A

PROJECT REPORT

ON

FINANCIAL MARKET AND INVESTMENT INSTRUMENT

At

Master of Business Administration

(2009-2010)

Submitted To Submitted By

Institute of Distance Sanjay Pathak

Education, M.P. Bhoj (Open) M.B.A. (Finance)

University, Gwalior Final Year

M.P. BHOJ (OPEN) UNIVERSITY,

GWALIOR (M.P.)
 PREFACE

A professional course like Business Administration demand in depth

theoretical knowledge and practical exposure to its application, for the same, the
course design includes two months training. The course aims to groom the student
professionally, and offer him/her a chance to work in the real environment of the
corporate world, so as to gain experience on practical aspect and supplement his/her
theoretical knowledge.
Today is an era of competition not just among the company’s products, but
also among the company’s strategic decisions which aims at large consumer base.
Consumer is one of the important entities in the channel as the generation of the
value offered by the companies is focused on the ultimate users. Thus, to have an
effective consumer base, TATA AIG has taken the strategic decision of Direct
Marketing through comparative study among various other steps.
TATA AIG is a leading company which deals in many broad areas of
business products such as Bank Services, Home Loans, Venture Capital, Securities,
General Insurance, and Life Insurance.
The organization has continuously evolved to adapt the changing industry
scenario and has consistently registered profile and growth.
It is been a real privilege to have a great experience with the company for
summer training. I sincerely hope that the organization will be benefited by the
findings of the project.
 ACKNOWLEDGEMENT

Words are indeed inadequate to convey my deep sense of gratitude to all those who
have helped me in completing this summer project to the best of my ability. Being a
part of this project has certainly been a unique and a very productive experience on
my part.

I am really thankful to Mr. Suresh Mahalingam (M.D.) for making all kinds of
arrangements to carry the project successfully and for guiding and helping me to
solve all kinds of queries regarding the project work. His systematic way of working
and incomparable guidance has inspired the pace of the project to a great extent.

Last but not least I would like to thank all the employees of The Tata AIG life
insurance,Gwalior who have directly or indirectly helped me with their moral
support for the completion of my project.

SANJAY PATHAK
 Table of Contents

Contents
Executive Summary
Objectives of Project
Research Methodology Used

Introduction to insurance
Definitions
Industry segment of insurance

Market dynamics
Market overview
Factors driving changes
Reasons for opening of industry
Market structure
Role of IRDA

Insurance sector future in India

Company profile
History
Business summary
Business strategy

Financial Market and investment instrument

Financial market

Investment

Types of plan

Generation of insurance

Why insurance is required

Working methodology

Analysis of questionnaire

Findings

learning’s

Limitations
Bibliography
 Executive summary

The main objective of this study is to “financial market of insurance and generating
leads for Tata AIG life insurance Gwalior.”

Besides this, the other objective is to understand the insurance sector in India.yhe
market share by different players in the market. Then understating types of
insurance.

Understanding the role of IRDA in Indian insurance market as a regulatory agency.

study of Tata AIG life insurance as a whole. Then we gone through the questioner
analysis, Types of plans provided by the company and how company is generating
the business. understanding the different plans by Tata AIG life insurance.

After this we have analyzed our questionnaire on the basis of which lead generation
was done. And from the analysis finding are generated. Which give a generalize idea
about Indian insurance industry.
 Objectives of the Project

• To understand financial market in insurance sector.

• To understand role of IRDA in insurance sector.

• To know how on the basic of demography people buy insurance.

• To understand who is the market leader in insurance sector with how much
insurance.

• To get insight about the recovery procedure followed by the bank for managing the
NPA’s.
 Research Methodology

The main objective of project was to understand financial market in insurance sector
and generating leads for the Tata AIG life insurance Gwalior. The work of lead
generation was done by survey we have targeted the group who are having good
disposable income. we was not directly approaching the people to buy insurance
from Tata AIG life but indirectly creating a good image for Tata AIG.
 Introduction to Insurance

Every asset has a value for its owner and also for those who are benefited with the
existence of that asset. Insurance is concerned with the protection of economic value
of assets.

Every asset has normally an expected lifetime. During this period, it is expected to
perform and provide income/comfort to the owner. The owner, being aware of this,
plans the things in such a way that by the time the expected lifetime of the asset
expires, he is ready with the funds required for its replacement. In this way, he
ensures that the value or income from the asset is not lost. Well, this appears to be a
fine arrangement provided the asset completes its expected lifetime!

All assets carry the risk of being destroyed or damaged. But all assets may not
necessarily get destroyed or damaged. Only in a few instances, the probability turns
out to be true and the asset gets actually lost or destroyed by accident or some other
unfortunate event before the completion of its expected lifetime. The owner and
those deriving benefits from the asset will suffer because the arrangement to make
available its substitute is not yet ready.

Insurance is helpful in mitigating such adverse consequences. To sum up, assets

are insured, as they are likely to be lost or made non-functional through an
accidental occurrence.
 History of Insurance

The beginning of insurance business is traced to the city of London. It started with
the marine business. Marine traders, who used to gather at Lloyd’s coffee house in
London, agreed to share losses to goods during transportation by ship. Marine
related losses included:-

 Loss of ship by sinking due to bad weather in high seas.

 Goods in transit by ship robbed by sea pirates.
 Loss of or damage to the goods in transit by ship due to bad weather in
high seas. The first insurance policy was issued in England in 1583.

Life Insurance in India

In India, insurance started with life Insurance. It was in the early 19 th Century when
the Britishers on their postings in India felt the need of life insurance cover.

It started with English Companies like... ‘The European and the Albert’. The First
Indian insurance company was the Bombay Mutual Assurance Society Ltd., formed
in 1870.

In the wake of the Swadeshi Movement in India in the early 1900s, quite a good
number of Indian companies were formed in various parts of the country to transact
insurance business. To name a few:: ‘Hindustan Co-operative’ and ‘National
Insurance’ in Kolkata
United India’ in Chennai; ‘Bombay Life’, ‘New India’ and ‘Jupiter’ in Mumbai and
‘Lakshmi Insurance’ in New Delhi.

Nationalisation of Life Insurance in India

In 1956, life insurance business was nationalized and LIC of India came into being
on 1.9.1956. The government took over the business of 245 companies (including 75
provident fund societies) who were transacting life insurance business at that time.
Thereafter, LIC got the exclusive privilege to transact life insurance business in India
An overview of India’s insurance market
Insurance in India used to be tightly regulated and monopolized by state-run
insurers. Following the move towards economic reform in the early 1990s, various
plans to revamp the sector finally resulted in the passage of the Insurance
Regulatory and Development Authority (IRDA) Act of 1999.Significantly, the
insurance business was opened on two fronts. Firstly, domestic private-sector
companies were permitted to enter both life and non-life insurance business.
Secondly, foreign companies were allowed to participate, albeit with a cap on
shareholding at 26%. With the introduction of the 1999 IRDA Act, the insurance
sector joined a set of other economic sectors on the growth march. During the 2003
financial year1, life insurance premiums increased by an estimated 12.3% in real
terms to INR 650 billion (USD 14 billion) while non-life insurance premiums rose
12.2% to INR 178 billion (USD 3.8 billion). The strong growth in 2003 did not come in
isolation. Growth in insurance premiums has been averaging at 11.3% in real terms
over the last decade.
Purpose and Need for Insurance

Assets are likely to be destroyed or made non-functional due to accidental

occurrences called perils. Assets can, therefore, be insured. A few examples of
perils are: fire, floods, breakdowns, lightning, earthquake etc. Perils are the events.
Risks are the consequential losses or damages.

• Possibility of damage to asset caused by any peril is the risk that asset is
exposed to.
• Risk means uncertainty or unpredictability about future loss or damage, which
may or may not happen. This refers to the losses, which may happen
suddenly and unexpectedly.
• We can say that a human life is also an income-generating asset.
• Human life may be lost due to unexpected early death or become non-
functional following sickness or disabilities cause by accidents.
If this happens by the time one is on the verge of retirement when his income
is about to cease, he might have made alternative arrangements to meet his
needs
 Types of Insurance

1. Non-Life Insurance 2. Life Insurance

Basically Non-Life Insurance Includes:-

 Marine Insurance

 Fire Insurance
 Miscellaneous Insurance
 Vehicles
 Furniture
 Building
 Aircrafts
 General

Life Insurance Includes:-

 Only Human Life Insurance

 Human being’s sickness, illness
 Long term concept
 Industry Segments of Insurance Industry
Insurance is an important aid to minimize the effect of uncertainties of life as well as
property. With the increasing complexities in our personal and professional life, the
range of risks that the insurance companies accept has also expended substantially.
The broadest classification of insurance is in terms of Life Insurance and Non-Life
Insurance (General insurance).A non-life insurance contract is different from a life
insurance contract. A life insurance contract is a long term contract, while general
insurance contract is a one-year renewable contract. The risk namely ‘death’ is
certain in life insurance. The only uncertainty is as to when it will take place, whereas
in general insurance, the insured event may or may not take place. It is difficult to
determine the economic value of life, whereas the financial value of any asset to be
insured under a general insurance policy can be determined.Because of these
peculiar features, a non life insurance contract is different from a life insurance
contract. In this lesson we will learn in detail the treatment of each type of non-life
insurance.Section 2(6B) of the Insurance Act 1938, defines general insurance
business. According to this general insurance business means fire, marine, or
miscellaneous insurance whether carried separately or in combination. General
Insurance Corporation of India (GIC) was set up with exclusive privilege for
transacting General Insurance business. After the passage of IRDA Act 1999, GIC
has been delinked from its subsidiaries and has been assigned the role of Indian
reinsurer

MEANING AND IMPORTANCE OF NON-LIFE INSURANCE :-

Non-life insurance refers to the property and liability insurance. Fire insurance covers
stationary property. Marine insurance covers mobile property. Bonding is a special
coverage that guarantees the performance of the contract by one party to another.
Casualty coverage includes accident and health insurance besides the above
mentioned categories. Miscellaneous Insurance business means all other general
insurance contracts including therein motor insurance.The role of insurance is two
fold. Insurance achieves both risk transfer and risk reduction. The insurer collects the
premium from a group of business firms who wants to protect their property against
the damage caused by fire.Insurer will then indemnify the firm that suffers a loss to
property due to fire out of the premium so collected. So the collective contributions of
this entire group of the insured have been utilized to pay for the losses of the
unfortunate few who sustain losses. Insurance also acts as a risk reduction
mechanism in various senses. Firstly,the individual risks have been shifted to the
insurance company by way of pooling. Secondly, firm’s risk exposure is well spread
out because insurer has an access to the reinsurance market making possible a
further spread of risk. If an aircraft is destroyed, the airline company will have a big
hole in its financials. If the aircraft is insured, the loss would be spread out among a
large number of insurance companies throughout the world.Every business
enterprise is exposed to a large number of risks and uncertainties to its premises,
plant and machinery, raw materials, finished
stock and other things. Goods may be damaged or lost in the process of
transportation and may be destroyed due to fire or flood while in storage. As a matter
of fact, business means risk and uncertainties. Some of the risks can be avoided by
timely precautions but some are unavoidable and are beyond the control of a
businessman. For those types of risks, Insurance is the best protection. By providing
protection against at least some of these risks, the insurance industry helps him
better manage his risks and contributes to capital formation in the economy. After
transferring risks and uncertainties of the business to the insurance company, the
entrepreneur can focus on his core activity- of running the business. Also, the
insurance companies bring their
experience and expertise to the field of risk management. Thus, they are able to add
value to the customer’s business processes.

Modern insurance came with a British accent

Insurance in its modern form first arrived in India through a British company called
the Oriental Life Insurance Company in 1818, followed by the Bombay Assurance
Company in 1823, and the Madras Equitable Life Insurance Society in 1829. They
insured the lives of Europeans living in India. The first company that sold policies to
Indians with “fair value” was the Bombay Mutual Life Assurance Society starting in
1871. The first general insurance company, Triton Insurance Company Limited, was
Life insurers (18)
Public sector (1)
Life Insurance Corporation of India (LIC)
Private sector (17)
Tata AIG ,Tata AIG, Bajaj Allianz, Bharti Axa, Birla Sunlife, Future Generali,
HDFC Std, ICICI Pru, IDBI Fortis, ING Vysya, Kotak Mahindra, Max NewYork,
MetLife, Reliance Life, Sahara, SBI Life, Shriram,
Non-life insurers (14)
Public sector (6)
National Insurance Company Limited, New India Assurance Company Limited,
Oriental Insurance
Company Limited, United India Insurance Company Limited

Private sector (8)

Bajaj Allianz, Cholamandalam, Future Generlai, HDFC Ergo, ICICI Lombard,
IFFCO-TOKIO, Reliance, Royal Sundaram, Tata AIG, Universal Sompo
Specialised insurers(2)
AIC, ECGC
Stand-alone Health insurance companies(2)
Apollo DKV, Star Health & Allied
Reinsurers (1)
General Insurance Corporation of India (GIC)
established in 1850. For the next hundred years, both life and non-life insurance
were confined mostly to the wealthy living in large metropolitan areas.

Source:- IRDA handbook statistics 2007-08

Regulation of insurance companies began with the Indian Life Assurance

Companies Act, 1912.
In 1938, all insurance companies were brought under regulation when a new
Insurance Act was
passed. It covered both life and non-life insurance companies. It clearly defined what
would come under life and non-life insurance business. The Act also covered,
among others, deposits, supervision of insurance companies, investments,
commissions of agents and directors appointed by the policyholders. This piece of
legislation lost significance after the insurance business was nationalized in 1956
(life) and 1972 (non-life), respectively. When the market was opened again to private
participation in 1999, the earlier Insurance Act of 1938 was reinstated as the
backbone of the current legislation of insurance companies, as the IRDA Act of 1999
was superimposed on the 1938 Insurance Act.in 2007-08, there were 25 private
sector insurance companies operating in India, alongside five public sector
companies .Of these, there were 17 life insurance companies comprising one public
(the old monopoly) and 13 private companies. Most private companies had foreign
participation up to the permissible limit of 26% of equity. In the non-life insurance
sector, there were 14 companies operating in India in 2007-08. Six of them are
public-sector companies, of which four were former subsidiaries of the GIC that
operatedas nationalised companies, and the other two are the Export Credit
Guarantee Corporation Limited and the Agriculture Insurance Company of India
Limited. The rest are private-sector companies.Most of these private-sector
companies have foreign partners with a maximum of 26% of shares,but there are
also purely domestic companies (eg Reliance General Insurance Company Limited).

Life insurance business

When the life insurance business was nationalised in 1956, there were 154 Indian
life insurance
companies. In addition, there were 16 non-Indian insurance companies and 75
provident societies also issuing life insurance policies. Most of these policies were
centred in the metropolitan areas like Bombay, Calcutta, Delhi and Madras. The life
insurance business was nationalised in 1956 with the Life Insurance Corporation of
India (LIC) designated the sole provider – its monopolistic status was revoked in
1999.
Factors Driving Change
The insurance industry has been growing between 15 and 20 percent, but it lags for
behind its global counterparts.
This was due to the following reasons. .
1. Insurance companies create products and go out to find customers.They do not
create products that the market wants.
2. Insurance awareness among the general public is low.
3. Term- Insurance Plants are not promoted.
4. Unit -linked assurances are not available.
5. Insurance covers are expensive. Inefficient management and low investment yield
are responsible for the high premium charged by Indian Insurance companies
Investment restrictions have been responsible for 10w yields.
6. Returns from Insurance Products are low.
7. There is a dearth of innovative and buyer-friendly insurance products.
8. Most agents and development officers are interested only in producing new
business servicing existing customers satisfactorily has not been a priority for them
the obvious reason to this is that incentives are them the obvious reason to this is
that incentives are based on new business generation and not on satisfactory
serving of existing customers it is surprise to note that more than 10% of LIC policies
are surrendered or get lapsed every year.
9. There is no market research worth the name and computerization is woefully
inadequate.

Globalization of Insurance Sector - Issues :

The three key issues that impinge on liberalization of insurance in India are: why
liberalize, what market structure to have finally and what is the role for regulator. :

Reason for opening up the Insurance Industry:

An insurance policy protects the buyer at some cost against financial loss arising
from a specified a risk. Different situation and different people require different mix of
risk – cost combinations. Insurance company thereby offers schemes of different
kinds. Among the emerging economies, India is one of the least insured countries,
but the potential for further growth is phenomenal. The demand for insurance is likely
to increase with rising per capital incomes,rising literacy rates and increase of the
service sectors. After Korean and Taiwanese insurance sectors were
liberalized, the Korean market has grown 3 times faster than GDP and Taiwan the
rate of growth has been almost 4 times than that of its GDP. Further, opening of the
sector to private firms will foster competition,innovation and variety of products.It will
also generate greater awareness on the need for buying insurance as a service and
not merely for tax exemption, which is currently done.

Market Structure:
What is the appropriate market structure for insurance markets?Should it be
monopoly (state or regulated) or should there be unlimited private entry or should
there only be a few regulated players? The answer is quite obvious. When traditional
public sector businesses like banking,power, telecom, airlines and even postal
services have been allowed
private entry, why must insurance remain a state monopoly? State monopoly had
little incentives to offer a wide range of products with more complex and extensive
risk categorization, better technology and better customer service including faster
settlements. Keeping in view the recommendations of insurance reforms committee
that a
limited number of high capital private companies be licensed, and no firm be allowed
to operate both in life and non-life insurance, IRDA has granted licenses to three
private companies on October 24, 2000 - Reliance Fire and General Insurance,
HDFC Standard Life Insurance and Royal Sundaram Alliance Insurance, to set up
the shop and
to get into business.
Role of IRDA
IRDA’s primary function is to protect consumer interests. This means ensuring
proper disclosure, keeping prices affordable but also insisting on some mandatory
products, and most importantly making sure that consumers get paid by
insurers.Further, ensuring the solvency of insurers is a very important function of
regulatory authority.IRDA has evolved a set of operational guidelines to deal with
maintaining the solvency of insurers.Growth of insurance
business entails better education and production to customers, creating better
incentives for agents and intermediaries. It has evolved guidelines on the entry and
functions of such intermediaries. Licensing of agents and brokers are required to
check their indulgence in activities such as twisting, fraudulent practices, rebating
and
misappropriation of funds.
Insurance Sector - Emerging Areas:
Some of the emerging areas for insurance sector in India are:
1. Demand for Pension Plans:
Two relatively modern trends affect life insurance business in India significantly. The
first one is the joint family system which worked like an insurance arrangement. With
more and more nuclear families becoming the rule, there it a greater demand for life
insurance cover the second trend is that elderly are increasingly having to fend for
themselves. In 1990, India had about 54 million people above the age of 60. This
number is expected to increase to 100 million by 2004, and to almost 10% of the
total population by 2010. Thus future senior citizens look towards planning for their
own old age and the need for pensions and annuities. These two trends portend a
large and growing market for life insurance in India.

2. Separateness of Banking and Insurance:

There is lot of speculation whether banks should be allowed to operate in the
insurance sectors. The reasons for allowing banks are – competition would enhance
efficiency and benefit consumers, public-men enjoy a “One- Stop Financial Service
Paradigm”, banks could recoup some of the lost business to securities firms and
there would be synergies in operating insurance and banking. The reasons against
are - it would create unhealthy concentration of
market power, it would expose banks to additional and unnecessary risks and banks
would have unfair advantages since they have detailed information on their
customers financial position. This debate is for from settled and we are likely to see
some restructuring in operations of banking and insurance.
3. Role of Information Technology :
The Business of selling life insurance requires assessing the profile of the customer
and assigning the right policy. This process is facilitated by a database and is
completely driven by information technology. If it uses this network of database to
offer their products, it would have better utilized this vastly underutilized capacity.
4. Using Postal Network:
Another important factor is allowing the existing network of 1,50,000 branch offices
of post andtelegraph to sell life insurances and related financial products. Already
postal banks generate more deposits than all commercial banks and hence their role
can hardly be overemphasized. Post offices can also act as avenues or agents of
non-life insurance companies. However they cannot be expected to underwrite risks.
5. Creating Insurance awareness:
It is the need of hour to create insurance awareness among the general public. It will
require a whole lot of efforts on the supply and distribution side.
6. Innovative Products:
Insurance companies should offer innovative products to tap huge amount of
resources for the developmental activities. In developed economies, insurance
products are sold Focus of insurance industry is changing towards providing a mix of
both protection / risk cover and long- term investment opportunities
3 Insurance sector in India- Future Scenario:
In India, only 10% of the market share has been tapped by LIC and GIC and the
balance 90% of the market still remains untapped. This vast Potential can be tapped
only by a large number of insurance. To serve the population of more than 100 crore
Indians, Indian insurance market offers tremendous opportunities to private insurers.
With the increase in the life expectancy of individuals and disintegration of Joint –
family system, each individual now has arranged cover for himself and for his family.
Therefore, coverage of insurers has to grow very fast.
 Company profile

History -
AIG insurance group in America with a history dating back to 83 years as
one of the leading provider of life and pension products to Europe and other
parts of the world. The history of AIG Life Insurance I starts at 1919 during
nationalization when AIG was the largest foreign insurance group in terms of
the compensation paid by the Indian Government. In 2001 AIG was the first
foreign insurance company to start its representative office in India. At present
in AIG Insurance India, the AIG group is a 26% share holder and the TATA
group holds 74% shares in the joint venture.

AIG is distinguished for being the first foreign insurance company to set up its
representative office in India, in 2001. AIG Life Insurance Company established the
concept of Bancassurance in India, and has leveraged its global expertise in
Bancassurance successfully here. The company boasts of 483 branches in India,
supporting its vast distribution network. TATA AIG offers various products that are
meant to provide customers flexibility, transparency and value for money. Given here
is a complete list of products & services offered by Tata AIG Life Insurance
Company India Ltd.

Business summary

What we do

Tata AIG have premium income and investment sales of £51.4 billion≠ and £381
billion†† of funds under management. We have 54,000 employees serving over 50
million customers in 28 countries around the world.

Tata AIG purpose is to bring prosperity and peace of mind. We will do this by
realising our vision: "One Tata AIG, twice the value".

By working together across our businesses, Tata AIG will optimise performance in
the global marketplace and maximize the value we can generate for all our
stakeholders
Strategy

Tata AIG purpose is to bring prosperity and peace of mind to our customers. We will
do this by realising our vision: One Tata AIG, twice the value. By working together
across our businesses, we will optimise our performance in the global marketplace
and maximise the value we can generate for all our stakeholders.

Business strategy by Tata AIG life insurance

The Companies Act requires that a fair review of the business contains financial and,
where applicable, non-financial key performance indicators (KPIs). We consider that
our financial KPIs are those that communicate to the members the financial
performance and strength of the group as a whole. These KPIs comprise:

• Earnings per share

• Proposed ordinary dividend per share and dividend cover*
• Group operating profit before tax**
• Long-term savings new business sales
• Return equity shareholders' capital

Management also use a variety of Other Performance Indicators (OPIs) in both

running and assessing the performance of individual business segments and units,
rather than the group as a whole. OPIs include measures such as present value of
new business premiums, new business margins, combined operating ratio and
underwriting profit.
Full-year 2008

Our strategy is underpinned by focusing on a number of key financial performance

measures. The key measures that are used to assess performance at a group level
are set out below:

Earnings per share

To demonstrate our commitment to our vision of “one Aviva, twice the value”, we
announced our ambition in February 2008 to double IFRS earnings per share by
2012. This ambition is based on total IFRS return, including investment volatility and
non-operating items over the weighted average number of shares.

Our IFRS earnings per share for 2008 was a loss of 36.8 pence (2007 restated: 48.9
profit). This reflects the net adverse short-term fluctuations and economic
assumption changes due to adverse market movement, continued investment in
developing the business and strengthening our provisions for latent claims.
Group operating profit before tax**

We aim to achieve steady sustainable growth in our operating profit, both on a

MCEV and IFRS basis. In seeking to achieve this growth, we continue to adopt strict
financial management disciplines underpinned by strong corporate governance.

In 2008 we delivered strong MCEV operating profit at £3,358 million, up 10% against
2007 and IFRS operating profit of £2,297 million, up 4% against the prior year.
These results reflect higher life and general insurance results offset by lower fund
management returns.

Long-term savings new business sales

Total new business sales, including investment sales, increased by 1% in 2008 to

£40,278 million (2007: £39,705 million) with growth in life and pension sales being
offset by a fall in the sales of investment products. As a global group with 67% of our
long-term savings sales coming from outside the UK we have benefited from
currency movements in the year, mainly the appreciation of the euro and US dollar.
However, while we have already met the target to double sales in North America a
year earlier than planned, in the current economic climate top-line sales growth
targets are not our priority. In 2009 we aim to maintain a strong franchise in each of
our markets, but with an increased emphasis on capital efficiency. We will aim to
perform in line with the market, but will prioritise profitability and efficient use of
capital.

Proposed ordinary dividend per share and dividend cover*

Our intention is to increase the total dividend on a basis judged prudent using a
dividend cover in the 1.5 to 2.0 times range as a guide, while retaining capital to
support future business growth.

Our board has recommended a final dividend of 19.91 pence per share (2007: 21.10
pence) bringing the total dividend for the year to 33.00 pence. The total dividend has
been maintained in line with 2007. Dividend cover is 1.9 times (2007: 1.6 times)
within our target range.
 Financial analysis

2008 2007 ˜
£m £m
Worldwide long-term savings new 40,278 39,705
business sales* ^
Worldwide general insurance and 11,137 11,137
health business net written
premiums**
Total sales 51,415 50,274

Consolidated profit and loss

account
Operating profit £m £m
Life Market Consistent Embedded 2,801 2,544
Value (MCEV) operating earnings ^
Fund management - MCEV basis ^ 42 90
General insurance and health 1,198 1,021
Other
Other operations and regional costs (163) (70)
Corporate centre (141) (157)
Group debt costs and other interest 379 363
MCEV Operating profit before tax 3,358 3,065
attributable to shareholders'
profits^
Adjustment to report the profits of our 1,061 849
long-term insurance, fund
management and other operations on
an IFRS basis
IFRS Operating profit before tax 2,297 2,216
attributable to shareholders' profits
Adjusted for the following:
Investment return variances and 1,631 15
economic assumption changes on
long-term business
Short-term fluctuation in return on 819 184
investments backing general
insurance and health business
Economic assumption changes on 94 2
general insurance and health business
Impairment of goodwill 66 10
Amortisation and impairment of 117 103
intangibles
Integration and restructuring costs 326 153)
Exceptional items (551) -
Loss) / Profit before tax attributable 1,300 1,832
to shareholders'
Tax 415 334
(Loss) / Profit for the year 885 1,498
Minority interests 30 178
Preference dividends 17) 17)
Coupon payment on Direct Capital 40 37
Instrument, net of tax
Profit after minority interests, 972 1,266
preference dividends and DCI
Consolidated shareholders' funds 14,446 15,931
Capital and reserves – IFRS basis 11,252 13,146
Equity attributable to shareholders 11,252 13,146
of TATA AIG plc – IFRS basis
Direct capital instrument 990 990
Minority interests 2,204 1,795
Shareholders' funds – IFRS basis 14,446 15,931
Capital and reserves – MCEV basis 12,481 12,656
Additional retained profit on an MCEV 431 7,342
basis
Equity attributable to shareholders 12,912 19,998
of TATA AIG plc – MCEV basis
Direct capital instrument and 1,190 1,190
preference dividends
Minority interests 3,013 2,501
Shareholders' funds – MCEV basis 17,115 23,689
Other financial information
Ordinary dividends declared and 902 801
charged in the year
Total dividend per share 33.00p 33.00p
Net asset value per ordinary share – 486p 763
MCEV basis
Return on equity shareholders' funds ^ 11.0% 10.4%
Earnings per share
Basic – MCEV operating profit after 83.4p 70.4p
tax basis ^
Basic – IFRS operating profit after tax 62.9p 52.8p
basis (a)
Basic – total IFRS return (a) (36.8)p 48.9p

On an MCEV basis for 2008 and 2007. Prior years presented on an EEV basis.
~ 2007 comparatives have been restated for change in approach to reserving for
latent claims.
* Present value of new business premiums plus investment sales.
**From continuing operations.

a. Basic earning per ordinary share are shown. No figures have been provided for
diluted earnings per share.
6. Financial market

Financial market can be defined as tailoring products and programs or services to

the needs and wants of individuals and groups, including local marketing and
individual marketing. The term local marketing refers to tailoring brands and
promotions to the needs and want of local groups, such as cities and neighborhoods.
Individual marketing is tailoring the product or service to one individual, also known
as "one-to-one marketing".

6.1 Fianancial market in today’s market

Fianancial market”, takes into cognizance the growing, observable fact that today s
customers distinguish themselves as having unique desires and interests and they
demand that businesses understand and meet those personal needs. To satisfy
these customers, major marketers must swing from casting a wide marketing net
over a vast crowd to selling to millions of individual customers. This shift from mass
to micro marketing presents both opportunities and challenges to market
researchers. In their efforts to market on a one-to-one basis, market-driven
companies must quickly make the move from creative, right-brain strategies to
analytical, left-brain strategies. One such right brain strategy is product placement.
Thanks to a growing use of personal video recorders and larger placement deals,
marketers move from traditional advertising to alternative media. Due to TV reality
shows etc, the explosion of reality TV programs has played a big role in product
placement growth in TV, according to PQ Media. The success of such shows as
Survivor and The Apprentice proves the value of product placement as an additional
component to the declining popularity of the 30-second spot, the report states. If
done correctly, product placement gets consumers thinking about trying new
products. Like the product placement strategy for making consumers sit up and
notice your product, this book on Micro marketing – Concepts and Cases, attempts
to explore other right brain strategies as well. The key to effective advertising and
promotions is a seamless communication/message. There should not be a
discordant note anywhere. This is difficult to achieve and is a challenge to
Organizations worldwide. It is about synchronizing the business context, the
customer context, the internal context, and the external context pertinent to a
particular Company/Organization.
 F o r I n t e r n a l C irc u la t io n O n ly

F in an cial M ark ets

C H R Y S A L IS T a t a A I G L i fe C o r p o r a te T ra i n in
 For Internal Circulation Only

Program Objectives

By the end of this program you will be able to:

 Define Basics of Investments
 Recognize Different Financial Instruments

CHRYSALIS Tata AIG Life Corporate Training and Development

For Inter nal Circulation Only

Session Objectives

By the end of this session you will be able to:

 Outline Investment and identify reasons for Investing
 Identify the need for planned Investments

 List the various Investment Avenues

 Identify relationship between risk and return

CHRYSALIS Tata AIG Life Corporate Training and Development

 For I nter nal C ircu latio n On ly

W hat is I nvestment?

Ea rn M o n e y

Spend S a ve

K e e p a sid e In v e s t

Yo u c o u in
ld v e sto
t e a rrn
n in c o mo r/a
e n dc a p ita l g ainin th e fu tu

C H R Y S A L IS T a t a A IG L ife C or p or a te T ra in in g a n d D
 F or I nter nal C irc u latio n O n ly

W hat is I n vestm ent?

E a r n in g s R s . 2 0 la k h s
E xp en s es R s . 7 la k h s
S a v in g s R s . 1 3 la k h s

In ve s t i n a H o uKs e e p A s i d e
R s . 1 0 la k h s R s . 3 la k h s

c o n t i n u ed . ..

C H R Y S A L IS T a t a A IG L ife C or p or a te T ra in in g a n d De
 For Inter nal Circulation Only

What is Investment?

House on Rent Rs. 120,000 per year

Rs. 10,000 per month =Income from Investment

Year Year
1 5

Total Return on Investment (ROI) Sale of House Rs. 15 lakhs

= Income + Capi tal Gain

Rs. 1.2 lakhs x 5 years + Rs. 5 lakhs Rs. 5 lakhs

= Rs. 11 lakhs Capital Gain on Investment

CHRYSALIS Tata AIG Life Corporate Training and Development

For Inter nal Circulation Only

Why Invest?
One needs to invest to:
1.Beat Inflation

2. Achieve Financial Goals

3.Meet with Life’s Uncertainties

CHRYSALIS Tata AIG Life Corporate Training and Development

 F o r I n te r n a l C irc u la tio n O n ly

B eat I n f latio n

T h e r a te a t w h i c h c o s t s o f g o o d

Today 1 Y e a r L a te r

5 % In f la t io n

Rs. 100 Rs. 105

T h er u p e e lovsa eluse h e ’sn cp eu ritc h a s iinn g dpeoc wr eears

c o n tin u
C H R Y S A L IS T a t a A I G L i fe C o r p o r a te T ra i n in
 For Inter nal Circulation Only

Beat Inflation

So if you kept Rs. 100 at

home earning nothing Next year you wouldn’t be able to
buy the same amount of goods
since it now costs Rs. 105.

Invest Rs. 100 for a year to give you

Rs. 105 to be abl e to buy the sam e
amount of goods next year.

Invest to earn at least the inflation rate to ensure your money

has the same value in the future.
For Inter nal Circulation Only

Achieve Financial Goals

CHRYSALIS Tata AIG Life Corporate Training and Development

Financial Goals
Buying a car Further education

Retirement
Buying a house
Marriage

Requires a large sum of money

Money should be kept aside and invested on a regular basis to
meet these goals

CHRYSALIS Tata AIG Life Corporate Training and Development

 For Inter nal Circulation Only

Meet Life’s Uncertainties

We can plan for the future, however life
always doe sn’t go as per our plans

We may be affected by
unfortunate events such as
critical illness, accidents etc.

Wise investments will help cover these unfortunate events.

CHRYSALIS Tata AIG Life Corporate Training and Development

For Inter nal Circulation Only

Need for Planned Investments

I want to buy a
house worth Rs. 10
lakhs after 10
years…

Not considering inflation rate,

You could pay Rs. 10 lakhs after
10 years… OR
The second You could invest Rs. 8,334 per
option seems month for 10 years. Rs. 8334 x 12
better… months x 10 years will give you
around Rs. 10 lakhs + ROI

One should invest periodically and start as early as possible

CHRYSALIS Tata AIG Life Corporate Training and Development

 For Internal Circulation Only

Investment Decision
Having determined the need for investment one needs to consi der
the appropriate investment avenues (Where to invest?)

One can invest in

Physical Assets Financial Assets
(Gold, Crude Oil, etc.) (Shares, Bonds, etc.)
Share Bond
__ __ __ __ __ __ __ __ __ __ __ __
_______
_______ _______
_______
_______
_______ _______
_______
_______
_______ _______
_______

When you choose an investment avenue, you should consider

the risk involved against the expected return

CHRYSALIS Tata AIG Life Corporate Training and Development

 For Internal Circulation Only

Relation between Risk and return

High Risk Moderate Risk Low Risk

High Return Moderate Return Low Return

Adventurous Balanced Cautious

Investor Profile

CHRYSALIS Tata AIG Life Corporate Training and Development

For Inter nal Circulation Only

Relation between Risk and return

Ri sk

Gambling
Commodities

Shares

Mutual Fund / Unit Linked

Traditional Insurance
Company FD

Company Bonds
Government
Bonds

Bank FD /Post Office

Return

CHRYSALIS Tata AIG Life Corporate Training and Development

 For Internal Circulation Only

Session Summary

At the end of this session we have been able to:

 Outline Investment and identify reasons for
Investing
 Identify the need for planned Investments
 List the various Investment Avenues
 Identify relationship between risk and return

CHRYSALIS Tata AIG Life Corporate Training and Development

 For Internal Circulation Only

Session Objectives

By the end of this session you will be able to:

 Define Securities and Securities Market and List Securities
Market Participants
 State need for Regulator and Specify powers of regulator
 Identify Segments of Securities Market
 Identify major instruments of the Securities Market

CHRYSALIS Tata AIG Life Corporate Training and Development

 For Inter nal Circulation Only

Securities
Securities

Units of a
Mutual Fund Derivatives

Shares
Bonds

Securities Markets is a place where one can buy and sell securities

Securities Market Participants are:

1. Issuers of Securities (Corporates, Government, etc.)
2. Investors in Securities (Households, Financial Institutions, etc)
3. Intermediaries (Brokers, Merchant Bankers, etc.)

CHRYSALIS Tata AIG Life Corporate Training and Development

For Inter nal Circulation Only

Securities Market Regulator

We will ensure that all these participants behave in a desired
manner so that
that the
the markets continue to be a source of
finance and investors
investors are protected. SEBI will help promote
and develop this market.

REGULATORS
Department of Economic Department of Company
Affairs (DEA) Affairs (DCA)

Securities and
Reserve Bank of Exchange Board
India (RBI) of India (SEBI)

CHRYSALIS Tata AIG Life Corporate Training and Development

 For Inter nal Circulation Only

Segments of Securities Market

I have some savings. I can invest
I need mone y for m y business. I
it through any of these markets.
can raise money for my
When I need the money I can sell
company through an issue of
the securities in the secondary
securities in the primary market.
market
ISSUER
INVESTOR

Securities Market

Primary Secondary
Market Market

Sale of new
new Transaction in
securities existing securities

CHRYSALIS Tata AIG Life Corporate Training and Development

 For Inter nal Circulation Only

Debt Instruments
INVESTOR
ISSUER
DEBT INSTRUMENT

MONEY

Predetermined Term s:
1. Rate of Interest (Also known as Coupon Rate)
2. Periodicity Of Interest Payment (Annually, Semi-annually, etc.)
3. Repayment of Principal Amount on a specific Date (Maturity Date)

In the Indian securities markets :

Bond Debenture
1. ‘Bonds’ are debt instruments issued by the Central and __ _ _ _ _ __ __ _
__ __ __ __ __ __
_______
_______
State governments and public sector organizations __ _ _ _ _ __ __ _
_______
_______ 2. ‘Debentures’ are instruments issued by private corporate __ _ _ _ _ __ __ _
__ _ _ _ _ __ __ _
_______
_______ sector.

CHRYSALIS Tata AIG Life Corporate Training and Development

For Inter nal Circulation Only

Equity / Share
Company Capital

Debt Equity

Total equity capital of a company is divided into equal units of small

denominations, each called a share.

The holders of such shares are members of the company and have
voting rights whic h gives them company related decision making powers.

Example:
 Company ABC Ltd issued 5000 shares of Rs 10 each.
 So the total Equity Capital of ABC Ltd. is 5000 shares x Rs 10 = Rs. 50,000

CHRYSALIS Tata AIG Life Corporate Training and Development

 For Inter nal Circulation Only

Derivatives
Derivative

Equity
Foreign Exchange
(forex)
Underlying
Commodity
Bonds Asset
Derivative is a type of
of security whose value is derived from the value of
the underl ying asset

Types of Derivatives

Futures Forwards Options Swaps

CHRYSALIS Tata AIG Life Corporate Training and Development

For Inter nal Circulation Only

Mutual Fund
Investors (Individual s / Corporate investors)

Pool in their money

Mutual Fund Issues units

Invests money pooled

Securities (Shares, Bonds, Debentures)

Return
Return on Investment Appreciation in
(ROI) value of units

Net Asset Value (NAV) = Market Value of Investments

Number of Units

CHRYSALIS Tata AIG Life Corporate Training and Development

 For Inter nal Circulation Only

Mutual Fund
Equity Funds/
Investment
Gilt Funds
Growth Funds Objective of
Mutual Fund
Tax Saving
Funds Liquid Funds/ Money
Market Funds
Balanced
Funds Debt/Income
Funds

The investment objectives specify the class of securiti es a Mutual

Fund can invest in

Investors are also given

given the option of getting dividends (by way of cash or
additional units), declared by the mutual fund, or to participate only in the
capital appreciation of the scheme ( Growth option).

CHRYSALIS Tata AIG Life Corporate Training and Development

For Inter nal Circulation Only

Session Summary

At the end of this session we have been able

to:
 Define Securities and Securities Market and List
Securities Market Participants
 State need for Regulator and Specify powers of
regulator
 Identify Segments of Securities Market

 Identify major instruments of the Securities

Market

Types of plans in TATA AIG

CHRYSALIS Tata AIG Life Corporate Training and Development
7.1Whole Life Plans (savings)

• Maha life gold

• Invest Assure gold

7.2Pure Term Plans

• Raksha

7.5Pension Plans (investment)

• Invest assure future

• Easy retire

7.6 Child Plans (investment)

• Super star

7.7Health Plans (living benefits)

• Health protector
• Health investor

Generation of insurance

There are 3 ways how TATA AIG get insurance

 TATA AIG

Bank tie up DSF(Agent) Direct

(Call center)

1. Bank tie up – TATA AIG life insurance is having a tie up with some of the
banks which help them to get insurance. TATA AIG life insurance provides
them insurance.eg. Punjab and Sindh bank.

2. DSF(Agent) - agents are the people who work for the company and bring
insurance for the company. Major part of insurance is generated by these
people only. India largest insurance company LIC is pioneer of this model
they are the people who are running this model successfully and they are
market leader in insurance.

3. Direct (call center) – This new marketing phenomena applied by most of the
insurance company in these days. Insurance companybring the list of bsnl
telephone number and they randomly call people and try to convince people
to purchase insurance. Some of people get ready to purchase insurance and
this way company sell their insurance

9 Why insurance is required

Two type of losses are there for the family when they loss a family member

1 Emotional loss to the family

2Financial loss

Emotional loss

This loss is due to the death of family member or because of absence of

that person. Kind this kind of loss cannot be covered by any insurance company.

Financial loss

The person who has been passed in some accident or disease might have some
earning and he or she was going to earn till his or her survival so this thing cause
financial loss to the family to cover these kind of loss insurance companies are there.
for covering this financial loss insurance companies are helping the family.

Plans

Plans are broadly divided into two categories

1. Term plans

2. Endorsement plans

 Term plans

Type of Proportional Reinsurance under which the Ceding Company (Primary

Insurer) cedes to a Reinsurer its Net Amount At Risk for the amount above its
retention limit on a life insurance policy. In the event the insured dies, the reinsurer is
obligated to pay that part of the death benefit which is equivalent to the net amount
at risk.

Life insurance can be defined as a means to protect the policy holder's family in the
event of his demise. And indeed it is an essential component for the future family
planning.

Term Life insurance policy is probably the basic form of all Life Insurances. It
provides the insurance coverage for a specific term of years with a specified
premium. Over here the premium buys only the death protection and nothing else.

There are three key factors in the term insurance:

a) face amount - the protection or death benefit.
b) Premium to be paid - the cost to the insured.
c) Length of coverage - the term.

The term life insurance types would mostly occur in combination of the above three
parameters:
1. The face amount can remain constant or decline.
2. The term can be for one or more years.
3. The premium can remain level or increase.

Term life insurance benefits offer an affordable protection and sometimes it also
comes with a guaranteed premium. If the insured dies while the policy is in force, the
face amount is paid to the named beneficiary. The insured can renew the coverage
at a higher premium at the end of the premium guarantee period.

The reason why the Term Life is an ideal choice for individuals is that, it has an initial
lower premium rate compared to the permanent policies. And the premium can be
increased at each renewal.

We can define the two common types of term life policies namely -
1. Yearly Renewable Term: For this type of a policy the insurance company assures
to provide a policy worth an amount equivalent or lesser to the insurability of the
insured and also a premium fixed according to the insured's current age.

2. Mortgage insurance: The flat premium rate of this type of a policy reduces its face
value. Incase the policy holder passes away the mortgage will be paid, since the aim
of the policy is to match the face amount with the amount of mortgage on his
residence.

 Endorsement plans

An endorsement is a written document attached to an insurance policy that modifies

the policy by changing the coverage afforded under the policy. An endorsement can
add coverage for acts or things that are not covered as a part of the original policy
and can be added at the inception of the policy or later during the term of the policy.

Working methodology

The work which was assigned to me was to bring the leads from government offices
of Gwalior. Sometimes company was providing me the contacts and most of the time
I have to approach the government offices by myself.

Leads – A person who is interested in buying any policy that is called a lead. After
the lead generation company sends their relationship manager to the person and the
R.O. find the requirement of that particular person and provide him insurance as per
his requirement.

Targeting- I have to target a group of people who are having a good disposable
income means I have to target officers. in layman’s term I have to target the people
who are having a salary of more than 20000.

Approach- during my training I have been taught that how I have to approach
people. First of all I have to go to any government office and tell them that I am
doing my project on insurance sector and I am comparing the insurance policies of
government employees and private sector employees. in this way I have to find out
who is the people willing to buy any insurance and how much they are ready to
invest and have to submit this to company. On the basis of this company finalize the
leads and TATA AIG’s relationship officer contacts them. This Is the way I was
approaching the people. This was our questionnaire on which basis we have to
generate the leads. It was possible for me to reach 50 people in the span of 15 days.
Name

Address

Married yes no Child Age

Phone no

Q1 Do you think life insurance is important?

Yes No

Q2 how much insurance do you have?

Yes No

Q3 if you are married have you planned for your child’s education /marriage?

Yes No

Q4 Have you done your retirement plan?

Yes No

Q5 If we will suggest you a good plan for your child/retirement/short term investment
will you be interested?

Q6 if yes, how much you will you be comfortably save for your child/retirement/short
term investment Per year?

Analysis of questionnaire

Q1 Do you think life insurance is important?

Yes no
Ans
Q2 which companies insurance do you have?

This pie chart is based on market data of insurance in the year 2007-08. Thepie
chart given below is on the basis of our survey.
Q3 if you are married have you planned for your child’s education /marriage?

Q4 Have you done your retirement plan?

Ans. Out of 200 people only 10 people was having a retirement plan and all the
people was having the same reason for not having retirement plan was that they was
government employees ,after their retirement they will be getting pension. They
believe that their future is secure this was the reason why they people was not
having retirement plans.
Q5 If we will suggest you a good plan for your child/retirement/short term investment
will you be interested?

Q6 if yes, how much you will you be comfortably save for your child/retirement/short
term investment Per year?

Ans. Not specified by people, they were saying this thing is dependent on the plan.
Findings

 Insurance sectored is highly competitive sectored with more than 15 players

and LIC is leading the market with 64% and the reason is that they is having a
huge network of agents.

 TATA AIG is having almost a 2% insurance market in Gwalior to improve their

market they need to increase the number of agents.

 Government employees are not interested in retirement plans because they

are. Security in the foam of pensions.

 80% of Government employees are having some or another kind of policy.

Learning’s

1. Insurance is very competitive market- insurance sector is one the most

competitive sector in this day due to the presence of more than fifteen
players in the market.LIC is undoubtedly market leader with the market
share of more than 60%.

2. Dealing with people- The most important thing which I have learn with
TATA AIG is that how to deal with people because my work was like that I
have to contact government employees and find the opportunity that they
are going to buy any policy or not.

3. Behavior in government offices- In government offices approaching the

people is very difficult. Some of the times people are really very busy so
sometimes they are not having the time to listen you.

4. Insurance is a unknown psychological fear- When you dealing with

people and telling them that you are from insurance sector people get
afraid they want to save them self from you.

Limitations
 I. Company was having interest in getting leads.

II. Covering all the government offices was very difficult because before
entering in some of the office you have to take permission from higher
authority.
14. Bibliography

www.tata-aig.com

www.wikipedia.com

www.irdaindia.org

www.google.com