Analysis of Profitability in Indian Life Insurance

CHAPTER - IV
PROFITABILITY ANALYSIS OF INDIAN

LIFE INSURANCE INDUSTRY
Insurance companies provide unique financial services for the growth and
development of every economy. Such specialized financial services range from the
underwriting of risks inherent in economic entities and the mobilization of large amount
of funds through premiums for long term investments. The risk absorption role of
insurers promotes financial stability in the financial markets and provides a sense of
peace to economic entities. The business world without insurance is unsustainable
since risky business may not have the capacity to retain all kinds of risks in this ever
changing and uncertain global economy. Insurance companies ability to continue to
cover risks in the economy hinges on their capacity to create profit or value for their
shareholders (Ahmed et al., 2010).
A well-developed and evolved insurance industry is a boon for economic
development of the country because it provides long- term funds for infrastructure
development of a country. The Insurance Regulatory Development Authority, the
regulatory body of the Indian insurance sector, has therefore intensified its supervision,
and has adopted a risk-based assessment of insurers activities. All of these regulatory
measures are to ensure that the financial performance of insurance companies is in
sound condition.
4.1 CONCEPT OF PROFITABILITY:

Profitability means ability to make profit from all the business activities of an
organization. It shows how efficiently the management can earn profit by making use of
all the available resources in the market. Harward & Upton says, profitability is the
ability of a given investment to earn a return from its use. However, the term
Profitability is not synonymous to the term Efficiency. Profitability is an index of
efficiency and is regarded as a measure of efficiency and management guide to greater
efficiency. Though, profitability is an important indicator for measuring the efficiency,
the extent of profitability cannot be taken as a final proof of efficiency. Sometimes
satisfactory profits can mark inefficiency and also, a proper degree of efficiency can be
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accompanied by an absence of profit. The net profit figure simply reveals a satisfactory
balance between the values received and value given. The change in operational
efficiency is merely one of the factors on which profitability of an enterprise largely
depends.
Profitability is the ability of the enterprise to make profit on sales of its products
or services. It is the ability of the enterprise to get sufficient return on the investments in
financial as well as human resources used in the business operations. The term profit
should not be confused with profitability. Weston and Brigham define the profit from
different perspectives as to the financial management, profit is the test of efficiency
and a measure of control, to the owners it is a measure of the worth of their investment,
to the creditors it is the margin of safety, to the government it is a measure of taxable
capacity and a basis of legislative action and to the country, profit is an index of
economic progress, national income generated and the rise in the standard of living,
while profitability is an outcome of profit. No profit drives towards profitability. Firms
having the same amount of profit may differ in terms of profitability. Profit in two
separate business concerns may be same but their profitability may differ when
measured in terms of size of investment.
The profitability of a life insurance company is critically dependent on its
operating and financial activities. Operating activities consist of insurance operations
such as selling new policies and providing services to existing policies. Financial
activities consist of investing the premiums of policies in viable opportunities. The
profits from operating activities can be calculated as the difference between premium
income and the total cost of operations, whereas the profits from financial activities is
calculated as the difference between actual returns on investment and the returns
credited to the policies. Success in the life insurance industry depends on the insurers
ability to control costs and on various intangibles, such as clientele and business-risk
preference, marketing skills, reputation, and perceived quality of services (Greene and
Segal, 2004).
A life insurers profitability is influenced by both internal and external factors.
Whereas internal factors focus on an insurers-specific characteristics, the external
87
factors concern both industry features and macroeconomic variables. The profitability
of life insurance companies can also be appraised at the micro, meso and macro levels
of the economy. The micro level refers to how firm-specific factors such as size, capital,
efficiency, age, and ownership structure affect profitability. The meso and macro levels
refer to the influence of support-institutions and macroeconomic factors respectively
(Akotey, 2011).
Figure 4.1: The Three-Level-Factor Determinants of Profitability in the Insurance
Industry
Source: Akotey, 2011.

Life insurance sector continues on its sluggish pace of growth and gradually
increasing penetration of life insurance services. The life
insurance industry has
enjoyed robust growth in the last few years, driven by favorable economic conditions,
expansion of the financial sector as a whole, privatization of large state-owned entities
and foreign investments (Malik, 2011). The reforms in the insurance sector in 2000
have brought about drastic changes in the functioning and operations of life insurance
companies. So it becomes necessary to evaluate the profitability of life insurance
companies in the post-reform period.
4.2 EVALUATION OF PROFITABILITY OF LIC

The profitability of public and private sector life insurance companies is
assessed through the use of financial ratios such as the claims ratio, net retention ratio,
88
commission ratio, operating ratio, net earnings ratio, combined ratio, return on equity
ratio, expenses of management ratio and investment income ratios for the period from
2001-02 to 2010-11.
Claim Ratio:
Claim ratio can be defined as the ratio of total net incurred claims to net written
premium (NWP). This indicator is a good complement to the picture of economics,
client value and service quality of the various life insurance schemes and measures
underwriting efficiency. The lower the rates of this ratio, the better the financial health of an
insurer (Akotey et. al, 2011).
Table 4.2.1 depicts the ratio of claim incurred as a percentage of net written
premium of the public and private sector life insurance companies for the period from
2001-02 to 2010-11. Met Life, SBI Life, ING Vyasya and Kotak Mahindra commenced
their business from the year 2001 and Reliance from the year 2002 so the data relating
to claims was not available for that period. The table also reveals the mean, median and
standard deviation for each life insurance company over the study period and also for
each year across the 9 companies. The sector-wise analysis shows that the claim
incurred ratio of the private sector life insurance companies is higher than that of the
public sector life insurance company throughout the study period that is the indicator of
higher underwriting efficiency of LIC than the private sector life insurers. Among the
private sector companies, ICICI Prudential Life Insurance Co. Ltd. showed a maximum
average claim ratio of 15.31 per cent, followed by Kotak Mahindra Life Insurance
Company Ltd. (12.04 per cent) and Reliance Life Insurance Co. Ltd. with a percentage
of 9.09 per cent. The public sector LIC showed the average claim ratio of 3.05 per cent,
followed by Met Life Insurance with the ratio of 5.44 per cent. The average claim ratio
of all the private sector life insurers is 9.40 per cent and that of public insurer is 3.05 per
cent, which clearly indicates a difference between the public and private life insurers'
claim ratio. The standard deviation values of the public and private sector life insurance
companies are 20.41 and 9.27 which exhibit that private life insurers are more
consistent
89
Table 4.2.1
Claim Ratio of Life Insurance Companies during the Post-reform Period (Percentage)
Name of the
2001-
2002-
2003-
2004-
2005-
2006-
2007-
2008-
2009-
02
03
04
05
06
07
08
09
10
0.09
0.38
0.93
2.34
2.90
6.18
10.41
12.35
19.24
31.61
8.64
4.54
10.20
NA
3.80
9.51
7.73
7.68
4.79
6.25
5.51
8.44
22.67
8.49
7.68
5.62
ICICI PRU
0.56
0.76
0.83
4.29
4.93
9.21
14.89
14.40
43.74
59.47
15.31
7.07
20.18
MET LIFE
NA
2.28
1.89
4.41
2.93
4.25
3.02
3.88
7.41
18.89
5.44
3.88
5.30
1.74
2.60
5.46
3.03
5.45
5.61
5.06
5.78
12.24
21.49
6.85
5.46
5.89
ING VYASYA
NA
1.38
1.09
0.77
7.17
7.17
7.77
9.32
14.98
34.37
9.34
7.17
10.46
RELIANCE
NA
1.42
1.63
6.61
14.76
7.89
5.05
3.16
10.52
30.74
9.09
6.61
9.19
NA
0.53
2.78
0.99
6.87
18.20
15.79
10.53
17.43
35.23
12.04
10.53
11.11
Mean
0.80
1.64
3.01
3.77
6.59
7.91
8.53
8.12
16.75
31.81
9.40
7.25
9.27
Median
0.56
1.40
1.76
3.66
6.16
6.68
7.01
7.55
13.61
31.17
8.86
S.D.
0.85
1.18
3.03
2.50
3.77
4.46
4.73
4.13
11.67
12.77
3.06
LIC
0.35
0.38
0.38
0.38
0.37
0.42
0.38
3.34
42.55
54.70
3.05
0.38
20.41
Company
HDFC LIFE
SBI LIFE
MAX NEW YORK
201011 Mean
Median S.D.
KOTAK
MAHINDRA
Source: Compiled and calculated from annual reports of various life insurance companies for the period from 2001-02 to 2010-11
NA- Not Applicable.
90
Test of Significance
Test
Ratio
Z-value
Asymp. Sig. (2-tailed)
Mann- Whitney Test
Claim Ratio
-2.169
0.03
than the public insurers in paying claims to the customers. Year-wise analysis indicates
that the average claim ratio of the public sector is the highest, i.e., 54.70 per cent in the
year 2010-11. The private insurers' average claim ratio is also the highest in the year
2010-11 followed by the year 2009-10. The study reveals that private sector life
insurance companies do not get much of their business reinsured in contrast to the
public sector player, who gets most of the business reinsured to reduce their claim
incurred ratio. Mann-Whitney test further shows that there is marginally significant
difference between the claim ratio of the public and the private sector life insurance
companies.
Ratio of Expenses of Management:

Ratio of expenses of Management is calculated by dividing the management
expenses by the gross direct premium of the company. Expenses of Management
includes employees remuneration, training expenses, rent, rates and taxes, repairs,
printing & stationary, legal & professional charges, Advertisement, interest and bank
charges, medical fees, auditors fees, travel, conveyance and vehicle running charges,
communication charges, etc. Whereas the claims ratio measures underwriting
efficiency, the expense ratio evaluates managerial competency and efficiency. The
lower the rates of these ratios, the better the financial health of an insurer.
91
Table 4.2.2
Ratio of Expenses of Management of Life Insurance Companies during the Post-reform Period (Percentage)
Name of the
2001-
2002-
2003-
2004-
Company
02
03
04
05
06
07
08
09
10
11
Mean
Median
S.D.
HDFC LIFE
143.10
60.35
45.97
44.25
33.05
27.55
28.08
39.26
29.04
21.90
47.26
36.16
35.53
SBI LIFE
78.01
34.77
29.60
24.61
24.15
17.70
15.16
15.09
14.05
12.26
26.54
20.93
19.53
ICICI PRU
85.34
50.67
38.70
27.05
23.67
25.89
27.51
22.39
19.19
15.37
33.58
26.47
20.81
1393.75 405.94 178.84 134.72
98.09
68.40
59.76
49.21
38.43
25.35
245.25
83.24
418.78
MAX NEW YORK
248.37
135.03
94.31
75.35
60.12
49.47
46.60
51.86
39.62
34.07
83.48
55.99
65.37
ING VYASYA
584.01
303.40 134.27
55.35
65.82
56.24
43.94
39.82
35.80
36.57
135.52
55.79
177.70
4035.71 551.00 185.64
79.46
58.10
52.54
40.51
51.09
34.29
31.62
511.99
55.32
1248.22
MET LIFE
RELIANCE
2005- 2006- 2007- 2008- 2009- 2010-
KOTAK
MAHINDRA
511.74
171.07
72.34
32.23
31.07
32.99
34.30
35.55
25.86
23.87
97.10
33.64
152.34
Mean
885.00
214.03
97.46
59.13
49.26
41.35
36.98
38.03
29.53
25.13
147.59
45.30
265.13
Median
380.06
153.05
83.33
49.80
45.57
41.23
37.40
39.54
31.67
24.61
90.29
1344.95 188.56
62.22
36.98
26.00
17.74
13.76
13.46
9.28
8.67
163.38
17.29
16.28
14.47
12.71
11.93
12.14
13.09
14.89
14.79
14.68
2.27
S.D.
LIC
17.62
17.52
Source: Compiled and calculated from annual reports of various life insurance companies for the period from 2001-02 to 2010-11. NANot Applicable.
92
Test
Ratio
Z-value
Mann- Whitney Test
Expense Ratio
-4.801
0.001
Table 4.2.2 depicts the ratio of expenses of management as a percentage of gross

direct premium of the public and private sector life insurance companies for the period
from 2001-02 to 2010-11. The table also reveals the mean, median and standard
deviation for each life insurance company over the study period and also for each year
across the 9 companies. The sector-wise analysis shows that the expenses of
management ratio of the private sector life insurance companies is higher than that of
the public sector life insurance company throughout the study period that is the
indicator of higher managerial efficiency of LIC than the private sector life insurers.
Among the private sector Reliance showed the maximum average expense ratio
consisting of 511.99 per cent, followed by Met Life (245.25 per cent). The average
expense ratio of public sector LIC is 14.68 per cent and it is the least ratio of the sample
companies. SBI Life showed the least expense ratio consisting of 26.54 per cent,
followed by ICICI Prudential (33.58 per cent) among the private sector life insurance
companies. Year wise results depict that LIC had the highest ratio of 17.62 per cent in
the year 2001-02 throughout the study period. Reliance showed the maximum expense
ratio in the year 2001-02 consisting of 4035.71 per cent, followed by Met Life (1393.75
per cent). The least expense ratio was depicted by SBI Life consisting of 12.26 per cent
in the year 2011-12. The standard deviation of the public and private sector life
insurance companies is 2.27 per cent and 265.13 per cent respectively. The study
reveals that the private sector life insurance companies had higher expenses of
management than the public sector LIC. Further, Mann-Whitney test shows that there is
highly significant difference between the ratio of expenses of management of the public
and the private sector life insurance companies.
93
Combined Ratio:
The combined ratio depicts the combined effect of expenses of management
ratio and claim ratio. It is most commonly used to measure underwriting profitability
and managerial competency and efficiency.
Table 4.2.3 presents the combined ratio of the public and private sector life
insurance companies for the period from 2001-02 to 2010-11. The table also reveals the
mean, median and standard deviation for each life insurance company over the study
period and also for each year across the 9 companies. The sector-wise analysis shows
that the combined ratio of the private sector life insurance companies is higher than that
of the public sector life insurance company throughout the study period. The public
sector LIC showed a combined ratio of 34.67 per cent, whereas that of private sector, it
is 83.88 per cent that reveals that the underwriting and managerial efficiency of public
sector LIC is better than the private sector life insurers. Among the private sector life
insurance companies Reliance showed the maximum average combined ratio of 129.56
per cent followed by Met Life in which the ratio is 123.08 per cent. Year wise, the
maximum average combined ratio was presented in the year 2002-03 consisting of
215.67 per cent and the least ratio was in the year 2007-08 consisting of 45.51 per cent.
The public sector LIC showed the highest combined ratio in the year 2010-11 consisting
of 69.59 per cent, followed by the year 2009-10 consisting of 55.64 per cent. The
standard deviation of the public and private sector life insurance companies is 20.13 per
cent
and
58.56
per
cent.
Thus,
the
analysis
94
reveals
that
the
private
Table 4.2.3
Combined Ratio of Life Insurance Companies during the Post-reform Period (Percentage)
Name of the
2001-
2002-
2003-
2004-
02
03
04
05
143.19
60.74
46.90
46.59
35.95 33.73
38.49 51.61 48.28 53.51
55.90
47.59
31.77
SBI LIFE
39.00
38.57
39.11
32.34
31.83 22.49
21.41 20.60 22.49 34.93
29.31
31.83
7.59
ICICI PRU
85.90
51.42
39.53
31.34
28.59 35.10
42.40 36.79 62.93 74.84
48.88
40.96
19.53
Company
HDFC LIFE
2005- 200606
07
2007- 2008- 2009- 201008
09
10
11
Mean Median
S.D.
MET LIFE
696.87 408.22 180.72 139.13 101.01 72.65
62.77 53.08 45.84 44.24 123.08
72.65 116.53
MAX NEW YORK
250.11 137.64
99.78
78.38
65.57 55.09
51.66 57.65 51.86 55.56
90.33
61.61
62.46
ING VYASYA
292.00 304.78 135.36
56.12
72.99 63.41
51.71 49.14 50.78 70.95
95.03
63.41
83.02
2017.85 552.42 187.27
86.07
72.85 60.42
45.56 54.25 44.81 62.35 129.56
62.35 164.49
RELIANCE
KOTAK
MAHINDRA
255.87 171.60
75.12
33.22
37.94 51.19
50.09 46.09 43.29 59.10
63.07
50.09
42.50
Mean
159.73 215.67 100.47
62.90
55.84 49.26
45.51 46.15 46.28 56.94
83.88
56.39
58.56
Median
143.19 154.62
87.45
51.35
51.75 53.14
47.82 50.37 47.06 57.33
76.70
S.D.
83.34 188.53
61.16
37.24
26.06 17.19
12.16 12.10 11.40 13.15
35.95
LIC
17.97
17.67
16.66
14.84 13.13
12.31 15.48 55.64 69.59
34.67
17.16
20.13
17.90
NA- Not Applicable
95
Test
Ratio
Z-value
Mann- Whitney Test
Combined Ratio
-3.261
0.000
sector life insurance companies must try to reduce their expenses of management and
also the claim ratio to increase their underwriting as well as managerial efficiency.
Mann-Whitney test shows that there is highly significant difference between the
combined ratio of the public and the private sector life insurance companies.
Commission Ratio:
Commission ratio is the ratio of commission expenses to the gross direct
premium. Commission expenses include commission paid to agents, brokers, corporate
agencies, commission on reinsurance accepted, etc.
96
Table 4.2.4
Commission Ratio of Life Insurance Companies during the Post-reform Period (Percentage)
Name of the
Company
2001- 2002- 2003- 2004- 2005- 2006- 200702
03
04
Mean
Median
19.78
13.28
12.98
10.65
7.66
7.35
7.23
7.64
7.50
5.30
9.94
7.65
4.34
1.29
2.58
4.19
3.89
6.48
6.93
7.21
6.49
7.50
5.18
5.17
5.83
2.12
ICICI PRU
12.43
8.73
8.74
7.53
6.65
6.64
5.98
4.56
3.65
3.14
6.81
6.65
2.77
MET LIFE
33.33
21.11
23.42
17.74
19.62
21.32
22.96
17.51
11.53
3.40
19.20
20.37
7.84
MAX NEW YORK
30.45
19.14
18.71
15.75
17.06
15.23
14.16
10.15
8.67
9.29
15.86
15.49
6.36
ING VYASYA
32.22
30.48
22.52
12.12
16.25
13.32
9.11
7.65
7.35
7.64
15.87
12.72
9.42
RELIANCE
25.00
25.81
17.61
7.38
6.39
9.83
8.55
12.10
9.51
7.83
13.00
9.67
7.26
MAHINDRA
23.88
18.86
12.74
8.34
9.51
8.26
9.17
9.62
5.85
4.37
11.06
9.34
5.99
Mean
25.00
19.14
17.61
10.65
7.66
9.83
8.55
7.65
7.50
5.30
11.89
9.19
6.43
Median
24.44
19.00
15.30
9.49
8.59
9.04
8.83
8.64
7.50
5.24
12.03
S.D.
10.96
9.04
6.69
4.62
5.51
5.18
5.58
3.99
2.36
2.24
4.80
LIC
9.07
9.15
9.08
8.31
7.81
7.17
6.39
6.38
6.51
6.54
7.64
7.49
1.19
HDFC LIFE
SBI LIFE
05
06
07
08
2008- 2009- 201009
10
11
S.D.
KOTAK
97
Test
Ratio
Z-value
Mann- Whitney Test
Commission Ratio
-1.842
0.06
Table 4.2.4 presents the commission ratio of the public and private sector life
period and also for each year across the 9 companies. The average commission ratio of
public sector LIC is 7.64 per cent and that of private sector life insurance companies is
11.89 per cent. SBI Life had the least commission ratio consisting of 1.29 per cent in
the year 2001-2002 followed by ICICI Prudential consisting of 3.14 per cent in the year
2010-11. Among the private sector, the average commission ratio of Met Life was the
maximum followed by ING Vyasya consisting of 19.20 per cent and 15.87 per cent
respectively. The public sector LIC has the maximum commission ratio of 9.15 per cent
in the year 2002-03 and the least in the year 2008-09 (6.38 per cent). The year-wise
average commission ratio was highest in the year 2001-02 (25 per cent) and the least in
the year 2010-11(5.30 per cent). The standard deviation of the public and private sector
life insurance companies is 6.43 per cent and 1.19 per cent. Thus, the analysis clearly
depicts that the commission ratio of the life insurance companies has reduced during the
post-reform period. Mann-Whitney test shows that there is no significant difference
between the commission ratio of the public and the private sector life insurance
companies.
Investment Income Ratio:

The investment income ratio is determined by investment income to net written
premium. The investment income as a proportion of the premium income evaluates the
performance of an insurers technical ability (underwriting strength) in relation with its
asset allocation capacity to viable investment portfolios (Akotey, et.al, 2011). It
measures the degree of quality, adequacy and the profitability of the investment
portfolios of an insurer.
98
Table 4.2.5
Investment Income Ratio of Life Insurance Companies during the Post-reform Period (Percentage)
Name of the
2001-
2002-
2003-
Company
02
03
04
3.41
3.63
9.11
HDFC LIFE
2004-
2005-
2006-
2007-
2008-
2009-
2010-
05
06
07
08
09
10
11
3.81
24.04
7.99
11.60
Mean
Median
S.D.
-31.22
82.28
22.96
13.76
8.55
28.44
1.43
6.94
5.27
6.52
12.18
7.51
8.97
-23.52
59.18
23.16
10.76
7.23
20.65
2.47
5.33
4.90
8.17
33.47
37.02
7.31
-40.11 106.66
34.99
20.02
7.74
37.82
NA
0.38
2.69
2.91
3.63
3.91
5.17
-18.16
54.21
23.41
8.68
3.63
20.03
2.00
4.25
4.36
5.10
8.00
6.27
8.34
-5.72
41.35
17.22
9.12
5.68
12.68
8.39
4.84
4.80
1.25
11.33
18.65
5.41
-22.05
62.29
22.23
11.71
6.90
21.37
NA
1.26
2.02
3.15
19.99
3.28
-2.13
-19.80
52.43
23.03
9.25
3.15
20.41
NA
1.04
4.75
3.96
21.17
12.55
15.70
-14.96
36.98
22.23
11.49
12.55
14.95
2.47
4.25
4.80
3.81
12.18
7.51
7.31
-22.05
59.18
23.03
10.25
6.05
20.52
2.47
3.94
4.77
3.88
16.09
7.75
7.82
-20.93
56.70
23.00
11.13
S.D.
2.81
2.34
2.11
2.18
9.72
11.22
5.20
10.35
22.74
5.00
3.70
LIC
47.91
47.58
47.28
48.37
44.12
35.75
37.09
27.21
60.43
47.13
44.29
47.20
9.03
SBI LIFE
ICICI PRU
MET LIFE
MAX NEW YORK
ING VYASYA
RELIANCE
KOTAK
MAHINDRA
Mean
Median
99
Test
Ratio
Z-value
Mann- Whitney Test
Investment Income Ratio
-4.288
0.801
Table 4.2.5 presents the investment income ratio of the public and private sector
life insurance companies for the period from 2001-02 to 2010-11. Met Life and Kotak
Mahindra commenced their business late in the year 2001 and Reliance from the year
2002 so the data was not available of these companies for that period. The table also
reveals the mean, median and standard deviation for each life insurance company over
the study period and also for each year across the 9 companies. The public sector LIC
has the average investment income ratio of 47.20 per cent whereas private sector life
insurance companies showed average investment income ratio of 6.05 per cent. The
highest investment income ratio in the public sector was 48.37 per cent in 2004-05 and
in private sector, it was 106.66 per cent in 2009-10. In the year 2008-09, all the private
sector life insurers had the negative investment income ratio. Met Life showed an
investment income ratio of 0.38 per cent in 2002-03 and it increased to 54.21 per cent in
2009-10 and further decrease to 23.41 per cent in 2010-11. The investment income ratio
of all the life insurance companies decreased in the year 2010-11 from 2009-10 in
public as well as private sector. The analysis reveals that the public sector LIC showed
the higher investment income ratio as compared to the private sector life insurance
companies. The standard deviation of the public and private sector life insurance
companies is 20.52 per cent and 9.03 per cent. Mann-Whitney test shows that there is
highly significant difference between the investment income ratio of the public and the
private sector life insurance companies.
Operating Ratio:
Operating Ratio may be defined as profit before tax divided by net written
premium. Operating ratio is a common term in the insurance business. It is a useful
way to evaluate a company's core operations because it is based on operating income.
The operating ratio is also an indirect measure of efficiency of a company.
100
Table 4.2.6
Operating Ratio of Life Insurance Companies during the Post-reform Period (Percentage)
Name of the
2001-
2002-
2003-
Company
02
03
HDFC LIFE
2004-
2005-
2006-
2007-
2008-
2009- 2010-
04
05
06
07
08
09
10
11
Mean
Median S.D.
-76.45
-33.46
-8.09
-13.34
-8.32
-4.45
-5.05
-9.11
-3.96
-1.11
-16.33
-8.20
22.98
-1.98
-10.34
-7.28
-1.92
0.19
0.13
0.62
-0.37
2.75
2.87
-1.53
-0.12
4.22
ICICI PRU
-88.86
-35.27
-22.68
-9.42
-4.78
-8.76
-11.40
-5.75
1.70
4.67
-18.05
-9.09
27.43
MET LIFE
-593.40
101.85
-42.39
-61.48
-38.94
-2.45
1.85
0.73
1.00
1.00
-63.22
-0.86 191.38
29.51
5.04
-109.23
-24.35
-7.70
-4.07
-5.84
-10.29
-0.43
3.37
-12.40
-4.96
-741.75
-179.79
-71.42
-27.76
-29.32
-25.22
-16.51
-13.55
-8.34
-4.11
-111.78
-26.49 227.42
742.34
96.88
-257.55
-51.40
-44.28
-31.49
-23.90
-22.07
-4.31
-1.98
40.22
-22.99 261.89
NA
NA
-62.98
-4.07
-7.14
-11.52
-4.37
0.62
2.43
3.48
-10.44
-4.22
21.82
Mean
-76.45
-10.34
-42.39
-24.35
-8.32
-4.45
-5.84
-9.11
-0.43
1.00
-18.07
-8.72
24.23
Median
-76.45
-10.34
-52.69
-18.84
-8.01
-6.60
-5.45
-7.43
0.28
1.93
-14.37
S.D.
481.62
94.99
82.35
21.98
17.23
11.44
8.74
7.99
3.98
3.12
45.17
LIC
1.65
0.91
0.87
0.94
0.70
0.61
0.56
0.61
0.57
0.58
0.80
0.65
0.33
SBI LIFE
MAX NEW YORK

ING VYASYA
RELIANCE
36.68
KOTAK
MAHINDRA
101
Test
Ratio
Z-value
Mann- Whitney Test
Operating Ratio
-3.060
0.002
Table 4.2.6 shows the operating ratio of the public and private sector life
period and also for each year across the 9 companies. The average operating ratio of
public sector LIC was 0.80 per cent, whereas of private sector life insurance companies
was -18.07 per cent. All the private sector life insurance companies exhibited negative
operating ratio up to the year 2008-09 except Max New York and Reliance in the years
from 2001-02 to 2002-03. LIC depicted the positive operating ratio throughout the
study period. However, some of the private sector life insurance companies, namely,
SBI Life, ICICI Prudential, Met Life and Kotak Mahindra showed a positive operating
ratio in the years 2009-10 and 2010-11 but the rate of ratio is less ranging from 2 per
cent to 4 per cent. Thus, the mean of operating ratio of public sector LIC is higher than
that of private sector life insurance companies. The standard deviation of public and
private life insurance companies was 0.33 per cent and 24.23 per cent respectively.
Mann-Whitney test shows that there is a significant difference between the operating
ratio of the public and the private sector life insurance companies.
Net Earnings Ratio:

Net earnings are one of the most closely followed numbers in finance and it
plays a large role in ratio analysis and financial statement analysis. Shareholders look at
net earnings closely because they are the source of compensation to shareholders of the
company and if a company cannot generate enough profits to compensate owners, the
value of shares will plummet. Conversely, if a company is healthy and growing,
higher stock prices will reflect the increased availability of profits. The net earnings
ratio has been calculated by dividing profit after tax to net written premium.
102
Table 4.2.7
Net Earnings Ratio of Life Insurance Companies during the Post-reform Period (Percentage)
Name of the
2001-
2002-
2003-
Company
02
03
04
HDFC LIFE
2004-
2005-
2006-
2007-
2008-
2009- 2010-
05
06
07
08
09
10
11
Mean
Median S.D.
-76.45
-33.46
-8.09
-13.34
-8.32
-4.45
-5.05
-9.11
-3.96
-1.11
-16.33
-8.20
22.98
-1.98
-10.34
-7.28
-1.92
0.19
0.13
0.61
-0.37
2.74
2.84
-1.54
-0.12
4.22
ICICI PRU
-90.48
-35.27
-22.44
-8.97
-4.42
-8.22
-10.31
-5.09
1.57
4.53
-17.91
-8.59
27.99
MET LIFE
-593.40
101.85
-42.39
-61.48
-38.94
-2.45
1.85
0.73
1.00
1.00
-63.22
-0.86
191.38
29.51
5.04
-109.23
-24.35
-7.70
-4.07
-5.84
-10.29
-0.43
3.37
-12.40
-4.96
36.68
-741.75
-179.79
-71.42
-27.77
-29.32
-25.22
-16.52
-13.91
-8.35
-4.11
-111.82
-26.50
227.40
742.34
96.88
-253.99
-51.40
-44.28
-31.49
-23.90
-22.07
-4.31
-1.98
40.58
-22.99
261.44
NA
NA
-62.98
-4.07
-7.27
-11.61
-4.32
0.62
2.43
3.48
-10.47
-4.20
21.82
Mean
-76.45
-10.34
-42.39
-24.35
-8.32
-4.45
-5.84
-9.11
-0.43
1.00
-18.07
-8.72
24.23
Median
-76.45
-10.34
-52.69
-18.84
-8.01
-6.33
-5.45
-7.10
0.28
1.92
-14.37
S.D.
481.61
94.99
81.23
22.02
17.26
11.45
8.69
8.06
3.97
3.10
45.26
LIC
1.65
0.91
0.87
0.94
0.70
0.61
0.56
0.61
0.57
0.58
0.80
0.65
0.33
SBI LIFE
MAX NEW YORK

ING VYASYA
RELIANCE
KOTAK
MAHINDRA
103
Test
Ratio
Z-value
Mann- Whitney Test
Net Earnings Ratio
-3.055
0.002
Table 4.2.7 shows the net earnings ratio of the public and private sector life
period and also for each year across the 9 companies. The average net earnings ratio of
public sector LIC was 0.80 per cent whereas of private sector life insurance companies
was -18.07 per cent. All the private sector life insurance companies exhibited negative
net earnings ratio up to the year 2008-09 except Max New York and Reliance in the
years form 2001-02 to 2002-03. LIC depicted the positive net earnings ratio throughout
the study period. However, some of the private sector life insurance companies, namely,
SBI Life, ICICI Prudential, Met Life and Kotak Mahindra showed positive net earnings
ratio in the years 2009-10 and 2010-11 but the rate of ratio is less ranging from 2 per
cent to 4 per cent. Thus, the mean of the net earnings ratio of public sector LIC is higher
than that of private sector life insurance companies. The standard deviation of public
and private life insurance companies was 0.33 per cent and 24.23 per cent respectively.
Mann-Whitney test shows that there is a significant difference between the net earnings
ratio of the public and the private sector life insurance companies.
Return on Equity Ratio:

It is the amount of net income returned as a percentage of shareholders equity.
Return on equity measures a corporation's profitability by revealing how much profit a
company generates with the money shareholders have invested. It measures the rate of
return on the ownership interest (shareholders' equity) of the common stock owners. It
measures a firm's efficiency at generating profits from every unit of shareholders'
equity. ROE shows how well a company uses investment funds to generate earnings
growth. ROEs between 15 per cent and 20 per cent are generally considered good. It is
computed by dividing profit after tax to Net worth.
104
Table 4.2.8
Return on Equity Ratio of Life Insurance Companies during the Post-reform Period (Percentage)
Name of the
2001-
2002-
2003-
Company
02
03
04
2004-
2005-
05
06
20072006-07 08
2008-
2009-
2010-
09
10
11
Mean
Median S.D.
HDFC LIFE
NA
-34.12
-14.96
-68.17
-40.67
-31.88
-38.17
-77.14
-47.84
-15.23
-40.91
-38.17
21.13
SBI LIFE
NA
-6.38
-10.81
-3.64
0.51
0.83
3.42
-2.69
21.85
22.48
2.84
0.51
11.73
ICICI PRU
NA
-85.86
-110.25
-88.43
-73.54
-129.51
-179.18
-77.63
20.35
38.74
-76.15
-85.86
68.37
MET LIFE
NA
NA
-7.63
-20.74
-24.39
-1.93
1.92
0.84
1.28
1.27
-6.17
-0.54
10.62
MAX NEW YORK
NA
NA
-77.30
-21.07
-10.66
-8.13
-14.96
-21.94
-1.02
9.41
-18.21
-12.81
26.03
ING VYASYA
NA
NA
-23.53
-24.05
-25.31
-25.73
-21.53
-18.41
-11.38
-4.78
-19.34
-22.53
7.53
RELIANCE
NA
NA
-36.34
-24.87
-29.56
-47.45
-50.80
-39.65
-9.53
-4.18
-30.30
-32.95
16.83
MAHINDRA
NA
NA
-59.55
-7.10
-14.99
-28.89
-13.50
2.55
12.31
18.22
-11.37
-10.30
24.77
Mean
NA
-34.12
-23.53
-24.05
-25.31
-25.73
-21.53
-21.94
-1.02
1.27
-19.55
-23.53
11.76
Median
NA
-34.12
-29.93
-22.56
-24.85
-27.31
-18.24
-20.17
0.13
5.34
-18.77
S.D.
NA
40.34
36.78
29.95
22.48
41.94
59.52
32.81
22.46
17.55
24.76
LIC
728.02 408.19 439.95
516.34 356.83
264.21
KOTAK
274.37 284.86 289.91 290.24 385.29
323.53 146.87
NA Not Applicable
105
Test
Ratio
Z-value
Mann- Whitney Test
Return on Equity Ratio
-5.101
0.030
Table 4.2.8 depicts the return on equity ratio of the public and private sector life
insurance companies for the period from 2001-02 to 2010-11. The data relating to net
worth in 2001-02 was not found for all the private life insurers. The table also reveals
the mean, median and standard deviation for each life insurance company over the study
period and also for each year across the 9 companies. The average return on equity of
public sector life insurer was 385.29 per cent whereas of the private sector was -19.55
per cent. This clearly shows that the return on equity of public sector was much higher
than that of the private sector. Among the private sector, all the life insurance
companies exhibited negative return on equity ratio except Met Life for the period from
2007-08 to 2010-11 and Kotak Mahindra for the period from 2008-09 to 2010-11. The
standard deviation of public and private life insurance companies was 11.76 per cent
and 146.87 per cent respectively. Mann-Whitney test shows that there is highly
significant difference between the return on equity ratio of the public and the private
sector life insurance companies.
Net Retention Ratio:

Insurance retention ratio is the amount of business an insurance company
retains. The companies having a stronger capital base are able to retain more of their
portfolios, whereas the companies, with relatively lower capitalization (and hence lower
capacity to retain risks) have resorted to higher utilization of reinsurance (Kumar,
2010). This is calculated based on premiums. It is the ratio of Net written premium to
gross direct premium of a life insurance company.
106
Table 4.2.9
Net Retention Ratio of Life Insurance Companies during the Post-reform Period (Percentage)
Name of the
2001-
2002-
Company
02
03
2003- 200404
05
2005-
2006-
2007-
2008-
2009-
2010-
06
07
08
09
10
11
Mean
Median
S.D.
HDFC LIFE
98.16
96.79 97.33
98.00
98.54
98.84
99.16
99.17
99.29
99.45
98.47
98.69
0.89
SBI LIFE
99.70 100.00 99.94
99.70
99.79
99.83
99.81
99.90
99.80
99.70
99.82
99.80
0.10
ICICI PRU
99.80
99.93 99.81
99.84
99.80
99.80
99.80
99.80
99.70
99.60
99.79
99.80
0.09
MET LIFE
99.71
99.80 99.60
97.37
99.02
99.11
99.05
99.08
98.83
98.50
99.01
99.07
0.70
MAX NEW YORK
99.00
99.00 99.00
99.00
99.00
99.00
99.00
99.00
99.00
99.00
99.00
99.00
0.00
ING VYASYA
99.55
99.52 99.64
99.64
99.41
99.55
99.52
99.47
99.75
99.80
99.59
99.55
0.12
RELIANCE
99.11
98.28 98.62
98.62
99.11
99.59
99.62
99.65
99.75
99.60
99.19
99.35
0.53
MAHINDRA
98.21
98.51 97.36
98.54
98.21
97.92
98.32
98.49
99.37
98.84
98.38
98.40
0.53
Mean
99.55
99.52 99.60
99.00
99.11
99.55
99.52
99.47
99.70
99.60
99.19
99.54
0.22
Median
99.33
99.26 99.30
98.81
99.07
99.33
99.34
99.32
99.54
99.53
99.10
1.06
0.88
0.56
0.64
0.51
0.47
0.37
0.47
0.55
99.95 99.94
99.94
99.96
99.97
99.94
99.94
99.95
99.94
99.95
99.94
0.01
KOTAK
S.D.
0.66
LIC
99.92
1.10
Source: Compiled and calculated from annual reports of various life insurance companies for the period from 2001-02 to 2010-11.
107
Test
Ratio
Z-value
Mann- Whitney Test
Net Retention Ratio
-4.609
0.042
Table 4.2.9 depicts the net retention ratio of the public and private sector life
period and also for each year across the 9 companies. The average net retention ratio of
the public sector LIC was 99.95 per cent and that of private sector was 99.19 per cent. It
clearly shows that net retention ratio of public sector is marginally higher than that of
private sector. Max New York Life insurance company exhibited constant ratio of 99
per cent throughout the study period. Year wise analysis shows that the maximum net
retention ratio in the private sector was in the year 2009-10 consisting of 99.70 per cent
followed by the year 2010-11 (99.60 per cent). The standard deviation of the public and
private sector life insurance companies was 0.01 per cent and 0.22 per cent respectively.
Mann-Whitney test shows that there is highly significant difference between the net
retention ratio of the public and the private sector life insurance companies.
The profitability analysis of the public and private life insurance companies in
the post-reform period shows that the claim incurred ratio and expense ratio of the
private sector life insurance companies is higher than that of the public sector life
insurance company throughout the study period that is the indicator of higher
underwriting and managerial efficiency of LIC than the private sector life insurers. The
analysis reveals that the private sector life insurance companies must try to reduce their
expenses of management and also the claim ratio to increase their underwriting as well
as managerial efficiency. The commission ratio of the life insurance companies has
reduced during the post-reform period. That is the better indication of profitability. The
public sector LIC showed the higher investment income ratio by 41.15 per cent as
compared to the private sector life insurance companies. The average net earnings ratio
and operating ratio of public sector LIC is higher than that of private sector life
insurance companies in which these ratios showed negative results. Most of the private
108
sector life insurers suffered losses throughout the study period. The average return on
equity of public sector life insurer was 385.29 per cent whereas of the private sector was
-19.55 per cent. This clearly shows that the return on equity of public sector was much
higher than that of the private sector. The net retention ratio of public sector is
marginally higher than that of private sector. Thus, we can conclude that the overall
profitability of the public sector was higher than that of the private sector. So the private
sector life insurers must reduce their expenses, get most of their business reinsured and
invest their earnings in the profitable opportunities to raise their level of profitability.
Thus, the study rejects the hypothesis that the profitability of private sector life
insurance companies is significantly higher than that of the public sector life insurance
company in the post-reform period.
MULTIVARIATE PROFITABILITY ANALYSIS OF THE LIFE

INSURANCE COMPANIES IN THE POST-REFORM PERIOD:
Correlation is a statistical technique used to analyze data from more than one
variable. Correlation is a statistical measure of how two variables move in relation to
each other. Correlation is computed into correlation coefficient, which ranges between 1 and +1. Perfect positive correlation (a correlation coefficient of +1) implies that as
one variable moves, either up or down, the other variable will move in lockstep, in the
same direction. Alternatively, perfect negative correlation means that if one variable
moves in either direction the variable that is perfectly negatively correlated will move in
the opposite direction. If the correlation is 0, the movements of the variables are said to
have no correlation; they are completely random. In real life, perfectly correlated
variables are rare; rather, we can find variables with some degree of correlation"
(Investopedia 2012). The present study uses the Return on Equity as the dependent
variable and all the others as independent variables. It aimed at identifying the most
important independent variable (s) which have higher significant association with the
dependent variable. The degree and direction of correlation coefficients, between the
selected variables and public sector life insurers' profitability is studied for both the
public and private sector companies during the post-reform period. The analysis was
performed with the help of statistical software called SPSS Version-16.0.
109
Table 4.2.10
Spearman's Correlation Cofficients of Public Sector Life Insurance
Company during Post-reform Period
Comm
ROE
Claim
ission
Combi
Opera
Net
Investment
ned
ting
earning
income
NRR
Exp
ROE
Claim
Commission
NRR
Combined
-0.582
.758*
-0.582
-0.493
0.184
-0.013
0.479
0.3
0.261
-0.305
**
**
-0.267
0.176
Operating
.845
-.659
.809
Netearning
.845**
-.659*
.809**
-0.267
0.176
1.000**
.673*
-0.15
0.479
-0.195
.661*
0.389
0.389
-0.463
**
0.6
**
**
.636*
Investment
income
Expenses
.903
**
.891
-0.311
.827
.827
**. Correlation is significant at the 1 per cent level (2-tailed).

*. Correlation is significant at the 5 per cent level (2-tailed).
Table 4.2.10 depicts the correlation between dependent variable return on equity
with other independent variables, viz., claim ratio, commission ratio, net retention ratio,
combined ratio, operating ratio, net earnings ratio, investment income and expenses
ratio of the public sector life insurance company LIC during the post-reform period
from 2001-02 to 2010-11. It can be seen from the table that all the independent
variables except claim ratio and net retention ratio have a significant positive correlation
with return on equity. Claim ratio, net retention ratio and combined ratio have
insignificant correlation with return on equity. Other independent variables have also
significant correlation with one another during the post-reform period, such as claim
ratio have a significant negative correlation with operating ratio and net earnings ratio
and their coefficients are -0.659 and -0.659 respectively. Commission ratio has
110
significant positive correlation with operating ratio, net earnings ratio and expens ratio
with their coefficient 0.809, 0.809 and 0.891 respectively. Combined ratio has a positive
significant correlation with investment income having coefficient of 0.661. Operating
ratio has a positive significant correlation with net earnings ratio (1.000) and expenses
ratio (0.827). Net earnings and investment income also have a positive significant
correlation with expenses ratio and their coefficients are 0.827 and 0.636 respectively.
Table 4.2.11
Spearman's Correlation Cofficients of Private Sector Life Insurance
Companies during Post-reform Period
Exp
ROE
Invest
Net
ClaimR
Of
Comm
ment
Operating
Earning
Combi
atio
Mgt
ission
Income
Ratio
Ratio
ned
NRR
ROE
Claim Ratio
.321**
**
-0.145
-.580**
.851**
.272*
.565**
-.478**
-.366**
Operating Ratio
.601**
.389**
-.472**
-.321**
.301**
Net Earn Ratio
.596**
.391**
-.476**
-.323**
.303**
1.000**
-0.081
-.291**
.815**
.728**
-.279*
-.316**
-.319**
0.132
**
**
0.064
**
Exp of Mgt
Commission
-.230
-.548
Investment
Income
Combined
NRR
0.054
-.348
-.398
0.081
0.059
-.349
*. Correlation is significant at the 5 per cent level (2-tailed).

**. Correlation is significant at the 0.01 level (2-tailed).
Table 4.2.11 depicts the correlation between dependent variable return on equity
with other independent variables, viz., claim ratio, commission ratio, net retention ratio,
combined ratio, operating ratio, net earnings ratio, investment income and expenses
ratio of the private sector life insurance companies during the post-reform period from
2001-02 to 2010-11. It can be seen from the table that all the independent variables
except commission ratio, expenses ratio, combined ratio and net retention ratio have a
111
significant positive correlation with return on equity. Commission ratio, expenses ratio,
combined ratio and net retention ratio have insignificant correlation with return on
equity. Other independent variables have also significant correlation with one another
during the post-reform period, such as claim ratio have a significant correlation with all
the other independent variables except net retention ratio. The table clearly depicts that
almost all the independent variables have significant relationships with other variables
except net retention ratio. Furthermore, combined ratio has a negative significant
correlation with net retention ratio with coefficient of 0.349. Commission ratio and
expenses of management have a positive significant correlation with combined ratio and
their coefficients are 0.728 and 0.815 respectively.
REGRESSION ANALYSIS:
Regression analysis involves identifying the relationship between a dependent
variable and one or more independent variables. A model of the relationship is
hypothesized and estimates of the parameter values are used to develop an estimated
regression equation. Multiple regression is also used to determine the overall fit
(variance explained) of the model and the relative contribution of each of the predictors
to the total variance explained. Multiple regression analysis is used to look for different
combinations of variables that explain a variation in profitability for the life insurance
companies in India. The analysis was performed with the help of statistical software
called SPSS Version-16.0.
Table 4.2.12
Multiple Regression Analysis of Public Sector Life Insurance
Company during the Post-reform Period (2001-02 to 2010-11)
Step
Intercept
(Constant a)
Unstandardized
R2
Co-efficients (b)
Adjusted
R
F-
df1
df2
Change
Sig. F
Change
Net Earnings
Ratio (X1)
I
41.029
430.329
(1.4228)*
(12.887)*
0.954
0.948
The figures given in parentheses represent the t-values.

Significant at 5 per cent level.
112
166.082
0.000
Table 4.2.12 depicts the results of step-wise multiple regression analysis for the
public sector life insurance company for the period from 2001-02 to 2010-11. The
analysis reveals that net earnings ratio (Profit after tax to Net Written Premium) entered
the regression model in first step, singularly explaining 94.8 per cent variation in return
on equity of the public sector life insurer with significant unstandarised regression
coefficient 430.729., i.e., one unit increase in net earnings ratio leads to 430.729 unit
increase in the return on equity. Thus, the multivariate regression analysis for the period
2001-2010-11 provides the following regression equation:
Y1=41.029+430.329 (X1)
Where, Y1 is the return on equity measured by net profit after tax as percentage
of net worth. It has been observed that no other variable was found to be significantly
affecting the return on equity of the public sector life insurer and profit after tax to net
written premium have been found significantly affecting profitability of the public
sector life insurance company throughout the study period.
Table 4.2.13
Multiple Regression Analysis of the Private Sector Life Insurance
Companies during the Post-reform Period (2001-02 to 2010-11)
Step
Intercept
Unstandardized Co-efficient
(Constant a)
II
R2
(b)
Adjusted
R
F-
df1
df2
Change
Sig. FChange
Claim
Commission
Ratio (x1)
Ratio (x2)
-34.292
1.027
0.092
0.080
7.903
78
0.006
(-6.712)*
(2.811)*
-51.089
1.375
1.116
0.137
0.115
4.036
77
0.048
(-5.241)*
(3.454)*
(2.009)
The figures given in parentheses represent the t-values.

Significant at 5 per cent level.
Table 4.2.13 presents the multiple regression analysis of the private sector life
insurance companies during the period from 2001-02 to 2010-11. The results reveal that
113
net incurred claims to net written premium entered the regression model in first step,
singularly explaining 8 per cent variation in the private sector life insurers' profitability
with significant regression coefficient (b) 1.027. In second step, commission expenses
to gross direct premium has entered the model and together with claim ratio explain
11.5 per cent variation with significant regression coefficient 1.375, i.e., one unit of
commission expenses to NWP leads to 1.375 increase in the private sector life insurers'
profitability. The multivariate regression analysis for the period from 2001-02 to 201011 provides the following regression equation:
Y1 = -51.089+ 1.375 (X1) + 1.116 (X2)
Where, Y1 is the return on equity measured by profit after tax as percentage of
net worth. The study exhibits that net incurred claims has the most powerful impact on
the profitability of the private sector life insurers in the post-reform period of study.
The results by using multivariable profitability analysis indicate that in the
public sector LIC, all the independent variables except claim ratio and net retention
ratio have a significant positive correlation with return on equity. Claim ratio, net
retention ratio and combined ratio have insignificant correlation with return on equity.
Net earnings and investment income also have a positive significant correlation with
expenses ratio and their coefficients are 0.827 and 0.636 respectively. The analysis
reveals that all the independent variables except commission ratio, expense ratio,
combined ratio and net retention ratio have a significant positive correlation with return
on equity in the private sector life insurance companies during the post-reform period.
Furthermore, combined ratio has a negative significant correlation with net retention
ratio with coefficient of 0.349. By using regression analysis, it has been observed that
profit after tax to net written premium explains 94.8 per cent variation in return on
equity of the public sector life insurer with significant unstandarised regression
coefficient 430.729., i.e., one unit increase in net earnings ratio leads to 430.729 unit
increase in the return on equity. No other variable except net earnings ratio has been
found significantly affecting profitability of the public sector life insurance company
throughout the study period. In case of the private sector life insurance companies,
commission expenses to gross direct premium has entered the model and together with
114
claim ratio explaining 11.5 per cent variation with significant regression coefficient
1.375, i.e., one unit of commission expenses to NWP leads to 1.375 increase in the
private sector life insurers' profitability. The study exhibits that net incurred claims to
net written premium has the most powerful impact on the profitability of the private
sector life insurance companies in the post-reform period of study.
115

Analysis of Profitability in Indian Life Insurance

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Analysis of Profitability in Indian Life Insurance

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CHAPTER - IV

PROFITABILITY ANALYSIS OF INDIAN

4.1 CONCEPT OF PROFITABILITY:

Source: Akotey, 2011.

insurance industry has

4.2 EVALUATION OF PROFITABILITY OF LIC

MAX NEW YORK

Asymp. Sig. (2-tailed)

Mann- Whitney Test

Ratio of Expenses of Management:

1393.75 405.94 178.84 134.72

MAX NEW YORK

4035.71 551.00 185.64

2005- 2006- 2007- 2008- 2009- 2010-

Asymp. Sig. (2-tailed)

Mann- Whitney Test

Table 4.2.2 depicts the ratio of expenses of management as a percentage of gross

38.49 51.61 48.28 53.51

21.41 20.60 22.49 34.93

42.40 36.79 62.93 74.84

2007- 2008- 2009- 201008

696.87 408.22 180.72 139.13 101.01 72.65

62.77 53.08 45.84 44.24 123.08

MAX NEW YORK

51.66 57.65 51.86 55.56

292.00 304.78 135.36

51.71 49.14 50.78 70.95

2017.85 552.42 187.27

45.56 54.25 44.81 62.35 129.56

50.09 46.09 43.29 59.10

159.73 215.67 100.47

45.51 46.15 46.28 56.94

47.82 50.37 47.06 57.33

12.16 12.10 11.40 13.15

12.31 15.48 55.64 69.59

Asymp. Sig. (2-tailed)

Mann- Whitney Test

2001- 2002- 2003- 2004- 2005- 2006- 200702

MAX NEW YORK

2008- 2009- 201009

Asymp. Sig. (2-tailed)

Mann- Whitney Test

Investment Income Ratio:

Asymp. Sig. (2-tailed)

Mann- Whitney Test

Investment Income Ratio

MAX NEW YORK

Asymp. Sig. (2-tailed)

Mann- Whitney Test

Net Earnings Ratio:

MAX NEW YORK

Asymp. Sig. (2-tailed)

Mann- Whitney Test

Net Earnings Ratio

Return on Equity Ratio:

MAX NEW YORK

728.02 408.19 439.95

274.37 284.86 289.91 290.24 385.29

Asymp. Sig. (2-tailed)

Mann- Whitney Test

Return on Equity Ratio

Net Retention Ratio: