Summer Traning Report on Metlife

A

Project Study Report

on

Training Undertaken at

MetLife Insurance Limited

Titled

Fundamental Analysis Of life Insurance Industry

And

Valuation of MetLife Insurance Limited

Submitted in partial fulfilment for the

Award of degree of

Master of Business Administration

Submitted By:- Submitted To:-

Kajol Jaju Vidhu Mathur

MBA Part 2 HOD

2009-2010

GLOBAL INSTITUTE OF TECHNOLOGY , JAIPUR

(An Autonomous Institute of Govt. of Rajasthan)

Acknowledgement

I express my sincere thanks to my project guide, Ms.Aastha Mishra, Designation Training Officer, Deptt Training &Development, for guiding me right from the inception till the successful completion of the project.

I sincerely acknowledge her for extending their valuable guidance, support for literature, critical reviews of project and the report and all the moral support she had provided to me with all stages of this project.

I am Grateful to Mr. Atul Verma, Sales Manager, MetLife Insurance Ltd. for his valuable advice during the entire project. I would also like to thank the supporting staff Sales Department, for their help and cooperation throughout our project.

KAJOL JAJU

M.B.A.2nd SEM.

G.I.T. JAIPUR

PREFACE

Financial analysis of any organization is done through analysis of its financial statement. Financial statement provides valuable information of the past performance and present position of the company. However, financial statements in their traditional form, depicting data, are of little use to those who are interested in drawing conclusion from these statements.

In this study, a sincere attempt has been made to analyze the working of MetLife Insurance making use of different financial appraisal techniques like Ratio analysis, Trend analysis, Common size balance sheet analysis etc. the period of study was 2 year i.e. 2007-2008 & 2009-2010. The data for the study obtained from published annual report of the company. An effort has been made to appraise the overall financial performance and efficiency of management, but the scope and depth of the study remained limited due to limiting factors of time, and resources. However, it is expected that the study will provide useful information for the better and easier understanding of the financial result of the economy.

This study has been divided into 5 chapters. The 1st chapter has been devoted to the introduction and brief profile of the insurance industry. The 2nd chapter provide the information about the MetLife Insurance ltd.. The 3rd chapter has been provide information about research methodology. The 4th chapter deals with analysis of company’s performance and the 5th chapter has been devoted to the summary of conclusion and recommendation.

EXECUTIVE SUMMARY

Fundamental analysis is a main tool for investor’s point of view that in which company’s share they have to invest their precious reserves that they can earn maximum returns out of that investment. It is also necessary for the Brokers and Mutual fund organizers that which Industry’s and which company’s share they have to put in their portfolio. A good portfolio manager always put fundamentally strong company’s share in their portfolio.

Now the question arise that how to evaluate the industry and company and the answer of this question is put forward in this report. The report present the Fundamental Analysis of Life Insurance Industry and also Valuation of MetLife Insurance .

1. Indian Economy2. Life Insurance Industry3. Company Analysis Under this three major heads the ability and future prospects of the Life Insurance Industry

can be analyzed.

1. Indian Economy

This part covers the economical situation of India. It shows current status of Indian Economy and performance during last few years. This shows us the macro aspects of Indian growth, which enable to analyze the industry growth.

2. Life Insurance Industry

This part covers all the past information about the Life Insurance Industry. It is also divided in micro parts like,

Introduction of Life Insurance Industry History of Life Insurance Industry Types of Life Insurance Tax and Life Insurance Milestones in Life Insurance Life Insurance Companies Market share of companies Govt policies for Life Insurance Industry

3. Company Analysis

This is a main part of the report it covers:

Introduction of MetLife Insurance Ltd. Company Profile History of MetLife Insurance Ltd. Types of Plans Planning for Life Porter’s 5 Force Analysis Forecasting SWOT Analysis Conclusion Suggestions

CONTENT

Sr. No. Topics Page No.

1. Introduction to the Life Insurance Industry

2. Introduction to the MetLife Insurance Ltd.

3. Research Methodology

4. Facts and Findings

5. Analysis and Interpretation

6. SWOT

7. Conclusion

8. Recommendation and Suggestion

9. Appendix

10. Bibliography

Indian Economy

1.1 The Indian Economy

India is a very large economy it covers lots of coverage and second largest population in world. it is necessary to see the movement of economical indicator to find the economical growth. After logging in three consecutive years of over 7% growth, the GDP growth rate slowed down to touch a low of 5% in FY98 and 6% in FY99.this was mainly due to the slowing down of domestic demand that commenced in the latter half of 1996.the GDP growth in FY99 would have been lower had it not been for the bumper agricultural crop in that year. The economic performance has been much better than anticipated in FY00 mainly due to a sharp rebound in the industrial and services sectors. Agricultural production however declined by 1.3% in FY00.in the current fiscal year, the economic growth has been estimated at 6.5-7.5%, benefiting mainly from a sharp recovery in industrial activity. The drought witnessed early in the fiscal year may however dampen growth expectations.

The contribution of the services sector to the total output of the economy seems to have stabilized at 51.2%.as industrial activity picks up, and the demand for services increases, there could be erosion in the share of agriculture and allied activities in favour of the industry and services sectors. However, the govt is initiating measures to step up the rate of growth in the agriculture and allied sector to 4%. The acceleration in economic activity during FY00 proved to be short lived. The worst affected has been the agriculture sector, which has witnessed a sharp deterioration in growth. manufacturing too has recorded a decline in growth. Among the sectors that have performed well are mining &quarrying, trade etc, construction and finance etc. The headline GDP growth rate has recovered a little after having recorded a decline in the first quarter. it is estimated by CMIE, a leading that the GDP growth will be at 5.8% for the current year. this is significantly lower than the earlier estimated of 7-7.5%and last's year's growth of 6.4%.

1.2 Economic review

The planning commission has been working on achieving the magic 9% growth target for the 10th plan. However, for the 9th plan itself, the plan target of 6.5% seems difficult to achieve since the annual average growth rate during the first three years of the 9th five year plan has been estimated at 6.2%.going by the growth rate achieved so far, a growth of 7.2%for the remaining two years of the 9th plan could lead to the average growth of 6.5%.the required 7.2%may be achieved only through a significant increase in public investment and public savings, which is unlikely in the short term. In order to step up the growth rates to these planned levels, especially in the 10th plan, the govt would have to take some tough measure a-like land and water mgmt, fiscal reforms, power reforms, labour law reforms, employment facilities, better regional growth and better governance. There is a pressing need for greater inflow of capital, both foreign and domestic, to augment resources. Although the govt has been setting impressive growth rate targets for the economy ,the

downtrodden grass root levels of the population still have a long way to go. The poverty level in India stands at 27%,which is still very much short of the targeted level of 16.5% set for 2001-2002.it is also far behind the present 5% poverty level of China. Therefore, the roadmap of achieving higher macro-economic growth rates needs to include targets like education, rural infrastructure, sanitation and public health. at present, India spends only 3.5%of GDP on social development and this is clearly not enough to put the country on the high growth path. More importantly, if India wants to achieve the 9%growth rate in the coming years, the govt has to make conscious efforts to bring the fiscal deficit under control. The fiscal situation at the end of October 2000 seems to be better than the budgeted levels for the current fiscal 2000-2001.in fact, during the first six months of the current financial year, the gross fiscal deficit was lower by 18.7%compared with the fiscal deficit in April-September last year. The lower deficit has been on account of the total receipts, which have been 43.2%higher than the last year. there has been a robust growth in revenue collections since tax collections have been posting impressive growth rates in past few months. Moreover, the non-tax collections have also picked up and have posted an impressive 55.4%growth.In a step to reduce the fiscal deficit by 0.5%to 1% annually over the five years, the govt has decided to step up its fiscal measures by introducing the fiscal responsibility bill in this session of parliament. the proposed law is expected to sets caps on the govt's fiscal and revenue deficits and to set a mid-term target for the fiscal deficit. The govt has targeted a fiscal deficit of 5.1% for the current financial year. however, the possibility of overshooting this is high and the targets are likely to go haywire due to the volatile trend in international prices of crude oil and petroleum products since the import bill is expected to reach over Rs800 billion this year against Rs535 billion. The demand for oil and gas in India has been growing at an annual rate of 6-7% compared to the world average rate of 2%.moreover,almost 70% of the petroleum demand is met by imports, at a huge foreign exchange cost, which has been pushing up the import bill.

1.3 Economical Performance

The overall growth in 2000-01 will be 6.0%. this is lower than the GDP growth last fiscal at 6.4%.the decline in growth rate GDP is mainly because of a deceleration in growth rate of service sector from 9.6%in 1999-2000 to 8.3% in 2000-2001.this decline as the survey points out is because of a steep decline in growth rate of community, social and personal services, attributable to the wage bill (arrears) drawn by govt employees.

Even though the country experienced a normal monsoon production for the third consecutive year, agricultural food grains will decline to 199mn tones from 208.9mn tones in the previous year.

The economic survey is optimistic regarding the fiscal position of the central govt. for a change, direct tax collections are showing a favourable trend as compared to indirect tax collections. This makes a strong point for the finance minister to pitch for broadening

the personal tax base in the budget. At the same time, the survey expresses disappointment for a likely shortfall in indirect tax collections.

The fiscal profligacy of the govt is manifest in the continued deterioration of savings of the public sector from a 2%surplus in 1995-96 to dismal disserving at 1.2% of the GDP. Overall, the savings-investment gap is estimated at 1% of GDP in 1999-2000.

The economic survey underlines that account deficit in 2000-2001 might widen to 1.5%-1.7% of GDP because of a higher non-oil import bill. The silver lining in the balance of payments is the continued buoyancy in exports and invisible earnings. Portfolio inflows have been erratic in the current fiscal, but FDI flows have picked up.

Exports have rebounded back strongly in the current fiscal after a string of disappointments, because of a more open foreign investment policy in export-oriented sectors like information, tariff reduction and rupee depreciation.

The 55th round of national sample survey reveals a huge decline in poverty to 26% based on 30-day recall and 23.3% on a 7-day recall methodology. in the same breath, the survey points out that these estimates may not be strictly comparable to the earlier estimates of poverty.

The point-to-point WPI-based inflation rate on janurary27, 2001 was 8.2% close to the peak level of 8.8% on september25, 1998 in recent times. The CPI (IW) based inflation rate decline to 2.7 % in November 1999 from peak of 19.7% in November 1998. the strong agricultural growth in 1998-99 and the consequent stability of food prices has contributed greatly to this decline. the survey is optimistic of an inflation rate of around 6.5-7.0% for 2000-2001.this is much higher than the earlier estimates of the RBI and govt of India.

Growth of money supply during the current financial year till January 12, 2001 was 15.8% as against 16.7 % in the corresponding period the previous year. the reserve money growth during this period could have been much higher (because of a higher growth in monetized deficit and net foreign exchange assets of the RBI ) but was offset by a decline in refinance facilities by the RBI.

India’s external debt at end-September 2000 stood at US$97.86 bn as against $98.44 bn at end-march 2000.short-term debt from $4.1bn to $4.6bn during the same period.

.

1. Introduction to the Life Insurance Industry

1.1 Introduction

Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a designated beneficiary a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount (at regular intervals or in lump sums). There may be designs in some countries where bills and death expenses plus catering for after funeral expenses should be included in Policy Premium. In the United States, the predominant form simply specifies a lump sum to be paid on the insured's demise.

The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured.

Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to suicide, fraud, war, riot and civil commotion.

Life-based contracts tend to fall into two major categories:

Protection policies - designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.

Investment policies - where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms are whole life, universal life and variable life policies.

1.2 Life Insurance Industry

India insurance is a flourishing, with several national and international players

competing and growing at rapid rates. Thanks to reforms and the easing of policy regulations,

the Indian insurance sector been allowed to flourish, and as Indians become more familiar with

different insurance products, this growth can only increase, with the period from 2010 - 2015

projected to be the 'Golden Age' for the Indian insurance industry.

Indian insurance companies offer a comprehensive range of insurance plans, a

range that is growing as the economy matures and the wealth of the middle classes

increases.

Due to the growing demand for insurance more and more insurance companies are now

emerging in the Indian insurance sector. With the opening up of the economy, several

international leaders in the insurance sector are trying to venture into the India insurance

industry.

The history of the Indian insurance sector dates back to 1818, when the Oriental Life

Insurance Company was formed in Kolkata. A new era began in the India insurance

sector, with the passing of the Life Insurance Act of 1912.

The Indian Insurance Companies Act was passed in 1928. This act empowered the

government of India to gather necessary information about the life insurance and non-life

insurance organizations operating in the Indian financial markets.

The Triton Insurance Company Ltd formed in 1850 and was the first of its kind in the

general insurance sector in India. Established in 1907, Indian Mercantile Insurance

Limited was the first company to handle all forms of India insurance.

Indian Insurance: Sector Reform

The formation of Malhotra Committee in 1993 Initiated reforms in the Indian insurance

sector. The aim of the Malhotra Committee was to assess the functionality of the

Indian insurance sector. This committee was also in charge of recommending the

future path of insurance in India.

The Malhotra Committee attempted to improve various aspects of the insurance

sector, making them more appropriate and effective for the Indian market.

The recommendations of the committee put stress on offering operational autonomy

to the insurance service providers and also suggested forming an independent

regulatory body.

The Insurance Regulatory and Development Authority Act of 1999 brought about

several crucial policy changes in the insurance sector of India. It led to the formation

of the Insurance Regulatory and Development Authority (IRDA) in 2000.

The goals of the IRDA are to safeguard the interests of insurance policyholders, as

well as to initiate different policy measures to help sustain growth in the Indian

insurance sector.

The Authority has notified 27 Regulation on various issues which include Registration

of Insurers, Regulation on insurance agents, Solvency Margin, Re-insurance

obligation of Insurance to Rural and Social sector, Investment and Accounting

Procedure, Protection of policy holders’ interest etc.

Applications were invited by the Authority with effect from 15th August, 2000 for issue

of the Certificate of Registration to both life and non-life insurers. The Authority has its

Head Quarter at Hyderabad.

1.3 Key points

Return on Equity (ROE):                   Net Income                                                                Shareholder's Equity

ROE indicates the return a company is generating on the owners' investments. In the policyholder owned case, you would use policy holders' surpluses as the denominator. As a general rule for insurance companies, ROE should lie between 10-15%.

Return on Assets (ROA):                Net Income + Interest Expense                                                                       Total Assets

ROA indicates the return a company is generating on the firm's investments/assets. In general, a life insurer should have an ROA that falls in the 0.5-1% range.

Return on Total Revenue:           Net Income                                                          Total Revenue

This is another variation of the profitability ratios. The insurance industry average return is approximately 3%. If possible, use the premium income and investment income as the numerator to find the profitability of each area.

Reinsurance:   This is the process of multiple insurers sharing an insurance policy to reduce the risk for each insurer. You can think of reinsurance as the insurance backing primary insurers against catastrophic losses.

The company transferring the risk is called the "ceding company"; the company receiving the risk is called the "assuming company" or "reinsurer."

Lapse Ratio:   Lapsed Life Insurance Specified Period                                   Contracts in Force (in effect) at Start of Specified Period

This ratio compares the number of policies that have lapsed (expired) within a specified period of time to those in force at the start of that same period. It is a ratio used to measure the effectiveness of an insurer's marketing strategy. A lower lapse ratio is better, particularly because insurance companies pay high commissions to brokers and agents that refer new clients.

A.M. Best Ratings:  A.M. Best dubs itself "The Insurance Information Source." This company provides data and research on almost every major insurance company in North America and abroad. Many analysts equate the quality of A.M. Best ratings to Moody's or Standard and Poor's bond ratings. A.M. Best ratings are so widely followed because they can usually obtain company information that wouldn't be accessible to the average person.

The A.M. ratings range from A++ (superior quality) to F (the company is in liquidation). If you are analyzing an insurance company, you may want to consider looking for the A.M. Best rating.

Analyst InsightThere are three major factors that we must consider when analyzing an insurance company. Coincidently, these are the same ones that the A.M. Best ratings (among other things) take into account.

1. Leverage. The first things you want to check when considering an insurance company are the quality and strength of the balance sheet. Everyday insurers are taking in premiums and paying out claims to policyholders. The ability to meet their obligations toward these policy holders is extremely important. Companies should strike a balance between high returns while keeping leverage intact. A company that is highly leveraged might not be able to meet financial obligations when a large catastrophic event occurs. The following three things act to increase leverage:

1) Writing more insurance policies 2) Dependence on reinsurance 3) Use of debt

Reinsurance allows a company to pass off some of the risk exposure to other insurers (usually a good thing), but be careful. Too much dependence on reinsurance means that the company is not keeping a fair portion of responsibility for each premium dollar.

2. Liquidity. The first test of an insurer's ability to meet financial obligations is the acid test. It tests whether a firm has enough short-term assets (without selling inventory) to cover its immediate liabilities. Also take a close look at cash flow. An insurer should almost always have a positive cash flow. Other things to keep an eye on are the investment grades of the company's bond portfolio. Too many high and medium risk bonds could lead to instability.

3. Profitability. As with any company, profitability is a key determinant for deciding whether to invest. For an insurance company, there are two components of profits that we must consider: premium/underwriting income and investment income.

Underwriting income is just that: any revenue derived from issuing insurance policies. By averaging the premium's growth rates of several past years, you can determine the growth trends. Growing premium income is a "catch 22" for insurance companies. Ideally, you want the growth rate to exceed the industry average, but you want to be sure that this higher growth does not come at the expense of accepting higher-risk clients. Conversely, a company whose premium income is growing at a slower rate might be too picky, looking for only the highest quality insurance opportunities. The one thing to remember is that higher premium collections do not equate to higher profits. Lower numbers of claims (via low risk clients) contribute more to the bottom line.

The second area of profitability that you need to include in your analysis is investment income. As we mentioned earlier, a greater proportion of an insurer's income comes from investments. To evaluate this area, take a look at the company's asset allocation strategy (usually mentioned in the notes of the financial statements). You aren't likely to find any secrets in this area. A majority of the assets should be invested in low-risk bonds, equities or money market securities. Some insurers invest a substantial portion of their assets in real estate. If this is so, take a look at what type of property it is and where it is located. A building in New York City is much more liquid than one in Boise, Idaho.

ROA, ROE, and the lapse ratios (discussed above) are also useful for evaluating the profitability of the insurer. Calculate the ROA and ROE numbers over the past several years to determine whether management has been increasing return for shareholders. The lapse ratio will help to tell whether the company has managed to keep marketing expenses under control. The more policies that remain in force (are not cancelled), the better.

.

1.4 Overview of Life Insurance Industry

1.4.1 Parties to Contract

1.4.2 Contract terms

1.4.3 Costs, insurability and underwriting

1.4.4 Death proceeds

1.4.5 Insurance vs. Assurance

1.4.1 Parties to contract

There is a difference between the insured and the policy owner (policy holder), although the owner and the insured are often the same person. For example, if Joe buys a policy on his own life, he is both the owner and the insured. But if Jane, his wife, buys a policy on Joe's life, she is the owner and he is the insured. The policy owner is the guarantee and he or she will be the person who will pay for the policy. The insured is a participant in the contract, but not necessarily a party to it. However, "insurable interest" is required to limit an unrelated party from taking life insurance on, for example, Jane or Joe.

The beneficiary receives policy proceeds upon the insured's death. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner can change the beneficiary unless the policy has an irrevocable beneficiary designation. With an irrevocable beneficiary, that beneficiary must agree to any beneficiary changes, policy assignments, or cash value borrowing.

In cases where the policy owner is not the insured, insurance companies have sought to limit policy purchases to those with an "insurable interest" in the CQV. For life insurance policies, close family members and business partners will usually be found to have an insurable interest. The "insurable interest" requirement usually demonstrates that the purchaser will actually suffer some kind of loss if the CQV dies. Such a requirement prevents people from benefiting from the purchase of purely speculative policies on people they expect to die. With no insurable interest requirement, the risk that a purchaser would murder the CQV for insurance proceeds would be great. In at least one case, an insurance company which sold a policy to a purchaser with no insurable interest (who later murdered the CQV for the proceeds), was found liable in court for contributing to the wrongful death of the victim (Liberty National Life v. Weldon, 267 Ala.171 (1957)).

1.4.2 Contract terms

Special provisions may apply, such as suicide clauses wherein the policy becomes null if the insured commits suicide within a specified time (usually two years after the purchase

date; some states provide a statutory one-year suicide clause). Any misrepresentations by the insured on the application is also grounds for nullification. Most US states specify that the contestability period cannot be longer than two years; only if the insured dies within this period will the insurer have a legal right to contest the claim on the basis of misrepresentation and request additional information before deciding to pay or deny the claim.

The face amount on the policy is the initial amount that the policy will pay at the death of the insured or when the policy matures, although the actual death benefit can provide for greater or lesser than the face amount. The policy matures when the insured dies or reaches a specified age (such as 100 years old).

1.4.3 Costs, insurability, and underwriting

The insurer (the life insurance company) calculates the policy prices with intent to fund claims to be paid and administrative costs, and to make a profit. The cost of insurance is determined using mortality tables calculated by actuaries. Actuaries are professionals who employ actuarial science, which is based in mathematics (primarily probability and statistics). Mortality tables are statistically-based tables showing expected annual mortality rates. It is possible to derive life expectancy estimates from these mortality assumptions. Such estimates can be important in taxation regulation.

The three main variables in a mortality table have been age, gender, and use of tobacco. More recently in the US, preferred class specific tables were introduced. The mortality tables provide a baseline for the cost of insurance. In practice, these mortality tables are used in conjunction with the health and family history of the individual applying for a policy in order to determine premiums and insurability. Mortality tables currently in use by life insurance companies in the United States are individually modified by each company using pooled industry experience studies as a starting point. In the 1980s and 90's the SOA 1975-80 Basic Select & Ultimate tables were the typical reference points, while the 2001 VBT and 2001 CSO tables were published more recently. The newer tables include separate mortality tables for smokers and non-smokers and the CSO tables include separate tables for preferred classes.

Recent US select mortality tables predict that roughly 0.35 in 1,000 non-smoking males aged 25 will die during the first year of coverage after underwriting. Mortality approximately doubles for every extra ten years of age so that the mortality rate in the first year for underwritten non-smoking men is about 2.5 in 1,000 people at age 65. Compare this with the US population male mortality rates of 1.3 per 1,000 at age 25 and 19.3 at age 65 (without regard to health or smoking status). The mortality of underwritten persons rises much more quickly than the general population. At the end of 10 years the mortality of that 25 year-old, non-smoking male is 0.66/1000/year. Consequently, in a group of one thousand 25 year old males with a $100,000 policy, all of average health, a life insurance company would have to collect approximately $50 a year from each of a large group to cover the relatively few expected claims. (0.35 to 0.66 expected deaths in each year x $100,000 payout per death = $35 per policy). Administrative and sales commissions need to be accounted for in order for this to make business sense. A 10 year policy for a 25 year old non-smoking male person with preferred medical history may get offers as low as $90 per year for a $100,000 policy in the competitive US life insurance market.

The insurance company receives the premiums from the policy owner and invests them to create a pool of money from which it can pay claims and finance the insurance

company's operations. The majority of the money that insurance companies make comes directly from premiums paid, as money gained through investment of premiums can never, in even the most ideal market conditions, vest enough money per year to pay out claims.[citation needed] Rates charged for life insurance increase with the insurer's age because, statistically, people are more likely to die as they get older.

Given that adverse selection can have a negative impact on the insurer's financial situation, the insurer investigates each proposed insured individual unless the policy is below a company-established minimum amount, beginning with the application process. Group Insurance policies are an exception.

This investigation and resulting evaluation of the risk is termed underwriting. Health and lifestyle questions are asked. Certain responses or information received may merit further investigation. Life insurance companies in the United States support the Medical Information Bureau (MIB which is a clearinghouse of information on persons who have applied for life insurance with participating companies in the last seven years. As part of the application, the insurer receives permission to obtain information from the proposed insured's physicians.

Underwriters will determine the purpose of insurance. The most common is to protect the owner's family or financial interests in the event of the insurer's demise. Other purposes include estate planning or, in the case of cash-value contracts, investment for retirement planning. Bank loans or buy-sell provisions of business agreements are another acceptable purpose.

Life insurance companies are never required by law to underwrite or to provide coverage to anyone, with the exception of Civil Rights Act compliance requirements. Insurance companies alone determine insurability, and some people, for their own health or lifestyle reasons, are deemed uninsurable. The policy can be declined (turned down) or rated. Rating increases the premiums to provide for additional risks relative to the particular insured.

Many companies use four general health categories for those evaluated for a life insurance policy. These categories are Preferred Best, Preferred, Standard, and Tobacco. Preferred Best is reserved only for the healthiest individuals in the general population. This means, for instance, that the proposed insured has no adverse medical history, is not under medication for any condition, and his family (immediate and extended) have no history of early cancer, diabetes, or other conditions. Preferred means that the proposed insured is currently under medication for a medical condition and have a family history of particular illnesses. Most people are in the Standard category. Profession, travel, and lifestyle factor into whether the proposed insured will be granted a policy, and which category the insured falls. For example, a person who would otherwise be classified as Preferred Best may be denied a policy if he or she travels to a high risk country. Underwriting practices can vary from insurer to insurer which provide for more competitive offers in certain circumstances.

1.4.4 Death proceeds

Upon the insured's death, the insurer requires acceptable proof of death before it pays the claim. The normal minimum proof required is a death certificate and the insurer's claim form completed, signed If the insured's death is suspicious and the policy amount is large, the insurer may investigate the circumstances surrounding the death before deciding whether it has an obligation to pay the claim.

Proceeds from the policy may be paid as a lump sum or as an annuity, which is paid over time in regular recurring payments for either a specified period or for a beneficiary's lifetime.

1.4.5 Insurance vs. Assurance

The specific uses of the terms "insurance" and "assurance" are sometimes confused. In general, in these jurisdictions "insurance" refers to providing cover for an event that might happen (fire, theft, flood, etc.), while "assurance" is the provision of cover for an event that is certain to happen. "Insurance" is the generally accepted term, but people using this description are liable to be corrected. In the United States both forms of coverage are called "insurance", principally due to many companies offering both types of policy, and rather than refer to themselves using both insurance and assurance titles, they instead use just one.

1.5 History of Life Insurance

Insurance began as a way of reducing the risk of traders, as early as 2000 BC in China and 1750 BC in Babylon. Life insurance dates only to ancient Rome; "burial clubs" covered the cost of members' funeral expenses and helped survivors monetarily. Modern life insurance started in 17th century England, originally as insurance for traders; merchants, ship owners and underwriters met to discuss deals at Lloyd's Coffee House, predecessor to the famous Lloyd's of London.

The first insurance company in the United States was formed in Charleston, South Carolina in 1732, but it provided only fire insurance. The sale of life insurance in the U.S. began in the late 1760s. The Presbyterian Synods in Philadelphia and New York created the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759; Episcopalian priests organized a similar fund in 1769. Between 1787 and 1837 more than two dozen life insurance companies were started, but fewer than half a dozen survived.

Prior to the American Civil War, many insurance companies in the United States insured the lives of slaves for their owners. In response to bills passed in California in 2001 and in Illinois in 2003, the companies have been required to search their records for such policies. New York Life for example reported that Nautilus sold 485 slaveholder life insurance policies during a two-year period in the 1840s; they added that their trustees voted to end the sale of such policies 15 years before the Emancipation Proclamation.

The story of insurance is probably as old as the story of mankind. The same instinct that prompts modern businessmen today to secure themselves against loss and disaster existed in primitive men also. They too sought to avert the evil consequences of fire and flood and loss of life and were willing to make some sort of sacrifice in order to achieve security. Though the concept of insurance is largely a development of the recent past, particularly after the industrial era – past few centuries – yet its beginnings date back almost 6000 years.

Life Insurance in its modern form came to India from England in the year 1818. Oriental Life Insurance Company started by Europeans in Calcutta was the first life insurance company on Indian Soil. All the insurance companies established during that period were brought up with

the purpose of looking after the needs of European community and Indian natives were not being insured by these companies. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal rates. Starting as Indian enterprise with highly patriotic motives, insurance companies came into existence to carry the message of insurance and social security through insurance to various sectors of society. Bharat Insurance Company (1896) was also one of such companies inspired by nationalism. The Swadeshi movement of 1905-1907 gave rise to more insurance companies. The United India in Madras, National Indian and National Insurance in Calcutta and the Co-operative Assurance at Lahore were established in 1906. In 1907, Hindustan Co-operative Insurance Company took its birth in one of the rooms of the Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were some of the companies established during the same period. Prior to 1912 India had no legislation to regulate insurance business. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed. The Life Insurance Companies Act, 1912 made it necessary that the premium rate tables and periodical valuations of companies should be certified by an actuary. But the Act discriminated between foreign and Indian companies on many accounts, putting the Indian companies at a disadvantage.

The first two decades of the twentieth century saw lot of growth in insurance business. From 44 companies with total business-in-force as Rs.22.44 crore, it rose to 176 companies with total business-in-force as Rs.298 crore in 1938. During the mushrooming of insurance companies many financially unsound concerns were also floated which failed miserably. The Insurance Act 1938 was the first legislation governing not only life insurance but also non-life insurance to provide strict state control over insurance business. The demand for nationalization of life insurance industry was made repeatedly in the past but it gathered momentum in 1944 when a bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly. However, it was much later on the 19th of January, 1956, that life insurance in India was nationalized. About 154 Indian insurance companies, 16 non-Indian companies and 75 provident were operating in India at the time of nationalization. Nationalization was accomplished in two stages; initially the management of the companies was taken over by means of an Ordinance, and later, the ownership too by means of a comprehensive bill. The Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956, and the Life Insurance Corporation of India was created on 1st September, 1956, with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost.

LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate office in the year 1956. Since life insurance contracts are long term contracts and during the currency of the policy it requires a variety of services need was felt in the later years to expand the operations and place a branch office at each district headquarter. Re-organization of LIC took place and large numbers of new branch offices were opened. As a result of re-organisation servicing functions were transferred to the branches, and branches were made accounting units. It worked wonders with the performance of the corporation. It may be seen that from about 200.00 crores of New Business in 1957 the corporation crossed 1000.00 crores only in the year 1969-70, and it took another 10 years for LIC to cross 2000.00

crore mark of new business. But with re-organisation happening in the early eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum Assured on new policies.

Today LIC functions with 2048 fully computerized branch offices, 109 divisional offices, 8 zonal offices, 992 satellite offices and the Corporate office. LIC’s Wide Area Network covers 109 divisional offices and connects all the branches through a Metro Area Network. LIC has tied up with some Banks and Service providers to offer on-line premium collection facility in selected cities. LIC’s ECS and ATM premium payment facility is an addition to customer convenience. Apart from on-line Kiosks and IVRS, Info Centres have been commissioned at Mumbai, Ahmadabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many other cities. With a vision of providing easy access to its policyholders, LIC has launched its SATELLITE SAMPARK offices. The satellite offices are smaller, leaner and closer to the customer. The digitalized records of the satellite offices will facilitate anywhere servicing and many other conveniences in the future.

LIC continues to be the dominant life insurer even in the liberalized scenario of Indian insurance and is moving fast on a new growth trajectory surpassing its own past records. LIC has issued over one crore policies during the current year. It has crossed the milestone of issuing 1,01,32,955 new policies by 15th Oct, 2005, posting a healthy growth rate of 16.67% over the corresponding period of the previous year.

From then to now, LIC has crossed many milestones and has set unprecedented performance records in various aspects of life insurance business. The same motives which inspired our forefathers to bring insurance into existence in this country inspire us at LIC to take this message of protection to light the lamps of security in as many homes as possible and to help the people in providing security to their families.

1.6 Types of Life Insurance

1.6.1 Term Insurance

1.6.2 Permanent Life Insurance

1.6.2.1 Whole Life Coverage

1.6.2.2 Universal Life Coverage

1.6.2.3 Limited-pay

1.6.2.4 Endowments

1.6.2.5 Accidental death

1.6.1 Term Insurance

Term assurance provides life insurance coverage for a specified term of years in exchange for a specified premium. The policy does not accumulate cash value. Term is generally considered "pure" insurance, where the premium buys protection in the event of death and nothing else.

There are three key factors to be considered in term insurance:

Face amount (protection or death benefit), Premium to be paid (cost to the insured), and Length of coverage (term).

Various insurance companies sell term insurance with many different combinations of these three parameters. The face amount can remain constant or decline. The term can be for one or more years. The premium can remain level or increase. Common types of term insurance include Level, Annual Renewable and Mortgage insurance.

Level Term policy has the premium fixed for a period of time longer than a year. These terms are commonly 5, 10, 15, 20, 25, 30 and even 35 years. Level term is often used for long term planning and asset management because premiums remain consistent year to year and can be budgeted long term. At the end of the term, some policies contain a renewal or conversion option. Guaranteed Renewal, the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time. Some companies however do not guarantee renewal, and require proof of insurability to mitigate their risk and decline renewing higher risk clients (for instance those that may be terminal). Renewal that requires proof of insurability often includes a conversion options that allows the insured to convert the term program to a permanent one that the insurance company makes available. This can force clients into a more expensive permanent program because of anti selection if they need to continue coverage. Renewal and conversion options can be very important when selecting a program.

Annual renewable term is a one year policy but the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time.

Another common type of term insurance is mortgage insurance, which is usually a level premium, declining face value policy. The face amount is intended to equal the amount of the mortgage on the policy owner’s residence so the mortgage will be paid if the insured dies.

A policy holder insures his life for a specified term. If he dies before that specified term is up (with the exception of suicide see below), his estate or named beneficiary receives a payout. If he does not die before the term is up, he receives nothing. However, in some European countries (notably Serbia), insurance policy is such that the policy holder receives the amount he has insured himself to, or the amount he has paid to the insurance company in the past years. Suicide used to be excluded from ALL insurance policies .however, after a number of court judgments against the industry, payouts do occur on death by suicide

(presumably except for in the unlikely case that it can be shown that the suicide was just to benefit from the policy). Generally, if an insured person commits suicide within the first two policy years, the insurer will return the premiums paid. However, a death benefit will usually be paid if the suicide occurs after the two year period.

1.6.2 Permanent Life Insurance

Permanent life insurance is life insurance that remains in force (in-line) until the policy matures (pays out), unless the owner fails to pay the premium when due (the policy expires OR policies lapse). The policy cannot be cancelled by the insurer for any reason except fraud in the application, and that cancellation must occur within a period of time defined by law (usually two years). Permanent insurance builds a cash value that reduces the amount at risk to the insurance company and thus the insurance expense over time. This means that a policy with a million dollar face value can be relatively expensive to a 70 year old. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value.

The four basic types of permanent insurance are whole life, universal life, limited pay and endowment.

1.6.2.1 Whole life coverage

Whole life insurance provides for a level premium, and a cash value table included in the policy guaranteed by the company. The primary advantages of whole life are guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges will not reduce the cash value shown in the policy. The primary disadvantages of whole life are premium inflexibility, and the internal rate of return in the policy may not be competitive with other savings alternatives. Also, the cash values are generally kept by the insurance company at the time of death, the death benefit only to the beneficiaries. Riders are available that can allow one to increase the death benefit by paying additional premium. The death benefit can also be increased through the use of policy dividends. Dividends cannot be guaranteed and may be higher or lower than historical rates over time. Premiums are much higher than term insurance in the short term, but cumulative premiums are roughly equal if policies are kept in force until average life expectancy.

Cash value can be accessed at any time through policy "loans" and are received "income-tax free". Since these loans decrease the death benefit if not paid back, payback is optional. Cash values support the death benefit so only the death benefit is paid out.

Dividends can be utilized in many ways. First, if Paid up additions is elected, dividend cash values will purchase additional death benefit which will increase the death benefit of the policy to the named beneficiary. Another alternative is to opt in for 'reduced premiums' on some policies. This reduces the owed premiums by the unguaranteed dividends amount. A third option allows the owner to take the dividends as they are paid out. (Although some policies provide other/different/less options than these - it depends on the company for some cases)

1.6.2.2 Universal life coverage

Universal life insurance (UL) is a relatively new insurance product intended to provide permanent insurance coverage with greater flexibility in premium payment and the potential for greater growth of cash values. There are several types of universal life insurance policies which include "interest sensitive" (also known as "traditional fixed universal life insurance"), variable universal life (VUL), guaranteed death benefit, and equity indexed universal life insurance.

A universal life insurance policy includes a cash values. Premiums increase the cash values, but, the cost of insurance (along with any other charges assessed by the insurance company) reduces cash values. However, with the exception of VUL, interest is credited on cash values at a rate specified by the company and may also increase cash values. With VUL, cash values will ebb and flow relative to the performance of the investment subaccounts the policy owner has chosen. The surrender value of the policy is the amount payable to the policy owner after applicable surrender charges, if any.

Universal life insurance addresses the perceived disadvantages of whole life - namely that premiums and death benefit are fixed. With universal life, both the premiums and death benefit are flexible. Except with regards to guaranteed death benefit universal life, this flexibility comes at a price: reduced guarantees.

Depending on how interest is credited, the internal rate of return can be higher because it moves with prevailing interest rates (interest-sensitive) or the financial markets (Equity Indexed Universal Life and Variable Universal Life). Mortality costs and administrative charges are known. And cash value may be considered more easily attainable because the owner can discontinue premiums if the cash value allows it.

Flexible death benefit means the policy owner can choose to decrease the death benefit. The death benefit could alos be increased by the policy owner but that would (typically) require that the insured go through new underwriting. Another example of flexible death benefit is the ability to choose option A or option B death benefits - and to be able to change those options during the life of the insured.

Option A is often referred to as a level death benefit. Generally speaking, the death benefit will remain level for the life of the insured and premiums are expected to be lower than policies with an Option B death benefit.

Option B pays the face amount plus the cash value. If cash values grow over time, so would the death benefit which is payable to the insured's beneficiaries. If cash values decline, the death benefit would also decline. Presumably option B death benefit policies require greater premium than option A policies.

1.6.2.3 Limited-pay

Another type of permanent insurance is Limited-pay life insurance, in which all the premiums are paid over a specified period after which no additional premiums are due to keep the policy in force. Common limited pay periods include 10-year, 20-year, and paid-up at age 65.

1.6.2.4 Endowments

Endowments are policies in which the cash value built up inside the policy, equals the death benefit (face amount) at a certain age. The age this commences is known as the endowment age. Endowments are considerably more expensive (in terms of annual premiums) than either whole life or universal life because the premium paying period is shortened and the endowment date is earlier.

In the United States, the Technical Corrections Act of 1988 tightened the rules on tax shelters (creating modified endowments). These follow tax rules as annuities and IRAs do.

Endowment Insurance is paid out whether the insured lives or dies, after a specific period (e.g. 15 years) or a specific age (e.g. 65).

1.6.2.5 Accidental Death

Accidental death is a limited life insurance that is designed to cover the insured when they pass away due to an accident. Accidents include anything from an injury, but do not typically cover any deaths resulting from health problems or suicide. Because they only cover accidents, these policies are much less expensive than other life insurances.

It is also very commonly offered as "accidental death and dismemberment insurance", also known as an AD&D policy. In an AD&D policy, benefits are available not only for accidental death, but also for loss of limbs or bodily functions such as sight and hearing, etc.

Accidental death and AD&D policies very rarely pay a benefit; either the cause of death is not covered, or the coverage is not maintained after the accident until death occurs. To be aware of what coverage they have, an insured should always review their policy for what it covers and what it excludes. Often, it does not cover an insured who puts themselves at risk in activities such as: parachuting, flying an airplane, professional sports, or involvement in a war (military or not). Also, some insurers will exclude death and injury caused by proximate causes due to (but not limited to) racing on wheels and mountaineering.

Accidental death benefits can also be added to a standard life insurance policy as a rider. If this rider is purchased, the policy will generally pay double the face amount if the insured dies due to an accident. This used to be commonly referred to as a double indemnity coverage. In some cases, some companies may even offer a triple indemnity cover.

1.7 Related Life Insurance Products

Riders are modifications to the insurance policy added at the same time the policy is issued. These riders change the basic policy to provide some feature desired by the policy owner. A common rider is accidental death, which used to be commonly referred to as "double indemnity", which pays twice the amount of the policy face value if death results from accidental causes, as if both a full coverage policy and an accidental death policy were in effect on the insured. Another common rider is premium waiver, which waives future premiums if the insured becomes disabled.

Joint life insurance is either a term or permanent policy insuring two or more lives with the proceeds payable on the first death or second death.

Survivorship life: is a whole life policy insuring two lives with the proceeds payable on the second (later) death.

Single premium whole life: is a policy with only one premium which is payable at the time the policy is issued.

Modified whole life: is a whole life policy that charges smaller premiums for a specified period of time after which the premiums increase for the remainder of the policy.

Group life insurance: is term insurance covering a group of people, usually employees of a company or members of a union or association. Individual proof of insurability is not normally a consideration in the underwriting. Rather, the underwriter considers the size and turnover of the group, and the financial strength of the group. Contract provisions will attempt to exclude the possibility of adverse selection. Group life insurance often has a provision that a member exiting the group has the right to buy individual insurance coverage.

Senior and preneed products: Insurance companies have in recent years developed products to offer to niche markets, most notably targeting the senior market to address needs of an aging population. Many companies offer policies tailored to the needs of senior applicants. These are often low to moderate face value whole life insurance policies, to allow a senior citizen purchasing insurance at an older issue age an opportunity to buy affordable insurance. This may also be marketed as final expense insurance, and an agent or company may suggest (but not require) that the policy proceeds could be used for end-of-life expenses.

Preneed (or prepaid) insurance policies: are whole life policies that, although available at any age, are usually offered to older applicants as well. This type of insurance is designed specifically to cover funeral expenses when the insured person dies. In many cases, the applicant signs a prefunded funeral arrangement with a funeral home at the time the policy is applied for. The death proceeds are then guaranteed to be directed first to the funeral services provider for payment of services rendered. Most contracts dictate that any excess proceeds will go either to the insured's estate or a designated beneficiary.

1.8 Investment Policies

With-profits policies:

Main article: With-profits policy

Some policies allow the policyholder to participate in the profits of the insurance company these are with-profits policies. Other policies have no rights to participate in the profits of the company, these are non-profit policies.

With-profits policies are used as a form of collective investment to achieve capital growth. Other policies offer a guaranteed return not dependent on the company's underlying

investment performance; these are often referred to as without-profit policies which may be construed as a misnomer.

Investment Bonds

Main article: Insurance bond

Pensions: Pensions are a form of life assurance. However, whilst basic life assurance, permanent health insurance and non-pensions annuity business includes an amount of mortality or morbidity risk for the insurer, for pensions there is a longevity risk.

A pension fund will be built up throughout a person's working life. When the person retires, the pension will become in payment, and at some stage the pensioner will buy an annuity contract, which will guarantee a certain pay-out each month until death.

There are three important types of insurance policies available in the market. These are:

Whole Life Insurance Policy Term Life Insurance Policy Accidental death Policy

Whole Life Insurance Policy: One needs to have full Whole Life Insurance Information before buying a policy. The whole life insurance policy provides coverage for the whole of life and even after death. The premium rate is thus fixed and a little higher than other insurance policies. It also provides added facilities such as pensions and accidental disability compensation and many more. A whole life policy runs as long as the policyholder is alive. As risk is covered for the entire life of the policyholder, therefore, such policies are known as whole life policies

Term Life Insurance Policy: Term Life Insurance is a kind of policy which lets the insured to change the policy after certain period of times according to one's needs. The premium for this life insurance policy is lesser than other policies. But the insured is only compensated if he dies within the contract period. There is not even any cash back possible. Term life insurance policy covers risk only during the selected term period. If the policyholder survives the term, the risk cover comes to an end

Accidental Death Policy: One needs to have the accidental Death Life Insurance Information because it does not provide compensation for any kind of death other than accidental deaths. This policy is only available for short term policy and there is no cash back opportunities.

Endowment PolicyAn endowment policy covers risk for a specified period, at the end of which the sum assured is paid back to the policyholder, along with the bonus accumulated during the term of the policy.

Money-back PolicyMoney back policy provides for periodic payments of partial survival benefits during the term of the policy, as long as the policyholder is alive.

Joint Life PolicyJoint life insurance policies are similar to endowment policies as they too offer maturity benefits to the policyholders, apart form covering risks like all life insurance policies.

Group Insurance PolicyGroup insurance offers life insurance protection under group policies to various groups such as employers-employees, professionals, co-operatives

Loan Cover Term Assurance PolicyLoan cover term assurance policy is an insurance policy, which covers a home loan. Such a policy covers the individual's home loan amount in case of an eventuality.

Pension Plan or AnnuitiesA pension plan or an annuity is an investment that is made either in a single lump sum payment or through instalments paid over a certain number of years

Unit Linked Insurance PlanUnit linked insurance plan (ULIP) is life insurance solution that provides for the benefits of risk protection and flexibility in investment.

Life Insurance Premium Another Life Insurance Information which is very important to know is the Premium that one pays to keep the life insurance policy in force. A premium is a certain amount of money dependent on the value of the policy, the type of policy and the facilities that are provided by the policy. The more valuable a policy would be the more would be the rate of premium. Premiums can be paid monthly, periodically and yearly depending on the contract on has signed.

There are many people associated with the life insurance business. Life Insurance Agents and Life Insurance brokers are some of them.

Life Insurance Agent: A life insurance agent works on behalf of the company. His duty is to meet with various potential life insurance policy holder and convince them about the policies of his companies, remind them when the premium is due and so on. He gets a commission per policy that he issues and a fixed payment per month from the company.

Life Insurance Broker: A life insurance broker is a person who helps the potential insurance holder to have a suitable life insurance policy. He is not officially recruited by any insurance company but he does this for the commission he gets from both the insured and the insurance company. A broker can deal with more than one company, not like an insurance agent.

Assumption that a certain portion of policy holders will seek to redeem the cash value of their insurance policies before death. They also expect that a certain portion will stop paying premiums and forfeit their policies. However, viatical settlements ensure that such policies will with absolute certainty be paid out. Some purchasers, in order to take advantage of the potentially large profits, have even actively sought to collude with uninsured elderly and terminally ill patients, and created policies that would have not otherwise been purchased. Likewise, these policies are guaranteed losses from the insurers' perspective.

1.9 Annuities An annuity is a contract with an insurance company whereby the insured pays an initial premium or premiums into a tax-deferred account, which pays out a sum at pre-determined intervals. There are two periods: the accumulation (when payments are paid into the account) and the annuitization (when the insurance company pays out). IRS rules restrict how you take money out of an annuity. Distributions may be taxable and/or penalized.

1.10 Tax and Life Insurance

As we all near the end of the financial year 2008-09, we start to worry about planning our investments to ensure maximum tax savings. The fear of finishing and furnishing our Income Tax details, and filing the IT returns on time engulfs us.

Various Sections relating to Income Tax

As per The Income Tax Act 1961, amended in 2008, there are 9 major sections

1. Section 80C: Deduction for Investments including Life Insurance and Provident Fund.

Minimum Period of Holding:

Unit-linked Insurance Plan -- 5 years, Life Insurance Premium -- 2 years Cost of construction or purchase of residential property -- 5 years Time deposit in Post Office Rules, 1981 -- 5 years Senior Citizen Saving Scheme Rules, 2004 -- 5 years.

2. Section 80CCC: Deduction for Contribution to Pension Funds

3. Section 80D:. Health Insurance premiums paid for insuring your own health, or that of your spouse, parents and children also allows you to avail of tax rebates. Section 80DD: Any expenses incurred on the treatment of a handicapped dependent fall under this section.

4. Section 80DDB: The deduction is allowed only for the diseases/ ailments prescribed in Rule 11DD.

5. Section 24 : The interest paid for a personal loan taken for acquisition, construction and renovation of the house can be claimed for tax deduction up to Rs. 1.5 lakh.

6. Section 80E: Deduction in respect of repayment of loan taken for higher education

7. Section 80G: Deduction in respect of donations to certain Funds, Charitable Institutions, etc.

Instruments that help you Save Tax:

Life Insurance: All investments made towards Life Insurance are eligible for a rebate u/s 80C of the Income Tax Act. Life Insurance products with a minimum lock in period of 3 yrs only are eligible for the rebate. Premiums paid under pension plans of various life insurers are also eligible for Tax rebate. The major advantage of a Life Insurance product is that they provide tax free interest income.

Equity Linked Saving Schemes: These are Mutual Fund products and carry market risk. These too, like life insurance products, are eligible for tax rebate u/s 80C, if they have a lock in period of 3 years. A major disadvantage of these instruments is that they do not provide life cover.

Public Provident Fund:  These are 15 yearlong investments and provide tax-free returns. The current rate of returns is 8%. Maximum investment allowed under this instrument is Rs. 70, 000, which is eligible for a rebate u/s 80C.

Bank Deposits: Tax rebate is available for 5 yrs deposits in any scheduled bank. The point to remember is that the entire interest income is taxable.

National Saving Certificates: Government sponsored securities certificates, which are available in denominations of Rs. 100, Rs.500, Rs. 1000, Rs.5000 & Rs. 10,000 may be purchased from any post office, either directly or through authorized agents. They currently provide a rate of interest @ 8.16% p.a. compounded half yearly and paid after the maturity period of six years along with principal. Interest accruing annually is automatically reinvested and such re invested interest also qualifies for rebate u/s 80C of Income Tax Act. The interest earned is completely taxable.

Home Loans: Section 24 of the Income Tax Act allows you to deduct the total interest paid on your home loan from your taxable income for the same financial year. You can also claim a rebate u/s 80C for the principal amount repaid on the home loan.

Tuition Fee: The entire tuition fee paid for up to two children is exempted from tax. Donations of any kind like development fee etc. are excluded from the same.

Loan on Higher Education: Those servicing a loan taken for higher education can claim a deduction on the interest paid for the loan u/s 80E of the Income Tax Act. Currently there is no ceiling on the interest amount that can be claimed under this section. The principle amount is however completely taxable.

Health Insurance Plans: Rebate is available u/s 80D of the Income Tax Act, for premiums paid for self, spouse, children and parents. A limit of Rs.15, 000 is fixed for premiums paid for self, spouse and children’s. There is an additional benefit of Rs. 15,000 on premiums paid for parent(s) and in case the parents are senior citizens, the upper limit increases to Rs. 20,000.

  Enjoy Dual Tax Benefits with Life Insurance:

Save tax on Regular Premium payments - All the premiums paid towards insuring your life are exempted from tax up to Rs. 1,00,000/- as specified in section 80C of the Income tax act.

Enjoy Tax free Maturity returns - One of the biggest advantages of investing in Life Insurance policies is that, the complete maturity amount is tax free.

Thus, you save tax not only at the time of investing in a life insurance plan, you also get completely tax free returns after maturity.

Tax Benefits on Insurance and Pension

Life insurance and retirement plans are effective ways to save taxes when doing your year end tax planning.  To assist in tax planning, the tax breaks that are available under our various insurance and pension policies are described below: 

1. Our life insurance plans are eligible for tax deduction under Sec. 80C.2. Our Pension plans are eligible for a tax deduction under Sec. 80CCC.3. Our health insurance plans/riders are eligible for tax deduction under Sec. 80D.4. The proceeds or withdrawals of our life insurance policies are exempt under Sec

10(10D), subject to norms prescribed in that section.

 Invest in ICICI Prudential Life insurance and retirement plans and avail of these tax planning services to save tax at your year end tax planning!

A life insurance tax shelter uses investments in life insurance to protect income or assets from tax liabilities. Life insurance proceeds are not taxable in many jurisdictions. Since most other forms of income are taxable (such as capital gains, dividends and interest income), consumers are often advised to purchase life insurance policies to either offset future tax liabilities, or to shelter the growth of their investments from taxation.

Life insurance to cover future taxes

In those jurisdictions where life insurance proceeds are only tax free at death, tax liabilities that come due at death are often offset by a policy of the same size. Since the mathematics required to compare different strategies is quite complex, most consumers defer to an accountant or life insurance agent for advice. However, there is often vast differences of opinion between these professionals, even given the same starting conditions. This should not be surprising, given the huge future differences that even small variances in starting conditions can make.

For example, assume that an individual is likely to owe $100,000.00 in taxes at death. If a permanent life insurance policy with a $100,000.00 death benefit costs $1,000 per year (remaining level for life), and the life expectancy of the person is 30 years, then the following events could occur.

The individual could die early. In this case, it is unlikely that any alternative investment of the $1000 per year would have yielded the required $100,000.00 at death.

The individual could live much longer than expected. The individual could have built up a significant cash value within the policy, depending on investment selection. As such, the individual would have access to these cash values tax-free regardless of growth, provided it is set up properly.

Since one normally does not know which of these will occur (see adverse selection) calculations must be based on expected life expectancies for people of similar gender, physical condition, and behaviour.

Life insurance to shelter investment growth and income

In an attempt to achieve the "best of both worlds" (protection in the case of early death, and additional tax-protected returns in the case of long life), life insurance policies were created containing investment accounts having preferential tax treatment. This is most often done with a Variable universal life policy. See that article for some discussion of the tax issues.

SOME IMPORTANT INCOME TAX BENEFITS AVAILABLE UNDER VARIOUS PLANS OF LIFE INSURANCE ARE HIGHLIGHTED BELOW:

1)   Deduction allowable from Income for payment of Life Insurance Premium (Sec. 80C).

a) Life Insurance premia paid in order to effect or to keep in force an insurance on the life of the assesses or on the life of the spouse or any child of assesses & in the case of HUF, premium paid on the life of any member thereof, Provided premium paid is not in excess of 20% of capital sum assured.

b) Contribution to deferred annuity Plans in order to effect or to keep in force a contract for deferred annuity, on his own life or the life of his spouse or any child of such individual, provided such contract does not contain a provision to exercise an option by the insured to receive a cash payment in lieu of the payment of annuity is eligible for deduction.

c) Contribution to Pension/Annuity Plans - New Jeevan Dhara-I.

2) Jeevan Nidhi Plan & New Jeevan Suraksha - I Plan (U/s. 80CCC )

A deduction to an individual for any amount paid or deposited by him from his taxable income in the above annuity plans for receiving pension (from the fund set up by the Corporation under the Pension Scheme) is allowed.        

3) Deduction under section 80D

1. Deduction allowable upto Rs.15,000/-  if an amount is paid to  keep in force an insurance on health of assessee or his family (i.e. Spouse & children)

2. Additional deduction upto Rs.15,000/- if an amount is paid to keep in force an insurance on health of parents

3. In case of HUF,  deduction allowable upto Rs.15,000/- if an amount is paid to  keep in force an insurance on health of any member of that HUF

4) Jeevan Aadhar Plan (Sec.80DD):

Deduction from total income upto Rs.50000/- allowable on amount deposited with LIC under Jeevan Aadhar Plan for maintenance of an handicapped dependent  (Rs.1,00,000/- where handicapped dependent is suffering from severe disability)

5) Exemption in respect of commutation of pension under Jeevan Suraksha &   Jeevan Nidhi Plans:

Under Section 10(10A) (iii) of the Income-tax Act, any payment received by way of commutations of pension out of the Jeevan Suraksha  & Jeevan Nidhi Annuity plans is exempt from tax under clause (23AAB).

6) Income tax exemption on Maturity/Death Claims proceeds under Section 10(10D)

Under the provisions of  section 10(10D) of the Income-tax Act, 1961, Maturity/Death claims proceeds of life insurance policy, including the sum allocated by way of bonus on such policy (other than amount to be refunded under Jeevan Aadhar Insurance Plan in case of handicapped dependent predeceases the individual or amount received under a Key man Insurance Plan) is exempted from income-tax.  However any sum (not including the premium paid by the assessee) received under an insurance policy issued on or after the 1st day of

April, 2003 in respect of which the premium payable for any of the years during the term of the policy exceeds 20% of the actual capital sum assured will no longer be exempted under.

1.11 Stranger Originated Life Insurance

Stranger Originated Life Insurance or STOLI is a life insurance policy that is held or financed by a person who has no relationship to the insured person. Generally, the purpose of life insurance is to provide peace of mind by assuring that financial loss or hardship will be lessened or eliminated in the event of the insured person's death. STOLI has often been used as an investment technique whereby investors will encourage someone (usually an elderly person) to purchase life insurance and name the investors as the beneficiary of the policy. This undermines the primary purpose of life insurance as the investors have no financial loss that would occur if the insured person were to die. In some jurisdictions, there are laws to discourage or prevent STOLI.

1.12 Criticism in Life Insurance

Although some aspects of the application process (such as underwriting and insurable interest provisions) make it difficult, life insurance policies have been used in cases of exploitation and fraud. In the case of life insurance, there is a motivation to purchase a life insurance policy, particularly if the face value is substantial, and then kill the insured. Usually, the larger the claim, and/or the more serious the incident, the larger and more intense will be the number of investigative lawyers, consisting in police and insurer investigation, eventually also loss adjusters hired by the insurers to work independently.

The television series Forensic Files has included episodes that feature this scenario. There was also a documented case in 2006, where two elderly women are accused of taking in homeless men and assisting them. As part of their assistance, they took out life insurance on the men. After the contestability period ended on the policies (most life contracts have a standard contestability period of two years), the women are alleged to have had the men killed via hit-and-run car crashes.

Recently, viatical settlements have created problems for life insurance carriers. A viatical settlement involves the purchase of a life insurance policy from an elderly or terminally ill policy holder. The policy holder sells the policy (including the right to name the beneficiary) to a purchaser for a price discounted from the policy value. The seller has cash in hand, and the purchaser will realize a profit when the seller dies and the proceeds are delivered to the purchaser. In the meantime, the purchaser continues to pay the premiums. Although both parties have reached an agreeable settlement, insurers are troubled by this trend.

1.13 Important Milestones in Life Insurance business in India

1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning.

1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business.

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies are taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.

.

1.14 Current Scenario

PRESENT SCENARIO OF INSURANCE INDUSTRY India with about 200 million middle class household shows a huge untapped potential for players in the insurance industry. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors. The insurance sector in India has come to a position of very high potential and competitiveness in the market. Indians, have always seen life insurance as a tax saving device, are now suddenly turning to the private sector that are providing them new products and variety for their choice. Consumers remain the most important centre of the insurance sector. After the entry of the foreign players the industry is seeing a lot of competition and thus improvement of the customer service in the industry. Computerisation of operations and updating of technology has become imperative in the current scenario. Foreign players are bringing in international best practices in service through use of latest technologies The insurance agents still remain the main source through which insurance products are sold. The concept is very well established in the country like India but still the increasing use of other sources is imperative.

Distribution channels that are available in the market are listed below.Direct selling•

Corporate agents•Group selling•Brokers and cooperative societies•Banc assurance• Customers have tremendous choice from a large variety of products from pure term (risk) insurance to unit-linked investment products. Customers are offered unbundled products with a variety of benefits as riders from which they can choose. More customers are buying products and services based on their true needs and not just traditional moneyback policies, which is not considered very appropriate for long-term protection and savings. There is lots of saving and investment plans in the market. However, there are still some key new products yet to be introduced - e.g. health products. The rural consumer is now exhibiting an increasing propensity for insurance products. A research conducted exhibited that the rural consumers are willing to dole out anything between Rs 3,500 and Rs 2,900 as premium each year. In the insurance the awareness level for life insurance is the highest in rural India, but the consumers are also aware about motor, accidents and cattle insurance. In a study conducted by MART the results showed that nearly one third said that they had purchased some kind of insurance with the maximum penetration skewed in favor of life insurance. The study also pointed out the private companies have huge task to play in creating awareness and credibility among the rural populace. The perceived benefits of buying a life policy range from security of income bulk

Introduction

Global integration of financial markets resulted from de-regulating measures, technological information explosion and financial innovations. Liberalisation and Globalisation have allowed the entry of foreign players in the Insurance sector. With the entry of private and foreign players in the Insurance business, people have got a lot of options to choose from. Radical changes are taking place in customer profile due to the changing life style and social perception, resulting in erosion of brand loyalty. To survive, the focus of the modern insurers shifted to a customer-centric relationship. The paper focuses the current position of insurance industry.

Liberalisation and Privatisation

India's economic development made it a most lucrative Insurance market in the world. Before the year 1999, there was monopoly state run LIC transacting life business and the General Insurance Corporation of India with its four Subsidiaries transacting the rest. In the wake of reform process and passing Insurance Regulatory and Development Authority (IRDA) Act through Indian parliament in 1999, Indian Insurance was opened for private companies.

Liberalisation on the Insurance sectors has allowed the foreign players to enter the market with their Indian partners. Most of the foreign Insurers have joined within the local market. India offers immense possibilities to foreign Insurers since it is the world's most populous country having over a billion people.

Insurance industry had ten and six entrants in life and non-life sector respectively in the year 2000-2001. The industry again saw two and three entrants in the life and non-life

business respectively in the year 2001-2002. One additional entrant was made both in the life and in non-life business in 2004 and 2005 respectively. At present there are fourteen companies each in Life and General Insurance. The Funds earlier generated by the state owned insurers have been diversified with other new insurers. We should wait and see how the new players are going to boost up our economy.

Competition

Private and Foreign entrants in the Insurance Industry made others difficult to retain their market. Higher customer aspirations lead to new expectations and compel him to move towards the insurer who provides him the best service in time. It becomes less viable for them even to maintain the functional networks or competitive standards and services. To survive in the Industry they analyse, the emerging requirements of the policyholders / insurers and they are in the forefront in providing essential services and introducing novel products. Thereby they become niche specialists, who provide the right service to the right person in right time.

The following table shows the market share of life and non-life insurers

 MARKET SHARE (%)   LIFE INSURERS  NON – LIFE INSURERS 1. LIC 76.07 1. New India 21.412.  ICICI Prudential  6.91 2. National 17.113.  Bajaj Allianz  4.75  3. United India  17.11 4.  HDFC Standard  2.98 4. Oriental 17.025.  Birla Sun life  1.72 5. ICICI-

Lombard8.04

 6. Tata AIG  1.66 6. Bajaj Allianz  6.15 7.  SBI Life 1.46 7. IFFCO-Tokyo 4.008. Max New York  1.28  8.  Tata-AIG  2.89 9. Aviva 1.08  9. ECGC 2.50 10. Kodak Mahindra Old Mutual 0.71  10. Royal

Sundaram2.17

11. ING Vysya 0.54 11. Cholamandala m

1.22

 12. AMP Sanmar 0.46 12. HDFC-Chubb 0.89 13. Met Life 0.37 13. Reliance

General0.75

14. Sahara Life 0.03 14. Agriculture Insurance Co.

--

 Private total  23.93 Private total  27.35 Public total 76.07 Public total 72.65 Grand total 100.00 Grand total   100.00 Source : www.irdaindia.org  

In the above table shows, the private players in the life insurance business have increased their market share to 23.93 per cent. Among them ICICI prudential is ranked first in capturing the market followed by Bajaj Allianz and HDFC Standard. In the General Insurance sector the

private players have captured 27.35 per cent. Among them ICICI-Lombard is ranked first, followed by Bajaj Allianz and IFFCO-Tokio.The healthy competition in the sector enabled the State owned insurers of our mother country to reduce its market share to 76.07 per cent and 72.65 percent in life and non-life business respectively. Moreover, private insurers have planned to increase their market share in the next five years. The public insurers have to enrich its approach to withhold its share.

Information Technology

Insurers are the earlier adopters of technology. Because of the Information revolution, customers are free to choose from a wide range of new and innovative products. The Insurance companies are utilizing the Information technology applications for better customer service, cost reduction, new product design and development and many more.

New technology gives the policyholders / insured better, wider and faster access to products and services. The impact of Information Technology in Insurance business is being felt at an accelerating pace. In the initial years IT was used more to execute back office functions like maintenance of accounts, reconciling broker accounts, client processing etc. With the advent of "database concepts", these functions are better integrated in an administrative efficiency.

The real evolution is however emerged out of Internet boom. The Internet has provided brand new distribution channels to the Insurers. The technology has enabled the Insurer to innovate new products, provide better customer service and deeper and wider insurance coverage to them. At present, Insurance companies are giving customers a distinct claim id to track claims on-line, entertaining on-line enrolment, eligibility review, financial reporting, and billing and electronic fund transfer to its benefit clan customers.

Product Innovations

Insurers are continuously innovating new products based on forward-looking models. They have developed new products addressing the new challenges in society and products to address the hazards from new environmental issues. Companies will need to constantly innovate in terms of product development to meet ever-changing consumer needs. Understanding the customer better will enable Insurance companies to design appropriate products, determine price correctly and to increase profitability. Since a single policy cannot meet all the Insurance objectives, one should have a portfolio of policies covering all the needs. Product development is made possible by integrating actuarial, rating, claims and illustration systems. At present, the Life Insurers are concentrating on the pension schemes and the Non-Life Insurers on many innovative schemes of various realms and thereby enriching their market share. Moreover, with increased commoditization of insurance products, brand building is going to play a vital role.

Distribution Network

While companies have been successful in product innovation, most of them are still grapping with right mix of Distribution Channels for capturing maximum market share to build

brand equity, building strong and effective customer relationships and cost effective customer service. While the traditional channel of tied up advisors or agents would be the chief distribution channel, insurer should innovate and find new methods of delivering the products to customers. Corporate agency, brokerage, Banc assurance, e-insurance, cooperative societies and panchayats are some of the channels, which can be tapped by the insurers to reach the appropriate market segments. Now days, the urban masses are tapped with the new techniques provided by Information Technology through Internet. Rural masses are attracted by the consultative approach adopted by the Insurers. Moreover, they attract the customers through telephone and mobile also.

Customer Education and Services Insurance is a unique service industry. The key industry drivers are related to life style issues in terms of perceiving insurance as a savings instrument rather than for risk cover, need based selling, quality of service and customers awareness.

In the present competitive scenario, a key differentiator is the professional customer service in terms of quality of advice on product choice along with policy servicing. Servicing focus is on enhancing the customer's experience and maximizing his convenience. This calls the effective CRM system, which eventually creates sustainable competitive advantage and enables to build long lasting relationship.

MODERN MARKETING APPROACH

Marketing strategies for insurance in the emerging scenario could be understood in terms of the following steps:

Having done market research and finalizing on segmentation, targeting and positioning the strategy would focus on the marketing mix namely, Product, Price, Place and Promotion. While determining the implementation methodology, the four characteristics viz. Intangibility, Inseparability, Perish ability and Variability gives rise to certain unique requirements that deserve careful attention while formulating the marketing strategy for insurance. After implementation, the insurers should concentrate on the effective control that would enhance their business.

In India Insurance is sold and not bought. The agents / Advisors by using various strategies sell the product by convincing the customers. Moreover, they push Policies with the highest premium to pocket a higher commission. The consultative approach to selling is the modern approach, which helps customers and prospects to buy. A consultant makes calls and sells just like any other sales person. The difference is in their attitude, their approach and their commitment. Here, the customer is seen as a person to be served and not a person to be sold. It helps the purchaser to make an intelligent decision. The four-step process includes:

* Need discovery* Selection of the product* Need satisfaction presentation, and* Serving the sale

This approach to selling their products requires understanding of concepts and principles borrowed from the fields of psychology, communications, and sociology and needs a lot of personal commitments and self – discipline from the seller.

The commitments referred are:

Finding and understanding the needs of the customers. Partnering with the customers. Helping the customers to achieve his business and other objectives by the purchase of

the product or service. Believing that your products / services are a great fit with your customer's needs, and Believing in yourself and your ability to help the customers in solving their problems.

The coming of private players, rules of the game have changed. Never were common men so rigorously targeted. It is today an industry which is growing at the rate more than 25%.“

The changes those have been bought in by privatization in the insurance sector can be

Categorized into followings;

1. New Market Development2. New Product Development

3. Customer Centric Approach

4. New Channel Development

New Market Development: It a logical step to look for new and newer markets when

Competition grows. Naturally, with as many as 16 players, latest being Bharti-AXA and six still in the offing, the competition has never been so intense. Advertising campaigns, awareness campaigns and other promotional tools players are ensuring that they make dent into right markets by educating prospects. The strategy to hunt for new markets has been aptly supplemented by new product offerings.

New Product Development: There has been a plethora of new and innovative products

offered by the new players, mainly from the stable of their international partners. The main concept underlying new product development has been of two kinds, Need-Based positioning development and Variety –Based development. Now, the customers have tremendous choice from a large variety of products from pure term (risk) insurance to unit-linked investment products. Customers are offered unbundled products with a variety of benefits as riders from which they can choose. More customers are buying products and services based on their true needs and not just traditional money-back policies, which is not considered very appropriate for long-term protection and savings.

Customer Centric Approach: CRM is a buzz word so is the customer satisfaction.

People are courteous, processes are being made simple. Customer is treated as king in true sense. Service, be it pre-selling or be it post-selling, is readily available at a click away!

International best practices in service and operational efficiency has started to make an inward way giving away the bureaucratic, cumbersome difficulties. Albeit, the use of latest technologies have complimented the process even further. Trained and technically qualified sales force and advisors are now concentrating on sound financial consultancy and need based selling. Prompt and accurate response and turnaround times in specific areas such as delivery of first policy receipt, policy document, premium notice, final maturity payment, settlement of claims etc. are some of the sea changes that this industry is experiencing.

New Channel Development: Sales and distributions channels also have gone a paradigm shift. Till recently, Agents were the only mode of distribution of life insurance products. But today a number of innovative alternative channels are being utilized by insurance marketers such as banc assurance, brokers, the internet and direct marketing. It is predicted that the wide spread of bank branch network in India could lead to banc assurance emerging as a significant distribution mechanism. However, as of today, agents still continue to be the main distribution channel. Some life insurance companies focusing on rural markets have gone one step further in adopting new innovative means of distributions. “Instead of appointing agents as is done typically, they have used

As the days pass off, we are likely to see many more actions in this arena. The government is also keen to continue with its financial sector reforms. The insurance industry is now hot and happening! The marketing wizards are breaking their heads to think for ideas to penetrate new markets, financial wiz-kids wracking their brains for new product categories and lot more actions are taking place even behind the scene. But whatever happens, one thing is for sure that the customers are going to be the greatest beneficiary of this revolution.

Conclusion

A consultant is willing to forego short-term gains to achieve greater long – term benefit to him and to the customers he serves. He builds relationships on a foundation of trust, respect and performance. Moreover, consultants don't sell – they're specialists who make recommendations to help the prospect to buy. They act as a professional and offer real–world solutions that make sense to the customer. Today, the insurers adopt this technique and thereby go on increasing their market share.

1.15 List of Life Insurance Companies

Public sector

Life Insurance Corporation of India

Private sector

1. Bajaj Allianz Life Insurance Company Limited 2. Birla Sun Life Insurance Company Ltd 3. HDFC Standard Life Insurance Company Ltd 4. ICICI Prudential Life Insurance Company Ltd. 5. ING Vysya Life Insurance Company Ltd. 6. Life Insurance Corporation of India 7. Max New York Life Insurance Company Ltd 8. Met Life India Insurance Company Ltd. 9. Kotak Mahindra Old Mutual Life Insurance Limited 10. SBI Life Insurance Company Ltd 11. Tata AIG Life Insurance Company Limited 12. Reliance Life Insurance Company Limited. 13. Aviva Life Insurance Company India Pvt. Ltd. 14. Sahara India Life Insurance Company Ltd. 15. Shriram Life Insurance Company Ltd. 16. Bharti AXA Life Insurance Company Ltd. 17. Future General Life Insurance Company Ltd. 18. IDBI Fortis Life Insurance Company Ltd. 19. Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd 20. AEGON Religare Life Insurance Company Limited. 21. DLF Pramerica Life Insurance Company Ltd. 22. Star Union Dai-ichi Life Insurance Company Ltd.

1.16 Market Share of Life Insurance Companies

Here is the market share of various Life Insurance Companies in India at the end of FY2008.

LIC 48.1%ICICI Prudential 13.7%Allianz Bajaj 10.3%SBI Life 6.2%HDFC Standard 4.1%Birla Sun life 3.4%Reliance Life 3.4%Max New York 2.4%OM Kotak 1.9%AVIVA 1.8%

Tata AIG 1.5%MetLife 1.4%ING Vysya 1.2%Shriram Life 0.3%Bharti Axa Life 0.2%

2009 Current Market Share of LIFE INSURANCE COMPANIES

LIC still remains the largest life insurance company accounting for 64% market share. Mainly owing to entry of private players with innovative products and better sales force.

Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52% and its market share went up to 6.98% in 2007-08. The company ranked second (after LIC) in number of policies sold in 2007-08, with total market share of 7.36%.

ICICI Prudential Life Insurance Co Ltd is the biggest private life insurance company in India. Accounting for increase in market share to 8.93% in 2007-08.

SBI Life Insurance Co Ltd in terms of new number of policies sold, the company ranked 6th in 2007-08. New premium collection for the company was Rs 4,792.66 crore in 2007-08, an increase of 87% over last year.

Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76 crore and its MARKET SHARE went up to 2.96% from 1.23% a year back.

HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680 crore in FY2007-08, registering a year-on-year growth of 64%. Its MARKET SHARE is 2.88% and it ranks 6th among the insurance companies and 5th amongst the private players.

Birla Sun Life Insurance Co Ltd market share of the company increased from 1.22% to 2.11% in 2007-08. The company moved to the 7th position in 2007-08 from 8the a year before.

Max New York Life Insurance Co Ltd has reported growth of 73% in 2007-08. Total new business generated was Rs 641.83 crore as against Rs 387.51 crore. The company was pushed down to the 8th position from 7th in 2007-08.

Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the company reported growth of 80%, moving from the 11th position to 9th. It captured a market share of 1.19% in 2007-08.

Aviva Life Insurance Company India Ltd ranking dropped to 10th in 2007-08 from 9th last year. It has presence in more than 3,000 locations across India via 221 branches and close to 40 banc assurance partnerships. Aviva Life Insurance plans to increase its capital base by Rs 344 crore. With the fresh investment, total paid-up capital of the insurer would go up to Rs 1,348.8 crore.

Life insurance industry’s new business volumes in the individual new business segment remained strong, growing 36% Y-o-Y and 23% M-o-M, in August 2010.

1.17 Government Policies for Life Insurance Industry

Govt. declares ULIPs life insurance product

Delivering a knock out punch to the Securities Exchange Board of India (SEBI), the government through a ordinance issued late Friday, has unequivocally declared that unit linked insurance policies (ULIPs) are part of the life insurance business. SEBI had April 9 banned 14 life insurers from selling unit-linked insurance products. Sensing that its turf was being encroached upon, the Insurance Regulatory and Development Authority (IRDA) asked the insurers to ignore SEBI's order. The finance ministry advised both regulators to get the issue resolved through a court. However, the government declared its intention to support the IRDA in the turf war with the presidential ordinance amending four laws - the Reserve Bank of India (RBI) Act 1934, the Insurance Act 1938, the SEBI Act 1992 and the Securities Contract

(Regulation)Act 1956 to clarify that life insurance business shall include ULIPs or scrip’s or any such instruments.

President Pratibha Patil, by the Securities and Insurance Laws (Amendment and Validation) Ordinance 2010, amended the four laws to clarify that life insurance business shall include ULIPs or scrip’s or any such instruments. In the SEBI Act, an explanation to section 12 has been inserted to the effect that collective investment scheme or mutual fund shall not include any ULIP or scrip’s or any such instrument or unit, by whatever name called, which provides a component of investment besides the component of insurance issued by an insurer.

Nullifying the SEBI's order of April 9, the ordinance categorically declared that the amendments made in the four acts "... shall have and shall be deemed to always have effect for all purposes as if the provisions of the said acts, as amended by this ordinance, had been in force at all material times.." The other members of the committee are the union finance secretary, secretary, the department of financial services and the chiefs of four financial regulators - RBI, IRDA, SEBI and the Pension Fund Regulatory Development Authority. Welcoming the ordinance, V. Srinivasan, chief financial officer of Bharti Axa Life Insurance Company, said in Chennai: "The ordinance unequivocally settles the jurisdiction over ULIP. We - the life insurers - along with the IRDA will attend to the products and its sale process." According to insurance industry officials, the IRDA had lobbied strongly with the government to win the first round.

"Now the government's intention is clear. The ordinance will be passed into a proper law in the course of time," another industry official said.

1.18 Impact of Budget on Life Insurance Industry

As per the new proposal, some of the investment avenues that would qualify for 80C exemptions are: (a) life insurance premium (b) deferred annuity plan (c) contribution to public provident fund (d) provident fund contributions(e) approved superannuation fund(f) subscription to securities approved by the central government(g) subscription to savings schemes notified by the central government(h) mutual fund units and,(i) contribution

The June 2010 Budget contains a small package of reforms to the tax regime for life

insurance companies.

Business transfers to non- EEA entities The taxation of transfers of long-term UK insurance business was the subject of a consultation exercise beginning in 2006, the results of which have now largely been implemented. However, the Government announced in the March 2010 Budget that HMRC are continuing to work closely with the life insurance industry to ensure additional changes are made where necessary to improve the tax regime for insurers. As a result, the Government announced in the June 2010 Budget that it will consult informally with the life insurance industry on a proposed change to the transfer of life insurance business rules which aims to prevent unintended corporation tax charges arising when a UK life insurance business transfers long-term insurance business to a non-EEA overseas company. Rules currently provide for a tax charge to arise on the fair value of any asset transferred from a long-term insurance fund where, instead of falling within the general rule that transfers between long-term insurance funds are tax-neutral, the assets of the transferor company do not become part of the long-term insurance fund of the transferee. While generally for UK-regulated and EEA insurers, this charge will be mitigated to the extent that the value of any assets transferred matches that of any liabilities transferred, because a non-EEA overseas insurance company does not fall within the definition of “insurance company” under the relevant rules, the current is that a tax charge will arise on the fair value of all assets transferred, regardless of whether they are transferred to match liabilities transferred. The Government intends to legislate for this measure in the next Finance Bill with effect for transfers of business is taking place after 22 June 2010.

Basis of taxation of UK branches where business transferred from UK insurance entity The Government has also announced the intention to make interim regulations to ensure a consistent basis of taxation when life insurance business ceases to be carried on in the UK through a UK company and starts to be carried on through a UK branch of a company resident elsewhere in the EEA. At present UK regulated life insurance entities are taxed on the basis of their regulatory return made to the Financial Services Authority (FSA), while non-UK regulated overseas entities are taxed on the basis of their financial statements. As these bases differ, there is a risk of either double allowance of expenses or not taxing or misapportioning income between different classes of business. To ensure a level of consistency in the meantime, HM Treasury will make regulations providing that where a UK business is transferred from a UK regulated entity to an EEA regulated entity, the UK branch will be taxed on the basis of its return to the overseas regulator..

Anti-avoidance on profit apportionments

Life insurance companies are able to defer recognition of profits in a non-profit fund on their regulatory return. Finance Act 2010 introduced legislation to modify the rules for

apportioning income and gains of non-profit funds between categories of insurance business to ensure that deferred profits, when recognised, are taxed on an appropriate basis and do not escape the tax net altogether.

The March 2010 Budget announced the intention to create a further anti-avoidance rule targeted at schemes to avoid the new rule for deferred profits by transferring business from one non-profit fund to another. The new anti-avoidance rule will impose a tax charge on the transferor company, where one of the purposes of the transfer was to avoid tax, in respect of the excess in the fair value of assets transferred over the amount brought into account for the period of account.

Increased rates of insurance premium tax (IPT)

One of the revenue-raising measures in the June 2010 Budget was an increase in the rate of IPT. The higher rate (for premiums under contracts relating to travel insurance, motor cars or motor cycles and some domestic appliances) remains in line with the VAT rate so will be increased to 20 per cent while the standard rate for most other forms of insurance will increase by 1 per cent to 6 per cent. The new rates will apply to premiums received or written by insurers from 4 January 2011. There are anti-avoidance measures which broadly prevent the manipulation of existing contracts or the advance payment of provisions in order to avoid the increased rate.

1.19 Forecasting

India's life insurance industry is expected to grow by around 10 per cent in 2010 over the previous year, mainly by improving efficiency but also by expanding in small towns and villages, industry experts say.

They also expect life insurers to rebalance their sales mix — unit linked insurance policies (ULIP) and non-ULIP.

The industry to grow at an average of around 10 per cent. A slight balancing of portfolios with a shift towards traditional policies with ULIP contribution coming down to 85 per cent from the high 90s.

After years of mis-selling ULIPs as a short-term investment instrument on the back of a stock market boom, risk-averse customers will make life insurers look at alternatives.

Much of the growth will happen by increasing agents' productivity and not by expanding the distribution network. If companies do expand their branches this will be in small towns and

villages.

"In the coming years, innovative low cost structures will be used for expansion especially in interior locations, a potentially lucrative market," said Ghosh.

"We can expect the branch expansion to continue at semi-urban and the larger of rural centres by private players," R Krishnamurthy, managing director of global consultancy firm Towers Watson's insurance and financial services division, told IANS.

Even new players like Future General India Life Insurance Company Ltd are cautious in opening new branches.

"We will not expand our branch network this year. I don't expect most other companies doing it as some had rationalised their branch network last year," G.N. Agarwal, appointed actuary, Future General, said.

A senior industry official said: "The focus will be on getting the fundamentals right - arresting expense overrun, reducing policy lapse rates and increasing productivity - though some players seem to be playing the top line game all over again."

"Reducing policy lapse rate or increasing the policy persistency ratio is the big challenge for the industry - and this is not an isolated experience of India. There are daunting experiences in other large emerging markets such as China," remarked Krishnamurthy.

Mis-selling of life insurance policies as short-term investment is cited as the major reason for the high surrender or lapse rate.

According to India First Life Insurance's Managing Director P Nandagopal, mis-selling of policies is resorted to by companies that use distribution channels like multi-level marketing companies.

"These companies operate pyramid schemes where many times there are no real customers and consequently there is no real persistence," Nandagopal told IANS.

According to Reliance Life's Ghosh, as the life insurance sector steps into a new decade, the regulator will lay emphasis on expense and persistency management as these are key drivers of profitability. Life Insurance Council today said the total premium collection during financial year FY) 2010 for the life insurance industry grew by 18% to Rs2,61,025 crore.

During fiscal 2008-09, the industry collected total Rs2,21 791 crore in premium, the council said in a statement here.

It said there was a 25% growth in new business premium at Rs1,09,213 crore in 2009-10 compared to Rs87,006 crore in the year-ago period, it said.

The renewal premium was at Rs1,51,812 crore, up by 13%. There has been a considerable reduction in management expenses and the total capital spending up to FY 10 stood at Rs28,929 crore, it said.

Commissions as percent of premiums have also declined to 6.71% during fiscal 2009-10.

"We believe that if India has to become an economic power, growth has to be inclusive Life companies have also sold more than 2.8 crore policies in rural areas in FY08 and FY09.

The Life Insurance industry employs 2.68 lakh people directly and has about 30 lakh agents. India also has the distinction of having largest number of in-force policies in the world," Life Insurance council secretary general S B Mathur said. Life insurance companies have set up more than 11,927 branches up to FY 09-10 as compared to 11,815 in the previous year.

2. Introduction to the MetLife Insurance Ltd.

MetLife Inc.

Type Public (NYSE: MET)

Industry Finance and Insurance

Founded 1868

Headquarters New York, NY

Key peopleC. Robert Henrikson, Chairman of the

Board, President, and CEO

Products Insurance, Banking

Revenue ▲$44.776 billion USD (2005)

Net income ▲$4.651 billion USD (2005)

Employees 52,900 (2010)

Website www.metlife.com

MetLife, Inc. is the holding corporation for the Metropolitan Life Insurance Company or MetLife for short. The firm was founded on March 24, 1868. For most of its life the company was a mutual organization, but it went public in 2000.

MetLife is the largest life insurer in the United States, with more than $3.3 trillion of life insurance in force. A leader in savings and retirement products and services for individuals, small business, and large institutions, MetLife serves 90 of the largest Fortune 100 companies.

The origins of Metropolitan Life Insurance Company (MetLife) go back to 1863, when a group of New York City businessmen raised $100,000 to found the National Union Life and Limb Insurance Company. The new company insured Civil War sailors and soldiers against disabilities due to wartime wounds, accidents, and sickness. In 1868, after several reorganizations and five difficult years, the company decided to focus on the life insurance business. A new company was chartered to sell "ordinary" insurance to the middle class.

1868 March 25, one day after the Company opened its books, the first policy carrying the name of the Metropolitan Life Insurance Company was issued. Dr. James R. Dow, a retired physician from Brooklyn, NY, was named Metropolitan Life’s first President. He held this position until 1871.

In 2000, Metropolitan Life Insurance Company (MetLife) launched the seventh largest IPO ever held in the United States.

In 2001, MetLife was the first insurance company to establish a financial holding company with a nationally chartered bank. Leveraging its unparalleled distribution channels, MetLife entered the retail-banking arena with the launch of MetLife Bank

MetLife India Insurance Co. Pvt. Ltd is a joint venture between MetLife Group and its Indian partners, including J&K Bank, Dhanalakshmi Bank, Karnataka Bank, Karvy Consultants, Geojit Securities, Way2Wealth, and Mini Muthoothu. MetLife is insuring the lives of the people for around 140 years. MetLife is 88 of the top one-hundred FORTUNE 500 companies. MetLife entered Indian insurance sector in 2001.

MetLife was the first insurance company which established a financial holding company with a nationally chartered bank. In 2005, Working Mother Magazine honored MetLife Insurance Co. as one of the "100 Best Companies for Working Mothers". In 2005, the company was listed among the Top 50 Companies for Diversity. In 2006, MetLife was named to the National Association for Female Executives' annual list of Top 30 Companies for Executive Women. Today, when people are feeling a greater financial burden than ever before, MetLife is helping millions of its customers in creating their own personal safety net by taking insurance plans. The plans provided by MetLife Insurance are listed below:

MetLife Building

General information

Location New York, New York USA

Status Complete

Constructed 1963

Use Office

Height

Roof 808 ft (246.6 m)

Technical details

Floor count 59

Floor area 3,140,000 sq ft (292,000 m2)

Elevators 23

Companies involved

Architect(s) Emery Roth & Sons

Structural engineer The Office of James Ruderman

2.1 Types of Plans

Protection Plans

Met Suraksha

Met Suraksha TROP

Met Mortgage Protector

Savings Plan

Met Sukh

Met Suvidha

Met Saral

Met 100

Investment Plans

Met Smart Premier - Regular

Met Easy Met Smart Plus - Regular Pay

Met Smart Premier - Single Pay

Met Smart Gold Met Smart plus - Single

Child Plans

Met Bhavishya

Met Junior Endowment

Met Little Star

Met Junior Money Back

Met Magic

Retirement Plans

Met Growth

Met Advantage Plus

Met Pension - Par

Group Plans

Met Loan Assure

Met Group Life

Met Group Life in lieu of EDLI

Met Group Gratuity

Rural Plans

Met Vishwas

Met Suvidha - Rural

3. Research Methodology

Research methodology is a systematically solve the research problem. It has many dimensions and research methods constitute a part of research methodology.

Thus when we talk about research methodology, we not only talk about the research methods but also consider the logic behind the methods. We use in context of our research study, so that research result are capable of being evaluated either by researcher himself or by others.

To efficiently carry out my research, I used following research process, which consists of series of actions or steps.

3.1 Title of the Study

Fundamental Analysis of Insurance Industry and Valuation of MetLife

3.2 Duration of study

45 days

3.3 Objective of Study

Primary objective

It is i mandatory to undergo summer training as a part of our M.B.A. program to get a practical review of the theoretical concepts studied during the year.

Secondary objective

To study the fundamental of Life Insurance Industry. To learn the valuation of company (MetLife lid.)

3.4 Type of Research

Analytical

3.5 Limitation of Study

Time constraint Projections regarding environmental and political basis can be change. The Life Insurance Industry covers very vast area so it may be possible that some of

that area might be not cover in this report.

4. Facts and Findings

Planning for Life

Each day we face difficulties in managing our finances. Inflation, taxes, debt, changing interest rates, and stock market swings - their effect can be unsettling. One thing we can be certain of is that the future will come, whether we are financially ready or not.

A MetLife Securities Financial Planner can help you achieve your goals and will give you the guidance to:

Help reduce taxes* Save for retirement Decide how to invest

Help you develop strategies to manage your debt Determine proper insurance coverage Offer custom-designed programs to try to achieve your special goals…buying a home or

condo, retiring early, financing your child’s education and more

As a client, you and your MetLife Securities Financial Planner will develop a confidential relationship and follow a 6 Step Plan to ensure that your objectives will be identified.

Planning Isn't Impossible

The beauty of your plan will be your ability to change it. This kind of flexibility is to your advantage because your goals will change as time goes by. There's no need to put off planning. The time is now. Creating a plan with a professional Financial Planner from MetLife Securities will help you to know where you want to be and how you're going to get there. Isn't now the right time to start planning for your life?

six step plan..

Planning for Life

MetLife's financial planning service has six steps:

Step 1: No Obligation Discovery Interview. At this meeting, a specially trained MetLife Securities Financial Planner will listen to your financial concerns and discuss what financial planning can do to help you achieve your financial objectives.

Step 2: Gather Information. If you decide to purchase financial planning services from MetLife, we move on to the next and most important step: data gathering. This is where we learn about all of your financial goals, objectives, assets, liabilities, income, expenses and other relevant information. The foundation of a sound financial plan is having a clear understanding of who and what you are. This information is kept strictly confidential.

Step 3: Analysis and Development. A preliminary analysis of the information about you is prepared. This includes reviewing all of your objectives and determining if they are feasible. Your planner may consult, with your permission, with your attorney, accountant, or other adviser to make sure the data is complete.

Step 4: Plan Presentation and Delivery. After all of the alternatives and information is analyzed, a final plan will be presented to you. The final plan is a written document prepared especially for you by your planner. It contains specific recommendations designed to help you meet your financial goals and objectives.

Step 5: Implementation. Your MetLife Securities Financial Planner, acting in a registered representative capacity, will explain how you can act on the specific recommendations in your financial plan by purchasing financial products. Financial products may be purchased at any institution you choose.

Step 6: Monitor and Update as Needed. In life, one thing is constant: change. Each year, and perhaps more frequently, your income, investments, assumptions, and objectives will change.

This is why your MetLife Securities Financial Planner stands ready to monitor and update your plan as needed.

Findings:It was very surprising for us to find that almost 58% of Insurance seekers were NOT sure of the specific end benefit that they wanted to derive from owning the insurance instrument.Amongst the ones who were specific in their requirement, Pension security emerged as the most sought after benefit, closely followed by economic security to Children and finally Tax-saving.

Now this might sound counter-intuitive, but here's some of our explanations:- A large chunk of Insurance seekers are specifically looking for ULIPs (see the graph below) and this segment is not very clear of the benefits apart from the investment opportunity.- Tax Saving is a low priority - given the months for which data is collected. Had the data pertained to the first quarter of a calendar year, this would have been a higher percentage.- Pension & Children plan are up there in the preference, partly due to the high decibel campaigns run by most insurers- specifically targeting these beneficial.

As expected most insurance seekers are looking for ULIPs and this is very much in line with the recent product distribution declarations by most insurers.Term plans form the next big chunk. A qualitative input, will spell out the opportunity here very clearly- most customers who wanted ULIPs were not sure of the product features and how to evaluate ULIPs.

5. Analysis and Interpretation

MetLife, Inc. (MetLife) through its subsidiaries provides individual insurance, employee benefits, and other financial services. These products and services of the company are offered to millions of individuals and institutional customers throughout the US. In addition to life, non-medical health and property and casualty insurance, MetLife is a leader in savings and retirement products and services for individuals, small businesses and large institutions. The company conducts its business operations through five segments namely, Institutional, Individual, International, Auto and Home, as well as the Corporate & Other. Global Markets Direct's MetLife, Inc - Financial and Strategic Analysis Review is an in-depth business, strategic and financial analysis of MetLife, Inc. The report provides a comprehensive insight into the company, including business structure and operations,

executive biographies and key competitors. The hallmark of the report is the detailed strategic analysis of the company. This highlights its strengths and weaknesses and the opportunities and threats it faces going forward.

MetLife, Inc. (MetLife) is a provider of insurance, employee benefits and financial services, with operations throughout the United States and the regions of Latin America, Asia Pacific and Europe, Middle East and India (EMEI). The Company provides a variety of insurance and financial services products, including life, dental, disability and long-term care insurance, various annuity products, and auto and home insurance. Within the United States, it also provides a range of savings and mortgage banking products. The Company’s segments include Insurance Products (group life, individual life and non-medical health insurance products), Retirement Products (individual and institutional annuity products), Corporate Benefit Funding (pension closeouts, structured settlements and other benefit funding solutions), Auto and Home segment, International, as well as Banking, Corporate and Other.

Stock Activity

fyi Last Price 39.72

52 Week High 47.75

52 Week Low 32.16

Volume 589,392

Average Daily Volume (13wk) 10.11 Mil

fyi 50 Day Moving Average 39.49

fyi 200 Day Moving Average 39.93

Volatility (beta) 1.80

Detailed quote

Financial data in U.S. dollars

Stock Price

History

Change Relative Strength

fyi Last 3 Months 1.4% 42

Last 6 Months -14.3% 35

fyi Last 12 Months 3.7% 51

Historical charts

Institutional Statistics

Analyst Consensus Moderate Buy

Institutional Ownership 61.90%

More Analyst Ratings

Want to learn how to evaluate a stock? Walk through the steps using the Research Wizard.

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Financials

Last 12 Months 5 Year Growth

Sales 50.0 Bil 1.2%

Income 2.0 Bil NA

Dividend Rate 0.74 9.98%

Dividend Yield 1.87% 1.40%

More financials

Fundamental Data

Debt/Equity Ratio 1.38

Gross Margin NA

Net Profit Margin 4.11%

Total Shares Outstanding 820.4 Mil

Market Capitalization 32.59 Bil

Earnings/Share 2.37

StockScouter Rating 5

More financial ratios

Earnings Estimates fyi

Qtr(9/10) EPS Estimate 1.04

FY(12/10) EPS Estimate 4.35

Current P/E 16.80

FY(12/11) EPS Estimate 5.24

Forward P/E 7.58

Next Earnings Release: N/A

More analyst estimates

3MetLife Inc: Highlights

Financial data in U.S. dollars

Financial Highlights

Sales 50.01 BilRevenue/Share 60.46

Income 1.96 BilEarnings/Share 2.37

Net Profit Margin 4.11%Book Value/Share 48.00

Return on Equity 5.88%Dividend Rate 0.74

Debt/Equity Ratio 1.38Payout Ratio 28.00%

Revenue - Quarterly

Results (in Millions)

FY (12/10) FY (12/09) FY (12/08)

1st Qtr 13,190.0 10,216.0 11,624.0

2nd Qtr 14,246.0 8,265.0 12,049.0

3rd Qtr NA 10,238.0 13,351.0

4th Qtr NA 12,341.0 13,962.0

Total 27,436.0 41,060.0 50,986.0

Earnings Per Share -

Quarterly Results

FY (12/10) FY (12/09) FY (12/08)

1st Qtr $0.98 -$0.71 $0.85

2nd Qtr $1.85 -$1.74 $1.28

3rd Qtr NA -$0.79 $0.84

4th Qtr NA $0.35 $1.21

Total $2.83 -$2.89 $4.18

Qtr. over Qtr. EPS Growth

Rate

FY (12/10) FY (12/09) FY (12/08)

1st Qtr 180% NA ---

2nd Qtr 89% -145% 51%

3rd Qtr NA 55% -34%

4th Qtr NA NA 44%

Yr. over Yr. EPS Growth

Rate

FY (12/10) FY (12/09)

1st Qtr NA NA

2nd Qtr

4Growth Rates % Company Industry S&P 500 Sales (Qtr vs. year ago qtr) 72.40 10.40 15.20 Net Income (YTD vs. YTD) NA 19.20 53.40 Net Income (Qtr vs. year ago qtr) 206.00 109.60 77.10 Sales (5-Year Annual Avg.) 1.19 11.87 8.88 Net Income (5-Year Annual Avg.) NA 10.17 8.66 Dividends (5-Year Annual Avg.)

Financial Condition Company Industry S&P 500

Debt/Equity Ratio 1.38 0.77 1.13

Current Ratio NA 0.0 1.4

Quick Ratio NA 0.0 1.1

Interest Coverage 2.6 51.5 35.0

Leverage Ratio 14.6 13.4 3.6

Book Value/Share 48.00 26.10 22.73

Financial data in U.S. dollars

Price Ratios Company Industry S&P 500 Current P/E Ratio 16.8 20.1 20.8 P/E Ratio 5-Year High 19.7 8.6 15.7 P/E Ratio 5-Year Low 2.8 1.4 2.7 Price/Sales Ratio 0.65 1.13 2.13 Price/Book Value 0.83 1.97 3.71 Price/Cash Flow Ratio NA 16.80 12.80

6. SWOT analysisMetLife (the company) is a leading insurance company in the US, primarily focused in life insurance operations. This profile offers a comprehensive review of the company's operations and performance.

Scope

*Contains corporate strategy, value chain presence and SWOT Analysis

*Provides detailed business description, segment analysis, 5-year financial trends, key products and key competitors

*Includes information on suppliers/ partners, shareholding structure and key employees with biographies

Porter's 5 Forces Analysis

1. Threat of New Entrants. The average entrepreneur can't come along and start a large insurance company. The threat of new entrants lies within the insurance industry itself. Some companies have carved out niche areas in which they underwrite insurance. These insurance companies are fearful of being squeezed out by the big players. Another threat for many insurance companies is other financial services companies entering the market. What would it take for a bank or investment bank to start offering insurance products? In some countries, only regulations that prevent banks and other financial firms from entering the industry. If those barriers were ever broken down, like they were in the U.S. with the Gramm-Leach-Bliley Act of 1999, you can be sure that the floodgates will open.

2. Power of Suppliers. The suppliers of capital might not pose a big threat, but the threat of suppliers luring away human capital does. If a talented insurance underwriter is working for a smaller insurance company (or one in a niche industry), there is the chance that person will be enticed away by larger companies looking to move into a particular market.

3. Power of Buyers. The individual doesn't pose much of a threat to the insurance industry. Large corporate clients have a lot more bargaining power with insurance companies. Large corporate clients like airlines and pharmaceutical companies pay millions of dollars a year in premiums. Insurance companies try extremely hard to get high-margin corporate clients.

4. Availability of Substitutes. This one is pretty straight forward, for there are plenty of substitutes in the insurance industry. Most large insurance companies offer similar suites of services. Whether it is auto, home, commercial, health or life insurance, chances are there are competitors that can offer similar services. In some areas of insurance, however, the availability of substitutes are few and far between. Companies focusing on niche areas usually have a competitive advantage, but this advantage depends entirely on the size of the niche and on whether there are any barriers preventing other firms from entering.

5. Competitive Rivalry. The insurance industry is becoming highly competitive. The difference between one insurance company and another is usually not that great. As a result, insurance has become more like a commodity - an area in which the insurance company with the low cost structure, greater efficiency and better customer service will beat out competitors. Insurance companies also use higher investment returns and a variety of insurance investment products to try to lure in customers. In the long run, we're likely to see more consolidation in the insurance industry. Larger companies prefer to take over or merge with other companies rather than spend the money to market and advertise to people

7. Conclusion

Provides key company information for business intelligence needs.

The company's strengths and weaknesses and areas of development or decline are analyzed. Financial, strategic and operational factors are considered.

The opportunities open to the company are considered and its growth potential assessed. Competitive or technological threats are highlighted.

The report contains critical company information - business structure and operations, the company history, major products and services, key competitors, key employees and executive biographies, different locations and important subsidiaries.

The report provides detailed financial ratios for the past five years as well as interim ratios for the last four quarters.

Financial ratios include profitability, margins and returns, liquidity and leverage, financial position and efficiency ratios.

COMPETITIVE RIVALRY

THREATS OF NEW

ENTRANTS

POWERS OF

SUPPLIERS

AVAILABILITY OF

SUBSITUTES

POWERS OF BUYERS

Performance on the basis of liquidity ratio is not in good position due to ratio below the standard.

In the view point of turnover ratios the performance of MetLife Insurance ltd. is in neutral condition that means not so much bad or not so much good.

8. Recommendation and Suggestions

MetLife is a leading provider of insurance and financial services with operations throughout the US and the Latin America, Europe and Asia Pacific and serves more than 70 million customers around the world. The MetLife companies are a leader in group benefits, and ranked no.1 in the US in most group product areas including life, auto and home.

As one of the largest insurance and financial services companies, MetLife has strong distribution power, strong client relationships, a wide range of products and a well-recognized brand. It has strong distribution network reaching wide range of customers through multiple channels including direct marketing, banc assurance, agents and internet.

MetLife is positive about the pension close out business. Pension closeouts enable plan sponsors to irrevocably transfer (closeout) pension plan liabilities using annuities as well as

other risk transfer solutions. The company anticipates large closeout business to come up in future which would increase the demand for the company's services.

Reasons to Purchase

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Identify prospective partners and suppliers - with key data on their businesses and locations.

Capitalize on competitor's weaknesses and target the market opportunities available to them.

Compare your company's financial trends with those of your peers / competitors.

Scout for potential acquisition targets, with detailed insight into the companies' strategic, financial and operational performance.

9. Forecasting

As supposedly solid financial institutions evaporate into thin air, the steady, changeless qualities of an insurance brand are doubtless reassuring. When it comes to service, however, meeting customers' expectations and sustaining a customer-friendly brand means trying to score as the goalposts constantly move. Bearing that challenge in mind, MetLife ($521.3 billion in total assets) has driven relentless improvements in its call center capabilities, aimed at continually improving service even as it seeks to reduce costs.

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The New York-based carrier recently relaunched its customer service representative (CSR) Knowledge Assistant application on a KANA (Menlo Park, Calif.) knowledge management

platform, reports Todd Fusco, VP of MetLife's business solutions planning unit. The revamped application puts more relevant information at CSRs' fingertips, reducing the time that they need to search for it and that customers have to wait, he says. MetLife also has deployed Nuance (Burlington, Mass.) interactive voice recognition (IVR) software to boost self-service capabilities, making it easier for customers to complete inquiries with fewer steps, Fusco adds.

Among the improvements in MetLife's customer service performance -- owing to a combination of the KANA and Nuance applications as well as existing routing and forecasting capabilities -- is a CSR availability rate increase from 67 percent to 85 percent, according to Fusco, who points out that Nuance IVR capabilities have contributed to an increase in self-service efficiency, freeing up CSRs for more-demanding inquiries. He notes that 74 percent of the carrier's customers report being "very satisfied," compared to an industry average of 53 percent.

Karen Hemingway, VP of MetLife's customer sales and service group, relates the latest call centre capability improvements to the carrier's quest for continuing recognition as a "Certified Centre of Excellence" by Purdue University's Centre for Customer Driven Quality. Call centres compete for the distinction on their ability to exceed their industry peers as measured by 28 performance categories. According to Hemingway, in October 2008 MetLife's call centre received the designation for the fourth year running, outperforming the industry in 18 categories and demonstrating improvement over its own 2007 performance in 12 categories.

"We have earned internal accolades for high quality and productivity, but we see value in seeking external validation," says Hemingway. "We have learned through the Centre of Excellence certifications that there are areas of opportunity for further improving our effectiveness and efficiency."

Optimization Phase

The addition of the KANA-based Knowledge Assistant represents the call centre’s transition from a building and consolidation phase to one of optimization, according to Fusco. "We're taking steps beyond the core capabilities that any call centre should have," he says. "We are focused on both implementing new capabilities and getting the most out of things we've invested in the past."

For example, KANA has boosted the capabilities of MetLife's MetCare unified service delivery desktop for CSRs, Fusco suggests. Built on Cordiant (Cupertino, Calif.) software implemented in 2000, MetCare connects to disparate systems to draw vital data needed by CSRs. Prior to the deployment of KANA, the Knowledge Assistant application transmitted unstructured data on MetCare through IBM's (Armonk, N.Y.) Lotus Notes.

"While we had the ability to do keyword searches and other queries, there was an onus on the CSRs to look for what they needed in the context of the call they were taking," Fusco recalls. "KANA offers you the ability to create unique knowledge bases and compartmentalize information to maximize and automate search capabilities -- it's the ability to deliver knowledge when and where you need it."

MetLife purchased the KANA software in early 2007 and began analysis and content redesign over the following four months. Building and testing followed through much of the year, and

group-by-group deployment began in the fourth quarter. "The larger part of the initiative was rethinking our store of knowledge -- how do we rewrite and rebuild it in context of a customer phone call?" says Fusco. "It was rationalized to the questions customers ask and need, as opposed to being broadly available in volumes of reference materials."

MetLife licensed the Nuance IVR software at about the same time it added KANA and spent most of 2007 analyzing processes and building menus designed to get answers to customers' questions with a minimum of steps, Fusco adds. "The build of development happened throughout 2008, with our first group going to pilot over the summer," he says. "The balance of groups will be rolled out over the next few months, with 100 percent deployment by the end of the third quarter

In response to the concerns related to low interest rates, MetLife Inc. (MET - Analyst Report) expects its profits to decline in 2011, though MetLife does not expect the impact to be adverse. According to MetLife’s estimates, if the interest rate on the 10-year Treasury Note remains 2.5% through 2011, MetLife’s earnings might reduce by about 20 cents per share in 2011. Though MetLife has not yet issued any guidance for its full year 2010 or 2011, these estimates are considered as preliminary. MetLife is expected to provide its guidance at the annual investor meet to be held on December 6. During the second quarter, MetLife reported earnings (excluding after-tax net investment gains and losses and discontinued operations) of $1.02 billion or $1.23 per share, which was significantly ahead of $723 million or $0.88 per share in the year-ago quarter. In addition, management of MetLife expects operating earnings to grow by about 50% in 2010 and fall in the range of $3.3 billion to $3.6 billion or $4.00 to $4.40 per share. Though MetLife foresees that the current interest rate environment will impact its profitability going ahead, it still believes that following the acquisition of American Life Insurance Co. (Alico), a unit of American International Group Inc. (AIG - Analyst Report), MetLife’s bottom line will be significantly less sensitive to equity market movements and interest rates. MetLife is expected to close the deal to acquire Alico for $15.5 billion in 4Q10, which was signed in March. Further, the addition of Alico is expected to add an estimated $1.5 billion to operating earnings in 2011 and $112 billion of assets, net of financing costs.  Moreover, the deal will more than triple the size of MetLife’s international businesses to over 40%. We believe that MetLife remains concerned by the low interest rate environment, which is consistently stretching its spreads (interest earned less interest credited to policyholders), besides impacting earnings. As a result, the annuity operations, which had been experiencing spread improvement, have moderated in the last few quarters. We believe that the Alico acquisition is expected to boost MetLife’s results, providing statutory capital and a modest upside in the operating earnings’ projection. In addition, we believe that MetLife is poised to propel its growth as the economy rebounds in the near to medium term.

10. Bibliography

www.metlife.com www.lifeinsurance.com Management Accounting

( M.R. AGARWAL) Management Accounting

( S.N. MAHESHWARI) Research Methodology

( C.R.KOTHARI)