PROJECT REPORT

ON

“Analysis on Working Capital Management of IDBI

Federal life insurance”

Submitted in Partial Fulfilment for the Award of the Degree of

MASTER OF BUSINESS ADMINISTRATION (MBA)
(BATCH 2018-2020)

Submitted by:
Vaibhav Jain
(Enroll. No:12912303918)

Under the Guidance of:

Ms. Charu Sarin
ASSISTANT PROFESSOR

DELHI INSTITUTE OF ADVANCED STUDIES

(Affiliated to Guru Gobind Singh Indraprastha University)

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ACKNOWLEDGEMENT

I would like to express my gratitude to all those who gave me the possibility to complete this project.
I am deeply indebted to my guide Ms. Charu Sarin from Delhi Institute of Advanced Studies whose help,
stimulating suggestions and encouragement helped me in all the time of research and writing of this
project.
The learning was immense and valuable

Vaibhav Jain
12912303918

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DECLARATION

I hereby declare that the project work entitled “Analysis on Working Capital
Management of IDBI Federal life insurance ” submitted to the Delhi Institute of
Advanced Studies, is a record of an original work done by me under the guidance of  Ms. Charu Sarin,
Assistant Professor DIAS and this project work is submitted in the partial fulfilment of the
requirements for the award of the degree of Master of Business Administration.

I hereby certify that all the endeavor put in the fulfilment of the task are genuine and original to the best
of my knowledge and I have not submitted it earlier elsewhere.

Vaibhav Jain

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 CHAPTER 1:
INTRODUCTION

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Insurance Industry
Insurance in India refers to the market for insurance in India which covers both the
public and private sector organisations .

Insurance is a risk redresser primarily used to protect against an uncertain loss. Insurance
can be called as the risk transfer of a damage or loss, from one body to another, for some
payment.
Insurance is a protective tool against financial losses arising due to an unexpected event.
Insurance companies collect premiums to provide protection against losses. Insurance is
a contract or legal agreement in between two entities.

A company selling insurance is insurer; the purchasing party of the insurance plan is
insured or policyholder. The insurance premium determines the amount of coverage.

For example, in a life insurance, by paying a premium to the insurance company, the
nominee of insured receives a certain amount as compensation on the death or
misshaping of the insured.
Similarly, in car insurance, in case of an accident, the insured person receives the
compensation that depends on the damage. The losses that few suffer are beard by many
how are facing the similar risks by a system.

In other words, Insurance is a contract, represented by a policy, in which an individual

or entity receives financial protection or reimbursement against losses from an insurance
company. The company pools clients' risks to make payments more affordable for the
insured.

Insurance policies are used to hedge against the risk of financial losses, both big and
small, that may result from damage to the insured or her property, or from liability for
damage or injury caused to a third party.

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Life insurance guarantees payment assured (or his nominee) when certain events occur
that are predetermined in the agreement. Payment is only paid when certain conditions
are met that are predefined.
The agreement is valid for payment of the insurance coverage in case of:
 Maturity of the agreement
 Certain predetermined time interval
 Death or misshaping during policy term

HISTORY
In India, insurance has a deep-rooted history, 1818 saw the advent of life insurance
business in India with the establishment of the Oriental Life Insurance Company in
Calcutta. This Company however failed in 1834. In 1829, the Madras Equitable had
begun transacting life insurance business in the Madras Presidency. 1870 saw the
enactment of the British Insurance Act and in the last three decades of the nineteenth
century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were
started in the Bombay Residency. This era, however, was dominated by foreign
insurance offices which did good business in India, namely Albert Life Assurance, Royal
Insurance, Liverpool and London Globe Insurance and the Indian offices were up for
hard competition from the foreign companies.

 
     In 1914, the Government of India started publishing returns of Insurance Companies
in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure
to regulate life business. In 1928, the Indian Insurance Companies Act was enacted to
enable the Government to collect statistical information about both life and non-life
business transacted in India by Indian and foreign insurers including provident insurance
societies. In 1938, with a view to protecting the interest of the Insurance public, the
earlier legislation was consolidated and amended by the Insurance Act, 1938 with
comprehensive provisions for effective control over the activities of insurers.
 
   The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there
were a large number of insurance companies and the level of competition was high.
There were also allegations of unfair trade practices. The Government of India,
therefore, decided to nationalize insurance business.
 
     

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 An Ordinance was issued on 19th January, 1956 nationalizing the Life Insurance sector
and Life Insurance Corporation came into existence in the same year. The LIC absorbed
154 Indian, 16 non-Indian insurers as also 75 provident societies—245 Indian and
foreign insurers in all. The LIC had monopoly till the late 90s when the Insurance sector
was reopened to the private sector.

The history of general insurance dates back to the Industrial Revolution in the west and
the consequent growth of sea-faring trade and commerce in the 17 th century. It came
to India as a legacy of British occupation. General Insurance in India has its roots in the
establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the
British. In 1907, the Indian Mercantile Insurance Ltd. was set up. This was the first
company to transact all classes of general insurance business.

1957 saw the formation of the General Insurance Council, a wing of the Insurance
Association of India. The General Insurance Council framed a code of conduct for
ensuring fair conduct and sound business practices.
 
    In 1968, the Insurance Act was amended to regulate investments and set minimum
solvency margins. The Tariff Advisory Committee was also set up then.
 
    In 1972 with the passing of the General Insurance Business (Nationalisation) Act,
general insurance business was nationalized with effect from 1st January, 1973. 107
insurers were amalgamated and grouped into four companies, namely National Insurance
Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance
Company Ltd and the United India Insurance Company Ltd. The General Insurance
Corporation of India was incorporated as a company in 1971 and it commence business
on January 1sst 1973.
 
     This millennium has seen insurance come a full circle in a journey extending to
nearly 200 years. The process of re-opening of the sector had begun in the early 1990s
and the last decade and more has seen it been opened up substantially. In 1993, the
Government set up a committee under the chairmanship of RN Malhotra, former
Governor of RBI, to propose recommendations for reforms in the insurance sector.The
objective was to complement the reforms initiated in the financial sector. The committee
submitted its report in 1994 wherein , among other things, it recommended that the
private sector be permitted to enter the insurance industry. They stated that foreign
companies be allowed to enter by floating Indian companies, preferably a joint venture
with Indian partners

 
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Following the recommendations of the Malhotra Committee report, in 1999, the
Insurance Regulatory and Development Authority (IRDA) was constituted as an
autonomous body to regulate and develop the insurance industry. The IRDA was
incorporated as a statutory body in April, 2000. The key objectives of the IRDA include
promotion of competition so as to enhance customer satisfaction through increased
consumer choice and lower premiums, while ensuring the financial security of the
insurance market.
 
     The IRDA opened up the market in August 2000 with the invitation for application
for registrations. Foreign companies were allowed ownership of up to 26%. The
Authority has the power to frame regulations under Section 114A of the Insurance Act,
1938 and has from 2000 onwards framed various regulations ranging from registration of
companies for carrying on insurance business to protection of policyholders’ interests.
 
    In December, 2000, the subsidiaries of the General Insurance Corporation of India
were restructured as independent companies and at the same time GIC was converted
into a national re-insurer. Parliament passed a bill de-linking the four subsidiaries from
GIC in July, 2002.
 
     Today there are 31 general insurance companies including the ECGC and Agriculture
Insurance Corporation of India and 24 life insurance companies operating in the country.

MISSION STATEMENT OF IRDAI

 To protect the interest of and secure fair treatment to policyholders.

 To bring about speedy and orderly growth of the insurance industry (including
annuity and superannuation payments), for the benefit of the common man, and to
provide long term funds for accelerating growth of the economy.

 To set, promote, monitor and enforce high standards of integrity, financial

soundness, fair dealing and competence of those it regulates.

 To ensure speedy settlement of genuine claims, to prevent insurance frauds and

other malpractices and put in place effective grievance redressal machinery.

 To promote fairness, transparency and orderly conduct in financial markets

dealing with insurance and build a reliable management information system to
enforce high standards of financial soundness amongst market players.

 To take action where such standards are inadequate or ineffectively enforced

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  To bring about optimum amount of self-regulation in day-to-day working of the
industry consistent with the requirements of prudential regulation.

Duties, powers and functions of IRDAI

 Issue to the applicant a certificate of registration, renew, modify, withdraw,

suspend or cancel such registration.

  Protection of the interests of the policy holders in matters concerning assigning

of policy, nomination by policy holders, insurable interest, settlement of insurance
claim, surrender value of policy and other terms and conditions of contracts of
insurance.

 Specifying requisite qualifications, code of conduct and practical training for

intermediary or insurance intermediaries and agents.

  Specifying the code of conduct for surveyors and loss assessors.

 promoting efficiency in the conduct of insurance business.

 Promoting and regulating professional organisations connected with the insurance

and re-insurance business.

  Levying fees and other charges for carrying out the purposes of this act. 

  Calling for information from, undertaking inspection of, conducting enquiries

and investigations including audit of the insurers, intermediaries, insurance
intermediaries and other organisations connected with the insurance business.

  Control and regulation of the rates, advantages, terms and conditions that may be
offered by insurers in respect of general insurance business not so controlled and
regulated by the tariff advisory committee under section 64u of the insurance act,
1938 (4 of 1938).

  Specifying the form and manner in which books of account shall be maintained
and statement of accounts shall be rendered by insurers and other insurance
intermediaries.

 Regulating investment of funds by insurance companies.

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  Regulating maintenance of margin of solvency.

 Adjudication of disputes between insurers and intermediaries or insurance

intermediaries.

 Supervising the functioning of the tariff advisory committee. 

 Specifying the percentage of premium income of the insurer to finance schemes

for promoting and regulating professional organisations referred to in clause (f). 

 Specifying the percentage of life insurance business and general insurance

business to be undertaken by the insurer in the rural or social sector.

 and exercising such other powers as may be prescribed.

Indian Insurance Sector

The insurance industry has witnessed a major growth in past decade as with the presence
of private companies, the competition level in the market is very high and this has forced
companies to introduce a huge number of advanced products. The companies are not
only promoting their products but the whole concept of insurance in the market, raising
the awareness among the public regarding insurance.
The Indian insurance sector is divided in two categories – Life and Non-life Insurance.
Non- life (general insurance) and covers travel, health, car, bikes, home and many more.
There are 57 insurance companies in Indian market including 24 life and 33 are non-life
companies. This includes seven public sector companies.
Gross premiums in India were Rs 5.53 trillion in FY18, with almost Rs 1.52 trillion from
non- life insurance and Rs 4.57 trillion from life insurance. Overall, insurance premiums
as percentage of GDP in India reached 3.69 % in 2017 from 2.71 % in 2001.
In FY19 (until Jan 2019), premium from new life insurance increased by 3.91 per cent to
Rs1.59 trillion. In FY19 (until Jan 2019), premiums of non-life insurance reached Rs
1.39 trillion, showing a growth rate of 12.65 per cent.
Even though the private companies have entered the insurance market after IRDA act
1999, LIC hails supreme over others with 70 percent of market share while private
companies hold the rest. The market share of private insurance companies have
increased from 28 percent to 30 percent in FY 2017-18, they have a steady increase in

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54.70%
market share over the years but still lag behind. 31.80%

Source: https://www.ibef.org/industry/insurance-sector-india/infographic
15%

2%

FY03 FY19

Share of Private Sector in Life InsuranceShare of Private Sector in Non-Life Insurance

About IDBI Federal Life Insurance Co. Ltd.

IDBI Federal Life Insurance Co Ltd. is a three
way joint-venture of IDBI Bank (48%), Federal bank
(26%) and Ageas (26%). IDBI bank is India’s industrial
development and commercial bank that operates as a
subsidy of Reserve bank of India. Federal Bank is a
private Indian bank with strong customer base in
Southern part of India. Ageas is a Belgian multinational
that is Belgium’s largest insurer and has operations in
14 countries and with over 100 years of experience in insurance sector. IDBI Federal
distributes its products through a multi-channel network consisting of Insurance agents,
Bancassurance partners (IDBI Bank, Federal Bank) Direct channel, and Insurance
Brokers.

HISTORY
In the year 2006, IDBI Bank, Federal Bank and Belgian-Dutch insurance major Fortis
Insurance International NV signed a MOU to start a life insurance company in India. The
company received its license from Insurance Regulatory and Development Authority of
India (IRDAI) in December 2007.
In just five months, IDBI Federal collected Rs 100 Cr in premiums becoming one of the
fastest growing new insurance companies. Through continuous innovations in products
and services, IDBI Federal’s aim is to provide excellent wealth management, protection
and retirement services to provide convenience and value to the customer. IDBI Federal
today is seen as a brand that’s customer centric, with a number of awards and
achievements to their name.
India-Sri Lanka ODI series that took place in October 2009, found a title sponsor in
insurance major IDBI Fortis. The company’s AUM crossed the Rs. 1,000 crore mark for
the first time in March 2010.
In August 2010, the company was rechristened as IDBI Federal Life Insurance
Company. In 2012-13, it declared its maiden profits in record 5 years, thus was one of
the fastest to do so in the industry.

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IDBI Bank Ltd.
IDBI Bank since its inception continuous to be India's prime industrial development
bank. It was established on 1st July 1964 to support India's industrial sector. Today, it is
one of India's elite commercial banks, with a variety of attractive products and services,
providing services to customers in all parts of the country through 1201 branches and
2156 ATMs. The Bank many services to its customers including term lending, project
finance, lease finance, working capital facilities, venture capital, corporate advisory
services, loan syndication and legal and technical advisory services to corporate houses
as well as personal loans and advances to its public. IDBI Bank has played a big role in
financing the development of key financial institutions like National Stock Exchange of
India Limited 0and National Securities Depository Ltd, Credit Analysis and Research
Ltd, Stock Holding Corporation of India Ltd.

Federal Bank
Federal Bank is among India’s private sector banks, with a dominant presence in Kerala.
With a network of over 1,142 branches and 1,312 ATMs across India it has been a game
changer for India’s banking sector. The bank provides financial aid to its base of over
four million customers. Federal Bank is among the first major Indian banks to set up an
completely automated and interconnected branch network.
In addition, the Bank has a variety of services like Mobile Banking, Internet Banking,
Tele Banking, anywhere banking, debit cards, online bill payment and call center
facilities to offer round the clock banking services to its customers. The Bank has been
an inspiration in providing innovative technological solutions to its customers and the
Bank has won several awards and recommendations.

AGEAS
Ageas is a Belgian multinational group with experience of over 180 years in insurance.
Ranked in top 20 companies in Europe for insurance, Ageas chose to focus its business
in European and Asian markets, which together comprise of largest global insurance
market. These markets segregated in four categories: Belgium, UK, Rest of Europe and
Asia and managed through a chain of WOSs and partnerships with strong financial
institutions and key distributors around the globe. Ageas has partnerships in countries
like Belgium, UK, Italy, Luxembourg, Turkey, China, Portugal, India, Thailand, and
Malaysia and has subsidiaries in France, UK and Hong Kong. Ageas dominated the
market for life insurance and employee benefits in Belgium, as well as a dominant non-

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life institution through AG Insurance. In the UK, Ageas has a commanding market base
as the fourth largest company in private car insurance. Ageas has more than 13,000
employees and has annual income of more than EUR 21 billion.

VISION and MISSION of IDBI Federal

Vision:-
To be the leading provider of wealth management, protection and retirement
solutions that meets the needs of our customers and adds value to their lives.

Mission:-

• To continually strive to enhance customer experience through innovative

productofferings, dedicated relationship management and superior service
delivery while striving to interact with our customers in the most convenient
and cost effective manner.
• To be transparent in the way we deal with our customers and to act with integrity.
• To invest in and build quality human capital in order to achieve our mission.

Values:-

• Transparency: Crystal Clear communication to our partners and stakeholders.

• Value to Customers: A product and service offering in which customers
perceive value.
• Rock Solid and Delivery on Promise: This translates into being financially strong,
operationally robust and having clarity in claims.
• Customer-friendly: Advice and support in working with customers and partners.
• Profit to Stakeholders: Balance the interests of customers, partners,
employees, shareholders and the community at large.

Products of IDBI Federal

ENDOWMENT PLAN ULIP

YOUNG STAR FUTURE STAR
LIFE ADVANTAGE SMART GROWTH
GUARANTEED WEALTH

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SWOT Analysis of the Company

Introduction
SWOT analysis is an initials for strengths, weaknesses, opportunities, and threats—
and is a structured planning method that evaluates those four elements of a project or
business venture. A SWOT analysis can be carried out for a product, place, industry, or
person. It involves specifying the objective of the business venture or project and
identifying the internal and external factors that are favorable and unfavorable to
achieve that objective. Some authors credit SWOT to Albert Humphrey, who led a
convention at the
Stanford Research Institute (now SRI International) in the 1960s and 1970s using data
from Fortune 500 companies. However, Humphrey himself does not claim the creation
of SWOT, and the origins remain obscure. The degree to which the internal
environment of the firm matches with the external environment is expressed by the
concept of strategic fit.

 Strengths: Characteristics of the business or project that give it an

advantage over others
• Weaknesses: Characteristics that place the business or project at a
disadvantage relative to others
• Opportunities: Elements that the business or project could exploit to its
advantage
• Threats: Elements in the environment that could cause trouble for the
business or project

Identification of SWOTs is important because they can inform later steps in planning to
achieve the objective. First, decision makers should consider whether the objective is
attainable, given the SWOTs. If the objective is not attainable, they must select a
different objective and repeat the process .

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Strengths
IDBI Federal boasts of its strength, as because of these strengths it has completed its
break even in just a short span-of time whereas its other competitors are still
struggling. The skilled manpower and in-depth knowledge of subjects related to their
industry surely turn table in their favor and they even try to retain and motivate their
employees as they promote within their organization. They generate services
according to the needs and wants of the customer like payment terms and premium to
be made. With the venture of three companies comprising of Ageas, Federal and IDBI
Bank, the image of IDBI is then supported by Federal which is a foreign bank,
therefore, attracting both the NRIs and Indian customers. It has a strong capital as to
deal with future contingencies. They even manage to have low management expenses
and administrative cost.

 8 days claim guaranteed or else 8% return p.a. along with claim amount.
 Crossed accumulated losses.

Weakness
It even has some weaknesses comprising of tele-calling agents as they need more skills
to talk to customers and giving them clearer picture of their queries. The tied-up
agents have poor retention percentage as they mostly do not contribute to the
company.

 Higher premium as compared to other companies.

 Limited presence in rural market due to lack of awareness among rural folk.

 Premiums are not flexible in the first year.

Opportunities
Since it is a dynamic environment, so we need to keep on innovate the product
according to the customers need, offering a right mix of flexibility/ risk/ return.
Educating the customers about the product is a difficult task, so one need to
inflow of managerial and financial expertise from the world’s leading insurance
markets.

 To reduce annual premium to increase market share.

 To penetrate rural market as well as urban population to increase market share

and companies size.

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Threats
There are n numbers of private insurance companies vying for the same uninsured
population. As recently there was rule by IRDA to stop running all the previous
products, and one has to launch all the new products in the market this results in
starting from the niche and then making a brand-name again therefore, legislation
could impact and great risk is involved. There are many substitutes available in the
market which results in very high competition prevailing in the industry. With the
changing in technological, political, economic, socio¬ cultural environment one has to
keep pace with these changing environments and only hence, one can survive in the
industry.

 Competitors in market especially LIC with 70% market share.

 Marketing strategies of different competitors.

 New IRDAI Norms.

BCG Matrix of IDBI Federal

Star Question mark

Young star plan Guaranteed wealth

plan

Life advantage plan

Cash cow Dog

Future star Whole life plan

Stars operate high market share and are very popular among customers. Young Star is
one of the most popular product of IDBI Federal due to its high yield. It is the primary
unit of the company because it is expected to become cash cows and increase cash flow.

Question marks are hold low market share even in growing market and may sometimes
incur losses but have the potential of becoming star or cash cow. Guaranteed Wealth
Plan and Life advantage Plan have the potential to provide benefit to company but their
market share is low

Cash Cows are most profitable units and should be milked to provide rapid benefits.
Future star plan is a cash cow for the company as it generates a considerable amount of
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profit for the company.

Dogs hold low market share and provide low return even in growing market condition.
Whole Life plan was a dog for the company and that is why the company has stopped
selling the plan, as it was neither popular nor profitable.

Working Capital Management

Working capital is a financial metric which represents operating liquidity available to a

business, organisation or other entity, including governmental entities. Along with fixed
assets such as plant and equipment, working capital is considered a part of operating
capital.

The crucial needs for which working capital is required can be mentioned as follows:

 For meeting daily cash requirements of business.

 Paying wages and salaries to its employees on time.

 For meeting its obligations to its creditors

 For paying taxes to the government on time.

 For long term survival of business entity.

Concept of working Capital

 Gross working capital refers to investment in current assets of the firm. Current
assets are the assets that can be converted into cash within one accounting period.
It helps in determining the return on investment of the firm.

Gross working capital = Debtors + Stock + Bills Receivables + Cash

 Net working capital means by how much current assets exceeds current liabilities.
It helps in determining the firm’s capability to pay its short-term liabilities and
expenses.

Net working capital = current assets – current liability

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Working capital is the difference between current assets and current liabilities. Current
assets and current liabilities include four accounts which are of special importance.
These accounts represent the areas of the business where managers have the most direct
impact:

 cash and cash equivalents (current asset)

 accounts receivable (current asset)
 inventory (current asset), and
 accounts payable (current liability)
The current portion of debt (payable within 12 months) is critical because it represents a
short-term claim to current assets and is often secured by long-term assets. Common
types of short-term debt are bank loans and lines of credit.
An increase in net working capital indicates that the business has either increased current
assets (that it has increased its receivables or other current assets) or has
decreased current liabilities—for example has paid off some short-term creditors, or a
combination of both.
The basic calculation of working capital is based on the entity’s gross current assets.
A company can be endowed with assets and profitability but may fall short of liquidity if
its assets cannot be readily converted into cash. Positive working capital is required to
ensure that a firm is able to continue its operations and that it has sufficient funds to
satisfy both maturing short-term debt and upcoming operational expenses. The
management of working capital involves managing inventories, accounts receivable and
payable, and cash.
Working capital management reflects the relationship between short-term assets and
liabilities of the company. The working capital management’s goal is to ensure smooth
operation of company and that it is able to fulfill short-term debt and expenses. Its plays
a significant role in financial management.

Every business needs capital to continue its operation. Working capital can be said to be
the blood of the company and working capital management is necessary to keep the
blood pumping and continue the operation of the firm. Proper working capital
management ensures continuous success and it plays an important role in deciding the
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company’s financial status.

Working capital is computed as the sum of: Inventories (+) Trade receivables (+) Cash
(-) Trade payables. The working capital cycle (WCC), also known as the cash conversion
cycle, is the amount of time it takes to turn the net current assets and current liabilities
into cash. The longer this cycle, the longer a business is tying up capital in its working
capital without earning a return on it.

Companies strive to reduce their working capital cycle by collecting receivables quicker
or sometimes stretching accounts payable. Under certain conditions, minimizing working
capital might adversely affect the company's ability to realize profitability, e.g. when
unforeseen hikes in demand exceed inventories, or when a shortfall in cash restricts the
company's ability to acquire trade or production inputs.
Decisions relating to working capital and short-term financing are referred to as working
capital management. These involve managing the relationship between a firm's short-
term assets and its short-term liabilities. The goal of working capital management is to
ensure that the firm is able to continue its operations and that it has sufficient cash flow
to satisfy both maturing short-term debt and upcoming operational expenses.
A managerial accounting strategy focusing on maintaining efficient levels of both
components of working capital, current assets, and current liabilities, in respect to each
other. Working capital management ensures a company has sufficient cash flow in order
to meet its short-term debt obligations and operating expenses.
 management will use a combination of policies and techniques for the management of
working capital. The policies aim at managing the current assets(generally cash and cash
equivalents, inventories and debtors) and the short-term financing, such that cash flows
and returns are acceptable.

 Cash management: Identify the cash balance which allows for the business to
meet day to day expenses, but reduces cash holding costs.
 Inventory management: Identify the level of inventory which allows for
uninterrupted production but reduces the investment in raw materials—and
minimizes reordering costs-and hence increases cash flow. Besides this, the lead
times in production should be lowered to reduce Work in Process (WIP) and

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 similarly, the Finished Goods should be kept on as low level as possible to avoid
overproduction.
 Debtors management. Identify the appropriate credit policy, i.e. credit terms
which will attract customers, such that any impact on cash flows and the cash
conversion cycle will be offset by increased revenue and hence Return on Capital
(or vice versa); see Discounts and allowances.

 Short-term financing. Identify the appropriate source of financing, given the

cash conversion cycle: the inventory is ideally financed by credit granted by the
supplier; however, it may be necessary to utilize a bank loan (or overdraft), or to
"convert debtors to cash" through "factoring".

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 CHAPTER 2:
LITERATURE REVIEW

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Dr. Azhagaiah Ramachandran and Mr. Muralidharan Janakiraman (2009) have analyse
the relationship between efficiency of working capital management and EBIT of paper
industry in India. They have used performance index, efficiency index and utilization
index to measure the working capital management efficiency. It was observed that
company has performed well during the period. Industry overall efficiency index was > 1
in three out of 9 years for the study period. It is also found that there is negative
relationship between EBIT and cash conversion cycle, which means operational EBIT
dictates how to manage the company’s working capital.

Mr. Lalit Kumar Joshi and Mr. Sudipta Ghosh (2012) studies the performance of
working capital of the Cipla Ltd of 5 Years data from 2004-05 to 2008-09. Their main
objectives were to examine the trend of some performance indicators, examining
working capital performance, studying liquidity position and examining liquidity and
profitability relationship. They have applied different financial ratios and statistical
techniques to working capital performance measurement. It was observed that
performance is satisfactory but the relationship between liquidity and profitability is
negative.

Mr. N. Suresh Babu and Prof. G.V. Chalam (2014) studies the efficiency of Working
Capital Management in Indian Leather Industry. Their objective is to find the
relationship between different conversion cycles with profitability of the company. The
different conversion cycles they have taken is Inventory Conversion Period, Average
Collection Period, Average Payment Period and Cash Conversion Cycle. They have
observed through Regression analysis that there is insignificant positive relationship of
inventory conversion duration and significant positive relationship of average collection
period with profitability of company but there is significant negative relationship of both
average payment period and cash conversion cycle.

Mrs. Poonam Gautam Sharma and Ms. Risham Preet Kaur (2016) made a study on
Working Capital Management and how it impacts profitability of Bharti Airtel during
period from 2006- 07 to 2014-15. Their main objective is to evaluate the performance of
working capital and to check the profitability and liquidity relationship. With the help of
different statistical tools, they concluded that performance of company is not
satisfactory in terms of current ratio and the relationship between liquidity and
profitability of the company is negative.

Minhas Akbar and Ashan Akbar (2016) conducted a study to examine efficiency of
working capital management. Finding of these researches reveals that the firm adopt
more ethical practice in working capital management. The research author have created a
concave relationship between cash conversion cycle and working capital, its square are
positively and negatively related to firm performance respectively
22 | P a g e
Monika wieczorek-Kosmala, Anna Dos, Joanna Blach, and Maria Gorczynska (2016)
recognized liquidity reserve magnitude and its attributes with regard to the data for 2013,
the majority of the examined companies distinguished with a positive liquidity reserves.
About 83% of the selected companies hold the liquidity reserve. It was found that in the
examined company’s sample of financial stability parameters were relevant for the
liquidity reserve, where the changes of assets and capital structure were influential on
relevance of liquidity reserve.

Harsh Pratap Singh studied comprehensive content analysis reveals that most of the
research work is experimental and focuses mainly on two aspects, affect of working
capital upon productivity of firm and working capital practices. Major research work has
done that WCM is necessary for corporate profitability. The major issues with previous
literature are lack of approach that was survey-based and lack of regular theory
development study, which opens all new areas for future research.
Gilbert and Reichert, find that records receivables administration models are utilized as a
part of 59 percent of this organization to enhance working capital tasks. While stock
administration models were utilized as a part of 60% of the organization. All the more as
of late. farragher, kleiman and sahu (1999) find that 55% of firms in the S&P industrial
file finish some type of income evaluation , yet didn’t display bits of knowledge with
records receivable and stock administration ,or the verities of any present resource
records or risk accounts crosswise over commercial ventures.
Weinraub and Visscher (1998), watch an inclination of firms with low levels of current
proportions to additionally have low levels of current liabilities. All the while examining
records receivables and payables issues. Hill, sartorsis and ferguson (1984) discover
contrasts in the way instalment dates are characterized. Payees characterize the date of
instalment as the date of instalment is gotten, while the prayers view instalment as the
date of instalment as the stamp date. Extra WCM understanding crosswise over firms,
commercial enterprise and time can add to this collection of exploration.
Uday Kumar Jagannathan and Jyoti Mahato, examine the working capital
management’s impact on the profitability of the Indian telecom sector. The result of
correlation analysis shows the ROA has a negative relationship with ACP, CCC, ICP
and Current ratio while ROA has positive relationship with APP, Debt ratio and Firm
size. Telecom sector is one of the major sectors in the country. Therefore, the aim of
this paper was to provide some useful suggestions for the individuals responsible for the
management of this sector.

23 | P a g e
Sumathi A and Narasimhaiah Tstudied the effect of working capital management in
profitability of Infosys. They have used several factors like current ratio, debt ratio, cash
conversion cycle, quick ratio, and many more for their paper. The findings were that the
management could increase shareholder’s fund by decreasing the credit period that is
allowed. They suggested that computation of working capital should be done at a level
that is optimum so that it helps the firm to maintain its current assets and current
liabilities to provide better returns to its shareholders.

24 | P a g e
 CHAPTER 3
METHODOLOGY

25 | P a g e
 Research methodology is the specific procedures or techniques used to identify, select,
process, and analyze information about a topic. In a research paper, the
methodology section allows the reader to critically evaluate a study’s overall validity and
reliability. In oter words, Research Methodology is the systematic, theoretical analysis of
the methods applied to a field of study. It comprises the theoretical analysis of the body
of methods and principles associated with a branch of knowledge.

RESEARCH OBJECTIVE OF THE STUDY:-

 To study the overview of background and characteristics of the Insurance sector

in India.
 To study the working capital performance of IDBI Federal.
 To analyze the short-term financing patterns, which affect the working capital of
the organization.

Purpose of research:-

Generally there are three purposes of research:

1. Exploratory: As the name suggests, exploratory research is conducted to explore a

group of questions. The answers and analytics may not offer a final conclusion to the
perceived problem. It is conducted to handle new problem areas which haven’t been
explored before. This exploratory process lays the foundation for more conclusive
research and data collection.

2. Descriptive: Descriptive research focuses on expanding knowledge on current

issues through a process of data collection. Descriptive studies are used to describe the
behavior of a sample population. In a descriptive study, only one variable is required
to conduct the study. The three main purposes of descriptive research are describing,
explaining, and validating the findings.

3. Explanatory: Explanatory research or causal research is conducted to understand the

impact of certain changes in existing standard procedures. Conducting experiments is
the most popular form of casual research. For example, a study conducted to
understand the effect of rebranding on customer loyalty.

26 | P a g e
In this project descriptive research is used for expanding knowledge on current issues
through a process of data collection.

Data can be of two types:-

1) Primary data
2) Secondary data

1. Primary Data → Raw data or primary data is a term for data collected at source.
This type of information is obtained directly from first hand sources by means of
surveys, observations and experimentation and not subjected to any processing or
manipulation and also called primary data.

2. Secondary Data → It refers to the data collected by someone other than the user
i.e. the data is already available and analysed by someone else. Common sources of
secondary data include various published or unpublished data, books, magazines,
newspaper, trade journals etc.

For the purpose of the study secondary data is used.

27 | P a g e
 CHAPTER 4
DATA PRESENTATION
AND
ANALYSIS

28 | P a g e
Working capital shows the financial position of the company that helps investors to
know the financial health of the company. However, two terms called gross working
capital and net working capital are generally used.

Working is calculated when we subtract current liabilities from current assets. If it is

positive, it reflects that the company’s financial health is good and can cover its short-
term debts by selling its short-term assets. The data from the financial reports are
analyzed to know the working capital position of the company and the efficiency and
effectiveness of the management policies.

Financial Ratio Analysis

Financial ratios are financial statement accounts comparison mathematically. These

relationships between the financial statement act as a guide for the investors, creditors,
and company’s management to understand key performance areas of the company and
of areas to improve. Ratios allow the comparison of companies irrespective of their
industry or size, to identify their areas of strengths and weaknesses. Financial ratios can
be characterized into seven main categories: liquidity, solvency, efficiency,
profitability, market prospect, investment advantage, and coverage.

29 | P a g e
 IDBI FEDERAL
Year Current Assets Current Liabilities
2014-15 3,436,895 2,072,070
2015-16 3,946,889 2,133,915
2016-17 5,222,595 2,982,962
2017-18 6,288,733 3,820,571
2018-19 6,311,031 3,105,500

7,000,000

6,000,000

5,000,000

4,000,000
Current Assets(in 000's)
3,000,000 Current Liability(in 000's)

2,000,000

1,000,000

0
2014-15 2015-16 2016-17 2017-18 2018-19

30 | P a g e
STAR UNION DIA-ICHI INSURANCE
Year Current Assets Current Liabilities
2014-15 3,360,078 2,687,404
2015-16 4,648,113 3,996,382
2016-17 4,124,407 2,054,732
2017-18 5,433,445 1,384,213
2018-19 6,988,200 1,267,220

7,000,000

6,000,000

5,000,000

4,000,000
Current Assets(in 000's)
3,000,000 Current Liability(in 000's)

2,000,000

1,000,000

0
2014-15 2015-16 2016-17 2017-18 2018-19

*Net Working Capital = Current Assets – Current Liabilities

31 | P a g e
 IDBI FEDERAL
Year Current Assets Current Liabilities Net Working Capital
2014-15 3,436,895 2,072,070 1,364,825
2015-16 3,946,889 2,133,915 1,812,974
2016-17 5,222,595 2,982,962 2,239,633
2017-18 6,288,733 3,820,571 2,468,162
2018-19 6,311,031 3,105,500 3,205,531

Working capital
3500000

3000000

2500000

2000000 Working capital

1500000

1000000

500000

0
2014-15 2015-16 2016-17 2017-18 2018-19

32 | P a g e
 STAR UNION DIA-ICHI INSURANCE
Year Current Assets Current Liabilities Net Working Capital
2014-15 3,360,078 2,687,404 672,674
2015-16 4,648,113 3,996,382 651,731
2016-17 4,124,407 2,054,732 2,069,675
2017-18 5,433,445 1,384,213 4,049,232
2018-19 6,988,200 1,267,220 5,720,980

Working capital
7000000

6000000

5000000

4000000 Working capital

3000000

2000000

1000000

0
2014-15 2015-16 2016-17 2017-18 2018-19

In case of IDBI Federal, there has been a gradual increase in working capital over the
years as seen in the upward trajectory of the columns.

Whereas in case of Star Union the working capital is increasing for the past two years
but its uneven and which is harmful for the business.

*Current Ratio = Current Assets / Current Liabilities

33 | P a g e
 IDBI FEDERAL

Year Current Assets Current Liabilities Current Ratio

2014-15 3436895 2072070 1.66

2015-16 3946889 2133915 1.85

2016-17 5222595 2982962 1.75

2017-18 6288733 3820571 1.65

2018-19 6311031 3105500 2.03

STAR UNION DIA-ICHI INSURANCE Current Ratio

6

4
STAR UNION DIA-ICHI INSURANCE
Current Ratio
3

0
2014-15 2015-16 2016-17 2017-18 2018-19

34 | P a g e
 STAR UNION DIA-ICHI INSURANCE
Year Current Assets Current Liabilities Current Ratio
2014-15 3360078 2687404 1.25

2015-16 4648113 3996382 1.16

2016-17 4124407 2054732 2.01

2017-18 5433445 1384213 3.93

2018-19 6988200 1267220 5.51

STAR UNION DIA-ICHI INSURANCE Current Ratio

6

4
STAR UNION DIA-ICHI INSURANCE
Current Ratio
3

0
2014-15 2015-16 2016-17 2017-18 2018-19

The numbers are high of Star union but there is more consistency in case of IDBI Federal.

An insurance industry requires a slightly higher current ratio than other industries because of its
risky business undertakings. Here, the current ratio is on increased in the year 2015-16, which is
a positive trend, but at next year, it is slightly decreasing and again it increased in 2018-19.

35 | P a g e
* Quick Ratio = Quick assets / Current Liability

IDBI FEDERAL
Year Quick Assets Current Liabilities Quick Ratio
2014-15 1236932 2072070 0.6
2015-16 1074726 2133915 0.5
2016-17 1618249 2982962 0.54
2017-18 1637837 3820571 0.43

2018-19 1365497 3105500 0.44

IDBI FEDERAL QUICK RATIO

0.70

0.60

0.50

0.40 IDBI FEDERAL QUICK RATIO

0.30

0.20

0.10

0.00
2014-15 2015-16 2016-17 2017-18 2018-19

36 | P a g e
 STAR UNION DIA-ICHI INSURANCE
Year Quick Assets Current Liabilities Quick Ratio
2014-15 1168435 2687404 0.43
2015-16 1099575 3996382 0.28
2016-17 1311023 2054732 0.64
2017-18 1602994 1384213 1.16
2018-19 1174436 1267220 0.93

STAR UNION DAI-ICHI LIFE INSURANCE QUICK RATIO

1.40

1.20

1.00

0.80 STAR UNION DAI-ICHI LIFE

INSURANCE QUICK RATIO

0.60

0.40

0.20

0.00
2014-15 2015-16 2016-17 2017-18 2018-19

Higher quick ratios are favorable for companies because it reflects there are more quick assets
than current liabilities. A company with a quick ratio of one indicates that quick assets equal
current liabilities. This also shows that the company could pay off its current liabilities without
selling any long-term assets. In this case company is not able to cover its current liabilities
through quick assets as quick ratio in the given period i.e. from 2015-2019 is less than one.

While in the case of Star union the company has improved its quick ratio.

37 | P a g e
* Working Capital Turnover Ratio = Net Sales / Net Working capital

IDBI FEDERAL
Year Net sales Net Working Capital WCT
2014-15 1917848 1364825 1.41
2015-16 427821 1812974 0.24
2016-17 605386 2239633 0.27
2017-18 1084125 2468162 0.43
2018-19 1510038 3205531 0.47

IDBI FEDERAL working capital turnover ratio

1.6

1.4

1.2

1
IDBI FEDERAL working capital
turnover ratio
0.8

0.6

0.4

0.2

0
2014-15 2015-16 2016-17 2017-18 2018-19

38 | P a g e
 STAR UNION DIA-ICHI INSURANCE
Year Net sales Net Working Capital WCT
2014-15 582,475 672,674 0.87
2015-16 433,335 651,731 0.66
2016-17 602,601 2,069,675 0.29
2017-18 777,442 4,049,232 0.19
2018-19 1,001,016 5,720,980 0.17

STAR UNION DAI-ICHI LIFE INSURANCE working capital

turnover ratio
1.00
0.90
0.80
0.70 STAR UNION DAI-ICHI LIFE
INSURANCE working capital
0.60 turnover ratio
0.50
0.40
0.30
0.20
0.10
0.00
2014-15 2015-16 2016-17 2017-18 2018-19

For both the companies in the year 2014-15 Working Capital Turnover Ratio is higher
which is showing that company is using less of its assets and inventories for sales but in
years from 2016 onwards company’s working capital turnover ratio is very low which
indicates that company sales is not getting higher which may lead company to an
excessive amount of bad debts, the ratio is increasing after the drop showing chances of
recovery.

39 | P a g e
*Average Collection Period
IDBI FEDERAL
Year Account Recievables Net Sales Average Collection Period
2014-15 605,264 1917848 115.19
2015-16 714,250 427821 609.37
2016-17 746,063 605386 449.82
2017-18 868,510 1084125 292.41
2018-19 742,633 1510038 179.51

Average Collection period

700

600

500

400 Average Collection period

300

200

100

0
2014-15 2015-16 2016-17 2017-18 2018-19

40 | P a g e
 STAR UNION DIA-ICHI INSURANCE
Year Account Recievables Net Sales Average Collection Period
2014-15
280,160 582,475 175.56
2015-16
309,350 433,335 260.57
2016-17
424,180 602,601 256.93
2017-18
901,332 777,442 423.16
2018-19
1,292,999 1,001,016 471.47

STAR UNION DAI-ICHI LIFE INSURANCE Average Collection

period
500.00
450.00
400.00
350.00 STAR UNION DAI-ICHI LIFE
INSURANCE Average Collection
300.00 period
250.00
200.00
150.00
100.00
50.00
0.00
2014-15 2015-16 2016-17 2017-18 2018-19

Star union Dai-ichi have average collection period rising continuously over the years
that means its taking longer to recover its receivables while on the other hand IDBI
Federal is showing a sign of recovery after initial glitch in the years between 2015 and
2017. This shows a sign of competence of its management while its getting worse for
Star union Dai-ichi.

41 | P a g e
*Average Payment Period

IDBI FEDERAL

Year Account Payable Net Sales Average Payment Period

2014-15 36,754 1917848 6.99

2015-16 75,348 427821 64.28

2016-17 60,389 605386 36.4

2017-18 87,353 1084125 29.4

2018-19 33,419 1510038 8.07

IDBI FEDERAL Average payment period

70

60

50

40 IDBI FEDERAL Average payment

period

30

20

10

0
2014-15 2015-16 2016-17 2017-18 2018-19

STAR UNION DIA-ICHI INSURANCE

42 | P a g e
 Year Account Payable Net Sales Average Payment Period
2014-15 70,849 582,475 44.39
2015-16 60,896 433,335 51.29
2016-17 47,002 602,601 28.46
2017-18 46,708 777,442 21.92
2018-19 54,852 1,001,016 20

STAR UNION DAI-ICHI LIFE INSURANCE Average payment

period
60

50

40 STAR UNION DAI-ICHI LIFE

INSURANCE Average payment
period
30

20

10

0
2014-15 2015-16 2016-17 2017-18 2018-19

The average payment period for both the companies is decreasing and it is a
positive sign that the company is able to pay its debtors quickly. IDBI Federal has
a lower payable period over the past 5 years as compared to Star Union dai-ichi.

43 | P a g e
*Days working capital = (Average Working capital *365)/ Net sales

IDBI FEDERAL
Year Net working capital Net Sales Days Working Capital
2014-15 1364825 1917848 259.75
2015-16 1812974 427821 1546.75
2016-17 2239633 605386 1350.32
2017-18 2468162 1084125 830.97
2018-19 3205531 1510038 774.82
      AVG. DWC= 952.52

IDBI FEDERAL Days working capital

1800

1600

1400

1200

1000 IDBI FEDERAL Days working capital

800

600

400

200

0
2014-15 2015-16 2016-17 2017-18 2018-19

STAR UNION DIA-ICHI INSURANCE

44 | P a g e
 Year Net working capital Net Sales Days Working Capital

2014-15 672,674 582,475 421.52

2015-16 651,731 433,335 548.95

2016-17 2,069,675 602,601 1253.61

2017-18 4,049,232 777,442 1901.06

2018-19 5720980 1,001,016 2086.04

      AVG. DWC= 1242.23

STAR UNION DAI-ICHI LIFE INSURANCE Days working capital

2500

2086.04
2000
1901.06

1500
1253.61
1000

500 548.95
421.52

0
2014-15 2015-16 2016-17 2017-18 2018-19

STAR UNION DAI-ICHI LIFE INSURANCE Days working capital

IDBI Federal has a better DWC as compared to Star union, which implies that
IDBI is able to convert its working capital into revenue in a shorter span of
time. This may be due to the efficiency of managers to handle its working
capital funds.

* Current Asset Turnover Ratio = Net sales / Current Assets

45 | P a g e
 IDBI FEDERAL

Year Net Sales Current Assets Current Assets Turnover

2014-15
1917848 3436895 0.56
2015-16
427821 3,946,889 0.11
2016-17
605386 5,222,595 0.12
2017-18
1084125 6,288,733 0.17
2018-19
1510038 6,311,031 0.23

current asset turnover

0.6

0.5

0.4
current asset turnover
0.3

0.2

0.1

0
2014-15 2015-16 2016-17 2017-18 2018-19

46 | P a g e
 STAR UNION DIA-ICHI INSURANCE
Year Net Sales Current Assets Current Assets Turnover
2014-15 582,475 3,360,078 0.17
2015-16 433,335 4,648,113 0.09
2016-17 602,601 4,124,407 0.14
2017-18 777,442 5,433,445 0.14
2018-19 1,001,016 6,988,200 0.14

STAR UNION DAI-ICHI LIFE INSURANCE current asset

turnover
0.18
0.16
0.14
0.12 STAR UNION DAI-ICHI LIFE
INSURANCE current asset
0.1 turnover

0.08
0.06
0.04
0.02
0
2014-15 2015-16 2016-17 2017-18 2018-19

The ratio indicates how co. is efficiently using its current assets to generate revenue.
Higher current assets turnover ratio indicates the capability of the company to achieve
maximum sales with the minimum investment in current assets. Here in 2014-2015
current assets turnover ratio is higher i.e. 0.56 In comparison with other financial years.

In case of star union the graph shows a upward trajectory which is a positive sign.

*Total Asset Turnover ratio = Net sales / Total Assets

47 | P a g e
 IDBI FEDERAL

Year Net Sales Total Assets Total Assets Turnover

2014-15 1917848 46134702 0.041
2015-16 427821 52,636,731 0.008
2016-17 605386 65,331,509 0.009
2017-18 1084125 76,757,766 0.014
2018-19 1510038 92,259,979 0.016

IDBI FEDERAL Total Assets Turnover Ratio

0.05

0.04

0.04

0.03
IDBI FEDERAL Total Assets
0.03 Turnover Ratio
0.02

0.02

0.01

0.01

0
2014-15 2015-16 2016-17 2017-18 2018-19

STAR UNION DIA-ICHI INSURANCE

48 | P a g e
 Year Net Sales Total Assets Total Assets Turnover
2014-15 582,475 56,468,193 0.01
2015-16 433,335 58,327,777 0.007
2016-17 602,601 65,262,681 0.009
2017-18 777,442 73,389,007 0.011
2018-19 1,001,016 85,852,062 0.012

STAR UNION DAI-ICHI LIFE INSURANCE Total Assets

Turnover Ratio
0.014

0.012

0.010 STAR UNION DAI-ICHI LIFE

INSURANCE Total Assets Turnover
0.008 Ratio

0.006

0.004

0.002

0.000
2014-15 2015-16 2016-17 2017-18 2018-19

The ratio indicates how co. is efficiently using its average of total assets to generate
revenue. Higher total assets turnover ratio indicates the capability of the company to
achieve maximum sales with the minimum investment in total assets. Here in 2014-2015
total assets turnover ratio is highest i.e. and then we can see a drop which is not ideal
In case of star union, the graph having upward slope showing the companies efficiency
and it is a favorable case.

49 | P a g e
ANALYSIS OF CASH FLOW STATEMENT:

(A) OPERATING ACTIVITY:

IDBI FEDERAL LIFE INSURANCE-OPERATING ACTIVITY

Particulars 2019 2018 2017 2016 2015

Cash flow from Operating Activities          
Premium including proposal deposits 19,171,60 17,424,92 15,949,66 12,253,44 10,846,15
received 9 7 8 8 1
Other Income 9,081 3,494 3,550 4,543 405
Commissions paid -1,001,919 -1,040,614 -936,398 -874,213 -709,844
Policy benefits paid including -5,564,667 -4,977,825 -6,279,482 -4,773,196 -4,173,276
interim bonus
Operating expenses -2,483,468 -2,085,532 -2,264,225 -2,117,431 -1,761,988
CSR payments -11,712 -14,448 -16,427 - -
Payments to reinsurers (net of -31,486 -7,449 -2,420 -36,350 -21,264
recovery amount)
Deposits paid -7,387 -315 13,865 -8,869 -2,498
Other advances -24,581 -51,293 1,497 -4,468 -200
Income taxes paid -230,000 -1,193 - -35,113 -160
GST/Service tax paid -389,238 -410,654 -199,855 -234,547 -211,354
Net cash inflow / (outflow) from 9,436,232 8,839,098 6,269,773 4,173,804 3,965,972
operating activities before
extraordinary items
Cash flows from extraordinary - - - - -
operations

Net cash inflow / (outflow) 9,436,232 8,839,098 6,269,773 4,173,804 3,965,972

10000000 9,436,232
9000000 8,839,098

8000000

7000000
6,269,773
6000000

5000000
3,965,972 4,173,804
4000000

3000000

2000000

1000000
2015 2016 2017 2018 2019
0
1 2 3 4 5

Cash flow from Operating Activities Net cash flow

The inflow of cash from operating activities have been increasing continuously from
50 | P a g e
2015 to 2019. This shows that the income from its operations i.e. selling of insurance
policies have increased over the years raising the level of premium received. The
company has been able to control its costs even with increase in sales.

STAR UNION DIA-ICHI LIFE INSURANCE-OPERATING ACTIVITY

Particulars 2019 2018 2017 2016 2015

Cash Flow from Operating Activities (A)          
Premium received from policyholders,
20,164,036 17,857,147 15,405,442 13,347,913 11,504,355
including advance receipts
Other receipts - - - - -
Payments to the re-insurers, net of
-1,807 -57,684 125,589 -115,594 -16,222
Commissions and Claims/ Benefits
- -
Payments of Claims/Benefits -9,642,769 -7,835,135 -7,492,122
10,428,638 12,610,119

Payments of Commission and Brokerage -1,486,994 -1,417,445 -1,315,631 -1,024,348 -815,696

Payments of other Operating Expenses* -3,495,725 -3,212,454 -2,667,261 -2,491,762 -2,188,534

Preliminary and Pre-Operative Expenses - - - - -

Deposits, Advances and Staff Loans -4,288 -3,273 -4,625 -10,491 150
Income taxes paid (Net) -41,100 - - - -
Service Tax / Goods & Services Tax
-229,635 -433,716 -422,730 -350,635 -247,237
Paid
Other payments - - - - -
Cash flow before extraordinary items - - - - -
Cash flow from extraordinary operations - - - - -
Net Cash Flow from Operating Activities
5,261,718 2,303,937 -1,489,335 1,519,948 744,694
(A)

51 | P a g e
 6000000
5,261,718
5000000

4000000

3000000
2,303,937
2000000
1,519,948

1000000 744,694

2015 2016 2017 2018 2019

0
1 2 3 4 5

-1000000

-1,489,335
-2000000

Cash flow from Operating Activities Net cash flow

Net cash flow is not following a particular pattern it is not ideal.

52 | P a g e
 (B) INVESTING ACTIVITY

IDBI FEDERAL LIFE INSURANCE- INVESTING ACTIVITY

Particulars 2019 2018 2017 2016 2015

Cash flow from Investing Activities          

Purchase of fixed assets including -46,416 -69,392 -195,785 -1,227,045 -53,805
capital work-in-progress and advance
for capital assets

Sale of fixed assets 1,319 1,941 4,064 3,775 661

Purchase of investments - - - - -
75,352,780 71,545,015 51,560,145 37,570,813 37,582,470
Proceeds from sale/redemption of 57,688,156 62,226,393 44,809,072 34,825,569 30,730,557
investments
Loans against Policies (net of -28,081 -9,669 -1,183 -15 -
repayments)
Interest and Dividends received 4,881,633 3,613,614 3,151,268 2,587,284 2,360,549

Investments in money market 3,169,662 -2,915,081 -1,946,516 -2,947,716 763,865

instruments and in liquid mutual funds
(Net)
Expenses related to investments -9,320 -10,764 -4,568 -4,304 -437

Net cash (used) in investing activities -9,695,827 -8,707,974 -5,743,793 -4,333,265 -3,781,080

2000000

2015 2016 2017 2018 2019

0
1 2 3 4 5

-2000000

-4000000 (3,781,080.00)
(4,333,265.00)

-6000000 (5,743,793.00)

-8000000

(8,707,974.00)
-10000000 (9,695,827.00)

-12000000

Cash flow from Operating Activities Net cash flow

53 | P a g e
The company has been making more and more investments over the years which
has increased the interest received. The use of cash in investing activities is
increasing at a great pace its almost tripled in past 5 years.

STAR UNION DIA-ICHI LIFE INSURANCE- INVESTING ACTIVITY

Particulars 2019 2018 2017 2016 2015
Cash Flow from Investing
         
Activities (B)
Purchase of fixed assets -81,982 -103,714 -124,159 -116,227 -77,430

Proceeds from sale of fixed assets 3,796 36 1,118 394 590

- - - - -
Purchases of investments 83,609,48 33,069,76 19,946,48 14,419,99 17,340,23
9 3 6 6 8
Loans disbursed - - - - -
Loans against policies -23,797 -36,578 19,204 -22,124 -42,814
42,081,39 25,952,59 18,060,82 12,963,26 14,013,52
Sale of investments
6 1 5 8 6
Repayments received - - - - -

Rents/Interests/ Dividends received 4,178,010 3,635,774 3,059,022 2,867,583 2,544,183

Investments in money market

34,231,10
instruments and in Liquid Mutual -435,896 1,505,226 -808,349 -47,167
0
Funds (Net)

Expense related to investments -488 -398 -784 -944 -1,268

Net Cash Flow from Investing

-3,221,454 -4,057,948 2,573,966 463,605 -950,618
Activities (B)

3000000 2,573,966.00

2000000

1000000
463,605.00
2015 2016 2017 2018 2019
0
1 2 3 4 5

-1000000
(950,618.00)

-2000000

-3000000
(3,221,454.00)
-4000000
(4,057,948.00)

-5000000

Cash flow from Operating Activities Net cash flow

The company is not following a particular pattern toward its investment policies.

54 | P a g e
 (C) FINANCING ACTIVITY

IDBI FEDERAL LIFE INSURANCE- FINANCING ACTIVITY

Particulars 2019 2018 2017 2016 2015
Cash flow from financing activities          
Proceeds from issue of share capital - - - - -
Proceeds from borrowing - - - - -
- - - - -
Repayments of borrowing
Interest/dividends paid - - - - -
Net cash inflow from financing activities - - - -  

Company had not issued any share capital during the period of 2014-2019. Also company
has not taken or repaid any borrowings from any financial institution or banks.

STAR UNION DIA-ICHI LIFE INSURANCE- FINANCING ACTIVITY

Particulars 2019 2018 2017 2016 2015
Cash Flow from Financing Activities (C)          

Proceeds from issuance of share capital   - 1,075,697 - -

Proceeds from borrowing   - - - -

Repayments of borrowing   - - - -

Interest/dividends paid -62,439 - - - -

Net cash flow from Financing activities (C) -62,439 - 1,075,697 - -

Company has raised share capital during 2016-17. Also company has paid dividend to its
share holders during the F.Y. 2018-19

55 | P a g e
Analysis of Cash Flow from All 3 Activities
IDBI FEDERAL
Particulars 2019 2018 2017 2016 2015
Net cash flow/(outflow) from operating
88,39,09
activities 94,36,232 62,69,773 41,73,804 39,65,972
8

Net cash (used) in investing activities - - - - -

96,95,827 87,07,974 57,43,793 43,33,265 37,81,080
Net Cash Flow from Financing Activities
- - - - -

Net increase / (decrease) in cash and cash

equivalents -2,59,595 1,31,124 5,25,980 -1,59,461 1,84,892

Cash and cash equivalents at the beginning

16,07,69
of the year 17,38,815 10,81,711 12,41,172 10,56,280
1
Cash and cash equivalents at end of year 17,38,81
14,79,220 16,07,691 10,81,711 12,41,172
5

STAR UNION DIA-ICHI

Particulars 2019 2018 2017 2016 2015
Net cash flow/(outflow) from operating 5,261,71 - 1,519,94
2,303,937 744,694
activities 8 1,489,335 8
-
Net cash (used) in investing activities 3,221,45 -4,057,948 2,573,966 463,605 -950,618
4

Net Cash Flow from Financing Activities -62,439 - 1,075,697 - -

Net increase / (decrease) in cash and cash

1977825 -1,754,011 2,160,328 1,983,553 -205,924
equivalents

Cash and cash equivalents at the beginning of 2,880,19

4,634,208 2,473,880 490,327 696,251
the year 7
4,858,02
Cash and cash equivalents at end of year 2,880,197 4,634,208 2,473,880 490,327
2

56 | P a g e
Findings & interpretations

The current assets are increasing which may indicate that the company’s liquid assets are
increasing but it may also be the case that the receivables component is higher in it.

In current liabilities are decreasing, which is a positive sign for the company. This
means that the company is able to discharge its obligations on time, pay off its debts on
time.

Net working capital increases, naturally because of an increase in current assets and
decrease in current liabilities. The company has enough funds for meeting its day-to-
day requirements.

The current ratio in case of insurance companies should be higher than other businesses,
so a current ratio of 1.5 to 2 is quite favorable.

An alarming thing here is the component of cash and bank in the current assets, which
has decreased in the last year. It means that the liquid assets are not quite available in the
company, which should be there, lest any unforeseen circumstances occur.

The working capital turnover ratio had decreased, again not a positive sign but has
started to get back up and it shows that the company is showing a sign of recovery. It
signifies ineffective utilization of working capital but, then again, a high working capital
turnover ratio may also be a sign of insufficient working capital.

As seen through the comparison of IDBI Federal Life Insurance with another insurance
provider Star Union Dai-ichi Life Insurance, IDBI Federal is over shadowing its
competitors in few areas but also lags behind in some. The management has to be careful
in their decision making to keep the company competitive and growing.

57 | P a g e
Summary & conclusion
Working capital is the essence of the continuous growth and survival of any
business; irrespective of the kind of business, any entity is involved in. In the
absence of continuous flow of net working capital, day-to-day working of a
company is hampered largely. In order to cope with the unforeseen and
emergency situations also, working capital is a much-required component of
business.

Working capital management involves efficient management of cash, debtors and

creditors. Here, it is seen that the particular company IDBI Federal is able to
maintain an adequate amount of working capital, which even increases every
year, but an important and alarming fact to be considered here is that maybe the
working capital has not been used effectively and in an optimum way. The
component of the most liquid asset i.e. cash balance should be increased so that
there is no need to worry about the emergencies that might occur in business.

58 | P a g e
Limitations

 The data collected was just for a period of few years. Hence a clear picture
could have been formed had the analysis been done for more number of
years, a much more transparent analysis could have been done.

 Not all assets, which form part of current assets, are so liquid in nature.
Therefore, discrepancies occur if judgement is done based on comparative
analysis of these assets.

 Annual reports may vary from the actual performance of the company
since a company may inflate its assets and decrease its liabilities to attract
its potential investors.

 Since the analysis is made through secondary sources of information, an

absolute true picture could not be painted. Had it been through any
primary source, much better and more accurate conclusions could have
been drawn.

59 | P a g e
APPENDIX

The data collected are the financial reports of IDBI Federal over the past 5 years.
The data includes profit and loss statement, balance sheet and cash flow statement,
which will help us in understanding the concept of working capital.

The data is collected from the official website of IDBI Federal Life Insurance Co.
Ltd and tabularized to provide a comparative overview of the financial positions
of the company.

Efficiency Ratio - The efficiency ratios are used to analyze how a company
uses its assets and liabilities internally. An efficiency ratio can be used to
calculate
the turnover of receivables, the repayment of liabilities, the quantity and usage of
equity, and the general use of inventory and machinery.

Current Assets: Current Assets are those assets that can be converted into
cash or cash equivalents within one year or in the operating cycle of the
assets, whichever is longer. The main components of current assets are:

1) Cash & Bank balances

2) Sundry Debtors

Current Liabilities: Current Liabilities are those obligations, which are to be

paid off within one year, or they are short-term obligations.

Average collection period is the time duration it takes for the company to
recover from its debtors or customers for outstanding payments.
Average payment period is the number of days a company takes to pay off its

60 | P a g e
creditors. Average Payment Period = (Account Payables/Cost of Sales)*365
Days Working capital: It describes the duration it takes for a company to convert
its working capital into revenue. The more days working capital, the more time is
required to convert working capital into sales. The days working capital is an
indicator of efficiency of the company.

Current Ratio- The current ratio is a liquidity and efficiency ratio that measures a
firm's ability to pay off its short-term liabilities with its current assets. The
current ratio is an important measure of liquidity because short-term liabilities are
to be paid within the next year. This means that the company has a limited
amount of time in order to raise the funds to pay for these liabilities.
Quick Ratio- The quick ratio is a liquidity ratio that measures the company’s
ability to pay its short-term liabilities with only quick assets when they come due.
Quick assets are current assets that can be converted to cash within 90 days or in
the short-term.
Working Capital Turnover Ratio:-
The working capital turnover ratio measures how well a company is able utilize its
working capital for supporting a given level of sales. Because working capital is
current assets less current liabilities, a high turnover ratio shows that management
is being efficient in using a company’s current assets and liabilities for supporting
sales. In contrast, a low ratio shows a business is investing in too many accounts
receivable (AR) and inventory assets for supporting its sales. This may lead to a
large amount of bad debts and obsolete inventory. Current Assets Turnover
Ratio- The Current Asset turnover ratio is an efficiency ratio that measures a
company’s capability to comparing net sales with current assets for generating
sales. In other words, this ratio shows how efficiently a company can use its
current assets to generate sales.

61 | P a g e
 Total Assets Turnover Ratio- The asset turnover ratio is an efficiency ratio that
measures a company's capability to compare net sales with average total assets
generate sales from its assets. In other words, this ratio shows how efficiently a
company can use its assets to generate sales. The total asset turnover ratio
calculates net sales as a percentage of assets to show how many sales are generated
from each rupee of company assets.

Cash Flow Statement Analysis

Cash flow statement provides information about the inflow and outflow of cash of
an enterprise for a given period. It provides useful information that effects the
profit and loss account and balance sheet of a company. A cash flow statement is a
statement which provides a in depth rationalization for the change in a firm‘s cash
balance during a particular duration by indicating the firm‘s income sources and
uses of cash during that duration. Cash flow statement is the cash flow during the
accounting period from-

Operating activities
 Investing activities
 Financing activities.
Cash Flow from Operating Activities: Cash generated by production and sales
of business is considered as cash flow from operating activities. It relatively
denotes flow of cash from operating activities weather income or expense
source. E.g., cash from operation is the revenue net of expenses.
Cash Flow from Financing Activities: This section of Cash flow statement
shows cash generated from activities to finance the business. E.g., cash receipt
on issue of equity shares or debentures etc. and cash paid to stakeholders.
Dividend to equity shares or interest on debenture etc.

62 | P a g e
Cash Flow from Investing Activities: Cash invested in long term assets e.g.
purchase of machinery and other long term assets as well as other current
assets such as purchase of equity shares of other company etc. and cash
receipts from such investing activities e.g. dividend received, interest received
sales of machinery and scrap etc.

63 | P a g e
Appendix A : Profit & Loss account of IDBI Federal
Particulars 2019 2018 2017 2016 2015
Amounts transferred from the 1,042,361 660,354 177,521 84,503 1,546,929
Policyholders’ Account
(Technical Account)
Income from investments          
(a) Interest, dividends & rent – 402,317 328,216 308,510 341,199 210,671
gross
(b) Profit on sale/redemption of 54,251 74,349 93,976 42,078 44,307
investments
(c) (Loss on sale/ redemption of -21,328 -12,681 -15,295 -88,205 -12,211
investments)
(d) Amortization of (premium) / 29,960 33,033 36,941 47,204 127,511
discount on investments(net)
Other Income          
(a) Fees and Charges 72 77 70 69 -
(b) Miscellaneous Income 2,405 777 3,663 973 641
Total (A) 1,510,038 1,084,125 605,386 427,821 1,917,848
Expense other than those directly 75,367 74,700 62,753 53,124 28,131
related to the insurance business
Bad debts written off - - - - -
Contribution to the Policyholders’ - - 22,009 221,871 344,027
Ac (Technical)
Provisions (other than taxation)     - 7 127
(a) For diminution in the value of 106,947 - - - -
investments (net)
(b) Provision for doubtful debts - - - - -
(c) Others - - - - -
Total (B) 182,314 74,700 84,762 275,002 372,285
Profit/(Loss) before tax = (A) - 1,327,724 1,009,425 520,624 152,819 1,545,563
(B)
Provision for taxation - - - - -
Profit/(Loss) after tax 1,327,724 1,009,425 520,624 152,819 1,545,563
Appropriations          
(a) Balance at the beginning of -201,512 -1,210,935 -1,731,556 -1,884,375 -3,429,938
the year
(b) Interim dividends paid during - - - - -
the year
(c) Proposed final dividend - - - - -
(d) Dividend distribution tax - - - - -

64 | P a g e
(e) Transfer to reserves/other - - - - -
accounts
Profit / (Loss) carried to the 1,126,212 -201,510 -1,210,932 -1,731,556 -1,884,375
Balance Sheet
Earnings per share - Basic and 1.66 1.26 0.65 0.02 1.93
Diluted (in `)

Appendix B : Balance Sheet of IDBI Federal Life Insurance

Particulars 2019 2018 2017 2016 2015
Sources of funds          
Shareholders' funds          
Share capital 8,000,000 8,000,000 8,000,000 7,998,912 7,997,824
Reserves and surplus 1,126,212 - - - -
Credit / (debit) fair value change account 2,321 -17,025 314 897 -582
Sub-total 9,128,533 7,982,975 8,000,314 7,999,809 7,997,242
Borrowings - - -    
Policyholders' funds          
Credit / (debit) fair value change account -3,336 -98,670 8,788 2,639 -10,345
Policy liabilities 55,384,94 44,957,84 36,288,47 27,970,44 20,394,569
8 0 7 8
Insurance reserves - - - - -
Provision for linked liabilities 26,668,94 23,116,95 19,012,92 - 17,214,082
0 1 3 16,054,33
8
Funds for discontinued policies -        
Discontinued on account of non-payment 808,026 411,238 248,977 207,138 351,459
of premium
Others - - -    
Sub-total 82,858,57 68,387,35 55,559,16 44,234,56 44,234,563
8 9 5 3
Funds for future appropriation - 272,868 387,432 - - -
participating funds
Total 92,259,97 76,757,76 63,559,47 52,234,37 45,947,007
9 6 9 2
Application of funds          
Investments          
Shareholders' 5,920,764 5,190,427 4,638,577 4,282,535 4,164,529
Policyholders' 54,242,76 43,920,18 34,736,72 26,844,32 20,861,480
0 8 1 9
Assets held to cover linked liabilities 27,476,96 23,528,18 19,261,90 16,261,47 17,565,541
5 9 0 6
Loans 39,111 10,920 1,203 15 -
Fixed assets 1,374,848 1,438,330 1,470,513 1,301,487 106,257

65 | P a g e
Current assets          
Cash and bank balances 1,365,479 1,637,837 1,601,983 1,074,726 1,236,932
Advances and other assets 4,945,552 4,650,936 3,620,537 2,872,163 2,199,963
Sub-total (a) 6,311,031 6,288,773 5,222,520 3,946,889 3,436,895
Current liabilities 2,976,619 3,763,143 2,917,123 2,089,828 2,030,258
Provisions 128,881 57,428 65,764 44,087 41,812
Sub-total (b) 3,105,500 3,820,571 2,982,887 2,133,915 2,072,070
Net current assets/(liabilities) (c) = (a) - (b) 3,205,531 2,468,202 2,239,633 1,812,974 1,364,825
Miscellaneous expenditure - - - - -
Debit balance in profit & loss account - 201,510 1,210,932 1,731,556 1,884,375
(shareholders' account)
Total 92,259,97 76,757,76 63,559,47 52,234,37 45,947,007
9 6 9 2

Appendix C : Cash Flow Statement

Particulars 2019 2018 2017 2016 2015
Cash flow from Operating          
Activities
Premium including proposal 19,171,609 17,424,927 15,949,668 12,253,448 10,846,151
deposits received
Other Income 9,081 3,494 3,550 4,543 405
Commissions paid -1,001,919 -1,040,614 -936,398 -874,213 -709,844
Policy benefits paid including -5,564,667 -4,977,825 -6,279,482 -4,773,196 -4,173,276
interim bonus
Operating expenses -2,483,468 -2,085,532 -2,264,225 -2,117,431 -1,761,988
CSR payments -11,712 -14,448 -16,427 - -
Payments to reinsurers (net of -31,486 -7,449 -2,420 -36,350 -21,264
recovery amount)
Deposits paid -7,387 -315 13,865 -8,869 -2,498
Other advances -24,581 -51,293 1,497 -4,468 -200
Income taxes paid -230,000 -1,193 - -35,113 -160
GST/Service tax paid -389,238 -410,654 -199,855 -234,547 -211,354
Net cash inflow / (outflow) from 9,436,232 8,839,098 6,269,773 4,173,804 3,965,972
operating activities before
extraordinary items
Cash flows from extraordinary - - - - -
operations

Net cash inflow / (outflow) 9,436,232 8,839,098 6,269,773 4,173,804 3,965,972

Cash flow from Investing          
Activities

66 | P a g e
Purchase of fixed assets including -46,416 -69,392 -195,785 -1,227,045 -53,805
capital work-in-progress and
advance for capital assets

Sale of fixed assets 1,319 1,941 4,064 3,775 661

Purchase of investments -75,352,780 -71,545,015 -51,560,145 -37,570,813 -37,582,470

Proceeds from sale/redemption of 57,688,156 62,226,393 44,809,072 34,825,569 30,730,557

investments
Loans against Policies (net of -28,081 -9,669 -1,183 -15 -
repayments)

Interest and Dividends received 4,881,633 3,613,614 3,151,268 2,587,284 2,360,549

Investments in money market 3,169,662 -2,915,081 -1,946,516 -2,947,716 763,865

instruments and in liquid mutual
funds (Net)

Expenses related to investments -9,320 -10,764 -4,568 -4,304 -437

Net cash (used) in investing -9,695,827 -8,707,974 -5,743,793 -4,333,265 -3,781,080

activities
Cash flow from financing activities          

Proceeds from issue of share - - - - -

capital
Proceeds from borrowing - - - - -

Repayments of borrowing - - - - -

Interest/dividends paid - - - - -

Net cash inflow from financing - - - -  

activities
Effect of foreign exchange rates on - - - -  
cash and cash equivalents,
Cash and Cash Equivalents          

Net increase / (decrease) in cash -259,595 131,124 525,980 -159,461 184,892

and cash equivalents
Cash and cash equivalents at the 1,738,815 1,607,691 1,081,711 1,241,172 1,056,280
beginning of the year

Cash and cash equivalents at end 1,479,220 1,738,815 1,607,691 1,081,711 1,241,172
of year

67 | P a g e
Net increase / (decrease) in cash -259,595 131,124 525,980 -159,461 184,892
and cash equivalents

         
Cash and Cash Equivalents at the 1,365,479 1,637,837 16,01,983 1,074,726 1,236,932
end of the year as per Balance
Sheet
Add: Bank balance 19,395 58,542 3,805 3,052 1,948

Add: Bank balance as per schedule 79,513 26,056 1,453 3,675 1,769
8A
Add: Bank balance as per schedule 14,742 16,296 402 258 523
8
Add: Bank balance as per schedule 91 84 48 -  
12- Unclaimed amount -
policyholder
Total 1,479,220 1,738,815 1,607,691 1,081,711 1,241,172

Appendix D: Profit and Loss Account Star Union Dai-ichi Life Insurance    
Particulars 2019 2018 2017 2016 2015
Amounts transferred from the
Policyholders’ Account (Technical
Account) 1,001,016 777,442 602,601 433,335 582,475
Income from Investments          
(a) Interest, Dividends & Rent – Gross 318,535 241,143 105,205 120,824 105,725
(b) Profit on sale/ redemption of
investments 51,067 37,471 32,394 22,061 18,444
(c)(Loss on sale/ redemption of
investments) -24,199 -9,938 -508 -2,226 -13,479
Other Income          
(a) Miscellaneous Income 36 52 1,106 98 633

Total (A) 1346455 1,046,170 740,798 574,092 693,798

Expense other than those directly
related to the insurance business 3A 99,614 152,303 109,363 44,394 27,585
Bad debts written off 809 381 - 75 -
CSR Expenditure 22,498 14,000 10,005 5,000 -
Contribution to the Policyholders
Account:          
(a) Non-Par Health - 17,765 72,905 279,202 -
(b) Linked Individual Life - 96,808 - 15,822 534,597

68 | P a g e
(c)Linked Group Life 172111 - 233 123 -
Provisions (Other than taxation)          
(a) For diminution in the value of
investments (Net) 31200 - - - -
(b) Provision for doubtful debts 4175 5,968 - - 748
(c)Others - - - 813 -
Total (B) 330407 287,225 192,506 347,365 562,930
Profit / (Loss) before tax 1016048 758,945 548,292 226,727 130,868
Provision for Taxation 49 - - - -
Profit / (Loss) after tax 1015299 758,945 548,292 226,244 128,727
Appropriations          
-
(a) Balance at the beginning of the - 1,760,11
year -226,636 -985,581 1,533,873 7 -1,888,844
(b) Interim dividends paid during the
year 51,793 - - - -
(c) Proposed final dividend - - - - -
(d) Dividend distribution tax 10,646 - - - -
(e) Transfer to reserves / other
accounts - - - - -
-
Profit / (Loss) carried to the Balance 1,533,87
Sheet 726,224 -226,636 -985,581 3 -1,760,117
EARNINGS PER EQUITY SHARE          
Basic earnings per equity share (`) 3.92 2.93 2.19 0.9 0.51
Diluted earnings per equity share (`) 3.92 2.93 2.19 0.9 0.51
Nominal value per equity share (`) 10 10 10 10 10

Appendix E: Balance Sheet Star Union Dai-ichi Life Insurance    

Particulars 2019 2018 2017 2016 2015
SOURCES OF FUNDS          
Shareholders’ Funds:          
Share Capital 2,589,641 2,589,641 2,589,641 2,500,000 2,500,000
Reserves And Surplus 3,412,280 2,686,056 2,686,056 1,700,000 1,700,000
Credit/[Debit] Fair Value Change
-376 -14,512 -218 559 1
Account
Sub-Total 6,001,545 5,261,185 5,275,479 4,200,559 4,200,001
Borrowings - - -    
Policyholders’ Funds:          
Credit/[Debit] Fair Value Change
-10,722 -90,904 -24,998 -39,515 -38,571
Account

69 | P a g e
Policy Liabilities 51,285,636 39,818,462 30,134,420 22,859,329 17,403,063
Insurance Reserves - - - - -
Provision for Linked Liabilities          
Linked Liabilities 19,622,360 19,587,124 19,801,270 22,564,925 24,272,097
Fair Value Change Account 3,962,530 3,417,930 4,804,700 3,737,921 6,285,453
Funds for discontinued policies          
Discontinued on account of non-
3,181,593 3,877,179 4,030,228 4,231,112 3,629,178
payment
Others (on account of surrenders) 5,019 6,435 9,833 21,215 39,456
Total 26,771,502 26,888,668 28,646,031 30,555,173 34,226,183
Sub-Total 78,046,416 66,616,226 58,755,453 53,374,987 51,590,675
Funds for Future Appropriations 1,804,101 1,511,596 1,231,749 752,231 677,517
Total 85,852,062 73,389,007 65,262,681 58,327,777 56,468,193
APPLICATION OF FUNDS          
Investments          
Shareholders’ 4,869,923 3,641,702 2,990,906 1,650,185 1,594,613
Policyholders’ 48,233,453 38,297,931 30,251,164 22,456,797 17,915,633
Assets Held to Cover Linked
26,771,502 26,888,668 28,646,031 30,555,173 34,226,183
Liabilities
Loans 84,346 89,238 94,498 103,951 73,079
Fixed Assets 171,858 195,600 224,826 224,536 225,894
Current Assets          
Cash and Bank Balances 1,317,692 890,906 414,694 478,016 487,953
Advances and Other Assets 5,670,508 4,542,539 3,709,713 4,169,369 2,872,125
Sub-Total (A) 6,988,200 5,433,445 4,124,407 4,648,113 3,360,078
Current Liabilities 1,233,409 1,355,507 2,035,307 3,986,684 2,677,770
Provisions 33,811 28,706 19,425 9,698 9,634
Sub-Total (B) 1,267,220 1,384,213 2,054,732 3,996,382 2,687,404
Net Current Assets (C) = (A – B) 5,720,980 4,049,232 2,069,675 651,731 672,674
Miscellaneous Expenditure - -     -
Debit Balance in Profit & Loss
- 226,636 985,581 1,533,873 1,760,117
Account
Total 85,852,062 73,389,007 65,262,681 58,327,777 56,468,193

Appendix F: Cash Flow Statement

         
Star Union Dai-ichi Life Insurance
Particulars 2019 2018 2017 2016 2015
Cash Flow from Operating
         
Activities (A)
Premium received from
20,164,036 17,857,147 15,405,442 13,347,913 11,504,355
policyholders, including advance

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receipts
Other receipts - - - - -
Payments to the re-insurers, net
of Commissions and Claims/ -1,807 -57,684 125,589 -115,594 -16,222
Benefits
-
Payments of Claims/Benefits -9,642,769 -10,428,638 -7,835,135 -7,492,122
12,610,119
Payments of Commission and
-1,486,994 -1,417,445 -1,315,631 -1,024,348 -815,696
Brokerage
Payments of other Operating
-3,495,725 -3,212,454 -2,667,261 -2,491,762 -2,188,534
Expenses*
Preliminary and Pre-Operative
- - - - -
Expenses
Deposits, Advances and Staff
-4,288 -3,273 -4,625 -10,491 150
Loans
Income taxes paid (Net) -41,100 - - - -
Service Tax / Goods & Services
-229,635 -433,716 -422,730 -350,635 -247,237
Tax Paid
Other payments - - - - -
Cash flow before extraordinary
- - - - -
items
Cash flow from extraordinary
- - - - -
operations
Net Cash Flow from Operating
5,261,718 2,303,937 -1,489,335 1,519,948 744,694
Activities (A)
Cash Flow from Investing
         
Activities (B)
Purchase of fixed assets -81,982 -103,714 -124,159 -116,227 -77,430
Proceeds from sale of fixed assets 3,796 36 1,118 394 590
- - -
Purchases of investments -83,609,489 -33,069,763
19,946,486 14,419,996 17,340,238
Loans disbursed - - - - -
Loans against policies -23,797 -36,578 19,204 -22,124 -42,814
Sale of investments 42,081,396 25,952,591 18,060,825 12,963,268 14,013,526
Repayments received - - - - -
Rents/Interests/ Dividends received 4,178,010 3,635,774 3,059,022 2,867,583 2,544,183
Investments in money market
instruments and in Liquid Mutual 34,231,100 -435,896 1,505,226 -808,349 -47,167
Funds (Net)
Expense related to investments -488 -398 -784 -944 -1,268
Net Cash Flow from Investing
-3,221,454 -4,057,948 2,573,966 463,605 -950,618
Activities (B)
Cash Flow from Financing
         
Activities (C)

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Proceeds from issuance of share
  - 1,075,697 - -
capital
Proceeds from borrowing   - - - -
Repayments of borrowing   - - - -
Interest/dividends paid -62,439 - - - -
Net cash flow from Financing
-62,439 - 1,075,697 - -
activities (C)
Effect of foreign exchange rates
on cash and cash equivalents (Net)   - - - -
(D)
Net increase / (decrease) in cash
and cash equivalents (E 1977825 -1,754,011 2,160,328 1,983,553 -205,924
=A+B+C+D)
Cash and cash equivalents at the
2,880,197 4,634,208 2,473,880 490,327 696,251
beginning of the year
Cash and cash equivalents at the
4,858,022 2,880,197 4,634,208 2,473,880 490,327
end of the year

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