WINTER TRAINING REPORT ON

Profitability and Financial Position of

IDBI Federal Life Insurance

For

IDBI-FEDERAL Life Insurance Co. Ltd.

By

GARIMA BHATT

18077
In Partial Fulfilment for the award of the degree
Post Graduate Diploma in Management
Batch (2018-2020)
Specialization: Finance and Business Analytics

New Delhi Institute of Management

50 (B&C), 60, Tughlakabad Institutional Area, New Delhi-110062
 E-mail:placement@ndimdelhi.org Website: www.ndimdelhi.org

WINTER TRAINING REPORT ON

Profitability and Financial Position of
IDBI Federal Life Insurance

For

IDBI-FEDERAL Life Insurance Co. Ltd.

Under the supervision

Of
Mr.Amit Kumar Singh
Submitted By- Submitted to-
Garima Bhatt Prof. Shagun Arora

18077
 Acknowledgement
Any work of this magnitude requires the inputs, efforts and encouragement of people from all
sides. In this project report I have been fortunate in having got the active co-operation of many
people, whom I would like to thank. I am deeply indebted to all people who have guided, inspired
and helped me in the successful completion of this project. I owe a debt of gratitude to all of them,
who were so generous with their time and expertise.

I offer my sincere thanks and humble regards to New Delhi Institute Of Management for imparting
us very valuable professional training in PGDM.

It gives me great pleasure to express my heartfelt gratitude to Mr. Amit Kumar Singh, my project
Guide for giving me the cream of his knowledge. I am thankful to him as he has been a constant
source of advice, motivation and inspiration. I humbly submit that without his efforts this project
would have not been conceptualized nor materialized.

I would like to thank Mr. Manas Das (Manager), for giving me an opportunity to work and
enlightening my ways whenever I need in completion of this project. My project will be incomplete
if I will fail to thank Mr. Zakir Hussain from IDBI federal Life Insurance, for all his insightful
lectures during the training period. The strong interest evinced by them has helped me with dealing
with the problem, I faced during my course of project work.

I am also thankful to my family and friends for constantly motivating me to complete the project
and providing me an environment which enhanced my knowledge.
 Student Declaration
This to certify that I have completed the project titled “Analysis of Profitability & Financial
position of IDBI Federal Life Insurance Co. Ltd.” under the guidance of “Prof. Amit Kumar
Singh” in the partial fulfillment of the requirement for the award of winter internship during “Post
Graduate Diploma in Management” from “New Delhi Institute Of Management.” This is an
original work and I have not submitted it earlier elsewhere.

Name: Garima Bhatt

Roll no: 77
 INDEX
1. Executive Summary
2. Introduction about the Insurance Industry
3. Introduction About the Company
4. Missions, values and vision
5. Product Range of IDBI Federal
6. Size of the Company
7. Market share of Insurance Companies
8. Organizational Structure
9. Balance Sheet of IDBI Federal
10. Profit and Loss Statement of IDBI Federal
11. Objectives and Importance of Ratio Analysis
12. Details of Ratios and Calculation Methods
13. Conclusions
14. Bibliography and References
 1. Executive Summary
This report examines the financial strength of IDBI Federal Life Insurance Co. Ltd. It is to check
the performance and financial health of the Company. Overall company strategies were reviewed
and considered along with the financial analysis to come to a conclusion for recommendation.

The reports introduction gives an overview to the insurance industry and expands on the Strategies
executed by IDBI Federal Life Insurance Co. Ltd. The financial analysis covers both Balance Sheet
and Income Statement of the Company.

It includes income statements and balance sheets, comparative income statements, Common Size
Income Statement and Common Size Balance Sheet, and various financial statement ratios such
as liquidity, capital structure and solvency, return on investment, operating performance, asset
utilization etc.

Some Industry related ratios are also calculated like persistency ratio, Growth rate of
shareholders’ funds and these ratios shows the strangeness of the business of the company.

1. Main objectives of the project

(i) To analyses the financial position of the IDBI Federal Insurance Co. Ltd.
(ii) To compare the market position of the IDBI Federal Insurance Co. Ltd. With its competitors.
(iii) To find out the consolidated position of the IDBI Federal Insurance Co. Ltd.
(iv) To find out the future prospective of the company.
The role objective of the project is to help the management of the organization in decision making
regarding the subject matter. Calculation of Financial statement and ration is only the clerical task
whereas the interpretation of its needs immense skill intelligence and foresightedness.
One of the easiest and most popular way of evaluating performance of the organization is to
compare its present ratio with the past ones called comparison and through development action
plan.
 2. Sources of Data Collection:
Primary Data: I will be collecting primary data through company’s annual reports, policies
brochures, and employees of the company and through direct face to face conversations with
various customers of the company.

Secondary Data: I will be collecting secondary data through various websites, articles,
company’s official website, articles, blogs, newspaper, magazines etc.

3. FINDINGS
Despite the uncertain regulatory framework and contrarian to the unsatisfactory performance by
industry peers, IDBI Federal registered some decline and achieved following results in FY 2015-
16.
 20% growth in new business (individual life) over FY 2014-15;
 13th ranking for single premium against 8th recorded last year;
 13th rank in new business
 Market share of 1.1% amongst private players as against 1.39% recorded last year;
 23% increase in total premium, taking it to 1240 crore;
 20% growth in total new business premium, 11% in renewal premium;
 18.7% gross operating cost to gross premium ratio, maintaining it consistency;
 76% persistency for 13th month - one of the best in the industry;
 87% decrease in earnings before tax, taking it to 15 crore - led by various factors.

4. Suggestion

 Cash Amount Available in the Balance Sheet of the Company is less than the required because as
the nature of the business, An Insurance Company should require a higher amount of Cash balance
in its Accounts to meet out the Claim Settlement requirements of the Cash.

 Fixed Assets of the Company is decreasing, IDBI Federal is a newly established Company and
should require increasing the fixed Assets of the Company for future Growth prospective.
 As the deposits are increasing in very low rate as compare to the other Insurance Sector
Companies, Company should require to work on the Marketing of the product.

 Discontinued policies are increasing, Discontinuation of the policies is considered as a main

drawback factor in the Insurance Sector Company should work on it.

 Products available with company are less comparatively less preferred by the clients, In some area
company don’t have the product e.g. – Health Insurance, Retirement plan.

 Company is Carrying a Loss since incorporation and claiming the set off of the carry forward
losses, Company should try to finish that loss because this loss is over shadowing the profits earned
by the company in the current year.
 2. Introduction to Insurance Sector
The insurance industry of India consists of 53 insurance companies of which 24 are in life
insurance business and 29 are non-life insurers. Among the life insurers, Life Insurance
Corporation (LIC) is the sole public sector company. Apart from that, among the non-life
insurers there are six public sector insurers. In addition to these, there is sole national re-insurer,
namely, General Insurance Corporation of India (GIC Re). Other stakeholders in Indian
Insurance market include agents (individual and corporate), brokers, surveyors and third party
administrators servicing health insurance claims.
Out of 29 non-life insurance companies, five private sector insurers are registered to underwrite
policies exclusively in health, personal accident and travel insurance segments. They are Star
Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance Company Ltd, Max
Bupa Health Insurance Company Ltd, Religare Health Insurance Company Ltd and Cigna TTK
Health Insurance Company Ltd. The general insurance industry recorded a 12 per cent growth
in Gross Direct Premium underwritten in April 2016 at Rs.105.25 billion (US$ 1.55 billion). The
life insurance industry reported 9 per cent increase in overall annual premium equivalent in
April-November 2016. In the period, overall annual premium equivalent (APE)- a measure to
normalize policy premium into the equivalent of regular annual premium- including individual
and group business for private players was up 16 per cent to Rs.1,25,563 crores (US$ 18.76
billion) and Life Insurance Corporation up 4 per cent to Rs.1,50,456 crore (US$ 22.48).

The general insurance business in India is currently at Rs.78,000 crores (US$ 11.44 billion)
premium per annum industry and is growing at a healthy rate of 17 per cent.
The Indian insurance market is a huge business opportunity waiting to be harnessed. India
currently accounts for less than 1.5 per cent of the world’s total insurance premiums and about
2 per cent of the world’s life insurance premiums despite being the second most populous nation.
The country is the fifteenth largest insurance market in the world in terms of premium volume,
and has the potential to grow exponentially in the coming years.
 3. Introduction about the Company
IDBI Federal Life Insurance Co. Ltd started in March 2008, it has its operations spread all over
India and its main activity is selling Insurance products through direct marketing, bank
assurance, agency channels or CSF. The corporate head office is situated in Mumbai and there
is a hierarchy through which the company is managed.
IDBI Federal Life Insurance is one of India’s growing life insurance companies and offers a
diverse range of wealth management, protection and retirement solutions to individual and
corporate customers.
IDBI Federal Life Insurance Co Ltd 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.
Having commenced operations in 2008, IDBI Federal was able to achieve breakeven within
just 5 years; the Company’s passion for innovation and growth helped it achieve this feat.
Through a nationwide network of 2,964 branches of IDBI Bank and Federal Bank, and a
sizeable network of advisors and partners, IDBI Federal Life Insurance has achieved presence
across the length and breadth of the country. As on March 31, 2018, the company has issued
nearly 10.29 lakh policies with a sum assured of over Rs. 58,653.76 crores. IDBI Federal Life
Insurance has total assets under management of 6,090 crores and a robust capital base of over
800 crores, as on March 31, 2018.

. The company offers its services through a vast nationwide network 2,308 partner bank branches
of IDBI Bank and Federal Bank in addition to a sizeable network of advisors and partners. As
on 31st December 2013, the company has issued nearly 5.5 lakh policies with a sum assured of
over Rs. 32,110.48 crores.
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 comers of the country from
1717 branches and 3000 ATMs. The Bank offers its customers an extensive range of diversified
services including project finance, 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.

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 1,247 branches and 1,485 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 center 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 is an international insurance group with a heritage spanning 190 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, the UK, Luxembourg, Italy, Portugal, Turkey, China, Malaysia, India
and Thailand and has subsidiaries in France, Hong Kong and the UK.
 4. MISSION, VISION & VALUES:

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.

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.

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.
5. PRODUCT RANGE OF IDBI FEDERAL

ENDOWMENT ULIP
1.Incomesurance Guaranteed Money Back 1.Wealthsurance Growth Insurance Plan
Insurance Plan 7 Pay
2.Lifesurance Savings Insurance Plan
3. Child Insurance saving Plan

4.Lifesurance Whole Life Savings Insurance

Plan

1. Endowment Plans

 Income Insurance Guaranteed Money Back Insurance Plan 7 Pay

IDBI Federal Income Insurance Guaranteed Money Back Insurance Plan 7 Pay
is a money-back plan that gives you the confidence of guaranteed income. You pay
for 7 years and start reaping the benefits from the 8th year onwards with the annual
payouts ranging from 126.66% to 143.23% of premiums paid. Additionally, you can
also guarantee a secure future for your family even when you are not around.
Criteria Minimum Maximum

Age at 10 years* 50 years

Entry {as on last .birthday)

Age at 24 years 64 years.

Maturity (as on last
birthday)

Premium: Rs 35,000 annually Rs. 20,00,000 annually

Amount

Policy Fixed -14 years term

Premium Fixed - 7 years payment

term

Premium Annual. Payment

Mode

 Child insurance Savings Protection Plan

IDBI Federal Child insurance Savings Protection Plan is a non-linked participating

endowment plan that ensures your child’s future financial needs are fulfilled. Child
insurance Savings, is designed to give you guaranteed annual payouts and aid the
important milestones in your child’s life. What’s more, in the unfortunate event of you
not being around, the policy will continue exactly as you had planned it, without any
further premiums being paid. .In other words, this plan ensures that your child gets to live
his/her dream exactly as you have planned, whether or not you are around.

Age at entry — Minimum 18 years

Insured Person
Maximum Regular payment option: 40 years
(Parent)
Limited payment option: 50 years

Age at entry - Greater than one month and less than 18 years of age
Nominee (Child)
Maturity age Minimum 28 years
(Insured Person) Maximum Regular payment option: 65 Years
Limited payment option: 75 years

Policy term Minimum 10 years

Maximum 25 years

Premium payment Regular payment option: Equal to policy term

term Limited payment option:: 5 years less than the policy
term

Premium payment Yearly, and monthly by ECS, standing instructions or direct

frequency debit only

Premium Minimum Yearly: Rs.10,000, Monthly;

Rs.1,000 Loading factor of 0.09 is
 (exclusive of applicable for monthly premium
service tax and payment
education frequency
cess)
Maximum No limit (subject to underwriting)

Maturity Sum Minimum Subject to above minim urn

Assured: premium

Maximum No limit, subject to underwriting

 Life Insurance Savings Protection Plan

IDBI Federal Life Insurance Savings Insurance Plan is a fixed term non-linked participating
plan that provides you the twin benefits of long-term savings and life cover. With Life Insurance
Savings, your small savings will help you realize the big dreams that you have for yourself and
your family. This plan also offers you the benefit of life cover that will provide financial security
to your family in your absence.

Age at entry (last birthday) Minimum 18 years

Maximum 55 years
Age at maturity (last birthday)
75 years

Policy terms and premium payment Policy term(s) Premium payment term(s)
available

Terms available 10 years Only 5 years premium

payment term is allowed
15, 20, 25 years Min: 5 years.
Max: Equal to policy term
Premium payment frequency Yearly, half yearly, quarterly and monthly.

Premium Minimum Yearly-Rs.10,000; Half Yearly, Rs.5,000,

Quarterly Rs: 2,500: and Monthly - Rs. 1.000
Maximum No limit (subject to underwriting)

Maturity sum insured Minimum Depends on age. premium payment and policy
term

Maximum No limit (subject to underwriting)

2. Unit-Linked Insurance Plan

 Wealth Insurance Growth Insurance Plan

The IDBI Federal Wealth Insurance Growth Insurance Plan is a regular premium
unit-linked insurance plan. A plan that gives you freedom to decide how much you want
to invest and for how long you want to stay invested. With a bouquet of 9 fund offerings,
 it gives you the freedom to invest in one or more funds, basis your risk appetite and
financial goals in life. Plus, it comes with a life cover benefit that ensures financial
security for your loved ones. In a nutshell, a smart investment plan that helps you design
your investments, your way.

Age at Minimum 1 month completed

entry

Maximum 64 years

Age at maturity Minimum 18 years

Maximum 74 years

Policy Term (PT)* Minimum 10 years (in multiples of 5 thereafter)

Maximum 30 years

Premium Payment Minimum

Term (PPT) 5 years
Maximum Up to the policy term

Minimum
premium Rs. 25,000/-annually
amount
Maximum Rs. 95.000/- annually subject to undewriting
approval
Sum Minimum For ages at entry below 45 years;
Assured Higher of:
 10 X annualized premium
 (0.5 X PT X annualized premium)
For ages at entry 45 years and above:
Higher of:
 7 X annualized premium
 (0.25 X PT X annualized premium) :
The minimum sum assured under the policy is Rs 1,
75,000

Maximum For ages at entry less than 54 years:

 PPT X 2 X annualized premium subject to a
maximum of 15 X annualized premium
For ages at entry 54 years and above:
 If PPT is greater than 7:
10X annualized premium
 If PPT is less or equal to 7:
7 X annualized premium

6.Size of the Company

 In terms of manpower
IDBI Federal Life Insurance Co. has 1,941 employees on roll and over 10000 agents who
are working for the company.

 In terms of turnover
The size of the company in terms of turnover is approximate 1400 crore. The company
achieved its break even in just 5 years and is making huge profits.
 7. Market Share
The market shares of leading companies in terms of life insurance premium collected are
as described in the table:

Companies Market Share

LIC 70.4%
SBI 5.1%
ICICI 4.88%
HDFC 4.08%
Bajaj Alliance 2.08%
Max Life 2.08%
Birla Sun Life 1.60%
Reliance Life 1.12%
Others 8.06%
 8. Organizational Structure

Vighnesh Shahane
CEO

Country
Head sales

North South East West

Zonal Head Zonal Head Zonal Head Zonal Head

Area Bank Area Bank Area Bank Area Bank

agency Assurance Agency Assurance agency assurance agency assurance
head Head Head Head head head head Head

Manager Manager Manager Manager

Distributio
Distribution distribution Distribution n
Deputy deputy Deputy Deputy
chief senior chief senior chief senior chief senior

Corporate Corporate
head Corporate Corporate
Head
Head head

Distributer Distributer Distributer Distributer

& trainees & trainees & trainees & trainees
& agencies & agencies & agencies & agencies
9. Balance Sheet of IDBI Federal Life Insurance
2017-18
2015-16
10. Profit and Loss Statement
2017-18
2015-16
 11. Ratio Analysis
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the indicated
quotient of two mathematical expressions” and “the relationship between two or more
things”. In financial analysis, a ratio is used as a benchmark for evaluation the financial position
and performance of a firm. The absolute accounting figures reported in the financial statements
do not provide a meaningful understanding of the performance and financial position of a firm.
An accounting figure conveys meaning when it is related to some other relevant information. For
example, an Rs.5 core net profit may look impressive, but the firm’s performance can be said to
be good or bad only when the net profit figure is related to the firm’s Investment.
The relationship between two accounting figures expressed mathematically, is known as a
financial ratio (or simply as a ratio). Ratios help to summarize large quantities of financial data
and to make qualitative judgment about the firm’s financial performance. For example, consider
current ratio. It is calculated by dividing current assets by current liabilities; the ratio indicates a
relationship- a quantified relationship between current assets and current liabilities. This
relationship is an index or yardstick, which permits a quantitative judgment to be formed about the
firm’s liquidity and vice versa. The point to note is that a ratio reflecting a quantitative relationship
helps to form a qualitative judgment. Such is the nature of all financial ratios.

Use and significance of ratio analysis:

The ratio is one of the most powerful tools of financial analysis.
It is used as a device to analyze and interpret the financial health of enterprise. Ratio analysis
stands for the process of determining and presenting the relationship of items and groups of items
in the financial statements. It is an important technique of the financial analysis. It is the way by
which financial stability and health of the concern can be judged. Thus ratios have wide
applications and are of immense use today. The following are the main points of importance of
ratio analysis:

(A) Managerial uses of ratio analysis:

1. Helps in decision making:
Financial statements are prepared primarily for decision-making. Ratio analysis helps in making
decision from the information provided in these financial Statements.
2. Helps in financial forecasting and planning:
Ratio analysis is of much help in financial forecasting and planning. Planning is looking ahead and
the ratios calculated for a number of years a work as a guide for the future. Thus, ratio analysis
helps in forecasting and planning.
3. Helps in communicating:
The financial strength and weakness of a firm are communicated in a more easy and
understandable manner by the use of ratios. Thus, ratios help in communication and enhance the
value of the financial statements.
4. Helps in co-ordination:
Ratios even help in co-ordination, which is of at most importance in effective business
management. Better communication of efficiency and weakness of an enterprise result in better
co-ordination in the enterprise
5. Helps in control:
Ratio analysis even helps in making effective control of business. The weaknesses are otherwise,
if any, come to the knowledge of the managerial, which helps, in effective control of the business.
(B) Utility to shareholders/investors:
An investor in the company will like to assess the financial position of the concern where he is
going to invest. His first interest will be the security of his investment and then a return in form of
dividend or interest. Ratio analysis will be useful to the investor in making up his mind whether
present financial position of the concern warrants further investment or not.
(C) Utility to creditors:
The creditors or supplier extent short-term credit to the concern. They are invested to know
whether financial position of the concern warrants their payments at a specified time or not.
(D) Utility to employees:
The employees are also interested in the financial position of the concern especially profitability.
Their wage increases and amount of fringe benefits are related to the volume of profits earned by
the concern.
(E) Utility to government:
Government is interested to know overall strength of the industry. Various financial statement
published by industrial units are used to calculate ratios for determining short term, long-term and
overall financial position of the concerns.
 (F) Tax audit requirements:
Sec44AB was inserted in the income tax act by financial act; 1984.Caluse 32 of the income tax act
requires that the following accounting ratios should be given:
Gross profit/turnover.
(1) Net profit/turnover.
(2) Stock in trade/turnover.
(3) Material consumed/finished goods produced.
Further, it is advisable to compare the accounting ratios for the year under consideration with the
accounting ratios for earlier two years so that the auditor can make necessary enquiries, if there is
any major variation in the accounting ratios.

Limitations:
Ratio analysis is very important in revealing the financial position and soundness of the business.
But, in spite of its advantages, it has some limitations which restrict its use. These limitations
should be kept in mind while making use of ratio analysis for interpreting the financial the financial
statements. The following are the main limitations of ratio analysis:

1. False results:
Ratios are based upon the financial statement. In case financial statement are in correct or the data
of on which ratios are based is in correct, ratios calculated will all so false and defective. The
accounting system itself suffers from many inherent weaknesses the ratios based upon it cannot be
said to be always reliable.
2. Limited comparability:
The ratio of the one firm cannot always be compare with the performance of other firm, if uniform
accounting policies are not adopted by them. The difference in the methods of calculation of stock
or the methods used to record the deprecation on assets will not provide identical data, so they
cannot be compared.
3. Absence of standard universally accepted terminology:
Different meanings are given to a particular term, egg. Some firms take profit before interest and
tax; others may take profit after interest and tax. A bank overdraft is taken as current liability but
some firms may take it as non-current liability. The ratios can be comparable only when all the
firms adapt uniform terminology.
4. Price level changes affect ratios:
The comparability of ratios suffers, if the prices of the commodities in two different years are not
the same. Change in price effect the cost of production, sale and also the value of assets. It means
that the ratio will be meaningful for comparison, if the prices do not change.
5. Ignoring qualitative factors:
Ratio analysis is the quantitative measurement of the performance of the business. It ignores
qualitative aspect of the firm; how so ever important it may be. It shoes that ratio is only a one
sided approach to measure the efficiency of the business.
6. Personal bias:
Ratios are only means of financial analysis and an end in itself. The ratio has to be interpreted and
different people may interpret the same ratio in different ways.
7. Window dressing:
Financial statements can easily be window dressed to present a better picture of its financial and
profitability position to outsiders. Hence, one has to be very carefully in making a decision from
ratios calculated from such financial statements.
8. Absolute figures distortive:
Ratios devoid of absolute figures may prove distortive, as ratio analysis is primarily a quantitative
analysis and not a qualitative analysis.
 12. Classification of ratios
Several ratios, calculated from the accounting data can be grouped into various classes according
to financial activity or function to be evaluated. Management is interested in evaluating every
aspect of the firm’s performance. They have to protect the interests of all parties and see that the
firm grows profitably. In view of the requirement of the various users of ratios, ratios are classified
into following four important categories:
 Liquidity ratios - short-term financial strength
 Leverage ratios - long-term financial strength
 Profitability ratios - long term earning power

Liquidity ratios measure the firm’s ability to meet current obligations;

Leverage ratios show the proportions of debt and equity in financing the firm’s assets;
Profitability ratios measure overall performance and effectiveness of the firm

LIQUIDITY RATIOS:
It is extremely essential for a firm to be able to meet the obligations as they become due. Liquidity
ratios measure the ability of the firm to meet its current obligations (liabilities). The liquidity ratios
reflect the short-term financial strength and solvency of a firm. In fact, analysis of liquidity needs
the preparation of cash budgets and cash and funds flow statements; but liquidity ratios, by
establishing a relationship between cash and other current assets to current obligations, provide a
quick measure of liquidity. A firm should ensure that it does not suffer from lack of liquidity, and
also that it does not have excess liquidity. The failure of a company to meet its obligations due to
lack of sufficient liquidity, will result in a poor credit worthiness, loss of credit worthiness, loss of
creditors’ confidence, or even in legal tangles resulting in the closure of the company. A very high
degree of liquidity is also bad; idle assets earn nothing. The firm’s funds will be unnecessarily
tied up in current assets. Therefore, it is necessary to strike a proper balance between high liquidity
and lack of liquidity.

The most common ratios which indicate the extent of liquidity are lack of it, are:
1. Current Ratio:
Current ratio is calculated by dividing current assets by current liabilities.

Current assets
Current Ratio =
Current Liabilities

YEAR 2015 2016 2017 2018

CURRENT RATIO 1.85 1.66 1.75 1.64

Current Ratio
1.9

1.85

1.8

1.75

1.7

1.65

1.6

1.55

1.5
2015 2016 2017 2018

Current assets include cash and other assets that can be converted into cash within in a year, such
as marketable securities, debtors and inventories. Prepaid expenses are also included in the current
assets as they represent the payments that will not be made by the firm in the future. All obligations
maturing within a year are included in the current liabilities. Current liabilities include creditors,
bills payable, accrued expenses, short-term bank loan, income tax, liability and long-term debt
maturing in the current year.
 The current ratio is a measure of firm’s short-term solvency. It indicates the availability
of current assets in rupees for every one rupee of current liability. A ratio of greater than one
means that the firm has more current assets than current claims against them Current liabilities.
INFERENCE: Greater the current ratio better is the position of company’s assets. Here the
company is having C.R. greater than 1 from last 4 years which implies that the assets of company
are in a good position.

2. Quick Ratio:
Quick ratio also called Acid-test ratio, establishes a relationship between quick, or
liquid, assets and current liabilities. An asset is a liquid if it can be converted into cash immediately
or reasonably soon without a loss of value. Cash is the most liquid asset. Other assets that are
considered to be relatively liquid and included in quick assets are debtors and bills receivables and
marketable securities (temporary quoted investments). Inventories are considered to be less liquid.
Inventories normally require some time for realizing into cash; their value also has a tendency to
fluctuate. The quick ratio is found out by dividing quick assets by current liabilities.
INFERENCE: Since the company is belonging to the Service sector and not having any kind of
stock with it, so it will equal to current ratio. A quick ratio greater than 1 shows that the company
has enough quick assets to pay for its liabilities. The quick ratio of the company is greater than 1
from last 4 years which implies that company is in a good position which respect to its quick assets.

𝑸𝒖𝒊𝒄𝒌 𝑨𝒔𝒔𝒆𝒕𝒔
𝑸𝒖𝒄𝒊𝒌 𝑹𝒂𝒕𝒊𝒐 =
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

Quick Asset = Current Asset – Stock – prepaid expense

YEAR 2015 2016 2017 2018
QUICK RATIO 1.85 1.66 1.75 1.64
 quick ratio
1.9

1.85

1.8

1.75

1.7

1.65

1.6

1.55

1.5
2015 2016 2017 2018

3. Cash Ratio:
Since cash is the most liquid asset, it may be examined cash ratio and its equivalent to
current liabilities. Trade investment or marketable securities are equivalent of cash; therefore, they
may be included in the computation of cash ratio:

Cash + marketable security

Cash Ratio =
Current Liabilities

YEAR 2015 2016 2017 2018

CASH RATIO 1.82 1.60 1.79 1.55
 cash ratio
1.85
1.8
1.75
1.7
1.65
1.6
1.55
1.5
1.45
1.4
2015 2016 2017 2018

INFERENCE: Cash ratio measures a company’s ability to pay off its short term liabilities. The
company has maintained a ideal ratio of greater than 1.5 which implies that company is in a good
position to pay off its short term liabilities.

4. Net Working Capital Ratio

The difference between current assets and current liabilities excluding short – term bank
borrowings in called net working capital (NWC) or net current assets (NCA). NWC is sometimes
used as a measure of firm’s liquidity. It is considered that between two firms, the one having larger
NWC as the greater ability to meet its current obligations. This is not necessarily so; the measure
of liquidity is a relationship, rather than the difference between current assets and current liabilities.
NWC, however, measures the firm’s potential reservoir of funds. It can be related to net assets (or
capital employed):

Net working capital (NWC)

NWC Ratio =
(Net asset or Capital employed)
 Year Ratio

2015 0.928
2016 0.57
2017 0.97
2018 0.97

Ratio
1.2

0.8

0.6

0.4

0.2

0
2015 2016 2017 2018

INFERENCE: This ratio measures the company’s ability to pay off its short term liabilities from
its current assets. Company has improved its ability to pay since 2016 but still the company
requires to increase its assets in order to maintain its net working capital ratio.

LEVERAGE RATIO:
The short-term creditors, like bankers and suppliers of raw materials, are more concerned with the
firm’s current debt-paying ability. On other hand, ling-term creditors like debenture holders,
financial institutions etc are more concerned with the firm’s long-term financial strength. In fact
a firm should have a strong short as well as long-term financial strength. In fact, a firm should
have a strong short-as well as long-term financial position. To judge the long-term financial
position of the firm, financial leverage, or capital structure ratios are calculated. These ratios
indicate mix of funds provided by owners and lenders. As a general rule there should be an
appropriate mix of debt and owners’ equity in financing the firm’s assets.
Leverage ratios may be calculated from the balance sheet items to determine the proportion of debt
in total financing. Many variations of these ratios exist; but all these ratios indicate the same thing
the extent to which the firms has relied on debt in financing assets. Leverage ratios are also
computed form the profit and loss items by determining the extent to which operating profits are
sufficient to cover the fixed charges.

1. Proprietary Ratio
This ratio indicates that the proportion of total assets funded by the owner or shareholders. It is
calculated as under

Equity
Proprietary ratio =
Total Asset

A higher proprietary ratio indicates high sound financial position of the company from the long
term point of view because it means that a large proportion of total asset is provided by equity and
hence the firm is less dependent on external sources.

Year Proprietary
Ratio
2015 1.88
2016 2.257
2017 0.11
2018 0.10
 Proprietary Ratio
2.5

1.5

0.5

0
2015 2016 2017 2018

INFERENCE: A high ratio is a good indication of the financial health of the company. But the
company’s financial health has declined in 2017 and 2018 which implies that a larger portion of
the total capital comes from debt rather than equity.

PROFITABILITY RATIOS
A company should earn profits to survive and grow over a long period of time. Profits are
essential, but it would be wrong to assume that every action initiated by management of a company
should be aimed at maximizing profits, irrespective of concerns for customers, employees,
suppliers or social consequences. It is unfortunate that the word profit is looked upon as a term of
abuse since some firms always want to maximize profits ate the cost of employees, customers and
society. Except such infrequent cases, it is a fact that sufficient profits must be able to obtain funds
from investors for expansion and growth and to contribute towards the social overheads for welfare
of the society.
Profit is the difference between revenues and expenses over a period of time (usually one year).
Profit is the ultimate output of a company, and it will have no future if it fails to make sufficient
profits. Therefore, the financial manager should continuously evaluate the efficiency of the
company in terms of profit. The profitability ratios are calculated to measure the operating
efficiency of the company. Besides management of the company, creditors and owners are also
 interested in the profitability of the firm. Creditors want to get interest and repayment of principal
regularly. Owners want to get a required rate of return on their investment. This is possible only
when the company earns enough profits.
Generally, two major types of profitability ratios are calculated:
 Profitability in relation to sales.
 Profitability in relation to investment.

1 Return on Equity (ROE)

Common or ordinary shareholders are entitled to the residual profits. The rate of dividend is not
fixed; the earnings may be distributed to shareholders or retained in the business. Nevertheless,
the net profits after taxes represent their return. A return on shareholder’s equity is calculated to
see the profitability of owners’ investment. The shareholders’ equity or net worth will include
paid-up share capital, share premium, and reserves and surplus less accumulated losses. Net worth
also be found by subtracting total liabilities from total assets. The return on equity is net profit
after taxes divided by shareholders’ equity, which is given by net worth:

Profit after taxes

Return on Equity =
Equity

ROE indicates how well the firm has used the resources of owners. In fact, this ratio is one of the
most important relationships in financial analysis. The earning of a satisfactory return is the most
desirable objective of business. The ratio of net profit to owners’ equity reflects the extent to
which this objective has been accomplished. This ratio is, thus, of great interest to the present as
well as the prospective Shareholders and also of great concern to management, which has the
responsibility of maximizing the owners’ welfare.
 The return on owners’ equity of the company should be compared with the ratios of other
similar companies and the industry average. This will reveal the relative performance and strength
of the company in attracting future investments.

Year ROE
2015 19.325
2016 1.910
2017 6.5
2018 7.2

ROE
25

20

15

10

0
2015 2016 2017 2018

INFERENCE: Earlier in 2015 the company acquired a good rate of return on resources
provided for company’s stockholders equity but in 2016 the ratio declined to a great extent.
Now the company is again trying to come back on the track.
2.Earnings per Share (EPS)
The profitability of the shareholder’s investments can also be measured in many other
ways. One such measure is to calculate the earnings per share. The earnings per share (EPS) are
calculated by dividing the profit after taxes by the total number of ordinary shares outstanding.
 Profit after taxes
EPS =
No of Shares

Year EPS
2015 0.02
2016 1.93
2017 0.65
2018 1.26

EPS
2.5

1.5

0.5

0
2015 2016 2017 2018

INFERENCE: Higher EPS is always better as it implies that company is more profitable and has
more profit to divide among its shareholders. Company improved its ability to pay dividend to its
shareholders since 2017 and is in a good condition now.
3 Net Profit Margins
Net profit is obtained when operating expenses; interest and taxes are subtracted from the
gross profit margin ratio is measured by dividing profit after tax by sales:
 Profit after tax
Net Profit Margin =
Net Sales*

Net profit ratio establishes a relationship between net profit and sales and indicates and
management’s in manufacturing, administrating and selling the products. This ratio is the overall
measure of the firm’s ability to turn each rupee sales into net profit. If the net margin is inadequate
the firm will fail to achieve satisfactory return on shareholders’ funds. This ratio also indicates the
firm’s capacity to withstand adverse economic conditions. A firm with high net margin ratio would
be advantageous position to survive in the face of falling prices, selling prices, cost of production.

Year Net Profit

Margin

2015 35.72

2016 80.59

2017 35.72

2018 85.99
 Net Profit Margin
100
90
80
70
60
50
40
30
20
10
0
2015 2016 2017 2018

INFERENCE: Net profit margin indicates how much of each rupee collected by a company as
revenue changes into profit. The company is holding a good ratio every year which implies that
company is making profit out from the money collected.
 13. Conclusion
IDBI Federal Life Insurance Co. Ltd. is consistently driving product and service innovations to
cater to the need based priorities of Indian masses and help them enjoy the goodness of life. Despite
challenges, we have expanded our customer reach, strengthened our Operations, and developed a
range of innovative savings and protection Solutions to address evolving customer aspirations. As
we strengthen our industry presence, we are inspired to do more. We are driven by our belief to
touch and transform people’s lives and create value for all stakeholders.

IDBI Federal Life Insurance CO. Ltd. is a newly started Insurance Company and trying their best
to get in a positive position since it belongs to Insurance business. It takes a lot of time to recover
the cost of starting of business.

However IDBI achieved Break Even in Year 2013 and on moving to generate profits. Company is
doing good business because the premium received by the Company is increasing year by year and
customer of the Company is also satisfied with the product of the Company because Persistency
Ration is regularly increasing now it is 78% which is very high than other insurance companies.

In the Product wise Company is only in Life Insurance and to success in competitive business
Company require to start more products like in retirement plan, Health Insurance, Low Cost
Accidental Insurance etc.
 14.Bibliography and References
Books Referred:
 Marketing Management by Philip Kotler
 Financial Statement Analysis and Reporting by Peddina
Mohana Rao

Websites Referred:
 https://www.irdai.gov.in/Defaulthome.aspx?page=H1
 http://www.idbifederal.com/Pages/home.aspx
 https://www.policybazaar.com/
 http://www.livemint.com/
 https://en.wikipedia.org/wiki/IDBI_Federal_Life_Insurance