PROJECT REPORT ON

THE ANALYSIS OF RISK INVOLVED IN PORTFOLIO MANAGEMENT

OF ICICI PRUDENTIAL LIFE INSURANCE COMPANY LTD

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF

DEGREE OF MASTERS IN FINANCE MANAGEMENT [MFM] FROM
THE UNIVERSITY OF MUMBAI

SUBMITTED BY
BHAVIT KIRIT VISARIA

MFM 2014-17

UNDER THE GUIDANCE OF PROF. RAVINDRA KAMATH

1
 CERTIFICATE

This is to certify that I Mr. BHAVIT KIRIT VISARIA student of N.L Dalmia

Institute of Management Studies and Research has successfully completed

the project work titled The Analysis Of Risk Involved In Portfolio

Management Of ICICI Prudential Life Insurance Company Ltd in partial

fulfilment of the requirement of degree of Masters in Finance Management

[MFM] from the University of Mumbai

This project is the record of authentic work carried out during the

academic year 2014-2017.

Date: _________________

Prof. Ravindra Kamath Dr. Gulab Mohite

(Project Guide) (Director)

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 CONTENTS

CHAPTER 1: INTRODUCTION Page No.

1.1 Preface..............................05

1.2 What is Portfolio Management.....07

1.3 Life Insurance Industry......11

CHAPTER 2: ICICI PRUDENTIAL LIFE INSURANCE COMPANY LTD

2.1 About Company...18

2.2 SWOT Analysis of the organization.............36

2.3 Product Overview....37

2.4 Study of Financial Products ..40

2.5 Personal Factors of Investors....45

2.6 Concerned Products of ICICI.........48

CHAPTER 3: RISK INVOLVED IN ICICI PRUDENTIAL LIFE INSURANCE PORTFOLIO

3.1 Investment Bifurcation................. 51

3.2 Key Risks........51

3.3 Valuation of ICICI IPO..............59

3.4 Data Analysis and Questionnaire...............60

3.5 Major Findings...............68

3.6 Sample Questionnaire .............69

METHODOLOGY.............................................................................................................71

BIBLIOGRAPHY..............................................................................................................72

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 DECLARATION

I hereby declare that the project entitle The Analysis Of Risk Involved In

Portfolio Management Of ICICI Prudential Life Insurance Company Ltdis

submitted in partial fulfillment of the requirement of degree of Masters in Finance

Management [MFM] from the University of Mumbai in the academic year 2014-17

was carried with sincere intension.

To the best of my knowledge it is an original work done by me, under the guidance

of Prof. C.A. Pradeep N. Hathi. The report submitted is a bona-fide work of my own

efforts and has not been submitted to any institute/university/conference or

published at anywhere before.

_____________________
(BHAVIT KIRIT VISARIA)
MFM 2014-17
Roll no: 287

Date:
Place:

4
 PREFACE

Incredible India is the buzzword these days, not only because India is one of the
most attractive tourist destination but also due to fact that it is coming out as an
economic power in the world arena. This has been reflected in the surge of Sensex,
which acts as a barometer of the Indian economy. This has also manifested the
importance of not only the Financial Service Industry but also Life Insurance sector,
which has grown leaps and bounce after its liberalization.

India presents good opportunity for foreign companies to set up their bases here
with some companies which have already made so. Achieving a growth of more
than 8% back to back speaks volume for the development that India is going
through. With lack of knowledge about the financial industry and more than 30
million prospects, financial sector in India is colossal. Now this is where the
importance of wealth and portfolio management comes into picture.

This project report brings to light the Importance of Portfolio management, its
impact on returns and benefits attached. It aims at understanding investors needs
and designing a good customized portfolio. This report also enlightens on the types
of investment option available to the investor and focuses mainly on Life insurance
and Mutual funds.

During this project a study was conducted to understand consumer behaviour for
gauging the impetus before an individual makes an investment. Various personal
factors such as objective, age, and time horizon and risk appetite were analyzed.
Funds selection parameters like risk associated, expenses involved, past
performances etc, were also taken into account before designing the portfolios.
Different portfolios were made according to the different requirements of the clients.

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 ACKNOWLEDGEMENT

I extent my sincere gratitude to Director Dr.Gulab Mohite and my Faculty Guide

Prof. Ravindra Kamath for continuous support for pursuing my project.

I render my whole hearted thanks to all the other respected faculties, library

staff and office staff of the management department, for their assistance and co-

operation given to me in regard to this work.

Finally, yet importantly, I would like to express my heart full thanks to my beloved pa

rents for their blessings, my friends and classmates for their help and cooperation

extended in this endeavor of mine and wish me for the successful completion of this

project.

_____________________
(BHAVIT KIRIT VISARIA)
MFM 2014-17
Roll no: 214

Date:
Place:

6
 INTRODUCTION

What is Portfolio management?

It is the art and science of making decisions about investment mix and policy,
matching investments to objectives, asset allocation for individuals and institutions,
and balancing risk against performance.

A portfolio is a collection of investments held by an institution or a private individual.

Holding a portfolio is part of an investment and risk-limiting strategy called
diversification. By owning several assets, certain types of risk (in particular specific
risk) can be reduced.

The aim of Portfolio Management is to achieve the maximum return from a portfolio
which has been delegated to be managed by an individual manager or financial
institution. The manager has to balance the parameters which define a good
investment i.e. security, liquidity and return. The goal is to obtain the highest return
for the client of the managed portfolio.

While doing the portfolio management of customers it is ensured that the portfolio
has multiple objectives and achieves a sound balance between the competing
objectives, which are: -

Safety of investment
Stable current returns
Appreciation in capital value
Liquidity
Tax planning
Minimizing Risk
Diversification

What is Risk?

(In business), the forecasting and evaluation of financial risks together with the
identification of procedures to avoid or minimize their impact.

"If you dont succeed with risk management, you wont succeed with project
portfolio management,"

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Even a simple task like choosing to drive to work requires a risk assessment,
although not a computational one; you can do shorthand probability in your head.
Though the cost of being wrong is high, the risk is relatively low (a 5 percent
probability of being seriously hurt in a car accident) and easily mitigated by wearing
a seat belt.

Risk Return Ratio

The discussion on investment objectives would not be complete without a

discussion on the risks that investing in a mutual fund entails. At the cornerstone of
investing is the basic principle that the greater the risk you take, the greater the
potential reward. Remember that the value of all financial investments will fluctuate.

Typically, risk is defined as short-term price variability. But on a long-term basis, risk
is the possibility that your accumulated real capital will be insufficient to meet your
financial goals. And if you want to reach your financial goals, you must start with an
honest appraisal of your own personal comfort zone with regard to risk. Individual
tolerance for risk varies, creating a distinct "investment personality" for each
investor. Some investors can accept short-term volatility with ease, others with near
panic. So whether you consider your investment temperament to be conservative,
moderate or aggressive, you need to focus on how comfortable or uncomfortable
you will be as the value of your investment moves up or down.

Investment Options Available in India

Before liberalization Indian people were investing their money mainly in government
backed instruments and traditional instruments. With the development of Indian
economy the investors are now having various financial instruments to add in their
portfolio. Some of the available investment options are as follows:

Bank fixed deposit

Bank recurring deposit
Shares
Company fixed deposit
Bonds / Debentures
Tax saving bonds
Life Insurance
Public Provident Fund
Mutual Funds
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 Gold / Real estate
Post Office Schemes

The focus of this project is on Life Insurance. Hence, it is explained in detail:

Life Insurance

Life Insurance is one of the most popular savings/ investment vehicles in India.

Ironically, its probably the least understood too. An insurance policy offers much
more than just tax planning and investment returns. It offers you the ability to plan
for unforeseen events that could affect your family's financial profile adversely.

What Is Life Insurance?

Life insurance is a financial resource for ones family and loved ones in case of his
death. It is a contract between insurer and an insurance company in which the
company provides the beneficiaries with a certain amount of money upon insurer
death. In return, you insurer periodic payments (premiums) in an amount that
depends on medical history, age, gender, and occupation

Insurance is a colossal sector in India that is growing at a speedy rate of 15-20%.

The insurance sector is approximately 450 billion yet 95 percent of the population in
India is not insured. This gives you a peek into the huge growth opportunity that
exists for this segment.

The insurance business is based on customers trust & confidence as it deals with
the finances of the customer. The basis for a well-planned and well-executed
marketing strategy is effective market segmentation. Insurance is broadly
segmented into individuals, institutions, industry, and trade customers. Most
industry players offer specialized services to cater to the needs of these segments.
Some marketers target niche markets and offer customized services.

Risks and uncertainties are part of life's great adventure -- accident, illness, theft,
natural disaster - they're all built into the working of the Universe, waiting to happen.
Insurance then is man's answer to the vagaries of life. If you cannot beat man-
made and natural calamities, well, at least be prepared for them and their
aftermath.

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Hence, insurance is essentially the means to financially compensate for losses
that life throws at people.

Thus, the need can be classified as:

Provision for the education & marriage of children.

Post retirement income for self & dependents.
Special needs like loss of income due to disabilities, accidents, treatment of
diseases, sickness etc.
To protect against inflation

The insurance markets have witnessed dynamic changes that include presence of a
fair number of insurers both life and non-life segment. Most of the private insurance
companies have formed joint venture partnering well with recognized foreign
players across the globe. The Indian Insurance market accounts only for 0.60% of
global Insurance market. Consumer awareness has improved. Competition has
brought more products and better customer servicing. It has had a positive impact
on the economy in terms of income generation and employment growth.

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 LIFE INSURANCE INDUSTRY

Industry Outlook
A Chinese proverb says, Wealth never survives three generations. With the
accumulation of wealth, need for its management arises. This should not lead to the
conclusion that only wealthy people invest their money. Need for investment arises
out of several reasons. Uncertainty of future is one of the primary causes that
trigger investment. Investment alone will not solve the problem of uncertainty. A
prudent approach in managing ones investment is equally important. The task of
managing investment is indeed a complex one for many individual investors. These
individuals seek the help of an investment manager for better management of their
wealth.

In the past, there was a great deal of investment in banks, which was considered to
be safe and risk-free. Investors were content with returns on their investment in
bank deposits, were very conservative and had only a few options at that point of
time.

But the situation has changed drastically now. There are many investment avenues
and a wide variety of choices are open to the investors these days. Investors can
choose a particular investment on the basis of their risk and return objectives. There
are number of financial products in the market like fixed deposits, shares, bonds,
mutual funds, post office schemes and life insurance.

Life insurance and mutual funds are popular investment vehicles in India. There are
wide varieties of schemes for investment under these products. After ULIP came in
insurance offering new products and variety in choices, life insurance has become a
major investment tool.

But after being used to decades of passbook savings, people are facing severe
difficulties understanding the concept of asset allocation and investment
performance analysis. Therefore, investors rely on guidance from advisors and
need a financial advisor to manage their portfolios.

A portfolio is a collection or diversification of investments held by an institution or a

private individual. And as per the well known adage Do not put all the eggs in one
basket, there is a need for diversification in investment in different products and
schemes to gain the maximum benefit. But managing a portfolio is not everybodys

11
cup of tea. One should have a clear knowledge about the markets and products,
with the analytical ability.

With the change in the market scenario of investment, need for managing the
portfolios has increased significantly. It is booming field and in order to get greater
understanding this project was undertaken.

In FY16, the Indian life insurance sector was the 10th largest life insurance market
in the world and the 5th largest in Asia in terms of total premiums, according to
Swiss Re, sigma No 3/2016. According to CRISIL Research, Life insurance industry
report, July 2016, the Indian economy is one of the fastest growing large economies
in the world, with a GDP growth rate of 7.3% (in real terms) in FY16 and a
household savings rate of 19.1% of GDP in FY15. In addition, the penetration (total
sum assured as a percentage of GDP) and density (total premium per capita) of the
Indian insurance market are significantly lower than those of most developed
countries, representing underinsurance and a significant growth potential. These
macroeconomic factors coupled with Indias large and young population, rapid
urbanisation and rising affluence are expected to propel the growth of the Indian life
insurance sector. According to CRISIL Research, Life insurance industry report, July
2016, total premiums in the Indian life insurance market are expected to increase
from 3,667 billion in FY16 to 6,600-7,000 billion in FY21.

Sources: Centrum Wealth Research

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Sources: Centrum Wealth Research

Sources: Centrum Wealth Research

Indian life insurance is a highly underpenetrated market

The size of the Indian life insurance sector (excluding Sahara Life Insurance
Company Limited) was Rs 3.7tn on a total premium basis in FY16, making it
the tenth largest life insurance market in the world and the fifth largest in
Asia, according to Swiss Re, sigma No 3/2016. The total premium in the
sector grew by ~17% pa during FY01-16 and despite this, India continues to
be an underpenetrated insurance market with a life insurance penetration
of 2.7% in FY15, as compared to 3.7% in Thailand, 7.3% in South Korea and
a global average of 3.5% in 2015. At US$43 in 2015, the life insurance
density in India also remains very low as compared to other developed and
emerging market economies. According to Swiss Re, Economic Research &
Consulting Mortality Protection Gap Asia-Pacific 2015, the Protection Gap
for India was ~US$8.5 trillion as of December 31, 2014, which was much
higher compared to its Asian counterparts.

13
The total premium of the Indian life insurance sector grew at a CAGR of
approximately 17 per cent between FY01 and FY16. India remains an
underpenetrated insurance market with a life insurance penetration of 2.7 per cent

Structural drivers of the life insurance industry growth in India

A) High GDP growth

According to Economist Intelligence Unit (EIU) forecasts in June 2016, the Indian
GDP was expected to grow at an average of ~7.3% pa (in real terms) for the
next three years, which was higher than the GDP growth rates for China and the
world as a whole.

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 B) Favourable demographics

India currently has one of the youngest populations in the world, with a median
age of 28 years and an estimated 90% of the Indias population will still be below
the age of 60 by 2020. A high share of working population, coupled with rapid
urbanization and rising affluence, is expected to propel the growth of the Indian life
insurance sector.

C) Rising share of financial savings and life insurance within it

The share of financial savings as a proportion of household savings declined from

52% in FY08 to 32% in FY12, due to higher risk aversion after the financial crisis in
2008, market volatility and high inflation. This share has since increased to 40% in
FY15. It is likely to rise further as stable inflationary trends and positive real interest
rates generally diminish the attractiveness of physical savings such as investments
in gold and real estate.

The share of life insurance as a proportion of financial savings in India reached its
highest level at 26.2% in FY10. However, with regulatory changes in the
sector and a downturn in capital markets, the share of life insurance declined
sharply to 16% of financial savings in FY14. In FY15, the share of life
insurance increased to 19.0%, partly due to increase in the sale of linked
products.

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Private players gaining market share at swift pace in recent years

Since the opening up of the sector, private sector companies have gained significant
market share. Their share peaked at 57% in FY09, on an RWRP basis. The
financial crisis in 2008 and regulatory changes in fiscal 2010 resulted in loss
of market share for private sector companies, which declined to 37% in FY12.
Private sector companies have regained significant market share in the last
two years; increasing their share from 38% of the overall Indian life insurance
sector in FY14 to 52% in FY16. This growth in market share has been driven
by improved product design, primarily for linked products that offer a superior
customer value propositions. Private sector companies have also increased
their focus on bancassurance for marketing their products.

Industry product mix is moving towards ULIPs again

ULIPs accounted for 92% and 75% of the new business premiums for private sector
companies and the overall industry, respectively in FY08. The unit-linked product
regulations introduced in September 2010, financial crisis, slow down in economic
growth and financial savings, volatility in the equity markets, rising interest rates and
high inflation led to changes in the product mix. During this period, the commission in
ULIPs reduced, which was a challenge to distributors (especially agents). This
resulted in a decline of the share of linked products in the life insurance sector from
55% to 7% and from 83% to 29% for private sector companies in FY14. The demand
for linked products revived in FY15 and the new business premium for linked
products increased by 54.9% for private sector companies, due to the enhanced
value proposition of ULIP products and a robust market outlook.

16
Focus of private players on bancassurance and direct sale

There has been a significant shift in the channel mix of the Indian life insurance
sector from the earlier agency-only model to a diversified distribution mix. The
cap on ULIP charges, introduced in 2010, has led to a rationalization of
owned agency network and introduced a shift towards third-party channels.
This resulted in the increase of bancassurance share from 5.6% of the retail
business, on a new business premium basis, in FY07 to 24.0% in FY16, while
the share of new business premiums from individual agents decreased from
90.5% in FY07 to 68.5% in FY16. The high share of the agency channel in
the retail new business premium is largely attributable to LIC. The well-
developed banking sector in India and the nationwide presence of banks
resulted in the increase of bancassurances contribution to total insurance
business. In FY16, bancassurance contributed to 52.6% of the new business
premiums for private sector companies. The direct distribution channel has
also increased in importance over the years for private sector companies. In
FY16, direct sales contributed 9.6% of the new business premiums for private
sector companies.

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 ABOUT COMPANY

Company Overview

ICICI Prudential Life Insurance Co. Ltd. (IPru) is a JV between ICICI Bank Ltd and
Prudential Corporation Holdings Ltd, a part of Prudential Group. The
company is the largest private sector life insurer in India by total premium
and assets under management (AUM) at the end of FY16. For Q1FY17,
IPrus market share, on a retail weighted received premium (RWRP) basis,
among all insurance companies in India and among private sector life
insurance companies in India was 11.2% and 23.3%, respectively.

ICICI Prudential Life Insurance Co. Ltd. (I-Pru Life) was the largest private sector
life insurer in India by total premium in FY16 and AUM as of end of year
March 31, 2016. During FY12-16, companys retail weighted received
premium (RWRP) witnessed a CAGR of 15.2% compared to a CAGR of
6.7% in the private sector and a decline of 2.1% pa in the overall Indian life
insurance sector.

The company operates through an extensive multi-channel sales network across

India including through the branches of bank partners, individual agents,
corporate agents, employees, offices and website. As at June 30, 2016, IPru
had 124,155 individual agents and as of July 12, 2016, the bank partners had
over 4,500 branches. According to CRISIL Research, Life insurance industry
report, July 2016, IPru has one of the largest agency channels among private
sector life insurance companies in India in terms of premium, with 121,016
individual agents at March 31, 2016. The companys agency channel
accounted for 24.3% and 23.9% of retail APE in FY16 and for the three
months ended June 30, 2016, respectively

ICICI Prudential Life began its operations in fiscal year 2001 and has been one of
the leading players in the Indian life insurance sector since the entry of private
players. Our Assets Under Management* (AUM) as on 31 st March 2016 were
1039.39 billion. We have maintained a dominant^ position amongst private life
insurers in the country.

We offer an array of products that match the different life stage requirements of our
customers and enable them to achieve their long term financial goals. Customer

18
centricity is the core philosophy we operate on. To further this we have developed
and implemented various initiatives to provide cost-effective products, superior
quality services, consistent fund performance and a hassle-free claim settlement
experience to you.

History

ICICI Prudential Life was one of the first private sector life insurance companies to
begin operations in fiscal 2001, after receiving approval from the Insurance
Regulatory Development Authority of India (IRDAI). For financial year 2016, the
company garnered a total premium of 191.64 billion.

As a result of your continued support over the years, ICICI Prudential Life has
emerged as one of the leading* names in the life insurance industry. From plans
designed for newly employed individuals, just-married couples, new parents, and
parents with teenage children and those in their golden years, we offer products that
cater to every life stage.

Vision and Values

Vision

To be the dominant Life, Health and Pensions player, built on trust, by world-class
people and service.
This we hope to achieve by:

Understanding the needs of customers and offering them superior products

and service
Leveraging technology to service customers quickly, efficiently and
conveniently

Developing and implementing superior risk management and investment

strategies, to offer sustainable and stable returns to our policyholders

Providing an enabling environment to foster growth and learning for our

employees

And above all, building transparency in all our dealings

Values

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The success of the company will be founded in its unflinching commitment to 5 core
values - Integrity, Customer First, Boundary less, Humility and Passion. Each of the
values describes what the company stands for, the qualities of our people and the
way we work. Every member of the ICICI Prudential team is committed to the 5 core
values and these values shine forth in all that we do.

Boundary less: I will treat organisation agenda as paramount

Integrity: What I do when nobody is watching me

Humility: Openness to learn a change

Customer First: Service excellence towards Internal and External

Customers

Passion: Demonstrates infectious energy and enthusiasm

Board of Directors
Leaders par Excellence: - Our journey at ICICI Prudential Life Insurance is guided
by Board members, who with their foresight and commitment are dedicated to drive
our journey towards our vision.

Chairperson Ms. Chanda D. Kochhar

Director
Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Managing Director and
CEO
Executive Director
Executive Director
Mr. N. S. Kannan
Mr. Adrian O'Connor
Prof. Marti G. Subrahmanyam
Ms. Rama Bijapurkar
Mr. Vinod Kumar Dhall
Mr. V. Sridar
Mr. M. S. Ramachandran
Mr. Dilip Karnik
Mr. Sandeep Bakhshi
Mr. Puneet Nanda
Mr. Sandeep Batra

Key Persons

Managing Director & Chief Mr. Sandeep

Executive Officer Bakhshi
Executive Director & Chief
Mr. Puneet Nanda
Marketing Officer
Executive Director- Corporate
Mr. Sandeep Batra
Center
Chief - Human Resources Mr. Judhajit Das
Chief Investment Officer Mr. Manish Kumar
Chief Financial Officer Mr. Satyan
Jambunatha
20
 n
Chief Risk & Compliance Officer Mr. Deepak Kinger
Company Secretary Ms. Vyoma Manek
Appointed Actuary Ms. Asha Murali

Sandeep Bakhshi (MD & CEO) - Mr. Bakshi holds a bachelors degree in
mechanical engineering from Punjab Engineering College, Chandigarh and has
done PGDBM from XLRI, Jamshedpur. His responsibilities include business
development, project appraisals, project monitoring and business re-structuring. He
joined ICICI Group in 1986 in the project financing group of erstwhile ICICI
Limited. He has served at ICICI Lombard General Insurance Company Limited from
April 1, 2002 to April 30, 2009. Previously, he has served as a deputy managing
director and head of retail at ICICI Bank. He has also served as a chairman of
ICICI Home Finance Company Limited.

Puneet Nanda (Executive Director - Business) - Mr. Nanda has obtained his
bachelors degree in engineering from Malaviya Regional Engineering College,
University of Rajasthan, Jaipur and a PGDBM from IIM, Lucknow. His current
responsibilities include sales and distribution, product design and management,
brand and marketing, customer service and operations, underwriting and claims,
digitalisation, technology and information systems. Prior to this, he was an
Executive Director - Corporate Center where the functions he managed included
finance, investments, business intelligence and strategy, legal and compliance,
internal audit and operational risk management, product design and management,

21
customer service and operations, underwriting and claims, technology and
corporate communications. He is part of the company since inception and initially
set up and managed the Investment function as Chief Investment Officer.

Sandeep Batra (Executive Director - Corporate Center) - Mr. Batra is a

qualified Chartered Accountant and Company Secretary. He is responsible for
functions in investments, business intelligence and strategy, enterprise risk
management, actuarial, finance and accounts, taxation, internal audit and
compliance, legal and secretarial, operational risk, policy affairs and corporate
communications. He has experience in finance, banking and insurance. He has
been one of the founder members of the company and worked as the CFO until
November 8, 2006, post which he moved to ICICI Bank. He has served as the
group compliance officer and company secretary of ICICI Bank. He also serves as
a non-executive director on the board of ICICI Prudential Trust Limited.

Judhajit Das (Chief - Human Resources) - Mr. Das holds a bachelors degree in
arts from Jadavpur University and a post-graduate diploma in personnel
management and industrial relations from Xavier School of Management,
Jamshedpur. He has been associated with the Company since November 15,
2000. He has experience in human resources, administration, IT infrastructure, and
corporate social responsibility. Previously, he worked with GE Capital Business
Process Management Services Private Limited as the Manager, Human
Resources from August 1999 to November 2000, prior to which he served RPG
Enterprises from June 1995 to July 1999 as the Manager, Human Resources. He
currently holds the position as President of National HRD Network, Mumbai.

Manish Kumar (Chief Investments Officer) Mr. Kumar holds a bachelors

degree in electrical engineering from IIT, Kanpur and a PGDBM from IIM, Calcutta.
He has been associated with the company since June 14, 2004 as is currently
responsible for entire investment portfolio management. He has experience in the
field of equity research, trading and fund management. Previously, he worked with
UTI Asset Management Company Private Ltd.

Satyan Jambunathan (Chief Financial Officer) - Mr. Jambunathan holds a

Bachelor of Science degree in Statistics from University of Madras and is a Fellow
of the Institute of Actuaries of India. He has been associated with the company

22
since August 17, 2000 and has been appointed as the Chief Financial Officer with
effect from June 29, 2016. He has rich experience in the field of life insurance,
having previously worked with Life Insurance Corporation of India. In I-Pru Life, he
is currently responsible for finance and taxation, business intelligence unit, legal
and corporate communications.

Deepak Kinger (Chief Risk and Compliance Officer) - Mr. Kinger holds a
bachelors degree in commerce from the Mumbai University and is a qualified
Chartered Accountant and a Certified Information Systems Auditor. He has been
associated with the company since October 15, 2004. He has experience in risk,
compliance, audit, legal, taxation and secretarial teams. He is responsible for
managing compliance, risk, legal, taxation and secretarial functions. Previously, he
worked with Ernst & Young and A. F. Ferguson.

Asha Murali (Appointed Actuary) - Mrs. Murali holds a masters degree in physics
from the Bangalore University. She is a Fellow of the Institute of Actuaries of India
and of the Institute and Faculty of Actuaries, UK. She has been associated with
the company since May 2009 and has been appointed as the Appointed Actuary
with effect from June 29, 2016. She has rich experience in the field of insurance,
having previously worked with Life Insurance Corporation of India. Prior to being
appointed as an Appointed Actuary of the company, she held the position of
Senior Vice President (Actuarial).

ICICI Prudential Life Insurance Investment Team

Manish Kumar: Chief Investment Officer - Manish is an engineer with a PGDM

from IIM Calcutta. He has the overall responsibility for managing the
entire investment portfolio of the company. He has 23 years of
experience in the area of equity research, trading and fund
management. Prior to ICICI Prudential Life Insurance, Manish has
been with an Indian asset management company.

Average experience of the Investments team: 12 years

As a life insurance company, we know that our customers trust their monies with us
for the long-term, and hope to use these funds to protect and achieve the dreams
and aspirations of their families. With this in mind, our investment focus is to ensure

23
long term Safety, Stability and Profitability of our customer's funds. Our aim is to
achieve superior returns for a given level of risk. In order to meet this objective, we
have developed an investment framework that is based on a sound investment
process coupled with a rigorous and sophisticated risk management strategy.

Benchmarks of Investment Team

To ensure that we maintain a strict discipline in managing policyholder's funds, we

have clearly articulated benchmarks for various unit-linked funds. In addition we
also have strict deviation limits vis--vis benchmarks that ensure that we do not take
undue exposure in any particular sector or stock. It is our endeavour to give better
returns than the benchmark to policyholders for all the funds that we manage.

In summary, our investment process is a function of extensive research and is

based on data and reasoning, backed by superior risk control measures. This, we
believe, would enable us to deliver to our customers safety, stability and returns on
their investments with us.

Investment process

Our investment management process relies on analytics & research to achieve

positive risk-adjusted returns in each product category, be it for child plans,
retirement solutions or other endowment-related funds. We clearly define an asset
allocation strategy that matches the risk characteristics of the corresponding liability,
or put simply, we ensure that the promise we have made to the customer will be
met.

The investment decision-making process has three tiers, each of which has varying
degrees of discretion and considers detailed research in order to decide the best
portfolio composition. The emphasis is to segregate the decision to buy scrip from
the process of actually buying it, and thereby institutionalize decision-making.

Our investment management team that has a cumulative experience of more than
50 years in various aspects of market like research, trading, risk management etc.
The top management teams at ICICI Bank and Prudential Corporation Asia ably
guide the investment team in making the strategic asset allocation and continuously
monitor the performance of the investment team.

24
Investment decisions

Debt investments target a mix of government and corporate bonds. The investment
process is backed by intense research and analysis and comprises qualitative as
well as quantitative measures. We make calls after carefully studying all the factors
that influence interest rate direction, such as RBI policy and stance, inflation, growth
of money supply, credit off-take, fiscal deficit, global interest rate scenario and
market sentiment. Detailed research reports obtained from credit rating agencies
form the primary basis for investment decisions. In addition, the team's assessment
of economic cycle, industry health, its perception of management quality and
demand and supply situation in stock of a particular entity influence the investment
decision.

The investments in equity are targeted at long-term capital appreciation. We are not
bound by traditional pure value or growth driven strategy and continuously look
where both co-exist. Portfolio diversification lies at the core of our investment
strategy. We have a clearly articulated benchmark for each of our funds and have
well-defined deviation limits vis-vis benchmark at both the sector and stock level. W
e combine a top-down and bottom-up approach while choosing stocks for our
investment, considering several factors like management quality, performance track
record (in relation to the sector), dividend track record, transparency in disclosures,
execution capabilities etc. Our equity portfolio has a large cap bias, as we believe
that they offer higher risk adjusted returns. However we do invest in mid-caps
provided they satisfy at least one of the criteria viz. presence in high growth
industry, one of the industry segment leaders, niche player, offer a play on
outsourcing opportunity or structural turnaround in performance. Thus the focus is
on ensuring consistent, stable and better risk adjusted performance over long term
for our policyholders.

Corporate Social Responsibility

Contribution to social welfare, focused on protection

At ICICI Prudential Life, our objective is to pro-actively support meaningful socio-

economic development in India. We help a larger number of people to benefit from
and participate in India's economic progress. This is based on the belief that growth
and development are effective only when they result in wider access to
opportunities and benefit a broader section of the society.

25
Corporate Social Responsibility Policy (CSR Policy) sets out the framework that
guides our CSR activities. It also lays out the rules that need to be followed while
taking up and carrying out these activities.

High growth, moderate profitability

I believe that ICICI Prudential Life is one of the most levered plays on the increase
in financial savings. I expect the company to deliver high (about 20%) APE
growth in the medium-term even as its RoEVs will likely remain moderate at
about 16%. Shift to higher margin (protection) business and higher
investment variance can provide upside though constrained by high overruns
and limited scope of upside on the persistency experience.

Nicely positioned to deliver industry leading growth

I-Pru Life has consistently generated the highest number of new business premiums
on RWRP basis among all private sector life insurers in India every year since
FY02. It has responded well to various regulatory changes since 2010 and its
market share, on a RWRP basis, has increased from 5.9% in FY12 to 11.3% in
FY16. It is poised to deliver high growth with its sharp focus on linked products and
a diversified multi-channel distribution network. ULIPs comprised 82.6% of I-Pru
Lifes retail APE in FY16 and has witnessed robust gfes RoE has exceeded 30%
for each year since FY12. Company has a strong capital position with a solvency
ratio of 320.5% at June 30, 2016 compared to regulatory requirement of 150.0%.
Companys persistency ratios have been increasing in recent years and its expense
ratio is one of the lowest among the private sector life insurers. I-Pru Lifes VNB
grew by robust 52.6% in FY16 on account of improvement in persistency ratios and
product mix. VNB margin also increased to 8.0% which partially led to EVOP
increasing by 17% yoy in FY16.

I-Pru Life 13th month persistency ratio has been increasing in recent years. It stood
at 82.4% in FY16, one of the highest in the Indian life insurance the highest in the
sector. The ratio of cost to total weighted received premium (TWRP), which is a
measure of cost productivity, declined from 17.9% in FY12 to 14.6% in FY16 and
compared favorably with peers. Robust risk management, resilient balance sheet
and focus on cost efficiency and persistency has underpinned the strong financial

26
performance delivered by the company over the years.

27
Dividend Track Record

Dividen
Q1 Q2 Q3 Q4 Total Q1
d Per
FY2 FY201 FY201 FY201 FY201 FY2
Share
016 6 6 6 6 017
(Rs)

Regul
1.10 1.10 1.10 1.10 4.40 1.10
ar

Speci
1.00 1.00 1.00 1.00 4.00 1.00
al

Total 2.10 2.10 2.10 2.10 8.40 2.10

28
Claims paying ability ratings of a company reflects the ability of a life insurance
company to pay customers claims and the policyholder's commitments in a timely
manner. claims paying ability is given by consistent highest ratings awarded to us
by ICRA, one of the well-known independent rating agencies.

Rating Agency Instrument Rating Rating Date

ICRA Claims Paying Ability iAAA MAR-16
ICRA Claims Paying Ability iAAA MAR-15
ICRA Claims Paying Ability iAAA MAR-14
ICRA Claims Paying Ability iAAA MAR-13
ICRA Claims Paying Ability iAAA MAR-12
ICRA Claims Paying Ability iAAA MAR-11

Note: Ratings for ICICI Prudential Life insurance are subject to regular revisions.
Kindly refer to the respective agencies for rating methodology.

Largest private sector life insurer

ICICI Prudential Life Insurance Co. Ltd. (I-Pru Life) was the largest private sector
life insurer in India by total premium in FY16 and AUM as of the end of the year.
The company is a joint venture between ICICI Bank Limited, Indias largest private
sector bank in terms of total assets and Prudential Corporation Holdings Limited, a
part of the Prudential Group, an international financial services group with GBP
509bn of assets under management at December 31, 2015. I-Pru Life was one of
the first private sector life insurance companies in India and commenced
operations in FY01. The company offers a range of life insurance, health insurance
and pension products and services to its customers.

In FY16, I-Pru Lifes market share, on a RWRP basis, among all insurance
companies in India (public and private sector) was 11.3%, as compared with a
market share of 9.7% of the nearest private sector competitor. Among the 23
private sector life insurance companies in India, the company had a market share
of 21.9% in FY16.

Unit linked insurance products (ULIPs) comprised 82.6% of I-Pru Lifes retail
annualized premium equivalent (APE) in FY16 and 75.2% for the three months
ended June 30, 2016. The APE from ULIPs increased from Rs22.1bn in FY14 to

29
Rs41.8bn in FY16, representing a CAGR of 37.5%. At June 30, 2016, company
had Rs1.09tn of assets under management, making it one of the largest fund
managers in India. Of these, 73% were in linked assets. Funds representing 94.2%
of linked assets with identified benchmarks at June 30, 2016 had performed better

than their respective benchmarks since inception. I-Pru Lifes 13 th month

persistency ratio in FY16 was 82.4%, which was one of the highest in the sector.
Expense ratio was 14.6% in FY16, one of the lowest among the private sector
life Insurance companies in India. The company commands a strong brand equity in
the insurance sector. As per the syndicated Nielsen Brand Track, the ICICI
Prudential brand had high awareness and consideration scores of 85% and 60%,
respectively for FY16. The brand has been ranked as one of the best brands in
the insurance category as per BrandZ Top 50 Most Valuable Indian Brands in 2014
and 2015, a study published by WPP and conducted by Millward Brown

Leadership across cycles

According to CRISIL Research, Life insurance industry report, Jul16, IPru has
consistently generated the highest new business premiums, on a RWRP
basis, among the private sector life insurers in India since FY02. Among the
23 private sector life insurance companies in India, IPrus market share
increased to 21.9% in FY16 from 16.1% in FY12.

Robust and Sustainable Business Model

Robust risk management and control process: The Company has implemented
robust risk management and control processes, with a detailed cost benefit analysis
for risk mitigation initiatives and a strong focus on the credit quality of their portfolio.

Balance sheet resilience: IPrus solvency ratio stood at 320.5% as on June 30,
2016, which is much higher than 150% prescribed by IRDAI. Further, with over
95.1% of our debt portfolio at June 30, 2016 invested in domestic AAA-rated
instruments, including sovereign instruments and AAA equivalent rated instruments,
the company has a low exposure to credit risk.

Market-leading cost and persistency ratios: The Companys 13th month

persistency ratio, stood at 82.4% for FY16 which is one of the highest in the Indian
life insurance sector. Also, the 49th month persistency ratio at 62.2% in FY16, was
also one of the highest in the Indian life insurance sector. IPru with its efficient

30
operations has been able to reduce its cost to total weighted received premium to
14.6% in FY16 compared to a high of 17.9% in FY12.

Established record of delivering results: IPrus robust risk management, resilient

balance sheet and focus on cost efficiency and persistency have enabled it
to establish a track record of healthy financials. While the growth in the
companys profit after tax has slowed down to 0.75% in FY16 at 1,653
crore, the company has maintained its RoEs above the 30% mark since
FY12.

Business strategy

I-Pru aims at enhancing its market leadership among private sector life insurance
companies and deliver superior profitability. In order to achieve this, the company
follows a detailed strategy.

Leverage Market Opportunity As per Crisil, the Indian insurance market is under
insured in terms of penetration and density. The company aims to tap this
opportunity by way of delivering superior customer value (end-to-end assistance,
competitive customer charges and higher returns), delivering superior fund
performance (funds representing 94.2% of linked assets performed better than their
respective benchmarks since inception, as on June 30, 2016), maintaining focus on
key local markets by improving market share, cost efficiency and persistency,
explore growth opportunities in emerging segments (to identify and explore growth
opportunities including emerging segments like health and pensions).

Focus on Increasing Value of New Business Iprus value of new business

increased 52.6% in FY16 to 412 crore compared to 270 crore in FY15. The
company aims to continue improving its value of new business by way of expanding
protection business (by offering protection as an add-on to our savings products
across channels, penetrating the online term insurance market and by partnering
with loan providers to offer coverage against loans), improving customer retention
(aiming to maintain high persistency ratios 13th month persistency ratio at 82.5%
in Q1FY17) and maintaining market-lending cost efficiency.

Strengthen Multi-channel Architecture and Explore Non-traditional Channels

The Company plans to diversify its distribution network by exploring non-traditional
channels, while strengthening existing channels and relationships. IPru will continue

31
to focus on deepening existing bancassurance relationships and also seek alliances
with other banks. It also intends to leverage digital channels to enhance direct-to-
consumer sales.

Leverage Technology for Profitable Growth The Company expects online sales
to play an increasingly larger role in the sale of simpler products like pure
term insurance. IPru intends to focus on five main initiatives to drive its digital
agenda a) increasing digital marketing and sales; b) utilising big data and
machine learning techniques; c) building a modular information technology
platform; d) digitising sales and service processes; and e) partnering with
organisations across the eco-system.

Delivering superior customer value

I-Pru Life offers arrange of products for customers to cater to their specific needs in
different life stages, enabling them to meet their long-term savings and protection
needs. The company also prices its products competitively. For instance, most of its
ULIPs have had lower charges than the maximum permissible regulatory amounts.
Delivering superior returns on the funds managed also generates customer value.
Funds representing 94.2% of linked assets with identified benchmarks as at June30,
2016 had performed better than their respective benchmarks since inception.

The high service level provided by the company is reflected in low grievance ratio
among individual customers. In FY15, I-Pru Life had a grievance ratio of 185 per
10,000 new policies issued, which compared favorably to the private sector average
of 345 per 10,000 new policies issued. In FY16, companys grievance ratio improved

32
to 153 per 10,000 new policies issued. In FY15, the claims settlement ratio for
individual death claims of 93.8% was higher than the private sector average of
89.4%. This ratio further improved to 96.2% in FY16. Also, in the preceding year,
over 99% of claim payouts were settled within the IRDAI-prescribed time line of 30
days for claims that are not investigated, and the average time taken to settle such
death claims was 3.3days from the date of submission of all required documents and
information in relation to the claim.

Diversified multi-channel distribution network

I-Pru Life has an extensive multi-channel sales network across India including
through the branches of bank partners, individual agents, corporate agents,
employees, offices and website. As at June 30, 2016, the company had 124,155
individual agents. As of July 12, 2016, the bank partners had over 4,500 branches. A
diversified channel mix enables the company to access different customer segments
and outperform the market across business cycles on a RWRP basis. Each of the
channels has grown in the last two fiscal years in terms of APE.

A) Strong bancassurance network

Through bancassurance tie-ups, company leverages the extensive and growing

branch network of the partner banks to reach a growing number of customers and
geographies. I-Pru Life works with its partner banks to integrate its processes with
theirs to improve efficiencies and increase productivity. Companys largest
shareholder, ICICIBank, is a key partner that currently exclusively distributes I-Pru
Lifes insurance products. The company has also entered into a bancassurance

33
relationship with Standard Chartered Bank pursuant to which the bank currently
exclusively distributes the products. I-Pru Life also intends to leverage the growth of
Capital Small Finance Bank Limited, which began operations as a small finance
bank in April 2016. I-Pru Lifes APE through bancassurance was Rs29.6bn in FY16
and Rs5.5 bn for the three months ended June 30, 2016, which constituted 58.6%
and 56.0% of retail APE, respectively.

B) Diversification across other channels

According to CRISIL Research, Life insurance industry report, July 2016, I-Pru Life
has one of the largest agency channels among private sector life insurance
companies in India in terms of premium, with 121,016 individual agents at March 31,
2016. The companys agency channel accounted for 24.3% and 23.9% of retail APE
in FY16 and for the three months ended June 30, 2016, respectively. ICICI
Securities, awholly owned subsidiary of ICICI Bank, also distributes companys
products. I-Pru Life also has long-term relationships with other financial services
distributors such as India Infoline Insurance Brokers and Bluechip Insurance
Broking, both of whom have been partners for over ten years. In the recent years,
company has scaled- up its direct sales channel, where the products are offered to
customers through employees, from the offices and on the website. Direct sales
witnessed a CAGR of 52.8% during FY14- 16 and accounted for 10.0% and 12.9%
of RWRP in FY16 and for the three months ended June30, 2016, respectively.

Focus on increasing value of new business

I-Pru Life would focus on continuing to increase the value of new business through
the following:

A) Expansion of protection business

34
The company is focusing on expanding its protection business as these products
typically have higher margins. It plans to achieve this by offering protection as an
add-on to savings products across channels, penetrating the online term insurance
market and by partnering with loan providers to offer coverage against loans.

B) Improving customer retention

Customer retention is essential for the growth of value of new business, and I-Pru
Life remains focused on strengthening mechanisms to increase renewal premiums
and reduce policy surrenders. The customers are encouraged to provide standing
instructions for renewal payments which are supplemented by regular reminders and
convenient payment options. The company ensures that there is adequate focus by
distributors and employees on customer retention by aligning key performance
indicators and rewards to it.

C) Sustaining market-leading cost efficiency

I-Pru Life is focused on improving operational efficiency. The companys regional

structure plays a key role in ensuring requisite focus on efficiency at the local level.
In addition, ongoing digitization efforts have helped to create a structured sales
process, achieve faster turnaround times, reduce paper work, and reduce
dependence on physical infrastructure without compromising market penetration.

35
 SWOT ANALYSIS OF THE ORGANIZATION

Business firms undertake Swot analysis to understand the external and internal
environment. SWOT, which is the acronym for Strength, Weakness, Opportunities
and Threats, is also known as WOT-UP Analysis. Through such an analysis
strength and weakness existing within an organization can be matched with the
opportunities and threats operating the environment so that an effective strategy
can be formulated. An effective organization strategy, therefore, is one that is
capitalized on the opportunities and through the use of strengths and neutralizes the
threats maximizing the impact of weakness.

STRENGTH:

- Brand power.
- Strong assets and infrastructure.

WEAKNESS:

- Awareness about private life insurance companies is still very less.

- Still not very popular in rural market.
- Very few branches in the country.
- Most of ULIP premium received.

OPPORTUNITY:

- Liberalization of Indian economy.

- Life Insurance sector opening up.
- Very small percentage of population insured in India One of best products
in the market.
- Global market opportunity.

THREAT:

- Lack of proper technical knowledge among the mass.

- Apprehension towards ICICI Prudential being a private life insurance
company.
- LIC: very big player.

36
- Change in government policy may affect the growth and expansion of the
Insurance sector and the company.

37
 PRODUCTS OVERVIEW

Life insurance product covers mainly the two basic requirement of an individual

(1)...Risk Coverage

(2)...Saving for Future

Risk in the above lines is used to cover the risk of death in case of the unfortunate
death of the policyholder. It provides a lump sum amount to the family for the
absence of the breadwinner. This is called as a Term Insurance or just covering the
risk of death. Here only the lump sum amount is available only in case of death and
nothing on survival or the maturity of the policy. The second is the accumulation of
saving for a specific purpose. Here the lump sum amount is available only if the
insured survives a particular period and nothing on the death of the insured. These
two are also referred to as building blocks in all life insurance product design. On
the basis of these two requirements various other products can thus be designed.

Each product of an insurance company offers something unique. Term insurance

covers just the risk of life and nothing is payable on survival, so the premium that is
charged is at its lowest and the time horizon for which it is available is also very
high. This is the most risky of the products that are offered by the company as for
just a meager premium, company covers the insurance of a very high amount. So
before allotting the policy to an individual the company has to carefully manage its
under writing with regards to the age at entry, amount of insurance, and term of the
insurance. Endowment is just like any other saving scheme which offers benefit just
in case of survival and nothing in case of death.

All insurance companies are very eager to sell ULIP plans, which provide the
company a handsome profit. It is in these ULIP plans that initial charges are very
high, which directly goes into the pocket of the insurer for bearing the cost of
distribution, promotion and advertising. Some part of that charges also goes into the
pocket of the advisor, who sells the insurance plan. With the capital markets are at
its record high some advisor finds it easy to sell, as long as you have the customer
who is ready to invest by taking the risk of the market.

ICICI Insurance offers a range of innovative, customer centric products that meet
the needs of customers at every life stage. Its products can be enhanced with up to
5 riders, to create a customized solution for each policyholder.

38
Ulip and Endowment

Endowment plans are life insurance plans, which not only cover the individuals life
in case of an eventuality but also offer a maturity value at the end of the term. In the
event of the individuals demise, his nominees receive the sum assured with
accumulated profits/bonus on investments (till the time of his demise). In case the
individual survives the tenure, he receives the sum assured and accumulated
profits/bonus.

ULIPs attempt to fulfil investment needs of an investor with protection/insurance

needs of an insurance seeker. ULIPs work on the premise that there is class of
investors who regularly invest their savings in products like fixed deposits (FDs),
coupon-bearing bonds, debt funds, diversified equity funds and stocks. There is
another class of individuals who take insurance to provide for their family in case of
an eventuality. So typically both these categories of individuals (which also overlap
to a large extent) have a portfolio of investments as well as life insurance. ULIP as a
product combines both these products (investments and life insurance) into a single
product. This saves the investor/insurance-seeker the hassles of managing and
tracking a portfolio of products.

The primary difference between conventional savings-based insurance plans like

endowment and ULIPs is the investment mandate- while ULIPs can invest upto
100% of the premium in equities, the percentage is much lower (usually not more
than 15%) in case of conventional insurance plans. ULIPs are also available in
multiple options like aggressive ULIPs (which can invest upto 100% in equities),
balanced ULIPs (which invest 40-60% in equities) and debt ULIPs (which invest
only in debt and money market instruments).

Costs Involved In Investing

Loads

Don't look at these as a burden; just think of them as tolls we pay on the highway to
big money!

Entry Load/Sale Load

This is the charge imposed at the time the investor enters a fund. He pays for the
value of the units plus an additional charge. That additional charge is termed
entry/sale load.

39
Exit Load/Repurchase Load

The opposite of the above! This is what the investor coughs up at the time of his
exit from the scheme. Operationally, therefore, what he gets back from the mutual
fund will be the value of the units minus the exit charge.

Contingent Deferred Sales Charge

A mutual fund may not want to charge an exit load in all cases. But it will still need
to recover the expenses incurred on the promotion and distribution of a scheme.
What it does then is impose a charge based on the time of withdrawal. Thus, a fund
that prefers long-term investors may stipulate that the exit charge will keep reducing
with the increasing duration of investment.

Such a charge is called Contingent Deferred Sales Charge (CDSC). The asset
management company is entitled to levy a CDSC for redemption during the first four
years after purchase, not exceeding 4% of the redemption proceeds in the first year,
3% in the second year, 2% in the third year and 1% in the fourth year. In order to
charge a CDSC, the scheme has to be a no-load scheme as per the regulations laid
down by SEBI.

Switchover/Exchange Fee

This is what the investor pays if he decides to switch his investment from one
scheme of the fund to another scheme from the same fund family.

Recurring Expense

Apart from loads, mutual funds also charge some other expenses, such as:

Investment Management & Advisory Fees

As the name suggests, this is meant to remunerate the asset management

company for managing the investor's money

Trustee Fees

These are fees payable to the trustees for managing the trust.

Custodian Fees

These are paid by the fund to its custodians, the organization which handles
the possession of the securities invested in by the fund.

40
 Registrar and Transfer Agents Charges

The fees payable to the registrar and the transfer agents for handling all
formalities related to the transfer of units and other related operations.

Broker/Dealer Remuneration, Audit Fees, Cost of Funds Transfer, Cost

of providing a/c statements, Cost of Statutory Advertisements

But all these are regulated and have an upper limit, so the investor won't go
broke trying to earn money!

Study Of Financial Products

A wealth manager should know his product in and out then only he can design a
fruitful portfolio for his clients. Before suggesting any financial product to a client
one should have a clear understanding of the products.

The project started with the study of financial products. Training on life insurance
and mutual funds was given by the seniors of ICICI bank for 7 days. But, only that
was not sufficient, one could get the insight from reading.

Various books, magazines and journals were referred. Employees who had similar
kind of jobs and provided the practical knowledge about the job what all one
should know about the product, what queries investors ask and how to tackle
different people in different manner?

Finding Potential Customers

The various methods used for finding potential customers are:

1) PHONE CALLS

Cold calls to different people spread across Delhi were made. The task was to
inform people about the Mutual Fund and Life Insurance, if possible fix an
appointment with them. This was a tedious task as the prospects were seldom in a
mood to listen about the product.

Advantages:-
1. Least time consuming method as compared to personal door to door visits
2. We get first hand information about the prospect hence we can plan better our
call and design an apt portfolio that suits his/her need.

41
3. The prospect feels comfortable in first face to face meeting, hence making the
discussion more fruitful.
4. An early Rapport is maintained
5. We can seek the prospects permission to call him back

Disadvantages:-
1. The success rate is quite low.
2. The prospects sometimes get irritated and hangs up the phone
3. The decision maker doesnt always picks up the phone always
4. The database comprises of many wrong numbers

2) FOOTFALLS

Customers of ICICI BANK who came in the branch for some transaction were also
trapped. The task was to first, help the customers in their transactions, then looked
for the right time to pitch them, explaining in brief about the product and if possible
fix an appointment with them.

Advantages:-
1. Footfalls already have a relation with ICICI. So, it is easy to pitch them for ICICI
product.
2. Face to face interaction
3. Follow up is easy

Disadvantages:-
1. Generally customers are in hurry.
2. Prospects may had a bad experience with bank
3. Prospects may have already invested in these products from ICICI.

3) REFERENCES

References were also considered. The main advantage of pitching the references
was that there was already a relation and trust. Also, fixing an appointment was
easy.

42
Identifying Customers Needs

No single shoe size fits all, similarly theres no single investment approach that
works for all investors. The structure of the portfolio will naturally depend on the
individual goals and preferences and each investor has unique parameters. After
finding the potential customers, the next step was to identify their needs on the
following parameters

Demographic Attributes: like age, Income, No. of years until retirement,

expectations from future earning, Family Size and knowledge of financial products &
the financial market
Risk attitude of the customers
Latest Investment in Mutual Fund: E.g. Amount invested in the mutual fund
recently, type of mutual fund, priority while investing in mutual fund and why mutual
funds.
Time Horizon: This component has been included in order to identify the time
period in which the customer withdraws his money from the investment made by
him
Investment objective: This will help in identifying the investment objective of the
customer i.e. for travel, for his children, for further investment or for availing
retirement benefit.

Designing The Portfolio

After identifying the customers requirement, the next step was to design a
customized portfolio strategy to match their objectives. As a financial Planner the
job was to combine the key asset classes in different combinations to create a
customized asset allocation that matches the personal objectives and risk tolerance
of the investors. There are two main steps in portfolio designing

Selecting a Portfolio Strategy

Selecting a portfolio strategy that is consistent with the objectives and policy
guidelines of the client or institution is the third step in the investment management
process. Portfolio strategies can be classified as either active strategies or passive
strategies. Essential to all active strategies are expectations about the factors that
are expected to influence the performance of an asset class. For example, with

43
active equity strategies this may include forecasts of futures earnings, dividends or
price earnings ratios. With active fixed income portfolios this may involve forecasts
of future interest rates; future interest rate volatility or future yield spreads. Active
portfolio strategies involving foreign securities will require forecasts of future
exchange rates.

Passive strategies involve minimal expectation input. The most popular type of
passive strategy is indexing. The objective in indexing is to replicate the
performance of a predetermined index. While indexing has been employed
extensively in the management of equity portfolios, the use of indexing for
managing fixed income portfolios is a relatively new practice.

Between these extremes of active and passive strategies have sprung strategies
that have elements of both. For example, the core of a portfolio may be indexed
with the balance managed actively. Or a portfolio may be primarily indexed but
employ low risk strategies to enhance the indexed return. This strategy is commonly
referred to as enhanced indexing or indexing plus.

In the fixed income area, several strategies classified as structured portfolio

strategies have been commonly used. A structured portfolio strategy is one in which
a portfolio is designed so as to achieve the performance of some predetermined
benchmark. These strategies are frequently used in funding liabilities. When the
predetermined benchmark is to have sufficient funds to satisfy a single liability
regardless of the course of future interest rates, a strategy known as immunization
is used. When the predetermined benchmark is multiple future liabilities that must
be funded regardless of how interest rates change, the strategies that can be used
are immunization or cash flow matching.

Even within the immunization and cash flow matching strategies, low risk active
management strategies can be employed. One immunization strategy, contingent
immunization, allows the portfolio manager to actively manage a portfolio until
certain parameters are realized. If those parameters are realized, the portfolio is
then immunized.
Indexing can be considered a structured portfolio strategy where the benchmark is
to achieve the performance of some predetermined index. A portfolio insurance

44
strategy - where the objective is to insure that the value of the portfolio does not fall
below a predetermined amount-is also viewed as a structured portfolio strategy.

Selecting assets

Once a portfolio is selected, the next main step is the selection of the specific
assets to be included in the portfolio. It is in this phase that financial theory tells us
the investment manager attempts to construct an optimal or efficient portfolio. An
optimal or efficient portfolio is one that provides the greatest expected return for a
given level of risk, or equivalently, the lowest risk for a given expected return.

Measuring & Evaluating Performance

The measurement and evaluation of investment performance is the last step in the
investment management process. (Actually, it is improper to say that it is the last
step since investment management is an ongoing process.) This step involves
measuring the performance and then evaluating that performance relative to some
realistic benchmark.

While the performance of a portfolio manager when compared to some benchmark

may demonstrate superior performance, this does not necessarily mean that the
portfolio satisfied its investment objective. For example, suppose that a life
insurance company establishes as its objective maximization of portfolio return and
allocates 75% of the fund to stocks and the balance to bonds. Suppose further that
the portfolio manager responsible for the equity portfolio of this pension fund earns
a return over a one year horizon that is 4% higher than the Standard & Poors 500
stock index (a benchmark used to evaluate equity performance). Assuming that the
risk of the portfolio was similar to that of the S&P 500, it would appear that the
portfolio manager performed well. However, suppose in spite of this performance
the life insurance company cannot meet its liabilities. The failure was in establishing
the investment objectives and setting policy, not with the manager responsible for
managing the portfolio.

Portfolio Management is an incomplete exercise without a periodic review. Every

security should be subject to severe scrutiny and a case made out for its

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continuation or disposal. The frequency of review will depend on the size, amount
involved and the kind of securities held in the portfolio. Spend a bit of time; you'll get
a little bit of results. If you spend more time, your results should improve. So I am
keeping a constant check on the portfolios I have made till now.

For designing the portfolio for the customers, analysis of their personal factors and
parameters for fund selection is needed.

Personal Factors Of Investors

The important factors which influence the portfolio management of individual are the
personal factors of the investor. Since the background, the needs and the mental
make-up of the individuals change very much, it is necessary to understand the
influence of these personal factors on portfolio management so that individualized
portfolios can be planned and developed after taking the personal characteristics of
the individuals into account. While it may be very difficult to offer an exhaustive list
of these personal factors, an inclusive list of these personal factors is given below:

A) OBJECTIVE

Its very important to know the financial goals of the investors. One saves for a
variety of reasons: to buy a house and a car, to educate your children, to set them
up in business, to get them married, to go on vacations, to save tax and, finally, to
give a comfortable life in retirement.

1. ATTITUDE TOWARDS RISK

All individuals do not, and cannot think alike about investments primarily because
their attitudes towards risk are varied. Some people are willing to take any risk for a
high enough return. On the other hand, there are some people who would consider
any investment other than a bank deposit too risky for them. Since the individual
preferences vary, there is a need to develop portfolios to suit the personal needs of
different investors. High risk takers prefer more of equity rather than debt and
government bonds in their portfolio

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 2. FAMILY RESPONSIBILITIES

The Younger an individual, lesser the responsibilities and the higher would be his
appetite for taking risk so he would prefer an investment in equity rather than a
mutual funds and government bonds. With an individual getting no younger his
responsibilities also tends to grow, now whether its related to marriage or the
responsibility of parents and children. These responsibilities only increases rather
than seeing a downtrend. A graph below would help us understanding the
responsibility of an individual better.

As one grows older touching retirements then his needs and desires changes his
requirement for different funds or avenues for investment also changes. At the age
of 55 to 60 an individual demands more of a security and regular returns in the form
of pension.

3. TIME HORIZON

The individual needs for safety, liquidity and profitability change from time to time.
When a person is planning to make a major investment in, say, a house, he may
have to withdraw funds from other investments and invest in the house. Hence, for
a few years before and after the construction/purchase of house, his preoccupation
will be with liquidity needs.

B) SELECTION PARAMETERS

1. INVESTORS OBJECTIVE

Before adding any product to clients portfolio it is very important to check that the
product is meeting the clients objective or not. Choice of any scheme would depend
to a large extent on the investor preferences. For an investor willing to undertake
risks, equity funds would be the most suitable as they offer the maximum returns.
Debt funds are suited for those investors who prefer regular income and safety. Gilt
funds are best suited for the medium to long-term investors who are averse to risk.
Balanced funds are ideal for medium- to long-term investors willing to take
moderate risks. Liquid funds are ideal for Corporate Clients, institutional investors

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and business houses who invest their funds for very short periods. Tax Saving
Funds are ideal for those investors who want to avail tax benefits.

2. RISK ASSOCIATED

Its very important to know what is the risk associated with the product. Certain
sector-specific schemes come with a high-risk high-return tag. Such plans are
suspect to crashes in case the industry loses the market mens fancy. If the investor
is totally risk averse he can opt for pure debt schemes with little or no risk. Most
prefer the balanced schemes which invest in the equity and debt markets. Growth
and pure equity plans give greater returns than pure debt plans but their risk is
higher.

3. THE SCHEMES EXPENSE

All schemes have a minimum requirement for the total amount of money one can
invest. Usually they begin from a minimum of Rs.5000. Do a check for the expense
ratio and sales charges the fund has. The NAV is good enough to know what each
unit of the scheme will cost. But, remember a low NAV (sometimes even below the
usual offer price of Rs.10) may make a scheme more affordable as one can acquire
more units but chances are the scheme is not performing well.

4. THE SCHEMES PERFORMANCE

Returns from schemes are calculated over various periods from a week to one year
or more. For each time period specify the returns. While you enter returns figures
the maximum, minimum and average returns for all schemes in the category you
have chosen are also displayed.

Premium Structure

The primary purpose of life insurance is to secure the financial future of the
nominees in case of an eventuality to the insured. The premium consists of three
important elements:

Mortality charges - Mortality charges are incurred by the insurance

company to cover the risk of an eventuality to the individual. The mortality

48
 expenses differ depending on the age of the individual and the sum assured-
they are higher for a higher age and sum assured.
Sales & administrative expenses - These expenses are incurred by the
insurance company for operational purposes and recovered from the
premiums that the individual pays towards his policy.

Savings component - This portion of the premium is invested by the life

insurance company in various investment avenues like government
securities, bonds, money market instruments and equities in varying
proportions. The savings component is what helps generate the returns
which insurance companies pay to the policyholder by way of bonuses and
the maturity amount.

Concerned Products Of ICICI

1.

Lifelink Super is a unique single premium market linked investment-cum-insurance

solution. It is a plan that combines the security of a life insurance policy with the
opportunity to enjoy potentially high returns on your investments.

Low Allocation Charges: The premium allocation charges are amongst the
lowest across products.
Death Benefit: There are 2 options for sum assured - 125% to 500% of the
single premium In the event of an unfortunate death, the beneficiary will
receive higher of the value of units or the initial death benefit
Liquidity: In order to meet liquidity requirements, one can make partial
withdrawals from the accumulated value of the policy after completion of
three policy years.
Flexibility: Choose from four fund options, based on your investment
objective and risk appetite. If at a later stage your financial priorities change,
you can switch between the various fund options, absolutely free, 4 times a
year.

2.

Lifetime has been developed to meet the savings, protection and investment needs
at every stage in life.

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Protection

Choose a specified level of protection

Flexibility to increase or decrease your sum assured.
Add-on riders to protect you against any eventuality.
Savings

Flexibility to increase or decrease your contribution.

Facility of Premium Holiday, wherein the policy continues even if there is a
temporary break in the payment of annual contribution
Additional allocation of units on a periodic basis.
Facility to top-up your investment any time you have surplus funds.
Loans against the policy.
Investment

Choose from among four funds, based on your investment objective and risk
appetite.
Choice to switch between investments options.

3.

Smart Kid is especially designed to provide flexibility and safeguard childs future
education and lifestyle, taking all possibilities into account.

Financial Benefits: Regular payments at critical stages in your childs life,

like Board examinations, Graduation and Post-graduation.
Total peace of mind, even if you are not around
Sum Assured is paid immediately: Ensures that your loved ones stay
financially secure, even in your absence.
All future premiums are waived: Ensuring that your family is not financially
burdened in your absence.
Policy benefits continue: The educational benefits of the policy continue,
ensuring that your child can realize his or her dreams without any hassles.
Development Allowance: Smart Kid guarantees regular income to secure
your childs educational career and also ensures his or her all-round

50
 development, for a nominal additional amount. The Income Benefit Rider
takes care of this through an annual payment of 10% of the sum assured, to
your child, till the maturity of the policy, in the unfortunate event of the death
of the parent.

4.

Life Time Pension II gives you the freedom to choose the amount of premium, and
invest in market-linked funds, to generate potentially higher returns. On the future
retirement date, the accumulated value of the units will be used to purchase an
annuity - to provide you with regular income for life.

Power to choose the protection level: Choose from either a Zero sum
assured or a sum assured, which will be equal to the product of your annual
contribution and term.
Power to choose the retirement date: Take advantage of market
movements by choosing a vesting age between 45 - 75 years of age.
Power to increase your investments: Use your surplus funds to top-up
your investments during the deferment period.
Power to invest in a plan based on your priorities: Choose from among
four funds, based on your investment objective and risk appetite. If at a later
stage your financial priorities change, you can switch between the various
fund options, absolutely free, 4 times a year.

51
 RISK INVOLVED IN ICICI PRUDENTIAL LIFE INSURANCE
PORTFOLIO

Investment Bifurcation

Key Risks

Regulatory changes can be a key risk to the insurance industry and regulator has
been tough in last few years to safeguard policyholder interest especially on mis
selling, commission payouts and expense capping. Regulator had hardened stance
on ULIPs in FY11 and then on other policies in FY1113 bringing in drastic changes
to products and which impacted growth of the industry.

Change in regulatory environment remains a key risk for the life insurance industry.
Several regulations over the last few years (2010 ULIP regulations being the most

52
impactful), directions on expense caps, banking partnerships and draft on
commissions payouts, have driven business strategies of life insurance players.

ICICI Prudential Life product mix has led it to depend on capital market
performance compared to other insurance companies. ULIP as a product is more
tilted as a pure saving instrument than life protection and is competing with Mutual
Funds. Any disappointment in capital market return can hamper ULIP product
growth.

ICICI Prudential Life is more levered to capital market movements as compared to

most other large life insurance companies. Policyholders typically like the
investment appeal of a ULIP (84% of FY2016 APE) and often consider ULIP as a
play on capital markets; ICICI Prudential Lifes average policy size in ULIP is
`150,000 in FY2016 as compared to `10,000-45,000 for other policies.

53
Estimating impact of lapses in ULIPs. The 2010 ULIP regulations not only
constrains the ability of life insurance companies to price their products (leading to
acquisition expense overruns) but also lead to higher surrender payouts in the fifth
year. For policies lapse within the first five years, these regulations cap surrender
penalties at `6,000 and provide for payment of the fund balance to the policyholder
at the end of the fifth year. As such, the company has reported large payout to ULIP
policyholders translating into a negative impact of `826 mn in FY2015 and `2.8 bn in
FY2016 on its earnings (Below Table). Given early days in the new regime (the first
set of ULIP policies completed five in FY2015), we find it challenging to forecast the
surrender payouts as well as the reduction in acquisition expense overruns.

54
 Lower persistency could hamper return profile for shareholders as capital burn
rate would be higher on lapsing of policies, would impact product margins and
impact long term opex ratios.

Variances on operating & investment could impact the embedded value.

Although historical disclosures are limited, high swings have been witnessed in
variances from expectations.

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 Low Profitability due to the Policies getting lapses/ Surrenders/ Claims.
As from the below data the premiums received by IPLIC is decreasing due to the
policies getting lapsed as this increasing for the each financial year.

56
Comparison of ULIP policy for ICICI pru compared to other private Life insurance
players:

57
As compared to other insurance company the ULIP plan is 75 which is highest as
compared to other companies. Due to this the is forced to invest in debt instead of
equity.

Financial Report of ICICI Prudential Life Insurance

58
Potential risk in future compared to other Life Insurance companies

59
VALUATION OF ICICI IPO BASED ON MACQUARIE
RESEARCH

60
 DATA ANALYSIS QUESTIONNAIRE

1. Do you think investment planning is important for your wealth?

Yes No

Service class 80% 20%

Business class 12% 88%

Interpretation:

After analyzing the data it was found that 80% of the service class and just 12% of
business class were interested in going for investment planning. Service class had
to save their tax and simultaneously they realize the need of investment of future.
Business class had an attitude of thinking about the things when incidents will be on
head.

2. What is the pattern of investment?

Property Shares Insurance Fixed Others
deposit

Social class 2% 3% 62% 5% 28%

Business class 55% 45% 5% 3% 12%

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Interpretation:

After analyzing the data, it was found that, just 2% of social class has invested in
property, 3% in shares, 62% in insurance, 5% in fixed deposit, 28% in others.

In business class, 55% invested in property, 45% in shares, 5% insurance, 3% in

fixed deposit, and 12%in others.

3. What is the insurance objective?

Short Term Long Term Retirement Children
Saving
objective

Social Class 45% 5% 25% 25%

Business Class 85% 5% 5% 5%

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Interpretation:

After analyzing the data it was found that 45% of service class wanted to go for
short-term objective, 5% for long-term objective, 25% for retirement-objective, and
25% for children saving objective.

In business class, 85% wanted to go for short-term objective, just 5% for long-term
objective, retirement objective and children saving objective.

4. Which industry do you prefer to invest the most?

Insurance Bank Shares Others

Service class 62% 20% 35% 15%

Business 5% 3% 45% 47%

class

Interpretation:

After analyzing the data it was found that in social class, 62% people want to invest
for insurance, 20% for bank, 3% for shares, and just 15% for other things.

In business class, 5% for insurance, 3% for bank, 45% for shares, and 47% for
others.

5. Have you done life insurance planning?

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 Yes No

Social Class 65% 25%

Business Class 15% 75%

Interpretation:

After analyzing the data it was found that, in social class, 65% have done life
insurance planning, and 25% have not done it.

In business class, 15 have done life insurance planning and 75% havent done

6. What is the insurance cover you possess?

1 Lac 5 Lac 10 Lac 1 Crore

Social Class 65% 20% 15% -

Business Class 75% 15% 20% -

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Interpretation:

After analyzing the data, it was found that, 65% of social class possess in 1 lack
plan, 20% in 5 lack plan, and 15% in 10 lack plans.

In business class, 75% possess in 1 lack plan, 15% in 5 lack plan, and20% in 10
lack plan.

7. According to you what are the basis you taking life insurance?
Long Larger risk Reputation of Money back
premium cover the company guarantee

Social class 25% 25% 25% 25%

Business 55% 35% - 5%

class

Interpretation:

After analyzing the data, it was found that, 25% of social class wants to invest for
high premium, larger risk cover, reputation of the country, money back guarantee.

In business class, 55%, and 35% want to go for high premium and larger risk cover
and only 5% want to for money back guarantee plan.

8. According to you in which company you will do insurance or investment?

LIC MAX ICICI OTHERS

Social Class 19% 30% 45% 9%

Business Class 45% 14% 35% 6%

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Interpretation:

After analyzing the data, it was found that, in social class, 19% want to go for LIC,
30% in MAX, 45% in ICICI, and 9% in others.

In social class, 45%, 14%, 35%, and 6% want to invest in LIC, MAX, ICICI,
OTHERS, respectively.

9. How do you rate your investment profile?

Conservative Aggressiv Secured Balance
e

Social Class 5% 55% 5% 35%

Business Class 80% - 20%

Interpretation:

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 After analyzing the data, it was found that, in social class, 5% want to invest
conservative and secured fund, 55% want to invest in aggressive fund, and 35% in
the balance fund.

In business class, 80% of the population wants to go for aggressive fund, and 20%
of population wants to go for the balance fund.

10. Have you planned to arrange the fund in case of emergency?

Critical Accident Pre- Savin Life Relative/friends Others
illness matured g from Medical
death bank insurance

Social 20% 20% 20% 20% 20% - -

Class

Business - - - - - 5% 95%
Class

Interpretation:

After analyzing the data, it was found that in social class, 20% have arranged for
critical illness, accident, pre-matured death, savings from bank, and for life medical
insurance.

In business class,5% want to invest in relative/friends plan and 95% for others.

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 MAJOR FINDINGS

After interacting with a number of people during the project and after designing
portfolio for some of them following points came to light:

1. Lack of awareness about the products.

Even though the number of asset management companies and insurance

companies along with investment schemes available has been increasing, it was
seen that still a large number of people dont know about mutual funds or ULIP
plans in Insurance. People were found to be knowledgeable about the post office
schemes and other traditional investment products, but not much about the modern
plans of investment.

2. Conservative attitude

Conservative attitude of the investors puts up a restriction on investments in mutual

funds and life Insurance. It was seen that investors have some misconceptions
regarding the products. People think that mutual funds are very risky and life
insurance has some hidden costs involved. So they invest in government bonds and
fixed deposits.

3. Peer pressure

It was found that some people are very dogmatic and they want to invest just
because of peer pressure. Even if the product is not matching his requirements he
wants this product in his portfolio just because his friend or family has that product.

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 SAMPLE QUESTIONNAIRE

Name Age Risk Objective Annual

appetite income

Q1. Do you think investment planning is important for your wealth?

Yes
No

Q2. What is the pattern of investment?

Property
Shares
Insurance
Fixed deposit
others

Q3. What is the insurance objective?

Short term objective

Long term objective
Retirement objective
Children saving objective

Q4. Which industry do you prefer to invest the most?

Insurance
Bank
Shares
Others

Q5. Have you done life insurance planning?

Yes
No

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Q6. What is the insurance cover you possess?

1 lac
5 lac
10 lakh
1 crore

Q7. According to you what are the basis you taking life insurance?

Long premium
Target risk cover
Reputation of the compony
Money back guarantee

Q8. According to you in which company you will do insurance or investment?

LIC
MAX
ICICI
Others

Q9. How do you rate your investment profile?

Consecutive
Aggressive
Secured
Balance

Q10. Have you planned to arrange the fund in case of emergency?

Critical illness
Life medical insurance
Pre-matured death
Others

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 METHODOLOGY

Primary Data Sources Used

Appointments with different people who seem to be prospective advisors.
Interview Method (Cold calling): This method involves presentation of oral
verbal stimuli and reply in terms of oral - verbal responses. This method can be
used through personal interviews and, if possible, through telephone interviews.

Secondary Data

Secondary data means data which is already available i.e. we refer to the data
which has already been collected and analyzed by someone else. Secondary data
may be either published data or unpublished data. In this project secondary data
collected from following sources.

Books and magazines.

Reports and publications of various associations connected with business

and industry.

Websites and other publications of company.

Previous reports about ICICI PRUDENTIAL.

Sample Design

SAMPLE SIZE
Sample study is been undertaken with a sample size of 50 respondents conducted
in Mumbai region.

STATISTICAL TOOL
The Microsoft excel template was used for analyzing the data collected .the various
statistical tool used for analyzing were

Bar graph
Simple percentages

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 BIBLIOGRAPHY

Prof. Ravindra Kamath

www.google.com
IIFL Research
Prabhudas Liladhar Research
Kotak Institutional Equities
Macquarie Research
ICICI Prudential
IRDAI
EIU ( Economic Intelligence Unit)
CRISIL Research
Centrum Wealth Research
Err Club

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