A PROJECT REPORT ON “
FUND MANAGEMENT”
Submitted in partial fulfillment of the requirements for the award of the Degree of BACHELOR OF BUSINESS ADMINISTRATION
To
Guru Gobind Singh Indraprastha University, Delhi
Guide: Miss. KIRTI DAHIYA
Submitted by: NITISH KAUSHIK Enroll. No. : 06020501811
BLS INSTITUTE OF TECHNOLOGY TECHNOLOGY MANAGEMENT MANAGEMENT Delhi- Rohtak Road, NH-10, Jakhoda, Bahadurgarh -
Batch (2011-2014)
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CERTIFICATE I, Mr. NITISH KAUSHIK, Enroll No. – No. – 06020501811 06020501811 certify that the Summer Training Report (Paper Code BBA 315) 315) entitled ”FUND ”FUND MANAGEMENT” MANAGEMENT” is done by me at PNB METLIFE. To the best of my knowledge and belief, the material embodied in this Report has not been submitted earlier for the award of any Degree or Diploma by any University or Institution.
Signature of the student Date: Certified that the Summer Training Report (Paper Code BBA 315) “FUND MANAGEMENT” done by Mr., NITISH KAUSHIK Enroll no. 06020501811 has been completed under my guidance and supervision.
Signature of the Guide Name of the Guide: KIRTI DAHIYA Designation:
Date:
Countersigned
Director
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CERTIFICATE I, Mr. NITISH KAUSHIK, Enroll No. – No. – 06020501811 06020501811 certify that the Summer Training Report (Paper Code BBA 315) 315) entitled ”FUND ”FUND MANAGEMENT” MANAGEMENT” is done by me at PNB METLIFE. To the best of my knowledge and belief, the material embodied in this Report has not been submitted earlier for the award of any Degree or Diploma by any University or Institution.
Signature of the student Date: Certified that the Summer Training Report (Paper Code BBA 315) “FUND MANAGEMENT” done by Mr., NITISH KAUSHIK Enroll no. 06020501811 has been completed under my guidance and supervision.
Signature of the Guide Name of the Guide: KIRTI DAHIYA Designation:
Date:
Countersigned
Director
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ACKNOWLEDGEMENT
In this project I have made an honest and dedicated attempt to make the research material as authentic as it could. And I earnestly hope that it provides useful and workable information and knowledge to any person reading it.
During this small time frame of two months in which the project reached its completion, there were a few people whom I would like to make a mention of and without whose help the project would have never seen the light of the day.
I also thank to my internal guide Prof. Pramod kumar Nayak and Kirti Dahiya for his and her timely response via e-mail, which immensely helped in giving the project the initial direction it needed.
I dedicate this project to my family and friends who were extremely kind and who at times went out of the way to help me. Without their co-operation it would have perhaps not been possible to research a few places, which I did, within the stipulated time frame.
NITISH KAUSHIK BBA(B&I)
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INDEX
S.NO.
CONTENT
PAGE NO.
1.
Introduction
5.
2.
Company profile
11.
3.
Objective
44.
4.
SWOT Analysis of the company
46.
5.
Research methodology methodology
54.
6.
Data Interpretation Interpretation and Analysis
57.
7.
Finding and Recommendation Recommendation
71.
8.
Lesson Learnt
74.
9.
Conclusion
77.
10.
Bibliography
79.
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CHAPTER 1 INTRODUCTION
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INTRODUCTION The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the non - Indian lives, as Indian lives were considered more risky to cover. The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge the same premium for both Indian and non-Indian lives.
The Oriental Assurance Company was established in 1880. The General insurance business in India, on the other hand, can trace its roots to Triton Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Till the end of the nineteenth century insurance business was almost entirely in the hands of overseas companies.
Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the Provident Fund Act of 1912. Several frauds during the 1920's and 1930's sullied insurance business in India. By 1938 there were 176 insurance companies.
The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over the insurance business. The insurance business grew at a faster pace after independence. Indian companies strengthened their hold on this business but despite the growth that was witnessed, insurance remained an urban phenomenon.
The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC) was born. Nationalization was justified on the grounds that it would create the much needed
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funds for rapid industrialization. This was in conformity with the Government's chosen path of State led planning and development.
The non-life insurance business continued to thrive with the private sector till 1972. Their operations were restricted to organized trade and industry in large cities. The general insurance industry was nationalized in 1972. With this, nearly 107 insurers were amalgamated and grouped into four companies- National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC).
KEY MILESTONES a) 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. b) 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. c) 1938: Earlier legislation consolidated and amended by the Insurance Act with the objective of protecting the interests of the insuring public. d) 1956: 245 Indian and foreign insurers along with provident societies were taken over by the central government and nationalized. LIC was formed by an Act of Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from the Government of India.
INDUSTRY REFORMS Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has
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fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations.
The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products.
PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIA The life insurance industry in India grew by an impressive 47.38%, with premium income at Rs. 1560.41 billion during the fiscal year 2006-2007.
The 17 private insurers increased their market share from about 15% to about 19% in a year's time. The figures for the first two months of the fiscal year 2007-08 also speak of the growing share of the private insurers. The share of LIC for this period has further come down to 75 percent, while the private players have grabbed over 24 percent.
With the opening up of the insurance industry in India many foreign players have entered the market. The restriction on these companies is that they are not allowed to have more than a 26% stake in a company‟s ownership. Since the opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into the Indian market and 22 private life insurance companies have been granted licenses.
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Innovative products, smart marketing, and aggressive distribution have enabled fledgling private insurance companies to sign up Indian customers faster than anyone expected. Indians, who had always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative products on offer. Some of these products include investment plans with insurance and good returns (unit linked plans), multi – purpose insurance plans, pension plans, child plans and money back plans.
The insurance sector was opened up for private participation four years ago. For years now, the private players are active in the liberalized environment. The insurance market have witnessed dynamic changes which includes presence of a fairly large number of insurers both life and nonlife segment. Indian life-insurance market is the target market of all the companies who either want to extend or diversify their business. To tap the Indian market there has been tie-ups between the major Indian companies with other International insurance companies to start up their business. The government of India has set up rules that no foreign insurance company can set up their business individually here and they have to tie up with an Indian company and this foreign insurance company can have an investment of only 24% of the total start-up investment.
Indian insurance industry can be featured by:
1. Low market penetration. 2. Growth of customer‟s interest with an increasing demand for better insurance products. 3. Ever growing middle class component in population. 4. Rebate from government in the form of tax incentives to be insured.
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Today, the Indian life insurance industry has a dozen private players, each of which are making strides in raising awareness levels, introducing innovative products and increasing the penetration of life insurance. Several of private insurers have introduced attractive products to meet the needs of their target customers and in line with their business objectives. The biggest beneficiary of the competition among life insurers has been the customer. A wide range of products, customer focused service and professional advice has become the mainstay of the industry, and the Indian customer‟s forms the turn of each company‟s strategy.
The health insurance sector has tremendous growth potential, and as it matures and new players enter, product innovation and enhancement will increase. The deepening of the health database over time will also allow players to develop and price products for larger segments of society.
Life insurance is also now being regarded as a flexible financial planning tool. Apart from the traditional plans and saving insurance policies, industry has seen the entry and growth of unit linked products. This provides market linked returns and is among the most flexible policies available today for investment.
So it is clear that the face of life insurance in India is changing, but with the changes come a host of challenges and it is only the likely players with a long term vision and a robust business strategy that will survive. Whatever the developments, the future and the opportunities in this industry will surely be exciting.
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CHAPTER 2 PROFILE OF THE COMPANY
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Company Profile Pnb MetLife India Insurance Company Limited (Pnb MetLife) is an affiliate of MetLife,Inc. and was incorporated between Punjab National Bank &MetLife International Holdings, Inc., The Jammu and Kashmir Bank, M. Pallonji and Co. Private Limited and other private investors. Pnb MetLife is one of the fastest growing life insurance companies in the country. It serves its customers by offering a range of innovative products to individuals and group customers at more than 600locations through its bank partners and company-owned offices. Pnb MetLife has more than 50,000+ Financial Advisors, who help customers achieve peace of mind across the length and breadth of the country. Pnb Me tLi fe , In c., th ro ugh it s affiliates, reaches more than 70 million customers in the Americas, Asia Pacific and Europe. Affiliated companies, outside of India, include the number one life insurer in the United States (based on life insurance enforce), with over 140 years of experience and relationships with more than 90of the top one hundred FORTUNE 500® companies.The Pnb MetLife companies offer life insurance, annuities, automobile, and home insurance, retail banking, and other financial service to individuals, as well as group insurance, reinsurance and retirement and savings products and services to co rporations and other institutions.
PNB MetLife India Insurance Company Limited (PNB MetLife) is a joint venture where MetLife, Inc. and Punjab National Bank (PNB) are the majority shareholders. PNB MetLife was previously known as MetLife India Insurance Company Limited (MetLife India). MetLife India has been present in India since 2001.
PNB MetLife brings together the financial strength of one of the world‟s leading life insurance providers, MetLife, Inc., and the credibility and reliability of Punjab National Bank, one of
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India's oldest and leading nationalized banks. The vast distribution reach of PNB together with the global insurance expertise and product range of MetLife makes PNB MetLife a strong and trusted insurance provider.
The Company is present in over 150 locations across the country and serves customers in more than 7,000 locations through its bank partnerships with PNB, the Jammu & Kashmir Bank Limited and Karnataka Bank Limited.
PNB MetLife provides a wide range of protection and retirement products through its Agency sales of over 24,000 financial advisors and bank partners, and provides access to Employee Benefit plans for over 800 corporate clients in India. With its headquarters in Bangalore and Corporate Office in Gurgaon, PNB MetLife is one of the fastest growing life insurance companies in the country. The Company continues to be consistently profitable and has declared profits for ten consecutive quarters as of Q3 2012-13.
PNB MetLife was previously known as MetLife India Insurance Company Limited (MetLife India). MetLife India has been present in India since 2001.
DETAILS OF REGISTERED OFFICE:-
Brigade Sheshamahal No. 5, Vani Villas Road Basavanagudi,Bangalore-560004 Fax:+91-80-22421970 Tel:-+91-80-26438638
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3.PNB METLIFE MISSION & VISION
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Our Vision and Mission
Build financial freedom for all through leadership in providing financial advice and building long-term relationships through innovative protection, accumulation and retirement products, robust underwriting processes and creating world-class customer service experience for our customers.
We want to provide customers in India with world-class solutions for financial security, and in the process add significant value to our shareholders, associates and society.
To be the first choice insurer for customers
To be the preferred employer for staff in the insurance industry.
To be the number one insurer for creating shareholder value.
As a responsible, customer focused market leader, we will strive to understand the insurance needs of the consumers and translate it into affordable products that deliver value for money.
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4.ProductsPortfolio Child plan Met bhavishya Met junior endowment Met junior money back Met smart child
Savings Met sukh Met suvidha Met saral Met 100
Protection Met suraksha Met suraksha trop Met suraksha plus Met mortgage protector plus
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Rural Met vishvas Met suvidhasaral Met grameenashray
Investment Met smart platinum Met smart one Met easy super
Health Met health care Met health cash
Monthly income Met monthly income plan Met monthly income plan 7 pay Met monthly income plan 15 pay
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Retirement MDMIP
Financial Performance Analysis MetLife declared profits of 35 crore for the first time in the year en ded March 2011, making it one of the few profitable and growing life insurance in India
CONCEPTUAL FRAMEWORK The insurance company in ULIPS collects money directly from investors. It serves as the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The income generated by selling securities or capital appreciation of these securities is passed on to the investors in proportion to their investment in the scheme. When an investor invests in a ULIPS, An investor is buying units or portions of the Fund and thus on investing, become unit holder of the fund.
ULIPS operation flow chart
Passed back to
Investors
Fund Managers
Return
Generates
Pool their money with
Securities
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Invest in
Asset Allocation Asset Allocation is an investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon.
The three main asset classes - equities, fixed-income, and cash and equivalents - have different levels of risk and return, so each will behave differently over time.
There is no simple formula that can find the right asset allocation for every fund. However, the consensus among most financial professionals is that asset allocation is one of the most important decisions that fund managers make. In other words, the selection of individual securities is secondary to the way fund managers allocate the fund assets in stocks, bonds, and cash and equivalents, which will be the principal determinants of the fund‟s performance.
Asset-allocation of funds, also known as life-cycle, or target-date, funds, are an attempt to provide customers with portfolio structures based on the variety of funds that address a customer‟s age, risk appetite and investment objectives with an appropriate apportionment of asset classes. However, critics of this approach point out that arriving at a standardized solution for allocating portfolio assets is problematic because every fund managers i nvests differently.
Fund Management
Fund Management is the professional management of various securities and assets (e.g., real estate) in order to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e.g. mutual funds or Insurance). 19
The term Fund management is often used to refer to the investment management of collective investments, while the more generic fund management may refer to all forms of institutional investment as well as investment management for private investors. Investment managers who specialize in advisory or discretionary manageme nt on behalf of private investors may often refer to their services as wealth management or portfolio management often within the context of socalled "private banking".
The provision of 'investment management services' includes elements of financial statement analysis, asset selection, stock selection, plan implementation and ongoing monitoring of investments. Investment management is a large and important global industry in its own right responsible for caretaking of trillions of yen, dollars, euro, pounds and yen. Coming under the remit of financial services many of the world's largest companies are at least in part investment managers and employ millions of staff and create billions in revenue.
Fund manager refers to both a firm that provides investment management services and an individual who directs fund management decisions.
Fund Manager
The person(s) responsible for implementing a fund's investing strategy and managing its portfolio trading activities. A fund can be managed by one person, by two people as co-managers and by a team of three or more people. Fund managers are paid a fee for their work, which is a percentage of the fund's average assets under management.
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Performance measurement
Fund performance is often thought to be the acid test of fund management, and in the institutional context, accurate measurement is a necessity. For that purpose, institutions measure the performance of each fund (and usually for internal purposes components of each fund) under their management, and performance is also measured by external firms that specialize in performance measurement. The leading performance measurement firms compile aggregate industry data, e.g., showing how funds in general performed against given indices and peer groups over various time periods.
In a typical case (let us say an equity fund), then the calculation would be made (as far as the client is concerned) every quarter and would show a percentage change compared with the prior quarter (e.g., +4.6% total return in US dollars). This figure would be compared with other similar funds managed within the institution (for purposes of monitoring internal controls), with performance data for peer group funds, and with relevant indices (where available) or tailormade performance benchmarks where appropriate. The specialist performance measurement firms calculate quartile and decile data and close attention would be paid to the ranking of any fund.
Generally speaking, it is probably appropriate for an investment firm to persuade its clients to assess performance over longer periods (e.g., 3 to 5 years) to smooth out very short term fluctuations in performance and the influence of the business cycle. This can be difficult however and, industry wide, there is a serious preoccupation with short-term numbers and the effect on the relationship with clients (and resultant business risks for the institutions).
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An enduring problem is whether to measure before-tax or after-tax performance. After-tax measurement represents the benefit to the investor, but investors' tax positions may vary. Beforetax measurement can be misleading, especially in regimens that tax realized capital gains (and not unrealized). It is thus possible that successful active managers may produce miserable aftertax results. One possible solution is to report the after-tax position of some standard taxpayer.
Theoretical Back Ground ULIPs
Meaning A unit-linked insurance plan (ULIP) is a type of life insurance where the cash value of a policy varies according to the current net asset value of the underlying investment assets. It allows protection and flexibility in investment, which are not present in other types of life insurance such as whole life policies. The premium paid is used to purchase units in investment assets chosen by the policyholder
How ULIPs work
ULIPs work on the lines of mutual funds. The premium paid by the client (less any charge) is used to buy units in various funds (aggressive, balanced or conservative) floated by the insurance companies. Units are bought according to the plan chosen by the policyholder. On every additional premium, more units are allotted to his fund. The policyholder can also switch among the funds as and when he desires. While some companies allow any number of free switches to the policyholder, some restrict the number to just three or four. If the number is exceeded, a certain charge is levied.
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Individuals can also make additional investments (besides premium) from time to time to increase the savings component in their plan. This facility is termed "top-up". The money parked in a ULIP plan is returned either on the insured's death or in the event of maturity of the policy. In case of the insured person's untimely death, the amount that the beneficiary is paid is the higher of the sum assured (insurance cover) or the value of the units (investments). However, some schemes pay the sum assured plus the prevailing value of the investments.
Types of ULIPs
ULIPs for retirement planning
ULIPs for long term wealth creation
ULIPs for child education
ULIPs for health solutions
Recent modification in ULIPs by IRDA
Initial charges: Premium paid by investors in ULIPs is partly used for insurance and partly for
making investments. However, for the first 2 -3 years of the term of the policy, insurance companies charged heavily. Sometimes insurance companies diverted as much as 80 percent of the premium payments towards these charges.
Initial charges are basically used for administration charges, processing fees etc. Therefore the charges should be extremely low.
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Facility to surrender policy: Sometimes policyholders need immediate funds, and then they opt
to surrender their policy. But the problem is, the long term consequences of surrendering the policy early had an adverse impact on the policyholder's investments.
The surrender charges on policy were high. Some companies confiscated up to 60 per cent of the policy value in case the policyholder surrendered his policy.
ULIPs give back most when it‟s invested as long term basis. Hence early withdrawal should be discouraged.
Advantages
1. The accretion to the fund invested can be checked on daily basis unlike the traditional policies. 2. There is lot more flexibility like partial withdrawal, switching, redirection, early withdrawal, Sum Assured reduction, top up contribution, etc.... 3.
Charges are transparent in nature, with the latest AML guidelines insisting on common nomenclature of charges for all insurance companies.
4. The customer can time the market by exercising switch options and make the most when markets are zooming or choose to be conservative when markets are falling. It‟s thus win-win situation 5.
He gets a life cover at a nominal cost unlike mutual funds,
6.
Stages in one life like education of children, marriage, and retirement needs can be soundly planned by the help of ULIPs.
7.
Tax advantages are also offered by the ULIPs.
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Disadvantages 1. Investors find it difficult to understand capital market and how ULIP works 2. ULIPS are attractive for risk taking people and less a ttractive for risk adverse people 3.
Some consider taking term insurance and a mutual fund as a combination to beat the ULIP.
4. Some consider charges levied exorbitant and not commensurate to the returns offered. 5. The complicated design of the policies makes the m less aware of the product features and chances of misuse by agents are very high.
The Role of a fund Manager
The Prime Goal of a Fund Manager is to monitor and manage the securities (in the form of stocks, bonds amongst others) to meet the investment goals and objectives of the customers (investors). The services include financial analysis on the investments, the assets that are invested upon and the stocks selected. The plan and strategy that is implemented is also to be closely monitored so that in the longer run, risks on loosing out on major dividends can be avoided. A certified company investment advisor should conduct an assessment of each client's individual needs and risk profile. The advisor then recommends appropriate investments. The art of managing investments is an important aspect in its own right and involves a lot of money at a single moment taking care of trillions of dollars, euro, pounds and yen and other major Global economies.
The budget of an investment management firm directly depends on the Asset Allocation that is made by the Fund Manager for the investors. Asset Allocation involves a lot of money at stake at 25
a go, because at one time you are investing one more than one commodity. Moreover Asset Allocation has more predictive power than the choice of individual holdings in determining portfolio/investment return. The real test and skill proof o f a Fund Manager truly lies in handling asset allocations and individual investments separately so that the competition that the investment faces from other competing funds is handled with care. Another important factor that a Fund Manager has got to take care of is the diversification in assets once an investment is be ing made. It is always advisable to investors to invest in more then one commodities at a time. A fund does fluctuate and varies with market conditions, so if an investor looses out on the dividend from one investment he has the other to gain from. As it is people investing in Mutual Funds do gain from long term returns.
There are numerous ways to invest in a Fund. It depends upon the risk you are willing to undertake and your expected dividends from your investments. Fund performance is the main test of fund management and for the investment management firm as well. In order to be sure that fund they are monitoring, the firm measures the performance of each fund they are managing. The performance of a Fund shouldn't be decided on the returns provided alone, as there are several other factors associated with it. Whether the return was worth the risk taken, Performance of the fund compared to their competitors and finally whether the portfolio management results were due to luck or the manager's skill. A Fund Manager is hence compared to God when it comes to Fund Investments.
ULIPs are almost similar to Mutual funds. Only difference in ULIPs is it covers the risk also.
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Major Problems For fund Management Companies
Revenue is directly linked to market valuations, so a major fall in asset prices causes a precipitous decline in revenues relative to costs;
Above-average fund performance is difficult to sustain, and clients may not be patient during times of poor performance;
Successful fund managers are expensive and may be headhunted by competitors;
Above-average fund performance appears to be dependent on the unique skills of the fund manager; however, clients are loath to stake their investments on the ability of a few individuals- they would rather see firm-wide success, attributable to a single philosophy and internal discipline;
Analysts who generate above-average returns often become sufficiently wealthy that they avoid corporate employment in favor of managing their personal portfolios.
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA
The Insurance Regulatory and Development Authority (IRDA) is a national agency of the Government of India, based in Hyderabad. It was formed by an act of Indian Parliament known as IRDA Act 1999, which was amended in 2002 to incorporate some emerging requirements. Mission of IRDA as stated in the act is "to protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected the rewith or incidental thereto."In 2010, the Government of India ruled that the Unit Linked Insurance Plans (ULIPs) will be governed by IRDA, and not the market regulator Securities and Exchange Board of India 27
DUTIES, POWERS AND FUNCTIONS OF IRDA
Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDA
1. Subject to the provisions of this Act and any other law for the time being in force, the Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business. 2. Without prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the Authority shall include,
I.
Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration;
II.
Protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance;
III.
Specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents;
IV. V. VI.
Specifying the code of conduct for surveyors and loss assessors; Promoting efficiency in the conduct of insurance business; Promoting and regulating professional organizations connected with the insurance and re-insurance business;
VII.
Levying fees and other charges for carrying out the purposes of this Act;
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VIII.
Calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organizations connected with the insurance b usiness;
IX.
Control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938);
X.
Specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries;
XI. XII. XIII.
Regulating investment of funds by insurance companies; Regulating maintenance of margin of solvency; Adjudication of disputes between insurers and intermediaries or insurance intermediaries;
XIV. XV.
Supervising the functioning of the Tariff Advisory Committee; Specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organizations referred to in clause (f);
XVI.
Specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and
XVII.
Exercising such other powers as may be prescribed from time to time.
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Protection of the interest of policy holders:
IRDA has the responsibility of protecting the interest of insurance policyholders. Towards achieving this objective, the Authority has taken the following steps:
IRDA has notified Protection of Policyholders Interest Regulations 2001 to provide for: policy proposal documents in easily understandable language; claims procedure in both life and nonlife; setting up of grievance redressal machinery; speedy settlement of claims; and policyholders' servicing. The Regulation also provides for payment of interest by insurers for the delay in settlement of claim.
The insurers are required to maintain solvency margins so that they are in a position to meet their obligations towards policyholders with regard to payment of claims.
It is obligatory on the part of the insurance companies to disclose clearly the benefits, terms and conditions under the policy. The advertisements issued by the insurers should not mislead the insuring public.
All insurers are required to set up proper grievance redress machinery in their head office and at their other offices.
The Authority takes up with the insurers any complaint received from the policyholders in connection with services provided by them under the insurance contract.
The institution of Insurance Ombudsman was created by a Government of India Notification dated 11th November, 1998 with the purpose of quick disposal of the grievances of the insured customers and to mitigate their problems involved in redressal of those grievances. This institution is of great importance and relevance for the protection of interests of policy holders
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and also in building their confidence in the system. The institution has helped to generate and sustain the faith and confidence amongst the consumers and insurers.
Insurance Ombudsman
The governing body of insurance council issues orders of appointment of the insurance Ombudsman on the recommendations of the committee comprising of Chairman, IRDA, Chairman, LIC, Chairman, GIC and a representative of the Central Government. Insurance council comprises of members of the Life Insurance council and general insurance council formed under Section 40 C of the Insurance Act, 1938. The governing body of insurance council consists of representatives of insurance companies.
Terms of office
An insurance Ombudsman is appointed for a term of three years or till the incumbent attains the age of sixty five years, whichever is earlier. Re -appointment is not permitted.
Territorial jurisdiction of Ombudsman
The governing body has appointed twelve Ombudsmen across the country allotting them different geographical areas as their areas of jurisdiction. The Ombudsman may hold sitting at various places within their area of jurisdiction in order to expedite disposal of complaints. The offices of the twelve insurance Ombudsmen are located at (1) Bhopal, (2) Bhubaneswar, (3) Cochin, (4) Guwahati, (5) Chandigarh, (6) New Delhi, (7) Chennai, (8) Kolkata, (9) Ahmedabad, (10) Lucknow, (11) Mumbai, (12) Hyderabad. The area of jurisdiction of each Ombudsman has been mentioned in the list of Ombudsman 31
Office Management
The Ombudsman has a secretarial staff provided to him by the insurance council to assist him in discharging his duties. The total expenses on Ombudsman and his staff are incurred by the insurance companies who are members of the insurance council in such proportion as may be decided by the governing body.
Removal from office
An Ombudsman may be removed from service for gross misconduct committed by him during his term of office. The governing body may appoint such person as it thinks fit to conduct enquiry in relation to misconduct of the Ombudsman. All enquiries on misconduct will be sent to Insurance Regulatory and Development Authority which may take a decision as to the proposed action to be taken against the Ombudsman. On recommendations of the IRDA, the Governing Body may terminate his services, in case he is found guilty.
Power of Ombudsman
Insurance Ombudsman has two types of functions to perform (1) conciliation, (2) Award making. The insurance Ombudsman is empowered to receive and consider complaints in respect of personal lines of insurance from any person who has any grievance against an insurer. The complaint may relate to any grievance against the insurer i.e. (a) any partial or total repudiation of claims by the insurance companies, (b) dispute with regard to premium paid or payable in terms of the policy, (c) dispute on the legal construction of the policy wordings in case such dispute relates to claims; (d) delay in settlement of claims and (e) non-issuance of any insurance
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document to customers after receipt of premium. Ombudsman's powers are restricted to insurance contracts of value not exceeding Rs. 20 lakhs. The insurance companies are required to honour the awards passed by an Insurance Ombudsman within three months
Manner of lodging complaint
The complaint by an aggrieved person has to be in writing, and addressed to the insurance Ombudsman of the jurisdiction under which the office of the insurer falls. The complaint can also be lodged through the legal heirs of the insured. Before lodging a complaint:
I.The complainant should have made a representation to the insurer named in thecomplaint and
the insurer either should have rejected the complaint or the complainant have not received any reply within a period of one month after the concerned insurer has received his complaint or he is not satisfied with the reply of the insurer. II.The complaint is not made later than one year after the insurer had replied. III.The same complaint on the subject should not be pending with before any court, consumer
forum or arbitrator.
Recommendations of the Ombudsman When a complaint is settled through the mediation of the Ombudsman, he shall make the recommendations which he thinks fair in the circumstances of the case. Such a recommendation shall be made not later than one month and copies of the same sent to complainant and the insurance company concerned. If the complainant accepts recommendations, he will send a communication in writing within 15 days of the d ate of receipt accepting the settlement.
33
Award The ombudsman shall pass an award within a period of three months from the receipt of the complaint. The awards are binding upon the insurance companies. If the policy holder is not satisfied with the award of the Ombudsman he can approach other venues like Consumer Forums and Courts of law for redressal of his grievances. As per the policy-holder's protection regulations, every insurer shall inform the policy holder along with the policy document in respect of the insurance Ombudsman in whose jurisdiction his office falls for the purpose of grievances redressal arising if any subsequently. Steady increase in number of complaints received by various Ombudsman shows that the policy-holders are reposing their confidence in the institution of Insurance Ombudsman. APPLICATION OF INFORMATION TECHNOLOGY IN INSURANCE SECTOR
There is an evolutionary change in the technology that has revolutionized the entire insurance sector. Insurance industry is a data-rich industry, and thus, there is a need to use the data for trend analysis and personalization. With increased competition among insurers, service has become a key issue. Moreover, customers are getting increasingly sophisticated and tech-savvy. People today don‟t want to accept the current value propositions, they want personalized interactions and they look for more and more features and add ones and better service The insurance companies today must meet the need of the hour for more and more personalized approach for handling the customer. Today managing the customer intelligently is very critical for the insurer especially in the very competitive environment. Companies need to apply different set of rules and treatment strategies to different customer segments. However, to 34
personalize interactions, insurers are required to capture customer information in an integrated system. With the explosion of Website and greater access to direct product or policy information, there is a need to developing better techniques to give customers a truly personalized experience. Personalization helps organizations to reach their customers with more impact and to generate new revenue through cross selling and up selling activities. To ensure that the customers are receiving personalized information, many organizations are incorporating knowledge databaserepositories of content that typically include a search engine and let the customers locate the all document and information related to their queries of request for services. Customers can hereby use the knowledge database to manage their products or the company information and invoices, claim records, and histories of the service inquiry. These products also may be able to learn from the customer‟s previous knowledge database and to use their information when determining the relevance to the customers search request. There is a probability of a spurt in employment opportunities. A number of web-sites are coming up on insurance, a few financial magazines exclusively devoted to insurance and also a few training institutes being set up hurriedly. Many of the universities and management institutes have already started or are contemplating new courses in insurance. Life insurance has today become a mainstay of any market economy since it offers plenty of scope for garnering large sums of money for long periods of time. A well-regulated life insurance industry which moves with the times by offering its customers tailor-made products to satisfy their financial needs is, therefore, essential if we desire to progress towards a worry-free future
35
The different portfolio strategies available in ULIPS
An Portfolio strategy is a set of rules, behavior or procedures, designed to guide an investor„s selection on a portfolio. Usually the strategy will be designed around the investor‟s risk -return trade off. Some investor will prefer to maximize expected returns by investing in risky assets, other will prefer to minimize risk, but most will select a strategy somewhere in between. Investor does not know how to invest in which fund so that where insurance companies provides an option for a investor to select a strategy for investment as per his risk appetite There are two types of strategy in insurance sector:
Passive strategy
Active strategy
Passive strategy : It is a strategy in which an investor invests in accordance with a
predetermined strategy that doesn‟t entail any forecasting. (E.g. any use of market timing or stock picking would not qualify as passive management.). The idea is to minimize investing fees and to avoid the adverse consequence of falling to correctly anticipate the future. The most popular method is to mimic the performance of an externally specified index. Retail investors typically do this by buying one or more „index funds‟. By tracking an index, an investment portfolio typically gets good diversification, low turnover (good for keeping down internal transaction costs), and extremely low management fees. With low management fees, an investor in such strategy would have higher returns than a similar investment but higher management fees and /or turnover /transaction costs. Active strategy : It is also refers as portfolio management strategy where the manager makes
specific investment with a goal of outperforming an investment benchmark index. Investors 36
or funds that do not aspire to create a return in excess of the benchmark index will often invest in an index fund that replicates as closely as possible the investment weighting and returns of that index; this is called a passive strategy. Active strategy is the opposite of passive strategy, because in passive strategy the fund manager does not seek to outperform the benchmark index Existing portfolio strategies in insurance sector :
I.
Fixed portfolio Strategy: In this strategy investor have a option in ulip to allocate his all
saving which he wants to invest in the fund of his choice including a option to guarantee the highest NAV achieved by his fund
II.
Life cycle based portfolio strategy: It is a unique and personalized strategy to create an
ideal balance between equity and debt, based on investor‟s age
III.
Trigger portfolio strategy: A unique portfolio strategy to protect gains made in equity
market from any feature equity market volatility while maintaining a pre-defined assets allocation. It books gains made in equity market and reinvest these gains in the funds of your choice.
IV.
Investor selectable portfolio strategy:
In this strategy insurance company offers
allocation of premiums based on investor‟s personal choice and decisions. An investor can opt any fund or mixture any two or three fund as per his personal choice and decisions
37
V.
Self managedoption: Under this strategy an investor can manage his investment by
choosing among the six unit linked option available in met life India. In this strategy investor has an option of switching among various funds & may choose premium redirection for his future premiums depending on his changing risk appetite and market conditions
VI.
Systematic transfer option: this is an strategy allows an investor to make the most of
market volatility by taking the advantage of rises and falls in the market with the benefit of rupee cost averaging. In this strategy 50% of annualized premium is been invest in protector II fund and rest of fund will be as per investors choice and this fund which is been kept in protector II will be systematically transferred from protector II to flexi cap as per market volatility. If market rises the fund systematically transferred to flexi from protector II & if market falls then the MR.X funds transfer to Protector II from flexi cap
VII.
Auto rebalancing option: Auto rebalancing is strategy which helps an investor with his
investment, in this strategy the investment proportion of investor will automatically rebalanced as per market conditions. Under this option, the capital is only invested in two funds i.e. flexi cap & protector II. In this strategy a trigger level has been created for e.g. if a investor opt for 10% of total fund as a trigger level then any increase ordecrease in total fund value of a investor will rebalance the ratio of flexi cap & protector fund which was at the time of inception.
38
Example of met life portfolio strategy:
Suppose there is a MR. X, he is willing to invest 5, 00,000 in ulip funds with a purpose of investment. The risk appetite of investor was medium. Investor was willing to invest for his better retirement, so an advisor helps him with a met smart platinum where MetLife was offering a wealth creation & a protection under this plan with offering to select any fund or any mix of debt & equity under this plan with different portfolio strategies like self managed option, auto rebalancing , systematic transfer option. Let‟s understands the portfolio strategies of met life: Self managed option: under this strategy met smart platinum offer to MR. X the choice of 6
unit linked funds for investment based on MR. X propensity to take risk. MR.X may choose to invest his premium in these unit linked funds in any proportion aggregating to a total of 100% subject to a minimum allocation in chosen funds n ot being less than 20%. In this strategy MR. X can mange his investment by himself. He can choose any fund which suits him better at any point of time in a policy year or switch to any fund in between of policy . Systematic transfer option: under this plan, STO allows to MR. X to make the most of market
volatility by taking the advantage of rises and falls in the market with the benefit of rupee cost averaging. This option can be taken by MR.X at time of policy inception or during the term of the policy. If MR.X chooses STO option, then the premium allocation percentage should be at least 50% of annualized premium in protector II fund and then this protector fund systematically transferred from protector II to flexi cap as per the market volatility. If market rises the fund of MR.X systematically transferred to flexi from protector II & if market falls then the MR.X funds transfer to Protector II from flexi cap.
39
So, this option provides the flexibility to MR.X to take an advantage of market volatility to appreciate his capital.
Auto rebalancing option: Auto rebalancing is strategy which helps an investor with his
investment, in this strategy the investment proportion of investor will automatically rebalanced as per market conditions. Under this option, the capital is only invested in two funds i.e. flexi cap & protector II. In this strategy a trigger level has been created for e.g. if a investor opt for 10% of total fund as a trigger level then any increase or decrease in total fund value of a investor will rebalance the ratio of flexi cap & protector fund which was at the time of inception. This option suits to MR.X if he wants to manage his investment portfolio directly on the regular basis. Under this option, MR.X‟s funds are allocated in flexi cap fund and protector II fund in the proportion as per MR.X„s choice which he can exercise at the time of o pting for auto rebalancing option. In case of any market movement, to a level as
specified by him, the mix of flexi cap
fund & protector II fund is automatically rebalanced to the ratio chosen by MR.X at inception of this option. As this strategy works on trigger level, MR.X has 4 rebalancing option available with met life:
10% of the total fund value
15% of the total fund value
20% of the total fund value
25% of the total fund value
40
These are three portfolio strategies which an financial advisor of Met life has offered to MR.X. These three strategies are been different among themselves. Every strategy has their own benefit depends on investors risk appetite and market knowledge.
41
5.Management Team
Managing Director
Mr.Rajesh Relan
Director – Agency
Mr.GirishMalhotra
Director - BA & BP
Mr.Sameer Bansal
Director – Marketing
Mr.Pankaj Raj
Director - Business Support
Mr.Sankaran P S
Deputy Director - Corporate Sales & Sales Training
Mr.PreetinderChadha
Appointed Actuary
Mr.Phanesh M S V S
Director – Finance
Mr.Nick Taket
Director - Financial Planning & Controller
Mr.K R Anil Kumar
Director - IT & Facilities
Mr.K S Raghavan
Director - Human Resources
Mr.AmitaMaheshwari
Deputy Director - Strategic Initiatives & Business Transformation
Mr.Vijay Raghavan
Deputy Director – Operations
Mr.Gaurav Sharma
42
MARKET SHARE & POSITION OF COMPANY
Commencement of operations in 2001.
Presence in 132 cities through 192 offices & growing.
Presence in 686 cities through 1910 offices through bank partners
Paid up capital of Rs. 1240 crore
Total Sum assured in force Rs 39,71,611(in lakhs)
Market Share as a company has come up from 1.8% to 2.4% Total Number of lives covered 13,77,250 ( in lakhs )
Number of employees 7688, Number of Advisors 56,072 and growing.
Widest product basket in the market with 28 produ cts.
43
CHAPTER 3
OBJECTIVES OF THE STUDY
44
OBJECTIVES OF THE STUDY
Indian insurance sector is comprises of various investment and protection plan with various funds, investment objectives & portfolio strategies for an investor it is very difficult to select any particular fund for investment. This present study has an objective of find out the assets allocation of met life and fund management. The specific objectives of study are: 1. To analyze the fund option available at met life and measure their past performance. 2. To explore different portfolio strategies available at met life for an investor for maximum returns. 3. To compare the funds of the met life against others in the industry
45
CHAPTER 4
SWOT ANALYSIS OF THE COMPANY
46
STRENGTH 1.Premium rates are increasing and so are commissions. 2.The variety of products are increasing. 3. Customers expectes more services from their brokers.
WEAKNESS
1.Companies are slow respond to changing need. 2. Increasing trend of financial weakness among the companies. 3. More competitors for agencies to compete with banks and internet players.
OPPORTUNITIES
1.Ability to cross sell financial services barely being tapped. 2. Technology is improving to that point that paperlass transactions are available. 3. Client‟s increasing need for insurance consultant can open ne w ways to service the client and generate income.
THREAT
1.Increasing cost and need for insurance might hit a point where a backlash will occur. 2.Incresing expenses and lower profit margins can hit smaller agencies and insurance companies.
47
PROFIT AND LOSS AND BALANCE SHEET FOR THE YEAR 2010-11
48
BALANCE SHEET FOR THE YEAR 2010-11
49
CASH FLOW STATEMENT
50
PROFIT AND LOSS ACCOUNT FOR THE YEAR 2011-12
51
BALANCE SHEET FOR THE YEAR 2011-12
52
CASH FLOW STATEMENT FOR THE YEAR 2011-12
53
CHAPTER 5 RESEARCH METHODOLOGY
54
RESEARCH METHODOLOGY
Research design Research design is considered as a "blueprint" for research, dealing with at least four problems: which questions to study, which data are relevant, what data to collect, and how to analyze the results. The best design depends on the research question as well as the orientation of the researcher.
Data collection method Primary source: Primary sources are original materials materials.. Information for which the writer has no personal knowledge is not primary, although it may ma y be used by historians in the absence of a primary source. In the study of history as an academic discipline, a primary source (also called original source or evidence) is an artifact, a document, a recording, or other source of information that was created at the time under study is called primary source.
Secondary source: When an investor uses the data which has already been collected by the others, such data is called secondary data. The data is primary data for the agency that collects it and it becomes secondary data for someone else who uses this data for his own purpose. Secondary data for the study is collected from internet, government publication, publications of professional and research organization. Following are few sources for secondary data.
55
Model of Research The present research is conducted for analysing a quantitative data. Hence, the Research model selected is descriptive research
Descriptive Research Descriptive research attempts to determine, describe, or identify what is. It uses description, classification, measurement and comparison to describe a situation. The main characteristic is that the researcher has no control over variables. He only reports the situation as it is at the time. The term ex-post facto is usually used for descriptive research studies in social sciences. The survey method is commonly used in descriptive research.
56
CHAPTER 6
DATA INTERPRETATION & ANALYSIS
57
1. To analyze the funds available at met life and measure their past performance. INVESTMENT PHILOSPY To invest 100% in government and other debt instrument to meet the stated objective of the company and the expectation of the customer. SECURITY NAME
WEIGHT
RATING
Government security
34.74%
GOI 2024
11.09%
Sovereign
GOI oil bond 2012
10.46%
Sovereign
GOI 2013
10.42%
Sovereign
GOI 2024
2.61%
Sovereign
Others
0.15%
Corporate bonds
50.60%
IL&FS
7.63%
AAA
TATA sons Ltd
7.45%
AAA
LIC Housing Finance
6.99%
AAA
Reliance Industries Ltd
6.59%
AAA
Power grid corporation Ltd
5.33%
AAA
HDFC
4.32%
AAA
Power finance corporation
3.17%
AAA
Indian railway financial
2.76%
AAA
Reliance capital Ltd
2.72%
AAA
Reliance Gas Transportation
2.48%
AAA
company Ltd
corporation
Infrastructure Others
1.16%
Cash &money market
14.65%
TOTAL
100.00%
58
percentage of bonds investment others Reliance Gas transp. Reliance capid.tal Lt IRFC Power finance corp. percentain bondsge of investment
HDFC Power grid corporation Ltd Reliance Industries Ltd LIC Housing Finance company…
TATA sons Ltd IL&FS 0.00%
2.00%
4.00%
6.00%
8.00%
Investment philosophy
The company target to invest 50% in equity and 50% investment in Government and other debt securities to meet stated objective. Here company tries to appreciate the capital and current income through judicious mix of investment in equities and other fixed income securities.
Portfolio of balancer II SECURITY NAME
WEIGHT
RATING
Government securities
7.76%
GOI 2013
5.46%
Sovereign
GOI 2021
1.13%
Sovereign
GOI oil bond 2012
1.09%
Sovereign
Others
0.09%
Corporate bonds
33.08%
LIC Housing finance company
8.23%
AAA
59
Ltd. IL&FS
8.02%
AAA
TATA &sons
7.24%
AAA
Reliance Gas Transport
4.70%
AAA
HDFC
2.72%
AAA
Reliance Infrastructure Ltd
1.05%
AA+
Other
1.11%
Equities
47.30%
ITC Ltd.
2.97%
Infosys Ltd.
2.85%
HDFC Bank Ltd.
2.15%
HDFC
2.10%
ICICI Bank Ltd.
2.02%
Reliance Industries Ltd.
1.85%
TATA Consultancy services
1.82%
Larsen & Turbo Ltd.
1.39%
Oil & Natural gas
1.34%
State Bank Of India
1.32%
Tata Motors Ltd.
1.16%
Hindustan Unilever Ltd.
1.04%
BhartiAirtel Ltd.
1.01%
Others
24.30%
Cash & Money market
11.86%
TOTAL
100.00%
Infrastructure
60
cash & money market 12%
assets allocation
government securities 8%
corporate bonds 33% equity 47%
Graph of equity Investment
shares 30.00% 20.00% 10.00% 0.00%
shares … . s d y t s L o C f n T I I
… C F D H
C F D H
… … I C e c I n C I a i l e R
… & n e s r a L
… … … s a a i t t t r r a s a e T u h h d B t o n i H
61
Equity sectorial Breakup
% shares 6%
automobile
5% 8%
20%
power
11%
oil & gas
3% 7%
media & telecom
15%
IT
25%
Finance engineering & construction
Investment philosophy
To invest 100% in equities of those companies who are promoting healthy lifestyle and enhancing quality of life to meet the stated objective. Portfolio of Virtue II SECURITY NAME
WEIGHT
Equity
93.61%
ITC Ltd.
7.48%
Infosys Ltd.
6.29%
ICICI Bank Ltd
5.69%
Reliance Industries Ltd.
5.56%
HDFC Bank Ltd.
5.27%
HDFC
5.19%
Larsen & Turbo
4.33%
Tata consultancy services ltd.
3.96%
State Bank of India
3.65%
Oil and Natural Gas
2.87%
Hindustan Unilever Ltd.
2.74%
BhartiAirtel Ltd.
2.51%
62
Tata motors ltd
2.22%
Axis Bank Ltd.
2.02%
Sun Pharmaceuticals Ltd.
1.90%
Tata steels Ltd.
1.80%
Mahindra & Mahindra Ltd.
1.75%
Dr.Reddys Laboratory Ltd.
1.61%
Coal India Ltd.
1.56%
HCL technologies Ltd.
1.32%
BPCL
1.24%
Jindal Steels & Power Ltd.
1.23%
NTPC
1.23%
Wipro
1.22%
Gail( India ) Ltd.
1.18%
Bajaj Auto Ltd.
1.17%
Cipla Ltd.
1.16%
Maruti Suzuki India Ltd.
1.07%
Tata Power co. Ltd.
1.06%
Hindalco Industries Ltd.
1.04%
Others
11.17%
Cash & Money market
6.39%
TOTAL
100.00%
63
Graph Representing equity share in companies
Series 1 8.00% 6.00% 4.00% 2.00% Series 1
0.00%
NAV Movement of Virtue II
64
Tasis Sharia 50 index performance from Dec 2010 till 2 July 2012
Analysis:
According to above statements and graphs it is been acknowledged that the company is investing 93% in equities and 7% in cash & money market. This fund is invested in those companies who are promoting healthy life cycle and enhancing the quality of life. This fund works on the model of sharia compliant fund as it has been managed as per the fundamentals of Islamic investment. Many insurance companies and AMC are using these funds to attract the Islamic investor. As in this fund company is invested 93% in equity as same as in multiplier II but the capital has been invested in those companies who are as per the fundamentals of Islamic investment. The NAV of virtue II is performing as per sharia 50 index. In virtue II company has invested in those companies which are fulfilling these conditions: Not involved in any such trades which are treated as unethical and immoral.
Stocks that passed the financial ratio clause of taqwa advisory board. Stocks are screened for Debt, cash and interest bearing securities and receivables as against their trailing twelve months (TTM) market cap.
65
FINANCIAL RATIOS
1
Total debt to Average TTM market cap less than 33%
2
Cash+interest bearing investment to average TTM market cap less than 33%
3.
Sundry debtors to average TTM market cap less than 33%
4
Interest income to total Income less than 5%
Who all companies are fulfilling the above conditions are invested under this fund. In this fund met life India is using sharia 50 index for the benchmark. This fund is good option for Islamic investors as this fund full fill the Islamic condition for investment. The currently the return in this fund is only 1% but this is a good option for people who follows the Islamic principles of investment.
To compare the funds of met life with different insurance companies of this sector. Under this objective the different funds of met life are compared with Aviva & SBI life on the basis of their benchmark and actual return. For comparison the data has been taken for last three years. Basically ulips are divided into four heads a s follows: Growth Fund
100% Equity
Balance Fund
60% Equity, 40% Debt
Debt Fund
100% Debt
Money Market Fund
100% mm instrument for a period of one year
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A. Equity funds METLIFE
SBI
AVIVA
Flexi cap
Equity fund
Enhancer fund
Multiplier II
Index fund
Index fund
Virtue II
P/E managed fund
PSU fund
Equity pension fund
Infrastructure fund
Benchmark (%)
Returns (%)
Flexi cap
-1.9%
-2.5%
multiplier
3.4%
2.5%
Met life
Virtue II
1.0%
SBI
Equity fund
3.44%
6.6%
p/e managed fund Index Fund
-7.18% -2.73%
-2.07%
Enhancer fund
3.4%
2.4%
Index fund
3.4%
3.9%
PSU fund( since inception )
-14.1%
-9.2%
Infrastructure fund (since
-19.5%
-11.2%
Aviva
inception )
SBI
met life 10.00%
4.00%
5.00%
2.00%
Benchmark
benchmark 0.00%
Returns
0.00%
-2.00%
-5.00%
-4.00%
-10.00%
67
Returns
AVIVA 10.00% benchmark
0.00% Enhancer
Index fund
PSU fund
-10.00%
Infrastruture fund
Returns
-20.00%
Analysis:
In equity fund all three insurance companies has invested their fund fully 100 % in equity market. The fund managers of Met life, SBI &Aviva had set their benchmark as per the sensex. Only SBI equity fund and Aviva index fund has over performed against their benchmark where Met life had under performed.
b. Balanced fund
METLIFE
SBI
AVIVA
Balancer
Balanced fund
Balancer fund
Benchmark
Returns
4.7%
4.4%
5.17%
5.49%
5.7%
4.7%
Metlife
Balancer SBI
Balanced fund Aviva
Balanced fund
68
Balanced funds 6.00% 5.00% 4.00% Benchmark 3.00%
Return
2.00% 1.00% 0.00% Met life
SBI
AVIVA
Analysis:
Balanced funds are those funds in equity & debt is mixed. This fund is very good option for investor here there is a mixture of equity and debt that why any loss in equity can be balanced by debt portion. In this only SBI had over performed with return of 5.49% against its benchmark of 5.17% and both Met life and Aviva had under performed.
C.Debt fund METLIFE
SBI
AVIVA
Protector
Bond fund
Secure fund
Preserver
Protector
Benchmark
Returns
Protector
5.9%
6.9%
Preserver
6.0%
4.8%
MetLife
SBI
69
Bond fund
5.88%
7.47%
Secure fund
5.9%
5.4%
Protector
5.8%
5.6%
Aviva
Met life
SBI
8.00% 8.00%
6.00% 4.00%
Benchmark
2.00%
Returns
0.00%
6.00%
Benchmark
4.00%
Returns
2.00% 0.00% Bond Fund
Aviva 6.00% Benchmark 5.50%
Returns
5.00% Secure Fund
Protector
Analysis:
In debt fund all three insurance companies had 100% invested their funds in debt either in corporate bonds or in government securities. In this fund all three insurance companies had performed quite good but met life & SBI had over performed against their benchmark. Aviva had quite managed to perform only.
70
CHAPTER 7 FINDINGS & RECOMMENDATIONDS
71
Scope of study This study will help to understand portfolio construction, evaluation, revision of insurance funds of Met life India insurance, at the same times gives an idea whether companies is gaining maximum returns or not, also helps in understanding the different strategies available in met life and helps in evaluating whether the funds of met life are performing against other insurance companies or not.
Limitations of the study
Secondary data can be general and vague and may not really help the company with decision making.
The information and data may not be accurate. The source of the data must always be checked.
The data may be old and out of date.
The sample used to generate the secondary data may be small.
The company publishing the data may not be repute.
Recommendation Equity has always been attractive investment options for all the investors in last few
decades due to it‟s over performing in comparison to other asset class, and in case of ULIPS the same held true for equity as a class because of its long term view of investments.
MetLife should start introspecting its performance in equity funds as they have
significantly underperformed as compared to other companies. 72
Met life has some very advanced and customer friendly passive portfolio management
options and they should introduce them in their future products also.
Debt performance has been exemplary for the funds of MetLife, so we can say that they
have been able to manage their debt portfolio well and should keep on doing the same.
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CHAPTER 8
LESSON LEARNT
74
LESSON LEARNT During summer training I have gained experience of working in an organization are being different rather than studying books as student. I had a great experience and good exposure with the corporate world; I would like to share my experience. As summer trainee I learned to be punctual i.e. to reaching the office at time, adopting myself to rules and regulations of the organization, and being used to and know about the MNC‟s culture, atmosphere etc. Here are some of the experiences in which I came across during my summer training. A) I have learnt to work in a team. B) How to take orders from my senior and explore the possibility to serve these orders in an effective way. C) How to deal with the customers by explaining the benefits of the insurance and give advise i.e which is best product for them who suits their needs and requirement.. D) Learnt how to take responsibilities and get them initiated in a better way. E) How to develop, plan and get ready for the work. F) Making customers focusing decisions. G) Researching and reporting on external opportunities. H) Based on overall company goals and direction.
Based on the above said experiences I can definitely say that it was the unique experience working with PNB METLIFE.
75
I can conclude that working in an organization teaches far beyond the classroom teaching, you have to work hard within the defined limits which enhances your skills and personality. It had a very good experience and I highly appreciate the effort of the university and recommend it for students in future.
76
CHAPTER 9 CONCLUSIONS
77
Conclusion
Equity as an asset class has not performed in recent months, but as we all know that
equity investments demands time to be spent in market. Thus equity although has not been able to outperform other asset class but taking a long term view of th e market equity has delivered always.
We can very clearly see in the analysis that debt has over performed and has been able to
give some exemplary returns in the past few months, thus it proves that equity and debt are inversely related.
We have also analyzed that there are three types of passive strategies in Met life. These
strategies are different from each other and beneficial for different mindset of investors. All three are able to provide good returns to investor as per their risk appetite.
The analysis also shows that the SBI life is performing far better than Met life and Aviva
in equity and balanced funds category, where in debt fund MetLife as well as SBI has performed well in comparison to their respective benchmarks; Aviva‟s debt fund performance has not been satisfactory for the investor‟s.
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CHAPTER 10 BIBLIOGRAPHY
79
