International Journal of Advanced Research in Commerce, Management & Social Science (IJARCMSS) 138

ISSN : 2581-7930, Impact Factor : 5.880 , Volume 04, No. 01, January - March, 2021, pp 138-142

PERFORMANCE ANALYSIS OF PUBLIC &

Rita Choudhary
**
Dr. Abhay Upadhyaya

ABSTRACT

Insurance is the backbone in managing the risk of individuals and businesses. The service
providers offer diversity of products ensuring financial security. It helps individuals and organizations to
minimize the risk but also face major challenges in attracting customers and retaining. Other than service
difficulties, achieving profitable growth is another big challenge faced by Indian insurance sectors. To
sustain the profitable growth, private companies are struggling in sustaining the growth by developing
brand strength. Liberalization in the sector also gave entry to many private insurers, resulting in drastic
changes in competition. The performance of the company plays a leading role towards the growth of the
industry which ultimately leads to the overall success of the economy. The present study attempts to
examine the financial performance of Indian life insurers based on various parameters. For measuring it,
various financial ratios have been calculated taking into consideration liquidity and profitability of
the insurance players. Companies selected for the present study include Life Insurance Corporation of
India (LIC), SBI Life Insurance and HDFC Standard Life Insurance. Paper compares the earnings and
profitability ratios of select insurance companies for the time-period from 2016 to 2020. Finding of the
present study assists academicians, marketers, and policy makers to analyse the status and
performance of life insurance companies.
___________________________________________________________________________________

Keywords: Performance Analysis, Public, Private, Insurance, India.

Introduction
The insurance sector in India has seen tremendous development over the last decade. It is
regulated by the Indian Insurance Regulatory and Growth Authority (IRDAI). India's insurance sector has
57 insurance providers, 24 are in the life insurance market, while 33 are non-life insurers. Life Insurance
Organization (LIC) is the only public sector insurance firm. There are six non-life insurance insurers in the
public sector. In India, the total business size of the insurance industry is forecast to be USD 280 billion in
2020. The insurance industry in India has seen substantial growth in the last decade, along with the
launch of a large range of advanced items. This lead to a tough rivalry for a good and safe result. The
insurance industry in India plays a diverse function in the well-being of its economy. It greatly enhances
the potential for investment among people, supports their prospects and allows the insurance industry to
create a large pool of funds.
The government's strategy of offering cover to the uninsured has steadily increased insurance
coverage in the country and the spread of insurance schemes. The total premium received by life
insurance firms in India increased from Rs 2.56 trillion (USD 39.7 billion) in FY12 to Rs 7.31 trillion (USD
94.7 billion) in FY20. Measures of insurance penetration and density represent the degree of growth of
the insurance sector in a region. Although insurance penetration is calculated as the %age of insurance
premiums to GDP, insurance density is also measured (per capita premium). During the first decade of
the liberalization of the insurance industry, the sector recorded a gradual growth in insurance penetration
from 2.71% in 2001 to 5.20% in 2009. Since then, the penetration frequency has been diminishing.
Health insurance adds 20% of the non-life insurance market, rendering it the second largest portfolio.


Department of A.B.S.T., University of Rajasthan, Jaipur, Rajasthan, India.
**
Associate Professor, Department of A.B.S.T., University of Rajasthan, Jaipur, Rajasthan, India.
Rita Choudhary & Dr. Abhay Upadhyaya: Performance Analysis of Public & Private Sector Insurance..... 139
The Indian Life insurance sector expanded by 13.2% in 2017 to hit a size of $92.1 billion and is
projected to account for 35% of India's overall assets by 2020. India accounts for 6.8% of Asia-Pacific life
insurance business share. Whereas the Indian non-life insurance sector expanded by 21.6% in 2017 to
hit a size of $24.5 billion. The Indian life insurance industry can be divided into two sub-sectors, namely
Life insurance, which contributed 69.3% and Pension/Annuity, which contributed 30.7% of the overall
market share by volume. LIC is the dominant player on the Indian life insurance market, producing 78%
of the market share. Whereas Motor is the main segment of the non-life insurance industry in India,
accounting for 63% of the overall market share. LIC contributed 71%, while private life insurers
contributed 29% of the overall market share up to 31 October 2018. As per the Union budget for 2019-20,
100% of foreign direct investment (FDI) was approved for insurance intermediaries. In September 2018,
Ayushman Bharat unveiled the National Health Insurance Scheme to offer coverage of up to Rs 500,000
(US$ 7,723) to more than 100 million needy households. The system is projected to raise the penetration
of health insurance in India from 34% to 50%.
The outlook looks bright for the life insurance sector with a range of improvements to the
legislative system that could contribute to more changes in the way the industry performs its market and
interacts with its clients. The total insurance market is projected to hit USD 280 billion by 2020. The
country's life insurance market is projected to grow by 14–15% annually during the next three to five
years. Demographic factors such as growing middle class, young insurable population and growing
awareness of the need for protection and retirement planning will support the growth of Indian life
insurance.
Literature Review
Das, D., & Debnath (2012) recorded that, with the growth of the industry, insurance penetration
and country density are improving, contributing to competitiveness within firms in terms of the policies
offered, the collection of premium revenue, the resolution of claims and others. Paper highlights the
success of the life insurance industry in terms of various metrics and shines light on the different
advertisement platforms used. Subhanam, B. L., & Nagarajan (2019) researched public and private life
insurance companies in India, contrasting consumer expectations in terms of standard of service and
evaluating the success of public and private life insurance companies in India.
Bawa, S. K., &Chattha (2013) studies 18 Indian life insurers (including 1 public and 17 private)
and analyzes the 5-year data from 2007-08 to 2011-12. The research uses a multiple linear regression
model to assess the degree to which these determinants influence the profitability of life insurers. The
findings of the study indicate that the profitability of life insurers is positively affected by liquidity and scale
and negatively linked to resources. Bodla, B., Tandon, D., &Bodla (2017) aimed at evaluating and
contrasting the profitability of life insurance firms in India (Public LIC and Private). The result confirmed
that the total net premium over the last 5 years was the largest among private sector life insurers in the
case of ICICI prudential led by HDFC.
Kumar, M. S., &Priyan (2012) recorded that while the privatization of the insurance industry is
feared to impact the prospects of the LIC, the study indicates that the LIC continues to control the sector.
Private insurance firms have also sought to boost their market share. Sumathy, M., & Kalyani proposed
that LIC boost its liquidity status. Private life insurance firms should boost their performance to maximize
their policy sales and take effective steps to reduce their risks. Srivastava, S., & Prakash (2016)
examined the success of public and private life insurance firms in India. Data have shown that private
insurance providers have a better development rate relative to the public sector. Insurance penetration is
higher today. Insurance providers differ in terms of the plans sold, the accumulation of premium revenue,
and so on.
Bansal, A., & Kaur (2016) used statistical indicators, such as the Internal Return Rate (XIRR)
for erratic cash flows, beta, R-square, to assess the efficiency of ULIPs from various angles. Oh,
Panchal, N. (2018) concluded that, with the arrival of private life insurers, the share of the public sector
has reduced and that there is a major gap in the success of public and private life insurance providers.
Rathi, S., &Jatav, S (2020) examined secondary ratio data from 2009-10 to 2018-19. Results concluded
on two parameters: first, there are no major variations between the average ratios of selected firms and
second, the New India insurance firm has done better in seven selected analytical ratios. In the present
analysis, viability and liquidity ratios are used to assess the willingness of the business to satisfy its short-
term debt commitments and the financial condition of the selected companies. Financial success relates
to the act of carrying out financial operations. This paper gathers financial metrics for selected public and
private insurance firms in India.
140 International Journal of Advanced Research in Commerce, Management & Social Science (IJARCMSS) - January- March, 2021

Methodology
The firms chosen for this analysis are Life Insurance Corporation of India (LIC), SBI Life
Insurance and HDFC Basic Life Insurance. Paper compares the profits and performance rates of
selected insurance firms for the duration from 2012 to 2019. Finding the present study allows
researchers, advertisers, and decision makers to evaluate the role and success of life insurance
providers. Life Insurance Company (LIC) presently owns 71.81% of the overall Indian Life Insurance
sector opposed to 28.19% owned by all 23 private players for 2016-2017. HDFC Standard Life Insurance
Business was founded in 2000 as a joint venture between Housing Development Finance Corporation
Limited (HDFC Ltd) and Standard Life Aberdeen. Company is a major private sector life insurer in India,
responsible for 49% of the digital new market in FY20. Sold 896.3 thousand policies for the FY20. SBI
Life Insurance was founded in 2000 as a JV between SBI and BNP Paribas Cardiff and has been one of
the country's leading life insurers. New Company Premium amounted to Rs. 165.9 billion (USD 2.35
billion) in FY20.
Data Analysis
The data is gathered from the 3 sample companies, one is bank owned SBI, Private-HDFC life
and Government owned LIC. The data gathered for the four major ratios of Profitability is presented in
table 1 as under:
Table 1: Ratio of selected Life Insurance Companies
Year/ Net Profit Margin (%) Return on Net Worth / Equity Return on Capital Return on Assets (%)
Company (%) Employed (%)
SBI HDFC LIC SBI HDFC LIC SBI HDFC LIC SBI HDFC LIC
Life life Life Life
Mar-20 73.33 79.5 12.19 16.26 19.06 13.2 0.86 1.03 10.95 0.85 0.98 1.1
Mar-19 88.2 79.04 14 17.51 22.57 14.95 0.96 1.03 10.11 0.9 0.98 1.21
Mar-18 89.77 86.47 13.49 17.62 23.35 14.06 1 1.06 9.71 0.94 1 1.17
Mar-17 90.39 88.05 13.8 17.46 23.24 17.43 0.98 1 11.18 0.93 0.93 1.27
Mar-16 87.06 92.25 13.39 17.83 26.32 18.15 1.05 1.12 1.62 1.01 1.06 1.27
Mean 85.75 85.062 13.374 17.336 22.908 15.558 0.97 1.048 8.714 0.926 0.99 1.204
SD 7.07 5.70 0.71 0.62 2.59 2.14 0.07 0.05 4.01 0.06 0.05 0.07
CV 8.24 6.70 5.27 3.57 11.31 13.78 7.22 4.34 46.03 6.32 4.74 5.98

The results revealed that the SBI has net profit margin at the highest with the average of
85.75% but the HDFC Life is also very close in NPR. The CV of the SBI is more showing the more
chances of variability than the HDFC Life. The Return on net worth ratio for the company HDFC life is
highest with 22.908% with average variability. The return on capital employed is significantly higher for
LIC with high variability rate. The Return on Assets is significantly higher for LIC with average variability
rate. This revealed that the company HDFC Life is better but the other two are also vary close and their
profitability is also similar. Hence, to measure the significant differences in the profitability the statistical
measure ANOVA is used for measuring the differences between the company’s profitability with the
following hypothesis:
H1: there is a significant difference in the profitability of the Life insurance Companies.
To analyse the above hypothesis one-way ANOVA is used with the SPSS software.
 For the Net Profit Ratio
Table 2: NPR Ratio of selected Life Insurance Companies
Descriptives
N Mean Std. Std. Error 95% Confidence Interval for Minimum Maximum
Deviation Mean
Lower Bound Upper Bound
SBI Life 5 85.7500 7.06514 3.15963 76.9775 94.5225 73.33 90.39
HDFC Life 5 85.0620 5.69601 2.54733 77.9895 92.1345 79.04 92.25
LIC 5 13.3740 .70515 .31535 12.4984 14.2496 12.19 14.00
Total 15 61.3953 35.48438 9.16203 41.7447 81.0459 12.19 92.25
ANOVA
Sum of Squares df Mean Square F Sig.
Between Groups 17296.547 2 8648.273 313.124 .000
Within Groups 331.432 12 27.619
Total 17627.979 14
Rita Choudhary & Dr. Abhay Upadhyaya: Performance Analysis of Public & Private Sector Insurance..... 141
The above analysis revealed the significant differences between the NPR of the selected
company as F=313.124 which is Significant (p<0.05). further the mean value suggest that the highest
ratio is of SBI Life having the significantly good performance.
 For Return on Networth / Equity (%)
Table 3: RONW Ratio of selected Life Insurance Companies
Descriptive
N Mean Std. Deviation Std. Error 95% Confidence Interval for Minimum Maximum
Mean
Lower Bound Upper Bound
SBI Life 5 17.3360 .61809 .27642 16.5685 18.1035 16.26 17.83
HDFC Life 5 22.9080 2.59175 1.15907 19.6899 26.1261 19.06 26.32
LIC 5 15.5580 2.14457 .95908 12.8952 18.2208 13.20 18.15
Total 15 18.6007 3.72103 .96077 16.5400 20.6613 13.20 26.32
ANOVA
Sum of Squares df Mean Square F Sig.
Between Groups 147.052 2 73.526 18.855 .000
Within Groups 46.793 12 3.899
Total 193.845 14
The above analysis revealed the significant differences between the RONW of the selected
company as F=18.855 which is Significant (p<0.05). further the mean value suggest that the highest ratio
is of HDFC Life having the significantly good performance.
 For Return on Capital Employed (%)
Table 4: ROCE Ratio of selected Life Insurance Companies
Descriptive
N Mean Std. Deviation Std. Error 95% Confidence Interval for Minimum Maximum
Mean
Lower Bound Upper Bound
SBI Life 5 .9700 .07000 .03130 .8831 1.0569 .86 1.05
HDFC Life 5 1.0480 .04550 .02035 .9915 1.1045 1.00 1.12
LIC 5 8.7140 4.01081 1.79369 3.7339 13.6941 1.62 11.18
Total 15 3.5773 4.32831 1.11756 1.1804 5.9743 .86 11.18
ANOVA
Sum of Squares df Mean Square F Sig.
Between Groups 197.905 2 98.953 18.446 .000
Within Groups 64.374 12 5.365
Total 262.280 14

The above analysis revealed the significant differences between the ROCE of the selected
company as F=18.446 which is Significant (p<0.05). further the mean value suggest that the highest ratio
is of LIC having the significantly good performance.
 For Return on Assets (%)
Table 5: ROA Ratio of selected Life Insurance Companies
Descriptive
N Mean Std. Deviation Std. Error 95% Confidence Interval for Minimum Maximum
Mean
Lower Bound Upper Bound
SBI Life 5 .9260 .05857 .02619 .8533 .9987 .85 1.01
HDFC Life 5 .9900 .04690 .02098 .9318 1.0482 .93 1.06
LIC 5 1.2040 .07197 .03219 1.1146 1.2934 1.10 1.27
Total 15 1.0400 .13501 .03486 .9652 1.1148 .85 1.27
ANOVA
Sum of Squares df Mean Square F Sig.
Between Groups .212 2 .106 29.412 .000
Within Groups .043 12 .004
Total .255 14
142 International Journal of Advanced Research in Commerce, Management & Social Science (IJARCMSS) - January- March, 2021

The above analysis revealed the significant differences between the ROA of the selected
company as F=29.412 which is Significant (p<0.05). Further the mean value suggest that the highest
ratio is of LIC having the significantly good performance.
Conclusion
Performance assessment is a topic that has gained tremendous coverage during the last
decades. There are several explanations for including performance metrics in a business, but perhaps
the most significant is that they can help increase efficiency when used correctly. Productivity is of
essential significance to the willingness of an organization to compete and make money over time.
However, the development of completely functional and effective performance assessment frameworks
(i.e. collection of measures) has proved to be a very difficult activity. This study centered on the final step
of the evolution of the performance assessment method. The most significant contribution of this study is
the creation of a functional structure and methods for measuring the success of businesses. In insurance
sector, the most significant contribution of this research is the creation of a realistic structure and
methodology for evaluating the success of firms. With the above analysis we can conclude that out of 4
selected ratios LIC is better in two while the other two companies are better in one ratio. But the overall
profitability wase the company SBI life has slightly better performance than the HDFC.
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