of new business policies sold. Product mix further shifts to long-term traditional products, thereby driving profitability through product-mix. Traditional products account for 83% of new business premium. 13 th month persistency improves to 76%. Among top 5 companies in persistency experience. 63.47 5.88 5.66 4.40 3.14 2.73 2.46 2.30 1.27 1.27 1.05 1.02 0.99 0.99 0.58 0.53 0.42 0.41 0.41 0.39 0.33 0.20 0.09 MARKET SHARE FOR FY'12~FY'13 (IN %) Life Insurance Corporation of India ICICI Prudential Life Insurance Co. Ltd HDFC Standard Life Insurance Co. Ltd SBI Life Insurance Co. Ltd Max Life Insurance Co. Ltd Bajaj Allianz Life Insurance Co Ltd Birla Sun life Insurance Co. Ltd Reliance Life Insurance Co. Ltd Tata AIG Life Insurance Co. Ltd ING Vysya Life Insurance Co. Ltd MetLife Life Insurance Co Ltd Aviva Life Insurance Co Ltd Canara HSBC OBC Life Insurance Co Ltd Kotak Life Insurance Co Ltd Star Union Dai - Ichi Life Insurance Co. Ltd Future Generali Life Insurance Co Ltd IDBI Federal Life Insurance Co. Ltd India First Life Insurance Co. Ltd Bharti Axa Life Insurance Co. Ltd Aegon Religare Life Insurance Co. Ltd Shriram Life Insurance Co. Ltd DLF Pramerica Life Insurance Co. Ltd 1.7.2 Market Position of IDBI Federal Market Position Life Insurance Companies 1 Life Insurance Corporation Of India 2 ICICI Prudential Life Insurance Co. Ltd 3 HDFC Standard Life Insurance Co. Ltd 4 SBI Life Insurance Co. Ltd 5 Max Life Insurance Co. Ltd 6 Bajaj Allianz Life Insurance Co Ltd 7 Birla Sun life Insurance Co.Ltd 8 Reliance Life Insurance Co. Ltd 9 Tata AIG Life Insurance Co. Ltd 10 ING Vysya Life Insurance Co. Ltd 11 MetLife Life Insurance Co Ltd 12 Aviva Life Insurance Co Ltd 13 Canara HSBC OBC Life Insurance Co Ltd 14 Kotak Life Insurance Co Ltd 15 Star Union Dai-Ichi Life Insurance Co. Ltd 16 Future Generali Life Insurance Co Ltd 17 IDBI Federal Life Insurance Co. Ltd 18 India First Life Insurance Co. Ltd 19 Bharti Axa Life Insurance Co. Ltd 20 Aegon Religare Life Insurance Co. Ltd Table no. 3 For the calendar year 2012, IDBI Federal Ranked 17 th and its Equity Fund ranked No 1 among 72 ULIP funds bearing testimony to the company‟s fund management expertise. IDBI Federal Life Insurance has achieved break even in 2012-13, its fifth year of operations. The company has reported a maiden profit of Rs 9.24 crore in 2012-13, thus making it one of the fastest to break- even in the Life Insurance industry. In an industry challenged by falling margins, shrinking new business volumes, high cost ratios and low profitability, this is a significant achievement. One of the major reasons behind the growth of IDBI Federal Life Insurance has been its employees. The organization regards its employees as valuable assets and takes pride in the fact that it has one of the finest workforces in the general insurance industry. 1.8 Leadership of IDBI Federal and their Levels in the Industry Figure no.5 During the tenure of the training we interacted with various people. Among them few guided us and helped us in better understanding of the functioning of different departments of the organization. Mr. Sumit Kalra, Regional Manager (sales) guided us with the functioning of the branch and how employees coordinate and are accoladed based on their performances. Mr. Sanjeev Arora (Branch Head) and Mr. Chandra Shekhar singh (Sr. Manager) helped us throughout by their guidance and support, throughout our tenure with IDBI Federal. Regional Manager Mr. Sumit Kalra Branch Head Mr. Sanjeev Arora Sr. Manager Mr. Chandra Shekhar Singh 1.9 Source of Data Collection Data Collection is an important aspect of any type of research study. It is a term used to describe a process of preparing and collecting data from all sources and observation. Data was collected from various primary and secondary sources. These two methods of data collection are discussed below: Figure no. 6 Primary Data includes unstructured interview conducted with management trainee from head office and various employees who provided valuable information regarding the organization and its working. Secondary Data is the data that have been already collected by and readily available from other sources. The secondary data includes information obtained from various sources that includes newspaper articles, business magazines, brochures, pamphlets and web. Data Collection Primary Data Secondary Data CHAPTER-2 SWOT ANALYSIS 2.1 Strengths and Weaknesses of the Company 2.1.1 STRENGTH Large pool of technically skilled manpower with in depth knowledge and understanding of the market. The company also provides innovative products to cater to different needs of different customers. Dedicated workforce aiming at making a long-term career in the field. Strong and well spread network of qualified intermediaries and sales person. Strong capital and surplus reserve. Low management expenses and administrative costs. IDBI Federal Life Insurance Company leverages on the strong distribution network of its promoters and advisors. Finance department helps the organization to keep a track on the administration cost and all the other expenses 2.1.2 WEAKNESSES Customer service staff needs training due to changing human behavior. Product awareness is low in the market. Management cover insufficient. Sectored growth is constrained by low unemployment levels and competition for staff. Low customer confidence on the private players. Centralization in the organization, management decisions are taken by top authority which leads to significant delays in decisions. A centralized administrative system gives way to inequity through the instigation of excessive regulations or strict conformity to official norms which is redundant or bureaucratic and that hinders decision-making and delays work. 2.2 Opportunities and Threats of the Company 2.2.1 OPPORTUNITIES Insurable population: According to IRDA only 10% of the population is insured which represent around 30% of the insurable population. This suggests more than 300m people, with the potential to buy insurance, remain uninsured. International companies will help in building world class expertise in local market by introducing the best global practice. Could extend to overseas broadly. New specialist applications. Could seek better customer deals. Fast-track career development opportunities on an industry-wide basis. An applied research centre to create opportunities for developing techniques to provide added-value services. There will be inflow of managerial and financial expertise from the world‟s leading insurance markets. Further the burden of educating consumers will also be shared among many players. 2.2.2 THREATS Big public sector insurance companies like Life Insurance Corporation (LIC) of India, National Insurance Company Limited, Oriental Insurance Limited, New India Assurance Company Limited and United India Insurance Company Limited. People trust and go to them more. Legislation could impact and Great risk involved. Very high competition prevailing in the industry. Vulnerable to reactive attack by major competitors Lack of infrastructure in rural areas could constrain investment People prefer short term investments rather than insurance. Figure no. 7 STRENTHS SKILLED MANPOWER WITH DEPTH KNOWLEDGE. INNOVATIVE PRODUCTS TO CATER NEEDS OF CUSTOMER. DOMESTIC IMAGE OF IDBI SUPPORTED BY FEDERAL IMAGE. STRONG CAPITAL AND SURPLUS RESERVE. LOW MANAGEMENT EXPENSES AND ADMINISTRATIVE COSTS. WEAKNESS CUSTOMER SERVICE STAFF NEED TRAINING. POOR RETENTION PERCENTAGE OF TIED UP AGENTS. LOW CUSTOMER CONFIDENCE ON THE PRIVATE PLAYERS. OPPORTUNITIES DEMAND FOR INNOVATIVE PRODUCTS OFFERING A RIGHT MIX OF FLEXIBILITY/ RISK/ RETURN. INTERNATIONAL COMPANIES WILL HELP IN BUILDING WORLD CLASS EXPERTISE IN LOCAL MARKET BY INTRODUCING THE BEST GLOBAL PRACTICES. THERE WILL BE INFLOW OF MANAGERIAL AND FINANCIAL EXPERTISE FROM THE WORLD’S LEADING INSURANCE MARKETS THREATS THER PRIVATE INSURANCE COMPANIES ALSO VYING FOR THE SAME UNINSURED POPULATION. LEGISLATION COULD IMPACT AND GREAT RISK INVOLVED. VERY HIGH COMPETITION PREVAILING IN THE INDUSTRY. OTHER PRIVATE INSURANCE COMPANIES ALSO VYING FOR THE SAME UNINSURED POPULATION. SWOT CHAPTER-3 DATA COLLECTION AND PRESENTATION 3.1 Key Functional Area in IDBI Federal Life Insurance. 3.1.1 FINANCE Finance is responsible for all external reporting to IDBI‟s shareholders and regulators. The finance domain aspires to act as a partner to the business by providing value-added services, financial analysis, information and advice. To do this, we must gather and process financial data in order to offer reliable, timely and meaningful financial information to the wider community of stakeholders. At Head Office level, IDBI Insurance‟s finance domain is generally responsible for setting standards, consolidating information and performing oversight towards the finance domains in the regions and business units. The finance domain is organized into seven specific departments: Deputy CFO Group Controller Insurance Capital Management Investor Relations Corporate Development 3.1.2 PORTFOLIO MANAGEMENT Fund managers decide how to construct a portfolio of assets that will achieve the fund‟s particular investment objectives. The portfolio of underlying assets must adhere to the parameters outlined in the fund‟s prospectus. The fund manager often uses the specialist expertise of analysts to identify investment opportunities and highlight new trends. Many analysts and fund managers focus their expertise and research on particular asset types, sectors or regions and therefore have a comprehensive knowledge of their specialist field. The fund manager takes responsibility for the investment decisions. In taking the investment decisions, the fund manager must ensure that the investment fund remains within its investment limits and does not exceed its risk boundaries, including any use of derivatives or borrowing. The decisions are then reviewed by risk specialists. Assets are bought and sold to order by dealers who execute the fund manager‟s decisions. They ensure that the assets are always bought or sold at the best possible price for the fund. 3.1.3 Risk Management Corporate Risk ensures that all risks run by the company are well understood and managed in order to provide an efficient allocation of capital, profitable growth, required (economic) returns on (economic) capital and predictability in earnings. Corporate Risk consists of the following teams: Investment Risk Management Asset Liability Management & Risk Analytics Actuarial Risk Management Model Validation Systems and Projects Operational Risk Management Examples of positions are: o Insurance Risk Officer o Actuary o Solvency II Specialist o Model Validation Specialist o Investment Risk Analyst 3.1.4 Tax The Tax department is responsible for optimizing the tax position of IDBI Insurance. Our main tasks are to assist management within the global regions and Business Units with their tax issues. Where necessary, the Tax department will draft and implement policies and procedures, such as product approval procedures and transfer pricing policies. In addition, Tax also performs an overseeing role for the financial departments, ensuring that all tax obligations are adequately reflected in all financial statements. 3.2 Data Presentation 3.2.1 EQUITY GROWTH FUND 3.2.1.1 INVESTMENT OBJECTIVE: The investment objective of this fund is to invest in listed stocks and aim to generate high returns by picking stocks that have growth prospects. It aims to diversify risk by investing in Large-cap as well as Mid-cap stocks and across multiple sectors. 3.2.1.2 INVESTMENT PATTERN: Fixed Income Investments includes Cash and Money Market Equities and Equity linked Instruments. 3.2.1.3 FUND MANAGER’S PERSPECTIVE: Valuation & liquidity concerns has kept the markets in range, and mid & small cap stocks has performed well. Conviction levels in markets are low due to concerns of inflation, interest rate hike & near term valuations. 3.2 EQUITY GROWTH FUND FOR JULY’2013 3.2.1 Asset Allocation An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon. The three main asset classes - equities, fixed-income, and cash and equivalents - have different levels of risk and return, so each will behave differently over time. asset allocation is an important factor in determining returns for an investment portfolio. Asset allocation is based on the principle that different assets perform differently in different market and economic conditions. Figure no. 8 EXPLANATION: The above chart shows 98.82% of investment is done in equity and remaining part of investment is done in Net Current Assets 0.63% and Cash & CBLO 0.55%. The above chart tells about the maximum investment is done in equity market and part of the investment is done in Net Current Assets and Cash CBLO Thus here risk and return is high. Table no. 4 COMPANY EPG (in %) ADITYA BIRLA NUVO LTD 1.62 AXIS BANK LTD 1.08 BAJAJ AUTO LTD. 1.24 BANK OF BARODA 0.90 BHARAT PETROLEUM CORPN. LTD. 1.65 BHARTI AIRTEL LIMITED 2.45 DR. REDDYS LABORATORIES LTD 1.17 GUJARAT MINERAL DEVP. CORPN. LTD. 1.44 HCL TECHNOLOGIES LTD 1.30 HDFC BANK LTD 6.27 HINDUJA GLOBAL SOLUTIONS LTD. 1.48 HINDUSTAN UNILEVER LTD. 1.31 HOUSING DEVELOPMENT FINANCE CORPN. LTD. 5.38 ICICI BANK LTD. 6.48 INFOSYS LIMITED. 6.24 ITC LTD 6.25 JAIPRAKASH POWER VENTURES LIMITED 0.81 LARSEN & TOUBRO LTD. 4.34 LUPIN LTD. 1.00 MAHINDRA & MAHINDRA LTD. 2.83 MARUTI SUZUKI INDIA LTD. 0.97 N M D C LTD. 1.19 NTPC LTD 0.96 OIL & NATURAL GAS CORPN. LTD. 3.24 POWER FINANCE CORPORATION LTD. 1.60 POWER GRID CORPN. OF INDIA LTD. 1.25 RELIANCE INDUSTRIES LTD . 8.42 STATE BANK OF INDIA 3.34 SUPREME INFRASTRUCTURE INDIA LTD. 1.51 TATA CONSULTANCY SERVICES LTD. 4.00 TATA MOTORS LTD-DVR-A-ORDY 1.48 UNITED SPIRITS LTD. 1.27 WIPRO LTD. 1.19 YES BANK LTD 0.89 Others (less than 0.80%) 12.25 Cash & CBLO 0.55 Net Current Asset 0.63 3.2.2 PORTFOLIO ANALYSIS – MARKET CAPWISE Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. Market cap (i.e, small cap, mid cap or large cap), it indicates the size of the companies in which the fund invests. Large Cap : $10 billion plus and include the companies with the largest market capitalization. Mid Cap : $2 billion to $10 billion Small Cap : Less than $2 billion Figure no. 9 EXPLANATION: The Pie chart shown above explains about investments of funds is done more in large capital market where 71.20% of investment is done where in Mid and Small cap 11.12% and 10.02% respectively of investment is done. Large Cap 77.11% Mid Cap 12.04% Small Cap 10.85% Portfolio Analysis - Market Capwise 3.2.3 EQUITY GROWTH FUND FOR JUNE’2013 3.2.1 Asset Allocation Figure no. 10 EXPLANATION: The above chart shows 99.22% of investment is done in equity and remaining part of investment is done in Net Current Assets 0.66% and Cash & CBLO 0.12%. The above chart tells about the maximum investment is done in equity market and part of the investment is done in Net Current Assets and Cash CBLO Thus here risk and return is high. EQUITY 99.22% NET CURRENT ASSETS 0.66% CASH & CBLO 0.12% ASSET ALLOCATION - EGF Table no. 5 COMPANY EPG (IN %) ADITYA BIRLA NUVO LTD 1.80 AXIS BANK LTD 0.87 BHARAT PETROLEUM CORPN. LTD. 1.62 BHARTI AIRTEL LIMITED 2.53 CESC LTD. 0.98 DR. REDDYS LABORATORIES LTD 1.68 GUJARAT MINERAL DEVP. CORPN. LTD. 1.37 HCL TECHNOLOGIES LTD 1.59 HDFC BANK LTD 6.42 HINDUJA GLOBAL SOLUTIONS LTD. 1.46 HINDUSTAN UNILEVER LTD. 1.29 HDFC. LTD. 4.31 ICICI BANK LTD. 7.39 INFOSYS LIMITED. 5.43 ITC LTD 6.53 LARSEN & TOUBRO LTD. 4.68 LUPIN LTD. 0.89 MAHINDRA & MAHINDRA LTD. 2.55 MARUTI SUZUKI INDIA LTD. 1.63 N M D C LTD. 1.21 NTPC LTD 1.18 OIL & NATURAL GAS CORPN. LTD. 2.64 POWER FINANCE CORPORATION LTD. 1.65 POWER GRID CORPN. OF INDIA LTD. 1.37 RELIANCE INDUSTRIES LTD . 7.77 STATE BANK OF INDIA 3.41 SUN PHARMACEUTICAL INDS. LTD. 1.07 SUPREME INFRASTRUCTURE INDIA LTD. 1.50 TATA CONSULTANCY SERVICES LTD. 4.33 UNITED SPIRITS LTD. 1.27 WIPRO LTD. 1.01 Others (less than 0.80%) 15.81 Cash & CBLO 0.12 Net Current Asset 0.66 3.2.2 PORTFOLIO ANALYSIS – MARKET CAPWISE Figure no. 11 EXPLANATION: The Pie chart shown above explains about investments of funds is done more in large capital market where 71.20% of investment is done where in Mid and Small cap 11.12% and 10.02% respectively of investment is done. Large Cap 77.11% Mid Cap 12.04% Small Cap 10.85% Portfolio Analysis - Market Capwise CHAPTER-4 FUNCTIONAL ANALYSIS 4.1. Conceptual Framework 4.1.1 Definition of Portfolio Management: A portfolio is a collection of securities since it is really desirable to invest the entire funds of an individual or an institution or a single security, it is essential that every security be viewed in a portfolio context. Thus it seems logical that the expected return of the portfolio. Portfolio analysis considers the determine of future risk and return in holding various blends of individual securities. Determining the mix of assets to hold in a portfolio is referred to as portfolio management. Investors must balance risk and performance in making portfolio management decisions. 4.1.2 Need For Portfolio Management: Portfolio management is a process encompassing many activities of investment in assets and securities. It is a dynamic and flexible concept and involves regular and systematic analysis, judgment and action. The objective of this service is to help the unknown and investors with the expertise of professionals in investment portfolio management. It involves construction of a portfolio based upon the investor‟s objectives, constraints, preferences for risk and returns and tax liability. The portfolio is reviewed and adjusted from time to time in tune with the market conditions. The evaluation of portfolio is to be done in terms of targets set for risk and returns. The changes in the portfolio are to be effected to meet the changing condition. Portfolio construction refers to the allocation of surplus funds in hand among variety of financial assets open for investment. Portfolio theory concerns itself with the principles governing such allocation. The modern view of investment is oriented more go towards the assembly of proper combination of individual securities to form investment portfolio. A combination of securities held together will give a beneficial result if they grouped in a manner to secure higher returns after taking into consideration the risk elements. The modern theory is the view that by diversification risk can be reduced. Diversification can be made byte investor either by having a large number of shares of companies in different regions, in different industries or those producing different types of product lines. Modern theory believes in the perspective of combination of securities under constraints of risk and returns. 4.1.3 Portfolio Management Process: Investment management is a complex activity which may be broken down into the following steps: 1. SPECIFICATION OF INVESTMENT OBJECTIVES ANDCONSTRAINTS: The typical objectives sought by investors are current income, capital appreciation, and safety of principle. The relative importance of these objectives should be specified further the constraints arising from liquidity, time horizon, tax and special circumstances must be identified. 2. CHOICES OF THE ASSET MIX: The most important decision in portfolio management is the asset mix decision very broadly; this is concerned with the proportions of „stocks‟ (equity shares and units/shares of equity-oriented mutual funds) and „bonds‟ in the portfolio. The appropriate „stock-bond‟ mix depends mainly on the risk tolerance and investment horizon of the investor. 4.1.4 Elements of Portfolio Management: Portfolio management is on‐going process involving the following basic tasks: Identification of the investor‟s objectives, constraints and preferences. Strategies are to be developed and implemented in tune with investment policy formulated. Review and monitoring of the performance of the portfolio. Finally the evaluation of the portfolio. RISK: Risk is uncertainty of the income /capital appreciation or loss or both. All investments are risky. The higher the risk taken, the higher is the return. But proper management of risk involves the right choice of investments whose risks are compensating. RETURNS ON PORTFOLIO: Each security in a portfolio contributes return in the proportion of its investments in security. Thus the portfolio expected return is the weighted average of the expected return, from each of the securities, with weights representing the proportions share of the security in the total investment. Why does an investor have so many securities in his portfolio? If the security ABC gives the maximum return why not he invests in that security all his funds and thus maximize return? The answer to this questions lie in the investor‟s perception of risk attached to investments, his objectives of income, safety, appreciation, liquidity and hedge against loss of value of money etc. this pattern of investment in different asset categories, types of investment, etc., would all be described under the caption of diversification, which aims at the reduction or even elimination onion-systematic risks and achieve the specific objectives of investors RISK ON PORTFOLIO: The expected returns from individual securities carry some degree of risk. Risk on the portfolio is different from the risk on individual securities. The risk is reflected in the variability of the returns from zero to infinity. Risk of the individual assets or a portfolios measured by the variance of its return. The expected return depends on the probability of the returns and their weighted contribution to the risk of the portfolio. These are two measures of risk in this context one is the absolute deviation and other standard deviation.‟ Most investors invest in a portfolio of assets, because as to spread risk by not putting all eggs in one basket. Hence, what really matters to them are not the risk and return of stocks in isolation, but the risk and return of the portfolio as a whole. Risk is mainly reduced by Diversification. RISK RETURN ANALYSIS: All investment has some risk. Investment in shares of companies has its own risk or uncertainty; these risks arise out of variability of yields and uncertainty of appreciation or depreciation of share prices, losses of liquidity etched risk over time can be represented by the variance of the returns, while the return overtime is capital appreciation plus payout, divided by the purchase price of the share. Normally, the higher the risk that the investor takes, the higher is the return. There is, however, a risk less return on capital of about 12% which is the bank, rate charged byte R.B.I or long term, yielded on government securities at around 13% to 14%. This riskless return refers to lack of variability of return and no uncertainty in the repayment or capital. But other risks such as loss of liquidity due to parting with money etc., may however remain, but are rewarded by the total return on the capital. Risk-return is subject to variation and the objectives of the portfolio manager are to reduce that variability and we reduce the risk by choosing an appropriate portfolio. Traditional approach advocates that one security holds the better, it is according to the modern approach diversification should not be quantity that should be related to the quality of scripts which leads to quality of portfolio. Experience has shown that beyond the certain securities by adding more securities expensive. 4.1.5 Persons Involved In Portfolio Management: INVESTOR: Investors are the people who are interested in investing their funds PORTFOLIO MANAGERS: Is a person who is in the wake of a contract agreement with a client, advices or directs or undertakes on behalf of the clients, the management or distribution or management of the funds of the client as the case may be. 4.1.6 Functions of Portfolio Managers: The main functions of portfolio managers are: • Advisory role: advice new investments, review the existing ones, identification of objectives, recommending high yield securities etc. • Conducting market and economic service: this is essential for recommending good yielding securities they have to study the current fiscal policy, budget proposal; individual policies etc further portfolio manager should take in to 33 accounts the credit policy, industrial growth, foreign exchange possible change in corporate law‟s etc. • Financial analysis: he should evaluate the financial statement of company in order to understand, their net worth future earnings, prospectus and strength. • Study of stock market: he should observe the trends at various stock exchange and analysis scripts so that he is able to identify the right securities for investment • Study of industry: he should study the industry to know its future prospects, technical changes etc, required for investment proposal he should also see the problem‟s of the industry. • Decide the type of port folio: keeping in mind the objectives of portfolio a portfolio manager has to decide whether the portfolio should comprise equity preference shares, debentures, convertibles, non-convertibles or partly convertibles, money market, securities etc or a mix of more than one type of proper mix ensures higher safety, yield and liquidity coupled with balanced risk techniques of portfolio management. 4.1.7 Technique’s Of Portfolio Management Followed in IDBI Federal: As of now the under noted technique of portfolio management: are in vogue in our country 1. Equity portfolio: is influenced by internal and external factors the internal factors affect the inner working of the company‟s growth plans are analyzed with referenced to Balance sheet, profit & loss a/c (account) of the company. Among the external factor are changes in the government policies, Trade cycle‟s etc. 2. Equity stock analysis: under this method the probable future value of a share of a company is determined it can be done by ratios of earning per share of the company and price earnings ratio. EPS = PROFIT AFTER TAX / NO. OF EQUITY SHARES PRICE EARNING RATIO = MARKET PRICE / E.P.S (earnings per share) One can estimate trend of earning by EPS, which reflects trends of earning quality of company, dividend policy, and quality of management. Price earnings ratio indicate a confidence of market about the company future, a high rating is preferable. The following points are taken into considered by portfolio managers while analyzing the Securities: 1. Nature of the industry and its product: long term trends of industries, competition within, and outside the industry, Technical changes, labour relations, sensitivity to Trade cycle. 2. Ratio analysis: Ratio such as debt equity ratio‟s current ratio‟s net worth, profit earnings ratio, returns on investment, is worked out to decide the portfolio. 4.7.8 Net Asset Value The Term Net Asset Value (NAV) is used by investment companies to measure net assets. It is calculated by subtracting liabilities from the value of a fund's securities and other items of value and dividing this by the number of outstanding shares. 4.7.9 Measurement of risk Risk refers to the possibility that the actual outcome of an investment will differ from the expected outcome. In other words we can say that risk refers to variability or dispersion. If any investment is said to invariable it means that it is totally risk free. Whenever we calculate the mean returns of an investment we also need to calculate the variability in the returns. 1. SHARPE RATIO The Sharpe ratio is the returns generated over the risk free rate, per unit of risk. Risk in this case is taken to be the fund‟s standard deviation. As standard deviation represents the total risk experienced by a fund, the Sharpe ratio reflects the returns generated by undertaking all possible risk. Mathematically, While investor seeks to generate high returns the question arises, how high? Usually one asks for returns, which are higher than those accustomed to. These are returns from risk-less instruments like treasury bills, government securities or bank saving deposits. So the aim of investing seems to be to generate returns in excess of the risk free return. At the same time high returns are generally associated with a high degree of volatility. The investors accept this volatility only because they want higher returns. The Sharpe ratio represents this trade-off between risk and returns. At the same time it also factors in the desire to generate returns, which are higher than those from risk free return. A higher Sharpe ratio is therefore better as it represents a higher return generated per unit of risk. For an investor who puts in all his/her money in a single fund, Sharpe ratio is a useful measure of risk-adjusted return. This is because standard deviation measures total risk and this is the case with a single portfolio. The Sharpe ratio tells us whether a portfolio's returns are due to smart investment decisions or a result of excess risk. This measurement is very useful be ca use although one portfolio or fund can reap higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk. The greater a portfolio's Sharpe ratio, the better it s risk- adjusted performance has been. 2. BETA: A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. A beta of 1 indicates that the security's price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1indicates that the security's price will be more volatile than the market. Calculating BETA BETA is ascertained mathematically by finding the covariance of the returns of the scrip to those of the market and then dividing it by the variance of the market return. As a market professional one is aware of his / her investment objectives and how much risk he/she can assume and canbest decide whether to use weekly, monthly or daily pricing information in BETA calculation. BETA (ß) = Covariance (portfolio‟s NAV, market Index) Variance ( market Index) 3. R- SQUARED: R-squared value s range from 0 to 1. An R-squared of 1 means that all movement s of a security are completely explained by movements in the index. A high R-squared (between 0.85 and 1) indicates the fund's performance patterns have been in line with the index. A fund with a low R squared (0.70 or less) doesn't act much like the index. 4. STANDARD DEVIATION: In the core of the fund analysis activity lie the twin pursuits of judging returns and risk. Stripped of a lot of the complexity, this task involves determining a fund's average performance over a period of time. Standard Deviation gives a quality rating of an average. The Standard Deviation of an average is the amount by which the numbers that go into an average deviate from that average. It tells us how closely an average represents the underlying numbers. If the individual monthly performances are very different from the average, then that fund is risky, delivering high returns in some months and poor returns in others. If they are mostly similar, then the fund is a low risk one, with about the same returns month after month. A high Standard Deviation may be a measure of volatility, but it does not necessarily mean that such a fund is worse than one with a low Standard Deviation. If the first fund is a much higher performer than the second one, the deviation will not matter much. 4. 2 Li mi t at i on of t he st udy 1. Ti me was t he bi gges t cons t r ai nt as many t i mes i t was not pos s i bl e t o meet senior officials to collect much information. 2. There may be biases on the part of the company executive while providing the information. 3. There are very limited latest information sources for this topic. 4. The information was collected from Delhi Branch. CHAPTER-5 SUMMARY & CONCLUSION A. Lessons Learnt My Internship in IDBI Federal Insurance Co Ltd started on 10 th June 2013. As per the program, I had training for Incomesurance and the different sales techniques to pitch for my prospective clients. I grabbed the opportunity to meet different people from diverse backgrounds and occupations to discuss on insurance related topics. Along with the sales part, I had been assigned a project for which I had chosen the topic Comparative study on June and July 2013 Portfolios. Working in IDBI Federal has helped me to gain lots of experience in the sale and finance field. I worked there under the sales and portfolio management team. I gained practical knowledge of funds and how they are allocated. The main contribution of an employee to its organization is to perform its responsibilities given with 100% effort and honesty. My major responsibility was to sell the product and analyze the performance of the investment team by comparing the June ‟13 and July ‟13 portfolio performance for the organization. I am one of the top performers of my company where in a month I gave the business of 2 lakhs and I was given the “Best Performance” certificate. For the goodwill of the company I was always honest to tell all the facts and benefits of the product to the customer and convince them for the right product that best suited them. After login their forms I called them and do a formal call that whether they received their documents or not and if some complication occurred with the document, I was helped in analysis of the performance of the portfolio, design by the investment team. Portfolio of the organization is managed after analysis of the performance of each and every company before investing and taking into consideration the risk and return relationship. Investment department is performing very well and company is able to provide good returns to the customers. I am very much satisfied with the level of work, I have done for the company and I am also able to keep my senior manager happy through my dedication, hard work, and performance. I and my seniors are happy with my contribution to the organization. B. Suggestions 1. Time of study and training was less. 2. Since everything in IDBI FEDERAL is driven from HEAD OFFICE which is at MUMBAI, thus many a times it uses to get difficult to contact the concerned departments since they are at Mumbai. 3. Being an agency, most of the work of IDBI federal at Connaught place, is sales and thus less exposure is given to students with FINANCE background. Thus, strongly recommended for students who are interested in blooming their careers in Marketing and sales.