ICICI PRUDENTIAL

BANKING & INSURANCE

NATURE & DEFINITION OF INSURANCE

Insurance is defined as a co-operative device to spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to ensure themselves against that risk. Risk is uncertainty of a financial loss. It should not be confused with the chance of loss, which is the probable number of losses out of confused with peril, which is defined as the cause of loss or with hazard, which is a condition, may increase the chance of loss. Every risk involves the loss of one or other kind. The function of insurance is to spread the loss over a large number of persons who are agreed to co-operate each other at the time of loss. The risk cannot be over rated but loss occurring due to a certain risk can be distributed amongst the agreed persons. They are agreed to share the loss because the chance of loss is there. Everybodys greatest asset during his/her working years is his/her ability to earn an income. It is important to adequately safeguard this asset to ensure his/her cash flow will continue in the event of an unexpected disaster. His/her insurance policies will help to protect him/her (if any) against any unforeseen odds. There are two kinds of insurance available viz. Life Insurance and General Insurance.

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Life Insurance Provides for dependents in case of death. Replaces earning power, if disabled. Protects his/her ability to meet accumulation/education / marriage goals.

General Insurance Addresses health care concerns. Provides for auto, home and personal liability protection. Provides for potential long-term care costs. Plans for business continuation.

GENERAL DEFINITION
The general definitions are given by the social scientists & they consider insurance as a device to protection against risks, or a provision against inevitable contingencies or a co -operative device of spreading risks. Some of such definitions are given below: In the words of John Magee, Insurance is a plan by which large number of people associate themselves & transfer to the shoulder of all, risks that attach to individuals. In the words of Sir William Bevridges, The collective bearing of risks is insurance. In the words of Thomas, Insurance is a provision, which a prudent man makes against for the loss or inevitable contingencies, loss or misfortune.

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FUNDAMENTAL STATEMENT
These are based on economic or business oriented since it is a device providing financial compensation against risk or misfortune. In the words of D. S. Harsell, Insurance may be defined as a social device providing financial compensation for the effects of misfortune, the payments being made from the accumulated contribution of all parties participating in the scheme. In the words of Robert I. Mehr & Emerson Cammark, Insurance is purchased to offset the risk resulting from hazards, which exposes a person to loss. In the words of Riegel & Miller, Insurance is a social device whereby the uncertain risks of individuals may be combined in a group & thus made more certain small periodic contributions, by the individuals providing a fund, out of which, those who suffer losses may be reimbursed.

CHARACTERISTICS OF INSURANCE

Sharing of Risks Insurance is a co-operative device to share the burden of risk, which may fall on happening of some unforeseen events, such as the death of head of the family, or on happening of marine perils or loss of by fire. Co-operative Device Insurance is a co-operative form of distributing a certain risk over a group of persons who are exposed to it (Ghosh &

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Agarwal). A large number of persons share the losses arising from a particular risk. Evaluation of Risk For the purpose of ascertaining the insurance premium, the volume of risk is evalu ated, which forms the basis of insurance contract. Protection against risks Insurance provides protection against risks involved in life, materials & property. It is a device to avoid or reduce risks. Spreading of risk Insurance is a plan, which spread the risks & losses of few people among a large number of people. John Magee writes, Insurance is a plan by which large number of people associates themselves & transfer to the shoulders of all, risks attached to individuals. Transfer of risk Insurance is a plan in which the insured transfers his risk on the insurer. This may be the reason that Mayerson observes, that insurance is a device to transfer some economic losses to the insurer, and otherwise such losses would have been borne by the insured themselves. Ascertaining of losses By taking a life insurance policy, one can ascertain his future losses in terms of money. This is done by the insurer to determining the rate of premium, which is calculated on the basis of maximum risks.

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A contract Insurance is a legal contract between the insurer & insured under which the insurer promises to compensate the insured financially within the scope of insurance policy, & the insured promises to pay a fixed rate of premium to the insurer. Based upon certain principle Insurance is a contract based upon certain fundamental principles of insurance, which includes utmost good faith, insurable interest, contribution, indemnity, causa proxima, subrogation, etc., which are the basis for su ccessful operation of insurance plan. Utmost Good Faith Insurance is a contract based on good faith between the parties. Therefore, both the parties are bound to disclose the important facts affecting to the contract before each other. Utmost good faith is one of the important principles of insurance.

To conclude, insurance is a device for the transfer of risks from the insured to the insurers, who agree to it for a consideration (known as premium), & promises that the specified extent of loss suffered by the insured shall be compensated. It is a legal contract of a technical nature.

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BANKING & INSURANCE

INTRODUCTION TO ICICI GROUP

ICICI BANK

ICICI Bank is Indias second-largest bank with total assets of about Rs.112.024 crore and a network of about 450 branches and offices and about 1750 ATMs. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customer through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital, asset management and information technology. ICICI Banks equity shares are listed in India on stock exchanges at Chennai. Delhi, Kolkata and Vadodara, the Stock Exchange, Mumbai and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly owned subsidiary. ICICIs shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Banks acquisition of Bank of Mathura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium term and long term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank, In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE.

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After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the management of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI groups universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entitys access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payment system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICIs strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, Particularly fee-based services, and access to the vast talent pool of ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, With ICICI Bank. Shareholders of ICICI and ICICI BANK approved the merger in January 2002, by the High Court of Gujarat at Jalandhar in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI groups financing and banking operations, both wholesale and retail, have been integrated in a single entity. ICICI Bank is the only Indian company to be rated above the country rating by the international rating agency moody s and the only Indian company to be awarded an investment grade international credit rating. The Bank enjoys the highest AAA (or equivalent) rating from all Leading Indian rating agencies.

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PRUDENTIAL P.L.C.

Established in 1848, today prudential plc is a leading international financial services company with some 16 million customers, policyholders and unit holders and some 20,000 employees worldwide. In the UK Prudential is a leading life and pensions provider with around seven million customers. M&G was acquired by Prudential in 1999 and is the Groups UK and European fund manager, responsible for managing over of 111 billion of funds (as at December 2003). Launched by Prudential in 1998, Egg is an innovative financial services company, with over three million customers, with nearly six per cent of UK credit card balances. In Asia, Prudential is the leading European life insurer with 23 life and fund management operations in 12 countries serving some five million customers. In the US, Prudential owns Jackson National Life, a leading life insurance company, and has more than 1.5 millions policies and contracts in force. Prudential has brought to market an integrated range of financial services products that now includes life assurance, pensions, mutual funds, banking, investment management and general insurance. In Asia, Prudential is UKs Largest life insurance company with a vast network of 22 life and mutual fund operations in twelve countries China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam. Since 1923, Prudential has championed customer-centric products and services, supported by over 60,000 staff and agents across the region. Prudential plcs strong mix of business around the world positions us well to benefit form the growth in customer demand for asset accumulation and income in retirement. Our international reach and diversity of earnings by geographic region and product will continue to give us significant advantage.

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Our commitment to the shareholders who own Prudential is to maximize the value over time of their investment. We do this by investing for the long term to develop and bring out the best in our people and our businesses to produce superior products and services, our international peer group in terms of total shareholder returns. At Prudential our aim is lasting relationships with our customers and policyholders, through products and services that offer value for money and security. We also seek to enhance our Companys reputation, built over 150 years, for integrity and for acting responsibly within society.

ICICI PRUDENTIAL LIFE INSURANCE

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse and Prudential Plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from insurance Regulatory Development Authority (IRDA). ICICI Prudential s equity base stands at Rs.6.75 billion with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. In the year ended March 31,2004 the company had issued over 430,000 policies, for a total sum assured of over Rs 8,000 crore and premium income in excess of Rs.980 crore. The company has a network of about 30,000 advisors; as well as 12 banc assurance tie-ups. Today the company is the number one private life insurer in the country.

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MANAGEMENT
The ICICI Prudential Life Insurance Company Limited Board comprises reputed people from the finance industry both from India and abroad. Ms. Chanda D. Kochhar, Chairperson Mr. N. S. Kannan, Director Mr. K. Ramkumar, Director Mr. Rajiv Sabharwal, Director Mr. Barry Stowe, Director Mr. Adrian OConnor, Director Mr. Keki Dadiseth, Independent Director Prof. Marti G. Subrahmanyam, Independent Director Ms. Rama Bijapurkar, Independent Director Mr. Vinod Kumar Dhall, Independent Director Mr. Sridar Iyengar, Independent Director Mr. Sandeep Bakhshi, Managing Director & CEO Mr. Puneet Nanda, Executive Director Mr. Madhivanan Balakrishnan, Executive Director

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ICICI PRUDENTIALS PRODUCTS

Insurance solution for individuals.. ICICI Prudential Life Insurance offers a range of innovative, customer-centric products that meet the needs of customers at every life stage. Its 17 products cab is enhanced with up to 6 riders, to create a customized solution for each policyholder.

Savings Solutions.. Secure Plus is a transparent and feature-packed savings plan that offers 3 levels of protection. Cash Plus is a transparent, feature-packed savings plan that offers 3 levels of protection as well as liquidity options. Save n Protect is a traditional endowment savings plan that offers life protection along with adequate returns. Cash Back is an anticipated endowment policy ideal for meeting milestone expenses like a childs marriage, expenses for a childs higher education or purchase of an asset.

Protection Solutions. LifeGuard is a protection plan, which offers life cover at very low cost. It is available in 3 coupons level term assurance, level term assurance with return or premium and single premium.

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Child Solutions. Smart kid child plans provide guaranteed educational benefits to a child along with life insurance cover for the parent who purchases the policy. The policy is designed to provide money at important milestones in the childs life. SmartKid child planed are also available within unit-linked form both single premium and regular premium.

Market-linked Solutions LifeLink is a single premium Market Linked Insurance Plan, which combines life insurance cover with the opportunity to stay, invested in the stock market. Life Time offers customers the flexibility and control to customize the policy to meet the changing needs at different life stages. It offers 3 investment options Growth Plan, Income plan and Balance plan.

Retirement Solutions Forever Life is a retirement products targeted at individual in there thirties. Secure Plus Pension is a flexible pension plan that allows one to select between 3 levels of cover.

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Market-linked retirement products Life Time Pension is a regular premium market-linked pension plan. Life Link Pension is a single premium market linked pension plan. ICICI Prudential also launched Salaam Zindagi, a social sector group insurance policy targeted at the economically underprivileged sections of the society.

Group Insurance Solutions ICICI Prudential also offers Group Insurance Solutions for companies seeking to enhance benefits to their employees.

Group Gratuity Plan ICICI Prus group gratuity plan helps employers fund their statutory gratuity obligation in a scientific manner. The plan can also customize to structure schemes that can provide benefits beyond the statutory obligations.

Group Superannuation Plan ICICI Bank offers flexible defined contribution superannuation scheme to provide a retirement kitty for each member of the group. Employees have the option of choosing from various annuity options or opting for partial commutation of the annuity at the time of retirement.

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Group Term Plan

Group Term Plan ICICI Prus flexible group term solution helps provides affordable cover to members of group. The cover could be uniform or based on designation/rank or a multiple of salary. The benefit under the policy is paid to the beneficiary nominated by the member on his/her death.

Flexible Rider Options ICICI Pru Life offers flexible riders, which can be added to the basic policy at marginal cost, depending on the specific of the customer.

Accident & disability benefit: If death occurs as the result of an accident during the term of the policy, the beneficiary receives an additional amount equal to the sum assured under the policy. If the death occurs while traveling in an authorized mass transport vehicle, the beneficiary will be entitled to twice the sum assured as additional benefit.

Accident benefit: This rider option pays the sum assured the rider on death due to accidents.

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Critical Illness Benefit: protects the insured against financial loss in the event of 9 specified critical illnesses. Benefits are payable to the insured for medical prior to death.

Major Surgical Assistance Benefits: provides financial support in the event of medical emergencies, ensuring that benefits are payable to the life assured for medical expenses Incurred for surgical procedures. Cove is offered against 43 different surgical procedures.

Income Benefit: This rider pays the 10% of the sum assured to the nominee every year, till maturity, in the event of the death of the life assured. It is available on SmartKid, SecurePlus and Cashplus.

Waiver of Premium: In Case of total and permanent due to an accident, the premiums are waived till maturity. This rider is available with SecurePlus and CashPlus.

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INTRODUCTION TO FINANCE MANAGEMENT

Financial management, as an academic discipline, has undergone fundamental changes in its scope and coverage. In the early years of its evolution it was treated synonymously with the raising of funds. In the current literature pertaining to financial Management, a broader scope so as to include, in addition to procurement of funds, efficient use of resources is universally recognized. Similarly, the academic thinking as regards the objective of financial management is also characterized by a change over the years. Financial management, as an integral part of overall management, is not a totally independent area. It draws heavily on related disciplines and fields of study, such as economics, accounting, marketing, production and quantitative methods. Although these disciplines are interrelated, there are key differences among them. The relationship between finance and accounting, conceptually speaking, has two dimensions: (1) They are closely related to the extent that accounting is an important input in financial decision-making and (2) There are key differences in viewpoints between them. The viewpoint of accounting relating to the funds of the firm is different from that of finance. The measurement of funds (income and expenses) in accounting is based on the accrual principle/system. Capitalization and Capital Structure: Capital structure can affect the value of a company by affecting either its expected earnings or the cost of capital, or both. While it is true that financing-mix cannot affect the total operating earnings of a firm, as they are determined by the investment decisions, it can affect the share of earnings belonging to the ordinary shareholders. The capital structure decision can influence the value of the firm through the earnings available to the shareholders. But the leverage can largely influence the value of the firm

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through the cost of capital. In exploring the relationship between leverage and value of a firm the relationship between leverage and cost of capital from the standpoint of valuation. The importance of an appropriate capital structure is, thus, obvious. There is a viewpoint that strongly supports the close relationship between leverage and value of a firm. There is an equally strong body of opinion, which believes that financing-mix or the combination of debt and equity has no impact on the shareholders wealth and the decision on financial structure is irrelevant. In other words, there is nothing such as optimum capital structure. Capital structure theories are based on certain assumptions, they are: [1] [2] [3] [4] [5] There are only two sources of funds used by a firm: perpetual risk less debt and ordinary shares. There are no corporate taxes. This assumption is removed later. The dividend-payout ratio is 100. That is, the total earnings are paid out as dividend to the shareholders and there are no retained earnings. The total assets are given and do not change. The investment decisions are, in other words, assumed to be constant. The total financing remains constant. The firm can change its degree of leverage (capital structure) either by selling shares and use the proceeds to retire debentures or by raising more debt and reduce the equity capital. The operating profits (EBIT) are not expected to grow. All investors are assumed to have the same subjective probability distribution of the future expected EBIT for a given firm. Business risk is constant over time and is assumed to be independent of its capital structure and financial risk. Perpetual life of the firm.

[6] [7] [8] [9]

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Leverage Analysis: A firm can make use of different sources of financing whose costs are different. These sources may be, for purposes of exposition, classified into those that carry a fixed rate of return and those on which the returns vary. The fixed returns on some sources of finance have implications for those who are entitled to a variable return. Thus, since debt involves the payment of a stated rte of interest, the return to the ordinary shareholders is affected by the magnitude of debt in the capital structure of a firm. The employment of an asset or source of funds for which the firm has to pay a fixed cost or fixed return may be termed as leverage. Consequently, the earnings available to the shareholders as also the risk are affected. If earnings les the variable costs exceed the fixed cost, or earnings before interest and taxes exceed the fixed return requirement, the leverage is called favorable. When they do not, the result is unfavorable leverage. There are 2 types of leverage- operating and financial. The leverage associated with investment (asset acquisition) activities is referred to as operating leverage, while leverage associated with financing activities is called financial leverage. While we are basically concerned with financial leverage for purposes of the financing decision of a firm, the discussion of operating leverage is to serve as a background to the understanding of financial leverage because the two types of leverage are closely related. Operating leverage is determined by the relationship between the firms sales revenues and its earnings before interest and taxes (EBIT). The earnings before interest and taxes are also generally called as operating profits. Financial leverage represents the relationship between the firms earnings before interest and taxes (operating profits) and the earnings available for ordinary shareholders. The operating profits (EBIT) are thus, used as the pivotal point in defining operating and financial leverage. In a way, operating and financial leverage represents two stages in the process of determining the earnings available to the equity shareholders and, Apart from the elaboration of the return-risk implications, their combined effect has also been discussed.

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Operating leverage results from the existence of fixed operating expenses in the firms income stream. The operating leverage may be defined as the firms ability to use fixed operating costs to magnify the effects of changes in sales on its earnings before interest and taxes. Operating leverage occurs any time a firm has fixed costs that must be met regardless of volume. We employ assets with fixed cost in the hope that volume will produce revenues more than sufficient to cover all fixed and variable costs. In other words, with fixed costs, the percentage change in profits accompanying a change in volume is greater than the percentage change in volume. This occurrence is known as operating leverage. Financial leverage relates to the financing activities of a firm. The sources from which funds can be raised by a firm, from the point of view of the cost/charges, can be categorized into [1] those which carry a fixed financial charge, and [2] those which do not involve any fixed charge. The sources of funds in the first category consist of various types of long-term debt, including bonds, debentures, and preference shares. Long-term debts carry a fixed rate of interest which is a contractual obligation for the firm. Although the dividend on preference shares is not a contractual obligation, it is fixed charge and must be paid before anything is paid to the ordinary shareholders. The equity shareholders are entitled to the remainder of the operating profits of the firm after all the prior obligations are met. Financial leverage results from the presence of fixed financial charges in the firms income stream. These fixed charges do not vary with the earnings before interest and taxes (EBIT) or operating profits. Capital Budgeting: Capital budgeting decision pertains to fixed/long-term assets which by definition refer to assets which are in operation, and yield a return, over a period of time, usually, exceeding one year. They therefore, involve a current outlay or series of outlays of cash resources in return for an anticipated flow of future benefits. In other words, the system of capital budgeting is employed to evaluate expenditure decisions which involve current outlays but are likely to produce benefits over a period of time longer than one year. These benefits

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may be either in the form of increased revenues or reduced costs. Capital expenditure management, therefore, includes addition, disposition, modification and replacement of fixed assets. Capital budgeting decisions are of paramount importance in financial decision-making. In the first place, such decisions affect the profitability of a firm. They also have a bearing on the competitive position of the enterprise mainly because of the fact that they relate to fixed assets. The fixed assets represent, in a sense, the true earning assets of the firm. They enable the firm to generate finished goods that can ultimately be sold for profit. The current assets are not generally earning assets. Rather, they provide a buffer that allows the firms to make sales and extend credit. True, current assets are important to operations, but without fixed assets to generate finished products that can be converted into current assets, the firm would not be able to operate. Further, they are strategic investment decisions as against tactical- which involve a relatively small amount of funds. Therefore, such capital investment decisions may result in a major departure from what the company has been doing in the past. Acceptance of a strategic investment will involve a significant change in the companys expected profits and in the risks to which these profits will be subject. Working Capital Management: Working capital management is concerned with the problems that arise in attempting to manage the current assets, the current liabilities and the interrelationship that exists between them. The term current assets refer to those assets which in the ordinary course of business can be, or will be, converted into cash within one year without undergoing a diminution in value and without disrupting the operations of the firm. The major current assets are cash, marketable securities, accounts receivable and inventory. Current liabilities are those liabilities which are intended, at their inception, to be paid in the ordinary course of business, within a year, out of the current assets or earnings of the concern. The basic current liabilities are accounts payable, bills payable, bank overdraft, and outstanding expenses.

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The goal of working capital management is to manage the firms current assets and liabilities in such a way that a satisfactory level of working capital, it is likely to become insolvent and may even be forced into bankruptcy. The current assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of safety. Each of the current assets must be managed efficiently in order to maintain the liquidity of the firm while not keeping too high a level of any one of them. Each of the short-term sources of financing must be continuously managed to ensure that they are obtained ad used in the best possible way. The interaction between current assets and current liabilities is, therefore, the main theme of the working capital management. Receivables Management: The receivables represent an important component of the current assets of a firm. The receivables are defined as debt owned to the firm by customers arising from sale of goods or services and in the ordinary course of businesses. When a firm makes an ordinary sale of goods or services and does not receive payment, the firm grants trade credit and creates accounts receivable, which could be collected in the future. Receivables management is also called trade credit management. Thus, accounts receivables represent an extension of credit to customers, allowing them a reasonable period of time in which to pay for the goods received. The sale of goods on credit is an essential part of the modern competitive economic systems. In fact, credit sales and, therefore, receivables are treated as a marketing tool to aid the sale of goods. The credit sales are generally made on open account in the sense that there are no formal acknowledgements of debt obligations through a financial instrument. As a marketing tool, they are intended to promote sales and thereby profits. However, extension of credit involves risk and cost. Management should weigh the benefits as well as cost to determine the goal of receivables management. The objective of receivables management is to promote sales and profits until point is reached where the return on investment in further funding receivables is less than the cost of funds raised to finance that

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additional credit (i.e. cost of capital). The specific costs and benefits, which are relevant to the determination of the objectives of receivables management, are: o o o o o Cost Collection cost Capital cost Delinquency cost Default cost

Dividend policy: Dividend refers to that portion of a firms net earnings which are paid out to the shareholders. Since dividends are distributed out of profits, the alternative to the payment of dividends is the retention of earnings/profits. The retained earnings constitute an easily accessible important source of financing the investment requirements of firms. There is, thus, a type of inverse relationship between retained earnings and cash dividends. Larger the retention, lesser dividends, and smaller retentions, larger dividends. Thus, the alternative uses of the net earnings-dividends and retained earnings-are competitive and conflicting. A major decision of financial management is the dividend decision in the sense that the firm has to choose between distributing the profits to the shareholders and plugging them back into the business. The choice would obviously hinge on the effect of the decision on the maximizing present values; the firm should be guided by the consideration as to which alternative use is consistent with the goal of wealth maximization. That is, the firm would be well advised to use the net profits for paying dividends to the shareholders if the payment will lead to the maximization of wealth of the owners. If not, the firm should rather retain them to finance investment programes. The relationship between dividends and value of the firm should, therefore, be the decision criterion.

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There are however, conflicting opinions regarding the impact of dividends on the valuation of a firm. According to one school of thought, dividends are irrelevant so that the amount of dividends paid has no effect on the valuation of a firm. On the other hand certain theories consider the dividend decision as relevant to the value of the value of the firm measured in terms of the market price of the shares. The crux of the argument supporting the irrelevance of dividends to valuation is that the dividend policy of a firm is a part of its financing decision. As a part of the financing decision, the dividend policy of the firm is a residual decision and dividends are a passive residual. If the dividend policy is strictly a financing decision, whether dividends are paid out of profits, or earnings are retained, will depend upon the available investment opportunities. It implies that when a firm has sufficient investment opportunities, it will retain the earnings to finance them. Conversely, if acceptable investment opportunities are inadequate, the implication is that the earnings would be distributed to the shareholders. The test of adequate acceptable investment opportunities is the relationship between the return on investments and the cost of capital. As long as investments exceed cost of capital, a firm has acceptable investment opportunities. In other words, ifs firm can earn a return higher tan its cost of capital; it will retain the earnings to finance investment projects. If the retained earnings fall short of the total funds required, it will raise external funds-both equity and debt-to make up the shortfall.

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List of Assets Management Companies and their assets under management As on June 2008 (In Crores.)
Particulars Diversified Tax Planning Index Sector Total Equity FMP MIP Debt ST Income Total Debt Balanced Gilt LT Gilt ST Total Gilt Liquid Total ICICI PRUDENTIAL 1593.8546 47.9336 2.0978 179.0116 2107.78 1551.236 823.2623 479.4336 3778.4525 6932.384 469.6412 412.9397 150.5677 563.5074 6961.6842 17095..89

(Above Table showing Acquisition and Utilization of fund of ICICI PRUDENTIAL)

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Fund Manager does utilization of fund, ICICI PRUDENTIAL AMC has variety of scheme and each scheme has different Fund Manager who is responsible of investing money into market and also responsible to give return to investors.

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RATIO ANALYSIS Growth Fund Ratio Current ratio Formula Current asset/curren t liability Total profit/unit capital Div. paid/unit capital 2008 2438.37/1818.15=1.34 2007 1275.46/1066.90=1.1 9 14126.20/9981.01=1. 41

EPS Div payout to unit holders Div. payout Div. to total income

23311.45/7700.63=3.02

941.81/7700.63=0.12(12%)D 621.86/9981.01=0.62 iv. paid/unit capital (6.2%) 621.86/14126.20=0.0 4(4%) 717.53/14882.68=0.4 8(4.8%)

Div. paid/net 941.81/23311.45=0.04(4%) profit Dividend/tot 428.45/18041.54=0.24(2.4% al income )

Profit on sales Profit/sales redemptio redemption n to total income

13834.17/18041.54=0.77(77 %)

12074.52/14882.68= 0.81(81%)

(Above Table Showing - Ratio analysis of ICICI PRUDENTIAL AMC)

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Marketing Yesterday and Today

Today the definition of marketing has been changed. The marketing activity of an organization before the product is produced and continues even after the product is sold. In the buyer market of recent times the sharpest weapon that a company can develop is globalize marketing place in the value creation and delivery. The proud and demanding customer of today brings before corporate a critical fact, when the customer is jury. It is the value generation for the customer that will separate the victor from vanquished. The value of customer service cascades all over the company. The aim of customer focus is not just satisfaction but delight satisfaction. Till the year 1999 the life insurance business was exclusively conducted by the Life Insurance Corporation (LIC) while the general insurance business in India, was exclusive by General Insurance Corporation and its four subsidiaries. The insurance sector is opened for private participation since November, 2000. Before 1999 there was no marketing done by LIC due to its monopoly but now after 5 years the picture has changed. Now there are private players in market. With the effective marketing techniques the private players has changed the whole scenario of the insurance sector. They are slowly and gradually driving the business out of the hands of the LIC. Before 1999 customer had no option other then LIC, but now they have got many options. This is the significant change in insurance industry. Now the customer is back in the center state. All the companies are trying to please the customer with the innovative schemes and better service.

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RELATIONSHIP MARKETING IN INSURANCE

Introduction It is five times more expensive to acquire a new customer than to retain an old one. Relationship marketing is the practice of building long term satisfying relationship with key parties customers and suppliers. They accomplish this by promoting and delivering high quality, goods, services, and fair prices to other parties overview. Relationship marketing results in strong economic, technical and social ties among the parties. Definition of Relation Marketing: Relationship marketing can be defined as the process to identify, establish, maintain and other stakeholders at a profit so that the objective of all parties involved are net and this is done by mutual exchange and fulfillment of promises. The important objectives of relationship marketing to acquire new customers maintain and enhance relationship with existing customers, reactivities of ex-customers and handling of customer terminations. The key objective of relationship marketing is to establish one to one relationship with all the customers. This may have sound like a day dream few dream few years ago but thanks to the technological breakthrough and technological solution providers, it is very much of a reality.

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How to add value through relationship Marketing

Identify loyal customers Recognize their special needs Provide special reward for loyalty Establish continuing relationship Ensure increase in customer value

Relationship marketing is one of the hottest tread in the present marketing scenario. Satisfied customers not only stay with a company but they are also walking talking advertisement for the companys product.

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OPERATION DEPARTMENT The Operation department oils the work processes between the customer and company to ensure consistent and quality service to the customer. To streamline the operations, the operations department interfaces between the clients and the agents, the branches and the under writers, and manages work processes.

The vision at customer service Vision of the company is to deliver World Class Service at every opportunity. Units such as the 9 to 9 contact centre, out bound call centre, customer care. And query reduction unit are all committed across the country. ICICI Prudential has one of the largest distribution networks amongst private life insurers in India, having commenced operations in 58 cities and towns in India. These are.. Agra, Jalandhar, Ajmer, Amritsar, Aurangabad, Bangalore, Bhopal, Calicat, Chandigrah, Chennai, Coimbatur, Dehradun, Gurgaon, Hyderabad, Hubli, Indore, Jaipur, Jalandhar, Jamnagar, Kanpur, karnal, Kochi, Kolkatta, Kota, Kolhapur, Kottayan, Lucknow, Ludhiana, Madurai, Mangalore, Meerut, Mumbai, Nagpur, Nashik, Noida, New Delhi, Patiala, Pune, Raipur, Rajkot, Ranchi, Surat, Thane, Thrissur, Trichy, Trivendrum, Udaipur, Vadodara, Vashi, Vijayawada and Vizag. The Company has twelve banc assurance tie-ups having agreements with ICICI Bank, Federal Bank, South Indian Bank, Bank of India, Lord Krishna Bank, Punjab and maharastra Co-Operative Bank, Goa State Co-operative Bank, Indoor Paraspar Sahakari Bank, Manipal State Co-Operative and Jalgaon Peoples Co-Operative Bank, as well as some corporate agents. It has tie-up with organizations like Dhan for Distribution of Salaam Zindgi, a Policy for the socially and economically underprivileged sections of society.

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ICICI Prudential has recruited and trained over 32000 insurance advisors to interface with and advice customers. Further, it leverages is Stateof the art IT infrastructure to provide superior quality of service to customer. The Operation Department of ICICI Prudential delivers the following services to the customers such as: Out Bound Call Centre Customer Care Query Resolution Unit Policy Login Process 9 to 9 Contact Centre

Role of Information Technology in Operation Department: The Information Technology function at ICICI Prudential is committed to enables business through the use of technology. It is segmented into 4 groups to enable highest levels of delivery to the customers: Life Asia Solutions Group that provides flexibility in designing better product offering to end-users, the Solutions Group- Web that provides real-time information to customers and is responsible for customer relationship management, IT Architecture and Corporate Solutions Group is in charge of developing and maintaining a blueprint for the IT Architecture for the enterprise as a whole. This team works as an in house R & D Solution Group, exploring new technological initiatives and also caters to information needs of corporate functions in the organizations. IT Infrastructure group is responsible for providing hardware, software, network services to the whole organization. This group runs the Digital Nervous System of the Enterprise at the highest levels of efficiency and provide robust, scalable and highly available platform for development of business application. With the help of Information Technology, an advisor and managers can login the policy fro any of the offices of ICICI Prudential Ltd. And also with the help of IT any employee or management can know any information, any thing

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about the policy, advisors record, any branchs sales, any new schemes, any managers record, and other thins at any time any place.

HUMAN RESOURCE MANAGEMENT DEPARTMENT

Introduction to HRM: Human resource management is a management function that helps managers recruit, select, train and develops members for an organization. HRM is concerned with the peoples dimension in organization. Manpower or human resource may be thought of as the total knowledge, shills, creative abilities, talents and aptitudes of an organizations work force, as well as the values, attitudes and benefits of an individual involved. It is the sum total of inherent abilities, acquired knowledge and shills represented by the talents and aptitudes of the employed persons. Of all the Ms in management (i.e. the management of materials, machines, methods, money, motive power), the most important m for men or human resources. It is the most valuable asset of an organization, and not the money or physical equipment. It is in fact an important economic resource, covering all human resources- organized or unorganized, employed or capable of employment, working at all levels- supervisors, executives, government employees, blue and white' collar workers, managerial, scientific, engineering, technical, skilled or unskilled persons, who are employed in creating, designing, developing, managing and operating productive and service enterprises, and other economic activities. Human resources are utilized to the maximum possible extent in order to achieve individual and organizational goals. And organizations performance and resulting productivity are directly proportional to the quantity of its human resources

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Organization Structure: Organization is a group of people working together cooperatively under authority toward achieving goals and objectives that mutually benefit the participants and the organization. A well-known author of HRM Allen says the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing relationships for the purpose of enabling people to work most effectively together in establishing of objectives The essence of this definition is that people who work together require a defined system or structure through which they relate to each other and through which their efforts can be coordinated. Every organization has goals or objectives for its existence. In the case of Personnel Management, it is to optimize the effectiveness of human resources. These goals can be achieved more suitably if the behavior of the workers and the composition of the organization can be predicted and integrated cooperatively. The formal organization structure attempts to give order and unity to the actions and efforts of those who work together. An organization tries to establish an effective behavioral relationship among selected employees and in selected work places in order that a group may work together effectively. There are three kinds of work which must be performed whenever an organization comes into being: Division of labor Combination of labour and Coordination

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The organization structure at ICICI web trade is somewhat like this:

C.E.O. Ms. Sandeep Bakhshi

Board of Directors

National Head (at Mumbai-branch) Area manger/ In charge of Project at Jalandhar (Navin Aggarwal)

Assistant unit manager (Miss Pinki Gupta)

Sales Executive

Sales Executive

Sales Executive

Sales Executive

In any organization there is what is termed a hierarchy, refers to various levels of authority in an organization, ranging from the Board of Directors at the top to the sales executives at the bottom.

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Human Resource Planning: Human resource planning can be explained as the process by which a management determines how an organization should move from its current manpower position to its desired manpower position. Through planning, a management strives to have the right number and right kind of people at the right places, at the right time to do things which result in both the organization and the individual receiving the maximum long-range benefit. Coloman has defined human resource or manpower planning as the process of determining manpower requirements and the means for meeting those requirements in order to carry out the integrated plan of the organization. Stainer defines HRM as Strategy for the acquisition, utilization, improvement, and preservation of an enterprises human resources. It relates to establishing job specifications or the quantitative requirements of jobs determining the number of personnel required and developing sources of manpower. Human resources planning are a double-edged weapon. If used properly, it leads to the maximum utilization of human resources, reduces excessive labor turnover and high absenteeism; improves productivity and aids in achieving the objectives of an organization. Faultily used, it leads to disruption in the flow of work, lower production, less job satisfaction, high cost of production and constant headaches for the management personnel. Therefore, for the success of an enterprise, human resource planning is a very important function, which can be neglected only at its own peril. It is as necessary as planning for production, marketing, or own peril. It is as necessary as planning for production marketing, or capital investment.

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Recruitment Sources: Human resource planning helps to determine the number and type of people an organization needs. Job analysis and job design specify the tasks and duties of jobs and the qualifications expected from prospective jobholders. The next logical step is to hire the right number of people of the right broad groups of activities. Recruitment forms the first stage in the process which continues with selection and ceases with the placement of the candidate. It is the next step in the procurement function, the first being the manpower planning. Recruiting makes it possible to acquire the number and types of people necessary to ensure the continued operation of the organization. Recruiting is the discovering of potential applicants for actual or anticipated organizational vacancies. In other words, it is linking activity bringing together those with jobs and those seeking jobs. As Dale Yoder and other point out: Recruitment is a process to discover the sources of manpower to meet the requirements of the staffing schedule and to employ effective measures for attracting that manpower in adequate numbers to facilitate effective selection of an efficient working force. Accordingly, the purpose of recruitment is to locate sources of manpower to meet job requirements and job specifications. Recruitment has been regarded as the most important function of personnel administration, because unless the right types of people are hired, even the best plans, organization charts and control systems would not do much good. Flippo views recruitment both as positive and negative activity. He says it is a process of searching for prospective employees and stimulating and encouraging them to apply for jobs in an organization. It is often termed positive in that it stimulates people to apply for jobs to increase the hiring ratio i.e. the number of applicants for a job. Selection, on the other hand tends to be negative because it rejects a good member of those who apply, leaving only the best to be hired.

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MANPOWER PLANNING AT ICICI PRUDENTIAL

Human Resource Planning is the process by which an organization ensures that it has the right number and kind of people, at the right place, at the right time, capable of effectively and efficiently competing those tasks that will help the organization achieve its overall objectives. Human Resource Planning translates the organizations objectives and plans into the number of workers meet those objectives. Without a clear-cut planning, estimation of an organizations human resource need is reduced to mere guesswork. ICICI PRUDENTIAL Asset Management Company considers several factor in HRP are strategy of company, organization planning about new schemes, environment uncertainties, time horizons, and nature of jobs being filled. By considering these entire factors it helps to ICICI PRUDENTIAL to coping with change, creates highly talented personnel, and helps to determine futures needs. Manpower planning is needed with respect to persons who can work as sub-broker for the companies. Companies focused on Insurance Advisor and post office agent, Tax consultants and CAs for making sub-broker. ICICI PRUDENTIAL AMC Forecast HR Demand it estimates the future quantity and quality of people required. It uses forecasting technique that is Management Judgment that involves bottom-up or top-down approach. After forecasting company forecast about HR supply that may be from Existing human resource, internal sources or External sources.

RECRUITMENT: The upper level members like zonal managers, regional managers, branch managers and senior executives are recruited. The regional manager has authority to select lower level employee like peon, marketing executives, financial accountant etc. by approval of zonal manager.

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ICICI PRUDENTIAL AMC recruits through following sources: Internal Sources: Present Employees Employee Referrals Previous Applicants External Sources: Advertisement Campus interview Consultants Walk-ins

SELECTION: Selection is a process to select a fixed number of personnel from a large number of applicant received by employees, seeking the job and selecting those who suitable for the given job selection includes a number of steps. The purpose of selection is to pick up the right person for every job. A scientific procedures of selection, requires 2 things: 1. Knowledge regarding the qualities which a person should posses in order to do the given job properly 2. The evaluation of qualities possessed by a candidate for the job. Prudential ICICI has adopted the following steps for selection procedure:

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PRELIMINARY INTERVIEW: The main purpose of preliminary interview is to screen out those who are unsuitable. Those interviews are quite short. If candidates are found suitable then an application blank may be given to him to fill up and return. In ICICI PRUDENTIAL AMC regional manager first interviews candidates, and if selected than he is interviewed by zonal manager & if he is found suitable than an application blank is given to them.

APPLICATION BLANK: Here the applicants are asked to complete a blank that provides space for him to record data relating to the name of candidates, experience etc. The application blank must not be too lengthy. In Pru ICICI AMC this application blank is forwarded to Mumbai branch to hr department.

INTERVIEW: After the application blank reaches to the HR Department Mumbai, a telephonic interview is conducted by HR Manager to see that the regional manager & zonal manager has made the right choice or not.

MEDICAL CHECK UP: If the candidates clears all the above stages, company checks his medical report the basic purpose of medical check-up is to determine the job for which candidate is fit or not.

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REFRENCES: Checking of references is an important part of selection process. The company prefers to select the candidate within the group or if the candidate gives the name of reputed person as his references.

FINAL SELECTION: If the candidate passes successfully from the above stages he is finally selected for the post. The final selection lies with the regional manager.

PLACEMENT: The last stage in selection process is the placement of candidate. After the final selection is done, the selected candidate is finally placed on the job.

TRAINING: THERE ARE TWO TYPES OF TRAINING PROGRAMS: ON THE JOB TRAINING OFF THE JOB TRAINING Continuous training and upgrading technical, behavioral and managerial skills is a way of life in ICICI PRUDENTIAL AMC. ICICI PRUDENTIAL AMC encourages agent or sub-broker to hone their skills regularly to enable them to face the challenges of the changing requirements of customers that fit market up and down. Training needs analysis is done on a regular basis and systematic methodologies are ensured that skills and capabilities of all agents are constantly upgraded to enable them to perform in the challenging work. There

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is special training session at regular time period in local branch to all financial consultant and agents about new scheme and to improve their effectiveness.

PERFORMANCE APPRAISAL

It is the systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for development.

Objective of Performance appraisal if for Developmental uses for agents and Financial Consultants, for wages, transfer, promotion, for documentation and for organizational purpose like Human Resource Planning, Job analysis and for training and development.

ICICI PRUDENTIAL first set the objective of performance appraisal then in establish job expectation and then decide whose performance should be rated and who the raters are. Basically raters are immediate supervisor, subordinates, peers, clients. For Performance Appraisal modern method is used like MBO (Management by Objectives) and 360 appraisal. But there is some limitation like Hello effect, Bias, Perception factor, Spill over etc

Selection Methods: The selection procedure is concerned with securing relevant information about an applicant. This information is secured in a number of steps or stages. The objective of selection process is to determine whether an applicant meets the qualifications for a specific job and to choose the applicant who is most likely to perform well in that job.

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The hiring procedure is not a single act but it is essentially a series of methods or steps or stages by which additional information is secured about the applicant. At each stage, facts may come to light which may lead to the rejection of the applicant. A procedure may be compared to a series of successive hurdles or barriers which an applicant must cross. These are intended as screens, and they are designed to eliminate an unqualified applicant at any point in the process. This technique is including all these hurdles.

Placement & Induction: Placement at ICICI bank is done very critically. The human resources are considered very critical and are said to be main power of the bank. The CEO Mr. K. V. Kamath says, Human capital is very important at ICICI. Training is a big thing; each employee spends at least 69 hours during the year recharging himself. Placement is done on the qualification and merit basis. Generally for the retail banking and other in house jobs placement is done on the basis of the interviews by branch and regional heads. They select only those competent people who are ready to work round the clock and have full dedication towards the bank. Induction is a technique by which a new employee is rehabilitated into the changed surroundings and introduced to the practices, policies and purposes of the organization. In other words, it is a welcoming process-the idea is to welcome a new comer, make him feel at home and generate in him a feeling that his own job, however small, is meaningful and has significance as a part of the total organization. When a new comer joins an organization, he is an utter stranger to the people, work place and work environment. He may feel insecure, shy and nervous. The first few days may be anxious and disturbing ones for him. He may have anxiety caused by not following the usual practices prevalent in the organization, or the haphazard procedures, and lack of information. These may develop discouragement, disillusionment or defensive behavior.

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Induction leads to reduction of such anxieties; dispels the irrational fears present employees and hold colleagues responsible for assisting the new comer so that he may feel confident. ICICI says that, newcomers are to be a part of informal identification of talent apart, there is a formal process. It starts form induction, where newcomers are subject to the OPQ (occupational personality questionnaire). The tests have also been conducted right up to the general manager and senior general manger.

Training and Development: ICICI is a kind of private sector bank where if you are confident and competent then you can get your carrier advancement and development at a very high speed. CEO Mr. K. V. Kamath says, There are several young people in our organization who are on the threshold of making it to the board. He himself has this habit of dropping in unannounced on people tow or three levels below him. It helps him to keep a tab on things and also to find out who is knocking on top management doors. His management by walking about also takes him to the basement, to see that everything is spick and span. He does like to get to the bottom of things. At ICICI executive development programme is more important. Because they believe that if the executives are properly trained, properly motivated and fully focused then they can guide any kind of work force. All those persons who have authority over others and are responsible for their activities and for the operations of an enterprise are managers. In a business organization, the co-ordination and direction of the efforts of others is a major part of the management job. The manager has to deal not only with the staff but also with others outside his own group, and has decided influence on the organization.

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Performance Appraisal policy: Once the employee has been selected, trained and motivated, he is then appraised for his performance. Performance appraisal is the step where the management finds out how effective it has been at hiring and placing employees. If any problems are identified, steps are taken to communicate with the employee and to remedy them. A performance appraisal is a process evaluation an employees performance of a job in terms of its requirements.

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RESEARCH DESIGN & METHODOLOGY

Objectives:

To Study the Brand awareness of the new product i.e. Unit Linked Insurance Plans in Jalandhar City. To know what are the priorities of people of city for making investment in Insurance. To know what are the perception of the consumer about ICICI Prudential Life Insurance Co. To know the standing of the ICICI Prudential Life Insurance Co. in Jalandhar City.

Data Source: The data would be collected from both primary as well as secondary source. Consumers would be asked to fill questionnaires to arrive at the information. Various secondary sources of data as magazines, journal, Internet etc. would also be explored.

Sampling Area: The sampling areas of this research are Jalandhar.

Sampling method: The convenient sampling method was used for this research and the respondents were those who have already taken life insurance policy.

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Sample Size: The size of this research is 50 respondents.

Research Instrument: The research instruments, which was used, for collecting the data is questionnaire.

Method of contact: The method of contact would be personal and direct as this would help to qualify the customers issues while filling up the questionnaire and also helps them if they do not have the knowledge about any insurance plan of the company.

Method of making an approach for Sales: After analyzing the data form the questionnaires the needs of prospects were identified and the best suitable insurance solution was suggested to them accordingly.

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SWOT ANALYSIS

Strengths Flexible Products Partners having experience in different markets of the world. Synergy with existing operations Expertise in the field of insurance Professional management Good Customer service Create a brand name Weakness Low capital base Yet to build strong distribution network Cannot tap rural market Opportunities Untapped market Banks ready to tie up for as a readymade distribution network for a small fee. Threats Large distribution network of LIC Decades of experience and brand name of LIC 5% service tax on investments.

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CONCLUSION

According to the data available from the survey one can conclude that even though the Unit Linked Insurance Plans are very much popular in Metro and semi cities, the product awareness of ULIP is very low among the people of villages/rural areas and at the same time there is a need to create the different image of the company among the people by any means like advertisement, seminars, meetings or by personnel selling.

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BIBLIOGRAPHY

WEBSITE ADDRESS www.bimaonline.com www.licindia.com www.irdaindia.com www.iciciprulife.com MATERIALS LIC literature and brochures ICICI Prudential literature and brochures

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