International Journal of Management Research and Technology Volume 5 Number 1 January-June 2011: 29-33 I J M R T Serials Publications FINANCIAL PERFORMANCE OF NATIONAL INSURANCE COMPANY LIMITED M. Subba Rao * & A.V. Ramana ** Abstract: The financial performance of NICL unlike manufacturing concerns can be evaluated on the basis of data available on gross and net direct premium income, previous received on different products, profit on different investments, investments made in infrastructure and social sectors, major sources and application of funds, expenditure incurred and the net operating profits earned by the company during the study period. It also analyses the investments in infrastructure and social sectors, loans on housing and fire fighting investments, sources and application of funds, status of current assets and current liabilities, net retention operating expenses, under writing experience, net operating profits and details of incurred claim ratios of National Insurance Company Ltd. from 2001-2009. Keywords: NICL, Investments, Profits, Products. INTRODUCTION Many of the insurance companies either run their operations without proper systems for new business, policy servicing, billing, claims, agency management systems, run with few of the systems that are mostly not integd with each other. This led to an increase in the cost towards data conversion, web enablement etc., [1]. The Committee on Financial Inclusion,rightly identified micro-insurance is a key element in the financial services package for the less privileged people. The poor not only face more risks (due to uncertainties associated with income) than those are well-off, but also their ability to cope with hazards is extremely limited [2]. The segment wise analysis revealed that the health insurance sector recorded a remarkable improvement as compared to other sectors. The level of penetration of general insurance, however, is showing a downturn and is far below the world average as per the Rajus observations [3]. Rama Krishna Rao [4] in his article on Indian Insurance Industry said that today the insurance market in India has come to life and is an exciting business. He further opined that though the Indian insurance industry is gaining in size and is on par with the Asian market, it has far behind the developed markets of Europe and America. The road to glory has not been very striven. It has been strewen with problems and there have been some stumbling blocks for the growth of insurance industry.it has been a double whammy for the non-insurance industry, the global melt down and the price was an account of defarrifing. The slowing down of the economy in most of the sectors, declining exports, increasing unemployment, etc has reduced the demand for insurance. The private players, who grew at a whopping of 50 per cent to 60 per cent in the past year, resorted to huge expansion in man-power and infrastructure. Resultantly, the fixed costs have been rising but commensu growth eluding them. * Principal, P.V.K.K. Degree College, Anantapur-515001, A.P., India ** Department of Commerce, S. K. University, Anantapur-515 055, A.P., India.
30 International Journal of Management Research and Technology Ramakrishna Rao, [5]. In his paper Indian Insurance Industry, stated that Indian Insurance has been a double whammy for the non-life insurance industry, the global meltdown and the price was on account of detariffing. He further opined that the slowing down of the economy in most of the sectors, declining exports, increasing unemployment, etc., has reduced the demand for insurance. NEED FOR THE PRESENT STUDY It is obviously clear from the literature reviewed above that some studies and articles are found on General Insurance on various aspects. Some sporadic attempts are also made to study the products introduced and the services extended by General Insurance Companies. However, it is found that no studies are carried out exclusively on the General Insurance Companies in terms of physical, financial and operational performance. Besides, no attempts are made covering the above parameters especially on National Insurance Company Ltd. Hence, the present study is undertaken for an indepth analysis. It is firmly hoped that the outcomes of the study would help the insurance business institutions both in public and private sectors in general and National Insurance Company Ltd. in particular to assess the present status and scale out its performance on the selected parameters and also suggest measures to the policy makers for enhancing the performance of General insurance business especially in the changing competitive business environment. OBJECTIVES OF THE STUDY The study is basically intended to evaluate the performance of National Insurance Company Ltd. However, the following are the specific objectives of the study. (i) To study and analyse the physical growth of NICL. (ii) To evaluate the operational performance of National Insurance Company Ltd. during the study period i.e. from 2001 to 2009. (iii) To evaluate and analyse the financial performance of NICL, and (iv) To suggest measures for enhancing the performance of general insurance business in general and business of NICL in particular. SCOPE OF THE PRESENT STUDY The analysis of the present study is confined to evaluate the physical growth, operational and financial performance of National Insurance Company Ltd. during 2001-09 period only. DATA SOURCE The data for the present study are collected mainly from the secondary sources such as annual reports of Insurance Regulatory and Development Authority (IRDA) and National Insurance Company Ltd., published books, periodicals, journals and websites of General Insurance Companies of both public and private sectors. Besides, informal discussions are also made with the company s top officials and personnel at Divisional, Regional, and Head Office level and collected the first hand information on various physical, operational and financial aspects of General insurance in general and National Insurance Company Ltd so particular.
Financial Performance of National Insurance Company Limited 31 RESULTS Table 1 Scheme-wise and Year-wise Details of Gross Direct Premium of NICL (Rs. in crores) Name of the 2001-2002- 2003-2004- 2005-2006- 2007-2008- Linear Average Scheme 02 03 04 05 06 07 08 09 growth Fire 496.16 507.85 515.77 537.64 483.94 492.52 380.72 393.59-3.69 476.02 Marine 211.02 219.06 187.18 251.29 173.43 204.89 174.98 200.78-1.86 202.82 Miscellaneous 1732.04 2136.67 2688.15 3010.98 2866.30 3117.00 3451.53 3685.53 8.98 2836.02 Total 2439.22 2863.58 3391.10 3799.91 3523.67 3814.41 4007.23 4279.90 6.64 3514.9 Table 2 Scheme-wise and Year-wise Details of Net Premium earned by NICL (Rs. in crore) Name of the 2001-2002- 2003-2004- 2005-2006- 2007-2008- Linear Average Scheme 02 03 04 05 06 07 08 09 growth Fire 367.60 360.10 348.28 352.59 357.27 338.36 291.17 294.42-3.10 338.72 Marine 132.81 132.81 198.16 113.00 118.76 102.35 108.17 124.03-4.31 128.76 Miscellaneous 1312.71 1473.05 1841.37 2198.55 2287.15 2326.85 2619.19 3003.88 10.67 2132.84 Total 1813.12 1965.96 2387.81 2664.14 2763.18 2767.56 3018.53 3422.33 8.13 2600.32 Source: Annual Reports of NICL from 2001 to 2009 Table 3 Scheme-wise and Year-wise Premiums Earned by the NICL (Rs. in lakhs) Source of 2001-2002- 2003-2004- 2005-2006- 2007-2008- Linear Total Average revenue 02 03 04 05 06 07 08 09 growth Fire 36655 36010 34828 35259 35727 33836 29117 29442 2790874-3.08 33.859.25 (20.17) (18.32) (14.59) (13.23) (12.93) (12.23) (9.65) (8.60) (13.01) (13.01) Marine 14912 13281 19816 11300 11876 10235 10817 12403 104640-5.28 13080 (8.20) (6.75) (8.30) (4.24) (4.30) (3.70) (3.58) (3.62) (5.04) (5.04) Misce- 130131 147305 184137 219855 228715 232685 261919 300391 1705138 16.43 213142.3 llaneous (71.63) (74.93) (77.11) (82.52) (82.77) (84.07) (86.77) (87.78) (81.95) (81.95) Total 1,81,698 1,96,596 2,38,781 2,66,414 2,76,317 2,76,757 3,01,853 3,42,236 2080652 8.12 260081.5 (100.00) (100.00) (100.00) (100.00) (100.00) (100.00) (100.00) (100.00) (100.00) (100.00) Source: Annual Reports of NICL from 2001 to 2009. Table 1 exhibits the scheme-wise and year-wise details of gross direct premium received by the NICL. The table also incorpos the linear growth achieved by the company in various schemes such as fire, marine and miscellaneous schemes. A deep peep into the table further
32 International Journal of Management Research and Technology unfolds that the Gross Direct Premium received from Fire Insurance during 2001-02 was Rs.496.16 crore and by 2008-09, the same was Rs. 393.59 crore while the average premium of the said premium is Rs. 476.02 crore. It is further noticed that the linear growth with regard to Fire and Marine is a negative trend i.e. -3.69 and -1.86 respectively. It is observed from the table that though the average gross domestic premium received from the Fire insurance premium compared to Marine but the negative growth trend is less in Marine than Fire insurance. From the above analysis it can be deducted that the Gross domestic premium received under fire and marine insurance schemes has declined and recorded a negative growth during a study period. A substantial increase in the gross premium was observed under Miscellaneous category of schemes with a positive linear growth of 8.98 per cent during the study period. The average premium under these schemes was Rs. 2,836.02 crore. A comparison of data presented on gross premium in Table 1 with the date on net premium presented the Table 2 indicates that the gap is widening between them due to increasing proportion of expenditure especially under miscellaneous category of insurance schemes. This has led to decreasing operating margin and overall financial performance. Scheme-wise and year-wise net premium income earned by the NICL is shown in Table 2. Regarding the net premium income earned out of the fire insurance scheme, it is noticed that Rs. 367.60 crore were earned during 2001-02 and there are ups and downs in the incomes earned and surprisingly seen that the company got an income of Rs. 294.42 crore during 2008-09 and the average net premium were Rs. 338.72 crore. But on the whole, the company registered a negative linear growth of -3.10 per cent of net premium income exclusively from Fire insurance. Details of net premium earned from Marine insurance show that the company earned high income to the tune of Rs. 132.81 crore during 2001-02 and the least Rs. 102.35 crore during 2006-07 and the average net premium is Rs. 128.76 crore. Compared to incomes from net premiums, the income earned from fire and miscellaneous, the growth from Marine insurance is registered as -4.31 per cent. However, it is quite interesting to note that net premium income earned from the Miscellaneous has consistently been increasing over the study period. In this regard, the company earned income to the extent of Rs. 1312.71 crore in 2001-02 and Rs.3003.88 crore by 2008-09 and achieved a linear growth of 10.67 per cent and the average income earned comes out to Rs. 2132.84 crore. The average net premium in Fire insurance was more higher than the average under Marine insurance. In the preceding analysis on Ratio of Claims to Premiums, it was observed that the percentage of claims to premiums was abnormal as in case of Marine insurance and Miscellaneous insurance schemes, in which, the average premium collected is very low. This points out to the need to concent more on Marine and Miscellaneous insurance schemes and rationalize the procedure of claims. Thus, it can be inferred that though the company has been earning net premium incomes, but the figures gratify that the growth is more in case of Miscellaneous premiums followed by the income in the inform of Fire and Marine insurance. Table3 exhibits revenue earned from fire, marine and miscellaneous insurance business of NICL in the form of premiums from 2001-02 to 2008-09, with average revenue and the linear growth of the respective insurance schemes. It is clearly found that premium received out of fire insurance during 2001-02 was Rs. 36,655 lakhs which by 2008-09 declined to Rs. 29,442
Financial Performance of National Insurance Company Limited 33 lakhs. The average revenue from the said scheme was Rs. 33,859.25 lakhs with a negative growth of 3.08. Similarly, the details on marine insurance confirmed that the average revenue is Rs. 13,080 lakhs with a negative linear growth of 5.28. However, linear growth of miscellaneous scheme recorded as a positive growth of 16.43 per cent. Thus, it can be inferred from the figures as portrayed in the table, that there is a considerable growth in the premiums of from miscellaneous general insurance business over the years but negative trend is clearly noticed from the Fire and Marine insurance. References Jayapakash, S. (2008), Insurance Industry the Need for ACORD, Insurance Chronicle, The ICFAI University Press, Sept., p. 36. The Committee on Financial Inclusion (2008), India Year Book, p. 56. Raju, G. (2010), General Insurance in India Present Status, Insurance Chronicle, February, pp. 37-40. Ramakrishna Rao (2010), Indian Insurance Industry: The exciting Journey Ahead, Insurance Chronicle, January, pp. 2-4. Ramakrishna Rao, T. S. (2010), Indian Insurance Industry: The Road Ahead, Insurance Chronicle, January, pp. 5-6.