The oriental insurance company ltd.

K. J. SOMAIYA
COLLEGE OF
SCIENCE & COMMERCE

Sumit k boricha 13-5843 TY BAF

02
ACKNOWLEDGEMENT
It is a great pleasure for me to take this opportunity to thank everybody who has been of great help in completion of the project. My sincere gratitude to our professor CA. MONIKA LODHA without whose help this project seemed impossible. I am greatly obliged to the principal of our institution DR. VIJAY JOSHI as well as our vice-principal MR.

JAYANT UNDIRVADKAR for the same It has been a great learning experience to work on this project, which enriched my knowledge and developed my outlook for becoming a better professional. It has enhanced my vision of how most of the banks in India operate on daily basis. Most importantly this project has helped me in studying the financial statements of the bank and also how the analysis is carried out on the basis of provided information helping us to determine the financial position of a bank amongst their competitors. Finally, all my friends and classmates who shared their thoughts and experiences so sincerely and honestly.

PREFACE
This project is about the highlighting the importance of insurance sector in India and how it developed throughout these years. Insurance in India plays a very vital role in the growth and development of the nations economy. So it is very important to have the knowledge of insurance sector and how it works to so that a person can interpret its importance in the current economy. The report also explains the basics of insurance, its meaning, elements of insurance etc. in laymens language. Insurance is a contractual arrangement that provides for compensation by an insurer to an insured part if a specify set of circumstances occurs. Insurance is not only the means to provide cover in case of accident or damage but also a great investment option. This report will provide the information about the Oriental Insurance Company Limited which is very vital for any investor. Companys stockholders should have a clear idea about a company in which they find an option to invest Financial Statements give the snapshot of the companys financial position. It is the basis on which a stockholder invests in a company. The analysis of the financial statements helps a company to interpret and understand the financials of the company.

CONTENTS
1. INSURANCE SECTOR IN INDIA
HISTORY INDUSTRY STRUCTURE LEGAL STRUCTURE

2. MEANING OF INSURANCE
3. INSURANCE REGULATORY AND

DEVELOPMENT AUTHORITY
HISTORY ORGANISATIONAL STRUCTURE AND COMPOSITION AUTHORITY INSURANCE REPOSITORY

4. ORIENTAL INSURANCE

5. FINANCIAL STATEMENTS
6. ANALYSIS OF FINANCIAL STATEMENTS 7. CONCLUSION 8. BIBLIOGRAPHY

INSURANCE SECTOR IN INDIA

Insurance in India is the market for insurance in India which covers both the state and private sector organisations. It is listed in the Constitution of India on the Union list in the Seventh Schedule meaning it can only be legislated by the central government. The insurance sector has gone through a number of phases by allowing private companies to solicit insurance and also allowing foreign direct investment of up to 26% (as of 2013 there have been proposals to extend the FDI up to 49% to strengthen the Insurance Market even further). However, the largest lifeinsurance company in India, Life Insurance Corporation of India is still owned by the government and carries a sovereign guarantee for all insurance policies issued by it.

History
In India, insurance has a deep-rooted history. Insurance in various forms has been mentioned in the writings

of Manu (Manusmrithi), Yagnavalkya (Dharmashastra) and Kautilya (Arthashastra). The fundamental basis of the historical reference to insurance in these ancient Indian texts is the same i.e. pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. The early references to Insurance in these texts have reference to marine trade loans and carriers' contracts. Insurance in its current form has its history dating back until 1818, when Oriental Life Insurance Company was started by Anita Bhavsar in Kolkata to cater to the needs of European community. The pre-independence era in India saw discrimination between the lives of foreigners (English) and

Indians with higher premiums being charged for the latter. In 1870, Bombay Mutual Life Assurance Society became the first Indian insurer. At the dawn of the twentieth century, many insurance companies were founded. In the year 1912, the Life Insurance Companies Act and the Provident Fund Act were passed to regulate the insurance business. The Life Insurance Companies Act, 1912 made it necessary that the premium-rate tables and periodical valuations of companies should be certified by an actuary. However, the disparity still existed as discrimination between Indian and foreign companies. The oldest existing insurance company in India is the National Insurance Company, which was founded in 1906, and is still in business. The Government of India issued an Ordinance on 19 January 1956 nationalising the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The Life Insurance Corporation (LIC) absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies245 Indian and foreign insurers in all. In 1972 with the General Insurance Business (Nationalisation) Act was passed by the Indian Parliament, and consequently, General Insurance business was nationalized with effect from 1 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 1 January 1973. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector. Before that, the industry consisted of only two state insurers: Life Insurers (Life Insurance Corporation of India, LIC) and General Insurers (General Insurance Corporation of India, GIC). GIC had four subsidiary companies. With effect from December 2000, these subsidiaries have been de-linked from the parent company and were set up as independent insurance companies: Oriental Insurance Company Limited, New India

Assurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited.

Industry structure
By 2012 Indian Insurance is a US$72 billion industry. However, only two million people (0.2% of the total population of 1 billion) are covered under Mediclaim, whereas in developed nations like USA about 75% of the total population are covered under some insurance scheme. With more and more private companies in the sector, this situation is expected to change. ECGC, ESIC and AIC provide insurance services for niche markets. So, their scope is limited by legislation but enjoy some special powers.

Legal structure
The insurance sector went through a full circle of phases from being unregulated to completely regulated and then currently being partly deregulated. It is governed by a number of acts. The Insurance Act of 1938[3] was the first legislation governing all forms of insurance to provide strict state control over insurance business. Life insurance in India was completely nationalized on 19 January 1956, through the Life Insurance Corporation Act. All 245 insurance companies operating then in the country were merged into one entity, the Life Insurance Corporation of India. The General Insurance Business Act of 1972 was enacted to nationalise the about 100 general insurance companies then and subsequently merging them into four companies. All the companies were amalgamated into National Insurance, New India Assurance, Oriental Insurance and United India Insurance, which were headquartered in each of the four metropolitan cities.

Until 1999, there were no private insurance companies in India. The government then introduced the Insurance Regulatory and Development Authority Act in 1999, thereby de-regulating the insurance sector and allowing private companies. Furthermore, foreign investment was also allowed and capped at 26% holding in the Indian insurance companies. In 2006, the Actuaries Act was passed by parliament to give the profession statutory status on par with Chartered Accountants, Notaries, Cost & Works Accountants, Advocates, Architects and Company Secretaries. A minimum capital of US$80 million (Rs.400 Crore) is required by legislation to set up an insurance business.

MEANING OF INSURANCE
According to Encarta Encyclopaedia, insurance is a contractual arrangement that provides for compensation by an insurer to an insured part if a specify set of circumstances occurs. These circumstances could be accident, personal injury, death, loss or damage to property or any other number of instances that can compensate for financially.

How does the insurance company operate? The insurance company operates by collecting small contributions from many people who are exposed to risks. This money collected is used to settle those who fall victim of such risks. These contributions which the insurance company collects are called premium.

To some individuals, insurance is seen as an investment. But is insurance an investment? No I dont think that insurance is an investment. Insurance is a way we share our risk with others. It is a way of getting protection to reduce damages associated with some mishaps. No matter how careful one may be, he/she must need one type of insurance or the other.

When you buy insurance, it means that you are sharing your risk with others. Simply, the insurance company is a risk management company that can help anyone to reduce risks associated in day to day activities. Man is vulnerable to dangers and by virtue of this need insurance to help him cope in an unfriendly world. Another thing you have to know when buying insurance is insurance policy. The insurance policy is the rule or guideline of the insurance company. It is the insurance policy that will help you to choose a better option for your insurance needs.

Insurance Regulatory and Development Authority

Insurance Regulatory and Development body which Authority (IRDA) regulates and is an autonomous apex statutory develops

the insurance industry in India. It was constituted by a Parliament of India act called Insurance Regulatory and Development Authority Act, 1999 and duly passed by the Government of India. The agency operates from its headquarters at Hyderabad, Andhra Pradesh where it shifted from Delhi in 2001. IRDA batted for a hike in the foreign direct investment (FDI) limit to 49 per cent in the insurance sector from the erstwhile 26 per cent. The FDI limit in insurance sector was raised to 49% in July 2013.

History
The IRDA Act, 1999 was passed as per the major recommendation of the Malhotra Committee report (1994) which recommended establishment of an independent regulatory authority for insurance sector in India. Later, It was incorporated as a statutory body in April, 2000. The IRDA Act, 1999 also allows private players to enter the insurance sector in India besides a maximum foreign equity of 26 per cent in a private insurance company having operations in India. The FDI limit in insurance sector was raised to 49% in July 2013. It serves as an Authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith. IRDA role
[8]

is to protect rights of policy holders

& they provides registration certification to life insurance companies &

responsible for renewal, modification, cancellation & suspension of this registered certificate.

Organizational structure or Composition of Authority

As per the section 4 of IRDA Act' 1999, Insurance Regulatory and Development Authority (IRDA, which was constituted by an act of parliament) specify the composition of Authority. IRDA is a ten member body consisting of: A Chairman Five whole-time members Four part-time members All members are appointed by the Government of India

Insurance Repository
Recently the Finance Minister of India announced the setting of insurance repository system. An Insurance Repository is a facility to help policy holders buy and keep insurance policies in electronic form, rather than as a paper document. Insurance Repositories, like Share Depositories or Mutual Fund Transfer Agencies, will hold electronic records of insurance policies issued to individuals and such policies are called electronic policies or e Policies.

ORIENTAL INSURANCE CO. LTD.

INTRODUCTION
The Oriental Insurance Company Ltd was incorporated at Bombay on 12th September 1947. The Company was a wholly owned subsidiary of the Oriental Government Security Life Assurance Company Ltd and was formed to carry out General Insurance business. The Company was a subsidiary of Life Insurance Corporation of India from 1956 to 1973 (till the General Insurance Business was nationalized in the country). In 2003 all shares of our company held by the General Insurance Corporation of India has been transferred to Central Government. The Company is a pioneer in laying down systems for expertise. Oriental specializes in devising special covers for large projects like power plants, petrochemical, steel and chemical plants. The company has developed various types of insurance covers to cater to the needs of both the urban and rural population of India. The Company has a highly technically qualified and competent team of professionals to render the best customer service .Oriental Insurance made a modest beginning with a first year premium of Rs.99,946 in 1950. The goal of the Company was Service to clients and achievement thereof was helped by the strong traditions built up overtime. ORIENTAL with its head Office at New Delhi has 30 Regional Offices smooth and orderly conduct of the business. The strength of the company lies in its highly trained and motivated work force that covers various disciplines and has vast and nearly 900+ operating Offices in various cities of the country. The Company has overseas operations in Nepal, Kuwait and Dubai. The Company has a total strength of around 15,000+ employees. From less than a lakh at inception, the Gross Premium went up to Rs.58 crores in 1973 and during 2010-11 the figure stood at a mammoth Rs. 5569.88 crores.

FINANCIAL STATEMENTS

..CONTINUED

ANALYSIS OF FINANCIAL STATEMENTS

What do internal users use it for? Planning, evaluating and controlling company operations What do external users use it for? Assessing past performance and current financial position and making predictions about the future profitability and solvency of the company as well as evaluating the effectiveness of management

Balance sheet
The balance sheet is a picture or snapshot of the financial conditions of an organisation at a specific point in time. The balance sheet is unique among the financial statement in that it represents the organisations financial condition on the date on which it is prepared. The balance sheet is organised in three primary sections: assets, liabilities and owners equity. A companys assets are what it owns; including items such as cash, inventories and account receivables, or the money a company is owed by the customers. Liabilities, conversely, are the organisations financial obligations or debt owed to others. Owners equity, which is also, referred to as shareholders equity or stock holders equity, is an estimated measure of the ownership value of the company. On the balance sheet owners equity is equal to the companys assets minus its liabilities. A balance sheet, also known as a "statement of financial position," reveals a company's assets, liabilities and owners' equity (net worth). The balance sheet, together with the income statement and cash flow statement, make up the cornerstone of any company's financial statements. It is important that you understand how the balance sheet is structured, how to analyse it and how to read it.

The above Balance sheet, for Oriental Insurance co. ltd., is as on 31 st march 2012 and 2013. The company has issued 5 crore equity shares of Rs.10 each. The company has no unpaid calls or shares forfeited. The company has zero Borrowings which are a very good sign as the company only relies on own capital rather than outsiders. This, also, considerably reduces the fixed cost or the interest expenses of the company. Ratio analysis one of the most favourable ways to analyse balance sheet. Some of the important ratios are as follows Quick Ratio= 0.368:1 EPS= 35.59

Income statement
The income statement also referred to as the statement of earnings or the profit and loss statement shows the organisations income over a specified period of time and is typically issued on an annual or quarterly basis. For the specified time period the income statement lists the organisations revenue or income generated from business activity such as the sale of goods or services and the organisations expenses or funds flowing out of the organisation as costs of doing business. An organisations books may be kept on cash basis or accrual basis, and it is important to note the differences between the two methods and the resulting impact on the income statement. The income statement above, for oriental insurance is for the years ended 31st march 2012 and 2013. Lets take a look and see how the company did over these two years. First we see that the companys major businesses: Fire, Marine And Miscellaneous Insurance. The company incurred heavy losses in the year 201112 whereas made huge profits in the following year. The reason for the heavy losses in the previous year was due the large amount of claims incurred which

reduced considerably in the year 2012-13. Income from Marine and Miscellaneous insurance business has increased considerably. There is slight increase in the income from Investments. We can observe that the company has incurred heavy exchange losses which is due decrease in the foreign business and the depreciating value of INR in The year 2012-13. There is heavy decline in the total provisions from Rs.27,09,82,000 to Rs.31,50,000 since there is no provision created for bad and doubtful debts in year 2012-13 which resulted in decreased total expenses. The decrease in total expenses has increased the profit before tax (PBT) by 117%.

CONCLUSION
The Oriental Insurance Company limited was established from the inception of the Insurance sector. The company played a major part in the development of the insurance sector in India. Insurance in India is the market for insurance in India which covers both the state and private sector organisations. Insurance in India is legislated by the Central Government. Insurance Sector in India took a giant leap during the twentieth century. Many insurance companies were founded during the period. Insurance sector in India is a major sector, however, it is still not developed as compared to other developing and developed countries. Insurance is a contractual arrangement that provides for compensation by an insurer to an insured part if a specify set of circumstances occurs. Insurance Regulatory and Development body which Authority (IRDA) regulates and is

an autonomous apex

statutory

develops

the insurance industry in India. It was constituted by a Parliament of India act called Insurance Regulatory and Development Authority Act, 1999 and duly passed by the Government of India. The Oriental Insurance Company Ltd was incorporated at Bombay on 12th September 1947. The Company was a wholly owned subsidiary of the Oriental Government Security Life Assurance Company Ltd and was formed to carry out General Insurance business. The Company was a subsidiary of Life Insurance Corporation of India from 1956 to 1973.

BIBLIOGRAPHY
INVESTOPEDIA.COM WIKIPEDIA.COM ORIENTALINSURANCE.ORG MONEYCONTROL.COM IBEF.ORG INVESTORWORDS.COM