RESEARCH PROJECT On Comparative analysis of ULIPS in India Submitted in partial fulfillment of the requirement for MBA Degree of Bangalore

University BY Nandha Kishore.D Registration Number 04XQCM6059 Under the guidance of Dr.N.S.MALLAVALLI M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan Bangalore-560 001 2004-2006

Comparative analysis of ULIPS in India DECLARATION I hereby declare that the research project titled Comparative analysis of ULIPS i n India is prepared under the guidance of Dr.N.S.MALLAVALLI in partial fulfillmen t of MBA degree of Bangalore University, and is my original work. This project d oes not form a part of any report submitted for degree or diploma under Bangalor e University or any other university. Place: Bangalore Nandha Kishore.D M. P. Birla Institute of Management 2

Comparative analysis of ULIPS in India PRINCIPALS CERTIFICATE This is to certify that Mr. Nandha Kishore.D, bearing Registration No: 04XQCM605 9 has done a research project on Comparative analysis of ULIPS in India under the guidance of Dr.N.S.MALLAVALLI M.P. Birla Institute of Management, Bangalore. This has not formed a basis for the award of any degree/diploma for a ny other university. Place: Bangalore Date: Dr.N.S.MALLAVALLI PRINCIPAL MPBIM, Bangalore M. P. Birla Institute of Management 3

Comparative analysis of ULIPS in India GUIDES CERTIFICATE I hereby declare that the research work embodied in this dissertation entitled Co mparative analysis of ULIPS in India has been undertaken and completed by Mr. Nan dha Kishore.D under my guidance and supervision. I also certify that he has fulfilled all the requirements under the covenant gov erning the submission of dissertation to the Bangalore University for the award of MBA Degree. Place: Bangalore Date: Dr.N.S.MALLAVALLI Research Guide MPBIM, Bangalore M. P. Birla Institute of Management 4

Comparative analysis of ULIPS in India ACKNOWLEDGEMENT The successful accomplishment of any task is incomplete without acknowledging th e contributing personalities who both assisted and inspired and lead us to visua lize the things that turn them into successful stories for our successors. First of all I thank the Almighty God for his grace bestowed on us throughout this pr oject. My special thanks to my project Guide Dr.N.S.MALLAVALLI, who guided me wi th the timely advice and expertise and has helped remarkably to complete the pro ject. Last, but not the least, I would like to thank my Parents and all my Friends for their wholehearted direct and indirect support and encouragement. Nandha Kishore.D M. P. Birla Institute of Management 5

Comparative analysis of ULIPS in India ABSTRACT The Life Insurance sector in India is growing at a very high rate through the Un it Linked Insurance Plan (ULIPs). Most of the Life Insurance companies grow more than 100% every year all through ULIPs. In this study we have compared the ULIPs products of five leading Insurance companies, which are hot selling products at present and also we have concentrated on the ranking of those companies based o n the some criteria like: 1. Minimum premium contribution 2. Minimum Term 3. Cha rges 4. Agents Commission 5. Returns from 11-01-05 to 11-05-05 6. Returns since inception Net Asset Value for all those five companies is collected. Considering an invest or wants to invest Rs.5000 every month, the charges and fund management between each and every companies will vary. After deduction of those charges what return s will an investor will get if he invest that amount in any of those five compan ies. (i.e.,) 1. ICICI Prudential 2. SBI Life 3. HDFC Standard Life 4. TATA AIG 5 . BAJAJ Allianz. M. P. Birla Institute of Management 6

Comparative analysis of ULIPS in India INTRODUCTION Indian insurance sector with the initiation of the deregulation created a tremen dous change in the last 6 years; The monopoly of big public sector companies in life insurance as well as general (non-life insurance) has been broken. . Indian insurance industry showed an annual growth rate of 15-20% and the largest number of life i nsurance policies in force.. New private players have entered the market and wit h their innovative approaches and better use of distribution channels and technology. They are grab bing the market share of established public sector companies in Indian Insurance Market. Since the deregulation has been put in to place, the market share of Li fe Insurance Corporation of India has come down to 71.4% in life insurance secto r. Total value of the Indian insurance market (2004-05) is estimated at Rs. 450 billion. According to government source s, the insurance and banking services contribution to the country s gross domesti c product (GDP) is 7% out of which the gross premium collection forms a signific ant part. Till date, only 20% of the total insurable population of India is covered under various life insurance schemes, the penetration rates of health and other non-li fe insurances in India is also well below the international level. These facts i ndicate the of immense growth potential of the insurance sector. In order to mee t the competition, these private companies are coming with new strategies and in novative products. The introduction of unit-linked insurance plans (ULIPs) has p ossibly been the single-largest innovation in the field of life insurance. In a swoop, it has addressed and overcome several concerns that customers had about l ife insurance liquidity, flexibility and transparency and the lack thereof. In t his study I am trying to do a comparative analysis of the different hot selling UNIT LINKED PLANS (ULIPs) which is available in India, on the basis of their per formance using different criterias like premium contribution, term, charges etc. M. P. Birla Institute of Management 7

Comparative analysis of ULIPS in India UNIT LINKED INSURANCE PLAN ULIP is the innovative insurance product launched by ICICI PRUDENTIAL in India on 24-11-01. Earlier only Endowment plans were there i n Insurance companies for savings and investment purposes. Most insurers in the year 2004 have started offering at least a few unitlinked plans. Unit-linked lif e insurance products are those where the benefits are expressed in terms of numb er of units and unit price. They can be viewed as a combination of insurance and mutual funds. The number of units that a customer would get would depend on the unit price when he pays his premium. The daily unit price is based on the marke t value of the underlying assets (equities, bonds, government securities, etc) a nd computed from the net asset value. The advantage of unit-linked plans is that they are simple, clear, and easy to understand. Being transparent the policyhol der gets the entire upside on the performance of his fund. Besides all the advan tages they offer to the customers, unit-linked plans also lead to an efficient u tilization of capital. Unit-linked products are exempted from tax and they provi de life insurance. Investors welcome these products as they provide capital appr eciation even as the yields on government securities have fallen below 6 per cen t, which has made the insurers slash payouts. According to the IRDA, a company o ffering unit-linked plans must give the investor an option to choose among debt, balanced and equity funds. If you opt for a unit-linked endowment policy, you c an choose to invest your premiums in debt, balanced or equity plans. If customer chooses a debt plan, the majority of his premiums will get invested in debt sec urities like gilts and bonds. If he chooses equity, then a major portion of his premiums will be invested in the equity market. Customer chooses the plan accord ing to his risk profile and investment need. The ideal time to buy a unit-linked plan is when one can expect long-term growth ahead. This is especially so if on e also believes that current market values (stock valuations) are relatively low . So if investor opts for a plan that invests primarily in equity, the buzzing m arket could lead to windfall returns. However, should the buzz die down, investo rs could be left stung. M. P. Birla Institute of Management 8

Comparative analysis of ULIPS in India WHY OFFER UNIT-LINKED POLICIES? 1 GENERAL CONSIIDERATIIONS 1 GENERAL CONS DERAT ONS A product will only provide good sales volumes in a market if it meets the r equirements of the parties involved in the transaction. For an insurance product , this means meeting the requirements of the client, the distributor (assumed to be an intermediary) and the insurer. In this section we look at how a unit-link ed policy meets the needs of the three parties. 2. THE CLIENT THE CLIENT Smoothing of investment returns on conventional policies has been reduced as act uaries, through competitive Unit-linked policies can be designed to do almost an ything a conventional policy can, but they can also offer more flexibility. The notable exception is achieving the smoothing of investment returns which was tra ditionally the objective of conventional policies. Over the years, the pressures have increased the terminal bonus element of matur ity payouts. The volatility of investment returns under conventional policies ha s therefore increased and the main perceived advantage of such policies has dimi nished. The major disadvantage of conventional policies lies in their bundled nature and , in particular, that the cash value of the policy at a particular time is not c lear to the client. The transparent nature of a unit-linked policy has a major a ppeal to clients who wish to monitor the progress of the value of their investme nt. This has enabled single premium life insurance policies to compete successfu lly with mutual funds and other open-ended collective investment schemes. M. P. Birla Institute of Management 9

Comparative analysis of ULIPS in India Further advantages of unit-linking are that the client has control over the inve stment strategy for the policy and may be more comfortable with unit linking as the concept is closer to other collective investment vehicles than a conventiona l policy. Notably, clients may control the degree of investment risk by directin g premiums to the funds most appropriate in relation to their risk tolerance. Th ose clients willing to take on more risk, for example by investing solely in an equity share fund, would expect to earn better returns over the long term. 3. TH E IINTERMEDIARY THE NTERMEDIARY The transparency and flexibility of unit-linked policies provide the intermediar y with products that meet a wide variety of client needs and which are easy to e xplain (in principle) to clients, particularly in terms of demonstrating investm ent performance compared to that of competitors. It is also possible for the int ermediary to show how unitlinked contracts have the potential to outperform thei r conventional with-profits counterparts based on past performance. In general, the maturity values of unit-linked policies invested in managed or balanced fund s where the underlying investments are a mix of shares, bonds, property and cash should be similar to the maturity value of a conventional withprofits policy. T he maturity values of unit-linked plans invested in equity share funds would be expected to be higher. In practice, results have varied considerably between ins urers depending on their relative investment performance. In addition, where the intermediary is acting as the clients investment adviser, the regular requirement to review the investment strategy for the policy with th e client gives the intermediary a reason to contact the client with the possibil ity of further sales as a consequence of the meeting. The quality of unitlinked business should be better than that of conventional business, in terms of persis tency, for this reason. M. P. Birla Institute of Management 10

Comparative analysis of ULIPS in India USES OF UNIT-LINKED PRODUCTS To date, unit-linked products have been structured in many different ways: I. Endowment assurances II. Open-ended whole life policies III. Savings for reti rement (deferred pensions) IV. Pensions in payment Many of these offer the choice of I. Single or regular (monthly, annual or other ) premiums II. Flexible premiums III. A single or a multiple life basis A range of covers that can be added (depending on local licensing regulations), e.g. I. Life cover II. Guaranteed insurability options III. Critical illness IV. Disa bility V. Health VI. Long term care VII. Redundancy M. P. Birla Institute of Management 11

Comparative analysis of ULIPS in India These products can be applied in a wide variety of situations. I. Personal lines II. Family protection III. Mortgage or loan repayment IV. Inheritance or estate tax planning V. Lump-sum investment VI. Saving for retirement VII. Saving for s chool or college fees VIII. Drawing retirement income IX. Charitable giving X. B usiness lines XI. Key person insurance XII. Partnership buy-sell agreements XIII . Other partnership situations XIV. Employee pension and other benefits XV. Exec utive benefits Of course, none of this is new just because a unit-linked policy is involved. Th e main points really are: I. Unit-linked policies can satisfy the same needs as conventional policies. II. Unit-linked policies are easy for the intermediary to explain and easy for the client to understand. Of course, the actual level of understanding of the average client will still be very low, but will nonetheless be better tha n for typical conventional policies. III. The flexibility and choices under unit-linked policies enable clients to ch oose the insurance coverages they require and to control the level of investment risk associated with the policy. M. P. Birla Institute of Management 12

Comparative analysis of ULIPS in India 1. THE INSURER THE INSURER The insurer should only offer unit-linked products in response to a demand from the market or where it is believed that market condit ions will support unit linked innovation and where it can make a sufficient prof it. Clear indications of where unit-linked plans may be successful are flat or s tagnating sales of traditional with profits products, and increases in sales of pure investment linked trusts (or mutual funds). Offering unit-linked insurance would be a method to retain existing customers or attract new customers who may otherwise purchase pure protection insurance (term insurance) and place their sa vings in investment-linked trusts or other pure investments. Unit-linked policies are usually less capital intensive than conventional with p rofits policies, i.e. the finance required to support equal volumes of with prof its and unit-linked business is lower for unit-linked business. There are two ma in reasons for this: I. The guarantees under unit-linked business are usually mu ch weaker than under a conventional with-profits policy (if they exist at all). II. The reserving requirements under a unit-linked policy are much less onerous than under a conventional with-profits policy. This partly reflects the weaker g uarantees but is mainly a result of using a valuation basis under which the rese rve is roughly equal to the surrender value at all times. The lower capital requ irement for unit-linked business means that unitlinked products are suitable pro ducts for insurers in start-up situations. In countries where bancassurance has been successful, the bancassurers have often started by selling unit-linked prod ucts. In some cases, insurers have responded to competition from the bancassurer s by introducing unit-linked products themselves. Unit-linked policies are often more profitable than conventional withprofits policies, particularly for propri etary life offices. The reason for this is that many proprietary life offices op erate a 90/10 (or other split) gate within their life fund. M. P. Birla Institute of Management 13

Comparative analysis of ULIPS in India This means that at least 90% of the profits of the business must go to the with profits policyholders, and the shareholders take a maximum of 10%. The requireme nt to split the profits in this way is written into the Memorandum and Articles of Association of the insurer (the basic documents governing its operations) and would be virtually impossible to circumvent. In some cases, the requirement to split the profits relates only to the profits arising from with profits business , but often the requirement covers profits arising from non-profit business as w ell. Non-profit business could include unit-linked business. However, by writing unit-linked business in a separate fund or even a separate c ompany, the requirement to distribute any profits arising from the business to a nyone other than the shareholders is removed. Insurers will need to decide whether to write unit-linked business either I. In the existing life fund with segregated assets; II. In a separate fund containing unit-linked assets only; III. In a separate company. M. P. Birla Institute of Management 14

Comparative analysis of ULIPS in India CRITICAL SUCCESS FACTORS FOR UNIT-LINKED BUSINESS I. EFFICIENT INVESTMENT MARKETS A key area in which a unit-linked policy differs from a conventional withprofits policy is that the investments of the unit-link ed policy should be able to be valued at any point in time. This means that a pr ice for the individual investments of a unit-linked fund should be available at any time, i.e. efficient investment markets. This covers not only share markets but also government bond markets, corporate bond markets and (as far as possible ) property markets. 2. A DEMAND FOR TRANSPARENT INVESTMENTS In markets where shares, bonds and prope rty are popular investment media, there is a predisposition towards investments that can be easily valued. This weighs heavily in favor of a unit-linked policy rather than a conventional policy. 3. A WELL-DEVELOPED LIFE INSURANCE MARKET A well-developed life insurance market can be characterized by the following: A need for protection and savings A stab le economic background Consumer wealth A sophisticated banking system able to pr ocess mass transactions An advanced supervision system which allows the introduc tion of new classes of business M. P. Birla Institute of Management 15

Comparative analysis of ULIPS in India Trust in financial services institutions A taxation regime that does not disadva ntage life insurance in general or unit-linked life insurance in particular 4. ADEQUATE SYSTEMS The flexibility of unit-linked products means that there can be a large number o f options as to how the policy is put together. There are options regarding the choice of add-on insurance benefits, the term of the policy and whether the cash value is payable as part of the sum insured or in addition to the sum insured o n the occurrence of the insured event. This means that complex point of- sale il lustration systems are required to support unit-linked products. Once written, unit-linked policies are complex from a record-keeping point of vi ew, as, there are large amounts of data required to be held and large numbers of transactions to be processed. A powerful and efficient administration system is needed to manage a unit-linked portfolio. 5. A VIABLE DISTRIBUTION SYSTEM Access to the market through one or more of the following: A tied sales force we ll trained, well paid and well motivated A reliable independent sales network An other financial services organization (e.g. a bank) Other direct access to the m arket (direct response or other distribution agreements with third parties) M. P. Birla Institute of Management 16

Comparative analysis of ULIPS in India 6. A GOOD INVESTMENT TRACK RECORD To be successful in the unit-linked market, an insurer must be able to demonstrate a good history of investment performance. F or a new entrant to the unit-linked market, this is clearly impossible (unless, for example, it relies on tracker funds which replicate the performance of wellknown stock indices) and the insurer must rely on its reputation in the market o r else rely on someone elses track record. This is often done by using external f und managers to manage the investments, or by investing in funds managed by anot her fund manager. In either case, the pedigree of the external fund manager beco mes part of the marketing message. PRODUCT DESIGN AND PRICING 1. PRODUCT DESIGN (TECHNICAL SPECIFICATION) The produ ct specification should include (where relevant): 1.1 CLASS OF PRODUCT 1. The technical class of product e.g. whole life, endowment, pension 2. Version s available single life, joint life (first death, last survivor), business 3. Pr emium options single, regular, flexible 4. Allowable insurance benefit add-ons 1.2 INVESTMENTS I. Fund links available and investment objectives of each fund I I. Investment guarantees (or lack of investment guarantees) III. Method and freq uency of unit pricing IV. The investment accounting and management system to be used M. P. Birla Institute of Management 17

Comparative analysis of ULIPS in India 1.3 MARKETING AND DISTRIBUTION The distribution channels through which the produ ct is available 1. Variations of product design by distribution channel, if any 2. The initial and renewal commission payable and clawback rules 3. Capabilities of illustration system to be used 4. Marketing material to be available 5. Othe r sales aids to be available 6. Training and qualification standards of unit-lin ked insurance intermediaries 1.4 ACTUARIAL AND TECHNICAL 1. Charging structure 2. Insurance benefit charges 3. Review provisions (if rele vant) 4. Policy limits (age limits, maximum and minimum premiums/sums insured, m inimum investment in individual funds, fund link rules, rules for fund switches, etc.) 5. Underwriting rules 6. Management and statistical information required 7. Valuation and reserving bases 8. Solvency margin requirements 9. Corporate ta x implications 10. Policyholder tax implications 1.5 ADMINISTRATION 1. Business processing rules new and ongoing business 2. proc essing rules allocation of cash to policies, late Policy and endorsement wording s 3. Cash processing rules 4. Permitted policy changes (by the insurer and by th e client) M. P. Birla Institute of Management 18

Comparative analysis of ULIPS in India 5. Availability of loans and/or partial withdrawals and the rules for administer ing them 6. Non-forfeiture provisions 1.6 OTHER SPECIFICATIONS REQUIRED 1. Administration system specification 2. Investment accounting and management s ystem specification 3. Illustrations system specification 4. Management informat ion system specification 2. PRODUCT PRICING This means the level and type of charges that the insurer can take under the policy. The types of charge, which can be levied, are initial ch arges, surrender charges, renewal charges, fund management charges, and switch o r redirection charges. In addition, charges are taken for add-on benefits if the premium for such benefits is not included in the total premium payable. a. INITIAL CHARGES Initial charges are intended to cover the marketing, distribu tion and other new business costs relating to the policy. There are many differe nt variations of initial charges, but essentially, whatever method is used, the effect is that less money is actually allocated to the policy than is received f rom the client for a period of time. Some possible ways of doing this are: b. Al locate no money to the policy for a period of months. c. Allocate only a proport ion of each premium to the policy for a period of months. d. Allocate money rece ived in the early months of a policy to units that have a higher fund management charge than those purchased by later premiums. M. P. Birla Institute of Management 19

Comparative analysis of ULIPS in India e. In the event of the policy being surrendered, the future excess fund manageme nt charges, in excess of the regular charges that would have been levied on thes e units, are levied at the point of surrender. As such, the excess fund manageme nt charges will be received regardless of whether the policy runs its full term or not, and only the amount of money required to purchase the units net of the e xcess fund management charges needs to be allocated to the policy. f. SURRENDER CHARGES Surrender charges (also called surrender penalties or backend charges) are, as their name suggests, applied when a policy is surrendered. They are used to recover costs already incurred to the extent that they have not been recovered from the charges made prior to surrender. g. RENEWAL CHARGES These are intended to cover the ongoing costs of administerin g the policy and any renewal commissions payable. There are various methods of t aking renewal charges: I. An explicit percentage of each premium II. A policy fe e deducted from the premium before it is allocated to units III. A policy fee de ducted from the funds under management IV. A bid/offer spread, whereby the price at which units are bought by clients is higher than the price at which the insu rer will redeem them. For example, units may be sold at 100 and redeemed at 95 ( redeemed in the case of surrenders, partial withdrawals, or to pay certain charg es). Both the bid price and the offer price of the units will change over time t o reflect the performance of the underlying investments and other factors, but t he spread between these prices will usually remain within certain bounds establi shed in the insurance contract, often close to a constant percentage such as 5%. M. P. Birla Institute of Management 20

Comparative analysis of ULIPS in India h. FUND MANAGEMENT CHARGES These are intended to cover the ongoing costs of mana ging the investments of the policy and any asset or trail commissions payable. T hese charges are almost always a percentage of the funds under management. i. SWITCH OR REDIRECTION CHARGES These cover the additional administration costs associated with switching investments between funds and redirecting premiums. T he objective of these charges is to discourage excessively frequent switches and premium redirections but often a number of free switches is allowed. Usually th ere is no charge for redirection of premiums. j. ADD-ON BENEFIT CHARGES These are usually calculated using a current cost meth od (unless the premium for add-on benefits is included in the total premium). Th is means that risk premium rates are applied each month to the sum at risk under each benefit. Any charge over and above the pure risk premium charge will help offset expenses. 3. PROFITABILITY Some assumptions about the future must be made to price the pro duct profitably. These are: The average size of policy the office expects to wri te, (i.e. the average premium and level of benefits), including the timing of pr emiums and charges for fully flexible policies. These averages may be related to age, sex and other factors such as the distribution channel. The expected costs for the product. They should be what the company thinks it needs to spend to ac quire and administer the product. This should include overhead (or indirect) cos ts. The amounts might be divided into initial and renewal costs and might be rel ated to premiums, benefits or simply to each policy. In order to allocate expens es at the policy level, sales volumes will have to be estimated. M. P. Birla Institute of Management 21

Comparative analysis of ULIPS in India Any expected increases in these amounts, due to inflation or other factors, shou ld also be considered. Economic assumptions such as future returns on unit-linke d and other funds, future inflation rates, future tax rates and rules. Lapse ass umptions calculated in accordance with the time since the policy was written and (if possible) with age, distribution method or other factors. The expected deat h and other benefit claim rates. These are not necessarily the same as the charg es for the benefits. The valuation method for the policy liabilities (or the res erves) and the need for any solvency margin. These will be in accordance with th e rules laid down by the appropriate supervisory authorities. These assumptions need to be based on good information. The best information is the experience of similar existing policies. If such information does not exist (or is not availab le), research will be necessary. M. P. Birla Institute of Management 22

Comparative analysis of ULIPS in India Problem Statement: Investors are being confused because many insurance companies approach and expla in that their product is better than other companies product. They have been expl ained only about the NAV returns and not the actual returns what they (investors ) will receive after amortizing the charges. Objective: To compare the hot selling Unit linked plans in India and to suggest the custome rs which company is giving better returns by ranking them. Awareness of Life Ins urance is being created among the people. Standard of life is increasing day-byday; many people tend to cover their risk associated with their life by taking I nsurance for their life. People are expecting high returns from ULIPs. Since ULI Ps are hot selling product in Life Insurance Industry, contributing more than 70 % of the premium collected by each company per year. Data Type: The data used for the study is Secondary data. Source: I. Insurance company brochures II. Irdaindia.org Sample size: A sample of 5 leading Life insurance companies, whose ULIPs are pop ular in the market has been taken for the study. M. P. Birla Institute of Management 23

Comparative analysis of ULIPS in India Methodology: Fixing a certain amount of premium contribution of an investor in monthly mode ( Rs.5000) and after deduction of charges, remaining amount will be converted into units by dividing with present day NAV. Total value of units = total number of units * present NAV Returns % =100* (Total value of units Total Investment)/ Total Investment Limitations: I. Only five Life Insurance companies have been considered for the study. II. Risk (death) cover charges are not considered. III. Only first two ye ars of investment charges are taken for ranking. M. P. Birla Institute of Management 24

Comparative analysis of ULIPS in India SBI LIFE INSURANCE: SBI Life Insurance is a joint venture between the State Bank of India and Cardif of France. SBI Life Insurance is registered with an authori zed capital of Rs 500 crore and a paid up capital of Rs 350 crores. SBI owns 74% of the total capital and Cardif the remaining 26%. State Bank of India enjoys t he largest banking franchise in India. Along with its 7 Associate Banks, SBI Gro up has the unrivalled strength of over 14,000 branches across the country, the l argest in the world. Cardif is a wholly owned subsidiary of BNP Paribas, which i s The Euro Zones leading Bank. BNP is one of the oldest foreign banks with a pres ence in India dating back to 1860. It has 9 branches in the metros and other maj or towns in the country. Cardif is a vibrant insurance company specializing in p ersonal lines such as long-term savings, protection products and creditor insura nce. Cardif has also been a pioneer in the art of selling insurance products thr ough commercial banks in France and 29 more countries. The company plans to make the insurance buying process quick, simple and based on well-informed judgment. In 2004, SBI Life Insurance became the first company amongst private insurance players to cover 30 lakh lives. The company expects to carve a niche in the Indi an insurance market through extensive product innovation and aims to provide the highest standards of customer service through a technological interface. To fac ilitate this, call centers has been installed. Help lines will also be installed and customers will have access to their accounts through the Internet or throug h SBI branches. M. P. Birla Institute of Management 25

Comparative analysis of ULIPS in India The company proposes to make available ready liquidity to its Life Insurance pol icies by way of loans at SBI counters. This will make Life Insurance a liquid as set in the financial portfolio of households. SBI Life Insurance is uniquely pla ced as a pioneer to usher banc assurance into India. The company hopes to extens ively utilize the SBI Group as a platform for cross-selling insurance products, along with its numerous banking product packages such as housing loans, personal loans and credit cards. SBIs access to over 100 million accounts provides a vibr ant base to build insurance selling across every region and economic strata in t he country. M. P. Birla Institute of Management 26

Comparative analysis of ULIPS in India BAJAJ ALLIANZ: Bajaj Allianz Life Insurance Co. Ltd. Is a joint venture between two leading conglomerates- Allianz AG, one of the world s largest insurance comp anies and Bajaj Auto, one of the biggest 2 and 3 wheeler manufacturers in the wo rld. Bajaj Allianz Life Insurance: I. Is the fastest growing private life insura nce company in India II. Currently has over 4,40,000 satisfied customers III. We have a presence in more than 550 locations with 60,000 Insurance Consultants pr oviding the finest customer service. One of India s leading private life insuran ce companies Bajaj Auto Ltd, the flagship company of the Rs. 8000 crore Bajaj gr oup is the largest manufacturer of two-wheelers and three-wheelers in India and one of the largest in the world. A household name in India, Bajaj Auto has a str ong brand image & brand loyalty synonymous with quality & customer focus. A STRO NG INDIAN BRAND- HAMARA BAJAJ One of the largest 2 & 3 wheeler manufacturers in the world. 21 million plus vehicles on the roads across the globe. Managing fund s of over Rs. 4000 cr. Bajaj Auto finance is one of the largest auto finance com panies in India. Rs. 4,744 Cr. Turnover & Profits of 538 Cr. in 2002-03. It has joined hands with Allianz to provide the Indian consumers with a distinct option in terms of life insurance products. As a promoter of Bajaj Allianz Life Insura nce Co. Ltd., Bajaj Auto has the following to offer I. Financial strength and st ability to support the Insurance Business. II. A strong brand-equity. III. A goo d market reputation as a world-class organization. IV. An extensive distribution network. V. Adequate experience of running a large organization M. P. Birla Institute of Management 27

Comparative analysis of ULIPS in India ALLIANZ GROUP Allianz Group is one of the world s leading insurers and financial services providers. Founded in 1890 in Berlin, Allianz is now present in over 7 0 countries with almost 174,000 employees. At the top of the international group is the holding company, Allianz AG, with its head office in Munich. Allianz Gro up provides its more than 60 million customers worldwide with a comprehensive ra nge of services in the areas of I. Property and Casualty Insurance, II. Life and Health Insurance, III. Asset Management and Banking. ALLIANZ AG- A GLOBAL FINAN CIAL POWERHOUSE I. Worldwide 2nd by Gross Written Premiums - Rs.4,46,654 cr. II. 3rd largest Assets Under Management (AUM) & largest amongst Insurance cos. - AU M of Rs.51,96,959 cr. III. 12th largest corporation in the world IV. 49.8 % of g lobal business from Life Insurance V. Established in 1890, 110 yrs of Insurance expertise VI. 70 countries, 173,750 employees worldwide M. P. Birla Institute of Management 28

Comparative analysis of ULIPS in India INDIAN OPERATIONS Growing at a breakneck pace with a strong pan Indian presence Bajaj Allianz has emerged as a strong player in India... Bajaj Allianz Life Insu rance Company Limited is a joint venture between two leading conglomerates Allia nz AG and Bajaj Auto Limited. Characterized by global presence with a local focu s and driven by customer orientation to establish high earnings potential and fi nancial strength, Bajaj Allianz Life Insurance Co. Ltd. was incorporated on 12th March 2001. The company received the Insurance Regulatory and Development Autho rity (IRDA) certificate of Registration (R3) No 116 on 3rd August 2001 to conduc t Life Insurance business in India. BAJAJ ALLIANZ- THE PRESENT I. Pan India pres ence in more than 550 locations. II. Wide range of products to suit peoples need s. III. Decentralized organizational structure for increased response and servic e levels. IV. All CCCs networked with state of art IT systems. V. Highest standa rd of customer service & simplified claims process in the industry. M. P. Birla Institute of Management 29

Comparative analysis of ULIPS in India ICICI PRUDENTIAL: ICICI Prudential Life Insurance Company is a joint venture bet ween ICICI Bank, a premier financial powerhouse and prudential plc, a leading in ternational financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin ope rations in December 2000 after receiving approval from Insurance Regulatory Deve lopment Authority (IRDA). For the year ended March 31, 2006, the company garnere d Rs 24.12 billion of weighted new business premium and wrote 837,963 policies. The sum assured in force stands at Rs 458.88 billion. The company has a network of over 72,000 advisors; as well as 9 bancassurance partners and over 200 corpor ate agent and broker tie-ups. It is also the only life insurer in India to be as signed AAA credit rating from Fitch Ratings. For the past five years, ICICI Prud ential has retained its position as the No. 1 private life insurer in the countr y, with a wide range of flexible products that meet the needs of the Indian cust omer at every step in life. Prudential plc is an international retail financial services group that aims to help people secure and enhance their own and their d ependants financial well-being by providing savings, protection and other product s and services suited to their needs. We have strong franchises in three of the largest and most attractive markets in the world, where rising wealth and changi ng demographics are fuelling demand for life insurance and other long-term savin gs and protection products. Our strategy is to build successful and increasingly profitable businesses in each of these markets, and thereby maximize returns to our shareholders over time. M. P. Birla Institute of Management 30

Comparative analysis of ULIPS in India ICICI Bank ICICI Bank is Indias second largest bank and largest private sector ba nk with over 50 years of financial experience and with assets of Rs. 1812.27 bil lion as on 30th June, 2005. ICICI Bank offers a wide range of banking products a nd financial services to corporate and retail customers through a variety of del ivery channels and through its specialized subsidiaries and affiliates in the ar eas of investment banking, life and non-life insurance, venture capital and asse t management. ICICI Bank is a leading player in the retail banking market and ha s over 13 million retail customer accounts. The Bank has a network of over 570 b ranches and extension counters, and 2,000 ATMs. Prudential plc Established in Lo ndon in 1848, Prudential plc, through its businesses in the UK and Europe, the U S and Asia, provides retail financial services products and services to more tha n 16 million customers, policyholder and unit holders worldwide. As of June 30, 2004, the company had over US$300 billion in funds under management. Prudential has brought to market an integrated range of financial services products that no w includes life assurance, pensions, mutual funds, banking, investment managemen t and general insurance. In Asia, Prudential is the leading European life insura nce company with a vast network of 24 life and mutual fund operations in twelve countries - China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Phil ippines, Singapore, Taiwan, Thailand and Vietnam. M. P. Birla Institute of Management 31

Comparative analysis of ULIPS in India TATA AIG THE TATA GROUP The Tata Group (www.tata.com) is one of India s best-kno wn industrial groups with an estimated turnover of around US $14.25 billion (app roximately 2.6% of India s GDP). With more than 220,000 employees across 91 majo r companies, it is also India s largest employer in the private sector. The Tata Group pioneered several firsts in Indian industry firsts, including: India s fi rst private sector steel mill, first private sector power utility, first luxury hotel chain and first international airline, amongst others. Recently, the Tata Group s pioneering spirit has been showcased by companies such as Tata Consultan cy Services (TCS), Asia s largest software and Services Company, and Tata Motors , the first carmaker in a developing country to design and produce a car from th e ground up. By combining ethical values with business acumen, globalization with national in terests and core businesses with emerging ones, the Tata Group aims to be the la rgest and most respected global brand from India whilst fulfilling its long-stan ding commitment to improving the quality of life of its stakeholders. AIG American International Group, Inc. is the world s leading international insuranc e and financial services organization, with operations in more than 130 countrie s and jurisdictions. AIG member companies serve commercial, institutional and in dividual customers through the most extensive worldwide property-casualty and li fe insurance networks of any insurer. M. P. Birla Institute of Management 32

Comparative analysis of ULIPS in India In the United States, AIG companies are the largest underwriters of commercial a nd industrial insurance and AIG American General is a top-ranked insurer. AIG s global businesses also include retirement services, financial services, and asse t management. AIG s financial services businesses include aircraft leasing, fina ncial products, trading and market making. American General Finance leads AIGs gr owing global consumer finance business in the United States. AIG also has one of the largest U.S. retirement savings businesses through AIG SunAmerica and AIG V ALIC, and is a leader in asset management for the individual and institutional m arkets, with specialized investment management capabilities in equities, fixed i ncome, alternative investments and real estate. AIG s common stock is listed in the New York Stock Exchange and ArcaEx, as well as the stock exchanges in London , Paris, Switzerland and Tokyo. M. P. Birla Institute of Management 33

Comparative analysis of ULIPS in India HDFC HDFC Standard Life Insurance Company Ltd. is one of Indias leading private l ife insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.), Indias leading housing finance institution and The Standard Life Assurance Company, a leading provider of financial services from the Unite d Kingdom. Both the promoters are well known for their ethical dealings and fina ncial strength and are thus committed to being a long-term player in the life in surance industry all important factors to consider when choosing your insurer. KEY STRENGTHS Financial Expertise As a joint venture of leading financial servic es groups, HDFC Standard Life has the financial expertise required to manage you r long-term investments safely and efficiently. Range of Solutions A wide range of individual and group solutions, which can be easily customized to specific ne eds. Group solutions have been designed to offer you complete flexibility combin ed with a low charging structure. Track Record so far Cumulative premium income, including the first year premiums and renewal premiums is Rs. 1532.21 Crores Ap r-Mar 2005 - 06.We have covered over 1.6 million individuals out of which over 5 ,00,000 lives have been covered through our group business tie-ups. Also declare d as the 5th consecutive bonus in as many years for our with profit policyholders. M. P. Birla Institute of Management 34

Comparative analysis of ULIPS in India DATA ANALYSIS: 1. Returns are calculated by taking the Net Asset Value(NAV) from 11-1-05 to 1105-06 2. Returns are calculated from inception till 11-05-06 ASSUM PTIONS: 1. An investor wants to invest an amount of rupees 5000 every month in ULIP star ting from 11-01-05. 2. He is willing to invest only in equity fund. 3. investor is alive till 11-05-06 Investors amount will be invested in equity fund of that company after paying the company charges. After payment of charges, the remaining amount (contribution) will be invested in equity fund and it will be converted into units by dividing the contribution by the respective days NAV. Charges differ from company to compa ny. After deducting all those charges annually fund management charges is deduct ed by cancellation of units. After the lock in period, investor can do partial w ithdrawal or whole withdrawal. The returns of the investor is calculated by find ing the total number of units and multiply it with the NAV value on the day of w ithdrawal to find the total value. Then the invested amount is deducted from the total value and the result is divided by the total investment. To find the retu rns percent multiply it by 100. M. P. Birla Institute of Management 35

Comparative analysis of ULIPS in India For analyzing the data the criterias are, 1. Minimum premium contribution 2. Mini mum term 3. Charges in first year 4. Charges in second year 5. Advisors(agents) commission 6. Returns from inception 7. Returns from 11-01-2005 to 11-01-2006. Ranking is done based on the above criteria. Returns from 11-01-2005 to 11-05-20 06 are as follows: 1. SBILIFE 2. ICICIPRUDENTIAL 3. HDFC 4. TATAAIG 5. BAJAJALLIANZ 38.85 % 24.41 % 18.83 % (6.04 ) % (32.43) % Returns per year since inception: 1. ICICIPRUDENTIAL 2. SBILIFE 3. HDFC 4. TATAAIG 5. BAJAJALLIANZ 30.04 % 25.01 % 8.08 % 7.09 % (2.71) % M. P. Birla Institute of Management 36

Comparative analysis of ULIPS in India CONCLUSION As we have all know todays scenario, awareness of Life Insurance is being created among the people, standard of life is increasing day-by-day; many people tend t o cover their risk associated with their life by taking Insurance for their life . People are expecting high returns from ULIPs. Since ULIPs are hot selling prod uct in Life Insurance Industry, contributing more than 70 % of the premium colle cted by each company per year. Investors need the clarity about the products of different life insurance compan ies particularly ULIPs. Hence we have tried to give our best to the investors by comparing the ULIPs of 5 leading insurance companies. Based on the returns given by the companies, which we have compared, SBI has giv en the maximum return compared to the other 4 insurance companies. And, if we ca lculate the returns from the inception, the ICICI PRUDENTIAL has given good retu rns. As per the objective of this study we have ranked the 5 major players in ULIPs. A nd found that the ICICI PRUDENTIAL leads the other 4 insurance companies. M. P. Birla Institute of Management 37

Comparative analysis of ULIPS in India DATE 11/1/2005 11/2/2005 11/3/2005 11/4/2005 11/5/2005 11/6/2005 11/7/2005 11/8/ 2005 11/9/2005 11/10/2005 11/11/2005 11/12/2005 HDFC NAV 24.94 26.06 27.43 26.02 26.74 27.95 29 31.28 33.18 34.6 33.4 38.03 PREMIUM 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 CONT % 73% 73% 73% 73% 73% 73% 73% 73% 73% 73% 73% 73% -0.80% 73% 73% 73% 73% 73 % MONTHLY CHARGES 15 15 15 15 15 15 15 15 15 15 15 15 CONT. Rs.. 3635 3635 3635 3635 3635 3635 3635 3635 3635 3635 3635 3635 UNITS 145.75 139.49 132.52 139.70 135.94 130.05 125.34 116.21 109.55 105.06 108. 83 95.58 1484.03 1472.16 91.15 85.23 79.04 71.54 67.17 394.12 1866.28 101003.21 16003.21 18.83 11/1/2006 11/2/2006 11/3/2006 11/4/2006 11/5/2006 39.88 42.65 45.99 50.81 54.12 5000 5000 5000 5000 5000 15 15 15 15 15 TOTAL UNITS TOTAL VALUE RETURNS RETURNS % 3635 3635 3635 3635 3635 M. P. Birla Institute of Management 38

Comparative analysis of ULIPS in India DATE 20-1101 20-1201 20-0102 20-0202 20-0302 20-0402 20-0502 20-0602 20-0702 200802 20-0902 20-1002 ICICI NAV PREMIUM CONTRIBUTION % CONTRIBUTION Rs. UNITS 10.17 10.42 10.71 11.13 11.12 10.79 10.27 10.73 10.69 10.27 9.91 9.91 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 82% 82% 82% 82% 82% 82% 82% 82% 82% 82% 82% 82% 2.25% 4100 4100 4100 4100 4100 4100 4100 4100 4100 4100 4100 4100 403.15 393.47 382.82 368.37 368.71 379.98 399.22 382.11 383.54 399.22 413.72 413 .72 4,688.03 4,582.55 446.43 413.32 403.23 406.41 429.43 428.64 409.29 374.80 35 2.78 321.40 311.03 261.15 4,557.91 4,455.36 20-1102 20-1202 20-0103 20-0203 20-0303 20-0403 20-0503 20-0603 20-0703 20-0803 20-0903 20-1003 10.36 11.19 11.47 11.38 10.77 10.79 11.3 12.34 13.11 14.39 14.87 17.71 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 92.50% 92.50% 92.50% 92.50% 92.50% 92.50% 92.50% 92.50% 92.50% 92.50% 92.50% 92. 50% 2.25% 4625 4625 4625 4625 4625 4625 4625 4625 4625 4625 4625 4625 M. P. Birla Institute of Management 39

Comparative analysis of ULIPS in India 20-1103 20-1203 20-0104 20-0204 20-0304 2 0-0404 20-0504 20-0604 20-0704 20-0804 20-0904 20-1004 17.58 19.5 20.45 21.41 19.59 21.75 17.8 17.71 18.64 19.33 20.48 21.1 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 96% 96% 96% 96% 96% 96% 96% 96% 96% 96% 96% 96% 2.25% 4800 4800 4800 4800 4800 4800 4800 4800 4800 4800 4800 4800 273.04 246.15 234.72 224.19 245.02 220.69 269.66 271.03 257.51 248.32 234.38 227 .49 2,952.21 2,885.78 217.39 202.02 205.92 193.00 198.10 205.22 199.67 189.80 17 9.17 168.60 157.64 165.40 2,281.93 2230.58 152.82 142.01 140.72 20-1104 20-1204 20-0105 20-0205 20-0305 20-0405 20-0505 20-0605 20-0705 20-0805 20-0905 20-1005 22.08 23.76 23.31 24.87 24.23 23.39 24.04 25.29 26.79 28.47 30.45 29.02 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 96% 96% 96% 96% 96% 96% 96% 96% 96% 96% 96% 96% 2.25% 4800 4800 4800 4800 4800 4800 4800 4800 4800 4800 4800 4800 20-1105 20-1205 20-0106 31.41 33.8 34.11 5000 5000 5000 96% 96% 96% 4800 4800 4800 M. P. Birla Institute of Management 40

Comparative analysis of ULIPS in India 20-0206 20-0306 20-0406 20-0506 35.84 39.02 42.43 43.37 5000 5000 5000 5000 96% 96% 96% 96% 4800 4800 4800 4800 133.93 123.01 113.13 110.68 916.30 15,070.57 653,610.45 378,610.45 137.67653 30. 04 TOTAL UNITS TOTAL VALUE LESS: INV. RETURNS % RETURNS %/YEAR CHARGES PRODUCT NAME LIFE TIME UNIT GAIN ULIP ENDOWMENT INVEST ASSURE UNIT PLUS MIN PREMIUM INR 18,000.00 INR 10,000.00 INR 10,000.00 INR 10,000.00 INR 24,000.0 0 MIN TERM 3 YRS 3 yrs 10 yrs 15 yrs 5 yrs 2 ND YEAR 7.5% 2.0% 27.0% 20.0% 7.5% COMPANY ICICI PRU BAJAJ ALLIANZ HDFC STANDARD TATA AIG SBI LIFE 1ST YEAR 20.0% 70.0% 27.0% 40.0% 25.0% ADV COMM * % OF RETURNS SINCE INCEPTION M. P. Birla Institute of Management 41

Comparative analysis of ULIPS in India M. P. Birla Institute of Management 42